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Worksport Ltd

Worksport LtdWKSPEarnings & Financial Report

Nasdaq · Industrials · Motor Vehicle Parts & Accessories

Worksport Ltd is a cleantech company specializing in portable solar energy solutions and custom truck bed accessories. Its core offerings include solar-powered tonneau covers for pickup trucks and portable mobile power stations, serving the North American automotive aftermarket and consumer clean energy segments.

What changed in Worksport Ltd's 10-K — 2022 vs 2023

Top changes in Worksport Ltd's 2023 10-K

332 paragraphs added · 282 removed · 218 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

70 edited+30 added−17 removed32 unchanged
When integrated into the design of an electric pickup truck, this power generation can be converted to additional vehicle mileage. The specific added mileage is dependent on many factors including but not limited to region of the world in which the vehicle is driven, weather conditions, season, temperature, hours of sun light per day, and average irradiance.
When integrated into the design of an electric pickup truck, this power generation can be converted to additional vehicle mileage. The specific added mileage is dependent on many factors including but not limited to the region of the world in which the vehicle is driven, weather conditions, season, temperature, hours of sun light per day, and average irradiance.
We are actively acquiring new engineering and design assets, both in-house and third-party. Our industrial engineers are based in both Canada and the United States, and they have developed and are further developing unique tonneau cover designs with enhanced user experience, cost-effective and sustainable materials, and automatable manufacturing potential.
We are actively acquiring new engineering and design assets, both in-house and third-party. Our design engineers are based in both Canada and the United States, and they have developed and are further developing unique tonneau cover designs with enhanced user experience, cost-effective and sustainable materials, and automatable manufacturing potential.
Some forms of tonneau covers include but are not limited to: ● Solid One Piece Caps and Lids; ● Retractable Covers; ● Soft Folding & Roll-Up Covers; and ● Hard Folding & Standing Covers. Solid one piece covers and retractable covers tend to have limited functionality and tend to be priced higher when compared to other types of tonneau covers.
Some forms of tonneau cover include but are not limited to: ● Solid One Piece Caps and Lids; ● Retractable Covers; ● Soft Folding & Roll-Up Covers; and ● Hard Folding & Standing Covers Solid one piece covers and retractable covers tend to have limited functionality and tend to be priced higher when compared to other types of tonneau covers.
Health and Safety We are committed to protecting our team members everywhere we operate and, as such, support employees with general safety trainings. We have also taken additional health and safety measures during the COVID-19 pandemic.
Health and Safety We are committed to protecting our team members everywhere we operate and, as such, support employees with general safety trainings. We have also taken additional health and safety measures during and after the COVID-19 pandemic.
If issued, pending applications would expire 20 years from the filing date of each application, excluding the filing date of any provisional applications and excluding any patent term adjustment that might be available following the grant of the patent.
If issued, pending utility patent applications would expire 20 years from the filing date of each application, excluding the filing date of any provisional applications and excluding any patent term adjustment that might be available following the grant of the patent.
Nasdaq Uplisting In connection with the Public Offering, our common stock and Public Warrant commenced trading on The Nasdaq Capital Market under the symbols “WKSP” and “WKSPW,” respectively, since August 4, 2021.
In connection with the Public Offering, our common stock and Public Warrant commenced trading on The Nasdaq Capital Market under the symbols “WKSP” and “WKSPW,” respectively, since August 4, 2021.
Retail end consumers are the end users of the products. 10 Competition Tonneau Cover Competitors The Tonneau Cover market is relatively consolidated with one industry leader, Real Truck (formerly Truck Hero), having the largest market share.
Retail end consumers are the end users of the products. Competition Tonneau Cover Competitors The Tonneau Cover market is relatively consolidated with one industry leader, Real Truck (formerly Truck Hero), having the largest market share.
Given these factors and our belief that we can develop less cumbersome, high functioning, and low cost soft and hard folding covers, we focus primarily on developing soft and hard folding covers. 8 Our tonneau cover revenue stream is largely proportional to sales of pickup trucks.
Given these factors and our belief that we can develop less cumbersome, high functioning, and low cost soft and hard folding covers, we focus primarily on developing soft and hard folding covers. 9 Our tonneau cover revenue stream is largely proportional to sales of pickup trucks.
Master warehouse distributors and big box stores stock and distribute products to their customers, which are usually local dealers and wholesalers. Dealers and wholesalers are local stores which sell products to some businesses and retail consumers in their area and online. Dealers purchase most of their products from their local distributor who deliver to them regularly.
Master warehouse distributors and big box stores stock and distribute products to their customers, which are usually local dealers and wholesalers. Dealers and wholesalers are local stores which sell products to some businesses and retail consumers in their area and online. Dealers purchase most of their products from their local distributor who delivers to them regularly.
The Public Offering price was $5.50 per unit, and each u nit consisted of one share of common stock and one warrant (“Public Warrant”) to purchase one share of common stock for $6.05 per share (110% of the unit offering price) from the date of issuance until the third anniversary of the issuance date.
The Public Offering price was $5.50 per unit, and each unit consisted of one share of common stock and one warrant (“Public Warrant”) to purchase one share of common stock for $6.05 per share (110% of the unit offering price) from the date of issuance until the third anniversary of the issuance date.
Real Truck has acquired upwards of 16 independent tonneau cover brands in North America, allowing it to concurrently target many different niche markets but also potentially cannibalizing its own sales. We compete directly with Real Truck. Other competitors in this space include Truck Accessories Group (Primarily Leer), Agricover (primarily Access), Truck Covers USA, and Paragon.
Real Truck has acquired upwards of 16 independent tonneau cover brands in North America, allowing it to concurrently target many different niche markets but also potentially causing it to cannibalize its own sales. We compete directly with Real Truck. Other competitors in this space include Truck Accessories Group (Primarily Leer), Agricover (primarily Access), Truck Covers USA, and Paragon.
For our COR and SOLIS components, we are establishing relationships with suppliers based in countries, including but not limited to China, Germany, Romania, Turkey, Philippines, and India. We actively seek to lower reliance on any country deemed a potential geo-political supply chain risk. Research and Development We invest in research and development activities on an ongoing basis.
For our COR and SOLIS components, we are establishing relationships with suppliers based in countries, including but not limited to the USA, Canada, China, Germany, Romania, Turkey, Philippines, and India. We actively seek to lower reliance on any country deemed a potential geo-political supply chain risk. Research and Development We invest in research and development activities on an ongoing basis.
Supply of Components Production of our soft and hard cover product lines requires components including but not limited to injection molded plastics, rubber hinges, rubber seals, foam corners, aluminum blanks, aluminum extrusions, and metal brackets.
Supply of Components Production of our soft and hard cover product lines requires components including but not limited to injection molded plastics, rubber hinges, rubber seals, foam corners, aluminum coils, aluminum extrusions, and metal brackets.
The Company is also in the process of preparing and filing several other utility and design patent applications across relevant countries and jurisdictions. Granted U.S. patents will expire between 2032 and 2036, excluding any patent term adjustment that might be available following the grant of the patent.
We are also in the process of preparing and filing several other utility and design patent applications across relevant countries and jurisdictions. Granted U.S. utility patents will expire between 2032 and 2040, excluding any patent term adjustment that might be available following the grant of the patent.
Despite crossover utility vehicles being the most common vehicle type on the road in the USA 1 , pickup trucks are the largest market by sales within the USA for specialty equipment – constituting 31% of this market 2 , which translated to $16 billion in sales during 2021. 2 This market is expected to grow from $50.9 billion in 2021 to $58.66 billion by 2025. 6 Within this pickup truck accessory market, 34% of accessories are truck bed & utility modifications 2 , which is the submarket in which we operate.
Despite crossover utility vehicles being the most common vehicle type on the road in the USA 1 , pickup trucks are the largest market by sales within the USA for specialty equipment – constituting 31% of this market 2 , which translated to $16 billion in sales during 2021. 2 This market is expected to grow from $51.80 billion in 2022 to $58.28 billion by 2026. 6 Within this pickup truck accessory market, 34% of accessories are truck bed & utility modifications 2 , which is the submarket in which we operate.
The SOLIS cover is intended to be sold as an Original Equipment Manufacturer product, as it can be integrated into the design of leading electric pickup trucks; consequently, we have and will continue forging relationships with electric pickup truck manufacturers, including but not limited to Workhorse, Atlis, Bollinger, and Hercules as well as Toyota, Stellantis, General Motors, Ford, Nissan, and Rivian.
The SOLIS cover is intended to be sold as an Original Equipment Manufacturer product, as it can be integrated into the design of leading electric pickup trucks; consequently, we have and will continue to forge and develop relationships with electric pickup truck manufacturers, including but not limited to Workhorse, Rivian, and Tesla as well as Toyota, Stellantis, General Motors, Ford, Nissan, Fisker, and Honda.
This includes patents, trademarks, copyrights and trade secrets. Although we believe the ownership of such intellectual property rights is an important factor in our business and that our success does depend in part on such ownership, we rely primarily on the innovative skills, technical competence and marketing abilities of our personnel.
Although we believe the ownership of such intellectual property rights is an important factor in our business and that our success does depend in part on such ownership, we rely primarily on the innovative skills, technical competence and marketing abilities of our personnel.
Our main telephone number is (888) 554-8789. Our main website is www.worksport.com . The contents of our website are not incorporated by reference into this Annual Report on Form 10-K.
Our main website is www.worksport.com . The contents of our website are not incorporated by reference into this Annual Report on Form 10-K.
Each soft cover is fitted with a powder-coated, lightweight aluminum frame and rear cam latches as well as ultra-violet (UV) protected, vinyl tri-layer material that seals around the truck bed with a rubber gasket designed to protect cargo from moisture and debris. Tri-fold soft covers are a lower cost option when compared to quad-fold tonneau covers.
Each soft cover is fitted with a powder-coated, lightweight aluminum frame and rear cam latches as well as ultra-violet (UV) protected, vinyl tri-layer material that seals around the truck bed with a rubber gasket designed to protect cargo from moisture and debris.
We have pursued and will continue to pursue relationships with Original Equipment Manufacturers with the intention of distributing through them as well. The specialty equipment aftermarket consists of three major types of customers, which include master warehouse distributors and big box stores, dealers and wholesalers, and retail end consumers.
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. The specialty equipment aftermarket consists of three major types of customers, which include master warehouse distributors and big box stores, dealers and wholesalers, and retail end consumers.
We are concurrently diversifying this list raw material suppliers who can use our production tools to continue producing our tonneau cover components, should trade with any particular or preferred raw material supplier become more expensive or difficult.
We are concurrently diversifying this list of raw material suppliers who can use our production tools to continue producing our tonneau cover components in order to lower the risk that trade with any particular or preferred raw material supplier become more expensive or difficult.
Currently, there are 284.9 million vehicles in operation in the USA 1 , 21%, or 59.5 million, of which are pickup trucks. 2 However, as a result of supply chain shortages, rising interest rates, high prices, and slowing sales, it may take until 2025 for new-vehicle sales to return to pre-pandemic levels. 1 While new vehicle sales have decreased, we are well-positioned to capitalize on new vehicle sales; we offer tonneau covers for each of the 10 most popular makes/models by projected 2022-2029 sales (including, for example, the Ford F-Series, RAM Pickups, and Chevrolet Silverado), as well as the top 10 most accessorized pickup truck makes/models projected in 2022-2029. 2 Within the USA market, pickup truck market revenue is expected to show a compound annual growth rate of 1.70% in 2023-2027. 3 Within this market, pickup trucks are most popular within the southern region of the United States 2 , and the two largest state markets for pickup trucks are by far Texas and California. 2 Globally, pickup truck market revenue is expected to show a compound annual growth rate of 1.01% in 2023-2027. 4 Electric pickup trucks are projected to gain a larger portion of the pickup truck market share each year through 2035 1 , as this submarket is estimated to have a compound annual growth rate of 29.7% between 2022 and 2023. 5 However, a large headwind acting against this trend is that pickup trucks tend to be more popular in areas with less-developed charging infrastructure 2 – a headwind that the SOLIS cover directly addresses and positions us favorably for possible partnerships and deals with electric pickup truck manufacturers.
As of late 2022, there were 284.9 million vehicles in operation in the USA 1 , roughly 21%, or 59.5 million, of which were pickup trucks. 2 However, as a result of recent supply chain shortages, heightened interest rates, high prices, and slowing sales, it may take until 2025 for new-vehicle sales to return to pre-pandemic levels. 1 While new vehicle sales have decreased, we are well-positioned to capitalize on new vehicle sales; we offer tonneau covers for each of the 10 most popular makes/models by projected 2022-2029 sales (including, for example, the Ford F-Series, RAM Pickups, and Chevrolet Silverado), as well as the top 10 most accessorized pickup truck makes/models projected in 2022-2029. 2 Within North America, the pickup truck market is expected to grow from $120 billion in 2022 to $160 billion by 2030, representing a compound annual growth rate of 5.9% in 2023-2030. 3 Within this market, pickup trucks are most popular within the southern region of the United States 2 , and the two largest state markets for pickup trucks are by far Texas and California. 2 Globally, the pickup truck market is expected to grow at a compound annual growth rate of 5.01% between 2023 and 2028, representing a $102.91 billion increase. 4 Electric pickup trucks are projected to gain a larger portion of the U.S. pickup truck market share each year through 2035. 1 In fact, the electric pickup truck submarket within North America is estimated to grow from $16.66 billion in 2024 to $64.65 billion in 2029, representing a compound annual growth rate of 31.15%. 5 However, a large headwind acting against this trend is that pickup trucks tend to be more popular in areas with less-developed charging infrastructure 2 – a headwind that the SOLIS cover directly addresses and positions us favorably for possible partnerships and deals with electric pickup truck manufacturers.
On April 1, 2022, the Company was issued 10,000 shares of common stock at par value of $0.0001 per share, representing 100% of the outstanding equity of Worksport New York Operations Corporation.
On April 1, 2022, the Company was issued 10,000 shares of common stock at par value of $0.0001 per share, representing 100% of the outstanding equity of Worksport New York Operations Corporation. Worksport Acquisition Corporation was incorporated in the State of Delaware on December 28, 2021.
We believe that being independent, innovative, operationally lean, and competitively priced will enable us to acquire a larger portion of the existing market share. In order to execute on this, we intend to have a small and effective sales team to forge strong business-to-business relationships, while turning inventory regularly through direct-to-consumer sales supported by a strong customer support team.
We believe that being independent, innovative, operationally lean, and competitively priced will enable us to acquire a larger portion of the existing market share. In order to execute on this, we have a small and effective sales team to forge strong business-to-business relationships as well as a small and effective customer support team to service both business-to-business and direct-to-consumer sales.
