What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2025-03-27 compared with 2024-03-28 · 753 added, 794 removed, 373 unchanged (81% of the section changed)

1 unchanged sentence

TO FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

Audited Consolidated Balance Sheets at December 31, 2023 and 2022

Audited Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2023 and 2022

Consolidated Statements of Shareholders’ Equity for the year ended December 31, 2023 and 2022

Audited Consolidated Statements of Cash Flow for the years ended December 31, 2023 and 2022

Notes to Audited Consolidated Financial Statements

of Independent Registered Public Accounting Firm

Board of Directors and Stockholders

Consolidated Balance Sheets at December 31, 2024 and 2023

Consolidated Statements of Operations and Comprehensive Loss for the years ended December 31, 2024 and 2023

Consolidated Statements of Shareholders’ Equity for the years ended December 31, 2024 and 2023

Consolidated Statements of Cash Flow for the years ended December 31, 2024 and 2023

to Audited Consolidated Financial Statements

OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

on the Financial Statements

15 unchanged sentences

Our responsibility is to express an opinion

on the Company’s consolidated financial statements based on our audits.

on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public

9 unchanged sentences

Accordingly, we express no such opinion.

audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due

audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due

to error or fraud, and performing procedures that respond to those risks.

1 unchanged sentence

regarding the amounts and disclosures in the consolidated financial statements.

Our audit also included evaluating the accounting principles

Our audits also included evaluating the accounting principles

used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

9 unchanged sentences

of the Matter

of December 31, 2023, the Company’s inventory balance was $3.6 million.

As reported in Note 5, inventory has increased significantly

over the past year as the Company began to stockpile inventory due to its start of domestic production during 2023.

of December 31, 2024, the Company’s inventory balance was approximately $5.190 million.

As reported in Note 3, inventory has increased over

the past year as the Company has shifted to full scale production in its West Seneca manufacturing facility.

The Company evaluates

4 unchanged sentences

auditing procedures related to inventory valuation included the following, among others:

evaluated the appropriateness and consistency of management’s methods used to value

inventory and develop its estimates.

evaluated the reasonableness of judgments made and significant assumptions used by management

relating to key estimates.

evaluated the appropriateness and consistency of management’s methods used to value inventory and develop its estimates.

evaluated the reasonableness of judgments made and significant assumptions used by management relating to key estimates.

inquired of management relative to write-offs of inventory during the year.

tested the completeness and accuracy of management’s inventory detail.

developed an independent expectation of the obsolescence reserve based on our knowledge of

the Company’s inventory, including analysis of slow-moving items and historical usage

and compared it to actual.

performed a lower of cost or net realizable value analysis by selecting a sample of items

included in inventory at year-end.

selected a sample of purchases made throughout the year to ensure they were included in inventory

at the proper weighted-average value.

selected a sample of purchases made before and after the year end to ensure proper cut-off

was achieved.

our physical inventory observation, we toured the Company’s facility and examined inventory

on hand to determine the completeness and existence of ending inventory.

examined management’s overhead analysis and performed procedures to test its completeness

and accuracy.

developed an independent expectation of the obsolescence reserve based on our knowledge of the Company’s inventory, including

analysis of slow-moving items and historical usage and compared it to actual.

performed a lower of cost or net realizable value analysis by selecting a sample of items included in inventory at year-end.

selected a sample of purchases made throughout the year to ensure they were included in inventory at the proper weighted-average

selected a sample of purchases made before and after the year end to ensure proper cut-off was achieved.

our physical inventory observation, we toured the Company’s facility and examined inventory on hand to determine the completeness

and existence of ending inventory.

examined management’s overhead analysis and performed procedures to test its completeness and accuracy.

Shareholders’

8 unchanged sentences

auditing procedures related to equity transactions included the following, among others:

evaluated the appropriateness and consistency of management’s methods used to develop

its estimates.

evaluated the appropriateness and consistency of management’s methods used to develop its estimates.

gained an understanding of management’s process to record the equity transactions.

9 unchanged sentences

auditing procedures related to going concern included the following, among others:

obtained the Company’s evaluation of its ability to continue as a going concern and

evaluated the Company’s plans to address these concerns.

obtained the Company’s evaluation of its ability to continue as a going concern and evaluated the Company’s plans to

address these concerns.

analyzed the Company’s current state of operations.

5 unchanged sentences

Current assets

Cash and cash equivalents

Cash and cash

Accounts receivable, net

Other receivable

Inventory (note 5)

Prepaid expenses and deposits (note 8)

Total Current Assets

Inventories, net (Note

expenses and deposits (Note 6)

Current assets

Investment (Note 11)

Property and Equipment, net (note 6)

Right-of-use asset, net (note 15)

Intangible Assets, net (note 7)

Liabilities and Shareholders’ Deficit

Property and equipment,

Operating lease right-of-use

assets (Note 12)

assets, net (Note 5)

LIABILITIES AND SHAREHOLDERS’

Current liabilities

Accounts payable and accrued liabilities

Payroll taxes payable

Related party loan (note 10)

Loan payable (note 16)

Current lease liability (note 15)

Total Current Liabilities

Long Term – Lease Liability (note 15)

Loan payable (note 16)

Total Liabilities

Accounts payable

Accrued liabilities and

Accrued compensation

Related party loan

Long-term debt, current

portion (Note 13)

liability, current portion (Note 12)

current liabilities

Lease liability, excluding

current portion (Note 12)

Long-term debt, excluding current portion (Note 13)

Shareholders’ equity

Series A & B Preferred Stock, $ 0.0001 par value, 100,100 shares authorized, 100 Series A and 0 Series B issued and outstanding, respectively (note 9)

Common stock, $ 0.0001 par value, 299,000,000 shares authorized, 20,320,503 and 17,159,376 shares issued and outstanding, respectively (note 9)

Series A & B Preferred Stock, $ 0.001 par

value, 10,010 shares authorized, 100 Series A and 0 Series B issued and outstanding, respectively (Note 7)

Common stock, $ 0.001 par value, 29,900,000

shares authorized, 4,016,205 and 2,032,050 shares issued and outstanding, respectively (Note 7)

Additional paid-in capital

4 unchanged sentences

( 48,313,177 )

Cumulative translation adjustment

Total Shareholders’ Equity

Total Liabilities and Shareholders’ Equity

accompanying notes form an integral part of these consolidated financial statements.

Cumulative translation

shareholders’ equity

liabilities and shareholders’ equity

accompanying Notes to Consolidated Financial Statements.

Statements of Operations and Comprehensive Loss

31, 2024 and 2023

Cost of Goods Sold

Cost of sales

Operating expenses

Research and development

General and administrative

1 unchanged sentence

Professional fees

Gain on foreign exchange

Total operating expenses

Loss from operations

on foreign exchange

operating expenses

from operations

( 15,465,834 )

4 unchanged sentences

Rental income (Note 17)

Gain on settlement of debt

Total other income (expense)

other income (expense)

( 16,163,789 )

( 14,928,958 )

Loss per Share (basic and diluted)

Weighted Average Number of Shares (basic and diluted)

accompanying notes form an integral part of these consolidated financial statements

Loss per share (basic

Weighted average number

of shares (basic and diluted)

accompanying Notes to Consolidated Financial Statements.

Statements of Shareholders’ Equity

31, 2024 and 2023

Preferred Stock

Additional Paid-in

Share Subscriptions

Share Subscription

Cumulative Translation

Stockholders’ Equity

Balance at December 31, 2021

Subscriptions

Stockholders’

December 31, 2022

$ ( 33,384,219 )

Share issuance

Warrant exercise (note 18)

Issuance for services and subscriptions payable

Shares issued (Note 7)

Warrant exercise (Note 15)

Stock option forfeiture (Note 16)

( 14,928,958 )

5 unchanged sentences

Shares issued (Note 7)

( 3,858,464 )

Warrant inducement (Note 15)

Warrant exercise (Note 15)

Stock option forfeiture (note 19)

( 16,163,789 )

3 unchanged sentences

$ ( 64,476,966 )

accompanying notes form an integral part of these consolidated financial statements

accompanying Notes to Consolidated Financial Statements.

Statements of Cash Flows

3 unchanged sentences

$ ( 14,928,958 )

Adjustments to reconcile net loss to net cash from operating activities:

Shares, options and warrants issued for services

Adjustments to reconcile

net loss to net cash from operating activities:

Shares, options and warrants

issued for services

Depreciation and amortization

Change in operating lease

Accrued interest

Gain on settlement of debt

Adjustments to reconcile net income loss to cash provided

2 unchanged sentences

( 8,078,283 )

Changes in operating assets and liabilities (note 13)

( 3,852,297 )

Net cash used in operating activities

( 11,930,580 )

Changes in operating assets

and liabilities (Note 10)

( 3,852,297 )

Cash Flows from Investing Activities

Purchase of intangible assets

Purchase of property and equipment

cash used in operating activities

( 10,138,798 )

( 11,930,580 )

Net cash used in investing activities

Cash flows from investing

Purchase of property and

( 3,690,056 )

cash used in investing activities

( 3,756,364 )

Financing activities

Proceeds from issuance of common shares, net of issuance cost

Proceeds from loan payable

Proceeds from issuance of common shares, net

of issuance cost

Proceeds from warrant exercise (Note 15)

Proceeds from line of credit

Repayments on line of credit

( 6,758,422 )

Proceeds from long-term debt

Related party loan

Repayments on loan and promissory notes payable

Net cash provided by financing activities

Change in cash

Repayments on short term

and long-term debt

( 5,325,249 )

cash provided by financing activities

Change in cash

( 11,254,979 )

Cash and cash equivalents - beginning of year

Cash and cash equivalents end of year

Supplemental Disclosure of non-cash activities

and cash equivalents - beginning of year

and cash equivalents end of year

Supplemental disclosure

of non-cash activities

Shares issued for purchase of intangible assets

Cashless warrant exercise

Supplemental Disclosure of cash flow information

disclosure of cash flow information

Income tax paid

Interest paid

accompanying notes form an integral part of these consolidated financial statements.

accompanying Notes to Consolidated Financial Statements.

to the Consolidated Financial Statements

31, 2024 and 2023

Nature of Operations

(together with its subsidiaries, the “Company”) was incorporated in the State of Nevada on April 2, 2003 under the name

Franchise Holdings International, Inc.

In May 2020, FNHI changed its name to Worksport Ltd.

During the year ended

December 31, 2014, the Company completed a reverse acquisition transaction (the “Reverse Acquisition”) with TruXmart Ltd.

(“TruXmart”).

On May 2, 2018, Truxmart legally changed its name to Worksport Ltd.

(“Worksport”).

Worksport designs

and distributes truck tonneau covers in Canada and the United States.

(“Terravis”) was incorporated in the State of Colorado on May 5, 2021.

On August 20, 2021, the Company was issued

100 common shares at par value of $ 0.0001 per share for a controlling interest in Terravis.

During the year ended December 31, 2022,

the Company was issued an additional 9,990,900 common shares of Terravis at par value of $ 0.0001 per share.

