Filed
Pursuant to Rule 424(b)(5)
Registration
No. 333-267696
PROSPECTUS
SUPPLEMENT
(To
Prospectus dated September 30, 2022)
1,925,000
Shares of Common Stock
1,575,000
Pre-Funded Warrants to Purchase One Share of Common Stock
Worksport
Ltd.
We
are offering 1,925,000 shares of our common stock, par value $0.0001 per share, directly to certain institutional investors pursuant to this prospectus supplement and the accompanying prospectus.
The offering price is $1.34 per share.
Our
common stock is listed on The Nasdaq Capital Market under the symbol “WKSP.” On October 30, 2023, the last reported sale
price of our common stock on The Nasdaq Capital Market was $1.34.
We
are also offering 1,575,000 pre-funded warrants (the “Pre-Funded Warrants”) to certain purchasers whose purchase of a common
stock in this offering would otherwise result in the purchaser, together with its affiliates and certain related parties, beneficially
owning more than 4.99% (or, at the election of the purchaser, 9.99%) of our outstanding common stock immediately following the consummation
of this offering. Each Pre-Funded Warrant is exercisable for one share of our common stock. The purchase price of each Pre-Funded Warrant
is equal to the price per share of common stock being sold to the public in this offering, minus $0.0001, and the exercise price of each
Pre-Funded Warrant is $0.0001 per share. The Pre-Funded Warrants will be immediately exercisable and may be exercised at any time until
all of the Pre-Funded Warrants are exercised in full.
In
addition, we are offering 7,000,000 warrants (the “Warrants”) in a concurrent private placement, with each Warrant having
the right to purchase one (1) share of common stock. The Warrants are exercisable from the period six (6) months from the closing date
of this offering and will expire five and a half (5½) years from the issuance date. The Warrants have an exercise price of $1.34 per share. The private placement warrants and the shares of common stock issuable upon the exercise of such
warrants are not being registered under the Securities Act of 1933, as amended (the “Securities Act”), and are not being offered
pursuant to this prospectus supplement and the accompanying prospectus and are being offered pursuant to an exemption from the registration
requirements of the Securities Act provided in Section 4(a)(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder.
The
final public offering price of the shares of common stock and Pre-Funded Warrants was determined through negotiation between us,
Maxim Group LLC (the “Placement Agent”), and the investors based upon a number of factors, including our history and our
prospects, the industry in which we operate, our past and present operating results, the previous experience of our executive officers
and the general condition of the securities markets at the time of this offering.
The
aggregate market value of our outstanding shares of common stock held by non-affiliates, or public float, was approximately $43,059,491.42
based on 17,437,017 outstanding shares of common stock as of September 27, 2023 (a date that is within 60 days of the date of this
prospectus supplement), of which approximately 14,899,478 shares are held by non-affiliates, and a per share price of $2.89, based on
the last sale price of our common stock on September 8, 2023, a date that is within 60 days of the date of this prospectus supplement.
During the 12 calendar months prior to and including the date of this prospectus supplement, we have sold securities with an aggregate
market value of $153,492.87 pursuant to General Instruction I.B.6 of Form S-3. One-third of our public float, calculated in accordance
with General Instruction I.B.6 of Form S-3, is equal to approximately $14,199,671, after deducting the aggregate market value of securities
sold pursuant to General Instruction I.B.6 of Form S-3. In no event will we sell securities registered on this registration statement
in a public primary offering with a value exceeding more than one-third of our public float in any 12-month period so long as our public
float remains below $75.0 million pursuant to General Instruction I.B.6 of Form S-3.
We
engaged Maxim Group LLC as our exclusive placement agent to place the securities offered by this
prospectus supplement. The Placement Agent has no obligation to purchase any of the securities from us or to arrange for the purchase or sale of any
specific number or dollar amount of the securities. We have agreed to pay the Placement Agent the Placement Agent fees set forth in the
table below.
Steven
Rossi, our founder and Chief Executive Officer, has voting control over approximately 57.97% of our outstanding voting stock and therefore
we currently meet the definition of a “controlled company” under the corporate governance standards for Nasdaq listed companies
and for so long as we remain a controlled company under this definition, we are eligible to utilize certain exemptions from the corporate
governance requirements of The Nasdaq Stock Market LLC (“Nasdaq”).
We
intend to use the proceeds from this offering for general corporate purposes, including working capital. See “Use of Proceeds.”
Investing
in our securities involves a high degree of risk. See “Risk Factors” beginning on page S-12 of this prospectus supplement
for a discussion of information that should be considered in connection with an investment in our securities.
Neither
the Securities and Exchange Commission (“SEC”) nor any state securities commission has approved or disapproved of these securities
or determined if this prospectus supplement is truthful or complete. Any representation to the contrary is a criminal offense.
We
are an “emerging growth company” as that term is used in the Jumpstart Our Business Startups Act of 2012, and we have elected
to comply with certain reduced public company reporting requirements.
| | |
Per Share | | |
Per Pre-Funded Warrant | | |
Total | |
| Public offering price | |
$ | 1.34 | | |
$ | 1.3399 | | |
$ | 4,689,842.50 | |
| Placement agent fees (7%) | |
$ | 0.0938 | | |
$ | 0.0938 | | |
$ | 328,300.00 | |
| Proceeds, before expenses, to us | |
$ | 1.2462 | | |
$ | 1.2461 | | |
$ | 4,361,542.50 | |
| (1) |
Represents a cash fee equal
to 7% of the aggregate purchase price paid by investors in this offering. See “Plan of Distribution” beginning
on page S-20 of this prospectus supplement for a description of the compensation to be received by the Placement Agent. |
| |
|
| (2) |
The
amount of offering proceeds to us presented in this table does not give effect to any exercise of the Warrants. |
Sole Placement Agent
Maxim
Group LLC
The
date of this prospectus supplement is October 31, 2023.
TABLE
OF CONTENTS
Prospectus
Supplement
Prospectus
You
should rely only on the information contained or incorporated by reference in this prospectus supplement or any prospectus supplement
or amendment thereof. Neither we, nor the Placement Agent, have authorized any other person to provide you with information that is different
from, or adds to, that contained in this prospectus supplement or the accompanying prospectus. If anyone provides you with different
or inconsistent information, you should not rely on it. Neither we nor the Placement Agent take responsibility for, and can provide no
assurance as to the reliability of, any other information that others may give you. You should assume that the information contained
in this prospectus supplement or the accompanying prospectus is accurate only as of their respective dates, regardless of the time of
delivery of thereof or of any sale of our common stock. Our business, financial condition, results of operations and prospects may have
changed since that date. We are not making an offer of any securities in any jurisdiction in which such offer is unlawful.
No
action is being taken in any jurisdiction outside the United States to permit a public offering of our securities or possession or distribution
of this prospectus in that jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States
are required to inform themselves about and to observe any restrictions as to this public offering and the distribution of this prospectus
applicable to that jurisdiction.
ABOUT
THIS PROSPECTUS SUPPLEMENT
This
prospectus supplement and the accompanying prospectus form part of a registration statement that we filed with the Securities and Exchange
Commission, or the SEC. This document is in two parts. The first part is this prospectus supplement, which describes the specific terms
of this offering and also adds to and updates information contained in the accompanying prospectus and the documents incorporated by
reference herein or therein. The second part, the accompanying prospectus, provides more general information. Generally, when we refer
to this prospectus in this prospectus supplement, we are referring to both parts of this document combined. If the description of this
offering varies between this prospectus supplement and the accompanying prospectus, you should rely on the information in this prospectus
supplement, which supersedes the information in the accompanying prospectus. This prospectus supplement contains information about the
securities offered in this offering and may add, update or change information in the accompanying prospectus. Before you invest in any
of the securities offered under this prospectus supplement, you should carefully read both this prospectus supplement and the accompanying
prospectus together with the additional information described under the headings “Where You Can Find More Information”
and “Information We Incorporate By Reference.”
We
are offering to sell, and seeking offers to buy, securities only in jurisdictions where offers and sales are permitted. The distribution
of this prospectus supplement and the accompanying prospectus and the offering of the shares of common in certain jurisdictions may be
restricted by law. Persons outside the United States who come into possession of this prospectus supplement and the accompanying prospectus
must inform themselves about, and observe any restrictions relating to, the offering of the shares of the securities and the distribution
of this prospectus supplement and the accompanying prospectus outside the United States. This prospectus supplement and the accompanying
prospectus do not constitute, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy, any securities
offered by this prospectus supplement and the accompanying prospectus by any person in any jurisdiction in which it is unlawful for such
person to make such an offer or solicitation.
You
should rely only on the information contained in, or incorporated by reference into, this prospectus supplement, the accompanying prospectus,
the documents incorporated by reference into this prospectus supplement or the accompanying prospectus, and in any free writing prospectus
that we may authorize for use in connection with this offering. We have not, and the Placement Agent has not, authorized any other person
to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on
it.
Throughout
this prospectus supplement, unless otherwise designated or the context suggests otherwise,
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generally, when we refer
to this prospectus in this prospectus supplement, we are referring to both the prospectus supplement and the prospectus combined; |
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all references to the “Company,”
“Worksport,” “we,” “our” and “us” or other similar terms mean Worksport Ltd. and
our subsidiaries, Worksport Ontario, a Canadian corporation, Terravis Energy, Inc., a Colorado corporation, Worksport
New York Operations Corporation, a New York corporation, and Worksport USA Operations Corporation, a Colorado corporation, unless
we state otherwise or the context indicates otherwise; |
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● |
“year” or “fiscal
year” means the year ending December 31st; and |
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● |
all dollar or $ references,
when used in this prospectus, refer to United States dollars. |
PROSPECTUS
Supplement SUMMARY
This
summary provides a brief overview of the key aspects of our business and our securities. The reader should read the entire prospectus
carefully, especially the risks of investing in our common stock discussed under “Risk Factors.” Some of the statements contained
in this prospectus, including statements under “Prospectus Supplement Summary” and “Risk Factors” as well as
those noted in the documents incorporated herein by reference, are forward-looking statements and may involve a number of risks and uncertainties.
Our actual results and future events may differ significantly based upon a number of factors. The reader should not put undue reliance
on the forward-looking statements in this document, which speak only as of the date on the cover of this prospectus.
Overview
Worksport
Ltd., through its subsidiaries, designs, develops, manufactures, and owns the intellectual property (“IP”) on a portfolio
of tonneau cover, solar integration, portable power station, and NP (non-parasitic), hydrogen-based green energy products and solutions
for the automotive aftermarket accessories, power storage, residential heating, and electric vehicle-charging industries. We seek to
provide consumers with next-generation automotive aftermarket accessories while capitalizing on growing consumer interest in clean energy
solutions and power grid independence.
Corporate
History
The
Company was incorporated in the State of Nevada on April 2, 2003 under the name Franchise Holdings International, Inc. (“FNHI”).
On December 16, 2014, FNHI acquired 100% of the outstanding equity of Worksport Ltd., a corporation formed in the Province of Ontario
on December 13, 2011, formerly known as Truxmart Ltd. (“Worksport Ontario”), pursuant to which Worksport Ontario became a
wholly-owned subsidiary of FNHI. In May 2020, FNHI changed its name from “Franchise Holding International Inc.” to “Worksport
Ltd.”
On
May 21, 2021, the Board of Directors (“Board”) 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 Financial Industry Regulatory Authority
(“FINRA”) corporate action was announced on August 3, 2021. On August 4, 2023, the Company effected a 1-for-20 (1:20) reverse
stock split of its issued and outstanding shares of common stock.
The
Company owns the following subsidiaries: (i) Worksport Ontario, a Canadian corporation; (ii) Terravis Energy, Inc. (“Terravis”),
a Colorado corporation, of which Steven Rossi has 51% voting power; (iii) Worksport USA Operations Corporation, a Colorado corporation;
and (iv) Worksport New York Operations Corporation, a New York corporation.
Public
Offering
On
August 6, 2021, we consummated an underwritten public offering (the “Public Offering”) of an aggregate of 3,272,727 units
pursuant to a registration statement on Form S-1, as amended (File No. 333-256142) and a registration statement on Form S-1 filed pursuant
to Rule 462(b) of the Securities Act of 1933, as amended (File No: 333-258429). The Public Offering
price was $5.50 per unit, and each unit consisted of one share of common stock and one warrant (“Public Warrant”)
to purchase one share of common stock for $6.05 per share (110% of the unit offering price) from the date of issuance until the third
anniversary of the issuance date. We received gross proceeds of approximately $18.0 million from the Public Offering, and after deducting
the underwriting commissions, discounts, and offering expenses payable by us, we received net proceeds of approximately $16.1 million.
We used the net proceeds for working capital, research & development, marketing, and equipment.
Nasdaq
Uplisting
In
connection with the Public Offering, our common stock and Public Warrant commenced trading on The Nasdaq Capital Market under the symbols
“WKSP” and “WKSPW,” respectively, on August 4, 2021. Prior to the uplisting, our common stock was quoted on the
OTCQB Marketplace under the symbol “WKSP.”
Business
Developments
The
following highlights recent material developments in our business:
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In August 2023, we announced
the successful dispatch of our first shipment of hard-folding tonneau covers, which are made in the U.S. with domestic and imported
components. This major development comes on the heels of us initiating manufacturing earlier this month, and aligns with recent sizable
orders, notably a $700,000 order for soft folding covers and a staggering $1,600,000 order for hard-folding covers, both from a national
U.S. customer and reseller of automotive aftermarket accessories. |
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In September 2023, we announced
that we have found a top-tier solar panel provider for our highly anticipated SOLIS Solar Tonneau Cover. This partner is renowned
for their state-of-the-art solar panels and underlying technology. A supply partner will help set a new standard in renewable energy
tech for vehicles and to provide the most durable and highest quality flexible solar panels. With this supply partner for SOLIS,
we are demonstrating its unwavering commitment to pioneering sustainable technological solutions. |
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In
September 2023, we announced significant strides in the development of our groundbreaking COR battery system, designed to complement
the launch of the SOLIS solar cover. This cutting-edge duo is poised to empower remote power supply and extend the driving range
of electric pickup trucks, thereby underscoring our commitment to sustainability and innovation as a cleantech company.
|
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In September 2023, we announced
that we have secured a long-term supply agreement with an established, leading automotive aftermarket reseller in the U.S. Under
this agreement, we are on track to earn an estimated $16,000,000 in annual sales of our advanced hard-folding and soft-folding covers,
from this single customer. |
Products
We
have developed a series of soft and hard folding tonneau covers as well as energy products.
Soft
Tonneau Covers
Our
soft tonneau cover offering consists of vinyl wrapped tri- and quad-fold tonneau covers manufactured overseas in Meizhou, China. Enhanced
versions of our vinyl tri-fold soft tonneau covers are now available for purchase and marketed under a “PRO” designation;
our quad-fold soft tonneau covers will soon have an upgraded “PRO” version available as well. These upgraded versions include
our patented quick latch system, which allows the operator to open the cover by simply pulling a release cable – enabling single-sided
operation. Each soft cover is fitted with a powder-coated, lightweight aluminum frame and rear cam latches as well as ultra-violet (UV)
protected, vinyl tri-layer material that seals around the truck bed with a rubber gasket designed to protect cargo from moisture and
debris.
Tri-fold
soft covers are a lower cost option when compared to quad-fold tonneau covers. Compared with Worksport tri-fold soft tonneau covers,
Worksport quad-fold covers have the additional benefit of enabling full truck bed access by being foldable upwards toward the rear window
of the truck. As the market’s first quad-folding vinyl-wrapped cover that will provide full truck bed access utilizing Worksport’s
Intellectual Property, Worksport’s soft quad-fold covers are compact when folded parallel to the back window of the truck while
avoiding obstruction of the rear brake light on most truck models.
Our
soft tonneau cover line includes:
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○ |
The Worksport SC3 – soft tri-fold introduced
in 2011, first Worksport Ltd. product; |
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|
|
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○ |
The Worksport SC3 PRO –soft tri-fold with Smart
Latch system introduced in 2012; |
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|
|
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The Worksport SC4 – soft quad-fold introduced
in 2022; and |
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|
|
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The Worksport SC4 PRO –soft quad-fold with Smart
Latch system introduced in 2023. |
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○ |
The Worksport SCX – soft tri-fold with extendable
frame. |
Hard
Tonneau Covers
Our
hard line of tonneau covers includes tri- and quad-fold, aluminum flush-mounted and top-mounted folding tonneau covers. Our entire line
of hard folding tonneau covers will be manufactured in the USA. Our hard cover panels are designed with formed aluminum, ultra-strong
high temper formed alloy panels with a durable black surface. These panels will have significant dent resistance over many other tonneau
covers as they use thicker aluminum on the exterior surface as opposed to the sandwich style of most covers today. Designed to auto index
(center) in the truck bed and be only 7.5mm above the truck bed, it is a low profile, sleek look that is easy to install. Our hard covers
will be offered with the XCX rail upgrade, allowing future accessories such as expandable cargo division and storage solutions. Similar
to the soft cover line, our hard cover line products will each be available in upgraded versions utilizing our quick latch system, enabling
single-sided operation.
Our
hard tonneau cover line, all of which is in development, includes:
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The
Worksport TC3 – top-mounted hard tri-fold;
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The Worksport TC3 PRO –
top-mounted hard tri-fold with Smart Latch system; |
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The
Worksport FC3 – flush-mounted hard tri-fold;
|
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The
Worksport FC4 – flush-mounted hard quad-fold; and
|
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The
Worksport FC4 PRO – flush-mounted hard quad-fold with Smart Latch system. |
Energy
Products
We
are researching and developing various energy-based products, two of which can be sold together as a kit: the Worksport SOLIS tonneau
cover (“SOLIS”) and the Worksport COR energy storage system (“COR”). This kit will be available for both end-consumers
and Original Vehicle Manufactures alike. This kit integrates tonneau cover, solar energy capture, and portable energy storage technologies
to convert pickup trucks to mobile microgrid power stations – allowing Worksport to compete within niche markets in each the automotive
aftermarket accessory, solar energy, and portable power station markets.
Worksport
SOLIS
The
SOLIS, a tonneau cover with integrated solar panels, is a unique, folding tonneau cover design founded on our top-mounted tough cover
design but with the addition of cutting edge, monocrystalline, semi-flexible solar panels and wiring system. These solar panels are secured
to aluminum alloy panels both mechanically and using specialized adhesives, which ensure the covers are extremely strong, durable, and
secure. The SOLIS cover is intended to be sold as an Original Equipment Manufacturer product, as it can be integrated into the design
of leading electric pickup trucks; consequently, we have and will continue forging relationships with electric pickup truck manufacturers,
including but not limited to Workhorse, Atlis, Bollinger, and Hercules as well as Toyota, Stellantis, General Motors, Ford, Nissan, and
Rivian.
The
solar panels that we plan to integrate into the SOLIS cover are capable of generating 170-180 watts per square meter. For example, as
tested outdoors, the SOLIS cover is capable of generating approximately 460 watts of power on a RAM 6’5” truck bed. When
integrated into the design of an electric pickup truck, this power generation can be converted to additional vehicle mileage. The specific
added mileage is dependent on many factors including but not limited to region of the world in which the vehicle is driven, weather conditions,
season, temperature, hours of sun light per day, and average irradiance. For example, assuming a solar power density of 170 W/m2,
battery capacity of 98 kWh, mileage range of 300 miles, average hours of sun per day of 6 hours, average irradiance per day of 700 W/m2,
and surface area of 2.7 m2, the SOLIS cover is estimated to provide 5.6 additional miles of range to an electric pickup truck
per day.
Worksport
COR
The
COR or COR ESS (energy storage system) is a modular, portable power station uniquely designed to mount to the inside of a pickup truck
bed and enable battery swapping without an immediate drop in power output. The COR built-in inverter with an output voltage of 120V AC
(frequency of 60Hz) is capable of powering loads up to 3000W. Combined with its modular 48V batteries, it can store up to 6kWh of energy
on the go. Each additional modular battery adds 1.5kWh of energy storage. The COR main battery, a Lithium battery, boasts a capacity
of 1534Wh while its Hot Swap Lithium Iron Phosphate (Li-LFP) battery has a capacity of around 200Wh. The system allows Bluetooth connection
for monitoring and controlling the COR system and its external batteries.
Not
only does the COR system allow users to swap a depleted battery for a fully charged one, but it does so without a drop in power output
for up to 15 seconds with a load of 3000W. This unique feature allows the COR system to be used in a variety of applications, including
but not limited to sporting and outdoor activities, disaster relief and general emergencies, and vocational activities ranging from contractor
to drone operator. While the COR system is designed to nicely complement the SOLIS tonneau cover, it will be purchasable as a standalone
product – allowing consumers to utilize stored energy, whether captured via grid or grid-independent energy sources, anywhere.
As Worksport’s first step into the energy storage market, the COR system is Worksport’s pioneer product within its future
COR platform.
Manufacturing
As
of June 30, 2023, all Worksport soft-folding tonneau covers were manufactured in a facility located in Meizhou, China according to Worksport’s
specifications, schematics and blueprints. We believe production at the factory can be increased within 30 days to facilitate volumes
up to ten times the current output without any adverse effects on quality or craftsmanship.
We
have purchased many production tools including injection molds, die cast molds, extrusion dies, and stamping dies – many of which
are residing among foreign suppliers who are currently utilizing said tooling to produce needed components for manufacturing or assembly
within the USA. We are concurrently diversifying this list raw material suppliers who can use our production tools to continue producing
our tonneau cover components, should trade with any particular or preferred raw material supplier become more expensive or difficult.
In
May 2022, we purchased a 152,847 square foot production facility for domestic production, storage, and distribution, located in West
Seneca, New York. We have received the majority of all manufacturing equipment deemed necessary to begin production, and we are in the
process of installing and testing those machines, as well as training personnel to use those machines. Management believes that having
manufacturing capability in North America will increase quality control and production efficiency, as well as lower landed costs and
geopolitical risks.
Our
Plant-Readiness Team began initial, basic manufacturing and assembly at our USA-based production facility, improving our process on an
on-going basis.
Intellectual
Property
We
currently hold a broad collection of intellectual property rights relating to certain aspects of our parts and accessories and services.
This includes patents, trademarks, copyrights and trade secrets. Although we believe the ownership of such intellectual property rights
is an important factor in our business and that our success does depend in part on such ownership, we rely primarily on the innovative
skills, technical competence and marketing abilities of our personnel.
Patents
As
of October 31, 2023, our patent portfolio consists of ten (10) issued U.S. utility patents, three (3) issued Canadian utility patent,
and thirty-four (34) pending utility patent applications in various jurisdictions worldwide. Our portfolio further includes seven (7)
design registrations in Europe and China, along with forty-five (45) pending design applications in various jurisdictions worldwide.
We are also in the process of preparing and filing several other utility and design patent applications across relevant countries and
jurisdictions.
Granted
U.S. utility patents will expire between 2032 and 2036, excluding any patent term adjustment that might be available following the grant
of the patent. If issued, pending utility patent applications would expire 20 years from the filing date of each application, excluding
the filing date of any provisional applications and excluding any patent term adjustment that might be available following the grant
of the patent.
Trademarks
As
of October 31, 2023, we have thirty-one (31) trademark registrations and twenty-three (23) pending trademark applications in various
jurisdictions worldwide.
The
Market
We
primarily compete in the Automotive Aftermarket Accessories and New Energy industries with a focus on the Tonneau Cover and the Portable
Power Station Markets.
Tonneau
Cover Market
There
are various forms of tonneau covers, each with their advantages and disadvantages, available for consumption through direct-to-consumer
and retailer and dealer sales channels. Some forms of tonneau covers include but are not limited to:
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Solid One Piece
Caps and Lids; |
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Retractable Covers; |
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Soft
Folding & Roll-Up Covers; and |
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Hard
Folding & Standing Covers. |
Solid
one piece covers and retractable covers tend to have limited functionality and tend to be priced higher when compared to other types
of tonneau covers. Soft and hard folding/rolling tonneau covers, in contrast, tend to be priced more competitively and, as such, are
a popular choice among tonneau cover consumers. Given these factors and our belief that we can develop less cumbersome, high functioning,
and low cost soft and hard folding covers, we focus primarily on developing soft and hard folding covers.
Our
tonneau cover revenue stream is largely proportional to sales of pickup trucks. Currently, there are 284.9 million vehicles in operation
in the U.S.1, 21%, or 59.5 million, of which are pickup trucks.2 However, as a result of supply chain shortages,
rising interest rates, high prices, and slowing sales, it may take until 2025 for new-vehicle sales to return to pre-pandemic levels.1
While new vehicle sales have decreased, we are well-positioned to capitalize on new vehicle sales; we offer tonneau covers for
each of the 10 most popular makes/models by projected 2022-2029 sales (including, for example, the Ford F-Series, RAM Pickups, and Chevrolet
Silverado), as well as the top 10 most accessorized pickup truck makes/models projected in 2022-2029.2 Within the USA market,
pickup truck market revenue is expected to show a compound annual growth rate of 1.7% in 2023-2027.3 Within this market, pickup
trucks are most popular within the southern region of the United States2, and the two largest state markets for pickup trucks
are by far Texas and California.2 Globally, pickup truck market revenue is expected to show a compound annual growth rate
of 1.58% in 2024-2028.4
Electric
pickup trucks are projected to gain a larger portion of the pickup truck market share each year through 20351, as this submarket
is estimated to have a compound annual growth rate of 31.3% between 2023 and 2032.5 However, a large headwind acting against
this trend is that pickup trucks tend to be more popular in areas with less-developed charging infrastructure2 – a headwind
that the SOLIS cover directly addresses and positions us favorably for possible partnerships and deals with electric pickup truck manufacturers.
