What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2026-03-26 compared with 2025-03-27 · 270 added, 181 removed, 171 unchanged (73% of the section changed)

48 unchanged sentences

factors impacting our results of operations.

Tariffs and Supply Chain Impact

Our hybrid manufacturing model, which includes

sourcing certain products and components from overseas—particularly from China—exposes us to risks associated with tariffs

and evolving global trade policies.

Tariffs on imported raw materials, components, and finished goods have increased our input costs and

may continue to do so in the future.

During fiscal 2025, increases in certain material and component costs attributable, in part, to tariffs

contributed to higher cost of goods sold;

however, these increases were offset by higher production volumes, improved overhead absorption,

and operational efficiencies, resulting in an overall improvement in gross margins compared to the prior fiscal year.

These impacts are

both direct, through duties applied to imported products and components, and indirect, as suppliers and logistics providers may pass through

increased costs associated with tariff regimes and related trade restrictions.

While we have taken steps to mitigate these risks

through supplier diversification, a portion of our supply chain remains dependent on foreign sources.

As a result, tariffs and other trade

measures may continue to increase our cost of goods sold and may impact product pricing and margins to the extent not offset by operational

efficiencies or pricing actions.

In addition, changes in U.S.

trade policy or further escalation of tariffs could disrupt supply availability

or increase lead times, which may adversely affect our operations and results of operations.

and Macroeconomic Conditions

geopolitical developments, including conflicts in the Middle East involving Iran, have contributed to volatility in global financial

markets, higher energy prices and inflationary pressures.

While we do not have direct exposure to the affected regions through our suppliers,

customers or operations, these conditions may adversely affect our business.

In particular, increases in global energy and transportation

costs may increase our cost of goods sold, and inflationary pressures may increase the cost of materials sourced from our suppliers,

including suppliers in Asia.

In addition, such conditions may adversely affect consumer discretionary spending, which could reduce demand

for our products.

Volatility in the capital markets may also affect our ability to raise capital on favorable terms.

The extent and duration

of these conditions remain uncertain and could adversely affect our business, financial condition and results of operations.

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

we strategically began 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

21 unchanged sentences

Federal Reserve has begun to decrease interest rates in 2024, but they may persist at an elevated level for the foreseeable

Our $6,000,000 mortgage on our West Seneca property and our $1,487,000 in equipment financing both have floating

interest rates, meaning we are susceptible to variable monthly mortgage and debt interest costs as a result of changes in interest rates.

Our indebtedness arrangements both have floating interest rates, meaning we are susceptible to variable monthly mortgage and

debt interest costs as a result of changes in interest rates.

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

3 unchanged sentences

Prices and Supply Chain Issues

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

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.

faced significantly higher ocean freight, trucking, and container handling costs as well as last mile delivery costs in recent 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 during certain periods due to geopolitical tensions and disruptions affecting global shipping

routes, the shipping routes used by Worksport have not faced dramatic price hikes.

Regardless, Worksport is closely monitoring international

shipping costs.

transition towards domestic manufacturing and assembly is anticipated to largely offset these higher costs, as we believe we will be

2 unchanged sentences

and will prioritize transport by rail when possible to avoid high trucking costs.

are subject to foreign exchange risk as we manufacture certain products and components in China, market extensively in both Canadian

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 USD.

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 USD 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.

are subject to foreign exchange risk as we manufacture certain products and components in China, market extensively in both U.S.

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

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

Dollars (USD) and Canadian

Dollars (CAD).

Meanwhile, we report results of operations in USD.

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

losses due to fluctuations in the USD relative to CAD.

Our manufacturers in China are paid in USD to better avoid the relatively greater

fluctuation of the Chinese Yuan.

To the extent the USD 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.

Accounting Policies

discussion and analysis of consolidated results of operations and financial condition are based upon our consolidated financial statements,

which have been prepared in accordance with accounting principles generally accepted in the United States of America.

