UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
Quarterly Period Ended:
Commission
File No.
(Exact Name of Small Business Issuer as specified in its charter)
(State or Other Jurisdiction of | (I.R.S. Employer | |
Incorporation or Organization) | Identification Number) |
(Address of Principal Executive Offices, Including Zip Code)
Registrant’s
Telephone Number, including area code:
With copies to:
Ross Carmel, Esq.
Philip Magri, Esq.
Carmel, Milazzo & Feil LLP
55 W 39th Street, 18th Floor
New York, NY 10018
Tel: 212-658-0458
Fax: 646-838-1314
Securities registered pursuant to Section 12(b) of the Act:
Title of each class: | Trading Symbol(s) | Name of each exchange on which registered: | ||
Indicate
by check mark whether the registrant (1) has filed all Reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter year that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data
File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding
12 months (or such shorter year that the registrant was required to submit and post such files.
Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “small reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ | |
☒ | Smaller reporting company | |||
Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition year for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): Yes ☐
As of November 14, 2022, shares of Common Stock were outstanding.
WORKSPORT LTD.
TABLE OF CONTENTS
2 |
Worksport Ltd.
Condensed Consolidated Balance Sheets
(Unaudited)
September 30, 2022 (Unaudited) | December 31, 2021 | |||||||
Assets | ||||||||
Current Assets | ||||||||
Cash and cash equivalents | $ | $ | ||||||
Restricted cash (note 14) | ||||||||
Accounts receivable net | ||||||||
Other receivable | ||||||||
Inventory (note 3) | ||||||||
Prepaid expenses and deposits (note 4) | ||||||||
Total Current Assets | ||||||||
Investment (note 12) | ||||||||
Property and Equipment, net | ||||||||
Right-of-use asset, net (note 13) | ||||||||
Intangible Assets, net | ||||||||
Total Assets | $ | $ | ||||||
Liabilities and Shareholders’ | ||||||||
Current Liabilities | ||||||||
Accounts payable and accrued liabilities | $ | $ | ||||||
Payroll taxes payable | ||||||||
Related party loan (note 8) | ||||||||
Promissory notes payable (note 5) | ||||||||
Loan payable (note 14) | ||||||||
Current lease liability (note 13) | ||||||||
Total Current Liabilities | ||||||||
Loan payable (note 14) | ||||||||
Long Term – Lease Liability (note 13) | ||||||||
Total Liabilities | ||||||||
Shareholders’ Equity | ||||||||
Series A & B Preferred Stock, $ par value, shares authorized, Series A and Series B issued and outstanding, respectively (note 7) | ||||||||
Common stock, $ par value, shares authorized, and shares issued and outstanding, respectively (note 7) | ||||||||
Additional paid-in capital | ||||||||
Share subscriptions receivable | ( | ) | ( | ) | ||||
Share subscriptions payable | ||||||||
Accumulated deficit | ( | ) | ( | ) | ||||
Cumulative translation adjustment | ( | ) | ( | ) | ||||
Total Shareholders’ Equity | ||||||||
Total Liabilities and Shareholders’ Equity | $ | $ |
The accompanying notes form an integral part of these condensed consolidated financial statements.
3 |
Worksport Ltd.
Condensed Consolidated Statements of Operations
For the Three and Nine Months Ended September 30, 2022 and 2021
(Unaudited)
Three Months ended September 30, | Nine Months ended September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Net Sales | $ | $ | $ | $ | ||||||||||||
Cost of Goods Sold | ||||||||||||||||
Gross Profit | ||||||||||||||||
Operating Expenses | ||||||||||||||||
General and administrative | ||||||||||||||||
Sales and marketing | ||||||||||||||||
Professional fees | ||||||||||||||||
(Gain) on foreign exchange | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Total operating expenses | ||||||||||||||||
Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Other Income (Expense) | ||||||||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Gain on settlement of debt | ||||||||||||||||
Rental income (note 19) | ||||||||||||||||
Interest income | ||||||||||||||||
Total other income (expense) | ( | ) | ( | ) | ( | ) | ||||||||||
Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Loss per Share (basic and diluted) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
Weighted Average Number of Shares (basic and diluted) |
The accompanying notes form an integral part of these condensed consolidated financial statements
4 |
Worksport Ltd.
Condensed Consolidated Statements of Shareholders’ Deficit
For the Three Months Ended September 30, 2022 and 2021
(Unaudited)
Preferred Stock |
Common Stock |
Additional Paid-in |
Share Subscriptions |
Share Subscription |
Accumulated |
Cumulative Translation | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Receivable | Payable | Deficit | Adjustment | (Deficit) | |||||||||||||||||||||||||||||||
Balance at July 1, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
Stock split provision | - | ( | ) | |||||||||||||||||||||||||||||||||||||
Issuance for services and subscriptions payable | - | ( | ) | |||||||||||||||||||||||||||||||||||||
Public offering | - | |||||||||||||||||||||||||||||||||||||||
Share issuance cost | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
Warrant exercise (note 17) | - | ( | ) | |||||||||||||||||||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
Balance at September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
Balance at July 1, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
Share issuance | - | ( | ) | |||||||||||||||||||||||||||||||||||||
Warrant exercise (note 17) | - | ( | ) | |||||||||||||||||||||||||||||||||||||
Issuance for services and subscriptions payable | - | - | ||||||||||||||||||||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
Balance at September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ |
The accompanying notes form an integral part of these condensed consolidated financial statements
5 |
Worksport Ltd.
Condensed Consolidated Statements of Shareholders’ Deficit
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)
Preferred Stock |
Common Stock |
Additional Paid-in |
Share Subscriptions |
Share Subscription |
Accumulated |
Cumulative Translation | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Capital | Receivable | Payable | Deficit | Adjustment | (Deficit) | |||||||||||||||||||||||||||||||
Balance at January 1, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
Stock split provision | - | - | 24 | 86,663 | - | - | (86,687 | ) | - | - | ||||||||||||||||||||||||||||||
Conversion of preferred stock to common stock | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
Issuance for services and subscriptions payable | - | ( | ) | |||||||||||||||||||||||||||||||||||||
Public offering | - | 4,986,046 | ( | ) | ||||||||||||||||||||||||||||||||||||
Share issuance cost | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
Issuance of shares from private placement | - | |||||||||||||||||||||||||||||||||||||||
Warrants issuance for services | - | - | ||||||||||||||||||||||||||||||||||||||
Conversion of convertible promissory note to shares (note 6) | - | |||||||||||||||||||||||||||||||||||||||
Warrant exercise (note 17) | - | |||||||||||||||||||||||||||||||||||||||
Loan repayment (note 5 and 14) | - | |||||||||||||||||||||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
Balance at September 30, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
Balance at January 1, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
Share issuance | - | ( | ) | |||||||||||||||||||||||||||||||||||||
Warrant exercise (note 17) | - | ( | ) | |||||||||||||||||||||||||||||||||||||
Issuance for services and subscriptions payable | - | |||||||||||||||||||||||||||||||||||||||
Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
Balance at September 30, 2022 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ |
The accompanying notes form an integral part of these condensed consolidated financial statements
6 |
Worksport Ltd.
Condensed Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2022 and 2021
(Unaudited)
2022 | 2021 | |||||||
Operating Activities | ||||||||
Net Loss | $ | ( | ) | $ | ( | ) | ||
Adjustments to reconcile net loss to net cash from operating activities: | ||||||||
Shares, options and warrants issued for services and share compensation | ||||||||
Depreciation and amortization | ||||||||
Interest on lease liability | ||||||||
Accrued interest | ||||||||
Repayment of lease liability | ( | ) | ( | ) | ||||
Amortization on OID interest | ||||||||
Loss on settlement of debt | ( | ) | ||||||
( | ) | ( | ) | |||||
Changes in operating assets and liabilities (note 9) | ( | ) | ( | ) | ||||
Net cash used in operating activities | ( | ) | ( | ) | ||||
Cash Flows from Investing Activities | ||||||||
Loan receivable | ( | ) | ||||||
Purchase of intangible assets | ( | ) | ||||||
Purchase of property and equipment | ( | ) | ( | ) | ||||
Net cash used in investing activities | ( | ) | ( | ) | ||||
Financing Activities | ||||||||
Proceeds from issuance of common shares, net of issuance cost | ||||||||
Proceeds from warrant exercise | ||||||||
Shareholder Assumption of Debt | ( | ) | ||||||
Loan payable | ||||||||
Repayments on loan payable | ( | ) | ( | ) | ||||
Net cash provided by financing activities | ||||||||
Change in cash | ( | ) | ||||||
Cash, restricted cash and cash equivalents - beginning of year | ||||||||
Cash, restricted cash and cash equivalents end of period | $ | $ | ||||||
Supplemental Disclosure of non-cash investing and financing Activities | ||||||||
Shares issued for purchase of software | $ | $ | ||||||
Shares base compensation | $ | $ | ||||||
Cashless warrant exercise | $ | $ | ||||||
Right-of-use asset | $ | $ | ||||||
Lease liability | $ | ( | ) | $ | ||||
Shares issued for share subscriptions payable | $ | $ | ||||||
Conversion of convertible promissory note to common stock | $ | $ | ||||||
Non-cash for prepaids | $ | $ | ||||||
Shares issued for note repayment | $ | $ | ||||||
Conversion of preferred stock to common stock | $ | $ | ||||||
Reverse stock split | $ | $ |
The accompanying notes form an integral part of these condensed consolidated financial statements.
7 |
Worksport Ltd.
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, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. 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, 2021 filed with the SEC on March 31, 2022.
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 NASDAQ. 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
Terravis Energy Inc. was incorporated in the State of Colorado on May 5, 2021. On August 20, 2021, the Company was issued common shares at par value of $ per share for a controlling interest in Terravis Energy Inc. During the nine months ended September 30, 2022, the Company was issued an additional common shares of Terravis Energy Inc. at par value of $ per share
On January 20, 2022, the board of directors of Terravis and the board of directors of the Company, as the sole stockholder of Terravis, adopted the Terravis Energy, Inc. 2022 Equity Incentive Plan (the “Terravis 2022 Plan”). Under the Terravis 2022 Plan, Terravis’ board of directors or a committee designated by the board of directors may grant incentive stock options, nonqualified stock options, shares of restricted stock, restricted stock units, performance shares, performance units and stock appreciation rights to eligible participants consisting of employees of Terravis, member of Terravis’ board of directors and advisors and consultants to Terravis. The Terravis board of directors authorized and reserved shares of Terravis common stock under the Terravis 2022 Plan, subject to adjustment for any stock splits of Terravis’s common stock or reorganization, recapitalization, or acquisition of Terravis.
On April 6, 2022, Terravis issued Lorenzo Rossi and Steven Rossi, both of whom are members of Terravis’s board of directors, non-qualified options under the Terravis 2022 Plan exercisable for and , respectively, shares of Terravis’s common stock, for $ per share from the date of grant until the tenth anniversary of the date of grant.
On April 12, 2022, Terravis Steven Rossi, William Caragol, and Ned L. Siegel, all of whom are members of Terravis’s board of directors, non-qualified options under the Terravis 2022 Plan exercisable for , , and , respectively, shares of Terravis’s common stock for $0.01 per share from the date of grant until the tenth anniversary of the date of grant.
