UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
Quarterly Period Ended:
Commission
File No.
(Exact Name of Small Business Issuer as specified in its charter)
| (State or other jurisdiction of | (I.R.S. Employer | |
| incorporation or organization) | Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s
Telephone Number, including area code:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class: | Trading Symbol(s) | Name of each exchange on which registered: | ||
Securities registered pursuant to Section 12(g) of the Act: None
Indicate
by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant
was required to submit post such files).
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ |
| ☒ | Smaller reporting company | ||
| Emerging growth company |
If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 13, 2026, the Registrant had shares of common stock, par value $ per share, issued and outstanding.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
| 2 |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
(Unaudited)
March 31, 2026 | December 31, 2025 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Accounts receivable, net | ||||||||
| Other receivable | ||||||||
| Inventory (Note 3) | ||||||||
| Prepaid expenses and other (Note 6) | ||||||||
| Total current assets | ||||||||
| Investments | ||||||||
| Property and equipment, net (Note 4) | ||||||||
| Operating lease right-of-use assets (Note 11) | ||||||||
| Intangible assets, net (Note 5) | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities and other | ||||||||
| Accrued compensation | ||||||||
| Long-term debt, current portion (Note 12) | ||||||||
| Lease liability, current portion (Note 11) | ||||||||
| Total current liabilities | ||||||||
| Lease liability, excluding current portion (Note 11) | ||||||||
| Long-term debt, excluding current portion (Note 12) | ||||||||
| Total liabilities | ||||||||
| Shareholders’ equity | ||||||||
| Series A, B and Series C preferred stock, $ par value, shares authorized, Series A, Series B, and and Series C issued and outstanding, respectively (Note 7) | ||||||||
| Common stock, $ par value, shares authorized, and shares issued and outstanding, respectively (Note 7) | ||||||||
| Additional paid-in capital | ||||||||
| Share subscriptions receivable | ( | ) | ( | ) | ||||
| Share subscriptions payable | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Cumulative translation adjustment | ( | ) | ( | ) | ||||
| Total shareholders’ equity | ||||||||
| Total liabilities and shareholders’ equity | $ | $ | ||||||
See accompanying Notes to Condensed Consolidated Financial Statements which form an integral part of the Condensed Consolidated Financial Statements.
| 3 |
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
Three Months ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Net sales | $ | $ | ||||||
| Cost of sales | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Research and development | ||||||||
| General and administrative | ||||||||
| Sales and marketing | ||||||||
| (Gain) loss on foreign exchange | ( | ) | ( | ) | ||||
| Total operating expenses | ||||||||
| Loss from operations | ( | ) | ( | ) | ||||
| Other income (expense) | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Other | ( | ) | ||||||
| Total other income (expense) | ( | ) | ( | ) | ||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Loss per share (basic and diluted) (Note 13) | $ | ) | $ | ) | ||||
| Weighted average number of shares (basic and diluted) | ||||||||
See accompanying Notes to Condensed Consolidated Financial Statements which form an integral part of the Condensed Consolidated Financial Statements.
| 4 |
Condensed Consolidated Statements of Shareholders’ Equity
(Unaudited)
| Preferred Stock | Common Stock | Additional Paid-in |
Share Subscriptions |
Share Subscription |
Accumulated | Cumulative Translation |
Total Stockholders’ | |||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Receivable | Payable | Deficit | Adjustment | Equity | |||||||||||||||||||||||||||||||
| Balance at January 1, 2025 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||
| Issuance for services and subscriptions payable | - | |||||||||||||||||||||||||||||||||||||||
| Shares issued (Note 7) | - | |||||||||||||||||||||||||||||||||||||||
| Warrant exercise (Note 14) | - | |||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||
| Balance at March 31, 2025 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||
| Balance at January 1, 2026 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||
| Issuance for services and subscriptions payable | - | - | ||||||||||||||||||||||||||||||||||||||
| Shares issued (Note 7) | - | |||||||||||||||||||||||||||||||||||||||
| Shares issued (Note 14) | - | ( |
) | |||||||||||||||||||||||||||||||||||||
| Proceeds from escrow pursuant to Reg-A | - | - | ||||||||||||||||||||||||||||||||||||||
| Series C preferred stock conversions | ( |
) | ||||||||||||||||||||||||||||||||||||||
| Dividends payable to Series C Preferred shareholders (Note 7) | - | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||
| Net loss | - | - | ( |
) | ( |
) | ||||||||||||||||||||||||||||||||||
| Balance at March 31, 2026 | $ | $ | $ | $ | ( |
) | $ | $ | ( |
) | $ | ( |
) | $ | ||||||||||||||||||||||||||
See accompanying Notes to Condensed Consolidated Financial Statements which form an integral part of the Condensed Consolidated Financial Statements.
| 5 |
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Three Months ended | ||||||||
March 31, | ||||||||
| 2026 | 2025 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| 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 | ||||||||
| ( | ) | ( | ) | |||||
| Changes in operating assets and liabilities (Note 10) | ( | ) | ( | ) | ||||
| Net cash provided by (used in) operating activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Purchase of intangible assets | ( | ) | ||||||
| Net cash provided by (used in) investing activities | ( | ) | ( | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from issuance of common stock, net of issuance cost | ||||||||
| Proceeds from issuance of Reg-A units, net of issuance cost | ||||||||
| Proceeds from warrant exercise | ||||||||
| Proceeds from line of credit | ||||||||
| Repayments on line of credit | ( | ) | ( | ) | ||||
| Repayments on long-term debt | ( | ) | ( | ) | ||||
| Dividends paid to Series C Preferred shareholders | ( | ) | ||||||
| Net cash provided by (used in) financing activities | ||||||||
| Increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash and cash equivalents - beginning of period | ||||||||
| Cash and cash equivalents - end of period | $ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION | ||||||||
| Income tax paid | $ | $ | ||||||
| Interest paid | $ | $ | ||||||
| Non-cash investing activities and financing activities | ||||||||
| Capital expenditures included in accounts payable | $ | $ | ||||||
See accompanying Notes to Condensed Consolidated Financial Statements which form an integral part of the Condensed Consolidated Financial Statements.
| 6 |
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
Note 1- Description of Business and Significant Accounting Policies
The accompanying unaudited condensed consolidated 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, 2026 are not necessarily indicative of the results expected for the full year. The accompanying unaudited condensed consolidated 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, 2025. All references to years in these financial statements are fiscal years.
Reclassifications
Certain
prior year amounts have been reclassified to conform to the current year’s presentation. The Company reclassified professional
fees of $
Recent accounting pronouncements
Recent accounting pronouncements not yet adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures. This ASU enhances 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 for fiscal years 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.
In September 2025, the FASB issued ASU 2025-06, Intangibles – Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. This ASU removes all references to prescriptive and sequential software development stages and will now require public business entities to start capitalizing software costs when management has authorized and committed to funding the software project and is probable that project will be completed and the software will be used to perform the function intended. The ASU also specifies that the disclosures in Subtopic 360-10, Property, Plant and Equipment – Overall, are required for all capitalized internal-use software costs. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the disclosure requirements of this standard and the impact on its consolidated financial statements.
