Quarterly Report for Quarter Ending September 30, 2025 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations

This section and other parts of this Quarterly Report on Form 10-Q ("Form 10-Q") contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as "future," "anticipates," "believes," "estimates," "expects," "intends," "plans," "predicts," "will," "would," "could," "can," "may," and similar terms. Forward-looking statements are not guarantees of future performance and actual results may differ significantly from the results discussed in the forward-looking statements. All forward-looking statements in this Form 10-Q are made based on current expectations, forecasts, estimates and assumptions, and involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. In evaluating these statements, various factors, uncertainties, and risks should be specifically considered that could affect future results or operations. These factors, uncertainties and risks may cause actual results to differ materially from any forward-looking statement set forth in this Form 10-Q. These risks and uncertainties described and other information contained in the reports filed with or furnished to the SEC should be carefully considered before making any investment decision with respect to the Company's securities. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.

Unless otherwise stated, all information presented herein is based on the Company's fiscal calendar, and references to particular years, quarters, months or periods refer to the Company's fiscal years ended December 31st and the associated quarters, months and periods of those fiscal years. Each of the terms "Company" and "Worksport" as used herein refers collectively to Worksport Ltd. and its subsidiaries, unless otherwise stated.

On March 18, 2025, the Company effected a 1-for-10 reverse stock split of its common stock. All share and per share information has been retroactively adjusted for all period presented.

The following discussion should be read in conjunction with the Company's Annual Report Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on March 27, 2025 and the unaudited condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q.

OVERVIEW

Worksport Ltd., through its subsidiaries, designs, develops, manufactures, and owns the intellectual property on a variety of tonneau covers, solar integrations, portable power systems, and clean heating & cooling solutions. Additionally, Worksport's hard-folding cover, designed and manufactured in the U.S., is compatible with all major truck models and is gaining traction with newer truck makers including the EV sector. Worksport seeks to capitalize on the growing shift of consumer mindsets towards clean energy integrations and power grid independence with its proprietary solar solutions, mobile energy storage systems (ESS), and Cold-Climate Heat Pump (CCHP) technology.

Key Performance Outcomes

The following highlights a summary of our achievements during the period:

	●	Sales growth: We recognized the highest net sales in our Company's history. For the three months ended September 30, 2025, net sales increased by 61% to $5.0 million when compared with $3.1 million during the same period in 2024. For the nine months ended September 30, 2025, net sales increased by 104% to $11.4 million when compared with $5.6 million during the same period in 2024.
	●	Margin expansion: We continued our focus to increase efficiency in our production process. For the three months ended September 30, 2025, gross margin expanded to 31.3%, an increase from 7.9% during the same period in 2024. For the nine months ended September 30, 2025, gross margin expanded to 26.8%, an increase from 10.5% during the same period in 2024.
	●	Distribution growth: We expanded our distribution network and now partner with six (6) national distributors, including two (2) new relationships during the three months ended September 30, 2025.
	●	Production milestones: Our U.S. production facilities achieved its highest monthly production volume in our Company's history.
	●	Research milestones: Our Terravis Energy subsidiary continues its prototype development efforts, including facility setup.

Rising Popularity of Electric Vehicles

Electric Vehicles (EVs) have been increasing in consumer interest, whether that interest takes the form of vehicle pre-orders, sales, or investments. As we begin marketing our Worksport SOLIS and COR, we plan to market the SOLIS as a must-have accessory for electric light duty vehicle owners while simultaneously riding the coattails of EV popularity to promote our other products (COR and conventional tonneau covers) to the very large population of Americans that have an interest in EVs without the funds to purchase them. Further, participating in the EV space allows us to target consumers with an interest in cutting-edge technologies - a great market in which to promote our COR portable power system. Notably, the COR & SOLIS are compatible with existing internal combustion engine vehicles and will not rely on the rapid adoption of EVs.

Regulatory Environment Favoring Electric Vehicles

The Build Back Better Bill was a strong indication of upcoming and favorable U.S. regulations. Many regulations that improve North America's EV charging infrastructure or provide grants to businesses operating in the EV space would benefit us. While we are primarily focused on the light duty vehicle market, our energy products are particularly useful for electric light duty pickup trucks and, therefore, are positioned to benefit greatly from any bill that increases the prevalence of such vehicles. However, President Donald Trump has signed an executive order titled Unleashing American Energy in which he has indicated his administration will be reversing the electric vehicle mandates of Joe Biden's former administration, and he has further paused billions of dollars in funding allocated towards electric vehicle charging stations. The future of the U.S.'s regulatory environment surrounding electric vehicles is uncertain.