During the nine months ended September 30, 2022, Worksport New York Operations Corporation and Worksport USA Operations Corporation were incorporated in the state of New York and Colorado, respectively. During the period, the Company was issued common shares at par value of $ of Worksport USA Operations Corporation. On April 1, 2022, the Company was issued common shares of Worksport New York Operations Corporation.
8 |
b) Functional and Reporting Currency
These condensed consolidated financial statements are presented in United States dollars (USD or US$). The functional currency of the Company and its subsidiaries are United States dollar. For purposes of preparing these consolidated financial statements, transactions denominated in Canadian dollars (CAD or C$) were converted to United States dollars at the spot rate. Transaction gains and losses resulting from fluctuations in currency exchange rates on transactions denominated in currencies other than the functional currency are recognized as incurred in the accompanying consolidated statement of operations.
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, 2022, the Company had working capital of $
Based
on the Company’s future operating plans, existing cash of $
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, 2021.
3. Inventory
Inventory consists of the following at September 30, 2022 and December 31, 2021:
September 30, 2022 | December 31, 2021 | |||||||
Finished goods | $ | $ | ||||||
Promotional items | ||||||||
Raw materials | ||||||||
$ | $ |
9 |
4. Prepaid expenses and deposits
As of September 30, 2022 and December 31, 2021 prepaid expenses and deposits consists of the following:
September 30, 2022 | December 31, 2021 | |||||||
Consulting, services and advertising | $ | $ | ||||||
Insurance | ||||||||
Deposit | ||||||||
$ | $ |
As
of September 30, 2022 prepaid expense and deposit consists of $
5. Promissory Notes
The following tables shows the balance of the notes payable as of September 30, 2022 and December 31, 2021:
Balance as of December 31, 2020 | $ | |||
Repayment | ( | ) | ||
Balance as of September 30, 2022 and December 31, 2021 | $ |
During
the year ended December 31, 2016, the Company issued a secured promissory note in the principal amount of $
During
the year ended December 31, 2016, the Company issued secured promissory notes in the aggregate principal amount of $
During
the years ended December 31, 2017, the Company issued secured promissory notes in the aggregate principal amount of $
During
the years ended December 31, 2017, the Company issued secured promissory notes in the aggregate principal amount of $
10 |
The amounts repayable under promissory notes and secured promissory notes at September 30, 2022 and December 31, 2021 are as follows:
September 30, 2022 | December 31, 2021 | |||||||
Balance owing | $ | $ | ||||||
Less amounts due within one year | ( | ) | ( | ) | ||||
Long-term portion | $ | $ |
6. 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 $
The
note carries an original issue discount of $
7. Shareholders’ Equity (Deficit)
During Nine months ended September 30, 2022, the following transactions occurred:
During
the nine months ended September 30, 2022, the Company issued
During
the nine months ended September 30, 2022 the Company issued
During
the nine months ended September 30, 2022, the Company recognized consulting expense of $
Refer to note 17 and 18 for additional shareholders’ equity (deficit).
11 |
During nine months ended September 30, 2021, the following transactions occurred:
During
the nine months ended September 30, 2021, the Company issued a total of
During
the nine months ended September 30, 2021 the Company had a underwriters’ public offering for
During
the same period
During
the nine months ended September 30, 2021 the Company raised $
During
the nine months ended September 30, 2021 the Company entered into a loan settlement agreement with a loan holder to issue
During
the nine months ended September 30, 2021 the Company entered into a promissory notes payable settlement agreement with a note holder
to issue
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
During the nine months ended September 30, 2021 the Company issued 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 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
During
the nine months ended September 30, 2021 the Company issued
During
the nine months ended September 30, 2021 the Company granted
12 |
During
the nine months ended September 30, 2021 the Company granted
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
Refer
to note 17 for additional shareholders’ equity (deficit) for consulting expense of $
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, an
anti-dilution clause was triggered resulting in the Company issuing
As
of September 30, 2022, the Company was authorized to issue
8. Related Party Transactions
During
the nine months ended September 30, 2022, the Company recorded salaries expense of $
During
the nine months ended September 30, 2021, the Company paid a director of the Company $
During
the nine months ended September 30, 2021, the Company paid $
Refer to note 18 for additional related party transactions.
9. Changes in Cash Flows from Operating Assets and Liabilities
The changes to the Company’s operating assets and liabilities for the nine months ended September 30, 2022 and 2021 are as follows:
2022 | 2021 | |||||||
Decrease (increase) in accounts receivable | $ | ( | ) | $ | ( | ) | ||
Decrease (increase) in other receivable | ( | ) | ||||||
Decrease (increase) in inventory | ( | ) | ( | ) | ||||
Decrease (increase) in prepaid expenses and deposits | ( | ) | ( | ) | ||||
Increase (decrease) in lease liability | ( | ) | ||||||
Increase (decrease) in taxes payable | ( | ) | ||||||
Increase (decrease) in accounts payable and accrued liabilities | ||||||||
$ | ( | ) | $ | ( | ) |
13 |
10. Commitments and contingencies
During the year ended December 31, 2021, the Company entered into an agreement with a third-party advisor to reserve for sale and issuance common shares for consulting services at $ per share.
11. Reverse Stock Split
On
May 21, 2021, the Board of Directors authorized the submission of a Certificate of Change/Amendment to the Nevada Secretary of State
to effect a reverse split of its common stock at
12. Investment
During
the year ended December 31, 2019, the Company entered into an agreement to purchase
13. Lease Liabilities
During
the nine months ended September 30, 2022, the Company entered into a lease agreement for warehouse space to commence on June 1, 2022
and ending on
During
the year ended December 31, 2021, the Company entered into a lease agreement for warehouse space to commence on September 1, 2021 and
end on
During
the year ended December 31, 2019, the Company signed a lease agreement for warehouse space to commence on August 1, 2019 and ended on
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
The Company’s right-of-use asset for the nine months ended September 30, 2022 and the year ended December 31, 2021 as follows:
September 30, 2022 | December 31, 2021 | |||||||
Right-of-use asset | $ | $ | ||||||
Current lease liability | $ | $ | ||||||
Long-term lease liability | $ | $ |
The components of lease expense are as follows:
September 30, 2022 | September 30, 2021 | |||||||
Amortization of right-of-use | $ | $ | ||||||
Interest on lease liability | $ | $ | ||||||
Total lease cost | $ | $ |
14 |
Maturities of lease liability are as follows:
Future minimum lease payments as of September 30, 2022,
2022 | ||||
2023 | ||||
2024 | ||||
2025 | ||||
2026 | ||||
2027 and after | ||||
Total future minimum lease payments | ||||
Less: amount representing interest | ( | ) | ||
Present value of future payments | ||||
Current portion | ||||
Long term portion | $ |
14. Loan payable
a) | During
the nine months ended September 30, 2022, the Company entered into a loan agreement with a third party for the purchase of property
located in West Seneca, New York, the details of which are disclosed in the Company’s Form 8-K filed with the United States
Securities and Exchange Commission on May 11, 2022. The Company received $ | |
b) | During
the year ended December 31, 2020, the Company received loans of $ | |
c) | During
the year ended December 31, 2020, the Company received $ |
15. Government Assistance
During
the COVID-19 pandemic the Government of Canada was 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 nine months ended September 30,
2022, the Company recognized CEWS of $
For the three and nine months ended September 30, 2022, loss per share is $( ) and $( ) (basic and diluted) compared to the three and nine months ended September 30, 2021 loss per share of $( ) and $( ) (basic and diluted). These losses per share are calculated using the weighted average number of shares of and (basic and diluted) for the three and nine months ended September 30, 2022 and of and (basic and diluted) for the three and nine months ended September 30, 2021.
15 |
There
are
17. Warrants
During
the nine months ended September 30, 2022, an aggregate of
During
the year ended December 31, 2021, the Company issued
During
the year ended December 31, 2021, the Company and warrant holder reached an agreement to amend a previous warrant agreement. The Company
will issue an additional
During the year ended December 31, 2021, an aggregate of warrants expired.
As of September 30, 2022, the Company has the following warrants outstanding:
Exercise price | Number outstanding | Remaining Contractual Life (Years) | Expiry date | |||||||||
$ | ||||||||||||
$ | ||||||||||||
$ | ||||||||||||
$ | ||||||||||||
$ | ||||||||||||
September 30, 2022 | December 31, 2021 | |||||||||||||||
Number of warrants | Weighted average price | Number of warrants | Weighted average price | |||||||||||||
Balance, beginning of year | $ | $ | ||||||||||||||
Issuance | $ | $ | ||||||||||||||
Expired | ( | ) | $ | ( | ) | ( | ) | $ | ( | ) | ||||||
Exercise | ( | ) | $ | ( | ) | ( | ) | $ | ( | ) | ||||||
Balance, end of period | $ | $ |
16 |
Under the Company’s 2015 Equity Incentive Plan, .
All equity-settled share-based payments are ultimately recognized as an expense in the statement of operations with a corresponding credit to “Additional Paid in Capital.” If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognized in the current period. No adjustment is made to any expense recognized in prior periods if share options ultimately exercised are different to that estimated on vesting.
Performance Share Units
On December 29, 2021, the Company granted and performance stock units (“PSU”) to the Company’s Chief Executive Officer and a director, respectively. . The fair value of the PSU was estimated to be $ . As of September 30, 2022, no PSUs have been vested and the Company recognized $ (2021 - $ ) in consulting expense.
Stock Options
On
July 23, 2021, the Company granted
On
August 6, 2021, the Company granted
On
September 1, 2021, the Company granted
On
October 7 and November 2, 2021, the Company granted
On
December 29, 2021, the Company granted an aggregate of
During
the nine months ended September 30, 2022, the Company granted
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During the nine months ended September 30, 2022, Terravis Energy Inc., a subsidiary of the Company, granted an aggregate of to its officers and directors. The stock options have an exercise price of $ and will expire on . The options vested immediately upon issuance. The fair value of the options on grant date was estimated to be immaterial.
September 30, 2022 | December 31, 2021 | |||||||||||||||
Number of stock options | Weighted average price | Number of stock options | Weighted average price | |||||||||||||
Balance, beginning of year | $ | $ | ||||||||||||||
Granted | $ | $ | ||||||||||||||
Balance, end of period | $ | $ |
Range of Exercise prices | Outstanding | Weighted average life (years) | Weighted average exercise price | Exercisable on September 30, 2022 | ||||||||||||||||
Stock options | $ | - | $ |
September 30, 2022 | ||||||||
Number of stock options | Weighted average price | |||||||
Balance, beginning of year | $ | |||||||
Granted | $ | |||||||
Balance, end of period | $ |
Range of Exercise prices | Outstanding | Weighted average life (years) | Weighted average exercise price | Exercisable on September 30, 2022 | ||||||||||||||||
Stock options | $ | $ |
19. Rental Income
During
the nine months ended September 30, 2022, the Company entered into a sublease agreement for its warehouse in Mississauga, Ontario, Canada.
The sublease commenced on September 15, 2022 and end on
During
the nine months ended September 30, 2022 the Company entered into a lease agreement in relation to its West Seneca property. Initially,
the Company entered into a lease agreement with a third-party from July 1 to
During
the nine months ended September 30, 2022 the Company recognized rental income of $
20. COVID-19
The outbreak of the 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 are unknown at this time, as is the efficacy of the government and central bank interventions.
