Worksport Ltd 10-Q

Item 1. Financial Statements Worksport Ltd. Condensed Consolidated Balance Sheets (Unaudited) March 31, 2025 December 31, 2024 (Unaudited) ASSETS Current assets Cash and cash equivalents $ 5,080,372 $ 4,883,099 Accounts receivable, net 67,951 42,589 Other receivable 196,743 169,728 Inventory (Note 3) 5,725,592 5,190,054 Prepaid expenses and deposits (Note 6) 384,263 192,192 Total current assets 11,454,921 10,477,662 Investments (Note 11) 66,308 66,308 Property and equipment, net (Note 4) 13,497,178 13,644,226 Operating lease right-of-use assets (Note 12) 531,122 595,415 Intangible assets, net (Note 5) 1,113,473 953,049 Total assets $ 26,663,002 $ 25,736,660 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities Accounts payable $ 1,763,556 $ 1,526,630 Accrued liabilities and other 852,103 800,283 Accrued compensation 431,479 377,112 Long-term debt, current portion (Note 13) 227,056 222,992 Lease liability, current portion (Note 12) 244,477 246,535 Total current liabilities 3,518,671 3,173,552 Lease liability, excluding current portion (Note 12) 310,337 368,472 Long-term debt, excluding current portion (Note 13) 2,708,497 4,781,005 Total liabilities 6,537,505 8,323,029 Shareholders’ Equity 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, 4,795,521 and 4,016,205 shares issued and outstanding, respectively (Note 7) 4,795 4,016 Additional paid-in capital 84,126,734 79,781,674 Share subscriptions receivable ( 1,577 ) ( 1,577 ) Share subscriptions payable 4,941,555 2,115,064 Accumulated deficit ( 68,937,430 ) ( 64,476,966 ) Cumulative translation adjustment ( 8,580 ) ( 8,580 ) Total shareholders’ equity 20,125,497 17,413,631 Total liabilities and shareholders’ equity $ 26,663,002 $ 25,736,660 See accompanying Notes to Condensed Consolidated Financial Statements which form an integral part of the Condensed Consolidated Financial Statements. 3 Worksport Ltd. Condensed Consolidated Statements of Operations and Comprehensive Loss For the Three Months Ended March 31, 2025 and 2024 (Unaudited) 2025 2024 Three Months ended March 31, 2025 2024 Net sales $ 2,240,005 $ 512,637 Cost of sales 1,843,784 475,181 Gross profit 396,221 37,456 Operating expenses Research and development 369,601 381,000 General and administrative 2,988,781 2,293,318 Sales and marketing 869,749 66,777 Professional fees 426,041 943,778 Gain on foreign exchange ( 1,645 ) ( 7,951 ) Total operating expenses 4,652,527 3,676,922 Loss from operations ( 4,256,306 ) ( 3,639,466 ) Other income (expense) Interest expense ( 195,438 ) ( 123,598 ) Interest income 8,134 3,054 Rental income - 45,353 Other ( 16,854 ) - Total other income (expense) ( 204,158 ) ( 75,191 ) Net loss $ ( 4,460,464 ) $ ( 3,714,657 ) Loss per share (basic and diluted) $ ( 1.05 ) $ ( 1.75 ) Weighted average number of shares (basic and diluted) 4,262,474 2,118,807 See accompanying Notes to Condensed Consolidated Financial Statements which form an integral part of the Condensed Consolidated Financial Statements. 4 Worksport Ltd. Condensed Consolidated Statements of Shareholders’ Equity For the Three Months Ended March 31, 2025 and 2024 (Unaudited) Shares Amount Shares Amount Capital Receivable Payable Deficit Adjustment (Deficit) Preferred Stock Common Stock Additional Paid-in Share Subscriptions Share Subscription Accumulated Cumulative Translation Total Stockholders’ Equity Shares Amount Shares Amount Capital Receivable Payable Deficit Adjustment (Deficit) Balance at January 1, 2024 100 $ - 2,032,050 $ 2,032 $ 64,685,693 $ ( 1,577 ) $ 1,814,152 $ ( 48,313,177 ) $ ( 8,580 ) $ 18,178,543 Issuance for services and subscriptions payable - - 21,454 21 1,138,109 - 103,433 - - 1,241,563 Shares issued (Note 7) - - 287,716 288 3,194,913 - - - - 3,195,201 Warrant exercise - - 68,800 69 - - - - - 69 Net loss - - - - - - - ( 3,714,657 ) - ( 3,714,657 ) Balance at March 31, 2024 100 $ - 2,410,020 $ 2,410 $ 69,018,715 $ ( 1,577 ) $ 1,917,585 $ ( 52,027,834 ) $ ( 8,580 ) $ 18,900,719 Balance at January 1, 2025 100 $ - 4,016,205 $ 4,016 $ 79,781,674 $ ( 1,577 ) $ 2,115,064 $ ( 64,476,966 ) $ ( 8,580 ) $ 17,413,631 Balance 100 $ - 4,016,205 $ 4,016 $ 79,781,674 $ ( 1,577 ) $ 2,115,064 $ ( 64,476,966 ) $ ( 8,580 ) $ 17,413,631 Issuance for services and subscriptions payable - - 1,033 1 579,445 - 22,170 - - 601,616 Shares issued (Note 7) - - 22,725 22 185,852 - - - - 185,874 Warrant Exercise (Note 15) - - 755,558 756 3,579,763 - 2,804,321 - - 6,384,840 Net loss - - - - - - - ( 4,460,464 ) - ( 4,460,464 ) Balance at March 31, 2025 100 $ - 4,795,521 $ 4,795 $ 84,126,734 $ ( 1,577 ) $ 4,941,555 $ 68,937,430 ) $ ( 8,580 ) $ 20,125,497 Balance 100 $ - 4,795,521 $ 4,795 84,126,734 $ ( 1,577 ) $ 4,941,555 $ 68,937,430 ) $ ( 8,580 ) $ 20,125,497 See accompanying Notes to Condensed Consolidated Financial Statements which form an integral part of the Condensed Consolidated Financial Statements. 