Soft Tonneau Covers Our soft tonneau cover offering consists of vinyl wrapped tri- and quad-fold tonneau covers manufactured overseas in Meizhou, China. Enhanced versions of our vinyl tri-fold soft tonneau covers are now available for purchase and marketed under a “PRO” designation; our quad-fold soft tonneau covers will soon have an upgraded “PRO” version available as well.
Soft Tonneau Covers Our soft tonneau cover offering consists of vinyl wrapped tri- and quad-fold tonneau covers manufactured overseas in Meizhou, China and Foshan, China. Enhanced versions of our vinyl tri- and quad-fold soft tonneau covers are now available for purchase and marketed under a “Pro” designation.
The COR main battery, a Lithium battery, boasts a capacity of 1534Wh while its Hot Swap Lithium Iron Phosphate (Li-LFP) battery has a capacity of around 200Wh. The system allows Bluetooth connection for monitoring and controlling the COR system and its external batteries.
The COR main battery, a Lithium battery, boasts a capacity of 1534Wh while its Hot Swap Nickel Manganese Cobalt (NMC) battery has a capacity of around 200Wh. The system allows Bluetooth connection for monitoring and controlling the COR system and its external batteries.
Pursuant to the ATM Agreement, H.C. Wainwright & Co., LLC (“Wainwright”) is entitled to a commission equal to 3.0% of the gross sales price of the shares of common stock sold.
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.
On January 1, 2022, the Company was issued 1,000 shares of common stock at par value of $0.0001 per share, representing 100% of the outstanding equity of Worksport Acquisition Corporation. Worksport USA Holding Corporation was incorporated in the State of Colorado on March 11, 2022.
On January 1, 2022, the Company was issued 1,000 shares of common stock at par value of $0.0001 per share, representing 100% of the outstanding equity of Worksport Acquisition Corporation. On August 8, 2023, this corporation was dissolved due to lack of operations and activity. Worksport USA Holding Corporation was incorporated in the State of Colorado on March 11, 2022.
In May 2020, FNHI changed its name from “Franchise Holding International Inc.” to “Worksport Ltd.” On May 21, 2021, the Board of Directors (“Board”) authorized the submission of a Certificate of Change/Amendment to the Nevada Secretary of State in which the Company sought to affect a reverse split of its common stock at the rate of 1-for-20 for the purpose of increasing the per share price for the Company’s stock in an effort to meet the minimum listing requirements of the Nasdaq.
On May 21, 2021, the Board of Directors (“Board”) authorized the submission of a Certificate of Change/Amendment to the Nevada Secretary of State in which the Company sought to affect a reverse split of its common stock at the rate of 1-for-20 for the purpose of increasing the per share price for the Company’s stock in an effort to meet the minimum listing requirements of The Nasdaq Stock Market LLC (“Nasdaq”).
Truck bed covers are among the top product categories for aftermarket accessory purchases in 2021 2 , and the size of the tonneau cover market within the USA was valued at $3 billion as of 2021. 7 As discretionary consumer goods, the specialty automotive part market is subject to consumer spending trends.
Truck bed covers are among the top product categories for aftermarket accessory purchases in 2021 2 , and the size of the tonneau cover market within the USA is expected to grow at a compound annual growth rate of 8.6% from $3 billion in 2021 to $5 billion in 2027. 7 As discretionary consumer goods, the specialty automotive part market is subject to consumer spending trends.
Retrieved from https://www.marketdecipher.com/report/electric-pickup-trucks-market 6. SEMA. 2022 Market Report . Retrieved from www.sema.org 7. Arizton. U.S. Tonneau Covers Market - Industry Outlook & Forecast 2022-2027 . Retrieved from https://www.arizton.com/market-reports/us-tonneau-covers-market 8. IBIS World. Per Capita Disposable Income . Retrieved from https://www.ibisworld.com/us/bed/per-capita-disposable-income/33/#: :text=Following%20the%20ending%20of%20government,when%20it%20may%20potentially%20hit. 9. Federal Reserve Board. Summary of Economic Projections . Retrieved from https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20221214.pdf. 10. Bureau of Labor Statistics.
Retrieved from www.sema.org 7. Arizton. U.S. Tonneau Covers Market - Industry Outlook & Forecast 2022-2027 . 2022. Retrieved from https://www.arizton.com/market-reports/us-tonneau-covers-market 8. IBIS World. Per Capita Disposable Income . 2023. Retrieved from https://www.ibisworld.com/us/bed/per-capita-disposable-income/33/#:~ :text=Following%20the%20ending%20of%20government,when%20it%20may%20potentially%20hit. 9. Bureau of Labor Statistics. The Employment Situation – February 2024 . Retrieved from https://www.bls.gov/news.release/pdf/empsit.pdf 10. Federal Reserve Board. Summary of Economic Projections . 2023.
The shares of Series A Preferred Stock vote together with the common stock of Terravis, unless prohibited by law, and have 51% voting power, regardless of how many shares of Series A Preferred Stock are outstanding. 3 Worksport Acquisition Corporation was incorporated in the State of Delaware on December 28, 2021.
The shares of Series A Preferred Stock vote together with the common stock of Terravis, unless prohibited by law, and have 51% voting power, regardless of how many shares of Series A Preferred Stock are outstanding. Worksport USA Operations Corporation was incorporated in the State of Colorado on March 23, 2022.
Public Offering On August 6, 2021, we consummated an underwritten public offering (the “Public Offering”) of an aggregate of 3,272,727 units, pursuant to a registration statement on Form S-1, as amended (File No. 333-256142) and a registration statement on Form S-1 (File No: 333-258429).
April 2021 Public Offering; Nasdaq Uplisting On August 6, 2021, we consummated a firm commitment underwritten public offering (the “Public Offering”) of an aggregate of 3,272,727 units pursuant to a registration statement on Form S-1, as amended (File No. 333-256142), and related registration statement on Form S-1 filed pursuant Rule 462(b) (File No: 333-258429) under the Securities Act.
Available Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Exchange Act, are filed with the SEC.
Available Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are filed with the U.S. Securities and Exchange Commission (the “SEC”).
The Employment Situation – January 2023 . Retrieved from https://www.bls.gov/news.release/pdf/empsit.pdf 11. SEMA. State of the Industry Report 2022 Fall . Retrieved from www.sema.org Portable Power Station Market Compared to the Tonneau Cover Market, the Portable Power Station Market is much younger and globalized.
Retrieved from https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20231213.pdf. 11. SEMA. State of the Industry Report 2022 Fall . 2022. Retrieved from www.sema.org Portable Power Station Market Compared to the Tonneau Cover Market, the Portable Power Station Market is much younger and globalized.
Compared with Worksport tri-fold soft tonneau covers, Worksport quad-fold covers have the additional benefit of enabling full truck bed access by being foldable upwards toward the rear window of the truck.
Tri-fold soft covers are a lower cost option when compared to quad-fold tonneau covers which have the additional benefit of enabling full truck bed access by being foldable upwards toward the rear window of the truck.
Trademarks As of December 31, 2022, the Company has 20 trademark registrations and 15 pending trademark applications in the United States, Canada, China, and European Union. The Market We primarily compete in the Automotive Aftermarket Accessories and New Energy industries with a focus on the Tonneau Cover and the Portable Power Station Markets.
Trademarks As of December 31, 2023, the Company has 36 trademark registrations and 18 pending trademark applications in various jurisdictions worldwide. The Market We primarily compete in the Automotive Aftermarket Accessories and New Energy industries with a focus on the Tonneau Cover and the Portable Power Station Markets.
As the market’s first quad-folding vinyl-wrapped cover that will provide full truck bed access utilizing Worksport’s Intellectual Property, Worksport’s soft quad-fold covers are compact when folded parallel to the back window of the truck while avoiding obstruction of the rear brake light on most truck models. 5 Our soft tonneau cover line includes: ● Developed ○ The Worksport SC3 – soft tri-fold introduced in 2011, first Worksport Ltd. product; ○ The Worksport SC3 PRO –soft tri-fold with Smart Latch system introduced in 2012; ○ The Worksport SC4 – soft quad-fold introduced in 2022; and ○ The Worksport SC4 PRO –soft quad-fold with Smart Latch system to be introduced in 2023. ● In Development ○ The Worksport SCX – soft tri-fold with extendable frame.
As the market’s only soft vinyl flip up cover that can be either folded against the truck’s rear window or secured like a traditional cover to avoid obstruction of the rear window, Worksport’s full bed access quad-fold soft cover when folded parallel to the back window of the truck while avoiding obstruction of the rear brake light on most truck models. 6 Our soft tonneau cover line includes: ● Developed ○ The Worksport SC3 – soft tri-fold introduced in 2011, first Worksport Ltd. product; ○ The Worksport SC3 PRO –soft tri-fold with Quick Latch system introduced in 2012; ○ The Worksport SC4 – soft quad-fold introduced in 2022; and ○ The Worksport SC4 PRO –soft quad-fold with Quick Latch system to be introduced in 2023. ● In Development ○ The Worksport SCX – soft tri-fold with extendable frame.
Retrieved from https://www.marketsandmarkets.com/Market-Reports/portable-power-station-market-23592113.html Distribution 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 2023.
Precedence Research. Portable Power Station Market . Retrieved from https://www.precedenceresearch.com/portable-power-station-market 2. Market Research Future. Global Portable Power Station Market Research Report. 2023. 11 Distribution 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.
On March 11, 2022, the Company was issued 1,000 shares of common stock at par value of $0.0001 per share, representing 100% of the outstanding equity of Worksport USA Holding Corporation. Worksport USA Operations Corporation was incorporated in the State of Colorado on March 23, 2022.
On March 11, 2022, the Company was issued 1,000 shares of common stock at par value of $0.0001 per share, representing 100% of the outstanding equity of Worksport USA Holding Corporation. On May 25, 2023, this corporation was dissolved due to lack of operations and activity.
At a compound annual growth rate of 3.9% between 2022 and 2031 1 , the global Portable Power Station market size was valued at $4.0 billion in 2021. 1 Within this global market, the largest regional market is the North American market. 2 The highest compound annual growth rates in this regional market is expected to be those power stations utilizing lithium-ion batteries for off-grid power applications 2 , which matches the COR system’s battery type as well as intended usage.
At a compound annual growth rate of 3.90% between 2023 and 2032, the global Portable Power Station market size is currently valued at $4.49 billion and is expected to grow to $6.13 billion by 2032. 1 Within this global market, the largest regional market is the North American market with the USA alone constituting $1.28 billion of the current market share and having a compound annual growth rate of 3.8%. 1 The segments within the North American market with the largest market share and highest compound annual growth rates are power stations utilizing lithium-ion batteries and those used for off-grid power applications, 2 which matches the COR system’s battery type as well as intended usage.
In May of 2022, we purchased a 152,847 square foot production facility for domestic production, storage, and distribution, located in West Seneca, New York. We have received the majority of all manufacturing equipment deemed necessary to begin production, and we are in the process of installing and testing those machines, as well as training personnel to use those machines.
In May of 2022, we purchased a 152,847 square foot production facility for domestic production, storage, and distribution, located in West Seneca, New York. We have received, installed, and tested all manufacturing equipment as well as trained all personnel necessary for phase one production.
Some of these competitors offer a line of Portable Power Stations, each with different power capacities, sizes, and price points. Others specialize in few or even one Portable Power Station as to target a specific or niche submarket. We intend to be competitive by focusing on our portable power station’s biggest strengths – primarily it’s modularity and Hot Swap battery.
Some of these competitors offer a line of Portable Power Stations, each with different power capacities, sizes, and price points, while others specialize in a few or even one Portable Power Station as to target a specific or niche submarket.
Gas and diesel generators have long been used by consumers to generate electricity when they could not rely on the grid, whether it be for grid damages or the lack of grid in remote areas. Unlike such generators, portable power stations do not generate electricity, themselves, but can also be used to provide electricity during times of grid unreliability.
Gas and diesel generators have long been used by consumers to generate electricity when they could not rely on the grid, whether it be due to grid damage or the lack of grid in remote areas.
Per capita disposable income fell 7.8% during 2022 as government stimulus ended; however, it is expected to increase slowly during 2023. 8 Further, while the Federal Reserve has projected unemployment rates to increase in 2023 and subsequent years 9 , recent unemployment rates are the lowest they have been in recent decades. 10 Together, these factors suggest consumer disposable income and unemployment will need to be carefully monitored in order to accurately forecast the automotive aftermarket accessories’ market potential year-to-year.
Per capita disposable income fell 7.8% during 2022 as government stimulus ended, though it has since increased by 4.6%. 8 Further, the Bureau of Labor has reported an increased unemployment rate in February 2024 relative to prior months 9 , and the Federal Reserve has projected unemployment rates may increase in 2024 and 2025. 10 Together, these factors suggest consumer disposable income and unemployment will need to be carefully monitored in order to accurately forecast the automotive aftermarket accessories’ market potential year-to-year.
These portable power stations are often charged by the grid via home outlets or independent of the grid via consumers’ vehicles or solar panels. The Portable Power Station Market is large and growing.
Unlike such generators, portable power stations do not generate electricity themselves, but they too can be used to provide electricity during times of grid unreliability. These portable power stations are often charged by the grid via home outlets or independent of the grid via consumers’ vehicles or solar panels. The Portable Power Station Market is large and growing.
For our domestically-assembled products, we have developed an extensive network of suppliers based in a diverse range of countries, including but not limited to the USA, China, Romania, Spain, Turkey, and Canada.
We believe that we can source materials needed for soft and hard tonneau cover production from other suppliers without major delay should any preferred supplier no longer be suitable. 12 For our domestically assembled products, we have developed an extensive network of suppliers based in a diverse range of countries, including but not limited to the USA, China, Romania, Spain, Turkey, and Canada.
When paired with the SOLIS cover, the COR energy storage system will be a market outlier in that it can be charged safely while mobile whereas competing portable power stations are intended to be stationary during charging. 1. Allied Market Research. Portable Power Station Market . Retrieved from https://www.alliedmarketresearch.com/portable-power-station-market-A11700 2. Markets And Markets. Portable Power Station Market .
Power stations with capacities equal to or greater than 1500 Wh trail slightly behind batteries with capacities equal to or less than 500 Wh in both market size and compound annual growth rate. 2 When paired with the SOLIS cover, the COR energy storage system will be a market outlier in that it can be charged safely while mobile whereas competing portable power stations are intended to be stationary during charging. 1.
We plan to conduct testing to demonstrate our compliance with such regulations. We use lithium-ion cells in our energy storage products. The use, storage, and disposal of our battery packs are regulated under existing laws and are the subject of ongoing regulatory changes that may add additional requirements in the future.