18 |
Additionally, while the potential economic impact and duration of such impact brought by the COVID-19 pandemic are 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. The Company does not yet know the full extent of potential delays or impacts on its business, financing or the global economy as a whole. However, these effects could have a material impact on the Company’s liquidity, capital resources, operations and business and those of the third parties on which the Company relies. The management and board of the Company are constantly monitoring this situation to minimize potential losses.
21. Subsequent Events
On
November 4, 2022, Terravis Energy, Inc. filed an amendment to its articles of incorporation with the Colorado Secretary of State, pursuant
to which the Terravis board of directors attached a certificate of designation designating
On November 11, 2022, performance stock units (“PSU”) as disclosed in Note 18 granted December 29, 2021 were cancelled and replaced. In replacement to the cancelled PSU the Company issued and .
Additionally, on November 11, 2022, the Company’s Compensation Committee of the Board of Directors granted up to restricted shares to the Company’s Chief Executive Officer. The vesting of these restricted shares are based on individual significant Company milestones.
19 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This section and other parts of this Quarterly Report on Form 10-Q (“Form 10-Q”) contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of future performance and actual results may differ significantly from the results discussed in the forward-looking statements. All forward-looking statements in this Form 10-Q are made based on current expectations, forecasts, estimates and assumptions, and involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. In evaluating these statements, various factors, uncertainties, and risks should be specifically considered that could affect future results or operations. These factors, uncertainties and risks may cause actual results to differ materially from any forward-looking statement set forth in this Form 10-Q. These risks and uncertainties described and other information contained in the reports filed with or furnished to the SEC should be carefully considered before making any investment decision with respect to the Company’s securities. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Unless otherwise stated, all information presented herein is based on the Company’s fiscal calendar, and references to particular years, quarters, months or periods refer to the Company’s fiscal years ended in March and the associated quarters, months and periods of those fiscal years. Each of the terms the “Company” and “Worksport” as used herein refers collectively to Worksport Ltd. and its wholly owned subsidiaries, unless otherwise stated.
The following discussion should be read in conjunction with the 2021 Form 10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q.
RESULTS OF OPERATIONS
Three Months Ended September 30, 2022 compared to the Three Months Ended September 30, 2021
Revenue
For the three months ended September 30, 2022, revenue generated from sales was $18,350, compared to $93,408 for the three months ended September 30, 2021. Total revenues decreased by approximately 80% compared to the same period in the prior year.
Revenue decreased for the three months ended September 30, 2022, compared to the same period the prior year due to the Company’s focus on building up its inventory in anticipation of launching its e-commerce platform, research and development, and repositioning for domestic manufacturing. The Company is anticipating the launch of its e-commerce platform and domestic manufacturing in early-to-mid 2023.
For the three months ended September 30, 2022, total revenue generated in the United States decreased by 86%, from $93,408 in the prior period to $13,134. For the three months ended September 30, 2022, total revenue generated in the Canada increased by 100%, from $0 in the prior period to $5,216. Similar to the above, the overall decrease in revenue was a result of the Company shifting its focus to inventory buildup in anticipation of launching its e-commerce platform.
For the three months ended September 30, 2022, online revenues decreased by 86% from $93,408 in the prior period to $13,134. Online revenue accounted for 72% and 100% of total revenue for the three months ended September 30, 2022 and 2021 respectively. For the three months ended September 30, 2022, distributor revenues were $5,216 compared to $0 in the prior period.
Cost of Sales
For the three months ended September 30, 2022, cost of sales decreased by 85%. from $81,810 in the prior period to $12,602. Cost of sales, as a percentage of sales, was approximately 69% for the three months ended September 30, 2022, compared to 88% for the same period in 2021. The decrease in cost of sales as a percentage of sales was primarily due to increased efficiency associated with manufacturing and acquiring inventory, driven by lower ocean freight costs, for the three months ended September 30, 2022, compared to the same prior period.
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Gross Margin
Gross margin percentage for the three months ended September 30, 2022 was 31%, compared to 12% for the same period in 2021. The increase in gross margin reflects the Company’s efforts to control the cost of manufacturing and acquiring inventory.
Operating Expenses
Operating expenses increased for the three months ended September 30, 2022, by $897,013 from $2,051,563 in the prior period to $2,948,576.
● | General and administrative expense increased by $1,002,652 from $517,735 in the prior period to $1,520,388. The increased expenses are related to research and development and salaries as the Company seeks to expand its domestic operations and further develop its products. | |
● | Sales and marketing expenses increased by $152,483 from $433,905 in the prior period to $586,388. The increase in sales and marketing is a result of the Company’s marketing campaign to create brand and product awareness. | |
● | Professional fees which include accounting, legal and consulting fees, decreased from $1,111,098 for the three months ended September 30, 2021 to $858,605 for the three months ended September 30, 2022. The decrease was due to the transition of various third-party consultant services to in-house operations. | |
● | The Company realized a gain on foreign exchange of $16,805 during the three months ended September 30, 2022, an increase of $5,630 compared to a gain of $11,175 during the prior period. |
Other Income and Expenses
Other income and expenses for the three months ended September 30, 2022, was a gain of $65,168 compared to a loss of $24,316 for the prior period, an increase of $89,484. The change can be attributed to higher than expected interest income and rental income from a sub-leased facility.
Net Loss
Net loss for the three months ended September 30, 2022, was $2,877,660 compared to $2,064,281 for the three months ended September 30, 2021, a change of $813,379 or 39%. The increase in the net loss can be attributed to the increase in various operating expenses as the Company focuses on expanding its operations, research and development, manufacturing and supply chain.
Nine Months Ended September 30, 2022, compared to Nine Months Ended September 30, 2021
Revenue
For the nine months ended September 30, 2022, revenue generated from sales was $77,439, compared to $287,297 for the nine months ended September 30, 2021. Total revenues decreased by approximately 73% compared to the same period in the prior year.
Revenue decreased for the three months ended September 30, 2022, compared to the same period the prior year due to the Company’s focus on building up its inventory in anticipation of launching its e-commerce platform, research and development, and repositioning for domestic manufacturing. The Company is anticipating the launch of its e-commerce platform and domestic manufacturing in early-to-mid 2023.
For the nine months ended September 30, 2022, total revenue generated in the United States decreased by 73% from $246,652 in the prior period to $65,458. For the nine months ended September 30, 2022, total revenue generated in the Canada decreased by 71% from $40,645 in the prior period to $11,981. Similar to the above, the decrease in revenue was a result of the Company shifting its focus to inventory buildup in anticipation of launching its e-commerce platform.
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For the nine months ended September 30, 2022, online revenues decreased by 73% from $246,701 in the prior period to $65.458. Online revenue accounted for 85% and 86% of total revenue for the nine months ended September 30, 2022, and 2021, respectively. For the nine months ended September 30, 2022, distributor revenues were $11,981 compared to $0 in the prior period.
Cost of Sales
For the nine months ended September 30, 2022, cost of sales decreased by 79% from $279,364 in the prior period to $58,566. Cost of sales, as a percentage of sales, was approximately 76% for the nine months ended September 30, 2022, compared to 97% for the same period in 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 nine months ended September 30, 2022, compared to the same prior period.
Gross Margin
Gross margin percentage for the nine months ended September 30, 2022, was 24% compared to a 3% for the same period in 2021. The increase in gross margin reflects the Company’s efforts to control the cost of manufacturing and acquiring inventory.
Operating Expenses
Operating expenses increased for the nine months ended September 30, 2022, by $5,215,392 from $3,852,280 in the prior periods to $9,067,672.
● | General and administrative expense increased by $2,048,120 from $924,041 in the prior period to $2,972,161. The increased expenses are related to research and development and salaries as the Company seeks to expand its operations and further develop its products. | |
● | Sales and marketing expenses increased by $1,191,531 from $761,712 in the prior period to $1,953,243. The increase in sales and marketing is a result of the Company’s marketing campaign to create brand and product awareness. | |
● | Professional fees which include accounting, legal and consulting fees, increased from $2,168,697 for the nine months ended September 30, 2021 to $4,160,059 for the nine months ended September 30, 2022. The increase was due to the engagement of various third-party consultants to expand the Company’s business operations. | |
● | The Company realized a gain on foreign exchange of $17,791 during the nine months ended September 30, 2022, an increase of $15,621 compared to a gain of $2,170 during the prior period. The gain on the foreign exchange can be attributed to operating expenses denominated in the Canadian Dollar. |
Other Income and Expenses
Other income and expenses for the nine months ended September 30, 2022, a loss of $18,789 compared to a loss of $255,112 the prior period, a decrease of $236,323. The change can be attributed to the Company’s interest expense partially offset by rental and interest income.
Net Loss
Net loss for the nine months ended September 30, 2022, was $9,067,588 compared to $4,099,459 for the nine months ended September 30, 2021, a change of $4,968,129 or 121%. The increase in the net loss can be attributed to the increase in various operating expenses as the Company focuses on expanding its operations, research and development, manufacturing and supply chain.
22 |
LIQUIDITY AND CAPITAL RESOURCES
As of September 30, 2022, the Company had $17,279,261 in cash, restricted cash and cash equivalents. The Company has generated only limited revenues and has relied primarily upon capital generated from public and private offerings of its securities.
Since the Company’s acquisition of Worksport in fiscal 2014, it has never generated a profit.
As of September 30, 2022, the Company had an accumulated deficit of $29,917,393.
Cash Flow Activities
Accounts receivable increased at September 30, 2022 by $390 and decreased at September 30, 2021 by $32,479. The increase in accounts receivable was due to sales near the end of the quarter. Other receivable increased at September 30, 2022 by $94,150 and decreased by $69,604 at September 30, 2021. Other receivables increased at September 30, 2022 due to increased receivables from a sales tax refund.
Inventory increased at September 30, 2022 by $785,014 and at September 30, 2021 by $156,822 as a result of the Company stockpiling inventory in anticipation of the launch of its e-commerce platform. Prepaid expenses increased by $1,063,680 at September 30, 2022 and at September 30, 2021 by $223,582, due to deposits made by the Company for the purchase of manufacturing equipment and professional services.
Accounts payable and accrued liabilities increased at September 30, 2022 by $647,996 and by $221,979 at September 30, 2021.
Cash decreased from $30,920,477 on September 30, 2021 to $17,279,261 at September 30, 2022, a decrease of $13,641,216 or 44%. The decrease was due to the Company’s focus on acquiring assets for domestic production such as the building in West Seneca, NY, industrial automation equipment, building up its inventory in anticipation of launching its e-commerce platform, and research and development.
As of September 30, 2022, the Company had current assets of $22,096,328 and current liabilities of $2,504,881.
Operating Activities
Net cash used by operating activities for the nine months ended September 30, 2022, was $6,361,539, compared to $2,117,305 in the prior period.
Investing Activities
Net cash used in investing activities for the nine months ended September 30, 2022, was $10,212,245 compared to $764,089 in the prior period. The increase in investing activities was primarily due to the purchase of property and equipment.
Financing Activities
Net cash generated by financing activities for the nine months ended September 30, 2022, was $5,285,712 compared to of $32,694,059 in the prior period.
