Worksport Ltd
For the period ended Dec 31, 2024. Filed Mar 27, 2025.
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A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Mar 27, 2025
WKSP$0.27+2.0%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-03-28.
0001493152-24-011808
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-03-27.
0001641172-25-000850
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 93 previous paragraphs and 78 current paragraphs.
31 unchanged; 25 reworded; 22 added; 35 removed; 2 previous and 0 current paragraphs rearranged.
Tables are not compared: 5 previous and 3 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (22)
Current report
Economic Conditions and Market Trends
Current report
Our discussion and analysis of consolidated results of operations and financial condition are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates assumptions and judgments that affect the amounts reported. These estimates, assumptions and judgments are affected by our application of accounting principles, which are discussed in Note 1 – Description of Business and Summary of Significant Accounting Policies of Part II, Item 8, Financial Statements and Supplementary Data, of this report. We believe the accounting policies discussed below are the most critical in understanding and evaluating our financial results. These critical accounting policies have been reviewed with the Audit Committee of our Board of Directors.
Current report
**Inventory Valuation –**At December 31, 2024, we had inventories of $5,190,054, or 50% of our current assets. Inventories are stated at the lower of cost or net realizable value with cost determined on a weighted average basis. We record valuation reserves to provide for slow-moving or obsolete inventory by principally using a formula-based method that increases the valuation reserve as the inventory ages. We also take specific circumstances into consideration. We consider overall inventory levels in relation to forecasted demand. Changes in these and other factors, such as low demand or technological obsolescence, could cause us to establish or increase our inventory reserves, which would negatively impact our gross margin.
Current report
Reviews of Impairment of Long-Lived Assets – Long-lived assets held for use, which primarily includes finite-lived intangible assets, property, plant and equipment, and right-of-use assets, are evaluated for impairment whenever events or circumstances indicate that the undiscounted cash flows to be generated by their use over their expected useful lives and eventual disposition are less than carrying value. The long-term nature of these assets requires the estimation of their cash inflows and outflows several years into the future and only takes into consideration technological advances known at the time of the impairment test.
Current report
**Income Taxes –**Our annual tax rate is based on our operating results before taxes by jurisdiction, applicable statutory tax rates, the impacts of permanent differences, tax incentives, and tax planning opportunities in the jurisdictions in which we operate. Significant judgment is required in determining our annual tax rate and evaluating our tax positions. We record reserves against tax benefits when it is more likely than not that we will not sustain a position if the appropriate taxing jurisdiction had full information and examined our position. We adjust these reserves when facts and circumstances change, and there is a considerable amount of judgment in making these assessments. For further information, refer to Note 8, Income Taxes of Part III Item 8, Financial Statements and Supplementary Data, of this report.
Current report
Split
Current report
On March 18, 2025, we effected a 1:10 stock split of our authorized shares of common stock and simultaneously reduced the number of authorized shares of common stock from 299,000,000 to 29,900,000.
Current report
Consolidated Results of Operations
Current report
The following is a discussion of our results of operations in 2024 compared to 2023.
Current report
Net sales
Current report
We distribute our hard tonneau covers and soft tonneau covers in the U.S. and Canada through an expanding network of wholesalers, private labels, distributors, and other online retailers, including eBay, Amazon, Walmart, and our own e-Commerce platform hosted on Shopify. Distribution via each aforementioned channel is expected to increase during 2025. We have pursued and will continue to pursue relationships with Original Equipment Manufacturers with the intention of distributing through them as well.
Current report
We currently work closely with a large Canadian and a large U.S. distributor as well as online retailers to grow our customer base. We are progressing well in conversations with three other major distributors with strong market presences, which will allow us to promote to dealers and sell to jobbers in strategic regions. Lastly, we are in closing discussions with a network of nationwide U.S. dealers capable of bringing our product to all U.S. continental states.
Current report
Cost of sales increased by 488%, from $1,289,118 for the year ended December 31, 2023 to $7,578,729 for the year ended December 31, 2024. Our cost of sales, as a percentage of net sales, was approximately 89% and 84% for the years ended December 31, 2024 and 2023, respectively. The increase in the cost of sales as a percentage of sales was primarily due to two factors: (1) strategic discounting aimed at boosting traffic to our direct-to-consumer online marketplace, and (2) overhead allocation associated with sold inventory produced in periods with limited production volume. Our discounting strategy is part of a broader initiative to enhance market presence and build brand awareness. We anticipate this will well position us for sustained customer engagement in future periods, during which discounting may not be necessary to the same extent. Additionally, overhead absorption was initially higher due to the allocation of fixed costs over a smaller production volume earlier in 2024. As production volume grows and our manufacturing process becomes more efficient, we expect to allocate those same fixed costs against a larger production volume base. This scaling will be facilitated by reallocating more of our existing human capital and machinery resources from design engineering and testing functions toward production. This shift is intended to support ongoing production increases and drive long-term efficiencies in our cost structure.