The use, storage, and disposal of our battery packs are regulated under existing laws and are the subject of ongoing regulatory changes that may add additional requirements in the future. 13 Environmental Compliance We are committed to high environmental standards and carry out our activities and operations in compliance with all relevant and applicable environmental regulations and best industry practices.
Programs and Incentives We have applied for and been granted tax, mortgage, wage, and energy cost relief in New York in addition to wage cost relief in Ontario. These programs are provided by several agencies including the Erie County Industrial Development Agency, Empire State Development, NY Power Authority, and The Canada Revenue Agency.
These programs are provided by several agencies including the Erie County Industrial Development Agency, Empire State Development, NY Power Authority, and The Canada Revenue Agency.
On December 16, 2014, FNHI acquired 100% of the outstanding equity of Worksport Ltd., a corporation formed in the Province of Ontario on December 13, 2011, formerly known as Truxmart Ltd. (“Worksport Ontario”), pursuant to which Worksport Ontario became a wholly-owned subsidiary of FNHI.
Corporate History The Company was incorporated in the State of Nevada on April 2, 2003 under the name Franchise Holdings International, Inc. (“FNHI”). In December 2014, FNHI acquired 100% of the outstanding equity of Worksport Ltd., an Ontario corporation formed in 2011 (“Worksport Ontario”), pursuant to which Worksport Ontario became a wholly-owned subsidiary of FNHI.
Concurrently, the electrical engineering department is researching and developing more size- and cost-effective methods of portable energy storage in order to offer the market a competitive portable energy storage system with distinguishable and unique product features. 11 Our subsidiary, Terravis, researches green energy solutions for home and community power as well as Electric Vehicle DC charging and heat-pump technology.
Concurrently, the electrical engineering department continues to research and develop more size- and cost-effective methods of portable energy storage in order to offer the market a competitive portable energy storage system with distinguishable and unique product features.
We rely on few independent contractors for additional labor and are very selective in our use of consultants.
We rely on few independent contractors for additional labor and are very selective in our use of consultants. Practices and Policies We are an equal opportunity employer committed to inclusion and diversity and to providing a workplace free of harassment or discrimination.
We recognize our people are most likely to thrive when they have the resources to meet their needs and the time and support to succeed in their professional and personal lives. In support of this, we offer a variety of benefits for employees and invest in tools and resources that are designed to support employees’ growth and development.
Compensation and Benefits We believe that compensation should be competitive and equitable and should enable employees to share in our success. We recognize our employees are most likely to thrive when they have resources and support to meet their needs and succeed in their professional and personal lives.
Human Capital As of December 31, 2022, we had a total of 25 employees, of which included 16 full-time employees in Canada and five full-time and four temporary employees in the USA. We intend to hire additional employees as operations grow – particularly within our West Seneca, NY manufacturing facility.
Costs of environmental regulatory compliance are not expected to be significant. Human Capital We employ twenty full-time employees and two part-time employees in Canada and further employ fifty full-time employees in the USA. We intend to hire additional employees as operations grow – particularly within our West Seneca, NY manufacturing facility.
Management believes that having manufacturing capability in North America will increase quality control and production efficiency, as well as lower landed costs and geopolitical risks.
Management believes that having manufacturing capability in North America will increase quality control and production efficiency, as well as lower landed costs and geopolitical risks. In August of 2023, we began early production of our first hard folding tonneau cover, the Worksport AL3 Pro. We have continued to develop, improve, and evolve our production methods and standards.
Modularity allows consumers not only to determine themselves the ideal stored energy capacity and price point they are seeking but also to upgrade their COR system overtime based on their evolving needs.
We intend to be competitive in this space by focusing on one Portable Power Station while selling additional modular batteries to allow consumers not only to determine for themselves their ideal stored energy capacity and price point but also to upgrade their COR system overtime based on their evolving needs.
We believe that by moving our manufacturing operations to the United States, we can (i) have better control over design and manufacturing quality of our products, (ii) lessen supply chain risk, (iii) decrease shipping costs, and (iv) cut overall manufacturing costs. ● On September 30, 2022, we filed a shelf registration statement on Form S-3 (File No. 333-267696), which was declared effective by the SEC on October 13, 2022 (the “Form S-3”), containing a base prospectus covering the offering, issuance and sale by us of up to $30,000,000 of our common stock and prospectus supplement covering the offering, issuance and sale by us of up to $13,000,000 of our common stock that may be issued and sold under an At The Market Offering Agreement dated as of September 30, 2022 (the “ATM Agreement”).
Prior to the uplisting, our common stock was quoted on the OTCQB Marketplace under the symbol “WKSP.” 4 September 2022 At-The-Market Sales Agreement 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 (“Form S-3 Registration Statement”), 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.
This kit integrates tonneau cover, solar energy capture, and portable energy storage technologies to convert pickup trucks to mobile microgrid power stations – allowing Worksport to compete within niche markets in each the automotive aftermarket accessory, solar energy, and portable power station markets. 6 Worksport SOLIS The SOLIS, a tonneau cover with integrated solar panels, is a unique, folding tonneau cover design founded on our top-mounted tough cover design but with the addition of cutting edge, monocrystalline, semi-flexible solar panels and wiring system.
This kit will be available for both end-consumers and Original Vehicle Manufactures alike. This kit integrates tonneau cover, solar energy capture, and portable energy storage technologies to convert pickup trucks to mobile microgrid power stations – allowing Worksport to compete within niche markets in each the automotive aftermarket accessory, solar energy, and portable power station markets.
Further, our references to website URLs are intended to be inactive textual references only. Executive Offices Our principal corporate office and research and development (“R&D”) facility is located at 55G East Beaver Creek Rd., Richmond Hill, Ontario, L4B 1E5, Canada while our manufacturing and secondary business address is 2500 N. America Dr., West Seneca, NY 14224, USA.
Further, our references to website URLs are intended to be inactive textual references only. 14 Executive Offices Our principal corporate office and manufacturing, storage, and distribution facility is located at 2500 N.
For physical location sales, the most popular sales channels for truck bed covers include Specialty Retailers/Installers and New Vehicle Dealerships, which constitute 17% and 11% of in-store sales, respectively. 6 For online sales, the most popular sales channels for truck bed covers include Online Only General Retailer, Specialty Retailers/Installers, and Parts Manufacturers, which constitute 23%, 19%, and 8% of online sales, respectively. 6 In the Fall of 2022, it was reported that roughly 59% of retailer specialty equipment sales were sold through in-store/physical channels while the other 41% were sold through online channels. 11 It was further reported that roughly 50% of manufacturer specialty equipment sales were sold through in-store/physical channels while the other 50% were sold through online channels. 11 Worksport aims to list its products on each of these highly-popular in-person and online sales channels in order to maximize sales volumes. 1.
For physical location sales, the most popular sales channels for truck bed covers include New Vehicle Dealerships and Specialty Retailers/Installers, which constituted 17% and 14% of physical location sales, respectively, in 2023. 6 For online sales, the most popular sales channels for truck bed covers include Online Only General Retailer, Specialty Retailers/Installers, and Direct from Parts Manufacturers, which constituted 22%, 19%, and 8% of online sales, respectively, in 2023. 6 In the Fall of 2022, it was reported that more than half of manufacturers within the specialty-equipment industry were realizing increasing sales through their Direct Sales to Consumers online sales channel over the prior twelve months – a proportion greater than that of any other online sales channel for specialty-equipment including Online Specialty Retailers, Online-Only Retailers, and Auto Parts Chains. 11 Worksport has begun selling in this sales channel and plans to invest further into doing so in the future. 10 1.
Governmental Programs, Incentives and Regulations Globally, both the operation of our business and the ownership of our products by our customers are impacted by various government programs, incentives, and other arrangements. Our business and products are also subject to numerous governmental regulations that vary among jurisdictions.
Our subsidiary, Terravis Energy, Inc., researches green energy solutions for home and community power as well as Electric Vehicle DC charging and heat-pump technology. Governmental Programs, Incentives and Regulations Globally, both the operation of our business and the ownership of our products by our customers are impacted by various government programs, incentives, and other arrangements.
Manufacturing As of December 31, 2022, all Worksport tonneau covers were manufactured in a facility located in Meizhou, China according to Worksport’s specifications, schematics and blueprints. We believe production at the factory can be increased within 30 days to facilitate volumes up to ten times the current output without any adverse effects on quality or craftsmanship.
Manufacturing As of December 31, 2023, all Worksport soft tonneau covers were manufactured in a facility located in Meizhou, China according to Worksport’s specifications, schematics and blueprints. We also began exploring and setting up production capabilities for additional soft covers at a second outsourced manufacturing facility located in Foshan, China.
SEMA. 2023 Future Trends Report . Retrieved from www.sema.org 2. SEMA. Pickup Accessorization Report . Retrieved from www.sema.org 3. Statista. Pickup Trucks – Worldwide . Retrieved from https://www.statista.com/outlook/mmo/passenger-cars/pickup-trucks/united-states 9 4. Statista. Pickup Trucks – Worldwide . Retrieved from https://fr.statista.com/outlook/mmo/passenger-cars/pickup-trucks/worldwide 5. Market Decipher. Electric Pickup Truck Market Size, Statistics, Growth Trend Analysis, and Forecast Report, 2022 – 2032 .
SEMA. Future Trends Report . 2023. Retrieved from www.sema.org 2. SEMA. Pickup Accessorization Report . 2022. Retrieved from www.sema.org 3. Skyquest Technology. Global Pickup Truck Market Size, Share, Growth Analysis, By Truck Type (Small Size Pickup Truck, Mid-Size Pickup Truck), By Propulsion Type (Diesel Pickup Truck, Gasoline Pickup Truck) - Industry Forecast 2023-2030 . 2024. Retrieved from https://www.skyquestt.com/report/pickup-truck-market 4. GlobalNewswire.
Energy Products We are researching and developing various energy-based products, two of which can be sold together as a kit: the Worksport SOLIS tonneau cover (“SOLIS”) and the Worksport COR energy storage system (“COR”). This kit will be available for both end-consumers and Original Vehicle Manufactures alike.
Our hard tonneau cover line, all of which is in development, includes: ● The Worksport TC3 – premium top-mounted hard tri-fold; ● The Worksport TC4 – premium top-mounted hard fold with full truck bed access; ● The Worksport AL3 – top-mounted hard tri-fold; ● The Worksport AL4 –top-mounted hard fold with full truck bed access Energy Products We are researching and developing various energy-based products, two of which are standalone items - the Worksport SOLIS tonneau cover (“SOLIS”) and the Worksport COR energy storage system (“COR”) - which can be sold together along with a Maximum Power Point Tracking (MPPT) system.
Patents As of December 31, 2022, the Company’s patent portfolio consists of eight (8) issued U.S. utility patents, one (1) issued Canadian utility patent, and twenty-seven (27) pending patent applications: eight (8) U.S. utility applications, seven (7) U.S. design applications, three (3) PCT applications, six (6) Canadian utility applications, one (1) Chinese invention application, and two (2) Chinese design applications.
Patents As of December 31, 2023, our patent portfolio consists of ten (10) issued U.S. utility patents, three (3) issued Canadian utility patents, and thirty-two (32) pending utility patent applications in various jurisdictions worldwide. Our portfolio further includes seven (7) design registrations in Europe and China, along with forty-five (45) pending design applications in various jurisdictions worldwide.
Hard Tonneau Covers Our hard line of tonneau covers includes tri- and quad-fold, aluminum flush-mounted and top-mounted folding tonneau covers. Our entire line of hard folding tonneau covers will be manufactured in the USA. Our hard cover panels are designed with formed aluminum, ultra-strong high temper formed alloy panels with a durable black surface.
Hard Tonneau Covers Our hard line of tonneau covers includes tri- and quad-fold, aluminum covers. Our entire line of hard folding tonneau covers is manufactured in the USA and include our Quick Latch technology to allow single-sided operation.
ITEM 1. BUSINESS Overview Worksport Ltd., through its subsidiaries, designs, develops, manufactures, and owns the intellectual property (“IP”) 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.
Worksport is able to monetize and protect its products through a large and growing intellectual property (“IP”) portfolio with patents and trademarks relating to, among other things, tonneau covers, solar integrated tonneau covers, portable power stations, NP (non-parasitic) hydrogen-based green energy systems, residential heating and cooling systems (heat pumps), and electric vehicle-charging stations.
These panels will have significant dent resistance over many other tonneau covers as they use thicker aluminum on the exterior surface as opposed to the sandwich style of most covers today. Designed to auto index (center) in the truck bed and be only 7.5mm above the truck bed, it is a low profile, sleek look that is easy to install.
Designed to auto index (center) in the truck bed and be only 7.5mm above the truck bed, the cover provides a low profile, sleek look and yet is easy to install. Our Tough Cover (TC) line will be purchasable with or without a rail system add-on, which provides enhanced utility and enhanced weather-resistance/sealing.
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. Corporate History The Company was incorporated in the State of Nevada on April 2, 2003 under the name Franchise Holdings International, Inc. (“FNHI”).
Worksport seeks to provide consumers with next-generation automotive accessories through the production of our innovative line of tonneau covers for light trucks while capitalizing on growing consumer interest in clean energy solutions and power grid independence through the launch of its forthcoming solar tonneau cover (Worksport SOLIS) and mobile battery generator system (Worksport COR).
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Prior to the uplisting, our common stock was quoted on the OTCQB Marketplace under the symbol “WKSP.” Business Developments The following highlights recent material developments in our business: ● In May 2022, we closed on the purchase of a commercial property (the “Property”) for $8,125,000 in the town of West Seneca, Erie County, New York (the “Acquisition”) pursuant to a Purchase and Sale Agreement that we entered into with J&M Distributing, Inc.
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ITEM 1. BUSINESS Overview Worksport Ltd., through its subsidiaries, designs, develops, and manufactures innovative products for various markets including automotive accessories, consumer electronics, and both residential and commercial HVAC system markets.
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We financed $5,300,000 in connection with the closing of the Acquisition pursuant to a Loan Agreement that we entered into with Northeast Bank (“Lender”), of which we issued a Promissory Note to the Lender guaranteed by Worksport Ltd. and secured by the Property per a Mortgage and Security Agreement entered into with the Lender.
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Worksport’s subsidiary, TerraVis Energy, is poised to revolutionize the local and global markets for efficient home and commercial heat pumps through its groundbreaking TerraVis Energy Aetherlux. This prototype heat pump, currently under rigorous development, showcases exceptional early test results that underscore its remarkable efficiency in heating and cooling across both extreme hot and cold climates.
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The Property consists of two parcels of land: (i) one parcel consisting of approximately 14 acres improved by a building containing approximately 152,847 square feet; and (ii) a second parcel consisting of approximately four acres of vacant land. Currently, our manufacturing operations are in China.