Based on the Company’s future operating plans and existing cash of $17,279,261, management believes that the Company has sufficient funds to meet its contractual obligations and working capital requirements for the next 12 months and the foreseeable future.
Off-Balance Sheet Arrangements
None.
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Critical Accounting Policies
Our discussion and analysis of results of operations and financial condition are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We evaluate our estimates on an ongoing basis, including those related to provisions for uncollectible accounts receivable, inventories, valuation of intangible assets and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
The accounting policies that we follow are set forth in Note 2 to our financial statements as included in the Form 10-K filed on March 31, 2022. These accounting policies conform to accounting principles generally accepted in the United States and have been consistently applied in the preparation of the financial statements.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not Applicable.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the quarter covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in this quarterly report have been prepared in accordance with generally accepted accounting principles. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
None.
24 |
Item 1A. Risk Factors
Not Applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Subsequent Events
On November 4, 2022, Terravis Energy, Inc. filed an amendment to its articles of incorporation with the Colorado Secretary of State, pursuant to which the Terravis board of directors attached a certificate of designation designating 1,000 shares of its authorized preferred stock as Series A Preferred Stock with a par value $0.0001 per share. According to the certificate of designation, holders of the Series A Preferred Stock does not have any dividend, conversion or liquidation rights. Unless otherwise prohibited by law or the Series A Preferred Stock certificate of designation, the Series A Preferred Stock shall vote together with the outstanding shares of common stock of Terravis as one class on any matter put forth before the common stockholders. For so long the Series A Preferred Stock is outstanding, the holders of the Series A Preferred Stock shall be entitled to 51% of the total votes on all matters regardless of the actual number of shares of Series A Preferred Stock then outstanding, and the holders of the common stock and any other shares of capital stock of Terravis entitled shall be entitled to their proportional share of the remaining 49% of the total votes based on their respective voting power. On November 4, 2022, the Company issued 1,000 shares of Series A Preferred Stock to Steven Rossi, the President of Terravis and the Chief Executive Officer and President of the Company.
On December 29, 2021, the Company granted 400,000 and 300,000 performance stock units (“PSU”) to the Company’s Chief Executive Officer and a director, respectively. The PSU will vest in 5% increments according to a schedule that correlates with the Company’s stock price. The first 5% of the PSUs vest upon the Company’s stock price closing at $3.00. 50% will have vested at a closing price of $16.50 and 100% will have vested at a closing price of $31.50. The fair value of the PSU was estimated to be $2,308,012. As of September 30, 2022, no PSUs have been vested and the Company recognized $201,686 (2021 - $0) in consulting expense.
On November 11, 2022, the performance stock unit (“PSU”) awards that the Company granted to Steven Rossi, the Company’s Chief Executive Officer and Chairman of the Board, and to Lorenzo Rossi, a member of the Company’s Board of Directors, on December 29, 2021 (as described in Note 18 to the financial statements included in Item 1.01 of this quarterly report) were cancelled and replaced. In replacement of the cancelled PSU awards, on November 11, 2022, the Compensation Committee of the Board of Directors of the Company granted 400,000 and 300,000 PSU awards under the Company’s 2015 Equity Incentive Plan to Steven Rossi and Lorenzo Rossi, respectively. The PSU awards will vest in 5% increments according to a schedule that correlates with the Company’s stock price. The first 5% of the PSUs vest upon the Company’s stock price closing at $2.25. 50% will have vested at a closing price of $5.31 and 100% will have vested at a closing price of $13.76. Copies of the PSU awards are filed as exhibits10.1 and 10.2 to this quarterly report and are incorporated by reference herein.
On November 11, 2022, the Company’s Compensation Committee of the Board of Directors granted Steven Rossi, the Company’s Chief Executive Officer and Chairman of the Board, a restricted stock award under the Company’s 2015 Equity Incentive Plan. The award vests upon the achievement of the following milestones: (i) 200,000 shares upon the completion of the Company’s first fiscal quarter in which the Company has revenues of $1,000,000 in two consecutive quarters; (ii) the greater of 200,000 restricted shares or the number of restricted shares equal to 3% of the value of the transaction upon the consummation of a material accretive acquisition; (iii) 200,000 shares upon the consummation of the spin-off of TerraVis Energy, Inc. on The Nasdaq Stock Market LLC; (iv) 200,000 shares shares upon the Company’s facility in Seneca, New York producing 100 tonneau covers per day, over the course of a calendar month, excluding weekends and holidays; (v) 200,000 shares upon the Company’s facility in Seneca, New York producing ten solar tonneau covers per day, over the course of a calendar month; (vi) 200,000 shares upon the consummation of an equity financing or cumulative equity financings with gross proceeds of at least $10,000,000; (vii) 200,000 shares upon the Company achieving net profitability for two consecutive fiscal quarters and (viii) 200,000 shares upon the consummation of a spin-off of a subsidiary (other than TerraVis Energy, Inc.) of the Company on The Nasdaq Stock Market LLC. A copy of the restrictive stock awards has been filed as Exhibit 10.3 to this quarterly report and is incorporated by reference herein.
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Item 6. Exhibits
EXHIBIT No. | DESCRIPTION | |
10.1† | Performance Stock Unit award, dated November 11, 2022, to Steven Rossi | |
10.2† | Performance Stock Unit award, dated November 11, 2022, to Lorenzo Rossi | |
10.3† | Restricted Stock award, dated November 11, 2022, to Steven Rossi | |
31.1 | Section 302 Certification of Chief Executive Officer | |
31.2 | Section 302 Certification of Chief Financial Officer | |
32.1 | Section 906 Certifications of Chief Executive Officer and Chief Financial Officer | |
101.INS | Inline XBRL Instance Document | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
† Management contract or any compensatory plan, contract or arrangement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
WORKSPORT LTD. | ||
Dated: November 14, 2022 | By: | /s/ Steven Rossi |
Steven Rossi | ||
Chief Executive Officer (Principal Executive Officer) |
Dated: November 14, 2022 | By: | /s/ Michael Johnston |
Michael Johnston | ||
Chief Financial Officer (Principal Financial and Accounting Officer) |
27 |
Exhibit 10.1
Worksport Ltd.
Notice of Performance Stock Unit Award
You (the “Stockholder”) have been granted the following performance stock units (the “PSU”) of Worksport Ltd. (the “Company”), par value $0.0001 per share, which may vest in the order provided for in the vesting schedule1 failing which the PSU shall stand rescinded and revert to the Company.
Name of Grantee: | Steven Rossi | |
Shares: | 400,000 | |
Effective Date of Grant: | November 11, 2022 |
Vesting Schedule:
Stock Price | Vesting % | |||||
$ | 2.25 | 5 | % | |||
$ | 2.48 | 10 | % | |||
$ | 2.72 | 15 | % | |||
$ | 2.99 | 20 | % | |||
$ | 3.29 | 25 | % | |||
$ | 3.62 | 30 | % | |||
$ | 3.99 | 35 | % | |||
$ | 4.38 | 40 | % | |||
$ | 4.82 | 45 | % | |||
$ | 5.31 | 50 | % | |||
$ | 5.84 | 55 | % | |||
$ | 6.42 | 60 | % | |||
$ | 7.06 | 65 | % | |||
$ | 7.77 | 70 | % | |||
$ | 8.54 | 75 | % | |||
$ | 9.40 | 80 | % | |||
$ | 10.34 | 85 | % | |||
$ | 11.37 | 90 | % | |||
$ | 12.51 | 95 | % | |||
$ | 13.76 | 100 | % |
The Grantee and the Company hereby agree and acknowledge that this Grant is governed by the terms and conditions of the 2015 Equity Incentive Plan (the “Plan”), which is incorporated herein by reference. The Grantee confirms that it has been provided with a copy of the Plan.
GRANTEE | WORKSPORT LTD. | ||
/s/ Steven Rossi | By: | /s/ William Caragol | |
Steven Rossi | Name: | William Caragol | |
Title: | Chair, Compensation Committee |
1 In accordance with the vesting schedule, a milestone is met if the VWAP exceeds the required price for ten (10) consecutive days, with over $100,000 of trading volume (min) on each of those days.
Exhibit 10.2
Worksport Ltd.
Notice of Performance Stock Unit Award
You (the “Stockholder”) have been granted the following performance stock units (the “PSU”) of Worksport Ltd. (the “Company”), par value $0.0001 per share, which may vest in the order provided for in the vesting schedule1 failing which the PSU shall stand rescinded and revert to the Company.
Name of Grantee: | Lorenzo Rossi | |
Shares: | 300,000 | |
Effective Date of Grant: | November 11, 2022 |
Vesting Schedule:
Stock Price | Vesting % | |||||
$ | 2.25 | 5 | % | |||
$ | 2.48 | 10 | % | |||
$ | 2.72 | 15 | % | |||
$ | 2.99 | 20 | % | |||
$ | 3.29 | 25 | % | |||
$ | 3.62 | 30 | % | |||
$ | 3.99 | 35 | % | |||
$ | 4.38 | 40 | % | |||
$ | 4.82 | 45 | % | |||
$ | 5.31 | 50 | % | |||
$ | 5.84 | 55 | % | |||
$ | 6.42 | 60 | % | |||
$ | 7.06 | 65 | % | |||
$ | 7.77 | 70 | % | |||
$ | 8.54 | 75 | % | |||
$ | 9.40 | 80 | % | |||
$ | 10.34 | 85 | % | |||
$ | 11.37 | 90 | % | |||
$ | 12.51 | 95 | % | |||
$ | 13.76 | 100 | % |
The Grantee and the Company hereby agree and acknowledge that this Grant is governed by the terms and conditions of the 2015 Equity Incentive Plan (the “Plan”), which is incorporated herein by reference. The Grantee confirms that it has been provided with a copy of the Plan.
GRANTEE | WORKSPORT LTD. | ||
/s/ Lorenzo Rossi | By: | /s/ Steven Rossi | |
Lorenzo Rossi | Name: | Steven Rossi | |
Title: | Chief Executive Officer |
1 In accordance with the vesting schedule, a milestone is met if the VWAP exceeds the required price for ten (10) consecutive days, with over $100,000 of trading volume (min) on each of those days.
Exhibit 10.3
WORKSPORT LTD.
RESTRICTED STOCK AWARD
Worksport Ltd., a Nevada corporation (the “Company”), hereby awards a Restricted Stock Award (the “Award”) for unregistered shares of common stock of the Company (the “Restricted Shares”) to the Participant named below. The terms and conditions of this Award are set forth in this cover sheet and the attached Restricted Stock Award Agreement. This cover sheet is incorporated into and a part of the attached Restricted Stock Award Agreement (together, the “Agreement”).