In December 2025, the FASB issued ASU 2025-11, Interim Reporting (Topic 270): Narrow Scope Improvements. This ASU amends Topic 270 by improving the navigability of the required interim disclosures and clarifying when the guidance is applicable. The amendment provides additional guidance on when disclosures should be provided in interim reporting periods and requires entities to disclose events since the end of the last annual reporting period that have a material impact on the Company. ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2026, with early adoption permitted. The Company is currently evaluating the disclosure requirements of this standard and the impact on its consolidated financial statements.
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 |
Note 2 - Going Concern
As
of March 31, 2026, the Company had $
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,
2026, the Company had net losses of $
The
Company has historically operated at a loss, although that may change as sales volumes increase and margins improve. As of March 31,
2026, the Company had cash and cash equivalents of $
The Company has successfully raised capital in recent periods and believes it is positioned to do so again if deemed necessary or strategically advantageous.
On September 30, 2022, the Company
entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC
(“Wainwright”), pursuant to which the Company could offer and sell shares of its common stock having an aggregate
offering price of up to $
Because the
Company’s public float was below $75.0 million, sales under the ATM Agreement were subject to the limitations of General Instruction
I.B.6 of Form S-3. Accordingly, on November 5, 2024 and December 13, 2024, the Company filed prospectus supplements to update the amount
of securities then eligible for sale under the ATM Agreement based on the Company’s public
float and prior sales during the applicable rolling 12-month period. The Company’s registration statement on Form S-3 (File No.
333-267696) expired on October 13, 2025. Through the expiration date, the Company had sold shares of common stock under the ATM
Agreement for aggregate gross proceeds of approximately $
On
November 14, 2025, the Company and Wainwright entered into an amendment to the ATM Agreement in connection with the Company’s new
shelf registration statement on Form S-3 (File No. 333-291582). Pursuant to the amended ATM Agreement and the related base prospectus
and prospectus supplement dated December 12, 2025, the Company may offer and sell shares of its common stock having an aggregate
offering price of up to $
On
November 2, 2023, the Company consummated a registered direct offering pursuant to which the Company issued
shares of common stock and
pre-funded warrants to an institutional investor for a total net proceeds of $
On
March 20, 2024, the Company consummated a registered direct offering pursuant to the prospectus supplement dated March 18, 2024 to
the Company’s effective shelf registration statement on Form S-3 (File No. 333-267696), pursuant
to which the Company issued
shares of common stock and
pre-funded warrants to purchase shares of common stock to the same institutional investor as in the Company’s registered
direct offering on November 2, 2023, for a total net proceeds of $
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 $
| 8 |
On
February 27, 2025, Worksport entered into a warrant inducement agreement with a shareholder to exercise of their
On
June 13, 2025, Worksport completed the initial closing of its Regulation A offering whereby up to Units may be sold at an offering
price of $ per unit. Each Unit consists of one share of
On
December 11, 2025, the Company entered into a warrant inducement agreement (the “Inducement”) with the holder of existing
warrants to purchase an aggregate of shares at a reduced exercise price of $
To date, the Company’s primary 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 primary 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.
Note 3 - Inventories
Inventories, net of reserves, consists of:
| March
31, 2026 | December
31, 2025 | |||||||
| Raw materials | $ | $ | ||||||
| Finished goods | ||||||||
| Work in progress | ||||||||
| Inventories, net | $ | $ | ||||||
Note 4 - Property and Equipment
Property and equipment consist of:
| March
31, 2026 | December
31, 2025 | |||||||
| Building | $ | $ | ||||||
| Manufacturing equipment | ||||||||
| Land | ||||||||
| Leasehold improvements | ||||||||
| Product molds | ||||||||
| Warehouse equipment | ||||||||
| Electrical equipment | ||||||||
| Automobile | ||||||||
| Furniture | ||||||||
| Computers | ||||||||
| Construction in progress | ||||||||
| Property and equipment, at cost | ||||||||
| Less accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Construction in progress includes the acquisition and installation of manufacturing equipment to support ongoing
production. As of March 31, 2026, the Company had an outstanding contractual obligation of approximately $
Depreciation
expense for the three months ended March 31, 2026 and 2025 was $
| 9 |
Note 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, 2025 and for the three months ended March 31, 2026.
The components of intangible assets are as follows:
| March
31, 2026 | December 31, 2025 | |||||||
| Software | $ | $ | ||||||
| License | ||||||||
| Patent | ||||||||
| Trademark | ||||||||
| Other | ||||||||
| Intangible assets, gross carrying amount | ||||||||
| Less accumulated amortization | ( | ) | ( | ) | ||||
| Intangible assets, net | $ | $ | ||||||
Amortization
expense for the three months ended March 31, 2026 and 2025 was $
Estimated amortization of the patent and software over the next five calendar years and beyond March 31, 2026 is as follows:
| 2026 | $ | |||
| 2027 | $ | |||
| 2028 | $ | |||
| 2029 | $ | |||
| 2030 | $ | |||
| Thereafter | $ |
Note 6 - Prepaid Expenses and Other
Prepaid expenses and other consist of:
March 31, 2026 | December 31, 2025 | |||||||
| Consulting, services and advertising | $ | $ | ||||||
| Insurance | ||||||||
| Deposits | ||||||||
| Prepaid expenses and other | $ | $ | ||||||
Note 7- Shareholders’ Equity
The
Company is authorized to issue up to shares of capital stock, par value $
Common stock – The Company is authorized to issue up to shares of common stock.
Preferred stock – The Company is authorized to issue up to shares of preferred stock. The board of directors may authorize, without further shareholder action, the issuance of preferred stock in one or more classes or series. Preferred stock ranks senior to common stock with respect to payment of dividends and the distribution of assets on liquidation. Each class or series of preferred stock, when issued, must include its designation and a description of certain rights, including voting privileges, dividend preferences, conversion features, restrictions and redemption rights.
| - | During
2019, the Company created and issued shares of its Series A preferred stock. | |
| - | During 2020, the Company created the Series B preferred stock. Series B preferred shareholders have the right to vote for each share of common stock outstanding after the issuance date. Series B preferred stock does not have conversion rights, is not entitled to receive dividend preferences nor receive any liquidation preferences. As of March 31, 2026, the Company has not issued shares of Series B preferred stock. | |
| - | During
2025, |
During three months ended March 31, 2026, the following transactions occurred:
During
the three months ended March 31, 2026, the Company sold an aggregate of
shares of its common stock pursuant to the ATM Agreement for aggregate gross proceeds of $
The
Company recognized consulting expense of $
| 10 |
Refer to Note 14, Warrants and Note 15, Equity Compensation for additional disclosures related to shareholders’ equity.
During three months ended March 31, 2025, the following transactions occurred:
During
the three months ended March 31, 2025, the Company sold an aggregate of
shares of its common stock pursuant to an At the Market Offering
Agreement, dated September 30, 2022, for aggregate gross proceeds of $
The
Company recognized consulting expense of $
During
the three months ended March 31, 2025, in connection with the inducement of warrants at $
Note 8 - Income Taxes
The
effective tax rate for the three months ended March 31, 2026 and 2025 was
Note 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 and long-term debt are based on a variable interest rate, and are reflected in the financial statements at carrying value which approximates fair value at March 31, 2026. The fair value of the revolving line of credit and long-term debt is classified as Level 2 within the fair value hierarchy.
