UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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Item 2.01. Completion of Acquisition or Disposition of Assets.
Acquisition of Seneca Property
On May 6, 2022, Worksport Ltd. (“Worksport,” the “Company” or “Guarantor”), through its wholly owned subsidiary, Worksport New York Operations Corporation (“WKSP NY” or “Borrower”), closed (the “Closing”) on the purchase of a property (the “Property”) in the town of West Seneca, Erie County, New York (the “Acquisition”).
The Acquisition was completed with a Purchase and Sale Agreement between the Company and J&M Distributing, Inc. (the “Seller), Loan Agreement (the “Agreement”) between WKSP NY and Northeast Bank (“Lender”), Promissory Note (the “Note”), Guarantee by Worksport (the “Guarantee”) and Mortgage and Security Agreement between WKSP NY and Lender (the “Mortgage”).
The full text of the Purchase and Sale Agreement, Loan Agreement, Promissory Note, Guarantee and Mortgage and Security Agreement will be filed as Exhibits to the Company’s 10-Q report for the quarter ended June 30, 2022.
The Property consists of two (2) parcels of land. One parcel consists of approximately 14 acres improved by a building containing approximately 152,847 square feet (the “Building”). The second parcel consists of approximately four (4) acres of vacant land.
Currently the Company’s manufacturing operations are in China. With the acquisition of the Property the Company plans to move its manufacturing operations to the United States.
The Company believes that by moving its manufacturing operations to the United States it can (i) have better control over design and manufacturing quality of its products, (ii) lessen supply chain risk, (iii) decrease shipping costs, and (iv) cut overall manufacturing costs.
Purchase Price and Loan
The purchase price of the property was eight million one hundred and twenty-five US Dollars ($8,125,000) (the “Purchase Price”). WKSP NY financed $5,300,000 of the Purchase Price with a loan (the “Loan”) from Northeast Bank of which the obligation is evidenced by the Note. Worksport has guaranteed the Loan. WKSP NY will be the owner legal owner of the Property. The Loan is secured by the Property with the Mortgage.
The Loan has a term of 24 months with an option to extend the term for an additional 12 months provided no default has occurred. The interest rate of the Loan is priced at the Wall Street Prime Rate (the “Prime Rate”) plus 2.25% (the “Interest Rate”) and is payable monthly. Principal and interest payments are due on the 10th of each month (the” Due Date”). The Interest Rate will adjust monthly on each Due Date in accordance with any change in the Prime Rate.
Worksport paid an interest rate reserve of $617,965.28 (the “Reserve”) at closing which can be used by the Company for monthly draws as long as the Reserve balance does not fall below six (6) months of required payments at then prevailing interest rates. The Loan also has a “Minimum Interest” term whereby, Lender is guaranteed at least 12 months of non-default interest during the term of the Loan, regardless of if the Company decides to prepay the Loan.
The Loan carries a 5% late charge for payments not received with five (5) days when due. In the event of default, the Interest Rate will increase to 24% or the maximum rate permitted under New York law.
The Loan and Mortgage contain customary provisions for default and breach.
The Lease
The Company, through WKSP NY, will lease (the “Lease”) the Property to Worksport USA Operations Corporation, a Colorado corporation, a wholly owned subsidiary of the Company (“WKSP CO”).
The Company plans to conduct all of its U.S. operations through WKSP CO while continuing to conduct its Canadian operations through its subsidiary, Worksport Ltd. (Ontario).
Currently 30,000 square feet of the Building is leased by Seller (the “Sonwil Lease”) to Sonwil Distribution (“Sonwil”). Effective April 16, 2022 the Sonwil lease was modified such that Sonwil will continue to lease 30,000 square feet of the building until December 31, 2022. Upon Closing the Sonwil Lease was assigned to WKSP NY.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| WORKSPORT LTD | ||
| Date: May 11, 2022 | By: | /s/ Steven Rossi |
| Name: | Steven Rossi | |
| Title: | Chief Executive Officer | |
Cover |
May 06, 2022 |
|---|---|
| Document Type | 8-K |
| Amendment Flag | false |
| Document Period End Date | May 06, 2022 |
| Entity File Number | 001-40681 |
| Entity Registrant Name | Worksport Ltd |
| Entity Central Index Key | 0001096275 |
| Entity Tax Identification Number | 35-2696895 |
| Entity Incorporation, State or Country Code | NV |
| Entity Address, Address Line One | 3120 Rutherford Road |
| Entity Address, Address Line Two | Suite 414 |
| Entity Address, Address Line Three | Vaughan |
| Entity Address, City or Town | Ontario |
| Entity Address, Country | CA |
| Entity Address, Postal Zip Code | L4K 0B1 |
| City Area Code | 888 |
| Local Phone Number | 554-8789 |
| Written Communications | false |
| Soliciting Material | false |
| Pre-commencement Tender Offer | false |
| Pre-commencement Issuer Tender Offer | false |
| Common Stock, par value $0.0001 | |
| Title of 12(b) Security | Common Stock, par value $0.0001 |
| Trading Symbol | WKSP |
| Security Exchange Name | NASDAQ |
| Warrants to purchase common stock | |
| Title of 12(b) Security | Warrants to purchase common stock |
| Trading Symbol | WKSPW |
| Security Exchange Name | NASDAQ |