The
Specialty Equipment Aftermarket provides more specific insight into how often and for what reasons vehicle owners or renters are purchasing
accessories for their vehicles. Despite crossover utility vehicles being the most common vehicle type on the road in the U.S.1,
pickup trucks are the largest market by sales within the USA for specialty equipment – constituting 31% of this market2,
which translated to $16 billion in sales during 2021.2 This market is expected to grow from $50.9 billion in 2021 to $58.66
billion by 2025.6 Within this pickup truck accessory market, 34% of accessories are truck bed & utility modifications2,
which is the submarket in which we operate. Truck bed covers are among the top product categories for aftermarket accessory purchases
in 20212, and the size of the tonneau cover market within the USA was valued at $3 billion as of 2021.7
As
discretionary consumer goods, the specialty automotive part market is subject to consumer spending trends. Per capita disposable income
fell 7.8% during 2022 as government stimulus ended; however, it is expected to increase slowly during 2023.8 Further, while
the Federal Reserve has projected unemployment rates to increase in 2023 and subsequent years9, recent unemployment rates
are the lowest they have been in recent decades.10 Together, these factors suggest consumer disposable income and unemployment
will need to be carefully monitored in order to accurately forecast the automotive aftermarket accessories’ market potential year-to-year.
Consumers
purchase automotive aftermarket accessories, as well as tonneau covers, specifically, for various reasons. According to recent reports,
97%, 92%, 80%, and 62% of pickup truck owners use their trucks for utility/work, travel/vacation, outdoor recreation, and off-road uses,
respectively.2 Of those pickup truck owners who have purchased accessories for their trucks, 93%, 86%, 68%, and 43% of them
use their pickup trucks for day trips, carrying tools/gear, light off-roading, and car camping, respectively.2 Pickup truck
owners who use their vehicles for outdoor recreation, work, or off-roading are much more likely to purchase accessories when compared
to those who use their vehicles for other purposes.2 Worksport’s tonneau covers largely benefit truck owners using their
vehicles for any of these aforementioned purposes, and the SOLIS cover provides additional utility for those utilizing their trucks for
utility/work, outdoor recreation, and car camping, in particular.
Sales
of truck bed covers occur across several channels, among those including but not limited to part manufacturers, specialty retailers and
online retailers. For physical location sales, the most popular sales channels for truck bed covers include Specialty Retailers/Installers
and New Vehicle Dealerships, which constitute 17% and 11% of in-store sales, respectively.6 For online sales, the most popular
sales channels for truck bed covers include Online Only General Retailer, Specialty Retailers/Installers, and Parts Manufacturers, which
constitute 23%, 19%, and 8% of online sales, respectively.6 In the Fall of 2022, it was reported that roughly 59% of retailer
specialty equipment sales were sold through in-store/physical channels while the other 41% were sold through online channels.11
It was further reported that roughly 50% of manufacturer specialty equipment sales were sold through in-store/physical channels
while the other 50% were sold through online channels.11 Worksport aims to list its products on each of these highly-popular
in-person and online sales channels in order to maximize sales volumes.
| |
1. |
SEMA. 2023 Future Trends Report. Retrieved from
www.sema.org |
| |
2. |
SEMA. Pickup Accessorization Report. Retrieved
from www.sema.org |
| |
3. |
https://www.statista.com/outlook/mmo/passenger-cars/pickup-trucks/united-states |
| |
4. |
https://www.statista.com/outlook/mmo/passenger-cars/pickup-trucks/worldwide |
| |
5. |
https://www.globenewswire.com/en/news-release/2023/03/09/2623657/0/en/Electric-Truck-Market-Worth-Over-USD-11-08-Billion-by-2032-At-CAGR-31-3.html |
| |
6. |
SEMA. 2022 Market Report.
Retrieved from www.sema.org |
| |
7. |
Arizton.
U.S. Tonneau Covers Market - Industry Outlook & Forecast 2022-2027. Retrieved from
https://www.arizton.com/market-reports/us-tonneau-covers-market |
| |
8. |
IBIS
World. Per Capita Disposable Income. Retrieved from
https://www.ibisworld.com/us/bed/per-capita-disposable-income/33/#:
:text=Following%20the%20ending%20of%20government,when%20it%20may%20potentially%20hit. |
| |
9. |
Federal
Reserve Board. Summary of Economic Projections. Retrieved from
https://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20221214.pdf. |
| |
10. |
Bureau
of Labor Statistics. The Employment Situation – January 2023. Retrieved from
https://www.bls.gov/news.release/pdf/empsit.pdf |
| |
11. |
SEMA. State of the Industry
Report 2022 Fall. Retrieved from www.sema.org |
Portable
Power Station Market
Compared
to the Tonneau Cover Market, the Portable Power Station Market is much younger and globalized. Gas and diesel generators have long been
used by consumers to generate electricity when they could not rely on the grid, whether it be for grid damages or the lack of grid in
remote areas. Unlike such generators, portable power stations do not generate electricity, themselves, but can also be used to provide
electricity during times of grid unreliability. These portable power stations are often charged by the grid via home outlets or independent
of the grid via consumers’ vehicles or solar panels.
The
Portable Power Station Market is large and growing. At a compound annual growth rate of 3.9% between 2022 and 20311, the global
Portable Power Station market size was valued at $4.0 billion in 2021.1 Within this global market, the largest regional market
is the North American market.2 The highest compound annual growth rates in this regional market is expected to be those power
stations utilizing lithium-ion batteries for off-grid power applications2, which matches the COR system’s battery type
as well as intended usage.
When
paired with the SOLIS cover, the COR energy storage system will be a market outlier in that it can be charged safely while mobile whereas
competing portable power stations are intended to be stationary during charging.
| |
1. |
Allied
Market Research. Portable Power Station Market. Retrieved from
https://www.alliedmarketresearch.com/portable-power-station-market-A11700 |
| |
2. |
Markets
And Markets. Portable Power Station Market. Retrieved from
https://www.marketsandmarkets.com/Market-Reports/portable-power-station-market-23592113.html |
Distribution
We
distribute our tonneau covers in Canada and the United States through an expanding network of wholesalers, private labels, distributors,
and online retail channels, including eBay, Amazon, Walmart, and our own e-commerce platform hosted on Shopify. Distribution via each
aforementioned channel is expected to increase during the remainder of 2023 and into 2024. We have pursued and will continue to pursue
relationships with Original Equipment Manufacturers with the intention of distributing through them as well.
The
specialty equipment aftermarket consists of three major types of customers, which include master warehouse distributors and big box stores,
dealers and wholesalers, and retail end consumers. Master warehouse distributors and big box stores stock and distribute products to
their customers, which are usually local dealers and wholesalers. Dealers and wholesalers are local stores which sell products to some
businesses and retail consumers in their area and online. Dealers purchase most of their products from their local distributor who deliver
to them regularly. Retail end consumers are the end users of the products.
Competition
Tonneau
Cover Competitors
The
Tonneau Cover market is relatively consolidated with one industry leader, Real Truck (formerly Truck Hero), having the largest market
share. Real Truck has acquired upwards of 16 independent tonneau cover brands in North America, allowing it to concurrently target many
different niche markets but also potentially cannibalizing its own sales. We compete directly with Real Truck. Other competitors in this
space include Truck Accessories Group (Primarily Leer), Agri-Cover (primarily Access), Truck Covers USA, and Paragon.
We
believe that being independent, innovative, operationally lean, and competitively priced will enable us to acquire a larger portion of
the existing market share. In order to execute on this, we intend to have a small and effective sales team to forge strong business-to-business
relationships, while turning inventory regularly through direct-to-consumer sales supported by a strong customer support team. Selling
above MAP (Minimum Advertised Price) and enforcing this policy will allow business customers to sell without competing with us and in
return support the growth of the distribution base. Our innovative covers are designed to serve purposes that no other tonneau cover
is currently capable of, some of which are specifically geared towards improving margins for distributors. Further, the SOLIS cover’s
inclusion of solar panels may be particularly attractive to electric pickup truck original equipment manufacturers, paving the path towards
an original equipment manufacturer relationship that may be lucrative beyond standard tonneau cover partnerships.
Portable
Power Station Competitors
The
Portable Power Station market is global and highly fragmented and includes many competitors from across the world including but not limited
to Alpha ESS Co., Ltd., Anker Technology, Bluetti, Chilwee Group Co., Ltd, Duracell, GES Group Limited Company, Jackery Inc., Lion Energy,
Milwaukee Tool, and Mitsubishi Corporation. Some of these competitors offer a line of Portable Power Stations, each with different power
capacities, sizes, and price points. Others specialize in few or even one Portable Power Station as to target a specific or niche submarket.
We
intend to be competitive by focusing on our portable power station’s biggest strengths – primarily its modularity and Hot
Swap battery. Modularity allows consumers not only to determine themselves the ideal stored energy capacity and price point they are
seeking but also to upgrade their COR system overtime based on their evolving needs.
Supply
of Components
Production
of our soft and hard cover product lines requires components including but not limited to injection molded plastics, rubber hinges, rubber
seals, foam corners, aluminum blanks, aluminum extrusions, and metal brackets. We believe that we can source materials needed for soft
and hard tonneau cover production from other suppliers without major delay should any preferred supplier no longer be suitable.
For
our domestically-assembled products, we have developed an extensive network of suppliers based in a diverse range of countries, including
but not limited to the USA, China, Romania, Spain, Turkey, and Canada. We are further diversifying our supply chain of tonneau cover
components by developing relationships with suppliers based in countries, including but not limited to Malaysia, Hungary, Czech Republic,
Estonia, Latvia, Slovakia, Bulgaria, Vietnam, Thailand, Poland, Finland, Italy, and Lithuania. For our COR and SOLIS components, we are
establishing relationships with suppliers based in countries, including but not limited to China, Germany, Romania, Turkey, Philippines,
and India. We actively seek to lower reliance on any country deemed a potential geo-political supply chain risk.
Research
and Development
We
invest in research and development activities on an ongoing basis. We are actively acquiring new engineering and design assets, both
in-house and third-party. Our industrial engineers are based in both Canada and the United States, and they have developed and are further
developing unique tonneau cover designs with enhanced user experience, cost-effective and sustainable materials, and automatable manufacturing
potential. Our electrical engineers are based in Canada and work heavily on sourcing solar panels with features suitable for the Company’s
SOLIS cover, as determined through deep product research and testing. Concurrently, the electrical engineering department is researching
and developing more size- and cost-effective methods of portable energy storage in order to offer the market a competitive portable energy
storage system with distinguishable and unique product features.
Our
subsidiary, Terravis Energy, researches green energy solutions for home and community power as well as Electric Vehicle DC charging and
heat-pump technology.
Governmental
Programs, Incentives and Regulations
Globally,
both the operation of our business and the ownership of our products by our customers are impacted by various government programs, incentives,
and other arrangements. Our business and products are also subject to numerous governmental regulations that vary among jurisdictions.
Programs
and Incentives
We
have applied for and been granted tax, mortgage, wage, and energy cost relief in New York in addition to wage cost relief in Ontario.
These programs are provided by several agencies including the Erie County Industrial Development Agency, Empire State Development, NY
Power Authority, and The Canada Revenue Agency. Each of these incentive programs includes its own set of guidelines and requirements,
including but not limited to timely eligibility reporting, environmental regulation compliance, and headcount projection realization
– each of which we have agreed to and must abide by in order to continue realizing said incentives.
We
continue to seek additional incentives and grants in order to lower our operational costs as well as commit less capital to new product
initiatives.
Regulations
Our
COR portable power station is subject to various U.S. and international regulations that govern transport of “dangerous goods,”
defined to include lithium-ion batteries, which may present a risk in transportation. We plan to conduct testing to demonstrate our compliance
with such regulations.
We
use lithium-ion cells in our energy storage products. The use, storage, and disposal of our battery packs are regulated under existing
laws and are the subject of ongoing regulatory changes that may add additional requirements in the future.
Environmental
Compliance
We
are committed to high environmental standards and carry out our activities and operations in compliance with all relevant and applicable
environmental regulations and best industry practices. Costs of environmental regulatory compliance are not expected to be significant.
Human
Capital
As
of October 31, 2023, we had a total of 25 employees, of which included 16 full-time employees in Canada and five full-time and four temporary
employees in the USA. We intend to hire additional employees as operations grow – particularly within our West Seneca, NY manufacturing
facility. We rely on few independent contractors for additional labor and are very selective in our use of consultants.
Practices
and Policies
We
are an equal opportunity employer committed to inclusion and diversity and to providing a workplace free of harassment or discrimination.
Compensation
and Benefits
We
believe that compensation should be competitive and equitable, and should enable employees to share in our success. We recognize our
people are most likely to thrive when they have the resources to meet their needs and the time and support to succeed in their professional
and personal lives. In support of this, we offer a variety of benefits for employees and invest in tools and resources that are designed
to support employees’ growth and development.
Inclusion
and Diversity
We
remain committed to our vision to build and sustain a more inclusive workforce that is representative of the communities we serve. We
continue to work to increase diverse representation, foster an inclusive culture, and support equitable pay and access to opportunity
for all employees.
Engagement
We
believe that open and honest communication among team members, managers, and leaders helps create an open, collaborative work environment,
where everyone can contribute, grow and succeed. Team members are encouraged to come to their managers with questions, feedback or concerns.
Health
and Safety
We
are committed to protecting our team members everywhere we operate and, as such, support employees with general safety trainings. We
have also taken additional health and safety measures during the COVID-19 pandemic.
Available
Information
Our
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to
Sections 13(a) and 15(d) of the Exchange Act, are filed with the SEC. Such reports and other information filed by us with the SEC are
available free of charge at investors.worksport.com/stock-information when such reports are available on the SEC’s website.
We periodically provide certain information for investors on our corporate website, worksport.com, and our investor relations
website, investors.worksport.com. This includes press releases and other information about financial performance, information
on environmental, social and governance matters, and details related to our annual meeting of shareholders. The information contained
on the websites referenced in this prospectus supplement is not incorporated by reference into this filing. Further, our references to
website URLs are intended to be inactive textual references only.
Controlled
Company
Steven
Rossi, our founder and Chief Executive Officer, has voting control over approximately 57.97% of our outstanding voting stock and therefore
we currently meet the definition of a “controlled company” under the corporate governance standards for Nasdaq listed companies
and for so long as we remain a controlled company under this definition, we are eligible to utilize certain exemptions from the corporate
governance requirements of Nasdaq. Upon the closing of this offering, Mr. Rossi, will own approximately 57.29% of the voting power of
our outstanding voting stock.
As
long as Mr. Rossi owns at least 50% of the voting power of our Company, we will be a “controlled company” as defined under
the Nasdaq rules.
For
so long as we are a controlled company under that definition, we are permitted to rely on certain exemptions from corporate governance
rules, including:
| |
● |
an
exemption from the rule that a majority of our Board must be independent directors;
|
| |
● |
an exemption from the rule
that the compensation of our chief executive officer must be determined or recommended solely by independent directors; and |
| |
|
|
| |
● |
an
exemption from the rule that our director nominees must be selected or recommended solely by independent directors. |
Although
we do not intend to rely on the “controlled company” exemption under Nasdaq listing rules, we could elect to rely on this
exemption in the future. If we elect to rely on the “controlled company” exemption, a majority of the members of our Board
might not be independent directors and our nominating and corporate governance and compensation committees might not consist entirely
of independent directors.
As
a result, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance
requirements.
Executive
Offices
Our
principal corporate office is located at 2500 N America Dr. West Seneca, NY 14224.
Our
main telephone number is (888) 554-8789. Our main website is www.worksport.com. The contents of our website are not incorporated
by reference into this prospectus supplement.
SUMMARY
OF THE OFFERING
| Common stock offered by us |
|
1,925,000 shares
of common stock at a price of $1.34 per share. |
| |
|
|
Common
stock to be outstanding after the offering(1)(2)
|
|
19,432,115 shares of common
stock |
| Pre-Funded Warrants |
|
We are also offering 1,575,000
pre-funded warrants to certain purchasers whose purchase of a common stock in this offering would otherwise result in the purchaser,
together with its affiliates and certain related parties, beneficially owning more than 4.99% (or, at the election of the purchaser,
9.99%) of our outstanding common stock immediately following the consummation of this offering. Each Pre-Funded Warrant is exercisable
for one share of our common stock. The purchase price of each Pre-Funded Warrant is $1.3399, and the exercise price of each Pre-Funded Warrant is $0.0001 per share.
The Pre-Funded Warrants will be immediately exercisable and may be exercised at any time until all of the Pre-Funded Warrants are
exercised in full. |
| Use of Proceeds |
|
We estimate the net proceeds
to us from this offering will be approximately $4.2 million, after deducting the Placement Agent fee and estimated offering expenses
payable by us. We intend to use the net proceeds from this offering for working capital and general corporate purposes. See the section
of this prospectus supplement titled “Use of Proceeds” beginning on page S-15. |
| |
|
|
| Listing |
|
Our common stock and our
warrants trade on The Nasdaq Capital Market under the symbol “WKSP” and “WKSPW,” respectively. |
| |
|
|
| Risk Factors |
|
You should carefully consider
the information set forth in this prospectus and, in particular, the specific factors set forth in the “Risk Factors”
section beginning on page S-12 of this prospectus supplement before deciding whether or not to invest in shares of our common stock. |
| |
|
|
| Transfer Agent and Registrar |
|
Vstock Transfer, LLC |
| |
|
|
| Concurrent Private Placement |
|
In a concurrent private placement, we are selling to the purchasers of securities in this offering warrants to purchase
up to 7,000,000 shares of our Common Stock at an exercise price of $1.34 per share. We will receive proceeds from such warrants solely
to the extent they are exercised for cash. The warrants and the shares of our common stock issuable upon the exercise of the warrants
are not being offered pursuant to this prospectus supplement and the accompanying prospectus. The private placement warrants will become
exercisable six (6) months from issuance and will expire five years and six months from the issuance date. See “Private Placement
Transaction.” |
| |
|
|
| Placement Agent |
|
We have engaged Maxim Group
LLC as our exclusive placement agent (the “Placement Agent”) in connection with this offering. Maxim Group LLC is not
required to buy or sell any specific number or dollar amount of the securities offered hereby, but it will use its best efforts to
solicit offers to purchase the securities offered by this prospectus. See “Plan of Distribution” on page S-20
of this prospectus supplement. |
| (1) |
The number of shares of
common stock to be outstanding after this offering is based on 17,507,115 shares of common stock outstanding as of October 31, 2023,
and excludes: |
| |
● |
455,000 shares of our common
stock issuable pursuant to options granted pursuant to the Worksport Ltd. 2015 Equity Incentive Plan (the “2015 Plan”)
with a weighted exercise of $2.54 per share, of which a total of 395,000 option shares have vested; |
| |
|
|
| |
● |
190,000 shares of our common
stock issuable pursuant to options granted pursuant to the Worksport Ltd. 2021 Equity Incentive Plan (the “2021 Plan”)
with a weighted exercise of $4.56 per share, of which a total of 145,000 have vested; |
| |
|
|
| |
●
|
967,056
shares of our common stock issuable pursuant to options granted pursuant to the Worksport Ltd. 2022 Equity Incentive Plan (the “2022
Plan”) with a weighted exercise of $2.30 per share, of which a total of 132,500 option shares have vested;
|
| |
●
|
300,000
shares of common stock underlying PSUs, of which 90,000 PSUs have vested;
|
| |
● |
1,870,212 shares of common
stock underlying RSUs; |
| |
|
|
| |
●
|
2,000,000
of our common stock issuable pursuant to options granted with a weighted exercise of $1.74 per share, of which a total of 400,000
option shares have vested;
|
| |
● |
Warrants
exercisable for an aggregate of 4,239,924 shares of common stock with a weighted exercise price of $5.72 per share; and
|
| |
● |
7,000,000 shares of our
common stock issuable pursuant to the exercise of the Warrants issued in the concurrent private placement with an exercise price
of $1.34 per share. |
| (2) |
Unless otherwise indicated,
this prospectus supplement reflects and assumes no exercise of the options and warrants described above. |
RISK
FACTORS
Investing
in our securities involves a high degree of risk. You should carefully consider the risks listed below and other information included
and incorporated by reference in this prospectus supplement and accompanying prospectus. There may also be risks of which we are currently
unaware, or that we currently regard as immaterial based on the information available to us that later prove to be material. If any of
these risks occur, our business, operating results and financial condition could be seriously harmed, the trading price of our common
stock could decline, and you could lose some or all of your investment.
Risks
Related to Our Business
Geopolitical
tensions and conflicts in the Middle East, specifically the Israel-Palestinian war, may lead to global economic instability and adversely
affect supply chains, which may adversely impact our operations, financial conditions and business prospects.
While
we do not have any direct operations or significant sales in the Middle East, geopolitical tensions and ongoing conflicts in the region,
particularly between Israel and Palestine, may lead to global economic instability and fluctuating energy prices that could materially
affect our business. It is not possible to predict the broader consequences of the Israel-Palestinian war, including related geopolitical
tensions, and the measures and actions taken by other countries in respect thereof, which could materially 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,
the Israel-Palestinian war 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.
Risks
Related to this Offering and Ownership of our Securities
The
price of our common stock may be adversely affected by the future issuance and sale of shares of our common stock or other equity securities.
We
cannot predict the size of future issuances or sales of our common stock or other equity securities, future acquisitions or capital raising
activities, or the effect, if any, that such issuances or sales may have on the market price of our common stock. The issuance and sale
of substantial amounts of common stock or other equity securities or announcement that such issuances and sales may occur, could adversely
affect the market price of our common stock.
There
is no public market for the Pre-Funded Warrants.
There
is no public trading market for the Pre-Funded Warrants being offered in this offering, and we do not expect a market to develop. In
addition, we do not intend to list the Pre-Funded Warrants on The Nasdaq Capital Market or any other national securities exchange or
nationally recognized trading system. Without an active trading market, the liquidity of the Pre-Funded Warrants will be limited.
Holders
of the Pre-Funded Warrants will have no rights as holders of Common Stock until they exercise their Pre-Funded Warrants and acquire common
stock.
Until
holders of the Pre-Funded Warrants acquire shares of common stock upon exercise of the Pre-Funded Warrants, holders of the Pre-Funded
Warrants will have no rights with respect to the shares of our common stock issuable upon exercise of such Pre-Funded Warrants. Upon
exercise of the Pre-Funded Warrants, the holders thereof will be entitled to exercise the rights of a holder of common stock only as
to matters for which the record date occurs after the exercise date.
We
will not receive any meaningful amount of additional funds upon the exercise of the Pre-Funded Warrants.
Each
Pre-Funded Warrant will be exercisable and will have no expiration date and by means of payment of the nominal cash purchase price upon
exercise. Accordingly, we will not receive any or any meaningful additional funds upon the exercise of the Pre-Funded Warrants.
Future
sales by stockholders, or the perception that such sales may occur, may depress the price of our common stock.
The
sale or availability for sale of substantial amounts of our shares in the public market or exercise of common stock warrants and options
or settlement of restricted stock units, or the perception that such sales could occur, could adversely affect the market price of our
common stock and also could impair our ability to raise capital through future offerings of our shares. As of October 31, 2023 we had
17,507,115 outstanding shares of common stock. Any decline in the price of our common stock may encourage short sales, which could place
further downward pressure on the price of our common stock and may impair our ability to raise additional capital through the sale of
equity securities.
The
issuance of shares upon exercise of derivative securities may cause immediate and substantial dilution to our existing stockholders.
The
issuance of shares upon exercise of options and settlement of outstanding restricted stock units may result in substantial dilution to
the interests of other stockholders since these selling stockholders may ultimately convert or exercise and sell all or a portion of
the full amount issuable upon exercise. If all derivative securities outstanding as of October 31, 2023 were converted or exercised into
shares of common stock, there would be approximately an additional 7.3 million shares of common stock outstanding as a result. The issuance
of these shares will have the effect of further diluting the proportionate equity interest and voting power of holders of our common
stock.
Since
we have broad discretion in how we use the proceeds from this offering, we may use the proceeds in ways in which you disagree.
Our
management will have significant flexibility in applying the net proceeds of this offering. You will be relying on the judgment of our
management with regard to the use of these net proceeds, and you will not have the opportunity, as part of your investment decision,
to assess whether the proceeds are being used appropriately. It is possible that the net proceeds will be invested in a way that does
not yield a favorable, or any, return for our company. The failure of our management to use such funds effectively could have a material
adverse effect on our business, financial condition, operating results and cash flow.
Purchasers
of our common stock will incur immediate dilution.
Purchasers
of shares of common stock in this offering will experience immediate and substantial dilution because the purchase price of the common
stock will be higher than the net tangible book value per share of the outstanding common stock immediately after this offering. In addition,
purchasers will experience dilution, which may be substantial, when we issue additional shares of common stock that we are permitted
or required to issue under options, our stock equity incentive plans or other employee or director compensation plans. Because the sales
of the shares offered hereby will be made directly into the market, the prices at which we sell these shares will vary and these variations
may be significant. Purchasers of the shares we sell, as well as our existing stockholders, will experience significant dilution if we
sell shares at prices significantly below the price at which they invested. See “Dilution” for a more detailed discussion
of the dilution you will incur if you purchase common stock in this offering.
We
currently do not intend to declare dividends on our common stock in the foreseeable future and, as a result, your returns on your investment
may depend solely on the appreciation of our common stock.
We
currently do not expect to declare any dividends on our common stock in the foreseeable future. Instead, we anticipate that all of our
earnings in the foreseeable future will be used to provide working capital, to support our operations and to finance the growth and development
of our business. Any determination to declare or pay dividends in the future will be at the discretion of our Board subject to applicable
laws and dependent upon a number of factors, including our earnings, capital requirements and overall financial conditions. In addition,
terms of any future debt or preferred securities may further restrict our ability to pay dividends on our common stock. Accordingly,
your only opportunity to achieve a return on your investment in our common stock may be if the market price of our common stock appreciates
and you sell your shares at a profit. The market price for our common stock may never exceed, and may fall below, the price that you
pay for such common stock. See “Dividend Policy.”