5 Worksport Ltd. Condensed Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2025 and 2024 (Unaudited) 2025 2024 Operating activities Net loss $ ( 4,460,464 ) $ ( 3,714,657 ) Adjustments to reconcile net loss to net cash from operating activities: Shares, options and warrants issued for services 608,353 1,241,563 Depreciation and amortization 444,966 383,147 Change in operating lease 4,100 1,988 Adjustments to reconcile net income loss to cash provided by (used in) operating activities ( 3,403,045 ) ( 2,087,959 ) Changes in operating assets and liabilities (Note 10) ( 436,873 ) ( 706,645 ) Net cash used in operating activities ( 3,839,918 ) ( 2,794,604 ) Cash flows from investing activities Purchase of property and equipment ( 201,459 ) ( 212,969 ) Purchase of intangible assets ( 256,883 ) - Net cash used in investing activities ( 458,342 ) ( 212,969 ) Financing activities Shareholder assumption of debt - ( 16,495 ) Proceeds from warrant exercise 6,384,840 69 Proceeds from line of credit 110,821 - Repayments on line of credit ( 2,131,871 ) - Repayments on long-term debt ( 47,394 ) - Proceeds from issuance of common share, net of issuance cost 179,137 3,195,201 Net cash received from financing activities 4,495,533 3,178,775 Change in cash 197,273 171,202 Cash, restricted cash and cash equivalents - beginning of period 4,883,099 3,365,778 Cash, restricted cash and cash equivalents end of period $ 5,080,372 $ 3,536,980 Supplemental Disclosure of cash flow information Income tax paid $ - $ - Interest paid $ 140,000 $ 144,000 See accompanying Notes to Condensed Consolidated Financial Statements which form an integral part of the Condensed Consolidated Financial Statements. 6 Worksport Ltd. Notes to the Condensed Consolidated Financial Statements (Unaudited) 1. Description of Business and Significant Accounting Policies The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments consisting of normal recurring adjustments considered necessary for the fair presentation of results for the interim period have been included. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results expected for the full year. The accompanying unaudited consolidated condensed financial statements should be read in conjunction with the financial statements and notes thereto included in our Form 10-K for the fiscal year ended December 31, 2024. All references to years in these financial statements are fiscal years. Reclassifications – Certain prior year amounts have been reclassified to conform to current year’s presentation. The Company reclassified research and development of $ 369,601 and $ 381,000 for the three months ended March 31, 2025 and 2024, 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. The change also provides a more accurate depiction of the Company’s operating performance. Recent accounting pronouncements Recent accounting pronouncements adopted In 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. We adopted this standard for the year ended December 31, 2024, and applied the amendments retrospectively to all prior periods presented. Refer to Note 17, Segment Reporting. The adoption of this standard did not have a material effect on the financial statements and related disclosures. Recent accounting pronouncements not yet adopted In 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. ASU 2023-09 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. In 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 disclosures. The 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. 7 2. Going Concern As of March 31, 2025, the Company had $ 5,080,372 in cash and cash equivalents. The Company also has availability on its revolving line of credit of $ 2,858,700 . 