Limited Competitive Landscape

Our conventional tonneau covers are engineered for enhanced user experience and resistance to wear-and-tear, making them strong and competitive products in an otherwise consolidated and saturated market. The Worksport COR, however, operates in a much wider yet unsaturated market. The global Portable Power Station market is quickly growing, and the competitive landscape is far from consolidated. The solar tonneau cover market is in its infancy, and it's a market in which we have first-mover advantage. To ensure we do not fall behind future competitors, we are highly focused on protecting our intellectual property both domestically and abroad.

Economic Conditions and Market Trends

As a result of a number of factors, our historical results of operations may not be comparable to our results of operations in future periods, and our results of operations may not be directly comparable from period to period. Set forth below is a brief discussion of the key factors impacting our results of operations.

Climate Change

Climate change threatens to cause many foreseeable as well as unforeseeable ramifications. In cautious preparation for those that are foreseeable, we have strategically begun domestic manufacturing operations in Western New York - an economically growing region not immediately threatened by climate change to the same extent as other regions and possibly one that may benefit from future population migrations within the U.S. Further, we intend to lower our own carbon footprint by investing in energy-saving measures in our factory in West Seneca, NY. Considering climate change may also exacerbate geopolitical tensions, we are working to diversify our supply chain and lower our reliance on any particular region or country for raw materials in order to lower our exposure to climate change-induced economic or political instability.

We believe our Worksport SOLIS and Worksport COR products will be received positively by the public for their resilience to, and even increased utility as a result of, Climate Change. However, we acknowledge the potentially negative environmental impacts of poor battery recycling and increasing demand for precious metals. We are actively researching ways to lower such environmental impacts.

Inflation

Prices of certain commodity products, including raw materials, are historically volatile and are subject to fluctuations arising from changes in domestic and international supply and demand, labor costs, competition, market speculation, government regulations, trade restrictions and tariffs. Increasing prices of the component materials for parts of our goods may impact the availability, quality and price of our products as suppliers search for alternatives to existing materials and increase the prices they charge. Our suppliers may also fail to provide consistent quality of product as they may substitute lower cost materials to maintain pricing levels. Rapid and significant changes in commodity prices may negatively affect our profit margins, and it may be difficult to mitigate worsened margins through customer pricing actions and cost reduction initiatives.

Additionally, as central banks and the U.S. Federal Reserve increase interest rates to combat global inflation, the cost of debt financing increases. The U.S. Federal Reserve has begun to decrease interest rates in 2024, but they may persist at an elevated level for the foreseeable future. Our $6,000,000 line of credit and our $1,487,000 in equipment financing both have floating interest rates, meaning we are susceptible to variable debt interest costs as a result of changes in interest rates.

High interest rates have also resulted in a shift in institutional holdings away from micro-cap equities, which has negatively influenced our stock's trading volume. We continue to forge relationships with institutional investors and analysts in order to maintain a healthy trading volume.

Gasoline Prices and Supply Chain Issues

We faced significantly higher ocean freight, trucking, and container handling costs as well as last mile delivery costs in 2021 and 2022 than we did in previous years - all of which have increased our products' landed costs. Higher oil and gasoline prices further increased these costs, and while such prices have come down from their 2022 highs, we continue to closely monitor gasoline and shipping costs. While the Freight Rate Index has significantly increased from late 2023 through mid-2024 as a result of Houthi attacks against cargo ships in the Red Sea and the concurrent decline in activity across the Panama Canal, the shipping routes used by Worksport have not faced dramatic price hikes. Regardless, Worksport is closely monitoring international shipping costs.

Our transition towards domestic manufacturing and assembly is anticipated to largely offset these higher costs, as we believe we will be less exposed to higher international shipping costs. We are also identifying North American suppliers of our products' components and will prioritize transport by rail when possible to avoid high trucking costs.

