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 nine month period ended September 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.
During
the nine months period September 30, 2021 Terravis Energy Inc. was incorporated in the State of Nevada on May 5, 2021. On August 20,
2021 the Company was issued 100 common shares at par value of $0.0001 per share for a controlling interest in Terravis Energy Inc.
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 September 30, 2021, the Company had working capital of $35,034,578 and an accumulated deficit of $17,052,179. As of September 30,
2021, the Company had cash, restricted cash and cash equivalents of $30,920,477. 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 Quarterly Report.
During
the nine months ended September 30, 2021 the Company through its Reg-A public offering, underwritten public offering, private placement
offering, and exercises of warrants had raised in aggregate of approximately $32,800,000.
In addition, as of November 2021 the Company has approximately 6,400,000
warrants and stock options exercisable at
$4 to
$6.05
per warrant and stock option compared to an average
share price of approximately $5.10
per share. The Company is anticipating additional
warrant exercises.
Worksport
Ltd.
Notes
to the Condensed Consolidated Financial Statements
(Unaudited)
d)
Business condition (continued)
Based
on the Company’s future operating plans, existing cash and restricted cash of $30,920,477 combined with possible warrants and stock
options exercises of approximately $33,000,000; 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.
e)
Reclassification
Certain
amounts in the prior period Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 have been reclassified
to conform with current period presentation. The Company reclassified $25,352 of changes from accounts payable and accrued liabilities
under operating assets and liabilities to repayment of lease liability under financing activities. This reclassification resulted in
a decrease in net cash used by operating activities from $407,704 to $382,352 and decrease in net cash provided by financing activities
from $879,571 to $854,219. This reclassification did not have any effect on the reported results of operations.
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 nine months ended September 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 September 30, 2021 and December 31, 2020:
Schedule of Inventory
|
|
2021
|
|
|
2020
|
|
Finished goods
|
|
$
|
46,157
|
|
|
$
|
32,358
|
|
Promotional items
|
|
|
552
|
|
|
|
552
|
|
Raw materials
|
|
|
9,496
|
|
|
|
7,893
|
|
Inventory
|
|
$
|
56,205
|
|
|
$
|
40,803
|
|
Prepaid inventory
|
|
$
|
141,420
|
|
|
$
|
-
|
|
4.
Promissory Notes
The
following tables shows the balance of the notes payable as of September 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 September 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
Worksport
Ltd.
Notes
to the Condensed Consolidated Financial Statements
(Unaudited)
4.
Promissory Notes (continued)
December
31, 2019, the Company extended the maturity dates of the secured promissory notes to be due on April 1, 2021. As at September 30, 2021,
principal balance owing was $96,091 ($123,231 Canadian Dollars) (December 31, 2020 - $96,091 ($123,231 Canadian Dollars)). As of September
30, 2021, the accrued interest on this note payable was $61,970 ($80,693 Canadian Dollars) (December 31, 2020 - $48,770 ($64,102 Canadian
Dollars)) included in accounts payable and accrued liabilities. As of September 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 September 30, 2021 principal balance owing was $79,000 (December 31, 2020 - $79,000). As of September
30, 2021, the accrued interest on this note payable was $41,607 (December 31, 2020 – $31,000) included in accounts payable and
accrued liabilities. As of September 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 nine months ended September
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 September 30,
2021 the secured promissory notes has been repaid in full.
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 September 30, 2021 the Company and secured promissory note holder agreed to repay all outstanding principal and interest
through the issuance of 36,048 common shares valued at $0.09 per share. As at September 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 September 30,
2021 the secured promissory notes has been repaid in full.
The
amounts repayable under promissory notes and secured promissory notes at September 30, 2021 and December 31, 2020:
Schedule of Secured Notes Payable
|
|
September 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 common shares,
and (ii) the Company issued to Leonite a five-year warrant to purchase 45,000 common shares at an exercise price of $2.00 per share (subject
to adjustment), which may be exercised on a cashless basis. Refer to note 14 for warrant valuation.