Our
Chief Executive Officer and Chairman, Steven Rossi, has significant control over stockholder matters and the minority stockholder will
have little or no control over our affairs.
Steven
Rossi currently owns 100% of our outstanding Series A Preferred Stock which entitles him to 51% of the voting power of our outstanding
voting equity. Subject to any fiduciary duties owed to our other stockholders under Nevada law, Mr. Rossi is able to exercise significant
influence over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions,
and will have some control over our management and policies. Mr. Rossi may have interests that are different from yours. For example,
Mr. Rossi may support proposals and actions with which you may disagree. The concentration of ownership could delay or prevent a change
in control of our Company or otherwise discourage a potential acquirer from attempting to obtain control of our Company, which in turn
could reduce the price of our stock. In addition, Mr. Rossi could use his voting influence to maintain our existing management and directors
in office, delay or prevent changes in control of our Company, or support or reject other management and Board proposals that are subject
to stockholder approval, such as amendments to our employee stock plans and approvals of significant financing transactions.
As
a “controlled company” under the rules of Nasdaq, we may choose to exempt our Company from certain corporate governance requirements
that could have an adverse effect on our public shareholders.
Steven
Rossi, our founder and Chief Executive Officer, has voting control over approximately 57.97% of our outstanding voting stock. Upon the
closing of this Offering, Mr. Rossi, will own approximately 57.29% of the voting power of our outstanding voting stock. We currently
meet the definition of a “controlled company” under the corporate governance standards for Nasdaq listed companies and for
so long as we remain a controlled company under this definition, we are eligible to utilize certain exemptions from the corporate governance
requirements of Nasdaq.
As
long as our officers and directors, either individually or in the aggregate, own at least 50% of the voting power of our Company, we
are a “controlled company” as defined under the listing rules of Nasdaq. For so long as we are a controlled company under
this definition, we are permitted to elect to rely, and may rely, on certain exemptions from corporate governance rules, including:
| |
● |
an
exemption from the rule that a majority of our Board must be independent directors;
|
| |
● |
an exemption from the rule
that the compensation of our chief executive officer must be determined or recommended solely by independent directors; and |
| |
|
|
| |
● |
an
exemption from the rule that our director nominees must be selected or recommended solely by independent directors. |
Although
we do not intend to rely on the “controlled company” exemption under the Nasdaq listing rules, we could elect to rely on
this exemption in the future. If we elect to rely on the “controlled company” exemption, a majority of the members of our
Board might not be independent directors and our nominating and corporate governance and compensation committees might not consist entirely
of independent directors.
As
a result, you will not have the same protection afforded to shareholders of companies that are subject to these corporate governance
requirements. Our status as a controlled company could cause our Common Stock to look less attractive to certain investors or otherwise
harm our trading price.
SPECIAL
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus, the documents incorporated by reference herein and therein, and other written and oral statements we make from time to time
contain certain “forward-looking” statements within the meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”). You can identify these forward-looking statements by the
fact they use words such as “could,” “expect,” “anticipate,” “estimate,” “target,”
“may,” “project,” “guidance,” “intend,” “plan,” “believe,” “will,”
“potential,” “opportunity,” “future,” and other words and terms of similar meaning and expression
in connection with any discussion of future operating or financial performance. You can also identify forward-looking statements by the
fact that they do not relate strictly to historical or current facts. Such forward-looking statements are based on current expectations
and involve inherent risks and uncertainties, including factors that could delay, divert, or change any of them, and could cause actual
outcomes to differ materially from current expectations. These statements are likely to relate to, among other things, our business strategy,
our research and development, our product development efforts, our ability to commercialize our product candidates, the activities of
our licensees, our prospects for initiating partnerships or collaborations, the timing of the introduction of products, the effect of
new accounting pronouncements, uncertainty regarding our future operating results and our profitability, anticipated sources of funds
as well as our plans, objectives, expectations, and intentions.
We
have included more detailed descriptions of these risks and uncertainties and other risks and uncertainties applicable to our business
that we believe could cause actual results to differ materially from any forward-looking statement in the “Risk Factors”
sections of this prospectus and the documents incorporated by reference herein including, but not limited to, the risk factors incorporated
by reference from our filings with the SEC. We encourage you to read those descriptions carefully. Although we believe we have been prudent
in our plans and assumptions, no assurance can be given that any goal or plan set forth in forward-looking statements can be achieved.
We caution investors not to place significant reliance on forward-looking statements; such statements need to be evaluated in light of
all the information contained and incorporated by reference in this prospectus. Furthermore, the statements speak only as of the date
of each document, and we undertake no obligation to update or revise these statements.
USE
OF PROCEEDS
We
estimate the net proceeds to us from this offering will be approximately $4.2 million, after deducting the Placement Agent fee and estimated
offering expenses payable by us. We intend to use the net proceeds from this offering for general corporate purposes, including working
capital.
The
amount, timing and nature of specific expenditures of net proceeds from this offering will depend on a number of factors, including the
timing, scope, progress and results of our development efforts and the timing and progress of any collaboration efforts. As of the date
of this prospectus supplement, we cannot specify with certainty all of the particular uses of the proceeds from this offering. Accordingly,
we will retain broad discretion over the use of such proceeds.
DIVIDEND
POLICY
We
have not declared any cash dividends since inception and we do not anticipate paying any dividends in the foreseeable future. Instead,
we anticipate that all of our earnings will be used to provide working capital, to support our operations, and to finance the growth
and development of our business, including potentially the acquisition of, or investment in, businesses, technologies or products that
complement our existing business. The payment of dividends is within the discretion of the Board and will depend on our earnings, capital
requirements, financial condition, prospects, applicable Delaware law, which provides that dividends are only payable out of surplus
or current net profits, and other factors our Board might deem relevant. There are no restrictions that currently limit our ability to
pay dividends on our common stock other than those generally imposed by applicable state law.
CAPITALIZATION
The
following table sets forth our consolidated cash and capitalization, as of June 30, 2023. Such information is set forth on the following
basis:
| |
● |
on an actual basis; |
| |
|
|
| |
● |
on a pro forma basis to
reflect the issuance of 94,693 shares sold under the ATM agreement after June 30, 2023 and prior to the date of this prospectus supplement;
and |
| |
|
|
| |
● |
on a pro forma as adjusted
basis to reflect our receipt of the net proceeds our sale and issuance of 1,925,000 shares of common stock and 1,575,000 Pre-Funded
Warrants in this offering based on the public offering price of $1.34 per share of common stock and $1.3399 per Pre-Funded Warrant,
after deducting estimated placement agent fees and estimated offering expenses of $428,300 payable by us and after the use of net
proceeds therefrom. |
You
should read the following table in conjunction with “Use of Proceeds,” “Management’s Discussion and
Analysis of Financial Condition and Results of Operations” and our financial statements and related notes included in this
prospectus. The following table sets forth our cash, cash equivalents and investments and capitalization as of June 30, 2023 (in thousands):
| | |
Actual | | |
Pro
Forma(1) | | |
Pro Forma as adjusted(1) | |
| Cash, cash equivalents and investments | |
$ | 5,902,235 | | |
$ | 6,109,343 | | |
$ | 10,371,078 | |
| | |
| | | |
| | | |
| | |
| Long term lease liability | |
$ | 693,289 | | |
$ | 693,289 | | |
$ | 693,289 | |
| | |
| | | |
| | | |
| | |
| Common stock, $0.0001 par value; 299,000,000 shares authorized at June 30, 2023; 17,413,810 shares issued and outstanding at June 30, 2023; 17,508,503 shares issued and outstanding, pro forma; 19,432,115 shares issued and outstanding, pro forma as adjusted | |
$ | 1,742 | | |
$ | 1,751 | | |
$ | 1,944 | |
| Additional paid-in capital | |
$ | 58,615,849 | | |
$ | 58,822,947 | | |
$ | 63,084,490 | |
| Share subscriptions receivable | |
$ | (1,577 | ) | |
$ | (1,577 | ) | |
$ | (1,577 | ) |
| Share subscriptions payable | |
$ | 1,494,885 | | |
$ | 1,494,885 | | |
$ | 1,494,885 | |
| Accumulated deficit | |
$ | (40,704,944 | ) | |
$ | (40,704,944 | ) | |
$ | (40,704,944 | ) |
| Cumulative translation adjustment | |
$ | (8,580 | ) | |
$ | (8,580 | ) | |
$ | (8,580 | ) |
| Total stockholders’ equity | |
$ | 19,397,375 | | |
$ | 19,604,483 | | |
$ | 23,866,218 | |
| Total capitalization | |
$ | 20,090,664 | | |
$ | 20,297,772 | | |
$ | 24,559,507 | |
| (1) |
Does not include the following: |
| |
● |
455,000 shares of our common stock issuable pursuant to options granted pursuant to the Worksport Ltd. 2015 Equity Incentive Plan (the “2015 Plan”) with a weighted exercise of $2.54 per share, of which a total of 395,000 option shares have vested; |
| |
|
|
| |
● |
190,000 shares of our common
stock issuable pursuant to options granted pursuant to the Worksport Ltd. 2021 Equity Incentive Plan (the “2021 Plan”)
with a weighted exercise of $4.56 per share, of which a total of 145,000 have vested; |
| |
|
|
| |
●
|
967,056
shares of our common stock issuable pursuant to options granted pursuant to the Worksport Ltd. 2022 Equity Incentive Plan (the “2022
Plan”) with a weighted exercise of $2.30 per share, of which a total of 132,500 option shares have vested;
|
| |
●
|
300,000
shares of common stock underlying PSUs, of which 90,000 PSUs have vested;
|
| |
● |
1,870,212 shares of common
stock underlying RSUs; |
| |
|
|
| |
●
|
2,000,000
of our common stock issuable pursuant to options granted with a weighted exercise of $1.74 per share, of which a total of 400,000
option shares have vested;
|
| |
● |
Warrants
exercisable for an aggregate of 4,239,924 shares of common stock with a weighted exercise price of $5.72 per share; and
|
| |
● |
7,000,000 shares of our
common stock issuable pursuant to the exercise of the Warrants issued in the concurrent private placement with an exercise price
of $1.34 per share. |
DILUTION
Purchasers
of our securities in this offering will experience an immediate and substantial dilution in the net tangible book value of their shares
of our common stock. Dilution in net tangible book value represents the difference between the public offering price per share of common
stock and the pro forma net tangible book value per share of our common stock immediately after the offering.
The
historical net tangible book value of our common stock as of June 30, 2023 was $18,057,228 or $1.04 per share. Historical net tangible
book value per share of our common stock represents our total tangible assets (total assets less intangible assets) less total liabilities
divided by the number of shares of our common stock outstanding as of that date.
After
giving effect to the issuance of 94,693 shares sold under the ATM agreement, our pro forma net tangible book value as of June 30, 2023
would have been $18,264,336 or approximately $1.04 per share of our common stock.
After
giving effect to the sale of up to 1,925,000 shares of common stock and 1,575,000 Pre-Funded Warrants in this offering at a public offering
price of $1.34 per share of common stock and $1.3399 per Pre-Funded Warrant for net proceeds of approximately $4,261,735 as if such offering
and such share issuances had occurred on June 30, 2023, our pro forma as adjusted net tangible book value as of June 30, 2023, would
have been $22,526,071 or approximately $1.16 per share of our common stock. This represents an immediate increase in net tangible book
value per share of $0.12 to the existing stockholders and an immediate dilution in net tangible book value per share of $0.18 to new
investors. We determine dilution by subtracting the pro forma as adjusted net tangible book value per share after this offering from
the amount of cash that a new investor paid for a share of common stock in this offering. The following table illustrates this per share
dilution to new investors:
| Public offering price per share | |
| | | |
$ | 1.34 | |
| Historical net tangible book value per share as of June 30, 2023 | |
$ | 1.04 | | |
| | |
| Increase in net tangible book value per share attributable to the pro forma adjustments described above | |
$ | - | | |
| | |
| Pro forma net tangible book value per share as of June 30, 2023 | |
$ | 1.04 | | |
| | |
| Increase in pro forma net tangible book value per share after giving effect to the offering | |
$ | 0.12 | | |
| | |
| Pro forma as adjusted net tangible book value per share as of June 30, 2023 after the offering | |
$ | 1.16 | | |
| | |
| Dilution per share to investors in this public offering | |
| | | |
$ | 0.18 | |
After
completion of this offering, our existing stockholders would own approximately 90% and our new investors would own approximately 10%
of the total number of shares of our common stock outstanding after this offering.
The
above discussion and table are based on 17,413,810 shares
of our common stock outstanding as of June 30, 2023, and excludes as of such date: (i) 1,302,500 shares of our common stock issuable
pursuant to options granted pursuant to our Plans; (ii) 300,000 shares of common stock underlying PSUs and PSUs; (iii) 2,000,000 shares
of our common stock issuable pursuant to options granted; and (iv) 850,000 shares of common stock underlying warrants.
To
the extent that outstanding options or warrants are exercised, you will experience further dilution. In addition, we may choose to raise
additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or
future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the
issuance of these securities may result in further dilution to our stockholders.
Capitalization
Table
| | |
Shares
Purchased | | |
Total Consideration | | |
| |
| | |
Number | | |
Percent | | |
Amount | | |
Percent | | |
Per Share | |
| Existing stockholders | |
| 17,508,502 | | |
| 90 | % | |
$ | 58,824,699 | | |
| 93 | % | |
$ | 3.36 | |
| New Investors | |
| 1,925,000 | | |
| 10 | % | |
$ | 4,261,735 | | |
| 7 | % | |
$ | 2.21 | |
| | |
| 19,433,502 | | |
| 100 | % | |
$ | 63,086,434 | | |
| 100 | % | |
$ | 5.57 | |
DESCRIPTION
OF SECURITIES
Description
of the Common Stock
A
description of the common stock we are offering pursuant to this prospectus supplement is set forth under the heading
“Description of Capital Stock – Common Stock,” starting on page 17 of the accompanying prospectus. As of
October 31, 2023, we had 17,507,115 shares of common stock outstanding.
Description
of the Pre-Funded Warrants
Exercisability.
The Pre-Funded Warrants are exercisable at any time after their original issuance until they are exercised in full. The Pre-Funded Warrants
will be exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice accompanied
by payment in full in immediately available funds for the number of shares of our common stock subscribed for upon such exercise (except
in the case of a cashless exercise as discussed below). If a registration statement registering the issuance of the shares of our common
stock underlying the Pre-Funded Warrants under the Securities Act is not effective or available, the holder may, in its sole discretion,
elect to exercise the Pre-Funded Warrants through a cashless exercise, in which case the holder would receive upon such exercise the
net number of shares of our common stock determined according to the formula set forth in the Pre-Funded Warrants. No fractional shares
of our common stock will be issued in connection with the exercise of a Pre-Funded Warrant. In lieu of fractional shares, we will pay
the holder an amount in cash equal to the fractional amount multiplied by the exercise price.
Exercise
Limitation. A holder will not have the right to exercise any portion of the Pre-Funded Warrants if the holder (together with
its affiliates) would beneficially own in excess of 4.99% (or, upon election by a holder prior to the issuance of any warrants, 9.99%)
of the number of shares of our common stock outstanding immediately after giving effect to the exercise, as such percentage ownership
is determined in accordance with the terms of the Pre-Funded Warrants. However, any holder may increase or decrease such percentage to
any other percentage not in excess of 9.99%, upon at least 61 days’ prior notice from the holder to us with respect to any increase
in such percentage.
Exercise
Price. The exercise price for the Pre-Funded Warrants is $0.0001 per share. The exercise price and number of shares of common
stock issuable upon exercise will adjust in the event of certain stock dividends and distributions, stock splits, stock combinations,
reclassifications, dilutive issuances or similar events.
Fundamental
Transactions. In the event of a fundamental transaction, as described in the Pre-Funded Warrants, and generally including, with
certain exceptions, any reorganization, recapitalization or reclassification of our shares of common stock, the sale, transfer or other
disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition
of more than 50% of our outstanding shares of common stock, or any person or group becoming the beneficial owner of 50% of the voting
power represented by our outstanding shares of common stock, the holders of the Pre-Funded Warrants will be entitled to receive upon
exercise thereof the kind and amount of securities, cash or other property that the holders would have received had they exercised the
warrants immediately prior to such fundamental transaction.
Rights
as a Shareholder. Except as otherwise provided in the Pre-Funded Warrants or by virtue of such holder’s ownership of our
shares of common stock, the holder of a Pre-Funded Warrant does not have the rights or privileges of a holder of our shares of common
stock, including any voting rights, until the holder exercises the Pre-Funded Warrant.
Transferability.
Subject to applicable laws, the Pre-Funded Warrants may be offered for sale, sold, transferred or assigned without our consent.
Exchange
Listing. We do not intend to apply for listing of the Pre-Funded Warrants on any exchange or market.
Governing
Law. The Pre-Funded Warrants are governed by New York law.
PRINCIPAL
STOCKHOLDERS
The
following table sets forth certain information regarding the beneficial ownership of our common stock as of October 31, 2023 by (a) each
stockholder who is known to us to beneficially own more than 5% of our common stock, (b) directors, (c) our executive officers and (d)
all executive officers and directors as a group. Beneficial ownership is determined according to the SEC rules, and generally means that
person has beneficial ownership of a security if he, she, or it possesses sole or shared voting or investment power of that security
and includes options, warrants and other securities convertible or exercisable into shares of common stock, provided that such securities
are currently exercisable or convertible or exercisable or convertible within 60 days of the date hereof. Each director or officer, as
the case may be, has furnished us with information with respect to their beneficial ownership. Except as otherwise indicated, all persons
listed below have (i) sole voting power and investment power with respect to their common stock, except to the extent that authority
is shared by spouses under applicable law and (ii) record and beneficial ownership with respect to their common stock.
| Name and Address of Beneficial Owner(1) | |
Common Stock Beneficially Owned | | |
Percentage of Common Stock Beneficially Owned(2) | | |
Percentage of Series A Preferred Stock Beneficially Owned | | |
Percentage
of Voting Power Prior to Offering | | |
Percentage
of Voting Power After the Offering | |
| Directors and Executive Officers: | |
| | | |
| | | |
| | | |
| | | |
| | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Steven Rossi—CEO, President, and Chairman of the Board | |
| 2,992,538 | (3) | |
| 16.69 | % | |
| 100 | %(4) | |
| 57.97 | % | |
| 57.26 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
Michael Johnston
—CFO | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
Lorenzo Rossi
—Director | |
| — | | |
| — | | |
| — | | |
| — | | |
| — | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
Craig Loverock
—Director | |
| 60,000 | (5) | |
| * | | |
| — | | |
| — | | |
| — | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
William Caragol
—Director | |
| 60,000 | (6) | |
| * | | |
| — | | |
| — | | |
| — | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
Ned L. Siegel
—Director | |
| 60,000 | (7) | |
| * | | |
| — | | |
| — | | |
| — | |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| All officers and directors as a group (6 persons) | |
| 3,172,538 | | |
| 17.69 | % | |
| 100 | % | |
| 58.48 | % | |
| 57.74 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| 5%+ Stockholders: | |
| | | |
| | | |
| | | |
| | | |
| | |
| AI Media Data LLC | |
| 1,850,000 | (8) | |
| 10.61 | % | |
| — | | |
| 2.66 | % | |
| 2.4 | % |
| | |
| | | |
| | | |
| | | |
| | | |
| | |
| Leonite Capital LLC | |
| 894,134 | (9) | |
| 5.13 | % | |
| — | | |
| 2.36 | % | |
| 2.13 | % |
| * |
Represents less than 1%. |
| |
|
| (1) |
Unless otherwise indicated,
the address for each person is c/o Worksport Ltd., 2500 N America Dr. West Seneca, NY 14224. |
| |
|
| (2) |
Based on 17,507,115 shares
of common stock outstanding as of October 31, 2023. Any shares of common stock not outstanding which are issuable upon the exercise
or conversion of other securities held by a person within the next 60 days are considered to be outstanding when computing such person’s
ownership percentage of common stock but are not when computing anyone else’s ownership percentage. |
| (3) |
Includes (i) 100,000 shares
of common stock issuable upon the exercise of vested options at a price of $5.50 per share until August 6, 2026 and (ii) 400,000
shares of common stock issuable upon the exercise of vested options at a price of $1.74 per share until May 1, 2033. Mr. Rossi also
owns 100 shares of Series A Preferred Stock entitling him to 51% of the voting power of the corporation. |
| |
|
| (4) |
Mr. Rossi owns 100 shares
of Series A Preferred Stock entitling him to 51% of the voting power of the Company. |
| (5) |
Includes (i) 15,000 shares
of restricted shares of common stock granted on September 6, 2021 and that vested on January 1, 2022, (ii) 15,000 shares of common
stock issuable upon the exercise of vested options at a price of $5.50 per share until August 6, 2026, (iii) 10,000 shares of common
stock issuable upon the exercise of vested options at a price of $2.51 per share until December 29, 2026 and (iv) 20,000 shares of
common stock issuable upon the exercise of vested options at a price of $1.66 per share until January 30, 2033. |
| |
|
| (6) |
Includes (i) 15,000 shares
of restricted shares of common stock granted on September 6, 2021 and that vested on January 1, 2022, (ii) 15,000 shares of common
stock issuable upon the exercise of vested options at a price of $5.50 per share until August 6, 2026, (iii) 10,000 shares of common
stock issuable upon the exercise of vested options at a price of $2.51 per share until December 29, 2026 and (iv) 20,000 shares of
common stock issuable upon the exercise of vested options at a price of $1.66 per share until January 30, 2033. |
| |
|
| (7) |
Includes (i) 15,000 shares
of restricted shares of common stock granted on September 6, 2021 and that vested on January 1, 2022, (ii) 15,000 shares of common
stock issuable upon the exercise of vested options at a price of $5.50 per share until August 6, 2026, (iii) 10,000 shares of common
stock issuable upon the exercise of vested options at a price of $2.51 per share until December 29, 2026 and (iv) 20,000 shares of
common stock issuable upon the exercise of vested options at a price of $1.66 per share until January 30, 2033. |
| |
|
| (8) |
Includes (i) 600,000 shares
of common stock issuable upon the exercise of vested warrants held by Wesley van de Wiel, (ii) 300,000 shares of common stock issuable
upon the exercise of vested stock options held by Wesley van de Wiel, and (iii) 950,000 vested RSUs held by AI Media Data LLC, an
entity of which Mr. Wesley Van De Wiel is the control person. The address for Mr. Van De Wiel is Borodinstraat 164,5011 HE Tilburg,
Noord Brabant -The Netherlands. |
| |
|
| (9) |
Includes 50,000 shares
of common stock issuable upon the exercise of vested warrants. Mr. Avi Geller is the Chief Investment Officer of Leonite Capital
LLC and is deemed to have voting and dispositive control over the securities held by Leonite Capital LLC. The address of Leonite
Capital LLC is 1 Hillcrest Center Dr, Suite 232, Spring Valley, NY 10977. |
PLAN
OF DISTRIBUTION
Pursuant to a placement agency agreement, dated as of October 31, 2023,
we have engaged Maxim Group LLC, to act as our exclusive Placement Agent to solicit offers to purchase the applicable securities offered
by this prospectus supplement. The Placement Agent is not purchasing or selling any securities, nor is it required to arrange for the
purchase and sale of any specific number or dollar amount of securities, other than to use its “best efforts” to arrange for
the sale of all of the securities offered hereby. We have entered into securities purchase agreement directly with certain investors in
connection with this offering for the sale of all of the securities offered hereby (and the issuance of the private placement warrants,
which are not being offered herein, but are being issued in a separate concurrent offering, exempt from registration under the Securities
Act).
The
placement agency agreement provides that the Placement Agent’s obligations are subject to conditions contained in the placement
agency agreement.
We
will deliver the securities being issued to the investors upon receipt of investor funds for the purchase of the securities offered pursuant
to this prospectus supplement. We expect to deliver the securities being offered pursuant to this prospectus supplement on or about November
2, 2023.
Placement
Agent Fees, Commissions and Expenses
Upon
the closing of this offering, we will pay the Placement Agent a cash transaction fee equal to 7% of the aggregate gross cash proceeds
to us from the sale of the securities in the offering. Pursuant to the placement agency agreement, we will agree to reimburse the Placement
Agent for certain out-of-pocket expenses of the Placement Agent payable by us, in an aggregate amount not to exceed $100,000.
The
following table shows the public offering price, Placement Agent fees and proceeds, before expenses, to us.
| | |
Per Share | | |
Per Pre-Funded Warrant | | |
Total | |
| Public offering price | |
$ | 1.34 | | |
$ | 1.3399 | | |
$ | 4,689,842.50 | |
| Placement agent fees (7%) | |
$ | 0.0938 | | |
$ | 0.0938 | | |
$ | 328,300.00 | |
| Proceeds, before expenses, to us | |
$ | 1.2462 | | |
$ | 1.2461 | | |
$ | 4,361,542.50 | |
We
estimate that the total expenses of the offering, including registration, filing and listing fees, printing fees and legal and accounting
expenses, but excluding the Placement Agent commission, will be approximately $428,300, all of which are payable by us. This figure does
not include, among other things, the Placement Agent’s fees and expenses (including the legal fees, costs and expenses for the
Placement Agent’s legal counsel) up to $100,000.
Indemnification
We
have agreed to indemnify the Placement Agent against certain liabilities, including liabilities under the Securities Act, and to contribute
to payments that the Placement Agent may be required to make for these liabilities.
