DEF 14C: Worksport Ltd. Stockholders Approve Share Issuance for Nasdaq Compliance

Worksport Ltd. informs stockholders of the approval, via written consent from a majority stockholder, of a share issuance to comply with Nasdaq listing rules related to warrants issued under an inducement letter.

Summary

• Worksport Ltd. is providing an information statement to its stockholders regarding the approval of a share issuance.
• The approval was obtained via written consent from a stockholder representing approximately 60% of the voting power as of June 7, 2024.
• The proposal authorizes the issuance of common stock underlying warrants issued pursuant to an inducement letter dated May 29, 2024, to comply with Nasdaq Listing Rule 5635(d).
• The share issuance involves more than 20% of the company's outstanding common stock.
• The board of directors unanimously approved and recommended the share issuance.
• Steven Rossi, CEO, President, and Chairman, holding 100% of the Series A Preferred Stock, approved the share issuance on June 7, 2024.
• The company is not soliciting any action from the other stockholders.
• The information statement is being mailed on or about June 18, 2024.
• The inducement letter involved the exercise of existing warrants for 7,000,000 shares at a reduced price of $0.5198 per share.
• In exchange, the company issued inducement warrants exercisable for up to 12,950,000 shares at $0.5198 per share.
• The company received approximately $3.6 million in net proceeds from the warrant exercise and sale of inducement warrants.
• The company intends to use the net proceeds for general corporate and working capital purposes.

Sentiment

Score: 6

Explanation: The document is primarily informational and procedural, outlining the approval of a share issuance for Nasdaq compliance. While the capital raise is a positive, the potential dilution is a concern. The sentiment is neutral to slightly positive.

Positives

• The company secured $3.6 million in net proceeds for general corporate and working capital purposes.
• The share issuance ensures compliance with Nasdaq Listing Rule 5635(d).
• The company reduced costs and management time by pursuing stockholder action via written consent instead of a special meeting.
• Existing warrant holders exercised warrants for 7,000,000 shares at a reduced price of $0.5198 per share.

Negatives

• The potential issuance of the inducement warrant shares will dilute the percentage ownership of existing stockholders.
• Stockholders do not have any dissenters rights or appraisal rights in connection with the approval of the Share Issuance.

Risks

• The company cannot predict whether or when the holder will exercise their inducement warrants.
• The issuance of the inducement warrant shares would exceed the number of authorized shares under the company's articles of incorporation.
• The holder's exercise of the inducement warrants is limited to ensure they do not own more than 4.99% (or 9.99% with prior notice) of the company's outstanding common stock after exercise.

Future Outlook

The company intends to use the net proceeds from the warrant exercise and sale of inducement warrants for general corporate and working capital purposes.

Management Comments

• Steven Rossi, CEO, President, and Chairman, approved the share issuance on June 7, 2024, by written consent.

Industry Context

This type of financing, involving warrant exercises and inducement warrants, is a relatively common method for small-cap companies to raise capital. Compliance with Nasdaq listing rules is a standard requirement for companies listed on the exchange.

Comparison to Industry Standards

• Similar inducement warrant structures have been used by other publicly traded companies to incentivize warrant holders to exercise their warrants and provide immediate capital to the company.
• The specific terms of the warrants, such as the exercise price and duration, are generally negotiated based on the company's financial condition and market conditions at the time of issuance.
• The use of a majority stockholder's written consent in lieu of a formal stockholder meeting is a common practice to expedite corporate actions and reduce costs, provided it is permitted under state law and the company's governing documents.

Stakeholder Impact

• Existing stockholders will experience dilution of their percentage ownership due to the potential issuance of inducement warrant shares.
• The company's ability to raise capital for general corporate and working capital purposes benefits the company and potentially its stakeholders.

Next Steps

• The company will file a registration statement on Form S-3 covering the resale of the inducement warrant shares.
• The company will keep the resale registration statement effective until the holders of the inducement warrants no longer hold any inducement warrant or inducement warrant shares.
• The corporate action taken by the Written Consent will not become effective earlier than 20 calendar days after the first mailing or delivery of this Information Statement to the stockholders of the Record Date.

Key Dates

Keywords

share issuance, inducement warrants, Nasdaq Listing Rule 5635(d), stockholder approval, written consent, dilution, Worksport Ltd., warrants, common stock