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 March 31, 2025, the Company had an accumulated deficit of $ 68,937,430 . The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. During the three months ended March 31, 2025, the Company had net losses of $ 4,460,464 (2024 - $ 3,714,657 ). As of March 31, 2025, the Company had working capital of $ 7,936,250 (December 31, 2024 – $ 2,901,401 ) and had an accumulated deficit of $ 68,937,430 (December 31, 2024 - $ 64,476,966 ). The Company has not generated profit from operations since inception and to date has relied on debt and equity financing for continued operations. The Company’s ability to continue as a going concern is dependent upon the ability to generate cash flows from operations and obtain equity and/or debt financing. The Company intends to continue funding operations through equity and debt financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements in the long term. There can be no assurance that the steps management is taking will be successful. The Company has historically operated at a loss, although that may change as sales volumes increase and margins improve. As of March 31, 2025, the Company had cash and cash equivalents of $ 5,080,372 (December 31, 2024 - $ 4,883,099 ). 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; this view 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 and into 2025. The Company has successfully raised cash, and it is positioned to do so again if deemed necessary or strategically advantageous. During the year ended December 31, 2021, the Company, through its Reg-A public offering, private placement offering, underwritten public offering, and exercises of warrants, raised an aggregate of approximately $ 32,500,000 . On September 30, 2022, the Company filed a shelf registration statement on Form S-3, which was declared effective by the SEC 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 September 30, 2022 (“ATM Agreement”), with H.C. Wainwright & 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. Through March 31, 2025, the Company has sold and issued 784,133 shares of common stock in consideration for net proceeds of $ 6,432,971 under the ATM Agreement. On 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 5.5 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. On 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. On May 29, 2024, Worksport sent an inducement letter to a shareholder offering an option to exercise their warrants at a reduced exercise price of $ 0.5198 per warrant. In turn for doing so, Worksport offered the shareholder new warrants to purchase up to 1,295,000 warrant shares with an exercise price of $ 0.5198 . The shares had a term of 5.5 years, with a 6-month required holding period. On 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. 8 On February 27, 2025, Worksport entered into a warrant inducement agreement with a shareholder to exercise 755,558 of their 1,295,000 May 2024 Warrants at price of $ 5.198 per share. The remaining unexercised 539,442 warrants are included in share subscription payable. In return, the Company issued 1,424,500 new 2025 Inducement Warrants. Each Inducement Warrant has an exercise price of $ 6.502 , will become exercisable six months after issuance, and have a 5.5 -year life. Worksport raised approximately $ 6,731,000 in gross proceeds before fees and expenses, with the funds earmarked for general corporate and working capital purposes. To date, the Company’s principal sources of liquidity consist of net proceeds from public and private securities offerings and cash exercises of outstanding warrants. 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. The Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. Still, certain factors indicate the existence of a material uncertainty that cast substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. These adjustments could be material. 3. Inventories Inventories, net of reserves, consists of: Schedule of Inventory March 31, 2025 December 31, 2024 Raw materials $ 3,462,797 $ 3,373,704 Finished goods 1,627,295 1,343,006 Work in progress 635,500 473,344 Inventories, net $ 5,725,592 $ 5,190,054 4. Property and Equipment Property and equipment consist of: Schedule of Property and Equipment March 31, 2025 December 31, 2024 Building $ 6,079,410 $ 6,079,410 Manufacturing equipment 6,043,398 5,830,999 Land 2,239,405 2,239,405 Leasehold improvements 867,756 862,504 Product molds 524,476 524,476 Warehouse equipment 512,700 512,700 Electrical equipment 185,261 185,261 Automobile 172,645 172,645 Furniture 154,065 154,065 Computers 98,594 114,786 Property and equipment, at cost 16,877,710 16,676,251 Less accumulated depreciation ( 3,380,532 ) ( 3,032,025 ) Property and equipment, net $ 13,497,178 $ 13,644,226 Depreciation expense for the three months ended March 31, 2025 and 2024 was $ 348,507 and $ 382,520 , respectively. 