What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-13 compared with 2024-05-16 · 320 added, 223 removed, 205 unchanged (73% of the section changed)

23 unchanged sentences

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

quarters, months or periods refer to the Company’s fiscal years ended December 31 st 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.

following discussion should be read in conjunction with the Company’s Annual Report Form 10-K for the fiscal year ended December 31, 2023 filed with the U.S.

Securities and Exchange Commission (the

“SEC”) and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form

following discussion should be read in conjunction with the Company’s Annual Report Form 10-K for the fiscal year ended December

31, 2023 filed with the U.S.

Securities and Exchange Commission (the “SEC”) and the condensed consolidated financial statements

and accompanying notes included in Part I, Item 1 of this Form 10-Q.

Ltd., through its subsidiaries, designs, develops, manufactures, and owns the Intellectual Property on a portfolio of tonneau cover,

24 unchanged sentences

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.

following highlights recent material developments in our business in the three months ended March 31, 2024:

March 28, 2024, we announced receipt of solar panels required to begin production of the

highly anticipated SOLIS Solar Tonneau Cover.

This milestone marks a significant step forward,

allowing the Company to begin initial production of the SOLIS Solar Tonneau Cover.

● On February

23, 2024, we announced a new arrangement with Dix Performance North, Canada’s leading

wholesaler of aftermarket car and truck products, for Dix to include our tonneau covers

in their catalog.

This strategic alliance is expected to make the Company’s range of

covers widely available throughout Canada, accelerate our growth, and contribute to significant

sales and revenue increases.

● On February 7, 2024, we announced a collaboration with Infineon

Technologies AG (FSE:

IFNNY) pursuant to which we will use Infineon’s

GaN power semiconductors GS-065-060-5-B-A in the converters for our portable power stations

to increase efficiency and power density.

January 3, 2024, we announced our strategic arrangement with NeuronicWorks Inc., a Toronto-based high-tech custom electronic product

development and manufacturing company, to manufacture and assemble our COR battery system in preparation for the system’s anticipated

Alpha release.

Even less 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.

following highlights recent material developments in our business in the three months ended June 30, 2024:

April 2024, 12,100 stock options issued during 2023 and 8,300 stock options issued during the six months ended June 30, 2024 were forfeited in connection with the termination

of employees with the Company.

restricted stock units (“RSUs”) were granted to a contractor on May 1, 2024 in consideration for services rendered in

the first quarter of 2024.

May 6, 2024, 1,477,892 pre-funded warrants issued during the three months ended March 31, 2024 were exercised for 1,477,892 shares

of common stock for a total of $15.

May 8, 2024, the Company announced its receipt of a major grant from New York State Excelsior Jobs Program worth up to $2.8 million.

The grant, following a strategic low-cost power award from New York Power Authority (NYPA) in April 2024, signifies additional state-level

investment in the Company’s expanding operations.

With growth exceeding NY State’s forecasts, the Company expects to

create up to or over 280 new jobs from 2025 to 2030 and if achieved will receive cash benefits for the creation of these jobs, amounting

to $2.8 million received over the next 10 years.

May 14, 2024, the Company and Worksport New York Operations Corporation (“Worksport New York”) entered into an Omnibus

Amendment of Loan Documents (the “Loan Amendment”) with Northeast Bank (the “Lender”) in connection with

that certain secured loan agreement, dated May 4, 2022 (the “Loan Agreement”), by and among the Company, as the guarantor,

Worksport New York, as the borrower (the “Borrower”), and the Lender in connection with the Company’s purchase

of its 152,847 square foot facility and 18 acres of land in West Seneca, New York on May 6, 2022 for a total purchase price of $8,150,000.

Pursuant to the Loan Amendment, effective as of May 10, 2024, the Lender extended the initial maturity date of the Loan from May

10, 2024 to August 10, 2024 (the “Extended Maturity Date”).

The Company also agreed to pay the Lender an extension fee

of $106,000 (the “Extension Fee”) which was deemed fully earned as of the date of the Loan Amendment.

However, the Lender

agreed to postpone payment of the Extension Fee until the occurrence of (i) the Loan not being repaid in full by or on the Extended

Maturity Date;

or (ii) the Loan being accelerated following an Event of Default or Termination Date (as defined in the Forbearance

Agreement dated as of February 4, 2024, by and between the Company, Worksport New York and the Lender).

If the Loan is repaid in

full on or prior to the Extended Maturity Date, the Lender has agreed to waive the Extension Fee.

In addition to the Extension Fee,

the Company agreed to pay the Lender an exit fee of $106,000 (the “Exit Fee”) in the event the Loan is not repaid in

full on or prior to the Extended Maturity Date or if the Loan has been accelerated following an Event of Default or in connection

with a Termination Event (as defined in the Forbearance Agreement).

If the Loan is repaid in full on or prior to the Extended Maturity

Date (and not as a result of an acceleration following a Termination Event), the Company will not be required to pay the Exit Fee.