The 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 liabilities. 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.
Market Risks
Foreign Currency Risk
The Company is exposed to currency risk on its sales and purchases denominated in Canadian Dollars. The Company actively manages these risks by adjusting its pricing to reflect currency fluctuations and purchasing foreign currency at advantageous rates.
Interest Rate Risk
The 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.
| 11 |
Note 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, 2026 and 2025 are as follows:
| 2026 | 2025 | |||||||
| Decrease (increase) in accounts receivable | $ | $ | ( | ) | ||||
| Decrease (increase) in other receivable | ( | ) | ( | ) | ||||
| Decrease (increase) in inventory | ( | ) | ( | ) | ||||
| Decrease (increase) in prepaid expenses and other | ( | ) | ||||||
| Increase (decrease) in accounts payable and accrued liabilities | ( | ) | ||||||
| $ | ( | ) | $ | ( | ) | |||
Note 11 - Leases
The Company accounts for leases under ASC 842, whereby it recognizes a lease liability and a right-of-use asset. The lease liability is measured at the present value of the remaining lease payments, discounted by the Company’s incremental borrowing rate. The Company measured the right of use asset at an initial amount equal to the lease liability.
On
April 1, 2025, the Company signed a lease agreement for
On
July 14, 2025, the Company signed a lease agreement for
| 12 |
The Company’s right-of-use asset and lease liability as of March 31, 2026, and December 31, 2025, are as follows:
March 31, 2026 |
December 31, 2025 |
|||||||
| Right-of-use asset | $ | $ | ||||||
| Current lease liability | $ | $ | ||||||
| Long-term lease liability | $ | $ | ||||||
The following is a summary of the Company’s total lease costs:
March 31, 2026 | March 31, 2025 | |||||||
| Operating lease cost | $ | $ | ||||||
The following is a summary of cash paid during the three months ended March 31, 2026 and 2025 for amounts included in the measurement of lease liabilities:
March 31, 2026 | March 31, 2025 | |||||||
| Operating cashflow | $ | $ | ||||||
The following are future calendar year minimum lease payments as of March 31, 2026:
| 2026 | $ | |||
| 2027 | ||||
| 2028 | ||||
| Total future minimum lease payments | ||||
| Less: amount representing interest | ( |
) | ||
| Present value of future payments | ||||
| Current portion | ||||
| Long term portion | $ |
| 13 |
Note 12 - Indebtedness
Long-term debt consists of:
March 31, 2026 |
December 31, 2025 |
|||||||
| Revolving Credit Facility (a) | $ | $ | ||||||
| Other (b) | ||||||||
| Less deferred debt issuance cost | ( |
) | ( |
) | ||||
| Less current installments | ( |
) | ( |
) | ||||
| Long-term debt | $ | $ | ||||||
| a) | ||
| 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 | ||
| b) |
The Company is in compliance with all covenants. |
For the three months ended March 31, 2026, loss per share is ($) (basic and diluted) compared to that of the three months ended March 31, 2025, of ($ (basic and diluted) using the weighted average number of shares of (basic and diluted) and (basic and diluted), respectively.
There are common shares authorized with and shares issued and outstanding, at March 31, 2026 and 2025, 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.
| 14 |
Note 14 - Warrants
On
December 11, 2025, the Company entered into a warrant inducement agreement with the holder of existing warrants to purchase an
aggregate of
On
September 2, 2025, the Company entered into a consulting agreement with a third party to perform certain services for a six-month
period in exchange for both cash consideration and the issuance of warrants. The warrant agreement was issued on March 2, 2026 and
is exercisable to purchase up to
The
Company commenced its Regulation A offering pursuant to which it offered up to
On
June 13, 2025, the Company completed the initial closing of the Regulation A offering. On October 15, 2025, the Company completed
the Regulation A offering, pursuant to which it sold an aggregate of
On
February 27, 2025, the Company entered into a warrant inducement agreement (the “Inducement Agreement”) with the holder
of existing warrants to purchase an aggregate of
During
the year ended December 31, 2024, in connection with the sale of shares of common stock, the Company also sold pre-funded
warrants and issued warrants exercisable for a total of
| 15 |
During
the year ended December 31, 2024, the Company closed a sale of shares of common stock. In connection with the sale of common stock,
the Company issued
During
the year ended December 31, 2024,
During
the year ended December 31, 2023, in connection with the sale of shares of common stock the Company also sold pre-funded
warrants and warrants convertible for
On
May 9, 2024, the Company entered into a warrant inducement agreement (the “Inducement”) with the holder of existing warrants
to purchase an aggregate
During
the year ended December 31, 2023, the Company and a stock options holder agreed to cancel all stock options in exchange for extending
the exercisable period of
During
the year ended December 31, 2022, the Company and a warrant holder reached an agreement to extend the exercisable period of
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 shares of common stock
at $ per share until August 3, 2024. As of December 31, 2022, the Company recognized a value of $
| 16 |
As of March 31, 2026, the Company has the following warrants outstanding:
Exercise price | Number outstanding | Remaining Contractual Life (Years) | Expiry date | |||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | ||||||||||||
| $ | - | |||||||||||
The average remaining contractual life of outstanding warrants that expire is years.
| March 31, 2026 | December 31, 2025 | |||||||||||||||
| Number
of warrants | Weighted average price | Number
of warrants | Weighted average price | |||||||||||||
| Balance, beginning of year | $ | $ | ||||||||||||||
| Issuance | $ | $ | ||||||||||||||
| Expired | $ | ( | ) | $ | ||||||||||||
| Exercise | $ | ( | ) | $ | ||||||||||||
| Balance, end of period | $ | $ |
| |||||||||||||
The Company has adopted three equity incentive plans: the 2015 Equity Incentive Plan, the 2021 Equity Incentive Plan, and the 2022 Equity Incentive Plan. The 2015 Equity Incentive Plan expired in 2025 upon reaching the end of its ten-year term. The 2015 and 2021 plans each authorized a fixed number of shares for issuance. Under the 2022 Equity Incentive Plan, .
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.
| 17 |
Performance Share Units
On May 1, 2023, the Company and Steven Rossi reached an agreement to modify restricted stock units and performance stock units (“PSUs”) issued on November 11, 2022, and December 29, 2021, respectively, and replace them with stock options, as described below.
On November 11, 2022, and PSUs granted on December 29, 2021, as described below, were modified to include new terms pertaining to the PSU vesting schedule. as measured using the volume weighted average of the Company’s common stock for ten (10) consecutive trading days, with over $ of trading volume on each of those days. The fair value of the PSUs was estimated to be $. As of March 31, 2026, PSUs of the remaining PSUs had vested, and the Company recognized $ (March 31, 2025 - $) in general and administrative expense.
On December 29, 2021, the Company granted and PSUs to the Company’s Chief Executive Officer and a director, respectively. The fair value of the PSUs was estimated to be $.