Current report
September 2024 Private Offering
Current report
On September 19, 2024, we entered into a Securities Purchase Agreement with an investor pursuant to which we issued and sold 95,000 shares of our common stock at a purchase price of $4.00 per share. As part of the agreement, we also issued warrants to purchase up to 190,000 shares of common stock at an exercise price of $4.00 per share, exercisable for a period of five years from the date of issuance. The warrants contain standard adjustment provisions for stock splits, recapitalizations and reorganizations and include beneficial ownership limitations to prevent the purchaser from exceeding certain ownership thresholds. We obtained $380,000 in net proceeds from this offering.
Current report
Consolidated Statement of Cash Flows
Current report
Cash increased from $3,365,778 at December 31, 2023 to $4,883,099 at December 31, 2024 – an increase of $1,517,321 or 45%. The increase was primarily due to financing activities conducted during the period to support growth of ongoing operations.
Current report
Accounts receivable decreased at December 31, 2024 by $387,561 and increased by $400,521 in the prior year. The decrease in accounts receivable was due to volume shifts from private label sales in 2023 to direct to consumer sales in 2024. The shift from private label sales to direct to consumer decreases the cash conversion timeline.
Current report
Contractual Obligations and Commercial Commitments
Current report
We do not have any material off balance sheet arrangements that have or are reasonably likely to have a material future effect on our financial condition, results of operations or cash flows.
Current report
Recent Accounting Pronouncements
Current report
See Note 1, Description of Business and Summary of Significant Accounting Policies, included in Part II Item 8, Financial Statements and Supplementary Data, of this report for further information regarding Financial Accounting Standards Board issued Accounting Standards Updates (“ASU”).
Removed paragraphs (35)
Previous report
Business Developments
Previous report
The following highlights recent material developments in our business:
Previous report
Key Factors Affecting our Performance
Previous report
COVID-19
Previous report
The outbreak of the coronavirus, specifically identified as “COVID-19,” resulted in governments worldwide enacting emergency measures to combat the spread of the virus. These measures, which included 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 experienced significant volatility and weakness. Governments and central banks have reacted with significant monetary and fiscal interventions designed to stabilize economic conditions – many of which have deeply impacted capital markets.
Previous report
As a safety precaution, we created a policy such that any personnel exposed to an infectious disease or virus was not to report to the office until the completion of a variable length quarantine. While this resulted in fewer personnel working in our offices or labs on a given day, it likely prevented further contamination and sick leave. We do not believe this policy has impacted revenue nor timelines towards upcoming product launches; however, supply chain issues caused by COVID-19 did result in higher cost of goods sold during 2021 and 2022. While freight costs have since returned to pre-COVID-19 levels, 2021 freight costs were, in some cases, more than four times higher than those shortly before COVID-19.
Previous report
The supply chain for certain raw materials has been disproportionately, negatively impacted when compared to supply chains of other raw materials. The supply chain for power electronics, specifically, is still facing supply chain issues as a result of COVID-19, for the globe faced a simultaneous supply shock and heightened demand for these goods – increasing the prices for such raw materials while simultaneously slowing suppliers’ order fulfillments. Further, due to such shortages, many suppliers of power electronics have focused their attention on large customers such as those more directly aligned within the electric vehicle supply chain as compared to companies on the outskirts of this supply chain such as Worksport. This particular result of COVID-19 primarily affects the sourcing of components for the Worksport COR. In order to mitigate these supply chain issues, we have invested more resources into sourcing power electronics in the interest of finding reliable suppliers with manageable lead times and competitive pricing.
Previous report
The response of many governments to the COVID-19 pandemic has resulted in higher interest rates and destabilized equity markets – particularly among micro- or low-capitalization companies – effectively increasing the cost of and decreasing easy access to capital, which could negatively impact our short-term and long-term liquidity. These factors, combined with the consequences of possible future waves of the disease, could have a material impact on our liquidity, capital resources, operations, and business as well as those of the third parties on which we rely. The management and Board are constantly monitoring this situation to minimize potential losses.
Previous report
Such an inflationary environment also increases our direct cost of raw goods or processed goods for our OEM manufacturing as well as indirect costs such as overhead and rent. Due to these present and forecasted price increases and the temporary increases in ocean freight and container handling costs faced during the majority of 2022 as a result of 2021 supply chain issues, we updated our product pricing in 2022.
Previous report
Geopolitical Conditions
Previous report
In February 2022, Russia initiated significant military action against Ukraine. In response, the U.S. and certain other countries imposed significant sanctions and export controls against Russia, Belarus and certain individuals and entities connected to Russian or Belarusian political, business, and financial organizations, and the U.S. and certain other countries could impose further sanctions, trade restrictions, and other retaliatory actions should the conflict continue or worsen. It is not possible to predict the broader consequences of these conflicts, including related geopolitical tensions, and the measures and retaliatory actions taken by the U.S. and other countries in respect thereof as well as whether any counter measures or retaliatory actions in response, including, for example, potential cyberattacks or the disruption of energy exports, are likely to cause regional instability and geopolitical shifts, which could materially adversely affect global trade, currency exchange rates, regional economies and the global economy. These situations remain uncertain, and while it is difficult to predict the impact of any of the foregoing, the conflicts and actions taken in response to these conflicts could increase our costs, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition, and results of operations.
