美國
證券交易委員會
華盛頓，特區。20549
表格
截至季度結束：
委員會文件編號：
（根據其章程規定的小型企業發行人的確切名稱）
| （註冊地或組織所在管轄區） | （美國國稅局僱主號碼） | |
| 文件號碼） | (主要 執行人員之地址) |
| (主要 執行人員之地址) | (郵政 編 碼) |
發行人的電話號碼，包括區號:
根據法案第12(b)節註冊的證券:
| 每一類的名稱： | 交易符號 | 每個註冊的證券交易所的名稱： | ||
| 該
|
根據該法第12(g)條登記的證券： 無
請打勾表示註冊者（1）是否已在過去12個月內提交證券交易所法案第13或15(d)款要求提交的所有報告，並且（2）過去90天一直受到此類申報要求的約束。
請用勾號表示，是否在過去12個月內（或者在註冊者需要提交這些文件的較短期間內）按照《S-T法規》第405條規定提交了每個互動數據文件。
請勾選表示註冊者是否爲大型加速申報人、加速申報人、非加速申報人、較小的報告公司或新興成長型公司。請參閱《交易所法》第120億.2條中對「大型加速申報人」、「加速申報人」、「較小的報告公司」和「新興成長型公司」的定義。
| 大型加速文件提交人 | ☐ | 加速文件提交人 | ☐ |
| ☒ | 小型報告公司 | ||
| 新興成長公司 |
如果屬於新興成長型公司，請在此處打勾，表示公司選擇不使用根據《證券交易法》第13(a)條規定提供的適用於遵守任何新的或修訂後的財務會計準則的延長過渡期。 ☐
請勾選表示是否公司是空殼公司（如《交易所法規規則120億.2號》定義）。 是 ☐ 否
截至2024年11月13日，登記人擁有 每股普通股的面值爲$每股面值爲$13的本公司普通股股票於截至2023年9月30日和2022年9月30日三個月內的運營報告中，分別已發行並流通，股份均爲180,641,272股。
WORKSPORt LTD.
目錄
| 2 |
第I部分。財務信息
項目 1. 基本報表
Worksport 有限公司。
簡明合併資產負債表
| 2024年9月30日（未經審計） | 2023年12月31日 | |||||||
| 資產 | ||||||||
| 流動資產 | ||||||||
| 現金及現金等價物 | $ | $ | ||||||
| 應收賬款淨額 | ||||||||
| 其他應收款 | ||||||||
| 庫存（注4） | ||||||||
| 關聯方貸款（注8） | ||||||||
| 預付費用及存款（注5） | ||||||||
| 流動資產合計 | ||||||||
| 投資（注10） | ||||||||
| 資產和設備，淨值（注6） | ||||||||
| 使用權資產，淨值（注11） | ||||||||
| 無形資產，淨額 | ||||||||
| 總資產 | $ | $ | ||||||
| 負債和股東權益 | ||||||||
| 流動負債 | ||||||||
| 應付賬款和應計負債 | $ | $ | ||||||
| 應付薪資稅款 | ||||||||
| 關聯方貸款（附註8） | ||||||||
| 長期債務的流動部分（附註12） | ||||||||
| 流動租賃負債（附註11） | ||||||||
| 總流動負債 | ||||||||
| 長期–租賃負債（附註11） | ||||||||
| 長期債務（附註12） | ||||||||
| 總負債 | ||||||||
| 股東權益 | ||||||||
| A和B優先股，$ 面值， 授權股份， A系列和 Series B分別發行和持有（附註7） | ||||||||
| 普通股，每股面值爲 $0.0001； 面值， 授權股份數， 和 分別發行和持有的股份數（附註7） | ||||||||
| 額外實收資本 | ||||||||
| 股份認購應收款 | ( | ) | ( | ) | ||||
| 分享認購應付款 | ||||||||
| 累積赤字 | ( | ) | ( | ) | ||||
| 累計轉換調整 | ( | ) | ( | ) | ||||
| 股東權益合計 | ||||||||
| 負債合計和股東權益總計 | $ | $ | ||||||
附帶的附註構成了這些簡明合併基本報表的一個不可或缺的部分。
| 3 |
Worksport 有限公司。
彙編的綜合損失和營運狀況
2024年和2023年截至9月30日的三個月和九個月
(未經審計)
| 三個月結束 9月30日， | 九
截至月份 | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| 淨銷售額 | $ | $ | $ | $ | ||||||||||||
| 營業成本 | ||||||||||||||||
| 毛利潤 | ||||||||||||||||
| 營業費用 | ||||||||||||||||
| 總部和行政管理費 | ||||||||||||||||
| 銷售與市場營銷 | ||||||||||||||||
| 專業費用 | ||||||||||||||||
| 匯率期貨的盈虧 | ( | ) | ( | ) | ( | ) | ||||||||||
| 總營業費用 | ||||||||||||||||
| 營業損失 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 其他收益（費用） | ||||||||||||||||
| 利息支出 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 利息收入 | ||||||||||||||||
| 租賃收入（注17） | ||||||||||||||||
| 債務結算所得收益 | ||||||||||||||||
| 其他收入（支出）總額 | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| 淨虧損 | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| 每股虧損（基本和稀釋） | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| 加權平均股份數（基本和稀釋） | ||||||||||||||||
附帶的附註構成了這些簡明合併基本報表的一個不可或缺的部分。
| 4 |
Worksport 有限公司。
簡明合併股東權益表
截至2024年和2023年9月30日的三個月
(未經審計)
| 優先股 | 普通 股 | 實收資本公積 | 分享訂閱 | 股份認購 | 累計的 | 累計翻譯 | 總計 股東權益 | |||||||||||||||||||||||||||||||||
| 股份 | 金額 | 股份 | 金額 | 資本 | 應收款項 | 應付賬款 | 赤字 | 調整 | (赤字) | |||||||||||||||||||||||||||||||
| 2023年7月1日的餘額 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
| 爲服務和訂閱支付的發行 | - | - | ||||||||||||||||||||||||||||||||||||||
| 股票發行 | - | |||||||||||||||||||||||||||||||||||||||
| 股票期權作廢 | - | - | ||||||||||||||||||||||||||||||||||||||
| 淨虧損 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| 2023年9月30日的餘額 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
| 2024年7月1日的餘額 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
| 服務和應付款項的發行 | - | |||||||||||||||||||||||||||||||||||||||
| 股份發行（見第16條） | - | ( | ) | |||||||||||||||||||||||||||||||||||||
| 淨虧損 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| 2024年9月30日的餘額 | $ | $ | $ | | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
附帶的附註構成了這些簡明合併基本報表的一個不可或缺的部分。
| 5 |
Worksport 有限公司。
簡明合併股東權益表
截至2024年和2023年9月30日的九個月
(未經審計)
| 優先股 | 普通 股 | 實收資本公積 | 分享訂閱 | 股份認購 | 累計的 | 累計翻譯 | Total 股東權益 | |||||||||||||||||||||||||||||||||
| 股份 | 金額 | 股票 | 金額 | 資本 | 應收款 | 應付款 | 赤字 | 調整 | （赤字） | |||||||||||||||||||||||||||||||
| 2023年1月1日餘額 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
| 爲服務和訂閱支付的發行 | - | |||||||||||||||||||||||||||||||||||||||
| 股票發行 | - | |||||||||||||||||||||||||||||||||||||||
| 股票期權作廢 | - | - | ||||||||||||||||||||||||||||||||||||||
| 淨損失 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| 2023年9月30日的餘額 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
| 2024年1月1日的餘額 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
| 服務和訂閱應付發行 | - | |||||||||||||||||||||||||||||||||||||||
| 股份發行（註釋7） | - | ( | ) | |||||||||||||||||||||||||||||||||||||