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, 2026, the Company issued the following stock options to various directors:
| - | stock options vesting ratably over three years, with an exercise price of $ and an expiration date of |
During the three months ended March 31, 2026, the Company issued the following stock options to various employees and consultants:
| - | stock options vesting over one year, with an exercise price of $ and an expiration date of | |
| - | stock options vesting ratably over three years, with an exercise price of $ and an expiration date of | |
| - | stock options vesting pursuant to performance milestones, with an exercise price of $ and an expiration date of | |
| - | stock options vesting ratably over two years, with an exercise price of $ and an expiration date of |
During the three months ended March 31, 2026, the Company issued the following stock options to Steven Rossi:
| - | stock options vesting ratably over three years, with an exercise price of $, and an expiration date of |
| March 31, 2026 | December 31, 2025 | |||||||||||||||
Number of stock | Weighted average | Number of stock | Weighted average | |||||||||||||
| options | price | options | price | |||||||||||||
| Balance, beginning of year | $ | $ | ||||||||||||||
| Granted | $ | $ | ||||||||||||||
| Forfeited | ( | ) | $ | ( | ) | $ | ||||||||||
| Balance, end of period | $ | $ | ||||||||||||||
| Range of Exercise | Weighted average | Weighted average | Exercisable on | |||||||||||||||||
| prices | Outstanding | life (years) | exercise price | March 31, 2026 | ||||||||||||||||
| Stock options | $ | - | $ | |||||||||||||||||
| 18 |
| March 31, 2026 | December 31, 2025 | |||||||||||||||
Number of stock | Weighted average | Number of stock | Weighted average | |||||||||||||
| options | price | options | price | |||||||||||||
| Balance, beginning of year | $ | $ | ||||||||||||||
| Granted | $ | $ | ||||||||||||||
| Balance, end of period | $ | $ | ||||||||||||||
| Range of | Weighted average | Weighted average | Exercisable on | |||||||||||||||||
| Exercise prices | Outstanding | life (years) | exercise price | March 31, 2026 | ||||||||||||||||
| Stock options | $ | $ | ||||||||||||||||||
Note 16 - Segment Reporting
The
Company manages its business on a product basis and operates in the following
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 (loss) from continuing operations to evaluate its reporting segments. The CODM also uses net income (loss) from continuing operations for evaluating pricing strategy and assessing the performance for determining the compensation of certain employees. Significant segment expenses reviewed, which represent the differences between segment net sales and segment net loss from continuing operations, consist of the following:
| For the three months ended March 31, 2026 | For the three months ended March 31, 2025 | |||||||||||||||||||||||||||||||
| Hard Tonneau Covers | Soft Tonneau Covers | Corporate / Eliminations | Consolidated | Hard Tonneau Covers | Soft Tonneau Covers | Corporate / Eliminations | Consolidated | |||||||||||||||||||||||||
| Net sales | $ | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||
| Cost of sales | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Selling, general and administrative | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Depreciation and amortization | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Loss from continuing operations | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||
The following table presents the Company’s net sales disaggregated by geographic area:
| 2026 | 2025 | |||||||||||||||||||||||
| Hard Tonneau Covers | Soft Tonneau Covers | Consolidated | Hard Tonneau Covers | Soft Tonneau Covers | Consolidated | |||||||||||||||||||
| United States | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Canada | ||||||||||||||||||||||||
| Total Net sales | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
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, 2026 and December 31, 2025, assets held in the U.S. accounted for
Note 17 - Commitments and Contingencies
There are no legal proceedings except for routine litigation incidental to the business.
Note 18 - Subsequent Events
The Company has evaluated subsequent events through May 13, 2026. The following events occurred after the three months ended March 31, 2026:
| ● | On
April 13, 2026, the Company issued to its Chief Executive Officer, Steven Rossi,
shares of the Company’s common stock, par value $
per share at a deemed price of $
per share, representing the closing price of the Company’s Common Stock on the Nasdaq Capital Market on April 10, 2026, for an
aggregate value of $ | |
| ● | On April 20, 2026, the Company announced the official commercial launch and commencement of sales for the NEXUS Tonneau Cover. Production began on April 13, 2026. | |
| ● | On April 29, 2026, the Company announced that it secured Tri-State Enterprises, Inc. (“Tri-State”) as a new cross-regional distribution partner for the Company’s growing tonneau cover lineup, including the Company’s recently launched NEXUS cover. | |
| ● | On April 30, 2026, Michael Johnston resigned as the Company’s Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer, effective April 30, 2026. Mr. Johnston’s resignation was not the result of any disagreement with the Company regarding its operations, policies or practices, including any matters relating to the Company’s accounting practices or financial reporting. | |
| ● | On April 30, 2026, the Company’s Board of Directors appointed Jennifer Kartychak as the Company’s Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer, effective May 1, 2026. Ms. Kartychak has served as the Company’s Vice President of Finance since January 1, 2026. Prior thereto, beginning in August 2023, Ms. Kartychak provided consulting services to the Company through Arend Advisory Group LLC, an entity wholly owned by Ms. Kartychak. | |
| ● | Through May 13, 2026, the Company sold and issued of common stock in consideration for net proceeds of $ |
| 19 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This section and other parts of this Quarterly Report on Form 10-Q (“Form 10-Q”) contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of future performance and actual results may differ significantly from the results discussed in the forward-looking statements. All forward-looking statements in this Form 10-Q are made based on current expectations, forecasts, estimates and assumptions, and involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. In evaluating these statements, various factors, uncertainties, and risks should be specifically considered that could affect future results or operations. These factors, uncertainties and risks may cause actual results to differ materially from any forward-looking statement set forth in this Form 10-Q. These risks and uncertainties described and other information contained in the reports filed with or furnished to the SEC should be carefully considered before making any investment decision with respect to the Company’s securities. The Company assumes no obligation to revise or update any forward-looking statements for any reason, except as required by law.
Unless otherwise stated, all information presented herein is based on the Company’s fiscal calendar, and references to particular years, quarters, months or periods refer to the Company’s fiscal years ended December 31st and the associated quarters, months and periods of those fiscal years. Each of the terms “Company” and “Worksport” as used herein refers collectively to Worksport Ltd. and its subsidiaries, unless otherwise stated.
The following discussion should be read in conjunction with the Company’s Annual Report Form 10-K for the fiscal year ended December 31, 2025 filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 26,2026 and the condensed consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q.
OVERVIEW
Worksport Ltd., through its subsidiaries, designs, develops, manufactures, and owns the Intellectual Property on a portfolio of tonneau cover, solar integration, portable power station, and NP (Non-Parasitic), Hydrogen-based green energy products and solutions for the automotive aftermarket accessories, power storage, residential heating, and electric vehicle-charging industries. We seek to provide consumers with next-generation automotive aftermarket accessories while capitalizing on growing consumer interest in clean energy solutions and power grid independence.
| 20 |
Rising Popularity of Electric Vehicles
Electric Vehicles (EVs) have been increasing in consumer interest, whether that interest takes the form of vehicle pre-orders, sales, or investments. As we begin marketing our Worksport SOLIS and COR, we plan to market the SOLIS as a must-have accessory for electric light duty vehicle owners while simultaneously riding the coattails of EV popularity to promote our other products (COR and conventional tonneau covers) to the very large population of Americans that have an interest in EVs without the funds to purchase them. Further, participating in the EV space allows us to target consumers with an interest in cutting-edge technologies – a great market in which to promote our COR portable power system.
Regulatory Environment Favoring Electric Vehicles
The Build Back Better Bill was a strong indication of upcoming and favorable U.S. regulations. Many regulations that improve North America’s EV charging infrastructure or provide grants to businesses operating in the EV space would benefit us. While we are primarily focused on the light duty vehicle market, our energy products are particularly useful for electric light duty pickup trucks and, therefore, are positioned to benefit greatly from any bill that increases the prevalence of such vehicles. However, President Donald Trump has signed an executive order titled Unleashing American Energy in which he has indicated his administration will be reversing the electric vehicle mandates of Joe Biden’s former administration, and he has further paused billions of dollars in funding allocated towards electric vehicle charging stations. The future of the U.S.’s regulatory environment surrounding electric vehicles is uncertain.
Limited Competitive Landscape
Our conventional tonneau covers are engineered for enhanced user experience and resistance to wear-and-tear, making them strong and competitive products in an otherwise consolidated and saturated market. The Worksport COR, however, operates in a much wider yet unsaturated market. The global Portable Power Station market is quickly growing, and the competitive landscape is far from consolidated. The solar tonneau cover market is in its infancy, and it’s a market in which we have first-mover advantage. To ensure we do not fall behind future competitors, we are highly focused on protecting our intellectual property both domestically and abroad.
Economic Conditions and Market Trends
As a result of a number of factors, our historical results of operations may not be comparable to our results of operations in future periods, and our results of operations may not be directly comparable from period to period. Set forth below is a brief discussion of the key factors impacting our results of operations.
Tariffs and Supply Chain Impact
Our hybrid manufacturing model, which includes sourcing certain products and components from overseas—particularly from China—exposes us to risks associated with tariffs and evolving global trade policies. Tariffs on imported raw materials, components, and finished goods have increased our input costs and may continue to do so in the future. During fiscal 2025, increases in certain material and component costs attributable, in part, to tariffs contributed to higher cost of goods sold; however, these increases were offset by higher production volumes, improved overhead absorption, and operational efficiencies, resulting in an overall improvement in gross margins compared to the prior fiscal year. These impacts are both direct, through duties applied to imported products and components, and indirect, as suppliers and logistics providers may pass through increased costs associated with tariff regimes and related trade restrictions.
While we have taken steps to mitigate these risks through supplier diversification, a portion of our supply chain remains dependent on foreign sources. As a result, tariffs and other trade measures may continue to increase our cost of goods sold and may impact product pricing and margins to the extent not offset by operational efficiencies or pricing actions. In addition, changes in U.S. trade policy or further escalation of tariffs could disrupt supply availability or increase lead times, which may adversely affect our operations and results of operations.
| 21 |
Geopolitical and Macroeconomic Conditions
Recent geopolitical developments, including conflicts in the Middle East involving Iran, have contributed to volatility in global financial markets, higher energy prices and inflationary pressures. While we do not have direct exposure to the affected regions through our suppliers, customers, or operations, these conditions may adversely affect our business. In particular, increases in global energy and transportation costs may increase our cost of goods sold, and inflationary pressures may increase the cost of materials sourced from our suppliers, including suppliers in Asia. In addition, such conditions may adversely affect consumer discretionary spending, which could reduce demand for our products. Volatility in the capital markets may also affect our ability to raise capital on favorable terms. The extent and duration of these conditions remain uncertain and could adversely affect our business, financial condition and results of operations.
Climate Change
Climate change threatens to cause many foreseeable as well as unforeseeable ramifications. In cautious preparation for those that are foreseeable, we have strategically begun domestic manufacturing operations in Western New York – an economically growing region not immediately threatened by climate change to the same extent as other regions and possibly one that may benefit from future population migrations within the U.S. Further, we intend to lower our own carbon footprint by investing in energy-saving measures in our factory in West Seneca, NY. Considering climate change may also exacerbate geopolitical tensions, we are working to diversify our supply chain and lower our reliance on any particular region or country for raw materials in order to lower our exposure to climate change-induced economic or political instability.
We believe our Worksport SOLIS and Worksport COR products will be received positively by the public for their resilience to, and even increased utility as a result of, Climate Change. However, we acknowledge the potentially negative environmental impacts of poor battery recycling and increasing demand for precious metals. We are actively researching ways to lower such environmental impacts.
Inflation
Prices of certain commodity products, including raw materials, are historically volatile and are subject to fluctuations arising from changes in domestic and international supply and demand, labor costs, competition, market speculation, government regulations, trade restrictions and tariffs. Increasing prices of the component materials for parts of our goods may impact the availability, quality and price of our products as suppliers search for alternatives to existing materials and increase the prices they charge. Our suppliers may also fail to provide consistent quality of product as they may substitute lower cost materials to maintain pricing levels. Rapid and significant changes in commodity prices may negatively affect our profit margins, and it may be difficult to mitigate worsened margins through customer pricing actions and cost reduction initiatives.
Additionally, as central banks and the U.S. Federal Reserve adjust interest rates in response to evolving inflationary conditions, the cost of debt financing may fluctuate. While the Federal Reserve began reducing the federal funds rate in the latter half of 2024 and has continued measured reductions into 2025 and early 2026, interest rates remain elevated relative to pre-2022 levels, and the pace and extent of future reductions remain uncertain. Our $6,000,000 revolving line of credit and our $1,487,000 in equipment financing both carry floating interest rates, meaning we remain susceptible to variable debt interest costs as a result of changes in interest rates.
High interest rates have also resulted in a shift in institutional holdings away from micro-cap equities, which has negatively influenced our stock’s trading volume. We continue to forge relationships with institutional investors and analysts in order to maintain a healthy trading volume.
Gasoline Prices and Supply Chain Issues
We faced significantly higher ocean freight, trucking, and container handling costs as well as last mile delivery costs in recent years – all of which have increased our products’ landed costs. Higher oil and gasoline prices further increased these costs, and while such prices have come down from their 2022 highs, we continue to closely monitor gasoline and shipping costs. While the Freight Rate Index has significantly increased during certain periods due to geopolitical tensions and disruptions affecting global shipping routes, the shipping routes used by Worksport have not faced dramatic price hikes. Regardless, Worksport is closely monitoring international shipping costs.
| 22 |
Our transition towards domestic manufacturing and assembly is anticipated to largely offset these higher costs, as we believe we will be less exposed to higher international shipping costs. We are also identifying North American suppliers of our products’ components and will prioritize transport by rail when possible to avoid high trucking costs.
Foreign Currencies
We are subject to foreign exchange risk as we manufacture certain products and components in China, market extensively in both Canadian and U.S. markets, employ people residing in both the U.S. and Canada and, to date, have raised funds in Canadian Dollars. Meanwhile, we report results of operations in U.S. Dollars. Since our Canadian customers pay in Canadian Dollars, we are subject to gains and losses due to fluctuations in the USD relative to the Canadian Dollar. Our manufacturers in China are paid in USD to better avoid the relatively greater fluctuation of the Chinese Yuan. To the extent the U.S. dollar strengthens against any of these foreign currencies, the translation of these foreign currencies denominated transactions results in reduced revenue, operating expenses and net income for our operations.