Geopolitical Conditions

In February 2022, Russia initiated significant military action against Ukraine. In response, the U.S. and certain other countries imposed significant sanctions and export controls against Russia, Belarus and certain individuals and entities connected to Russian or Belarusian political, business, and financial organizations, and the U.S. and certain other countries could impose further sanctions, trade restrictions, and other retaliatory actions should the conflict continue or worsen. It is not possible to predict the broader consequences of these conflicts, including related geopolitical tensions, and the measures and retaliatory actions taken by the U.S. and other countries in respect thereof as well as whether any counter measures or retaliatory actions in response, including, for example, potential cyberattacks or the disruption of energy exports, are likely to cause regional instability and geopolitical shifts, which could materially adversely affect global trade, currency exchange rates, regional economies and the global economy. These situations remain uncertain, and while it is difficult to predict the impact of any of the foregoing, the conflicts and actions taken in response to these conflicts could increase our costs, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition, and results of operations.

While we do not have any direct operations or significant sales in the Middle East, geopolitical tensions and ongoing conflicts in the region, particularly between Israel and Hamas, may lead to global economic instability and fluctuating energy prices that could materially affect our business. It is not possible to predict the broader consequences of the Israel-Hamas war, including related geopolitical tensions, and the measures and actions taken by other countries in respect thereof, which could materially adversely affect global trade, currency exchange rates, regional economies and the global economy. While it is difficult to predict the impact of any of the foregoing, the Israel-Hamas war may increase our costs, disrupt our supply chain, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all, or otherwise adversely affect our business, financial condition and results of operations.

Foreign Currencies

We are subject to foreign exchange risk as we manufacture certain products and components in China, market extensively in both Canadian and U.S. markets, employ people residing in both the U.S. and Canada and, to date, have raised funds in Canadian Dollars. Meanwhile, we report results of operations in U.S. Dollars. Since our Canadian customers pay in Canadian Dollars, we are subject to gains and losses due to fluctuations in the USD relative to the Canadian Dollar. Our manufacturers in China are paid in USD to better avoid the relatively greater fluctuation of the Chinese Yuan. To the extent the U.S. dollar strengthens against any of these foreign currencies, the translation of these foreign currencies denominated transactions results in reduced revenue, operating expenses and net income for our operations.

Tariffs

Worksport's hard tonneau covers-led by the AL3 and AL4 models-are manufactured in the U.S. using predominantly American aluminum, providing strong resilience against tariffs. Soft covers, currently sourced from China, account for a minor portion of revenue, with domestic sourcing options actively under review. The upcoming SOLIS solar cover will be built in the U.S., with solar panels expected to be sourced from India, a country maintaining relatively stable trade relations with the U.S. For the COR portable power system, Worksport is working with its international battery supplier and U.S.-based partners to mitigate tariff exposure and evaluate onshore manufacturing opportunities. We continue to monitor international trade developments closely, including potential changes in tariff rates and the possibility of new exemptions or other regulatory actions, to analyze impacts to our operations. The extent and duration of tariffs remain uncertain and will depend on a variety of factors outside of our control. We remain committed to optimizing our operations, including managing our supply chain to minimize the impact of tariffs on our results of operations.

Business Developments

The following highlights recent material developments in our business in the three months ended September 30, 2025:

	●	On July 16, 2025, Worksport announced that the AetherLux Pro heat pump with high-performance Zerofrost technology - a product of its subsidiary, Terravis Energy - had received the attention of multi-billion dollar corporations and U.S. government entities, with site visits and due diligence underway.
	●	On July 16, 2025, Worksport announced it doubled its R&D footprint by beginning a new lease at a larger R&D facility in Ozark, Missouri for the development of upcoming product lines.
	●	On August 5, 2025, Worksport announced its strongest 4-week production run since beginning domestic production.
	●	On August 7, 2025, Worksport announced that it had doubled its Bitcoin holdings and invested in additional manufacturing machinery to double its production output.
	●	On September 30, 2025, Worksport announced a 42% increase in national dealer partnerships over the preceding quarter.

CRITICAL ACCOUNTING POLICIES

The SEC defines critical accounting policies as those that are, in management's view, most important to the portrayal of our financial condition and results of operations and those that require significant judgments and estimates. The accounting principles we utilized in preparing our unaudited condensed consolidated financial statements conform in all material respects to Generally Accepted Accounting Principles in the U.S., or U.S. GAAP.

On a regular basis, we evaluate the critical accounting policies used to prepare our consolidated financial statements, including revenue recognition, inventory valuation, reviews for impairment of long-lived assets, and income taxes.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 1, Description of Business and Significant Accounting Policies included in Item 1, Financial Statements of this report for further information regarding Financial Accounting Standards Board issued Accounting Standards Updates.