Worksport
Ltd.
Notes
to the Condensed Consolidated Financial Statements
(Unaudited)
5.
Convertible Promissory Notes (continued)
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 September 30,
2021, the Company has recorded $509,037,
$467,500
principal and $41,537
original issue discount. Furthermore, the Company
issued 22,500
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
common shares at $1.80
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 nine months
ended September 30, 2021 Leonite converted its remaining outstanding principal and interest into common shares. Leonite received
204,622
common shares at $1.80 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 September 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 nine months ended September
30, 2021. The remaining net balance of the note at September 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).
6.
Shareholders’ Equity (Deficit)
During
the nine months period ended September 30, 2021, the following transactions occurred:
During
the nine months ended September 30, 2021 the Company issued a total of 1,502,409
common shares relating to the Reg-A public offering.
Of the shares issued 15,500
common shares valued at $31,200
were from share subscription payable and 750
common shares were cancelled and refunded valued at $1,500.
The Company raised $3,004,818
and incurred share issuance cost of $123,984.
During
the nine months ended September 30, 2021 the Company had a underwriters’ public offering for 3,272,727 units consisting of 1 common
share and 1 warrant at $5.50 per unit. In addition, the Company has granted the underwriter of the offering the option to purchase 490,909
warrants and/or an additional 490,909 common shares for 45 days after the closing of the option. During the nine months ended September
30, 2021 the underwriter purchased 210,909 common shares at $5.49 per share and 490,909 warrants. A cumulative 3,483,636 common shares
were issued in connection with offering for $19,162,798 incurring share issuance costs of $4,335,908.
During
the same period 2,277,171
warrants were exercised for 2,196,416
common shares. As of September 30, 2021 2,190,515
common shares were issued valued at $8,387,758.
Subsequent to September 30, 2021 the remaining 5,899
common shares valued at $20,000
were issued. Refer to note 14.
During
the nine months ended September 30, 2021 the Company raised $4,081,980
through private placement offerings of 2,040,990
units for 1 common share and 2 warrants at $2 per unit. As such the Company issued 2,040,990
common
shares in connection with the private offering.
During
the nine months ended September 30, 2021 the Company entered into a loan settlement agreement with a loan holder to issue 62,006 common
shares at $1.80 per share for all outstanding loan principal and interest valued at $111,610. 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 September 30,
2021 the Company issued 62,006 common shares.
During
the nine months ended September 30, 2021 the Company entered into a promissory notes payable settlement agreement with a note holder
to issue 36,048 common shares valued at $1.80 per share for a total value of $64,890. 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 September
30, 2021 the Company issued 36,048 common shares.
During
the nine months ended September 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
common shares at $1.80
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 recognizing a loss of $42,651
on settlement of debt. Refer to note 5.
Worksport
Ltd.
Notes
to the Condensed Consolidated Financial Statements
(Unaudited)
6.
Shareholders’ Equity (Deficit) (continued)
During
the nine months ended September 30, 2021 the Company issued 1,717,535 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 nine months ended September 30, 2021 the Company entered into consulting agreements with third party consultants for 380,000 shares
of common stock valued at $1,648,700 for consulting services. As of September 30, 2021 the Company issued 370,000 common shares to the
third party consultants for services received. The remaining 10,000 common share will be expensed throughout the term of the agreement
as the Company accrues the stock payable. As of September 30, 2021 the Company recorded $44,652 in share subscriptions payable.
During
the nine months ended September 30, 2021 the Company issued 259,808 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 common shares valued at $390,000 for
consulting services. During the same period the Company issued 3,350 common shares for employee compensation valued at $24,121.
During
the nine months ended September 30, 2021 the Company granted 750,000 restricted shares of the Company to consultants for services to
be rendered over a period of 12 and 24 months. Upon issuance 750,000 of the restricted shares vested immediately and issued. As of September
30, 2021 the Company recognized consulting and advertising expense of $177,333 and $3,812,667 to prepaid expense.