| 認股權誘導（註釋16） | - | ( | ) | |||||||||||||||||||||||||||||||||||||
| 認股權行使（註釋14） | - | ( | ) | |||||||||||||||||||||||||||||||||||||
| 淨損失 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| 2024年9月30日的餘額 | $ | $ | $ | | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||||||||||||
附帶的附註構成了這些簡明合併基本報表的一個不可或缺的部分。
| 6 |
Worksport 有限公司。
簡明合併現金流量表。
截至2024年和2023年9月30日的九個月
(未經審計)
| 2024 | 2023 | |||||||
| 經營活動 | ||||||||
| 淨虧損 | $ | ( | ) | $ | ( | ) | ||
| 調整爲了將淨虧損調節爲經營活動現金流： | ||||||||
| 爲服務發行的分享、期權和warrants | ||||||||
| 折舊和攤銷 | ||||||||
| 經營租約的變化 | ( | ) | ||||||
| ( | ) | ( | ) | |||||
| 經營資產和負債的變動（注9） | ( | ) | ( | ) | ||||
| 用於經營活動的淨現金 | ( | ) | ( | ) | ||||
| 投資活動產生的現金流量 | ||||||||
| 投資 | ( | ) | ||||||
| 購置固定資產等資產支出 | ( | ) | ( | ) | ||||
| 投資活動使用的淨現金 | ( | ) | ( | ) | ||||
| 籌資活動 | ||||||||
| 關聯方貸款的淨變動 | ( | ) | ( | ) | ||||
| 認股權行權所得款項 | ||||||||
| 普通股發行所得，扣除發行成本 | ||||||||
| 信貸額度收到的款項 | ||||||||
| 長期債務的淨收入 | ||||||||
| 償還貸款額度款項 | ( | ) | ||||||
| 長期債務的償還 | ( | ) | ||||||
| 來自融資活動的淨現金收入 | ||||||||
| 現金流量變動 | ( | ) | ( | ) | ||||
| 現金、受限現金及現金等價物 - 年初餘額 | ||||||||
| 現金、受限現金及現金等價物期末餘額 | $ | $ | ||||||
| 非現金投資和融資活動的補充披露 | ||||||||
| 發行股份用於購買軟件 | $ | $ | ||||||
| 現金流信息的補充披露 | ||||||||
| 所繳納所得稅 | $ | $ | ||||||
| 支付利息 | $ | $ | ||||||
附帶的附註構成了這些簡明合併基本報表的一個不可或缺的部分。
| 7 |
Worksport 有限公司。
合併財務報表註釋
(未經審計)
1. 報告基礎及業務狀況
a) interim financial information
附帶的未經審計的簡明綜合基本報表已根據美國通用會計原則（「GAAP」）及美國證券交易委員會（SEC）的規則和法規，按照中期財務信息編制。因此，它們不包括基本基本報表所需的所有信息和附註。在管理層的看法中，爲了使基本報表不具有誤導性並具有公正和可比性的呈現，已包括所有必要的調整和重新分類，並且屬於正常週期性。截至2024年9月30日的三個月和九個月期間的營運結果並不能必然表示2024年12月31日結束的年度可能出現的結果。附帶的未經審計的簡明綜合基本報表應與公司已於2024年3月28日向SEC提交的截至2023年12月31日年度10-K表的年度報告一同閱讀。
Worksport 有限公司（連同其子公司，統稱「公司」）於2003年4月2日在內華達州註冊，原名 Franchise Holdings International, Inc.（「FNHI」）。在2020年5月，FNHI更名爲Worksport Ltd. 在截至2014年12月31日的年度內，公司完成了一項反向收購交易（「反向收購」），與TruXmart Ltd. （「TruXmart」）進行合作。2018年5月2日，TruXmart正式更名爲Worksport Ltd.（「Worksport」）。Worksport設計並分銷加拿大和美國的卡車貨箱蓋。
b) 合規聲明
公司的基本報表已根據美國財務會計準則（「GAAP」）和美國財務會計準則委員會（「FASB」）發佈的準則編制。
c) 計量基準
公司的基本報表已基於權責發生制編制。
d) 合併
公司的簡明綜合財務報表合併了公司的賬目。所有單位間交易、餘額和單位間交易的未實現利潤或虧損在合併時已經被消除。
e) 功能和報告貨幣
這些 合併的基本報表以美元（USD或US$）呈現。公司的功能貨幣及其子公司是美元。爲了編制這些合併的基本報表，使用加元（CAD或C$）計價的交易按現貨匯率轉換爲美元。因貨幣匯率波動導致的交易損益在以功能貨幣以外的貨幣計價的交易中被確認，並在隨附的合併基礎報表中體現。
f) 估計的使用
根據美國一般公認的會計原則準則，編制符合條件的未經審計的簡明基本報表要求管理層作出影響資產和負債的報告金額以及在簡明中期財務報表日期披露的計提資產和負債和報告的收入和費用金額的估計和假設。實際結果可能與這些估計不同。
| 8 |
2. 持續經營
截至2024年9月30日，公司的現金及現金等價物餘額爲$
附帶的簡明合併基本報表已假設公司將持續作爲持續經營，
這意味着在正常的業務過程中實現資產和清算負債。在截至2024年9月30日的三個月和九個月期間，公司淨虧損爲 $
儘管公司已爲當前產出需求購買了大型製造業-半導體機械，但預計運營成本仍將保持較高水平，從而進一步減少現金及現金等價物。與此同時，公司打算在2024年及以後繼續加大製造業-半導體規模並增加銷售額，這將有助於緩解運營成本對現金及現金等價物的影響；這一觀點得到了支持，因爲公司的製造工廠已於2023年完成初期生產產出，並於2023年第三季度開始產生營業收入，在2024年第三季度創下了公司歷史上最高的季度銷售總額。
公司已成功籌集資金，並在必要或戰略上有利的情況下準備再次籌集資金。在截至2021年12月31日的年度中，公司通過其Reg-A公開募股、定向增發、承銷公開募股和認購權證的行使，共籌集了大約$
2023年11月2日，公司根據註冊直接發行完成了一項發售，公司發行了 普通股和普通股衍生權證的股份 預融資權利證書給一家機構投資者，總淨收益爲$
2024年3月20日，公司根據註冊直接發行完成了一項發行，公司發行了 普通股和普通股衍生權證的股份 預先融資權證給了與公司於2023年11月的註冊直接發行中相同的機構投資者，獲得總淨收益爲$
截至目前，公司主要的流動性來源包括公開和私募證券發行的淨收益以及未行使的認股權證現金。 管理層專注於通過擴大現有產品供應以及公司客戶群來實現營業收入作爲主要流動性來源的轉變。公司無法保證其能夠增加現金餘額或限制現金消耗，從而維持計劃運營或未來業務發展所需的充足現金餘額。 未來的業務發展和需求可能導致現金利用達到超過最近經驗的水平。公司未來可能需要籌集額外資本。然而，公司無法保證其能夠按可接受條款或根本就能籌集到額外資本。
| 9 |
公司已評估是否存在條件和事件，綜合考慮，可能對公司在財務報表發佈之日起一年內繼續作爲持續經營的能力產生重大疑慮。然而，某些因素表明存在對公司繼續作爲持續經營能力產生重大疑慮的重大不確定性。隨附的財務報表不包括可能由此不確定性結果引起的任何調整。這些調整可能是重大的。
3. 重要會計政策
在編制這些簡明合併中期基本報表時所採用的會計政策與公司截至2023年12月31日的經審計基本報表的一致。
4. 存貨
截至2024年9月30日和2023年12月31日，庫存情況如下：
| 2024年9月30日 | 2023年12月31日 | |||||||
| 成品 | $ | $ | ||||||
| 促銷物品 | ||||||||
| 原材料 | ||||||||
| $ | $ | |||||||
截至2024年9月30日，庫存的成品價值因囤積了價值更高的硬貨箱蓋而增加，這些硬貨箱蓋的價值高於囤積的軟貨箱蓋，以及它們的原材料，以利用公司2024年銷售活動所產生的需求。
5. 預付費用和存款
截至2024年9月30日和2023年12月31日，預付費用和存款包括以下內容：
| 2024年9月30日 | 2023年12月31日 | |||||||
| 諮詢、服務和廣告 | $ | $ | ||||||
| 存入資金 | ||||||||
| $ | $ | |||||||
截至2024年9月30日，預付費用和存款包括$
| 10 |
6. 資產和設備
截至2024年9月30日和2023年12月31日，主要的資產和設備類別如下：
| 2024年9月30日 | 2023年12月31日 | |||||||
| 設備 | $ | $ | ||||||
| 製造業設備 | ||||||||
| 傢俱 | ||||||||
| 產品模具 | ||||||||
| 電腦 | ||||||||
| 租賃改良 | ||||||||
| 建造業 | ||||||||
| 土地 | ||||||||
| 汽車 | ||||||||
| 減少已計提折舊額 | ( | ) | ( | ) | ||||
| $ | $ | |||||||
7. 股東權益（赤字）
2024年9月30日結束的九個月內，發生了以下交易：
截至2024年9月30日的九個月內，公司出售了 普通股股份，淨收益總額爲$
The
Company recognized consulting expense of $
During
the nine months ended September 30, 2024, the Company closed a sale of shares of common stock for net proceeds of $
During
the nine months ended September 30, 2024, the Company closed a sale of shares of common stock for proceeds of $
Refer to note 14, 15 and 16 for additional shareholders’ equity (deficit) details.
