UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
Quarterly Period Ended:
Commission
File No.
(Exact Name of Small Business Issuer as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
Telephone Number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class: | Trading Symbol(s) | Name of each exchange on which registered: | ||
| The
| ||||
| The
|
Securities registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant
was required to submit post such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of August 13, 2024, the Registrant had shares of common stock, par value $ per share, issued and outstanding.
WORKSPORT LTD.
TABLE OF CONTENTS
| 2 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Worksport Ltd.
Condensed Consolidated Balance Sheets
(Unaudited)
| June 30, 2024 (Unaudited) | December 31, 2023 | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Other receivable | ||||||||
| Inventory (note 4) | ||||||||
| Related party loan (note 8) | ||||||||
| Prepaid expenses and deposits (note 5) | ||||||||
| Total Current Assets | ||||||||
| Investments (note 10) | ||||||||
| Property and Equipment, net (note 6) | ||||||||
| Right-Of-Use Asset, net (note 11) | ||||||||
| Intangible Assets, net | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Payroll taxes payable | ||||||||
| Related party loan (note 8) | ||||||||
| Current portion – Long term debt (note 12) | ||||||||
| Current lease liability (note 11) | ||||||||
| Total Current Liabilities | ||||||||
| Long Term – Lease Liability (note 11) | ||||||||
| Long Term Debt (note 12) | ||||||||
| Total Liabilities | ||||||||
| Shareholders’ Equity | ||||||||
| Series A & B Preferred Stock, $ par value, shares authorized, Series A and Series B issued and outstanding, respectively (note 7) | ||||||||
| Common stock, $ par value, shares authorized, and shares issued and outstanding, respectively (note 7) | ||||||||
| Additional paid-in capital | ||||||||
| Share subscriptions receivable | ( | ) | ( | ) | ||||
| Share subscriptions payable | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Cumulative translation adjustment | ( | ) | ( | ) | ||||
| Total Shareholders’ Equity | ||||||||
| Total Liabilities and Shareholders’ Equity | $ | $ | ||||||
The accompanying notes form an integral part of these condensed consolidated financial statements.
| 3 |
Worksport Ltd.
Condensed Consolidated Statements of Operations and Comprehensive Loss
For the Three and Six Months Ended June 30, 2024 and 2023
(Unaudited)
Three Months ended June 30, | Six Months ended June 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Net Sales | $ | $ | $ | $ | ||||||||||||
| Cost of Goods Sold | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Professional fees | ||||||||||||||||
| (Gain) loss on foreign exchange | ( | ) | ||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other Income (Expense) | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest income | ||||||||||||||||
| Rental income (note 17) | ||||||||||||||||
| Gain on settlement of debt | ||||||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per Share (basic and diluted) | $ | ) | $ | ) | $ | ) | $ | ) | ||||||||
| Weighted Average Number of Shares (basic and diluted) | ||||||||||||||||
The accompanying notes form an integral part of these condensed consolidated financial statements.
| 4 |
Worksport Ltd.
Condensed Consolidated Statements of Shareholders’ Equity
For the Three Months Ended June 30, 2024 and 2023
(Unaudited)
Preferred Stock | Common Stock | Additional Paid-in | Share Subscriptions | Share Subscription | Accumulated | Cumulative Translation | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Receivable | Payable | Deficit | Adjustment | (Deficit) | |||||||||||||||||||||||||||||||
| Balance at April 1, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
| Issuance for services and subscriptions payable | - | |||||||||||||||||||||||||||||||||||||||
| Share issuance | - | |||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
| Balance at April 1, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
| Issuance for services and subscriptions payable | - | |||||||||||||||||||||||||||||||||||||||
| Warrant inducement (note 16) | - | ( | ) | |||||||||||||||||||||||||||||||||||||
| Warrant exercise (note 14) | - | ( | ) | |||||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
The accompanying notes form an integral part of these condensed consolidated financial statements.
| 5 |
Worksport Ltd.
Condensed Consolidated Statements of Shareholders’ Equity
For the Six Months Ended June 30, 2024 and 2023
(Unaudited)
Preferred Stock |
Common Stock |
Additional Paid-in |
Share Subscriptions |
Share Subscription |
Accumulated |
Cumulative Translation | Total Stockholders’ Equity | |||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Receivable | Payable | Deficit | Adjustment | (Deficit) | |||||||||||||||||||||||||||||||
| Balance at January 1, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | | |||||||||||||||||||||||||
| Issuance for services and subscriptions payable | - | |||||||||||||||||||||||||||||||||||||||
| Share issuance | - | |||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Balance at June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
| Balance at January 1, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
| Issuance for services and subscriptions payable | - | |||||||||||||||||||||||||||||||||||||||
| Shares issued (note 7) | - | |||||||||||||||||||||||||||||||||||||||
| Warrant inducement (note 16) | - | ( | ) | |||||||||||||||||||||||||||||||||||||
| Warrant exercise (note 14) | - | ( | ) | |||||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Balance at June 30, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ||||||||||||||||||||||||||
The accompanying notes form an integral part of these condensed consolidated financial statements.
| 6 |
Worksport Ltd.