9 5. Intangible Assets Intangible 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 2025. 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 prior year ended December 31, 2024 and for the three months ended March 31, 2025. The components of intangible assets are as follows: Schedule of Components of Intangible Assets March 31, 2025 December 31, 2024 Software $ 1,150,000 $ 1,150,000 License 218,329 103,329 Patent 62,706 62,706 Trademark 5,150 5,150 Other 171,334 29,451 Intangible assets, gross carrying amount 1,607,519 1,350,636 Less accumulated amortization ( 494,046 ) ( 397,587 ) Intangible assets, net $ 1,113,473 $ 953,049 Amortization expense for the three months ended March 31, 2025 and 2024 was $ 96,459 and $ 627 , respectively. Estimated amortization of the patent and software over the next five calendar years and beyond March 31, 2025 is as follows: 2025 $ 289,383 2026 $ 385,842 2027 $ 2,508 2028 $ 2,508 2029 $ 2,508 Thereafter $ 35,911 6. Prepaid Expenses and Deposits Prepaid expenses and deposits consist of: Schedule of Prepaid Expenses and Deposits March 31, 2025 December 31, 2024 Consulting, services and advertising $ 187,158 $ 35,740 Insurance 37,510 65,938 Deposits 159,595 90,514 Prepaid expenses and deposits $ 384,263 $ 192,192 7. Shareholders’ Equity During three months ended March 31, 2025, the following transactions occurred: During the three months ended March 31, 2025, the Company sold 22,725 shares of common stock for total gross proceeds of $ 185,874 . 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. The Company recognized consulting expense of $ 22,017 to share subscriptions payable from restricted shares and stock options to be issued. As of March 31, 2025, the restricted shares have not been issued. During the three months ended March 31, 2025, the Company issued 1,000 restricted shares with a value of $ 82,100 . During the three months ended March 31, 2025, in connection with the inducement of 1,295,000 warrants at $ 5.198 per share, the Company also sold 1,424,500 warrants exercisable at $ 6.502 per share. The Company received proceeds of $ 6,731,410 before deducting placement agent fees of $ 346,570 and other offering expenses payable by the Company upon the exercise of the May 2024 Existing Warrants. 10 Refer to Note 15, Warrants and Note 16, Equity Compensation for additional disclosures related to shareholders’ equity. During three months ended March 31, 2024, the following transactions occurred: During the three months ended March 31, 2024, the Company sold 50,492 shares of common stock for a total net proceeds of $ 566,118 . 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. The Company recognized consulting expense of $ 407,621 to share subscriptions payable from restricted shares and stock options to be issued. As of March 31, 2024, the Company issued 21,454 restricted shares with a value of $ 304,188 . During the three months ended March 31, 2024, the Company closed a sale of 237,224 shares of common stock for net proceeds of $ 1,535,591 . In association with the sale of common stock, the Company issued 147,789 pre-funded warrants and 770,026 warrants totaling proceeds of $ 1,093,492 . 8. Income Taxes The effective tax rate for the three months ended March 31, 2025 and 2024 was 22.9 % before 100 % allowance adjustments on net deferred income tax assets. The effective tax rate for the three months ended March 31, 2025 and 2024 was higher than expected from applying the U.S. federal statutory rate of 21 % to loss before income taxes due to tax benefits on losses generated outside the U.S. with higher statutory rates. 9. Financial Instruments and Fair Value Fair 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: Level 1 – Quoted prices in active markets for identical assets and liabilities. Level 2 – Observable inputs other than quoted prices in active markets for similar assets and liabilities. Level 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. The 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 March 31, 2025. The Company’s long-term debt is based on a fixed interest rate, and its carrying amount approximates fair value at March 31, 2025. 