May 29, 2024, the Company entered into a common stock warrant exercise inducement offer letter (the “Inducement Offer Letter”)

with a certain holder (the “Holder”) of existing warrants to purchase shares of the Company’s common stock at an

exercise price of $1.34 per share issued on November 2, 2023 (the “Existing Warrants”), pursuant to which the Holder

agreed to exercise for cash its Existing Warrants to purchase an aggregate of 7,000,000 shares of the Company’s common stock,

at a reduced exercised price of $0.5198 per share, in consideration for the Company’s agreement to issue new warrants (the

“Inducement Warrants”) to purchase up to 12,950,000 shares of the Company’s common stock at $0.5198 per share.

The Company received aggregate gross proceeds of $3,638,600 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 payable by the Company.

May 29, 2024, the Company announced it had been issued a new utility patent from the United States Patent & Trademark Office

related to its highly anticipated SOLIS Solar Tonneau Cover.

RSUs were granted to two contractors on May 30, 2024 in consideration for services rendered over the prior year.

June 5, 2024, the Company announced the formation of a new sales partnership with a prominent Midwest distributor operating within

the automotive industry.

June 13, 2024, the Company was awarded “Innovator of the Year” by Buffalo Business First – recognizing the Company’s

commitment to pioneering advancements in the automotive sector.

June 26, 2024, the Company announced it had strategically decided to design its Maximum Power Point Tracking algorithm such that

its SOLIS Solar Power System will be able to charge not only the Company’s COR Portable Battery Generator system but also most

other portable power stations and power banks on the market.

Factors Affecting our Performance

3 unchanged sentences

factors impacting our results of operations.

outbreak of the coronavirus, specifically identified as “COVID-19,” resulted in governments worldwide enacting emergency

measures to combat the spread of the virus.

These measures, which included 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 experienced significant volatility and weakness.

Governments and central banks have reacted with significant monetary and fiscal

interventions designed to stabilize economic conditions – many of which have deeply impacted capital markets.

a safety precaution, we created a policy such that any personnel exposed to an infectious disease or virus was not to report to the office

until the completion of a variable length quarantine.

While this resulted in fewer personnel working in our offices or labs on a given

day, it likely prevented further contamination and sick leave.

We do not believe this policy has impacted revenue nor timelines towards

upcoming product launches;

however, supply chain issues caused by COVID-19 did result in higher cost of goods sold during 2021 and 2022.

While freight costs have since returned to pre-COVID-19 levels, 2021 freight costs were, in some cases, more than four times higher than

those shortly before COVID-19.

supply chain for certain raw materials has been disproportionately, negatively impacted when compared to supply chains of other raw materials.

The supply chain for power electronics, specifically, is still facing supply chain issues as a result of COVID-19, for the globe faced

a simultaneous supply shock and heightened demand for these goods – increasing the prices for such raw materials while simultaneously

slowing suppliers’ order fulfillments.

Further, due to such shortages, many suppliers of power electronics have focused their attention

on large customers such as those more directly aligned within the electric vehicle supply chain as compared to companies on the outskirts

of this supply chain such as Worksport.

This particular result of COVID-19 primarily affects the sourcing of components for the Worksport

In order to mitigate these supply chain issues, we have invested more resources into sourcing power electronics in the interest

of finding reliable suppliers with manageable lead times and competitive pricing.

response of many governments to the COVID-19 pandemic has resulted in higher interest rates and destabilized equity markets – particularly

among micro- or low-capitalization companies – effectively increasing the cost of and decreasing easy access to capital, which

could negatively impact our short-term and long-term liquidity.

These factors, combined with the consequences of possible future waves

of the disease, could have a material impact on our liquidity, capital resources, operations, and business as well as those of the third

parties on which we rely.

The management and Board are constantly monitoring this situation to minimize potential losses.

change threatens to cause many foreseeable as well as unforeseeable ramifications.

22 unchanged sentences

pricing actions and cost reduction initiatives.

an inflationary environment also increases our direct cost of raw goods or processed goods for our OEM manufacturing as well as indirect

costs such as overhead and rent.

Due to these present and forecasted price increases and the temporary increases in ocean freight and

container handling costs faced in recent periods, Worksport factors in all costs when assessing proper pricing of its goods for sale.

an inflationary environment also increases our direct cost of raw goods or processed goods for our original equipment manufacturing as

well as indirect costs such as overhead and rent.

Due to these present and forecasted price increases and the temporary increases in

ocean freight and container handling costs faced in recent periods, Worksport factors in all costs when assessing proper pricing of its

goods for sale.

Additionally,

1 unchanged sentence

Federal Reserve increase interest rates to combat global inflation, the cost of debt financing increases.

While we currently do not have material debt other than our $5.3 million mortgage on our West Seneca facility, our mortgage’s variable

rate increases and decreases along with interest rates, which resulted in an increase of monthly premiums throughout 2022 and 2023.

are still susceptible to variable monthly mortgage interest costs as a result of changes in interest rates.

