Notes
to the Condensed Consolidated Financial Statements
(Unaudited)
1.
Basis of Presentation and Business Condition
a)
Interim Financial Information
The
accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting
principles in the United States (“GAAP”) for interim financial information pursuant to the rules and regulations of the U.S.
Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and notes required by GAAP for complete
financial statements. In the opinion of management, all adjustments and reclassifications considered necessary in order to make the financial
statements not misleading and for a fair and comparable presentation have been included and are of a normal recurring nature. Operating
results for the six-month period ended June 30, 2021 are not necessarily indicative of the results that may be expected for the year
ending December 31, 2021. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the
Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on April 13, 2021.
On
May 21, 2021, the Board of Directors 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 NADAQ. The Certificate of Change
was submitted to the Nevada Secretary of State on May 21, 2021 and the FINRA corporate action was announced on August 3, 2021. FINRA declared
the 1 for 20 reverse stock split effective on
August 4, 2021. These condensed interim financial statements including, prior period comparative share amounts, have been retrospectively
restated to reflect this reverse split.
b)
Functional and Reporting Currency
Effective
January 1, 2020, the Company changed the functional currency of its subsidiary to United States dollars given the increasing prevalence
of U.S. dollar-denominated activities of the subsidiary over time. The change in functional currency from Canadian dollars to United
States dollars is accounted for prospectively from January 1, 2020. The subsidiary’s balance sheet was converted from Canadian
dollars to United States dollars using the year ended December 31, 2019 United States dollar balance as the opening for January 1, 2020
in accordance to ASC 830. These condensed interim financial statements are presented in United States Dollars. The functional
and presentation currency of the Company and its subsidiary is the United States Dollar. As a result of the change in functional currency
the Company recognized a loss on foreign exchange of $29,940.
c)
Use of Estimates
The
preparation of condensed unaudited financial statements in conformity with accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the condensed interim financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from these estimates.
d)
Business condition
The
Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s
ability to continue as a going concern within one year after the date the financial statements are issued.
As
of June 30, 2021, the Company had working capital of $11,657,250 and an accumulated deficit of $14,901,211. As of June 30, 2021, the
Company had cash and cash equivalents of $12,266,597. Based on its current operating plans, the Company believes it has sufficient level
of funding for anticipated operations, capital expenditures and debt repayments for a period of at least 12 months from the issuance
date of this Annual Report.
During
the six month ended June 30, 2021 the Company through its Reg-A public offering, private placement offering, and exercises of warrants
had raised in aggregate of approximately $12,700,000. In addition, as of August 2021 the Company has approximately 2,500,000 (50,000,000
pre-stock split) warrants exercisable at $4 ($0.20 pre-stock split) per warrant compare to an average share price of approximately $4.30
($0.22 pre-stock split) per share, anticipating additional warrant exercises.
Based
on the Company’s future operating plans, existing cash of $12,266,597 combined with possible warrants exercises of approximately
$10,000,000; management believes the Company have sufficient funds to meet its contractual obligations and working capital requirements
for the next 12 months and the foreseeable future.
Worksport
Ltd.
Notes
to the Condensed Consolidated Financial Statements
(Unaudited)
2.
Significant Accounting Policies
The
accounting polices used in the preparation of these condensed consolidated interim financial statements are consistent with those of
the Company’s audited financial statements for the year ended December 31, 2020 in addition to:
Property
and Equipment – During
the six month ended June 30, 2021 the Company purchased an automobile. As such the Company has updated its accounting policy
of its capital assets. Capital assets are recorded at cost and are amortized using the straight-line method over the following estimated
useful lives:
3.
Inventory
|
Inventory consists of the following at June 30, 2021 and December 31, 2020:
|
|
|
|
|
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Finished goods
|
|
$
|
64,990
|
|
|
$
|
32,358
|
|
|
Promotional items
|
|
|
552
|
|
|
|
552
|
|
|
Raw materials
|
|
|
7,893
|
|
|
|
7,893
|
|
|
Inventory
|
|
$
|
73,435
|
|
|
$
|
40,803
|
|
|
Prepaid inventory
|
|
$
|
179,713
|
|
|
$
|
-
|
|
4.