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. 11 10. Changes in Cash Flows from Operating Assets and Liabilities The changes to the Company’s operating assets and liabilities for the three months ended March 31, 2025 and 2024 are as follows: Schedule of Changes in Operating Assets and Liabilities 2025 2024 Decrease (increase) in accounts receivable $ ( 25,362 ) $ 306,778 Decrease (increase) in other receivable ( 27,015 ) 10,538 Decrease (increase) in inventory ( 583,116 ) ( 2,908,354 ) Decrease (increase) in prepaid expenses and deposits ( 192,071 ) 1,155,090 Increase (decrease) in accounts payable and accrued liabilities 390,691 729,303 Changes in operating assets and liabilities $ ( 436,873 ) $ ( 706,645 ) 11. Investments a) During the three months ended March 31, 2025, $ 66,308 ($ 90,000 CAD) of the Company’s Guaranteed Investment Certificate (“GIC”) matured and the Company received $ 2,499 ($ 3,603.69 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, 2026. The anticipated earned interest on the GIC at maturity is $ 2,499 ($ 3,603.69 CAD). 12. Leases During the year ended December 31, 2022, the Company signed a lease agreement for approximately 20,296 square feet to be used as its primary corporate office and research and development (“R&D”) facility pursuant to a five-year lease, dated June 1, 2022 , for a variable rate averaging $ 20,242 per month over the lifetime of the lease not inclusive of additional fees, which also vary and average $ 5,033 per month in 2025 not inclusive of taxes. During 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 . The lease was renewed effective June 1, 2024 at a rate of $ 3,600 per month with a termination date of May 31, 2025 . The 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 initial amount equal to the lease liability. 12 The Company’s right-of-use asset and lease liability as of March 31, 2025, and December 31, 2024, are as follows: Schedule Right-of-use Asset March 31, 2025 December 31, 2024 Right-of-use asset $ 531,122 $ 595,415 Current lease liability $ 244,477 $ 246,535 Long-term lease liability $ 310,337 $ 368,472 The following is a summary of the Company’s total lease costs: Schedule of Lease Cost March 31, 2025 March 31, 2024 Operating lease cost $ 78,407 $ 133,796 The following is a summary of cash paid during the three months ended March 31, 2025 and 2024 for amounts included in the measurement of lease liabilities: Schedule of Measurement of Lease Liabilities March 31, 2025 March 31, 2024 Operating cashflow $ 78,471 $ 135,784 The following are future minimum lease payments as of March 31, 2025: Schedule of Future Minimum Lease Payments 2026 $ 286,627 2027 279,815 2028 46,975 Total future minimum lease payments 613,417 Less: amount representing interest ( 58,603 ) Present value of future payments 554,814 Current portion 244,477 Long term portion $ 310,337 13. Indebtedness Long-term debt consists of: Schedule of Long Term Debt March 31, 2025 December 31, 2024 Revolving Credit Facility (a) $ 1,735,414 $ 3,808,025 Other (b) 1,404,991 1,456,485 Long-term debt 3,140,405 5,264,510 Less deferred debt issuance cost ( 204,851 ) ( 260,513 ) Less current installments ( 227,056 ) ( 222,992 ) Long-term debt $ 2,708,497 $ 4,781,005 a) On 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 March 31, 2025, the outstanding balance of this loan was $ 1,570,197 (net of issuance costs of $ 165,217 ). For 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 March 31, 2025, the Company had an available balance of $ 2,858,700 to borrow on the Revolving Credit Facility. b) On 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 ). The Company 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. 14. Loss per Share For the three months ended March 31, 2025, loss per share is $ 1.05 (basic and diluted) compared to that of the three months ended March 31, 2024, of $ 1.75 (basic and diluted) using the weighted average number of shares of 4,262,474 (basic and diluted) and 2,118,807 (basic and diluted), respectively. There are 29,900,000 shares authorized with 4,795,521 and 2,410,020 shares issued and outstanding, at March 31, 2025 and 2024, 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 March 31, 2025, the Company has 2,414,526 warrants convertible to 2,444,526 common shares, 115,713 restricted stock to be issued, and 201,824 stock options exercisable for 201,824 common shares for a total underlying common shares of 2,762,063 . As of March 31, 2024, the Company has 2,011,808 warrants convertible to 2,041,808 common shares, 35,702 restricted stock to be issued, and 513,266 stock options exercisable for 513,266 common shares for a total underlying common shares of 2,590,775 . 