Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is -0.13pp more bearish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Real-time Form 4 intelligence. Smarter insider tracking.
Lean -
Net-tone change vs last year's 10-K.
MD&A
+0.08pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adversely+4
unable+4
loss+3
conflict+3
decline+2
Positive rising
effective+3
greater+1
better+1
favorable+1
improve+1
Risk Factors (Item 1A)
8,998 words
ITEM 1A. RISK FACTORS
Investing in our securities involves a high degree of risk. You should carefully consider the following risk factors, together with the other information contained in this Form 10-K, including our consolidated financial statements and the related notes, before making an investment decision. If any of the following risks actually occur, our business, financial condition, results of operations or prospects could be materially adversely affected. In that event, the trading price of our securities could decline, and investors could lose all or part of their investment.
The risks described below are not the only risks facing our Company. Additional risks and uncertainties not presently known to us or that we currently believe are immaterial may also adversely affect our business, financial condition, results of operations or prospects
Risks Related to Our Business
We have expressed substantial doubt about our ability to continue as a going concern.
Our independent registered public accounting firm’s report on our audited financial statements includes an explanatory paragraph expressing substantial doubt about our ability to continue as a going . We have a history of operating , have never generated a profit, and have relied primarily on equity and debt financings to fund our operations. For the year ended December 31, 2025, we incurred a net of approximately $19.4 million, and accumulated of approximately $83.9 million and cash and cash equivalents of approximately $5.9 million. We also had availability on our revolving line of credit of approximately $3.4 million.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
adversely+4
loss+2
volatility+2
unfavorable+2
exposes+1
Positive rising
efficiencies+3
favorable+3
improvement+2
exclusive+2
effective+1
MD&A (Item 7)
5,254 words
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Prospective investors should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth elsewhere in this annual report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. See “Cautionary Note Regarding Forward-Looking Statements.” This discussion should be read in conjunction with our audited consolidated financial statements and the notes thereto included elsewhere in this Annual Report on Form 10-K .
Overview
Worksport Ltd., through its subsidiaries, designs, develops, manufactures, and owns the Intellectual Property on a portfolio of tonneau cover, solar integration, portable power station, and NP (Non-Parasitic), Hydrogen-based green energy products and solutions for the automotive aftermarket accessories, power storage, residential heating, and electric vehicle-charging industries. We seek to provide consumers with next-generation automotive aftermarket accessories while capitalizing on growing consumer interest in clean energy solutions and power grid independence.
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 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 market in which to promote our COR portable power system.
Our ability to continue as a going concern depends on our ability to generate positive cash flows from operations and to obtain additional financing on acceptable terms, if at all. We expect to continue to incur operating losses as we scale our operations and invest in product development, manufacturing, and commercialization. There can be no assurance that we will achieveprofitability or generate sufficient cash flows from operations in the future. If we are unable to obtain additional financing when needed, our liquidity, financial condition, and ability to continue operations could be materially and adversely affected.
Our business, results of operations and financial condition could be adversely affected by the effects of widespread public health events or outbreaks that are beyond our control.
A significant outbreak, epidemic or pandemic of contagious diseases in any geographic area in which we operate or plan to operate could result in a health crisisadversely affecting the economies and financial markets in which we operate as well as the overall demand for our products. In addition, any preventative or protective actions that governments implement or that we take in response to a health crisis, such as travel restrictions, quarantines, or site closures, may interfere with the ability of our employees, suppliers and customers to perform their responsibilities. Such events could have a materially adverse effect on our business. Any such public health events may also exacerbate other risks described in this “ Risk Factors ” section.
We will require additional capital to fund our operations, and such capital may not be available on acceptable terms, or at all.
We expect to require additional capital to fund working capital needs, capital expenditures, product development, manufacturing scale-up, sales and marketing activities, and ongoing operating losses. Our future capital requirements will depend on many factors, including the pace of commercialization of our products, customer demand, manufacturing costs, and operating expenses.
Additional financing may not be available when needed or on terms acceptable to us. Any future equity or equity-linked financing would dilute existing stockholders, and debt financing could impose restrictive covenants, require significant cash payments, or limit our operational flexibility. If we are unable to obtain sufficient capital to support our operations and growth strategy, our business, financial condition, and results of operations could be materially and adversely affected.
We have only sold tonneau covers, the market size of which is limited. Our long-term results depend upon our ability to successfully introduce and market new products, which may expose us to new and increased challenges and risks.
To date, we have only sold tonneau covers, the market size of which is limited. Our growth strategy depends, in part, on our ability to successfully introduce and market new products, such as our SOLIS cover and COR system, as well as developing new products. As we introduce new products or refine, improve or upgrade versions of existing products, we cannot predict the level of market acceptance or the amount of market share these products will achieve, if any. Our ability to compete also depends on our ability to anticipate and respond to evolving customer preferences, industry standards and technological developments, including developments affecting product design, functionality, manufacturing processes, battery and energy storage technologies, software-enabled features and automation. We cannot assure you that we will not experience material delays in the introduction of new products and services in the future. Consistent with our strategy of offering new products and product refinements, we expect to continue to use a substantial amount of capital for product refinement, research and development, and sales and marketing, which may not provide a return on investment in the event we fail to bring potential products to market. In addition, if we are unable to adjust our manufacturing capabilities, supplier base, quality controls and operational processes in a timely and cost-effective manner to support evolving technologies or new product requirements, our costs could increase, our margins could decline, product launches could be delayed and our competitive position could be harmed. We will need additional capital for product development and refinement, and this capital may not be available on terms favorable to us, if at all, which could adversely affect our business, prospects, financial condition, results of operations, and cash flows. If we are unable to successfully introduce, integrate, and market new products and services, or to adapt to technological changes in our products or operations, our business, prospects, financial condition, results of operations, and cash flows may be materially and adversely affected.
We may not succeed in establishing, maintaining and strengthening our brand, which would materially and adversely affect customer acceptance of our products and our business, prospects, financial condition, results of operations and cash flows.
Our business and prospects heavily depend on our ability to develop, maintain and strengthen the Worksport brand. If we are not able to establish, maintain and strengthen our brand, we may lose the opportunity to build a critical mass of customers. Our ability to develop, maintain and strengthen our brand will depend heavily on our ability to provide high quality products and engage with our customers as intended, as well as depend on the success of our customer development and marketing efforts. The automobile accessory and parts industry is intensely competitive, and we may not be successful in building, maintaining and strengthening the Worksport brand. Many of our current and potential competitors have greater name recognition, broader customer relationships and substantially greater marketing resources than we do. If we do not develop and maintain a strong brand, our business, prospects, financial condition, results of operations and cash flows could be materially and adversely impacted.
In addition, we could be subject to adverse publicity. In particular, given the popularity of social media, any negative publicity, whether true or not, could quickly proliferate and harm consumer perceptions and confidence in our brand. In addition, from time to time, our products may be evaluated and reviewed by third parties. Any negative reviews or reviews which compare us unfavorably to competitors could adversely affect consumer perception about our products.
The U.S. Central Bank has provided forward-looking guidance of relatively high interest rates plateauing for the near future.
We may need to invest in additional machinery, equipment and land if demand for our products is higher than anticipated or if we secure a supplier deal with a major original equipment manufacturer (OEM). With high interest rates, it will be less financially attractive to finance such purchases, which may lead to an otherwise higher burn rate. High interest rates increase the amount that we must pay related to our indebtedness. At the same time, it lowers the attractiveness of refinancing, despite the fact that our anticipated positive future cash flows would allow us to seek financing from a broader selection of lenders.
