Worksport .(WKSP) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements Worksport Ltd. reported a $3.52 million net loss for Q1 2023, with total assets at $30.10 million and an accumulated deficit of $36.91 million Condensed Consolidated Balance Sheets Key balance sheet figures show a decrease in cash and total assets, alongside an increase in accumulated deficit Condensed Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $10,489,214 | $14,620,757 | | Total Current Assets | $14,705,146 | $18,332,107 | | Total Assets | $30,096,232 | $32,764,130 | | Liabilities & Equity | | | | Total Current Liabilities | $2,432,819 | $2,461,730 | | Total Liabilities | $8,513,131 | $8,645,876 | | Accumulated deficit | $(36,907,489) | $(33,384,219) | | Total Shareholders' Equity | $21,583,101 | $24,118,254 | Condensed Consolidated Statements of Operations and Comprehensive Loss The company reported a net loss of $3.52 million for Q1 2023, driven by increased operating expenses despite minimal net sales Statement of Operations Summary (Unaudited) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net Sales | $31,925 | $47,784 | | Gross Profit | $12,168 | $9,807 | | Total operating expenses | $3,542,116 | $2,807,587 | | Loss from operations | $(3,529,948) | $(2,797,780) | | Net Loss | $(3,523,270) | $(2,817,609) | | Loss per Share (basic and diluted) | $(0.21) | $(0.17) | Condensed Consolidated Statements of Shareholders' Equity Shareholders' equity decreased significantly due to the net loss incurred during the quarter - Total shareholders' equity decreased from $31.90 million as of March 31, 2022, to $21.58 million as of March 31, 2023, primarily driven by the $3.52 million net loss during the quarter[10] Condensed Consolidated Statements of Cash Flow Cash and cash equivalents significantly decreased due to substantial cash used in operating and investing activities Cash Flow Summary (Unaudited) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,934,410) | $(2,130,184) | | Net cash used in investing activities | $(1,153,229) | $(614,046) | | Net cash used in financing activities | $(43,904) | $(1,863) | | Change in cash | $(4,131,543) | $(2,758,395) | | Cash at end of period | $10,489,214 | $25,808,938 | Notes to the Condensed Consolidated Financial Statements Notes detail accounting policies, going concern uncertainty, equity compensation changes, and subsequent events impacting the company's financial position - The company's ability to continue as a going concern is in doubt due to a history of net losses and an accumulated deficit of $36.9 million as of March 31, 2023[28][29][31] - During Q1 2023, the company issued 810,106 new stock options and cancelled 400,000 options, exchanging them for an extension on 300,000 warrants[62][82][85] - Subsequent to quarter end, the company sold 4,434 common shares for $7,624, cancelled 1.6 million restricted stock units and 400,000 performance stock units, and issued 2 million new stock options to the CEO[91][92] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the 33% revenue decrease, increased operating expenses, and a widened net loss, attributing changes to strategic shifts and asset acquisitions Results of Operations Revenue declined by 33% year-over-year due to a strategic shift towards new sales channels, while operating expenses increased significantly Revenue Comparison (Q1 2023 vs Q1 2022) | Metric | Q1 2023 | Q1 2022 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $31,925 | $47,784 | -33% | | U.S. Revenue | $26,403 | $47,784 | -45% | | Canadian Revenue | $5,522 | $0 | N/A | - The 33% decrease in revenue is attributed to the company's strategic focus on establishing new sales channels in preparation for domestic manufacturing expected in Q2 2023[97] - Operating expenses increased by $0.73 million year-over-year, primarily due to a $1.53 million rise in general and administrative expenses from expanded R&D and salaries[102][106] - Net loss for Q1 2023 was $3.52 million, a 25% increase from the $2.82 million loss in Q1 2022, driven by higher operating expenses[104] Liquidity and Capital Resources The company relies on securities offerings for liquidity, with management expecting current cash to cover working capital for at least one year - As of March 31, 2023, the company held $10.49 million in cash and cash equivalents with an accumulated deficit of $36.91 million[105] - Historically reliant on securities offerings, management is now transitioning towards revenue as the principal source of liquidity[105][106] - Management believes current cash and anticipated cash flow will be sufficient for working capital requirements for at least one year[106] Cash Flow Activities Cash decreased significantly due to substantial outflows from operating and investing activities, primarily for asset acquisitions - Cash decreased by $4.13 million (28%) during Q1 2023, primarily due to acquiring assets for domestic production and increased inventory spending[107] Cash Flow Activity Summary (Q1 2023 vs Q1 2022) | Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Cash Used in Operating | $(2,934,410) | $(2,130,184) | | Net Cash Used in Investing | $(1,153,229) | $(614,046) | | Net Cash Used in Financing | $(43,904) | $(1,863) | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section is not applicable for the reporting period - The company has indicated that Quantitative and Qualitative Disclosures about Market Risk are not applicable[118] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were not effective, though financial statements are believed to be fairly presented - An evaluation concluded that the company's disclosure controls and procedures were not effective as of the end of the quarter[119] - No material changes were made to internal control over financial reporting during the quarter[121] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company reported no legal proceedings during the period - There are no legal proceedings to report[123] Item 1A. Risk Factors This section is not applicable for the reporting period - The company has indicated that this item is not applicable[124] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities - There were no unregistered sales of equity securities or use of proceeds to report[125] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - There were no defaults upon senior securities[126] Item 4. Mine Safety Disclosures This section is not applicable to the company - This item is not applicable[127] Item 5. Other Information This section discloses subsequent events, including a small common stock sale and a significant restructuring of the CEO's equity compensation - On April 21, 2023, the Company sold 4,434 common shares at $1.72 per share for proceeds of $7,624 under its At The Market Offering Agreement[129] - On May 1, 2023, the Company and CEO Steven Rossi agreed to cancel 1,600,000 restricted stock units and 400,000 performance stock units previously issued to him[129] - On May 1, 2023, the Company issued 2,000,000 new stock options to CEO Steven Rossi with an exercise price of $1.74, expiring in 2033, with vesting tied to stock price increases[129] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications (Sections 302 and 906) and Inline XBRL data files - The exhibits filed with this report include Section 302 and 906 certifications by the CEO and CFO, as well as various Inline XBRL documents[130]