The preparation

of these consolidated financial statements requires us to make estimates assumptions and judgments that affect the amounts reported.

These estimates, assumptions and judgments are affected by our application of accounting principles, which are discussed in Note 1 –

Description of Business and Summary of Significant Accounting Policies of Part II, Item 8, Financial Statements and Supplementary Data,

of this report.

We believe the accounting policies discussed below are the most critical in understanding and evaluating our financial

These critical accounting policies have been reviewed with the Audit Committee of our Board of Directors.

which have been prepared in accordance with accounting principles generally accepted in the U.S.

The preparation of these

consolidated financial statements requires us to make estimates assumptions and judgments that affect the amounts reported.

These estimates,

assumptions and judgments are affected by our application of accounting principles, which are discussed in Note 1 – Description

of Business and Summary of Significant Accounting Policies of Part II, Item 8, Financial Statements and Supplementary Data, of this report.

We believe the accounting policies discussed below are the most critical in understanding and evaluating our financial results.

critical accounting policies have been reviewed with the Audit Committee of our Board of Directors.

Recognition – In accordance with Accounting Standards Codification (ASC) 606 Revenue from Contracts with Customers, sales are

29 unchanged sentences

Data, of this report.

On March 18, 2025, we effected

a 1:10 stock split of our authorized shares of common stock and simultaneously reduced the number of authorized shares of common stock

from 299,000,000 to 29,900,000.

Common Stock Split

March 18, 2025, we effected the Reverse Stock Split at the ratio of 1:10, which immediately proportionally reduced the authorized number

of shares of common stock from 299,000,000 to 29,900,000.

Pursuant to the laws of the State of Nevada, shareholder approval was not required

in order to effect the split as the Board has the authority to effect a reverse stock split without shareholder approval if the number

of authorized shares of common stock is proportionally reduced as a result.

No fractional shares were issued as a result of the Reverse

Each fractional share was automatically rounded up to the next whole share.

Reverse Stock Split was undertaken in order for us to regain compliance with the minimum bid requirement under Nasdaq Listing Rule 5550(a)(2).

Amendment to Articles of Incorporation

On April 17, 2025, our Board of Directors and

majority stockholder approved an amendment to our articles of incorporation to increase the total number of authorized shares of capital

stock from 30,900,000 to 55,000,000, consisting of an increase in the authorized number of shares of common stock from 29,900,000 to 45,000,000

and an increase in the authorized number of shares of preferred stock from 1,000,000 to 10,000,000.

The amendment was filed with the State

of Nevada and became effective on May 19, 2025.

The increase in authorized capital provides the Company with additional flexibility to

issue equity securities in connection with capital-raising transactions, strategic initiatives, or other corporate purposes.

Results of Operations

following is a discussion of our results of operations in 2024 compared to 2023.

the year ended December 31, 2024, net sales were $8,484,379, as compared to $1,529,632 for the year ended December 31, 2023.

Year-over-year

sales increased by approximately 455%.

following is a discussion of our results of operations for the fiscal year ended December 31, 2025 compared to the fiscal year ended

December 31, 2024.

Years ended December 31,

Favorable (Unfavorable) 2025 vs.

Cost of sales

Research and development

General and administrative

Sales and marketing

Other operating income, net

Loss from operations

(18,813,426 )

(15,465,834 )

Interest expense

Other (expense) income

$ (19,352,297 )

$ (16,163,789 )

$ (3,188,508 )

Per share data

Basic and diluted earnings per share

Years ended December 31,

Favorable (Unfavorable)

Percent of net sales

Percentage points

Research and development expense

General and administrative expense

Sales and marketing expense

For the year ended December 31, 2025, net sales generated in the U.S.

was $8,397,570,

$16,010,083, compared to $8,397,570 for the same period in 2024, an increase of 91%.

For the year ended December 31, 2024, net sales generated in

Canada was $67,519, compared to $6,811 for the same period in 2023, an increase of 891%.