During
the nine months ended September 30, 2021 the Company granted 45,000 restricted shares of the Company to directors of the Company. Upon
issuance 15,000 of the restricted shares vested immediately, 30,000 shall vest on January 1, 2022. As of September 30, 2021 the Company
recognized consulting expense of $35,569.
During
the nine months ended September 30, 2021, the Company completed a share consolidation of the Company’s issued and outstanding common
shares based on twenty (20) pre-consolidation shares to one (1) post-consolidation share. As a result of the share consolidation a anti-dilution
clause was triggered resulting in the Company issuing 237,500 common shares valued at $86,688.
During
the nine months period ended September 30, 2020, the following transactions occurred:
During
the nine months ended September 30, 2020 the Company issued 120,651 common shares at $1.40 per share for $168,910 for consulting services.
During
the nine months ended September 30, 2020, the Company issued 126,022 common shares pursuant to the conversion of the convertible promissory
note (note 5) with a value of $226,839.
During
the nine months ended September 30, 2020, the Company entered into a share subscription agreement with a consultant of the Company for
200,000 common shares valued at $250,000.
During
the nine months ended September 30, 2020 the Company issued 66,667 and 12,000 common shares at $1.80 and $1.40 per share for $120,000
and $16,800 respectively for prepaid advertising services. As of September 30, 2020 the Company has expensed $53,293 from prepaid expenses.
During
the nine months ended September 30, 2020 the Company entered into a share subscription agreement with a consultant of the Company for
200,000 common shares valued at $125,000 for prepaid consulting services. As of September 30, 2020 the Company issued 107,500 shares
with a value of $67,188. As of September 30, 2020 the Company has expensed $93,750 from prepaid expenses.
During
the nine months ended September 30, 2020 the Company issued a consultant 284,349 common shares of subscription payable with a value of
$648,147 relating to the anti-dilution feature triggered on March 5, 2019.
During
the nine months ended September 30, 2020 the Company issued 22,942 common shares pursuant to a subscription payable with a value of $55,000.
During
the nine months ended September 30, 2020 the Company issued 22,500 shares in connection with the issuance of convertible promissory note
(note 5) at $5.40 per share.
Worksport
Ltd.
Notes
to the Condensed Consolidated Financial Statements
(Unaudited)
6.
Shareholders’ Equity (Deficit) (continued)
During
the nine months ended September 30, 2020 the Company entered into a settlement to fulfill a debt purchase agreement entered in 2017 for
205,000 shares valued at $856,080. As of September 30, 2020 the Company has issued 205,000 shares.
During
the nine months ended September 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 September 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 nine months ended September 30, 2021, the Company recorded salaries expense of $157,899 (2020 - $48,194) related to services rendered
to the Company by its CEO. During the same period the Company recorded salaries expense of $58,167 to an officer of the Company who is
also a director of the Company.
During
the nine months ended September 30, 2021 the Company repaid $75,621 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 $26,760
for a total net transaction of $48,861.
As of September 30, 2021 the Company has a receivable from related party of $25,468.
During
the year ended December 31, 2020, the Company repaid $5,245 to the Company’s CEO and director. As of December 31, 2020, the Company
has $23,393 in related party loan.
During
the nine months ended September 30, 2021 the Company paid a director of the Company $50,000 for services rendered from 2015 to 2020.
During
the nine months ended September 30, 2021, the Company paid $59,203 to a U.S.-based corporation which the Company’s CEO and director
is also a stockholder.
Refer
to note 6 and 15 for additional related party transactions.
8.