13 15. Warrants 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. Pursuant to the Inducement, the exercising holder of the existing warrants received 1,425,000 inducement warrants and the Company received $ 6,731,000 from the exercise of the existing warrants. As a result of the inducement and subsequent exercise, the Company determined the incremental fair value provided to the holder from the inducement warrants issued using the Black Scholes model. The total incremental fair value of $ 7,602,000 , is recorded as a non-cash deemed dividend. The proceeds of the warrant inducement and issuance of 1,295,000 shares of common stock are recorded as additional paid-in capital. 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. The Company 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 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 . During 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 . During 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. During the year ended December 31, 2023, in connection with the sale of 192,500 shares of common stock the Company also sold 157,500 pre-funded warrants and 700,000 warrants convertible for 857,500 shares of common stock at an exercise price of $ 0.001 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 . On 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. During 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. During the year ended December 31, 2022, the Company and a warrant holder reached an agreement to extend the exercisable period of 30,000 warrants, convertible to 2 shares of common stock each, for an additional 12 months. During the year ended December 31, 2021, the Company issued 13,091 representative warrants to the Company’s underwriters. The representative warrants were not exercisable until January 30, 2022. 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. As of March 31, 2025, the Company has the following warrants outstanding: Schedule of Warrants Exercise Price Exercise price Number outstanding Remaining Contractual Life (Years) Expiry date $ 40.00 30,000 1.75 December 31, 2026 $ 7.40 770,026 4.47 September 20, 2029 $ 6.502 1,424,500 5.41 August 27, 2030 $ 4.00 190,000 4.48 September 21, 2029 2,414,526 4.99 The average remaining contractual life of outstanding warrants that expire is 4.99 years. Schedule of Warrants Activity March 31, 2025 December 31, 2024 Number of warrants Weighted average price Number of warrants Weighted average price Balance, beginning of year 2,291,276 $ 6.35 1,162,792 $ 24.20 Issuance 1,424,500 $ 6.50 2,402,815 $ 5.49 Expired ( 6,250 ) $ 24.00 ( 357,742 ) $ 60.50 Exercise ( 1,295,000 ) $ 5.20 ( 916,589 ) $ ( 3.97 ) Balance, end of period 2,414,526 $ 7.01 2,291,276 $ 6.35 16. Equity Compensation Under the Company’s 2015, 2021 and 2022 Equity Incentive Plans, the number of shares of common stock reserved for issuance under the option plan shall not exceed 10% of the issued and outstanding shares of common stock of the Company, have a maximum term of 10 years, and vest at the discretion of the Board of Directors. All equity-settled, share-based payments are ultimately recognized as an expense in the statement of operations with a corresponding credit to “Additional Paid in Capital.” If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognized in the current period. No adjustment is made to any expense recognized in prior periods if share options ultimately exercised are different than that estimated on vesting. 14 Performance Share Units On 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. On 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 stock price. 