For the year ended December 31, 2024, net sales generated outside the U.S.

and Canada was $19,290.

sales increased the year ended December 31, 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 marketplace.

The Company continues

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

For the year ended December 31, 2025, net sales generated

in Canada was $90,955, compared to $67,519 for the same period in 2024, an increase of 35%.

For the year ended December 31, 2025, net

sales generated outside the U.S.

and Canada was $700, compared to $19,290 for the same period in 2024.

Net sales increased the year ended December 31, 2025, compared to the same

period the prior year due to increased sales of tonneau covers to end users via the Company’s online marketplace and various dealers

and distributors.

The Company increased its product offerings in 2025 to also include the AL4 and HD3 covers to end customers.

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

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

Worksport has successfully bolstered its business-to-consumer

sales channels in 2024, and it is now focusing on increasing cost efficiencies in these sales channels as well as establishing new business-to-business

sales channels.

For business-to-consumer channels, we are focused on lowering our customer acquisition cost throughout 2025.

For business-to-business

channels, we have assembled a strong team of both internal and external sales representatives, and we are actively presenting our product

offerings to various dealers, wholesalers, and retailers across the U.S.

We intend to continue gradually increasing output

capacity through refined production processes and increased personnel.

sales from online retailers of our products increased from $104,352 in 2023 to $4,930,822 in 2024, an increase of 4,625%.

Online retailers

accounted for 58% of total net sales for the year ended December 31, 2024 compared to 7% for the year ended December 31, 2023.

sales increased 6,120% for the year ended December 31, 2024 compared with the year ended December 31, 2023 with net sales of $423,627

and $6,811, respectively.

Private label sales accounted for 37% or $3,129,930 of net sales for the year ended December 31, 2024.

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

sales channels in 2025, and it is now focusing on increasing cost efficiencies in these sales channel as well as expanding its presence

in additional business-to-business sales channel territories.

For the business-to-consumer channel, we are focused on lowering our customer

acquisition cost with additional focus on brand awareness and shift away from reliance on conversion marketing to increase brand awareness.

For the business-to-business channel, we have assembled a strong team of both internal and external sales representatives, and we are

actively presenting our product offerings to various dealers, wholesalers, and retailers across the U.S.

We intend to continue

gradually increasing output capacity through refined production processes and increased personnel.

Net sales from online retailers of our products increased from $4,930,822

in 2024 to $11,933,269 in 2025, an increase of 142%.

Online retailers accounted for 74% of total net sales for the fiscal year ended December

31, 2025 compared to 58% for the fiscal year ended December 31, 2024.

Distributor sales increased 884% for the fiscal year ended December

31, 2025 compared with the fiscal year ended December 31, 2024 with net sales of $4,168,469 and $423,627, respectively.

There were no

private label sales in 2025.

Private label sales accounted for 37% or $3,129,930 of net sales for the fiscal year ended December 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.

and Canadian markets.

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, Walmart, and our own e-Commerce platform hosted on Shopify.

Distribution via each aforementioned channel is expected to increase during 2025.

We have pursued and will continue to pursue relationships

with Original Equipment Manufacturers with the intention of distributing through them as well.

currently work closely with a large Canadian and a large U.S.

distributor as well as online retailers to grow our customer base.

We distribute our products in the U.S.

and Canada through an expanding

network of wholesalers, distributors, and dealers, and through online channels, including major online marketplaces and our direct-to-consumer

e-commerce platform.

We intend to continue expanding both business-to-business and direct-to-consumer channels with product offerings

unique to each of these channels.

We also continue to pursue relationships with original equipment manufacturers and fleet customers where

currently work closely with a large U.S.

and a large Canadian distributor as well as online retailers to grow our customer base.

progressing well in conversations with three other major distributors with strong market presences, which will allow us to promote to

4 unchanged sentences

continental states.

of sales increased by 488%, from $1,289,118 for the year ended December 31, 2023 to $7,578,729 for the year ended December 31, 2024.