January 20, 2022, the board of directors of Terravis and the board of directors of the Company, as the sole stockholder of Terravis,

adopted the Terravis Energy, Inc.

2022 Equity Incentive Plan (the “Terravis 2022 Plan”).

Under the Terravis 2022 Plan, Terravis’

board of directors or a committee designated by the board of directors may grant incentive stock options, nonqualified stock options,

shares of restricted stock, restricted stock units, performance shares, performance units and stock appreciation rights to eligible participants

consisting of employees of Terravis, member of Terravis’ board of directors and advisors and consultants to Terravis.

board of directors authorized and reserved 1,500,000 shares of Terravis common stock under the Terravis 2022 Plan, subject to adjustment

for any stock splits of Terravis’s common stock or reorganization, recapitalization, or acquisition of Terravis.

April 6, 2022, Terravis issued Lorenzo Rossi and Steven Rossi, both of whom are members of Terravis’s board of directors, were

granted non-qualified stock options under the Terravis 2022 Plan exercisable for 750,000 and 250,000 shares of Terravis’s common

stock, respectively, with exercise prices of $ 0.01 per share exercisable from the date of grant until the tenth anniversary of the date

April 12, 2022, Steven Rossi, William Caragol, and Ned L.

Siegel, all of whom are members of Terravis’s board of directors, were

granted non-qualified stock options under the Terravis 2022 Plan exercisable for 250,000 , 50,000 , and 50,000 shares of Terravis’s

common stock, respectively, with exercise prices of $ 0.01 per share exercisable from the date of grant until the tenth anniversary of

the date of grant.

November 4, 2022, Terravis filed an amendment to its articles of incorporation with the Colorado Secretary of State, pursuant to which

the Terravis board of directors attached a certificate of designation designating 1,000 shares of its authorized preferred stock as Series

A Preferred Stock with a par value $ 0.0001 per share.

According to the certificate of designation, holders of the Series A Preferred

Stock do not have any dividend, conversion or liquidation rights.

Unless otherwise prohibited by law or the Series A Preferred Stock

certificate of designation, the Series A Preferred Stock shall vote together with the outstanding shares of common stock of Terravis

as one class on any matter put forth before the common stockholders.

For so long the Series A Preferred Stock is outstanding, the holders

of the Series A Preferred Stock shall be entitled to 51 % of the total votes on all matters regardless of the actual number of shares

of Series A Preferred Stock then outstanding, and the holders of the common stock and any other shares of capital stock of Terravis entitled

shall be entitled to their proportional share of the remaining 49 % of the total votes based on their respective voting power.

4, 2022, the Company issued 1,000 shares of Series A Preferred Stock to Lorenzo Rossi, the President of Terravis and the Chief Executive

Officer and President of the Company.

the year ended December 31, 2022, Worksport New York Operations Corporation and Worksport USA Operations Corporation were incorporated

in the state of New York and Colorado, respectively.

During the year ended, the Company was issued 1,000 common shares at par value of

$ 0.0001 of Worksport USA Operations Corporation.

On April 1, 2022, the Company was issued 10,000 common shares of Worksport New York

Operations Corporation.

Description of Business and Significant Accounting Policies

Company’s corporate history and business overview are described in detail in our most recent registration statement on Form S-1,

filed with the SEC on July 3, 2024, which is incorporated herein by reference.

For a description of material developments the Company

has undertaken since that time, see Corporate History of Part I Item 1, Business of this report.

of presentation – The accompanying financial statements have been prepared in accordance with U.S.

generally accepted accounting

principles (“GAAP”) as contained within the Financial Accounting Standards Board (“FASB”) Accounting Standards

Codification (“ASC”).

Consolidation

– The Company’s consolidated financial statements consolidate the accounts of the Company.

All intercompany transactions,

balances and unrealized gains or losses from intercompany transactions have been eliminated upon consolidation.

currency translation and presentation – The consolidated financial statements are presented in United States Dollars.

The functional

currency of the Company and all its subsidiaries is the United States Dollar.

Transactions denominated in foreign currencies are initially

recorded in the functional currency using exchange rates in effect at the dates of the transactions.

Monetary assets and liabilities

denominated in foreign currencies are translated into the functional currency using exchange rates in effect at the dates of the transactions.

All exchange gains and losses are included in the statement of operations and comprehensive loss.

of estimates – The preparation of financial statements in conformity with U.S.

generally accepted accounting principles requires

management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent

liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods.

results could differ from these estimates and assumptions.

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

recognized when (1) products are shipped, with no right of return except for defective products, and the title and risk of loss has passed

to customers;

and (2) when they are delivered based on the terms of the sale, and there is an identifiable contract with a customer with

defined performance obligations, the transaction price is determinable, and the entity has fulfilled its performance obligation.

related to shipping and handling costs billed to customers is included cost of sales and presented net of related shipping and handling costs.

of sales – Includes costs of products sold, which include but are not limited to:

purchased product, raw material, direct labor,

shipping and handling costs, depreciation and amortization, indirect costs and overhead charges.

and development – Research and development costs are expensed as incurred and include consulting and material

Advertising costs – The Company expenses

advertising costs as incurred and includes expenses in selling and marketing.

payments - The Company offers a share option plan for its directors, officers, employees, and consultants.

“Compensation – Stock Compensation” prescribes accounting and reporting standards for all share-based payment

transactions in which employee services are acquired.

Transactions include incurring liabilities, or issuing or offering to issue

shares, options, and other equity instruments such as stock appreciation rights.

Share-based payments to employees, including grants

of employee stock options, are recognized as compensation expense in the financial statements based on their fair values at the time

Compensation expense is included in general and administrative expenses.

Compensation expense is recognized over the estimated

period during which an employee is required to provide services in exchange for the award, known as the requisite service period

(usually the vesting period).

The Company elected to account for forfeitures when the forfeiture of the underlying awards occur.

of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable:

(a) the goods

or services received;

or (b) the equity instruments issued.

The fair value of the share-based payment transaction is determined at the

earlier of the performance commitment date or performance completion date.

taxes - Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary

differences between taxable income and pretax financial income, and between the tax bases of assets and liabilities and their reported

amounts in the financial statements.

Deferred tax assets and liabilities are included in the consolidated financial statements at currently

enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled.

As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

positions initially need to be recognized in the financial statements when it is more likely than not the positions will be sustained

upon examination by the tax authorities.

The Company recognizes interest accrued related to

unrecognized tax benefits in interest expenses and penalties in operating expenses.

The Company treats tax on the Global Intangible Low-Tax

Income (“GILTI”) as a current period cost included in tax expense in the year incurred.

The Company does not measure the impact

of GILTI in the determination of deferred taxes.

and cash equivalents - All highly liquid investments with an original maturity of three months or less are considered cash equivalents.

Cash and cash equivalents in financial institutions may exceed insured limits at various times during the year and subject the Company

to concentrations of credit risk.

Cash and cash equivalents includes restricted cash at December 31, 2023 of $ 730,802 and primarily represents

funds held to satisfy obligations related to a financing arrangement.

There is no restricted cash at December 31, 2024 (see Note 13).

to the Consolidated Financial Statements

31, 2024 and 2023

Basis of Presentation and Business Condition

Statement of Compliance

Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States

(“GAAP”) as issued by the Financial Accounting Standards Board (“FASB”).

Basis of Measurement

Company’s financial statements have been prepared on an accrual basis.

Consolidation

Company’s consolidated financial statements consolidate the accounts of the Company.

All intercompany transactions, balances and

unrealized gains or losses from intercompany transactions have been eliminated upon consolidation.

Functional and Presentation Currency

consolidated financial statements are presented in United States Dollars.

The functional currency of the Company and all its subsidiaries

is the United States Dollar.

For purposes of preparing these consolidated financial statements, transactions denominated in Canadian

Dollar were converted to United States Dollar at the spot rate.

Transaction gains and losses resulting from fluctuations in currency

exchange rates on transactions denominated in currencies other than the functional currency are recognized as incurred in the accompanying

consolidated statement of operations and comprehensive loss.

Use of Estimates

preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management

to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and

liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

results could differ from these estimates.

Description of Business and Significant Accounting Policies (continued)

receivable, net – Accounts receivable primarily

consists of amounts that are due and payable from distributors, wholesalers, and private label partners.

Receivables are stated at net

realizable value, which approximates fair value.

Receivables are reduced by an allowance for credit losses for amounts that may be uncollectible

in the future.

The allowance is determined by considering factors such as historical experience, credit quality, age

of the accounts receivable, economic conditions and reasonable forecasted financial information that may affect a customer’s ability

The allowance for credit losses at December 31, 2024 and 2024 is $ 15,000 and $ 0 , respectively.

- Inventories are stated at the lower of cost or net realizable value.

The cost of inventory is measured on a weighted average cost

Cost includes purchase price of materials, freight, and related costs required to bring the goods to Company warehouses.

are reviewed to determine if quantities are in excess of forecasted usage or if they become obsolete.

and equipment, net – Property and equipment are measured at cost.

Maintenance and repair costs are charged to expense when

Depreciation is recognized on a straight-line method based on the following estimated useful lives:

of Estimated Useful Lives of Property and Equipment

and equipment

years or lease term, if shorter

Manufacturing

assets - The Company recognizes leases in accordance with ASC 842, which requires lessees to recognize operating leases on the balance

sheet as right-of-use assets and lease liabilities based on the value of the discounted future lease payments.

assets – Patents and other intangibles are amortized using the straight-line method over their estimated useful lives.

Intangible assets, such as trademarks with indefinite lives, are not amortized.

of long-lived assets – Intangible assets are evaluated for impairment at least annually or when events or circumstances arise

that indicate the existence of impairment.

The Company evaluates the recoverability of identifiable intangible assets whenever events

or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable.

When indicators of impairment

exist, the Company measures the carrying amount of the asset against the estimated undiscounted future cash flows associated with it.

Should the sum of the expected future cash flows be less than the carrying value of the asset being evaluated, an impairment loss would

be recognized.

The impairment loss would be calculated as the amount by which the carrying value of the asset exceeds its fair value.

The evaluation of asset impairment requires the Company to make assumptions about future cash flows over the life of the asset being

These assumptions require significant judgment, and actual results may differ from assumed and estimated amounts.

years ended December 31, 2024 and 2023, the Company had no impairment losses related to intangible assets.

to the Consolidated Financial Statements

31, 2024 and 2023

Description of Business and Significant Accounting Policies (continued)

warranties - The Company currently offers a three year limited warranty against defective products out-of-the-box.

Customers who are not satisfied with their purchase may attempt to have their purchases reimbursed outside of the warranty

instruments - FASB ASC 825, Disclosures about Fair Value of Financial Instruments, requires disclosures of the fair value of financial

The carrying value of the Company’s current financial instruments, which include cash and cash equivalents, accounts

receivable, and accounts payable and accrued liabilities, approximates their fair values because of the short-term maturities of these

The carrying value of the loan payable approximates fair value as its interest rate fluctuates with market interest rates.