During nine months ended September 30, 2023, the following transactions occurred:
The
Company sold shares of common stock for a total net proceeds of $
The
Company recognized consulting expense of $
Refer to note 15 for additional shareholders’ equity (deficit) details.
As
of September 30, 2024, the Company was authorized to issue shares of its common stock with a par value of $. All shares
were ranked equally with regard to the Company’s residual assets. During the nine months ended September 30, 2024, the Company
was authorized to issue shares of its Series A and Series B Preferred Stock with a par value of $.
| 11 |
8. Related Party Transactions
As of September 30, 2024, the Company
has a receivable of $
9. Changes in Cash Flows from Operating Assets and Liabilities
The changes to the Company’s operating assets and liabilities for the nine months ended September 30, 2024 and 2023 are as follows:
| 2024 | 2023 | |||||||
| Decrease (increase) in accounts receivable | $ | ( | ) | $ | ( | ) | ||
| Decrease (increase) in other receivable | ||||||||
| Decrease (increase) in inventory | ( | ) | ( | ) | ||||
| Decrease (increase) in prepaid expenses and deposits | ||||||||
| Increase (decrease) in payroll taxes payable | ||||||||
| Increase (decrease) in accounts payable and accrued liabilities | ( | ) | ||||||
| $ | ( | ) | $ | ( | ) | |||
10. Investments
During
the year ended December 31, 2019, the Company entered into an agreement to purchase shares of a privately owned US-based mobile
phone development company for $
During
the nine months ended September 30, 2024, $
11. Operating Lease Obligations
During
the year ended December 31, 2019, the Company signed a lease agreement for warehouse space to commence on August 1, 2019 and end on
During
the year ended December 31, 2022, the Company signed a lease agreement for approximately
During
the year ended December 31, 2023, the Company signed a lease agreement for office space to be used as an R&D facility pursuant to
a one-year lease with an option to extend the lease for an additional year, dated June 1, 2023, for a monthly rent of $
During
the nine months ended September 30, 2024, the Company signed a lease agreement for office space to be used as an R&D facility pursuant
to a one-year lease with an option to extend the lease for an additional year, dated June 1, 2024, for a monthly rent of $
The
Company has accounted for its leases upon adoption of ASC 842 whereby it recognizes a lease liability and a right-of-use asset at the
date of initial application beginning January 1, 2019. The lease liability is measured at the present value of the remaining lease payments,
discounted using the Company’s incremental borrowing rate of
| 12 |
The Company’s right-of-use asset and lease liability as of September 30, 2024, and December 31, 2023, are as follows:
| September 30, 2024 | December 31, 2023 | |||||||
| Right-of-use asset | $ | $ | ||||||
| Current lease liability | $ | $ | ||||||
| Long-term lease liability | $ | $ | ||||||
The following is a summary of the Company’s total lease costs:
| September 30, 2024 | September 30, 2023 | |||||||
| Operating lease cost | $ | $ | ||||||
The following is a summary of cash paid during the nine months ended September 30, 2024 and 2023 for amounts included in the measurement of lease liabilities:
| September 30, 2024 | September 30, 2023 | |||||||
| Operating cashflow | $ | $ | ||||||
The following are future minimum lease payments due as of September 30, 2024:
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| Total future minimum lease payments | ||||
| Less: amount representing interest | ( | ) | ||
| Present value of future payments | ||||
| Current portion | ||||
| Long term portion | $ |
12. Long term Debt
On
May 4, 2022, the Company, as the guarantor, and Worksport New York Operations Corporation (“Worksport New York”), as the
borrower (the “Borrower”) entered into a secured loan agreement (the “Loan Agreement”) with an external banking
entity (the “Lender”) relating to the Company’s purchase of a
On February 4, 2024, the Company and Worksport New York entered into a Forbearance Agreement with the Lender in connection with the Loan Agreement. Pursuant to the Forbearance Agreement, the Lender agreed to forbear from commencing an action for judgement of foreclosure and sale, seeking an appointment of a receiver or collecting default accrued interest under the Loan until the occurrence of a Termination Event (as defined in the Forbearance Agreement) and the Company and Worksport waived all defenses in connection with the Worksport New York failure to maintain 1.20 to 1.0 debt service coverage ratio of operating income to debt service under the Loan for each of the trailing twelve (12) months ended December 31, 2023, and the indirect sale of equity securities of Worksport New York as a result of the Company’s sale equity securities in November 2023 (the “Existing Defaults”). Pursuant to the Forbearance Agreement, the definition of “Permitted Transfers” in the Loan Agreement was amended to include the transfer of direct or indirect interest in the Company solely through a stock sale for capital raising purposes, subject to certain conditions, including no occurrence of an Event of Default (other than the Existing Defaults), change in ownership or control of the Company, no new 10% or greater owners, and no involvement of Sanctioned Persons. The Borrower was required to provide prior notice to Lender and satisfactory reporting of the results of the capital raise.
| 13 |
On
May 14, 2024, the Company successfully negotiated an extension of the maturity date for its $
On
July 19, 2024, the Company, as the guarantor, and Worksport New York Operations Corporation as well as Worksport USA Operations
Corporation, entered into a $
On
September 4, 2024, the Company, through its wholly owned subsidiary, Worksport USA Operations Corporation, entered into a $
During
the year ended December 31, 2020, the Company received $
For the three and nine months ended September 30, 2024, loss per share is $ and $ (basic and diluted) compared to the three and nine months ended September 30, 2023, of $ and $ (basic and diluted) using the weighted average number of shares of and (basic and diluted) as of September 30, 2024 and and (basic and diluted) as of September 30, 2023, respectively.
There are shares authorized with and shares issued and outstanding, as at September 30, 2024 and 2023, respectively. The computation of loss per share is based on the weighted average number of shares outstanding during the period in accordance with ASC Topic No. 260, “Earnings Per Share.” Shares underlying the Company’s outstanding warrants and convertible promissory notes were excluded due to the anti-dilutive effect they would have on the computation. As of September 30, 2024, the Company has warrants convertible to common shares, restricted stock to be issued, performance stock units and stock options exercisable for common shares for a total underlying common shares of . As of September 30, 2023, the Company has warrants convertible to shares of common stock, restricted stock to be issued, performance stock units and stock options exercisable for shares of common stock, for a total underlying shares of common stock of .
14. Warrants
During
the nine months ended September 30, 2024, in connection with the sale of shares of common stock, the Company also sold
pre-funded warrants and issued warrants exercisable for a total of
| 14 |
During
the nine months ended September 30, 2024, the Company closed a sale of shares of common stock. In connection with the sale of
common stock the Company issued warrants. The warrants have an exercise price of $
During
the nine months ended September 30, 2024,
During
the year ended December 31, 2023, in connection with the sale of shares of common stock in a registered direct offering, the
Company also sold pre-funded warrants and warrants exercisable for
During
the year ended December 31, 2023, the Company and a stock options holder agreed to cancel all stock options in exchange for extending
the exercisable period of
As of September 30, 2024, the Company has the following warrants outstanding:
| Exercise price | Number outstanding | Remaining Contractual Life (Years) | Expiry date | |||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
The average remaining contractual life of outstanding warrants that expire is years.
| September 30, 2024 | December 31, 2023 | |||||||||||||||
| Number of warrants | Weighted average price | Number of warrants | Weighted average price | |||||||||||||
| Balance, beginning of year | $ | $ | ||||||||||||||
| Issuance | $ | $ | ||||||||||||||
| Expired | ( | ) | $ | $ | ||||||||||||
| Exercise | ( | ) | $ | ( | ) | $ | ||||||||||
| Balance, end of period | $ | $ | ||||||||||||||
Under the Company’s 2015, 2021 and 2022 Equity Incentive Plans,
All equity-settled, share-based payments are ultimately recognized as an expense in the statement of operations with a corresponding credit to “Additional Paid in Capital.” If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognized in the current period. No adjustment is made to any expense recognized in prior periods if share options ultimately exercised are different than that estimated on vesting.
| 15 |
Performance Share Units
On May 1, 2023, the Company and Steven Rossi reached an agreement to modify restricted stock units and performance stock units issued on November 11, 2022, and December 29, 2021, respectively, and replace them with stock options, as described below.