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 March 31, 2025, 7,500 PSUs of the remaining 30,000 PSUs had vested. On 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 . Stock Options The Company uses the Black-Scholes option pricing model to determine fair value of stock options on the grant date. During the three months ended March 31, 2025, the Company issued 10,000 stock options to a director with an exercise price of $ 5.95 and an expiration date of Marh 7, 2035. On 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. As a result of the modification in exercise prices, the Company recognized additional expense of $ 93,140 on the date of modification. During 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 cancelled. Schedule of Stock Options Activity March 31, 2025 December 31, 2024 Number of stock Weighted average Number of stock Weighted average options price options price Balance, beginning of year 579,936 $ 7.14 506,386 $ 19.62 Granted 10,000 $ 5.95 84,860 $ 7.70 Forfeited ( 960 ) $ 7.04 ( 11,310 ) $ ( 29.30 ) Balance, end of period 588,976 $ 7.10 579,936 $ 7.14 Schedule of Share Based Payment Arrangement, Option, Exercise Price Range Range of Exercise Weighted average Weighted average Exercisable on prices Outstanding life (years) exercise price March 31, 2025 Stock options $ 5.20 - 55.00 588,976 7.66 $ 7.10 191,755 15 As of March 31, 2025 and December 31, 2024, Terravis Energy Inc., a wholly owned subsidiary of the Company, has the following options outstanding: Schedule of Stock Options Activity March 31, 2025 December 31, 2024 Number of stock Weighted average Number of stock Weighted average options price options price Balance, beginning of year 1,350,000 $ 0.01 1,350,000 $ 0.01 Granted - $ - - $ - Balance, end of period 1,350,000 $ 0.01 1,350,000 $ 0.01 Schedule of Share Based Payment Arrangement, Option, Exercise Price Range Range of Weighted average Weighted average Exercisable on Exercise prices Outstanding life (years) exercise price March 31, 2025 Stock options $ 0.01 1,350,000 7.03 $ 0.01 1,350,000 17. Segment Reporting The 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. The 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 segments. 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: Schedule of Revenue and Segment Net Loss Hard Tonneau Covers Soft Tonneau Covers Corporate / Eliminations Consolidated Hard Tonneau Covers Soft Tonneau Covers Corporate / Eliminations Consolidated For the three months ended March 31, 2025 For the three months ended March 31, 2024 Hard Tonneau Covers Soft Tonneau Covers Corporate / Eliminations Consolidated Hard Tonneau Covers Soft Tonneau Covers Corporate / Eliminations Consolidated Net sales $ 2,118,565 $ 121,440 $ - $ 2,240,005 $ 35,782 $ 476,855 $ - $ 512,637 Less: Cost of sales ( 1,736,491 ) ( 98,351 ) ( 8,942 ) ( 1,843,784 ) ( 31,554 ) ( 443,627 ) - ( 475,181 ) Selling, general and administrative ( 2,023,395 ) ( 66,229 ) ( 2,117,937 ) ( 4,207,561 ) ( 977,026 ) ( 232,461 ) ( 2,084,288 ) ( 3,293,775 ) Depreciation and amortization ( 417,316 ) ( 12,829 ) ( 14,821 ) ( 444,966 ) ( 310,452 ) ( 15,040 ) ( 57,655 ) ( 383,147 ) Loss from continuing operations $ ( 2,058,637 ) $ ( 55,969 ) $ ( 2,141,700 ) $ ( 4,256,306 ) $ ( 1,283,250 ) $ ( 214,273 ) $ ( 2,141,943 ) $ ( 3,639,466 ) The following table presents the Company’s net sales disaggregated by geographic area: Schedule of Net Sales Disaggregated by Geographic Area Hard Tonneau Covers Soft Tonneau Covers Consolidated Hard Tonneau Covers Soft Tonneau Covers Consolidated 2025 2024 Hard Tonneau Covers Soft Tonneau Covers Consolidated Hard Tonneau Covers Soft Tonneau Covers Consolidated United States $ 2,105,908 $ 121,641 $ 2,227,549 $ 17,976 $ 474,654 $ 474,654 Canada 12,456 - 12,456 17,806 2,201 20,007 Total Revenues $ 2,118,364 $ 121,641 $ 2,240,005 $ 35,782 $ 476,855 $ 512,637 Revenues $ 2,118,364 $ 121,641 $ 2,240,005 $ 35,782 $ 476,855 $ 512,637 No asset information has been provided for the reported segments as the CODM does not regularly review asset information by reportable segment. As of March 31, 2025 and December 31, 2024, assets held in the U.S. accounted for 89 % and 88 % of total assets, respectively. 18. Commitments and Contingencies There are no legal proceedings except for routine litigation incidental to the business. 19. Subsequent Events The Company has evaluated subsequent events through May 15, 2025. The following events occurred after the three months ended March 31, 2025: ● On April 1, 2025, the Company signed a lease agreement for 12,500 square feet of office space to be used as an R&D facility pursuant to a three-year lease effective May 1, 2025, for an average monthly rent of $ 9,659 . 16