Our cost of sales, as a percentage of net sales, was approximately 89% and 84% for the years ended December 31, 2024 and 2023, respectively.

The increase in the cost of sales as a percentage of sales was primarily due to two factors:

(1) strategic discounting aimed at boosting

traffic to our direct-to-consumer online marketplace, and (2) overhead allocation associated with sold inventory produced in periods

with limited production volume.

Our discounting strategy is part of a broader initiative to enhance market presence and build brand awareness.

We anticipate this will well position us for sustained customer engagement in future periods, during which discounting may not be necessary

to the same extent.

Additionally, overhead absorption was initially higher due to the allocation of fixed costs over a smaller production

volume earlier in 2024.

As production volume grows and our manufacturing process becomes more efficient, we expect to allocate those

same fixed costs against a larger production volume base.

This scaling will be facilitated by reallocating more of our existing human

capital and machinery resources from design engineering and testing functions toward production.

This shift is intended to support ongoing

production increases and drive long-term efficiencies in our cost structure.

The decrease in the cost of sales as

a percentage of sales was primarily due to two factors:

(1) increase production volume to support sales growth, including

introduction of new product lines during 2025, and (2) overhead allocation efficiencies associated with higher production volume.

These improvements offset increases in certain material, components, and landed costs, including the impact of tariffs on imported

products and components sourced from overseas.

While tariffs contributed to higher input costs during the fiscal year, the overall

effect of increased scale and production efficiencies resulted in an improvement in our gross margin.

We continue to employ a

discounting strategy as part of a broader initiative to enhance market presence and build brand awareness.

We anticipate this will

well position us for sustained customer engagement in future periods, during which discounting may not be necessary to the same

As production volume grows and our manufacturing process becomes more efficient, we expect to allocate fixed costs included

in overhead absorption against a larger production volume base.

This scaling will be facilitated by reallocating more of our

existing human capital and machinery resources toward 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 U.S.

This includes import duty charges, including

tariffs, taxes, and shipping charges.

Discounts are applied if the distributor or retailer chooses to use their own shipping

Certain exceptions apply on rare occasions where product is shipped outside the contiguous U.S.

or from the U.S.

Volume discounts are offered

to certain high-volume customers, and we also offer a “dock price” or “pickup program” in which clients are able

to pick up inventory directly from our stocking warehouse.

expenses increased for the year ended December 31, 2024 by $1,394,309, from $14,977,175 for the fiscal year ended December 31, 2023 to

$16,371,484 for the fiscal year ended December 31, 2024, due to the following factors.

and development expense increased by $620,622 from $1,669,318 in 2023 to $2,289,940 in 2024.

The increase relates to development

initiatives for hard tonneau covers (HD3, AL4), soft tonneau covers (SCX) and energy products.

and administrative expense increased by $704,632 from $7,974,362 in 2023 to $8,678,994 in 2024.

increase was related to 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.

and marketing expenses increased by $903,450, from $1,483,054 for 2023 to $2,386,504 for 2024.

The increase in sales and marketing

is primarily attributable to the Company’s marking campaigns to create brand and product awareness.

fees, which include accounting, legal, and consulting fees, decreased by $822,203 from $3,853,134 in 2023 to $3,030,931 in 2024.

The decrease in professional fees was due to insourcing certain business processes and fewer share-based payments to third

parties for services rendered.

Income and Expenses

reported net other expenses for the year ended December 31, 2024 of $697,955 compared to net other expenses of $192,297 the prior year.

The increase in other expenses can be attributed to decreased interest and rental income.

Volume discounts are offered to certain high-volume customers, and we also offer a “dock price” or “pickup

program” in which clients are able to pick up inventory directly from our stocking warehouse.

Operating expenses increased for the fiscal year ended December 31, 2025

by $6,916,849, from $16,371,484 for the fiscal year ended December 31, 2024 to $23,288,333 for the fiscal year ended December 31, 2025,

due to the following factors.