On November 11, 2022, performance stock units (“PSUs”) granted on December 29, 2021, were modified to include new terms pertaining to the PSU vesting schedule. On December 29, 2021, the Company granted and performance stock units (“PSUs”) to the Company’s Chief Executive Officer and a director, respectively.
Stock Options
The Company uses the Black-Scholes option pricing model to determine fair value of stock options on the grant date.
On
July 23, 2024, the Company engaged in stock option repricing for certain employees, executive officers, and members of the board of directors
of the Company.
During the nine months ended September 30, 2024, the Company issued stock options to employees and directors with exercise prices ranging from $ to $ and expiration dates ranging from to . Of these stock options, were subsequently cancelled.
During the year ended December 31, 2023, the Company issued stock options to employees, directors, and consultants with exercise prices ranging from $ to $ and expiration dates ranging from to . Of these stock options, were subsequently cancelled.
| 16 |
| September 30, 2024 | December 31, 2023 | |||||||||||||||
| Number of stock options | Weighted average price | Number of stock options | Weighted average price | |||||||||||||
| Balance, beginning of period | $ | $ | ||||||||||||||
| Granted | $ | $ | ||||||||||||||
| Cancelled | ( | ) | $ | ( | ) | ( | ) | $ | ( | ) | ||||||
| Balance, end of period | $ | $ | ||||||||||||||
| Range of Exercise prices | Outstanding | Weighted average life (years) | Weighted average exercise price | Exercisable on September 30, 2024 | ||||||||||||||||
| Stock options | $ | - | $ | |||||||||||||||||
| September 30, 2024 | December 31, 2023 | |||||||||||||||
| Number of stock options | Weighted average price | Number of stock options | Weighted average price | |||||||||||||
| Balance, beginning of period | $ | $ | ||||||||||||||
| Granted | $ | $ | ||||||||||||||
| Balance, end of period | $ | $ | ||||||||||||||
| Range of Exercise prices | Outstanding | Weighted average life (years) | Weighted average exercise price | Exercisable on September 30, 2024 | ||||||||||||||||
| Stock options | $ | $ | ||||||||||||||||||
16. Warrant Inducement
On
May 9, 2024, the Company entered into a warrant inducement agreement (the “Inducement”) with the holder of existing warrants
to purchase an aggregate
| 17 |
17. Rental Income
During
the year ended December 31, 2022, the Company entered into a sublease agreement for its warehouse in Mississauga, Ontario, Canada. The
sublease commenced on
During
the nine months ended September 30, 2024, the Company recognized rental income of $
18. Subsequent Events
The Company has evaluated subsequent events through November 13, 2024. The following events occurred after the quarter ended September 30, 2024:
| ● | On October 3, 2024, the Company announced its first partnership with a government agency for the sale of Worksport tonneau covers. This government agency has a fleet of an estimated two million pickup trucks nationwide. | |
| ● | On October 9, 2024, the Company announced it is expanding its product line to include tonneau covers compatible with the Rivian R1T electric pickup truck. | |
| ● | On
October 17, 2024, the Company announced a strategic cost-saving initiative to cut $ | |
| ● | On
October 17, 2024, the Company announced The Nasdaq Stock Market LLC provided formal notice that the Company is eligible for an additional
180 calendar days to regain compliance with the minimum $ | |
| ● | On October 23, 2024, the Company announced its targeted market release of its highly anticipated AL4 Premium Tonneau Cover to be dated December 15th, 2024, with a complementary preorder campaign announced as of October 29, 2024. | |
| ● | On October 31, 2024, the Company announced that it’s SOLIS Solar tonneau cover has been improved to operate at 60V, thereby bringing a substantial cost savings to consumers and enabling a wider breadth of battery integrations. |
| 18 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This section and other parts of this Quarterly Report on Form 10-Q (“Form 10-Q”) contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of future performance and actual results may differ significantly from the results discussed in the forward-looking statements. All forward-looking statements in this Form 10-Q are made based on current expectations, forecasts, estimates and assumptions, and involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. In evaluating these statements, various factors, uncertainties, and risks should be specifically considered that could affect future results or operations. These factors, uncertainties and risks may cause actual results to differ materially from any forward-looking statement set forth in this Form 10-Q. These risks and uncertainties described and other information contained in the reports filed with or furnished to the SEC should be carefully considered before making any investment decision with respect to the Company’s securities. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Unless otherwise stated, all information presented herein is based on the Company’s fiscal calendar, and references to particular years, quarters, months or periods refer to the Company’s fiscal years ended December 31st and the associated quarters, months and periods of those fiscal years. Each of the terms “Company” and “Worksport” as used herein refers collectively to Worksport Ltd. and its subsidiaries, unless otherwise stated.
The following discussion should be read in conjunction with the Company’s Annual Report Form 10-K for the fiscal year ended December 31, 2023 filed with the U.S. Securities and Exchange Commission (the “SEC”) and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q.
Overview
Worksport Ltd., through its subsidiaries, designs, develops, manufactures, and owns the Intellectual Property on a portfolio of tonneau cover, solar integration, portable power station, and NP (Non-Parasitic), Hydrogen-based green energy products and solutions for the automotive aftermarket accessories, power storage, residential heating, and electric vehicle-charging industries. We seek to provide consumers with next-generation automotive aftermarket accessories while capitalizing on growing consumer interest in clean energy solutions and power grid independence.
Rising Popularity of Electric Vehicles
Electric Vehicles (EVs) have been exponentially increasing in consumer interest, whether that interest takes the form of vehicle pre-orders, sales, or investments. As we begin marketing our Worksport SOLIS and COR, we plan to market the SOLIS as a must-have accessory for electric light duty vehicle owners while simultaneously riding the coattails of EV popularity to promote our other products (COR and conventional tonneau covers) to the very large population of Americans that have an interest in EVs without the funds to purchase them. Further, participating in the EV space allows us to target consumers with an interest in cutting-edge technologies – a great market in which to promote our COR.
Regulatory Environment Favoring Electric Vehicles
The Build Back Better Bill was a strong indication of upcoming and favorable USA regulations. Many regulations that improve North America’s EV charging infrastructure or provide grants to businesses operating in the EV space will benefit us. While we are primarily focused on the light duty vehicle market, our energy products are particularly useful for electric light duty pickup trucks and, therefore, are positioned to benefit greatly from any bill that increases the prevalence of such vehicles.
| 19 |
Limited Competitive Landscape
Our conventional tonneau covers are engineered for enhanced user experience and resistance to wear-and-tear, making them strong and competitive products in an otherwise consolidated and saturated market. The Worksport COR, however, operates in a much wider yet unsaturated market. The global Portable Power Station market is quickly growing, and the competitive landscape is far from consolidated. Even less consolidated, the solar tonneau cover market is in its infancy, and it’s a market in which we have first-mover advantage. To ensure we do not fall behind future competitors, we are highly focused on protecting our intellectual property both domestically and abroad.