We continue to explore debt

financing options at reasonable interest rates in order to strengthen our cash position.

While we currently do not have material debt other than our $6.0 million Revolving Credit Facility, our facility’s variable rate

fluctuates along with the Prime Rate, meaning our monthly interest costs vary not only by our usage of the facility but by interest rates

We continue to explore debt financing options at reasonable interest rates in order to strengthen our cash position.

interest rates have also resulted in a shift in institutional holdings away from micro-cap equities, which has negatively influenced

42 unchanged sentences

markets, employ people residing in both the U.S.

and Canada and, to date, have raised funds in Canadian Dollars.

we report results of operations in U.S.

Since our Canadian customers pay in Canadian Dollars, we are subject to gains and losses

and Canada and, to date, have raised funds in U.S.

Meanwhile, we report

results of operations in U.S.

Since some of 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.

5 unchanged sentences

OF OPERATIONS

Months Ended March 31, 2024 compared to the Three Months Ended March 31, 2023

the three months ended March 31, 2024, revenues from our entire line of products was $512,637, as compared to $31,925 for the three months

ended March 31, 2023.

Months Ended June 30, 2024 compared to the Three Months Ended June 30, 2023

the three months ended June 30, 2024, revenues from our entire line of products was $1,921,539, as compared to $199,851 for the three

months ended June 30, 2023.

Year-over-year sales increased by approximately 862%.

For the three months ended March 31, 2024, revenue generated

For the three months ended June 30, 2024, revenue generated

in Canada was $31,853 as compared to $0 for the same period in 2023.

For the three months ended March 31, 2024, revenue generated

in the United States was $492,630, compared to $26,403 for the same period in 2023, an increase of 1,766%.

increased during the three months ended March 31, 2024 compared to the same period the prior year due to increased sales of soft

tonneau covers to a private label partner.

The Company continues to focus on establishing new business-to-consumer and

business-to-business sales channels while strengthening the support of those channels to increase customer satisfaction and enable

high product turnover.

For business-to-consumer channels, we have configured our product offerings in a manner conducive with

cost-effective marketing, allowing us to securely invest in marketing during 2024.

For business-to-business channels, we have

created all necessary marketing/sales materials and policies, and we are now actively presenting our product offerings to various

For the three months ended June 30, 2024, revenue generated in the

United States was $1,889,686, compared to $199,851 for the same period in 2023, an increase of 846%.

increased during the three months ended June 30, 2024 compared to the same period the prior year due to increased sales of tonneau covers

to a private label partner, various dealers and distributors, and end users via the Company’s online marketplaces.

continues to focus on establishing new and strengthening existing business-to-consumer and business-to-business sales channels while

also strengthening customer support to increase customer satisfaction and enable high product turnover.

For business-to-consumer channels,

we have configured our product offerings in a manner conducive with cost-effective marketing, allowing us to securely invest in marketing

and sales campaigns.

For business-to-business channels, we have created all necessary marketing/sales materials and policies as well

as an online dealer marketplace, and we are now actively contacting thousands of leads and presenting our product offerings to various

dealers, jobbers, and retailers across the United States and Canada.

1 unchanged sentence

production processes and increased personnel.

from online retailers of our products increased from $26,434 during the three months ended March 31, 2023, to $45,886 during the

three months ended March 31, 2024.

Online retailers accounted for 5% of total revenue for the three months ended March 31, 2024,

compared to 83% for the three months ended March 31, 2023.

Distributor sales decreased for the three months ended March 31, 2024,

compared with the three months ended March 31, 2023, with sales of $0 and $5,491, respectively.

Private label sales increased from

$0 for the three months ended March 31, 2023, to $466,751 for the three months ended March 31, 2024.

Private label sales accounted

for 91% of total revenue for the three months ended March 31, 2024.

We expect to continue to grow our fields of business as we

develop unique products with enhanced utility to offer to other prospective clients in the U.S.

from online retailers of our products increased from $18,163 during the three months ended June 30, 2023, to $897,213 during the three

months ended June 30, 2024.

Online retailers accounted for 47% of total revenue for the three months ended June 30, 2024, compared to

9% for the three months ended June 30, 2023.

Distributor sales increased for the three months ended June 30, 2024, compared with the

three months ended June 30, 2023, with sales of $63,926 and $0, respectively.

Distributors accounted for 3% of total revenue for the

three months ended June 30, 2024.

Private label sales increased from $181,688 for the three months ended June 30, 2023, to $960,400 for

the three months ended June 30, 2024.

Private label sales accounted for 50% of total revenue for the three months ended June 30, 2024.

We expect to continue to grow our fields of business as we develop unique products with enhanced utility to offer to other prospective

clients in the U.S.

and Canadian markets.

we work closely with two distributors in Canada, and we are close to setting up a distribution network within the United States.