Effective Date of Award: November 11, 2022
Name of Participant: Steven Rossi
Number of Restricted Shares to vest upon the achievement of the milestones set forth in the table below:
Milestone | Number of Restricted Shares | |||
1. | Upon the completion of the Company’s first fiscal quarter in which the Company has revenues of at least $1,000,000, followed by a second quarter with at least $1,000,000 of revenue. | 200,000 | ||
2. | Upon the consummation of a material accretive acquisition. | The greater of 200,000 restricted shares or the number of restricted shares equal to 3% of the value of the transaction. | ||
3. | Upon the consummation of the spin-off of TerraVis Energy, Inc. on the Nasdaq Stock Market LLC. | 200,000 | ||
4. | Upon the Company’s facility in Seneca, New York producing 100 tonneau covers per day, over the course of a calendar month, excluding weekends and holidays. | 200,000 | ||
5. | Upon the Company’s facility in Seneca, New York producing 10 solar tonneau covers per day, over the course of a calendar month, excluding weekends and holidays. | 200,000 | ||
6. | Upon the consummation of an equity financing or cumulative equity financings with gross proceeds of at least $10,000,000. | 200,000 | ||
7. | Upon the Company achieving net profitability for two consecutive fiscal quarters. | 200,000 | ||
8. | Upon the consummation of a spin-off of a subsidiary (other than TerraVis Energy, Inc.) of the Company on The Nasdaq Stock Market LLC. | 200,000 |
1 |
WORKSPORT LTD.
RESTRICTED STOCK AWARD AGREEMENT
Entire Agreement: | This Agreement constitutes the entire understanding between you and the Company regarding this Award of Restricted Stock. Any prior agreements, commitments or negotiations are superseded by this Agreement. | |
Award of Restricted Stock: | The Company awards you the number of shares of restricted shares of common stock of the Company shown on the cover sheet of this Agreement (the “Shares” or “Restricted Stock”). The Award is subject to the terms and conditions of this Agreement. This Award is not intended to constitute a nonqualified deferred compensation plan within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and will be interpreted accordingly. | |
Vesting: | This Award will vest according to the vesting schedule set forth on the cover sheet hereto. | |
Dividends: | All dividends whether in cash or in stock, if any, on the Restricted Stock shall also be held in escrow and subject to the same vesting terms and conditions as the Restricted Stock and such dividends shall only be paid to Participant upon vesting of the underlying Shares of Restricted Stock. | |
No Assignment: | The Shares subject to this Award shall not be sold, anticipated, assigned, attached, garnished, pledged, hypothecated, optioned, transferred or made subject to any creditor’s process, whether voluntarily, involuntarily or by operation of law. However, this shall not preclude a transfer of vested Shares by will or by the laws of descent and distribution. In addition, pursuant to Company procedures, you may designate a beneficiary who will receive any outstanding vested Shares in the event of your death. Regardless of any marital property settlement agreement, the Company is not obligated to recognize your spouse’s interest in your Award in any way. | |
U.S. IRS Code Section 83(b) Election: | If you are a U.S. taxpayer, you represent and warrant that you understand the U.S. federal, state and local income tax consequences of the granting of this Restricted Stock Award. Under Section 83 of the Code, the Fair Market Value of the Restricted Stock on the date any forfeiture restrictions applicable to such Restricted Stock lapse will be reportable as ordinary income at that time. For this purpose, “forfeiture restrictions” include surrender to the Company of unvested Restricted Stock as described above. You may voluntarily elect to be taxed at the time the Restricted Stock is acquired to the extent that the Fair Market Value of the Restricted Stock exceeds the amount of consideration paid by you (if any) for such Restricted Stock at that time rather than when such Restricted Stock ceases to be subject to such forfeiture restrictions, by filing an election under Section 83(b) of the Code with the Internal Revenue Service within thirty (30) days after the Date of Award. Failure to make this filing within the thirty (30) day period will result in the recognition of ordinary income by you as the forfeiture restrictions lapse. YOU ACKNOWLEDGE THAT IT IS YOUR SOLE RESPONSIBILITY, AND NOT THE COMPANY’S, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN IF YOU REQUEST THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON YOUR BEHALF. MOREOVER, YOU ARE RELYING SOLELY ON YOUR OWN ADVISORS WITH RESPECT TO THE DECISION AS TO WHETHER OR NOT TO FILE A CODE SECTION 83(b) ELECTION. | |
Voting and Other Rights | Subject to the terms of this Agreement, you shall have all of the rights and privileges of a stockholder of the Company, including the right to vote and to receive dividends (if any). |
2 |
Adjustments | In the event of a stock split, a stock dividend or a similar change in the Company Stock of the Company, the number of Shares covered by this Award (even if not vested) will be adjusted. This Award shall be subject to the terms of the agreement of merger, liquidation or reorganization in the event the Company is subject to such corporate activity. | |
Taxes: | You will be solely responsible for payment of any and all applicable taxes associated with this Award.
The delivery to you of any Shares will not be permitted unless and until you have satisfied any withholding or other taxes that may be due. Any such tax withholding obligations may be settled at the discretion of the Committee by the Company withholding and retaining a portion of the Shares from the Shares that would otherwise be deliverable to you as of the vesting date and/or by Shares that have already been owned by you for more than six
(6) months and which are surrendered to the Company. Such withheld or surrendered Shares will be applied to pay the withholding obligation by using the aggregate Fair Market Value of the withheld or surrendered Shares as of the date of vesting. If Shares are withheld, then you will be delivered the net amount of vested Shares after the Share withholding has been effected and you will not receive the withheld Shares. | |
Legal Compliance: | The Company will not issue any Shares if the issuance of such Shares at that time would violate any law or regulation. | |
Legends: | The Shares have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), and the Company has no obligation to register the Shares under the Securities Act.
All certificates representing the Shares issued under this Award may, where applicable, have endorsed thereon the following legends and any other legends the Company determines appropriate:
“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS ON TRANSFER AND OPTIONS TO PURCHASE SUCH SHARES SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER, OR HIS OR HER PREDECESSOR IN INTEREST. A COPY OF SUCH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST TO THE SECRETARY OF THE COMPANY BY THE HOLDER OF RECORD OF THE SHARES REPRESENTED BY THIS CERTIFICATE.”
“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.” | |
No Retention Rights | Your Award or this Agreement does not give you the right to be retained by the Company (or any Parent or any Subsidiaries or Affiliates) in any capacity and does replace any written employment or compensation agreement or arrangement between you and the Company. This Award and the Shares subject to the Award are not intended to constitute or replace any pension rights or compensation and are not to be considered compensation of a continuing or recurring nature, or part of your normal or expected compensation, and in no way represent any portion of your salary, compensation or other remuneration for any purpose, including but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments. |
3 |
Notices: | Any notice to be given or delivered to the Company relating to this Agreement shall be in writing and addressed to the Company at its principal corporate offices. Any notice to be given or delivered to you relating to this Agreement shall be in writing and addressed to you at such address of which you advise the Company in writing. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S. mail, postage prepaid and properly addressed to the party to be notified. | |
Applicable Law: | This Agreement will be interpreted and enforced under the laws of the State of Nevada without reference to the conflicts of law provisions thereof. | |
Accredited Investor: | The Participant represents that the Participant is an “accredited investor,” as defined under the Securities Act. | |
Investment Intent: | The Participant represents that it will acquire the Shares as principal for its own account for investment purposes only and not with a view to or for distributing or reselling such Shares or any part thereof, without prejudice, however, to such Participant’s right, subject to the provisions of this Agreement, at all times to sell or otherwise dispose of all or any part of such Securities pursuant to an effective registration statement under the Securities Act or under an exemption from such registration and in compliance with applicable federal and state securities laws. | |
No Guarantee of Future Value: | The future value of the underlying Shares is unknown and cannot be predicted with certainty. If the underlying Shares do not increase in value after the date of issuance of this Award, the Award could have little or no value. | |
No tax legal or financial advice: | The Company has not provided any tax, legal or financial advice, nor has the Company made any recommendations regarding this Award and the underlying Shares. You are hereby advised to consult with your own personal tax, legal and financial advisors regarding this Award and the underlying Shares. | |
Term: | The term of the award is for ten (10) years, and shall expire on such date if the award has not vested. |
Termination: | The Agreement may be terminated by the Company with or without “Cause” defined the occurrence of one or more of the following events: | |||
● | Your continued refusal or failure to perform (other than by reason of a Disability) your material duties and responsibilities to the Company; | |||
● | a material breach of your employment agreement with the Company; | |||
● | willful, grossly negligent or unlawful misconduct which causes material harm to the Company or its reputation; | |||
● | any conduct engaged in that is materially detrimental to the business or reputation of the Company; | |||
● | a conviction, plea of guilty, or plea of nolo contendere by Executive, of or with respect to a criminal offense which is a felony or other crime involving dishonesty, disloyalty, fraud, embezzlement, theft or similar action(s) (including, without limitation, acceptance of bribes, kickbacks or self-dealing), or the material breach of Executive’s fiduciary duties with respect to the Company. | |||
Upon this termination by the Company of this Agreement for “Cause” all unvested Shares shall be forfeited. |
4 |
IN WITNESS WHEREOF, the undersigned duly authorized officer of Worksport Ltd. has executed this Agreement as of the date first written above.
WORKSPORT LTD. | ||
By: | /s/ William Caragol | |
Name: | William Caragol | |
Title: | Compensation Committee Chair |
By signing this cover sheet, you agree to all terms and conditions described in the attached Restricted Stock Award Agreement. You specifically acknowledge that you have carefully read the section entitled “Code Section 83(b) Election” and you further acknowledge that you are solely responsible for filing any Code Section 83(b) election and that such election must be filed within thirty (30) days after the Date of Award in order to be effective.
Participant: | ||
/s/ Steven Rossi | ||
Name: | Steven Rossi |
5 |
EXHIBIT 31.1
Certification of Principal Executive Officer
I, Steven Rossi, certify that:
1. | I have reviewed this Form 10-Q of Worksport Ltd; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and; | |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 14, 2022
By: | /s/ Steven Rossi | |
Steven Rossi | ||
Chief Executive Officer | ||
(Principal Executive Officer) |
EXHIBIT 31.2
Certification of Principal Financial Officer
I, Michael Johnston, certify that:
1. | I have reviewed this Form 10-Q of Worksport Ltd.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; | |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; | |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and; | |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and | |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 14, 2022
By: | /s/ Michael Johnston | |
Michael Johnston | ||
Chief Financial Officer | ||
(Principal Financial and Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
I, Steve Rossi, certify, as of the date hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Worksport Ltd. on Form 10-Q for the period ended September 30, 2022 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Worksport Ltd. at the dates and for the periods indicated.
By: | /s/ Steven Rossi | |
Steven Rossi | ||
Chief Executive Officer | ||
(Principal Executive Officer) |
Date: November 14, 2022
I, Michael Johnston, certify, as of the date hereof, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of Worksport Ltd. on Form 10-Q for the period ended September 30, 2022 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Form 10-Q fairly presents in all material respects the financial condition and results of operations of Worksport Ltd. at the dates and for the periods indicated.