Continued uncertain economic conditions, including inflation and the risk of a global recession could impair our ability to forecast and may harm our business, operating results, including our revenue growth and profitability, financial condition and cash flows.
While U.S. inflation rates have come down substantially from their 2022 highs, the U.S. economy is still experiencing higher than target inflation rates, and high levels of inflation persist in many countries around the world. Historically, we have not experienced significant inflation risk in our business. However, our ability to raise our product prices depends on market conditions, and there may be periods during which we are unable to fully recover increases in our costs. In addition, the global economy suffers from slowing growth and elevated interest rates, and many economists are still unsure whether a global recession may begin in the near future. If the global economy slows, our business would likely be adversely affected.
Also, a recession may result in job loss and lower discretionary funds among potential customers, lowering demand for automotive aftermarket accessories. Part of our consumer base for SOLIS includes workers, particularly those in manufacturing and construction environments, who may have lower job security in the event of a recession and, thus, have lower demand for the SOLIS. Commercial real estate values may also decrease, which would lower the value of our production facility in West Seneca, NY.
Our business and operations would suffer in the event of computer system failures, cyberattacks or a deficiency in our cybersecurity, or an inability to effectively adopt and govern emerging technologies, including artificial intelligence, or a natural disaster.
There are growing risks related to the security, confidentiality and integrity of personal and corporate information stored and transmitted electronically due to increasingly diverse and sophisticated threats to networks, systems and data security. Potential attacks span a spectrum from attacks by criminal hackers, hacktivists, and nation state or state-sponsored actors, to employee malfeasance and human or technological error. The increasing availability and use of artificial intelligence technologies may further increase these risks by enabling more targeted phishing attempts, fraud, social engineering, malicious code development and other cyber intrusions, and our own or our third-party service providers’ use of artificial intelligence tools may create additional risks relating to data privacy, confidentiality, intellectual property, accuracy, bias, internal controls and regulatory compliance.
Despite the implementation of security measures, our internal computer systems, and those of third parties on which we rely (including our vendors, contractors and other third-party partners who process information on our behalf or have access to our systems), are vulnerable to damage from computer viruses, malware, ransomware, phishing attacks and other forms of social engineering, denial-of-service attacks, third party or employee theft or misuse and other negligent actions, natural disasters, terrorism, war, telecommunication and electrical failures, cyberattacks or cyber-intrusions over the internet, security incidents, disruptions, attachments to emails, persons inside our organization, or persons with access to systems inside our organization. The risk of a security breach or disruption, particularly through cyberattacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. If we or our third-party service providers fail to adopt, implement, monitor or govern artificial intelligence technologies effectively and responsibly, or if such technologies produce inaccurate, misleading or unauthorized outputs or actions, our operations, decision-making, customer relationships, reputation or compliance efforts could be adversely affected. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our product development programs. To the extent that any disruption or security breach was to result in a loss of or damage to our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur material legal claims (including class claims) and liability, substantial remediation costs, regulatory enforcement, liability under data protection laws, additional reporting requirements and damage to our reputation, and the further development of our product lines could be delayed.
To mitigate risks associated with cybersecurity attacks, we have cybersecurity insurance coverage in the aggregate amount of $1,000,000 per annual policy period , which covers damages from a range of potential cybersecurity issues including but not limited to property damage, computer crime, privacy liability, privacy regulatory defense, cyber extortion, and post breach remediation.
We may not be able to accurately estimate the demand for our tonneau covers, which could result in inefficiencies in our production and hinder our ability to generate revenue.
If we fail to predict our manufacturing requirements accurately, we will incur the risk of having to pay for production capacities that we reserved but will not be able to use or that we will not be able to secure sufficient additional production capacities at reasonable costs in the event product demand exceeds expectations. A single contract with an OEM or key distributor can significantly increase demand for our products, requiring investments in expanded operational capacity including personnel, equipment and potential facilities.
Our future growth may be limited.
Our ability to achieve our expansion objectives and to manage our growth effectively depends upon a variety of factors, including our ability to internally develop products, to attract and retain skilled employees, to successfully position and market our products, to protect our existing intellectual property, to capitalize on the potential opportunities we are pursuing with third parties, and to acquire sufficient funding whether internally or externally. To accommodate growth and compete effectively, we will need working capital to maintain adequate inventory levels, develop additional procedures and controls and increase, train, motivate and manage our work force. There is no assurance that our personnel, systems, procedures and controls will be adequate to support our potential future operations. There is no assurance that we will generate higher revenues from our prospective sales partners nor be able to capitalize on additional third-party manufacturers.
We rely on one supplier for the production of our outsourced soft tonneau covers, which may hinder our ability to grow.
We purchase all of our soft tonneau covers from a supplier located in Foshan, China. We carry significant strategic inventories of these finished goods to reduce the risk associated with this concentration of suppliers. Strategic inventories are managed based on demand. While we are now manufacturing hard tonneau covers in the U.S., the loss of this supplier or a delay in shipments could have a material adverse effect on our soft tonneau cover sales and business.
We rely on key personnel, especially Steven Rossi, our Chief Executive Officer, President and Chairman of the Board.
Our success also will depend in large part on the continued service of our key operational and management personnel, including executive, research and development, engineering, marketing and sales staff. Most specifically, this includes Steven Rossi, our President and Chief Executive Officer, who oversees the implementation of new products, key customer acquisition and retention, and our overall management and future growth. Any failure on our part to hire, train and retain a sufficient number of qualified professionals could impair our business.
We depend on intellectual property rights that may be infringed upon, and we may infringe upon the intellectual property rights of others.
Our success depends to a significant degree upon our ability to develop, maintain, and protect proprietary products and technologies. However, patents provide only limited protection of our intellectual property. The assertion of patent protection involves complex legal and factual determinations and is therefore uncertain and potentially expensive. We cannot provide assurance that patents will be granted with respect to our pending patent applications, that the scope of any patents we might obtain will be sufficiently broad to offer meaningful protection, or that we will develop additional proprietary products that are patentable. In fact, any patents which might issue from our patent applications pending with the U.S. Patent and Trademark Office could be successfullychallenged, invalidated or circumvented. This could result in our pending patent rights failing to create an effective competitive barrier. Losing a significant patent or failing to get a patent issued from a pending patent application we consider significant could have a material adverse effect on our business.
We may not be able to protect our intellectual property rights throughout the world, which could negatively impact our business.
Filing, prosecuting and defending patents covering our current and future product candidates and technology platforms in all countries worldwide would be prohibitively expensive. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we may obtain patent protection but where patent enforcement is not as strong as that in the U.S.. These products may compete with our products in jurisdictions where we do not have any issued or licensed patents, and any future patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our intellectual property and proprietary rights, generally. Proceedings to enforce our intellectual property and proprietary rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly, could put our patent applications at risk of not issuing, and could provoke third parties to assert claimsagainst us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property and proprietary rights worldwide may be inadequate to obtain a significant commercial advantage from the intellectual property we develop or license.
Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position may be impaired, and our business, financial condition, results of operations and prospects may be adversely affected.
Our patents might not protect our technology from competitors, in which case we may not have any exclusionary advantage over competitors in selling any products that we may develop.
Our commercial success will depend in part on our ability to obtain additional patents and protect our existing patent position, as well as our ability to maintain adequate intellectual property protection for our technologies, product candidates, and any future products in the U.S. and other countries. If we do not adequately protect our technology, product candidates and future products, competitors may be able to use or practice them and erode or negate any competitive advantage we may have, which could harm our business and ability to achieveprofitability. The laws of some foreign countries do not protect our proprietary rights to the same extent or in the same manner as U.S. laws, and we may encounter significant problems in protecting and defending our proprietary rights in these countries. We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our proprietary technologies, product candidates and any future products are covered by valid and enforceable patents or are effectively maintained as trade secrets.
Certain aspects of our technologies are protected by patents, patent applications, and trade secrets. In addition, we have a number of new patent applications pending. There is no assurance that the applications still pending or which may be filed in the future will result in the issuance of any patents. Furthermore, there is no assurance as to the breadth and degree of protection any issued patents might afford us. Disputes may arise between us and others as to the scope and validity of these or other patents. Any defense of the patents could prove costly and time-consuming, and there can be no assurance that we will be in a position, or deem it advisable, to carry on such a defense. A suit for patent infringement could result in increasing costs as well as delaying or halting development. Other private and public entities, including universities, may have filed applications for, may have been issued, or may obtain additional patents and other proprietary rights to technology potentially useful or necessary to us. We are not currently aware of any such patents, but the scope and validity of such patents, if any, and the cost and availability of such rights are impossible to predict.
Any trademarks we may obtain may be infringed or successfullychallenged, resulting in harm to our business.
We expect to rely on trademarks as one means to distinguish our products from our competitors’ products. Once we select trademarks and apply to register them, our trademark applications may not be approved. Third parties may oppose our trademark applications or otherwise challenge our use of the trademarks. In the event that our trademarks are successfullychallenged, we could be forced to rebrand our products, which could result in a loss of brand recognition and could require us to devote resources to advertising and marketing new brands. Our competitors may infringe on our trademarks, and we may not have adequate resources to enforce our trademarks.
Much of our intellectual property is protected as trade secrets or confidential know-how.
We consider proprietary trade secrets to be important to our business. This type of information must be protected diligently by us to protect its disclosure to competitors, since legal protections after disclosure may be minimal or non-existent. Accordingly, much of the value of this intellectual property is dependent upon our ability to keep our trade secrets.
To protect this type of information against disclosure or appropriation by competitors, our policy is to require our employees, consultants, contractors and advisors to enter into confidentiality agreements with us. However, current or former employees, consultants, contractors and advisers may unintentionally or willfullydisclose our confidential information to competitors, and confidentiality agreements may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Enforcing a claim that a third party illegally obtained, and is using, trade secrets is expensive, time-consuming and unpredictable. The enforceability of confidentiality agreements may vary from jurisdiction to jurisdiction.
Failure to obtain or maintain trade secret protection could adversely affect our competitive position. Moreover, our competitors may independently develop substantially equivalent proprietary information and may even apply for patent protection in respect of the same. If successful in obtaining such patent protection, our competitors could limit our use of such trade secrets.
We may be subject to claimschallenging the inventorship or ownership of our patents and other intellectual property.
We may also be subject to claims that former employees, suppliers, collaborators or other third parties have an ownership interest in our patents or other intellectual property. We may be subject to ownership disputes in the future arising, for example, from conflicting obligations of suppliers, consultants or others who are involved in developing our products. Litigation may be necessary to defendagainst these and other claimschallenging inventorship or ownership. If we fail in defending any such claims, in addition to paying monetary damages, we may losevaluable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Such an outcome could have a material adverse effect on our business. Even if we are successful in defendingagainst such claims, litigation could result in substantial costs and be a distraction to management and employees.
Intellectual property rights do not necessarily address all potential threats to our business.
The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business. The following examples are illustrative:
others may be able to develop technologies that are similar to our technology platforms but that are not covered by the claims of any patents, should they issue, that we own or license;
we or our licensors might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own or license;
we or our licensors might not have been the first to file patent applications covering certain aspects of our inventions;
others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights;
it is possible that our pending patent applications will not lead to issued patents;
issued patents that we own or license may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges;
our competitors might conduct research and development activities in the U.S. and other countries that provide a safe harbor from patent infringementclaims for certain research and development activities, as well as in countries where we do not have patent rights, and then use the information learned from such activities to develop competitive products for sale in our major commercial markets;
we may not develop additional proprietary technologies that are patentable; and
the patents of others may have an adverse effect on our business.
We may need to defend ourselves against patent or trademark infringementclaims, which may be time-consuming and cause us to incur substantial costs.
Companies, organizations or individuals, including our competitors, may own or obtain patents, trademarks or other proprietary rights that would prevent or limit our ability to make, use, develop or sell our products or components, which could make it more difficult for us to operate our business. The automotive aftermarket has been characterized by significant litigation and other proceedings regarding patents, patent applications and other intellectual property rights. The situations in which we may become parties to such litigation or proceedings may include:
litigation or other proceedings we may initiate against third parties to enforce our patent rights or other intellectual property rights;
litigation or other proceedings we or our licensee(s) may initiate against third parties seeking to invalidate the patents held by such third parties or to obtain a judgment that our products do not infringe such third parties’ patents; and
litigation or other proceedings third parties may initiate against us to seek to enforce their patents and/or invalidate our patents.
If third parties initiate litigationclaiming that our products infringe their patent or other intellectual property rights, we will need to defendagainst such proceedings.
The costs of resolving any patent litigation or other intellectual property proceeding, even if resolved in our favor, could be substantial. Many of our potential competitors will be able to sustain the cost of such litigation and proceedings more effectively than we can because of their substantially greater resources. In some instances, competitors may proceed with litigation or other proceedings pertaining to infringement of their intellectual property as a means to hinder or devaluate the target defendant company, with no intention of the matter being resolved in their favor. Uncertainties resulting from the initiation and continuation of patent litigation or other intellectual property proceedings could have a material adverse effect on our ability to compete in the marketplace. Patent litigation and other intellectual property proceedings may also consume significant management time and costs. Substantial additional costs may be evident in the event that litigation or other proceedings were initiated against us because we would have to seek legal defense or counsel in the state (U.S.) or province (Canada) where the litigation or legal proceedings were filed. Failure to adequately protect our intellectual property rights could result in our competitors offering similar products, potentially resulting in the loss of some of our competitive advantage, and a decrease in our revenue which would adversely affect our business, prospects, financial condition and operating results.
Confidentiality agreements with employees and others may not adequately prevent the disclosure of trade secrets and other proprietary information.
In order to protect our proprietary technology and processes, we also rely in part on confidentiality agreements with our employees, consultants, outsourced manufacturers and other advisors. These agreements may not effectively prevent the disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, others may independently discover trade secrets and proprietary information. Costly and time-consuming litigation could be necessary to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.
There are risks associated with outsourced production that may result in a decrease in our profit.
The possibility of delivery delays, product defects and other production-side risks stemming from our use of outsourced manufacturers and suppliers cannot be eliminated. In particular, inadequate production capacity among outsourced manufacturers could result in us being unable to supply enough product amid periods of high product demand, the opportunity costs of which could be substantial. In addition, if our outsourced manufacturers or suppliers are unable or unwilling to adopt new production methods, automation, quality systems or other technological improvements necessary to support our current or future products on a timely and cost-effective basis, our manufacturing costs, product quality, launch timing and ability to compete could be adversely affected
We have competition for our market share which could harm our sales.
We participate in the automotive aftermarket equipment industry which is highly competitive for a relatively limited customer base. Companies that compete in this market include RealTruck, Truck Accessories Group, and Agri-Cover, Inc., among others. Many of our current competitors are significantly better funded and have longer operating histories than we do.
In addition, some of our competitors sell their products at prices lower than ours, and we compete primarily on the basis of product quality, features, value, service, and customer relationships. Our competitive success also depends on our ability to maintain a strong brand and the belief that customers will need our products and services to meet their growth requirements. Alternatively, in the case of generic competition, competitors’ products may be of equal or better quality and sold at substantially lower prices than our products. At times, competitors may also release a generic or re-branded version of a current and successful product at a substantially reduced price in efforts to increase revenues or market share. As a result, if we fail to maintain our competitive position, this could have a material adverse effect on our business, cash flow, results of operations, financial position and prospects.
We may not have sufficient product liability insurance to cover potential damages.
The existence of any defects, errors or failures in our products or the misuse of our products could also lead to product liability claims or lawsuits against us. While we had $5,000,000 in umbrella coverage on top of our $1,000,000 aggregate product liability coverage as of the date of this prospectus, we have no assurance that this insurance will be adequate to protect us from all material judgments and expenses related to potential future claims or that these levels of insurance will be available at economical prices, if at all. To that extent, product liability insurance is conditional and up for further investigation. A successful product liability claim could result in substantial costs for us. Even if we are fully insured as it relates to a claim, a claim could nevertheless diminish our brand and divert management’s attention and resources, which could have a negative impact on our business, financial condition and results of operations.
We may produce products of inferior quality or perceived inferior quality which would cause us to lose customers.
Although we make an effort to ensure the high quality of our light truck tonneau cover products, they could from time to time contain defects, anomalies or malfunctions that are undetectable at the time of shipment. These defects, anomalies or malfunctions could be discovered after our products are shipped to customers, resulting in the return or exchange of our products, customers’ claims for compensatory damages or discontinuation of the use of our products, which could negatively impact our operating results. We do not presently have product recall (or similar function) insurance that protects a company against broad-scale product manufacturing defects, engineering defects and the costs related to a broad product recall such as shipping, replacement or repairs. Even if in place, there is no guarantee that the full costs of any reimbursements or claims, lawsuits or litigation would be covered by such insurance.
Geopolitical conditions, including direct or indirect acts of war or terrorism, could have an adverse effect on our operations and financial results.
Geopolitical conditions, including but not limited to acts of war, terrorism, political and social instability, may negatively impact our business operations and financial performance. Our business activities could face interruptions due to such unpredictable geopolitical events. Notably, the recent escalation of military conflict by Russia in Ukraine in February 2022, the internal conflict within Sudan that erupted in April 2023 between the Rapid Support Forces and the Sudanese Armed Forces, and the conflict initiated by Hamas against Israel in October 2023, leading to a war in Gaza, have all contributed to a tense geopolitical climate. This tension has also encouraged Houthi attacks on commercial vessels in the Red Sea and hindered diplomatic efforts in the Middle East. Moreover, ongoing conflicts in regions such as Ethiopia and Myanmar further underscore the global nature of these geopolitical risks.
In reaction to the invasion of Ukraine by Russia, the U.S. along with several other nations have enforced substantial sanctions and export controls on Russia and Belarus, as well as on certain individuals and enterprises linked to their political, commercial, and financial sectors. There is a possibility that additional sanctions, trade restrictions, and retaliatory measures may be adopted should these conflictspersist or escalate. The full ramifications of these and other global conflicts are challenging to predict but may lead to increased geopolitical tension, regional instability, shifts in geopolitical alliances, cyber threats, or interruptions in energy exports. These outcomes could have a considerable negative effect on international trade, currency exchange rates, regional economies, and the global economic landscape.
In addition to the above, conflicts involving Iran and instability in the Middle East have contributed to volatility in global financial markets, increases in energy prices and inflationary pressures. While we do not have operations, suppliers or customers in the affected regions, these developments could indirectly impact our business by increasing global energy and transportation costs and contributing to higher costs of materials and logistics across our global supply chain, including materials sourced from our suppliers in Asia, and may reduce consumer demand for our products, which are generally discretionary in nature. In addition, such conditions could result in adverse capital markets conditions, including reduced liquidity and increased volatility, which could impair our ability to access capital on acceptable terms, or at all. Any of these factors could adversely affect our business, financial condition and results of operations.
We currently, and may in the future, have assets held at financial institutions that may exceed the insurance coverage offered by the Federal Deposit Insurance Corporation (“FDIC”), the loss of such assets would have a severenegative effect on our operations and liquidity.
We may maintain our cash assets at certain financial institutions in the U.S. in amounts that may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limit of $250,000. In the event of a failure of any financial institutions where we maintain our deposits or other assets, we may incur a loss to the extent such loss exceeds the FDIC insurance limitation, which could have a material adverse effect upon our liquidity, financial condition and our results of operations.
Risks Associated with Outsourced Manufacturing and Foreign Sourcing
Evolving U.S. trade regulations and policies with China have in the past and may in the future have a material and adverse effect on our business, financial condition and results of operations.
Our soft tonneau covers and some raw materials are sourced from China. The U.S. government has recently imposed a variety of tariffs, duties and other trade measures on imports from China, and there is an increasing risk of further changes to tariffs or other trade restrictions. Any tariffs, duties, quotas, export controls, sanctions or other trade restrictions imposed on products that we or our suppliers import for sale or production in the U.S. would adversely and directly impact our cost of goods sold and could force us to seek alternative suppliers, which may not be as cost effective or readily available. In addition, changes in U.S. trade regulations and policies could have an adverse impact on trade relations between the U.S. and certain foreign countries, which could materially and adversely affect our relationships with our international suppliers and reduce the supply of goods available to us. Further, we cannot predict the extent to which the U.S. or foreign governments will implement new or modified trade regulations and policies, which creates uncertainties in planning our sourcing strategies and forecasting our margins. Although we are taking steps to mitigate these risks, including evaluating alternative sourcing and manufacturing strategies, the COR energy storage system is expected to be manufactured initially in China, we and our manufacturing partner are actively evaluating potential U.S. production options for future periods. However, transitioning to domestic production may involve significant costs, regulatory approvals and operational challenges, and there is no guarantee that it will be operational in the anticipated timeframe. If additional tariffs or other trade measures are implemented on our products, or other retaliatory trade measures are taken, our costs could increase, and we may be required to raise our prices, which could materially and adversely affect our results. In addition, extended trade tensions and regulatory uncertainties may disrupt our supply chain, delay production or negatively impact our ability to compete in the market.
There are risks associated with outsourced production in China, and their laws may have a material adverse effect on our financial stability.
We have historically purchased all our soft tonneau cover finished goods from one to two suppliers in China. Changes in Chinese laws and regulations, or their interpretation, or the imposition of confiscatory taxation or restrictions are matters over which we have no control. While the Chinese government has been pursuing economic reform policies that encourage private economic activity and greater economic decentralization, there is no assurance that the Chinese government will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice.
For example, the Chinese government has enacted some laws and regulations dealing with matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. However, their experience in implementing, interpreting and enforcing these laws and regulations is limited and, in turn, our ability to enforce commercial claims or to resolve commercial disputes is unpredictable. If our business ventures with Chinese manufacturers and suppliers are unsuccessful, or other adverse circumstances arise from these transactions, we face the risk that the parties to these ventures may seek ways to terminate the transactions. The resolution of these matters may be subject to the exercise of considerable discretion by agencies of the Chinese government, and forces unrelated to the legal merits of a particular matter or dispute may influence their determination.
Any rights we may have to specific performance or to seek an injunction under Chinese law are severely limited, and, without a means of recourse by virtue of the Chinese legal system, we may be unable to prevent these situations from occurring. The occurrence of any such events could have a material adverse effect on our business, financial condition and results of operations in such guises as currency conversion, imports and sources of supply, devaluations of currency or the nationalization or other expropriation of private enterprises.
In that context, we may have to evaluate the feasibility of acquiring alternative or fallback manufacturing capabilities to support the production of our existing and future soft tonneau cover products. Such a development could adversely affect our cost structure inasmuch as we would be required to support sales at an acceptable cost and might have relatively limited time to adapt. We have not manufactured our own soft tonneau covers in the past and are not planning to do so in the short term. That is because developing these technological capabilities and building or purchasing a facility will increase our expenses with no guarantee that we will be able to recover our investment in our manufacturing capabilities.
We engage in cross-border sales transactions which present tax risks among other obstacles.
Cross-border sales transactions carry a risk of changes in import tax and/or duties related to the import and export of our product, which can result in pricing changes, which will affect revenues and earnings. Cross-border sales transactions carry other risks including, but not limited to, changing regulations, wait times, customs inspection and lost or damaged product.
We are subject to foreign currency risk which may adversely affect profitability.
We are subject to foreign exchange risk as we manufacture our products in China, market extensively in both Canadian and U.S. markets, and employ people residing in both the U.S. and Canada. Meanwhile, we report results of operations in U.S. Dollars (USD). Since our Canadian customers pay in Canadian Dollars (CAD), we are subject to gains and losses due to fluctuations in the USD relative to the CAD. While having our soft tonneau covers manufactured in China, our manufacturers are paid in USD to better avoid the relatively greater fluctuation of the Chinese Yuan (RMB). Any large fluctuations in the exchange between the RMB and USD may cause product costs to increase, therefore affecting revenues and profits, potentially adversely.
Changes in U.S. government policies or regulations, including potential rollbacks of electric vehicle initiatives, could adversely affect our business, strategy, and growth prospects.
Our business strategy may rely, in part, on regulatory support for electric vehicle adoption, including incentives, mandates, infrastructure investment and emissions regulations. However, President Donald Trump has signed an executive order titled Unleashing American Energy , indicating that his administration intends to reverse electric vehicle mandates implemented by the prior administration. In addition, President Trump has paused billions of dollars in federal funding allocated toward EV charging infrastructure.
The actions reflect a shift in federal energy and transportation policy, and the future of the U.S. regulatory environment surrounding electric vehicles remains uncertain. Any reduction or elimination of governmental support for EV adoption or related infrastructure development could negatively impact market demand, hinder our growth initiatives and materially affect our financial condition and results of operations.
Risks Related to the Ownership of Our Securities
We have a large number of authorized but unissued shares of our common stock which will dilute existing ownership positions when issued.
At December 31, 2025, our authorized capital stock consisted of 45,000,000 shares of common stock and 10,000,000 shares of preferred stock. A substantial number of shares of our common stock remain available for issuance, including shares issuable upon the exercise of outstanding warrants.
Our Board of Directors has the authority to issue additional shares of common stock and, with respect to preferred stock, to establish the rights, preferences and privileges of one or more series of preferred stock without further stockholder approval, except where stockholder approval may be required by applicable law or the rules of Nasdaq or any other trading market on which our common stock may be listed.
The issuance of additional shares of common stock could dilute the ownership interests of existing stockholders. In addition, the issuance of preferred stock could adversely affect the voting power, dividend rights and other rights of holders of our common stock and could have the effect of discouraging, delaying or preventing a change in control of the Company.
Our common stock or warrants may be affected by limited trading volume and price fluctuations, which could adversely impact the value of our common stock.
Our common stock has experienced, and is likely to experience in the future, significant price and volume fluctuations, which could adversely affect the market prices of our common stock without regard to our operating performance. In addition, we believe that factors such as quarterly fluctuations in our financial results and changes in the overall economy or the condition of the financial markets could cause the market prices of our common stock and warrants to fluctuate substantially. These fluctuations may also cause short sellers to periodically enter the market in the belief that we will have poor results in the future. We cannot predict the actions of market participants and, therefore, can offer no assurances that the market for our common stock and warrants will be stable or appreciate over time.
We may need, but be unable, to obtain additional funding on satisfactory terms, which could dilute our stockholders or impose burdensome financial restrictions on our business.
We have relied upon cash from financing activities, and, in the future, we hope to rely on revenues generated from operations to fund the cash requirements of our activities. However, there can be no assurance that we will be able to generate any significant cash from our operating activities in the future. Future financing may not be available on a timely basis, in sufficient amounts or on terms acceptable to us, if at all. Any debt financing or other financing of securities senior to the common stock will likely include financial and other covenants that will restrict our financing and/or operational flexibility. Any failure to comply with these covenants would have a material adverse effect on our business, prospects, financial condition and results of operations because we could lose our existing sources of funding, and our ability to secure new sources of funding could be impaired.
Our stock ownership structure has the effect of concentrating voting control with our Chief Executive Officer and Chairman, Steven Rossi, which will limit the ability of other shareholders to influence the outcome of important decisions.
Mr. Steven Rossi currently owns 100% of our outstanding Series A Preferred Stock which entitles him to 51% of the voting power of our outstanding voting equity. Subject to any fiduciary duties owed to our other stockholders under Nevada law, Mr Steven Rossi is able to exercise significant influence over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, and will have some control over our management and policies. Mr. Steven Rossi may have interests that are different from yours. For example, Mr. Steven Rossi may support proposals and actions with which you may disagree. The concentration of ownership could delay or prevent a change in control of our Company or otherwise discourage a potential acquirer from attempting to obtain control of our Company, which in turn could reduce the price of our stock. In addition, Mr. Steven Rossi could use his voting influence to maintain our existing management and directors in office, delay or prevent changes in control of our Company, or support or reject other management and Board proposals that are subject to stockholder approval, such as amendments to our employee stock plans and approvals of significant financing transactions.
If research analysts do not publish research about our business, or if they issue unfavorable commentary or downgrade our common stock, our stock price and trading volume could decline.
The trading market for our securities may depend in part on the research and reports that research analysts publish about us and our business. If we do not maintain adequate research coverage, or if any of the analysts who cover us downgrade our stock or publish inaccurate or unfavorable research about our business, the price of our common stock could decline. If one or more of our research analysts ceases to cover our business or fails to publish reports on us regularly, demand for our securities could decrease, which could cause the price of our common stock or trading volume to decline.
Anti-takeover provisions in our charter documents and Nevada law could discourage, delay or prevent a change of control of our Company and may affect the trading price of our common stock.
We are a Nevada corporation, and the anti-takeover provisions of the Nevada Control Shares Acquisition Act may discourage, delay or prevent a change of control by limiting the voting rights of control shares acquired in a control share acquisition. In addition, our amended and restated articles of incorporation, as amended (“Articles of Incorporation”), and amended and restated bylaws (“Bylaws”) may discourage, delay or prevent a change in our management or control over us that stockholders may consider favorable. Among other things, our Articles of Incorporation and Bylaws:
authorize the issuance of “blank check” preferred stock that could be issued by our Board in response to a takeover attempt;
provide that vacancies on our Board, including newly created directorships, may be filled only by a majority vote of directors then in office, except a vacancy occurring by reason of the removal of a director without cause shall be filled by vote of the stockholders; and
limit who may call special meetings of stockholders.
These provisions could have the effect of delaying or preventing a change of control, whether or not it is desired by, or beneficial to, our stockholders.
We do not intend to pay dividends in the foreseeable future.
We currently do not expect to declare any dividends on our common stock in the foreseeable future. Any decision to declare or pay dividends in the future will be at the discretion of our Board of Directors and may also be subject to the rights and preferences of any outstanding preferred stock, including our Series C Preferred Stock. Accordingly, even if our Board of Directors were to determine to declare dividends in the future, holders of preferred stock may be entitled to receive dividends before any dividends may be declared or paid on our common stock. As a result, your only opportunity to achieve a return on your investment in our common stock may be if the market price of our common stock appreciates and you sell your shares at a profit. The market price for our common stock may never exceed, and may fall below, the price that you pay for such common stock. See Part II, Item 5 “ Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Dividend Policy .”
Risks Associated with Holding Cryptocurrency Reserves
Our Bitcoin acquisition strategy may expose us to various risks associated with bitcoin.
Bitcoin is a highly volatile asset.
Bitcoin is a highly volatile asset that has traded at widely fluctuating prices during recent periods. The trading price of bitcoin was significantly lower during prior periods, and such decline may occur again in the future. Significant declines in the price of bitcoin could materially and adversely affect the value of our bitcoin holdings and our financial condition.
Changes in our ownership of bitcoin could have accounting, regulatory and other impacts.
While we currently intend to own bitcoin directly, we may investigate other potential approaches to owning bitcoin, including indirect ownership (for example, through ownership interests in a fund that owns bitcoin). If we were to own all or a portion of our bitcoin in a different manner, the accounting treatment for our bitcoin, our ability to use our bitcoin as collateral for additional borrowings, and the regulatory requirements to which we are subject, could change, which may have a material impact on our financial statements, liquidity, or regulatory obligations.
We may be subject to regulatory developments related to crypto assets and crypto asset markets, which could adversely affect our business, financial condition, and results of operations.
As bitcoin, XRP and other digital assets are relatively novel and the application of state and federal securities laws and other laws and regulations to digital assets is unclear in certain respects, regulators in the U.S. and internationally may interpret or apply existing laws and regulations in a manner that adversely affects the ownership, transfer, valuation, or use of digital assets The U.S. federal government, states, regulatory agencies, and foreign countries may also enact new laws and regulations, or pursue regulatory, legislative, enforcement or judicial actions, that could materially impact the price of bitcoin or the ability of individuals or institutions such as us to own or transfer bitcoin.
The acceptance of blockchain and digital assets as payment on our platform introduces significant risks, including, without limitation, regulatory uncertainty, market volatility, and operational challenges.
We accept digital assets as a form of payment from our customers. Digital assets are subject to evolving legal and regulatory frameworks in the U.S. and internationally. Any change in laws regulating or enforcement actions pertaining to digital assets may restrict the use of these assets, including bitcoin and XRP, expose us to penalties and increase compliance costs. Our ability to convert digital asset payments into fiat currency may be impaired during periods of market instability, while funds stored in digital assets lack protections offered by institutions such as the Federal Deposit Insurance Corporation or the Securities Investor Protection Corporation. The integration of blockchain payment systems may expose us to risks of cyberattacks, fraud, or technical failures, potentially resulting in financial losses or reputational damage.
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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 benefitgreatly from any bill that increases the prevalence of such vehicles. However, President Donald Trump has signed an executive order titled Unleashing American Energy in which he has indicated his administration will be reversing the electric vehicle mandates of Joe Biden’s former administration, and he has further paused billions of dollars in funding allocated towards electric vehicle charging stations. The future of the U.S.’s regulatory environment surrounding electric vehicles is uncertain.
Limited Competitive Landscape
Our conventional tonneau covers are engineered for enhanced user experience and resistance to wear-and-tear, making them strong and competitive products in an otherwise consolidated and saturated market. The Worksport COR, however, operates in a much wider yet unsaturated market. The global Portable Power Station market is quickly growing, and the competitive landscape is far from consolidated. The solar tonneau cover market is in its infancy, and it’s a market in which we have first-mover advantage. To ensure we do not fall behind future competitors, we are highly focused on protecting our intellectual property both domestically and abroad.
Economic Conditions and Market Trends
As a result of a number of factors, our historical results of operations may not be comparable to our results of operations in future periods, and our results of operations may not be directly comparable from period to period. Set forth below is a brief discussion of the key factors impacting our results of operations.
Tariffs and Supply Chain Impact
Our hybrid manufacturing model, which includes sourcing certain products and components from overseas—particularly from China—exposes us to risks associated with tariffs and evolving global trade policies. Tariffs on imported raw materials, components, and finished goods have increased our input costs and may continue to do so in the future. During fiscal 2025, increases in certain material and component costs attributable, in part, to tariffs contributed to higher cost of goods sold; however, these increases were offset by higher production volumes, improved overhead absorption, and operational efficiencies, resulting in an overall improvement in gross margins compared to the prior fiscal year. These impacts are both direct, through duties applied to imported products and components, and indirect, as suppliers and logistics providers may pass through increased costs associated with tariff regimes and related trade restrictions.
While we have taken steps to mitigate these risks through supplier diversification, a portion of our supply chain remains dependent on foreign sources. As a result, tariffs and other trade measures may continue to increase our cost of goods sold and may impact product pricing and margins to the extent not offset by operational efficiencies or pricing actions. In addition, changes in U.S. trade policy or further escalation of tariffs could disrupt supply availability or increase lead times, which may adversely affect our operations and results of operations.
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 strategically began 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 increase interest rates to combat global inflation, the cost of debt financing increases. The U.S. Federal Reserve has begun to decrease interest rates in 2024, but they may persist at an elevated level for the foreseeable future. Our indebtedness arrangements both have floating interest rates, meaning we are susceptible to variable monthly mortgage and debt interest costs as a result of changes in interest rates.
High interest rates have also resulted in a shift in institutional holdings away from micro-cap equities, which has negatively influenced our stock’s trading volume. We continue to forge relationships with institutional investors and analysts in order to maintain a healthy trading volume.
Gasoline Prices and Supply Chain Issues
We faced significantly higher ocean freight, trucking, and container handling costs as well as last mile delivery costs in recent years – all of which have increased our products’ landed costs. Higher oil and gasoline prices further increased these costs, and while such prices have come down from their 2022 highs, we continue to closely monitor gasoline and shipping costs. While the Freight Rate Index has significantly increased during certain periods due to geopolitical tensions and disruptions affecting global shipping routes, the shipping routes used by Worksport have not faced dramatic price hikes. Regardless, Worksport is closely monitoring international shipping costs.
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 U.S. and Canadian markets, employ people residing in both the U.S. and Canada and, to date, have raised funds in both U.S. Dollars (USD) and Canadian Dollars (CAD). Meanwhile, we report results of operations in USD. Since our Canadian customers pay in CAD, we are subject to gains and losses due to fluctuations in the USD relative to CAD. Our manufacturers in China are paid in USD to better avoid the relatively greater fluctuation of the Chinese Yuan. To the extent the USD strengthensagainst 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.
Critical Accounting Policies
Our discussion and analysis of consolidated results of operations and financial condition are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. of America. The preparation of these consolidated financial statements requires us to make estimates assumptions and judgments that affect the amounts reported. These estimates, assumptions and judgments are affected by our application of accounting principles, which are discussed in Note 1 – Description of Business and Summary of Significant Accounting Policies of Part II, Item 8, Financial Statements and Supplementary Data, of this report. We believe the accounting policies discussed below are the most critical in understanding and evaluating our financial results. These critical accounting policies have been reviewed with the Audit Committee of our Board of Directors.
Revenue Recognition – In accordance with Accounting Standards Codification (ASC) 606 Revenue from Contracts with Customers, sales are recognized when (1) products are shipped, with no right of return except for defective products, and the title and risk of loss has passed to customers; and (2) when they are delivered based on the terms of the sale, and there is an identifiable contract with a customer with defined performance obligations, the transaction price is determinable, and the entity has fulfilled its performance obligation. Revenue related to shipping and handling costs billed to customers is included in net sales, and the related shipping and handling costs are included in cost of sales.
Inventory Valuation – At December 31, 2025, we had inventories of $9,530,671, or 57% of our current assets. Inventories are stated at the lower of cost or net realizable value with cost determined on a weighted average basis. We record valuation reserves to provide for slow-moving or obsolete inventory by principally using a formula-based method that increases the valuation reserve as the inventory ages. We also take specific circumstances into consideration. We consider overall inventory levels in relation to forecasted demand. Changes in these and other factors, such as low demand or technological obsolescence, could cause us to establish or increase our inventory reserves, which would negatively impact our gross margin.
Reviews of Impairment of Long-Lived Assets – Long-lived assets held for use, which primarily includes finite-lived intangible assets, property, plant and equipment, and right-of-use assets, are evaluated for impairment whenever events or circumstances indicate that the undiscounted cash flows to be generated by their use over their expected useful lives and eventual disposition are less than carrying value. The long-term nature of these assets requires the estimation of their cash inflows and outflows several years into the future and only takes into consideration technological advances known at the time of the impairment test.
Income Taxes – Our annual tax rate is based on our operating results before taxes by jurisdiction, applicable statutory tax rates, the impacts of permanent differences, tax incentives, and tax planning opportunities in the jurisdictions in which we operate. Significant judgment is required in determining our annual tax rate and evaluating our tax positions. We record reserves against tax benefits when it is more likely than not that we will not sustain a position if the appropriate taxing jurisdiction had full information and examined our position. We adjust these reserves when facts and circumstances change, and there is a considerable amount of judgment in making these assessments. For further information, refer to Note 8, Income Taxes of Part III Item 8, Financial Statements and Supplementary Data, of this report.
Reverse Common Stock Split
On March 18, 2025, we effected the Reverse Stock Split at the ratio of 1:10, which immediately proportionally reduced the authorized number of shares of common stock from 299,000,000 to 29,900,000. Pursuant to the laws of the State of Nevada, shareholder approval was not required in order to effect the split as the Board has the authority to effect a reverse stock split without shareholder approval if the number of authorized shares of common stock is proportionally reduced as a result. No fractional shares were issued as a result of the Reverse Stock Split. Each fractional share was automatically rounded up to the next whole share.
The Reverse Stock Split was undertaken in order for us to regain compliance with the minimum bid requirement under Nasdaq Listing Rule 5550(a)(2).
Amendment to Articles of Incorporation
On April 17, 2025, our Board of Directors and majority stockholder approved an amendment to our articles of incorporation to increase the total number of authorized shares of capital stock from 30,900,000 to 55,000,000, consisting of an increase in the authorized number of shares of common stock from 29,900,000 to 45,000,000 and an increase in the authorized number of shares of preferred stock from 1,000,000 to 10,000,000. The amendment was filed with the State of Nevada and became effective on May 19, 2025. The increase in authorized capital provides the Company with additional flexibility to issue equity securities in connection with capital-raising transactions, strategic initiatives, or other corporate purposes.
Consolidated Results of Operations
The following is a discussion of our results of operations for the fiscal year ended December 31, 2025 compared to the fiscal year ended December 31, 2024.
Years ended December 31,
Favorable (Unfavorable) 2025 vs. 2024
Amount
Net sales
Cost of sales
Gross profit
Research and development
General and administrative
Sales and marketing
Other operating income, net
Loss from operations
Interest expense
Other (expense) income
Net loss
Per share data
Basic and diluted earnings per share
Years ended December 31,
Favorable (Unfavorable)
Percent of net sales
Percentage points
Cost of sales
Gross profit
Research and development expense
General and administrative expense
Sales and marketing expense
Net sales
For the year ended December 31, 2025, net sales generated in the U.S. was $16,010,083, compared to $8,397,570 for the same period in 2024, an increase of 91%. For the year ended December 31, 2025, net sales generated in Canada was $90,955, compared to $67,519 for the same period in 2024, an increase of 35%. For the year ended December 31, 2025, net sales generated outside the U.S. and Canada was $700, compared to $19,290 for the same period in 2024.
Net sales increased the year ended December 31, 2025, compared to the same period the prior year due to increased sales of tonneau covers to end users via the Company’s online marketplace and various dealers and distributors. The Company increased its product offerings in 2025 to also include the AL4 and HD3 covers to end customers. The Company continues to focus on establishing new and strengthening existing business-to-consumer and business-to-business channels while also strengthening customer support to increase customer satisfaction and enable high product turnover. Worksport has successfullybolstered its business-to-consumer sales channels in 2025, and it is now focusing on increasing cost efficiencies in these sales channel as well as expanding its presence in additional business-to-business sales channel territories. For the business-to-consumer channel, we are focused on lowering our customer acquisition cost with additional focus on brand awareness and shift away from reliance on conversion marketing to increase brand awareness. For the business-to-business channel, we have assembled a strong team of both internal and external sales representatives, and we are actively presenting our product offerings to various dealers, wholesalers, and retailers across the U.S. and Canada. We intend to continue gradually increasing output capacity through refined production processes and increased personnel.
Net sales from online retailers of our products increased from $4,930,822 in 2024 to $11,933,269 in 2025, an increase of 142%. Online retailers accounted for 74% of total net sales for the fiscal year ended December 31, 2025 compared to 58% for the fiscal year ended December 31, 2024. Distributor sales increased 884% for the fiscal year ended December 31, 2025 compared with the fiscal year ended December 31, 2024 with net sales of $4,168,469 and $423,627, respectively. There were no private label sales in 2025. Private label sales accounted for 37% or $3,129,930 of net sales for the fiscal year ended December 31, 2024. We expect to continue to grow our fields of business as we develop unique products with enhanced utility to offer to other prospective clients in the U.S. and Canadian markets.
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 U.S. and a large Canadian 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.
Cost of Sales
The decrease in the cost of sales as a percentage of sales was primarily due to two factors: (1) increase production volume to support sales growth, including introduction of new product lines during 2025, and (2) overhead allocation efficiencies associated with higher production volume. These improvements offset increases in certain material, components, and landed costs, including the impact of tariffs on imported products and components sourced from overseas. While tariffs contributed to higher input costs during the fiscal year, the overall effect of increased scale and production efficiencies resulted in an improvement in our gross margin. We continue to employ a discounting strategy as part of a broader initiative to enhance market presence and build brand awareness. We anticipate this will well position us for sustained customer engagement in future periods, during which discounting may not be necessary to the same extent. As production volume grows and our manufacturing process becomes more efficient, we expect to allocate fixed costs included in overhead absorption against a larger production volume base. This scaling will be facilitated by reallocating more of our existing human capital and machinery resources toward production.
We provide our distributors and online retailers an “all-in” wholesale price. This includes import duty charges, including tariffs, taxes, and shipping charges. Discounts are applied if the distributor or retailer chooses to use their own shipping process. Certain exceptions apply on rare occasions where product is shipped outside the contiguous U.S. or from the U.S. to Canada. Volume discounts are offered to certain high-volume customers, and we also offer a “dock price” or “pickup program” in which clients are able to pick up inventory directly from our stocking warehouse.
Operating Expenses
Operating expenses increased for the fiscal year ended December 31, 2025 by $6,916,849, from $16,371,484 for the fiscal year ended December 31, 2024 to $23,288,333 for the fiscal year ended December 31, 2025, due to the following factors.
Research and development expense: The $751,017 (33%) decrease relates to our transition from development of certain hard covers in 2024 (e.g., HD3, AL4, certain energy products) to production in 2025. We continued our development initiatives with our energy products and other tonneau covers in 2025 with the anticipation of production of 2026.
General and administrative expense: The $3,096,401 (26%) increase was related to increased employment as we expand our operations and further develop our products. We also incurred expenses related to ongoing investment relations initiatives to further our brand recognition to investors during the period.
Sales and marketing expense: The $4,561,167 (191%) increase in sales and marketing is primarily attributable to the Company’s online optimization efforts, online marking campaigns and other traditional branding initiatives to create brand and product awareness.
Other Income ((Expense)
The $159,084 (23%) decrease in other expenses can be attributed to decreased interest expense based on our components of indebtedness in 2025. In 2024, we converted from a traditional mortgage to a line of credit which is secured by our production facility.
Liquidity and Capital Resources
As of December 31, 2025, we had $5,945,894 in cash and cash equivalents and $3,448,016 of remaining available capacity on our revolving line of credit. We have historically generated only limited gross profit and have relied primarily upon capital generated from public and private offerings of our securities to fund continuing operations. Since the Company’s acquisition of Worksport in 2014, it has never generated a profit. During the fiscal year ended December 31, 2025, we had net losses of $19,352,297 (2024 - $16,163,789). As of December 31, 2025, the Company had working capital of $10,061,578 (2024 – $7,304,110) and had an accumulated deficit of $83,873,790 (2024 - $64,476,966).
In their 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 fiscal year ended December 31, 2025, the Company received net proceeds of approximately $21.8 million from offerings. Management is focused on transitioning towards gross profit as our principal source of liquidity by growing our existing product offerings and customer base and realizing manufacturing efficiencyimprovements. 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 significant funds during the 2025 fiscal year by utilizing the following public and private offerings:
At-the-Market Offering Program
During the fiscal year ended December 31, 2025, the Company sold 110,619 shares of its common stock under its at-the-market offering program pursuant to the At-the-Market Offering Agreement, dated September 30, 2022 (the “Sales Agreement”), as amended on November 14, 2025, with H.C. Wainwright & Co., LLC acting as sales agent. These sales resulted in gross proceeds of approximately $521,835 and net proceeds of approximately $504,372, after commissions and offering expenses. Under the Sales Agreement, the Company pays Wainwright a commission of 3.0% of the gross sales price of the shares sold through the at-the-market offering program.
December 2025 Warrant Inducement
On December 11, 2025, the Company entered into a warrant exercise inducement agreement with the holder of certain existing warrants originally issued on March 20, 2024 and March 3, 2025. Pursuant to the agreement, the holder exercised warrants to purchase 2,194,526 shares of the Company’s common stock at a reduced exercise price of $2.90 per share, resulting in gross proceeds of approximately $6.4 million, before placement agent fees and other offering expenses. In consideration for the exercise, the Company issued new warrants to purchase up to 3,840,421 shares of common stock. The shares of common stock issuable upon exercise of the new warrants were registered for resale pursuant to the Company’s registration statement on Form S-3 (File No. 333-292823), filed January 20, 2025 and declared effective January 28, 2025. The Company intends to use the net proceeds from the transaction for general corporate and working capital purposes. The Company engaged Maxim Group LLC as its exclusive financial advisor in connection with the transaction.
Regulation A Offering
Between June 2025 and October 2025, we conducted a Regulation A offering pursuant to which we sold units consisting of shares of Series C Preferred Stock and accompanying warrants, generating aggregate gross proceeds of approximately $10.0 million before fees and expenses.
February 2025 Warrant Inducement
On February 27, 2025, the Company entered into a warrant exercise inducement agreement with the holder of certain existing warrants originally issued on May 29, 2024. Pursuant to the agreement, the holder exercised warrants to purchase 1,295,000 shares of the Company’s common stock at a reduced exercise price of $5.198 per share, resulting in gross proceeds of approximately $6.7 million, before placement agent fees and other offering expenses.
In consideration for such exercise, the Company issued new warrants to purchase up to 1,424,500 shares of its common stock at an exercise price of $6.502 per share, subject to adjustment. The new warrants become exercisable six months from the date of issuance and expire on the fifth anniversary of the date of issuance. The shares of common stock issuable upon exercise of the new warrants were registered for resale pursuant to the Company’s registration statement on Form S-1 (File No. 333-286255), filed with the SEC on March 28, 2025 and declared effective on April 3, 2025. The Company used the net proceeds from the transaction for working capital and general corporate purposes. The Company engaged Maxim Group LLC as its exclusive financial advisor in connection with the transaction.
Consolidated Statement of Cash Flows
Cash increased from $4,883,099 at December 31, 2024 to $5,945,894 at December 31, 2025 – an increase of $1,062,795 or 22%. The increase was primarily due to financing activities conducted during the fiscal year to support growth of ongoing operations.
Operating Activities
Net cash used in operating activities for the fiscal year ended December 31, 2025 was $17,314,390, compared to $10,138,798 in the prior year, driven by a shift to production and distribution of hard tonneau covers.
Accounts receivable increased at December 31, 2025 by $461,382 and decreased by $387,561 in the prior year. The increase in accounts receivable when compared with 2024 was due to volume shifts from private label sales in 2023 to direct to consumer sales in 2024. The shift from private label sales to other business to business channel customers resulted in an increase in accounts receivable in 2025 based on longer payment terms when compared with direct sales to consumers.
Inventory increased at December 31, 2025 by $4,340,617 and increased at December 31, 2024 by $1,558,562 due to a shift in production requirements from soft tonneau covers to hard tonneau covers. Prepaid expenses and deposits increased by $338,669 at December 31, 2025 and decreased by $1,305,057 at December 31, 2024 due to deposits by us for the purchase of production equipment and inventory.
Accounts payable and accrued liabilities increased at December 31, 2025 by $2,179,473 and increased at December 31, 2024 by $1,167,834, respectively. These fluctuations were driven primarily by the transition to production activities in 2024 and increased raw materials inventory purchases to support production in 2025.
Investing Activities
Net cash used in investing activities for the fiscal year ended December 31, 2025 was $1,119,503 compared to $528,235 in the prior year. The increase in investing activities was primarily due to higher capital expenditures on various production equipment in 2025.
Financing Activities
Net cash provided by financing activities for the fiscal year ended December 31, 2025 was $19,456,688 compared to $12,184,354 in the prior year. During the fiscal year ended December 31, 2025 the Company received net proceeds of $21,823,476 from the sale of shares and pre-funded warrants. During the fiscal year ended December 31, 2024, the Company received net proceeds of $12,482,549 from the sale of shares and pre-funded warrants.
Contractual Obligations and Commercial Commitments
The following table summarizes our contractual obligations as of December 31, 2025 and 2024:
Contractual Obligations
December 31, 2025
December 31, 2024
Operating lease obligations
Equipment purchases
Total Contractual Obligations
We intend to fund our contractual obligations with working capital.
Off-Balance Sheet Arrangements
We do 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.
Recent Accounting Pronouncements
See Note 1, Description of Business and Summary of Significant Accounting Policies, included in Part II Item 8, Financial Statements and Supplementary Data, of this report for further information regarding Financial Accounting Standards Board issued Accounting Standards Updates (“ASU”).