Regulation
M
The
Placement Agent may be deemed to be an underwriter within the meaning of Section 2(a)(11) of the Securities Act, and any commissions
received by it and any profit realized on the resale of the securities sold by it while acting as principal might be deemed to be underwriting
discounts or commissions under the Securities Act. As an underwriter, the Placement Agent would be required to comply with the requirements
of the Securities Act and the Exchange Act, including, without limitation, Rule 10b-5 and Regulation M under the Exchange Act. These
rules and regulations may limit the timing of purchases and sales of our securities by the Placement Agent acting as principal. Under
these rules and regulations, the Placement Agent (i) may not engage in any stabilization activity in connection with our securities and
(ii) may not bid for or purchase any of our securities or attempt to induce any person to purchase any of our securities, other than
as permitted under the Exchange Act, until it has completed its participation in the distribution.
Electronic
Distribution
A
prospectus supplement in electronic format may be made available on a website maintained by the Placement Agent. In connection with the
offering, the Placement Agent or selected dealers may distribute prospectuses electronically. No forms of electronic prospectus other
than prospectuses that are printable as Adobe® PDF will be used in connection with this offering.
Other
than the prospectus supplement in electronic format, the information on the Placement Agent’s website and any information contained
in any other website maintained by the Placement Agent is not part of the prospectus supplement or the registration statement of which
this prospectus supplement forms a part, has not been approved and/or endorsed by us or the Placement Agent in its capacity as Placement
Agent and should not be relied upon by investors.
The foregoing
does not purport to be a complete statement of the terms and conditions of the placement agency agreement and the securities purchase
agreement. A copy of the placement agency agreement and the securities purchase agreement with the purchasers will be included as an exhibit
to our Current Report on Form 8-K to be filed with the SEC and incorporated by reference into the registration statement of which this
prospectus supplement and the accompanying prospectus form a part. See “Where You Can Find More Information” and “Information
We Incorporate By Reference.”
Tail Fee
If within nine months following the consummation of
this offering, we complete any financing of equity, equity-linked, convertible or debt financing or any other capital raising activity
with, or receive any proceeds from, any of the investors contacted or introduced to us by the Placement Agent during the engagement term,
then the Company shall pay to the Placement Agent upon the closing of such financing or receipt of such proceeds 7% of such proceeds.
Lock-Up Agreements
In addition, pursuant to certain “lock-up”
agreements (each, a “Lock-Up Agreement”) that were required to be entered into as a condition to the closing of the offering,
our officers and directors have agreed, for a period of 90 days from October 31, 2023, not to engage in any of the following, whether
directly or indirectly: offer to sell, sell, contract to sell pledge, grant, lend or otherwise transfer or dispose of our Common Stock
or any securities convertible into or exercisable or exchangeable for Common Stock of the Company (the “Lock-Up Securities”);
enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership
of the Lock-Up Securities; make any demand for or exercise any right or cause to be filed a registration statement, including any amendments
thereto, with respect to the registration of any Lock-Up Securities; enter into any transaction, swap, hedge or other arrangement relating
to any Lock-Up Securities subject to customary exceptions; or publicly disclose the intention to do any of the foregoing.
From the date hereof until 90 days after the after the closing of this offering, subject to certain exceptions,
we may not issue, enter into any agreement to issue or announce the issuance or proposed issuance of any shares of Common Stock or Common
Stock equivalents, or file any registration statement or any amendment or supplement thereto, other than a prospectus supplement for the
registration statement of which this prospectus supplement forms a part. In addition, from the date of this prospectus supplement until
180 days after the closing of this offering, we are prohibited from effecting or entering into an agreement to effect any issuance of
Common Stock or Common Stock equivalents involving a variable rate transaction, provided,
however, that this prohibition is not applicable to the offer, sale and issuance of shares of Common Stock in connection with that certain
At the Market Offering Agreement dated as of September 30, 2022, by and between the Company and H.C. Wainwright & Co., LLC from the
period ninety (90) days after the closing of this offering and thereafter.
Certain
Relationships
The
Placement Agent and its affiliates have and may in the future provide, from time to time, investment banking and financial advisory services
to us in the ordinary course of business, for which they may receive customary fees and commissions.
Transfer
Agent and Registrar
The
transfer agent and registrar for our common stock is Vstock Transfer, LLC, whose address
is 18 Lafayette Place, Woodmere, NY 11598 and telephone number is (212) 828-8436.
Listing
Our
common stock is listed on The Nasdaq Capital Market under the symbol “WKSP.” On October 30, 2023, the last reported sale
price of our common stock on The Nasdaq Capital Market was $1.34.
PRIVATE PLACEMENT TRANSACTION
Concurrently with the sale of shares of Common Stock
and Pre-funded Warrants in this offering, we will issue and sell to the investors in this offering the private placement warrants to purchase
up to an aggregate of 7,000,000 shares of Common Stock at an exercise price equal to $1.34 per share.
The private placement warrants and the shares of Common
Stock issuable upon the exercise of such warrants have not been registered under the Securities Act, are not being offered pursuant to
this prospectus supplement and the accompanying prospectus, and are instead being offered pursuant to an exemption provided in Section
4(a)(2) under the Securities Act and Rule 506 of Regulation D promulgated thereunder. Accordingly, purchasers may only sell the private
placement warrants and the shares of Common Stock issued upon exercise of the private placement warrants pursuant to an effective registration
statement under the Securities Act covering the resale of those shares, an exemption under Rule 144 under the Securities Act or another
applicable exemption under the Securities Act.
The following sets forth the material terms of the
private placement warrants.
Exercisability. The private placement
warrants will become exercisable six (6) months from issuance and will expire five (5) years and six (6) months from the issuance date.
The private placement warrants will be exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed
exercise notice and, at any time a registration statement registering the issuance of the shares of Common Stock underlying the private
placement warrants under the Securities Act is effective and available for the issuance of such shares, or an exemption from registration
under the Securities Act is available for the issuance of such shares, by payment in full in immediately available funds for the number
of shares of Common Stock purchased upon such exercise. If a registration statement registering the issuance of the shares of Common Stock
underlying the private placement warrants under the Securities Act is not effective or available, the holder may, in its sole discretion,
elect to exercise the private placement warrants through a cashless exercise, in which case the holder would receive upon such exercise
the net number of shares of Common Stock determined according to the formula set forth in the warrant.
Exercise Limitation. A holder will not
have the right to exercise any portion of the private placement warrants if the holder (together with its affiliates) would beneficially
own in excess of 4.99% (or, upon election of the holder, 9.99%) of the number of shares of our Common Stock outstanding immediately after
giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the private placement warrants.
However, any holder may increase or decrease such percentage, provided that any increase will not be effective until the 61st day after
such election.
Exercise Price Adjustment. The exercise
price of the private placement warrants is subject to appropriate adjustment in the event of certain stock dividends and distributions,
stock splits, stock combinations, reclassifications or similar events affecting our common stock and also upon any distributions of assets,
including cash, stock or other property to our stockholders.
Exchange Listing. There is no established
trading market for the private placement warrants and we do not expect a market to develop. In addition, we do not intend to apply for
the listing of the private placement warrants on any national securities exchange or other trading market.
Fundamental Transactions. If a fundamental
transaction occurs, then the successor entity will succeed to, and be substituted for us, and may exercise every right and power that
we may exercise and will assume all of our obligations under the private placement warrants with the same effect as if such successor
entity had been named in the warrant itself. If holders of our Common Stock are given a choice as to the securities, cash or property
to be received in a fundamental transaction, then the holder shall be given the same choice as to the consideration it receives upon any
exercise of the private placement warrants following such fundamental transaction. Additionally, as more fully described in the private
placement warrants, in the event of certain fundamental transactions, the holders of those warrants will be entitled to receive consideration
in an amount equal to the Black Scholes value of the remaining unexercised portion of the warrants on the date of consummation of such
transaction.
Rights as a Stockholder. Except as otherwise
provided in the private placement warrants or by virtue of such holder’s ownership of shares of our common stock, the holder of
private placement warrants will not have the rights or privileges of a holder of our Common Stock, including any voting rights, until
the holder exercises the warrant.
Resale/Registration Rights. We are required
within 45 days of the offering to file a registration statement on Form S-3 (or other appropriate form if the Company is not then S-3
eligible) providing for the resale of the shares of common stock issued and issuable upon the exercise of the private placement warrants.
We are required to use commercially reasonable efforts to keep such registration statement effective at all times until no investor owns
any warrants or shares issuable upon exercise thereof.
EXPERTS
The
2021 consolidated financial statements of Worksport Ltd. included in Worksport Ltd.’s Annual Report on Form 10-K for the year ended
December 31, 2022, have been audited by Haynie & Company, the former independent registered public accounting firm of the Company,
as set forth in their report thereon which is incorporated herein by reference. The 2022 consolidated financial statements of Worksport
Ltd. included in Worksport Ltd.’s Annual Report on Form 10-K for the year ended December 31, 2022, have been audited by Lumsden
& McCormick, LLP, the independent registered public accounting firm for the Company, as set forth in their report thereon which is
incorporated herein by reference. Such financial statements have been incorporated by reference in reliance upon the report pertaining
to such financial statements of such firm given upon their authority as experts in accounting and auditing.
LEGAL
MATTERS
Certain
legal matters with respect to the validity of the securities being offered by this prospectus supplement will be passed upon by
Sichenzia Ross Ference Carmel LLP, New York, New York. Lucosky Brookman LLP, Woodbridge, New Jersey is acting as counsel to the Placement Agent with respect to the offering.
WHERE
YOU CAN FIND MORE INFORMATION
We
have filed a registration statement on Form S-3 (including the exhibits, schedules and amendments thereto) with the Securities and Exchange
Commission under the Securities Act with respect to the shares of our common stock offered by this prospectus supplement. This prospectus
supplement is part of that registration statement and does not contain all the information included in the registration statement.
For
further information with respect to our common stock and us, you should refer to the registration statement, its exhibits and the material
incorporated by reference therein. Portions of the exhibits have been omitted as permitted by the rules and regulations of the Securities
and Exchange Commission. Statements made in this prospectus supplement as to the contents of any contract, agreement or other document
referred to are not necessarily complete. In each instance, we refer you to the copy of the contracts or other documents filed as an
exhibit to the registration statement, and these statements are hereby qualified in their entirety by reference to the contract or document.
The registration statement may be obtained from the web site that the Securities and Exchange Commission maintains at www.sec.gov.
We file annual, quarterly and current reports and other information with the Securities and Exchange Commission.
INFORMATION
WE INCORPORATE BY REFERENCE
The
SEC allows us to “incorporate by reference” into this prospectus supplement and the accompanying prospectus the information
in documents we file with it, which means that we can disclose important information to you by referring you to those documents. The
information incorporated by reference is considered to be a part of this prospectus supplement and the accompanying prospectus, and information
that we file later with the SEC will automatically update and supersede this information. Any statement contained in any document incorporated
or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this prospectus supplement
and the accompanying prospectus to the extent that a statement contained in or omitted from this prospectus supplement or the accompanying
prospectus, or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein or therein,
modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this prospectus supplement or the accompanying prospectus.
We
incorporate by reference the documents listed below and any future documents that we file with the SEC (excluding any portion of such
documents that are furnished and not filed with the SEC) under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date
of this prospectus supplement until the offering of the securities is terminated:
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The Registrant’s
Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 31, 2022; |
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The Registrant’s
Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 31, 2023; |
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The Registrant’s
Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023, filed with the SEC on May 5, 2023; |
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The Registrant’s
Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2023, filed with the SEC on August 14, 2023; |
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The Registrant’s
Current Reports on Form 8-K filed with the SEC on August 22, 2023, September 7, 2023, September 11, 2023, September 14, 2023, and
September 19, 2023, to the extent the information in such report is filed and not furnished; and |
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The description of the
Registrant’s common stock, which is contained in a registration statement on Form 8-A12B filed with the SEC on July 27, 2021
under the Exchange Act, including any amendment or report filed for the purpose of updating such description. |
We
will not, however, incorporate by reference in this prospectus supplement or the accompanying prospectus any documents or portions thereof
that are not deemed “filed” with the SEC, including any information furnished pursuant to Item 2.02 or Item 7.01 of our current
reports on Form 8-K unless, and except to the extent, specified in such current reports.
You
can obtain any of the filings incorporated by reference into this prospectus through us or from the SEC through the SEC’s website
at www.sec.gov. We will provide, at no charge, to each person, including any beneficial owner, to whom a copy of this prospectus
is delivered, upon written or oral request of such person, a copy of any or all of the reports and documents referred to above which
have been or may be incorporated by reference into this prospectus. Written or telephone requests should be directed to: Worksport Ltd.,
2500 N America Dr. West Seneca, NY 14224, telephone number (888) 554-8789, Attention: Chief Financial Officer.
You
should rely only on the information contained or incorporated by reference in this prospectus or any prospectus supplement. We have not
authorized anyone else to provide you with different or additional information. We will not make an offer of these securities in any
state where the offer is not permitted. You should not assume that the information in this prospectus or any supplement is accurate as
of any date other than the date of those documents.
The
information in this prospectus is not complete and may be changed. We may not sell these securities or accept an offer to buy these securities
until the Securities and Exchange Commission declares our registration statement effective. This prospectus is not an offer to sell these
securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT
TO COMPLETION, DATED SEPTEMBER 30, 2022
PROSPECTUS
WORKSPORT
LTD.
$30,000,000
Common
Stock
Preferred
Stock
Warrants
Debt
Securities
Units
From
time to time, we may offer and sell shares of preferred stock, common stock, debt securities or warrants to purchase preferred stock,
common stock or any combination of these securities, either separately or in units, in one or more offerings in amounts, at prices and
on terms that we will determine at the time of the offering. The debt securities and warrants may be convertible into or exercisable
or exchangeable for preferred stock, common stock or debt securities and the preferred stock may be convertible into or exchangeable
for common stock. The aggregate initial offering price of all securities sold by us under this prospectus will not exceed $30,000,000.
We
may offer securities through underwriting syndicates managed or co-managed by one or more underwriters or dealers, through agents or
directly to purchasers. The prospectus supplement for each offering of securities will describe in detail the plan of distribution for
that offering. For general information about the distribution of securities offered, please see “Plan of Distribution”
in this prospectus. Each time our securities are offered, we will provide a prospectus supplement containing more specific information
about the particular offering and attach it to this prospectus. The prospectus supplements may also add, update or change information
contained in this prospectus. This prospectus may not be used to offer or sell securities without a prospectus supplement that includes
a description of the method and terms of that offering.
Our
common stock is quoted on the Nasdaq Capital Market (“Nasdaq”) under the symbol “WKSP.” The last reported sale
price of our common stock on Nasdaq on September 29, 2022 was $1.68 per share.
The
aggregate market value of our outstanding common stock held by non-affiliates is $40,163,326, based on 17,190,016 shares of outstanding
common stock, of which 14,191,988 shares are held by non-affiliates, and a share price of $2.83 per share, which was the last
reported sale price of our common stock as quoted on Nasdaq on August 18, 2022. Pursuant to General Instruction I.B.6 of
Form S-3, in no event will we sell our securities in a public primary offering with a value exceeding more than one-third of our public
float in any 12-month period so long as our public float remains below $75,000,000. As of the date of this prospectus, we have not offered
any securities during the past twelve months pursuant to General Instruction I.B.6 of Form S-3. You are urged to obtain current market
quotations of our common stock.
If
we decide to seek a listing of any preferred stock, purchase contracts, warrants, subscriptions rights, depositary shares or units offered
by this prospectus, the related prospectus supplement will disclose the exchange or market on which the securities will be listed, if
any, or where we have made an application for listing, if any.
Other
than our common stock, we have not yet determined whether the other securities that may be offered by this prospectus will be listed
on any exchange, interdealer quotation system or over-the-counter market. If we decide to seek the listing of any such securities upon
issuance, the prospectus supplement relating to those securities will disclose the exchange, quotation system or market on which those
securities will be listed.
We
are a “smaller reporting company” as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”),
and have elected to comply with certain reduced public company reporting requirements.
Investing
in our securities involves a high degree of risk. See “Risk Factors” beginning on page 3 and any risk factors
in our most recent Annual Report on Form 10-K, which is incorporated by reference herein, as well as in any other recently filed quarterly
or current reports and, if any, in the relevant prospectus supplement. We urge you to carefully read this prospectus and the accompanying
prospectus supplement, together with the documents we incorporate by reference, describing the terms of these securities before investing.
Neither
the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed
upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.
The
date of this prospectus is _______________, 2022.
TABLE
OF CONTENTS
ABOUT
THIS PROSPECTUS
This
prospectus is part of a registration statement on Form S-3 that we filed with the Securities and Exchange Commission (the “SEC”
or the “Commission”) utilizing a “shelf” registration process. Under this shelf registration process, we may
offer and sell, either individually or in combination, in one or more offerings, any of the securities described in this prospectus,
for total gross proceeds of up to $30,000,000. This prospectus provides you with a general description of the securities we may offer.
Each time we offer securities under this prospectus, we will provide a prospectus supplement to this prospectus that will contain more
specific information about the terms of that offering. We may also authorize one or more free writing prospectuses to be provided to
you that may contain material information relating to these offerings. The prospectus supplement and any related free writing prospectus
that we may authorize to be provided to you may also add, update or change any of the information contained in this prospectus or in
the documents that we have incorporated by reference into this prospectus.
We
urge you to read carefully this prospectus, any applicable prospectus supplement and any free writing prospectuses we have authorized
for use in connection with a specific offering, together with the information incorporated herein by reference as described under the
heading “Incorporation of Documents by Reference,” before investing in any of the securities being offered. You should
rely only on the information contained in, or incorporated by reference into, this prospectus and any applicable prospectus supplement,
along with the information contained in any free writing prospectuses we have authorized for use in connection with a specific offering.
We have not authorized anyone to provide you with different or additional information. This prospectus is an offer to sell only the securities
offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so.
The
information appearing in this prospectus, any applicable prospectus supplement or any related free writing prospectus is accurate only
as of the date on the front of the document and any information we have incorporated by reference is accurate only as of the date of
the document incorporated by reference, regardless of the time of delivery of this prospectus, any applicable prospectus supplement or
any related free writing prospectus, or any sale of a security.
This
prospectus contains summaries of certain provisions contained in some of the documents described herein, but reference is made to the
actual documents for complete information. All of the summaries are qualified in their entirety by the actual documents. Copies of some
of the documents referred to herein have been filed, will be filed or will be incorporated by reference as exhibits to the registration
statement of which this prospectus is a part, and you may obtain copies of those documents as described below under the section entitled
“Where You Can Find Additional Information.”
We
have not authorized any dealer, agent or other person to give any information or to make any representation other than those contained
or incorporated by reference in this prospectus and any accompanying prospectus supplement. You must not rely upon any information or
representation not contained or incorporated by reference in this prospectus or an accompanying prospectus supplement. This prospectus
and the accompanying prospectus supplement, if any, do not constitute an offer to sell or the solicitation of an offer to buy any securities
other than the registered securities to which they relate, nor do this prospectus and the accompanying prospectus supplement, if any,
constitute an offer to sell or the solicitation of an offer to buy securities in any jurisdiction to any person to whom it is unlawful
to make such offer or solicitation in such jurisdiction. You should not assume that the information contained in this prospectus and
the accompanying prospectus supplement, if any, is accurate on any date subsequent to the date set forth on the front of such document
or that any information we have incorporated by reference is correct on any date subsequent to the date of the document incorporated
by reference, even though this prospectus and any accompanying prospectus supplement is delivered or securities are sold on a later date.
References
in this prospectus to the terms “the Company,” “Worksport,” “we,” “our” and “us”
or other similar terms mean Worksport Ltd. and our subsidiaries, Worksport Ontario, a Canadian corporation, Terravis Energy, Inc., a
Colorado corporation, Worksport New York Operations Corporation, a New York corporation, and
Worksport USA Operations Corporation, a Colorado corporation, unless we state otherwise or the context indicates otherwise.
CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus and the documents incorporated by reference herein contain forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). All statements other than statements of historical facts contained in this prospectus and the
documents incorporated by reference herein, including statements regarding our future results of operations and financial position, business
strategy, research and development plans, the anticipated timing, costs, design and conduct of our ongoing and planned research and development
for our products, our ability to commercialize our products, the impact of the coronavirus (COVID-19) pandemic and global geopolitical
events, such as the ongoing conflict between Russia and Ukraine, on our business, the potential benefits of strategic agreements and
our intent to enter into any strategic arrangements, the timing and likelihood of success, plans and objectives of management for future
operations, and future results of anticipated product development efforts, are forward-looking statements. These statements involve known
and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or implied by the forward-looking statements. This prospectus
and the documents incorporated by reference herein also contain estimates and other statistical data made by independent parties and
by us relating to market size and growth and other data about our industry. This data involves a number of assumptions and limitations,
and you are cautioned not to give undue weight to such estimates. In addition, projections, assumptions and estimates of our future performance
and the future performance of the markets in which we operate are necessarily subject to a high degree of uncertainty and risk.
In
some cases, you can identify forward-looking statements by terms such as “may,” “will,” “would,”
“could,” “should,” “expect,” “plan,” “anticipate,” “intend,”
“target,” “project,” “contemplates,” “believes,” “estimates,” “predicts,”
“potential” or “continue” or the negative of these terms or other similar expressions. The forward-looking statements
in this prospectus and the documents incorporated by reference herein are only predictions. We have based these forward-looking statements
largely on our current expectations and projections about future events and financial trends that we believe may affect our business,
financial condition and results of operations. These forward-looking statements speak only as of the date of this prospectus and are
subject to a number of risks, uncertainties and assumptions, which we discuss in greater detail in the documents incorporated by reference
herein, including under the heading “Risk Factors” and elsewhere in this prospectus. The events and circumstances
reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected
in the forward-looking statements. Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from
time to time, and it is not possible for management to predict all risk factors and uncertainties. Given these risks and uncertainties,
you should not place undue reliance on these forward-looking statements. Except as required by applicable law, we do not plan to publicly
update or revise any forward-looking statements contained in this prospectus or the documents incorporated by reference herein, whether
as a result of any new information, future events, changed circumstances or otherwise. For all forward-looking statements, we claim the
protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
MARKET,
INDUSTRY AND OTHER DATA
This
prospectus and any applicable prospectus supplement and the documents incorporated by reference herein and therein contain estimates,
projections, market research and other information concerning, among other things, our industry, our business, and markets for our products.
Unless otherwise expressly stated, we obtain this information from reports, research surveys, studies and similar data prepared by market
research firms and other third parties, industry, technology and general publications, government data and similar sources as well as
from our own internal estimates and research and from publications, research, surveys and studies conducted by third parties on our behalf.
Information that is based on estimates, projections, market research or similar methodologies is inherently subject to uncertainties
and actual events or circumstances may differ materially from events and circumstances that are reflected in this information. As a result,
you are cautioned not to give undue weight to such information.
TRADEMARKS
Solely
for convenience, our trademarks and tradenames referred to in this prospectus may appear without the ® or ™ symbols, but such
references are not intended to indicate in any way that we will not assert, to the fullest extent under applicable law, our rights to
these trademarks and tradenames. All other trademarks, service marks and trade names included or incorporated by reference into this
prospectus or the accompanying prospectus are the property of their respective owners. We do not intend our use or display of other companies’
trade names, trademarks or service marks to imply relationships with, or endorsements or sponsorship of us by, these other companies.
PROSPECTUS
SUMMARY
This
summary highlights selected information from this prospectus and does not contain all of the information that you need to consider in
making your investment decision. You should carefully read the entire prospectus, the applicable prospectus supplement and any related
free writing prospectus, including the risks of investing in our securities discussed under the heading “Risk Factors” contained
in the applicable prospectus supplement and any related free writing prospectus, and under similar headings in the other documents that
are incorporated by reference into this prospectus. You should also carefully read the information incorporated by reference into this
prospectus, including our financial statements, and the exhibits to the registration statement of which this prospectus is a part.
Company
Overview
Worksport
Ltd.
Worksport
Ltd., through its subsidiaries, designs, develops, manufactures, and owns the IP on a variety of tonneau covers, solar integrations,
and NP (Non-Parasitic), Hydrogen-based true green energy solutions for the sustainable, clean energy, and automotive industries. Worksport’s
solar integrations include its paired COR and SOLIS products which, when used together, are capable of forming a nanogrid on the back
of a consumer’s truck bed. Prototypes of both the COR and SOLIS have been successfully tested, used and presented to potential
business partners. Worksport’s Non-Parasitic Electrical Vehicle Charging stations are currently being researched and developed.
The Company is currently assembling and installing grid-connected charging stations and reengineering the charging station design as
well as researching hydrogen charging solutions separately with the intention of introducing an original and useful product to consumer
markets. Worksport seeks to capitalize on the growing shift of consumer mindsets towards clean energy integrations with its proprietary
solar solutions, mobile energy storage systems (ESS), and NP, Hydrogen-based technology.
Terravis
Energy, Inc.
Terravis
Energy, Inc., a subsidiary of the Company (“Terravis”), designs, develops and manufactures clean, green energy solutions
that power lifestyle markets, with each segment of the Company feeding into the derivation of the brand itself – Latin for “Earth”
and “Force.” The Company foresees the future of the electric vehicle and sustainable energy markets through multiple lenses.