By: | /s/ Michael Johnston | |
Michael Johnston | ||
Chief Financial Officer | ||
(Principal Financial and Accounting Officer) |
Date: November 14, 2022
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares |
Sep. 30, 2022 |
Dec. 31, 2021 |
---|---|---|
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common Stock, Shares Authorized | 299,000,000 | 299,000,000 |
Common stock, shares issued | 17,189,104 | 16,951,034 |
Common stock, shares outstanding | 17,189,104 | 16,951,034 |
Series A and B Preferred Stock [Member] | ||
Preferred Stock, par value | $ 0.0001 | $ 0.0001 |
Preferred Stock, shares authorized | 1,100,000 | 1,100,000 |
Series A Preferred Stock [Member] | ||
Preferred Stock, shares issued | 100 | 100 |
Preferred Stock, shares outstanding | 100 | 100 |
Series B Preferred Stock [Member] | ||
Preferred Stock, par value | $ 0.0001 | |
Preferred Stock, shares issued | 0 | 0 |
Preferred Stock, shares outstanding | 0 | 0 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
Sep. 30, 2022 |
Sep. 30, 2021 |
|
Income Statement [Abstract] | ||||
Net Sales | $ 18,350 | $ 93,408 | $ 77,439 | $ 287,297 |
Cost of Goods Sold | 12,602 | 81,810 | 58,566 | 279,364 |
Gross Profit | 5,748 | 11,598 | 18,873 | 7,933 |
Operating Expenses | ||||
General and administrative | 1,520,388 | 517,735 | 2,972,161 | 924,041 |
Sales and marketing | 586,388 | 433,905 | 1,953,243 | 761,712 |
Professional fees | 858,605 | 1,111,098 | 4,160,059 | 2,168,697 |
(Gain) on foreign exchange | (16,805) | (11,175) | (17,791) | (2,170) |
Total operating expenses | 2,948,576 | 2,051,563 | 9,067,672 | 3,852,280 |
Loss from operations | (2,942,828) | (2,039,965) | (9,048,799) | (3,844,347) |
Other Income (Expense) | ||||
Interest expense | (112,341) | (26,114) | (317,451) | (275,114) |
Gain on settlement of debt | 18,204 | |||
Rental income (note 19) | 108,552 | 204,770 | ||
Interest income | 68,957 | 1,798 | 93,892 | 1,798 |
Total other income (expense) | 65,168 | (24,316) | (18,789) | (255,112) |
Net Loss | $ (2,877,660) | $ (2,064,281) | $ (9,067,588) | $ (4,099,459) |
Loss per Share (basic and diluted) | $ (0.17) | $ (0.15) | $ (0.53) | $ (0.42) |
Weighted Average Number of Shares (basic and diluted) | 17,164,505 | 13,983,567 | 17,059,021 | 9,688,668 |
Basis of Presentation and Business Condition |
9 Months Ended |
---|---|
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Basis of Presentation and Business Condition | 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, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. 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, 2021 filed with the SEC on March 31, 2022.
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 NASDAQ. 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.
Terravis Energy Inc. was incorporated in the State of Colorado on May 5, 2021. On August 20, 2021, the Company was issued common shares at par value of $ per share for a controlling interest in Terravis Energy Inc. During the nine months ended September 30, 2022, the Company was issued an additional common shares of Terravis Energy Inc. at par value of $ per share
On January 20, 2022, the board of directors of Terravis and the board of directors of the Company, as the sole stockholder of Terravis, adopted the Terravis Energy, Inc. 2022 Equity Incentive Plan (the “Terravis 2022 Plan”). Under the Terravis 2022 Plan, Terravis’ board of directors or a committee designated by the board of directors may grant incentive stock options, nonqualified stock options, shares of restricted stock, restricted stock units, performance shares, performance units and stock appreciation rights to eligible participants consisting of employees of Terravis, member of Terravis’ board of directors and advisors and consultants to Terravis. The Terravis board of directors authorized and reserved shares of Terravis common stock under the Terravis 2022 Plan, subject to adjustment for any stock splits of Terravis’s common stock or reorganization, recapitalization, or acquisition of Terravis.
On April 6, 2022, Terravis issued Lorenzo Rossi and Steven Rossi, both of whom are members of Terravis’s board of directors, non-qualified options under the Terravis 2022 Plan exercisable for and , respectively, shares of Terravis’s common stock, for $ per share from the date of grant until the tenth anniversary of the date of grant.
On April 12, 2022, Terravis Steven Rossi, William Caragol, and Ned L. Siegel, all of whom are members of Terravis’s board of directors, non-qualified options under the Terravis 2022 Plan exercisable for , , and , respectively, shares of Terravis’s common stock for $0.01 per share from the date of grant until the tenth anniversary of the date of grant.
During the nine months ended September 30, 2022, Worksport New York Operations Corporation and Worksport USA Operations Corporation were incorporated in the state of New York and Colorado, respectively. During the period, the Company was issued common shares at par value of $ of Worksport USA Operations Corporation. On April 1, 2022, the Company was issued common shares of Worksport New York Operations Corporation.
b) Functional and Reporting Currency
These condensed consolidated financial statements are presented in United States dollars (USD or US$). The functional currency of the Company and its subsidiaries are United States dollar. For purposes of preparing these consolidated financial statements, transactions denominated in Canadian dollars (CAD or C$) were converted to United States dollars at the spot rate. Transaction gains and losses resulting from fluctuations in currency exchange rates on transactions denominated in currencies other than the functional currency are recognized as incurred in the accompanying consolidated statement of operations.
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, 2022, the Company had working capital of $19,591,447 and an accumulated deficit of $29,917,393. As of September 30, 2022, the Company had cash, restricted cash and cash equivalents of $17,279,261. 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.
Based on the Company’s future operating plans, existing cash of $17,279,261 combined with possible warrants and stock options exercises of approximately $28,695,215; management believes the Company has sufficient funds to meet its contractual obligations and working capital requirements for the next 12 months and the foreseeable future.
|
Significant Accounting Policies |
9 Months Ended |
---|---|
Sep. 30, 2022 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | 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, 2021.
|
Inventory |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Inventory | 3. Inventory
Inventory consists of the following at September 30, 2022 and December 31, 2021:
|
Prepaid expenses and deposits |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
Prepaid Expenses And Deposits | ||||||||||||||||||||||||||||||||||||||||||||||
Prepaid expenses and deposits | 4. Prepaid expenses and deposits
As of September 30, 2022 and December 31, 2021 prepaid expenses and deposits consists of the following:
As of September 30, 2022 prepaid expense and deposit consists of $1,933,547 (December 31, 2021- $4,328,389) in prepaid consulting, services and advertising for third party consultants through the issuance of shares and stock options.
|
Promissory Notes |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Promissory Notes | 5. Promissory Notes
The following tables shows the balance of the notes payable as of September 30, 2022 and December 31, 2021:
During the year ended December 31, 2016, the Company issued a secured promissory note in the principal amount of $73,452 ($123,231 Canadian dollars), respectively. 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 of September 30, 2022, principal balance owing was $96,091 ($123,231 Canadian Dollars) (December 31, 2021 - $96,091 ($123,231 Canadian Dollars)). As of September 30, 2022, the accrued interest on this note payable was $79,331 ($102,874 Canadian Dollars) (2021 - $61,970 ($80,693 Canadian Dollars)) included in accounts payable and accrued liabilities. As of September 30, 2022, the Company and the promissory note holder are in dispute.
During the year ended December 31, 2016, the Company issued secured promissory notes in the aggregate principal amount of $79,000. The secured promissory notes have an 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 of September 30, 2022 principal balance owing was $79,000 (2021 - $79,000). As of September 30, 2022, the accrued interest on this note payable was $55,797 (2021 – $41,607) included in accounts payable and accrued liabilities. As of September 30, 2022, the Company and the promissory note holder are in dispute.
During the years ended December 31, 2017, the Company issued secured promissory notes in the aggregate principal 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 year ended December 31, 2021, the Company and promissory note holders reached an agreement to repay $62,905 ($80,108 Canadian Dollars), for the outstanding principal of $53,848 and accrued interest of $14,740. As a result, the Company recognized a gain on settlement of debt of $5,682. As of September 30, 2022 and December 31, 2021, the secured promissory notes have been repaid in full.
During the years ended December 31, 2017, the Company issued secured promissory notes in the aggregate principal amount of $60,000. The secured promissory notes were 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 made a principal repayment of $10,000. During the year ended December 31, 2021, the Company and secured promissory note holder agreed to repay all outstanding principal and interest through the issuance of common shares valued at $ per share. As of December 31, 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, 2022 and December 31, 2021 the secured promissory notes have been repaid in full.
The amounts repayable under promissory notes and secured promissory notes at September 30, 2022 and December 31, 2021 are as follows:
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Convertible Promissory Notes |
9 Months Ended |
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Sep. 30, 2022 | |
Debt Disclosure [Abstract] | |
Convertible Promissory Notes | 6. 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 common shares, and (ii) the Company issued to Leonite a -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.
The note carries an original issue discount of $44,425 to cover Leonite’s legal fees, accounting fees, due diligence fees and 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 December 31, 2021, the Company has recorded $509,037, consisting of $467,500 for principal and $41,537 as an original issue discount. Furthermore, the Company issued 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 common shares at $ 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 year ended December 31, 2021, Leonite converted its remaining outstanding principal and interest into common shares. Leonite received 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, 2022 and December 31, 2021, the convertible promissory note has been repaid in full.
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Shareholders’ Equity (Deficit) |
9 Months Ended |
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Sep. 30, 2022 | |
Equity [Abstract] | |
Shareholders’ Equity (Deficit) | 7. Shareholders’ Equity (Deficit)
During Nine months ended September 30, 2022, the following transactions occurred:
During the nine months ended September 30, 2022, the Company issued 86,000, of which $ was issued from share subscriptions payable. During the same period the Company issued common shares for consulting, advisory services and employee compensation valued at $240,000. common shares to a consultant for services received valued at $
During the nine months ended September 30, 2022 the Company issued 260,100 from share subscriptions payable. restricted stock to members of the board valued at $
During the nine months ended September 30, 2022, the Company recognized consulting expense of $186,107 to share subscriptions payable from restricted shares and stock options to be issued. As of September 30, 2022, the restricted shares have not been issued.
Refer to note 17 and 18 for additional shareholders’ equity (deficit).
During nine months ended September 30, 2021, the following transactions occurred:
During the nine months ended September 30, 2021, the Company issued a total of 1,500. The Company incurred share issuance cost of $123,984. common shares in connection with a Regulation A offering. Of the shares issued, common shares valued at $ were from share subscription payable and common shares were cancelled and refunded valued at $
During the nine months ended September 30, 2021 the Company had a underwriters’ public offering for 490,909 warrants and/or an additional common shares for 45 days after the closing of the option. During the nine months ended September 30, 2021 the underwriter purchased common shares at $ per share and 490,909 warrants. A cumulative common shares were issued in connection with offering for $19,162,798 incurring share issuance costs of $ . units consisting of 1 common share and 1 warrant at $ per unit. In addition, the Company has granted the underwriter of the offering the option to purchase
During the same period 20,000 were issued. warrants were exercised for common shares. As of September 30, 2021 common shares were issued valued at $ . Subsequent to September 30, 2021 the remaining common shares valued at $
During the nine months ended September 30, 2021 the Company raised $4,081,980 through private placement offerings of units for 1 common share and 2 warrants at $ per unit. As such the Company issued 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 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 common shares. common shares at $ per share for all outstanding loan principal and interest valued at $
During the nine months ended September 30, 2021 the Company entered into a promissory notes payable settlement agreement with a note holder to issue 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. As of September 30, 2021 the Company issued common shares. common shares valued at $ per share for a total value of $
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 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. common shares at $ per share valued at $
During the nine months ended September 30, 2021 the Company issued 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 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 1,648,700 for consulting services. As of September 30, 2021 the Company issued common shares to the third party consultants for services received. The remaining 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 $ in share subscriptions payable. shares of common stock valued at $
During the nine months ended September 30, 2021 the Company issued 390,000 for consulting services. During the same period the Company issued common shares for employee compensation valued at $24,121. common shares valued at $ for consulting services, $ were issued from share subscriptions payable. During the same period the Company issued common shares valued at $
During the nine months ended September 30, 2021 the Company granted 177,333 and $3,812,667 to prepaid expense. restricted shares of the Company to consultants for services to be rendered over a period of 12 and 24 months. Upon issuance of the restricted shares vested immediately and issued. As of September 30, 2021 the Company recognized consulting and advertising expense of $
During the nine months ended September 30, 2021 the Company granted 35,569. restricted shares of the Company to directors of the Company. Upon issuance of the restricted shares vested immediately, shall vest on January 1, 2022. As of September 30, 2021 the Company recognized consulting expense of $
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 86,688. common shares valued at $
Refer to note 17 for additional shareholders’ equity (deficit) for consulting expense of $37,000 related to warrant issuance.