This does not

include multiple independent online retailers.

We currently support a network of dealers and distributors, and we intend to continue expanding

our business and online sales channels in 2024.

of sales increased by 2,305%, from $19,757 for the three months ended March 31, 2023, to $475,181 for the three months ended March 31,

Our cost of sales, as a percentage of sales, was approximately 93% and 62% for the three months ended March 31, 2024 and 2023,

respectively.

The increase in the cost of sales as a percentage of sales was primarily due to increased sales to private labels at a

lower agreed upon sales price compared to online retail sales.

We consistently secure a 20% gross margin on soft covers sold to private

labels, as these soft covers are drop shipped from our Chinese suppliers at a fixed cost.

However, our margins on domestically manufactured

hard covers is dependent on the cost of raw materials, which fluctuates, as well as overhead, which is expected to decrease in future

quarters as we realize manufacturing efficiencies and allocate more existing human capital and machinery resources away from design engineering

and testing towards production.

Our overhead per domestic unit was particularly high during the three months ended March 31, 2024 due

to this allocation of resources.

distribute our tonneau covers in Canada and the United States through an expanding network of wholesalers, private labels, distributors,

and online retail channels, including eBay, Amazon, Walmart, and our own e-commerce platform hosted on Shopify.

Distribution via each

aforementioned channel is expected to increase during 2024.

We have pursued and will continue to pursue relationships with Original Equipment

Manufacturers with the intention of distributing through them as well.

of sales increased by 960%, from $153,288 for the three months ended June 30, 2023, to $1,624,910 for the three months ended June 30,

Our cost of sales, as a percentage of sales, was approximately 85% and 77% for the three months ended June 30, 2024 and 2023, respectively.

The increase in the cost of sales as a percentage of sales was primarily due to increased sales of domestically-produced hard covers.

We consistently secure a 20% gross margin on soft covers sold to private labels, as these soft covers are drop shipped from our Chinese

suppliers at a fixed cost.

However, our margins on domestically manufactured hard covers is dependent on the cost of raw materials, which

fluctuates, as well as overhead, which has been high due to manufacturing inefficiencies and low production volumes – both of which

are actively being mitigated as we streamline manufacturing processes and allocate more existing human capital and machinery resources

away from design engineering and testing towards production.

provide our distributors and online retailers an “all-in” wholesale price.

7 unchanged sentences

are able to pick up product directly from our stocking warehouse.

expenses increased for the three months ended March 31, 2024 by $134,806, from $3,542,116 for the three months ended March 31, 2023 to

expenses increased for the three months ended June 30, 2024 by $422,095, from $3,785,282 for the three months ended June 30, 2023 to

$4,207,377, due to the following factors:

General and administrative

expenses increased by $544,706, from $2,129,612 in 2023 to $2,674,318 in 2024.

The increase was related to increased research and

development activities, increased employment of production personnel including engineers, machine operators, and assembly people,

and increases in wages and salaries as we seek to expand our operations and further develop our products.

Sales and marketing expenses

decreased by $477,574, from $544,351 for 2023 to $66,777 for 2024.

The decrease in sales and marketing is primarily attributable

to the completion of several marketing agreements and lower cost of in-house marketing campaigns to create brand and product awareness.

Professional fees, which

include accounting, legal, and consulting fees, increased from $868,611 in 2023 to $943,778 in 2024.

The increase in professional

fees was due primarily to increased expenditure related to stock options and restricted stock compensation with consultants and employees.

We realized a gain on foreign

exchange of $7,951 during 2024, compared to a gain on foreign exchange of $458 for the prior period due to conversions between CAD

and administrative expenses increased by $1,201,585, from $1,744,801 in 2023 to $2,946,386

The increase was related to increased research and development activities, increased

employment of support personnel including engineers,

and increases in wages and salaries as we seek to expand our operations and further develop

our products.

and marketing expenses decreased by $69,920, from $548,712 for 2023 to $478,792 for 2024.

The decrease in sales and marketing is primarily attributable to the completion of several

marketing agreements and lower cost of in-house marketing campaigns to create brand and product

fees, which include accounting, legal, and consulting fees, decreased from $1,491,453 in

2023 to $766,563 in 2024.

The decrease in professional fees was due primarily to insourcing

of certain business processes and fewer equity grants to third parties for services rendered.

realized a loss on foreign exchange of $15,636 during 2024, compared to a loss on foreign exchange of $316 for the prior

period due to conversions between CAD and USD.

Income and Expenses

reported other expenses for the three months ended March 31, 2024 of $75,191, compared to a gain of $6,678 for three months ended March 23, 2023.

expenses can be attributed to increased interest expense partially offset by interest and rental income.

loss for the three months ended March 31, 2024 was $3,714,657, compared to a net loss of $3,523,270 for the three months ended March 31,

reported net other expenses for the three months ended June 30, 2024 of $102,651, compared to a loss of $58,736 for three months

ended June 30, 2023.