Terravis’ Non-Parasitic Electric Vehicle (NPEVTM) fast charging platform which combines ultra-efficient hydrogen fuel
cells with solar to create completely carbon-free charge points that can re-energize battery electric vehicles. Its Terravis Nanogrid™
is designed to power houses and is modular where excess power can be directed toward utilities such as crypto mining. Its Terravis Microgrid™
system, composed of a number of Terravis Nanogrid™ systems, can power data centers and entire communities. Its Terravis Wall-e™
platform is a standalone power backup system for homes in cases of power failures, as well as a “power guardian” that can
be used in conjunction with the Terravis Nanogrid™. The Terravis NPEV produces electricity, heat and water through an electrochemical
reaction requiring oxygen and hydrogen cells as inputs. Each NPEV system is being designed to charge up to three vehicles at once and
designed for easy installation. The main components of the TVE Microgrid are hydro fluorocarbons (HFCs), electrolyzers, battery energy
storage system (BESS) with BMS (Battery Management System), PV panels and wind turbines. The Terravis Microgrid™ is containerized
in an environmentally-controlled enclosure and monitored over the air 4G/WiFi, 24x7. The Terravis Nanogrid is composed of a small fuel
cell stack with a power density commensurate to the house size and a complementary electrolyzer matching said fuel cell. The system only
requires a water supply, either municipal or well water.
For
more information about our Company, please refer to other documents that we have filed with the SEC and that are incorporated by reference
into this prospectus, as listed under the heading “Incorporation of Certain Information by Reference.”
Corporate
Information
We
were incorporated in the State of Nevada on April 2, 2003 under the name Franchise Holdings International, Inc. (“FNHI”).
On April 30, 2003, FNHI completed a merger with TMAN Global.com Inc. in order to, among other things, change its domicile from a Florida
to Nevada corporation. In December 2014, FNHI acquired 100% of the outstanding equity of Worksport Ltd., an Ontario, Canada corporation
formed in 2011 (“Worksport Ontario”), pursuant to which Worksport Ontario became a wholly-owned subsidiary of FNHI. Upon
acquiring Worksport Ontario, FNHI abandoned all previous business plans and has been focusing on developing the tonneau business. In
May 2020, FNHI changed its name to Worksport Ltd.
Terravis
Energy, Inc. was incorporated in the State of Colorado on May 5, 2021. On August 20, 2021, the Company was issued 100 common shares at
a par value of $0.0001 per share for a controlling interest in Terravis. During the three months ended March 31, 2022, the Company was
issued 9,990,900 common shares of Terravis at a par value of $0.0001 per share. During the same period, Terravis issued 1,000 preferred
shares at $0.0001 per share to Steven Rossi, Worksport’s Chief Executive Officer.
References
in this prospectus to the terms “the Company,” “Worksport,” “we,” “our” and “us”
or other similar terms mean Worksport Ltd. and our subsidiaries, Worksport Ontario, a Canadian corporation, Terravis Energy, Inc., a
Colorado corporation, Worksport New York Operations Corporation, a New York corporation, Worksport
USA Operations Corporation, a Colorado corporation, Worksport USA Holding Corporation, a Colorado corporation, and Worksport Acquisition
Corporation, a Delaware corporation, unless we state otherwise or the context indicates otherwise.
On
December 28, 2021, Worksport Acquisition Corporation was incorporated in the State of Delaware. On
January 1, 2022, the Company was issued 1,000 common shares at a par value of $0.0001 per share by Worksport Acquisition Corporation.
On March 11, 2022, Worksport USA Holding Corporation was incorporated in the State of Colorado and issued 1,000 common shares
to the Company for $0.0001 par value per share.
During
the three months ended March 31, 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 ended March 31, 2022, the Company was issued 1,000 common shares
at a par value of $0.0001 of Worksport USA Operations Corporation. Subsequently, to the period ended on April 1, 2022, the Company was
issued 10,000 common shares of Worksport New York Operations Corporation.
Executive
Offices
Our
principal executive offices are located at 55 East Beaver Creek Road, Unit 40, Richmond Hill, Ontario, Canada L4B 1E5. Our main telephone
number is (888) 554-8789. The Company owns the domain names of the following websites: (i) www.worksport.com, (ii) www.investworksport.com,
(iii) www.goterravis.com and (iv) www.shopworksport.com. Except for the websites www.investworksport.com and www.goterravis.com,
which link to either www.worksport.com or www.shopworksport.com, all the websites are active. We do not incorporate the
information on, or accessible through, our websites into this prospectus, and you should not consider any information on, or accessible
through, our websites as part of this prospectus.
Implications
of Being a Smaller Reporting Company
We
are a “smaller reporting company” meaning that the market value of our stock held by non-affiliates plus the proposed aggregate
amount of gross proceeds to us as a result of this offering is less than $700 million and our annual revenue was less than $100 million
during the most recently completed fiscal year. Smaller reporting companies may take advantage of certain reduced disclosure obligations,
including, among other things, providing only two years of audited financial statements in our Annual Report on Form 10-K, and, similar
to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation. We will
remain a smaller reporting company until the last day of the fiscal year in which (i) the market value of our common stocks held by non-affiliates
exceeds $250 million as of the end of that year’s second fiscal quarter, or (ii) our annual revenues exceeded $100 million during
such completed fiscal year and the market value of our common stocks held by non-affiliates exceeds $700 million as of the end of that
year’s second fiscal quarter.
We
also would not be eligible for status as a smaller reporting company if we become an investment company, an asset-backed issuer or a
majority-owned subsidiary of a parent company that is not a smaller reporting company.
We
have elected to take advantage of certain of the reduced disclosure obligations in the registration statement of which this prospectus
is a part and may elect to take advantage of other reduced reporting requirements in future filings. As a result, the information that
we provide to our stockholders may be different from what you might receive from other public reporting companies in which you hold equity
interests.
RISK
FACTORS
Investing
in our securities involves a high degree of risk. Before deciding whether to invest in our securities, you should consider carefully
the risks and uncertainties described under this section and the section titled “Risk Factors” contained in the applicable
prospectus supplement, and discussed under the section titled “Risk Factors” contained in our most recent Annual Report
on Form 10-K and in our most recent Quarterly Report on Form 10-Q, as well as any amendments thereto reflected in subsequent filings
with the SEC, which are incorporated by reference into this prospectus in their entirety, together with other information in this prospectus,
and the documents incorporated by reference that we may authorize for use in connection with a specific offering. The risks described
in this section and in these documents are not the only ones we face, but those that we consider being material. There may be other unknown
or unpredictable economic, business, competitive, regulatory or other factors that could have material adverse effects on our future
results. Past financial performance may not be a reliable indicator of future performance, and historical trends should not be used to
anticipate results or trends in future periods. If any of these risks actually occur, our business, financial condition, results of operations
or cash flow could be harmed. This could cause the trading price of our securities to decline, resulting in a loss of all or part of
your investment. Please also read carefully the section above titled “Cautionary Note Regarding Forward-Looking Statements.”
Risks
Related to Our Business
Our
business, results of operations and financial condition may be adversely impacted by the continued global COVID-19 pandemic.
A
significant outbreak, epidemic or pandemic of contagious diseases in any geographic area in which we operate or plan to operate could
result in a health crisis adversely affecting the economies, financial markets and overall demand for our products. In addition, any
preventative or protective actions that governments implement or that we take in response to a health crisis, such as travel restrictions,
quarantines, or site closures, may interfere with the ability of our employees, suppliers and customers to perform their responsibilities.
Such results could have a material adverse effect on our business.
The
continued global COVID-19 pandemic has created significant volatility, uncertainty and economic disruption. To date, this pandemic has
affected nearly all regions around the world. In the United States, businesses as well as federal, state and local governments implemented
significant actions to mitigate this public health crisis. While we cannot predict the duration or scope of the COVID-19 pandemic, it
may negatively impact our business and such impact could be material to our financial results, condition and outlook related to:
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disruption
to our operations or the operations of our suppliers, through the effects of business and facilities closures, worker sickness and
COVID-19 related inability to work, social, economic, political or labor instability in affected areas, transportation delays, travel
restrictions and changes in operating procedures, including for additional cleaning and safety protocols; |
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increased
volatility or significant disruption of global financial markets due in part to the COVID-19 pandemic, which could have a negative
impact on our ability to access capital markets and other funding sources, on acceptable terms or at all and impede our ability to
comply with debt covenants; and |
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the
further spread of COVID-19, and the requirements to take action to mitigate the spread of the pandemic (e.g., vaccination requirements
that have been and continue to be taken in response to the pandemic and enhanced health and hygiene requirements or social distancing
or other measures), will impact our ability to carry out our business as usual and may materially adversely impact global economic
conditions, our business, results of operations, cash flows and financial condition. |
To
the extent the COVID-19 pandemic or a similar public health threat has an impact on our business, it is likely to also have the effect
of heightening many of the other risks described in this “Risk Factors” section.
We
are a growth stage company with a history of losses and expect to incur significant expenses and continuing losses for the foreseeable
future.
We
have incurred net losses since our inception. In the six months ended June 30, 2022 and 2021, we incurred operating losses of $6,105,971
and $1,804,382, respectively, and as of June 30, 2022, we had an accumulated deficit of $27,039,733. In the fiscal year ended December
31, 2021 and 2020, we incurred operating losses of $7,561,731 and $986,239, respectively, and as of December 31, 2021, we had an accumulated
deficit of $20,849,805. We believe that we will continue to incur operating and net losses in the future while we grow, including bringing
our TC3 tonneau and Terravis System to market, but which may occur later than we expect or not at all. We do not expect to be profitable
for the foreseeable future as we invest in our business, build capacity and ramp up operations, and we cannot assure you that we will
ever achieve or be able to maintain profitability in the future. Even if we are able to successfully develop our products and attract
customers, there can be no assurance that we will be financially successful. For example, as we expand our product portfolio, and expand internationally, we will need to manage costs effectively to sell those products
at our expected margins. Failure to become profitable would materially and adversely affect the value of your investment. If we are ever
to achieve profitability, it will be dependent upon the successful development and commercial introduction and acceptance of our consumer
products, and our services, which may not occur.
We
have only sold tonneau covers, the market size of which is limited. Our long-term results depend upon our ability to successfully introduce
and market new products, which may expose us to new and increased challenges and risks.
To
date, we have only sold tonneau covers, the market size of which is limited. Our growth strategy depends, in part, on our ability to
successfully introduce and market new products, such as our Terravis System’s Worksport SOLIS, Worksport COR, and XCX Accessory
Rail, as well as develop new products. As we introduce new products or refine, improve or upgrade versions of existing products, we cannot
predict the level of market acceptance or the amount of market share these products will achieve, if any. We cannot assure you that we
will not experience material delays in the introduction of new products and services in the future. Consistent with our strategy of offering
new products and product refinements, we expect to continue to use a substantial amount of capital for product refinement, research and
development, and sales and marketing, of which may not provide a return on investment in the event we fail to bring potential products
to market. We will need additional capital for product development and refinement, and this capital may not be available on terms favorable
to us, if at all, which could adversely affect our business, prospects, financial condition, results of operations, and cash flows. If
we are unable to successfully introduce, integrate, and market new products and services, our business, prospects, financial condition,
results of operations, and cash flows may be materially and adversely affected.
We
may not succeed in establishing, maintaining and strengthening our brand, which would materially and adversely affect customer acceptance
of our products and our business, prospects, financial condition, results of operations and cash flows.
Our
business and prospects heavily depend on our ability to develop, maintain and strengthen the Worksport and Terravis brands. If we are
not able to establish, maintain and strengthen our brands, we may lose the opportunity to build a critical mass of customers. Our ability
to develop, maintain and strengthen our brands will depend heavily on our ability to provide high quality products and engage with our
customers as intended, as well as the success of our customer development and marketing efforts. The automobile accessory and parts industry
is intensely competitive, and we may not be successful in building, maintaining and strengthening either or both the Worksport and Terravis
brands. Many of our current and potential competitors have greater name recognition, broader customer relationships and substantially
greater marketing resources than we do. If we do not develop and maintain a strong brand for either or both of our Worksport or Terravis
brands, our business, prospects, financial condition, results of operations and cash flows could be materially and adversely impacted.
In
addition, we could be subject to adverse publicity. In particular, given the popularity of social media, any negative publicity, whether
true or not, could quickly proliferate and harm consumer perceptions and confidence in our brands. In addition, from time to time, our
products may be evaluated and reviewed by third parties. Any negative reviews or reviews which compare us unfavorably to competitors
could adversely affect consumer perception about our products.
The US Central Bank has provided forward looking guidance
of high interest rates for the near future.
We may need to invest in additional machinery,
equipment and land if demand for our products is higher than anticipated or if it secures a supplier deal with a major original equipment
manufacturer (OEM). With high interest rates, it will be less financially attractive to finance such purchases, which may lead to an
otherwise higher burn rate. Further, rising interest rates increase the amount that we must pay for our mortgage on our West Seneca,
New York property. At the same time, it lowers the attractiveness of refinancing, despite the fact that its anticipated positive future
cash flows would allow us to seek financing from a broader selection of lenders.
Continued
uncertain economic conditions, including inflation and the risk of a global recession could impair our ability to forecast and may harm
our business, operating results, including our revenue growth and profitability, financial condition and cash flows.
The
U.S. economy is experiencing the highest rates of inflation since the 1980s. Historically, we have not experienced significant inflation
risk in our business. However, our ability to raise our product prices depends on market conditions and there may be periods during which
we are unable to fully recover increases in our costs. In addition, the global economy suffers from slowing growth and rising interest
rates, and many economists believe that a global recession may begin in the near future. If the global economy slows, our business would
likely be adversely affected.
Also,
a recession may result in job loss and lower discretionary funds among potential customers, lowering demand for automotive aftermarket
accessories. Part of our consumer base for the Worksport SOLIS includes workers, particularly those in manufacturing and construction
environments, who may have lower job security in the event of a recession and, thus, have lower demand for the Worksport SOLIS. Commercial
real estate values may also decrease, which would lower the value of our production facility in West Seneca, New York.
The
US is in a state of low unemployment, and many companies that provide wage-based jobs are having trouble filling open positions.
We
need to fill certain positions that do not require specialized knowledge or experience, and we will need to offer competitive pay and
benefits in order to attract people as the Company competes with other local businesses for employment. Competing with local businesses
may delay hiring time as well as production timelines. Offering more competitive compensation packages also damages the Company’s
profits and sets forward looking compensation expectations.
As
the international supply chain still recovers from the COVID-19 pandemic and as the international supply chain faces future uncertainty
in the wake of global economic uncertainty, equipment and services that were not long ago less expensive may stay at high prices or become
more expensive.
Industrial
machinery such as forklifts are less available than they used to be a few years ago due to lingering supply chain shortages. Lower availability
for necessary industrial machinery may increase the amount of money that we must spend for said machinery as well as result in delays
in our domestic manufacturing. Further disruptions to the supply chain may also increase prices for necessary services such as international
shipping for component purchasing as well as shipping of finished goods from China.
We
have demonstrated historical success in less capital-intensive manufacturing in China, but we have not demonstrated success in domestic,
highly capital-intensive manufacturing.
In
addition to beginning a new manufacturing process, we must continuously improve our manufacturing processes in order to lower costs.
We are partially reliant on third parties to assist us in properly establishing such processes and improving them due to a lack of in-house,
capital-intensive domestic manufacturing experience. Lack of experience may create delays in production, cost inefficiencies in expansions
of production and difficulty identifying process improvements.
We
may not be able to accurately estimate the demand for our tonneau covers, which could result in inefficiencies in its production and
hinder its ability to generate revenue.
If
we fail to accurately predict our manufacturing requirements, we will incur the risk of having to pay for production capacities that
we reserved but will not be able to use or that we will not be able to secure sufficient additional production capacities at reasonable
costs in case product demand exceeds expectations. A single contract with an OEM, private label or key distributor can significantly
increase demand for the Company’s products, requiring investments in expanded operational capacity including personnel, equipment
and potentially facilities.
Our
future growth may be limited.
The
Company’s ability to achieve its expansion objectives and to manage its growth effectively depends upon a variety of factors, including
the Company’s ability to internally develop products, to attract and retain skilled employees, to successfully position and market
its products, to protect its existing intellectual property, to capitalize on the potential opportunities it is pursuing with third parties,
and sufficient funding. To accommodate growth and compete effectively, the Company will need working capital to maintain adequate inventory
levels, develop additional procedures and controls and increase, train, motivate and manage its work force. There is no assurance that
the Company’s personnel, systems, procedures and controls will be adequate to support its potential future operations. There is
no assurance that the Company will generate revenues from its prospective sales partners and be able to capitalize on additional third
party manufacturers.
We
rely on a sole supplier for our production which may hinder our ability to grow.
The
Company purchases all of its inventory from one supplier source in China. The Company has no written agreement with this supplier. The
Company carries significant strategic inventories of these materials to reduce the risk associated with this concentration of suppliers.
Strategic inventories are managed based on demand. To date, the Company has been able to obtain adequate supplies of the materials used
in the production of its products in a timely manner from existing sources. The loss of this sole supplier or a delay in shipments
could have a material adverse effect on its business.
We
rely on a small number of customers for the majority of our sales.
The
following table includes the percentage of the Company’s sales to significant customers for the year ended December 31, 2021 and
2020, as well as the balance included in revenue and accounts receivable for each significant customer as at December 31, 2021 and 2020.
A customer is considered to be significant if they account for greater than 10% of the Company’s annual sales.
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2021 | | |
2020 | |
| Customer A | |
| 33.40 | % | |
| 26.10 | % |
| Customer B | |
| 29.30 | % | |
| 51.00 | % |
| Customer C | |
| 14.90 | % | |
| - | |
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| 77.60 | % | |
| 77.10 | % |
The
loss of any of these key customers could have an adverse effect on the Company’s business. At December 31, 2021, Customer A represented
33.4% at $106,988 of the Company’s revenue, compared to 26.1% at $190,313 of Company revenue in 2020. Customer B represented 29.3%
of the Company’s revenue at $93,622 compared to 2020 of 51% or $190,313. Customer C represented 14.90% or $47,604 of the Company’s
revenue compared to 2020 of 0% or $0.
We
will need additional financing in order to grow our business.
From
time to time, in order to expand operations to meet customer demand, the Company will need to incur additional capital expenditures.
These capital expenditures are intended to be funded from third party sources, including the incurring of debt and/or the sale of additional
equity securities. In addition to requiring additional financing to fund capital expenditures, the Company may require additional financing
to fund working capital, research and development, sales and marketing, general and administrative expenditures and operating losses.
The incurrence of debt creates additional financial leverage and therefore an increase in the financial risk of the Company’s operations.
The sale of additional equity securities will be dilutive to the interests of current equity holders. In addition, there can be no assurance
that such additional financing, whether debt or equity, will be available to the Company or that it will be available on acceptable commercial
terms. Any inability to secure such additional financing on appropriate terms could have a materially adverse impact on the business,
financial condition and operating results of the Company.
We
rely on key personnel, especially Steven Rossi, our Chief Executive Officer, President and Chairman of the Board.
The
Company’s success also will depend in large part on the continued service of its key operational and management personnel, including
executive staff, research and development, engineering, marketing and sales staff. Most specifically, this includes Steven Rossi, the
Company’s President and Chief Executive Officer, who oversees new product , the implementation of new products, key customer acquisition
and retention, and overall management and future growth of the Company. The Company faces intense competition from its competitors, customers
and other companies throughout the industry. Any failure on the Company’s part to hire, train and retain a sufficient number of
qualified professionals could impair the business of the Company.
We
depend on intellectual property rights that may be infringed upon or infringe upon the intellectual property rights of others.
The
Company’s success depends to a significant degree upon its ability to develop, maintain and protect proprietary products and technologies.
As of the date of this prospectus, we own five patents (including four U.S. and one in Canada) and six pending patent applications. However,
patents provide only limited protection of the Company’s intellectual property. The assertion of patent protection involves complex
legal and factual determinations and is therefore uncertain and potentially expensive. The Company cannot provide assurance that patents
will be granted with respect to its pending patent application, that the scope of any patents it might obtain will be sufficiently broad
to offer meaningful protection, or that it will develop additional proprietary products that are patentable. In fact, any patents which
might issue from the Company’s pending provisional patent applications with the USPTO could be successfully challenged, invalidated
or circumvented. This could result in the Company’s pending patent rights failing to create an effective competitive barrier. Losing
a significant patent or failing to get a patent issued from a pending patent application the Company considers significant, could have
a material adverse effect on the Company’s business.
We
may not be able to protect our intellectual property rights throughout the world, which could negatively impact our business.
Filing,
prosecuting and defending patents covering our current and any future product candidates and technology platforms in all countries throughout
the world would be prohibitively expensive. Competitors may use our technologies in jurisdictions where we have not obtained patent protection
to develop their own products and, further, may export otherwise infringing products to territories where we may obtain patent protection
but where patent enforcement is not as strong as that in the United States. These products may compete with our products in jurisdictions
where we do not have any issued or licensed patents, and any future patent claims or other intellectual property rights may not be effective
or sufficient to prevent them from so competing.
Many
companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The
legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets
and other intellectual property protection which could make it difficult for us to stop the infringement of our patents or marketing
of competing products in violation of our intellectual property and proprietary rights generally. Proceedings to enforce our intellectual
property and proprietary rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from
other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications
at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate,
and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual
property and proprietary rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual
property that we develop or license.
Many
countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition,
many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent
owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors are forced to
grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and
our business, financial condition, results of operations and prospects may be adversely affected.
Our
patents might not protect our technology from competitors, in which case we may not have any advantage over competitors in selling any
products that we may develop.
Our
commercial success will depend in part on our ability to obtain additional patents and protect our existing patent position, as well
as our ability to maintain adequate intellectual property protection for our technologies, product candidates, and any future products
in the United States and other countries. If we do not adequately protect our technology, product candidates and future products, competitors
may be able to use or practice them and erode or negate any competitive advantage we may have, which could harm our business and ability
to achieve profitability. The laws of some foreign countries do not protect our proprietary rights to the same extent or in the same
manner as U.S. laws, and we may encounter significant problems in protecting and defending our proprietary rights in these countries.
We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies,
product candidates and any future products are covered by valid and enforceable patents or are effectively maintained as trade secrets.
Certain
aspects of our technologies are protected by the U.S. and Canadian patents, and Patent Cooperation Treaty filings. In addition, we have
a number of new patent applications pending. There is no assurance that the applications still pending or which may be filed in the future
will result in the issuance of any patents. Furthermore, there is no assurance as to the breadth and degree of protection any issued
patents might afford us. Disputes may arise between us and others as to the scope and validity of these or other patents. Any defense
of the patents could prove costly and time-consuming and there can be no assurance that we will be in a position, or deem it advisable,
to carry on such a defense. A suit for patent infringement could result in increasing costs, delaying or halting development. Other private
and public concerns, including universities, may have filed applications for, may have been issued, or may obtain additional patents
and other proprietary rights to technology potentially useful or necessary to us. We are not currently aware of any such patents, but
the scope and validity of such patents, if any, and the cost and availability of such rights are impossible to predict.
Any
trademarks we may obtain may be infringed or successfully challenged, resulting in harm to our business.
We
expect to rely on trademarks as one means to distinguish any of our products that are approved for marketing from the products of our
competitors. Once we select trademarks and apply to register them, our trademark applications may not be approved. Third parties may
oppose our trademark applications or otherwise challenge our use of the trademarks. In the event that our trademarks are successfully
challenged, we could be forced to rebrand our products, which could result in a loss of brand recognition and could require us to devote
resources to advertising and marketing new brands. Our competitors may infringe our trademarks, and we may not have adequate resources
to enforce our trademarks.
Much
of our intellectual property is protected as trade secrets or confidential know-how, not as a patent.
We
consider proprietary trade secrets to be important to our business. This type of information must be protected diligently by us to protect
its disclosure to competitors, since legal protections after disclosure may be minimal or non-existent. Accordingly, much of the value
of this intellectual property is dependent upon our ability to keep our trade secrets.
To
protect this type of information against disclosure or appropriation by competitors, our policy is to require our employees, consultants,
contractors and advisors to enter into confidentiality agreements with us. However, current or former employees, consultants, contractors
and advisers may unintentionally or willfully disclose our confidential information to competitors, and confidentiality agreements may
not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Enforcing a claim that a third party
obtained illegally, and is using, trade secrets is expensive, time-consuming and unpredictable. The enforceability of confidentiality
agreements may vary from jurisdiction to jurisdiction.
Failure
to obtain or maintain trade secret protection could adversely affect our competitive position. Moreover, our competitors may independently
develop substantially equivalent proprietary information and may even apply for patent protection in respect of the same. If successful
in obtaining such patent protection, our competitors could limit our use of such trade secrets.
We
may be subject to claims challenging the inventorship or ownership of our patents and other intellectual property.
We
may also be subject to claims that former employees, suppliers, collaborators or other third parties have an ownership interest in our
patents or other intellectual property. We may be subject to ownership disputes in the future arising, for example, from conflicting
obligations of suppliers, consultants or others who are involved in developing our products. Litigation may be necessary to defend against
these and other claims challenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary
damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property.
Such an outcome could have a material adverse effect on our business. Even if we are successful in defending against such claims, litigation
could result in substantial costs and be a distraction to management and employees.
Intellectual
property rights do not necessarily address all potential threats to our business.
The
degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations
and may not adequately protect our business. The following examples are illustrative:
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others
may be able to develop technologies that are similar to our technology platforms but that are not covered by the claims of any patents,
should they issue, that we own or license; |
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we
or our licensors might not have been the first to make the inventions covered by the issued patents or pending patent applications
that we own or license; |
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we
or our licensors might not have been the first to file patent applications covering certain of our inventions; |
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others
may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual
property rights; |
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it
is possible that our pending patent applications will not lead to issued patents; |
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issued
patents that we own or license may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result
of legal challenges; |
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our
competitors might conduct research and development activities in the United States and other countries that provide a safe harbor
from patent infringement claims for certain research and development activities, as well as in countries where we do not have patent
rights, and then use the information learned from such activities to develop competitive products for sale in our major commercial
markets; |
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we
may not develop additional proprietary technologies that are patentable; and |
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the
patents of others may have an adverse effect on our business. |
We
may need to defend ourselves against patent or trademark infringement claims, which may be time-consuming and cause us to incur substantial
costs.