Business Developments
The following highlights recent material developments in our business in the three months ended September 30, 2024:
| ● | On July 11, 2024, the Company launched a new dealer webpage to facilitate sales to tonneau cover dealers by offering a simplified ordering process. | |
| ● | On July 19, 2024, the Company, as the guarantor, and Worksport New York Operations Corporation as well as Worksport USA Operations Corporation, entered into a $6,000,000 Revolving Financing and Assignment Agreement with an external lending entity with a maturity of 24 months from initial funding (July 2026). Upon transaction close, the Company drew down approximately $5.06 million of the Revolving Credit Facility, net of $790,000 of interest reserve required to be withheld to ensure interest payments by the Company. The Company used $4.73 million of the drawn down amount to refinance the Company’s mortgage on the Company’s real property located at 2500 North America Dr. in West Seneca, New York, and additionally drew approximately $330,000 to fund operations. | |
| ● | On July 23, 2024, the Company engaged in stock option repricing for certain employees, executive officers, and members of the board of directors of the Company. All included options’ exercise prices were repriced to $0.7042 – the closing price per share of the Company’s Common Stock as reported on The Nasdaq Stock Market on July 23, 2024. The Repriced Options consisted of certain outstanding stock options that had been granted under the Company’s 2015 Equity Incentive Plan, the 2021 Equity Incentive Plan and 2022 Stock Incentive Plan as of the Effective Date. | |
| ● | On August 6, 2024, through a partnership with Firework, the Company launched a new live sales feature to drive direct to consumer sales. | |
| ● | On August 13, 2024, the Company hosted its first live earnings call. | |
| ● | On September 3, 2024, the Company launched its new Dealer Sales Initiative, which represents a sharp expansion of its sales team to driver sales amount dealers. | |
| ● | On September 4, 2024, the Company announced an expansion of it’s product lines to service a wider range of truck models. | |
| ● | On September 4, 2024, the Company, through its wholly owned subsidiary, Worksport USA Operations Corporation, entered into a $1,487,200 credit and security agreement with an external lending entity with a maturity of 36 months from initial funding (September 2027). Upon transaction close, the Company received net proceeds of $1,437,998. The Company and its wholly owned subsidiary, Worksport New York Operations Corporation, serve as guarantors on the loan. | |
| ● | On September 11, 2024, the Company published results from a lab test in which it found that the COR Hub + Battery, which carries over 1.7 kWh of power, added approximately seven miles of range to a Tesla Model 3 when used as a Level 1 power source. |
Key Factors Affecting our Performance
As a result of a number of factors, our historical results of operations may not be comparable to our results of operations in future periods, and our results of operations may not be directly comparable from period to period. Set forth below is a brief discussion of the key factors impacting our results of operations.
Climate Change
Climate change threatens to cause many foreseeable as well as unforeseeable ramifications. In cautious preparation for those that are foreseeable, we have strategically begun domestic manufacturing operations in Western New York – an economically growing region not immediately threatened by climate change to the same extent as other regions and possibly one that may benefit from future population migrations within the United States of America. Further, we intend to lower our own carbon footprint by investing in energy-saving measures in our factory in West Seneca, NY. Considering climate change may also exacerbate geopolitical tensions, we are working to diversify our supply chain and lower our reliance on any particular region or country for raw materials in order to lower our exposure to climate change-induced economic or political instability.
| 20 |
We believe our Worksport SOLIS and Worksport COR products will be received positively by the public for their resilience to, and even increased utility as a result of, Climate Change. However, we acknowledge the potentially negative environmental impacts of poor battery recycling and increasing demand for precious metals. We are actively researching ways to lower such environmental impacts.
Inflation
Prices of certain commodity products, including raw materials, are historically volatile and are subject to fluctuations arising from changes in domestic and international supply and demand, labor costs, competition, market speculation, government regulations, trade restrictions and tariffs. Increasing prices of the component materials for parts of our goods may impact the availability, quality and price of our products as suppliers search for alternatives to existing materials and increase the prices they charge. Our suppliers may also fail to provide consistent quality of product as they may substitute lower cost materials to maintain pricing levels. Rapid and significant changes in commodity prices may negatively affect our profit margins, and it may be difficult to mitigate worsened margins through customer pricing actions and cost reduction initiatives.
Such an inflationary environment also increases our direct cost of raw goods or processed goods for our original equipment manufacturing as well as indirect costs such as overhead and rent. Due to these present and forecasted price increases and the temporary increases in ocean freight and container handling costs faced in recent periods, Worksport factors in all costs when assessing proper pricing of its goods for sale.
Additionally, as central banks and the U.S. Federal Reserve increase interest rates to combat global inflation, the cost of debt financing increases. While we currently do not have material debt other than our $6.0 million Revolving Credit Facility, our facility’s variable rate fluctuates along with the Prime Rate, meaning our monthly interest costs vary not only by our usage of the facility but by interest rates as well. We continue to explore debt financing options at reasonable interest rates in order to strengthen our cash position.
Elevated interest rates have also resulted in a shift in institutional holdings away from micro-cap equities, which has negatively influenced our stock’s trading volume. We continue to forge relationships with institutional investors and analysts in order to maintain a healthy trading volume.
Inflation has fallen since it’s 2022 highs, although inflation rates are still above the Federal Reserve’s target rate of 2%. Additionally, for the first time since the Federal Reserves’ sharp post-Covid interest rate hike, during it’s September meeting, the Federal Reserve announced it is lowering the overnight borrowing rate by 50 basis points, and it gave guidance of an additional 50 basis point cut by end of FY24. It is possible these interest rate cuts result in an increase in inflation.
Gasoline Prices and Supply Chain Issues
We faced significantly higher ocean freight, trucking, and container handling costs as well as last mile delivery costs in 2021 and 2022 than we did in previous years – all of which have increased our products’ landed costs. Higher oil and gasoline prices further increased these costs, and while such prices have come down from their 2022 highs, we continue to closely monitor gasoline and shipping costs. While the Freight Rate Index has significantly increased since late 2023 as a result of Houthi attacks against cargo ships in the Red Sea and the concurrent decline in activity across the Panama Canal, the shipping routes used by the Company have not faced dramatic price hikes. Regardless, the Company is closely monitoring international shipping costs. Further, there is a risk of worker strikes within our supply chain, such as the October US port workers strike that was postponed to January, 2025, causing higher import prices for our raw materials and finished goods.
We are also identifying North American suppliers of our products’ components and will prioritize transport by rail when possible to avoid high trucking costs. Our transition towards domestic manufacturing and assembly is anticipated to largely offset these higher costs, as we believe we will be less exposed to higher international shipping costs.
| 21 |
Geopolitical Conditions
In February 2022, Russia initiated significant military action against Ukraine. In response, the U.S. and certain other countries imposed significant sanctions and export controls against Russia, Belarus and certain individuals and entities connected to Russian or Belarusian political, business, and financial organizations, and the U.S. and certain other countries could impose further sanctions, trade restrictions, and other retaliatory actions should the conflict continue or worsen. It is not possible to predict the broader consequences of these conflicts, including related geopolitical tensions, and the measures and retaliatory actions taken by the U.S. and other countries in respect thereof as well as whether any counter measures or retaliatory actions in response, including, for example, potential cyberattacks or the disruption of energy exports, are likely to cause regional instability and geopolitical shifts, which could materially adversely affect global trade, currency exchange rates, regional economies and the global economy. These situations remain uncertain, and while it is difficult to predict the impact of any of the foregoing, the conflicts and actions taken in response to these conflicts could increase our costs, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition, and results of operations.
While we do not have any direct operations or significant sales in the Middle East, geopolitical tensions and ongoing conflicts in the region, particularly between Israel and Hamas, and more recently Israel and Hezbollah, may lead to global economic instability and fluctuating energy prices that could materially affect our business. It is not possible to predict the broader consequences of the Israeli wars, including related geopolitical tensions, and the measures and actions taken by other countries in respect thereof, which could materially adversely affect global trade, currency exchange rates, regional economies and the global economy. While it is difficult to predict the impact of any of the foregoing, the Israeli wars may increase our costs, disrupt our supply chain, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition and results of operations.
Foreign Currencies
We are subject to foreign exchange risk as we manufacture certain products and components in China, market extensively in both Canadian and U.S. markets, employ people residing in both the U.S. and Canada and, to date, have raised funds in U.S. Dollars. Meanwhile, we report results of operations in U.S. Dollars. Since some of our Canadian customers pay in Canadian Dollars, we are subject to gains and losses due to fluctuations in the USD relative to the Canadian Dollar. Our manufacturers in China are paid in USD to better avoid the relatively greater fluctuation of the Chinese Yuan. To the extent the U.S. dollar strengthens against any of these foreign currencies, the translation of these foreign currencies denominated transactions results in reduced revenue, operating expenses and net income for our operations.
RESULTS OF OPERATIONS
Three Months Ended September 30, 2024 compared to the Three Months Ended September 30, 2023
Net Sales
For the three months ended September 30, 2024, net sales from our entire line of products was $3,122,359, as compared to $458,483 for the three months ended September 30, 2023. Year-over-year net sales increased by approximately 581%. For the three months ended September 30, 2024, net sales generated in Canada was $28,751 as compared to $4,225 for the same period in 2023. For the three months ended September 30, 2024, net sales generated in the United States was $3,093,608 compared to $454,258 for the same period in 2023, an increase of 581% .
Net sales increased during the three months ended September 30, 2024 compared to the same period the prior year due to increased sales of tonneau covers to a private label partner, various dealers and distributors, and end users via the Company’s online marketplaces. The Company continues to focus on establishing new and strengthening existing business-to-consumer and business-to-business sales channels while also strengthening customer support to increase customer satisfaction and enable high product turnover. For business-to-consumer channels, we have configured our product offerings in a manner conducive with cost-effective marketing, allowing us to securely invest in marketing and sales campaigns. For business-to-business channels, we have created all necessary marketing/sales materials, policies, and teams as well as an online dealer marketplace, and we are now actively contacting thousands of leads and presenting our product offerings to various dealers, jobbers, and retailers across the United States and Canada. We intend to gradually increase output capacity through refined production processes and increased personnel.
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Net sales from online retailers of our products increased from $21,599 during the three months ended September 30, 2023, to $1,594,368 during the three months ended September 30, 2024. Online retailers accounted for 51% of total net sales for the three months ended September 30, 2024, compared to 5% for the three months ended September 30, 2023. Distributor net sales increased for the three months ended September 30, 2024, compared with the three months ended September 30, 2023, with net sales of $114,681 and $4,225, respectively. Distributors accounted for 4% of total net sales for the three months ended September 30, 2024. Private label net sales increased from $432,659 for the three months ended September 30, 2023, to $1,413,310 for the three months ended September 30, 2024. Private label net sales accounted for 45% of total net sales for the three months ended September 30, 2024. We expect to continue to grow our fields of business as we develop unique products with enhanced utility to offer to other prospective clients in the U.S. and Canadian markets.
We distribute our tonneau covers in Canada and the United States through an expanding network of wholesalers, private labels, distributors, and online retail channels, including eBay, Amazon, Walmart, and our own e-commerce platform hosted on Shopify. Distribution via each aforementioned channel is expected to increase during 2024. We have pursued and will continue to pursue relationships with Original Equipment Manufacturers with the intention of distributing through them as well.
Cost of Sales
Cost of sales increased by 680%, from $368,796 for the three months ended September 30, 2023, to $2,875,186 for the three months ended September 30, 2024. Our cost of sales, as a percentage of net sales, was approximately 92% and 80% for the three months ended September 30, 2024 and 2023, respectively. Our cost of sales as a percentage of net sales increased primarily driven by two factors: (1) strategic discounting aimed at boosting traffic to our direct-to-consumer online marketplace, and (2) overhead allocation associated with sold inventory produced in previous periods, which had limited production volumes. Our discounting strategy is part of a broader initiative to enhance market presence and build brand awareness. We anticipate that this will position us for sustained customer engagement in future periods, during which discounting may not be necessary to the same extent. Additionally, overhead absorption was higher due to the allocation of fixed costs over a smaller production volume in prior periods. As production volume grows and our manufacturing process becomes more efficient, we expect to allocate these costs across a larger base. This scaling will be facilitated by reallocating more of our existing human capital and machinery resources from design engineering and testing functions toward production. This shift is intended to support ongoing production increases and drive long-term efficiencies in our cost structure.
We provide our distributors and online retailers an “all-in” wholesale price. This includes any import duty charges, taxes, and shipping charges. Discounts are applied if the distributor or retailer chooses to use their own shipping process. Certain exceptions apply on rare occasions where product is shipped outside the contiguous United Sates or from the United States to Canada. Volume discounts are offered to certain high-volume customers, and we also offer a “dock price” or “pickup program” whereby clients are able to pick up product directly from our stocking warehouse.
Operating Expenses
Operating expenses increased for the three months ended September 30, 2024 by $143,193, from $4,009,196 for the three months ended September 30, 2023 to $4,152,389, due to the following factors:
| ● | General and administrative expenses decreased by $216,233, from $3,091,488 in 2023 to $2,875,255 in 2024. General and administrative is constant with a slight decrease compared to prior year as the Company begins to shift its focus to production and research and development activities. | |
| ● | Sales and marketing expenses increased by $280,391, from $380,847 for 2023 to $661,238 for 2024. The increase in sales and marketing is primarily attributable to the Company’s marketing campaign to create brand and product awareness. | |
| ● | Professional fees, which include accounting, legal, and consulting fees, increased from $539,126 in 2023 to $621,728 in 2024. The increase in professional fees was due primarily to payment of commissions to third parties, stock options modification, and its associated fees. | |
| ● | We realized a gain on foreign exchange of $5,832 during 2024, compared to a gain on foreign exchange of $2,265 for the prior period due to conversions between CAD and USD. |
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Other Income and Expenses
We reported net other expenses for the three months ended September 30, 2024 of $229,701, compared to a $29,789 for three months ended September 30, 2023. Net other expenses can be attributed to increased interest expense and decreased rental income.
Net Loss
Net loss for the three months ended September 30, 2024 was $4,134,917, compared to a net loss of $3,949,298 for the three months ended September 30, 2023 – an increase of 4.7%. The increase in the net loss can be attributed to the increase in various operating expenses as we focus on expanding our operations, research and development, manufacturing, and supply chain.
Nine Months Ended September 30, 2024 compared to the Nine Months Ended September 30, 2023
Net Sales
For the nine months ended September 30, 2024, net sales from our entire line of products was $5,556,535, as compared to $690,259 for the nine months ended September 30, 2023. Year-over-year net sales increased by approximately 705%. For the nine months ended September 30, 2024, net sales generated in Canada was $80,530 as compared to $6,961 for the same period in 2023. For the nine months ended September 30, 2024, net sales generated in the United States was $5,476,005 compared to $683,298 for the same period in 2023, an increase of 701% .
Net sales increased during the nine months ended September 30, 2024 compared to the same period the prior year due to increased net sales of tonneau covers to a private label partner, various dealers and distributors, as well as end users via the Company’s online marketplaces. The Company continues to focus on establishing new and strengthening existing business-to-consumer and business-to-business net sales channels while also strengthening customer support to increase customer satisfaction and enable high product turnover. For business-to-consumer channels, we have configured our product offerings in a manner conducive to cost-effective marketing, allowing us to securely invest in marketing and sales campaigns. For business-to-business channels, we have created all necessary marketing/sales materials and policies as well as an online dealer marketplace, and we are now actively contacting thousands of leads and presenting our product offerings to various dealers, jobbers, and retailers across the United States and Canada. We intend to gradually increase output capacity through refined production processes and increased personnel.
Net sales from online retailers of our products increased from $62,827 during the nine months ended September 30, 2023, to $2,446,053 during the nine months ended September 30, 2024. Online retailers accounted for 44% of total net sales for the nine months ended September 30, 2024, compared to 9% for the nine months ended September 30, 2023. Distributor net sales increased for the nine months ended September 30, 2024, compared with the nine months ended September 30, 2023, with net sales of $204,158 and $6,961, respectively. Distributor net sales accounted for 4% of total net sales for the nine months ended September 30, 2024. Private label net sales increased from $620,471 for the nine months ended September 30, 2023, to $2,906,324 for the nine months ended September 30, 2024. Private label net sales accounted for 52% of total net sales for the nine months ended September 30, 2024. We expect to continue to grow our fields of business as we develop unique products with enhanced utility to offer to other prospective clients in the U.S. and Canadian markets.
We distribute our tonneau covers in Canada and the United States through an expanding network of wholesalers, private labels, distributors, and online retail channels, including eBay, Amazon, Walmart, and our own e-commerce platform hosted on Shopify. Distribution via each aforementioned channel is expected to increase during 2024. We have pursued and will continue to pursue relationships with Original Equipment Manufacturers with the intention of distributing through them as well.
Cost of Sales
Cost of sales increased by 818%, from $541,841 for the nine months ended September 30, 2023, to $4,975,277 for the nine months ended September 30, 2024. Our cost of sales, as a percentage of net sales, was approximately 89% and 78% for the nine months ended September 30, 2024 and 2023, respectively. Our cost of sales as a percentage of net sales increased primarily driven by two factors: (1) strategic discounting aimed at boosting traffic to our direct-to-consumer online marketplace, and (2) overhead allocation associated with sold inventory produced in previous periods, which had limited production volumes. Our discounting strategy is part of a broader initiative to enhance market presence and build brand awareness. We anticipate that this will position us for sustained customer engagement in future periods, during which discounting may not be necessary to the same extent. Additionally, overhead absorption was higher due to the allocation of fixed costs over a smaller production volume in prior periods. As production volume grows and our manufacturing process becomes more efficient, we expect to allocate these costs across a larger base. This scaling will be facilitated by reallocating more of our existing human capital and machinery resources from design engineering and testing functions toward production. This shift is intended to support ongoing production increases and drive long-term efficiencies in our cost structure.
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We provide our distributors and online retailers an “all-in” wholesale price. This includes any import duty charges, taxes, and shipping charges. Discounts are applied if the distributor or retailer chooses to use their own shipping process. Certain exceptions apply on rare occasions where product is shipped outside the contiguous United Sates or from the United States to Canada. Volume discounts are offered to certain high-volume customers, and we also offer a “dock price” or “pickup program” whereby clients are able to pick up product directly from our stocking warehouse.
Operating Expenses
Operating expenses increased for the nine months ended September 30, 2024 by $700,094, from $11,336,594 for the nine months ended September 30, 2023 to $12,036,668, due to the following factors:
| ● | General and administrative expenses increased by $1,530,058, from $6,965,901 in 2023 to $8,495,959 in 2024. The increase was related to increased research and development activities, increased employment of support personnel including engineers, and increases in wages and salaries as we seek to expand our operations and further develop our products. | |
| ● | Sales and marketing expenses decreased by $267,103, from $1,473,910 for 2023 to $1,206,807 for 2024. The decrease in sales and marketing is primarily attributable to the completion of several marketing agreements and lower cost of in-house marketing campaigns to create brand and product awareness. | |
| ● | Professional fees, which include accounting, legal, and consulting fees, decreased from $2,899,190 in 2023 to $2,332,069 in 2024. The decrease in professional fees was due primarily to insourcing of certain business processes and fewer equity grants to third parties for services rendered. | |
| ● | We realized a loss on foreign exchange of $1,853 during 2024, compared to a gain on foreign exchange of $2,407 for the prior period due to conversions between CAD and USD. |
Other Income and Expenses
We reported net other expenses for the nine months ended September 30, 2024 of $407,543, compared to net expenses of $81,847 for the nine months ended September 30, 2023. Other expenses can be attributed to decreased interest and rental income.
Net Loss
Net loss for the nine months ended September 30, 2024 was $11,862,973, compared to a net loss of $11,270,023 for the nine months ended September 30, 2023 – an increase of 5.3%. The increase in the net loss can be attributed to the increase in various operating expenses as we focus on expanding our operations, research and development, manufacturing, and supply chain.
Liquidity and Capital Resources; Going Concern
The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. During the three and nine months ended September 30, 2024, the Company had a net loss of $4,134,917 (2023 – $3,949,298) and $11,862,973 (2023 – $11,270,023), respectively. As of September 30, 2024, the Company has working capital of $5,880,926 (December 31, 2023 – $1,956,894) and had an accumulated deficit of $60,176,150 (December 31, 2023 – $48,313,177). The Company has not generated profit from operations since inception and to date has relied on debt and equity financings for continued operations. The Company’s ability to continue as a going concern is dependent upon the ability to generate cash flows from operations and obtain equity and/or debt financing. The Company intends to continue funding operations through equity and debt financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements in the long term. There can be no assurance that the steps management is taking will be successful.
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Despite the Company having completed its purchasing of large manufacturing machinery for current output needs, operational costs are expected to remain elevated and, thus, further decrease cash and cash equivalents. Concurrently, the Company intends to continue its ramp-up of manufacturing and increasing sales volumes in the second half of 2024, which should mitigate the effects of operational costs on cash and cash equivalents; this view is supported by the fact that the manufacturing facility of the Company was completed for initial production output in 2023 and started to generate revenue in the third quarter of 2023, registering its highest quarterly sales total in the Company’s history in the third quarter of 2024.
The Company has successfully raised cash, and it is positioned to do so again if deemed necessary or strategically advantageous. During the year ended December 31, 2021, the Company, through its Reg-A public offering, private placement offering, underwritten public offering, and exercises of warrants, raised an aggregate of approximately $32,500,000. On September 30, 2022, the Company filed a shelf registration statement on Form S-3, which was declared effective by the SEC on October 13, 2022, allowing the Company to issue up to $30,000,000 of common stock and prospectus supplement covering the offering, issuance and sale of up to $13,000,000 of common stock that may be issued and sold under an At The Market Offering Agreement dated September 30, 2022 (“ATM Agreement”), with H.C. Wainwright & Co., LLC, as the sales agent (“HCW”). Pursuant to the ATM Agreement, HCW is entitled to a commission equal to 3.0% of the gross sales price of the shares of common stock sold. As of September 30, 2024, the Company has sold and issued 604,048 shares of common stock in consideration for net proceeds of $780,356 under the ATM Agreement.
On November 2, 2023, the Company consummated a registered direct offering pursuant to which it sold 1,925,000 shares of common stock and 1,575,000 pre-funded warrants to an institutional investor for a total net proceeds of $4,261,542. Concurrently with the registered direct offering, the Company issued the same institutional investor 7,000,000 warrants in a private sale. The warrants are exercisable for 7,000,000 shares of common stock for $1.34 per share six months after issuance until five and a half years from the issuance date, subject to beneficial ownership limitations as described in the warrants. The Company registered the 7,000,000 shares of common stock underlying the warrants on a Form S-1 (333-276241) which was declared effective by the SEC on December 29, 2023.
On March 20, 2024, the Company consummated a registered direct offering pursuant to which it sold 2,372,240 shares of common stock and 1,477,892 pre-funded warrants to the same institutional investor as in the Company’s registered direct offering on November 2, 2023, for total net proceeds of $2,629,083. Concurrently with the registered direct offering, the Company issued the institutional investor 7,700,264 warrants in a private sale. The warrants are exercisable for 7,700,264 shares of common stock for $0.74 per share six months after issuance until five and a half years from the issuance date, subject to beneficial ownership limitations contained in the warrants. The Company registered the 7,700,264 shares of common stock underlying the warrants on a Form S-1 (333-278461) which was declared effective by the SEC on April 8, 2024.
As disclosed in the footnotes to our financial statements, on May 14, 2024, the Company and Worksport New York Operations Corporation entered into an Omnibus Amendment of Loan Documents with Northeast Bank. This amendment pertains to the secured loan agreement dated May 4, 2022, which was originally used to finance the purchase of our facility and land in West Seneca, New York. Effective as of May 10, 2024, the Lender extended the maturity date of the loan from May 10, 2024, to August 10, 2024. This extension alleviated immediate cash flow pressures by postponing the loan repayment, allowing us to manage our resources more effectively and focus on other operational needs. As part of the Loan Amendment, we agreed to pay the Lender an extension fee of $106,000. This fee was deemed fully earned but was waived, as the loan was repaid in full on or before the new maturity date. If the loan was not repaid by the extended maturity date or was accelerated due to default, the fee would have become payable. Additionally, we agreed to an exit fee of $106,000 under similar conditions. This fee was waived, as the loan was repaid on or before the new maturity date without acceleration. This loan extension demonstrates our ability to negotiate favorable terms with our creditors and underscores our commitment to maintaining strong liquidity. This strategic decision supported our long-term growth and helped us navigate the current economic and interest rate environment more effectively. The details of the Loan Amendment have been filed as an exhibit to this report and are incorporated by reference herein.
On May 29, 2024, the Company entered into Inducement Offer Letter with a certain holder of existing warrants to purchase shares of the Company’s common stock at an exercise price of $1.34 per share issued on November 2, 2024, pursuant to which the Holder agreed to exercise for cash its Existing Warrants to purchase an aggregate of 7,000,000 shares of the Company’s common stock, at a reduced exercised price of $0.5198 per share, in consideration for the Company’s agreement to issue new warrants to purchase up to 12,950,000 shares of the Company’s common stock at $0.5198 per share. The Company received aggregate gross proceeds of approximately $3,638,600 from the exercise of the Existing Warrants by the Holder and the sale of the Inducement Warrants, before deducting placement agent fees and other offering expenses payable by the Company.
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On July 19, 2024, the Company, as the guarantor, and Worksport New York Operations Corporation as well as Worksport USA Operations Corporation, entered into a $6 million Revolving Financing and Assignment Agreement with an external lending entity, Amerisource Business Capital. Upon transaction close, the Company drew down approximately $5.06 million of the Revolving Credit Facility, net of $790,000 of interest reserve required to be withheld to ensure interest payments by the Company. The Company used $4.73 million of the drawn down amount to refinance the Company’s mortgage on the Company’s real property located at 2500 North America Dr. in West Seneca, New York, and additionally drew approximately $330,000 to fund operations.
On September 4, 2024, the Company, through its wholly owned subsidiary, Worksport USA Operations Corporation, entered into a $1,487,200 credit and security agreement with an external lending entity with a maturity of 36 months from initial funding (September 2027). Upon transaction close, the Company received net proceeds of $1,437,998. The Company and its wholly owned subsidiary, Worksport New York Operations Corporation, serve as guarantors on the loan.
To date, the Company’s principal sources of liquidity consist of net proceeds from public and private securities offerings and cash exercises of outstanding warrants. Management is focused on transitioning towards revenue as its principal source of liquidity by growing existing product offerings as well as the Company’s customer base. The Company cannot give assurance that it can increase its cash balances or limit its cash consumption and thus maintain sufficient cash balances for planned operations or future business developments. Future business development and demands may lead to cash utilization at levels greater than recently experienced. The Company may need to raise additional capital in the future. However, the Company cannot provide assurances it will be able to raise additional capital on acceptable terms, or at all.
The Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. Still, certain factors indicate the existence of a material uncertainty that cast substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. These adjustments could be material.
Cash Flow Activities
Cash decreased from $3,365,778 at December 31, 2023, to $1,857,685 at September 30, 2024 – a decrease of $1,508,093 or 45%.
As of September 30, 2024, we had current assets of $8,887,057 (December 31, 2023 – $9,123,506) and current liabilities of $3,006,131 (December 31, 2023 – $7,166,612). As of September 30, 2024, we had working capital of $5,880,926 (December 31, 2023 – $1,956,894) and an accumulated deficit of $60,176,150 (December 31, 2023 – $48,313,177).
Operating Activities
Net cash used by operating activities for the nine months ended September 30, 2024 was $7,959,212, compared to $8,194,347 in the prior period. While net loss increased by $592,950 and non-cash payments decreased by $1,585,718, they were more than offset by a $2,413,803 decrease in cash used in operating assets and liabilities relative to the prior period, which reflects the Company’s improved inventory storage and consumption efficiency.
Accounts receivable increased at September 30, 2024 by $3,320 and increased by $455,509 in the prior period. This small increase relative to the prior period was due to there being a small increase in business-to-business sales relative to the prior period.
Inventory increased at September 30, 2024 by $2,506,568, and at September 30, 2023 by $2,205,697, as a result of our purchasing more raw materials for increased output to fulfill rising demand for our domestically-produced tonneau covers. Prepaid expenses and deposits decreased by $1,240,649 at September 30, 2024, and decreased by $26,200 at September 30, 2023 due to deposits used and made by us for the purchase of inventory.
Accounts payable and accrued liabilities increased at September 30, 2024 by $1,004,819 compared to a decrease of $152,474 in the prior period.
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Investing Activities
Net cash used in investing activities for the nine months ended September 30, 2024 was $500,760 compared to $3,512,469 in the prior period. The decrease in investing activities was primarily attributable to higher capital expenditure on various manufacturing equipment in 2023.
Financing Activities
Net cash generated by financing activities for the nine months ended September 30, 2024 was $6,951,879 compared to net cash generated by financing activities of $51,637 in the prior period. Cash generated from financing activities increased as the Company issued additional shares, warrants and access to credit lines compared to 2023.
Critical Accounting Policies
Our discussion and analysis of results of operations and financial condition are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis, including those related to provisions for uncollectible accounts receivable, inventories, valuation of intangible assets and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
The accounting policies that we follow are set forth in Note 2 to our financial statements as included in our 2023 Annual Report on Form 10-K filed on March 27, 2024. These accounting policies conform to accounting principles generally accepted in the United States and have been consistently applied in the preparation of the financial statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not Applicable.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the quarter covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the required time and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, cannot provide absolute assurance that the objectives of the control system are met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.
To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in our periodic reports filed with the SEC are prepared in accordance with generally accepted accounting principles. Management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are involved in lawsuits, claims, investigations, and proceedings, including pending opposition proceedings involving patents that arise in the ordinary course of business. We are not presently a party to any material pending or threatened legal proceedings, nor do we have any knowledge of any such pending claims.
Item 1A. Risk Factors
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”), which could materially affect our business, financial condition, liquidity, or future results. The risks described in our 2023 Annual Report are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, liquidity or future results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
| ● | 在2024年5月31日，公司發行了認股權證，以購買最高12,950,000股公司普通股，與持有現有認股權證的某特定持有人簽訂了誘因報價函，根據該函，持有人同意以現金行使其現有認股權證，購買總計7,000,000股公司普通股，行使價格爲每股$0.5198。每份誘因認股權證的行使價格爲每股$0.5198，自發行日期起六（6）個月後的任何時間可行使，前提是獲得股東批准，並在發行日期後五年半（5½）的行使期。公司聘請Maxim Group LLC（「Maxim」）作爲其獨家認股權證徵集代理和財務顧問，與認股權證誘因交易有關，並向Maxim支付現金費用，相當於從行使現有認股權證所獲收入的7.0%。公司已經使用並預期將使用這些交易的淨收入用於一般企業用途，包括運營資金。 |
上述warrants的發行被認爲根據證券法第4(a)(2)條或根據其制定的D條款免於註冊，因爲這些證券的發行是針對認可投資者，並未涉及公開發行。 該證券的接收者表示其意圖僅爲投資目的而收購證券，而不是爲了任何分配而進行銷售。
物品 3.優先證券違約
無。
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
On May 14, 2024, the Company and Worksport New York Operations Corporation entered into an Omnibus Amendment of Loan Documents with Northeast Bank in connection with that certain secured loan agreement, dated May 4, 2022, by and among the Company, as the guarantor, Worksport New York, as the borrower, and the Lender in connection with the Company’s purchase of its 152,847 square foot facility and 18 acres of land in West Seneca, New York on May 6, 2022 for a total purchase price of $8,150,000. Pursuant to the Loan Amendment, effective as of May 10, 2024, the Lender extended the initial maturity date of the Loan from May 10, 2024 to August 10, 2024. The Company also agreed to pay the Lender an extension fee of $106,000 which was deemed fully earned as of the date of the Loan Amendment. However, the Lender agreed to postpone payment of the Extension Fee until the occurrence of (i) the Loan not being repaid in full by or on the Extended Maturity Date; or (ii) Loan being accelerated following an Event of Default or Termination Date (as defined in the Forbearance Agreement). If the Loan is repaid in full on or prior to the Extended Maturity Date, the Lender has agreed to waive the Extension Fee. In addition to the Extension Fee, the Company agreed to pay the Lender an exit fee of $106,000 (the “Exit Fee”) in the event the Loan is not repaid in full on or prior to the Extended Maturity Date or if the Loan has been accelerated following an Event of Default or in connection with a Termination Event (as defined in the Forbearance Agreement). If the Loan is repaid in full on or prior to the Extended Maturity Date (and not as a result of an acceleration following a Termination Event), the Company will not be required to pay the Exit Fee.
Subsequent Events
| ● | On October 3, 2024, the Company announced its first partnership with a government agency for the sale of Worksport tonneau covers. This government agency has a fleet of an estimated two million pickup trucks nationwide. | |
| ● | On October 9, 2024, the Company announced it is expanding its product line to include tonneau covers compatible with the Rivian R1T electric pickup truck. | |
| ● | On October 17, 2024, the Company announced a strategic cost-saving initiative to cut $1.5 million in annual expenses without negatively impacting revenues. | |
| ● | On October 17, 2024, the Company announced The Nasdaq Stock Market LLC provided formal notice that the Company is eligible for an additional 180 calendar days to regain compliance with the minimum $1 bid requirement under Nasdaq Listing Rule 5550(a)(2). | |
| ● | On October 23, 2024, the Company announced its targeted market release of its highly anticipated AL4 Premium Tonneau Cover to be dated December 15th, 2024, with a complementary preorder campaign announced as of October 29, 2024. | |
| ● | On October 31, 2024, the Company announced that its SOLIS Solar tonneau cover has been improved to operate at 60V, thereby bringing a substantial cost savings to consumers and enabling a wider breadth of battery integrations. |
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Item 6. Exhibits
| * | Filed herewith. |
| ** | Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise specifically stated in such filing. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| WORKSPORT LTD. | ||
| Dated: November 13, 2024 | By: | /s/ Steven Rossi |
| Steven Rossi | ||
Chief Executive Officer and President (Principal Executive Officer) | ||
| Dated: November 13, 2024 | By: | /s/ Michael Johnston |
| Michael Johnston | ||
Chief Financial Officer (Principal Financial and Accounting Officer) | ||
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