UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarterly Period Ended: September 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File No. 001-40681

Worksport Ltd.

(Exact Name of Small Business Issuer as specified in its charter)

Nevada		35-2696895
(State or Other Jurisdiction of		(I.R.S. Employer
Incorporation or Organization)		Identification Number)

7299 E Danbro Cres.

Mississauga, Ontario, Canada L5N 6P8

(Address of Principal Executive Offices, Including Zip Code)

Registrant’s Telephone Number, including area code: (888) 554-8789

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:
Common Stock	WKSP	NASDAQ CAPITAL MARKET
Warrants	WKSPW	NASDAQ CAPITAL MARKET

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. Yes: ☒ No: ☐

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. Yes ☒ No ☐

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	☐
Non-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 ☐ No ☒

As of November 15, 2021 16,871,486 shares of Common Stock outstanding.

WORKSPORT LTD.

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets at September 30, 2021 and December 31, 2020 (Unaudited)	3
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020 (Unaudited)	4
Condensed Consolidated Statements of Cash Flow for the nine months ended September 30, 2021 and 2020 (Unaudited)	5
Condensed Consolidated Statements of Shareholders’ Deficit for the three and nine months ended September 30, 2021 and 2020 (Unaudited)	6-7
Notes to the Condensed Consolidated Financial Statements (Unaudited)	8-17

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	18-21

Item 3. Quantitative and Qualitative Disclosures About Market Risk	21

Item 4. Controls and Procedures	22

PART II OTHER INFORMATION

Item 1. Legal Proceedings	22

Item 1A. Risk Factors	22

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	22

Item 3. Defaults Upon Senior Securities	22

Item 4. Mine Safety Disclosures	22

Item 5. Other Information	22

Item 6. Exhibits	22

SIGNATURES	23

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Worksport Ltd.

Condensed Consolidated Balance Sheets

(Unaudited)

	September 30, 2021			December 31, 2020
Assets
Current Assets
Cash, restricted cash and cash equivalents	$	29,002,627		$	1,107,812
Restricted cash		1,917,850			-
Accounts receivable net		155,266			122,787
Other receivable		103,742			167,836
Inventory (note 3)		56,205			40,803
Prepaid inventory (note 3)		141,420			-
Prepaid expenses and deposits		5,360,043			245,526
Related party receivable (note 7)		25,468			-
Total Current Assets		36,762,621			1,684,764
Investment		24,423			24,423
Property and Equipment, net		800,970			91,511
Right-of-use asset, net (note 10)		573,862			38,506
Intangible Assets, net		442,458			62,948
Total Assets	$	38,604,334		$	1,902,152

Liabilities and Shareholders’ Deficit
Current Liabilities
Accounts payable and accrued liabilities	$	1,171,010		$	971,667
Payroll taxes payable		51,186			48,216
Related party loan (note 7)		-			23,393
Promissory notes payable (note 4)		263,211			367,058
Convertible promissory note, net (note 5)		-			98,982
Loan payable (note 11)		28,387			184,854
Current lease liability (note 10)		214,249			23,883
Total Current Liabilities		1,728,043			1,718,053
Long Term – Lease Liability (note 10)		368,431			14,624
Total Liabilities		2,096,474			1,732,677

Shareholders’ Equity (Deficit)
Series A & B Preferred Stock, $0.0001 par value, 100,100 shares authorized, 100 Series A and 0 Series B issued and outstanding, respectively (note 6)		-			1
Common stock, $0.0001 par value, 299,000,000 shares authorized, 16,829,037 and 3,820,618 shares issued and outstanding, respectively (note 6)		1,683			382
Additional paid-in capital		53,279,583			12,665,854
Share subscriptions receivable		(1,577	)		(1,577	)
Share subscriptions payable		288,930			379,428
Accumulated deficit		(17,052,179	)		(12,866,033	)
Cumulative translation adjustment		(8,580	)		(8,580	)
Total Shareholders’ Equity (Deficit)		36,507,860			169,475
Total Liabilities and Shareholders’ Equity (Deficit)	$	38,604,334		$	1,902,152

The accompanying notes form an integral part of these condensed consolidated financial statements.

Worksport Ltd.

Condensed Consolidated Statements of Operations

For the three and nine months ended September 30, 2021 and 2020

(Unaudited)


	Three Months ended September 30						Nine Months ended September 30
	2021			2020			2021			2020

Net Sales	$	93,408		$	116,491		$	287,297		$	223,620
Cost of Goods Sold		81,810			94,134			279,364			180,028
Gross Profit (Loss)		11,598			22,357			7,933			43,592

Operating Expenses
General and administrative		517,735			50,836			924,041			97,566
Sales and marketing		433,905			59,122			761,712			69,869
Professional fees		1,111,098			280,413			2,168,697			509,347
(Gain) loss on foreign exchange		(11,175	)		2,599			(2,170	)		(4,845	)
Total operating expenses		2,051,563			392,970			3,852,280			671,937
Loss from operations		(2,039,965	)		(370,613	)		(3,844,347	)		(628,345	)

Other Income (Expense)
Interest expense (note 5)		(26,114	)		(190,103	)		(275,114	)		(276,822	)
Interest income		1,798			-			1,798			-
Gain (loss) on settlement of debt		-			(44,274	)		18,204			(44,274	)
Total other income (expense)		(24,316	)		(234,377	)		(255,112	)		(321,096	)

Net Loss	$	(2,064,281	)	$	(604,990	)	$	(4,099,459	)	$	(949,441	)

Loss per Share (basic and diluted)	$	(0.15	)	$	(0.21	)	$	(0.42	)	$	(0.38	)
Weighted Average Number of Shares (basic and diluted)		13,983,567			2,857,443			9,688,668			2,527,364

The accompanying notes form an integral part of these condensed consolidated financial statements

Worksport Ltd.