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In May 2020, FNHI changed its name to Worksport Ltd.
Removed
With the acquisition of the Property, we plan to move our manufacturing operations to the United States.
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As of December 30, 2023, the Company has sold and issued 604,048 shares of common stock in consideration for net proceeds of $ 812,551 under the ATM Agreement.
Removed
As of the filing date of this Annual Report on Form 10-K, no securities have been sold pursuant to the Form S-3. 4 ● On November 14, 2022, our shareholders approved the Worksport Ltd. 2022 Equity Incentive Plan (the “2022 Plan”).
Added
November 2023 Registered Direct Offering and Concurrent Private Offering On November 2, 2023, we raised roughly $4.7 million from a registered direct offering and concurrent private placement before deducting the placement agent’s fees and other estimated offering expenses payable by the Company.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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The continued global COVID-19 pandemic has created significant volatility, uncertainty and economic disruption. To date, this pandemic has affected nearly all regions around the world. In the United States, businesses as well as federal, state and local governments implemented significant actions to mitigate this public health crisis.
The continued global COVID-19 pandemic created significant volatility, uncertainty and economic disruption. To date, this pandemic has affected nearly all regions around the world. In the United States, businesses as well as federal, state and local governments implemented significant actions to mitigate this public health crisis.
Consistent with our strategy of offering new products and product refinements, we expect to continue to use a substantial amount of capital for product refinement, research and development, and sales and marketing, of which may not provide a return on investment in the event we fail to bring potential products to market.
Consistent with our strategy of offering new products and product refinements, we expect to continue to use a substantial amount of capital for product refinement, research and development, and sales and marketing, which may not provide a return on investment in the event we fail to bring potential products to market.
However, current or former employees, consultants, contractors and advisers may unintentionally or willfully disclose our confidential information to competitors, and confidentiality agreements may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Enforcing a claim that a third party obtained illegally, and is using, trade secrets is expensive, time-consuming and unpredictable.
However, current or former employees, consultants, contractors and advisers may unintentionally or willfully disclose our confidential information to competitors, and confidentiality agreements may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Enforcing a claim that a third party illegally obtained, and is using, trade secrets is expensive, time-consuming and unpredictable.
We are subject to foreign exchange risk as we manufacture our products in China, market extensively in both Canadian and U.S. markets, employee people residing in both the U.S. and Canada. Meanwhile, we report results of operations in U.S. Dollars (USD or US$).
We are subject to foreign exchange risk as we manufacture our products in China, market extensively in both Canadian and U.S. markets, and employee people residing in both the U.S. and Canada. Meanwhile, we report results of operations in U.S. Dollars (USD or US$).
Instead, we anticipate that all of our earnings in the foreseeable future will be used to provide working capital, to support our operations and to finance the growth and development of our business.
Instead, we anticipate that all our earnings in the foreseeable future will be used to provide working capital to support our operations and to finance the growth and development of our business.
The following examples are illustrative: ● others may be able to develop technologies that are similar to our technology platforms but that are not covered by the claims of any patents, should they issue, that we own or license; 19 ● we or our licensors might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own or license; ● we or our licensors might not have been the first to file patent applications covering certain aspects of our inventions; ● others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; ● it is possible that our pending patent applications will not lead to issued patents; ● issued patents that we own or license may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges; ● our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims for certain research and development activities, as well as in countries where we do not have patent rights, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; ● we may not develop additional proprietary technologies that are patentable; and ● the patents of others may have an adverse effect on our business.
The following examples are illustrative: ● others may be able to develop technologies that are similar to our technology platforms but that are not covered by the claims of any patents, should they issue, that we own or license; ● we or our licensors might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own or license; ● we or our licensors might not have been the first to file patent applications covering certain aspects of our inventions; ● others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights; ● it is possible that our pending patent applications will not lead to issued patents; ● issued patents that we own or license may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges; ● our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims for certain research and development activities, as well as in countries where we do not have patent rights, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets; ● we may not develop additional proprietary technologies that are patentable; and ● the patents of others may have an adverse effect on our business.
The US is in a state of low unemployment, and many companies that provide wage-based jobs are having trouble filling open positions. We need to fill certain positions that do not require specialized knowledge or experience, and we will need to offer competitive pay and benefits in order to attract people as we compete with other local businesses for employment.
The US is in a state of low unemployment, and many companies that provide wage-based jobs are having trouble filling open positions. We need to fill certain positions that do not require specialized knowledge or experience, and we offer competitive pay and benefits in order to attract people as we compete with other local businesses for employment.
If additional tariffs are imposed on our products, or other retaliatory trade measures are taken, our costs could increase, and we may be required to raise our prices, which could materially and adversely affect our results. 22 There are risks associated with outsourced production in China and their laws which may have a material adverse effect on our financial stability.
If additional tariffs are imposed on our products, or other retaliatory trade measures are taken, our costs could increase, and we may be required to raise our prices, which could materially and adversely affect our results. There are risks associated with outsourced production in China and their laws which may have a material adverse effect on our financial stability.
We expect to take advantage of these reporting exemptions until we are no longer a “smaller reporting company.” Because of these lessened regulatory requirements, our stockholders are not provided information or rights available to stockholders of more mature companies. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions.
We expect to take advantage of these reporting exemptions until we are no longer a “smaller reporting company.” Because of these lessened regulatory requirements, our stockholders are not provided with information or rights available to stockholders of more mature companies. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions.
The situations in which we may become parties to such litigation or proceedings may include: ● litigation or other proceedings we may initiate against third parties to enforce our patent rights or other intellectual property rights; ● litigation or other proceedings we or our licensee(s) may initiate against third parties seeking to invalidate the patents held by such third parties or to obtain a judgment that our products do not infringe such third parties’ patents; and ● litigation or other proceedings third parties may initiate against us to seek to invalidate our patents.
The situations in which we may become parties to such litigation or proceedings may include: ● litigation or other proceedings we may initiate against third parties to enforce our patent rights or other intellectual property rights; ● litigation or other proceedings we or our licensee(s) may initiate against third parties seeking to invalidate the patents held by such third parties or to obtain a judgment that our products do not infringe such third parties’ patents; and ● litigation or other proceedings third parties may initiate against us to seek to enforce their patents and/or invalidate our patents.
Even if we are fully insured as it relates to a claim, a claim could nevertheless diminish our brand and divert management’s attention and resources, which could have a negative impact on our business, financial condition and results of operations. 21 We may produce products of inferior quality which would cause us to lose customers.
Even if we are fully insured as it relates to a claim, a claim could nevertheless diminish our brand and divert management’s attention and resources, which could have a negative impact on our business, financial condition and results of operations. We may produce products of inferior quality which would cause us to lose customers.
The possibility of delivery delays, product defects and other production-side risks stemming from our use of outsourced manufacturers cannot be eliminated. In particular, inadequate production capacity among outsourced manufacturers could result in us being unable to supply enough product amid periods of high product demand, the opportunity costs of which could be substantial.
The possibility of delivery delays, product defects and other production-side risks stemming from our use of outsourced manufacturers and suppliers cannot be eliminated. In particular, inadequate production capacity among outsourced manufacturers could result in us being unable to supply enough product amid periods of high product demand, the opportunity costs of which could be substantial.
Investors may be subject to substantial risks involved in an investment in the Company, including the risk of losing their entire investment. 24 We may need, but be unable, to obtain additional funding on satisfactory terms, which could dilute our stockholders or impose burdensome financial restrictions on our business.
Investors may be subject to substantial risks involved in an investment in the Company, including the risk of losing their entire investment. We may need, but be unable, to obtain additional funding on satisfactory terms, which could dilute our stockholders or impose burdensome financial restrictions on our business.
In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in a loss of brand recognition and could require us to devote resources to advertising and marketing new brands. Our competitors may infringe our trademarks, and we may not have adequate resources to enforce our trademarks.
In the event that our trademarks are successfully challenged, we could be forced to rebrand our products, which could result in a loss of brand recognition and could require us to devote resources to advertising and marketing new brands. Our competitors may infringe on our trademarks, and we may not have adequate resources to enforce our trademarks.
As a result, if we fail to maintain our competitive position, this could have a material adverse effect on our business, cash flow, results of operations, financial position and prospects. We may not have sufficient product liability insurance to cover potential damages.
As a result, if we fail to maintain our competitive position, this could have a material adverse effect on our business, cash flow, results of operations, financial position and prospects. 22 We may not have sufficient product liability insurance to cover potential damages.
Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and employees. Intellectual property rights do not necessarily address all potential threats to our business.
Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and employees. 20 Intellectual property rights do not necessarily address all potential threats to our business.
Although we make an effort to ensure the quality of our light truck tonneau cover products, they could from time to time contain defects, anomalies or malfunctions that are undetectable at the time of shipment.
Although we make an effort to ensure the high quality of our light truck tonneau cover products, they could from time to time contain defects, anomalies or malfunctions that are undetectable at the time of shipment.
Any restrictions or tariffs imposed on products that we or our suppliers import for sale in the United States would adversely and directly impact our cost of goods sold.
Any restrictions or tariffs imposed on products that we or our suppliers import for sale or production in the United States would adversely and directly impact our cost of goods sold.
At the same time, it lowers the attractiveness of refinancing, despite the fact that our anticipated positive future cash flows would allow us to seek financing from a broader selection of lenders. 15 Continued uncertain economic conditions, including inflation and the risk of a global recession could impair our ability to forecast and may harm our business, operating results, including our revenue growth and profitability, financial condition and cash flows.
At the same time, it lowers the attractiveness of refinancing, despite the fact that our anticipated positive future cash flows would allow us to seek financing from a broader selection of lenders. 16 Continued uncertain economic conditions, including inflation and the risk of a global recession could impair our ability to forecast and may harm our business, operating results, including our revenue growth and profitability, financial condition and cash flows.
Failure to adequately protect our intellectual property rights could result in our competitors offering similar products, potentially resulting in the loss of some of our competitive advantage, and a decrease in our revenue which would adversely affect our business, prospects, financial condition and operating results. 20 Confidentiality agreements with employees and others may not adequately prevent the disclosure of trade secrets and other proprietary information.
Failure to adequately protect our intellectual property rights could result in our competitors offering similar products, potentially resulting in the loss of some of our competitive advantage, and a decrease in our revenue which would adversely affect our business, prospects, financial condition and operating results. 21 Confidentiality agreements with employees and others may not adequately prevent the disclosure of trade secrets and other proprietary information.
In addition, any preventative or protective actions that governments implement or that we take in response to a health crisis, such as travel restrictions, quarantines, or site closures, may interfere with the ability of our employees, suppliers and customers to perform their responsibilities. Such results could have a material adverse effect on our business.
In addition, any preventative or protective actions that governments implement or that we take in response to a health crisis, such as travel restrictions, quarantines, or site closures, may interfere with the ability of our employees, suppliers and customers to perform their responsibilities. Such results could have a materially adverse effect on our business.
While we had insurance coverage of $2,000,000 for the year ended December 31, 2022, we have no assurance this insurance will be adequate to protect us from all material judgments and expenses related to potential future claims or that these levels of insurance will be available at economical prices, if at all.
While we had insurance coverage of $2,000,000 for the year ended December 31, 2023, we have no assurance that this insurance will be adequate to protect us from all material judgments and expenses related to potential future claims or that these levels of insurance will be available at economical prices, if at all.
A suit for patent infringement could result in increasing costs as well as delaying or halting development. Other private and public concerns, including universities, may have filed applications for, may have been issued, or may obtain additional patents and other proprietary rights to technology potentially useful or necessary to us.
A suit for patent infringement could result in increasing costs as well as delaying or halting development. Other private and public entities, including universities, may have filed applications for, may have been issued, or may obtain additional patents and other proprietary rights to technology potentially useful or necessary to us.
We may not succeed in establishing, maintaining and strengthening our brand, which would materially and adversely affect customer acceptance of our products and our business, prospects, financial condition, results of operations and cash flows. Our business and prospects heavily depend on our ability to develop, maintain and strengthen the Worksport and Terravis brands.
We may not succeed in establishing, maintaining and strengthening our brand, which would materially and adversely affect customer acceptance of our products and our business, prospects, financial condition, results of operations and cash flows. Our business and prospects heavily depend on our ability to develop, maintain and strengthen the Worksport brand.
If we fail to accurately predict our manufacturing requirements, we will incur the risk of having to pay for production capacities that we reserved but will not be able to use or that we will not be able to secure sufficient additional production capacities at reasonable costs in case product demand exceeds expectations.
If we fail to accurately predict our manufacturing requirements, we will incur the risk of having to pay for production capacities that we reserved but will not be able to use or that we will not be able to secure sufficient additional production capacities at reasonable costs in the event product demand exceeds expectations.
Included elsewhere in this Annual Report on Form 10-K, we disclose that our management has assessed and identified several material weaknesses in our internal and controls over financial reporting (“ICFR”) and concluded that our IFCR was not effective as of December 31, 2022.
Included elsewhere in this Annual Report on Form 10-K, we disclose that our management has assessed and identified several material weaknesses in our internal controls over financial reporting (“ICFR”) and concluded that our IFCR was not effective as of December 31, 2023.
In particular, given the popularity of social media, any negative publicity, whether true or not, could quickly proliferate and harm consumer perceptions and confidence in our brands. In addition, from time to time, our products may be evaluated and reviewed by third parties.
In particular, given the popularity of social media, any negative publicity, whether true or not, could quickly proliferate and harm consumer perceptions and confidence in our brand. In addition, from time to time, our products may be evaluated and reviewed by third parties.
A single contract with an OEM, private label or key distributor can significantly increase demand for our products, requiring investments in expanded operational capacity including personnel, equipment and potentially facilities. 16 Our future growth may be limited.
A single contract with an OEM, private label or key distributor can significantly increase demand for our products, requiring investments in expanded operational capacity including personnel, equipment and potentially facilities. 17 Our future growth may be limited.
A significant outbreak, epidemic or pandemic of contagious diseases in any geographic area in which we operate or plan to operate could result in a health crisis adversely affecting the economies, financial markets and overall demand for our products.
A significant outbreak, epidemic or pandemic of contagious diseases in any geographic area in which we operate or plan to operate could result in a health crisis adversely affecting the economies and financial markets in which we operate as well as the overall demand for our products.
In that context, we may have to evaluate the feasibility of acquiring alternative or fallback manufacturing capabilities to support the production of our existing and future tonneau cover products. Such development could adversely affect our cost structure inasmuch as we would be required to support sales at an acceptable cost—and might have relatively limited time to so adapt.
In that context, we may have to evaluate the feasibility of acquiring alternative or fallback manufacturing capabilities to support the production of our existing and future soft tonneau cover products. Such a development could adversely affect our cost structure inasmuch as we would be required to support sales at an acceptable cost and might have relatively limited time to adapt.