We do not hold or issue financial instruments for trading purposes.

party transactions - All transactions with related parties are in the normal course of operations and are measured at the exchanged

Reclassifications

– Certain prior year amounts have been reclassified to conform to current year’s presentation.

The Company reclassified

accrued liabilities of $ 800,283 and $ 190,896 for the fiscal years ended December 31, 2024 and 2023, respectively, which were reclassified

from accounts payable and accrued liabilities to accrued liabilities and other to better align functional classification of obligations.

The Company also reclassified research and development costs of $ 2,289,940 and $ 1,669,318 for the fiscal years ended December 31, 2024

and 2023, respectively, which were reclassified from general and administrative expense, to research and development expense.

This change improves the disclosure of costs to develop new products and technologies and reflects the Company’s ongoing investment

in innovation.

This change also provides a more accurate depiction of the Company’s operating performance.

accounting pronouncements

accounting pronouncements adopted

November 2023, the Financial Standards Accounting Board (FASB) issued Accounting Standards Update (ASU) 2023-07 “ Segment Reporting

(Topic 280) :

Improvements to Reportable Segment Disclosures ” which expands annual and interim disclosure requirements

for reportable segments, primarily through enhanced disclosures about significant segment expenses.

ASU 2023-07 is effective for our

annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted.

this standard for the year ended December 31, 2024, and applied the amendments retrospectively to all prior periods presented.

to Note 18, Segment Reporting.

The adoption of this standard did not have a material effect on the financial statements and related disclosures.

accounting pronouncements not yet adopted

December 2023, the FASB issued ASU 2023-09 “ Income Taxes (Topics 740) :

Improvements to Income Tax Disclosures ”

to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid.

is effective for our annual periods beginning January 1, 2025, with early adoption permitted.

The Company is currently evaluating the

potential effect that the updated standard will have on the financial statements and related disclosures.

November 2024, the FASB issued ASU 2024-03, “ Income Statement – Reporting Comprehensive Income – Expense Disaggregation

Disclosures” to enhance disclosure of specified categories of expenses (purchases of inventory, employee compensation, depreciation

and amortization) included in certain expense captions presented on the face of the income statement.

ASU 2024-03 is effective beginning

after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted.

The Company is currently evaluating the potential effect that the updated standard will have on the financial statements and related

Company considers the applicability and impact of all ASUs.

ASUs not listed were assessed and determined to be either not applicable

or had or are expected to have an immaterial impact on the financial statements and related disclosures.

to the Consolidated Financial Statements

31, 2024 and 2023

Going Concern

of December 31, 2023, the Company had $ 3,365,778 in cash and cash equivalents.

The Company has generated only limited revenues and has

relied primarily upon capital generated from public and private offerings of its securities.

Since the Company’s acquisition of

Worksport in fiscal year 2014, it has never generated a profit.

As of December 31, 2023, the Company had an accumulated deficit of $ 48,313,177 .

of December 31, 2024, the Company had $ 4,883,099

in cash and cash equivalents.

The Company also has availability on its revolving line of credit of $ 892,000 .

The Company has

generated only limited revenues and has relied primarily upon capital generated from public and private offerings of its securities.

Since the Company’s acquisition of Worksport in 2014, it has never generated a profit.

As of December 31, 2024,

the Company had an accumulated deficit of $ 64,476,966 .

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

12 unchanged sentences

is taking will be successful.

to the Consolidated Financial Statements

31, 2023 and 2022

Going Concern (continued)

Company has historically operated at a loss, although that may change as sales volumes increase and margins improve.

As of December 31, 2023, the

Company had working capital of $ 1 , 956,894

(2022 – $ 15,870,377 ) and

an accumulated deficit of $ 48,313,177 (2022

- $ 33,384,219 ).

As of December 31, 2023, the Company had cash and cash equivalents of $ 3,365,778

(2022 - $ 14,620,757 ).

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

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.

As of December 31,

2024, the Company had cash and cash equivalents of $ 4,883,099 (2023 - $ 3,365,778 ).

Despite the Company having completed its purchasing

of large manufacturing machinery for phase one output levels, 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

2025, which should mitigate the effects of operational costs on cash and cash equivalents as it releases new product lines;

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

began improving output and sales during 2024.

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

6 unchanged sentences

& Co., LLC, as the sales agent (“HCW”).

Pursuant to the ATM Agreement, HCW is entitled to a commission equal to 3.0 % of the

gross sales price of the shares of common stock sold.

As of December 31, 2023, the Company has sold and issued 99,127 shares of common

stock in consideration for net proceeds of $ 214,238 under the ATM Agreement.

November 2, 2023, the Company closed a sale of 1,925,000

shares of common stock and 1,575,000

pre-funded warrants for a total net proceeds of $ 4,261,542 .

In association with the sale, the Company also issued 7,000,000

warrants convertible for 7,000,000

shares of common stock at an exercise price of $ 1.34 .

The warrants are exercisable six months after issuance and will expire five

and a half years from the issuance date.

Pursuant to the ATM Agreement, HCW is entitled to a commission equal to 3.0 %

of the gross sales price of the shares of common stock sold.

Through December 31, 2024, the Company has sold and issued 761,408 shares

of common stock in consideration for net proceeds of $ 6,247,097 under the ATM Agreement.

November 2, 2023, the Company consummated a registered direct offering pursuant to which the Company issued 192,500 shares of common

stock and 157,500 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 700,000 warrants in a private sale.

The warrants are exercisable

for 700,000 shares of common stock for $ 13.40 per share six months after issuance and until five and a half years from the issuance date,

subject to beneficial ownership limitations as described in the warrants.

The Company registered the 700,000 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 the Company issued 237,224 shares of common stock

and 147,789 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 770,026 warrants in a private sale.

The warrants are exercisable for 770,026 shares of common stock for $ 7.40 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 770,026 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.

December 13, 2024, the Company filed a Prospectus Supplement to amend Amendment No.

1 to the prospectus supplement dated as of November

5, 2024, prospectus supplement dated as of October 13, 2022, and the prospectus dated as of October 13, 2022 to increase the maximum

amount of shares that we are eligible to sell pursuant to the Sales Agreement under General Instruction I.B.6.

to $ 4,962,092 of shares

of our common stock not including whatever had been sold prior to this filing date.

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

exercises of outstanding warrants.

During the year ended December 31, 2023, the Company received nominal proceeds from public offerings,

private placement offerings, and from the exercise of any outstanding warrants or options.

Management is focused on transitioning towards

revenue as its principal source of liquidity by growing existing product offerings as well as the Company’s customer base.

Company cannot give assurance that it can increase its cash balances or limit its cash consumption and thus maintain sufficient cash

balances for planned operations or future business developments.

Future business development and demands may lead to cash utilization

at levels greater than recently experienced.

The Company may need to raise additional capital in the future.

However, the Company cannot

provide assurances it will be able to raise additional capital on acceptable terms, or at all.

Management is focused on transitioning towards revenue as its principal source of liquidity by growing

existing product offerings as well as the Company’s customer base.

The Company cannot give assurance that it can increase its cash

balances or limit its cash consumption and thus maintain sufficient cash balances for planned operations or future business developments.

Future business development and demands may lead to cash utilization at levels greater than recently experienced.

The Company may need

to raise additional capital in the future.

However, the Company cannot provide assurances it will be able to raise additional capital

on acceptable terms, or at all.

Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s

7 unchanged sentences

31, 2024 and 2023

Significant Accounting Policies

and Cash Equivalents - Cash and cash equivalents includes cash on account and demand deposits with maturities of three

months or less.

Cash and cash equivalents in financial institutions may exceed insured limits at various times during the year and

subject the Company to concentrations of credit risk.

Cash and cash equivalents include restricted cash at December 31, 2023 and

2022 totaling $ 730,802

and $ 411,016 (see note 16).

- Trade accounts receivable are stated at the amount the Company expects to collect.

Receivables are reviewed individually for collectability.

If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments,

allowances may be required.

Company offers credit terms on the sale of the Company’s products to a significant majority of the Company’s customers and

requires no collateral from these customers.

The Company performs ongoing credit evaluations of customers’ financial condition

and, if needed, maintains an allowance for doubtful accounts receivable based upon the Company’s historical experience, forecasted economic conditions, and a specific

review of accounts receivable at the end of each period.

At December 31, 2023 and 2022, the Company had no allowance for doubtful accounts.

- Inventory is stated at the lower of cost or net realizable value, with cost being determined on a weighted average basis.

includes purchase price of materials, freight, and related costs required to bring the goods to Company warehouses.

Research and Development – Research and

development costs are expensed as incurred and are included in general and administrative expense in the accompanying financial statements.

- The Company currently offers a limited lifetime warranty against defective products out-of-the-box.

Customers who are not satisfied

with their purchase may attempt to have their purchases reimbursed outside of the warranty period.

Recognition – In accordance with Accounting Standards Codification (ASC) 606 Revenue from Contracts with Customers, sales are recognized when (1) products are

shipped, with no right of return except for defective products, and the title and risk of loss has passed to customers;

they are delivered based on the terms of the sale, and there is an identifiable contract with a customer with defined performance obligations,

the transaction price is determinable, and the entity has fulfilled its performance obligation.

Revenue related to shipping and handling

costs billed to customers is included in net sales, and the related shipping and handling costs are included in cost of goods sold.

and Equipment - Capital assets are recorded at cost and are depreciated using the straight-line method over the following estimated

useful lives:

of Estimated Useful Lives of Property and Equipment

and equipment

Manufacturing

to the Consolidated Financial Statements

31, 2023 and 2022

Significant Accounting Policies (continued)

payments - The Company offers a share option plan

for its directors, officers, employees, and consultants.

ASC 718 “Compensation – Stock Compensation” prescribes accounting

and reporting standards for all share-based payment transactions in which employee services are acquired.

Transactions include incurring

liabilities, or issuing or offering to issue shares, options, and other equity instruments such as stock appreciation rights.

payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements

based on their fair values at the time of grant.

That expense is recognized over the estimated period during which an employee is required

to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable:

(a) the goods

or services received;

or (b) the equity instruments issued.

The fair value of the share-based payment transaction is determined at the

earlier of the performance commitment date or performance completion date.

Taxes - Provisions for income taxes are based on taxes payable or refundable for the current year and deferred taxes on temporary

differences between taxable income and pretax financial income, and between the tax bases of assets and liabilities and their reported

amounts in the financial statements.

Deferred tax assets and liabilities are included in the consolidated financial statements at currently

enacted income tax rates applicable to the period in which the deferred tax assets and liabilities are expected to be realized or settled.

As changes in tax laws or rates are enacted, deferred tax assets and liabilities are adjusted through the provision for income taxes.

positions initially need to be recognized in the financial statements when it is more likely than not the positions will be sustained

upon examination by the tax authorities.

Currency Items - Transactions denominated in foreign currencies are initially recorded in the functional currency using exchange

rates in effect at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies are translated into

the functional currency using exchange rates in effect at the dates of the transactions.