CONSOLIDATED RESULTS OF OPERATIONS

Three Months Ended September 30, 2025 compared to the Three Months Ended September 30, 2024

Net Sales

For the three months ended September 30, 2025, net sales were $5,013,872, as compared to $3,122,359 for the three months ended September 30, 2024. Year-over-year net sales increased by 61%. For the three months ended September 30, 2025, net sales generated in the U.S. was $4,985,887, as compared to $3,093,608 for the same period in 2024, an increase of 61%. For the three months ended September 30, 2025, net sales generated from other countries was $27,985, compared to $28,751 for the same period in 2024.

Net sales increased during the three months ended September 30, 2025 compared to the same period the prior year due to the successful launch of the AL4 product line alongside further branding and marketing efforts for all product lines, resulting in higher direct to consumer sales. Implementation of our distributor, wholesaler, and jobber sales strategy via the addition of multiple distributor partners with a network of over 550 locations across the U.S. has driven higher net sales from our business-to-business sales channels.

We distribute our hard tonneau covers and soft tonneau covers in the U.S. and Canada through an expanding network of wholesalers, private labels, distributors, and other online retailers, including eBay, Amazon, and our own e-commerce platform hosted on Shopify. Distribution via each aforementioned channel is expected to increase during 2026. We have pursued and will continue to pursue relationships with Original Equipment Manufacturers with the intention of distributing through them as well.

We currently work closely with six large U.S. distributors, one retail auto chain, and online retailers to grow our customer base. We added two of these U.S. distributors within the period, which will allow us to promote to dealers and sell to jobbers in strategic regions. Lastly, we partnered with a network of nationwide U.S. dealers capable of bringing our product to all U.S. continental states.

Cost of Sales

Cost of sales increased by 20%, from $2,875,186 for the three months ended September 30, 2024, to $3,445,088 for the three months ended September 30, 2025. Our cost of sales, as a percentage of sales, was 69% and 92% for the three months ended September 30, 2025 and 2024, respectively. The decrease in the cost of sales as a percentage of sales was primarily driven by improved production efficiencies resulting from the continued maturation of our manufacturing processes. As production volumes increased, we achieved greater economies of scale and more efficient overhead absorption, resulting in lower per-unit manufacturing costs. This improvement in operational throughput allowed fixed and semi-variable overhead costs to be allocated across a higher number of units, thereby reducing the cost of sales on a per-unit basis.

We provide our distributors and online retailers an "all-in" wholesale price. This includes any import duty charges, taxes, and shipping charges. Discounts are applied if the distributor or retailer chooses to use their own shipping process. Certain exceptions apply on rare occasions where product is shipped outside the contiguous U.S. or from the U.S. to Canada. Volume discounts are offered to certain high-volume customers, and we also offer a "dock price" or "pickup program" whereby clients are able to pick up product directly from our stocking warehouse.

Operating Expenses

Operating expenses increased for the three months ended September 30, 2025 by $2,209,166, from $4,152,389 for the three months ended September 30, 2024 to $6,361,555, mainly due to the following factors:

	●	Research and development expense decreased by $95,351, from $396,446 in 2024 to $301,095 in 2025. The decrease was related to developmental progress of our AL3 product line and release of our AL4 product line, both of which required less development efforts as resources were shifted to normal-course production.
	●	General and administrative expense increased by $471,291, from $2,478,809 in 2024 to $2,950,100 in 2025. The increase was primarily attributable to increased insurance and facility support costs to sustain production efforts, alongside an increase in e-Commerce fees due to increased sales volume.
	●	Sales and marketing expense increased by $1,700,957, from $661,238 in 2024 to $2,362,195 in 2025. The increase in sales and marketing was primarily attributable to marketing campaigns to support investor relations initiatives and drive traffic and engagement to our online marketplace for direct-to-consumer sales, including awareness campaigns for the newly released AL4 product line.
	●	Professional fees expense, which includes accounting, legal, and consulting fees, increased by $126,928 from $621,728 in 2024 to $748,656 in 2025. The increase in professional fees was primarily driven by stock awards granted to external consultants to support strategic objectives.