Condensed Consolidated Statements of Cash Flows
For the Six Months Ended June 30, 2024 and 2023
(Unaudited)
| 2024 | 2023 | |||||||
| Operating Activities | ||||||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash from operating activities: | ||||||||
| Shares, options and warrants issued for services | ||||||||
| Depreciation and amortization | ||||||||
| Change in operating lease | ( | ) | ||||||
| ( | ) | ( | ) | |||||
| Changes in operating assets and liabilities (note 9) | ( | ) | ( | ) | ||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities | ||||||||
| Investments | ( | ) | ||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Financing Activities | ||||||||
| Net change in related party loan | ( | ) | ( | ) | ||||
| Proceeds from warrant exercise | ||||||||
| Proceeds from issuance of common share, net of issuance cost | ||||||||
| Proceeds from issuance of common stock | ||||||||
| Net cash received from (used in) financing activities | ( | ) | ||||||
| Change in cash | ( | ) | ||||||
| Cash, restricted cash and cash equivalents - beginning of period | ||||||||
| Cash, restricted cash and cash equivalents end of period | $ | $ | ||||||
| Supplemental Disclosure of non-cash operating and investing activities | ||||||||
| Fixed asset additions included in accounts payable | $ | $ | ||||||
| Supplemental Disclosure of non-cash investing and financing activities | ||||||||
| Shares issued for purchase of software | $ | $ | ||||||
| Supplemental Disclosure of non-cash operating and financing activities | ||||||||
| Warrant inducement issuance costs included in accounts payable | $ | $ | ||||||
| Supplemental Disclosure of cash flow information | ||||||||
| Income tax paid | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
The accompanying notes form an integral part of these condensed consolidated financial statements.
| 7 |
Worksport Ltd.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
1. Basis of Presentation and Business Condition
a) Interim Financial Information
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) for interim financial information pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and notes required by GAAP for complete financial statements. In the opinion of management, all adjustments and reclassifications considered necessary in order to make the financial statements not misleading and for a fair and comparable presentation have been included and are of a normal recurring nature. Operating results for the three and six month periods ended June 30, 2024 are not necessarily indicative of the results that may be expected for the year ending December 31, 2024. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 28, 2024.
Worksport Ltd. (together with its subsidiaries, the “Company”) was incorporated in the State of Nevada on April 2, 2003 under the name Franchise Holdings International, Inc. (“FNHI”). In May 2020, FNHI changed its name to Worksport Ltd. During the year ended December 31, 2014, the Company completed a reverse acquisition transaction (the “Reverse Acquisition”) with TruXmart Ltd. (“TruXmart”). On May 2, 2018, TruXmart legally changed its name to Worksport Ltd. (“Worksport”). Worksport designs and distributes truck tonneau covers in Canada and the United States.
b) Statement of Compliance
The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) as issued by the Financial Accounting Standards Board (“FASB”).
c) Basis of Measurement
The Company’s financial statements have been prepared on the accrual basis.
d) Consolidation
The Company’s condensed consolidated financial statements consolidate the accounts of the Company. All intercompany transactions, balances and unrealized gains or losses from intercompany transactions have been eliminated upon consolidation.
e) Functional and Reporting Currency
These condensed consolidated financial statements are presented in United States dollars (USD or US$). The functional currency of the Company and its subsidiaries are United States dollar. For purposes of preparing these condensed consolidated financial statements, transactions denominated in Canadian dollars (CAD or C$) were converted to United States dollars at the spot rate. Transaction gains and losses resulting from fluctuations in currency exchange rates on transactions denominated in currencies other than the functional currency are recognized as incurred in the accompanying condensed consolidated statement of operations.
f) Use of Estimates
The preparation of condensed unaudited financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed interim financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
| 8 |
2. Going Concern
As
of June 30, 2024, the Company had $
The
accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern,
which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. During the three and
six months ended June 30, 2024, the Company had net losses of $
Despite the Company having mostly completed its purchasing of large manufacturing machinery, operational costs are expected to remain elevated and, thus, further decrease cash and cash equivalents. Concurrently, the Company intends to continue its ramp-up of manufacturing and increasing sales volumes in 2024, which should mitigate the effects of operational costs on cash and cash equivalents; this view is supported by the fact that the manufacturing facility of the Company was completed for initial production output in 2023 and started to generate revenue in the third quarter of 2023, registering its highest quarterly sales total in the Company’s history in the second quarter of 2024.
The
Company has successfully raised cash, and it is positioned to do so again if deemed necessary or strategically advantageous. During the
year ended December 31, 2021, the Company, through its Reg-A public offering, private placement offering, underwritten public offering,
and exercises of warrants, raised an aggregate of approximately $
On
November 2, 2023, the Company consummated a registered direct offering pursuant to which the Company issued shares of common
stock and pre-funded warrants to an institutional investor for a total net proceeds of $
On
March 20, 2024, the Company consummated a registered direct offering pursuant to which the Company issued shares of common
stock and pre-funded warrants to the same institutional investor as in the Company’s registered direct offering on November
2, 2023, for a total net proceeds of $
To date, the Company’s principal sources of liquidity consist of net proceeds from public and private securities offerings and cash exercises of outstanding warrants. Management is focused on transitioning towards revenue as its principal source of liquidity by growing existing product offerings as well as the Company’s customer base. The Company cannot give assurance that it can increase its cash balances or limit its cash consumption and thus maintain sufficient cash balances for planned operations or future business developments. Future business development and demands may lead to cash utilization at levels greater than recently experienced. The Company may need to raise additional capital in the future. However, the Company cannot provide assurances it will be able to raise additional capital on acceptable terms, or at all.
| 9 |
The Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. Still, certain factors indicate the existence of a material uncertainty that cast substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. These adjustments could be material.