All exchange gains and losses are included in

the statement of operations and comprehensive loss.

Instruments - FASB ASC 825, Disclosures about Fair Value of Financial Instruments, requires disclosures of the fair value

of financial instruments.

The carrying value of the Company’s current financial instruments, which include cash and cash

equivalents, accounts receivable, and accounts payable and accrued liabilities, approximates their fair

values because of the short-term maturities of these instruments.

The carrying value of the loan payable approximates fair value as

its interest rate fluctuates with market interest rates.

Party Transactions - All transactions with related parties are in the normal course of operations and are measured at the exchange

to the Consolidated Financial Statements

31, 2023 and 2022

Significant Accounting Policies (continued)

Assets and Impairment – Patents and other intangibles are amortized using the straight-line method over their estimated useful

Intangible assets, such as trademarks with indefinite lives, are not amortized.

Intangible assets are evaluated for impairment

at least annually or when events or circumstances arise that indicate the existence of impairment.

The Company evaluates the recoverability

of identifiable intangible assets whenever events or changes in circumstances indicate that an intangible asset’s carrying amount

may not be recoverable.

When indicators of impairment exist, the Company measures the carrying amount of the asset against the estimated

undiscounted future cash flows associated with it.

Should the sum of the expected future cash flows be less than the carrying value of

the asset being evaluated, an impairment loss would be recognized.

The impairment loss would be calculated as the amount by which the

carrying value of the asset exceeds its fair value.

The evaluation of asset impairment requires the Company to make assumptions about

future cash flows over the life of the asset being evaluated.

These assumptions require significant judgment, and actual results may

differ from assumed and estimated amounts.

During the years ended December 31, 2023 and 2022, the Company had no impairment losses related

to intangible assets.

Taxes – Certain jurisdictions impose a sales tax on Company sales to nonexempt customers.

The Company collects these taxes

from customers and remits the entire amount as required by the applicable law.

The Company excluded from revenues and expenses the tax

collected and remitted.

Accounting - On January 1, 2019, the Company adopted ASC 842, which requires lessees to recognize operating leases on the balance

sheet as right-of-use assets and lease liabilities based on the value of the discounted future lease payments.

Expanded disclosures about

the nature and terms of lease agreements are required and are included in note 15.

Accounting Pronouncements

recently issued Accounting Standards Codification guidance has either been implemented or is not significant to the Company.

consists of the following at December 31, 2024 and 2023:

Schedule of Inventory

Finished goods

Promotional items

Raw materials

to the Consolidated Financial Statements

31, 2023 and 2022

Finished goods

Work in progress

Inventories, net

Property and Equipment

2 unchanged sentences

Manufacturing equipment

Product molds

Leasehold improvements

Property and Equipment, gross

Product molds

Warehouse equipment

Electrical equipment

Property and equipment,

Less accumulated depreciation

( 3,032,025 )

( 1,664,580 )

Property and equipment,

the years ended December 31, 2024 and 2023, the Company recognized depreciation expense of $ 1,367,445 and $ 1,107,292 , respectively.

the year ended December 31, 2022, the Company completed the purchase of a manufacturing facility and land for $ 6,079,410 and $ 2,239,405 ,

respectively.

The Company has and continues to produce soft tonneau covers in Meizhou, China and Foshan, China, and it began producing hard tonneau covers

in its West Seneca manufacturing facility in 2023.

The Company believes that by doing so it (i) has better control over design and manufacturing

quality of its products, (ii) mitigates supply chain risk, (iii) decreases shipping costs, (iv) cuts overall manufacturing costs, and

(v), by on-shoring production, participates in creating positive social externalities including employment in its largest market:

United States.

Intangible Assets

assets consist of costs incurred to establish the patent rights related to the quick latch and soft vinyl quad-fold tonneau cover

technologies, Worksport trademarks, licenses, and software costs.

The Company’s utility patents and design registrations were

issued between 2014 and 2023.

The patents and software will be amortized on a straight-line basis.

At December 31, 2023, the

software has not been placed into service.

The Company’s trademark, licenses, and other indefinite life

intangible assets are reassessed every year for impairment;

the Company has determined that impairment is not necessary for the

current year ended December 31, 2023.

The change in intangible assets for the years ended December 31, 2023 and 2022 are as

Schedule of Change in Intangible Assets

Intangible Assets, gross

assets consist of costs incurred to establish the patent rights related to the quick latch and soft vinyl quad-fold tonneau cover technologies,

Worksport trademarks, licenses, and software costs.

The Company’s utility patents and design registrations were issued between

2014 and 2024 .

The patents and software are amortized on a straight-line basis over their useful life.

The Company’s trademark,

licenses, and other indefinite life intangible assets are reassessed every year for impairment.

The Company determined that impairment

is not necessary for the current year ended December 31, 2024.

The components of intangible assets as of December 31, 2024

and 2023 are as follows:

Schedule of Components of Intangible Assets

Intangible assets, gross carrying amount

Less accumulated amortization

Intangible assets, net

Amortization expense for the years ended December 31, 2023 and 2022 was

$ 2,450 and $ 2,509 , respectively.

expense for the years ended December 31, 2024 and 2023 was $ 385,840 and $ 2,450 , respectively.

to the Consolidated Financial Statements

2 unchanged sentences

amortization of the patent and software over the next five years and beyond December 31, 2024 is as follows:

of Amortization of patent

2028 and later

Amortization of Patent and Software

Prepaid Expenses and Deposits

2 unchanged sentences

Consulting, services and advertising

expenses and deposits, net

of December 31, 2023, prepaid expense and deposit consists of $ 5,215 (2022 - $ 1,313,799 ) in prepaid consulting, services and advertising

for third party consultants through the issuance of shares and stock options.

Deposits primarily include prepayments for raw materials

used in the manufacturing of finished goods.

Prepaid expenses

include prepayments for manufacturing equipment and raw materials used in the production of finished goods.

Shareholders’ Equity

1 unchanged sentence

the year ended December 31, 2024, the Company sold 758,995 shares of common stock for a total net proceeds of $ 6,032,789 .

The sale of shares was

in connection with the shelf registration statement on Form S-3 effective on October 13, 2022, allowing the Company to issue up to $ 30,000,000

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

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

Company recognized consulting expense of $ 747,366 to share subscriptions payable from restricted shares and stock options to be issued.

of December 31, 2024, the restricted shares have not been issued.

As of December 31, 2024, the Company issued 84,594 restricted shares with

a value of $ 438,992 .

During the year ended December 31, 2024, in

connection with the sale of 237,224 shares of common stock, the Company also sold 147,789 pre-funded warrants and issued 770,026

warrants exercisable for a total of 770,026 shares of common stock for $ 0.001 and $ 7.40 , respectively, per share.

received net proceeds of $ 1,093,492 associated with the sale of the pre-funded warrants.

The pre-funded warrants are immediately

exercisable until all the pre-funded warrants are exercised.

During the period, 147,790 warrants were exercised for 147,790 shares

of common stock for $ 150 .

Refer to Note 15, Warrants.

the year ended December 31, 2024, the Company closed a sale of 95,000 shares of common stock for proceeds of $ 380,000 .

In connection

with the sale of common stock, the Company issued 190,000 warrants.

Refer to Note 15, Warrants.

As of December 31, 2024, the shares have not been

Refer to Note 15, Warrants and Note 16, Equity Compensation

for additional disclosures related to shareholders’ equity.

to the Consolidated Financial Statements

31, 2024 and 2023

Shareholders’ Equity (continued)

year ended December 31, 2023, the following transactions occurred:

the year ended December 31, 2023, the Company sold 9,913 shares of common stock for a total net proceeds of $ 214,238 .

The sale of shares

6 unchanged sentences

stock for consulting services valued at $ 635,000 .

the year ended December 31, 2023, the Company closed a sale of 1,925,000

shares of common stock for $ 2,579,500 .

The Company incurred share issuance expense of $ 428,300 .

In association with the sale of common shares, the Company also issued 1,575,000

pre-funded warrants and 7,000,000

Refer to note 18.

to notes 18 and 19 for additional shareholders’ equity (deficit).

to the Consolidated Financial Statements

31, 2023 and 2022

Shareholders’ Equity (continued)

year ended December 31, 2022, the following transactions occurred:

Company issued 10,000 common shares to a consultant for services received valued at $ 86,000 , of which $ 66,329 was issued from share subscriptions

During the same period, the Company issued 80,000 common shares for consulting, advisory services, and employee compensation

valued at $ 240,000 .

Company issued 45,000 shares of restricted stock to members of the board valued at $ 260,100 from share subscriptions payable.

Company recognized consulting expense of $ 487,602 to share subscriptions payable from restricted shares and stock options to be issued.

As of December 31, 2022, the restricted shares have not been issued.

to note 18 and 19 for additional disclosures of shareholders’ equity.

the year ended December 31, 2023, the Company closed a sale of 192,500 shares of common stock for $ 2,579,500 .

The Company incurred share

issuance expense of $ 428,300 .

In association with the sale of common shares, the Company also issued 157,500 pre-funded warrants and

700,000 warrants.

the years ended December 31, 2024 and 2023, the Company was authorized to issue 29,900,000 shares of its common stock with a par value

of $ 0.0001 .

All shares were ranked equally with regards to the Company’s residual assets.

3 unchanged sentences

Stock have voting rights equal to 30 shares of common stock, per share of Preferred Stock.

Series B Preferred Stock have voting

rights equal to 10,000 shares of common stock, per share of Preferred Stock.

Related Party Transactions

the year ended December 31, 2023, the Company recorded salaries expense of $ 374,864 (2022 - $ 387,308 ) related to services rendered to

the Company by its CEO.

During the same period the Company recorded salaries expense of $ 271,601 (2022 - $ 265,858 ) to an officer and

director of the Company.

As of December 31, 2023 and 2022, the Company has a payable of $ 2,192 and $ 46,096 to the CEO.

to note 9 and 19 for additional related party transactions.

Series B Preferred Stock have voting rights

equal to 1,000 shares of common stock, per share of Preferred Stock .

The income tax expense for the years ended December 31, 2024 and 2023 is reconciled per the schedule below:

3 unchanged sentences

$ ( 11,405,000 )

State income taxes, net of federal benefits

Non-deductible portion of meals and entertainment

Share base compensation

Interest and penalty

Adjusted net loss for tax purposes

( 5,845,000 )

( 3,524,000 )

Statutory rate

( 16,164,000 )

( 14,929,000 )

Federal statutory income tax rate

State taxes, net of federal benefits

Share based compensation

Limitation on depreciation and amortization deduction

Capitalized research and development expenditures

Effective income tax rate

Income tax benefit

1 unchanged sentence

( 2,606,000 )

Estimated research and development credit

Increase in valuation allowance

7 unchanged sentences

Net operating loss carry forwards

Amortization and depreciation

Change in operating lease

Share base compensation

Deferred tax assets, gross

Differences in bases of depreciation of

property and equipment

Lease liability

Share based compensation

Research and development credit

Deferred tax asset, gross

Deferred tax assets not recognized

5 unchanged sentences

Within Each Jurisdiction

United States

Deferred income taxes

Valuation allowance

( 7,537,000 )

( 4,648,000 )

Net deferred tax asset

1 unchanged sentence

Company has non-capital losses carried forward of approximately $ 43,999,000 available to reduce future years’ taxable income.

losses will expire as follows:

will expire as follows:

Schedule of Cumulative Non-capital Losses

United States

Non-capital losses carried forward Total

Effective for 2023, the Tax Cuts and Jobs Act (“TCJA” of 2017 requires taxpayers to capitalize and amortize research and development

costs pursuant to IRC Section 174.