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, an anti-dilution clause was triggered resulting in the Company issuing 86,688. common shares valued at $
As of September 30, 2022, the Company was authorized to issue Series A Preferred Stock do not have any voting rights. Each share of Series B Preferred Stock has voting rights equal to 10,000 shares of common stock. shares of its common stock with a par value of $ . All shares were ranked equally with regard to the Company’s residual assets. During 2022 and 2021, the Company was authorized to issue shares of its Series A and Series B Preferred Stock with a par value of $ .
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Related Party Transactions |
9 Months Ended |
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Sep. 30, 2022 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | 8. Related Party Transactions
During the nine months ended September 30, 2022, the Company recorded salaries expense of $231,432 (2021 - $157,899) related to services rendered by the Company by its CEO. During the same period, the Company recorded salaries expense of $192,589 to an officer and director of the Company. As of September 30, 2022 the Company has a payable of $49,646 to the CEO.
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 in which the Company’s CEO and Chairman of the Board is a stockholder.
Refer to note 18 for additional related party transactions.
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Changes in Cash Flows from Operating Assets and Liabilities |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Cash Flows from Operating Assets and Liabilities | 9. Changes in Cash Flows from Operating Assets and Liabilities
The changes to the Company’s operating assets and liabilities for the nine months ended September 30, 2022 and 2021 are as follows:
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Commitments and contingencies |
9 Months Ended |
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Sep. 30, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and contingencies | 10. Commitments and contingencies
During the year ended December 31, 2021, the Company entered into an agreement with a third-party advisor to reserve for sale and issuance common shares for consulting services at $ per share.
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Reverse Stock Split |
9 Months Ended |
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Sep. 30, 2022 | |
Reverse Stock Split | |
Reverse Stock Split | 11. Reverse Stock Split
On May 21, 2021, the Board of Directors authorized the submission of a Certificate of Change/Amendment to the Nevada Secretary of State to effect 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. The Certificate of Change was submitted to the Nevada Secretary of State on May 21, 2021, and FINRA announced the reverse stock split on August 3, 2021. The reverse stock split took effect in the marketplace on August 4, 2021. These consolidated financial statements, including prior period comparative share amounts, have been retrospectively restated to reflect this reverse split.
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Investment |
9 Months Ended |
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Sep. 30, 2022 | |
Investments, All Other Investments [Abstract] | |
Investment | 12. Investment
During the year ended December 31, 2019, the Company entered into an agreement to purchase 50,000. The shares have been issued to the Company. The Company’s investment accounts for a 10% equity stake in a privately owned US-based mobile phone development company. As of September 30, 2022, the Company had advanced a total of $24,423 and is advancing tranches of capital as required by the Company. shares for $
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Lease Liabilities |
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Lease Liabilities | 13. Lease Liabilities
During the nine months ended September 30, 2022, the Company entered into a lease agreement for warehouse space to commence on June 1, 2022 and ending on May 31, 2027 with monthly lease payments of $20,808.
During the year ended December 31, 2021, the Company entered into a lease agreement for warehouse space to commence on September 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 ended 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 30, 2022 and the year ended December 31, 2021 as follows:
The components of lease expense are as follows:
Maturities of lease liability are as follows:
Future minimum lease payments as of September 30, 2022,
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Loan payable |
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Loan payable | 14. Loan payable
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Government Assistance |
9 Months Ended |
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Sep. 30, 2022 | |
Government Assistance [Abstract] | |
Government Assistance | 15. Government Assistance
During the COVID-19 pandemic the Government of Canada was 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 nine months ended September 30, 2022, the Company recognized CEWS of $0 (2021 - $51,606 ($63,905 CDN)) and CERS of $0 (2021 - $4,971 ($6,000 CDN)) as a reduction in general and administrative expense on the consolidated statements of operations.
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Loss per Share |
9 Months Ended |
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Sep. 30, 2022 | |
Earnings Per Share [Abstract] | |
Loss per Share |
For the three and nine months ended September 30, 2022, loss per share is $( ) and $( ) (basic and diluted) compared to the three and nine months ended September 30, 2021 loss per share of $( ) and $( ) (basic and diluted). These losses per share are calculated using the weighted average number of shares of and (basic and diluted) for the three and nine months ended September 30, 2022 and of and (basic and diluted) for the three and nine months ended September 30, 2021.
There are 5,239,914 common shares, restricted stock to be issued and stock options exercisable for common shares and performance stock units of for common shares for a total underlying common shares of 7,757,414. As of September 30, 2021 the Company has 5,896,680 warrants and stock options convertible to common shares for a total underlying common shares of . shares authorized, and shares issued and outstanding, as of September 30, 2022 and 2021 respectively. As of September 30, 2022, the Company has 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 of September 30, 2022 the Company has warrants convertible to
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Warrants |
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Warrants | 17. Warrants
During the nine months ended September 30, 2022, an aggregate of 250,121 warrants were exercised for 103,771 common shares and Reg-A public offering warrants expired. During the year ended December 31, 2021, the Company issued representative warrants to the Company’s underwriters. The representative warrants are exercisable for common shares at $6.05 per share until August 3, 2024. As of September 30, 2022, the Company recognized a value of $273,993 for the representative warrants to share issuance cost.
During the year ended December 31, 2021, the Company issued 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 nine months ended September 30, 2022 the Company and a warrant holder reached an agreement to extend the exercisable period of warrants for an additional 12 months. During the same period, the Company issued warrants convertible to 1 common share at an exercise price of $ 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 were purchased by the underwriter. The warrants were issued in connection with the underwritten public offering. and
During the year ended December 31, 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 $2.00 per share.
During the year ended December 31, 2021, an aggregate of warrants expired.
As of September 30, 2022, the Company has the following warrants outstanding:
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Stock Options and Performance Share Units |
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Share-Based Payment Arrangement [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Options and Performance Share Units |
Under the Company’s 2015 Equity Incentive Plan, .
All equity-settled share-based payments are ultimately recognized as an expense in the statement of operations with a corresponding credit to “Additional Paid in Capital.” If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognized in the current period. No adjustment is made to any expense recognized in prior periods if share options ultimately exercised are different to that estimated on vesting.
Performance Share Units
On December 29, 2021, the Company granted and performance stock units (“PSU”) to the Company’s Chief Executive Officer and a director, respectively. . The fair value of the PSU was estimated to be $ . As of September 30, 2022, no PSUs have been vested and the Company recognized $ (2021 - $ ) in consulting expense.
Stock Options
On July 23, 2021, the Company granted 799 (2021 - $55,149) in consulting expense during the nine months ended September 30, 2022. options to a director with an exercise price of $ and an expiry date of . . The Company recognized $
On August 6, 2021, the Company granted 5,096 (2021 - $280,270) in consulting expense during the nine months ended September 30, 2022. options to directors, advisors and officers with an exercise price of $ and an expiry date of . . The Company recognized $
On September 1, 2021, the Company granted 790,541 (2021 - $84,597) in consulting expense during the nine months ended September 30, 2022. options to a consultant with an exercise price of $ and an expiry date of . ; vested on March 1, 2022, shall vest on September 1, 2022, shall vest on March 1, 2023, and shall vest on September 1, 2023. The fair value of the options on the grant date was estimated to be $ . The Company recognized $
On October 7 and November 2, 2021, the Company granted 32,856 (2021 - $0) to consulting expense during the nine months ended September 30, 2022. and options respectively, to advisors with an exercise price of $ and $ . The options will expire on and respectively. The stock options vested on January 1, 2022. The fair value of the options on grant date was estimated to be $ . The Company recognized $
On December 29, 2021, the Company granted an aggregate of 56,326 (2021 - $0) in consulting expense during the nine months ended September 30, 2022. options to members of the board with an exercise price of $ . The options will expire on . ; shall vest on December 29, 2022, shall vest on December 29, 2023, and shall vest on December 29, 2024. The fair value of the options on grant date was estimated to be $ . The Company recognized $
During the nine months ended September 30, 2022, the Company granted 283,180 in consulting expense during the nine months ended September 30, 2022. and options to advisors with an exercise price of $ and $ respectively. The options will expire on and . The options vested immediately upon issuance. The fair value of the options on the grant date was estimated to be $ and $ . The Company recognized $
During the nine months ended September 30, 2022, Terravis Energy Inc., a subsidiary of the Company, granted an aggregate of to its officers and directors. The stock options have an exercise price of $ and will expire on . The options vested immediately upon issuance. The fair value of the options on grant date was estimated to be immaterial.
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Rental Income |
9 Months Ended |
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Sep. 30, 2022 | |
Rental Income | |
Rental Income | 19. Rental Income
During the nine months ended September 30, 2022, the Company entered into a sublease agreement for its warehouse in Mississauga, Ontario, Canada. The sublease commenced on September 15, 2022 and end on May 31, 2024 at $15,515 ($19,992 CDN) per month.
During the nine months ended September 30, 2022 the Company entered into a lease agreement in relation to its West Seneca property. Initially, the Company entered into a lease agreement with a third-party from July 1 to December 31, 2022 at $33,750 per month. During the period ended September 30, 2022, the Company and the third-party amended the maturity date to September 30, 2022.
During the nine months ended September 30, 2022 the Company recognized rental income of $204,770.
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COVID-19 |
9 Months Ended |
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Sep. 30, 2022 | |
Covid-19 | |
COVID-19 | 20. COVID-19
The outbreak of the 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 are unknown at this time, as is the efficacy of the government and central bank interventions.
Additionally, while the potential economic impact and duration of such impact brought by the COVID-19 pandemic are 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. The Company does not yet know the full extent of potential delays or impacts on its business, financing or the global economy as a whole. However, these effects could have a material impact on the Company’s liquidity, capital resources, operations and business and those of the third parties on which the Company relies. The management and board of the Company are constantly monitoring this situation to minimize potential losses.