Previous report
In addition, while we do not have any direct operations or significant sales in the Middle East nor Africa, geopolitical tensions and ongoing conflicts in these regions, particularly in Gaza, northern Israel and southern Lebanon, the Red Sea, Sudan, and Ethiopia, may lead to further global economic instability and fluctuating energy prices that could materially affect our business. It is not possible to predict the broader consequences of these conflicts, including related geopolitical tensions, and the measures and actions taken by other countries in respect thereof, which could materially and adversely affect global trade, currency exchange rates, regional economies and the global economy. While it is difficult to predict the impact of any of the foregoing, these conflicts may increase our costs, disrupt our supply chain, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition and results of operations.
Previous report
Results of Operations
Previous report
Revenue
Previous report
Currently, we work closely with two distributors in Canada, and we are close to setting up a distribution network within the USA. This does not include multiple independent online retailers. We currently support a network of dealers and distributors, and we will continue to expand our business and online sales channels in 2024.
Previous report
Cost of sales increased by 2,163%, from $56,967 for the year ended December 31, 2022 to $1,289,118 for the year ended December 31, 2023. Our cost of sales, as a percentage of sales, was approximately 84% and 49% for the years ended December 31, 2023 and 2022, respectively. The increase in the cost of sales as a percentage of sales was primarily due to increased sales to private labels at a lower agreed upon sales price compared to online retail sales. We consistently secure a 20% gross margin on soft covers sold to private labels, as these soft covers are drop shipped from our Chinese suppliers at a fixed cost. However, our margins on domestically manufactured hard covers is dependent on the cost of raw materials, which fluctuates, as well as overhead, which is expected to decrease in future quarters as we realize manufacturing efficiencies and allocate more existing human capital and machinery resources away from design engineering and testing towards production. Our overhead per domestic unit was particularly high during the year ended December 31, 2023 due to this allocation of resources.
Previous report
Net Loss
Previous report
Net loss for the year ended December 31, 2023 was $14,928,958 compared to a net loss of $12,534,414 for the year ended December 31, 2022 – an increase of 19%. The increase in the net loss can be attributed to the increase in various operating expenses as we focus on expanding our operations, research and development, manufacturing, and supply chain.
Previous report
Public Underwritten Offering
Previous report
On November 2, 2023, the Company closed a sale of 1,925,000 shares of common stock and 1,575,000 pre-funded warrants for a total net proceeds of $4,261,542. In association with the sale, the Company also issued 7,000,000 warrants convertible for 7,000,000 shares of common stock at an exercise price of $1.34. The warrants are exercisable six months after issuance and will expire five and a half years from the issuance date.
Previous report
September 2022 At-The-Market Sales Agreement
Previous report
On November 2, 2023, we raised roughly $4.7 million from a registered direct offering and concurrent private placement before deducting the placement agent’s fees and other estimated offering expenses payable by the Company. The registered direct offering entailed the sale of 3,500,000 shares of common stock (or pre-funded warrants to purchase shares of common stock in lieu thereof) to a single institutional investor. The concurrent private placement entailed the issuance and sale of warrants to purchase up to 7,000,000 shares of common stock to the same institutional investor. The combined effective offering price for each share of common stock (or pre-funded warrant in lieu thereof) and accompanying warrant was $1.34. The warrants will become exercisable six months from issuance, expire five and a half years from the issuance date and have an exercise price of $1.34 per share. The shares of common stock (or pre-funded warrants in lieu thereof) were offered by the Company pursuant to the Company’s Form S-3 Registration Statement. The warrants issued in the concurrent private placement and the shares issuable upon exercise of such warrants were offered in a private placement under Section 4(a)(2) and/or Rule 506 of Regulation D. The 7,000,000 shares of common stock underlying the warrants were registered for resale by the institutional investor on a registration statement on Form S-1 (File No. 333-276241) filed with the SEC on December 22, 2023 and declared effective by the SEC on December 29, 2023. If at time, there is no effective registration statement available for the shares of common stock underlying the warrants, the warrants may be exercised via a “cashless exercise.” We will not receive any proceeds from any warrants exercised by a “cashless exercise.”
Previous report
Cash Flow Activities
Previous report
Cash decreased from $14,620,757 at December 31, 2022 to $3,365,778 at December 31, 2023 – a decrease of $11,254,979 or 77%. The decrease was primarily due to the acquiring of assets for domestic production, such as industrial manufacturing equipment, as well as increasing spending on production personnel, and for raw materials in anticipation of domestic production, research and development, and overhead.
Previous report
As of December 31, 2023, we had current assets of $9,123,506 (2022 - $18,332,107) and current liabilities of 7,166,612 (2022 – $2,461,730). As of December 31, 2023, we had working capital of $1,956,894 (2022 – $15,870,377) and an accumulated deficit of $48,313,177 (2022 - $33,384,219).
Previous report
Accounts receivable increased at December 31, 2023 by $400,525 and decreased by $83 in the prior year. The increase in accounts receivable was due to higher sales to private labels near the end of the year in 2023 compared to that of 2022.
Previous report
Material Cash Requirements from Known Contractual and Other Obligations
Previous report
None.
Previous report
Our discussion and analysis of results of operations and financial condition are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses as well as 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.
Previous report
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.
Previous report
Cash and Cash Equivalents - Cash and cash equivalents includes cash on account and demand deposits with maturities of three months or less. Cash and cash equivalents in financial institutions may exceed insured limits at various times during the year and subject the Company to concentrations of credit risk. Cash and cash equivalents include restricted cash at December 31, 2023 and 2022 totaling $730,802 and $411,016, respectively.