Promissory Notes
The
following tables shows the balance of the notes payable as of June 30, 2021 and December 31, 2020:
Schedule of Notes Payable
|
Balance as at December 31, 2019
|
|
$
|
267,881
|
|
|
Reclassification
|
|
|
99,177
|
|
|
Balance as at December 31, 2020
|
|
$
|
367,058
|
|
|
Repayment
|
|
|
(103,847
|
)
|
|
Balance as at June 30, 2021
|
|
$
|
263,211
|
|
During
the year ended December 30, 2020, the Company reclassified $88,120 from accounts payable to promissory notes. The terms of the note is
under negotiation and is currently due on demand.
During
the year ended December 30, 2020, the Company reclassified a debit balance of $11,058 from notes payable to other receivable.
During
the year ended December 31, 2016, the Company issued a secured promissory note in the amount of $73,452 ($123,231 Canadian Dollars).
During the year ended December 31, 2018, the Company issued two additions to the original unsecured promissory note of July 2016, totaling
$22,639 ($30,884 Canadian dollars). The secured promissory note bears interest at a rate of 18% per annum. The payment terms of the original
note including these additions are due “upon completion of going public on the Canadian Securities Exchange, with no change in
interest rate. The secured promissory note is secured by all present and after-acquired property and assets of the Company. During the
year ended December 31, 2019, the Company extended the maturity dates of the secured promissory notes to be due on April 1, 2021. As
at June 30, 2021, principal balance owing was $96,091 ($123,231 Canadian Dollars) (December 31, 2020 - $96,091 ($123,231 Canadian Dollars)).
As of June 30, 2021, the accrued interest on this note payable was $57,582 ($75,102 Canadian Dollars) (December 31, 2020 - $48,770 ($64,102
Canadian Dollars)) included in accounts payable and accrued liabilities. As of June 30, 2021, the Company and the secured promissory
note holder are in dispute.
During
the year ended December 31, 2016, the Company issued secured promissory notes in the amount of $79,000. The secured promissory notes
bears interest at a rate of 18% per annum, payable monthly. The secured promissory notes are secured by all present and after-acquired
property and assets of the Company. During the year ended December 31, 2019, the Company extended the maturity dates of all secured promissory
notes to be due on April 1, 2021. As at June 30, 2021 principal balance owing was $79,000 (December 31, 2020 - $79,000). As of June 30,
2021, the accrued interest on this note payable was $38,032 (December 31, 2020 – $31,000) included in accounts payable and accrued
liabilities. As of June 30, 2021, the Company and the secured promissory note holder are in dispute.
During
the years ended December 31, 2017, the Company issued secured promissory notes in the amount of $53,848 ($67,700 Canadian Dollars). The
secured promissory notes were due in October and November 2018 and bears interest at a rate of 12% per annum. The secured promissory
notes are secured by Company inventory and personal assets held by the CEO. During the year ended December 31, 2019, the Company extended
the maturity date of the secured promissory notes to November 3, 2020. During the six months ended June 30, 2021, the Company and promissory
note holders reached an agreement to repay $62,905 ($80,108 Canadian Dollars) for outstanding principal of $53,848 and interest of $14,740.
As a result of the Company recognized a gain on settlement of debt of $5,682. As of June 30, 2021 the secured promissory notes has been
repaid in full.
Worksport
Ltd.
Notes
to the Condensed Consolidated Financial Statements
(Unaudited)
4.
Promissory Notes (continue)
During
the years ended December 31, 2017, the Company issued secured promissory notes in the amount of $60,000. The secured promissory notes
are due in August and November 2018 and bear interest at a rate of 12% per annum. The secured promissory notes are secured by Company
inventory and personal assets held by the CEO. During the year ended December 31, 2019 the Company extended the maturity dates of this
secured promissory note to November 3, 2020. During the year ended December 31, 2019, the Company a principal repayment of $10,000. During
the quarter ended June 30, 2021 the Company and secured promissory note holder agreed to repay all outstanding principal and interest
through the issuance of 36,048 (720,966 pre-stock split) common shares valued at $0.09 per share. As at June 30, 2021, the Company had
recorded principal and interest of $73,886 as a result of the share repayment the Company recognized a gain on settlement of $8,997.
