What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-05-13 compared with 2025-11-13 · 237 added, 344 removed, 140 unchanged (81% of the section changed)

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and its subsidiaries, unless otherwise stated.

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.

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.

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)

Key Performance Outcomes

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

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.

We continued our focus to increase efficiency in our production process.

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

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 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.

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

31, 2025 filed with the U.S.

Securities and Exchange Commission (the “SEC”) on March 26,2026 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,

solar integration, portable power station, and NP (Non-Parasitic), Hydrogen-based green energy products and solutions for the automotive

aftermarket accessories, power storage, residential heating, and electric vehicle-charging industries.

We seek to provide consumers with

next-generation automotive aftermarket accessories while capitalizing on growing consumer interest in clean energy solutions and power

grid independence.

Popularity of Electric Vehicles

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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.

Environment Favoring Electric Vehicles

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factors impacting our results of operations.

and Supply Chain Impact

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.

we have taken steps to mitigate these risks through supplier diversification, a portion of our supply chain remains dependent on foreign

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.

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as central banks and the U.S.

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

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 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.

Federal Reserve adjust interest rates in response to evolving inflationary conditions, the cost of

debt financing may fluctuate.

While the Federal Reserve began reducing the federal funds rate in the latter half of 2024 and has

continued measured reductions into 2025 and early 2026, interest rates remain elevated relative to pre-2022 levels, and the pace and

extent of future reductions remain uncertain.

Our $6,000,000 revolving line of credit and our $1,487,000 in equipment financing both

carry floating interest rates, meaning we remain susceptible to variable debt interest costs as a result of changes in interest

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

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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

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

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.

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.

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

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of these foreign currencies denominated transactions results in reduced revenue, operating expenses and net income for our operations.

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.

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

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.

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.

August 5, 2025, Worksport announced its strongest 4-week production run since beginning domestic production.

August 7, 2025, Worksport announced that it had doubled its Bitcoin holdings and invested in additional manufacturing machinery

to double its production output.

September 30, 2025, Worksport announced a 42% increase in national dealer partnerships over the preceding quarter.

following highlights recent material developments in our business in the three months ended March 31, 2026:

January 13, 2026, the Company announced the commercial launch of the SOLIS™ Solar Tonneau Cover and

COR™ Portable Energy System.

The production launch allowed pre-orders to be fulfilled via Worksport’s US facilities,

and a digital marketing campaign was initiated to drive sales for the standalone COR battery system and the solar-integrated

February 12, 2026, the Company announced that a large government entity is actively monitoring upcoming laboratory performance results

of Aetherlux™ Heat Pump as part of an internal evaluation process.

March 19, 2026, the Company announced its presentation of its new, premium tonneau cover model to industry buyers at the Keystone

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.

a regular basis, we evaluate the critical accounting policies used to prepare our consolidated financial statements, including revenue

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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.

information regarding Financial Accounting Standards Board issued Accounting Standards Updates (“ASU”).

RESULTS OF OPERATIONS

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

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

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.

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.

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.

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

following is a discussion of our results of operations from the three months ended March 31, 2026 compared to the three months ended

March 31, 2025

months ended March 31,

(Unfavorable)

Research and development

General and administrative

Sales and marketing

loss on foreign exchange

Loss from operations

Interest expense

income (expense)

$ (5,828,522 )

$ (4,460,464 )

$ (1,368,058 )

Per share data

Basic and diluted earnings

months ended March 31,

(Unfavorable)

Cost of sales

Research and development

General and administrative

Sales and marketing expense

For the three months ended March 31, 2026, net sales generated in

was $3,306,645, compared to $2,227,549 for the same period in 2025, an increase of approximately 48%.

sales increased during the three months ended March 31, 2026 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 AL4 and HD3 covers to end customers.

The Company continues to focus on establishing as well as strengthening

its presence in both the direct-to-consumer and business-to-business sales channels while also strengthening customer support to increase

customer satisfaction and increase product turnover.

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.

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 appropriate.

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

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

dealers and sell to jobbers in strategic regions.

Lastly, we are in closing discussions with a network of nationwide U.S.

dealers capable

of bringing our product to all U.S.

continental states.

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.

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

This includes any import duty charges, taxes,

and shipping charges.

sales from online retailers of our products decreased by $60,045, from $1,871,085 for the three months ended March 31, 2025 to $1,811,040

for same period ended March 31, 2026.

The 3% decrease is a result of the Company’s focus to lower our customer acquisition cost

with additional focus on brand awareness and less focus on conversion marketing.

The reduction in conversion marketing efforts decreased

order volume, but this was offset by an increase in the average order value of our product offerings.

The decrease in the cost of sales as a percentage of sales was primarily driven by 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 three

months ended March 31, 2026, the overall effect of increased scale and production efficiencies resulted in an improvement in our gross

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 extent.

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 with 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.

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 three months ended September 30, 2025 by $2,209,166, from $4,152,389 for the three months ended September

exceptions apply on rare occasions where product is shipped outside the contiguous United Sates or from the U.S.

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 three months ended March 31, 2026 by $1,945,596, from $4,652,527 for the three months ended March 31,

2025 to $6,598,123, mainly due to the following factors:

and development expense decreased by $95,351, from $396,446 in 2024 to $301,095 in 2025.

and development expense decreased by $164,268, from $369,601 for the three months ended March 31, 2025 to $205,333 for the three months ended March 31, 2026.

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.

progress of our AL3 and AL4 product lines, which required less R&D efforts as resources were shifted to normal-course production.

and administrative expense increased by $824,332, from $3,414,822 in 2025 to $4,239,154 in 2026.

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.

The increase was related

to a shift in overhead absorption driven by production volume requirements as well as an increase in labor costs to support production

and marketing expense increased by $1,286,118, from $869,749 in 2025 to $2,155,867 in 2026.

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.

fees expense, which includes accounting, legal, and consulting fees, increased by $126,928 from $621,728 in 2024 to $748,656 in

The increase in professional fees was primarily driven by stock awards granted to external consultants to support strategic

Income and Expenses

reported net other expenses for the three months ended September 30, 2025 of $135,908, compared to $229,701 for three months ended September

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.

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.

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

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,

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%.

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.

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.

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.

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.

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 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:

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.

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 .

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.

fees expense, which includes accounting, legal, and consulting fees, decreased by $519,879 from $2,332,069 in 2024 to $1,812,190 in

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.

primarily attributable to marketing campaigns to promote brand awareness.

Income and Expenses

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.

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.

reported net other expenses for the three months ended March 31, 2026 of $84,345, compared to $204,158 for three months ended March

The decrease in net other expenses was attributed to decreased interest expense on our line of credit as a result of reduced usage following cash inflows as a result of the December warrant inducement transaction.

loss for the three months ended March 31, 2026 was $5,828,522, compared to a net loss of $4,460,464 for the three months ended March 31, 2025

– an increase of approximately 31%.

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

on expanding our operations and promoting our brand awareness.

and Capital Resources

of September 30, 2025 and December 31, 2024, we had $3,761,690 and $4,883,099, respectively in cash and cash equivalents.

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.

of March 31, 2026 and December 31, 2025, we had $566,583 and $5,945,894, respectively in cash and cash equivalents.

As of March 31,

2026, we had $2,479,490 of remaining available capacity on our revolving line of credit compared with $3,448,016 of remaining

available capacity as of December 31, 2025.

The decrease in cash and cash equivalents and decrease in the remaining available

capacity on our revolving line of credit was primarily a result of our use of proceeds from our warrant inducement transaction in

December 2025 to fund working capital requirements to support the production of our new product offerings.

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).

During the three months ended March 31, 2026, we had net losses of $5,828,522 (three months

ended March 31, 2025 - $4,460,464).

As of March 31, 2026, the Company had working capital of $6,579,541 (As of December 31, 2025 -

$10,061,578) and had an accumulated deficit of $89,729,030 (As of December 31, 2025 - $83,873,790).

their fiscal 2025 audit report, our independent auditors expressed that there is substantial doubt as to our ability to continue as a

8 unchanged sentences

outstanding warrants.

During the nine months ended September 30, 2025, the Company received net proceeds of $13,358,414 from

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.

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

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.

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.

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.

During the three months ended March 31, 2026, the Company received net proceeds of $2,208,337 from the

offerings described below.

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

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.

have raised funds during the three months ended March 31, 2026 from the following public and private securities

November 14, 2025, the Company entered into an amendment to its At The Market Offering Agreement, dated September 30, 2022, with H.C.

Wainwright & Co., LLC (“Wainwright”) in connection with a new shelf registration statement on Form S-3 (File No.

which was declared effective by the SEC on December 12, 2025.

Pursuant to the amended ATM Agreement and the related prospectus supplement

dated December 12, 2025, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $4.0 million

through Wainwright as sales agent.

During the three months ended March 31, 2026, the Company sold 1,468,606 shares of common stock under

the ATM Agreement for aggregate gross proceeds of approximately $2,232,530, resulting in net proceeds of approximately $2, 154,230

after deducting commissions and offering expenses.

Because the Company’s public float is below

$75.0 million, sales under the ATM Agreement are subject to the limitations of General Instruction I.B.6 of Form S-3, which limits the

amount of securities the Company may sell in primary offerings during any rolling 12-month period.

As a result, the amount currently

available for sale under the ATM Agreement may be significantly less than the aggregate amount registered under the Company’s shelf

registration statement.

the three months ended March 31, 2026, we received $54,107 of proceeds net of issuance cost that were previously held in escrow.

funds in escrow pertain to the Regulation A offering from 2025.

Statement of Cash Flows

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.

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.

receivable increased at September 30, 2025 by $472,485 and increased at September 30, 2024 by $3,320.

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.

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.

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.

payable and accrued liabilities increased at September 30, 2025 by $1,477,537 compared to an increase of $1,031,400 at September 30,

The increase is primarily due to an increase in raw materials order volume.

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.

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.

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.

decreased from $5,945,894 at December 31, 2025, to $566,583 at March 31, 2026 – a decrease of $5,379,311 or 90%.

was primarily due to the use of cash to acquire working capital based on supporting the production of existing product offerings as

well as the expected growth of additional product offerings launched in 2026.

The Company procured approximately $5.1 million of raw materials to support production of our expanded product lineup,

including the SOLIS, COR and NEXUS product lines.

Some of our new product offerings utilize raw materials common to existing product offerings.

Approximately $1.0 million of these raw materials purchases remained in accounts payable as of March 31, 2026.

cash used in operating activities for the three months ended March 31, 2026 was $8,234,754, compared to $3,839,918 in 2025,

primarily driven by the launch of additional product offerings during the three months ended March 31, 2026.

Net cash used in operating activities exceeded the Company’s net loss by approximately $2.4 million.

The principal

component of the change is attributable to the $2.1 million increase in inventory, reflecting the procurement of raw materials and production

of finished goods to support the launch of new product offerings during the three months ended March 31, 2026:

SOLIS, COR, and NEXUS.

receivable decreased at March 31, 2026 by $23,759 and increased by $25,362 in the prior period.

The decrease in accounts receivable

is based on the timing of shipment with various business-to-business customers and well as the concentration of customers in certain

sales channels.

increased at March 31, 2026 by $2,092,218, and increased at March 31, 2025 by $583,116, as a result of the procurement and production of raw materials and finished goods to support the successful launches of our COR,

SOLIS and NEXUS product lines.

Prepaid expenses and other decreased by $62,902 at March 31, 2026, and increased by $192,071 at March 31, 2025 due to timing of advanced

payments for professional services to support operations.

payable and accrued liabilities decreased at March 31, 2026 by $1,562,383 compared to an increase of $390,691 at March 31, 2025

due to the payment for raw materials and finished goods procured and produced in preparation to support the successful

launches of our COR, SOLIS and NEXUS product lines.

cash used in investing activities for the three months ended March 31, 2026 was $103,643 compared to $458,342 for the three months

ended March 31, 2025.

The decrease in investing activities was primarily attributable to our purchase of cryptocurrency and website

enhancements in the prior period, both of which are classified as intangible assets.

cash provided by financing activities for the three months ended March 31, 2026 was $2,959,086 compared to net cash provided by financing activities

of $4,495,533 for the three months ended March 31, 2025.

Net cash provided by financing activities were principally due to our use of the ATM, whereby we received net proceeds

of $2,154,230.

We also received proceeds from our line of credit through net borrowings of $829,591 for the three months ended March 31,

Material Contractual Obligations

As of March 31, 2026, the Company had an outstanding

contractual obligation of approximately $2.1 million related to the acquisition of manufacturing equipment from Prima Power, representing

approximately 70% of the total equipment cost of approximately $3.0 million.

Equipment deposits totaling approximately $859,000 are reflected

in construction in progress on the Company’s balance sheet, and approximately $879,000 of capital expenditures related to the equipment

were included in accounts payable as of March 31, 2026.

The remaining amounts are expected to become due when the equipment is delivered,

and installation milestones are achieved.

Sheet Arrangements

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What changed 10-Q

Item 2. Management’s Discussion and Analysis