3. Significant Accounting Policies
The accounting policies used in the preparation of these condensed consolidated interim financial statements are consistent with those of the Company’s audited financial statements for the year ended December 31, 2023.
4. Inventory
As of June 30, 2024 and December 31, 2023, inventory consists of the following:
| June 30, 2024 | December 31, 2023 | |||||||
| Finished goods | $ | $ | ||||||
| Promotional items | ||||||||
| Raw materials | ||||||||
| $ | $ | |||||||
As of June 30, 2024, the value of finished goods on-hand increased due to stockpiling of hard tonneau covers, which have higher values than stockpiled soft tonneau covers, as well as their raw materials to capitalize on demand generated from the Company’s 2024 sales campaigns.
5. Prepaid expenses and deposits
As of June 30, 2024 and December 31, 2023, prepaid expenses and deposits consist of the following:
| June 30, 2024 | December 31, 2023 | |||||||
| Consulting, services, and advertising | $ | $ | ||||||
| Deposits | ||||||||
| $ | $ | |||||||
As
of June 30, 2024, prepaid expenses and deposits consists of $
| 10 |
6. Property and Equipment
As of June 30, 2024 and December 31, 2023, major classes of property and equipment consist of the following:
| June 30, 2024 | December 31, 2023 | |||||||
| Equipment | $ | $ | ||||||
| Manufacturing equipment | ||||||||
| Furniture | ||||||||
| Product molds | ||||||||
| Computers | ||||||||
| Leasehold improvements | ||||||||
| Building | ||||||||
| Land | ||||||||
| Automobile | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| $ | $ | |||||||
7. Shareholders’ Equity (Deficit)
During six months ended June 30, 2024, the following transactions occurred:
During
the six months ended June 30, 2024, the Company sold shares of common stock for a total net proceeds
of $
The
Company recognized consulting expense of $
During
the six months ended June 30, 2024, the Company closed a sale of shares of common stock for net proceeds of $
Refer to note 14, 15 and 16 for additional shareholders’ equity (deficit) details.
During six months ended June 30, 2023, the following transactions occurred:
The
Company recognized consulting expense of $
Refer to note 15 for additional shareholders’ equity (deficit) details.
| 11 |
As
of June 30, 2024, the Company was authorized to issue shares of its common stock with a par value of $. All shares
were ranked equally with regard to the Company’s residual assets. During the six months ended June 30, 2024, the Company was authorized
to issue shares of its Series A and Series B Preferred Stock with a par value of $.
8. Related Party Transactions
During
the six months ended June 30, 2024, the Company recorded salaries expense of $
9. Changes in Cash Flows from Operating Assets and Liabilities
The changes to the Company’s operating assets and liabilities for the six months ended June 30, 2024 and 2023 are as follows:
| 2024 | 2023 | |||||||
| Decrease (increase) in accounts receivable | $ | ( | ) | $ | ( | ) | ||
| Decrease (increase) in other receivable | ( | ) | ||||||
| Decrease (increase) in inventory | ( | ) | ( | ) | ||||
| Decrease (increase) in prepaid expenses and deposits | ( | ) | ||||||
| Increase (decrease) in payroll taxes payable | ||||||||
| Increase (decrease) in accounts payable and accrued liabilities | ( | ) | ( | ) | ||||
| $ | ( | ) | $ | ( | ) | |||
10. Investments
During the year
ended December 31, 2019, the Company entered into an agreement to purchase shares of a privately owned US-based mobile phone
development company for $
During the six
months ended June 30, 2024, $
11. Operating Lease Obligations
During
the year ended December 31, 2019, the Company signed a lease agreement for warehouse space to commence on August 1, 2019 and end on
During
the year ended December 31, 2022, the Company signed a lease agreement for approximately
During
the year ended December 31, 2023, the Company signed a lease agreement for office space to be used as an R&D facility pursuant to
a one-year lease with an option to extend the lease for an additional year, dated June 1, 2023 , for a monthly rent of $
| 12 |
During
the six months ended June 30, 2024, the Company signed a lease agreement for office space to be used as an R&D facility pursuant
to a one-year lease with an option to extend the lease for an additional year, dated June 1, 2024, for a monthly rent of $
The
Company has accounted for its leases upon adoption of ASC 842 whereby it recognizes a lease liability and a right-of-use asset at the
date of initial application beginning January 1, 2019. The lease liability is measured at the present value of the remaining lease payments,
discounted using the Company’s incremental borrowing rate of
The Company’s right-of-use asset and lease liability as of June 30, 2024, and December 31, 2023, are as follows:
| June 30, 2024 | December 31, 2023 | |||||||
| Right-of-use asset | $ | $ | ||||||
| Current lease liability | $ | $ | ||||||
| Long-term lease liability | $ | $ | ||||||
The following is a summary of the Company’s total lease costs:
| June 30, 2024 | June 30, 2023 | |||||||
| Operating lease cost | $ | $ | ||||||
The following is a summary of cash paid during the six months ended June 30, 2024 and 2023 for amounts included in the measurement of lease liabilities:
| June 30, 2024 | June 30, 2023 | |||||||
| Operating cashflow | $ | $ | ||||||
The following are future minimum lease payments as of June 30, 2024:
| 2025 | $ | |||
| 2026 | ||||