Previous report
**Receivables -**Trade accounts receivable are stated at the amount the Company expects to collect. Receivables are reviewed individually for collectability. If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments, allowances may be required.
Previous report
The Company offers credit terms on the sale of the Company’s products to a significant majority of the Company’s customers and requires no collateral from these customers. The Company performs ongoing credit evaluations of customers’ financial condition and, if needed, maintains an allowance for doubtful accounts receivable based upon the Company’s historical experience, forecasted economic conditions, and a specific review of accounts receivable at the end of each period. At December 31, 2023 and 2022, the Company had no allowance for doubtful accounts.
Previous report
**Inventory -**Inventory is stated at the lower of cost or net realizable value, with cost being determined on a weighted average basis. Cost includes purchase price of materials, freight, and related costs required to bring the goods to Company warehouses.
Previous report
**Property and Equipment -**Capital assets are recorded at cost and are depreciated using the straight-line method over the following estimated useful lives:
Reworded paragraphs (25)
Previous wording
Electric Vehicles (EVs) have been exponentially increasing in consumer interest, whether that interest takes the form of vehicle pre-orders, sales, or investments. As we begin marketing our Worksport SOLIS and COR, we plan to market the SOLIS as a must-have accessory for electric light duty vehicle owners while simultaneously riding the coattails of EV popularity to promote our other products (COR and conventional tonneau covers) to the very large population of Americans that have an interest in EVs without the funds to purchase them. Further, participating in the EV space allows us to target consumers with an interest in cutting-edge technologies – a great market in which to promote our COR.
Current wording
Electric Vehicles (EVs) have been increasing in consumer interest, whether that interest takes the form of vehicle pre-orders, sales, or investments. As we begin marketing our Worksport SOLIS and COR, we plan to market the SOLIS as a must-have accessory for electric light duty vehicle owners while simultaneously riding the coattails of EV popularity to promote our other products (COR and conventional tonneau covers) to the very large population of Americans that have an interest in EVs without the funds to purchase them. Further, participating in the EV space allows us to target consumers with an interest in cutting-edge technologies – a great market in which to promote our COR portable power system.
Previous wording
The Build Back Better Bill was a strong indication of upcoming and favorable USA regulations. Many regulations that improve North America’s EV charging infrastructure or provide grants to businesses operating in the EV space will benefit us. While we are primarily focused on the light duty vehicle market, our energy products are particularly useful for electric light duty pickup trucks and, therefore, are positioned to benefit greatly from any bill that increases the prevalence of such vehicles.
Current wording
The Build Back Better Bill was a strong indication of upcoming and favorable U.S. regulations. Many regulations that improve North America’s EV charging infrastructure or provide grants to businesses operating in the EV space would benefit us. While we are primarily focused on the light duty vehicle market, our energy products are particularly useful for electric light duty pickup trucks and, therefore, are positioned to benefit greatly from any bill that increases the prevalence of such vehicles. However, President Donald Trump has signed an executive order titled Unleashing American Energy in which he has indicated his administration will be reversing the electric vehicle mandates of Joe Biden’s former administration, and he has further paused billions of dollars in funding allocated towards electric vehicle charging stations. The future of the U.S.’s regulatory environment surrounding electric vehicles is uncertain.
Previous wording
Climate change threatens to cause many foreseeable as well as unforeseeable ramifications. In cautious preparation for those that are foreseeable, we have strategically begun domestic manufacturing operations in Western New York – an economically growing region not immediately threatened by climate change to the same extent as other regions and possibly one that may benefit from future population migrations within the United States of America. Further, we intend to lower our own carbon footprint by investing in energy-saving measures in our factory in West Seneca, NY. Considering climate change may also exacerbate geopolitical tensions, we are working to diversify our supply chain and lower our reliance on any particular region or country for raw materials in order to lower our exposure to climate change-induced economic or political instability.
Current wording
Climate change threatens to cause many foreseeable as well as unforeseeable ramifications. In cautious preparation for those that are foreseeable, we have strategically begun domestic manufacturing operations in Western New York – an economically growing region not immediately threatened by climate change to the same extent as other regions and possibly one that may benefit from future population migrations within the U.S. Further, we intend to lower our own carbon footprint by investing in energy-saving measures in our factory in West Seneca, NY. Considering climate change may also exacerbate geopolitical tensions, we are working to diversify our supply chain and lower our reliance on any particular region or country for raw materials in order to lower our exposure to climate change-induced economic or political instability.
Previous wording
Additionally, as central banks and the U.S. Federal Reserve increase interest rates to combat global inflation, the cost of debt financing increases. While we currently do not have material debt other than our $5.3 million mortgage on our West Seneca facility, our mortgage’s variable rate increases and decreases along with interest rates, which resulted in an increase of monthly premiums throughout 2022 and 2023. We are still susceptible to variable monthly mortgage interest costs as a result of changes in interest rates. We continue to explore debt financing options at reasonable interest rates in order to strengthen our cash position.
Current wording
Additionally, as central banks and the U.S. Federal Reserve increase interest rates to combat global inflation, the cost of debt financing increases. The U.S. Federal Reserve has begun to decrease interest rates in 2024, but they may persist at an elevated level for the foreseeable future. Our $6,000,000 mortgage on our West Seneca property and our $1,487,000 in equipment financing both have floating interest rates, meaning we are susceptible to variable monthly mortgage and debt interest costs as a result of changes in interest rates.
Previous wording
Rising interest rates have also resulted in a shift in institutional holdings away from micro-cap equities, which has negatively influenced our stock’s trading volume. We continue to forge relationships with institutional investors and analysts in order to maintain a healthy trading volume.
Current wording
High interest rates have also resulted in a shift in institutional holdings away from micro-cap equities, which has negatively influenced our stock’s trading volume. We continue to forge relationships with institutional investors and analysts in order to maintain a healthy trading volume.
Previous wording
We faced significantly higher ocean freight, trucking, and container handling costs as well as last mile delivery costs in 2021 and 2022 than we did in previous years – all of which have increased our products’ landed costs. Higher oil and gasoline prices further increased these costs, and while such prices have come down from their 2022 highs, we continue to closely monitor gasoline and shipping costs. While the Freight Rate Index has significantly increased since late 2023 as a result of Houthi attacks against cargo ships in the Red Sea and the concurrent decline in activity across the Panama Canal, the shipping routes used by Worksport have not faced dramatic price hikes. Regardless, Worksport is closely monitoring international shipping costs.
Current wording
We faced significantly higher ocean freight, trucking, and container handling costs as well as last mile delivery costs in 2021 and 2022 than we did in previous years – all of which have increased our products’ landed costs. Higher oil and gasoline prices further increased these costs, and while such prices have come down from their 2022 highs, we continue to closely monitor gasoline and shipping costs. While the Freight Rate Index has significantly increased from late 2023 through mid-2024 as a result of Houthi attacks against cargo ships in the Red Sea and the concurrent decline in activity across the Panama Canal, the shipping routes used by Worksport have not faced dramatic price hikes. Regardless, Worksport is closely monitoring international shipping costs.
Previous wording
We are subject to foreign exchange risk as we manufacture certain products and components in China, market extensively in both Canadian and U.S. markets, employ people residing in both the U.S. and Canada and, to date, have raised funds in Canadian Dollars. Meanwhile, we report results of operations in U.S. Dollars. Since our Canadian customers pay in Canadian Dollars, we are subject to gains and losses due to fluctuations in the USD relative to the Canadian Dollar. Our manufacturers in China are paid in USD to better avoid the relatively greater fluctuation of the Chinese Yuan. To the extent the U.S. dollar strengthens against any of these foreign currencies, the translation of these foreign currencies denominated transactions results in reduced revenue, operating expenses and net income for our operations.
Current wording
We are subject to foreign exchange risk as we manufacture certain products and components in China, market extensively in both Canadian and U.S. markets, employ people residing in both the U.S. and Canada and, to date, have raised funds in Canadian Dollars. Meanwhile, we report results of operations in USD. Since our Canadian customers pay in Canadian Dollars, we are subject to gains and losses due to fluctuations in the USD relative to the Canadian Dollar. Our manufacturers in China are paid in USD to better avoid the relatively greater fluctuation of the Chinese Yuan. To the extent the USD strengthens against any of these foreign currencies, the translation of these foreign currencies denominated transactions results in reduced revenue, operating expenses and net income for our operations.
Previous wording
**Revenue Recognition –**In accordance with Accounting Standards Codification (ASC) 606 Revenue from Contracts with Customers, sales are recognized when (1) products are shipped, with no right of return except for defective products, and the title and risk of loss has passed to customers; and (2) when they are delivered based on the terms of the sale, and there is an identifiable contract with a customer with defined performance obligations, the transaction price is determinable, and the entity has fulfilled its performance obligation. Revenue related to shipping and handling costs billed to customers is included in net sales, and the related shipping and handling costs are included in cost of goods sold.
Current wording
**Revenue Recognition –**In accordance with Accounting Standards Codification (ASC) 606 Revenue from Contracts with Customers, sales are recognized when (1) products are shipped, with no right of return except for defective products, and the title and risk of loss has passed to customers; and (2) when they are delivered based on the terms of the sale, and there is an identifiable contract with a customer with defined performance obligations, the transaction price is determinable, and the entity has fulfilled its performance obligation. Revenue related to shipping and handling costs billed to customers is included in net sales, and the related shipping and handling costs are included in cost of sales.
Previous wording
For the year ended December 31, 2023, revenues from the entire line of our products were $1,529,632, as compared to $116,502 for the year ended December 31, 2022. Year-over-year sales increased by approximately 1,213%. For the year ended December 31, 2023, revenue generated in Canada was $6,811, as compared to $14,572 for the same period in 2022, a decrease of 53%. For the year ended December 31, 2023, revenue generated in the United States was $1,522,821, compared to $101,930 for the same period in 2022, an increase of 1,394%.