Business Developments
The following highlights recent material developments in our business in the three months ended March 31, 2026:
| ● | On January 13, 2026, the Company announced the commercial launch of the SOLIS™ Solar Tonneau Cover and COR™ Portable Energy System. The production launch allowed pre-orders to be fulfilled via Worksport’s US facilities, and a digital marketing campaign was initiated to drive sales for the standalone COR battery system and the solar-integrated SOLIS cover. | |
| ● | On February 12, 2026, the Company announced that a large government entity is actively monitoring upcoming laboratory performance results of Aetherlux™ Heat Pump as part of an internal evaluation process. | |
| ● | On March 19, 2026, the Company announced its presentation of its new, premium tonneau cover model to industry buyers at the Keystone BIG Show. |
CRITICAL ACCOUNTING POLICIES
On a regular basis, we evaluate the critical accounting policies used to prepare our consolidated financial statements, including revenue recognition, inventory valuation, reviews for impairment of long-lived assets, and income taxes.
RECENT ACCOUNTING PRONOUNCEMENTS
See Note 1, Description of Business and Significant Accounting Policies included in Item 1, Financial Statements of this report for further information regarding Financial Accounting Standards Board issued Accounting Standards Updates (“ASU”).
| 23 |
CONSOLIDATED RESULTS OF OPERATIONS
The following is a discussion of our results of operations from the three months ended March 31, 2026 compared to the three months ended March 31, 2025
| Three months ended March 31, | Favorable
(Unfavorable) 2026 vs. 2025 | |||||||||||||||
| 2026 | 2025 | Amount | % | |||||||||||||
| Net sales | $ | 3,312,800 | $ | 2,240,005 | $ | 1,072,795 | 47.9 | % | ||||||||
| Cost of sales | 2,458,854 | 1,843,784 | (615,070 | ) | (33.4 | )% | ||||||||||
| Gross profit | 853,946 | 396,221 | 457,725 | 115.5 | % | |||||||||||
| Research and development | 205,333 | 369,601 | 164,268 | 44.4 | % | |||||||||||
| General and administrative | 4,239,154 | 3,414,822 | (824,332 | ) | (24.1 | )% | ||||||||||
| Sales and marketing | 2,155,867 | 869,749 | (1,286,118 | ) | (147.9 | )% | ||||||||||
| (Gain) loss on foreign exchange | (2,231 | ) | (1,645 | ) | 586 | 35.6 | % | |||||||||
| Loss from operations | (5,744,177 | ) | (4,256,306 | ) | (1,487,871 | ) | (35.0 | )% | ||||||||
| Interest expense | (92,383 | ) | (195,438 | ) | 103,055 | 52.7 | % | |||||||||
| Other income (expense) | 8,038 | (8,720 | ) | 16,758 | 192.2 | % | ||||||||||
| Net loss | $ | (5,828,522 | ) | $ | (4,460,464 | ) | $ | (1,368,058 | ) | (30.7 | )% | |||||
| Per share data | ||||||||||||||||
| Basic and diluted earnings per share | $ | (0.54 | ) | $ | (1.05 | ) | $ | 0.51 | 48.3 | % | ||||||
| Three months ended March 31, | Favorable (Unfavorable) | |||||||||||
| Percent of net sales | 2026 | 2025 | Percentage points | |||||||||
| Cost of sales | 74 | % | 82 | % | 8 | % | ||||||
| Gross profit | 26 | % | 18 | % | 8 | % | ||||||
| Research and development expense | 6 | % | 17 | % | 10 | % | ||||||
| General and administrative expense | 128 | % | 152 | % | 24 | % | ||||||
| Sales and marketing expense | 65 | % | 39 | % | (26 | )% | ||||||
Net sales
For the three months ended March 31, 2026, net sales generated in the U.S. was $3,306,645, compared to $2,227,549 for the same period in 2025, an increase of approximately 48%.
Net sales increased during the three months ended March 31, 2026 compared to the same period the prior year due to increased sales of tonneau covers to end users via the Company’s online marketplace and various dealers and distributors. The Company increased its product offerings in 2025 to also include AL4 and HD3 covers to end customers. The Company continues to focus on establishing as well as strengthening its presence in both the direct-to-consumer and business-to-business sales channels while also strengthening customer support to increase customer satisfaction and increase product turnover.
We distribute our products in the U.S. and Canada through an expanding network of wholesalers, distributors, and dealers, and through online channels, including major online marketplaces and our direct-to-consumer e-commerce platform. We intend to continue expanding both business-to-business and direct-to-consumer channels with product offerings unique to each of these channels. We also continue to pursue relationships with original equipment manufacturers and fleet customers where appropriate.
| 24 |
We currently work closely with a large Canadian and a large U.S. distributor as well as online retailers to grow our customer base. We are progressing well in conversations with three other major distributors with strong market presences, which will allow us to promote to dealers and sell to jobbers in strategic regions. Lastly, we are in closing discussions with a network of nationwide U.S. dealers capable of bringing our product to all U.S. continental states.
Net sales from online retailers of our products decreased by $60,045, from $1,871,085 for the three months ended March 31, 2025 to $1,811,040 for same period ended March 31, 2026. The 3% decrease is a result of the Company’s focus to lower our customer acquisition cost with additional focus on brand awareness and less focus on conversion marketing. The reduction in conversion marketing efforts decreased order volume, but this was offset by an increase in the average order value of our product offerings.
Cost of Sales
The decrease in the cost of sales as a percentage of sales was primarily driven by two factors: (1) increase production volume to support sales growth, including introduction of new product lines during 2025, and (2) overhead allocation efficiencies associated with higher production volume. These improvements offset increases in certain material, components, and landed costs, including the impact of tariffs on imported products and components sourced from overseas. While tariffs contributed to higher input costs during the three months ended March 31, 2026, the overall effect of increased scale and production efficiencies resulted in an improvement in our gross margin.
We continue to employ a discounting strategy as part of a broader initiative to enhance market presence and build brand awareness. We anticipate this will well position us for sustained customer engagement in future periods, during which discounting may not be necessary to the same extent. As production volume grows and our manufacturing process becomes more efficient, we expect to allocate fixed costs included in overhead absorption against a larger production volume base. This scaling will be facilitated by reallocating more of our existing human capital and machinery resources toward production.
We provide our distributors and online retailers with an “all-in” wholesale price. This includes any import duty charges, taxes, and shipping charges. Discounts are applied if the distributor or retailer chooses to use their own shipping process. Certain exceptions apply on rare occasions where product is shipped outside the contiguous United Sates or from the U.S. to Canada. Volume discounts are offered to certain high-volume customers, and we also offer a “dock price” or “pickup program” whereby clients are able to pick up product directly from our stocking warehouse.
Operating Expenses
Operating expenses increased for the three months ended March 31, 2026 by $1,945,596, from $4,652,527 for the three months ended March 31, 2025 to $6,598,123, mainly due to the following factors:
| ● | Research and development expense decreased by $164,268, from $369,601 for the three months ended March 31, 2025 to $205,333 for the three months ended March 31, 2026. The decrease was related to developmental progress of our AL3 and AL4 product lines, which required less R&D efforts as resources were shifted to normal-course production. | |
| ● | General and administrative expense increased by $824,332, from $3,414,822 in 2025 to $4,239,154 in 2026. The increase was related to a shift in overhead absorption driven by production volume requirements as well as an increase in labor costs to support production efforts. | |
| ● | Sales and marketing expense increased by $1,286,118, from $869,749 in 2025 to $2,155,867 in 2026. The increase in sales and marketing was primarily attributable to marketing campaigns to promote brand awareness. |
Other Income and Expenses
We reported net other expenses for the three months ended March 31, 2026 of $84,345, compared to $204,158 for three months ended March 31, 2025. The decrease in net other expenses was attributed to decreased interest expense on our line of credit as a result of reduced usage following cash inflows as a result of the December warrant inducement transaction.
Net Loss
Net loss for the three months ended March 31, 2026 was $5,828,522, compared to a net loss of $4,460,464 for the three months ended March 31, 2025 – an increase of approximately 31%. The increase in net loss can be attributed to the increase in various operating expenses as we focus on expanding our operations and promoting our brand awareness.
| 25 |
Liquidity and Capital Resources
As of March 31, 2026 and December 31, 2025, we had $566,583 and $5,945,894, respectively in cash and cash equivalents. As of March 31, 2026, we had $2,479,490 of remaining available capacity on our revolving line of credit compared with $3,448,016 of remaining available capacity as of December 31, 2025. The decrease in cash and cash equivalents and decrease in the remaining available capacity on our revolving line of credit was primarily a result of our use of proceeds from our warrant inducement transaction in December 2025 to fund working capital requirements to support the production of our new product offerings. We have historically generated only limited gross profit and have relied primarily upon capital generated from public and private offerings of our securities to fund continuing operations. Since the Company’s acquisition of Worksport in 2014, it has never generated a profit. During the three months ended March 31, 2026, we had net losses of $5,828,522 (three months ended March 31, 2025 - $4,460,464). As of March 31, 2026, the Company had working capital of $6,579,541 (As of December 31, 2025 - $10,061,578) and had an accumulated deficit of $89,729,030 (As of December 31, 2025 - $83,873,790).
In their fiscal 2025 audit report, our independent auditors expressed that there is substantial doubt as to our ability to continue as a going concern. Our ability to continue as a going concern is dependent upon our ability to generate cash flows from operations and obtain equity and/or debt financing. We intend to continue funding operations through equity and debt financing arrangements, which may be insufficient to fund our capital expenditures, working capital and other cash requirements in the long term. There can be no assurance that the steps our management is taking will be successful.
To date, our principal sources of liquidity consist of net proceeds from public and private securities offerings and cash exercises of outstanding warrants. During the three months ended March 31, 2026, the Company received net proceeds of $2,208,337 from the offerings described below. Management is focused on transitioning towards gross profit as our principal source of liquidity by growing our existing product offerings and customer base and realizing manufacturing efficiency improvements. We cannot give assurance that we can increase our cash balances or limit our cash consumption and thus maintain sufficient cash balances for our planned operations or future business developments. Future business development and demands may lead to cash utilization at levels greater than recently experienced. We may need to raise additional capital in the future. However, we cannot ensure that we will be able to raise additional capital on acceptable terms, or at all. Subject to the foregoing, we believe our current cash balances coupled with anticipated cash flow from operating activities will be sufficient to meet our working capital requirements for at least one year from the date of issuance of the accompanying consolidated financial statements.
We have raised funds during the three months ended March 31, 2026 from the following public and private securities offerings:
ATM Shares
On November 14, 2025, the Company entered into an amendment to its At The Market Offering Agreement, dated September 30, 2022, with H.C. Wainwright & Co., LLC (“Wainwright”) in connection with a new shelf registration statement on Form S-3 (File No. 333-291582), which was declared effective by the SEC on December 12, 2025. Pursuant to the amended ATM Agreement and the related prospectus supplement dated December 12, 2025, the Company may offer and sell shares of its common stock having an aggregate offering price of up to $4.0 million through Wainwright as sales agent. During the three months ended March 31, 2026, the Company sold 1,468,606 shares of common stock under the ATM Agreement for aggregate gross proceeds of approximately $2,232,530, resulting in net proceeds of approximately $2,154,230 after deducting commissions and offering expenses.
Because the Company’s public float is below $75.0 million, sales under the ATM Agreement are subject to the limitations of General Instruction I.B.6 of Form S-3, which limits the amount of securities the Company may sell in primary offerings during any rolling 12-month period. As a result, the amount currently available for sale under the ATM Agreement may be significantly less than the aggregate amount registered under the Company’s shelf registration statement.
Regulation A Offering
During the three months ended March 31, 2026, we received $54,107 of proceeds net of issuance cost that were previously held in escrow. The funds in escrow pertain to the Regulation A offering from 2025.
Consolidated Statement of Cash Flows
Cash decreased from $5,945,894 at December 31, 2025, to $566,583 at March 31, 2026 – a decrease of $5,379,311 or 90%. The decrease was primarily due to the use of cash to acquire working capital based on supporting the production of existing product offerings as well as the expected growth of additional product offerings launched in 2026. The Company procured approximately $5.1 million of raw materials to support production of our expanded product lineup, including the SOLIS, COR and NEXUS product lines. Some of our new product offerings utilize raw materials common to existing product offerings. Approximately $1.0 million of these raw materials purchases remained in accounts payable as of March 31, 2026.
Operating Activities
Net cash used in operating activities for the three months ended March 31, 2026 was $8,234,754, compared to $3,839,918 in 2025, primarily driven by the launch of additional product offerings during the three months ended March 31, 2026. Net cash used in operating activities exceeded the Company’s net loss by approximately $2.4 million. The principal component of the change is attributable to the $2.1 million increase in inventory, reflecting the procurement of raw materials and production of finished goods to support the launch of new product offerings during the three months ended March 31, 2026: SOLIS, COR, and NEXUS.
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Accounts receivable decreased at March 31, 2026 by $23,759 and increased by $25,362 in the prior period. The decrease in accounts receivable is based on the timing of shipment with various business-to-business customers and well as the concentration of customers in certain sales channels.
Inventory increased at March 31, 2026 by $2,092,218, and increased at March 31, 2025 by $583,116, as a result of the procurement and production of raw materials and finished goods to support the successful launches of our COR, SOLIS and NEXUS product lines.
Prepaid expenses and other decreased by $62,902 at March 31, 2026, and increased by $192,071 at March 31, 2025 due to timing of advanced payments for professional services to support operations.
Accounts payable and accrued liabilities decreased at March 31, 2026 by $1,562,383 compared to an increase of $390,691 at March 31, 2025 due to the payment for raw materials and finished goods procured and produced in preparation to support the successful launches of our COR, SOLIS and NEXUS product lines.
Investing Activities
Net cash used in investing activities for the three months ended March 31, 2026 was $103,643 compared to $458,342 for the three months ended March 31, 2025. The decrease in investing activities was primarily attributable to our purchase of cryptocurrency and website enhancements in the prior period, both of which are classified as intangible assets.
Financing Activities
Net cash provided by financing activities for the three months ended March 31, 2026 was $2,959,086 compared to net cash provided by financing activities of $4,495,533 for the three months ended March 31, 2025. Net cash provided by financing activities were principally due to our use of the ATM, whereby we received net proceeds of $2,154,230. We also received proceeds from our line of credit through net borrowings of $829,591 for the three months ended March 31, 2026.