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Subsequent Events |
9 Months Ended |
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Sep. 30, 2022 | |
Subsequent Events [Abstract] | |
Subsequent Events | 21. Subsequent Events
On November 4, 2022, Terravis Energy, Inc. filed an amendment to its articles of incorporation with the Colorado Secretary of State, pursuant to which the Terravis board of directors attached a certificate of designation designating 51% of the total votes on all matters regardless of the actual number of shares of Series A Preferred Stock then outstanding, and the holders of the common stock and any other shares of capital stock of Terravis entitled shall be entitled to their proportional share of the remaining 49% of the total votes based on their respective voting power. On November 4, 2022, the Company issued shares of Series A Preferred Stock to Steven Rossi, the President of Terravis and the Chief Executive Officer and President of the Company. shares of its authorized preferred stock as Series A Preferred Stock with a par value $ per share. According to the certificate of designation, holders of the Series A Preferred Stock does not have any dividend, conversion or liquidation rights. Unless otherwise prohibited by law or the Series A Preferred Stock certificate of designation, the Series A Preferred Stock shall vote together with the outstanding shares of common stock of Terravis as one class on any matter put forth before the common stockholders. For so long the Series A Preferred Stock is outstanding, the holders of the Series A Preferred Stock shall be entitled to
On November 11, 2022, performance stock units (“PSU”) as disclosed in Note 18 granted December 29, 2021 were cancelled and replaced. In replacement to the cancelled PSU the Company issued and .
Additionally, on November 11, 2022, the Company’s Compensation Committee of the Board of Directors granted up to restricted shares to the Company’s Chief Executive Officer. The vesting of these restricted shares are based on individual significant Company milestones. |
Inventory (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
Inventory Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Inventory | Inventory consists of the following at September 30, 2022 and December 31, 2021:
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Prepaid expenses and deposits (Tables) |
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
Prepaid Expenses And Deposits | ||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Prepaid Expenses and Deposits | As of September 30, 2022 and December 31, 2021 prepaid expenses and deposits consists of the following:
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Promissory Notes (Tables) |
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Sep. 30, 2022 | |||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||
Schedule of Notes Payable | The following tables shows the balance of the notes payable as of September 30, 2022 and December 31, 2021:
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Schedule of Secured Notes Payable | The amounts repayable under promissory notes and secured promissory notes at September 30, 2022 and December 31, 2021 are as follows:
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Changes in Cash Flows from Operating Assets and Liabilities (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Changes in Operating Assets and Liabilities | The changes to the Company’s operating assets and liabilities for the nine months ended September 30, 2022 and 2021 are as follows:
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Lease Liabilities (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Lease Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Right-of-use Asset | The Company’s right-of-use asset for the nine months ended September 30, 2022 and the year ended December 31, 2021 as follows:
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Schedule of Components of Lease Expense | The components of lease expense are as follows:
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Schedule of Future Minimum Lease Payments | Future minimum lease payments as of September 30, 2022,
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Warrants (Tables) |
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Warrants | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Warrants Exercise Price | As of September 30, 2022, the Company has the following warrants outstanding:
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Schedule of Warrants Activity |
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Stock Options and Performance Share Units (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock Options Activity |
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Schedule of Share-based Payment Arrangement, Option, Exercise Price Range |
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Terravis Energy Inc [Member] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Stock Options Activity |
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Schedule of Share-based Payment Arrangement, Option, Exercise Price Range |
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Schedule of Inventory (Details) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
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Inventory Disclosure [Abstract] | ||
Finished goods | $ 1,018,130 | $ 427,794 |
Promotional items | 46,060 | 728 |
Raw materials | 222,596 | 73,250 |
Inventory | $ 1,286,786 | $ 501,772 |
Schedule of Prepaid Expenses and Deposits (Details) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
Sep. 30, 2021 |
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Prepaid Expenses And Deposits | |||
Consulting, services and advertising | $ 1,933,547 | $ 4,328,389 | $ 3,812,667 |
Insurance | 33,251 | 3,041 | |
Deposit | 1,221,537 | 384,065 | |
Prepaid expenses and deposits, net | $ 3,188,335 | $ 4,715,495 |
Prepaid expenses and deposits (Details Narrative) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
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Prepaid Expenses And Deposits | ||
Prepaid expenses and deposits | $ 1,933,547 | $ 4,328,389 |
Schedule of Notes Payable (Details) |
12 Months Ended |
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Dec. 31, 2021
USD ($)
| |
Debt Disclosure [Abstract] | |
Balance | $ 367,058 |
Repayment | (103,847) |
Balance | $ 263,211 |
Schedule of Secured Notes Payable (Details) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
Dec. 31, 2020 |
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Debt Disclosure [Abstract] | |||
Balance owing | $ 263,211 | $ 263,211 | |
Less amounts due within one year | (263,211) | (263,211) | $ (367,058) |
Long-term portion |
Schedule of Changes in Operating Assets and Liabilities (Details) - USD ($) |
9 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Decrease (increase) in accounts receivable | $ (390) | $ (32,479) |
Decrease (increase) in other receivable | (94,150) | 69,603 |
Decrease (increase) in inventory | (785,014) | (156,822) |
Decrease (increase) in prepaid expenses and deposits | (1,063,680) | (223,582) |
Increase (decrease) in lease liability | 8,737 | (14,295) |
Increase (decrease) in taxes payable | (112,189) | 2,970 |
Increase (decrease) in accounts payable and accrued liabilities | 647,996 | 221,979 |
Changes in operating assets and liabilities | $ (1,398,690) | $ (132,626) |
Commitments and contingencies (Details Narrative) - $ / shares |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2021 |
Dec. 31, 2021 |
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Defined Benefit Plan Disclosure [Line Items] | ||
Issuance of shares for services, shares | 370,000 | 15,000 |
Shares issued price per share | $ 5.50 | |
Third Party [Member] | ||
Defined Benefit Plan Disclosure [Line Items] | ||
Shares issued price per share | $ 0.001 |
Reverse Stock Split (Details Narrative) - FINRA [Member] |
May 21, 2021 |
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Stockholders equity, reverse stock split | the 1-for-20 reverse stock split effective on August 4,2021. |
Board of Directors Chairman [Member] | |
Stockholders equity, reverse stock split | 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. The Certificate of Change was submitted to the Nevada Secretary of State on May 21, 2021, and FINRA announced the reverse stock split on August 3, 2021. |
Investment (Details Narrative) - USD ($) |
12 Months Ended | |
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Dec. 31, 2019 |
Sep. 30, 2022 |
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Purchase shares | 10,000,000 | |
Purchase value | $ 50,000 | |
Advance receivable for stock issuance | $ 24,423 | |
Mobile Phone Development Company [Member] | ||
Ownership percentage | 10.00% |
Schedule Right-of-use Asset (Details) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
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Lease Liabilities | ||
Right-of-use asset | $ 1,318,855 | $ 515,819 |
Current lease liability | 375,933 | 212,929 |
Long-term lease liability | $ 985,426 | $ 316,988 |
Schedule of Components of Lease Expense (Details) - USD ($) |
9 Months Ended | |
---|---|---|
Sep. 30, 2022 |
Sep. 30, 2021 |
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Lease Liabilities | ||
Amortization of right-of-use | $ 240,128 | $ 86,817 |
Interest on lease liability | 66,252 | 21,633 |
Total lease cost | $ 306,380 | $ 108,450 |
Schedule of Future Minimum Lease Payments (Details) - USD ($) |
Sep. 30, 2022 |
Dec. 31, 2021 |
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Lease Liabilities | ||
2022 | $ 122,155 | |
2023 | 493,025 | |
2024 | 361,297 | |
2025 | 269,645 | |
2026 | 277,767 | |
2027 and after | 117,158 | |
Total future minimum lease payments | 1,641,047 | |
Less: amount representing interest | (279,688) | |
Present value of future payments | 1,361,359 | |
Current portion | 375,933 | $ 212,929 |
Long term portion | $ 985,426 | $ 316,988 |
Lease Liabilities (Details Narrative) - Lease Agreement [Member] - USD ($) |
9 Months Ended | 12 Months Ended | |
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Sep. 30, 2022 |
Dec. 31, 2021 |
Dec. 31, 2019 |
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Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
Lease expiration date | May 31, 2027 | May 31, 2024 | Jul. 31, 2022 |
Monthly lease payments | $ 20,808 | $ 19,910 | $ 2,221 |
Incremental borrowing rate | 10.00% |
Government Assistance (Details Narrative) |
9 Months Ended | ||
---|---|---|---|
Sep. 30, 2022
USD ($)
|
Sep. 30, 2022
CAD ($)
|
Sep. 30, 2021
USD ($)
|
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Canada Emergency Wage Subsidy [Member] | |||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
Subsidy received | $ 0 | $ 63,905 | $ 51,606 |
Canada Emergency Rent Subsidy [Member] | |||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||
Subsidy received | $ 0 | $ 6,000 | $ 4,971 |
Schedule of Warrants Activity (Details) - $ / shares |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
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Warrants | ||
Number of warrants, balance, beginning of year | 5,658,315 | 716,815 |
Weighted average price, balance, beginning of year | $ 4.40 | $ 4.00 |
Number of warrants, issuance | 130,909 | 7,457,036 |
Weighted average price, issuance | $ 6.05 | $ 4.30 |
Number of warrants, expired | (1,099,179) | (26,815) |
Weighted average price, expired | $ (4.00) | $ (4.00) |
Number of warrants, exercise | (250,121) | (2,494,209) |
Weighted average price, exercise | $ (2.00) | $ (4.00) |
Number of warrants, balance, end of period | 4,439,924 | 5,658,315 |
Weighted average price, balance, ending of year | $ 5.63 | $ 4.40 |
Schedule of Stock Options Activity (Details) - $ / shares |
9 Months Ended | 12 Months Ended |
---|---|---|
Sep. 30, 2022 |
Dec. 31, 2021 |
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Number of options, balance, beginning of period | 712,500 | |
Weighted average price, balance, beginning of period | $ 5.00 | |
Number of options, granted | 60,000 | 712,500 |
Weighted average price, granted | $ 4.73 | $ 5.00 |
Number of options, balance, end of period | 772,500 | 712,500 |
Weighted average price, balance, end of period | $ 4.98 | $ 5.00 |
Terravis Energy Inc [Member] | ||
Number of options, balance, beginning of period | ||
Weighted average price, balance, beginning of period | ||
Number of options, granted | 1,350,000 | |
Weighted average price, granted | $ 0.01 | |
Number of options, balance, end of period | 1,350,000 | |
Weighted average price, balance, end of period | $ 0.01 |
Rental Income (Details Narrative) |
3 Months Ended | 9 Months Ended | 12 Months Ended | ||||
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Sep. 30, 2022
USD ($)
|
Sep. 30, 2021
USD ($)
|
Sep. 30, 2022
USD ($)
|
Sep. 30, 2022
CAD ($)
|
Sep. 30, 2021
USD ($)
|
Dec. 31, 2021
USD ($)
|
Dec. 31, 2019
USD ($)
|
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Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||
Rental income | $ 108,552 | $ 204,770 | |||||
Sublease Agreement [Member] | |||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||
Expiration date | May 31, 2024 | May 31, 2024 | |||||
Lease payments | $ 15,515 | $ 19,992 | |||||
Lease Agreement [Member] | |||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||
Expiration date | May 31, 2027 | May 31, 2027 | May 31, 2024 | Jul. 31, 2022 | |||
Lease payments | $ 20,808 | $ 19,910 | $ 2,221 | ||||
Lease Agreement [Member] | Third Party [Member] | |||||||
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items] | |||||||
Expiration date | Dec. 31, 2022 | Dec. 31, 2022 | |||||
Lease payments | $ 33,750 |
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