Net other expenses can be attributed to decreased interest and rental

loss for the three months ended June 30, 2024 was $4,013,399, compared to a net loss of $3,797,455 for the three months ended June 30,

2023 – an increase of 6%.

1 unchanged sentence

on expanding our operations, research and development, manufacturing, and supply chain.

Months Ended June 30, 2024 compared to the Six Months Ended June 30, 2023

the six months ended June 30, 2024, revenues from our entire line of products was $2,434,176, as compared to $231,776 for the six months

ended June 30, 2023.

Year-over-year sales increased by approximately 950%.

For the six months ended June 30, 2024, revenue generated

in Canada was $51,890, as compared to $2,655 for the same period in 2023.

For the six months ended June 30, 2024, revenue generated in

the United States was $2,382,286 compared to $229,121 for the same period in 2023, an increase of 940%.

increased during the six months ended June 30, 2024 compared to the same period the prior year due to increased sales of tonneau covers

to a private label partner, various dealers and distributors, as well as end users via the Company’s online marketplaces.

continues to focus on establishing new and strengthening existing business-to-consumer and business-to-business sales channels while

also strengthening customer support to increase customer satisfaction and enable high product turnover.

For business-to-consumer channels,

we have configured our product offerings in a manner conducive to cost-effective marketing, allowing us to securely invest in marketing

and sales campaigns.

For business-to-business channels, we have created all necessary marketing/sales materials and policies as well

as an online dealer marketplace, and we are now actively contacting thousands of leads and presenting our product offerings to various

dealers, jobbers, and retailers across the United States and Canada.

We intend to gradually increase output capacity through refined

production processes and increased personnel.

from online retailers of our products increased from $42,437 during the six months ended June 30, 2023, to $921,623 during the six months

ended June 30, 2024.

Online retailers accounted for 38% of total revenue for the six months ended June 30, 2024, compared to 18% for

the six months ended June 30, 2023.

Distributor sales increased for the six months ended June 30, 2024, compared with the six months

ended June 30, 2023, with sales of $86,773 and $2,655, respectively.

Distributor sales accounted for 3% of total revenue for the six

months ended June 30, 2024.

Private label sales increased from $188,684 for the six months ended June 30, 2023, to $1,425,780 for the

six months ended June 30, 2024.

Private label sales accounted for 59% of total revenue for the six months ended June 30, 2024.

to continue to grow our fields of business as we develop unique products with enhanced utility to offer to other prospective clients

and Canadian markets.

distribute our tonneau covers in Canada and the United States through an expanding network of wholesalers, private labels, distributors,

and online retail channels, including eBay, Amazon, Walmart, and our own e-commerce platform hosted on Shopify.

Distribution via each

aforementioned channel is expected to increase during 2024.

We have pursued and will continue to pursue relationships with Original Equipment

Manufacturers with the intention of distributing through them as well.

of sales increased by 1,114%, from $173,045 for the six months ended June 30, 2023, to $2,100,091 for the six months ended June 30, 2024.

Our cost of sales, as a percentage of sales, was approximately 86% and 75% for the six months ended June 30, 2024 and 2023, respectively.

The increase in the cost of sales as a percentage of sales was primarily due to increased sales of domestically-produced hard covers.

We consistently secure a 20% gross margin on soft covers sold to private labels, as these soft covers are drop shipped from our Chinese

suppliers at a fixed cost.

However, our margins on domestically manufactured hard covers is dependent on the cost of raw materials, which

fluctuates, as well as overhead, which has been high due to manufacturing inefficiencies and low production volumes – both of which

are actively being mitigated as we streamline manufacturing processes and allocate more existing human capital and machinery resources

away from design engineering and testing towards production.

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 United Sates or from the United States 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.

expenses increased for the six months ended June 30, 2024 by $556,901, from $7,327,398 for the six months ended June 30, 2023 to $7,884,299,

due to the following factors:

and administrative expenses increased by $1,746,291, from $3,874,413 in 2023 to $5,620,704

The increase was related to increased research and development activities, increased

employment of support personnel including engineers, and increases in wages and salaries as we seek to expand our operations and further develop

our products.

and marketing expenses decreased by $547,494, from $1,093,063 for 2023 to $545,569 for 2024.

The decrease in sales and marketing is primarily attributable to the completion of several

marketing agreements and lower cost of in-house marketing campaigns to create brand and product

fees, which include accounting, legal, and consulting fees, decreased from $2,360,064 in

2023 to $1,710,341 in 2024.

The decrease in professional fees was due primarily to insourcing

of certain business processes and fewer equity grants to third parties for services rendered.

realized a loss on foreign exchange of $7,685 during 2024, compared to a gain on foreign exchange of $142 for the prior period due

to conversions between CAD and USD.

Income and Expenses

reported net other expenses for the six months ended June 30, 2024 of $177,842, compared to net expenses of $52,058 for the six

months ended June 30, 2023.