Other Income and Expenses

We reported net other expenses for the three months ended September 30, 2025 of $135,908, compared to $229,701 for three months ended September 30, 2024. The decrease in net other expenses was attributed to a reduction in interest expense as a result of reduced reliance on our line of credit.

Net Loss

Net loss for the three months ended September 30, 2025 was $4,928,679, compared to a net loss of $4,134,917 for the three months ended September 30, 2024 - an increase of 19%. The increase in the net loss can be attributed to higher marketing expenses to support investor relationship initiatives and campaigns to expand sales volumes, including the development of future campaigns for which we expect to show return on investment via increased net sales in future periods.

Nine Months Ended September 30, 2025 compared to the Nine Months Ended September 30, 2024

Net Sales

For the nine months ended September 30, 2025, net sales were $11,358,835, as compared to $5,556,535 for the nine months ended September 30, 2024. Year-over-year net sales increased by 104%. For the nine months ended September 30, 2025, net sales generated in U.S. was $11,284,538, as compared to $5,475,975 for the same period in 2024, an increase of 106%. For the nine months ended September 30, 2025, revenue generated in other countries was $74,297, compared to $80,560 for the same period in 2024, a decrease of 8%.

Net sales increased during the nine months ended September 30, 2025 compared to the same period the prior year due to further branding and marketing efforts resulting in higher direct-to-consumer sales as well as implementation of our distributor, wholesaler, and jobber sales strategy leading to increases in our business-to-business sales channels. Also driving greater net sales was the release of the flagship AL4 product line.

We distribute our hard tonneau covers and soft tonneau covers in the U.S. and Canada through an expanding network of wholesalers, private labels, distributors, and other online retailers, including eBay, Amazon, and our own e-Commerce platform hosted on Shopify. Distribution via each aforementioned channel is expected to increase during 2026. We have pursued and will continue to pursue relationships with Original Equipment Manufacturers with the intention of distributing through them as well.

We currently work closely with six large U.S. distributors, one retail auto chain, and online retailers to grow our customer base. We added two of these U.S. distributors within the period, which will allow us to promote to dealers and sell to jobbers in strategic regions. Lastly, we partnered with a network of nationwide U.S. dealers capable of bringing our product to all U.S. continental states.

Cost of Sales

Cost of sales increased by 67%, from $4,975,277 for the nine months ended September 30, 2024, to $8,311,718 for the nine months ended September 30, 2025. Our cost of sales, as a percentage of sales, was 73% and 90% for the nine months ended September 30, 2025 and 2024, respectively. The decrease in the cost of sales as a percentage of sales was primarily driven by improved production efficiencies resulting from the continued maturation of our manufacturing processes. As production volumes increased, we achieved greater economies of scale and more efficient overhead absorption, resulting in lower per-unit manufacturing costs. This improvement in operational throughput allowed fixed and semi-variable overhead costs to be allocated across a higher number of units, thereby reducing the cost of sales on a per-unit basis.

We provide our distributors and online retailers an "all-in" wholesale price. This includes any import duty charges, taxes, and shipping charges. Discounts are applied if the distributor or retailer chooses to use their own shipping process. Certain exceptions apply on rare occasions where product is shipped outside the contiguous U.S. or from the U.S. to Canada. Volume discounts are offered to certain high-volume customers, and we also offer a "dock price" or "pickup program" whereby clients are able to pick up product directly from our stocking warehouse.

Operating Expenses

Operating expenses increased for the nine months ended September 30, 2025 by $3,693,990, from $12,036,688 for the nine months ended September 30, 2024 to $15,730,678, mainly due to the following factors:

	●	Research and development expense decreased by $836,382, from $1,811,911 in 2024 to $975,529 in 2025. The decrease was related to developmental progress of our AL3 product line and release of our AL4 product line, both of which required less development efforts as resources were shifted to normal-course production.
	●	General and administrative expense increased by $1,725,741, from $6,684,048 in 2024 to $8,409,789 in 2025. The increase was primarily attributable to increased insurance and facility support costs to sustain production efforts, increased e-Commerce fees due to higher current period sales volume, and increased depreciable equipment used to support administrative and production efforts .
	●	Sales and marketing expense increased by $3,330,492, from $1,206,807 in 2024 to $4,537,299 in 2025. The increase in sales and marketing was primarily attributable to marketing campaigns to support investor relations initiatives and drive traffic and engagement to our online marketplace for direct-to-consumer sales, including awareness campaigns for the newly released AL4 product line.
	●	Professional fees expense, which includes accounting, legal, and consulting fees, decreased by $519,879 from $2,332,069 in 2024 to $1,812,190 in 2025. The decrease in professional fees was primarily driven by reduced reliance on external consultants as the Company progressed from the planning and setup phase of its manufacturing operations to active production and scaling efforts, inclusive of marketing, as well as a net reduction in non-cash expenditures relating to stock-based compensation for consultants.