Condensed Consolidated Statements of Cash Flows

For the nine Months Ended September 30, 2021 and 2020

(Unaudited)

	2021			2020
Operating Activities
Net Loss	$	(4,099,459	)	$	(949,441	)
Adjustments to reconcile net loss to net cash from operating activities:
Shares, options and warrants issued for services		1,838,661			328,644
Depreciation and amortization		114,035			19,972
Interest on lease liability		21,633			3,983
Accrued interest		32,654			44,095
Amortization of debt discount		-			198,060
Amortization on OID interest		211,340			17,597
Loss (Gain) on settlement of debt		(18,204	)		44,274
		(1,899,340	)		(292,816	)
Changes in operating assets and liabilities (note 8)		(132,626	)		(89,536	)
Net cash used in operating activities		(2,031,966	)		(382,352	)

Cash Flows from Investing Activities
Loan receivable		(5,506	)		-
Purchase of investment		-			(8,765	)
Purchase of intangible assets		(23,700	)		-
Purchase of property and equipment		(734,883	)		(7,962	)
Net cash used in investing activities		(764,089	)		(16,727	)

Financing Activities
Repayment of lease liability		(85,339	)		(25,352	)
Proceeds from issuance of common shares, net of issuance cost		24,398,070			250,000
Proceeds from warrant exercise		8,407,755			-
Proceeds from loan payable		-			178,836
Repayment of loan payable		(62,905	)		(16,150	)
Proceeds from promissory notes		-			467,500
Shareholder assumption of debt		(48,861	)		(615	)
Net cash provided by financing activities		32,608,720			854,219
Change in cash		29,812,665			455,140
Cash, restricted cash and cash equivalents - beginning of year		1,107,812			11,993
Cash, restricted cash and cash equivalents end of period	$	30,920,477		$	467,133
Supplemental disclosure of cash flow information:
Interest paid	$	9,737		$	11,100
Supplemental Disclosure of non-cash investing and financing Activities
Shares issued for purchase of software	$	357,603		$	-
Shares issued to service providers	$	791,029		$	-
Cashless warrant exercise	$	238,895		$	-
Non-cash for prepaids	$	5,953,950		$	-
Shares issued from share subscriptions payable	$	86,688		$	1,626,415
Shares issued for loan repayment	$	176,500		$	-
Conversion of convertible promissory note to common stock	$	368,318		$	-
Convertible promissory note – equity discount	$	-		$	467,500
Convertible promissory note – original issue discount	$	-		$	41,537
Conversion of preferred stock to common stock	$	171		$	226,587
Reverse stock split	$	21,182		$	-

The accompanying notes form an integral part of these condensed consolidated financial statements.

Worksport Ltd.

Condensed Consolidated Statements of Shareholders’ Deficit

For the Three Months Ended September 30, 2021 and 2020

(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, 2020		1,000	$	1		2,636,496	$	264	$	10,001,399	$	(1,577	)	$	1,248,735		$	(12,022,864	)	$	(8,580	)	$	(782,622	)
Issuance for prepaid services		-		-		120,651		12		168,898		-			-			-			-			168,910
Issuance for prepaid services and subscriptions payable		-		-		179,801		18		590,737		-			(590,755	)		-			-			-
Conversion of convertible promissory note to shares		-		-		126,022		12		226,826		-			-			-			-			226,839
Warrants issuance in connection to convertible promissory note		-		-		-		-		285,000		-			-			-			-			285,000
Warrant issuance for services		-		-		-		-		12,600		-			-			-			-			12,600
Issuance of subscriptions payable		-		-		-		-		-		-			250,000			-			-			250,000
Stock split provision
Stock split provision, shares
Issuance for services and subscriptions payable
Issuance for services and subscriptions payable
Public offering
Public offering
Share issuance cost
Warrant exercise (note 14)
Warrant exercise (note 14), shares
Issuance for services								12		168,898														168,910
Issuance for services, shares								120,651
Warrants issuance in connection to convertible promissory note (note 5)										285,000														285,000
Share issuance in connection to convertible promissory note (note 5)
Share issuance in connection to convertible promissory note (note 5), shares
Conversion of convertible promissory note to shares (note 5)								12		226,826														226,839
Conversion of convertible promissory note to shares (note 5), shares								126,022
Issuance for settlement of payables
Issuance for settlement of payables, shares
Issuance of Preferred Stock
Issuance of Preferred Stock, shares
Conversion of preferred stock to common stock
Conversion of preferred stock to common stock, shares
Issuance for services and subscriptions payable
Issuance for services and subscriptions payable, shares
Issuance of shares from private placement
Issuance of shares from private placement, shares
Warrants issuance for services										12,600														12,600
Loan repayment (note 4 and 11)
Loan repayment (note 4 and 11), shares
Net loss		-		-		-		-		-		-			-			(604,990	)		-			(604,990	)
Balance at September 30, 2020		1,000	$	1		3,062,970		306		11,285,460	$	(1,577	)	$	907,980

SEC Form 10-Q filed by Worksport Ltd.