Our ability to develop, maintain and strengthen our brands will depend heavily on our ability to provide high quality products and engage with our customers as intended, as well as the success of our customer development and marketing efforts.
Our ability to develop, maintain and strengthen our brand will depend heavily on our ability to provide high quality products and engage with our customers as intended, as well as depend on the success of our customer development and marketing efforts.
Much of our intellectual property is protected as trade secrets or confidential know-how, not as a patent. We consider proprietary trade secrets to be important to our business. This type of information must be protected diligently by us to protect its disclosure to competitors, since legal protections after disclosure may be minimal or non-existent.
Much of our intellectual property is protected as trade secrets or confidential know-how. We consider proprietary trade secrets to be important to our business. This type of information must be protected diligently by us to protect its disclosure to competitors, since legal protections after disclosure may be minimal or non-existent.
Even if we are able to successfully develop our products and attract customers, there can be no assurance that we will be financially successful. For example, as we expand our product portfolio, and expand internationally, we will need to manage costs effectively to sell those products at our expected margins.
Even if we can successfully develop our additional products and attract customers, there can be no assurance that we will be financially successful. For example, as we expand our product portfolio, and expand internationally, we will need to manage costs effectively to sell those products at our expected margins.
Our ability to achieve our expansion objectives and to manage our growth effectively depends upon a variety of factors, including our ability to internally develop products, to attract and retain skilled employees, to successfully position and market our products, to protect our existing intellectual property, to capitalize on the potential opportunities we are pursuing with third parties, and sufficient funding.
Our ability to achieve our expansion objectives and to manage our growth effectively depends upon a variety of factors, including our ability to internally develop products, to attract and retain skilled employees, to successfully position and market our products, to protect our existing intellectual property, to capitalize on the potential opportunities we are pursuing with third parties, and to acquire sufficient funding whether internally or externally.
If we are not able to establish, maintain and strengthen our brands, we may lose the opportunity to build a critical mass of customers.
If we are not able to establish, maintain and strengthen our brand, we may lose the opportunity to build a critical mass of customers.
An investment in our securities is speculative and there can be no assurance that investors will obtain any return on their investment.
An investment in our securities is speculative, and there can be no assurance of any return on any such investment. An investment in our securities is speculative, and there can be no assurance that investors will obtain any return on their investment.
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.
In response to Russia’s invasion of Ukraine, 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.
Since 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. While having our products manufactured in China, our manufacturers are paid in USD to better avoid the relatively greater fluctuation of the Chinese Yuan (RMB).
Since 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. While having our soft tonneau covers manufactured in China, our manufacturers are paid in USD to better avoid the relatively greater fluctuation of the Chinese Yuan (RMB).
Any large fluctuations in the exchange between the RMB and USD may cause product costs to increase, therefore affecting revenues and profits, potentially adversely. 23 Risks Related to the Ownership of Our Securities We have a large number of authorized but unissued shares of our common stock which will dilute your ownership position when issued.
Any large fluctuations in the exchange between the RMB and USD may cause product costs to increase, therefore affecting revenues and profits, potentially adversely. Risks Related to the Ownership of Our Securities We have a large number of authorized but unissued shares of our common stock which will dilute existing ownership positions when issued.
Any determination to declare or pay dividends in the future will be at the discretion of our Board, subject to applicable laws and dependent upon a number of factors, including our earnings, capital requirements and overall financial conditions. In addition, terms of any future debt or preferred securities may further restrict our ability to pay dividends on our common stock.
Any decision to declare or pay dividends in the future will be at the discretion of our Board, subject to applicable laws and dependent upon several factors, including our earnings, capital requirements and overall financial conditions. In addition, terms of any future debt or preferred securities may further restrict our ability to pay dividends on our common stock.
If our business ventures with Chinese manufacturers were unsuccessful, or other adverse circumstances arise from these transactions, we face the risk that the parties to these ventures may seek ways to terminate the transactions.
If our business ventures with Chinese manufacturers and suppliers are unsuccessful, or other adverse circumstances arise from these transactions, we face the risk that the parties to these ventures may seek ways to terminate the transactions.
We have not manufactured our own soft tonneau covers in the past—and are not expecting to do so in the foreseeable future. That is because developing these technological capabilities and building or purchasing a facility will increase our expenses with no guarantee that we will be able to recover our investment in our manufacturing capabilities.
We have not manufactured our own soft tonneau covers in the past and are not planning to do so in the short term. That is because developing these technological capabilities and building or purchasing a facility will increase our expenses with no guarantee that we will be able to recover our investment in our manufacturing capabilities.
The automobile accessory and parts industry is intensely competitive, and we may not be successful in building, maintaining and strengthening either or both the Worksport and Terravis brands. Many of our current and potential competitors have greater name recognition, broader customer relationships and substantially greater marketing resources than we do.
The automobile accessory and parts industry is intensely competitive, and we may not be successful in building, maintaining and strengthening the Worksport brand. Many of our current and potential competitors have greater name recognition, broader customer relationships and substantially greater marketing resources than we do.
Further, rising interest rates increase the amount that we must pay for our mortgage on our West Seneca, New York property.
High interest rates increase the amount that we must pay for our mortgage on our West Seneca, New York property.
We have identified material weaknesses in our internal control over financial reporting. Failure to maintain effective internal controls could cause our investors to lose confidence in us and adversely affect the market price of our common stock. If our internal controls are not effective, we may not be able to accurately report our financial results or prevent fraud.
Failure to maintain effective internal controls could cause our investors to lose confidence in us and adversely affect the market price of our common stock. If our internal controls are not effective, we may not be able to accurately report our financial results or prevent fraud.
We expect to rely on trademarks as one means to distinguish any of our products that are approved for marketing from the products of our competitors. Once we select trademarks and apply to register them, our trademark applications may not be approved. Third parties may oppose our trademark applications or otherwise challenge our use of the trademarks.
We expect to rely on trademarks as one means to distinguish our products from our competitors’ products. Once we select trademarks and apply to register them, our trademark applications may not be approved. Third parties may oppose our trademark applications or otherwise challenge our use of the trademarks.
We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies, product candidates and any future products are covered by valid and enforceable patents or are effectively maintained as trade secrets. 18 Certain aspects of our technologies are protected by the U.S. and Canadian patents and Patent Cooperation Treaty filings.
We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies, product candidates and any future products are covered by valid and enforceable patents or are effectively maintained as trade secrets. 19 Certain aspects of our technologies are protected by patents, patent applications, and trade secrets.
Risks Associated with Manufacturing in China Evolving U.S. trade regulations and policies with China may in the future have a material and adverse effect on our business, financial condition and results of operations. Our products are sourced from China.
Risks Associated with Manufacturing in China Evolving U.S. trade regulations and policies with China may in the future have a material and adverse effect on our business, financial condition and results of operations. Our soft tonneau covers and some raw materials are sourced from China.
If we do not develop and maintain a strong brand for either or both of our Worksport or Terravis brands, our business, prospects, financial condition, results of operations and cash flows could be materially and adversely impacted. In addition, we could be subject to adverse publicity.
If we do not develop and maintain a strong brand, our business, prospects, financial condition, results of operations and cash flows could be materially and adversely impacted. In addition, we could be subject to adverse publicity.
Rossi could use his voting influence to maintain our existing management and directors in office, delay or prevent changes in control of our Company, or support or reject other management and Board proposals that are subject to stockholder approval, such as amendments to our employee stock plans and approvals of significant financing transactions.
Rossi could use his voting influence to maintain our existing management and directors in office, delay or prevent changes in control of our Company, or support or reject other management and Board proposals that are subject to stockholder approval, such as amendments to our employee stock plans and approvals of significant financing transactions. 26 We have identified material weaknesses in our internal control over financial reporting.
Among other things, our Articles of Incorporation and Bylaws: ● authorize the issuance of “blank check” preferred stock that could be issued by our Board in response to a takeover attempt; ● provide that vacancies on our Board, including newly created directorships, may be filled only by a majority vote of directors then in office, except a vacancy occurring by reason of the removal of a director without cause shall be filled by vote of the stockholders; and ● limit who may call special meetings of stockholders. 26 These provisions could have the effect of delaying or preventing a change of control, whether or not it is desired by, or beneficial to, our stockholders.
Among other things, our Articles of Incorporation and Bylaws: ● authorize the issuance of “blank check” preferred stock that could be issued by our Board in response to a takeover attempt; 28 ● provide that vacancies on our Board, including newly created directorships, may be filled only by a majority vote of directors then in office, except a vacancy occurring by reason of the removal of a director without cause shall be filled by vote of the stockholders; and ● limit who may call special meetings of stockholders.
At December 31, 2022, our authorized capital stock consists of 299,000,000 shares of common stock, of which approximately 281,840,624 remain available for issuance, including shares of common stock issuable upon the exercise of outstanding warrants.
At December 31, 2023, our authorized capital stock consists of 299,000,000 shares of common stock, of which approximately 278,679,497 remain available for issuance, including shares of common stock issuable upon the exercise of outstanding warrants.
If our management determines it be appropriate to issue shares of our common stock from the large pool of authorized but unissued shares for any purpose in the future and is not required to obtain stockholder approval, your ownership position would be diluted without your further ability to vote on that transaction.
If our management determines it be appropriate to issue shares of our common stock from the large pool of authorized but unissued shares for any purpose in the future and is not required to obtain stockholder approval, your ownership position would be diluted without your further ability to vote on that transaction. 25 Our common stock or warrants may be affected by limited trading volume and price fluctuations, which could adversely impact the value of our common stock or warrants.
There is no assurance that we will generate revenues from our prospective sales partners and be able to capitalize on additional third party manufacturers. We rely on a sole supplier for our production which may hinder our ability to grow. We purchase all of our finished goods from one supplier source in China.
There is no assurance that we will generate higher revenues from our prospective sales partners nor be able to capitalize on additional third-party manufacturers. We rely on two suppliers for the production of our outsourced finished goods which may hinder our ability to grow. We purchase all of our soft tonneau covers from two supplier sources in China.
We rely on key personnel, especially Steven Rossi, our Chief Executive Officer, President and Chairman of the Board. Our success also will depend in large part on the continued service of our key operational and management personnel, including executive staff, research and development, engineering, marketing and sales staff.
Our success also will depend in large part on the continued service of our key operational and management personnel, including executive staff, research and development, engineering, marketing and sales staff.
We purchase all of our inventory from one supplier source in China. Changes in Chinese laws and regulations, or their interpretation, or the imposition of confiscatory taxation or restrictions are matters over which we have no control.
We purchase all our soft tonneau cover finished goods from two suppliers in China. Changes in Chinese laws and regulations, or their interpretation, or the imposition of confiscatory taxation or restrictions are matters over which we have no control.
Any failure on our part to hire, train and retain a sufficient number of qualified professionals could impair our business. 17 We depend on intellectual property rights that may be infringed upon or infringe upon the intellectual property rights of others. Our success depends to a significant degree upon our ability to develop, maintain and protect proprietary products and technologies.
Any failure on our part to hire, train and retain a sufficient number of qualified professionals could impair our business. 18 We depend on intellectual property rights that may be infringed upon, and we may infringe upon the intellectual property rights of others.
Lack of experience may create delays in production, cost inefficiencies in expansions of production and difficulty identifying process improvements. We may not be able to accurately estimate the demand for our tonneau covers, which could result in inefficiencies in our production and hinder our ability to generate revenue.
We may not be able to accurately estimate the demand for our tonneau covers, which could result in inefficiencies in our production and hinder our ability to generate revenue.
In addition, the global economy suffers from slowing growth and rising interest rates, and many economists believe that a global recession may begin in the near future. If the global economy slows, our business would likely be adversely affected. Also, a recession may result in job loss and lower discretionary funds among potential customers, lowering demand for automotive aftermarket accessories.
If the global economy slows, our business would likely be adversely affected. Also, a recession may result in job loss and lower discretionary funds among potential customers, lowering demand for automotive aftermarket accessories.
While the Chinese government has been pursuing economic reform policies that encourage private economic activity and greater economic decentralization, there is no assurance that the Chinese government will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice.
While the Chinese government has been pursuing economic reform policies that encourage private economic activity and greater economic decentralization, there is no assurance that the Chinese government will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice. 24 For example, the Chinese government has enacted some laws and regulations dealing with matters such as corporate organization and governance, foreign investment, commerce, taxation and trade.
The situation remains uncertain, and while it is difficult to predict the impact of any of the foregoing, the conflict and actions taken in response to the conflict could 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.
These situations remain uncertain, and while it is difficult to predict the impact of any of the foregoing, these conflicts and actions taken in response to these conflicts could 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. 23 We currently, and may in the future, have assets held at financial institutions that may exceed the insurance coverage offered by the Federal Deposit Insurance Corporation (“FDIC”), the loss of such assets would have a severe negative affect on our operations and liquidity.
Competing with local businesses may delay hiring time as well as production timelines. Offering more competitive compensation packages also damages our profits and sets forward looking compensation expectations.
Competing with local businesses may delay hiring time as well as production scaling timelines. Offering more competitive compensation packages also damages our profits and sets forward-looking compensation expectations. We have demonstrated historical success in less capital-intensive manufacturing in China, but we have not demonstrated success in low-cost, domestic, highly capital-intensive manufacturing.
Our operations could be disrupted by geopolitical conditions, political and social instability, acts of war, terrorist activity or other similar events. In February 2022, Russia initiated significant military action against Ukraine.
Our operations could be disrupted by geopolitical conditions, political and social instability, acts of war, terrorist activity or other similar events. In February 2022, Russia initiated significant military action against Ukraine. In April 2023, the paramilitary Rapid Support Forces within Sudan began fighting the Sudanese Armed Forces over tensions related to the paramilitary’s transition towards civilian rule.
See Part II, Item 5 “ Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Dividend Policy .” An investment in our securities is speculative and there can be no assurance of any return on any such investment.
See Part II, Item 5 “ Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities —Dividend Policy .”
To the extent the COVID-19 pandemic or a similar public health threat has an impact on our business, it is likely to also have the effect of heightening many of the other risks described in this “ Risk Factors ” section. There is substantial doubt of our ability to continue as a going concern.
To the extent the COVID-19 pandemic or a similar public health threat has an impact on our business, it is likely to also have the effect of heightening many of the other risks described in this “ Risk Factors ” section. 15 We are a growth stage company with a history of losses and expect to incur significant expenses and continuing losses for the foreseeable future.
We may also pursue strategic alliances and joint ventures that leverage another company’s core products and industry experience to expand our product offerings and geographic presence. We have limited experience with respect to acquiring other companies and limited experience with respect to forming collaborations, strategic alliances and joint ventures.
