Benzinga | Aug 24, 2021 08:45AM EDT

What Worksport's $28 Million Cash on Hand Means for the Company and Shareholders

Photo by Sharon McCutcheon on Unsplash

Cash on hand is one of the most important financial statements for businesses.

In 2020, the top companies included giants like Apple (NASDAQ:AAPL), Google-parent Alphabet (NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT) -- sitting on cash and investments of more than $1 trillion. The massive cash pile accounts for nearly 40% of the $2.7 trillion held by the companies in the S&P 500.

Even non-technology stocks in the S&P 500 like Costco (NASDAQ:COST), JP Morgan Chase (NYSE:JPM), and Ford (NYSE:F) also hold a massive cash reserve.

But what does it mean to have significant cash on hand? How important is it for a company and shareholders?Implications of Cash on Hand

A company with a significant amount of cash on hand implies a strong liquidity position, which means its assets can be converted into cash immediately -- physical cash, money in the bank, securities, money market funds and short-term bonds.

With strong liquidity, a company can meet working capital requirements, pay wages, taxes, liabilities and interest, make investments or acquisitions, give higher returns to shareholders, and even leverage the position to raise more capital.

For investors, it lowers the risk profile. A seasoned investor's primary question when evaluating a company of interest is, "How much can I lose if I'm wrong?" If a company's share in cash is a significant percentage of its share price, then the investor's downside risk is reduced by the cash level.What this Means for Worksport

Worksport (NASDAQ:WKSP) recently received approval to list its common stock and warrants on the Nasdaq's Capital Markets Exchange with trading that began on August 4.

The company's balance sheet revealed more than $28 million in cash and cash equivalents -- and no long-term debt. Worksport's cash reserve accounts for roughly 40% of its $73 million market capitalization. This means that for its $5 stock price, nearly $2 is in cash, which is a big deal from a risk assessment point of view.

In comparison, Apple's cash reserve is $196 billion which is 12.5% of its $2,475 billion market capitalization. This translates to $18.75 cash for its $150 stock price. Apple uses its cash on hand to aggressively grow its investments in its digital ecosystem, which includes new products, services and acquisitions of new businesses and smaller companies to expand their ecosystem.

Worksport is following a similar aggressive growth by using its significant cash reserve for its current expansion plans and meeting its other development goals. Some of these include:1. New headquarters and manufacturing facility

The company recently moved into a new 55,000 square feet headquarters in Mississauga, Ontario, and has set up production with new and advanced automation. Worksport believes that the move will help the team solidify its manufacturing process for pre-production of its TerraVis solar-powered tonneau cover and COR battery systems.

The facility will host existing operating infrastructure and bring valuable industry and networking resources -- its landlord, a top executive at Matcor-Matsu, is an established Tier 1 original equipment manufacturer (OEM) with over 1.5 million square feet across the U.S., Canada and Mexico.2. New technological endeavor: NPEV

Worksport is working on a new product termed "NPEV", for which "NP" stands for non-parasitic. The product will be in service to the growing EV markets and will help forge additional company ecosystems.

The company believes NPEV could play a significant role in decarbonizing transportation with true green energy.3. Hydrogen-based charging solutions

Worksport recently registered trademark applications under the categories of charging stations for an electric vehicle, fuel cells, uninterruptible power supplies and hydrogen gas fueling for vehicles.

While there has been no official announcement, the company appears to be on track to manufacture EV charging solutions using hydrogen fuel cells, operating under its rumored TerraVis Energy subsidiary. It's also rumored that NPEV is the project that falls directly under this new umbrella.The Grass is Getting Greener

Worksport is leveraging its current cash position to think differently and bring practicality to energy-focused products, introducing technology that does not yet exist in the markets.

The company's leadership is in partnership with world-class advisors, engineers and research partners -- including the experienced minds at Ontario Tech University -- ushering the company into the EV, energy storage system and sustainable energy industries.

With all groundbreaking developments being disclosed within a short period of time and an impressive balance sheet, Worksport is poised to take on the market like it never has before.