| 2027 | ||||
| Total future minimum lease payments | ||||
| Less: amount representing interest | ( | ) | ||
| Present value of future payments | ||||
| Current portion | ||||
| Long term portion | $ |
12. Long term Debt
On May 4, 2022, the Company, as the guarantor, and Worksport New York Operations Corporation (“Worksport New York”), as the
borrower (the “Borrower”) entered into a secured loan agreement (the “Loan Agreement”) with an external banking
entity (the “Lender”) relating to the Company’s purchase of a
| 13 |
On February 4, 2024, the Company and Worksport New York entered into a Forbearance Agreement with the Lender in connection with the Loan Agreement. Pursuant to the Forbearance Agreement, the Lender agreed to forbear from commencing an action for judgement of foreclosure and sale, seeking an appointment of a receiver or collecting default accrued interest under the Loan until the occurrence of a Termination Event (as defined in the Forbearance Agreement) and the Company and Worksport waived all defenses in connection with the Worksport New York failure to maintain 1.20 to 1.0 debt service coverage ratio of operating income to debt service under the Loan for each of the trailing twelve (12) months ended December 31, 2023, and the indirect sale of equity securities of Worksport New York as a result of the Company’s sale equity securities in November 2023 (the “Existing Defaults”). Pursuant to the Forbearance Agreement, the definition of “Permitted Transfers” in the Loan Agreement was amended to include the transfer of direct or indirect interest in the Company solely through a stock sale for capital raising purposes, subject to certain conditions, including no occurrence of an Event of Default (other than the Existing Defaults), change in ownership or control of the Company, no new 10% or greater owners, and no involvement of Sanctioned Persons. The Borrower must provide prior notice to Lender and satisfactory reporting of the results of the capital raise.
On
May 14, 2024, the Company successfully negotiated an extension of the maturity date for its $
On
July 19, 2024, the Company, as the guarantor, and Worksport New York Operations Corporation as well as Worksport USA Operations Corporation,
entered into a $
During the year ended December 31, 2020, the Company received $
For the three and six months ended June 30, 2024, loss per share is $ and $ (basic and diluted) compared to the three and six months ended June 30, 2023, of $ and $ (basic and diluted) using the weighted average number of shares of and (basic and diluted) as of June 30, 2024 and and (basic and diluted) as of June 30, 2023, respectively.
There are shares authorized with and shares issued and outstanding, as at June 30, 2024 and 2023, respectively. The computation of loss per share is based on the weighted average number of shares outstanding during the period in accordance with ASC Topic No. 260, “Earnings Per Share.” Shares underlying the Company’s outstanding warrants and convertible promissory notes were excluded due to the anti-dilutive effect they would have on the computation. As of June 30, 2024, the Company has warrants convertible to common shares, restricted stock to be issued, and stock options exercisable for common shares for a total underlying common shares of . As of June 30, 2023, the Company has warrants convertible to common shares, restricted stock to be issued, performance stock units and stock options exercisable for common shares for a total underlying common shares of .
| 14 |
14. Warrants
During
the six months ended June 30, 2024, in connection with the sale of shares of common stock, the Company also sold
pre-funded warrants and issued warrants exercisable for a total of
During
the year ended December 31, 2023, in connection with the sale of shares of common stock in a registered direct offering, the
Company also sold pre-funded warrants and warrants exercisable for
During
the year ended December 31, 2023, the Company and a stock options holder agreed to cancel all stock options in exchange for extending
the exercisable period of
As of June 30, 2024, the Company has the following warrants outstanding:
| Exercise price | Number outstanding | Remaining Contractual Life (Years) | Expiry date | |||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
The average remaining contractual life of outstanding warrants that expire is
| June 30, 2024 | December 31, 2023 | |||||||||||||||
| Number of warrants | Weighted average price | Number of warrants | Weighted average price | |||||||||||||
| Balance, beginning of year | $ | $ | ||||||||||||||
| Issuance | $ | $ | ||||||||||||||
| Exercise | ( | ) | $ | ( | ) | $ | ||||||||||
| Balance, end of period | $ | $ | ||||||||||||||
Under the Company’s 2015, 2021 and 2022 Equity Incentive Plans, .
All equity-settled, share-based payments are ultimately recognized as an expense in the statement of operations with a corresponding credit to “Additional Paid in Capital.” If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognized in the current period. No adjustment is made to any expense recognized in prior periods if share options ultimately exercised are different than that estimated on vesting.
| 15 |
Performance Share Units
On May 1, 2023, the Company and Steven Rossi reached an agreement to modify restricted stock units and performance stock units issued on November 11, 2022, and December 29, 2021, respectively, and replace them with stock options, as described below.