Material Contractual Obligations
As of March 31, 2026, the Company had an outstanding contractual obligation of approximately $2.1 million related to the acquisition of manufacturing equipment from Prima Power, representing approximately 70% of the total equipment cost of approximately $3.0 million. Equipment deposits totaling approximately $859,000 are reflected in construction in progress on the Company’s balance sheet, and approximately $879,000 of capital expenditures related to the equipment were included in accounts payable as of March 31, 2026. The remaining amounts are expected to become due when the equipment is delivered, and installation milestones are achieved.
Off-Balance Sheet Arrangements
We did not have any material off-balance sheet arrangements that have or are reasonably likely to have a material future effect on our financial condition, results of operations or cash flows.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
As a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, we are not required to provide the information in this Item.
Item 4. Controls and Procedures
Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the quarter covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the required time and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure due to a material weakness in internal control over financial reporting.
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Material Weaknesses
A material weakness is a deficiency, or a combination of deficiencies, within the meaning of Public Company Accounting Oversight Board Auditing Standard AS 2201, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. We had the following material weakness in internal control over financial reporting, characterized by the following:
| ● | We have not designed written policies and procedures at a sufficient level of precision to support the operating effectiveness of the controls to prevent and timely detect potential errors. | |
| ● | We did not maintain adequate documentation to evidence the operating effectiveness of certain control activities. | |
| ● | We did not maintain appropriate access to certain systems and did not maintain appropriate segregation of duties related to processes associated with those systems. |
To address the material weaknesses, we performed additional analysis and other post-closing procedures in an effort to ensure our consolidated financial statements included in our periodic reports filed with the SEC are prepared in accordance with generally accepted accounting principles. Management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.
Remediation Efforts
Management is committed to remediating the material weaknesses described above. During the three months ended March 31, 2026, the Company engaged an external CPA firm to augment its external reporting review process. The Company’s remediation efforts are ongoing and include, among other things: (i) formalizing written policies and procedures for key financial reporting processes at a level of precision sufficient to support the operating effectiveness of the related controls; (ii) enhancing documentation practices to evidence the design and operating effectiveness of control activities; and (iii) evaluating and implementing appropriate access controls and segregation of duties within key systems. While the Company believes these actions will remediate the identified material weaknesses, the material weaknesses will not be considered fully remediated until the applicable controls have operated effectively for a sufficient period of time and management has concluded, through testing, that the controls are operating effectively. We will continue to monitor and evaluate the effectiveness of our remediation efforts in subsequent periods.
Changes in Internal Control Over Financial Reporting
In January 2026, the Company appointed Jennifer Kartychak as Vice President of Finance and began transitioning certain finance and accounting functions to internal personnel. In connection with this transition, the Company implemented changes to certain processes and controls relating to its financial reporting function.
Subsequent to March 31, 2026, Michael Johnston resigned as the Company’s Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer, and Ms. Kartychak was appointed to such positions effective May 1, 2026. Management does not currently believe these changes have materially affected, or are reasonably likely to materially affect the Company’s internal control over financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we are involved in lawsuits, claims, investigations, and proceedings, including pending opposition proceedings involving patents that arise in the ordinary course of business. We are not presently a party to any material pending or threatened legal proceedings, nor do we have any knowledge of any such pending claims.
Item 1A. Risk Factors
In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, which could materially affect our business, financial condition, liquidity, or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, liquidity or future results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
| ● |
During the three months ended March 31, 2026, the Company granted an aggregate of 90,006 stock options to certain directors of the Company under the Company’s 2022 Equity Incentive Plan. The options have an exercise price of $1.66 per share, vest ratably over three years, and expire on February 9, 2036. The grants were made prior to the filing of the Company’s Registration Statement on Form S-8 covering shares issuable under the plan. No underwriters were involved, and no commissions were paid. The directors represented that the options were acquired for investment purposes and not with a view toward distribution. The options were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended. No underwriters were involved, and no commissions were paid. |
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Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
Securities Trading Plans
During
the three months ended March 31, 2026, none of our Section 16 officers or directors (as defined in Rule 16a-1(f) of the Exchange Act)
Subsequent Events
| ● | On April 13, 2026, the Company issued to its Chief Executive Officer, Steven Rossi, 88,214 shares of the Company’s common stock, par value $0.001 per share at a deemed price of $0.8502 per share, representing the closing price of the Company’s Common Stock on the Nasdaq Capital Market on April 10, 2026, for an aggregate value of $75,000. The shares were issued in satisfaction of previously accrued and unpaid bonus compensation owed to Mr. Steven Rossi and were approved by the Company’s Board of Directors. | |
| ● | On April 20, 2026, the Company announced the official commercial launch and commencement of sales for its highly anticipated NEXUS Tonneau Cover, a premium tonneau cover, with innovative features previously unseen in the market. Production began on the NEXUS cover on April 13, 2026, and early demand from established distributors with multi-million-dollar annual purchasing capacity—supports management’s expectation that the NEXUS platform can contribute millions in incremental revenue in 2026, while accelerating adoption across existing and new sales channels | |
| ● | On April 29, 2026, the Company announced that it secured Tri-State Enterprises, Inc. (“Tri-State”) as a new cross-regional distribution partner for the Company’s growing tonneau cover lineup, including the Company’s recently launched NEXUS cover. | |
| ● | On April 30, 2026, Michael Johnston resigned as the Company’s Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer, effective April 30, 2026. Mr. Johnston’s resignation was not the result of any disagreement with the Company regarding its operations, policies or practices, including any matters relating to the Company’s accounting practices or financial reporting. | |
| ● | On April 30, 2026, the Company’s Board of Directors appointed Jennifer Kartychak as the Company’s Chief Financial Officer, Principal Financial Officer and Principal Accounting Officer, effective May 1, 2026. Ms. Kartychak has served as the Company’s Vice President of Finance since January 1, 2026. Prior thereto, beginning in August 2023, Ms. Kartychak provided consulting services to the Company through Arend Advisory Group LLC, an entity wholly owned by Ms. Kartychak. | |
| ● | Through May 13, 2026, the Company sold and issued 606,069 of common stock in consideration for net proceeds of $623,124 under the ATM Agreement. |
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Item 6. Exhibits
| EXHIBIT | ||
| No. | DESCRIPTION | |
| 10.1 | Employment Agreement, dated as of January 27, 2026, between Worksport Ltd. and Jennifer Kartychak (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on April 30, 2026) | |
| 31.1* | Section 302 Certification of Chief Executive Officer | |
| 31.2* | Section 302 Certification of Chief Financial Officer | |
| 32.1** | Section 906 Certifications of Chief Executive Officer | |
| 32.2** | Section 906 Certifications of Chief Financial Officer | |
| 101.INS* | Inline XBRL Instance Document | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 104* | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
| * | Filed herewith. |
| ** | Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, nor shall such exhibits be deemed to be incorporated by reference in any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise specifically stated in such filing. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| WORKSPORT LTD. | ||
| Dated: May 13, 2026 | By: | /s/ Steven Rossi |
| Steven Rossi | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| Dated: May 13, 2026 | By: | /s/ Jennifer Kartychak |
| Jennifer Kartychak | ||
| Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) | ||
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