Current wording
For the year ended December 31, 2024, net sales were $8,484,379, as compared to $1,529,632 for the year ended December 31, 2023. Year-over-year sales increased by approximately 455%. For the year ended December 31, 2024, net sales generated in the U.S. was $8,397,570, compared to $1,522,821 for the same period in 2023, an increase of 451%. For the year ended December 31, 2024, net sales generated in Canada was $67,519, compared to $6,811 for the same period in 2023, an increase of 891%. For the year ended December 31, 2024, net sales generated outside the U.S. and Canada was $19,290.
Previous wording
Revenue increased the year ended December 31, 2023 compared to the same period the prior year due to increased sales of soft tonneau covers to a private label partner during the year ended December 31, 2023. Worksport continues to focus on establishing new business-to-consumer and business-to-business sales channels while strengthening the support of those channels to increase customer satisfaction and enable high product turnover. For business-to-consumer channels, we have configured our product offerings in a manner conducive with cost-effective marketing, allowing us to securely invest in marketing during 2024. For business-to-business channels, we have created all necessary marketing/sales materials and policies, and we are now actively presenting our product offerings to various dealers, jobbers, and retailers across the USA and Canada. We intend to gradually increase output capacity through refined production processes and increased personnel.
Current wording
Net sales increased the year ended December 31, 2024 compared to the same period the prior year due to increased sales of tonneau covers to a private label partner, various dealers and distributors, and end users via the Company’s online marketplace. The Company continues to focus on establishing new and strengthening existing business-to-consumer and business-to-business channels while also strengthening customer support to increase customer satisfaction and enable high product turnover. Worksport has successfully bolstered its business-to-consumer sales channels in 2024, and it is now focusing on increasing cost efficiencies in these sales channels as well as establishing new business-to-business sales channels. For business-to-consumer channels, we are focused on lowering our customer acquisition cost throughout 2025. For business-to-business channels, we have assembled a strong team of both internal and external sales representatives, and we are actively presenting our product offerings to various dealers, wholesalers, and retailers across the U.S. and Canada. We intend to continue gradually increasing output capacity through refined production processes and increased personnel.
Previous wording
Sales from online retailers of our products increased from $101,930 in 2022 to $104,352 in 2023, an increase of 2%. Online retailers accounted for 7% of total revenue for the year ended December 31, 2023 compared to 87% for the year ended December 31, 2022. Distributor sales decreased for the year ended December 31, 2023 compared with the year ended December 31, 2022 with sales of $6,811 and $14,572, respectively. Private label sales accounted for 93% or $1,418,869 of total revenue for the year ended December 31, 2023. We expect to continue to grow our fields of business as we develop unique products with enhanced utility to offer to other prospective clients in the U.S. and Canadian markets.
Current wording
Net sales from online retailers of our products increased from $104,352 in 2023 to $4,930,822 in 2024, an increase of 4,625%. Online retailers accounted for 58% of total net sales for the year ended December 31, 2024 compared to 7% for the year ended December 31, 2023. Distributor sales increased 6,120% for the year ended December 31, 2024 compared with the year ended December 31, 2023 with net sales of $423,627 and $6,811, respectively. Private label sales accounted for 37% or $3,129,930 of net sales for the year ended December 31, 2024. We expect to continue to grow our fields of business as we develop unique products with enhanced utility to offer to other prospective clients in the U.S. and Canadian markets.
Previous wording
We provide our distributors and online retailers an “all-in” wholesale price. This includes any import duty charges, taxes, and shipping charges. Discounts are applied if the distributor or retailer chooses to use their own shipping process. Certain exceptions apply on rare occasions where product is shipped outside the contiguous United Sates or from the United States to Canada. Volume discounts are offered to certain high-volume customers, and we also offer a “dock price” or “pickup program” in which clients are able to pick up inventory directly from our stocking warehouse.
Current wording
We provide our distributors and online retailers an “all-in” wholesale price. This includes any import duty charges, taxes, and shipping charges. Discounts are applied if the distributor or retailer chooses to use their own shipping process. Certain exceptions apply on rare occasions where product is shipped outside the contiguous U.S. or from the U.S. to Canada. Volume discounts are offered to certain high-volume customers, and we also offer a “dock price” or “pickup program” in which clients are able to pick up inventory directly from our stocking warehouse.
Previous wording
Operating expenses increased for the year ended December 31, 2023 by $2,143,925, from $12,833,250 for the fiscal year ended December 31, 2022 to $14,977,175 for the fiscal year ended December 31, 2023, due to the following factors.
Current wording
Operating expenses increased for the year ended December 31, 2024 by $1,394,309, from $14,977,175 for the fiscal year ended December 31, 2023 to $16,371,484 for the fiscal year ended December 31, 2024, due to the following factors.
Previous wording
We reported other expenses for the year ended December 31, 2023 of $192,297 compared to other income of $239,301 the prior year. The increase in other expenses can be attributed to higher interest expense in the current period compared to the prior period, offset by interest income and rental income.
Current wording
We reported net other expenses for the year ended December 31, 2024 of $697,955 compared to net other expenses of $192,297 the prior year. The increase in other expenses can be attributed to decreased interest and rental income.
Previous wording
As of December 31, 2023, we had $3,365,778 in cash, restricted cash, and cash equivalents. We have generated only limited revenues and have relied primarily upon capital generated from public and private offerings of our securities. Since the Company’s acquisition of Worksport in fiscal year 2014, it has never generated a profit. During the year ended December 31, 2023, we had net losses of $14,928,958 (2022 - $12,534,414). As of December 31, 2023, the Company had working capital of $1,956,894 (2022 – $15,870,377) and had an accumulated deficit of $48,313,177(2022 - $33,384,219).