Companies,
organizations or individuals, including our competitors, may own or obtain patents, trademarks or other proprietary rights that would
prevent or limit our ability to make, use, develop or sell our products or components, which could make it more difficult for us to operate
our business. The automotive aftermarket has been characterized by significant litigation and other proceedings regarding patents, patent
applications and other intellectual property rights. The situations in which we may become parties to such litigation or proceedings
may include:
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litigation
or other proceedings we may initiate against third parties to enforce our patent rights or other intellectual property rights; |
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litigation
or other proceedings we or our licensee(s) may initiate against third parties seeking to invalidate the patents held by such third
parties or to obtain a judgment that our products do not infringe such third parties’ patents; and |
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litigation
or other proceedings, third parties may initiate against us to seek to invalidate our patents. |
If
third parties initiate litigation claiming that our products infringe their patent or other intellectual property rights, we will need
to defend against such proceedings.
The
costs of resolving any patent litigation or other intellectual property proceeding, even if resolved in our favor, could be substantial.
Many of our potential competitors will be able to sustain the cost of such litigation and proceedings more effectively than we can because
of their substantially greater resources. In some instances, competitors may proceed with litigation or other proceedings pertaining
to infringement of their intellectual property as a means to hinder or devaluate the target defendant company, with no intention of the
matter being resolved in their favor. Uncertainties resulting from the initiation and continuation of patent litigation or other intellectual
property proceedings could have a material adverse effect on our ability to compete in the marketplace. Patent litigation and other intellectual
property proceedings may also consume significant management time and costs. Substantial additional costs may be evident in the event
that litigation or other proceedings were initiated against the Company because Worksport would have to seek legal defense or counsel
in the province (Canada) or state (U.S.) where the litigation or legal proceedings were filed. Failure to adequately protect our intellectual
property rights could result in our competitors offering similar products, potentially resulting in the loss of some of our competitive
advantage, and a decrease in our revenue which would adversely affect our business, prospects, financial condition and operating results.
Confidentiality
agreements with employees and others may not adequately prevent the disclosure of trade secrets and other proprietary information.
In
order to protect our proprietary technology and processes, we also rely in part on confidentiality agreements with our employees, consultants,
outsourced manufacturers and other advisors. These agreements may not effectively prevent the disclosure of confidential information
and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently
discover trade secrets and proprietary information. Costly and time-consuming litigation could be necessary to enforce and determine
the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive
business position.
There
are risks associated with outsourced production that may result in a decrease in our profit.
The
possibility of delivery delays, product defects and other production-side risks stemming from outsourcers cannot be eliminated. In particular,
inadequate production capacity among outsourced manufacturers could result in the Company being unable to supply enough product amid
periods of high product demand, the opportunity costs of which could be substantial.
We
may not be successful in our potential business combinations.
The
Company may, in the future, pursue acquisitions of other complementary businesses and technology licensing arrangements. We have been
approached by competitors to license one or more of our tonneau cover products. The Company may also pursue strategic alliances and joint
ventures that leverage its core products and industry experience to expand its product offerings and geographic presence. The Company
has limited experience with respect to acquiring other companies and limited experience with respect to forming collaborations, strategic
alliances and joint ventures. If the Company were to make any acquisitions, it may not be able to integrate these acquisitions successfully
into its existing business and could assume unknown or contingent liabilities. Integrating an acquired company also may require management
resources that otherwise would be available for the ongoing development of the Company’s existing business.
We
have competition for our market share which could harm our sales.
We
participate in the automotive aftermarket equipment industry which is highly competitive for a relatively limited customer base. Companies
that compete in this market are Truck Hero Group, Tonno Pro and Rugged Liner. Our current competitors are significantly better funded
and have a longer operating history than us.
In
addition, some of our competitors sell their products at prices lower than ours and we compete primarily on the basis of product quality,
features, value, service, and customer relationships. Our competitive success also depends on our ability to maintain a strong brand
and the belief that customers will need our products and services to meet their growth requirements. Alternatively, in the case of generic
competition, they may be of equal or better quality and are sold at substantially lower prices than the Company’s products. At
times, competitors may also release a generic or re-branded version of a current and successful product at a substantially reduced price
in efforts to increase revenues or market share. As a result, if the Company fails to maintain its competitive position, this could have
a material adverse effect on its business, cash flow, results of operations, financial position and prospects.
We
may not have sufficient product liability insurance to cover potential damages.
The
existence of any defects, errors or failures in our products or the misuse of our products could also lead to product liability claims
or lawsuits against us. While we had insurance coverage of $2,000,000 for the year ended December 31, 2021, we have no assurance this
insurance will be adequate to protect us from all material judgments and expenses related to potential future claims or that these levels
of insurance will be available at economical prices, if at all. To that extent, product liability insurance is conditional and up for
further investigation. A successful product liability claim could result in substantial costs for us. Even if we are fully insured as
it relates to a claim, a claim could nevertheless diminish our brand and divert management’s attention and resources, which could
have a negative impact on our business, financial condition and results of operations.
We
may produce products of inferior quality which would cause us to lose customers.
Although
we make an effort to ensure the quality of our light truck tonneau cover products, they could from time to time contain defects, anomalies
or malfunctions that are undetectable at the time of shipment. These defects, anomalies or malfunctions could be discovered after our
products are shipped to customers, resulting in the return or exchange of our products, customers’ claims for compensatory damages
or discontinuation of the use of our products, which could negatively impact our operating results. We do not presently have product
recall (or similar function) insurance that protects a company against broad-scale product manufacturing defects, engineering defects
and the costs related to a broad product recall such as shipping, replacement or repairs. Even if in place, there is no guarantee that
the full costs of any reimbursements or claims, lawsuits or litigation would be covered by such insurance.
Geopolitical
conditions, including direct or indirect acts of war or terrorism, could have an adverse effect on our operations and financial results.
Our
operations could be disrupted by geopolitical conditions, political and social instability, acts of war, terrorist activity or other
similar events. Recently, 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 the conflict, including related geopolitical tensions, and the measures and retaliatory actions taken by the U.S. and other countries
in respect thereof as well as any counter measures or retaliatory actions by Russia or Belarus in response, including, for example, potential
cyberattacks or the disruption of energy exports, is likely to cause regional instability, geopolitical shifts, and could materially
adversely affect global trade, currency exchange rates, regional economies and the global economy. The situation remains uncertain, and
while it is difficult to predict the impact of any of the foregoing, the conflict and actions taken in response to the conflict could
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.
We
have identified material weaknesses in our internal control over financial reporting. Failure to maintain effective internal controls
could cause our investors to lose confidence in us and adversely affect the market price of our common stock. If our internal controls
are not effective, we may not be able to accurately report our financial results or prevent fraud.
Section
404 of the Sarbanes-Oxley Act of 2002, or Section 404, requires that we maintain internal control over financial reporting that meets
applicable standards. We may err in the design or operation of our controls, and all internal control systems, no matter how well designed
and operated, can provide only reasonable assurance that the objectives of the control system are met. Because there are inherent limitations
in all control systems, there can be no assurance that all control issues have been or will be detected.
In
prior periods, we identified certain material weaknesses in our internal controls. Specifically, we did not maintain effective controls
over the control environment. Our weaknesses are related to a lack of a sufficient number of personnel with appropriate training and
experience in accounting principles generally accepted in the United States of America. Furthermore, we have not developed and effectively
communicated to our employees the accounting policies and procedures necessary to maintain effective controls over the control environment.
and lack staffing in accounting and finance operations.
If
we are unable, or are perceived as unable, to produce reliable financial reports due to internal control deficiencies, investors could
lose confidence in our reported financial information and operating results, which could result in a negative market reaction and a decrease
in our stock price.
Risks
Associated with Manufacturing in China
Evolving
U.S. trade regulations and policies with China may in the future have a material and adverse effect on our business, financial condition
and results of operations.
Our
products are sourced from China. Any restrictions or tariffs imposed on products that we or our suppliers import for sale in the United
States would adversely and directly impact our cost of goods sold. In addition, changes in U.S. trade regulations and policies could
have an adverse impact on trade relations between the United States and certain foreign countries, which could materially and adversely
affect our relationships with our international suppliers and reduce the supply of goods available to us. Further, we cannot predict
the extent to which the United States will adopt changes to existing trade regulations and policies, which creates uncertainties in planning
our sourcing strategies and forecasting our margins. If additional tariffs are imposed on our products, or other retaliatory trade measures
are taken, our costs could increase and we may be required to raise our prices, which could materially and adversely affect our results.
There
are risks associated with outsourced production in China and their laws which may have a material adverse effect on our financial stability.
The
Company purchases all of its inventory from one supplier source in China. Changes in Chinese laws and regulations, or their interpretation,
or the imposition of confiscatory taxation or restrictions are matters over which the Company has no control. While the current leadership,
(and the Chinese government), have been pursuing economic reform policies that encourage private economic activity and greater economic
decentralization, there is no assurance, however, that the Chinese government will continue to pursue these policies, or that it will
not significantly alter these policies from time to time without notice.
For
example, the Chinese government has enacted some laws and regulations dealing with matters such as corporate organization and governance,
foreign investment, commerce, taxation and trade. However, their experience in implementing, interpreting and enforcing these laws and
regulations is limited and, in turn, our ability to enforce commercial claims or to resolve commercial disputes is unpredictable. If
our business ventures with Chinese manufacturers were unsuccessful, or other adverse circumstances arise from these transactions, we
face the risk that the parties to these ventures may seek ways to terminate the transactions. The resolution of these matters may be
subject to the exercise of considerable discretion by agencies of the Chinese government and forces unrelated to the legal merits of
a particular matter or dispute may influence their determination.
Any
rights we may have to specific performance, or to seek an injunction under Chinese law are severely limited, and without a means of recourse
by virtue of the Chinese legal system, we may be unable to prevent these situations from occurring. The occurrence of any such events
could have a material adverse effect on our business, financial condition and results of operations, in such guises as currency conversion,
imports and sources of supply, devaluations of currency or the nationalization or other expropriation of private enterprises.
In
that context, we may have to evaluate the feasibility of acquiring alternative or fallback manufacturing capabilities to support the
production of our existing and future tonneau cover products. Such development could adversely affect our cost structure inasmuch as
we would be required to support sales at an acceptable cost—and might have relatively limited time to so adapt. We have not manufactured
these products in the past—and are not expecting to do so in the foreseeable future. That is because developing these technological
capabilities and building or purchasing a facility will increase our expenses with no guarantee that we will be able to recover our investment
in our manufacturing capabilities.
We
engage in cross border sales transactions which present tax risks among other obstacles.
Cross
border sales transactions carry a risk of changes in import tax and/or duties related to the import and export of our product, which
can result in pricing changes, which will affect revenues and earnings. Cross border sales transactions carry other risks including,
but not limited to, changing regulations, wait times, customs inspection and lost or damaged product.
We
are subject to foreign currency risk which may adversely affect our net profit.
The
Company is subject to foreign exchange risk as it manufactures its products in China, markets extensively in both Canadian and U.S. markets,
most of the Company’s employees reside in Canada and, to date, the Company has raised funds in Canadian Dollars. Meanwhile, the
Company reports results of operations in U.S. Dollars (USD or US$). Since our Canadian customers pay in Canadian Dollars, the Company
is subject to gains and losses due to fluctuations in the USD relative to the Canadian Dollar. While having our products manufactured
in China, our manufacturers are paid in USD to better avoid the relatively greater fluctuation of the Chinese Yuan (RMB). Any large fluctuations
in the exchange between the RMB and USD may cause product costs to increase, therefore affecting revenues and profits, potentially adversely.
Risks
Related to this Offering and the Ownership of Our Securities
We
have a large number of authorized but unissued shares of our common stock which will dilute your ownership position when issued.
Our
authorized capital stock consists of 299,000,000 shares of common stock, of which approximately 281,809,984 remain available for issuance,
including shares of common stock issuable upon the exercise of outstanding warrants. Our management will continue to have broad discretion
to issue shares of our common stock in a range of transactions, including capital-raising transactions, mergers, acquisitions and other
transactions, without obtaining stockholder approval, unless stockholder approval is required under law or the rules of Nasdaq or any other trading market on which our common stock may be listed. If our management determines to issue
shares of our common stock from the large pool of authorized but unissued shares for any purpose in the future and is not required to
obtain stockholder approval, your ownership position would be diluted without your further ability to vote on that transaction.
Our
common stock or warrants may be affected by limited trading volume and price fluctuations, which could adversely impact the value of
our common stock or warrants.
Our
common stock has experienced and is likely to experience in the future, significant price and volume fluctuations, which could adversely
affect the market prices of our common stock or warrants without regard to our operating performance. In addition, we believe that factors
such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets
could cause the market prices of our common stock and warrants to fluctuate substantially. These fluctuations may also cause short sellers
to periodically enter the market in the belief that we will have poor results in the future. We cannot predict the actions of market
participants and, therefore, can offer no assurances that the market for our common stock and warrants will be stable or appreciate over
time.
The
shares of common stock offered hereby will be sold in “at the market” offerings, and purchasers which buy shares at different
times will likely pay different prices.
Purchasers
which purchase shares in this offering at different times will likely pay different prices, and so may experience different outcomes
in their investment results. We will have discretion, subject to market demand, to vary the timing, prices and numbers of shares sold,
and there is no minimum or maximum sales price. Investors may experience a decline in the value of their shares as a result of share
sales made at prices lower than the prices they paid.
We
currently do not intend to declare dividends on our common stock in the foreseeable future and, as a result, your returns on your investment
may depend solely on the appreciation of our common stock.
We
currently do not expect to declare any dividends on our common stock in the foreseeable future. Instead, we anticipate that all of our
earnings in the foreseeable future will be used to provide working capital, to support our operations and to finance the growth and development
of our business. Any determination to declare or pay dividends in the future will be at the discretion of our Board of Directors (“Board”),
subject to applicable laws and dependent upon a number of factors, including our earnings, capital requirements and overall financial
conditions. In addition, terms of any future debt or preferred securities may further restrict our ability to pay dividends on our common
stock. Accordingly, your only opportunity to achieve a return on your investment in our common stock may be if the market price of our
common stock appreciates and you sell your shares at a profit. The market price for our common stock may never exceed, and may fall below,
the price that you pay for such common stock. See “Dividend Policy.”
An
investment in our securities is speculative and there can be no assurance of any return on any such investment.
An
investment in our securities is speculative and there can be no assurance that investors will obtain any return on their investment.
Investors may be subject to substantial risks involved in an investment in the Company, including the risk of losing their entire investment.
We
have broad discretion in the use of the net proceeds of this offering and, despite our efforts, we may use the net proceeds in a manner
that does not increase the value of your investment.
We
intend to use the net proceeds from this offering for general corporate purposes and working capital. However, we have not determined
the specific allocation of the net proceeds among these potential uses. Our management will have broad discretion over the use and investment
of the net proceeds of this offering, and, accordingly, investors in this offering will need to rely upon the judgment of our management
with respect to the use of proceeds, with only limited information concerning our specific intentions. These proceeds could be applied
in ways that do not improve our operating results or increase the value of your investment. Please see the section entitled “Use
of Proceeds” on page 16 of this prospectus or further information.
We
may need, but be unable, to obtain additional funding on satisfactory terms, which could dilute our stockholders or impose burdensome
financial restrictions on our business.
We
have relied upon cash from financing activities and in the future, we hope to rely on revenues generated from operations to fund the
cash requirements of our activities. However, there can be no assurance that we will be able to generate any significant cash from our
operating activities in the future. Future financing may not be available on a timely basis, in sufficient amounts or on terms acceptable
to us, if at all. Any debt financing or other financing of securities senior to the common stock will likely include financial and other
covenants that will restrict our flexibility. Any failure to comply with these covenants would have a material adverse effect on our
business, prospects, financial condition and results of operations because we could lose our existing sources of funding and impair our
ability to secure new sources of funding.
The
actual number of shares we will issue under the Sales Agreement, at any one time or in total, is uncertain.
Subject
to certain limitations in the Sales Agreement and compliance with applicable law, we have the discretion to deliver a sales notice to
the Sales Agent at any time throughout the term of the Sales Agreement. The number of shares that are sold by the Sales Agent after we
deliver a sales notice will fluctuate based on the market price of the common stock during the sales period and limits we set with the
Sales Agent. Because the price per share of each share sold will fluctuate based on the market price of our common stock during the sales
period, it is not possible at this stage to predict the number of shares that will be ultimately issued.
Our
Chief Executive Officer and Chairman, Steven Rossi, has significant control over stockholder matters and the minority stockholder will
have little or no control over our affairs.
Steven
Rossi currently owns 100% of our outstanding Series A Preferred Stock which entitles him to 51% of the voting power of our outstanding
voting equity. Subject to any fiduciary duties owed to our other stockholders under Nevada law, Mr. Rossi is able to exercise significant
influence over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions,
and will have some control over our management and policies. Mr. Rossi may have interests that are different from yours. For example,
Mr. Rossi may support proposals and actions with which you may disagree. The concentration of ownership could delay or prevent a change
in control of our Company or otherwise discourage a potential acquirer from attempting to obtain control of our Company, which in turn
could reduce the price of our stock. In addition, Mr. Rossi could use his voting influence to maintain our existing management and directors
in office, delay or prevent changes in control of our Company, or support or reject other management and Board proposals that are subject
to stockholder approval, such as amendments to our employee stock plans and approvals of significant financing transactions.
The
requirements of being a public company may strain our resources, divert management’s attention and affect our results of operations.
As
a public company in the United States, we face increased legal, accounting, administrative and other costs and expenses. We are subject
to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act of 2002. The Exchange Act requires, among other things,
that we file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires,
among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. For
example, Section 404 requires that our management report on the effectiveness of our internal controls structure and procedures for financial
reporting. Section 404 compliance may divert internal resources and will take a significant amount of time and effort to complete. If
we fail to maintain compliance under Section 404, or if in the future management determines that our internal control over financial
reporting are not effective as defined under Section 404, we could be subject to sanctions or investigations by Nasdaq, the SEC, or other
regulatory authorities. Furthermore, investor perceptions of our Company may suffer, and this could cause a decline in the market price
of our common stock. Any failure of our internal control over financial reporting could have a material adverse effect on our stated
results of operations and harm our reputation. If we are unable to implement these changes effectively or efficiently, it could harm
our operations, financial reporting or financial results and could result in an adverse opinion on internal controls from our independent
auditors. We may need to hire a number of additional employees with public accounting and disclosure experience in order to meet our
ongoing obligations as a public company, particularly if we become fully subject to Section 404 and its auditor attestation requirements,
which will increase costs, and evaluate the costs of our current service providers. We expect these rules and regulations to increase
our legal and financial compliance costs and to make some activities more time consuming and costly, although we are currently unable
to estimate these costs with any degree of certainty. A number of those requirements will require us to carry out activities we have
not done previously. Our management team and other personnel will need to devote a substantial amount of time to new compliance initiatives
and to meeting the obligations that are associated with being a public company, which may divert attention from other business concerns,
which could have a material adverse effect on our business, financial condition and results of operations.
Additionally,
the expenses incurred by public companies generally for reporting and corporate governance purposes have been increasing. These increased
costs will require us to divert a significant amount of money that we could otherwise use to develop our business. If we are unable to
satisfy our obligations as a public company, we could be subject to delisting of our common stock, fines, sanctions and other regulatory
action and potentially civil litigation.
New
laws, regulations, and standards relating to corporate governance and public disclosure may create uncertainty for public companies,
increasing legal and financial compliance costs and making some activities more time consuming.
These
laws, regulations and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result,
may evolve over time as new guidance is provided by the courts and other bodies. This could result in continuing uncertainty regarding
compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. If our efforts to comply
with new laws, regulations, and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related
to their application and practice, regulatory authorities may initiate legal proceedings against us and our business may be adversely
affected.
As
a public company subject to these rules and regulations, we may find it more expensive for us to obtain director and officer liability
insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could
also make it more difficult in the future for us to attract and retain qualified members of our Board, particularly to serve on its audit
committee and compensation committee, and qualified executive officers.
As
a “smaller reporting company” under applicable law, we are subject to lessened disclosure requirements, which could leave
our stockholders without information or rights available to stockholders of more mature companies.
For
as long as we remain a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act, we have elected to take
advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “smaller
reporting companies” including, but not limited to:
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being
permitted to provide only two years of audited financial statements, in addition to any required unaudited interim financial statements
disclosure; and |
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reduced
disclosure obligations regarding executive compensation in our periodic reports, proxy statements and registration statements. |
We
expect to take advantage of these reporting exemptions until we are no longer a “smaller reporting company.” Because of these
lessened regulatory requirements, our stockholders are not provided information or rights available to stockholders of more mature companies.
We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find
our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may
be more volatile.
We
are also a “smaller reporting company” as defined in Rule 12b-2 of the Exchange Act and have elected to follow certain scaled
disclosure requirements available to smaller reporting companies.
If
research analysts do not publish research about our business or if they issue unfavorable commentary or downgrade our common stock, our
stock price and trading volume could decline.
The
trading market for our securities may depend in part on the research and reports that research analysts publish about us and our business.
If we do not maintain adequate research coverage, or if any of the analysts who cover us downgrade our stock or publish inaccurate or
unfavorable research about our business, the price of our common stock and warrants could decline. If one or more of our research analysts
ceases to cover our business or fails to publish reports on us regularly, demand for our securities could decrease, which could cause
the price of our common stock and warrants or trading volume to decline.
Anti-takeover
provisions in our charter documents and Nevada law could discourage delay or prevent a change of control of our Company and may affect
the trading price of our common stock.
We
are a Nevada corporation and the anti-takeover provisions of the Nevada Control Shares Acquisition Act may discourage, delay or prevent
a change of control by limiting the voting rights of control shares acquired in a control share acquisition. In addition, our amended
and restated articles of incorporation (“Articles of Incorporation”) and amended and restated bylaws (“Bylaws”)
may discourage, delay or prevent a change in our management or control over us that stockholders may consider favorable. Among other
things, our Articles of Incorporation and Bylaws:
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authorize
the issuance of “blank check” preferred stock that could be issued by our Board in response to a takeover attempt; |
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provide
that vacancies on our Board, including newly created directorships, may be filled only by a majority vote of directors then in office,
except a vacancy occurring by reason of the removal of a director without cause shall be filled by vote of the stockholders; and |
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limit
who may call special meetings of stockholders. |
These
provisions could have the effect of delaying or preventing a change of control, whether or not it is desired by, or beneficial to, our
stockholders.
USE
OF PROCEEDS
We
intend to use the net proceeds from the sale of the securities as set forth in the applicable prospectus supplement.
DIVIDEND
POLICY
We
have never declared or paid any cash dividends on our capital stock. We intend to retain future earnings, if any, to finance the operation
of our business and do not anticipate paying any cash dividends in the foreseeable future. Any future determination related to our dividend
policy will be made at the discretion of our Board after considering our financial condition, results of operations, capital requirements,
business prospects and other factors our Board deems relevant, and subject to the restrictions contained in any future financing instruments.
THE
SECURITIES WE MAY OFFER
We
may offer and sell, at any time and from time to time:
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shares
of our common stock; |
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shares
of our preferred stock; |
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warrants
to purchase shares of our common stock, preferred stock and/or debt securities; |
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debt
securities consisting of debentures, notes or other evidences of indebtedness; |
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units
consisting of a combination of the foregoing securities; or |
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any
combination of these securities. |
The
terms of any securities we offer will be determined at the time of sale. We may issue debt securities that are exchangeable for and/or
convertible into common stock or any of the other securities that may be sold under this prospectus. When particular securities are offered
by us, a supplement to this prospectus will be filed with the SEC, which will describe the terms of the offering and sale of the offered
securities.
We
may offer up to $30,000,000 of securities under this prospectus. If securities are offered as units, we will describe the terms of the
units in a prospectus supplement.
DESCRIPTION
OF CAPITAL STOCK
General
The
following description summarizes some of the terms of our capital stock. Because it is only a summary, it does not contain all the information
that may be important to you and is subject to and qualified in its entirety by reference to our amended and restated articles of incorporation
(“Articles of Incorporation”) and amended and restated bylaws (“Bylaws”), which are filed as exhibits to our
most recent Annual Report on Form 10-K and are incorporated by reference herein. We encourage you to read our Articles of Incorporation
and our Bylaws for additional information.
As
of June 30, 2022, our authorized capital stock presently consists of 299,000,000 shares of common stock, par value $0.0001 per share,
and 1,000,000 shares of “blank check” preferred stock, par value $0.0001 per share.
Common
Stock
As
of June 30, 2022, there were 17,041,266 shares of our common stock outstanding and held of record by 388 stockholders.
Holders
of common stock are entitled to one vote for each share held on all matters submitted to a vote of the stockholders and do not have cumulative
voting rights. Accordingly, holders of a majority of the shares of common stock entitled to vote in any election of directors may elect
all of the directors standing for election. Holders of common stock are entitled to receive ratably any dividends, as may be declared
by the Board out of funds legally available therefor, subject to the rights of the holders of preferred stock. Upon the liquidation,
dissolution or winding up of our Company, the holders of common stock are entitled to receive ratably our net assets available after
the payment of our debts and other liabilities. Holders of common stock have no preemptive, subscription, redemption or conversion rights.
The outstanding shares of common stock are fully paid and nonassessable.