As of June 30, 2021 the secured promissory notes has been repaid in full.
The
amounts repayable under promissory notes and secured promissory notes at June 30, 2021 and December 31, 2020:
Schedule of Secured Notes Payable
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
Balance owing
|
|
$
|
263,211
|
|
|
$
|
367,058
|
|
|
Less amounts due within one year
|
|
|
(263,211
|
)
|
|
|
(367,058
|
)
|
|
Long-term portion
|
|
$
|
-
|
|
|
$
|
-
|
|
5.
Convertible Promissory Notes
On
February 25, 2020, the Company entered into an agreement with Leonite Capital LLC, a Delaware limited liability company (“Leonite”),
pursuant to which the Company issued to Leonite a secured convertible promissory note in the aggregate principal amount of $544,425 to
be paid in tranches. As additional consideration for the purchase of the note, (I) the Company issued to Leonite 22,500 (450,000 pre-stock
split) common shares, and (ii) the Company issued to Leonite a five-year warrant to purchase 45,000 (900,000 pre-stock split) common
shares at an exercise price of $2.00 ($0.10 pre-stock split) per share (subject to adjustment), which may be exercised on a cashless
basis. Refer to note 14 for warrant valuation.
The
note carries an original issue discount of $44,425 to cover Leonite’s legal fees, accounting fees, due diligence fees and/or other
transactional costs incurred in connection with the purchase of the note. Therefore, the purchase price of the note was $500,000. On
February 28, 2020, the Company recorded $198,715, $182,500 principal and $16,215 original issue discount. On September 1, 2020 the Company
recorded an additional $310,322, $285,000 principal and $25,322 original issue discount. As of June 30, 2021, the Company has recorded
$509,037, $467,500 principal and $41,537 original issue discount. Furthermore, the Company issued 22,500 (450,000 pre-stock split) shares
of common stock valued at $123,390 and a debt-discount related to the warrants valued at $344,110. During the year ended December 31,
2020 Leonite converted $226,839 of convertible promissory note into 126,022 ( 2,520,434 pre-stock split) common shares at $1.80 ($0.09
pre-stock split) per share. The original value of the convertible note converted was $182,565 as a result the Company recognized a loss
of $44,274 on settlement of debt. During the six months ended June 30, 2021 Leonite converted its remaining outstanding principal and
interest into common share. Leonite received 204,622 (4,092,431 pre-stock split) common shares at $1.80 ($0.09 pre-stock split) per share
valued at $368,319. The original value of the convertible note converted including interest was $325,667. As a result the Company recognized
a loss of $42,651 on settlement of debt. In connection with the settlement the Company expensed the remaining $148,027 of the original
debt discount to interest expense. As of June 30, 2021 the convertible promissory note has been repaid in full.
The
Company amortized $58,146 (2020 - $11,677) of financing costs related to the shares and warrants for the six months ended June 30, 2021.
The remaining net balance of the note at June 30, 2021 is $0 (2020 - $12,715) comprised of principal of $0 (2020 - $183,538) and net
of unamortized debt discount of $0 (2020 - $170,823).
Worksport
Ltd.
Notes
to the Condensed Consolidated Financial Statements
(Unaudited)
6.
Shareholders’ Equity (Deficit)
During
the six months ended June 30, 2021 the Company issued a total of 1,502,409
(30,048,199
pre-stock split) common shares relating to the
Reg-A public offering. Of the shares issued 15,500
(312,000
pre-stock split) common shares valued at $31,200
were from share subscription payable and 750
(15,000
pre-stock split) common shares were cancelled
and refunded valued at $1,500.
The Company incurred share issuance cost of $123,984.
During
the same period 1,409,122
(28,182,451
pre-stock split) Reg-A public offering warrants
were exercised for 1,409,122
(28,182,451
pre-stock split) common shares. As of June 30,
2021 1,311,394
(26,227,876
pre-stock split) common shares were issued valued
at $5,245,592.