Research and development expense:

The $751,017 (33%) decrease relates to

our transition from development of certain hard covers in 2024 (e.g., HD3, AL4, certain energy products) to production in 2025.

our development initiatives with our energy products and other tonneau covers in 2025 with the anticipation of production of 2026.

General and administrative expense:

The $3,096,401 (26%) increase was related

to increased employment as we expand our operations and further develop our products.

We also incurred expenses related to ongoing investment

relations initiatives to further our brand recognition to investors during the period.

Sales and marketing expense:

The $4,561,167 (191%) increase in sales and

marketing is primarily attributable to the Company’s online optimization efforts, online marking campaigns and other traditional

branding initiatives to create brand and product awareness.

Income ((Expense)

The $159,084 (23%) decrease in other expenses can be attributed to decreased

interest expense based on our components of indebtedness in 2025.

In 2024, we converted from a traditional mortgage to a line of credit

which is secured by our production facility.

and Capital Resources

of December 31, 2024, we had $4,883,099 in cash and cash equivalents and $892,000 of remaining available capacity on our revolving line of credit.

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 year ended December 31,

2024, we had net losses of $16,163,789 (2023 - $14,928,958).

As of December 31, 2024, the Company had working capital of $7,304,110

(2023 – $1,956,894) and had an accumulated deficit of $64,476,966 (202 3 -

of December 31, 2025, we had $5,945,894 in cash and cash equivalents and $3,448,016 of remaining available capacity on our revolving

line of credit.

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 fiscal year ended December 31, 2025, we had net losses of $19,352,297 (2024 - $16,163,789).

As of December 31, 2025, the Company had working capital of $10,061,578 (2024 – $7,304,110) and had an accumulated deficit of $83,873,790

(2024 - $64,476,966).

7 unchanged sentences

date, our principal sources of liquidity consist of net proceeds from public and private securities offerings and cash exercises of outstanding

During the year ended December 31, 2024, the Company received net proceeds of $12,482,549 from offerings.

During the fiscal year ended December 31, 2025, the Company received net proceeds of approximately $21.8 million from offerings.

Management is focused

11 unchanged sentences

have raised significant funds during the 2025 fiscal year by utilizing the following public and private offerings:

September 2024 Private Offering

On September 19, 2024, we entered

into a Securities Purchase Agreement with an investor pursuant to which we issued and sold 95,000 shares of our common stock at a purchase

price of $4.00 per share.

As part of the agreement, we also issued warrants to purchase up to 190,000 shares of common stock at an exercise

price of $4.00 per share, exercisable for a period of five years from the date of issuance.

The warrants contain standard adjustment provisions

for stock splits, recapitalizations and reorganizations and include beneficial ownership limitations to prevent the purchaser from exceeding

certain ownership thresholds.

We obtained $380,000 in net proceeds from this offering.

September 30, 2022, we filed a shelf registration statement on Form S-3 (File No.

333-267696), which was declared effective by the SEC

on October 13, 2022, containing a base prospectus covering the offering, issuance and sale by us of up to $30,000,000 of our common stock

and prospectus supplement covering the offering, issuance and sale by us of up to $13,000,000 of our common stock that may be issued

and sold under an At The Market Offering Agreement dated as of September 30, 2022.

Pursuant to the ATM Agreement, H.C.

Co., LLC is entitled to a commission equal to 3.0% of the gross sales price of the shares of common stock sold.

We sold $6,032,789 of shares of common stock pursuant to the ATM Agreement during the fiscal year ended December

2024 Direct Offering and Concurrent Private Offering

March 18, 2024, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) with a certain institutional

investor (the “Purchaser”) pursuant to which we sold, in a registered direct offering, an aggregate of (i) 237,224 shares

(the “Shares”) of common stock and (ii) 147,789 pre-funded warrants (the “Pre-funded Warrants”) to purchase up

to 147,789 shares of Common Stock (the “Pre-funded Warrant Shares”).

The offering price per Share was $7.40 and the offering

price per Pre-funded Warrant was $7.399.

