COMMITMENTS AND CONTINGENCIESGeneral Matters
We are party to various negotiations and legal proceedings arising in the normal course of business. We provide reserves for these matters when a loss is probable and reasonably estimable. We do not disclose a range of potential loss because the likelihood of such a loss is remote. In the opinion of management, the ultimate disposition of these matters will not have a material adverse effect on our financial position, results of operations, cash flows or liquidity.
Legal Proceedings
On April 19, 2024, Coulomb Solutions Inc. (“CSI”), a supplier to the Company of certain of the batteries used in its vehicles, filed a complaint against the Company in United States District Court for the Eastern District of Michigan (Case No. 2:24-cv-11048). In its complaint, CSI asserts two claims – a breach of contract claim and an alternative unjust enrichment claim – that are both based upon Workhorse’s alleged failure to pay amounts due under several invoices. CSI seeks to recover damages in excess of $4.0 million, including alleged past due amounts, interest, and collection costs. As of December 31, 2025, the Company has accrued $1.0 million in connection with this dispute along with the outstanding trade amounts.
On November 6, 2025, CMD Global Partners (USA), LLC ("CMD"), filed a complaint against the Company in the United States District Court for the Southern District of New York (Case No. 1:25-cv-09298). In its complaint, CMD seeks to recover success fees pursuant to a signed engagement letter for investment banking services for the Workhorse Aero divestiture transaction. The amount sought is $0.7 million plus attorney's fees and costs. The Company has accrued $0.7 million in connection with this dispute.
About Commitments Disclosures
Commitments and contingencies disclosures catalog a company's off-balance-sheet obligations and legal exposures — purchase commitments, guarantee arrangements, pending litigation, and regulatory proceedings. These items represent potential future cash outflows that may not appear as liabilities on the balance sheet until they become probable and estimable.
Key signals: litigation reserves and disclosed loss ranges quantify management's estimate of legal exposure, but unquantified "reasonably possible" losses often represent the larger risk. Watch for changes in language around pending cases — shifts from "remote" to "reasonably possible" or increases in estimated loss ranges signal deteriorating outcomes. Unconditional purchase obligations and take-or-pay contracts create fixed cost structures that reduce operational flexibility. Guarantee arrangements for subsidiaries or joint ventures can create cascading obligations. Compare the total commitment schedule against projected free cash flow to assess whether the company can meet its obligations without additional financing.