Current wording
As of December 31, 2024, we had $4,883,099 in cash and cash equivalents and $892,000 of remaining available capacity on our revolving line of credit. We have historically generated only limited gross profit and have relied primarily upon capital generated from public and private offerings of our securities to fund continuing operations. Since the Company’s acquisition of Worksport in 2014, it has never generated a profit. During the year ended December 31, 2024, we had net losses of $16,163,789 (2023 - $14,928,958). As of December 31, 2024, the Company had working capital of $7,304,110 (2023 – $1,956,894) and had an accumulated deficit of $64,476,966(2023- $48,313,177).
Previous wording
To date, our principal sources of liquidity consist of net proceeds from public and private securities offerings and cash exercises of outstanding warrants. During the year ended December 31, 2023, the Company received net proceeds of $4,475,869 from offerings. Management is focused on transitioning towards revenue as our principal source of liquidity by growing our existing product offerings and customer base. We cannot give assurance that we can increase our cash balances or limit our cash consumption and thus maintain sufficient cash balances for our planned operations or future business developments. Future business development and demands may lead to cash utilization at levels greater than recently experienced. We may need to raise additional capital in the future. However, we cannot ensure that we will be able to raise additional capital on acceptable terms, or at all. Subject to the foregoing, we believe our current cash balances coupled with anticipated cash flow from operating activities will be sufficient to meet our working capital requirements for at least one year from the date of issuance of the accompanying consolidated financial statements.
Current wording
To date, our principal sources of liquidity consist of net proceeds from public and private securities offerings and cash exercises of outstanding warrants. During the year ended December 31, 2024, the Company received net proceeds of $12,482,549 from offerings. Management is focused on transitioning towards gross profit as our principal source of liquidity by growing our existing product offerings and customer base and realizing manufacturing efficiency improvements. We cannot give assurance that we can increase our cash balances or limit our cash consumption and thus maintain sufficient cash balances for our planned operations or future business developments. Future business development and demands may lead to cash utilization at levels greater than recently experienced. We may need to raise additional capital in the future. However, we cannot ensure that we will be able to raise additional capital on acceptable terms, or at all. Subject to the foregoing, we believe our current cash balances coupled with anticipated cash flow from operating activities will be sufficient to meet our working capital requirements for at least one year from the date of issuance of the accompanying consolidated financial statements.
Previous wording
We have conducted the following public and private offerings since the beginning of the 2023 fiscal year:
Current wording
We have raised significant funds during the 2024 fiscal year by utilizing the following public and private offerings:
Previous wording
On September 30, 2022, we filed a shelf registration statement on Form S-3 (File No. 333-267696), which was declared effective by the SEC on October 13, 2022, containing a base prospectus covering the offering, issuance and sale by us of up to $30,000,000 of our common stock and prospectus supplement covering the offering, issuance and sale by us of up to $13,000,000 of our common stock that may be issued and sold under an At The Market Offering Agreement dated as of September 30, 2022. Pursuant to the ATM Agreement, H.C. Wainwright & Co., LLC is entitled to a commission equal to 3.0% of the gross sales price of the shares of common stock sold. As of December 31, 2023, the Company has issued 99,127 shares for net proceeds of $214,238.
Current wording
On September 30, 2022, we filed a shelf registration statement on Form S-3 (File No. 333-267696), which was declared effective by the SEC on October 13, 2022, containing a base prospectus covering the offering, issuance and sale by us of up to $30,000,000 of our common stock and prospectus supplement covering the offering, issuance and sale by us of up to $13,000,000 of our common stock that may be issued and sold under an At The Market Offering Agreement dated as of September 30, 2022. Pursuant to the ATM Agreement, H.C. Wainwright & Co., LLC is entitled to a commission equal to 3.0% of the gross sales price of the shares of common stock sold. We sold $6,032,789 of shares of common stock pursuant to the ATM Agreement during the fiscal year ended December 31, 2024.
Previous wording
On March 18, 2024, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) with a certain institutional investor (the “Purchaser”) pursuant to which we sold, in a registered direct offering, an aggregate of (i) 2,372,240 shares (the “Shares”) of common stock and (ii) 1,477,892 pre-funded warrants (the “Pre-funded Warrants”) to purchase up to 1,477,892 shares of Common Stock (the “Pre-funded Warrant Shares”). The offering price per Share was $0.74 and the offering price per Pre-funded Warrant was $0.7399. The Shares, Pre-funded Warrants and Pre-funded Warrants Shares were offered pursuant to our Form S-3 Registration as supplemented by a prospectus supplement and accompanying base prospectus dated March 18, 2024, filed with the SEC on March 19, 2024 pursuant to Rule 424(b)(5) promulgated under the Securities Act. The registered direct offering closed on March 20, 2024.