On November 11, 2022, performance stock units (“PSUs”) granted on December 29, 2021, were modified to include new terms pertaining to the PSU vesting schedule. On December 29, 2021, the Company granted and performance stock units (“PSUs”) to the Company’s Chief Executive Officer and a director, respectively.
Stock Options
The Company uses the Black-Scholes option pricing model to determine fair value of stock options on the grant date.
During the six months ended June 30, 2024, the Company issued stock options to an employee with an exercise price of $ and an expiration date of.
During the six months ended June 30, 2024, the Company issued stock options to employees with an exercise price ranging from $ to $ and expiration dates from February 1, 2029 to March 22, 2034. Of these stock options, were subsequently cancelled.
During the year ended December 31, 2023, the Company issued stock options to Steven Rossi. The stock options have an exercise price of $ and an expiration date of .
During the year ended December 31, 2023, the Company issued and stock options to employees with an exercise price of $ and $, respectively. The stock options will expire years from the grant date.
During the year ended December 31, 2023, the Company issued stock options to employees, consultants and directors with an exercise price ranging from $ to $ which will expire at various points though August 23, 2033. During the year ended December 31, 2023, stock options were cancelled upon the departure of employees, and an additional stock options were cancelled upon the departure of an employee during the six months ended June 30, 2024.
During the year ended December 31, 2023, the Company issued stock options to Steven Rossi. The stock options have an exercise price of $ and an expiration date of .
During the year ended December 31, 2023, the Company issued stock options to an employee with an exercise price of $ and expiring on .
During the year ended December 31, 2023, the Company issued stock options to employees and a consultant with an exercise price of $ and expiring on . During the year ended December 31, 2023, stock options were cancelled upon the departure of employees, and an additional stock options were cancelled upon the departure of an employee during the six months ended June 30, 2024.
During the year ended December 31, 2023, the Company issued stock options to an employee with an exercise price of $ and expiring on .
During the year ended December 31, 2023, the Company issued stock options to a consultant with an exercise price of $ and expiring on .
During the year ended December 31, 2023, the Company issued stock options to directors with an exercise price of $and expiring on January 30, 2033.
| June 30, 2024 | December 31, 2023 | |||||||||||||||
| Number of stock options | Weighted average price | Number of stock options | Weighted average price | |||||||||||||
| Balance, beginning of period | $ | $ | ||||||||||||||
| Granted | $ | $ | ||||||||||||||
| Cancelled | ( | ) | $ | ( | ) | ( | ) | $ | ( | ) | ||||||
| Balance, end of period | $ | $ | ||||||||||||||
| Range of Exercise prices | Outstanding | Weighted average life (years) | Weighted average exercise price | Exercisable on June 30, 2024 | ||||||||||||||||
| Stock options | $ | - | $ | |||||||||||||||||
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| June 30, 2024 | December 31, 2023 | |||||||||||||||
| Number of stock options | Weighted average price | Number of stock options | Weighted average price | |||||||||||||
| Balance, beginning of period | $ | $ | ||||||||||||||
| Granted | $ | $ | ||||||||||||||
| Balance, end of period | $ | $ | ||||||||||||||
| Range of Exercise prices | Outstanding | Weighted average life (years) | Weighted average exercise price | Exercisable on June 30, 2024 | ||||||||||||||||
| Stock options | $ | $ | ||||||||||||||||||
16. Warrant Inducement
On
May 9, 2024, the Company entered into a warrant inducement agreement (the “Inducement”) with the holder of existing warrants
to purchase an aggregate
17. Rental Income
During
the year ended December 31, 2022, the Company entered into a sublease agreement for its warehouse in Mississauga, Ontario, Canada. The
sublease commenced on
During
the six months ended June 30, 2024, the Company recognized rental income of $
18. Subsequent Events
The Company has evaluated subsequent events through August 13, 2024. The following events occurred after the three and six months ended June 30, 2024:
| ● | On
July 19, 2024, the Company refinanced its $ | |
| ● | On
July 23, 2024, the Company engaged in stock option repricing for certain employees, executive
officers, and members of the board of directors of the Company. All included options’
exercise prices were repriced to $ |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This section and other parts of this Quarterly Report on Form 10-Q (“Form 10-Q”) contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of future performance and actual results may differ significantly from the results discussed in the forward-looking statements. All forward-looking statements in this Form 10-Q are made based on current expectations, forecasts, estimates and assumptions, and involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. In evaluating these statements, various factors, uncertainties, and risks should be specifically considered that could affect future results or operations. These factors, uncertainties and risks may cause actual results to differ materially from any forward-looking statement set forth in this Form 10-Q. These risks and uncertainties described and other information contained in the reports filed with or furnished to the SEC should be carefully considered before making any investment decision with respect to the Company’s securities. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Unless otherwise stated, all information presented herein is based on the Company’s fiscal calendar, and references to particular years, quarters, months or periods refer to the Company’s fiscal years ended December 31st and the associated quarters, months and periods of those fiscal years. Each of the terms “Company” and “Worksport” as used herein refers collectively to Worksport Ltd. and its subsidiaries, unless otherwise stated.
The following discussion should be read in conjunction with the Company’s Annual Report Form 10-K for the fiscal year ended December 31, 2023 filed with the U.S. Securities and Exchange Commission (the “SEC”) and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q.