In
the event of our liquidation, dissolution or winding up, the holders of common stock will be entitled to share ratably in the assets
legally available for distribution to stockholders after the payment of or provision for all of our debts and other liabilities, subject
to the prior rights of any preferred stock then outstanding.
We
have never declared or paid any cash dividends on our common stock. We have no present plan to declare and pay any dividends on our common
stock in the near future. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and
expand our business. Any future determination to pay dividends will be at the discretion of our Board, subject to applicable laws, and
will depend on our financial condition, results of operations, capital requirements, general business conditions and other factors that
our Board considers relevant.
Preferred
Stock
Our
Articles of Incorporation authorizes the issuance of 1,000,000 shares of “blank check” preferred stock, par value $0.0001
per share, of which there are 100 shares of Series A Preferred Stock outstanding.
The
Board may provide for the issue of any or all of the unissued and undesignated shares of the preferred stock in one or more series, and
to fix the number of shares and to determine or alter for each such series, such voting powers, full or limited, or no voting powers,
and such designation, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions
thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board providing for the issuance of such shares
and as may be permitted by law, without stockholder approval.
Our
Board has the right to establish one or more series of preferred stock without stockholder approval. Unless required by law or by any
stock exchange on which our common stock is listed, the authorized shares of preferred stock will be available for issuance at the discretion
of our Board without further action by our stockholders. Our Board is able to determine, with respect to any series of preferred stock,
the terms and rights of that series, including:
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the designation of the
series; |
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the number of shares of
the series; |
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whether dividends, if any,
will be cumulative or non-cumulative and the dividend rate, if any, of the series; |
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the dates at which dividends,
if any, will be payable; |
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the redemption rights and
price or prices, if any, for shares of the series; |
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the terms and amounts of
any sinking fund provided for the purchase or redemption of shares of the series; |
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the amounts payable on
shares of the series in the event of any voluntary or involuntary liquidation, dissolution or winding-up of the affairs of our Company; |
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whether the shares of the
series will be convertible into shares of any other class or series, or any other security, of our Company or any other entity, and,
if so, the specification of the other class or series or other security, the conversion price or prices or rate or rates and provisions
for any adjustments to such prices or rates, the date or dates as of which the shares will be convertible, and all other terms and
conditions upon which the conversion may be made; |
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the ranking of such series
with respect to dividends and amounts payable on our liquidation, dissolution or winding-up, which may include provisions that such
series will rank senior to our common stock with respect to dividends and those distributions; |
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restrictions on the issuance
of shares of the same series or any other class or series; or |
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voting rights, if any,
of the holders of the series. |
The
issuance of preferred stock could adversely affect, among other things, the voting power of holders of common stock and the likelihood
that stockholders will receive dividend payments and payments upon our liquidation, dissolution or winding up. The issuance of preferred
stock could also have the effect of delaying, deferring or preventing a change in control of us.
A
prospectus supplement relating to any series of preferred stock being offered will include specific terms related to the offering. They
will include, where applicable:
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the title and stated value
of the series of preferred stock and the number of shares constituting that series; |
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the number of shares of
the series of preferred stock offered, the liquidation preference per share and the offering price of the shares of preferred stock; |
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the dividend rate(s), period(s)
and/or payment date(s) or the method(s) of calculation for those values relating to the shares of preferred stock of the series; |
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the date from which dividends
on shares of preferred stock of the series shall cumulate, if applicable; |
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our right, if any, to defer
payment of dividends and the maximum length of any such deferral period; |
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the procedures for any
auction and remarketing, if any, for shares of preferred stock of the series; |
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the provision for redemption
or repurchase, if applicable, of shares of preferred stock of the series; |
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any listing of the series
of shares of preferred stock on any securities exchange; |
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the terms and conditions,
if applicable, upon which shares of preferred stock of the series will be convertible into shares of preferred stock of another series
or common stock, including the conversion price, or manner of calculating the conversion price; |
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whether the preferred stock
will be exchangeable into debt securities, and, if applicable, the exchange period, the exchange price, or how it will be calculated,
and under what circumstances it may be adjusted; |
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voting rights, if any,
of the preferred stock; |
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restrictions on transfer,
sale or other assignment, if any; |
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whether interests in shares
of preferred stock of the series will be represented by global securities; |
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any other specific terms,
preferences, rights, limitations or restrictions of the series of shares of preferred stock; |
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a discussion of any material
United States federal income tax consequences of owning or disposing of the shares of preferred stock of the series; |
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the relative ranking and
preferences of shares of preferred stock of the series as to dividend rights and rights upon liquidation, dissolution or winding
up of our affairs; and |
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any limitations on issuance
of any series of shares of preferred stock ranking senior to or on a parity with the series of shares of preferred stock as to dividend
rights and rights upon liquidation, dissolution or winding up of our affairs. |
If
we issue shares of preferred stock under this prospectus, the shares will be fully paid and nonassessable and will not have, or be subject
to, any preemptive or similar rights.
Series
A Preferred Stock
We
are authorized to issue 100 shares of Series A Preferred Stock, par value $0.0001 per share. All of 100 outstanding shares of common
stock are held by Steven Rossi, the Company’s Chief Executive Officer. The Series A Preferred Stock is entitled to 51% of the total
power of the Company regardless of the number of shares of Series A Preferred Stock that are outstanding. The Series A are not (i) convertible
into any other securities of the Company, (ii) entitled to dividends or (iii) to receive any distributions in an event of a liquidation
or winding up of the Company.
Series
B Preferred Stock
We
are authorized to issue up to 100,000 shares of our Series B Preferred Stock, $0.0001 par value.
The
holders of the Series B Preferred Stock are entitled to receive dividends upon payment of any dividend on the Common Stock of the Company
as if the Series B Preferred Stock had been converted into Common Stock.
In
the event of liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the holders of the Series B Preferred
Stock are entitled to receive prior and in preference to any distribution of the assets of the Company to the holders of the common stock
an amount per share equal to the price per share actually paid to the Company upon the initial issuance of Series B Preferred Stock plus
any declared but unpaid dividends.
The
Series B Preferred Stock is not convertible nor non-redeemable. Each outstanding share of Series B Preferred Stock is entitled to vote
on any matter put forth to the holders of the common stock equal to the number of shares of common stock divided by the original issue
price of each share of Series B Preferred Stock divided by $0.000000001.
As
of the date of this prospectus there were no shares of Series B Preferred Stock nor any securities convertible into shares of Series
B Preferred Stock outstanding.
Anti-Takeover
Provisions of Nevada Law and Charter Documents
Anti-Takeover
Effects of Certain Provisions of Nevada Law and Nevada Anti-takeover Statutes.
Certain
provisions of the Nevada Revised Statutes, or NRS, as described below, may delay or discourage transactions involving an actual or potential
change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for
their shares or transactions that our stockholders might otherwise deem to be in their best interests.
Combinations
with Interested Stockholders Statutes
Nevada’s
“combinations with interested stockholders” statutes, NRS 78.411 through 78.444, inclusive, prohibit specified types of business
“combinations” between certain Nevada corporations and any person deemed to be an “interested stockholder” for
two years after such person first becomes an “interested stockholder” unless (1) the corporation’s board of directors
approves, in advance, either the combination itself, or the transaction by which such person becomes an interested stockholder, or (2)
the combination is approved by the board of directors and 60% of the then-outstanding voting power of the corporation’s stockholders
not beneficially owned by the interested stockholder, its affiliates and associates. Further, in the absence of the prior approval described
above, certain restrictions may apply even after such two-year period. However, these statutes do not apply to any combination of a corporation
and an interested stockholder after the expiration of four years after the person first became an interested stockholder.
For
purposes of these statutes, an “interested stockholder” is any person who is (1) the beneficial owner, directly or indirectly,
of 10% or more of the voting power of the outstanding voting shares of the corporation, or (2) an affiliate or associate of the corporation
and at any time within the two previous years was the beneficial owner, directly or indirectly, of 10% or more of the voting power of
the then outstanding shares of the corporation. The definition of the term “combination” is sufficiently broad to cover most
significant transactions between a corporation and an interested stockholder. These statutes generally apply to “resident domestic
corporations,” namely Nevada corporations with 200 or more stockholders of record. However, a Nevada corporation may elect in its
articles of incorporation not to be governed by these particular laws, but if such election is not made in the corporation’s original
articles of incorporation, the amendment (1) must be approved by the affirmative vote of the holders of stock representing a majority
of the outstanding voting power of the corporation not beneficially owned by interested stockholders or their affiliates and associates,
and (2) is not effective until 18 months after the vote approving the amendment and does not apply to any combination with a person who
first became an interested stockholder on or before the effective date of the amendment.
Our
original articles of incorporation include a provision providing that at such time, if any, that we become a “resident domestic
corporation” as defined in the NRS, we will not be subject to, or governed by, any of the provisions of NRS 78.411 to 78.444, inclusive,
as amended from time to time, or any successor statute. As a result, pursuant to NRS 78.434, the “combinations with interested
stockholders” statutes will not apply to us, unless our Articles of Incorporation are subsequently amended to provide that we are
subject to those provisions.
Acquisition
of Controlling Interest Statutes
Nevada’s
“acquisition of controlling interest” statutes, NRS 78.378 through 78.3793, inclusive, contain provisions governing the acquisition
of stockholder voting power above specified thresholds in certain Nevada corporations. These “control share” laws provide
generally that any person that acquires a “controlling interest” in certain Nevada corporations may be denied voting rights,
unless a majority of the disinterested stockholders of the corporation elects to restore such voting rights. These laws provide that
a person acquires a “controlling interest” whenever a person acquires shares of a subject corporation that, but for the application
of these provisions of the NRS, would enable that person to exercise (1) one-fifth or more, but less than one-third, (2) one-third or
more, but less than a majority or (3) a majority or more, of all of the voting power of the corporation in the election of directors.
Once an acquirer crosses one of these thresholds, shares which it acquired in the transaction taking it over the threshold and within
the 90 days immediately preceding the date when the acquiring person acquired or offered to acquire a controlling interest become “control
shares” to which the voting restrictions described above apply.
In
our Bylaws, we have elected not to be governed by, and to otherwise opt out of, the provisions of NRS 78.378 to 78.3793, inclusive. Absent
such provision in our Bylaws, these statutes would apply to us as of a particular date if we were to have 200 or more stockholders of
record (at least 100 of whom have addresses in Nevada appearing on our stock ledger at all times during the 90 days immediately preceding
that date) and do business in the State of Nevada directly or through an affiliated corporation, unless our Articles of Incorporation
or Bylaws in effect on the tenth day after the acquisition of a controlling interest provide otherwise.
NRS
78.139(4) also provides that directors of a Nevada corporation may resist a change or potential change in control of the corporation
if the board of directors determines that the change or potential change is opposed to, or not in, the best interest of the corporation
upon consideration of any relevant facts, circumstances, contingencies or constituencies that the directors are entitled, but not required,
to consider when exercising their directorial powers pursuant to NRS 78.138(4).
The
existence of the foregoing provisions and other potential anti-takeover measures could limit the price that investors might be willing
to pay in the future for shares of our common stock. They could also deter potential acquirers of our Company, thereby reducing the likelihood
that you could receive a premium for your common stock in an acquisition.
Articles
of Incorporation and Bylaw Provisions.
Our
Articles of Incorporation and Bylaws contain provisions that might have an anti-takeover effect. These provisions, which are summarized
below, may have the effect of delaying, deterring or preventing a change in control of our Company. They could also impede a transaction
in which our stockholders might receive a premium over the then-current market price of our common stock and our stockholders’
ability to approve transactions that they consider to be in their best interests.
Articles
of Incorporation. Our authorized but unissued shares of common stock and preferred stock are available for our Board to issue without
stockholder approval. We may use these additional shares for a variety of corporate purposes, including future public or private offerings
to raise additional capital, corporate acquisitions and employee benefit plans. The existence of our authorized but unissued shares of
common stock and preferred stock could render more difficult or discourage an attempt to obtain control of our Company by means of a
proxy contest, tender offer, merger or other transaction. Our authorized but unissued shares may be used to delay, defer or prevent a
tender offer or takeover attempt that a stockholder might consider in its best interest, including those attempts that might result in
a premium over the market price for the shares held by our stockholders.
Bylaws.
Certain provisions of our Bylaws may be considered to have anti-takeover effects, including advance notice requirements for director
nominations and other stockholder proposals. Our Bylaws establish advance notice procedures for stockholder proposals to be brought before
an annual meeting of stockholders, and for proposed nominations of candidates for election to our Board at an annual or special meeting
of stockholders. Generally, such notices must be received by our corporate secretary at our principal executive offices, in the case
of an annual meeting, between 90 days and 120 days prior to the first anniversary of the preceding year’s annual meeting and, in
the case of a special meeting called for the purpose of electing directors, between 90 and 120 days prior to the date of the special
meeting or within 10 days after the day on which public announcement of the date of the special meeting is first made by us. In addition,
our Board has the authority to amend or repeal our Bylaws, or to adopt new bylaws, which could have the effect of delaying, deterring
or preventing a change of control.
Listing
Our
common stock is listed on the Nasdaq Capital Market under the symbol “WKSP.”
Transfer
Agent and Registrar
Our
transfer agent and registrar is Vstock Transfer, LLC, 18 Lafayette Place, Woodmere, NY 11598. Their telephone number is (212) 828-8436.
DESCRIPTION
OF WARRANTS
We
may issue warrants for the purchase of shares of our common stock or preferred stock or of debt securities. We may issue warrants independently
or together with other securities, and the warrants may be attached to or separate from any offered securities. Each series of warrants
will be issued under a separate warrant agreement to be entered into between us and the investors or a warrant agent. The following summary
of material provisions of the warrants and warrant agreements is subject to, and qualified in its entirety by reference to, all the provisions
of the warrant agreement and warrant certificate applicable to a particular series of warrants. The terms of any warrants offered under
a prospectus supplement may differ from the terms described below. We urge you to read the applicable prospectus supplement and any related
free writing prospectus, as well as the complete warrant agreements and warrant certificates that contain the terms of the warrants.
The
particular terms of any issue of warrants will be described in the prospectus supplement relating to the issue. Those terms may include:
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the
number of shares of common stock or preferred stock purchasable upon the exercise of warrants to purchase such shares and the price
at which such number of shares may be purchased upon such exercise; |
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the
designation, stated value and terms (including, without limitation, liquidation, dividend, conversion and voting rights) of the series
of preferred stock purchasable upon exercise of warrants to purchase preferred stock; |
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the
principal amount of debt securities that may be purchased upon exercise of a debt warrant and the exercise price for the warrants,
which may be payable in cash, securities or other property; |
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the
date, if any, on and after which the warrants and the related debt securities, preferred stock or common stock will be separately
transferable; |
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the
terms of any rights to redeem or call the warrants; |
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the
date on which the right to exercise the warrants will commence and the date on which the right will expire; |
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United
States federal income tax consequences applicable to the warrants; and |
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any
additional terms of the warrants, including terms, procedures, and limitations relating to the exchange, exercise and settlement
of the warrants. |
Holders
of equity warrants will not be entitled to:
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vote,
consent or receive dividends; |
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receive
notice as stockholders with respect to any meeting of stockholders for the election of our directors or any other matter; or |
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exercise
any rights as stockholders of Worksport. |
Each
warrant will entitle its holder to purchase the principal amount of debt securities or the number of shares of preferred stock or common
stock at the exercise price set forth in, or calculable as set forth in, the applicable prospectus supplement. Unless we otherwise specify
in the applicable prospectus supplement, holders of the warrants may exercise the warrants at any time up to the specified time on the
expiration date that we set forth in the applicable prospectus supplement. After the close of business on the expiration date, unexercised
warrants will become void.
A
holder of warrant certificates may exchange them for new warrant certificates of different denominations, present them for registration
of transfer and exercise them at the corporate trust office of the warrant agent or any other office indicated in the applicable prospectus
supplement. Until any warrants to purchase debt securities are exercised, the holder of the warrants will not have any rights of holders
of the debt securities that can be purchased upon exercise, including any rights to receive payments of principal, premium or interest
on the underlying debt securities or to enforce covenants in the applicable indenture. Until any warrants to purchase common stock or
preferred stock are exercised, the holders of the warrants will not have any rights of holders of the underlying common stock or preferred
stock, including any rights to receive dividends or payments upon any liquidation, dissolution or winding up on the common stock or preferred
stock, if any.
DESCRIPTION
OF DEBT SECURITIES
The
following description, together with the additional information we include in any applicable prospectus supplement or free writing prospectus,
summarizes certain general terms and provisions of the debt securities that we may offer under this prospectus. When we offer to sell
a particular series of debt securities, we will describe the specific terms of the series in a supplement to this prospectus. We will
also indicate in the supplement to what extent the general terms and provisions described in this prospectus apply to a particular series
of debt securities.
We
may issue debt securities either separately, or together with, or upon the conversion or exercise of or in exchange for, other securities
described in this prospectus. Debt securities may be our senior, senior subordinated or subordinated obligations and, unless otherwise
specified in a supplement to this prospectus, the debt securities will be our direct, unsecured obligations and may be issued in one
or more series.
The
debt securities will be issued under an indenture between us and a trustee named in the prospectus supplement. We have summarized select
portions of the indenture below. The summary is not complete. The form of the indenture has been filed as an exhibit to the registration
statement and you should read the indenture for provisions that may be important to you. In the summary below, we have included references
to the section numbers of the indenture so that you can easily locate these provisions. Capitalized terms used in the summary and not
defined herein have the meanings specified in the indenture.
General
The
indenture does not limit the amount of debt securities that we may issue. It provides that we may issue debt securities up to the principal
amount that we may authorize and may be in any currency or currency unit that we may designate. Except for the limitations on consolidation,
merger and sale of all or substantially all of our assets contained in the indenture, the terms of the indenture do not contain any covenants
or other provisions designed to give holders of any debt securities protection against changes in our operations, financial condition
or transactions involving us.
We
may issue the debt securities issued under the indenture as “discount securities,” which means they may be sold at a discount
below their stated principal amount. These debt securities, as well as other debt securities that are not issued at a discount, may be
issued with “original issue discount,” or OID, for U.S. federal income tax purposes because of interest payment and other
characteristics or terms of the debt securities. Material U.S. federal income tax considerations applicable to debt securities issued
with OID will be described in more detail in any applicable prospectus supplement.
We
will describe in the applicable prospectus supplement the terms of the series of debt securities being offered, including:
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the title of
the series of debt securities; |
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any limit upon the aggregate
principal amount that may be issued; |
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the maturity date or dates; |
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the form of the debt securities
of the series; |
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the applicability of any
guarantees; |
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whether or not the debt
securities will be secured or unsecured, and the terms of any secured debt; |
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whether the debt securities
rank as senior debt, senior subordinated debt, subordinated debt or any combination thereof, and the terms of any subordination; |
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if the price (expressed
as a percentage of the aggregate principal amount thereof) at which such debt securities will be issued is a price other than the
principal amount thereof, the portion of the principal amount thereof payable upon declaration of acceleration of the maturity thereof,
or if applicable, the portion of the principal amount of such debt securities that is convertible into another security or the method
by which any such portion shall be determined; |
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the interest rate or rates,
which may be fixed or variable, or the method for determining the rate and the date interest will begin to accrue, the dates interest
will be payable and the regular record dates for interest payment dates or the method for determining such dates; |
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our right, if any, to defer
payment of interest and the maximum length of any such deferral period; |
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if applicable, the date
or dates after which, or the period or periods during which, and the price or prices at which, we may, at our option, redeem the
series of debt securities pursuant to any optional or provisional redemption provisions and the terms of those redemption provisions; |
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the date or dates, if any,
on which, and the price or prices at which we are obligated, pursuant to any mandatory sinking fund or analogous fund provisions
or otherwise, to redeem, or at the holder’s option to purchase, the series of debt securities and the currency or currency
unit in which the debt securities are payable; |
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the denominations in which
we will issue the series of debt securities, if other than denominations of $1,000 and any integral multiple thereof; |
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any and all
terms, if applicable, relating to any auction or remarketing of the debt securities of that series and any security for our obligations
with respect to such debt securities and any other terms which may be advisable in connection with the marketing of debt securities
of that series; |
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whether the debt securities
of the series shall be issued in whole or in part in the form of a global security or securities; the terms and conditions, if any,
upon which such global security or securities may be exchanged in whole or in part for other individual securities; and the depositary
for such global security or securities; |
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if applicable, the provisions
relating to conversion or exchange of any debt securities of the series and the terms and conditions upon which such debt securities
will be so convertible or exchangeable, including the conversion or exchange price, as applicable, or how it will be calculated and
may be adjusted, any mandatory or optional (at our option or the holders’ option) conversion or exchange features, the applicable
conversion or exchange period and the manner of settlement for any conversion or exchange; |
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if other than the full
principal amount thereof, the portion of the principal amount of debt securities of the series which shall be payable upon declaration
of acceleration of the maturity thereof; |
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additions to or changes
in the covenants applicable to the particular debt securities being issued, including, among others, the consolidation, merger or
sale covenant; |
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additions to or changes
in the events of default with respect to the securities and any change in the right of the trustee or the holders to declare the
principal, premium, if any, and interest, if any, with respect to such securities to be due and payable; |
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additions to or changes
in or deletions of the provisions relating to covenant defeasance and legal defeasance; |
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additions to or changes
in the provisions relating to satisfaction and discharge of the indenture; |
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additions to or changes
in the provisions relating to the modification of the indenture both with and without the consent of holders of debt securities issued
under the indenture; |
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the currency of payment
of debt securities if other than U.S. dollars and the manner of determining the equivalent amount in U.S. dollars; |
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whether interest will be
payable in cash or additional debt securities at our or the holders’ option and the terms and conditions upon which the election
may be made; |
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any restrictions on transfer,
sale or assignment of the debt securities of the series; and |
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any other specific terms,
preferences, rights or limitations of, or restrictions on, the debt securities, any other additions or changes in the provisions
of the indenture, and any terms that may be required by us or advisable under applicable laws or regulations. |
Conversion
or Exchange Rights
We
will set forth in the applicable prospectus supplement the terms on which a series of debt securities may be convertible into or exchangeable
for our common stock or our other securities. We will include provisions as to settlement upon conversion or exchange and whether conversion
or exchange is mandatory, at the option of the holder or at our option. We may include provisions pursuant to which the number of shares
of our common stock or our other securities that the holders of the series of debt securities receive would be subject to adjustment.
Consolidation,
Merger or Sale
Unless
we provide otherwise in the prospectus supplement applicable to a particular series of debt securities, the indenture will not contain
any covenant that restricts our ability to merge or consolidate, or sell, convey, transfer or otherwise dispose of our assets as an entirety
or substantially as an entirety. However, any successor to or acquirer of such assets (other than a subsidiary of ours) must assume all
of our obligations under the indenture or the debt securities, as appropriate.
Events
of Default under the Indenture
Unless
we provide otherwise in the prospectus supplement applicable to a particular series of debt securities, the following are events of default
under the indenture with respect to any series of debt securities that we may issue:
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if we fail
to pay any installment of interest on any series of debt securities, as and when the same shall become due and payable, and such
default continues for a period of 90 days; provided, however, that a valid extension of an interest payment period by us in accordance
with the terms of any indenture supplemental thereto shall not constitute a default in the payment of interest for this purpose; |
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if we fail to pay the principal
of, or premium, if any, on any series of debt securities as and when the same shall become due and payable whether at maturity, upon
redemption, by declaration or otherwise, or in any payment required by any sinking or analogous fund established with respect to
such series; provided, however, that a valid extension of the maturity of such debt securities in accordance with the terms of any
indenture supplemental thereto shall not constitute a default in the payment of principal or premium, if any; |
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if we fail to observe or
perform any other covenant or agreement contained in the debt securities or the indenture, other than a covenant specifically relating
to another series of debt securities, and our failure continues for 90 days after we receive written notice of such failure, requiring
the same to be remedied and stating that such is a notice of default thereunder, from the trustee or holders of at least 25% in aggregate
principal amount of the outstanding debt securities of the applicable series; and |
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if specified events of
bankruptcy, insolvency or reorganization occur. |
If
an event of default with respect to debt securities of any series occurs and is continuing, other than an event of default specified
in the last bullet point above, the trustee or the holders of at least 25% in aggregate principal amount of the outstanding debt securities
of that series, by notice to us in writing, and to the trustee if notice is given by such holders, may declare the unpaid principal of,
premium, if any, and accrued interest, if any, due and payable immediately. If an event of default specified in the last bullet point
above occurs with respect to us, the principal amount of and accrued interest, if any, of each issue of debt securities then outstanding
shall be due and payable without any notice or other action on the part of the trustee or any holder.
The
holders of a majority in principal amount of the outstanding debt securities of an affected series may waive any default or event of
default with respect to the series and its consequences, except defaults or events of default regarding payment of principal, premium,
if any, or interest, unless we have cured the default or event of default in accordance with the indenture. Any waiver shall cure the
default or event of default.
Subject
to the terms of the indenture, if an event of default under an indenture shall occur and be continuing, the trustee will be under no
obligation to exercise any of its rights or powers under such indenture at the request or direction of any of the holders of the applicable
series of debt securities, unless such holders have offered the trustee reasonable indemnity. The holders of a majority in principal
amount of the outstanding debt securities of any series will have the right to direct the time, method and place of conducting any proceeding
for any remedy available to the trustee, or exercising any trust or power conferred on the trustee, with respect to the debt securities
of that series, provided that:
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the direction so given
by the holder is not in conflict with any law or the applicable indenture; and |
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subject to its duties under
the Trust Indenture Act of 1939 (“Trust Indenture Act”), the trustee need not take any action that might involve it in
personal liability or might be unduly prejudicial to the holders not involved in the proceeding. |
A
holder of the debt securities of any series will have the right to institute a proceeding under the indenture or to appoint a receiver
or trustee, or to seek other remedies only if:
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the
holder has given written notice to the trustee of a continuing event of default with respect to that series; |
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the
holders of at least 25% in aggregate principal amount of the outstanding debt securities of that series have made written request; |
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such
holders have offered to the trustee indemnity satisfactory to it against the costs, expenses and liabilities to be incurred by the
trustee in compliance with the request; and |
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the
trustee does not institute the proceeding, and does not receive from the holders of a majority in aggregate principal amount of the
outstanding debt securities of that series other conflicting directions within 90 days after the notice, request and offer. |
These
limitations do not apply to a suit instituted by a holder of debt securities if we default in the payment of the principal, premium,
if any, or interest on, the debt securities.