Changes in Cash Flows from Operating Assets and Liabilities
The
changes to the Company’s operating assets and liabilities for the nine months ended September 30, 2021 and 2020 are as follows:
Schedule of Changes in Operating Assets and Liabilities
|
|
2021
|
|
|
2020
|
|
Decrease (increase) in accounts receivable
|
|
$
|
(32,479
|
)
|
|
$
|
(122,606
|
)
|
Decrease (increase) in other receivable
|
|
|
69,603
|
|
|
|
22,970
|
|
Decrease (increase) in inventory and prepaid inventory
|
|
|
(156,822
|
)
|
|
|
44,423
|
|
Decrease (increase) in prepaid expenses and deposits
|
|
|
(223,582
|
)
|
|
|
48,642
|
|
Increase (decrease) in lease liability
|
|
|
(14,295
|
)
|
|
|
4,297
|
|
Increase (decrease) in payroll taxes payable
|
|
|
2,970
|
|
|
|
(14,061
|
)
|
Increase (decrease) in accounts payable and accrued liabilities
|
|
|
221,979
|
|
|
|
(73,201
|
)
|
Changes in operating
assets and liabilities
|
|
$
|
(132,626
|
)
|
|
$
|
(89,536
|
)
|
9.
Commitments and contingencies
During
the nine months ended September 30, 2021 the Company entered into an amended agreement to reserve an additional 7,500 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 5,000 common shares for consulting services. As of September 30, 2021, 12,500 common shares were issued to the third party.
Worksport
Ltd.
Notes
to the Condensed Consolidated Financial Statements
(Unaudited)
9.
Commitments and contingencies (continued)
During
the nine months period ended September 30, 2021 the Company entered into an agreement with a third-party advisor to reserve for sale
and issuance 15,000 common shares for consulting services at a $0.001 per share.
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 September 30, 2021, the outcome of the legal proceeding is uncertain.
10.
Lease Liabilities
During
the nine months ended September 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 nine months ended September, 2021 and December 31, 2020 as follows:
Schedule Right-of-use Asset
|
|
September 30, 2021
|
|
|
December 31, 2020
|
|
Right-of-use asset
|
|
$
|
573,862
|
|
|
$
|
38,506
|
|
|
|
|
|
|
|
|
|
|
Current lease liability
|
|
$
|
214,249
|
|
|
$
|
23,883
|
|
Long-term lease liability
|
|
$
|
368,431
|
|
|
$
|
14,624
|
|
The
components of lease expense are as follows:
Schedule of Components of Lease Expense
|
|
September 30, 2021
|
|
|
September 30, 2020
|
|
Amortization of right-of-use
|
|
$
|
86,817
|
|
|
$
|
16,010
|
|
Interest on lease liability
|
|
$
|
21,633
|
|
|
$
|
3,983
|
|
Total lease cost
|
|
$
|
108,451
|
|
|
$
|
19,993
|
|
Maturities
of lease liability are as follows:
Future
minimum lease payments as of September 30, 2021,
Schedule of Future Minimum Lease Payments
|
|
|
|
|
2021 (remainder of year)
|
|
|
66,395
|
|
2022
|
|
|
254,469
|
|
2023
|
|
|
238,918
|
|
2024
|
|
|
99,549
|
|
Total future minimum lease payments
|
|
|
659,331
|
|
Less: amount representing interest
|
|
|
(76,652
|
)
|
Present value of future payments
|
|
|
582,680
|
|
Current portion
|
|
|
214,249
|
|
Long term portion
|
|
$
|
368,431
|
|
Worksport
Ltd.
Notes
to the Condensed Consolidated Financial Statements
(Unaudited)
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 nine months ended September
30, 2021 the Company agreed to repay the outstanding principal and interest through the issuance of 62,006 common shares at $1.80 per
share. During the nine months ended September 30, 2021, the Company accrued interest expense of $1,319 (2020 - $2,226). 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 nine months ended September 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 September 30, 2021 loan payable outstanding is $28,387 ($40,000 CDN).
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 nine months ended September 30, 2021,
the Company recognized CEWS of $103,870 ($129,947 CDN) and CERS of $13,628 ($16,974 CDN) as a reduction in general and administrative
on the condensed consolidated statements of operations.
13.
Loss per Share
For
the three and nine months ended September 30, 2021, loss per Share is $(0.15) and $(0.42) (basic and diluted), compared to the three
and nine months ended September 30, 2020, of $(0.21) and $(0.38) (basic and diluted). Using the weighted average number of shares of
13,983,567 and 9,688,668 (basic and diluted) for the three nine months ended September 30, 2021 and 2,857,443 and 2,527,364 (basic and
diluted) for the three and nine months ended September 30, 2020.
There
are 299,000,000 shares authorized, 16,829,037 and 3,062,970 shares issued and outstanding, as at September 30, 2021 and 2020 respectively.
As of September 30, 2021, the Company has 227,566 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 September 30, 2021 the Company has 5,896,680 warrants and 555,000 stock options convertible to 7,187,670 common
shares for a total underlying common shares of 7,187,670. At September 30, 2020 the Company has 145,000 warrants convertible to 145,000
common shares and convertible promissory note convertible to 110,397 common shares for a total underlying common shares of 255,397.
14.
Warrants
During
the nine months ended September 30, 2021, a total of 2,277,171 warrants were exercised for 2,196,416 common shares. 1,626,161 warrants
were exercised at $4.00 per share, 317,000 warrants were exercised at $6.05 per share and 294,500 warrants were exercised on a cashless
basis for 213,743 common shares. During the same period the 39,512 warrants were exercised on a cashless basis related to a convertible
promissory note, please refer to note 5. As of September 30, 2021 2,190,517 common shares were issued with the remaining 5,899 common
shares issued subsequent to the period ended.
During
the nine months ended September 30, 2021, the Company issued 1,502,409
and 2,040,990
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
per share. During the same period the Company
issued 3,763,636
warrants convertible to 1 common share at an
exercise price of $6.05
per share exercisable for a period of 36
months. 3,272,727
warrants were purchased through the underwritten
public offering and 490,909
over-allotment warrants purchased by the underwriter.
The warrants were issued in connection with the underwritten public offering.
During
the nine months ended September 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 valued at $37,000. 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.
Worksport
Ltd.
Notes
to the Condensed Consolidated Financial Statements
(Unaudited)
14.
Warrants (continued)
During
the nine months period ended the Company issued 130,909 representative warrants to the Company’s underwriters. The representative
warrants are not exercisable until January 30, 2022. The representative are exercisable for 130,909 common shares at $6.05 per share
until August 3, 2024. As of September 30, 2021 the Company has not valued the representative warrants.
As
of September 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
|
|
|
|
11,250
|
|
|
|
0.17
|
|
|
December 1, 2021
|
$
|
4.00
|
|
|
|
329,816
|
|
|
|
0.30
|
|
|
February 24, 2022
|
$
|
4.00
|
|
|
|
1,790,990
|
|
|
|
1.00
|
|
|
October 1, 2022
|
$
|
6.05
|
|
|
|
3,446,636
|
|
|
|
2.85
|
|
|
August 6, 2024
|
$
|
2.00
|
|
|
|
5,488
|
|
|
|
3.41
|
|
|
February 25, 2025
|
$
|
2.40
|
|
|
|
62,500
|
|
|
|
3.47
|
|
|
March 20, 2025
|
$
|
40.00
|
|
|
|
250,000
|
|
|
|
4.29
|
|
|
January 14, 2026
|
|
|
|
|
|
5,896,680
|
|
|
|
1.75
|
|
|
|
Schedule of Warrants Activity
|
|
September 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
|
|
|
7,307,036
|
|
|
$
|
4.30
|
|
|
|
716,815
|
|
|
$
|
4.00
|
|
Exercise
|
|
|
(2,277,171
|
)
|
|
$
|
(4.00
|
)
|
|
|
-
|
|
|
$
|
-
|
|
Balance, end of period
|
|
|
5,896,680
|
|
|
$
|
4.30
|
|
|
|
716,815
|
|
|
$
|
4.00
|
|
15.
Stock Options
Under
the Company’s 2015 Equity Incentive Plan the number of common shares reserved for issuance under the option plan shall not
exceed 10% of the issued and outstanding common shares of the Company, have a maximum term of 10 years and vest at the discretion of
the Board of Directors.
All
equity-settled share-based payments are ultimately recognized as an expense in the statement of operations and comprehensive loss with
a corresponding credit to “Additional Paid in Capital”. If vesting periods or other non-market vesting conditions apply,
the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest.
Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous
estimates. Any cumulative adjustment prior to vesting is recognized in the current period. No adjustment is made to any expense recognized
in prior periods if share options ultimately exercised are different to that estimated on vesting.
On
August 6, 2021, the Company granted 140,000
options to directors, advisors and officers with
an exercise price of $5.50
and an expiry date of August
6, 2026. The stock options will vest on January
1, 2022. The fair value of the options on grant date was estimated to be $754,189. The Company recognized $283,131
to consulting expense during the nine months
ended September 30, 2021.
On
July 23, 2021, the Company granted 15,000
options to a director with an exercise price
of $5.50
and an expiry date of July
23, 2026. The stock options will vest on January
1, 2022. The fair value of the options on grant date was estimated to be $129,480. The Company recognized $52,242
to consulting expense during the nine months
ended September 30, 2021.
On
September 1, 2021, the Company granted 400,000
options to a consultant with an exercise price
of $5.32
and an expiry date of September
1, 2026. The options have a vesting period of
6 months from the initial grant date; 100,000 shall vest on March 1, 2022, 100,000 shall vest on September 1, 2022, 100,000 shall vest
on March 1, 2023 and 100,000 shall vest on September 1, 2023. The fair value of the options on grant date was estimated to be $2,112,000.
The Company recognized $84,949 to consulting expense during the nine months ended September 30, 2021.
Worksport
Ltd.
Notes
to the Condensed Consolidated Financial Statements
(Unaudited)
15.
Stock Options (continued)
Schedule
of Stock Options Activity
|
|
Nine months ended
September 30, 2021
|
|
|
|
Number of options
|
|
|
Weighted Average Price
|
|
Balance, beginning of period
|
|
|
-
|
|
|
$
|
-
|
|
Granted
|
|
|
555,000
|
|
|
$
|
5.37
|
|
Balance, end of period
|
|
|
555,000
|
|
|
$
|
5.37
|
|
Schedule
of Share-based Payment Arrangement, Option, Exercise Price Range
|
|
Range of
Exercise prices
|
|
|
Number
outstanding
|
|
|
Weighted average
life (years)
|
|
|
Weighted average
exercise price
|
|
|
Number exercisable on September 30, 2021
|
|
Stock options
|
|
$
|
5.32
- 5.50
|
|
|
|
555,000
|
|
|
|
4.86
|
|
|
$
|
5.37
|
|
|
|
-
|
|
As of September 30, 2021 no stock options has
been vested.
16.
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.
17.
Subsequent Events
|
●
|
On October 7, 2021, the Company entered into a board advisory agreement with a third party. As compensation the Company shall grant to the advisor 5,000 stock options. The stock option has an exercise price of $5.50 and an expiry date of October 7, 2026. The stock options will fully vest on January 1, 2022.
|
|
●
|
On October
26, 2021, 11,250 warrants were exercised for 11,250 shares valued $45,000.
|
|
●
|
On October 27, 2021, 300 warrants were exercised for 300 shares valued $1,200.
|
|
●
|
On November 2, 2021, the Company and an advisor entered into a modified advisory board
agreement. The advisor and Company has agreed to a milestone compensation structure base on when milestone criteria are achieved
for Customer/Revenue generation, Strategic Partnership, Board/Advisor, Government Affairs and Banking and Capital Markets. The Company
has agreed to potential compensation package for the advisory of 250,000 stock options exercisable at $5.24 for 10 years and/or 100,000
restricted stocks of common shares.
|
|
|
○
|
As of November 3, 2021 the Company has issued 25,000
restricted stock valued at $131,000.
|