Current wording
On March 18, 2024, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) with a certain institutional investor (the “Purchaser”) pursuant to which we sold, in a registered direct offering, an aggregate of (i) 237,224 shares (the “Shares”) of common stock and (ii) 147,789 pre-funded warrants (the “Pre-funded Warrants”) to purchase up to 147,789 shares of Common Stock (the “Pre-funded Warrant Shares”). The offering price per Share was $7.40 and the offering price per Pre-funded Warrant was $7.399. The Shares, Pre-funded Warrants and Pre-funded Warrants Shares were offered pursuant to our Form S-3 Registration as supplemented by a prospectus supplement and accompanying base prospectus dated March 18, 2024, filed with the SEC on March 19, 2024 pursuant to Rule 424(b)(5) promulgated under the Securities Act. The registered direct offering closed on March 20, 2024.
Previous wording
In a concurrent private placement, we issued the Purchaser warrants to purchase an aggregate of 7,700,264 shares of common stock for $0.74 per share. Under the warrants, we are obligated to register the shares underlying the warrants on a registration statement on Form S-3 (or other applicable form). If at the time of exercise of the Warrant there is no effective registration statement available for the shares of common stock underlying the warrants, the warrants may be exercised via a “cashless exercise.” We will not receive any proceeds from any warrants exercised by a “cashless exercise.”
Current wording
In a concurrent private placement, we issued the Purchaser warrants to purchase an aggregate of 770,264 shares of common stock for $7.40 per share. Under the warrants, we are obligated to register the shares underlying the warrants on a registration statement on Form S-3 (or other applicable form). If at the time of exercise of the Warrant there is no effective registration statement available for the shares of common stock underlying the warrants, the warrants may be exercised via a “cashless exercise.” We will not receive any proceeds from any warrants exercised by a “cashless exercise.”
Previous wording
Net cash used by operating activities for the year ended December 31, 2023 was $11,930,580, compared to $7,977,960 in the prior year, driven by a larger net loss during the year ended December 31, 2023, and partially offset by the issuance of shares, options, and warrants for services.
Current wording
Net cash used by operating activities for the year ended December 31, 2024 was $10,138,798, compared to $11,930,580 in the prior year, driven by a shift to production and distribution of hard tonneau covers.
Previous wording
Inventory increased at December 31, 2023 by $2,285,120 and at December 31, 2022 by $844,600 as a result of our stockpiling inventory in anticipation of the launch of our e-commerce platform and our purchasing of raw materials for domestic production. Prepaid expenses increased by $776,703 at December 31, 2023 and by $529,438 at December 31, 2022 due to deposits made by us for the purchase of manufacturing equipment and inventory.
Current wording
Inventory increased at December 31, 2024 by $1,558,562 and increased at December 31, 2023 by $2,285,120 due to a shift in production requirements from soft tonneau covers to hard tonneau covers. Prepaid expenses and deposits decreased by $1,305,057 at December 31, 2024 and increased by $776,709 at December 31, 2023 due to deposits by us for the purchase of production equipment and inventory.
Previous wording
Accounts payable and accrued liabilities decreased at December 31, 2023 by $577,124 and increased at December 31, 2022 by $995,340, respectively.
Current wording
Accounts payable and accrued liabilities increased at December 31, 2024 by $1,167,834 and decreased at December 31, 2023 by $492,114, respectively. These fluctuations were driven primarily by the transition to production activities in 2024.
Previous wording
Net cash used in investing activities for the year ended December 31, 2023 was $3,756,364 compared to $11,150,776 in the prior year. The decrease in investing activities was primarily due to the purchase of a manufacturing facility in 2022.
Current wording
Net cash used in investing activities for the year ended December 31, 2024 was $528,235 compared to $3,756,364 in the prior year. The decrease in investing activities was primarily due to higher capital expenditures on various production equipment in 2023 to support the Company’s transition to production in 2024.
Previous wording
Net cash provided by financing activities for the year ended December 31, 2023 was $4,431,965 compared to $5,182,160 in the prior year. During the year ended December 31, 2023 the Company received net proceeds of $4,475,869 from the sale of shares and pre-funded warrants. During the year ended December 31, 2022, we received a $5,300,000 loan for the purchase of a manufacturing facility.
Current wording
Net cash provided by financing activities for the year ended December 31, 2024 was $12,184,354 compared to $4,431,965 in the prior year. During the year ended December 31, 2024 the Company received net proceeds of $12,482,549 from the sale of shares and pre-funded warrants. During the year ended December 31, 2023, the Company received net proceeds of $4,475,869 from the sale of shares and pre-funded warrants.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
On September 30, 2022, the Company filed a shelf registration statement on Form S-3, which was declared effective by the SEC on October 13, 2022 (“Form S-3 Registration Statement”), allowing the Company to issue up to $30,000,000 of common stock and prospectus supplement covering the offering, issuance and sale of up to $13,000,000 of common stock that may be issued and sold under an At The Market Offering Agreement dated September 30, 2022 (“ATM Agreement”), with H.C. Wainwright & Co., LLC, as the sales agent (“HCW”). Pursuant to the ATM Agreement, HCW is entitled to a commission equal to 3.0% of the gross sales price of the shares of common stock sold. As of December 31, 2023, the Company has sold and issued 604,048 shares of common stock in consideration for net proceeds of $812,551 under the ATM Agreement.
Previous report — wording carried elsewhere
November 2023 Registered Direct Offering and Concurrent Private Offering