Domestic expenses are amortized over a 5 year period and foreign over a 15 year period.

of the TCJA, a deferred tax asset was established beginning in 2023 and is reflected in the table above.

Realization of deferred tax assets is dependent, in part,

upon the generation of future taxable income during the periods in which those temporary differences become deductible.

Management considers

projected future taxable income, tax planning strategies and carryback opportunities in making its assessment of the recoverability of

operating loss carryforwards of approximately $ 43,399,000 may be offset against future taxable income.

No tax benefit from these losses

have been reported in the December 31, 2023 consolidated financial statements since the potential tax benefit is offset by a valuation

allowance of the same amount.

No tax benefit from these losses have

been reported in the December 31, 2024 consolidated financial statements since the potential tax benefit is offset by a valuation allowance

of the same amount.

to the Consolidated Financial Statements

8 unchanged sentences

Under ASC 740,

the Company may recognize the tax benefit from an uncertain tax position only if it is more –likely –than not that the tax

position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

The Company has determined

that the Company has no significant uncertain tax positions requiring recognition under ASC 740.

Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.

Company had no accruals for interest and tax penalties at December 31, 2023 and 2022.

the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will

be sustained on examination by the taxing authorities, based on the technical merits of the position.

The Company has determined that

the Company has no significant uncertain tax positions requiring recognition under ASC 740.

Company does not expect the amount of unrecognized tax benefits to materially change within the next twelve months.

Company is required to file income tax returns in the U.S.

and Canadian Federal jurisdictions, as well as various states and in the

province of Ontario.

The Company is no longer subject to income tax examinations by tax authorities for tax years ending before

December 31, 2020 in the United States and for tax years ending before December 31, 2014 in Canada.

Financial Instruments

Company is exposed to credit risk on the accounts receivable from its customers.

To reduce its credit risk, the Company has adopted

credit policies which include the analysis of the financial position of its customers and the regular review of their credit

The Company incurred bad debt expense of $ 0

during each of the years ended December 31, 2023 and 2022.

The Company is subject to income taxes in the U.S.

in various states and foreign jurisdictions.

Tax regulations with each jurisdiction are subject to the interpretation of the related tax

laws and regulations and require the application of significant judgment.

The Company is no longer subject to U.S.

federal, state, and local income tax examinations by tax authorities for tax years ending before

December 31, 2020 in the U.S.

The Company is no longer subject to non-U.S.

income tax examinations by tax authorities for tax years ending

before December 31, 2014.

Financial Instruments and Fair Value

value is defined as the price that would be received to sell an asset or paid to transfer a liability in an ordinary transaction between

market participants at the measurement date.

Depending on the nature of the asset or liability, various techniques and assumptions can

be used to estimate fair value.

The definition of the fair value hierarchy is as follows:

1 – Quoted prices in active markets for identical assets and liabilities.

2 – Observable inputs other than quoted prices in active markets for similar assets and liabilities.

3 – Inputs for which significant valuation assumptions are unobservable in a market and therefore value is based on the best available

data, some of which is internally developed and considers risk premiums that a market participant would require.

Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, revolving line of credit,

and long-term debt.

The fair values of cash and cash equivalents, accounts receivable and accounts payable approximate their carrying

value because of the short-term nature of these instruments.

The Company’s revolving line of credit is based on a variable interest

rate and is reflected in the financial statements at carrying value which approximates fair value at December 31, 2024.

The Company’s

long-term debt is based on a fixed interest rate, and its carrying amount approximates fair value at December 31, 2024.

The fair value

of the revolving line of credit and long-term debt is classified as Level 2 within the fair value hierarchy and is estimated based on

quoted market prices.

Company is exposed to market risks such as fluctuation in foreign currency exchange rates and interest rates.

Derivative instruments

may be used to offset some of the effects of these market risks on the expected future cash flows and on certain existing assets and

The Company may choose not to hedge certain exposures for a variety of reasons including, but not limited to, accounting

considerations and the prohibitive economic cost of hedging particular exposures.

Currency Risk

Company is exposed to currency risk on its sales and purchases denominated in Canadian Dollars.

1 unchanged sentence

by adjusting its pricing to reflect currency fluctuations and purchasing foreign currency at advantageous rates.

risk is the risk that the Company will not be able to meet its obligations associated with financial liabilities.

The Company relies

on its cash reserves, cash flows generated from operations, and injections of capital through the issuance of the Company’s capital

stock to settle its liabilities when they become due.

Company is exposed to interest rate risk due to the variable interest rate of its mortgage, which is equal to the Prime Rate plus two

hundred twenty-five basis points ( 2.25 %) per annum.

borrowing under the Company’s Line of Credit Facility and Equipment Financing is at variable interest rates and exposes the Company

to interest rate risk.

If interest rates increase, debt service obligations on variable rate indebtedness will increase even though the

amount borrowed may not change.

to the Consolidated Financial Statements

31, 2024 and 2023

Financial Instruments (continued)

Financial Instruments and Fair Value (continued)

Concentration

of Supplier Risk

3 unchanged sentences

materials and is increasing its purchasing from the supplier in Foshan to lower supplier concentration risk .

Further, the Company has

established domestic assembly of its hard tonneau cover product line to further reduce the risk associated with this concentration of

finished good suppliers.

Further, the Company

has established domestic assembly of its hard tonneau cover product line to further reduce the risk associated with this concentration

of finished good suppliers.

The company primarily sources raw materials for domestic production and assembly from vendors in Europe,

Southeast Asia, and North America.

Strategic inventories are managed based on demand.

To date, the Company has been able to obtain adequate supplies

of the materials used in the production of its products in a timely manner from existing sources.

The loss of these key suppliers or

a delay in shipments could have an adverse effect on its business.

To date, the Company has been able to obtain adequate

supplies of the materials used in the production of its products in a timely manner from existing sources.

The loss of these key suppliers

or a delay in shipments could have an adverse effect on fulfillment of soft tonneau cover orders.

Concentration

3 unchanged sentences

customer could have an adverse effect on the Company’s business.

the year ended December 31, 2023, 93 % of the Company’s revenue is comprised of one customer.

the year ended December 31, 2024, 37 %

of the Company’s revenue is comprised of one customer.

For the year ended December 31, 2023, 93 %

two customers made up 50 % ( 38 % and 12 % individually) of revenue.

of the Company’s revenue was comprised of one customer.

Changes in Cash Flows from Operating Assets and Liabilities

1 unchanged sentence

Schedule of Changes in Operating Assets and Liabilities

Decrease (increase) in accounts receivable

Decrease (increase) in accounts

$ ( 400,521 )

Decrease (increase) in other receivable

Decrease (increase) in inventory

Decrease (increase) in inventories

( 1,558,562 )

Decrease (increase) in prepaid expenses and deposits

Increase (decrease) in lease liability

Increase (decrease) in payroll taxes payable

Increase (decrease) in accounts payable and accrued liabilities

in operating assets and liabilities

( 2,285,120 )

Decrease (increase) in prepaid expenses

Increase (decrease)

in accounts payable and accrued liabilities

in operating assets and liabilities

$ ( 3,852,297 )

the year ended December 31, 2019, the Company entered into an agreement to purchase 10,000,000 shares of a privately owned US-based

mobile phone development company for $ 50,000 – representing a 10 % equity stake.

The shares have been issued to the Company.

As of December 31, 2023 and 2022, the Company had advanced a total of $ 24,423 and is advancing tranches of capital as required by

the year ended December 31, 2023, the Company purchased $ 66,308 ($ 90,000 CAD) of Guaranteed Investment Certificate (“GIC”).

The GIC bears a variable interest rate and matured on February 27, 2024.

The anticipated earned interest on the GIC at maturity

is $ 2,818 ($ 3,825 CAD).

Operating Lease Obligations

the year ended December 31, 2019, the Company signed a lease agreement for warehouse space to commence on August 1, 2019 and end on July

31, 2022 with monthly lease payments of $ 2,221 .

During the year ended December 31, 2021, the Company entered into a second lease agreement

for warehouse space to commence on June 1, 2021 and end on May 31, 2024 with monthly lease payments of $ 19,910 .

the year ended December 31, 2024, $ 66,308 ($ 90,000 CAD) of the Company’s Guaranteed Investment Certificate (“GIC”)

matured and the Company received $ 3,054 ($ 4,129 CAD) in interest income.

During the same period, the Company reinvested the principal

amount of $ 66,308 ($ 90,000 CAD) in a GIC.

The GIC bears a variable interest rate and will mature on February 27, 2025.

The anticipated

earned interest on the GIC at maturity is $ 3,123 ($ 4,275 CAD).

to the Consolidated Financial Statements

31, 2024 and 2023

Operating Lease Obligations (continued)

the year ended December 31, 2022, the Company signed a lease agreement for approximately 20,296 square feet to be used as its then primary,

now secondary corporate office and R&D facility pursuant to a five-year lease, dated June 1, 2022 , for a variable rate averaging

$ 22,101 per month over the lifetime of the lease.

The Company also pays approximately $ 4,418 in additional fees per month, which varies

year to year.

$ 20,242 per month over the lifetime of the lease not inclusive of additional fees, which also vary and averaged $ 5,250 per month in 2024

not inclusive of taxes.

the year ended December 31, 2023, the Company signed a lease agreement for office space to be used as an R&D facility pursuant to

a one-year lease with an option to extend the lease for an additional year , dated June 1, 2023, for a monthly rent of $ 3,350 .

Company has accounted for its leases upon adoption of ASC 842 whereby it recognizes a lease liability and a right-of-use asset at the

date of initial application beginning January 1, 2019.

The lease liability is measured at the present value of the remaining lease payments,

discounted using the Company’s incremental borrowing rate of 10 %.

The Company has measured the right-of-use asset at an amount

equal to the lease liability.

was renewed effective June 1, 2024 at a rate of $ 3,600 per month with a termination date of May 31, 2025 .

Company has accounted for its leases upon adoption of ASC 842 whereby it recognizes a lease liability and a right-of-use asset at

the date of initial application beginning January 1, 2019.

The lease liability is measured at the present value of the remaining

lease payments, discounted using the Company’s incremental estimated borrowing rate of 10 %.

The Company has measured the right-of-use asset at an amount equal to the lease liability.