The Shares, Pre-funded Warrants and Pre-funded Warrants Shares were offered pursuant to our

Form S-3 Registration as supplemented by a prospectus supplement and accompanying base prospectus dated March 18, 2024, filed with the

SEC on March 19, 2024 pursuant to Rule 424(b)(5) promulgated under the Securities Act.

The registered direct offering closed on March

Company received net proceeds of approximately $2.59 million from the offering, after deducting the estimated offering expenses payable

by the Company, including the tail fees payable to Maxim Group LLC.

The Company intends to use the net proceeds from the offering for

general corporate purposes, including working capital.

a concurrent private placement, we issued the Purchaser warrants to purchase an aggregate of 770,264

shares of common stock for $7.40 per share.

Under the warrants, we are obligated to register the shares underlying the warrants

on a registration statement on Form S-3 (or other applicable form).

If at the time of exercise of the Warrant there is no effective registration

statement available for the shares of common stock underlying the warrants, the warrants may be exercised via a “cashless exercise.”

We will not receive any proceeds from any warrants exercised by a “cashless exercise.”

At-the-Market

Offering Program

the fiscal year ended December 31, 2025, the Company sold 110,619 shares of its common stock under its at-the-market offering program

pursuant to the At-the-Market Offering Agreement, dated September 30, 2022 (the “Sales Agreement”), as amended on November

14, 2025, with H.C.

Wainwright & Co., LLC acting as sales agent.

These sales resulted in gross proceeds of approximately $521,835

and net proceeds of approximately $504,372, after commissions and offering expenses.

Under the Sales Agreement, the Company pays Wainwright

a commission of 3.0% of the gross sales price of the shares sold through the at-the-market offering program.

2025 Warrant Inducement

December 11, 2025, the Company entered into a warrant exercise inducement agreement with the holder of certain existing warrants originally

issued on March 20, 2024 and March 3, 2025.

Pursuant to the agreement, the holder exercised warrants to purchase 2,194,526 shares of

the Company’s common stock at a reduced exercise price of $2.90 per share, resulting in gross proceeds of approximately $6.4 million,

before placement agent fees and other offering expenses.

In consideration for the exercise, the Company issued new warrants to purchase

up to 3,840,421 shares of common stock.

The shares of common stock issuable upon exercise of the new warrants were registered for resale

pursuant to the Company’s registration statement on Form S-3 (File No.

333-292823), filed January 20, 2025 and declared effective

January 28, 2025.

The Company intends to use the net proceeds from the transaction for general corporate and working capital purposes.

The Company engaged Maxim Group LLC as its exclusive financial advisor in connection with the transaction.

June 2025 and October 2025, we conducted a Regulation A offering pursuant to which we sold units consisting of shares of Series C Preferred

Stock and accompanying warrants, generating aggregate gross proceeds of approximately $10.0 million before fees and expenses.

2025 Warrant Inducement

On February 27, 2025, the Company entered into

a warrant exercise inducement agreement with the holder of certain existing warrants originally issued on May 29, 2024.

Pursuant to the

agreement, the holder exercised warrants to purchase 1,295,000 shares of the Company’s common stock at a reduced exercise price

of $5.198 per share, resulting in gross proceeds of approximately $6.7 million, before placement agent fees and other offering expenses.

In consideration for such exercise, the Company issued new warrants to purchase up to 1,424,500 shares of its

common stock at an exercise price of $6.502 per share, subject to adjustment.

The new warrants become exercisable six months from the

date of issuance and expire on the fifth anniversary of the date of issuance.

The shares of common stock issuable upon exercise of the

new warrants were registered for resale pursuant to the Company’s registration statement on Form S-1 (File No.

333-286255), filed

with the SEC on March 28, 2025 and declared effective on April 3, 2025.

The Company used the net proceeds from the transaction for working

capital and general corporate purposes.

