Worksport Ltd. Form 8-K Summary
Business Context and Reporting Period
Worksport Ltd. (WKSP) filed a Current Report on Form 8-K on July 19, 2024, regarding the entry into a material definitive agreement. The Company, through its wholly-owned subsidiaries Worksport New York Operations Corporation and Worksport USA Operations Corporation (collectively the "Borrower"), entered into a Revolving Financing and Assignment Agreement with Amerisource Funding, Inc.
Key Financial Metrics and Transaction Details
- Total Credit Facility: $6,000,000 revolving credit facility.
- Initial Drawdown: Approximately $5,520,000 net of a $788,000 interest reserve.
- Use of Proceeds: $4,730,000 used to refinance the mortgage on the Company's real property in West Seneca, NY; approximately $330,000 used for accounts receivable financing.
- Remaining Availability: Approximately $937,000 available for accounts receivable financing at closing.
- Interest Rate: Prime rate plus 3.00% per annum, subject to a floor of 6.00% per annum.
- Fees: 1.75% initial commitment fee; 1.00% annual commitment fee; 0.25% quarterly non-usage fee on undrawn amounts.
- Collateral: Secured by a security interest in substantially all assets, including accounts receivable and the Company's real property at 2500 North America Dr, West Seneca, NY.
- Term: 24 months from the date of initial funding.
Material Changes and Obligations
The filing represents a significant change in the Company's capital structure and debt obligations. The Borrower issued a Commercial Promissory Note for up to $6,000,000. The agreement requires the Borrower to assign and sell all invoices and accounts included on daily sales ledgers to Amerisource. A "Real Estate Sub-Limit Reserve" of $500,000 plus six months of interest was established, which will increase over two years to $1,000,000. The Company and its subsidiary, Terravis Energy, Inc., provided a guaranty for the Borrower's obligations.
Outlook, Risks, and Contingencies
The agreement includes customary representations, warranties, and covenants. Risks include the potential for an Event of Default, which would allow Amerisource to demand immediate payment of the unpaid principal and accrued interest without notice. A late charge of 5% applies if installment payments are not received by the 10th day after the due date. The agreement contains provisions for cross-default and cross-collateralization with other obligations the Borrower or its affiliates may have with Amerisource. The Company may terminate the agreement with 60 days' written notice prior to each maturity date.
Investor Verification Checklist
- Verify the exact interest rate calculation based on the current prime rate and the 6.00% floor.
- Review the full Revolving Financing and Assignment Agreement (Exhibit 10.1) for specific covenants and conditions precedent.
- Confirm the impact of the $788,000 interest reserve on immediate cash flow availability.
- Assess the implications of the "springing equipment lien" and cross-collateralization clauses on future financing flexibility.
- Monitor the Company's ability to meet daily sales ledger submission requirements to maintain the facility.