Company’s right-of-use asset and lease liability as of December 31, 2024 and 2023 is as follows:

Schedule Right-of-use Asset

December 31, 2023

December 31, 2022

Right-of-use asset

2 unchanged sentences

following is a summary of the Company’s total lease costs:

of Lease Costs

of Lease Cost

following is a summary of cash paid in 2024 and 2023 for amounts included in the measurement of lease liabilities:

of Measurement of Lease Liabilities

December 31, 2023

December 31, 2022

Operating cashflow

of lease liability are as follows:

2 unchanged sentences

Total future minimum lease payments

amount representing interest

amount representing

Present value of future payments

3 unchanged sentences

31, 2024 and 2023

Loans payable

May 4, 2022, the Company entered into a secured loan agreement (the “Loan Agreement”) with an external banking entity

relating to the Company’s purchase of a 152,847 square-foot building situated on two parcels of land aggregating 18 acres of

land located in West Seneca, New York (collectively, the “Property”) for a total purchase price of $ 8,150,000 on May 6,

Under the terms of the Loan Agreement, the Company procured a total principal sum of $ 5,300,000 ,

bearing an interest rate of the prime rate

annually, for the Company’s purchase of the Property and covering associated costs.

To ensure the loan’s servicing over its

duration, the Company allocated $ 667,409 into

a specially designated account.

By the close of December 31, 2023, this account’s balance had risen to $ 730,802 ,

which is recorded under cash and cash

equivalents in the concurrent financial statements.

As of December 31, 2023, the outstanding principal and the accrued interest

was an aggregate of $ 5,331,889 .

This outstanding balance and accrued interest are due on May 20, 2024.

The Company disclosed the material terms of the Loan Agreement in a

Current Report on Form 8-K filed with the Securities and Exchange Commission on May 11, 2022.

the year ended December 31, 2020, the Company received $ 28,387 ($ 40,000 CAD) interest-free from the Government of Canada as part

of the COVID-19 small business relief program.

Repaying the balance of the loan on or before December 31, 2023 resulted in loan forgiveness

of 25 percent ( 25 %).

As of September 30, 2022, the Company made the repayment of $ 28,387 ($ 40,000 CAD) and, as of February 14, 2023,

received the forgiven debt of $ 7,493 ($ 10,000 CAD).

As at December 31, 2023 and 2022, there are no amounts owing, and the loan has

been fully settled.

Long-term debt consists

Schedule of Long Term Debt

December 31, 2024

December 31, 2023

Secured Loan Agreement (a)

Revolving Credit Facility (b)

Long-term debt

Less deferred debt issuance cost

Less current installments

( 5,300,000 )

Long-term debt

May 4, 2022, the Company entered into a secured loan agreement (the “Loan Agreement”)

with an external banking entity relating to the Company’s purchase of a 152,847 square-foot

building situated on two parcels of land aggregating 18 acres of land located in West Seneca,

New York (collectively, the “Property”) for a total purchase price of $ 8,150,000

on May 6, 2022.

Under the terms of the Loan Agreement, the Company procured a total principal

sum of $ 5,300,000 , bearing an interest rate of the prime rate plus 2.25 % annually, for the

Company’s purchase of the Property and covering associated costs.

To ensure the loan’s

servicing over its duration, the Company allocated $ 667,409 into a specially designated account.

The loan’s outstanding balance and accrued interest were due on August 10, 2024.

Company disclosed the material terms of the Loan Agreement in a Current Report on Form 8-K

filed with the Securities and Exchange Commission on May 11, 2022.

February 4, 2024, the Company and Worksport New York Operations Corporation entered into a Forbearance Agreement with the Lender

in connection with the Loan Agreement.

On May 14, 2024, the Company successfully negotiated an extension of the maturity date for

its $ 5.3 million Loan Agreement from an original due date of May 20, 2024 to a new maturity date of August 10, 2024.

has since refinanced this loan.

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

as well as Worksport USA Operations Corporation, entered into a $ 6,000,000 Revolving Financing

and Assignment Agreement with an external lending entity with a maturity date of July 18,

2026, or 24 months.

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 Dr.

in West Seneca, New York, and additionally drew approximately $ 330,000

to fund operations.

At December 31, 2024, the outstanding balance of this loan was $ 3,591,247

(net of issuance costs of $ 216,778 ).

collateral, the lender holds a first position on the Company’s major asset classes (accounts receivable, the factory in New

York, and inventory) other than the Company’s equipment.

A non-usage fee of 0.25 %

is assessed quarterly and applied to the difference between the quarter’s average daily outstanding loan balance and the total

credit facility amount.

As of December 31, 2024, the Company had an available balance of $ 892,000 to borrow on the Revolving Credit Facility.

September 4, 2024, the Company, through its wholly owned subsidiary, Worksport USA Operations Corporation, entered into a $ 1,487,200

credit and security agreement with an external

lending entity with a maturity date of September

1, 2027 , which is 36

months from initial funding.

Upon transaction

close, the Company received net proceeds of $ 1,412,750

(net of issuance costs of $ 43,735 ).

and its wholly owned subsidiary, Worksport New York Operations Corporation, serve as guarantors on the loan.

For collateral,

the lender holds a first position on the Company’s equipment, which is primarily manufacturing and warehousing equipment.

Loss per Share

2 unchanged sentences

respectively.

are 299,000,000 shares authorized with 20,320,503 and 17,159,376 shares issued and outstanding, as at December 31, 2023 and 2022, respectively.

The computation of loss per share is based on the weighted average number of shares outstanding during the period in accordance with

ASC Topic No.

260, “Earnings Per Share.” Shares underlying the Company’s outstanding warrants and convertible promissory

notes were excluded due to the anti-dilutive effect they would have on the computation.

are 29,900,000

shares authorized with 4,016,205

and 2,032,050

shares issued and outstanding, at December 31, 2024 and 2023, respectively.

The computation of loss per share is based on the

weighted average number of shares outstanding during the period in accordance with ASC Topic No.

260, “Earnings Per

Share.” Shares underlying the Company’s outstanding warrants and convertible promissory notes were excluded due to the

anti-dilutive effect they would have on the computation.

As of December 31, 2024, the Company has 2,291,276

warrants convertible to 11,927,924 common shares, 570,212 restricted stock to be issued, and 5,063,856 stock options

exercisable for 5,063,856 common shares for a total underlying common shares of 17,561,922 .

warrants convertible to 2,321,276

common shares, 117,018

restricted stock to be issued, and 192,784

stock options exercisable for 192,784

common shares for a total underlying common shares of 2,631,078 .

As of December 31, 2023, the Company has 1,162,792

3,939,924 warrants convertible to 4,239,924 common shares, 1,940,000 restricted stock to be issued, and 785,000 stock options exercisable

for 785,000 common shares for a total underlying common shares of 7,669,924 .

the year ended December 31, 2023, in connection to the sale of 1,925,000 shares of common stock the Company also sold 1,575,000 pre-funded

warrants and 7,000,000 warrants convertible for 8,575,000 shares of common stock at an exercise price of $ 0.0001 and $ 1.34 , respectively.

warrants convertible to 1,192,792

common shares, 57,021

restricted stock to be issued, and 506,386

stock options exercisable for 506,386

common shares for a total underlying common shares of 1,756,199 .

to the Consolidated Financial Statements

31, 2024 and 2023

the year ended December 31, 2024, in connection with the sale of 237,224 shares of common stock, the Company also sold 147,789 pre-funded

warrants and issued 770,026 warrants exercisable for a total of 770,026 shares of common stock for $ 0.001 and $ 7.40 , respectively, per

The Company received net proceeds of $ 1,093,492 associated with the sale of the pre-funded warrants.

The pre-funded warrants are exercisable

immediately with no expiration date.

The warrants are exercisable six months after issuance and will expire five and a half years from

the issuance date.

the year ended December 31, 2023, 887,000 pre-funded warrants were exercised for 887,000 shares of common stock for $ 89 .

the year ended December 31, 2023, the Company and a stock options holder agreed to

cancel all 400,000

stock options in exchange for extending the exercisable period of 300,000

warrants to December 31, 2024.

Later in the year ended December 31, 2023, the expiration date for these warrants was extended to December 31, 2026, and the stock

option holder was issued an additional 400,000 restricted stock units.

the year ended December 31, 2022, an aggregate of 250,121 warrants were exercised primarily on a cashless basis for 73,321 common shares,

and 1,599,179 Reg-A public offering and private placement warrants expired.

The pre-funded warrants are

immediately exercisable until all of the pre-funded warrants are exercised.

During the same period, 147,789 pre-funded warrants were

exercised for 147,789 shares of common stock for $ 150 .

the year ended December 31, 2024, the Company closed a sale of 95,000 shares of common stock.

In connection with the sale of common stock

the Company issued 190,000 warrants.

The warrants have an exercise price of $ 4.00 and an expiration date of September 21, 2029 .

the year ended December 31, 2024, 13,091 warrants issued on August 3, 2021, and 344,652 warrants issued on August 6, 2021, all of which

having an exercise price of $ 60.50 , expired.

the year ended December 31, 2023, in connection with the sale of 192,500

shares of common stock the Company also sold

pre-funded warrants and 700,000

warrants convertible for 857,500

shares of common stock at an exercise price of

and $ 13.40 ,

respectively.

The Company received net proceeds of $ 2,110,342

associated with the sale of the pre-funded warrants.

During the same period, 88,700

pre-funded warrants were exercised for 88,700

shares of common stock for $ 89 .

During the year ended December 31, 2024, the remaining 68,800

pre-funded warrants were exercised for 68,800

shares of common stock for $ 69 .

May 9, 2024, the Company entered into a warrant inducement agreement (the “Inducement”) with the holder of existing warrants

to purchase an aggregate 700,000 shares at a reduced exercise price of $ 5.198 in consideration for the Company to issue new warrants

to purchase up to 1,295,000 additional shares of common stock – resulting in gross proceeds of approximately

$ 3,638,000 received by the Company.

As a result of the Inducement and subsequent exercise, the Company determined the incremental fair

value provided to the holder from both the adjustment in exercise price of the existing warrants and the fair value of the inducement

warrants issued using the Black Scholes model.

The total incremental fair value of $ 4,996,000 is recorded as a non-cash deemed dividend.

The proceeds of the warrant inducement and issuance of 284,000 shares of common stock are recorded as capital in excess of par.

The obligation

to issue the remaining 416,000 shares was originally recorded as a share subscription payable.

During the twelve months ended December

31, 2024, the Company issued 416,000 out of the 416,000 shares to be issued.

the year ended December 31, 2023, the Company and a stock options holder agreed to cancel all 40,000 stock options in exchange for extending

the exercisable period of 30,000 warrants to December 31, 2024.

Later in the year ended December 31, 2023, the expiration date for these

warrants was extended to December 31, 2026, and the stock option holder was issued an additional 40,000 restricted stock units.

to the Consolidated Financial Statements

3 unchanged sentences

convertible to 2 shares of common stock each, for an additional 12 months.

the year ended December 31, 2021, the Company and warrant holder reached an agreement to amend a previous warrant agreement.

issued an additional 150,000 warrants for a total of 250,000 warrants valued at $ 37,000 .