The Company engaged Maxim Group LLC as its exclusive financial advisor in connection with the

Statement of Cash Flows

increased from $4,883,099 at December 31, 2024 to $5,945,894 at December 31, 2025 – an increase of $1,062,795 or 22%.

was primarily due to financing activities conducted during the period to support growth of ongoing operations.

cash used by operating activities for the year ended December 31, 2024 was $10,138,798, compared to $11,930,580 in the prior year, driven

by a shift to production and distribution of hard tonneau covers.

receivable decreased at December 31, 2024 by $387,561 and increased by $400,521 in the prior year.

The decrease in accounts receivable

was due to volume shifts from private label sales in 2023 to direct to consumer sales in 2024.

The shift from private label sales to

direct to consumer decreases the cash conversion timeline.

increased at December 31, 2024 by $1,558,562 and increased at December 31, 2023 by $2,285,120 due to a shift in production

requirements from soft tonneau covers to hard tonneau covers.

Prepaid expenses and deposits decreased by $1,305,057 at December 31,

2024 and increased by $776,709 at December 31, 2023 due to deposits by us for the purchase of production equipment and

payable and accrued liabilities increased at December 31, 2024 by $1,167,834 and decreased at December 31, 2023 by $492,114,

respectively.

These fluctuations were driven primarily by the transition to production activities in 2024.

cash used in investing activities for the year ended December 31, 2024 was $528,235 compared to $3,756,364 in the prior year.

in investing activities was primarily due to higher capital expenditures on various production equipment in 2023 to support the Company’s

transition to production in 2024.

cash provided by financing activities for the year ended December 31, 2024 was $12,184,354 compared to $4,431,965 in the prior year.

During the year ended December 31, 2024 the Company received net proceeds of $12,482,549 from the sale of shares and pre-funded warrants.

During the year ended December 31, 2023, the Company received net proceeds of $4,475,869 from the sale of shares and pre-funded warrants.

was primarily due to financing activities conducted during the fiscal year to support growth of ongoing operations.

cash used in operating activities for the fiscal year ended December 31, 2025 was $17,314,390, compared to $10,138,798 in the prior year,

driven by a shift to production and distribution of hard tonneau covers.

receivable increased at December 31, 2025 by $461,382 and decreased by $387,561 in the prior year.

The increase in accounts

receivable when compared with 2024 was due to volume shifts from private label sales in 2023 to direct to consumer sales in 2024.

The shift from private label sales to other business to business channel customers resulted in an increase in accounts receivable in

2025 based on longer payment terms when compared with direct sales to consumers.

increased at December 31, 2025 by $4,340,617 and increased at December 31, 2024 by $1,558,562 due to a shift in production requirements

from soft tonneau covers to hard tonneau covers.

Prepaid expenses and deposits increased by $338,669 at December 31, 2025 and decreased

by $1,305,057 at December 31, 2024 due to deposits by us for the purchase of production equipment and inventory.

payable and accrued liabilities increased at December 31, 2025 by $2,179,473 and increased at December 31, 2024 by $1,167,834, respectively.

These fluctuations were driven primarily by the transition to production activities in 2024 and increased raw materials inventory purchases to support production in 2025.

Net cash used in investing activities for the fiscal year ended December

31, 2025 was $1,119,503 compared to $528,235 in the prior year.

The increase in investing activities was primarily due to higher capital

expenditures on various production equipment in 2025.

Net cash provided by financing activities for the fiscal year ended December

31, 2025 was $19,456,688 compared to $12,184,354 in the prior year.

During the fiscal year ended December 31, 2025 the Company received

net proceeds of $21,823,476 from the sale of shares and pre-funded warrants.

During the fiscal year ended December 31, 2024, the Company

received net proceeds of $12,482,549 from the sale of shares and pre-funded warrants.

Obligations and Commercial Commitments

following table summarizes our contractual obligations as of December 31, 2025 and 2024:

Contractual Obligations

December 31, 2025

December 31, 2024

Operating lease obligations

13 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis