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Item 8. Financial Statements and Supplementary Data

2021-04-13 compared with 2020-05-14 · 973 added, 543 removed, 173 unchanged (90% of the section changed)

1 unchanged sentence

TO FINANCIAL STATEMENTS

of Independent Registered Public Accounting Firm

Balance Sheet at December 31, 2019 and 2018

Statements of Operations and Comprehensive Loss for the year ended December 31, 2019 and 2018

Statements of Shareholders’

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheet at December 31, 2020 and 2019

Consolidated Statements of Operations and Comprehensive Loss for the year ended December 31, 2020 and 2019

Consolidated Statements of Stockholders’

Equity for the year ended December 31, 2020 and 2019

statements of Cash Flow for the year ended December 31, 2019 and 2018

to the Financial Statements

Page 18 of 40

Consolidated statements of Cash Flow for the year ended December 31, 2020 and 2019

Notes to the Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

the Board of Directors and

of Franchise Holdings International, Inc.

of Worksport Ltd.

on the Financial Statements

have audited the accompanying consolidated balance sheets of Franchise Holdings International, Inc.

(the Company) as of December

31, 2019 and 2018, and the related statements of operations, comprehensive loss, stockholders’

equity, and cash flows for

each of the years in the two-year period ended December 31, 2019, and the related notes (collectively referred to as the financial

In our opinion, the financial statements present fairly, in all material respects, the financial position of the

Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for each of the years in the two-year

period ended December 31, 2019, in conformity with accounting principles generally accepted in the United States of America.

Consideration

of the Company’s Ability to Continue as a Going Concern

accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As more fully

described in Note 2 to the financial statements, the Company has incurred net losses and has an accumulated deficit.

These factors

raise substantial doubt about the Company’s ability to continue as a going concern.

Management’s plans in regard to

these matters are also described in Note 2 to the financial statements.

The financial statements do not include any adjustments

that might result from the outcome of this uncertainty.

have audited the accompanying consolidated balance sheets of Worksport, LTD (the Company) as of December 31, 2020 and 2019, and the related

statements of operations, comprehensive loss, stockholders’

equity, and cash flows for each of the years in the two-year period

ended December 31, 2020, and the related notes (collectively referred to as the financial statements).

In our opinion, the financial

statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the

results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2020, in conformity with

accounting principles generally accepted in the United States of America.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on

the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company

Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance

with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the

Our responsibility is to express an opinion on the Company’s

financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities

laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit

to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial

As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but

not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits,

we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to

error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence

regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

audits included performing procedures to assess the risks of m000aterial misstatement of the financial statements, whether due to error

or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits

provide a reasonable basis for our opinion.

Audit Matters

critical audit matters (CAM) communicated below are matters arising from the current period audit of the consolidated financial statements

that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are

material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments.

communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole,

and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the

accounts or disclosures to which they relate.

Promissory Note

discussed in Note 8 to the financial statements, the Company entered into a secured convertible promissory note which included

an original issue discount and is convertible at a set price which was lower than market on the date of issuance.

The promissory

note was issued with warrants.

The Company accounted for the conversion feature as a beneficial conversion feature.

was recorded for the beneficial conversion feature and the relative value of the warrants after considering the original issue

identified the conversion feature as a critical audit matter because accounting for such features is complex and requires management

to consider alternative reporting models.

Convertible debt also requires management to complete complex calculations and include significant

disclosures in their notes to the financial statements.

These matters involve a large degree of expertise and judgment on the part of

In turn, it required us to use significant effort and judgment.

Haynie & Company

1 unchanged sentence

have served as the Company’s auditor since 2016.

Page 19 of 40

Holdings International, Inc.

(formerly Franchise Holdings International, Inc.)

Balance Sheets

31, 2020 and 2019

and cash equivalents

receivable net

expenses and deposits

Current Assets

and Equipment, net (note 5)

asset, net (note 19)

Assets, net (note 6)

and Shareholders’

payable and accrued liabilities

taxes payable (note 10)

party loan (note 9)

portion of notes payable (note 7)

lease liability (note 19)

Cash and cash equivalents

Accounts receivable net

Other receivable

Inventory (Note 4)

Prepaid expenses and deposits

Total Current Assets

Investment (Note 18)

Property and Equipment, net (Note 5)

Right-of-use asset, net (Note 19)

Intangible Assets, net (Note 6)

Liabilities and Stockholders’

Current Liabilities

Lease Liability

and Contingencies

Shareholders’

Accounts payable and accrued liabilities

Payroll taxes payable

Related party loan (Note 10)

Promissory notes payable (Note 7)

Convertible promissory note, net (Note 8)

Loan payable (Note 20)

Current lease liability (Note 19)

Total Current Liabilities

Long Term–Lease Liability (Note 19)

Total Liabilities

Stockholders’

Equity (Deficit)

A Preferred Stock, $0.0001 par value, 1,000,000 shares authorized, 0 and 100,000 shares issued and outstanding, respectively

stock, $0.0001 par value, 43,833,333 shares authorized, 41,906,790 and 24,634,051 shares issued and outstanding, respectively

paid-in capital

Share subscriptions

Series A & B Preferred Stock, $0.0001 par value, 1,100,000 shares authorized, 1,000 Series A and 0 Series B issued and outstanding, respectively (Note 9)

Common stock, $0.0001 par value, 299,000,000 shares authorized, 76,412,359 and 41,906,790 shares issued and outstanding, respectively (Note 9)

Additional paid-in capital

Share subscriptions receivable

Share subscriptions payable

Accumulated deficit

(12,866,033 )

(11,678,413 )

translation adjustment

Shareholders’

Liabilities and Shareholders’

Cumulative translation adjustment

Total Stockholders’

Equity (Deficit)

Total Liabilities and Stockholders’

Equity (Deficit)

accompanying notes form an integral part of these consolidated financial statements.

Page 20 of 40

Holdings International, Inc.

(formerly Franchise Holdings International, Inc.)

Statements of Operations and Comprehensive Loss

31, 2020 and 2019

of Goods Sold

and administrative

and marketing

(gain) on foreign exchange

Cost of Goods Sold

Operating Expenses

from operations

Income (Expense)

expense (note 7)

(loss) on settlement of debt

General and administrative

Sales and marketing

Professional fees

Loss (gain) on foreign exchange

Total operating expenses

Loss from operations

Other Income (Expense)

Interest expense (Note 8)

Gain (loss) on settlement of debt

Total other (expense)

Other Comprehensive Loss

Foreign currency translation adjustment

Comprehensive Loss

currency translation adjustment

Comprehensive

$ (1,187,620 )

per Share (basic and diluted)

Average Number of Shares (basic and diluted)

Loss per Share (basic and diluted)

Weighted Average Number of Shares (basic and diluted)

accompanying notes form an integral part of these consolidated financial statements

Page 21 of 40

Holdings International, Inc.

Statements of Shareholders’

(formerly Franchise Holdings International, Inc.)

Statements of Stockholders’

31, 2020 and 2019

1 unchanged sentence

Stockholders’

at December 31, 2017

at January 1, 2019

$ (10,354,299 )

for settlement of payables

for cash and subscription payable

Uncollectible

Issuance of share subscriptions payable

Deemed dividend related to

down-round features

Return and Cancellation of shares

Issuance for settlement of

Conversion of Preferred Stock

currency translation adjustment

1 unchanged sentence

$ (11,678,413 )

and cancellation of shares

for cash and subscriptions payable

of Preferred Stock

currency translation adjustment

Issuance for services

Issuance for prepaid services

and subscriptions payable

Issuance from subscriptions

Issuance of shares from Reg-A

Share issuance cost

Cancellation of reserved shares

Warrants issuance for services

Conversion of convertible promissory

note to shares (Note 8 and 22)

Warrants issuance in connection

to convertible promissory note (Note 8 and 22)

Share issuance in connection

to convertible promissory note (Note 8)

Issuance of Preferred Stock

at December 31, 2020

1 unchanged sentence

accompanying notes form an integral part of these consolidated financial statements

Page 22 of 40

Holdings International, Inc.

(formerly Franchise Holdings International, Inc.)

Statements of Cash Flows

31, 2020 and 2019

Operating Activities

$ (1,187,620 )

to reconcile net loss to net cash from operating activities:

issued for services

on impairment

and amortization

Uncollectible

Subscription Receivable

Loss on settlement of debt

in operating assets and liabilities (note 13)

cash used in operating activities

Flows from Investing Activities

of investment (note 18)

of property and equipment

cash used in investing activities

from issuance of stock for cash

from loan payable

Assumption of Debt

from shareholder loan

on notes payable

cash provided by financing activities

of Foreign Currency Translation

and cash equivalents - beginning of year

and cash equivalents end of year

disclosure of cash flow information:

Disclosure of non-cash investing and financing Activities

issued for settlement of notes and accounts payable

issued to service providers

of Preferred Stock to Common Stock

issued for share subscriptions payable

off share subscriptions receivable

of operating lease right of use asset and liability

Adjustments to reconcile net loss to net cash from operating activities:

Amortization of prepaid services paid by shares issuance

Shares and warrants issued for services

Loss on impairment

Depreciation and amortization

Interest on lease liability

Wages and salaries

Accrued interest

Amortization on OID interest

Gain on settlement of debt

Changes in operating assets and liabilities (Note 13)

Net cash used in operating activities

Cash Flows from Investing Activities

Repayment of lease liability

Purchase of investment (Note 18)

Purchase of property and equipment

Net cash used in investing activities

Financing Activities

Proceeds from issuance of stock for cash

Proceeds from share subscriptions

Proceeds from loan payable

Proceeds from promissory notes

Stockholder Assumption of Debt

Repayments on promissory notes (Note 8)

Net cash provided by financing activities

Effects of Foreign Currency Translation

Change in cash

Cash and cash equivalents–beginning of year

Cash and cash equivalents end of year

Supplemental disclosure of cash flow information:

Interest paid

Supplemental Disclosure of non-cash investing and financing Activities

Share cancellation

Shares issued to service providers

Conversion of preferred stock to common stock

Shares issued for share subscriptions payable

Recognition of operating lease right of use asset and liability

Conversion of convertible promissory note to common stock

Convertible promissory note–equity discount

Convertible promissory note–original issue discount

accompanying notes form an integral part of these consolidated financial statements.

Page 23 of 40

Holdings International, Inc.

(formerly Franchise Holdings International, Inc.)

to the Consolidated Financial Statements

1 unchanged sentence

Nature of Operations and Reverse Acquisition Transaction

Holdings International, Inc.

(the “Company”) was incorporated in the State of Nevada on April 2, 2003.

year ended December 31, 2014, the Company completed a reverse acquisition transaction (the “Reverse Acquisition”)

(the “Company”

) was incorporated in the state of Nevada on April 2, 2003.

During the year ended December 31,

2014, the Company completed a reverse acquisition transaction (the “Reverse Acquisition”

) with TruXmart Ltd.

2 unchanged sentences

( “Worksport”

Worksport designs and distributes truck tonneau covers in Canada and the United States.

Basis of Presentation and Going Concern

Worksport designs and distributes

truck tonneau covers in Canada and the United States.

Basis of Presentation and Business Condition

Statement of Compliance

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”).

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”

Basis of Measurement

1 unchanged sentence

Consolidation

Company's consolidated financial statements consolidate the accounts of the Company and its wholly owned subsidiary.

Company’s consolidated financial statements consolidate the accounts of the Company and its wholly-owned subsidiary.

All intercompany

transactions, balances and unrealized gains or losses from intercompany transactions have been eliminated upon consolidation.

d) Functional and Presentation Currency

These consolidated financial statements

are presented in United States Dollars.

The functional currency of the Company is the Canadian Dollar.

For purposes of preparing

these consolidated financial statements, balances denominated in Canadian Dollars outstanding at December 31, 2019 were converted

into United States Dollars at a rate of 1.30 Canadian Dollars to one United States Dollar.

Balances denominated in Canadian Dollars

outstanding at December 31, 2018 were converted into United States Dollars at a rate of 1.36 Canadian Dollars to one United States

Transactions denominated in Canadian Dollars for the period ended December 31, 2019 and December 31, 2018 were converted

into United States Dollars at an average rate of 1.33 and 1.30 Canadian Dollars to one United States Dollar, respectfully.

Functional and Presentation Currency

January 1, 2020, the Company changed the functional currency of its subsidiary to United States dollars given the increasing prevalence

dollar-denominated activities of the subsidiary over time.

The change in functional currency from Canadian dollars to United

States dollars is accounted for prospectively from January 1, 2020.

The subsidiary’s balance sheet was converted from Canadian

dollars to United States dollars using the year ended December 31, 2019 United States dollar balance as the opening for January 1, 2020

in accordance with Accounting Standards Codification (ASC) 830 .

These financial statements are presented in United States dollars.

The functional and presentation currency of the Company and its subsidiary is the United States dollar.

As a result of the change in

functional currency the Company recognized a loss on foreign exchange of $29,940.

Use of Estimates

preparation of 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 financial statements and the reported amounts of revenues and expenses during the reporting

Actual results could differ from these estimates.

Going Concern

financial statements have been prepared on a going concern basis which assumes that the Company will be able to realize its assets

and discharge its liabilities in the normal course of business for the foreseeable future.

During the year ended December 31,

2019, the Company incurred a net loss of $414,607 and as of that date, the Company’s accumulated deficit was $10,768,906.

While the Company has demonstrated the ability to generate revenue, there are no assurances that it will be able to achieve level

of revenues adequate to generate sufficient cash flow from operations or obtain additional financing through private placements,

public offerings and/or bank financing necessary to support our working capital requirements.

To the extent that funds generated

from any private placements, public offerings and/or bank financing are insufficient, we will have to raise additional working

No assurance can be given that additional financing will be available, or if available, will be on acceptable terms.

These conditions raise substantial doubt about our ability to continue as a going concern.

If adequate working capital is not

available we may be forced to discontinue operations, which would cause investors to lose their entire investment.

The accompanying

consolidated financial statements do not include any adjustments that might result relating to the recoverability and classification

of the asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this risk

and uncertainty.

preparation of 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 financial statements and the reported amounts of revenues and expenses during the reporting period.

results could differ from these estimates.

Business condition

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.

of December 31, 2020, the Company had working capital deficiency of $33,289 and an accumulated deficit of $12,866,033.

As of December

31, 2020, the Company had cash and cash equivalents of $1,107,812.

Based on its current operating plans, the Company believes it has

sufficient level of funding for anticipated operations, capital expenditures and debt repayments for a period of at least 12 months from

the issuance date of this annual report.

(formerly Franchise Holdings International, Inc.)

to the Consolidated Financial Statements

31, 2020 and 2019

the year ended December 31, 2020 and subsequent to the year ended the Company through its Reg-A public offering, private placement

offering, and exercises of warrants had raised in aggregate of approximately $7,400,000.

In addition, as of April 2021

the Company has approximately 45,840,121 warrants exercisable at $0.20 per warrant compare to an average share price of approximately

$0.40 per share, anticipating additional warrant exercises.

to year ended December 31, 2020 the Company intents to introduce several new tonneau covers most significant of which is the TerraVis.

TerraVis is a solar cover tonneau cover will give pickup truck owners rechargeable portable power and add range to upcoming EV pickup

The Company anticipates that the introduction of these new products will sufficiently improve the Company’s financial position.

on the Company’s future operating plans, existing cash of $1,107,812, additional funds of approximately $6,300,000 raised subsequent

to year ended, combined with possible warrants exercises of approximately $9,100,000;

management believes the Company have sufficient

funds to meet its contractual obligations and working capital requirements for the next 12 months and the foreseeable future.

Reclassification

comparative figures have been re-classified to conform to the current period’s presentation.

Page 24 of 40

comparative figures have been reclassified to conform to the current period’s presentation.

Revision of Prior Period Financial Statements

connection with the preparation of our consolidated financial statements, we identified an immaterial error related to the recognition

of a deemed dividend related to down-round features along with the associated shares issuance and professional fees in the annual periods

in fiscal 2019 and first quarter of 2020.

In accordance with SAB (Staff Accounting Bulletins) Topic 1.M, “Materiality,”

SAB (Staff Accounting Bulletins) Topic 1.N, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements

in Current Year Financial Statements,”

we evaluated the error and determined that the related impact was not material to our financial

statements for any prior annual or interim period, but that correcting the cumulative impact of the error would be significant to our

results of operations and equity fiscal and interim periods of 2019 and 2020.

Accordingly, we have revised previously reported financial

information for such immaterial error, as previously disclosed in our Annual Report on Form 10-K for the fiscal year 2019.

of revisions to certain previously reported financial information presented herein for comparative purposes is included in note 23.

Significant Accounting Policies

Consolidation

- The Company is incorporated in the state of Nevada.

The Company has one wholly-owned subsidiary, Worksport Ltd., a company incorporated

in the province of Ontario.

All intercompany transactions and balances have been eliminated upon consolidation.

and Cash Equivalents - Cash and cash equivalents includes cash on account and demand deposits with maturities of three months

- Trade accounts receivable are stated at the amount the Company expects to collect.

Receivables are reviewed individually

for collectability.

If the financial condition of the Company’s customers were to deteriorate, adversely affecting their

ability to make payments, allowances may be required.

Company offers credit terms on the sale of the Company’s products to a significant majority of the Company’s customers

and requires no collateral from these customers.

and Cash Equivalents –Cash and cash equivalents includes cash on account and demand deposits with maturities of three months

Receivables–

accounts receivable are stated at the amount the Company expects to collect.

Receivables are reviewed individually for collectability.

If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments,

allowances may be required.

Company offers credit terms on the sale of the Company’s products to a significant majority of the Company’s customers and

requires no collateral from these customers.

The Company performs ongoing credit evaluations of customers’

condition and maintains an allowance for doubtful accounts receivable based upon the Company’s historical experience and

a specific review or accounts receivable at the end of each period.

As at December 31, 2019 and 2018, the Company had no allowance

for doubtful accounts.

- Inventory is stated at the lower of cost or net realizable value, with cost being determined by a weighted average basis.

Cost includes the cost of materials plus direct labor applied to the product.

- The Company offers limited warranties against product defects.

Customers who are not completely satisfied with their purchase

may attempt to be reimbursed for their purchases outside the warranty period.

For the years ending December 31, 2019 and 2018,

the Company incurred warranty expenses of $2,106 and $3,538.

Revenue Recognition –

after December 15, 2017, for public entities reporting Revenue from Contracts with Customers, ASC 606, a new accounting standard

for revenue recognition was issued.

An entity must satisfy the following steps under ASC 606 for revenue recognition;

contract, identifiable performance obligation, determinable transaction price, allocating the transaction price and satisfying

performance obligations.

Sales are recognized when products are shipped, with no right of return, the title and risk of loss has

passed to the customers or when they are delivered based on the terms of the sale.

Revenue related to shipping and handling costs

billed to customers is included in net sales and the related shipping and handling costs are included in cost of products sold.

financial condition

and maintains an allowance for doubtful accounts receivable based upon the Company’s historical experience and a specific review

or accounts receivable at the end of each period.

As at December 31, 2020 and 2019, the Company had no allowance for doubtful accounts.

Inventory–

is stated at the lower of cost or net realizable value, with cost being determined by a weighted average basis.

Cost includes the cost

of materials plus direct labor applied to the product.

Warranties–

Company offers limited warranties against defective products.

Customers who are not satisfied with their purchase may attempt to have

their purchases reimbursed outside past the warranty period.

For the years ending December 31, 2020 and 2019, the Company incurred warranty

expenses of $0 and $2,106.

(formerly Franchise Holdings International, Inc.)

to the Consolidated Financial Statements

31, 2020 and 2019

Significant Accounting Policies ( continued)

Recognition–

Beginning after December 15, 2018, for public entities reporting Revenue from Contracts with Customers, ASC 606,

a new accounting standard for revenue recognition was issued.

Sales are recognized when products are shipped, with no right of return

but reimbursement maybe offered for defective products and the title and risk of loss has passed to unaffiliated customers or when they

are delivered based on the terms of the sale, there is an identifiable contract with a customer with defined performance obligations,

the transaction price is determinable and the entity has fulfilled its performance obligation.

Revenue related to shipping and handling

costs billed to customers is included in net sales and the related shipping and handling costs are included in cost of products sold.

These standards have had no effect on the reported consolidated financial statements.

and Equipment - Capital assets are recorded at cost and are amortized using the straight-line method over the following estimated

and Equipment–

Capital assets are recorded at cost and are amortized using the straight-line method over the following estimated

useful lives:

1 unchanged sentence

at December 31, 2020, the Company does not take depreciation for the following items:

product moulds, trademarks and the website

as the following items are not in service.

Taxes - Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary

differences between the amount of taxable income and pretax financial income, and between the tax bases of assets and liabilities

and their reported amounts in the financial statements.

Deferred tax assets and liabilities are included in the consolidated financial

statements at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are

expected to be realized or settled as prescribed in FASB ASC 740.

As changes in tax laws or rates are enacted, deferred tax assets

and liabilities are adjusted through the provision for income taxes.

product molds, trademarks and the website.

Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary

differences between the amount of taxable income and pretax financial income, and between the tax bases of assets and liabilities and

their reported amounts in the financial statements.

Deferred tax assets and liabilities are included in the consolidated financial statements

at currently enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized

or settled as prescribed in FASB ASC 740.

As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted

through the provision for income taxes.

positions initially need to be recognized in the financial statements when it is more-likely-than-not the positions will be sustained

upon examination by the tax authorities.

Currency Translation - Transactions denominated in foreign currencies are initially recorded in the functional currency using

(formerly Franchise Holdings International, Inc.)

to the Consolidated Financial Statements

31, 2020 and 2019

Significant Accounting Policies ( continued)

Currency Translation–

Transactions denominated in foreign currencies are initially recorded in the functional currency using

exchange rates in effect at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies are

translated into the functional currency using exchange rates prevailing at the end of the reporting period.

All exchange gains

and losses are included in the statement of operations and deficit.

the purpose of presenting financial statements in United States Dollars, the assets and liabilities are expressed in United States

Dollars using exchange rates prevailing at the end of the reporting period.

Income and expense items are translated at the average

exchange rates for the period, unless exchange rates fluctuated significantly during that period, in which case the exchange rates

at the dates of the transactions are used.

Exchange differences arising, if any, are recognized in other comprehensive loss and

reported as cumulative translation adjustment in shareholder’s equity.

the purpose of these financial statements, the following exchange rates were used:

Page 25 of 40

Instruments - Financial Accounting Standards Board’s (FASB) Accounting Standards Codification (ASC) 825, Disclosures

about Fair Value of Financial Instruments, requires disclosures of the fair value of financial instruments.

The carrying value

of the Company’s current financial instruments, which include cash and cash equivalents, accounts receivable, accounts payable

and accrued liabilities and shareholder loan, approximates their fair values because of the short-term maturities of these instruments.

- The Company initially measures its financial instrument at fair value, except for certain non-arm’s length transactions.

The Company subsequently measures all its financial assets and financial liabilities at amortized cost, except for investments

in equity instruments that are quoted in an active market, which are measured at fair value.

Changes in fair value are recognized

in earnings for the period in which they occur.

Monetary assets and liabilities denominated in foreign currencies are translated

into the functional currency using at the historical exchange rates in effect at the dates of the transactions.

All exchange gains and

losses are included in the statement of operations and comprehensive loss.

Instruments–

Financial Accounting Standards Board’s (FASB) ASC 825, Disclosures about Fair Value of Financial Instruments,

requires disclosures of the fair value of financial instruments.

The carrying value of the Company’s current financial instruments,

which include cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities and stockholder loan, approximates

their fair values because of the short-term maturities of these instruments.

Measurement–

Company initially measures its financial instrument at fair value, except for certain non-arm’s length transactions.

subsequently measures all its financial assets and financial liabilities at amortized cost, except for investments in equity instruments

that are quoted in an active market, which are measured at fair value.

Changes in fair value are recognized in earnings for the period

in which they occur.

assets measured at amortized cost include cash and cash equivalents, accounts receivable, related party receivable, other receivables

2 unchanged sentences

and promissory note payable.

Financial Instruments - The Company has issued and could issue instruments with such terms that require the Company to account

for the transactions as derivative financial instruments.

The Company is accounting for these transactions in accordance with

FASB Accounting Standards Codification (“ASC”) Topic 815, Derivatives and Hedging, which requires that every derivative

instrument is recorded on the balance sheet as an asset or liability measured at its fair value as of the reporting date.

815 also requires changes in the derivatives’

fair value to be recognized in earnings for the period.

Party Transactions - All transactions with related parties are in the normal course of operations and are measured at the

exchange amount.

Assets and Impairment - Patents and other intangibles are amortized using the straight-line method over their estimated useful

lives and are evaluated for impairment at least annually or when events or circumstances arise that indicate the existence of

The Company evaluates the recoverability of identifiable intangible assets whenever events or changes in circumstances

indicate that an intangible asset’s carrying amount may not be recoverable.

When indicators of impairment exist, the Company

measures the carrying amount of the asset against the estimated undiscounted future cash flows associated with it.

sum of the expected future cash flows be less than the carrying value of the asset being evaluated, an impairment loss would be

The impairment loss would be calculated as the amount by which the carrying value of the asset exceeds its fair value.

The evaluation of asset impairment requires the Company to make assumptions about future cash flows over the life of the asset

being evaluated.

These assumptions require significant judgment and actual results may differ from assumed and estimated amounts.

During the years ended December 31, 2019 and 2018, the Company had no impairment losses related to intangible assets.

Accounting - On January 1, 2019, the Company adopted the new accounting standards ASC 842 that requires lessees to recognize

all leases on the balance sheet as right-of-use assets and lease liabilities based on the value of the discounted future lease

Party Transactions–

All transactions with related parties are in the normal course of operations and are measured at the exchange

Assets and Impairment–

Patents and other intangibles are amortized using the straight-line method over their estimated useful

Intangible assets, such as trademarks with indefinite live are not amortized.

Intangible assets are evaluated for impairment at

least annually or when events or circumstances arise that indicate the existence of impairment.

The Company evaluates the recoverability

of identifiable intangible assets whenever events or changes in circumstances indicate that an intangible asset’s carrying amount

may not be recoverable.

When indicators of impairment exist, the Company measures the carrying amount of the asset against the estimated

undiscounted future cash flows associated with it.

Should the sum of the expected future cash flows be less than the carrying value of

the asset being evaluated, an impairment loss would be recognized.

The impairment loss would be calculated as the amount by which the

carrying value of the asset exceeds its fair value.

The evaluation of asset impairment requires the Company to make assumptions about

future cash flows over the life of the asset being evaluated.

These assumptions require significant judgment and actual results may differ

from assumed and estimated amounts.

During the years ended December 31, 2020 and 2019, the Company had no impairment losses related to

intangible assets.

Accounting –On January 1, 2019, the Company adopted the new accounting standards ASC 842 that requires lessees to recognize

operating leases on the balance sheet as right-of-use assets and lease liabilities based on the value of the discounted future lease

Expanded disclosures about the nature and terms of lease agreements are required prospectively and are included in Note 19.

Upon adoption, the Company also recognized right-of-use assets and lease liabilities of $68,516.

Private Equity Investment - Private

equity investments may consist of common stock and preferred stock of privately owned companies.

The Company records all private

equity investments at the transaction price, excluding transaction costs.

The Company assesses annually if there is any objective

evidence that its interest in its investments are impaired.

If impaired, the carrying value of the Company's share of the underlying

assets of the investment is written down to its estimated recoverable amount and charged to the consolidated statement of operations

and comprehensive loss.

(formerly Franchise Holdings International, Inc.)

to the Consolidated Financial Statements

31, 2020 and 2019

Accounting Pronouncements

August 2020, the FASB issued ASU 2020-06, “Debt–Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives

and Hedging–Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an

Entity’s Own Equity.”

The new guidance eliminates two of the three models in ASC 470-20, which required entities to account

for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock.

As a result, only conversion features accounted for under the substantial premium model in ASC 470-20 and those that require bifurcation

in accordance with ASC 815-15 will be accounted for separately.

In addition, the amendments in ASU 2020-06 eliminates some of the requirements

in ASC 815-40 related to equity classification.

The amendments in ASU 2020-06 further revised the guidance in ASC 260, Earnings Per Share

(“EPS”), to address how convertible instruments are accounted for in calculating diluted EPS and requires enhanced disclosures

about the terms of convertible instruments and contracts in an entity’s own equity.

The new standard is effective for the Company

for fiscal years beginning after December 15, 2023, including interim periods within these fiscal years, with early adoption permitted.

Management is currently evaluating the impact the adoption of this new guidance will have on its consolidated financial statements and

does not anticipate a material impact.

consists of the following at December 31, 2020 and 2019:

Finished goods

Promotional items

Raw materials

Prepaid inventory

the year ended December 31, 2019, the Company recognized a loss on impairment of inventory $54,292.

Page 26 of 40

Property and Equipment

classes of property and equipment at December 31, 2020 and 2019 are as follows:

January 1, 2019

December 31, 2019

January 1, 2019

December 31, 2019

amount as at December 31, 2019

January 1, 2018

December 31, 2018

January 1, 2018

December 31, 2018

amount as at December 31, 2018

Product molds

Leasehold Improvements

Balance–January 1, 2020

Balance–December 31, 2020

Accumulated Depreciation

Balance–January 1, 2020

Balance–December 31, 2020

Net amount as at December 31, 2020

Product molds

Leasehold Improvements

Balance–January 1, 2019

Balance–December 31, 2019

Accumulated Depreciation

Balance–January 1, 2019

Balance–December 31, 2019

Net amount as at December 31, 2019

(formerly Franchise Holdings International, Inc.)

to the Consolidated Financial Statements

31, 2020 and 2019

the years ended December 31, 2020 and 2019, the Company recognized depreciation expense of $3,184 and $2,198, respectively.

current property and equipment, as well as any future purchases of property and equipment have been pledged as security for the

notes payable disclosed in Note 7.

property and equipment, as well as any future purchases of property and equipment have been pledged as security for the notes payable

disclosed in Notes 7 and 8.

Intangible Assets

assets consist of costs incurred to establish the Worksport Tri-Fold and Smart Fold patent technology, Worksport trademarks, as

well as the Company’s website.

assets consist of costs incurred to establish the Worksport Tri-Fold and Smart Fold patent technology, Worksport trademarks, as well

as the Company’s website.

The patent was issued in 2014 and 2019.

The patent will be amortized on a straight-line basis

over its useful life of 25 years.

The Company’s trademark and website are reassessed annually for impairment;

has determined that impairment is not necessary for the current year ended December 31, 2019.

The patent will be amortized on a straight-line basis over its

useful life of 25 years.

The Company’s trademark and website are reassessed every year for amortization/impairment;

has determined that amortization/impairment is not necessary for the current year ended December 31, 2020.

The change in intangible assets

for the years ending December 31, 2020 and 2019 are as follows:

January 1, 2019

December 31, 2019

January 1, 2019

December 31, 2019

amount as at December 31, 2019

Page 27 of 40

January 1, 2018

December 31, 2018

January 1, 2018

December 31, 2018

amount as at December 31, 2018

Balance–January 1, 2020

Balance–December 31, 2020

Accumulated Depreciation

Balance–January 1, 2020

Balance–December 31, 2020

Net amount as at December 31, 2020

Balance–January 1, 2019

Balance–December 31, 2019

Accumulated Depreciation

Balance–January 1, 2019

Balance–December 31, 2019

Net amount as at December 31, 2019

of the patent over the next five years and beyond December 31, 2020 is as follows:

Notes Payable

2026 and later

(formerly Franchise Holdings International, Inc.)

to the Consolidated Financial Statements

31, 2020 and 2019

Promissory Notes

following tables shows the balance of the notes payable as of December 31, 2020 and 2019:

as at December 31, 2017

as at December 31, 2018

as at December 31, 2019

Notes Payable

the year ended December 31, 2019 the Company extended the maturity dates of all secured promissory notes in the amount of $79,000

and $96,091 ($123,231 Canadian Dollars) to be due on April 1, 2021.

the year ended December 31, 2019 the Company extended the maturity dates of all unsecured promissory notes in the amount of $50,000

and $53,848 ($67,700 Canadian Dollars) to be due on October 8, 2020 and November 3, 2020 respectively.

the year ended December 31, 2019 the Company repaid $9,545 ($12,000 Canadian dollars) and $10,000 of its unsecured promissory

In addition, the Company paid $8,113 in interest for outstanding unsecured promissory notes.

Notes Payable

the year ended December 31, 2018, the Company issued two additions to the original unsecured promissory note of July 2016, totaling

$22,639 ($30,884 Canadian dollars).

Interest is accrued at 18% per annum, payable monthly.

The payment terms of the original note

including these additions are due “upon completion of going public on the Canadian Securities Exchange, with no change in

interest rate.

Notes Payable

the year ended December 31, 2017, the Company issued an unsecured promissory note in the amount of $9,545 ($12,000 Canadian Dollars).

The unsecured promissory note was due in August 2018 and bears interest at a rate of 18% per annum, payable monthly.

is in good standing, the payment terms have been extended indefinitely with no change in interest rate.

Page 28 of 40

the year ended December 31, 2017, the Company issued secured promissory notes in the amount of $53,848 ($67,700 Canadian

The secured promissory notes were due in October and November 2018 and bears interest at a rate of 12% per annum.

secured promissory notes are secured by Company inventory and personal assets held by the CEO.

As the note is in good standing,

the payment terms have been extended with no change in interest rate.

Refer to 2019 notes payable above for note extension.

Balance as at December 31, 2018

Balance as at December 31, 2019

Reclassification

Balance as at December 31, 2020

the year ended December 30, 2020, the Company reclassified $88,120 from accounts payable to promissory notes.

The terms of the note is

under negotiation and is currently due on demand.

the year ended December 30, 2020, the Company reclassified a debit balance of $11,058 from notes payable to other receivable.

the year ended December 31, 2016, the Company issued a secured promissory note in the amount of $73,452 ($123,231 Canadian dollars),

respectively.

During the year ended December 31, 2018, the Company issued two additions to the original unsecured promissory note of

July 2016, totaling $22,639 ($30,884 Canadian dollars).

The secured promissory note bears interest at a rate of 18% per annum.

terms of the original note including these additions are due upon completion of going public on the Canadian Securities Exchange, with

no change in interest rate.

The secured promissory note is secured by all present and after-acquired property and assets of the Company.

During the year ended December 31, 2019, the Company extended the maturity dates of the secured promissory notes to be due on April 1,

As at December 31, 2020, principal balance owing was $96,091 ($123,231 Canadian dollars) (2019–$96,091 ($123,231 Canadian

As of December 31, 2020, the accrued interest on this note payable was $48,770 ($64,102 Canadian dollars) (2019–$32,277

($41,921 Canadian dollars)) included in accounts payable and accrued liabilities.

As of December 31, 2020, the Company and the secured

promissory note holder are in dispute.

the year ended December 31, 2016, the Company issued secured promissory notes in the amount of $79,000.

The secured promissory notes

bears interest at a rate of 18% per annum, payable monthly.

The secured promissory notes are secured by all present and after-acquired

property and assets of the Company.

During the year ended December 31, 2019, the Company extended the maturity dates of all secured promissory

notes to be due on April 1, 2021.

As at December 31, 2020 principal balance owing was $79,000 (2019–$79,000).

As of December 31,

2020, the accrued interest on this note payable was $31,000 (2019–16,780) included in accounts payable and accrued liabilities.

As of December 31, 2020, the Company and the secured promissory note holder are in dispute.

the year ended December 31, 2017, the Company issued a secured promissory note in the amount of $9,545 ($12,000 Canadian dollars).

secured promissory note was due in August 2018 and bears interest at a rate of 18% per annum, payable monthly.

During the year ended

December 31, 2019, the Company made a repayment of $9,545 ($12,000 Canadian dollars).

As of December 31, 2020, the unsecured promissory

note has been repaid in full.

the years ended December 31, 2017, the Company issued secured promissory notes in the amount of $53,848 ($67,700 Canadian dollars).

secured promissory notes were due in October and November 2018 and bears interest at a rate of 12% per annum.

The secured promissory

notes are due in August and November 2018 and bear interest at a rate of 12% per annum.

The secured promissory notes are secured

by Company inventory and personal assets held by the CEO.

As the note is in good standing, the payment terms have been extended

with no change in interest rate.

Refer to 2019 notes payable above for note extension.

the year ended December 31, 2017, the Company issued a secured promissory note in the amount of $52,845 ($64,677 Canadian

Dollars), respectively.

The secured promissory note was due in July 2018 and bears interest at a rate of 18% per annum.

promissory note is secured by all present and after-acquired property and assets of the Company.

The balance owed on this note

payable at December 31, 2017 is $73,452 ($92,348 Canadian Dollars).

At December 31, 2017, the accrued interest on this note payable

was $13,134 ($16,513 Canadian Dollars).

The payment due date remains the same as stated:

upon completion of going public on the

Canadian Securities Exchange with no change in interest rate.

Promissory Note

October 2015, the Company signed a secured promissory note with an investor in the principal amount of $79,768 ($102,000 Canadian

The Company received proceeds of $58,653 (75,000 Canadian Dollars) and $21,115 (27,000 Canadian Dollars) was recorded

as a discount which was accrued over the life of the note.

The promissory note required a daily payment of $249 (324 Canadian

Dollars) until January 26, 2017 and carried a 40.0% interest rate.

promissory note was secured by all assets of the Company.

During 2017, the lender agreed to settle the loan for $30,826 ($39,000

Canadian Dollars) resulting in the Company recording a $13,556 gain on the forgiveness of the remaining portion of the secured

promissory note.

amounts repayable under notes payable and secured promissory note at December 31, 2019 and 2018 are as follows:

amounts due within one year

Shareholders’

notes are secured by Company inventory and personal assets held by the CEO.

During the year ended December 31, 2019, the Company extended

the maturity date of the secured promissory notes to November 3, 2020.

As at December 31, 2020, principal balance owing was $53,848 ($67,700

Canadian dollars) (2019–$53,848 ($67,700 Canadian dollars)).

As of December 31, 2020, the accrued interest on this note payable

was $14,050 ($18,740 Canadian dollars) (2019–$8,174 ($10,616 Canadian dollars)) included in accounts payable and accrued liabilities.

(formerly Franchise Holdings International, Inc.)

to the Consolidated Financial Statements

31, 2020 and 2019

to the year ended on February 9, 2021, the Company made a repayment of $62,905 (principal and interest) for the above secured promissory

note issued during the year ended December 31, 2017.

the years ended December 31, 2017, the Company issued secured promissory notes in the amount of $60,000.

The secured promissory notes

are due in August and November 2018 and bear interest at a rate of 12% per annum.

The secured promissory notes are secured by Company

inventory and personal assets held by the CEO.

During the year ended December 31, 2019 the Company extended the maturity dates of this

secured promissory note to November 3, 2020.

During the year ended December 31, 2019, the Company a principal repayment of $10,000.

at December 31, 2020, principal balance owing was $50,000 (2019–$50,000).

As of December 31, 2020, the accrued interest on this

note payable was $22,703 (2019–$16,703) included in accounts payable and accrued liabilities.

As the note is outstanding beyond

its maturity date interest rate increased from 12% to 22%.

amounts repayable under promissory notes and secured promissory notes at December 31, 2020 and 2019 are as follows:

Balance owing

Less amounts due within one year

Long-term portion

Convertible Promissory Notes

February 25, 2020, the Company entered into an agreement with Leonite Capital LLC, a Delaware limited liability company ( “Leonite”

pursuant to which the Company issued to Leonite a secured convertible promissory note in the aggregate principal amount of $544,425 to

be paid in tranches.

As additional consideration for the purchase of the note, (i) the Company issued to Leonite 450,000 shares of common

stock, and (ii) the Company issued to Leonite a five-year warrant to purchase 900,000 shares of common stock at an exercise price of

$0.10 per share (subject to adjustment), which may be exercised on a cashless basis.

Refer to note 22 for warrant valuation.

note carries an original issue discount of $44,425 to cover Leonite’s legal fees, accounting fees, due diligence fees and/or other

transactional costs incurred in connection with the purchase of the note.

Therefore, the purchase price of the note was $500,000.

February 28, 2020, the Company recorded $198,715, $182,500 principal and $16,215 original issue discount.

On September 1, 2020 the Company

recorded an additional $310,322, $285,000 principal and $25,322 original issue discount.

As of December 31, 2020, the Company has recorded

$509,037, $467,500 principal and $41,537 original issue discount.

Furthermore, the Company issued 450,000 shares of common stock valued

at $123,390 and a debt discount related to the warrants valued at $344,110.

During the year ended December 31, 2020 Leonite converted

$226,839 of convertible promissory note into 2,520,434 shares of common stock at $0.09 per share.

The original value of the convertible

note converted was $182,565 as a result the Company recognized a loss of $44,274 on settlement of debt.

The Company amortized $273,405

of financing costs related to the shares and warrants for the year ended December 31, 2020.

The remaining net balance of the note at

December 31, 2020 is $98,982 comprised of principal of $293,077 and net of unamortized debt discount of $194,095.

to the year ended December 31, 2020 the Company issued 4,092,431 shares of common stock at $0.09 per share to Leonite to settle all outstanding

principal and interest.

note bears interest at the rate of the greater of 10.2% per annum.

Any amount of principal or interest on the note which is not paid

by the maturity date shall bear interest at the rate at the lesser of 24% per annum or the maximum legal amount permitted by law (the

“Default Interest”).

(formerly Franchise Holdings International, Inc.)

to the Consolidated Financial Statements

31, 2020 and 2019

on March 18, 2020 and on the same day of each and every calendar month thereafter throughout the term of the note, the Company shall

make monthly payments of interest only due under the note to Leonite at the Stated Rate as set forth above.

The Company shall pay to

Leonite on an accelerated basis any outstanding principal amount of the note, along with accrued, but unpaid interest, from:

proceeds of any future financings by the Company, but not its subsidiaries, whether debt or equity, or any other financing proceeds,

except any transaction having a specific use of proceeds requirement that such proceeds are to be used exclusively to purchase the assets

or equity of an unaffiliated business and the proceeds are used accordingly;

(ii) net proceeds from any sale of assets of the Company

or any of its subsidiaries other than sales of assets in the ordinary course of business or receipt by the Company or any of its subsidiaries

of any tax credits existing prior to the date of the note;

and (iii) net proceeds from the sale of any assets outside of the ordinary

course of business or securities in any subsidiary.

As of December 31, 2020, the Company has paid $11,100 in interest.

note will mature 18 months from the issue date, or August 25, 2021, at which time the principal amount and all accrued and unpaid interest,

if any, and other fees relating to the note, will be due and payable.

Unless an event of default as set forth in the note has occurred,

the Company has the right to prepay principal amount of, and any accrued and unpaid interest on, the note at any time prior to the maturity

date at 100% of the principal amount plus any accrued and unpaid interest plus the lesser of (i) nine months of unaccrued interest or

(ii) all unaccrued interest through the remainder of the term.

note contains customary events of default, including in the event of (i) nonpayment, (ii) a breach by the Company of its covenants under

the securities purchase agreement or any other agreement entered into in connection with the securities purchase agreement, or a breach

of any of representations or warranties under the note, or (iii) the bankruptcy of the Company.

The note also contains a cross-default

provision, whereby a default by the Company of any covenant or other term or condition contained in any of the other financial instrument

issued by the Company to Leonite or any other third party after the passage all applicable notice and cure or grace periods that results

in a material adverse effect shall, at Leonite’s option, be considered a default under the note, in which event Leonite shall be

entitled to apply all rights and remedies under the terms of the note.

the note, Leonite has the right at any time at its option to convert all or any part of the outstanding and unpaid principal amount and

accrued and unpaid interest of the note into fully paid and non-assessable shares of common stock of the Company.

The number of shares

of common stock to be issued upon each conversion of the note shall be determined by dividing the conversion amount by the applicable

conversion price then in effect.

The conversion amount is the sum of:

(i) the principal amount of the note to be converted plus (ii)

at Leonite’s option, accrued and unpaid interest, plus (iii) at Leonite’s option, Default Interest, if any, plus (iv) Leonite’s

expenses relating to a conversion, plus (v) at Leonite’s option, any amounts owed to Leonite.

The conversion price shall be $0.09

per share (subject to adjustment as further described in the note for common share distributions and splits, certain fundamental transactions,

and anti-dilution adjustments), provided that at any time after any event of default under the note, the conversion price shall immediately

be equal to the lesser of (i) the fixed conversion price ($0.09);

(ii) 60% of the lowest bid price during the 21 consecutive trading

day period immediately preceding the trading that the Company receives a Notice of Conversion or (iii) the discount to market based on

subsequent financing.

Notwithstanding

the foregoing, in no event shall Leonite be entitled to convert any portion of the note in excess of that portion of the note upon conversion

of which the sum of (1) the number of shares of common stock beneficially owned by Leonite and its affiliates (other than shares of common

stock which may be deemed beneficially owned through the ownership of the unconverted portion of the note or the unexercised or unconverted

portion of any other security of the Company subject to a limitation on conversion or exercise analogous to the limitations contained

in the note, and, if applicable, net of any shares that may be deemed to be owned by any person not affiliated with Leonite who has purchased

a portion of the note from Leonite) and (2) the number of shares of common stock issuable upon the conversion of the portion of the note

with respect to which the determination of this proviso is being made, would result in beneficial ownership by Leonite and its affiliates

of more than 4.99% of the outstanding shares of common stock of the Company.

Such limitations on conversion may be waived (up to a maximum

of 9.99%) by Leonite upon, at its election, not less than 61 days’

prior notice to the Company, and the provisions of the conversion

limitation shall continue to apply until such 61st day (or such later date, as determined by Leonite, as may be specified in such notice

(formerly Franchise Holdings International, Inc.)

to the Consolidated Financial Statements

31, 2020 and 2019

note shall give Leonite a senior secured obligation of the Company, with first priority over all current and future indebtedness

of the Company and any subsidiary.

of Beneficial Conversion Feature

of December 31, 2020, The Company allocated $509,037 as the proceeds from Leonite;

$467,500 principal and $41,537 original issue

The Company allocated $123,390 to shares of common stock and $242,100 to warrants calculated using the Black-Scholes

The effective rate resulted in a beneficial conversion feature greater than the proceeds.

Allocated proceeds of Convertible Promissory Note

Conversion Price

Number of shares of common stock that would be issued upon conversion of Convertible Promissory Note

Conversion price

FMV of common stock

Per Share Intrinsic Value of Beneficial Conversion Feature

Calculated Beneficial Conversion Feature

accordance with ASC 470-20-30 , if the intrinsic value of the beneficial conversion feature is greater than the proceeds

allocated to the convertible promissory note, the amount of the discount assigned to the beneficial conversion feature shall be

limited to the amount of the proceeds allocated to the convertible promissory note.

As such, the beneficial conversion feature

of the convertible promissory note is equal to $467,500 with an excess of $466,146.

Stockholders’

Equity (Deficit)

the year ended December 31, 2019, the Company completed a share consolidation of the Company’s issued and outstanding common

shares based on six (6) pre-consolidation shares to one (1) post-consolidation share.

The Consolidation reduced the number of

issued and outstanding common shares of the Company from 147,804,298 pre-Consolidation common shares to approximately 24,634,051

post-Consolidation common shares.

While the share consolidation occurred during the year ended December 31, 2019, the Company

has accounted for the effects retrospectively as such, the schedules and all references to shares, options and warrants throughout

the financial statements have been updated to reflect the number of post-consolidation securities.

2018 and 2019, the Company was authorized to issue 49,833,333 shares of its common stock with a par value of $0.0001.

were ranked equally with regards to the Company’s residual assets.

During 2018 and 2019, the Company was authorized to issue

1,000,000 shares of its Series A Preferred Stock with a par value of $0.0001.

These shares have voting rights equal to 299 shares

of common stock, per share of preferred.

the year ended December 31, 2019, the Company issued 1,901,455 common shares, previously recorded as subscription payable to a

consultant with a value of $290,730.

In addition the Company also issued to the same consultant 2,778,629 common shares at $0.02

per share for $55,573 for additional consulting serviced performed.

During the same period, the Company entered into a share subscription

agreement with a consultant of the Company for 1,500,000 common shares valued at $30,000.

As the shares have not yet been issued,

the $30,000 has been recorded as share subscriptions payable.

year ended December 31, 2019, the Company reached a legal settlement agreement (the “unwinding”) with an individual

the year ended December 31, 2020 the Company issued 2,413,022 shares of common stock at $0.07 per share for $168,910 for consulting

the year ended December 31, 2020 the Company entered into a share subscription agreement with a consultant of the Company for

4,000,000 shares of common stock valued at $125,000 for prepaid consulting services.

The Company also entered into two prepaid

advertising services agreement for 1,333,333 and 240,000 shares of common stock at $0.09 and 0.07 per share for $120,000 and $16,800

respectively.

As of December 31, 2020, the Company has expensed $215,164 from prepaid expenses.

As of December 31, 2020, the Company

issued 3,723,333 shares of common stock from share subscriptions payable for services render.

Subsequent to year ended December

31, 2020 the Company issued the remaining 1,850,000 shares of common stock valued at $67,188.

the year ended December 31, 2020 the Company entered into a share subscription agreement with a consultant of the Company for

1,246,154 shares of common stock valued at $162,000 for prepaid consulting services.

As of December 31, 2020, no shares have been

As of December 31, 2020, the Company has expensed $18,900 from prepaid expenses.

Subsequent to year ended December 31,

2020 the Company issued 1,246,154 shares of common stock.

the year ended December 31, 2020 the Company entered into an advertising service agreement to issue 225,000 shares of common stock

and warrants.

The warrants are convertible at a ratio of 1:1 and are exercisable until December 31, 2021 at $0.20 per warrant.

The shares valued at $21,747 have been included in share subscriptions payable.

The warrants valued at $16,503 have been included

in additional paid-in capital.

Subsequent to year ended December 31, 2020 the Company issued 225,000 shares of common stock.

the year ended December 31, 2020, the Company entered into a share subscription agreement with a consultant of the Company for

4,000,000 shares of common stock valued at $250,000.

During the year ended December 31, 2020, the Company issued 11,337,479 shares

of common stock from shares of subscription payable with a combined value of $1,123,147.

5,686,978 of the shares of common stock

issued from subscription payable valued at $648,147 relates to the anti-dilution feature triggered on March 5, 2019 as noted below.

(formerly Franchise Holdings International, Inc.)

to the Consolidated Financial Statements

31, 2020 and 2019

Stockholders’

Equity (Deficit) (continued)

the year ended December 31, 2020 the Company entered into a settlement to fulfill a debt purchase agreement entered in 2017 for

4,100,000 shares valued at $856,080.

As of December 31, 2020, the Company has issued 4,100,000 shares from share subscriptions

the year ended December 31, 2020 the Company initiated a Reg-A public offering at $0.10 per share and warrant.

As of December

31, 2020, the Company raised $1,017,617 incurring share issuance cost of $55,004.

As of December 31, 2020, the Company issued

9,961,301 shares of common stock valued at $996,301.

As of December 31, 2020, the Company has 327,000 shares of common stock valued

at $32,701 to be issued.

Refer to note 25 for subsequent issuance.

the year ended December 31, 2020 the issued 100,000 warrants for services valued at $12,600.

Refer to note 22.

the year ended December 31, 2020, the Company reached a legal settlement agreement with an investor.

In accordance with the settlement

agreement, 4,166,667 post-stock split (25,000,000 pre-stock split), reserved shares were released and returned to the Company

valued at $325,000.

the year ended December 31, 2020, the Company issued 2,520,434 shares of common stock pursuant to the conversion of the convertible

promissory note (Note 8) with a value of $226,839.

the year ended December 31, 2020 the Company issued 450,000 shares in connection with the issuance of convertible promissory note

(Note 8) at $0.27 per share.

the year ended December 31, 2020, Steven Rossi (the Company’s CEO) was issued 1,000 Series A Preferred Shares at $0.09 per

share equal to 299,000 shares of common stock voting rights for services rendered.

the year ended December 31, 2019, the Company issued 1,901,455 shares of common stock, previously recorded as subscription payable

to a consultant with a value of $290,730.

In addition, the Company also issued to the same consultant 2,778,629 shares of common

stock at $0.02 per share for $55,573 for additional consulting serviced performed.

During the same period, the Company entered

into a share subscription agreement with a consultant of the Company for 1,500,000 shares of common stock valued at $30,000.

the shares have not yet been issued, the $30,000 has been recorded as share subscriptions payable.

year ended December 31, 2019, the Company reached a legal settlement agreement (the “unwinding”

) with an individual

investor to dissolve the Debt Settlement and Mutual Release Agreement entered into on January 12, 2018.

In accordance to the settlement

agreement, 19,055,551 pre-stock split (990,742 post stock split), reserved shares with a value of $325,000 recorded in share subscription

payable were released and returned to the Company.

In accordance with the

settlement agreement, 19,055,551 pre-stock split (990,742 post-stock split), reserved shares with a value of $325,000 recorded

in share subscription payable were released and returned to the Company.

the year ended December 31, 2019, Steven Rossi was issued 13,583,397 shares of Franchise Holdings International, Inc common stock

as approved by the Board of Directors, due to a conversion of all 1,000,000 shares of his Series A Preferred stock.

the year ended December 31, 2018, the Company entered into an agreement with an investor relations company to provide various

services to the Company.

These services were valued at $150,000 and will be charged to expense as certain milestones are met.

The agreement is to be settled through the issuance of 1,250,000 common shares.

As of December 31, 2019, all shares have been

issued and $150,000 has been expensed.

Page 29 of 40

the year ended December 31, 2018, the Company entered into a share issuance/ claim extinguishment agreement with two parties,

pursuant to which the Company agreed to issue 8,333,333 shares of its common stock in exchange for the assumption of aggregate

accounts payable of the Company totaling $154,057.

The fair value of the shares to be issued was estimated to be $650,000 resulting

in a loss on the settlement of debt in the amount of $495,944 recognized during the year ended December 31, 2018.

During the year

ended December 31, 2018, 990,742 shares were issued under this agreement which reduced the stock subscription payable by $77,278.

The third parties failed to pay the Company’s vendors as agreed so the Company notified them that they are in breach of

the year ended December 31, 2018, the Company issued 3,125,001 common shares related to consulting agreements with two individuals

with a subscription payable value of $534,270.

the year ended December 31, 2018, the Company received proceeds of $300,000 on subscription agreements ($0.12 per share).

Company will issue 2,500,000 shares for this capital raise.

As of December 31, 2019, the shares have not been issued.

the year ended December 31, 2018, the Company entered into a share issuance agreement with a public relations company whereby

they would issue shares in satisfaction for service rendered.

Through December 31, 2018, the public relations company provided

services valued at $18,000.

During September 2018, the Company issued 130,435 shares valued at $0.138 per share to settle the

the year ended December 31, 2019, the Company completed a share consolidation of the Company’s issued and outstanding shares

of common stock based on six (6) pre-consolidation shares to one (1) post-consolidation share.

The consolidation reduced the number

of issued and outstanding shares of common stock of the Company from 147,804,298 pre-consolidation shares of common stock to approximately

24,634,051 post-consolidation shares of common stock.

While the share consolidation occurred during the year ended December 31,

2019, the Company has accounted for the effects retrospectively as such, the schedules and all references to shares, options and

warrants throughout the financial statements have been updated to reflect the number of post-consolidation securities.

March 5, 2019 immediately following the share consolidation the anti-dilution feature under the Investment and Co-operation agreement,

dated November 1, 2017 came into effect.

As part of the anti-dilution feature the Company is obligated to issue an additional

8,465,608 shares at $0.11 per share for a total of $965,079.

The Company recognized a non-cash deemed dividend of $965,079 to

retain earnings and share subscriptions payable (Note 23).

the year ended December 31, 2020 and 2019, the Company was authorized to issue 299,000,000 shares of its common stock with a par

value of $0.0001.

All shares were ranked equally with regards to the Company’s residual assets.

During 2020 and 2019, the

Company was authorized to issue 1,100,000 shares of its Series A and Series B Preferred Stock with a par value of $0.0001.

A Preferred Stock have voting rights equal to 299 shares of common stock, per share of preferred stock .

Series B Preferred

Stock have voting rights equal to 10,000 shares of common stock, per share of preferred stock.

(formerly Franchise Holdings International, Inc.)

to the Consolidated Financial Statements

31, 2020 and 2019

Related Party Transactions

the year ended December 31, 2019, the Company incurred $112,665 payable to a US based corporation controlled by the Company’s

CEO and director for the purchase of inventory.

the year ended December 31, 2019, the Company recorded salaries expense of $65,589 (2018 - $63,796) related to services rendered

the year ended December 31, 2020, the Company repaid $5,245 to the Company’s CEO and director.

As of December 31, 2020,

the Company has $23,393 in related party loan.

the year ended December 31, 2020, the Company recorded salaries expense of $64,903 (2019–$65,589) related to services rendered

to the Company by its CEO.

the year ended December 31, 2019, the Company incurred $112,665 payable to a U.S.-based corporation with whom the Company’s

CEO and director is also a stockholder.

The corporation is to help facilitate the purchase of inventory for the Company.

The income tax expense for the year ended December 31, 2020 and 2019 is reconciled per the schedule below:

loss before income taxes

Net loss before income taxes

$ (1,187,620 )

Non-deductible

portion of meals and entertainment

paid in shares

on impairment

Settlement of Debt

net loss for tax purposes

in valuation allowance

for income taxes

Non-deductible portion of meals and entertainment

Expenses paid in shares

Interest on lease liability

Lease payments

Gain on impairment

Gain Settlement of Debt

Adjusted net loss for tax purposes

Statutory rate

Increase in valuation allowance

Provision for income taxes

Deferred Income Tax Assets

tax effects of temporary differences that give rise to the deferred income tax assets at December 31, 2020 and 2019 are as follows:

operating loss carry forwards

tax assets not recognized

deferred tax asset

Net operating loss carry forwards

Transaction costs

Deferred tax assets not recognized

Net deferred tax asset

Cumulative Net Operating Losses

2 unchanged sentences

These losses will expire as follows:

Page 30 of 40

United States

(formerly Franchise Holdings International, Inc.)

to the Consolidated Financial Statements

31, 2020 and 2019

Income Taxes (continued)

net operating loss carryforwards of approximately $5,897,000 may be offset against future taxable income for the years 2021 through

13 unchanged sentences

The Company had no accruals for interest and tax penalties at December 31, 2020 and 2019.

Company does not expect the amount of unrecognized tax benefits to materially change within the next twelve months.

Company does not expect the amount of unrecognized tax benefits to materially change within the next 12 months.

Company is required to file income tax returns in the U.S.

26 unchanged sentences

its business.

(formerly Franchise Holdings International, Inc.)

to the Consolidated Financial Statements

31, 2020 and 2019

Financial Instruments ( continued)

Concentration

3 unchanged sentences

A customer is considered to be significant if they account for greater than 10% of the Company’s annual

Page 31 of 40

loss of any of these key customers could have an adverse effect on the Company’s business.

At December 31, 2019, $1,912,401

was included in revenue from Company A, representing 89% of the Company’s total sales for the year ended.

With Customer

A representing 89% of the revenue, the loss of the customer would have an adverse effect on the Company’s revenue.

2018, Customer A represented 37.8% or $182,738 of total sales.

Fair Value of Financial Instruments

Company complies with the accounting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards

Codification (“ASC”) 820-10, Fair Value Measurements, as well as certain related FASB staff positions.

This guidance

defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction

between market participants at the measurement date.

When determining the fair value measurements for assets and liabilities required

to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact business

and considers assumptions that marketplace participants would use when pricing the asset or liability, such as inherent risk,

transfer restrictions, and risk of nonperformance.

guidance also establishes a fair value hierarchy for measurements of fair value as follows:

quoted market prices in active markets for identical assets or liabilities.

inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices in active markets

for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active,

or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets

or liabilities.

unobservable inputs that are supported by little or no market activity and that are significant to the fair value of

the assets or liabilities.

of December 31, 2019, and 2018, the Company had no assets and liabilities measured at fair value on a recurring basis.

At December 31, 2020 customer

A represented 0% of the Company’s revenue compare to 89% or $1,912,401 of Company revenue in 2019.

Customer B represented

51% of the Company’s revenue at $190,313.

Customer C represented 26% or $97,514 of the Company’s revenue compare to

2019 of 3% or $67,018.

Changes in Cash Flows from Operating Assets and Liabilities

changes to the Company’s operating assets and liabilities for the years ended December 31, 2020 and 2019 are as follows:

(increase) in accounts receivable

(increase) in inventory

(increase) in prepaid expenses and deposits

(increase) in related party receivables

(decrease) in lease liability

(decrease) in income taxes payable

(decrease) in accounts payable and accrued liabilities

the year ended December 31, 2015, the Company entered into a License Agreement whereby the Company was granted an exclusive license

under Patent Rights to make, use, offer for sale, import or sell a proprietary latching system developed and patented by the Company’s

shareholder (the “Licensor”).

The License Agreement allows the Company to manufacture or sub-license the patented

latching system and provide services utilizing the patented latching system within the United States and its territories and possessions

and any foreign countries where Patent Rights exist.

The License Agreement does not require the payment of license issue fees

or royalties, however, the Company will be required to maintain any fees or costs associated to keep the patent active.

Agreement will be in effect for the life of the last-to-expire patent or last-to-be-abandoned patent application licensed under

this Agreement, whichever is later.

The Company will have the right to terminate the Agreement in whole or as to any portion of

Patent Rights at any time by giving such notice to the Licensor.

Should the Company violate or fail to perform any term of this

Agreement, the Licensor may give written notice of such default (“Notice of Default”) to the Company.

Should the Company

fail to repair such default within sixty days, of the effective date of such notice, the Licensor will have the right to terminate

the License Agreement and the licenses therein by a second written notice (“Notice of Termination”) to the Company.

If a Notice of Termination is sent to the Company, the License Agreement will automatically terminate on the effective date of

Decrease (increase) in accounts receivable

Decrease (increase) in other receivable

Decrease (increase) in inventory

Decrease (increase) in prepaid expenses and deposits

Increase (decrease) in lease liability

Increase (decrease) in income taxes payable

Increase (decrease) in accounts payable and accrued liabilities

the year ended December 31, 2020 the Company entered into an agreement with a third party advisor to reserve for issuance 100,000

shares of common stock at $0.0001 per share for consulting services.

As of December 31, 2020, the third party has not exercised

Refer note 25 for subsequent event.

Gain (Loss) on Settlement of Debt

year ended December 31, 2019, the Company reached a legal settlement agreement (the “unwinding”) with an individual

the year ended December 31, 2020 a convertible promissory note was converted into 2,520,434 shares of common stock at $0.09 per

share for $226,839.

The original value of the convertible promissory note converted was $182,565 as a result of the conversion

the Company recognized a loss of $44,274 on settlement of debt.

the year ended December 31, 2020, the Company reached a legal settlement agreement with an investor.

In accordance with the settlement

agreement, 4,166,667 post-stock split (25,000,000 pre-stock split), reserved shares were released and returned to the Company.

This transaction resulted in a gain on debt settlement of $229,142.

year ended December 31, 2019, the Company reached a legal settlement agreement (the “unwinding”

) with an individual

investor to dissolve the Debt Settlement and Mutual Release Agreement entered into on January 12, 2018.

In accordance to the settlement

agreement, 19,055,551 pre-stock split, reserved shares were released and returned to the Company.

In addition, 5,944,449 pre-stock

split (990,742 post stock split) shares already issued were returned to the Company’s treasury, and cancelled, reducing

the companies issued and outstanding shares accordingly.

In accordance with the

settlement agreement, 19,055,551 pre-stock split, reserved shares were released and returned to the Company.

In addition, 5,944,449

pre-stock split (990,742 post-stock split) shares already issued were returned to the Company’s treasury, and cancelled,

reducing the Company’s issued and outstanding shares accordingly.

The Company closed the unwinding in August 2019.

Page 32 of 40

(formerly Franchise Holdings International, Inc.)

to the Consolidated Financial Statements

31, 2020 and 2019

Contingent Liability

the year ended December 31, 2020 the Company (defendant) is currently in an ongoing legal proceeding with a promissory notes payable

holder (plaintiff).

As of December 31, 2020, the outcome of the legal proceeding is uncertain.

the year ended December 31, 2020, the Company reached a legal settlement with a supplier in which the Company is obligated to

pay $6,037 per month beginning on March 1, 2020 for four months until the settlement amount of $24,148 has been fully paid on

June 1, 2020.

As of December 31, 2020, the Company has completed all payments.

the year ended December 31, 2019 the Company entered into an agreement with a debtor for the settlement of outstanding notes payable

of $56,723 ($75,000 CAD).

The Company will issue to the debtor 1,500,000 million common shares for the settlement of the outstanding

The Company will issue to the debtor 1,500,000 shares of common stock for the settlement of the outstanding

notes payable upon listing on the Canadian Securities Exchange.

The agreement was subsequently cancelled after year end.

of December 31, 2019 the Company (defendant) is currently in an ongoing legal proceedings with a supplier (plaintiff).

Note 20 for subsequent event and resolution.

Reverse Stock Split

March 8th, 2019, the Board of Directors 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 6 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 Canadian Stock

Exchange (“CSE”).

The Certificate of Change was submitted to the Nevada Secretary of State on March 20, 2019 and the

FINRA corporate action was filed on March 21, 2019.

FINRA declared the 1 for 6 reverse stock split effective on March 29, 2019.

These financial statements including, prior period comparative share amounts, have been retrospectively restated to reflect this

reverse split.

the year ended December 31, 2019, the Company entered into an agreement to purchase 10,000,000 shares for $50,000 which has been

issued to FNHI.

The Company’s investment accounts for a 10% equity stake in a US based mobile phone development company.

As of December 31, 2019 the Company had advanced a total of $15,658 and is advancing trenches of capital as required by the Company.

March 8, 2019, the Board of Directors 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 one-for-six 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 Canadian

Stock Exchange ( “CSE”

The Certificate of Change was submitted to the Nevada Secretary of State on March 20,

2019 and the FINRA corporate action was filed on March 21, 2019.

FINRA declared the one-for-six reverse stock split effective

on March 29, 2019.

These financial statements including, prior period comparative share amounts, have been retrospectively restated

to reflect this reverse split.

the year ended December 31, 2019, the Company entered into an agreement to purchase 10,000,000 shares for $50,000.

have been issued to the Company.

The Company’s investment accounts for a 10% equity stake in a privately owned U.S.-based

mobile phone development company.

As of December 31, 2020, the Company had advanced a total of $15,658 and is advancing trenches

of capital as required by the Company.

Lease Liabilities

6 unchanged sentences

Company’s right-of-use asset for the year ended December 31, 2020 is as follows:

lease liability

Right-of-use asset

Current lease liability

Long-term lease liability

components of lease expense are as follows:

of right-of-use

on lease liability

December 31, 2020

December 31, 2019

Amortization of right-of-use

Interest on lease liability

Total lease cost

(formerly Franchise Holdings International, Inc.)

to the Consolidated Financial Statements

31, 2020 and 2019

Lease Liabilities (continued)

of lease liability are as follows:

minimum lease payments as of December 31, 2020,

future minimum lease payments

Total future minimum lease payments

amount representing interest

value of future payments

Page 33 of 40

Present value of future payments

Current portion

Long term portion

the year ended December 31, 2020, the Company received a loan of $32,439, $10,000 and $108,000 from a unrelated third party with

an interest rate of 10% per annum with a maturity date of December 31, July 22 and August 31, 2021 respectively.

Subsequent to

the year ended December 31, 2020 the Company agreed to repay the outstanding principal and interest through the issuance of 1,850,000

shares of common stock at $0.09 per share.

the year ended December 31, 2020, the Company received $28,397 ($40,000 CDN) interest free from the Government of Canada as part

of the COVID-19 small business relief program.

Repaying the balance of the loan on or before December 31, 2022 will result in

loan forgiveness of 25%.

of December 31, 2020, the Company accrued interest of $6,018.

Loss per Share

the year ended December 31 2020, Loss per Share is $(0.02) (basic and diluted) compared to the year ended December 31, 2019 of

$0.01 (basic and diluted) using the weighted average number of shares of 54,690,611 (basic and diluted) and 36,824,519 (basic

and diluted) respectively.

are 299,000,000 shares authorized, 76,412,359 and 41,906,790 shares issued and outstanding, as at December 31, 2020 and 2019 respectively.

As of December 31, 2020, the Company has 6,831,489 shares to be issued.

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 at December 31, 2020 the Company has 12,436,301 warrants convertible to 12,436,301

shares of common stock and convertible promissory note convertible to 3,448,025 shares of common stock for a total underlying

shares of common stock of 15,884,326.

At December 31, 2019 there were no underlying shares of common stock.

the year ended December 31, 2020 the Company issued 900,000 warrants convertible to one common share each with an exercise period

The exercise price of the warrants is $0.10 per share (subject to adjustment) and may be exercised on a cashless basis,

refer to note 8.

Refer to notes 25 for subsequent exercise of 790,243 warrants.

The fair value of the warrants was calculated

using the Black-Scholes pricing model and using the following assumptions:

Discount rate

Expected volatility

Expected life (years)

Exercise price

(formerly Franchise Holdings International, Inc.)

to the Consolidated Financial Statements

31, 2020 and 2019

Warrants (continued)

the year ended December 31, 2020, the Company issued 1,250,000 and 100,000 warrants convertible to one common share each exercisable

until March 30, 2025 and April 29, 2022 respectively.

The warrants were issued in connection with a subscriptions payable and

advisory agreement.

The exercise price of the warrants are $0.12 and $2.00 per share.

Refer to note 25 for subsequent issuance

of an additional 150,000 warrant.

fair value of the 1,250,000 warrants was calculated using the Black-Scholes pricing model and using the following assumptions:

Discount rate

Expected volatility

Expected life (years)

Exercise price

fair value of the 100,000 warrants was calculated using the Black-Scholes pricing model and using the following assumptions:

Discount rate

Expected volatility

Expected life (years)

Exercise price

the year ended December 31, 2020 the Company issued 225,000 warrants in connection to a advertising agreement and 9,961,301 warrants

related to the Reg-A public offering.

The warrants are convertible at a rate of 1:1 common share, exercisable until December 1

and 22, 2021 respectively.

The exercise price of the warrants are $0.20 per share.

fair value of the 225,000 warrants was calculated using the Black-Scholes pricing model and using the following assumptions:

Discount rate

Expected volatility

Expected life (years)

Exercise price

fair value of the 9,961,301 warrants was calculated using the Black-Scholes pricing model and using the following assumptions:

Discount rate

Expected volatility

Expected life (years)

Exercise price

Number outstanding

Remaining Contractual

December 1, 2021

December 22, 2021

April 29, 2022

February 25, 2025

March 20, 2025

(formerly Franchise Holdings International, Inc.)

to the Consolidated Financial Statements

31, 2020 and 2019

Warrants (continued)

December 31, 2020

December 31, 2019

Number of warrants

Weighted average price

Number of warrants

Weighted average price

Balance, beginning of year

Balance, end of period

Revision of Prior Period Financial Statements

the audit for the year ended December 31, 2020 an error was discovered relating to share issuances resulting from an anti-dilution

The share issuances for the three months ended March 31, 2020 were 2,000,000 and 458,834 shares of common stock respectively.

The anti-dilution agreement relating to a 2017 share subscription payable agreement was triggered in March 2019 upon the Company’s

Please refer to note 9.

revised certain prior period financial statements for an immaterial error related to the recognition of the deemed dividend related

features along with the associated shares issuance and professional fees (Note 1).

A summary of revisions to our previously reported

financial statements presented herein for comparative purposes.

cumulative effect of the adjustments on all prior periods to Stockholders’

Equity as of June 30, 2019, September 30, 2019,

December 30, 2019 and March 31, 2020 reflected below:

Additional Paid-in

Share Subscriptions

Share Subscription

Cumulative translation

Stockholders’

Balance at June 30, 2019

$ (10,482,521 )

Balance at June 30, 2019, as revised

$ (11,447,600 )

Balance at September, 2019

$ (10,212,150 )

Balance at September 30, 2019, as revised

$ (11,177,230 )

Balance at December 31, 2019

$ (10,768,906 )

Balance at December 31, 2019, as revised

$ (11,678,413 )

Balance at March 31, 2020

$ (10,961,172 )

Balance at March 31, 2020, as revised

$ (11,830,679 )

Consolidated Statements of Operations and Comprehensive Loss has been revised to reflect the correction for the year ended December

31, 2019 and three months ended March 31, 2020 as follows:

For the Year Ended December 31, 2019

As previously reported

Professional Fees

Total Operating Expenses

Loss from Operations

Comprehensive Loss

Loss per Share–Basic and Diluted

For the Three Months Ended March 31, 2020

As previously reported

Professional Fees

Total Operating Expenses

Loss from Operations

Comprehensive Loss

Loss per Share–Basic and Diluted

(formerly Franchise Holdings International, Inc.)

to the Consolidated Financial Statements

31, 2020 and 2019

recent outbreak of the novel coronavirus, specifically identified as “COVID-19,”

has resulted in governments worldwide

enacting emergency measures to combat the spread of the virus.

These measures, which include the implementation of travel bans,

self-imposed quarantine periods and social distancing, have caused material disruption to businesses globally resulting in an

economic slowdown.

Global equity markets have experienced significant volatility and weakness.

Governments and central banks have

reacted with significant monetary and fiscal interventions designed to stabilize economic conditions.

The duration and impact

of the COVID-19 outbreak is unknown at this time, as is the efficacy of the government and central bank interventions.

Additionally,

while the potential economic impact brought by, and the duration of the COVID-19 pandemic is difficult to assess or predict, the

impact of the COVID-19 pandemic on the global financial markets may reduce our ability to access capital, which could negatively

impact our short-term and long-term liquidity.

The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to

We do not yet know the full extent of potential delays or impacts on our business, financing or mining production activities

or the ore and mining industry or the global economy as a whole.

However, these effects could have a material impact on our liquidity,

capital resources, operations and business and those of the third parties on which we rely.

The management and Board of the Company

is constantly monitoring this situation to minimize potential losses.

Subsequent Events

Company has evaluated subsequent events through May 14, 2020 which is the date the financial statements were available

Company has evaluated subsequent events through April 13, 2021 which is the date the financial statements were available

to be issued and the following events after year end occurred:

January 2, 2020, a consulting agreement was signed with Craft Capital Management LLC to introduce placement opportunities

to the Company in exchange for 4%-8% of the Placement received by the Company.

The agreement is effective from the date of

signing for 18 months.

January 4, 2020, a consulting agreement was signed with an individual to assist the Company in developing and procuring all

company media assets including videos, photos, photo shoots, video shoots, logos, print and digital media.

The term of the

consulting agreement will be for a minimum period of 18 months with a consideration of 4,000,000 common shares at $0.03 per

share for a total value of $125,000.

January 23, 2020, a subscription agreement for 5,000,000 shares for $186,874 was cancelled.

The Company and investor are currently

in negotiation on the return the funds.

January 28, 2020, a consulting agreement was signed with YK GROUP INC in assisting the Company with going public on the Canadian

Securities Exchange.

February 3, 2020, the Company terminated a consulting agreement signed on July 23, 2016.

February 6, 2020, the Company reached a legal settlement with a supplier in which the Company is obligated to pay $6,037 per

month beginning on March 1, 2020 for four months until the full amount of $24,148 has been repaid in full on June 1, 2020.

February 28, 2020, the Company issued 2,680,982 for shares to settle the remaining debt purchase agreement entered in 2017

March 2020, the Company entered into a secured promissory note of $544,425.

$44,425 are to be used to pay legal and accounting

As part of the secured promissory note the agreement the loan holder is also granted warrants allowing the loan holder

to purchase 900,000 shares at an exercise price of $0.10.

The agreement also requires the Company to issue 450,000 shares

to the loan holder.

March 26, 2020 the Company issued 2,000,000 shares to a consultant for $40,000 of consulting expense performed.

April 20, 2020, the Company changed its name from Franchise Holding International Inc.

to Worksport Ltd pending approval of

the change from “FNHI”

to WKSP”.

April 20, 2020, the Company issued 1,000 preferred stock to the Company’s President, Secretary and Director.

to the impact of COVID-19 around the world the Company expects its sales to decrease significantly for the first and second

quarter of 2020 as governments around the world enter a lockdown to prevent the spread of COVID-19.

January and February 2021 in connection with the Company’s Reg-A public offering the Company issued an additional 30,033,199

shares of common stock at $0.10 per share and warrants exercisable for a period of 12 months at $0.20 per warrant for one

common share.

January 8, 2021 the Company issued 3,000,000 shares of common stock for consulting services valued at $0.10 per share.

January 14, 2021 the Company entered into an amended advisory agreement for the following:

available for the purchase of an additional 150,000 shares of common stock for a total of 250,000 shares of common stock at

of an additional 100,000 warrants for a total of 250,000 warrants exercisable for a period of five years at $0.20 per share.

January 15, 2021 the Company entered into a consulting service agreement for a duration of 18 months for 2,000,000 shares

of common stock at $0.13 per share.

the month of February 2021, 12,284,800 warrants were exercised at $0.20 per warrant for 12,284,800 shares of common stock

at a value of $2,455,960.

February 15, 2021 the Company signed an advertising and promotion agreement for a duration of three months at $10,000 per

month for advertising and promotion services.

February 15, 2021 the Company entered into a service agreement with a consultant to develop and provide Sales CRM system to

the Company for 5,000,000 shares of common stock at $0.23 per share.

March 3, 2021 the Company signed a consulting agreement with a third party to assist the Company in developing manufacturing

processes of new products for 200,000 shares of common stock valued at $20,000.

March 12, 2021 the Company entered into a strategic advisory and digital marketing service agreement for a duration of 12

months for 200,000 shares of common stock.

March 19, 2021 the Company issued to Leonite 790,243 shares of common stock through the exercise of 790,243 of its 900,000

warrants on a cashless exercise.

to year ended, the Company entered into private placement agreements issuing 11,368,800 shares of common stock and warrants

at $0.10 per share with an exercise price of $0.20 per warrant for one shares of common stock over a period of 18 months.

As of the date of this financial statement 9,060,000 shares of common stock have been issued.

to Notes 7, 8, 9 and 20 for additional subsequent events.

Changes In and Disagreements With Accountants On Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data