The exercisable period of the warrants was also

amended to a period of five years beginning on January 14, 2021 .

The warrants are convertible to 1 share of common stock, each exercisable

at $ 2 per share.

During the year ended December 31, 2022, the warrants were exercised on a cashless basis for 73,321 shares of common

the year ended December 31, 2021, the Company issued 13,091 representative warrants to the Company’s underwriters.

1 unchanged sentence

warrants were not exercisable until January 30, 2022.

The representative warrants are exercisable for 130,909 shares of common stock

at $ 6.05 per share until August 3, 2024.

The representative warrants were exercisable for 13,091 shares of common stock at

$ 60.50 per share until August 3, 2024.

As of December 31, 2022, the Company recognized a value of $ 273,993 for the representative warrants

to share issuance cost.

During the year ended December 31, 2024, these representative warrants expired.

of December 31, 2024, the Company has the following warrants outstanding:

Schedule of Warrants Exercise Price

Exercise price

Number outstanding

Remaining Contractual Life (Years)

August 6, 2024

August 3, 2024

December 31, 2026

March 20, 2025

Never – see note 22

of Warrants Activity

December 31, 2026

December 31, 2022

Number of warrants

Weighted average price

Number of warrants

Weighted average price

Balance, beginning of year

( 1,593,691 )

Balance, end of period

Stock Options and Performance Share Units

September 20, 2029

September 21, 2029

November 26, 2029

average remaining contractual life of outstanding warrants that expire is 4.78 years.

of Warrants Activity

average price

beginning of year

end of period

Equity Compensation

the Company’s 2015, 2021 and 2022 Equity Incentive Plans, the number of shares of common stock reserved for issuance under the

3 unchanged sentences

31, 2024 and 2023

Stock Options and Performance Share Units (continued)

Equity Compensation (continued)

equity-settled, share-based payments are ultimately recognized as an expense in the statement of operations with a corresponding credit

7 unchanged sentences

share options ultimately exercised are different than that estimated on vesting.

May 1, 2023, the Company and Steven Rossi reached an agreement to modify 1,600,000

restricted stock units and 400,000

performance stock units (“PSUs”) issued on November 11, 2022, and December 29, 2021, respectively, and replace them with 2,000,000

stock options, as described below.

November 11, 2022, 400,000

PSUs granted on December 29, 2021, as described below, were modified to include new terms pertaining to the PSU vesting schedule.

PSUs vest in 5% increments according to the modified schedule that correlates with the Company’s stock price.

The first 5% of

the PSUs vest upon the Company’s stock price closing at $2.25, 50% will have vested at a closing price of $5.31, and 100% will

have vested at a closing price of $13.76 as measured using the volume weighted average of the Company’s common stock

for ten (10) consecutive trading days, with over $ 100,000

of trading volume on each of those days.

The fair value of the PSUs was estimated to be $ 1,254,460 .

As of December 31, 2023, 75,000

PSUs of the remaining 300,000

PSUs had vested, and the Company recognized $ 155,314

(2022 - $ 35,100 )

May 1, 2023, the Company and Steven Rossi reached an agreement to modify 160,000 restricted stock units and 40,000 performance stock

units (“PSUs”) issued on November 11, 2022, and December 29, 2021, respectively, and replace them with 200,000 stock options,

as described below.

November 11, 2022, 40,000 and 30,000 PSUs granted on December 29, 2021, as described below, were modified to include new terms pertaining

to the PSU vesting schedule.

The PSUs vest in 5% increments according to the modified schedule that correlates with the Company’s

The first 5% of the PSUs vest upon the Company’s stock price closing at $22.50, 50% will have vested at a closing

price of $53.10, and 100% will have vested at a closing price of $137.60 as measured using the volume weighted average of the Company’s

common stock for ten (10) consecutive trading days, with over $ 100,000 of trading volume on each of those days.

The fair value of the

PSUs was estimated to be $ 1,254,460 .

As of December 31, 2024, 7,500 PSUs of the remaining 30,000 PSUs had vested, and the Company recognized

$ 107,525 (2023 - $ 155,314 ) in consulting expenses.

December 29, 2021, the Company granted 400,000

PSUs to the Company’s Chief Executive Officer and a director, respectively.

PSUs were to vest in 5% increments according to a schedule that correlates with the Company’s stock price.

The first 5% of the

PSUs was to have vested upon the Company’s stock price closing at $3.00, 50% was to have vested at a closing price of $16.50,

December 29, 2021, the Company granted 40,000 and 30,000 PSUs to the Company’s Chief Executive Officer and a director, respectively.

The PSUs were to vest in 5% increments according to a schedule that correlates with the Company’s stock price.

The first 5% of

the PSUs was to have vested upon the Company’s stock price closing at $30.00, 50% was to have vested at a closing price of $165.00,

and 100% was to have vested at a closing price of $315.00.

The fair value of the PSUs was estimated to be $ 1,344,570 .

As December 31, 2023, no PSUs have vested, and the Company recognized $ 0

(2022 - $ 232,312 )

in consulting expenses.

Company uses the Black-Scholes option pricing model to determine fair value of stock options on the grant date.

the year ended December 31, 2023, the Company issued 1,500,000 stock options to Steven Rossi.

The stock options have an exercise price

of $ 1.584 and an expiration date of October 31, 2033 .

The stock options shall vest as follows:

20% shall vest upon the Company achieving

annual run rate revenue of $10,000,000, measured by $2,500,000 of quarterly revenue;

(ii) an additional 20% shall vest upon the Company

achieving annual run rate revenue of $20,000,000, measured by $5,000,000 of quarterly revenue;

(iii) an additional 20% shall vest upon

the Company achieving annual run rate revenue of $30,000,000, measured by $7,500,000 of quarterly revenue;

(iv) an additional 20% shall

vest upon the Company achieving annual run rate revenue of $40,000,000, measured by $10,000,000 of quarterly revenue;

and (v) an additional

20% shall vest upon the Company achieving annual run rate revenue of $50,000,000, measured by $12,500,000 of quarterly revenue.

the year ended December 31, 2023 the Company recognized $ 374,547 in related wages and salary.

to the Consolidated Financial Statements

31, 2023 and 2022

Stock Options and Performance Share Units (continued)

the year ended December 31, 2023, the Company issued 12,100 and 25,000 stock options to employees with an exercise price of $ 1.70 and

$ 1.44 , respectively.

The stock options will expire 10 years from the grant date.

12,100 stock options shall vest in two equal

installments on the second and third anniversary of the grant date.

25,000 stock options shall vest on October 31, 2025 .

The total fair

value of the options on the grant date was estimated to be $ 56,496 .

The Company recognized $ 4,144 in wages and salary during the year

ended December 31, 2023.

the year ended December 31, 2023, the Company issued 321,150 stock options to employees, consultants and directors with an

exercise price ranging from $ 2.55 to $ 4.20 .

108,750 of the stock options shall expire 5 years after grant date and vest in two equal

installments on the first and second anniversary of the grant date.

155,400 of the stock options shall expire 10 years after grant date

and vest in two equal installments on the first and second anniversary of the grant date.

The fair value of the options on the grant date was estimated to be $ 1,116,856 .

During the year ended

December 31, 2023, 49,500 stock options were cancelled upon the departure of employees.

The Company recognized $ 386,606 in

wages and salary and consulting expenses during the year ended December 31, 2023.

the year ended December 31, 2023, the Company issued 2,000,000 stock options to Steven Rossi.

The stock options have an exercise price

of $ 1.74 and an expiration date of May 1, 2033 .

The options shall vest in increments of 10% for each dollar that the Company’s

stock price increases between $2.00 and $11.00, as measured using the volume weighted average of the Company’s common stock for

ten consecutive trading days .

The fair value of the options on the grant date was estimated to be $ 2,821,572 .

The Company recognized

$ 714,798 in wages and salary during the year ended December 31, 2023.

the year ended December 31, 2023, the Company issued 75,000 stock options to an employee with an exercise price of $ 2.43 and expiring

on May 18, 2033 .

The options shall vest in two installments, 25,000 on May 18, 2024, and 50,000 on August 1, 2024 .

The fair value of

the options on the grant date was estimated to be $ 182,025 .

The Company recognized $ 37,632 in wages and salary expenses during the year

ended December 31, 2023.

the year ended December 31, 2023, the Company issued 65,000 stock options to employees and a consultant with an exercise price of $ 1.53

and expiring on March 14, 2033 .

The options shall vest in two equal installments on March 14, 2024, and 2025 .

The fair value of the options

on the grant date was estimated to be $ 98,670 .

The Company recognized $ 33,683 in wages and salary and consulting expenses during the

year ended December 31, 2023.

During the year ended December 31, 2023, 15,000 stock options were cancelled upon the departure of employees;

as a result the Company recognized $ 19,406 in wages and salary expense during the period.

the year ended December 31, 2023, the Company issued 85,106 stock options to an employee with an exercise price of $ 1.53 and expiring

on March 14, 2033 .

The options shall vest in two installments;

a) one fiscal quarter in which the Company generates $3,600,000 in sales

with at least 20% unit margin and b) one fiscal quarter in which the Company generates $5,400,000 in sales with at least 30% unit margin .

The fair value of the options on the grant date was estimated to be $ 129,191 .

The Company recognized $ 45,476 in wages and salary expenses

during the year ended December 31, 2023.

the year ended December 31, 2023, the Company issued 300,000 stock options to a consultant with an exercise price of $ 1.66 and expiring

on January 30, 2028 .

150,000 of the stock options shall vest on January 30, 2023, and 75,000 of the stock options shall each vest on

March 1, 2023 and September 1, 2023 .

The fair value of the options on the grant date was estimated to be $ 486,600 .

The Company recognized

$ 486,600 in consulting expenses during the year ended December 31, 2023.

the year ended December 31, 2023, the Company issued 360,000 stock options to directors with an exercise price of $ 1.66 and expiring

on January 30, 2033 .

The options shall vest in six equal installments on January 30, 2023, July 31, 2023, January 30, 2024, July 30,

2024, January 30, 2025, and July 30, 2025.

The fair value of the options on the grant date was estimated to be $ 592,560 .

recognized $ 217,542 in consulting expenses during the year ended December 31, 2023.

to the Consolidated Financial Statements

31, 2023 and 2022

Stock Options and Performance Share Units (continued)

the year ended December 31, 2022, the Company granted 10,000 and 50,000 options to advisors with an exercise price of $ 2.19 and $ 2.37 ,

respectively, expiring on February 7, 2027 , and May 5, 2032 , respectively.

The options vested immediately upon issuance.

The fair values

of the options on the grant date were estimated to be $ 21,780 and $ 261,400 , respectively.

The Company recognized $ 0 (2022 - $ 283,180 )

in consulting expenses during the year ended December 31, 2023.

the year ended December 31, 2022, the Company granted 12,500 options to a consultant with an exercise price of $ 1.60 expiring on November

The options are earned in four equal installments on February 27, 2023, May 29, 2023, August 29, 2023, and November 27, 2023.