We have been approached by competitors to license one or more of our tonneau cover products. We may also pursue strategic alliances and joint ventures that leverage another company’s core products and industry experience to expand our product offerings and geographic presence.
In that case, the trading price of our common stock could decline, and investors in our securities may lose all or part of their investment. 13 Risks Related to Our Business Our business, results of operations and financial condition may be adversely impacted by the continued global COVID-19 pandemic.
In that case, the trading price of our common stock could decline, and investors in our securities may lose all or part of their investment.
For example, the Chinese government has enacted some laws and regulations dealing with matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. However, their experience in implementing, interpreting and enforcing these laws and regulations is limited and, in turn, our ability to enforce commercial claims or to resolve commercial disputes is unpredictable.
However, their experience in implementing, interpreting and enforcing these laws and regulations is limited and, in turn, our ability to enforce commercial claims or to resolve commercial disputes is unpredictable.
If we are unable to satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions and other regulatory action and potentially civil litigation. 25 New laws, regulations, and standards relating to corporate governance and public disclosure may create uncertainty for public companies, increase legal and financial compliance costs and make some activities more time consuming.
New laws, regulations, and standards relating to corporate governance and public disclosure may create uncertainty for public companies, increase legal and financial compliance costs and make some activities more time consuming.
We do not expect to be profitable for the foreseeable future as we invest in our business, build capacity and ramp up operations, and we cannot assure you that we will ever achieve or be able to maintain profitability in the future.
We are unsure whether we will be profitable in the near future while we continue to ramp up our product offerings, bolster our sales channels, and increase output capacity, and we cannot assure you that we will ever achieve or be able to maintain profitability in the future.
These capital expenditures are intended to be funded from third party sources, including the incurring of debt and/or the sale of additional equity securities. In addition to requiring additional financing to fund capital expenditures, we may require additional financing to fund working capital, research and development, sales and marketing, general and administrative expenditures and operating losses.
From time to time, in order to expand operations to meet customer demand, we will need to incur additional capital expenditures. These capital expenditures are intended to be funded from third party sources, including the incurring of debt and/or the sale of additional equity securities.
In addition, there can be no assurance that such additional financing, whether debt or equity, will be available to us or that it will be available on acceptable commercial terms. Any inability to secure such additional financing on appropriate terms could have a materially adverse impact on our business, financial condition and operating results.
The sale of additional equity securities will be dilutive to the interests of current equity holders. In addition, there can be no assurance that such additional financing, whether debt or equity, will be available to us or that it will be available on acceptable commercial terms.
We have incurred net losses since our inception. In the twelve months ended December 31, 2022 and 2021, we incurred operating losses of $12,773,715 and $7,561,731, respectively. As at December 31, 2022, the Company has working capital of $15,870,377 and an accumulated deficit of $33,384,219.
We have incurred net losses since our inception. In the twelve months ended December 31, 2023 and 2022, we incurred operating losses of $14,928,958 and $12,534,414, respectively, and as of December 31, 2023, we had an accumulated deficit of $48,313,177.
The loss of any of these key customers could have an adverse effect on our business. We will need additional financing in order to grow our business. From time to time, in order to expand operations to meet customer demand, we will need to incur additional capital expenditures.
For the year ended December 31, 2022, two customers made up approximately 50% (38% and 12% individually) of prior year revenue. The loss of any of these key customers could have an adverse effect on our business. We will need additional financing in order to grow our business.
The U.S. economy is experiencing the highest rates of inflation since the 1980s. Historically, we have not experienced significant inflation risk in our business. However, our ability to raise our product prices depends on market conditions, and there may be periods during which we are unable to fully recover increases in our costs.
However, our ability to raise our product prices depends on market conditions, and there may be periods during which we are unable to fully recover increases in our costs. In addition, the global economy suffers from slowing growth and elevated interest rates, and many economists are still unsure whether a global recession may begin in the near future.
We have no written agreement with this supplier. We carry significant strategic inventories of these materials to reduce the risk associated with this concentration of suppliers. Strategic inventories are managed based on demand. To date, we have been able to obtain adequate supplies of the materials used in the production of our products in a timely manner from existing sources.
We carry significant strategic inventories of these finished goods to reduce the risk associated with this concentration of suppliers. Strategic inventories are managed based on demand.
We may not be successful in our potential business combinations. We may, in the future, pursue acquisitions of other complementary businesses and technology licensing arrangements. We have been approached by competitors to license one or more of our tonneau cover products.
Domestic production increases our susceptibility to domestic low-wage labor shortages and subjects us to higher thresholds of compliance with local labor and business laws. We may not be successful in our potential business combinations. We may, in the future, pursue acquisitions of other complementary businesses and technology licensing arrangements.
If we were to make any acquisitions, we may not be able to integrate these acquisitions successfully into our existing business and could assume unknown or contingent liabilities. Integrating an acquired company also may require management resources that otherwise would be available for the ongoing development of our existing business.
We have limited experience with respect to acquiring other companies and limited experience with respect to forming collaborations, strategic alliances and joint ventures. If we were to make any acquisitions, we may not be able to integrate these acquisitions successfully into our existing business and could assume unknown or contingent liabilities.
Although we intend to manufacture our products in the near future, the loss of this sole supplier or a delay in shipments could have a material adverse effect on our business. We rely on a small number of customers for the majority of our sales. The loss of any significant customer could have an adverse effect on our business.
While we are now manufacturing hard covers in the United States, the loss of one or both of these suppliers or a delay in shipments could have a material adverse effect on our soft tonneau cover sales and business. We rely on a small number of customers for the majority of our sales.
A customer is considered to be significant if they account for greater than 10% of our annual sales. For the year ended December 31, 2022, two customers made up approximately 50% (38% and 12% individually) of revenue. For the year ended December 31, 2021, three customers made up approximately 77% (33%, 29%, and 15% individually) of revenue.
The loss of any significant customer could have an adverse effect on our business. A customer is considered to be significant if they account for greater than 10% of our annual sales. For the year ended December 31, 2023, the Company had one significant customer accounting for 93% of the Company’s revenue.

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Item 2. Properties

Properties — owned and leased real estate

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We also lease approximately 14,178 square feet, originally used for R&D space and additional offices, located at 7299 E Danbro Crescent, Mississauga, Ontario L5N 6P8, Canada pursuant to a three-year lease dated April 16, 2021, and terminating on May 31 st of 2024 for $23,971 CAD per month.
We lease approximately 14,178 square feet, originally used for R&D space and additional offices, located at 7299 E Danbro Crescent, Mississauga, Ontario L5N 6P8, Canada pursuant to a three-year lease dated April 16, 2021, and terminating on May 31 st of 2024 for $23,971 CAD per month.
We have purchased an approximately 152,847 square foot facility located at 2500 N America Dr., West Seneca, NY 14224 to serve as our new OEM facility. This facility meets our OEM manufacturing needs both now and in future years, as the facility contains ample space in which to grow.
ITEM 2. PROPERTIES On May 4, 2022, we purchased an approximately 152,847 square foot facility located at 2500 N America Dr., West Seneca, NY 14224 to serve as our primary corporate office and manufacturing facility. This facility meets our OEM manufacturing needs both now and in future years, as the facility contains ample space in which to grow.
ITEM 2. PROPERTIES We lease approximately 20,296 square feet for our primary corporate office and R&D facility located at 55G East Beaver Creek Rd., Richmond Hill, Ontario L4B 1E5, Canada pursuant to a five-year lease, dated June 1, 2022, for a variable rate averaging $27,934 CAD per month over the lifetime of the lease.
We lease approximately 20,296 square feet for our secondary corporate office and electrical R&D facility located at 55G East Beaver Creek Rd., Richmond Hill, Ontario L4B 1E5, Canada pursuant to a five-year lease, dated June 1, 2022, for a variable rate averaging $27,934 CAD per month over the lifetime of the lease not inclusive of additional fees, which also vary and averaged $7,019 CAD per month in 2023.
Removed
We also pay approximately $5,584 CAD in additional fees per month, which varies year to year.
Added
We also lease approximately 3,200 square feet for our primary design engineering/R&D facility located at 5232 N. 23rd St. Ozark, MO 65721 pursuant to a twelve-month lease dated June 1, 2023, and terminating on the May 31 st of 2024 for $3,250 USD per month.
Added
We have extended this lease for an additional twelve months such that it is to terminate on May 31st of 2025 for $3,350 USD per month.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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ITEM 3. 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 pending claims.
ITEM 3. 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 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Their telephone number is (212) 828-8436. 27 Dividend Policy We have never paid any cash dividends on our common stock. We anticipate that we will retain funds and future earnings to support operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends in the foreseeable future.
Dividend Policy We have never paid any cash dividends on our common stock. We anticipate that we will retain funds and future earnings to support operations and to finance the growth and development of our business. Therefore, we do not expect to pay cash dividends in the foreseeable future.
Prior to trading on Nasdaq, our common stock was quoted on the OTCQB Market under the symbol “WKSP.” Holders of Common Stock On March 31, 2023, there were 176 holders of record of our common stock. Stock Transfer Agent Our transfer agent is Vstock Transfer, LLC., located at 18 Lafayette Place, Woodmere, NY 11598.
Prior to trading on Nasdaq, our common stock was quoted on the OTCQB Market under the symbol “WKSP.” Holders of Common Stock On March 27, 2024, there were 170 holders of record of our common stock. Stock Transfer Agent Our transfer agent is Vstock Transfer, LLC., located at 18 Lafayette Place, Woodmere, NY 11598. Their telephone number is (212) 828-8436.
Any future determination to pay dividends will be at the discretion of our Board and will depend on our financial condition, results of operations, capital requirements, and other factors that our Board deems relevant. In addition, the terms of any future debt or credit financings may preclude us from paying dividends.
Any future decision to pay dividends will be at the discretion of our Board and will depend on our financial condition, results of operations, capital requirements, and other factors that our Board deems relevant.
Unregistered Sales of Equity Securities ● 40,000 shares of common stock issued to Exchange Listing LLC on March 17, 2022 for consulting services rendered per agreement signed on January 26, 2022. ● 10,000 shares of common stock issued to Zenfar Investments on January 13, 2022 for consulting services rendered per agreement signed on March 3, 2021. ● 10,000 common shares issued to Rafael Oliveira on April 23, 2022 for employment services rendered per agreement signed on March 7, 2022. ● 10,000 common shares issued to Steven Obadiah on April 23, 2022 for consulting services rendered per agreement signed on February 23, 2022. 28 The foregoing securities were issued in reliance on the exclusion from registration provided by Section 4(a)(2) of the Securities Act due to the fact the issuance did not involve a public offering of securities.
The foregoing securities were issued in reliance on the exclusion from registration provided by Section 4(a)(2) and/or Rule 506 of Regulation D promulgated under the Securities Act due to the fact the issuance did not involve a public offering of securities.
Removed
Equity Incentive Plans In July 2015, our Board and shareholders adopted the Worksport Ltd. 2015 Equity Incentive Plan (the “2015 Plan”), effective as of July 5, 2015.
Added
In addition, the terms of any future debt or credit financings may preclude us from paying dividends. 31 Unregistered Sales of Equity Securities ● Warrants to purchase 7,000,000 shares of common stock of the Company at an exercise price of $1.34 per share, subject to adjustment for reverse stock splits, recapitalizations and reorganizations, which are exercisable six months from November 2, 2023, or May 2, 2024, until the date that is five and a half years from November 2, 2023, or May 7, 2029. ● Warrants to purchase 7,700,264 shares of common stock of the Company at an exercise price of $0.74 per share, subject to adjustment for reverse stock splits, recapitalizations and reorganizations, which are exercisable six months after the date of issuance, or September 20, 2024, until the five and a half-year anniversary date of the date of issuance, or September 20, 2029.
Removed
The 2015 Plan provides for the grant of the following types of stock awards: (i) incentive stock options, (ii) nonstatutory stock options, (iii) stock appreciation rights, (iv) restricted stock awards, (v) restricted stock unit awards and (vi) other stock awards.
Added
Securities Authorized For Issuance Under Equity Compensation Plans See Item 12 “ Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters—Equity Incentive Plans ” of this Annual Report on Form 10-K. Equity Incentive Plans See Item 11 “ Executive Compensation ” of this Annual Report on Form 10-K. 32 ITEM 6. [RESERVED].
Removed
The 2015 Plan is intended to help us secure and retain the services of eligible award recipients, provide incentives for such persons to exert maximum efforts for our success and that of any affiliate and provide a means by which the eligible recipients may benefit from increases in value of our common stock.
Removed
The Board reserved 500,000 shares of common stock issuable upon the grant of awards under the 2015 Plan. As of December 31, 2022, zero shares of common stock were available under the 2015 Plan. On March 31, 2021, our Board and shareholders adopted the Worksport Ltd. 2021 Equity Incentive Plan (the “2021 Plan”).
Removed
The 2021 Plan provides for the grant of the following types of stock awards: (i) incentive stock options, (ii) nonstatutory stock options, (iii) stock appreciation rights, (iv) restricted stock awards, (v) restricted stock unit awards and (vi) other stock awards.
Removed
The 2021 Plan is intended to help us secure and retain the services of eligible award recipients, provide incentives for such persons to exert maximum efforts for our success and that of any affiliate and provide a means by which the eligible recipients may benefit from increases in value of our common stock.
Removed
The Board reserved 1,250,000 shares of common stock issuable upon the grant of awards under the 2021 Plan. As of December 31, 2022, 60,000 shares of common stock were available under the 2021 Plan. In September 2022 and November 2022, our Board and shareholders, respectively, approved and adopted the Worksport Ltd. 2022 Equity Incentive Plan.
Removed
The 2022 Plan authorizes the grant of the following types of stock awards: (i) incentive stock options, (ii) nonstatutory stock options, (iii) stock appreciation rights, (iv) restricted stock awards, (v) restricted stock units, (vi) performance units, (vii) performance shares and (viii) other awards as the administrator may determine.
Removed
The 2022 Plan is to be administered by the Board, the Compensation Committee or any other committee appointed by the Board. The 2022 Plan is intended to (i) attract and retain the best available personnel for positions of substantial responsibility, (ii) provide incentives to individuals who perform services for us and (iii) promote the success of the business.
Removed
A total of 750,000 shares of common stock have been reserved for the issuance of awards under the 2022 Plan.
Removed
The 2022 Plan also contains an “evergreen formula” pursuant to which the number of shares of common stock available for issuance under the 2022 Plan will automatically increase on January 1 of each calendar year during the term of the 2022 Plan, beginning with the calendar year 2023, by an amount of shares of common stock so that the total amount of common stock available under the 2022 Plan is equal to 15% of the total number of shares of common stock outstanding on December 31 st of the prior calendar year minus the total number of shares reserved and available for issuance under the 2015 Plan and 2021 Plan.
