Worksport (NASDAQ: WKSP) boosts revenue yet warns on going concern
Rhea-AI Filing Summary
Worksport Ltd. reported higher Q2 2026 revenue but continued sizable losses. Net sales rose to $5.23 million from $4.10 million a year earlier, with gross profit improving to $1.65 million. For the first six months of 2026, net sales were $8.54 million.
Despite this growth, the company recorded a Q2 net loss of $3.97 million and a six‑month net loss of $9.79 million, with operating cash outflow of $11.68 million. Cash and equivalents fell to $1.16 million as of June 30, 2026, while total debt increased to $5.28 million. Management disclosed a material uncertainty that casts substantial doubt about its ability to continue as a going concern and highlighted reliance on equity and debt financings, including ATM sales and registered direct offerings completed in June 2026.
Positive
- Net sales grew 27.4% year over year in Q2 2026 to $5.23 million, with six‑month revenue reaching $8.54 million, indicating expanding demand for the company’s tonneau covers and related products.
- Gross profit increased 52.5% in Q2 2026 to $1.65 million, outpacing revenue growth and suggesting better production scale or mix despite higher operating expenses.
- The company strengthened distribution and product pipeline, launching the NEXUS Tonneau Cover and adding new partners such as Tri-State Enterprises and Meyer Distributing, while its Terravis Energy unit received a U.S. patent for the AetherLux heat-pump system.
- Worksport raised additional capital through equity, including 3,157,774 shares sold under its ATM for $4.00 million in gross proceeds and two June 2026 registered direct offerings totaling about $722,870, enhancing near‑term liquidity.
Negative
- Management identified a material uncertainty that casts substantial doubt on Worksport’s ability to continue as a going concern, citing recurring losses and dependence on external financing.
- The company reported a Q2 2026 net loss of $3.97 million and a six‑month net loss of $9.79 million, with an accumulated deficit of $93.72 million as of June 30, 2026.
- Operating cash burn was significant, with net cash used in operating activities of $11.68 million in the first half of 2026, sharply exceeding gross profit and pressuring liquidity.
- Cash and equivalents declined to $1.16 million from $5.95 million at December 31, 2025, while total debt rose to $5.28 million, including $4.16 million drawn on the revolving credit facility.
- Operating expenses remain high relative to revenue, with six‑month selling, general and administrative costs of $11.22 million, contributing to a six‑month loss from operations of $9.56 million despite higher sales.
Filing Explained
By June 30, completed June offerings had issued common shares and exercised warrants, reducing existing holders’ percentage ownership.
Form 10-Q is the unaudited quarterly report; this filing covers the period ended
A registered direct offering is a negotiated sale of registered securities to selected investors. The first offering included warrants immediately exercisable at
The filing reports 15,282,595 common shares outstanding at
As of
Key Figures
Key Terms
At The Market Offering Agreement financial
going concern financial
non-cash deemed dividend financial
right-of-use asset financial
performance stock units financial
Revolving Credit Facility financial
FAQ
How did Worksport (WKSP) perform financially in Q2 2026?
What is the going concern status disclosed by Worksport (WKSP)?
What is Worksport’s cash position and debt level as of June 30, 2026?
How much revenue did Worksport (WKSP) generate in the first half of 2026?
What capital-raising activities did Worksport complete in early 2026?
How is Worksport (WKSP) using its revolving credit facility and what availability remains?
What segment and product developments did Worksport highlight for Q2 2026?
AI-generated analysis. How Rhea-AI works. Not financial advice.
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For Quarterly Period Ended:
Commission File No.
Worksport Ltd.
(Exact name of registrant 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: |
|
| The |
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 such files).
Table of Contents
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
As of August 11, 2026, the Registrant had
Table of Contents
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
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Page |
PART I. FINANCIAL INFORMATION |
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Item 1. Financial Statements. |
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Condensed Consolidated Balance Sheets as at June 30, 2026 (Unaudited) and December 31, 2025 |
4 |
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2026 and 2025 (Unaudited) |
5 |
Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended June 30, 2026 and 2025 (Unaudited) |
6 |
Condensed Consolidated Statements of Cash Flow for the six months ended June 30, 2026 and 2025 (Unaudited) |
7 |
Notes to the Condensed Consolidated Financial Statements (Unaudited) |
8 |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
24 |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk |
36 |
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Item 4. Controls and Procedures |
37 |
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PART II OTHER INFORMATION |
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Item 1. Legal Proceedings |
38 |
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Item 1A. Risk Factors |
38 |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
39 |
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Item 3. Defaults Upon Senior Securities |
39 |
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Item 4. Mine Safety Disclosures |
39 |
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Item 5. Other Information |
40 |
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Item 6. Exhibits |
41 |
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SIGNATURES |
42 |
3
Table of Contents
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
(Unaudited)
| | June 30, | | | December 31, | | ||
| | 2026 | | | 2025 | | ||
| | (Unaudited) | | | | | | |
ASSETS | | | | | | | | |
Current assets | | | | | | | | |
Cash and cash equivalents | | $ | | | $ | | ||
Accounts receivable, net | | | | | | | ||
Other receivable | | | | | | | ||
Inventories, net (Note 3) | | | | | | | ||
Prepaid expenses and other (Note 6) | | | | | | | ||
Total current assets | | | | | | | ||
Property and equipment, net (Note 4) | | | | | | | ||
Operating lease right-of-use assets (Note 11) | | | | | | | ||
Other noncurrent assets | | | | | | | ||
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.
4
Table of Contents
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
| | Three Months ended | | | Six Months ended | | ||||||||||
| | June 30, | | | June 30, | | ||||||||||
| | 2026 | | | 2025 | | | 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.
5
Table of Contents
Condensed Consolidated Statements of Shareholders’ Equity
(Unaudited)
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Balance at April 1, 2025 |
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Issuance for services and subscriptions payable |
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Warrant exercise (Note 14) |
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Issuance of preferred shares pursuant to Reg-A |
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Issuance of warrants pursuant to Reg-A |
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Net loss |
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Balance at June 30, 2025 |
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Balance at April 1, 2026 |
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| $ |
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| $ |
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| $ | ( | ) |
| $ |
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Issuance for services and subscriptions payable |
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Shares issued (Note 7) |
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Warrant issuance (Note 14) |
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Warrant exercise (Note 14) |
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Dividends paid and payable to Series C preferred shareholders (Note 7) |
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Net loss |
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Balance at June 30, 2026 |
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| Cumulative |
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| Preferred Stock |
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| Common Stock |
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| Paid-in |
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| Subscriptions |
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| Translation |
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| Capital |
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| Receivable |
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| Deficit |
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| Adjustment |
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| Equity |
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Balance at January 1, 2025 |
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| $ |
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| $ |
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Issuance for services and subscriptions payable |
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Shares issued (Note 7) |
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Warrant exercise (Note 14) |
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Issuance of preferred shares pursuant to Reg-A |
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Issuance of warrants pursuant to Reg-A |
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Net loss |
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Balance at June 30, 2025 |
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Balance at January 1, 2026 |
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Issuance for services and subscriptions payable |
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Shares issued (Note 7) |
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Shares issued (Note 14) |
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Warrant issuance (Note 14) |
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Warrant exercise (Note 14) |
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Dividends paid and payable to Series C preferred shareholders (Note 7) |
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Proceeds from escrow pursuant to Reg-A |
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Conversions of Series C preferred shares |
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Net loss |
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Balance at June 30, 2026 |
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| $ | ( | ) |
| $ |
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See accompanying Notes to Condensed Consolidated Financial Statements which form an integral part of the Condensed Consolidated Financial Statements.
6
Table of Contents
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| | Six Months ended | | |||||
| | June 30, | | |||||
| | 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 | | | ( | ) | | | ( | ) |
Purchase of investments | | | | | | ( | ) | |
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 preferred stock, net of issuance cost | | | | | | | ||
Proceeds from issuance of warrants, 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 | | $ | | | $ | | ||
| | | | | | | | |
See accompanying Notes to Condensed Consolidated Financial Statements which form an integral part of the Condensed Consolidated Financial Statements.
7
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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 and six months ended June 30, 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 consolidated 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 consolidated financial statements and related disclosures.
8
Table of Contents
Note 2 - Going Concern
As of June 30, 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 June 30, 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 June 30, 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
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 $
9
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On November 2, 2023, the Company consummated a registered direct offering pursuant to which the Company issued
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
On May 29, 2024, the Company sent an inducement letter to a shareholder offering an option to exercise their warrants at a reduced exercise price of $
On February 27, 2025, the Company entered into a warrant inducement agreement with a shareholder to exercise
On June 13, 2025, the Company completed the initial closing of its Regulation A offering whereby up to
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
On June 17, 2026, the Company entered into a securities purchase agreement (the “First Agreement”) with an institutional accredited investor pursuant to which the Company issued and sold, in a registered direct offering,
The warrants issued in the registered direct offering have an exercise price of $
On June 18, 2026, the Company entered into a second securities purchase agreement (the “Second Agreement”) with the same institutional accredited investor pursuant to which the Company issued and sold, in a separate registered direct offering,
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.
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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 consolidated 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 consolidated 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:
| | June 30, | | | December 31, | | ||
| | 2026 | | | 2025 | | ||
Raw materials | | $ | | | $ | | ||
Finished goods | | | | | | | ||
Work in progress | | | | | | | ||
Inventories, net | | $ | | | $ | | ||
Note 4 - Property and Equipment
Property and equipment consists of:
| | June 30, | | | December 31, | | ||
| | 2026 | | | 2025 | | ||
Building | | $ | | | $ | | ||
Manufacturing equipment | | | | | | | ||
Land | | | | | | | ||
Leasehold improvements | | | | | | | ||
Product molds | | | | | | | ||
Warehouse equipment | | | | | | | ||
Electrical equipment | | | | | | | ||
Automobile | | | | | | | ||
Furniture | | | | | | | ||
Computers | | | | | | | ||
Property and equipment, at cost | | | | | | | ||
Less accumulated depreciation | | | ( | ) | | | ( | ) |
Property and equipment, net | | $ | | | $ | | ||
On June 30, 2026, the Company amended an agreement whereby it was released from an outstanding contractual obligation of approximately $
Depreciation expense for the three months ended June 30, 2026 and 2025 was $
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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 and six months ended June 30, 2026.
The components of intangible assets are as follows:
| | June 30, | | | December 31, | | ||
| | 2026 | | | 2025 | | ||
Software | | $ | | | $ | | ||
License | | | | | | | ||
Patent | | | | | | | ||
Trademark | | | | | | | ||
Other | | | | | | | ||
Intangible assets, gross carrying amount | | | | | | | ||
Less accumulated amortization | | | ( | ) | | | ( | ) |
Intangible assets, net | | $ | | | $ | | ||
Amortization expense for the three months ended June 30, 2026 and 2025 was $
Estimated amortization of the patent and software over the next five calendar years and beyond June 30, 2026 is as follows:
2026 | | $ | | |
2027 | | $ | | |
2028 | | $ | | |
2029 | | $ | | |
2030 | | $ | | |
Thereafter | | $ | |
Note 6 - Prepaid Expenses and Other
Prepaid expenses and other consists of:
| | June 30, | | | December 31, | | ||
| | 2026 | | | 2025 | | ||
Consulting, services and advertising | | $ | | | $ | | ||
Insurance | | | | | | | ||
Deposits | | | | | | | ||
Prepaid expenses and other | | $ | | | $ | | ||
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Note 7- Shareholders’ Equity
The Company is authorized to issue up to
Common stock – The Company is authorized to issue up to
Preferred stock – The Company is authorized to issue up to
| - | During 2019, the Company created and issued |
| - | 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 June 30, 2026, the Company has issued shares of Series B preferred stock. |
| - | During 2025, the Company created its Series C preferred stock for its Regulation A offering. Refer to Note 14, Warrants, for a description of units available in the Regulation A offering. Series C preferred stock ranks senior to common stock and future classes or series of preferred stock as to dividend and liquidation rights. Series C preferred shareholders may convert holdings on a basis to common stock at any time. Series C preferred shareholders are entitled to cumulative dividends at a rate of |
During six months ended June 30, 2026, the following transactions occurred:
During the six months ended June 30, 2026, the Company sold an aggregate of
The Company recognized consulting expense of $
Refer to Note 14, Warrants, and Note 15, Equity Compensation, for additional disclosures related to shareholders’ equity.
During six months ended June 30, 2025, the following transactions occurred:
During the six months ended June 30, 2025, the Company sold an aggregate of
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The Company recognized consulting expense of $
During the six months ended June 30, 2025, in connection with the inducement of
Note 8 - Income Taxes
The effective tax rate for the three and six months ended June 30, 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 June 30, 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.
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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.
Note 10 - Changes in Cash Flows from Operating Assets and Liabilities
The changes to the Company’s operating assets and liabilities for the six months ended June 30, 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
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The Company’s right-of-use asset and lease liability as of June 30, 2026, and December 31, 2025, are as follows:
| | June 30, | | | December 31, | | ||
| | 2026 | | | 2025 | | ||
Right-of-use asset | | $ | | | $ | | ||
Current lease liability | | $ | | | $ | | ||
Long-term lease liability | | $ | | | $ | | ||
The following is a summary of the Company’s total lease costs:
| | June 30, | | | June 30, | | ||
| | 2026 | | | 2025 | | ||
Operating lease cost | | $ | | | $ | | ||
The following is a summary of cash paid during the six months ended June 30, 2026 and 2025 for amounts included in the measurement of lease liabilities:
| | June 30, | | | June 30, | | ||
| | 2026 | | | 2025 | | ||
Operating cashflow | | $ | | | $ | | ||
The following are future calendar year minimum lease payments as of June 30, 2026:
2026 |
| $ |
| |
2027 |
|
|
| |
2028 |
|
|
| |
Total future minimum lease payments |
|
|
| |
Less: amount representing interest |
|
| ( | ) |
Present value of future payments |
|
|
| |
Current portion |
|
|
| |
Long term portion |
| $ |
|
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Table of Contents
Note 12 - Indebtedness
Long-term debt consists of:
| | June 30, | | | December 31, | | ||
| | 2026 | | | 2025 | | ||
Revolving Credit Facility (a) | | $ | | | $ | | ||
Other (b) | | | | | | | ||
| | | | | | | ||
Less deferred debt issuance cost | | | ( | ) | | | ( | ) |
Less current installments | | | ( | ) | | | ( | ) |
Long-term debt | | $ | | | $ | | ||
| 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 $ |
|
|
|
|
| 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) | On September 4, 2024, the Company, through its wholly owned subsidiary, Worksport USA Operations Corporation, entered into a $
The Company is in compliance with all covenants. |
Note 13 - Loss per Share
For the three and six months ended June 30, 2026, loss per share is ($
There are
17
Table of Contents
Note 14 - Warrants
On June 17, 2026, the Company entered into a Securities Purchase Agreement with an investor. The terms of the agreement provided for the issuance of
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
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During the year ended December 31, 2024, the Company closed a sale of
During the year ended December 31, 2023, the Company and a stock options holder agreed to cancel all
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As of June 30, 2026, the Company has the following warrants outstanding:
| | | | | | | | Remaining | | | |
Exercise | | | Number | | | Contractual | | | |||
price | | | outstanding | | | Life (Years) | | Expiry date | |||
$ | | | | | | | | June 12, 2031 | |||
$ | | | | | | | | March 2, 2028 | |||
$ | | | | | | | | March 2, 2028 | |||
$ | | | | | | | | June 13, 2028 – October 24, 2028 | |||
$ | | | | | | | | September 21, 2029 | |||
$ | | | | | | | | December 31, 2026 | |||
| | | | | | | | | | ||
The average remaining contractual life of outstanding warrants that expire is
|
| June 30, 2026 |
|
| December 31, 2025 |
| ||||||||||
|
| Number of |
|
| Weighted |
|
| Number of |
|
| Weighted |
| ||||
|
| warrants |
|
| average price |
|
| warrants |
|
| average price |
| ||||
Balance, beginning of year |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Issuance |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Expired |
|
|
|
| $ |
|
|
| ( | ) |
| $ |
| |||
Exercise |
|
| ( | ) |
| $ | ( | ) |
|
| ( | ) |
| $ |
| |
Balance, end of period |
|
|
|
| $ |
|
|
|
|
| $ |
| ||||
Note 15 - Equity Compensation
The Company has adopted 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 -year term. The 2015 and 2021 plans each authorized a fixed number of shares for issuance. Under the 2022 Equity Incentive Plan, the number of shares of common stock reserved for issuance shall not exceed
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.
Performance Share Units
On May 1, 2023, the Company and Steven Rossi reached an agreement to modify
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On November 11, 2022,
On December 29, 2021, the Company granted
Stock Options
The Company uses the Black-Scholes option pricing model to determine fair value of stock options on the grant date.
During the six months ended June 30, 2026, the Company issued the following stock options to various directors:
| - |
During the six months ended June 30, 2026, the Company issued the following stock options to various employees and consultants:
| - | |
|
|
|
| - | |
|
|
|
| - | |
|
|
|
| - |
During the six months ended June 30, 2026, the Company issued the following stock options to Steven Rossi:
| - |
| | June 30, 2026 | | | December 31, 2025 | | ||||||||||
| | Number of | | | Weighted | | | Number of | | | Weighted | | ||||
| | stock | | | average | | | stock | | | average | | ||||
| | options | | | price | | | options | | | price | | ||||
Balance, beginning of year | | | | | $ | | | | | | $ | | ||||
Granted | | | | | $ | | | | | | $ | | ||||
Forfeited | | | ( | ) | | $ | | | | ( | ) | | $ | | ||
Balance, end of period | | | | | $ | | | | | | $ | | ||||
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|
| Range of |
|
|
|
| |
| Weighted |
|
| Weighted |
|
|
|
| | |||
|
| Exercise |
|
|
|
| |
| average |
|
| average |
|
| Exercisable on |
| ||||
|
| prices |
|
| Outstanding |
|
| life (years) |
|
| exercise price |
|
| June 30, 2026 |
| |||||
Stock options |
| $ |
|
|
|
|
|
|
|
| $ |
|
|
|
| |||||
As of June 30, 2026 and December 31, 2025, Terravis Energy Inc., a wholly owned subsidiary of the Company, has the following options outstanding:
| | June 30, 2026 | | | December 31, 2025 | | ||||||||||
| | Number of | | | Weighted | | | Number of | | | Weighted | | ||||
| | stock | | | average | | | stock | | | average | | ||||
| | options | | | price | | | options | | | price | | ||||
Balance, beginning of year | | | | | $ | | | | | | $ | | ||||
Granted | | | | | $ | | | | | | $ | | ||||
Balance, end of period | | | | | $ | | | | | | $ | | ||||
|
| Range of |
|
|
|
| |
| Weighted |
|
| Weighted |
|
|
|
| | |||
|
| Exercise |
|
|
|
| |
| average |
|
| average |
|
| Exercisable on |
| ||||
|
| prices |
|
| Outstanding |
|
| life (years) |
|
| exercise price |
|
| June 30, 2026 |
| |||||
Stock options |
| $ |
|
|
|
|
|
|
|
| $ |
|
|
|
| |||||
Note 16 - Segment Reporting
The Company manages its business on a product basis and operates in the following 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 (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 June 30, 2026 |
|
| For the three months ended June 30, 2025 |
| ||||||||||||||||||||||||||
|
| Hard |
|
| Soft |
|
|
|
| |
|
|
| |
| Hard |
|
| Soft |
|
|
|
| |
|
|
| | ||||
|
| Tonneau |
|
| Tonneau |
|
| Corporate / |
|
|
|
| |
| Tonneau |
|
| Tonneau |
|
| Corporate / |
|
|
|
| | ||||||
|
| Covers |
|
| Covers |
|
| Eliminations |
|
| Consolidated |
|
| Covers |
|
| Covers |
|
| Eliminations |
|
| Consolidated |
| ||||||||
Net sales |
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
|
| $ |
| ||||||||
Cost of sales |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
|
|
|
| ( | ) | ||
Selling, general and administrative |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Depreciation and amortization |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
|
| ( | ) |
Loss from continuing operations |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
| $ | ( | ) |
22
Table of Contents
|
| For the six months ended June 30, 2026 |
|
| For the six months ended June 30, 2025 |
| ||||||||||||||||||||||||||
|
| Hard |
|
| Soft |
|
|
|
| |
|
|
| |
| Hard |
|
| Soft |
|
|
|
| |
|
|
| | ||||
|
| Tonneau |
|
| Tonneau |
|
| Corporate / |
|
|
|
| |
| Tonneau |
|
| Tonneau |
|
| Corporate / |
|
|
|
| | ||||||
|
| Covers |
|
| Covers |
|
| Eliminations |
|
| Consolidated |
|
| Covers |
|
| Covers |
|
| 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 | | | Soft | | | | | | | Hard | | | Soft | | | | | | ||||
| | Tonneau | | | Tonneau | | | | | | | Tonneau | | | Tonneau | | | | | | ||||
| | Covers | | | Covers | | | Consolidated | | | Covers | | | 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 June 30, 2026 and December 31, 2025, assets held in the U.S. accounted for
Note 17 - Commitments and Contingencies
From time to time, the Company is involved in lawsuits, claims, investigations and proceedings arising in the ordinary course of business, including opposition proceedings involving patents. As of June 30, 2026, the Company was not a party to any legal proceeding that management believed would have a material adverse effect on the Company’s business, financial condition or results of operations.
Note 18 - Subsequent Events
The Company has evaluated subsequent events through August 11, 2026. The following events occurred after the six months ended June 30, 2026:
| ● | On July 31, 2026, the Company granted an aggregate of |
|
|
|
| ● | On July 31, 2026, the Company granted an aggregate of |
|
|
|
23
Table of Contents
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 sells tonneau covers, portable energy storage systems, and solar-integrated automotive accessories, and is developing other energy technologies, including pre-commercial non-parasitic heat-pump technology. The Company owns intellectual property associated with these products and technologies. We seek to expand our automotive-accessory business while commercializing selected clean-energy products and technologies, subject to product-development, regulatory, manufacturing, market-acceptance and financing risks.
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.
24
Table of Contents
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 portable power station, 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.
25
Table of Contents
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.
26
Table of Contents
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.
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 June 30, 2026:
|
● |
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 the NEXUS Tonneau Cover. Production began on April 13, 2026.
|
|
|
|
|
● |
On April 29, 2026, the Company announced that it secured Tri-State Enterprises, Inc. as a new cross-regional distribution partner. |
|
|
|
|
● |
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. |
|
|
|
|
● |
On May 26, 2026, the Company announced that its clean-energy subsidiary, Terravis Energy, has been issued a U.S. patent for its AetherLux™ heat-pump system incorporating ZeroFrost™ technology. |
|
|
|
|
● |
On June 5, 2026, the Company issued to its Chief Executive Officer, Steven Rossi, 79,618 shares of the Company’s common stock, par value $0.001 per share at a deemed price of $0.6280 per share, representing the closing price of the Company’s Common Stock on the Nasdaq Capital Market on June 5, 2026, for an aggregate value of $50,000. 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 June 17, 2026, the Company entered into a securities purchase agreement with an investor pursuant to which the Company agreed to issue and sell to the investor in a registered direct offering: (i) 208,333 shares of the Company’s common stock, par value $0.001 per share, at an offering price of $1.20 per unit (each unit consisting of one share and one common warrant, as defined herein), and (ii) common stock purchase warrants to purchase up to 208,333 shares of common stock (or up to 291,667 shares of common stock upon cashless exercise), for aggregate gross proceeds of $250,000, before deducting placement agent fees and other offering expenses payable by the Company. The registered direct offering closed on June 18, 2026. |
|
|
|
|
● |
On June 18, 2026, the Company entered into a second securities purchase agreement with an investor, pursuant to which the Company agreed to issue and sell to the investor in a separate registered direct offering 675,529 shares of common stock at an offering price of $0.70 per share, for aggregate gross proceeds of approximately $472,870, before deducting placement agent fees and other offering expenses payable by the Company. The registered direct offering closed on June 18, 2026. |
|
|
|
|
● |
On June 22, 2026, the Company announced that it has secured Meyer Distributing as its first multinational distribution partner. |
27
Table of Contents
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”).
CONSOLIDATED RESULTS OF OPERATIONS
The following is a discussion of our results of operations from the three months ended June 30, 2026 compared to the three months ended June 30, 2025
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) |
|
|||||
|
|
Three months ended June 30, |
|
|
2026 vs. 2025 |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
Amount |
|
|
|
% |
||||
Net sales |
|
$ | 5,229,660 |
|
|
$ | 4,104,958 |
|
|
$ | 1,124,702 |
|
|
|
27.4 |
% |
Cost of sales |
|
|
3,579,724 |
|
|
|
3,022,846 |
|
|
|
556,878 |
|
|
|
18.4 |
% |
Gross profit |
|
|
1,649,936 |
|
|
|
1,082,112 |
|
|
|
567,824 |
|
|
|
52.5 |
% |
Research and development |
|
|
214,183 |
|
|
|
304,833 |
|
|
|
(90,650 |
) |
|
|
(29.7 |
)% |
General and administrative |
|
|
3,548,867 |
|
|
|
3,091,548 |
|
|
|
457,319 |
|
|
|
14.8 |
% |
Sales and marketing |
|
|
1,707,194 |
|
|
|
1,305,355 |
|
|
|
401,839 |
|
|
|
30.8 |
% |
(Gain) loss on foreign exchange |
|
|
(1,755 |
) |
|
|
(1,993 |
) |
|
|
238 |
|
|
|
(11.9 |
)% |
Loss from operations |
|
|
(3,818,553 |
) |
|
|
(3,617,631 |
) |
|
|
(200,922 |
) |
|
|
5.6 |
% |
Interest expense |
|
|
(146,837 |
) |
|
|
(128,156 |
) |
|
|
(18,681 |
) |
|
|
14.6 |
% |
Other |
|
|
87 |
|
|
|
11,303 |
|
|
|
(11,216 |
) |
|
|
(99.2 |
)% |
Net loss |
|
$ | (3,965,303 |
) |
|
$ | (3,734,484 |
) |
|
$ | (230,819 |
) |
|
|
6.2 |
% |
Per share data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share |
|
$ | (0.33 |
) |
|
$ | (0.71 |
) |
|
$ | 0.37 |
|
|
|
52.7 |
% |
|
|
Three months ended June 30, |
|
|
Increase (Decrease) |
|
||||||
Percent of net sales |
|
2026 |
|
|
2025 |
|
|
Percentage points |
|
|||
Cost of sales |
|
|
68 |
% |
|
|
74 |
% |
|
|
(5.2 |
)% |
Gross profit |
|
|
32 |
% |
|
|
26 |
% |
|
|
5.2 |
% |
Research and development expense |
|
|
4 |
% |
|
|
7 |
% |
|
|
(3.3 |
)% |
General and administrative expense |
|
|
68 |
% |
|
|
75 |
% |
|
|
(7.5 |
)% |
Sales and marketing expense |
|
|
33 |
% |
|
|
32 |
% |
|
|
0.8 |
% |
28
Table of Contents
Net sales
For the three months ended June 30, 2026, net sales generated in the U.S. was $5,197,760, compared to $4,070,406 for the same period in 2025, an increase of approximately $1,127,354.
Net sales increased during the three months ended June 30, 2026 compared to the same period the prior year due to increased sales of tonneau covers to end users via various dealers and distributors. The Company increased its product offerings in 2026 to also include NEXUS 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.
We currently work closely with a large Canadian and two large U.S. distributors 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 $241,704, from $3,121,458 for the three months ended June 30, 2025 to $2,879,754 for same period ended June 30, 2026. The $241,704 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) increased 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 June 30, 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 position us well 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.
29
Table of Contents
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 June 30, 2026 by $768,746, from $4,699,743 for the three months ended June 30, 2025 to $5,468,489, mainly due to the following factors:
|
● |
Research and development expense decreased by $90,650, from $304,833 for the three months ended June 30, 2025 to $214,183 for the three months ended June 30, 2026. The decrease was related to developmental progress of our AL4 and NEXUS product lines, which required less R&D efforts as resources were shifted to normal-course production. |
|
|
|
|
● |
General and administrative expense increased by $457,319, from $3,091,548 in 2025 to $3,548,867 in 2026. The increase was related to a shift in overhead absorption driven by production volume requirements as well as an increase in production costs to support order volume. |
|
|
|
|
● |
Sales and marketing expense increased by $401,839, from $1,305,355 in 2025 to $1,707,194 in 2026. The increase in sales and marketing was primarily attributable to marketing campaigns to promote brand awareness and new product launches. |
Other Income and Expenses
We reported net other expenses for the three months ended June 30, 2026 of $146,750, compared to $116,853 for three months ended June 30, 2025. The increase in net other expenses was attributed to an greater use of our line of credit to fund working capital requirements.
Net Loss
Net loss for the three months ended June 30, 2026 was $3,965,303, compared to a net loss of $3,734,484 for the three months ended June 30, 2025 – an increase of approximately 6.2%. 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.
30
Table of Contents
The following is a discussion of our results of operations from the six months ended June 30, 2026 compared to the six months ended June 30, 2025
|
|
|
|
|
|
|
|
|
|
Increase (Decrease) |
|
|||||
|
|
Six months ended June 30, |
|
|
2026 vs. 2025 |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
Amount |
|
|
|
% |
||||
Net sales |
|
$ | 8,542,460 |
|
|
$ | 6,344,963 |
|
|
$ | 2,197,497 |
|
|
|
34.6 |
% |
Cost of sales |
|
|
6,038,577 |
|
|
|
4,866,630 |
|
|
|
1,171,947 |
|
|
|
24.1 |
% |
Gross profit |
|
|
2,503,883 |
|
|
|
1,478,333 |
|
|
|
1,025,550 |
|
|
|
69.4 |
% |
Research and development |
|
|
419,516 |
|
|
|
674,434 |
|
|
|
(254,918 |
) |
|
|
(37.8 |
)% |
General and administrative |
|
|
7,788,021 |
|
|
|
6,506,369 |
|
|
|
1,281,652 |
|
|
|
19.7 |
% |
Sales and marketing |
|
|
3,863,061 |
|
|
|
2,175,104 |
|
|
|
1,687,957 |
|
|
|
77.6 |
% |
(Gain) loss on foreign exchange |
|
|
(3,986 |
) |
|
|
(3,638 |
) |
|
|
(348 |
) |
|
|
9.6 |
% |
Loss from operations |
|
|
(9,562,729 |
) |
|
|
(7,873,936 |
) |
|
|
(1,688,793 |
) |
|
|
21.4 |
% |
Interest expense |
|
|
(239,220 |
) |
|
|
(323,594 |
) |
|
|
84,374 |
|
|
|
(26.1 |
)% |
Other |
|
|
8,125 |
|
|
|
2,582 |
|
|
|
5,543 |
|
|
|
214.7 |
% |
Net loss |
|
$ | (9,793,824 |
) |
|
$ | (8,194,948 |
) |
|
$ | (1,598,876 |
) |
|
|
19.5 |
% |
Per share data |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted earnings per share |
|
$ | (0.87 |
) |
|
$ | (1.71 |
) |
|
$ | 0.85 |
|
|
|
49.5 |
% |
|
|
Six months ended June 30, |
|
|
Increase (Decrease) |
|
||||||
Percent of net sales |
|
2026 |
|
|
2025 |
|
|
Percentage points |
|
|||
Cost of sales |
|
|
71 |
% |
|
|
77 |
% |
|
|
(6.0 |
)% |
Gross profit |
|
|
29 |
% |
|
|
23 |
% |
|
|
6.0 |
% |
Research and development expense |
|
|
5 |
% |
|
|
11 |
% |
|
|
(5.7 |
)% |
General and administrative expense |
|
|
91 |
% |
|
|
103 |
% |
|
|
(11.4 |
)% |
Sales and marketing expense |
|
|
45 |
% |
|
|
34 |
% |
|
|
10.9 |
% |
31
Table of Contents
Net sales
For the six months ended June 30, 2026, net sales generated in the U.S. was $8,504,405, compared to $6,297,955 for the same period in 2025, an increase of approximately 35.0%.
Net sales increased during the six months ended June 30, 2026 compared to the same period the prior year due to increased sales of tonneau covers to end users via various dealers and distributors. The Company increased its product offerings in 2025 to also include AL4 and HD3 covers to end customers. In 2026, the Company added the NEXUS product offering to its 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.
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 $301,739, from $4,992,533 for the six months ended June 30, 2025 to $4,690,794 for the same period ended June 30, 2026. The 6.0% 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) increased 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 six months ended June 30, 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 position us well 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.
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Table of Contents
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 six months ended June 30, 2026 by $2,714,343, from $9,352,269 for the six months ended June 30, 2025 to $12,066,612, mainly due to the following factors:
|
● |
Research and development expense decreased by $254,918, from $674,434 for the six months ended June 30, 2025 to $419,516 for the six months ended June 30, 2026. The decrease was related to developmental progress of our AL4 and NEXUS product lines, which required less R&D efforts as resources were shifted to normal-course production. |
|
|
|
|
● |
General and administrative expense increased by $1,281,652, from $6,506,369 in 2025 to $7,788,021 in 2026. The increase was related to labor and consulting costs to support production and operational efforts. |
|
|
|
|
● |
Sales and marketing expense increased by $1,687,957, from $2,175,104 in 2025 to $3,863,061 in 2026. The increase in sales and marketing was primarily attributable to marketing campaigns to promote brand awareness and new product launches. |
Other Income and Expenses
We reported net other expenses for the six months ended June 30, 2026 of $231,095, compared to $321,012 for six months ended June 30, 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 2025 warrant inducement transaction.
Net Loss
Net loss for the six months ended June 30, 2026 was $9,793,824, compared to a net loss of $8,194,948 for the six months ended June 30, 2025 – an increase of approximately 19.5%. 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.
33
Table of Contents
Liquidity and Capital Resources
As of June 30, 2026 and December 31, 2025, we had $1,160,158 and $5,945,894, respectively in cash and cash equivalents. As of June 30, 2026, we had $818,339 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 limited gross profit and have relied primarily upon capital generated from public and private offerings of our securities to fund continuing operations. Since the Company’s acquisition of Worksport in 2014, it has never generated a profit. During the three and six months ended June 30, 2026, we had net losses of $3,965,303 and $9,793,824, respectively (three months ended June 30, 2025 - $3,734,484; six months ended June 30, 2025 - $8,194,948). As of June 30, 2026, the Company had working capital of $10,961,087 (As of December 31, 2025 - $10,061,578) and had an accumulated deficit of $93,721,747 (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 six months ended June 30, 2026, the Company received net proceeds of $4,523,215 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 six months ended June 30, 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 six months ended June 30, 2026, the Company sold 3,157,774 shares of common stock under the ATM Agreement for aggregate gross proceeds of approximately $4,003,273, resulting in net proceeds of approximately $3,869,882 after deducting commissions and offering expenses.
34
Table of Contents
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 six months ended June 30, 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.
Registered Direct Offerings
During the six months ended June 30, 2026, we completed two registered direct offerings with one institutional accredited investor and received gross proceeds of $722,870, resulting in net proceeds of approximately $599,226 after deducting issuance costs.
Consolidated Statement of Cash Flows
Cash and cash equivalents decreased from $5,945,894 at December 31, 2025, to $1,160,158 at June 30, 2026 – a decrease of $4,785,736 or 80.5%. 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 $8.1 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 June 30, 2026.
Operating Activities
Net cash used in operating activities for the six months ended June 30, 2026 was $11,677,145, compared to $6,935,033 in 2025, primarily driven by the launch of additional product offerings during the six months ended June 30, 2026. Net cash used in operating activities exceeded the Company’s net loss by approximately $1.8 million. The principal component of the change is attributable to the $2.5 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 six months ended June 30, 2026 including SOLIS, COR, and NEXUS.
Accounts receivable increased at June 30, 2026 by $503,358 and increased by $253,372 in the prior period. The increase in accounts receivable is based on the volume of shipment with various business-to-business customers as well as the concentration of customers in certain sales channels.
Inventory increased at June 30, 2026 by $2,535,745, and increased at June 30, 2025 by $691,459, as a result of the procurement of raw materials and production of finished goods to support the commercial launches of our COR, SOLIS and NEXUS product lines.
Prepaid expenses and other decreased by $186,836 at June 30, 2026, and increased by $470,641 at June 30, 2025 due to timing of advanced payments for professional services to support operations.
Accounts payable and accrued liabilities decreased at June 30, 2026 by $1,248,251 and increased by $469,362 at June 30, 2025 due to the payment for raw materials and finished goods procured and produced in preparation for and support of the commercial launches of our COR, SOLIS and NEXUS product lines.
35
Table of Contents
Investing Activities
Net cash used in investing activities for the six months ended June 30, 2026 was $197,654 compared to $582,797 for the six months ended June 30, 2025. The decrease in investing activities was primarily attributable to our purchase of cryptocurrency and website enhancements in 2025, both of which are classified as intangible assets.
Financing Activities
Net cash provided by financing activities for the six months ended June 30, 2026 was $7,089,063 compared to net cash provided by financing activities of $4,027,871 for the six months ended June 30, 2025. Net cash provided by financing activities were principally due to our use of the ATM, whereby we received net proceeds of $3,869,882. We also received proceeds from our line of credit through net borrowings of $2,729,739 for the six months ended June 30, 2026. In June 2026, we completed two registered direct offerings with one institutional accredited investor for gross proceeds of $722,870, resulting in net proceeds of approximately $599,226 after deducting issuance costs.
Material Contractual Obligations
As of June 30, 2026, the Company amended an agreement that included 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. The amendment provides for Prima Power to retain the initial 10% equipment deposit of $300,000 to be applied to a future equipment purchase. The equipment deposit of $300,000 is included in other noncurrent assets as of June 30, 2026. Other than the indebtedness, lesses, purchases, employment and other obligations disclosed in this Form 10-Q or incurred in the ordinary course of business, the Company had no material contractual obligations as of June 30, 2026.
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.
36
Table of Contents
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.
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.
37
Table of Contents
Remediation Efforts
Management is committed to remediating the material weaknesses described above. During the six months ended June 30, 2026, the Company engaged an external CPA firm and an external consultant 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
There were no changes in the Company's internal control over financial reporting during the quarter ended June 30, 2026 that 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 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.
38
Table of Contents
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
● |
On April 13, 2026, the Company issued 88,214 shares of common stock to Steven Rossi, the Company's Chief Executive Officer, at a deemed price of $0.8502 per share, which was equal to 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 $75,000 of previously accrued and unpaid bonus compensation owed by the Company to Steven Rossi. The issuance was approved by the Company's Board of Directors. |
|
|
|
|
● |
On June 5, 2026, the Company issued 79,618 shares of common stock to Steven Rossi at a purchase price of $0.6280 per share, which was equal to the closing price of the Company's common stock on the Nasdaq Capital Market on June 5, 2206, for an aggregate value of $50,000. The shares were issued in satisfaction of $50,000 of previoulsy accrued and unpaid bonus compensation owed by the Company to Steven Rossi. The issuance was approved by the Board of Directors |
|
|
|
The shares issued in each of the foregoing transactions were issued in reliance upong the exemption from registration provided in Section 4(a)(2) of the Securities Act of 1933, as amended, as transactions by an issuer not involving a public offering. No underwriter or placement agent participated in either transaction, and no underwriting discounts or commissions were paid in connection with either issuance.
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.
39
Table of Contents
Item 5. Other Information
Securities Trading Plans
During the six months ended June 30, 2026, of our Section 16 officers or directors (as defined in Rule 16a-(f) of the Exchange Act) adopted or terminated any contract, instruction or written plan for the purchase or sale of our securities that was intended to satisfy the affirmative defense conditions of Rule -(c) of the Exchange Act or any “non-Rule 10b5-1 trading arrangement” (as defined in Section 408(c) of Regulation S-K).
Subsequent Events
| ● | On July 31, 2026, the Company granted an aggregate of 274,000 restricted stock units ("RSUs") to certain employees and consultants under the Company's 2022 Equity Incentive Plan. The grant-date fair value of the RSUs was determined based on the closing price of the Company's common stock on July 31, 2026. The RSU's vest immediately on the grant date. |
|
|
|
| ● | On July 31, 2026, the Company granted an aggregate of 492,050 non-qualified stock options to certain employees, including an officer of the Company, under the Company's 2022 Equity Incentive Plan. The options have an exercise price equal to the closing price of the Company's common stock on the grant date, July 31, 2026. The options are subject to the terms of the applicable award agreements, with vesting schedules ranging from immediate vesting to quarterly vesting through June 30, 2029. |
|
|
|
40
Table of Contents
Item 6. Exhibits
EXHIBIT |
|
|
|
|
No. |
|
DESCRIPTION |
PREVOUSLY FILED AND INCORPORATED BY REFERENCE HEREIN: |
EXHIBIT NUMBER: |
|
|
|
|
|
1.1 |
|
Form of Placement Agency Agreement, dated June 18, 2026, by and between the Company and D. Boral Capital LLC |
Exhibit 1.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 24, 2026 |
1.1 |
4.1 |
|
Form of Common Warrant |
Exhibit 4.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 24, 2026 |
4.1 |
10.1 |
|
Form of Securities Purchase Agreement, dated June 17, 2026, by and between the Company and the Purchaser signatory thereto (First Offering) |
Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 24, 2026 |
10.1 |
10.2 |
|
Form of Securities Purchase Agreement, dated June 18, 2026, by and between the Company and the Purchaser signatory thereto (Second Offering). |
Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on June 24, 2026 |
10.2 |
10.3 |
|
Employment Agreement, dated January 27, 2026, between Worksport Ltd. and Jennifer Kartychak |
Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on April 30, 2026 |
10.1 |
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. |
41
Table of Contents
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: August 11, 2026 |
By: |
/s/ Steven Rossi |
|
|
Steven Rossi |
|
|
Chief Executive Officer |
|
|
(Principal Executive Officer) |
|
|
|
Dated: August 11, 2026 |
By: |
/s/ Jennifer Kartychak |
|
|
Jennifer Kartychak |
|
|
Chief Financial Officer |
|
|
(Principal Financial Officer) |
|
|
(Principal Accounting Officer) |
42