The options shall vest one year after being earned on February 27, 2024, May 29, 2024, August 29, 2024, and November 27, 2024 .

value of the options on the grant date was estimated to be $ 18,725 .

The Company recognized $ 17,083 (2022 - $ 1,642 ) in consulting expenses

during the year ended December 31, 2023.

the year ended December 31, 2022, Terravis Energy, Inc., a subsidiary of the Company, granted an aggregate of 1,350,000 of Terravis Energy,

stock options to its officers and directors.

The stock options have an exercise price of $ 0.01 and will expire on April 12, 2032 .

The options vested immediately upon issuance.

The fair value of the options on the grant date was estimated to be immaterial.

July 23, 2021, the Company granted 15,000 options to a director with an exercise price of $ 5.50 and an expiry date of July 23, 2026 .

The stock options vested on January 1, 2022.

The fair value of the options on the grant date was estimated to be $ 129,480 .

recognized $ 0 (2022 - $ 799 ) to consulting expenses during the year ended December 31, 2023.

August 6, 2021, the Company granted 140,000 options to directors, advisors, and officers with an exercise price of $ 5.50 and an expiry

date of August 6, 2026 .

The stock options vested on January 1, 2022.

The fair value of the options on the grant date was estimated to

be $ 754,189 .

The Company recognized $ 0 (2022 - $ 5,105 ) to consulting expenses during the year ended December 31, 2023.

September 1, 2021, the Company granted 400,000 options to a consultant with an exercise price of $ 5.32 and an expiry date of September

100,000 shall vest on March 1, 2022, 100,000 shall vest on September 1, 2022, 100,000 shall vest on March 1, 2023, and 100,000

shall vest on September 1, 2023.

The fair value of the options on the grant date was estimated to be $ 2,112,000 .

The Company recognized

$ 87,514 (2022 - $ 1,058,917 ) to consulting expenses during the year ended December 31, 2023.

During the year ended December 31, 2023,

the Company and the stock options holder reached an agreement to cancel all 400,000 stock options in exchange for extending the exercisable

period of 300,000 warrants to December 31, 2024.

October 7 and November 2, 2021, the Company granted advisors 5,000 and 62,500 options with exercise prices of $ 5.50 and $ 5.24 , respectively.

The options will expire on October 7, 2026 , and November 2, 2026 , respectively.

The stock options fully vested on January 1, 2022.

fair value of the options on the grant date was estimated to be $ 353,230 .

The Company recognized $ 0 (2022 - $ 32,856 ) to consulting expenses

during the year ended December 31, 2023.

December 29, 2021, the Company granted an aggregate of 90,000 options to members of the board with an exercise price of $ 2.51 .

will expire on December 29, 2026 .

For each of these three option grants, 10,000 vested on December 29, 2022, 10,000 shall vest on December

29, 2023, and 10,000 shall vest on December 29, 2024.

The fair value of the options on the grant date was estimated to be $ 224,280 .

Company recognized $ 75,170 (2022 - $ 73,941 ) in consulting expenses during the year ended December 31, 2023.

July 23, 2024, the Company engaged in stock option repricing for certain employees, executive officers, and members of the board of directors

of the Company.

538,896 stock options’ exercise prices were repriced to $ 7.042 , and all other criteria were unchanged.

of the modification in exercise prices, the Company recognized additional expense of $ 93,140 on the date of modification.

the year ended December 31, 2024, the Company issued 84,860 stock options to employees and directors with exercise prices ranging from

$ 5.20 to $ 14.10 and expiration dates ranging from February 1, 2029 to November 19, 2034 .

Of these stock options, 2,040 were subsequently

the year ended December 31, 2023, the Company issued 474,336 stock options to employees, directors, and consultants with exercise prices

ranging from $ 14.40 to $ 42.00 and expiration dates ranging from January 30, 2028 to October 31, 2033 .

Of these stock options, 15,720 were

subsequently cancelled.

to the Consolidated Financial Statements

31, 2024 and 2023

Stock Options and Performance Share Units (continued)

Equity Compensation (continued)

Schedule of Stock Options Activity

December 31, 2023

December 31, 2022

Number of stock options

Weighted average price

Number of stock options

Weighted average price

Balance, beginning of year

Balance, end of period

Schedule of Share-based Payment Arrangement, Option, Exercise Price Range

Range of Exercise prices

Weighted average life (years)

Weighted average exercise price

Exercisable on December 31, 2023

stock options

average price

stock options

average price

beginning of period

end of period

of Share Based Payment Arrangement, Option, Exercise Price Range

Exercise prices

exercise price

$ 5.70 - 55.00

of December 31, 2023, Terravis Energy Inc.

had the following options outstanding:

of December 31, 2024 and December 31, 2023, Terravis Energy Inc., a subsidiary of the Company, has the following options outstanding:

Schedule of Stock Options Activity

December 31, 2023

December 31, 2022

Number of stock options

Weighted average price

Number of stock options

Weighted average price

Balance, beginning of year

Balance, end of period

of Share-based Payment Arrangement, Option, Exercise Price Range

Range of Exercise prices

Weighted average life (years)

Weighted average exercise price

Exercisable on December 31, 2023

stock options

average price

stock options

average price

beginning of period

end of period

of Share Based Payment Arrangement, Option, Exercise Price Range

Exercise prices

exercise price

Rental Income

the year ended December 31, 2022, the Company entered into a sublease agreement for its warehouse in Mississauga, Ontario, Canada.

sublease commenced on September 15, 2022 and will end on May 31, 2024 at $ 15,515 ($ 19,992 CAD) per month.

the year ended December 31, 2022, the Company entered into a lease agreement in relation to its West Seneca property.

Initially, the

Company entered into a lease agreement with a third-party from July 1 to December 31, 2022 at $ 33,750 per month.

Subsequently, on September

23, 2022, a mutual agreement was reached to terminate the lease agreement.

sublease commenced on September 15, 2022 and ended on May 31, 2024 at $ 15,515 ($ 19,992 CAD) per month.

the year ended December 31, 2024, the Company recognized rental income of $ 76,413 (2023 - $ 184,564 ).

Legal Proceedings

There are no legal proceedings except for routine litigation incidental to the business.

to the Consolidated Financial Statements

31, 2024 and 2023

Segment Reporting

Company manages its business on a product basis and operates in the following two reporting segments for financial reporting purposes:

(1) Hard Tonneau Covers and (2) Soft Tonneau Covers.

The accounting policies of both reporting segments are the same as those described

in Note 1, Description of Business and Summary of Significant Accounting Policies.

Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer, who regularly reviews financial information

presented on a consolidated basis for purposes of allocating resources and evaluating financial performance of the Company’s reporting

The CODM primarily focuses on net income to evaluate its reporting segments.

The CODM also uses net income for evaluating pricing

strategy and to assess the performance for determining the compensation of certain employees.

Significant segment expenses reviewed,

which represent the differences between segment revenue and segment net loss, consist of the following:

of Revenue and Segment Net Loss

Tonneau Covers

/ Eliminations

Tonneau Covers

/ Eliminations

the year ended December 31, 2024

the year ended December 31, 2023

Tonneau Covers

/ Eliminations

Tonneau Covers

/ Eliminations

Cost of sales

( 4,663,491 )

( 2,915,238 )

( 7,578,729 )

( 1,118,389 )

( 1,289,118 )

Selling, general and administrative

( 5,918,555 )

( 4,762,105 )

( 3,937,539 )

( 14,618,199 )

( 6,596,626 )

( 6,357,980 )

( 13,867,433 )

Depreciation and amortization

( 1,206,499 )

( 1,753,285 )

( 1,109,742 )

Net loss from continuing operations

( 6,617,344 )

( 4,805,081 )

( 4,043,409 )

( 15,465,834 )

( 7,124,591 )

( 6,646,308 )

( 14,736,661 )

following table presents the Company’s net sales disaggregated by geographic area:

of Net Sales Disaggregated by Geographic Area

Tonneau Covers

United States

asset information has been provided for the reported segments as the CODM does not regularly review asset information by reportable segment.

As of December 31, 2024 and 2023, assets held in the U.S.

accounted for 88 % and 80 % of total assets, respectively.

Legal Proceedings

are no legal proceedings except for routine litigation incidental to the business.

Subsequent Events

1 unchanged sentence

The following events occurred after year-end:

January 11, 2024, the Company issued 53,194

of restricted stock to an employee.

February 5, 2024, the remaining 688,000

pre-funded warrants issued in October of 2023 were exercised for 688,000

shares of common stock for $ 0.0001 per share, for an aggregate of $ 69 .

February 7, 2024, the Company issued 1,343 shares of common stock for services received valued at $ 2,000 .

to the year ended December 31, 2023, the Company granted 68,800

stock options to employees.

of these options shall vest 50 %

on July 17, 2025 and 50 %

on July 17, 2026;

the remainder shall vest in two equal installments on the second and third anniversary of the grant date.

exercise price of the stock options ranges from $ 0.62

stock options will expire 5

years from grant date and 60,500

stock options will expire 10

years from grant date.

to the year ended December 31, 2023, the Company issued 504,921 shares of common stock for net proceeds of $ 566,118 .

On March 18, 2024, Worksport entered into a securities

purchase agreement with a single institutional investor to purchase 3,850,132

shares of common stock (or pre-funded warrants to purchase shares of common stock in lieu thereof) in a registered direct offering.

The offering was consummated on March 20, 2024.

In a concurrent private placement, the Company also agreed to issue and sell to the

investor warrants to purchase up to 7,700,264

shares of common stock.

The combined effective offering price for each share of common stock (or pre-funded warrant in lieu thereof)

and accompanying warrant is $ 0.74 .

The warrants will become exercisable six months from issuance, expire five and a half years from the issuance date and have an

exercise price of $ 0.74

The gross proceeds to the Company from the registered direct offering and concurrent private placement are estimated to

be approximately $ 2.8

million before deducting the placement agent’s fees and other estimated offering expenses payable by the Company.

Through March 27, 2025, the Company has sold and issued 22,725 shares of

common stock in consideration for net proceeds of $ 185,875 under the ATM Agreement.

On February 27, 2025, the

Company entered into a warrant inducement agreement (the “Inducement”) with the holder of existing warrants to purchase

an aggregate 1,295,000 shares at a revised price of $ 5.20 in consideration for the Company to issue new warrants to purchase

up to 1,424,500 additional shares of common stock at an exercise price of $ 6.502 each – resulting in gross proceeds of approximately

$ 6,734,000 received by the Company.

On March 18, 2025, Worksport effectuated a 1-for-10 reverse stock split

of its common stock.

The Company’s common stock continues to trade on the Nasdaq under the Company’s existing trading symbol,

“WKSP”, and a new CUSIP number, 98139Q308, was assigned as a result of the reverse stock split.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

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 8. Financial Statements and Supplementary Data