Removed
As of December 31, 2022, 737,500 shares of common stock were available under the 2022 Plan.
Removed
EQUITY PLAN INFORMATION Plan Category: Number of securities to be issued upon exercise of outstanding options, warrants and rights: Weighted average exercise price of outstanding options, warrants and rights: Number of securities remaining available for future issuance: 2015 Equity Incentive Plan: Equity compensation plans approved by security holders 672,500 $ 2.54 0 Equity compensation plans not approved by security holders 0 0 0 Total 672,500 $ 2.54 0 2021 Equity Incentive Plan: Equity compensation plans approved by security holders 1,190,000 $ 5.5 60,000 Equity compensation plans not approved by security holders 0 $ 0 0 Total 1,190,000 5.5 60,000 2022 Equity Incentive Plan: (1) Equity compensation plans approved by security holders 12,500 $ 1.60 737,500 Equity compensation plans not approved by security holders 0 0 0 Total 12,500 $ 1.60 737,500 Total 1,875,000 $ 4.41 797,500 (1) The 2022 Plan also contains an “evergreen formula” pursuant to which the number of shares of common stock available for issuance under the 2022 Plan will automatically increase on January 1 of each calendar year during the term of the 2022 Plan, beginning with the calendar year 2023, by an amount of shares of common stock so that the total amount of common stock available under the 2022 Plan is equal to 15% of the total number of shares of common stock outstanding on December 31 st of the prior calendar year minus the total number of shares reserved and available for issuance under the 2015 Plan and 2021 Plan.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

53 edited+44 added−23 removed23 unchanged
COVID-19 The outbreak of the coronavirus, specifically identified as “COVID-19,” resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which included the implementation of travel bans, self-imposed quarantine periods, and social distancing, have caused material disruption to businesses globally, resulting in an economic slowdown. Global equity markets have experienced significant volatility and weakness.
COVID-19 The outbreak of the coronavirus, specifically identified as “COVID-19,” resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which included the implementation of travel bans, self-imposed quarantine periods, and social distancing, have caused material disruption to businesses globally, resulting in an economic slowdown. Global equity markets experienced significant volatility and weakness.
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 $5.3 million mortgage on our West Seneca facility, our mortgage’s variable rate increases and decreases along with interest rates, which resulted in an increase of monthly premiums throughout 2022.
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 $5.3 million mortgage on our West Seneca facility, our mortgage’s variable rate increases and decreases along with interest rates, which resulted in an increase of monthly premiums throughout 2022 and 2023.
Increasing prices in the component materials for the 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.
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.
We are also identifying North American suppliers of our products’ components and will prioritize transport by rail when possible to avoid high trucking costs. Geopolitical Conditions In February 2022, Russia initiated significant military action against Ukraine.
We are also identifying North American suppliers of our products’ components and will prioritize transport by rail when possible to avoid high trucking costs. 35 Geopolitical Conditions In February 2022, Russia initiated significant military action against Ukraine.
We have conducted the following public and private offerings since the beginning of the 2021 fiscal year: Public Offering On September 30, 2022, we filed a shelf registration statement on Form S-3 (File No. 333-267696), which was declared effective by the SEC on October 13, 2022, containing a base prospectus covering the offering, issuance and sale by us of up to $30,000,000 of our common stock and prospectus supplement covering the offering, issuance and sale by us of up to $13,000,000 of our common stock that may be issued and sold under an At The Market Offering Agreement dated as of September 30, 2022.
We have conducted the following public and private offerings since the beginning of the 2023 fiscal year: Public Offering On September 30, 2022, we filed a shelf registration statement on Form S-3 (File No. 333-267696), which was declared effective by the SEC on October 13, 2022, containing a base prospectus covering the offering, issuance and sale by us of up to $30,000,000 of our common stock and prospectus supplement covering the offering, issuance and sale by us of up to $13,000,000 of our common stock that may be issued and sold under an At The Market Offering Agreement dated as of September 30, 2022.
Property and Equipment Capital assets are recorded at cost and are depreciated using the straight-line method over the following estimated useful lives: Furniture and equipment 5 years Automobile 5 years Computers 3 years Leasehold improvements 15 years Building 15 years
Property and Equipment - Capital assets are recorded at cost and are depreciated using the straight-line method over the following estimated useful lives: Furniture and equipment 5 years Automobile 5 years Computers 3 years Leasehold improvements 15 years Manufacturing equipment 5-15 years Building 15 years
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 take the form of vehicle pre-orders, sales, or investments.
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.
Our ability to continue as a going concern is dependent upon our ability to generate cash flows from operations and obtain financing. We intend to continue funding our 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.
Our ability to continue as a going concern is dependent upon our ability to generate cash flows from operations and obtain equity and/or debt financing. We intend to continue funding operations through equity and debt financing arrangements, which may be insufficient to fund our capital expenditures, working capital and other cash requirements in the long term.
Revenue Recognition In accordance with ASC 606 Revenue from Contracts with Customers, sales are recognized when (1) products are shipped, with no right of return except for defective products, and the title and risk of loss has passed to customers; and (2) when they are delivered based on the terms of the sale, and there is an identifiable contract with a customer with defined performance obligations, the transaction price is determinable, and the entity has fulfilled its performance obligation.
Revenue Recognition – In accordance with Accounting Standards Codification (ASC) 606 Revenue from Contracts with Customers, sales are recognized when (1) products are shipped, with no right of return except for defective products, and the title and risk of loss has passed to customers; and (2) when they are delivered based on the terms of the sale, and there is an identifiable contract with a customer with defined performance obligations, the transaction price is determinable, and the entity has fulfilled its performance obligation.
While this resulted in fewer average R&D personnel working in our offices or labs on a given day, it likely prevented further contamination and sick leave. We do not believe this policy has impacted revenue nor timelines towards upcoming product launches; however, supply chain issues caused by COVID-19 did result in higher cost of goods sold during 2021 and 2022.
While this resulted in fewer personnel working in our offices or labs on a given day, it likely prevented further contamination and sick leave. We do not believe this policy has impacted revenue nor timelines towards upcoming product launches; however, supply chain issues caused by COVID-19 did result in higher cost of goods sold during 2021 and 2022.
Many regulations that improve North America’s Electric Vehicle (EV) charging infrastructure or provide grants to businesses operating in the EV space will benefit us.
Many regulations that improve North America’s EV charging infrastructure or provide grants to businesses operating in the EV space will benefit us.
Due to these present and forecasted price increases and the temporary increases in ocean freight and container handling costs faced during the majority of 2022 as a result of 2021 supply chain issues, we updated our product pricing in 2022. In addition, as central governments and the U.S.
Due to these present and forecasted price increases and the temporary increases in ocean freight and container handling costs faced during the majority of 2022 as a result of 2021 supply chain issues, we updated our product pricing in 2022. Additionally, as central banks and the U.S.
It is not possible to predict the broader consequences of the conflict, including related geopolitical tensions, and the measures and retaliatory actions taken by the U.S. and other countries in respect thereof as well as any counter measures or retaliatory actions by Russia or Belarus in response, including, for example, potential cyberattacks or the disruption of energy exports, is likely to cause regional instability and geopolitical shifts, which could materially adversely affect global trade, currency exchange rates, regional economies and the global economy.
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.
The Company performs ongoing credit evaluations of customers’ financial condition and, if needed, maintains an allowance for doubtful accounts receivable based upon the Company’s historical experience and a specific review of accounts receivable at the end of each period. At December 31, 2022 and 2021, the Company had no allowance for doubtful accounts.
The Company performs ongoing credit evaluations of customers’ financial condition and, if needed, maintains an allowance for doubtful accounts receivable based upon the Company’s historical experience, forecasted economic conditions, and a specific review of accounts receivable at the end of each period. At December 31, 2023 and 2022, the Company had no allowance for doubtful accounts.
Critical Accounting Policies Our discussion and analysis of results of operations and financial condition are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.
Off-Balance Sheet Arrangements None. Critical Accounting Policies Our discussion and analysis of results of operations and financial condition are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America.
Receivables are reviewed individually for collectability. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, allowances may be required. The Company offers credit terms on the sale of the Company’s products to a significant majority of the Company’s customers and requires no collateral from these customers.
If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, allowances may be required. The Company offers credit terms on the sale of the Company’s products to a significant majority of the Company’s customers and requires no collateral from these customers.
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.
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.
Material Cash Requirements from Known Contractual and Other Obligations The following table summarizes our contractual obligations as of December 31, 2022 and 2023: Contractual Obligations December 31, 2022 December 31, 2023 Operating lease obligations $ 1,518,895 $ 1,025,869 Equipment purchases $ 2,545,000 $ - Total Contractual Obligations $ 4,063,895 $ 1,025,869 We intend to fund our contractual obligations with working capital.
Material Cash Requirements from Known Contractual and Other Obligations The following table summarizes our contractual obligations as of December 31, 2023 and 2022: Contractual Obligations December 31, 2023 December 31, 2022 Operating lease obligations $ 1,082,319 $ 1,518,895 Equipment purchases $ 59,815 $ 2,545,000 Total Contractual Obligations $ 1,142,134 $ 4,063,895 We intend to fund our contractual obligations with working capital.
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 As of December 31, 2022, we had $14,620,757 in cash, restricted cash, and cash equivalents.
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 As of December 31, 2023, we had $3,365,778 in cash, restricted cash, and cash equivalents.
Pursuant to the ATM Agreement, Wainwright is entitled to a commission equal to 3.0% of the gross sales price of the shares of common stock sold.
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.
There can be no assurance that the steps management is taking will be successful. Subject to the foregoing, however, we believe our current cash balances coupled with anticipated cash flow from operating activities will be sufficient to meet our working capital requirements for at least one year from the date of issuance of the accompanying consolidated financial statements.
Subject to the foregoing, we believe our current cash balances coupled with anticipated cash flow from operating activities will be sufficient to meet our working capital requirements for at least one year from the date of issuance of the accompanying consolidated financial statements.
Meanwhile, we report results of operations in U.S. Dollars. Since 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. While having our products manufactured in China, our manufacturers are paid in USD to better avoid the relatively greater fluctuation of the Chinese Yuan.
Since 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.
Operating Activities Net cash used by operating activities for the year ended December 31, 2022 was $7,977,960, compared to $4,210,623 in the prior year, primarily driven by a larger net loss in 2022, which was partially offset by the issuance of shares, options, and warrants for services.
Operating Activities Net cash used by operating activities for the year ended December 31, 2023 was $11,930,580, compared to $7,977,960 in the prior year, driven by a larger net loss during the year ended December 31, 2023, and partially offset by the issuance of shares, options, and warrants for services.
The management and Board is constantly monitoring this situation to minimize potential losses. 31 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.
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.
We currently support a network of dealers, distributors, and independent resellers, and we will continue to expand our business and online sales channels in 2023. Cost of Sales Cost of sales decreased by 84%, from $350,702 for the year ended December 31, 2021 to $56,967 for the year ended December 31, 2022.
We currently support a network of dealers and distributors, and we will continue to expand our business and online sales channels in 2024. Cost of Sales Cost of sales increased by 2,163%, from $56,967 for the year ended December 31, 2022 to $1,289,118 for the year ended December 31, 2023.
Investing Activities Net cash used in investing activities for the year ended December 31, 2022 was $11,150,776 compared to $1,131,735 in the prior year. The increase in investing activities was primarily due to the purchase of the manufacturing facility and equipment.
Investing Activities Net cash used in investing activities for the year ended December 31, 2023 was $3,756,364 compared to $11,150,776 in the prior year. The decrease in investing activities was primarily due to the purchase of a manufacturing facility in 2022.
Results of Operations Revenue For the year ended December 31, 2022, revenues from our entire line of products was $116,502, as compared to $303,750 for the year ended December 31, 2021. The year-over-year sales decreased by approximately 62%.
Results of Operations Revenue For the year ended December 31, 2023, revenues from the entire line of our products were $1,529,632, as compared to $116,502 for the year ended December 31, 2022. Year-over-year sales increased by approximately 1,213%.
We have generated only limited revenues and have relied primarily upon capital generated from public and private offerings of our securities. Since the Company’s acquisition of Worksport in fiscal year 2014, it has never generated a profit. As of December 31, 2022, we had an accumulated deficit of $33,384,219.
We have generated only limited revenues and have relied primarily upon capital generated from public and private offerings of our securities. Since the Company’s acquisition of Worksport in fiscal year 2014, it has never generated a profit. During the year ended December 31, 2023, we had net losses of $14,928,958 (2022 - $12,534,414).
Inventory increased at December 31, 2021 by $460,969 and at December 31, 2022 by $844,600 as a result of our stockpiling inventory in anticipation of the launch of our e-commerce platform.
Inventory increased at December 31, 2023 by $2,285,120 and at December 31, 2022 by $844,600 as a result of our stockpiling inventory in anticipation of the launch of our e-commerce platform and our purchasing of raw materials for domestic production.
Higher oil and gasoline prices further increased these costs, and we are operating under the assumption most of these higher costs will remain throughout 2023. 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.
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.
For the year ended December 31, 2022, revenue generated in Canada was $14,572, as compared to $40,683 for the same period in 2021, a decrease of 64%. For the year ended December 31, 2022, revenue generated in the United States was $101,930, compared to $263,067 for the same period in 2021, a decrease of 61%.
For the year ended December 31, 2023, revenue generated in Canada was $6,811, as compared to $14,572 for the same period in 2022, a decrease of 53%. For the year ended December 31, 2023, revenue generated in the United States was $1,522,821, compared to $101,930 for the same period in 2022, an increase of 1,394%.
While freight costs have since returned to pre-COVID-19 levels, 2021 freight costs were, in some cases, more than four times higher than those shortly before COVID-19.
While freight costs have since returned to pre-COVID-19 levels, 2021 freight costs were, in some cases, more than four times higher than those shortly before COVID-19. The supply chain for certain raw materials has been disproportionately, negatively impacted when compared to supply chains of other raw materials.
The increase was related to increased research and development activities and an increase in salaries as we seek to expand our operations and further develop our products. ● Sales and marketing expenses increased by $1,059,574, from $1,386,692 for 2021 to $2,446,266 for 2022.
The increase was related to increased research and development activities, increased employment of production personnel including engineers, machine operators, and assembly people, and increases in wages and salaries as we seek to expand our operations and further develop our products. ● Sales and marketing expenses decreased by $963,212, from $2,446,266 for 2022 to $1,483,054 for 2023.
The decrease was primarily due to the acquisition of assets for domestic production, such as the building in West Seneca, NY and industrial manufacturing equipment, as well as increased spending for inventory in anticipation of launching our e-commerce platform, research and development, and overhead.