Other Income and Expenses

We reported net other expenses for the nine months ended September 30, 2025 of $440,066, compared to $407,543 for the nine months ended September 30, 2024. The increase in net other expenses was attributed to a reduction in rental income as a result of the completion of the term of our sublease agreement.

Net Loss

Net loss for the nine months ended September 30, 2025 was $13,123,627, compared to a net loss of $11,862,973 for the nine months ended September 30, 2024 - an increase of 11%. The increase in the net loss can be attributed to the increase in various operating expenses as we focus on expanding our operations alongside higher marketing expenses to support both ongoing sales volumes and develop future campaigns for which we expect to show return on investment via increased sales in future periods.

Liquidity and Capital Resources

As of September 30, 2025 and December 31, 2024, we had $3,761,690 and $4,883,099, respectively in cash and cash equivalents. As of September 30, 2025, we had $3,291,250 of remaining available capacity on our revolving line of credit compared with $811,400 of remaining available capacity as of December 31, 2024. The decrease in cash and cash equivalents and increase in the remaining available capacity on our revolving line of credit was primarily a result of the use of cash flows from operations to reduce our indebtedness. We have historically generated only limited gross profit and have relied primarily upon capital generated from public and private offerings of our securities to fund continuing operations. Since the Company's acquisition of Worksport in 2014, it has never generated a profit. During the three and nine months ended September 30, 2025, we had net losses of $4,928,679 and $13,123,627, respectively (three months ended September 30, 2024 - $4,134,917; nine months ended September 30, 2024 - $11,862,973). As of September 30, 2025, the Company had working capital of $6,311,857 (As of December 31, 2024 - $7,304,110) and had an accumulated deficit of $77,617,726 (as of December 31, 2024 - $64,476,966).

In their fiscal 2024 audit report, our independent auditors expressed that there is substantial doubt as to our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate cash flows from operations and obtain equity and/or debt financing. We intend to continue funding operations through equity and debt financing arrangements, which may be insufficient to fund our capital expenditures, working capital and other cash requirements in the long term. There can be no assurance that the steps our management is taking will be successful.

To date, our principal sources of liquidity consist of net proceeds from public and private securities offerings and cash exercises of outstanding warrants. During the nine months ended September 30, 2025, the Company received net proceeds of $13,358,414 from offerings. Through November 13, 2025, the Company received additional net proceeds of $2,623,212 from offerings. Management is focused on transitioning towards gross profit as our principal source of liquidity by growing our existing product offerings and customer base and realizing manufacturing efficiency improvements. We cannot give assurance that we can increase our cash balances or limit our cash consumption and thus maintain sufficient cash balances for our planned operations or future business developments. Future business development and demands may lead to cash utilization at levels greater than recently experienced. We may need to raise additional capital in the future. However, we cannot ensure that we will be able to raise additional capital on acceptable terms, or at all. Subject to the foregoing, we believe our current cash balances coupled with anticipated cash flow from operating activities will be sufficient to meet our working capital requirements for at least one year from the date of issuance of the accompanying consolidated financial statements.

We have raised significant funds during the nine months ended September 30, 2025 per the following public and private offerings:

Warrant Inducement

On February 27, 2025, we entered into a common stock warrant exercise inducement offer letter (the "Inducement Letter") with a certain holder (the "Holder") of existing warrants to purchase shares of our common stock at an exercise price of $5.198 per share, issued on May 29, 2024 (the "Existing Warrants"), pursuant to which the Holder agreed to exercise for cash its Existing Warrants to purchase an aggregate of 1,295,000 shares of the Company's common stock at $5.198 per share, in consideration for the Company's agreement to issue new warrants (the "Inducement Warrants") having terms as described below, to purchase up to 1,424,500 shares of the Company's common stock (the "Inducement Warrant Shares"). We received aggregate gross proceeds of $6,731,410 from the exercise of the Existing Warrants by the Holder and the sale of the Inducement Warrants, before deducting placement agent fees and other offering expenses of $346,570. We engaged Maxim Group LLC ("Maxim") to act as our exclusive financial advisor in connection with the transactions summarized above and will pay Maxim a cash fee from the gross proceeds received from the exercise of the Existing Warrants. Each Inducement Warrant has an exercise price equal to $6.502 per share. The Inducement Warrants are exercisable at any time on or after the date that is six (6) months from the issuance date and will have a term of exercise of five and one half (5½) years following the date of issuance. The exercise price and number of shares of common stock issuable upon exercise is subject to appropriate adjustment in the event of stock dividends, stock splits, subsequent rights offerings, pro rate distributions, reorganizations, a Fundamental Transaction (as defined in the Inducement Warrants) or similar events affecting our common stock and the exercise price.

ATM Shares

Pursuant to the ATM Agreement, with H.C. Wainwright & Co., LLC, as the sales agent, during the nine month period ended September 30, 2025, we sold and issued a total of 110,619 shares of common stock in consideration for net proceeds of $504,372 under the ATM Agreement.

Regulation A Offering

On June 13, 2025, Worksport completed the initial closing of its Regulation A offering whereby up to 3,100,000 units may be sold at an offering price of $3.25 per unit. Each unit consists of one share of 8% Series C Convertible Preferred Stock, par value $0.001 per share (the "Series C Preferred Stock") and one warrant for the right to purchase one (1) share of common stock, $0.001 par value with an exercise price of $4.50 per share. The qualified Regulation A offering is expected to generate gross proceeds of $10,000,000, and the warrants have the potential to provide an additional $13,950,000 of additional proceeds if all are converted. Through September 30, 2025, the Company completed twenty-four tranches and received net proceeds of $6,927,922, including $458,720 of share subscriptions receivable. On October 1, 2025, the Company received the share subscriptions receivable of $458,720. Subsequent to September 30, the Company completed eight additional tranches and received net proceeds of $2,164,492.

Consolidated Statement of Cash Flows

Cash decreased from $4,883,099 at December 31, 2024, to $3,761,690 at September 30, 2025 - a decrease of $1,121,409 or 23%. The decrease was primarily due to repayments on debt obligations.

Operating Activities

Net cash used in operating activities for the nine months ended September 30, 2025 was $11,190,182, compared to $7,959,212 in 2024, primarily driven by the shift to production and distribution of hard tonneau covers.

Accounts receivable increased at September 30, 2025 by $472,485 and increased at September 30, 2024 by $3,320. The increase in accounts receivable was due to further development of our business-to-business sales channel, specifically our Distributor and Jobber customer network and relationships.

Inventory increased at September 30, 2025 by $1,645,437, and increased at September 30, 2024 by $2,506,568, as a result of the maturation of the production process and shift in 2024 to hard tonneau cover production.

Prepaid expenses and deposits increased by $865,634 at September 30, 2025, and decreased by $1,240,649 at September 30, 2024, primarily attributable to payments for future strategic marketing, including planned public relations campaigns, and deposits for raw materials required to support planned production requirements.

Accounts payable and accrued liabilities increased at September 30, 2025 by $1,477,537 compared to an increase of $1,031,400 at September 30, 2024. The increase is primarily due to an increase in raw materials order volume.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2025 was $1,067,257 compared to net cash used in investing activities of $500,760 for the nine months ended September 30, 2024. The increase in investing activities was primarily attributable to a deposit for a new piece of manufacturing equipment. The new manufacturing equipment will increase our production capacity and support our sales forecast. We expect the production equipment to be delivered and installed in the first half of 2026. Terms of the commitment include consideration of $3 million payable 10% upon order placement, 20% due at time of shipment, 60% upon completion of installation, net 180 days, and 10% upon completion of installation, net 365 days. We also purchased cryptocurrency and completed website enhancements, both of which are classified as intangible assets on the unaudited condensed consolidated balance sheet.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2025 was $11,136,030 compared to net cash provided by financing activities of $6,951,879 for the nine months ended September 30, 2024. The increase in financing activities was primarily attributable to net proceeds from offerings offset by net payments on our line of credit.

Off-Balance Sheet Arrangements

We did not have any material off-balance sheet arrangements that have or are reasonably likely to have a material future effect on our financial condition, results of operations or cash flows.