Overview
Worksport Ltd., through its subsidiaries, designs, develops, manufactures, and owns the Intellectual Property 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.
Rising Popularity of Electric Vehicles
Electric Vehicles (EVs) have been exponentially increasing in consumer interest, whether that interest takes the form of vehicle pre-orders, sales, or investments. As we begin marketing our Worksport SOLIS and COR, we plan to market the SOLIS as a must-have accessory for electric light duty vehicle owners while simultaneously riding the coattails of EV popularity to promote our other products (COR and conventional tonneau covers) to the very large population of Americans that have an interest in EVs without the funds to purchase them. Further, participating in the EV space allows us to target consumers with an interest in cutting-edge technologies – a great market in which to promote our COR.
Regulatory Environment Favoring Electric Vehicles
The Build Back Better Bill was a strong indication of upcoming and favorable USA regulations. Many regulations that improve North America’s EV charging infrastructure or provide grants to businesses operating in the EV space will benefit us. While we are primarily focused on the light duty vehicle market, our energy products are particularly useful for electric light duty pickup trucks and, therefore, are positioned to benefit greatly from any bill that increases the prevalence of such vehicles.
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Limited Competitive Landscape
Our conventional tonneau covers are engineered for enhanced user experience and resistance to wear-and-tear, making them strong and competitive products in an otherwise consolidated and saturated market. The Worksport COR, however, operates in a much wider yet unsaturated market. The global Portable Power Station market is quickly growing, and the competitive landscape is far from consolidated. Even less consolidated, the solar tonneau cover market is in its infancy, and it’s a market in which we have first-mover advantage. To ensure we do not fall behind future competitors, we are highly focused on protecting our intellectual property both domestically and abroad.
Business Developments
The following highlights recent material developments in our business in the three months ended June 30, 2024:
| ● | In April 2024, 12,100 stock options issued during 2023 and 8,300 stock options issued during the six months ended June 30, 2024 were forfeited in connection with the termination of employees with the Company. | |
| ● | 16,667 restricted stock units (“RSUs”) were granted to a contractor on May 1, 2024 in consideration for services rendered in the first quarter of 2024. | |
| ● | On May 6, 2024, 1,477,892 pre-funded warrants issued during the three months ended March 31, 2024 were exercised for 1,477,892 shares of common stock for a total of $15. | |
| ● | On May 8, 2024, the Company announced its receipt of a major grant from New York State Excelsior Jobs Program worth up to $2.8 million. The grant, following a strategic low-cost power award from New York Power Authority (NYPA) in April 2024, signifies additional state-level investment in the Company’s expanding operations. With growth exceeding NY State’s forecasts, the Company expects to create up to or over 280 new jobs from 2025 to 2030 and if achieved will receive cash benefits for the creation of these jobs, amounting to $2.8 million received over the next 10 years. | |
| ● | On May 14, 2024, the Company and Worksport New York Operations Corporation (“Worksport New York”) entered into an Omnibus Amendment of Loan Documents (the “Loan Amendment”) with Northeast Bank (the “Lender”) in connection with that certain secured loan agreement, dated May 4, 2022 (the “Loan Agreement”), by and among the Company, as the guarantor, Worksport New York, as the borrower (the “Borrower”), and the Lender in connection with the Company’s purchase of its 152,847 square foot facility and 18 acres of land in West Seneca, New York on May 6, 2022 for a total purchase price of $8,150,000. Pursuant to the Loan Amendment, effective as of May 10, 2024, the Lender extended the initial maturity date of the Loan from May 10, 2024 to August 10, 2024 (the “Extended Maturity Date”). The Company also agreed to pay the Lender an extension fee of $106,000 (the “Extension Fee”) which was deemed fully earned as of the date of the Loan Amendment. However, the Lender agreed to postpone payment of the Extension Fee until the occurrence of (i) the Loan not being repaid in full by or on the Extended Maturity Date; or (ii) the Loan being accelerated following an Event of Default or Termination Date (as defined in the Forbearance Agreement dated as of February 4, 2024, by and between the Company, Worksport New York and the Lender). If the Loan is repaid in full on or prior to the Extended Maturity Date, the Lender has agreed to waive the Extension Fee. In addition to the Extension Fee, the Company agreed to pay the Lender an exit fee of $106,000 (the “Exit Fee”) in the event the Loan is not repaid in full on or prior to the Extended Maturity Date or if the Loan has been accelerated following an Event of Default or in connection with a Termination Event (as defined in the Forbearance Agreement). If the Loan is repaid in full on or prior to the Extended Maturity Date (and not as a result of an acceleration following a Termination Event), the Company will not be required to pay the Exit Fee. | |
| ● | On May 29, 2024, the Company entered into a common stock warrant exercise inducement offer letter (the “Inducement Offer Letter”) with a certain holder (the “Holder”) of existing warrants to purchase shares of the Company’s common stock at an exercise price of $1.34 per share issued on November 2, 2023 (the “Existing Warrants”), pursuant to which the Holder agreed to exercise for cash its Existing Warrants to purchase an aggregate of 7,000,000 shares of the Company’s common stock, at a reduced exercised price of $0.5198 per share, in consideration for the Company’s agreement to issue new warrants (the “Inducement Warrants”) to purchase up to 12,950,000 shares of the Company’s common stock at $0.5198 per share. The Company received aggregate gross proceeds of $3,638,600 from the exercise of the Existing Warrants by the Holder and the sale of the Inducement Warrants, before deducting placement agent fees and other offering expenses payable by the Company. |
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| ● | On May 29, 2024, the Company announced it had been issued a new utility patent from the United States Patent & Trademark Office related to its highly anticipated SOLIS Solar Tonneau Cover. | |
| ● | 45,315 RSUs were granted to two contractors on May 30, 2024 in consideration for services rendered over the prior year. | |
| ● | On June 5, 2024, the Company announced the formation of a new sales partnership with a prominent Midwest distributor operating within the automotive industry. | |
| ● | On June 13, 2024, the Company was awarded “Innovator of the Year” by Buffalo Business First – recognizing the Company’s commitment to pioneering advancements in the automotive sector. | |
| ● | On June 26, 2024, the Company announced it had strategically decided to design its Maximum Power Point Tracking algorithm such that its SOLIS Solar Power System will be able to charge not only the Company’s COR Portable Battery Generator system but also most other portable power stations and power banks on the market. |
Key Factors Affecting our Performance
As a result of a number of factors, our historical results of operations may not be comparable to our results of operations in future periods, and our results of operations may not be directly comparable from period to period. Set forth below is a brief discussion of the key factors impacting our results of operations.
Climate Change
Climate change threatens to cause many foreseeable as well as unforeseeable ramifications. In cautious preparation for those that are foreseeable, we have strategically begun domestic manufacturing operations in Western New York – an economically growing region not immediately threatened by climate change to the same extent as other regions and possibly one that may benefit from future population migrations within the United States of America. Further, we intend to lower our own carbon footprint by investing in energy-saving measures in our factory in West Seneca, NY. Considering climate change may also exacerbate geopolitical tensions, we are working to diversify our supply chain and lower our reliance on any particular region or country for raw materials in order to lower our exposure to climate change-induced economic or political instability.
We believe our Worksport SOLIS and Worksport COR products will be received positively by the public for their resilience to, and even increased utility as a result of, Climate Change. However, we acknowledge the potentially negative environmental impacts of poor battery recycling and increasing demand for precious metals. We are actively researching ways to lower such environmental impacts.
Inflation
Prices of certain commodity products, including raw materials, are historically volatile and are subject to fluctuations arising from changes in domestic and international supply and demand, labor costs, competition, market speculation, government regulations, trade restrictions and tariffs. Increasing prices of the component materials for parts of our goods may impact the availability, quality and price of our products as suppliers search for alternatives to existing materials and increase the prices they charge. Our suppliers may also fail to provide consistent quality of product as they may substitute lower cost materials to maintain pricing levels. Rapid and significant changes in commodity prices may negatively affect our profit margins, and it may be difficult to mitigate worsened margins through customer pricing actions and cost reduction initiatives.
Such an inflationary environment also increases our direct cost of raw goods or processed goods for our original equipment manufacturing as well as indirect costs such as overhead and rent. Due to these present and forecasted price increases and the temporary increases in ocean freight and container handling costs faced in recent periods, Worksport factors in all costs when assessing proper pricing of its goods for sale.
Additionally, as central banks and the U.S. Federal Reserve increase interest rates to combat global inflation, the cost of debt financing increases. While we currently do not have material debt other than our $6.0 million Revolving Credit Facility, our facility’s variable rate fluctuates along with the Prime Rate, meaning our monthly interest costs vary not only by our usage of the facility but by interest rates as well. We continue to explore debt financing options at reasonable interest rates in order to strengthen our cash position.
Elevated interest rates have also resulted in a shift in institutional holdings away from micro-cap equities, which has negatively influenced our stock’s trading volume. We continue to forge relationships with institutional investors and analysts in order to maintain a healthy trading volume.
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Gasoline Prices and Supply Chain Issues
We faced significantly higher ocean freight, trucking, and container handling costs as well as last mile delivery costs in 2021 and 2022 than we did in previous years – all of which have increased our products’ landed costs. Higher oil and gasoline prices further increased these costs, and while such prices have come down from their 2022 highs, we continue to closely monitor gasoline and shipping costs. While the Freight Rate Index has significantly increased since late 2023 as a result of Houthi attacks against cargo ships in the Red Sea and the concurrent decline in activity across the Panama Canal, the shipping routes used by the Company have not faced dramatic price hikes. Regardless, the Company is closely monitoring international shipping costs.
Our transition towards domestic manufacturing and assembly is anticipated to largely offset these higher costs, as we believe we will be less exposed to higher international shipping costs. We are also identifying North American suppliers of our products’ components and will prioritize transport by rail when possible to avoid high trucking costs.
Geopolitical Conditions
In February 2022, Russia initiated significant military action against Ukraine. In response, the U.S. and certain other countries imposed significant sanctions and export controls against Russia, Belarus and certain individuals and entities connected to Russian or Belarusian political, business, and financial organizations, and the U.S. and certain other countries could impose further sanctions, trade restrictions, and other retaliatory actions should the conflict continue or worsen. It is not possible to predict the broader consequences of these conflicts, including related geopolitical tensions, and the measures and retaliatory actions taken by the U.S. and other countries in respect thereof as well as whether any counter measures or retaliatory actions in response, including, for example, potential cyberattacks or the disruption of energy exports, are likely to cause regional instability and geopolitical shifts, which could materially adversely affect global trade, currency exchange rates, regional economies and the global economy. These situations remain uncertain, and while it is difficult to predict the impact of any of the foregoing, the conflicts and actions taken in response to these conflicts could increase our costs, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition, and results of operations.
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 Hamas, 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-Hamas 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-Hamas 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.
Foreign Currencies
We are subject to foreign exchange risk as we manufacture certain products and components in China, market extensively in both Canadian and U.S. markets, employ people residing in both the U.S. and Canada and, to date, have raised funds in U.S. Dollars. Meanwhile, we report results of operations in U.S. Dollars. Since some of our Canadian customers pay in Canadian Dollars, we are subject to gains and losses due to fluctuations in the USD relative to the Canadian Dollar. Our manufacturers in China are paid in USD to better avoid the relatively greater fluctuation of the Chinese Yuan. To the extent the U.S. dollar strengthens against any of these foreign currencies, the translation of these foreign currencies denominated transactions results in reduced revenue, operating expenses and net income for our operations.
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RESULTS OF OPERATIONS
Three Months Ended June 30, 2024 compared to the Three Months Ended June 30, 2023
Revenue
For the three months ended June 30, 2024, revenues from our entire line of products was $1,921,539, as compared to $199,851 for the three months ended June 30, 2023. Year-over-year sales increased by approximately 862%. For the three months ended June 30, 2024, revenue generated in Canada was $31,853 as compared to $0 for the same period in 2023. For the three months ended June 30, 2024, revenue generated in the United States was $1,889,686, compared to $199,851 for the same period in 2023, an increase of 846%.
Revenue increased during the three months ended June 30, 2024 compared to the same period the prior year due to increased sales of tonneau covers to a private label partner, various dealers and distributors, and end users via the Company’s online marketplaces. The Company continues to focus on establishing new and strengthening existing business-to-consumer and business-to-business sales channels while also strengthening customer support to increase customer satisfaction and enable high product turnover. For business-to-consumer channels, we have configured our product offerings in a manner conducive with cost-effective marketing, allowing us to securely invest in marketing and sales campaigns. For business-to-business channels, we have created all necessary marketing/sales materials and policies as well as an online dealer marketplace, and we are now actively contacting thousands of leads and presenting our product offerings to various dealers, jobbers, and retailers across the United States and Canada. We intend to gradually increase output capacity through refined production processes and increased personnel.
Sales from online retailers of our products increased from $18,163 during the three months ended June 30, 2023, to $897,213 during the three months ended June 30, 2024. Online retailers accounted for 47% of total revenue for the three months ended June 30, 2024, compared to 9% for the three months ended June 30, 2023. Distributor sales increased for the three months ended June 30, 2024, compared with the three months ended June 30, 2023, with sales of $63,926 and $0, respectively. Distributors accounted for 3% of total revenue for the three months ended June 30, 2024. Private label sales increased from $181,688 for the three months ended June 30, 2023, to $960,400 for the three months ended June 30, 2024. Private label sales accounted for 50% of total revenue for the three months ended June 30, 2024. We expect to continue to grow our fields of business as we develop unique products with enhanced utility to offer to other prospective clients in the U.S. and Canadian markets.
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 2024. We have pursued and will continue to pursue relationships with Original Equipment Manufacturers with the intention of distributing through them as well.
Cost of Sales
Cost of sales increased by 960%, from $153,288 for the three months ended June 30, 2023, to $1,624,910 for the three months ended June 30, 2024. Our cost of sales, as a percentage of sales, was approximately 85% and 77% for the three months ended June 30, 2024 and 2023, respectively. The increase in the cost of sales as a percentage of sales was primarily due to increased sales of domestically-produced hard covers. We consistently secure a 20% gross margin on soft covers sold to private labels, as these soft covers are drop shipped from our Chinese suppliers at a fixed cost. However, our margins on domestically manufactured hard covers is dependent on the cost of raw materials, which fluctuates, as well as overhead, which has been high due to manufacturing inefficiencies and low production volumes – both of which are actively being mitigated as we streamline manufacturing processes and allocate more existing human capital and machinery resources away from design engineering and testing towards production.
We provide our distributors and online retailers an “all-in” wholesale price. This includes any import duty charges, taxes, and shipping charges. Discounts are applied if the distributor or retailer chooses to use their own shipping process. Certain exceptions apply on rare occasions where product is shipped outside the contiguous United Sates or from the United States to Canada. Volume discounts are offered to certain high-volume customers, and we also offer a “dock price” or “pickup program” whereby clients are able to pick up product directly from our stocking warehouse.
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Operating Expenses
Operating expenses increased for the three months ended June 30, 2024 by $422,095, from $3,785,282 for the three months ended June 30, 2023 to $4,207,377, due to the following factors:
| ● | General and administrative expenses increased by $1,201,585, from $1,744,801 in 2023 to $2,946,386 in 2024. The increase was related to increased research and development activities, increased employment of support personnel including engineers, and increases in wages and salaries as we seek to expand our operations and further develop our products.
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