We
will periodically file statements with the trustee regarding our compliance with specified covenants in the indenture.
Modification
of Indenture; Waiver
We
and the trustee may change an indenture without the consent of any holders with respect to specific matters:
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to
cure any ambiguity, defect or inconsistency in the indenture or in the debt securities of any series; |
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to
comply with the provisions described above under “Description of Debt Securities—Consolidation, Merger or Sale”; |
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to
provide for uncertificated debt securities in addition to or in place of certificated debt securities; |
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to
add to our covenants, restrictions, conditions or provisions such new covenants, restrictions, conditions or provisions for the benefit
of the holders of all or any series of debt securities, to make the occurrence, or the occurrence and the continuance, of a default
in any such additional covenants, restrictions, conditions or provisions an event of default or to surrender any right or power conferred
upon us in the indenture; |
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to
add to, delete from or revise the conditions, limitations, and restrictions on the authorized amount, terms, or purposes of issue,
authentication and delivery of debt securities, as set forth in the indenture; |
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to
make any change that does not adversely affect the interests of any holder of debt securities of any series in any material respect; |
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to
provide for the issuance of and establish the form and terms and conditions of the debt securities of any series as provided above
under “Description of Debt Securities—General” to establish the form of any certifications required to be
furnished pursuant to the terms of the indenture or any series of debt securities, or to add to the rights of the holders of any
series of debt securities; |
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to evidence and provide
for the acceptance of appointment under any indenture by a successor trustee; or |
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to comply with any requirements
of the SEC in connection with the qualification of any indenture under the Trust Indenture Act. |
In
addition, under the indenture, the rights of holders of a series of debt securities may be changed by us and the trustee with the written
consent of the holders of at least a majority in aggregate principal amount of the outstanding debt securities of each series that is
affected. However, unless we provide otherwise in the prospectus supplement applicable to a particular series of debt securities, we
and the trustee may make the following changes only with the consent of each holder of any outstanding debt securities affected:
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extending
the fixed maturity of any debt securities of any series; |
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reducing
the principal amount, reducing the rate of or extending the time of payment of interest, or reducing any premium payable upon the
redemption of any series of any debt securities; or |
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reducing
the percentage of debt securities, the holders of which are required to consent to any amendment, supplement, modification or waiver. |
Discharge
Each
indenture provides that we can elect to be discharged from our obligations with respect to one or more series of debt securities, except
for specified obligations, including obligations to:
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provide
for payment; |
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register
the transfer or exchange of debt securities of the series; |
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replace
stolen, lost or mutilated debt securities of the series; |
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pay
principal of and premium and interest on any debt securities of the series; |
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maintain
paying agencies; |
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hold
monies for payment in trust; |
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recover
excess money held by the trustee; |
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compensate
and indemnify the trustee; and |
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appoint
any successor trustee. |
In
order to exercise our rights to be discharged, we must deposit with the trustee money or government obligations sufficient to pay all
the principal of, any premium, if any, and interest on, the debt securities of the series on the dates payments are due.
Form,
Exchange and Transfer
We
will issue the debt securities of each series only in fully registered form without coupons and, unless we provide otherwise in the applicable
prospectus supplement, in denominations of $1,000 and any integral multiple thereof. The indenture provides that we may issue debt securities
of a series in temporary or permanent global form and as book-entry securities that will be deposited with, or on behalf of, The Depository
Trust Company, or DTC, or another depositary named by us and identified in the applicable prospectus supplement with respect to that
series. To the extent the debt securities of a series are issued in global form and as book-entry, a description of terms relating to
any book-entry securities will be set forth in the applicable prospectus supplement.
At
the option of the holder, subject to the terms of the indenture and the limitations applicable to global securities described in the
applicable prospectus supplement, the holder of the debt securities of any series can exchange the debt securities for other debt securities
of the same series, in any authorized denomination and of like tenor and aggregate principal amount.
Subject
to the terms of the indenture and the limitations applicable to global securities set forth in the applicable prospectus supplement,
holders of the debt securities may present the debt securities for exchange or for registration of transfer, duly endorsed or with the
form of transfer endorsed thereon duly executed if so required by us or the security registrar, at the office of the security registrar
or at the office of any transfer agent designated by us for this purpose. Unless otherwise provided in the debt securities that the holder
presents for transfer or exchange, we will impose no service charge for any registration of transfer or exchange, but we may require
payment of any taxes or other governmental charges.
We
will name in the applicable prospectus supplement the security registrar, and any transfer agent in addition to the security registrar,
that we initially designate for any debt securities. We may at any time designate additional transfer agents or rescind the designation
of any transfer agent or approve a change in the office through which any transfer agent acts, except that we will be required to maintain
a transfer agent in each place of payment for the debt securities of each series.
If
we elect to redeem the debt securities of any series, we will not be required to:
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issue, register the transfer
of, or exchange any debt securities of that series during a period beginning at the opening of business 15 days before the day of
mailing of a notice of redemption of any debt securities that may be selected for redemption and ending at the close of business
on the day of the mailing; or |
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register the transfer of
or exchange any debt securities so selected for redemption, in whole or in part, except the unredeemed portion of any debt securities
we are redeeming in part. |
Information
Concerning the Trustee
The
trustee, other than during the occurrence and continuance of an event of default under an indenture, undertakes to perform only those
duties as are specifically set forth in the applicable indenture. Upon an event of default under an indenture, the trustee must use the
same degree of care as a prudent person would exercise or use in the conduct of his or her own affairs. Subject to this provision, the
trustee is under no obligation to exercise any of the powers given it by the indenture at the request of any holder of debt securities
unless it is offered reasonable security and indemnity against the costs, expenses and liabilities that it might incur.
Payment
and Paying Agents
Unless
we otherwise indicate in the applicable prospectus supplement, we will make payment of the interest on any debt securities on any interest
payment date to the person in whose name the debt securities, or one or more predecessor securities, are registered at the close of business
on the regular record date for the interest.
We
will pay principal of and any premium and interest on the debt securities of a particular series at the office of the paying agents designated
by us, except that unless we otherwise indicate in the applicable prospectus supplement, we will make interest payments by check that
we will mail to the holder or by wire transfer to certain holders. Unless we otherwise indicate in the applicable prospectus supplement,
we will designate the corporate trust office of the trustee as our sole paying agent for payments with respect to debt securities of
each series. We will name in the applicable prospectus supplement any other paying agents that we initially designate for the debt securities
of a particular series. We will maintain a paying agent in each place of payment for the debt securities of a particular series.
All
money we pay to a paying agent or the trustee for the payment of the principal of or any premium or interest on any debt securities that
remains unclaimed at the end of two years after such principal, premium or interest has become due and payable will be repaid to us,
and the holder of the debt security thereafter may look only to us for payment thereof.
Governing
Law
The
indenture and the debt securities will be governed by and construed in accordance with the internal laws of the State of New York, except
to the extent that the Trust Indenture Act is applicable.
DESCRIPTION
OF UNITS
The
following description, together with the additional information we include in any applicable prospectus supplement, summarizes the material
terms and provisions of the units that we may offer under this prospectus. Units may be offered independently or together with common
stock, preferred stock, debt securities and/or warrants offered by any prospectus supplement, and may be attached to or separate from
those securities. While the terms we have summarized below will generally apply to any future units that we may offer under this prospectus,
we will describe the particular terms of any series of units that we may offer in more detail in the applicable prospectus supplement.
The terms of any units offered under a prospectus supplement may differ from the terms described below.
We
will incorporate by reference into the registration statement of which this prospectus forms a part the form of unit agreement, including
a form of unit certificate, if any, that describes the terms of the series of units we are offering before the issuance of the related
series of units. The following summaries of material provisions of the units, and the unit agreements, are subject to, and qualified
in their entirety by reference to, all the provisions of the unit agreement applicable to a particular series of units. We urge you to
read the applicable prospectus supplements related to the units that we sell under this prospectus, as well as the complete unit agreements
that contain the terms of the units.
General
We
may issue units comprised of one or more shares of our common stock or preferred stock, debt securities and warrants in any combination.
Each unit will be issued so that the holder of the unit is also the holder of each security included in the unit. Thus, the holder of
a unit will have the rights and obligations of a holder of each included security. The unit agreement under which a unit is issued may
provide that the securities included in the unit may not be held or transferred separately, at any time or at any time before a specified
date.
We
will describe in the applicable prospectus supplement the terms of the series of units, including:
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the
designation and terms of the units and of the securities comprising the units, including whether, and under what circumstances, those
securities may be held or transferred separately; |
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the
rights and obligations of the unit agent, if any; |
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any
provisions of the governing unit agreement that differ from those described below; and |
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any
provisions for the issuance, payment, settlement, transfer or exchange of the units or of the securities comprising the units. |
The
provisions described in this section, as well as those described under “Description of Capital Stock,” “Description
of Our Common Stock,” “Description of Debt Securities” and “Description of Warrants,”
will apply to each unit and to any common stock, preferred stock, debt securities or warrants included in each unit, respectively.
Issuance
in Series
We
may issue units in such amounts and in numerous distinct series as we determine.
LEGAL
OWNERSHIP OF SECURITIES
We
may issue securities in registered form or in the form of one or more global securities. We describe global securities in greater detail
below. We refer to those persons who have securities registered in their own names on the books that we or any applicable trustee, depositary
or warrant agent maintain for this purpose as the “holders” of those securities. These persons are the legal holders of the
securities. We refer to those persons who, indirectly through others, own beneficial interests in securities that are not registered
in their own names, as “indirect holders” of those securities. As we discuss below, indirect holders are not legal holders,
and investors in securities issued in book-entry form or in street name will be indirect holders.
Book-Entry
Holders
We
may issue securities in book-entry form only, as we will specify in the applicable prospectus supplement. This means securities may be
represented by one or more global securities registered in the name of a financial institution that holds them as depositary on behalf
of other financial institutions that participate in the depositary’s book-entry system. These participating institutions, which
are referred to as participants, in turn, hold beneficial interests in the securities on behalf of themselves or their customers.
Only
the person in whose name a security is registered is recognized as the holder of that security. Securities issued in global form will
be registered in the name of the depositary or its participants. Consequently, for securities issued in global form, we will recognize
only the depositary as the holder of the securities, and we will make all payments on the securities to the depositary. The depositary
passes along the payments it receives to its participants, which in turn pass the payments along to their customers who are the beneficial
owners. The depositary and its participants do so under agreements they have made with one another or with their customers; they are
not obligated to do so under the terms of the securities.
As
a result, investors in a global security will not own securities directly. Instead, they will own beneficial interests in a global security,
through a bank, broker or other financial institution that participates in the depositary’s book-entry system or holds an interest
through a participant. As long as the securities are issued in global form, investors will be indirect holders, and not legal holders,
of the securities.
Street
Name Holders
We
may terminate a global security or issue securities in non-global form. In these cases, investors may choose to hold their securities
in their own names or in “street name.” Securities held by an investor in street name would be registered in the name of
a bank, broker or other financial institution that the investor chooses, and the investor would hold only a beneficial interest in those
securities through an account he or she maintains at that institution.
For
securities held in street name, we or any applicable trustee or depositary will recognize only the intermediary banks, brokers and other
financial institutions in whose names the securities are registered as the holders of those securities, and we or any applicable trustee
or depositary will make all payments on those securities to them. These institutions pass along the payments they receive to their customers
who are the beneficial owners, but only because they agree to do so in their customer agreements or because they are legally required
to do so. Investors who hold securities in street name will be indirect holders, not holders, of those securities.
Legal
Holders
Our
obligations, as well as the obligations of any applicable trustee and of any third parties employed by us or a trustee, run only to the
legal holders of the securities. We do not have obligations to investors who hold beneficial interests in global securities, in street
name or by any other indirect means. This will be the case whether an investor chooses to be an indirect holder of a security or has
no choice because we are issuing the securities only in global form.
For
example, once we make a payment or give a notice to the holder, we have no further responsibility for the payment or notice even if that
holder is required, under agreements with depositary participants or customers or by law, to pass it along to the indirect holders but
does not do so. Similarly, we may want to obtain the approval of the holders to amend an indenture, to relieve us of the consequences
of a default or of our obligation to comply with a particular provision of the indenture or for other purposes. In such an event, we
would seek approval only from the holders, and not the indirect holders, of the securities. Whether and how the holders contact the indirect
holders is up to the holders.
Special
Considerations for Indirect Holders
If
you hold securities through a bank, broker, or other financial institution, either in book-entry form because the securities are represented
by one or more global securities or in street name, you should check with your own institution to find out:
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the
performance of third-party service providers; |
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how
it handles securities payments and notices; |
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whether
it imposes fees or charges; |
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how
it would handle a request for the holders’ consent, if ever required; |
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whether
and how you can instruct it to send you securities registered in your own name so you can be a holder, if that is permitted in the
future; |
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how
it would exercise rights under the securities if there were a default or other event triggering the need for holders to act to protect
their interests; and |
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if
the securities are in book-entry form, how the depositary’s rules and procedures will affect these matters. |
Global
Securities
A
global security is a security that represents one or any other number of individual securities held by a depositary. Generally, all securities
represented by the same global securities will have the same terms.
Each
security issued in book-entry form will be represented by a global security that we deposit with and register in the name of a financial
institution or its nominee that we select. The financial institution that we select for this purpose is called the depositary. Unless
we specify otherwise in the applicable prospectus supplement, DTC will be the depositary for all securities issued in book-entry form.
A
global security may not be transferred to or registered in the name of anyone other than the depositary, its nominee or a successor depositary,
unless special termination situations arise. We describe those situations below under “Special Situations When a Global Security
Will Be Terminated.” As a result of these arrangements, the depositary, or its nominee, will be the sole registered owner and
holder of all securities represented by a global security, and investors will be permitted to own only beneficial interests in a global
security. Beneficial interests must be held by means of an account with a broker, bank or other financial institution that in turn has
an account with the depositary or with another institution that does. Thus, an investor whose security is represented by a global security
will not be a holder of the security, but only an indirect holder of a beneficial interest in the global security.
If
the prospectus supplement for a particular security indicates that the security will be issued in global form only, then the security
will be represented by a global security at all times unless and until the global security is terminated. If termination occurs, we may
issue the securities through another book-entry clearing system or decide that the securities may no longer be held through any book-entry
clearing system.
Special
Considerations for Global Securities
The
rights of an indirect holder relating to a global security will be governed by the account rules of the investor’s financial institution
and of the depositary, as well as general laws relating to securities transfers. We do not recognize an indirect holder as a holder of
securities and instead deal only with the depositary that holds the global security.
If
securities are issued only in the form of a global security, an investor should be aware of the following:
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an
investor cannot cause the securities to be registered in his or her name, and cannot obtain non-global certificates for his or her
interest in the securities, except in the special situations we describe below; |
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an
investor will be an indirect holder and must look to his or her own bank or broker for payments on the securities and protection
of his or her legal rights relating to the securities, as we describe above; |
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an
investor may not be able to sell interests in the securities to some insurance companies and to other institutions that are required
by law to own their securities in non-book-entry form; |
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an
investor may not be able to pledge his or her interest in a global security in circumstances where certificates representing the
securities must be delivered to the lender or other beneficiary of the pledge in order for the pledge to be effective; |
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the
depositary’s policies, which may change from time to time, will govern payments, transfers, exchanges and other matters relating
to an investor’s interest in a global security; |
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we
and any applicable trustee have no responsibility for any aspect of the depositary’s actions or for its records of ownership interests
in a global security, nor do we or any applicable trustee supervise the depositary in any way; |
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the
depositary may, and we understand that DTC will, require that those who purchase and sell interests in a global security within its
book-entry system use immediately available funds, and your broker or bank may require you to do so as well; and |
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financial
institutions that participate in the depositary’s book-entry system, and through which an investor holds its interest in a
global security, may also have their own policies affecting payments, notices and other matters relating to the securities. |
There
may be more than one financial intermediary in the chain of ownership for an investor. We do not monitor and are not responsible for
the actions of any of those intermediaries.
Special
Situations When a Global Security Will Be Terminated
In
a few special situations described below, the global security will terminate and interests in it will be exchanged for physical certificates
representing those interests. After that exchange, the choice of whether to hold securities directly or in street name will be up to
the investor. Investors must consult their own banks or brokers to find out how to have their interests in securities transferred to
their own name, so that they will be direct holders. We have described the rights of holders and street name investors above.
Unless
we provide otherwise in the applicable prospectus supplement, the global security will terminate when the following special situations
occur:
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if
the depositary notifies us that it is unwilling, unable or no longer qualified to continue as depositary for that global security
and we do not appoint another institution to act as depositary within 90 days; |
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if
we notify any applicable trustee that we wish to terminate that global security; or |
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if
an event of default has occurred with regard to securities represented by that global security and has not been cured or waived.
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The
applicable prospectus supplement may also list additional situations for terminating a global security that would apply only to the particular
series of securities covered by the applicable prospectus supplement. When a global security terminates, the depositary, and not we or
any applicable trustee, is responsible for deciding the names of the institutions that will be the initial direct holders.
PLAN
OF DISTRIBUTION
We
may sell the securities from time to time pursuant to underwritten public offerings, direct sales to the public, negotiated transactions,
block trades or a combination of these methods. We may sell the securities to or through underwriters or dealers, through agents, or
directly to one or more purchasers. We may distribute securities from time to time in one or more transactions:
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at
a fixed price or prices, which may be changed; |
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at
market prices prevailing at the time of sale; |
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at
prices related to such prevailing market prices; or |
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at
negotiated prices. |
A
prospectus supplement or supplements (and any related free writing prospectus that we may authorize to be provided to you) will describe
the terms of the offering of the securities, including, to the extent applicable:
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the
name or names of the underwriters, if any; |
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the
purchase price of the securities or other consideration therefor, and the proceeds, if any, we will receive from the sale; |
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any
options under which underwriters may purchase additional securities from us; |
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any
agency fees or underwriting discounts and other items constituting agents’ or underwriters’ compensation; |
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any
public offering price; |
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any
discounts or concessions allowed or reallowed or paid to dealers; and |
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any
securities exchange or market on which the securities may be listed. |
Only
underwriters named in the prospectus supplement will be underwriters of the securities offered by the prospectus supplement.
If
underwriters are used in the sale, they will acquire the securities for their own account and may resell the securities from time to
time in one or more transactions at a fixed public offering price or at varying prices determined at the time of sale. The obligations
of the underwriters to purchase the securities will be subject to the conditions set forth in the applicable underwriting agreement.
We may offer the securities to the public through underwriting syndicates represented by managing underwriters or by underwriters without
a syndicate. Subject to certain conditions, the underwriters will be obligated to purchase all of the securities offered by the prospectus
supplement, other than securities covered by any option to purchase additional securities from us. Any public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may change from time to time. We may use underwriters with whom we have
a material relationship. We will describe in the prospectus supplement, naming the underwriter, the nature of any such relationship.
We
may sell securities directly or through agents we designate from time to time. We will name any agent involved in the offering and sale
of securities and we will describe any commissions we will pay the agent in the prospectus supplement. Unless the prospectus supplement
states otherwise, our agent will act on a best-efforts basis for the period of its appointment.
We
may authorize agents or underwriters to solicit offers by certain types of institutional investors to purchase securities from us at
the public offering price set forth in the prospectus supplement pursuant to delayed delivery contracts providing for payment and delivery
on a specified date in the future. We will describe the conditions to these contracts and the commissions we must pay for solicitation
of these contracts in the prospectus supplement.
We
may provide agents and underwriters with indemnification against civil liabilities, including liabilities under the Securities Act of
1933, as amended (“Securities Act”), or contribution with respect to payments that the agents or underwriters may make with
respect to these liabilities. Agents and underwriters may engage in transactions with, or perform services for, us in the ordinary course
of business.
All
securities we may offer, other than common stock, will be new issues of securities with no established trading market. Any underwriters
may make a market in these securities, but will not be obligated to do so and may discontinue any market making at any time without notice.
We cannot guarantee the liquidity of the trading markets for any securities.
LEGAL
MATTERS
Unless
otherwise indicated in the applicable prospectus supplement, the validity of the issuance of the securities offered hereby will be passed
upon for us by Carmel, Milazzo & Feil LLP located in New York, New York. Additional legal matters may be passed upon for us or any
underwriters, dealers or agents, by counsel that we will name in the applicable prospectus supplement.
EXPERTS
Haynie
& Company, our independent registered public accounting firm, has audited our consolidated financial statements included in our Annual
Report on Form 10-K for the year ended December 31, 2021, as set forth in their report, which is incorporated by reference in this prospectus
and elsewhere in the registration statement of which this prospectus forms a part. Our consolidated financial statements are incorporated
by reference in reliance on Haynie & Company’s report, given on their authority as experts in accounting and auditing.
WHERE
YOU CAN FIND MORE INFORMATION
This
prospectus is part of the registration statement on Form S-3 that we filed with the Commission under the Securities Act and does not
contain all of the information set forth in the registration statement. Whenever a reference is made in this prospectus to any of our
contracts, agreements or other documents, the reference may not be complete and you should refer to the exhibits that are part of the
registration statement or the exhibits to the reports or other document incorporated into this prospectus for a copy of such contract
agreement or other document. Because we are subject to the information and reporting requirements under the Exchange Act, we file annual,
quarterly and current reports, proxy statements and other information with the Commission. Our filings with the Commission are available
to the public over the Commission’s website at www.sec.gov. Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K, including any amendments to those reports, and other information that we file with or furnish to the
Commission pursuant to Section 13(a) or 15(d) of the Exchange Act can also be accessed free of charge on our website. You may also read
and copy any document we file with the SEC at its public reference facility at 100 F Street, N.E., Washington, D.C., 20549, on official
business days during the hours of 10 a.m. to 3 p.m. You may also obtain copies of the documents at prescribed rates by writing to the
Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C., 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference facility. In addition, you can find more information about us on our website at
worksport.com. Information contained on or accessible through our website is not a part of this prospectus and is not incorporated
by reference herein, and the inclusion of our website address in this prospectus is an inactive textual reference only.
INCORPORATION
OF CERTAIN INFORMATION BY REFERENCE
The
SEC allows us to “incorporate by reference” information that we file with it into this prospectus, which means that we can
disclose important information to you by referring you to those documents. The information incorporated by reference is an important
part of this prospectus. The information incorporated by reference into this prospectus is deemed to be part of this prospectus, and
any information filed with the SEC after the date of this prospectus will automatically be deemed to update and supersede information
contained in this prospectus and any accompanying prospectus supplement.
The
following documents previously filed with the SEC are incorporated by reference in this prospectus:
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The
Registrant’s Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 31, 2022; |
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The
Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2022, filed with the SEC on May 23, 2022; |
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The
Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2022, filed with the SEC on August 19, 2022; |
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The
Registrant’s Current Report on Form
8-K filed with the SEC on May 11, 2022, to the extent the information in such report is filed and not furnished; and |
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The Registrant’s Preliminary Schedule 14A filed
with the SEC on September 23, 2022; and |
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The
description of the Registrant’s common stock, which is contained in a registration statement on Form 8-A12B filed with the
SEC on July 27, 2021 under the Exchange Act, including any amendment or report filed for the purpose of updating such description. |
All
filings filed by us pursuant to the Exchange Act after the date of the initial filing of the registration statement of which this prospectus
is a part and prior to effectiveness of the registration statement shall be deemed to be incorporated by reference into this prospectus.
We
also incorporate by reference all additional documents that we file with the Securities and Exchange Commission under the terms of Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act that are made after the date of the initial registration statement but prior to effectiveness
of the registration statement and after the date of this prospectus but prior to the termination of the offering of the securities covered
by this prospectus. We are not, however, incorporating, in each case, any documents or information that we are deemed to furnish and
not file in accordance with Securities and Exchange Commission rules.
You
should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized any other person
to provide you with different information. If anyone provides you with different or inconsistent information, you should not rely on
it. You should assume that the information appearing in this prospectus is accurate only as of the date of this prospectus. Our business,
financial condition, results of operations and prospects may have changed since that date.
Any
statement contained in a document incorporated or deemed to be incorporated by reference into this prospectus will be deemed to be modified
or superseded for the purposes of this prospectus to the extent that a statement contained herein, or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein, modifies or supersedes that statement. The modifying or superseding
statement need not state it has modified or superseded a prior statement or include any other information set forth in the document that
it modifies or supersedes. The making of a modifying or superseding statement is not an admission for any purposes that the modified
or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a
material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in
which it was made. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part
of this prospectus.
You
may request, and we will provide you with, a copy of these filings, at no cost, by calling us at (888) 554-8789 or by writing to us at
the following address:
Worksport
Ltd.
55
East Beaver Creek Road, Unit 40
Richmond
Hill, Ontario, Canada L4B 1E5
Attn:
Steven Rossi, Chief Executive Officer
1,925,000
Shares of Common Stock
1,575,000
Pre-Funded Warrants to Purchase One Share of Common Stock
Worksport
Ltd.
PROSPECTUS
SUPPLEMENT
Sole
Placement Agent
Maxim Group LLC
October
31, 2023
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