The decrease was primarily due to the acquiring of assets for domestic production, such as industrial manufacturing equipment, as well as increasing spending on production personnel, and for raw materials in anticipation of domestic production, research and development, and overhead.
The situation remains uncertain, and while it is difficult to predict the impact of any of the foregoing, the conflict and actions taken in response to the conflict 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. 32 Foreign Currencies We are subject to foreign exchange risk as we manufacture our products in China, market extensively in both Canadian and U.S. markets, employee people residing in both the U.S. and Canada and, to date, have raised funds in Canadian Dollars.
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.
Accounts receivable decreased at December 31, 2022 by $83 and increased by $2,228 in the prior year. The decrease in accounts receivable was due to lower sales in 2022 compared to 2021.
Accounts receivable increased at December 31, 2023 by $400,525 and decreased by $83 in the prior year. The increase in accounts receivable was due to higher sales to private labels near the end of the year in 2023 compared to that of 2022.
As of December 31, 2022, we had current assets of $18,332,107 (2021 - $34,032,005) and current liabilities of $2,461,730 (2021 – $1,796,789). As of December 31, 2022, we had working capital of $15,870,377 (2021 – $32,235,216) and an accumulated deficit of $33,384,219 (2021 - $20,849,805).
As of December 31, 2023, we had current assets of $9,123,506 (2022 - $18,332,107) and current liabilities of 7,166,612 (2022 – $2,461,730). As of December 31, 2023, we had working capital of $1,956,894 (2022 – $15,870,377) and an accumulated deficit of $48,313,177 (2022 - $33,384,219).
Prepaid expenses increased by $529,438 at December 31, 2022 and by $382,067 at December 31, 2021 due to deposits for manufacturing equipment and professional services. 35 Accounts payable and accrued liabilities increased at December 31, 2022 and 2021 by $995,340 and $187,510, respectively.
Prepaid expenses increased by $776,703 at December 31, 2023 and by $529,438 at December 31, 2022 due to deposits made by us for the purchase of manufacturing equipment and inventory. Accounts payable and accrued liabilities decreased at December 31, 2023 by $577,124 and increased at December 31, 2022 by $995,340, respectively.
Our cost of sales, as a percentage of sales, was approximately 49% and 115% for the years ended December 31, 2022 and 2021, respectively. The decrease in the cost of sales as a percentage of sales was primarily due to increased efficiency associated with acquiring and manufacturing inventory for the year ended December 31, 2022, compared to the previous year.
Our cost of sales, as a percentage of sales, was approximately 84% and 49% for the years ended December 31, 2023 and 2022, respectively. The increase in the cost of sales as a percentage of sales was primarily due to increased sales to private labels at a lower agreed upon sales price compared to online retail sales.
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.
Our overhead per domestic unit was particularly high during the year ended December 31, 2023 due to this allocation of resources. 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.
Financing Activities Net cash provided by financing activities for the year ended December 31, 2022 was $5,182,160 compared to $32,801,879 in the prior year. During the year ended December 31, 2022, we received $5,300,000 in loans for the purchase of a manufacturing facility.
During the year ended December 31, 2022, we received a $5,300,000 loan for the purchase of a manufacturing facility.
Cash and cash equivalents in financial institutions may exceed insured limits at various times during the year and subject the Company to concentrations of credit risk. Cash and cash equivalents include restricted cash at December 31, 2022 and 2021 totaling $411,016 and $0, respectively. Receivables Trade accounts receivable are stated at the amount the Company expects to collect.
Cash and cash equivalents include restricted cash at December 31, 2023 and 2022 totaling $730,802 and $411,016, respectively. Receivables - Trade accounts receivable are stated at the amount the Company expects to collect. Receivables are reviewed individually for collectability.
We believe that by moving our manufacturing operations to the United States, we can (i) have better control over design and manufacturing quality of our products, (ii) lessen supply chain risk, (iii) decrease shipping costs, and (iv) cut overall manufacturing costs. 30 ● On September 30, 2022, we filed a shelf registration statement on Form S-3 (File No. 333-267696), which was declared effective by the SEC on October 13, 2022, containing a base prospectus covering the offering, issuance and sale by us of up to $30,000,000 of our common stock and prospectus supplement covering the offering, issuance and sale by us of up to $13,000,000 of our common stock that may be issued and sold under an At The Market Offering Agreement dated as of September 30, 2022.
September 2022 At-The-Market Sales Agreement 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 (“Form S-3 Registration Statement”), 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.
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. 36 Cash and Cash Equivalents Cash and cash equivalents includes cash on account and demand deposits with maturities of three months or less.
Actual results may differ from these estimates under different assumptions or conditions. 39 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.
The increase was due to the engagement of various third-party consultants to expand our business operations. ● We realized a gain on foreign exchange of $10,461 for 2022, compared to a loss on foreign exchange of $4,165 for the prior year due to conversions between CAD and USD.
The decrease in professional fees was due to the completion of consulting engagements with various third-party consultants. ● We realized a gain on foreign exchange of $2,693 during 2023, compared to a gain on foreign exchange of $10,461 for the prior year due to conversions between CAD and USD. \Other Income and Expenses We reported other expenses for the year ended December 31, 2023 of $192,297 compared to other income of $239,301 the prior year.
We cannot give assurance that we can increase our cash balances or limit our cash consumption and thus maintain sufficient cash balances for our planned operations or future business developments. Future business development and demands may lead to cash utilization at levels greater than recently experienced.
Management is focused on transitioning towards revenue as our principal source of liquidity by growing our existing product offerings and customer base. We cannot give assurance that we can increase our cash balances or limit our cash consumption and thus maintain sufficient cash balances for our planned operations or future business developments.
Revenue decreased for the year ended December 31, 2022 compared to the prior year due to our focus on establishing new business-to-consumer and business-to-business sales channels, while strengthening the support of those channels to increase customer satisfaction and enable high product turnover once domestic production begins.
Worksport continues to focus on establishing new business-to-consumer and business-to-business sales channels while strengthening the support of those channels 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 during 2024.
The increase in sales and marketing is primarily attributable to compensation for investor relations consulting services. ● Professional fees, which include accounting, legal, and consulting fees, increased from $4,268,684 in 2021 to $5,418,863 in 2022.
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 $5,418,863 in 2022 to $3,853,134 in 2023.
Sales from online retailers of our products decreased from $263,116 in 2021 to $101,930 in 2022, a decrease of 61%, due to our focus on establishing new sales channels. Online retailers accounted for 87% of total revenue for the year ended December 31, 2022 compared to 87% for the year ended December 31, 2021.
We intend to gradually increase output capacity through refined production processes and increased personnel. 36 Sales from online retailers of our products increased from $101,930 in 2022 to $104,352 in 2023, an increase of 2%. Online retailers accounted for 7% of total revenue for the year ended December 31, 2023 compared to 87% for the year ended December 31, 2022.
Net Loss Net loss for the year ended December 31, 2022 was $12,534,414 compared to a net loss of $7,897,085 for the year ended December 31, 2021 – an increase of 59%.
The increase in other expenses can be attributed to higher interest expense in the current period compared to the prior period, offset by interest income and rental income. 37 Net Loss Net loss for the year ended December 31, 2023 was $14,928,958 compared to a net loss of $12,534,414 for the year ended December 31, 2022 – an increase of 19%.
Volume discounts are offered to certain high-volume customers, and we also offer a “dock price” or “pickup program” in which clients are able to pick up product directly from our stocking warehouse. 33 Operating Expenses Operating expenses increased for the year ended December 31, 2022 by $5,318,471, from $7,514,779 for the fiscal year ended December 31, 2021 to $12,833,250 for the fiscal year ended December 31, 2022, due to the following factors. ● General and administrative expense increased by $3,123,344 from $1,855,238 in 2021 to $4,978,582 in 2022.
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” in which clients are able to pick up inventory directly from our stocking warehouse.
Distributor sales decreased for the year ended December 31, 2022 compared with the year ended December 31, 2021, with sales of $14,572 and $40,349, respectively. 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 US and Canadian markets.
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. Currently, we work closely with two distributors in Canada, and we are close to setting up a distribution network within the USA. This does not include multiple independent online retailers.
Pursuant to the ATM Agreement, Wainwright is entitled to a commission equal to 3.0% of the gross sales price of the shares of common stock sold. As of the date of this Annual Report, no securities have been sold pursuant to the Form S-3. ● On November 14, 2022, our shareholders approved the Worksport Ltd. 2022 Equity Incentive Plan.
Pursuant to the ATM Agreement, H.C. Wainwright & Co., LLC is entitled to a commission equal to 3.0% of the gross sales price of the shares of common stock sold. As of December 31, 2023, the Company has issued 99,127 shares for net proceeds of $214,238.
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Business Developments The following highlights recent material developments in our business: ● In May 2022, we closed on the purchase of a commercial property for $8,125,000 in the town of West Seneca, Erie County, New York pursuant to a Purchase and Sale Agreement that we entered into with J&M Distributing, Inc.
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Business Developments The following highlights recent material developments in our business: ● In August 2023, we announced the successful dispatch of our first shipment of hard-folding tonneau covers, which are made in the U.S. with domestic and imported components.
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We financed $5,300,000 in connection with the closing of the Acquisition pursuant to a Loan Agreement that we entered into with Northeast Bank, of which we issued a Promissory Note to the Lender guaranteed by Worksport Ltd. and secured by the Property per a Mortgage and Security Agreement entered into with the Lender.
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This major development follows our initiating manufacturing earlier that month and aligns with recent sizable orders, notably a $700,000 order for soft-folding covers and a staggering $1,600,000 order for hard-folding covers, both from a national U.S. customer and reseller of automotive aftermarket accessories. ● In September 2023, we announced that we had found a top-tier solar panel provider for our highly anticipated SOLIS Solar Tonneau Cover.
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The Property consists of two parcels of land: (i) one parcel consisting of approximately 14 acres improved by a building containing approximately 152,847 square feet; and (ii) a second parcel consisting of approximately four acres of vacant land. Currently, our manufacturing operations are in China.
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We believe that this provider, renowned for its state-of-the-art solar panels and underlying technology, will help us set a new standard in renewable energy tech for vehicles and provide the most durable and highest quality flexible solar panels. ● In September 2023, we announced significant strides in the development of our groundbreaking COR battery system, designed to complement the launch of the SOLIS solar cover.
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With the acquisition of the Property, we plan to move our manufacturing operations to the United States.
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This cutting-edge duo is poised to empower remote power supply and extend the driving range of electric pickup trucks, thereby underscoring our commitment to sustainability and innovation as a cleantech company. ● On September 19, 2023, we announced that we had secured a long-term supply agreement with an established, leading automotive aftermarket reseller in the United States. 33 ● On January 3, 2024, we announced our strategic arrangement with NeuronicWorks Inc., a Toronto-based high-tech custom electronic product development and manufacturing company, to manufacture and assemble our COR battery system in preparation for the system’s anticipated Alpha release. ● On February 7, 2024, we announced a collaboration with Infineon Technologies AG (FSE: IFX / OTCQX: IFNNY) pursuant to which we will use Infineon’s GaN power semiconductors GS-065-060-5-B-A in the converters for our portable power stations to increase efficiency and power density. ● On February 23, 2024, we announced a new arrangement with Dix Performance North, Canada’s leading wholesaler of aftermarket car and truck products, for Dix would include our tonneau covers in their catalog.
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A total of 750,000 shares of common stock were initially reserved for the issuance of awards under the 2022 Plan.
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This strategic alliance is expected to make Worksport’s range of covers widely available throughout Canada, accelerate our growth, and contribute to significant sales and revenue increases.
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The 2022 contains an “evergreen formula” pursuant to which the number of shares of common stock available for issuance under the 2022 Plan will automatically increase on January 1 of each calendar year during the ten-year term of the 2022 Plan, beginning with the calendar year 2023, by an amount of shares of common stock so that the total amount of common stock available under the 2022 Plan is equal to 15% of the total number of shares of common stock outstanding on December 31 st of the prior calendar year minus the total number of shares reserved and available for issuance under the Worksport Ltd. 2015 Equity Incentive Plan and Worksport Ltd. 2021 Equity Incentive Plan.
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The supply chain for power electronics, specifically, is still facing supply chain issues as a result of COVID-19, for the globe faced a simultaneous supply shock and heightened demand for these goods – increasing the prices for such raw materials while simultaneously slowing suppliers’ order fulfillments.
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On January 1, 2023, the authorized number of shares of common stock of the 2022 Plan was 2,518,502. ● On November 18, 2022, we engaged Lumsden & McCormick, LLP to replace Haynie & Company as our independent registered public accounting firm.
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Further, due to such shortages, many suppliers of power electronics have focused their attention on large customers such as those more directly aligned within the electric vehicle supply chain as compared to companies on the outskirts of this supply chain such as Worksport. This particular result of COVID-19 primarily affects the sourcing of components for the Worksport COR.
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For business-to-consumer channels, we established our own e-commerce platform as well as listed our products on online marketplaces including eBay, Amazon, and Walmart.
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In order to mitigate these supply chain issues, we have invested more resources into sourcing power electronics in the interest of finding reliable suppliers with manageable lead times and competitive pricing.
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For business-to-business channels, we updated our terms and conditions, created improved product brochures for distributors, strategically created a Minimum Advertised Price policy to prevent our business-to-consumer channels from interfering with our business-to-business channels, established sales representation across the continental U.S. by forging relationships with various sales agencies, and more.
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The management and Board are constantly monitoring this situation to minimize potential losses. 34 Climate Change Climate change threatens to cause many foreseeable as well as unforeseeable ramifications.
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We intend to begin domestic manufacturing in the second quarter of fiscal year 2023, barring unforeseeable delays, and gradually increase output capacity through refined production processes and increased personnel during following quarters.
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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.
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Other Income and Expenses We reported other income for the year ended December 31, 2022 of $239,301 compared to a loss of $335,354 in the prior year.
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Further, we intend to lower our own carbon footprint by investing in energy-saving measures in our factory in West Seneca, NY.
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The change can be attributed to an increase in the gain on settlement of debt, as well as increases in rental and interest income and a reduction in bad debt expense, which are partially offset by an increase in interest expense.
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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.
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In their audit report for the fiscal year ended December 31, 2022 included in this report, our auditors have expressed their consent as to our ability to continue as a going concern. To date, our principal sources of liquidity consists of net proceeds from public and private securities.
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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.
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During the year ended December 31, 2022, we did not receive any proceeds from public offerings nor private placement offerings. Management is focused on transitioning towards revenue as our principal source of liquidity by growing our existing product offerings, as well as our customer base, to increase our revenues.

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