Other expenses can be attributed to decreased interest and rental

loss for the six months ended June 30, 2024 was $7,728,056, compared to a net loss of $7,320,725 for the six months ended June 30, 2023

– an increase of 6%.

The increase in the net loss can be attributed to the increase in various operating expenses as we focus on

expanding our operations, research and development, manufacturing, and supply chain.

and Capital Resources;

Going Concern

accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going

concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business.

the three months ended March 31, 2024 ,

the Company had a net loss of $3,714,657 (2023 - $3,523,270).

As of March 31, 2024 , the

Company has working capital of $2,901,401 (December 31, 2023 - $1,956,894) and had an accumulated deficit of $52,027,834 (December

31, 2023 - $48,313,177).

The Company has not generated profit from operations since inception and to date has relied on debt and

equity financings for continued operations.

The Company’s ability to continue as a going concern is dependent upon the ability

to generate cash flows from operations and obtain equity and/or debt financing.

The Company intends to continue funding operations

through equity and debt financing arrangements, which may be insufficient to fund its capital expenditures, working capital and

other cash requirements in the long term.

There can be no assurance that the steps management is taking will be

Despite the Company having mostly completed its purchasing

of large manufacturing machinery, operational costs are expected to remain elevated and, thus, further decrease cash and cash equivalents.

Concurrently, the Company intends to continue its ramp-up of manufacturing and increasing sales volumes in 2024, which should mitigate

the effects of operational costs on cash and cash equivalents;

this view is supported by the fact that the manufacturing facility of

the Company was completed for initial production output in 2023 and has started to generate revenue in the third quarter of 2023.

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

which contemplates the realization of assets and the liquidation of liabilities in the normal course of business.

During the three and

six months ended June 30, 2024, the Company had a net loss of $4,013,399 (2023 – $3,797,455) and $7,728,056 (2023 – $7,320,725),

respectively.

As of June 30, 2024, the Company has working capital of $8,489,246 (December 31, 2023 – $1,956,894) and had an accumulated

deficit of $56,041,233 (December 31, 2023 – $48,313,177).

The Company has not generated profit from operations since inception

and to date has relied on debt and equity financings for continued operations.

The Company’s ability to continue as a going concern

is dependent upon the ability to generate cash flows from operations and obtain equity and/or debt financing.

The Company intends to

continue funding operations through equity and debt financing arrangements, which may be insufficient to fund its capital expenditures,

working capital and other cash requirements in the long term.

There can be no assurance that the steps management is taking will be successful.

the Company having mostly completed its purchasing of large manufacturing machinery, operational costs are expected to remain elevated

and, thus, further decrease cash and cash equivalents.

Concurrently, the Company intends to continue its ramp-up of manufacturing and

increasing sales volumes in the second half of 2024, which should mitigate the effects of operational costs on cash and cash equivalents;

this view is supported by the fact that the manufacturing facility of the Company was completed for initial production output in 2023

and started to generate revenue in the third quarter of 2023, registering its highest quarterly sales total in the Company’s history

in the second quarter of 2024.

Company has successfully raised cash, and it is positioned to do so again if deemed necessary or strategically advantageous.

8 unchanged sentences

gross sales price of the shares of common stock sold.

As of March 31, 2024, the Company has sold and issued 604,048 shares of common

stock in consideration for net proceeds of $780,356 under the ATM Agreement.

November 2, 2023, the Company consummated a registered direct offering pursuant to which it sold 1,925,000 shares of common stock

and 1,575,000 pre-funded warrants to an institutional investor for a total net proceeds of $4,261,542.

Concurrently with the

registered direct offering, the Company issued the same institutional investor 7,000,000 warrants in a private sale.

are exercisable for 7,000,000 shares of common stock for $1.34 per share six months after issuance until five and a half years from the issuance date, subject to beneficial ownership limitations as described in the warrants.

The Company registered the 7,000,000

shares of common stock underlying the warrants on a Form S-1 (333-276241) which was declared effective by the SEC on December 29, 2023.

As of June 30, 2024, the Company has sold and issued 604,048 shares of common stock

in consideration for net proceeds of $780,356 under the ATM Agreement.

November 2, 2023, the Company consummated a registered direct offering pursuant to which it sold 1,925,000 shares of common stock and

1,575,000 pre-funded warrants to an institutional investor for a total net proceeds of $4,261,542.

Concurrently with the registered direct

offering, the Company issued the same institutional investor 7,000,000 warrants in a private sale.

The warrants are exercisable for 7,000,000

shares of common stock for $1.34 per share six months after issuance until five and a half years from the issuance date, subject to beneficial

ownership limitations as described in the warrants.

The Company registered the 7,000,000 shares of common stock underlying the warrants

on a Form S-1 (333-276241) which was declared effective by the SEC on December 29, 2023.

March 20, 2024, the Company consummated a registered direct offering pursuant to which it sold 2,372,240 shares of common stock and 1,477,892

1,477,892 pre-funded warrants to the same institutional investor as in the Company’s registered direct offering on November 2,

2023, for a total net proceeds of $2,629,083.

Concurrently with the registered direct offering, the Company issued the

institutional investor 7,700,264 warrants in a private sale.

The warrants are exercisable for 7,700,264 shares of common stock for $0.74 per share six months after issuance until five and a half years from

the issuance date, subject to beneficial ownership limitations contained in the warrants.

The Company registered the 7,700,264 shares of common stock underlying the warrants on a Form S-1 (333-278461) which was declared effective by the SEC on April 8, 2024.

disclosed in the footnotes to our financial statements, on May 14, 2024, the Company and Worksport New York Operations Corporation (“Worksport

New York”) entered into an Omnibus Amendment of Loan Documents (the “Loan Amendment”) with Northeast Bank (the “Lender”).

This amendment pertains to the secured loan agreement dated May 4, 2022, which was originally used to finance the purchase of our facility

and land in West Seneca, New York.

Effective as of May 10, 2024, the Lender extended the maturity date of the loan from May 10, 2024,

to August 10, 2024.

This extension alleviates immediate cash flow pressures by postponing the loan repayment, allowing us to manage our

resources more effectively and focus on other operational needs.

As part of the Loan Amendment, we agreed to pay the Lender an extension

fee of $106,000.

This fee is deemed fully earned but will be waived if the loan is repaid in full on or before the new maturity date.

If the loan is not repaid by the extended maturity date or is accelerated due to default, the fee will become payable.

Additionally,

we agreed to an exit fee of $106,000 under similar conditions.

This fee will be waived if the loan is repaid on or before the new maturity

date without acceleration.

This loan extension demonstrates our ability to negotiate favorable terms with our creditors and underscores

our commitment to maintaining strong liquidity.

This strategic decision supports our long-term growth and helps us navigate the current

economic and interest rate environment more effectively.

The details of the Loan Amendment have been filed as an exhibit to this report

and are incorporated by reference herein.

pre-funded warrants to the same institutional investor as in the Company’s registered direct offering on November 2, 2023, for

total net proceeds of $2,629,083.

Concurrently with the registered direct offering, the Company issued the institutional investor 7,700,264

warrants in a private sale.

The warrants are exercisable for 7,700,264 shares of common stock for $0.74 per share six months after issuance

until five and a half years from the issuance date, subject to beneficial ownership limitations contained in the warrants.

registered the 7,700,264 shares of common stock underlying the warrants on a Form S-1 (333-278461) which was declared effective by the

SEC on April 8, 2024.

disclosed in the footnotes to our financial statements, on May 14, 2024, the Company and Worksport New York Operations Corporation entered

into an Omnibus Amendment of Loan Documents with Northeast Bank.

This amendment pertains to the secured loan agreement dated May 4, 2022,

which was originally used to finance the purchase of our facility and land in West Seneca, New York.

Effective as of May 10, 2024, the

Lender extended the maturity date of the loan from May 10, 2024, to August 10, 2024.

This extension alleviated immediate cash flow pressures

by postponing the loan repayment, allowing us to manage our resources more effectively and focus on other operational needs.

of the Loan Amendment, we agreed to pay the Lender an extension fee of $106,000.

This fee was deemed fully earned but was waived, as

the loan was repaid in full on or before the new maturity date.

If the loan was not repaid by the extended maturity date or was accelerated

due to default, the fee would have become payable.

Additionally, we agreed to an exit fee of $106,000 under similar conditions.

fee was waived, as the loan was repaid on or before the new maturity date without acceleration.

This loan extension demonstrates our

ability to negotiate favorable terms with our creditors and underscores our commitment to maintaining strong liquidity.

This strategic

decision supported our long-term growth and helped us navigate the current economic and interest rate environment more effectively.

details of the Loan Amendment have been filed as an exhibit to this report and are incorporated by reference herein.

May 29, 2024, the Company entered into Inducement Offer Letter with a certain holder of existing warrants to purchase shares of the Company’s

common stock at an exercise price of $1.34 per share issued on November 2, 2024, pursuant to which the Holder agreed to exercise for

cash its Existing Warrants to purchase an aggregate of 7,000,000 shares of the Company’s common stock, at a reduced exercised price

of $0.5198 per share, in consideration for the Company’s agreement to issue new warrants to purchase up to 12,950,000 shares of

the Company’s common stock at $0.5198 per share.

The Company received aggregate gross proceeds of approximately $3,638,600 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 payable by the Company.

July 19, 2024, the Company, as the guarantor, and Worksport New York Operations Corporation as well as Worksport USA Operations

Corporation, entered into a $6 million Revolving Financing and Assignment Agreement with an external lending entity, Amerisource

Business Capital.

Upon transaction close, the Company drew down approximately $5.06 million of the Revolving Credit Facility, net of

$790,000 of interest reserve required to be withheld to ensure interest payments by the Company.

The Company used $4.73 million of

the drawn down amount to refinance the Company’s mortgage on the Company’s real property located at 2500 North America

in West Seneca, New York, and additionally drew approximately $330,000 in accounts receivables, leaving approximately $940,000

available for Accounts Receivable financing under the Agreement as of the deal close date.

date, the Company’s principal sources of liquidity consist of net proceeds from public and private securities offerings and cash

17 unchanged sentences

Flow Activities

increased from $3,365,778 at December 31, 2023, to $3,536,980 at March 31, 2024 – an increase of $171,202 or 5%.

increased from $3,365,778 at December 31, 2023, to $3,426,089 at June 30, 2024 – an increase of $60,311 or 2%.

The increase was

primarily due to the closing of sale of shares during the three months ended March 31, 2024, raising approximately $3,200,000.

of March 31, 2024, we had current assets of $10,744,959 (December 31, 2023 - $9,123,506) and current liabilities of $7,843,558 (December

primarily due to the closing of a sale of shares as well as a warrant inducement during the six months ended June 30, 2024, raising approximately

of June 30, 2024, we had current assets of $10,743,200 (December 31, 2023 – $9,123,506) and current liabilities of $2,253,954 (December

31, 2023 – $7,166,612).

As of March 31, 2024, we had working capital of $2,901,401 (December 31, 2023 – $1,956,894) and an

As of June 30, 2024, we had working capital of $8,489,246 (December 31, 2023 – $1,956,894) and an

accumulated deficit of $56,041,233 (December 31, 2023 – $48,313,177).

cash used by operating activities for the three months ended March 31, 2024 was $2,794,604, compared to $2,934,410 in the prior period,

primarily driven by a larger net loss during the three months ended March 31, 2024, and partially offset by the issuance of shares, stock

cash used by operating activities for the six months ended June 30, 2024 was $6,421,292, compared to $6,018,704 in the prior period,

primarily driven by a larger net loss during the six months ended June 30, 2024, and partially offset by the issuance of shares, stock

options, and warrants for services.

receivable decreased at March 31, 2024 by $306,778 and increased by $38,013 in the prior period.

The decrease in accounts receivable

was due to the collection of accounts receivable from a private label partner.

increased at March 31, 2024 by $2,908,354, and at March 31, 2023 by $257,423, as a result of our stockpiling components for

production as well as finished goods in anticipation of the launch of targeted sales campaigns expected to drive significant sales

volumes in our business to consumer department.

Prepaid expenses decreased by $1,155,090 at March 31, 2024, and increased by

$742,590 at March 31, 2023 due to deposits used and made by us for the purchase of

manufacturing equipment and inventory, respectively.

payable and accrued liabilities increased at March 31, 2024 by $810,688 compared to an decrease of $6,799 in the prior period.

cash used in investing activities for the three months ended March 31, 2024 was $212,969 compared to $1,153,229 in the prior period.

The decrease in investing activities was primarily attributable to higher capital expenditure on various manufacturing equipment in

cash generated by financing activities for the three months ended March 31, 2024 was $3,178,775 compared to net cash used from

financing activities of $43,904 in the prior period.

Sheet Arrangements

receivable increased at June 30, 2024 by $160,264 and increased by $263,874 in the prior period.

The increase in accounts receivable

was due to larger sales volume with business-to-business customers.

increased at June 30, 2024 by $2,755,252, and at June 30, 2023 by $1,533,492, as a result of our stockpiling components for

production as well as finished goods to fulfill rising demand for our domestically-produced tonneau covers.

Prepaid expenses and

deposits decreased by $1,345,434 at June 30, 2024, and increased by $14,280 at June 30, 2023 due to deposits used and made by us

for the purchase of manufacturing equipment and inventory, respectively.

payable and accrued liabilities decreased at June 30, 2024 by $59,989 compared to a decrease of $828,757 in the prior period.

cash used in investing activities for the six months ended June 30, 2024 was $335,787 compared to $2,663,046 in the prior period.

decrease in investing activities was primarily attributable to higher capital expenditure on various manufacturing equipment in 2023.

cash generated by financing activities for the six months ended June 30, 2024 was $6,817,390 compared to net cash used from financing

activities of $36,772 in the prior period.

Accounting Policies

12 unchanged sentences

or conditions.

accounting policies that we follow are set forth in Note 2 to our financial statements as included in the Form 10-K filed on March 27,

These accounting policies conform to accounting principles generally accepted in the United States and have been consistently applied

in the preparation of the financial statements.

accounting policies that we follow are set forth in Note 2 to our financial statements as included in our 2023 Annual Report on Form

10-K filed on March 27, 2024.

These accounting policies conform to accounting principles generally accepted in the United States and

have been consistently applied in the preparation of the financial statements.

Quantitative and Qualitative Disclosures about Market Risk

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-Q

Item 2. Management’s Discussion and Analysis