Subsequent to June 30, 2021 the remaining 97,729
(1,954,575
pre-stock split) common shares valued at $390,915
were issued.
During
the six months ended June 30, 2021 the Company raised $4,081,980 through private placement offerings for 2,040,990 (40,819,800 pre-stock
split) common shares and warrants.
During
the six months ended June 30, 2021 the Company entered into consulting agreements with third party consultants for 370,000
(7,400,000
pre-stock split) shares of common stock valued
at $1,588,000
for consulting services. The services will
be expensed throughout the term of the agreement as the Company accrues the stock payable. As of June 30, 2021 the Company recorded
$337,145
in share subscriptions payable.
During
the six months ended June 30, 2021 the Company issued 259,808
(5,196,154
pre-stock split) common shares valued at $741,159
for consulting services, $241,559
were issued from share subscriptions payable.
During the same period the Company issued 150,000
(3,000,000
pre-stock split) common shares valued at $390,000
for consulting services. During the same period
the Company issued 3,350
(67,000
pre-stock split) common shares for employee compensation
valued at $24,121.
During
the six months ended June 30, 2021 the Company entered into a loan settlement agreement with a loan holder to issue 62,006
(1,240,111
pre-stock split) common shares at $1.80
($0.09
pre-stock split) per share
for all outstanding loan principal and interest valued at $111,611.
As of the date of the settlement the Company had $157,787
loan payable, resulting in the Company recognized a gain on
settlement of $46,176.
Refer to note 11. As of June 30, 2021 the Company issued 62,006
(1,240,111
pre-stock split) common shares.
During
the six months ended June 30, 2021 the Company entered into a promissory notes payable settlement agreement with a note holder to issue
36,048 (720,996 pre-stock split) common shares valued at $1.80
($0.09
pre-stock split) per share
for a total value of $64,891.
As of the date of the settlement the Company had $73,886
promissory notes payable, resulting in
the Company recognized a gain on settlement of $8,997.
Refer to note 4. As of June 30, 2021 the Company issued 36,048
(720,966
pre-stock split) common shares.
During
the six months ended June 30, 2021 the Company entered into a settlement agreement with the convertible promissory note holder to settle
all outstanding principal and interest. The Company issued 204,622
(4,092,431
pre-stock split) common shares at $1.80
($0.09
pre-stock split) per share
valued at $368,318.
As of the date of the settlement the Company had $325,667
convertible promissory note, resulting
in the Company recognized a loss of $42,651
on settlement of debt.
During the same period the convertible promissory note holder exercised 39,512
(790,243
pre-stock split) warrants on a cashless basis
for 39,512
(790,243
pre-stock split) common shares. Refer to note
5 and 14.
During
the six months ended June 30, 2021 the Company issued 1,717,535 (34,350,697 pre-stock split) common shares to Steve Rossi, the Company’s
Chief Executive Officer and Director, in connection with his Employment Agreement in consideration for Mr. Rossi agreeing to amend the
Series A Certificate of Designation to eliminate the Series A Preferred Stock conversion rights and returning 900 Series A Preferred
Stock to the Company.
During
the six-months ended June 30, 2020 the Company issued 66,667 (1,333,333 pre-stock split) and 12,000 (240,000 pre-stock split) common
shares at $1.80 ($0.09 pre-stock split) and $1.40 ($0.07 pre-stock split) per share for $120,000 and $16,800 respectively for prepaid
advertising services. As of June 30, 2020 the Company has expensed $6,620 from prepaid expenses.
During
the six-months ended June 30, 2020 the Company entered into a share subscription agreement with a consultant of the Company for 200,000
(4,000,000 pre-stock split) common shares valued at $125,000 for prepaid consulting services. As of June 30, 2020 the Company issued
107,500 (2,150,000 pre-stock split) shares with a value of $67,188. As of June 30, 2020 the Company has expensed $62,500 from prepaid
expenses.
During
the six-months ended June 30, 2020 the Company issued a consultant 200,000 (4,000,000 pre-stock split) common shares of subscription
payable with a value of $456,000 relating to the anti-dilution feature triggered on March 5, 2019.
During
the six-months ended June 30, 2020 the Company issued 22,942 (458,834 pre-stock split) common shares pursuant to a subscription payable
with a value of $55,000.
During
the six-months ended June 30, 2020 the Company issued 22,500 (450,000 pre-stock split) shares in connection with the issuance of convertible
promissory note (note 5) at $5.40 ($0.27 pre-stock split) per share.
During
the six-months ended June 30, 2020 the Company entered into a settlement to fulfill a debt purchase agreement entered in 2017 for 134,049
(2,680,981 pre-stock split) shares valued at $138,818. As of June 30, 2020 the Company has issued 109,548 (2,190,959 pre-stock split)
shares.
Worksport
Ltd.
Notes
to the Condensed Consolidated Financial Statements
(Unaudited)
6.
Shareholders’ Equity (Deficit) (continued)
During
the six-months ended June 30, 2020, Steven Rossi (the Company’s CEO) was issued 1,000 Series A Preferred Shares at $0.09 per share
equal to 299,000 common shares voting rights.
As
of June 30, 2021, the Company was authorized to issue 299,000,000 shares of its common stock with a par value of $0.0001. All shares
were ranked equally with regards to the Company’s residual assets. During 2021, the Company was authorized to issue 100 shares
of its Series A and 100,000 Series B Preferred Stock with a par value of $0.0001. Series A preferred Stock have voting rights equal to
0 shares of common stock, per share of preferred stock. Series B preferred Stock have voting rights equal to 10,000 shares of common
stock, per share of preferred stock.
7.
Related Party Transactions
During
the six months ended June 30, 2021, the Company recorded salaries expense of $77,026 (2020 - $31,837) related to services rendered to
the Company by its CEO.
During
the six months ended June 30, 2021 the Company repaid $36,494
to the Company’s CEO and director. During
the same period the Company’s CEO and director paid on behalf of the Company’s operating expense of $10,563
for a total net transaction $25,931.
As of June 30, 2021 the Company has a receivable from related party of $2,538.
During
the six months ended June 30, 2021 the Company paid a director of the Company $50,000 for services rendered from 2015 to 2020.
During
the six months ended June 30, 2021, the Company paid $59,203 to a U.S.-based corporation which the Company’s CEO and director is
also a stockholder.
8.
Changes in Cash Flows from Operating Assets and Liabilities
The
changes to the Company’s operating assets and liabilities for the six months ended June 30, 2021 and 2020 are as follows:
Schedule of Changes in Operating Assets and Liabilities
|
|
|
2021
|
|
|
2020
|
|
|
Decrease (increase) in accounts receivable
|
|
$
|
16,504
|
|
|
$
|
(35,406
|
)
|
|
Decrease (increase) in other receivable
|
|
|
116,997
|
|
|
|
9,657
|
|
|
Decrease (increase) in inventory and prepaid inventory
|
|
|
(212,344
|
)
|
|
|
60,136
|
|
|
Decrease (increase) in prepaid expenses and deposits
|
|
|
(220,841
|
)
|
|
|
(20,925
|
)
|
|
Increase (decrease) in lease liability
|
|
|
1,823
|
|
|
|
(14,390
|
)
|
|
Increase (decrease) in payroll taxes payable
|
|
|
2,970
|
|
|
|
(14,061
|
)
|
|
Increase (decrease) in accounts payable and accrued liabilities
|
|
|
(34,428
|
)
|
|
|
(1,042
|
)
|
|
Changes in operating
assets and liabilities
|
|
$
|
(329,319
|
)
|
|
$
|
(16,031
|
)
|
9.
Commitments and contingencies
During
the six months ended June 30, 2021 the Company entered into an amended agreement to reserve an additional 150,000 common
shares for consulting services. During the year ended December 31, 2020 the Company entered into an agreement with a third-party
advisor to reserve for issuance 100,000
common shares for consulting services. As of June 30, 2021, 12,500 (250,000 pre-stock
split) common shares were issued to the third party.
During
the year ended December 31, 2020 the Company (defendant) is currently in an ongoing legal proceeding with a promissory notes payable
holder (plaintiff). As June 30, 2021, the outcome of the legal proceeding is uncertain.
During
the year ended December 31, 2020, the Company reached a legal settlement with a supplier in which the Company is obligated to pay $6,037
per month beginning on March 1, 2020 for four months until the settlement amount of $24,148 has been fully paid on June 1, 2020. As of
December 31, 2020, the Company has completed all payments.
Worksport
Ltd.
Notes
to the Condensed Consolidated Financial Statements
(Unaudited)
10.
Lease Liabilities
During
the six months ended June 30, 2021 the Company entered into a second lease agreement for warehouse space to commence on June 1, 2021
and end on May 31, 2024 with monthly lease payments of $19,910. During the year ended December 31, 2019, the Company signed a lease agreement
for warehouse space to commence on August 1, 2019 and end on July 31, 2022 with monthly lease payments of $2,221.
The
Company has accounted for its leases upon adoption of ASC 842 whereby it recognizes a lease liability and a right-of-use asset at the
date of initial application, beginning January 1, 2019. The lease liability is measured at the present value of the remaining lease payments,
discounted using the Company’s incremental borrowing rate of 10%. The Company has measured the right-of-use asset at an amount
equal to the lease liability.
The
Company’s right-of-use asset for the six months ended June 30, 2021 and December 31, 2020 as follows:
Schedule Right-of-use Asset
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
Right-of-use asset
|
|
$
|
631,753
|
|
|
$
|
38,506
|
|
|
|
|
|
|
|
|
|
|
|
|
Current lease liability
|
|
$
|
213,775
|
|
|
$
|
23,883
|
|
|
Long-term lease liability
|
|
$
|
420,369
|
|
|
$
|
14,624
|
|
The
components of lease expense are as follows:
Schedule of Components of Lease Expense
|
|
|
June
30,
2021
|
|
|
June
30,
2020
|
|
|
Amortization of right-of-use
|
|
$
|
28,927
|
|
|
$
|
10,540
|
|
|
Interest on lease liability
|
|
$
|
6,704
|
|
|
$
|
2,789
|
|
|
Total lease cost
|
|
$
|
35,631
|
|
|
$
|
13,329
|
|
Maturities
of lease liability are as follows:
Future
minimum lease payments as of June 30, 2021,
Schedule of Future Minimum Lease Payments
|
|
|
|
|
|
|
2021 (remainder of year)
|
|
|
132,788
|
|
|
2022
|
|
|
254,469
|
|
|
2023
|
|
|
238,918
|
|
|
2024
|
|
|
99,549
|
|
|
Total future minimum lease payments
|
|
|
725,724
|
|
|
Less: amount representing interest
|
|
|
(91,580
|
)
|
|
Present value of future payments
|
|
|
634,144
|
|
|
Current portion
|
|
|
213,775
|
|
|
Long term portion
|
|
$
|
420,369
|
|
11.
Loan payable
During
the year ended December 31, 2020 the Company received loans of $32,439,
$10,000
and $108,000
from a unrelated third party with an interest
rate of 10%
per annum with a maturity date of December 31,
July 22 and August
31, 2021 respectively. During the six months ended
June 30, 2021 the Company agreed to repay the outstanding principal and interest through the issuance of 62,006
(1,240,111
pre-stock split) common shares at $1.80
($0.09
pre-stock split) per share. During the six
month ended June 30, 2021, the Company accrued interest expense of $1,319
(2020 - $0).
As of the date of the settlement agreement the Company had $150,439
principal and $7,348
interest outstanding, resulting in the Company
recognizing a gain on settlement of $46,176
for the six month period ended June 30, 2021.
During
the year ended December 31, 2020 the
Company received $28,387
($40,000
CDN)
interest free from the Government of Canada as part of the COVID-19 small business relief program. Repaying the balance of the loan on
or before December 31, 2022 will result in loan forgiveness of 25
percent.
As of June 30, 2021 loan payable outstanding
is $28,387 ($40,000
CDN).
Worksport
Ltd.
Notes
to the Condensed Consolidated Financial Statements
(Unaudited)
12.
Government Assistance
The
Government of Canada is currently providing funding through the Canada Emergency Wage Subsidy (“CEWS”) and Canada Emergency
Rent Subsidy (“CERS”) programs in order to provide financial relief to Canadian businesses affected by COVID-19. The CEWS
program provides a reimbursement of salaries for eligible employers based on a decrease in revenues. The CERS program provides a reimbursement
of rent expenses paid by eligible parties based on a decrease in revenues. During the three and six months ended June 30, 2021, the Company
recognized CEWS of $51,606 ($63,905 CDN) and CERS of $4,971 ($6,000 CDN) as a reduction in general and administrative on the condensed
consolidated statements of Operations.
13.
Loss per Share
For
the three and six months ended June 30, 2021, loss per Share is $(0.08) and $(0.27) (basic and diluted), compared to the three and six
months ended June 30, 2020, of $(0.08) and $(0.15) (basic and diluted). Using the weighted average number of shares of 9,827,576 and
7,505,625 (basic and diluted) for the three and six months ended June 30, 2021 and 2,466,875 and 2,360,511 (basic and diluted) for the
three and six months ended June 30, 2020.
There
are 299,000,000 shares authorized, 11,148,292 and 2,636,496 shares issued and outstanding, as at June 30, 2021 and 2020 respectively.
As of June 30, 2021, the Company has 619,395 shares to be issued. The computation of loss per share is based on the weighted average
number of shares outstanding during the period in accordance with ASC Topic No. 260, “Earnings Per Share”. Shares underlying
the Company’s outstanding warrants and convertible promissory notes were excluded due to the anti-dilutive effect they would have
on the computation. As at June 30, 2021 the Company has 2,961,580 warrants convertible to 5,002,570 common shares for a total underlying
common shares of 5,002,570. At June 30, 2020 the Company has 45,000 warrants convertible to 45,000 common shares and convertible promissory
note convertible to 110,397 common shares for a total underlying common shares of 155,397.
14.
Warrants
During
the six months ended June 30, 2021, a total of 1,448,635
(28,972,694
pre-stock split) warrants were exercised for
1,448,635
(28,972,694
pre-stock split) common shares. 1,409,122
(28,182,451
pre-stock split) warrants were exercised at $4.00
($0.20
pre-stock split) per share, the remaining 39,512
(790,243
pre-stock split) warrants were exercised on a
cashless basis, refer to note 5. As of June 30, 2021 1,350,906
(27,018,120
pre-stock split) common shares were issued
with the remaining 97,729
(1,954,575
pre-stock split) common shares issued subsequent
to the period ended.
During
the six months ended June 30, 2021, the Company issued 1,502,410 (30,048,199 pre-stock split) and 2,040,990 (40,819,800 pre-stock split)
warrants convertible to 1 and 2 common shares each exercisable for a period of 12 and 18 months respectively. The warrants were issued
in connection with the Reg-A public offering and private placement offering respectively. The exercise price of the warrants is $4.00
($0.20 pre-stock split) per share.
During
the six months ended June 30, 2021 the Company and warrant holder reached an agreement to amend a previous warrant agreement. The Company
will issue an additional 150,000 warrants for a total of 250,000 warrants. The exercisable period of the warrants was also amended to
a period of five years beginning on January 14, 2021. The warrants are convertible to 1 common share each exercisable at $2 per share.
As
of June 30, 2021, the Company has the following warrants outstanding:
Schedule of Warrants Exercise Price
|
Exercise price
|
|
|
Number outstanding
|
|
|
Remaining Contractual Life (Years)
|
|
|
Expiry date
|
|
$
|
4.00
|
|
|
|
563
|
|
|
|
0.42
|
|
|
December 1, 2021
|
|
$
|
4.00
|
|
|
|
29,568
|
|
|
|
0.55
|
|
|
February 24, 2022
|
|
$
|
40.00
|
|
|
|
12,500
|
|
|
|
4.55
|
|
|
January 14, 2026
|
|
$
|
2.00
|
|
|
|
247
|
|
|
|
3.66
|
|
|
February 25, 2025
|
|
$
|
2.40
|
|
|
|
3,125
|
|
|
|
3.72
|
|
|
March 20, 2025
|
|
$
|
4.00
|
|
|
|
102,050
|
|
|
|
1.25
|
|
|
October 1, 2022
|
|
|
|
|
|
|
148,079
|
|
|
|
1.76
|
|
|
|
Schedule of Warrants Activity
|
|
|
June 30, 2021
|
|
|
December 31, 2020
|
|
|
|
|
Number of warrants
|
|
|
Weighted average price
|
|
|
Number of warrants
|
|
|
Weighted average price
|
|
|
Balance, beginning of year
|
|
|
716,815
|
|
|
$
|
4.00
|
|
|
|
-
|
|
|
$
|
-
|
|
|
Issuance
|
|
|
3,643,400
|
|
|
$
|
4.20
|
|
|
|
716,815
|
|
|
$
|
4.00
|
|
|
Exercise
|
|
|
(1,448,635
|
)
|
|
$
|
(4.00
|
)
|
|
|
-
|
|
|
$
|
-
|
|
|
Balance, end of period
|
|
|
2,961,580
|
|
|
$
|
4.20
|
|
|
|
716,815
|
|
|
$
|
4.00
|
|
Worksport
Ltd.
Notes
to the Condensed Consolidated Financial Statements
(Unaudited)
15.
COVID-19
The
recent outbreak of the novel coronavirus, specifically identified as “COVID-19”, has resulted in governments worldwide enacting
emergency measures to combat the spread of the virus. These measures, which include 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. Governments and central banks have reacted with significant monetary and
fiscal interventions designed to stabilize economic conditions. The duration and impact of the COVID-19 outbreak is unknown at this time,
as is the efficacy of the government and central bank interventions.
Additionally,
while the potential economic impact brought by, and the duration of the COVID-19 pandemic is difficult to assess or predict, the impact
of the COVID-19 pandemic on the global financial markets may reduce our ability to access capital, which could negatively impact our
short-term and long-term liquidity. The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change. We do not
yet know the full extent of potential delays or impacts on our business, financing or mining production activities or the ore and mining
industry or the global economy as a whole. However, these effects could have a material impact on our liquidity, capital resources, operations
and business and those of the third parties on which we rely. The management and board of the Company is constantly monitoring this situation
to minimize potential losses
16.
Subsequent Events
The
Company has evaluated subsequent events through August 16, 2021 which is the date the financial statements were available to be
issued and the following events after year end occurred:
|
|
●
|
On
May 21, 2021, the Board of Directors 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 NADAQ. The Certificate of Change was submitted to the Nevada Secretary of State on May 21, 2021 and the FINRA corporate
action was announced on August 3, 2021. FINRA declared the 1 for 20 reverse stock split effective on August
4, 2021. These condensed interim financial statements including, prior period comparative share amounts, have been retrospectively
restated to reflect this reverse split.
|
|
|
|
|
|
|
●
|
On
August 3, 2021 immediately following the share consolidation the anti-dilution feature dated January 1, 2021 came into effect. As
part of the anti-dilution feature the Company is obligated to issue an additional 237,500 shares at $0.37 per share for a total of
$86,688. The Company recognized a non-cash deemed dividend of $86,688 to retain earnings and share subscriptions payable.
|
|
|
|
|
|
|
●
|
Subsequent
to quarter ended June 30, 2021, 207,425 (4,148,500 pre-stock split) warrants were exercised for 207,425 (4,148,500 pre-stock split)
common shares valued at $829,700.
|
|
|
|
|
|
|
●
|
On
August 6, 2021 the Company closed on a public offering whereby 3,272,727
Units were sold to Maxim Group LLC at
a price of $5.12
per Unit. Each Unit consisted of one (1)
share of common stock and one (1) warrant to purchase common stock at an exercise price of $6.05
per share. In addition, 490,909
warrants to purchase common stock were
issued to the underwriter pursuant to the over-allotment option.
|