Worksport Ltd

Notes to the Condensed Consolidated Financial Statements

Note1- Description of Business and Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form10-Q and Article10 of Regulation S-X. In the opinion of management, all adjustments consisting of normal recurring adjustments considered necessary for the fair presentation of results for the interim period have been included. The results of operations for thethree andsix months ended* June 30, 2026* arenot necessarily indicative of the results expected for the full year. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and notes thereto included in our Form10-K for the fiscal year ended* December 31, 2025*. All references to years in these financial statements are fiscal years.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year’s presentation. The Company reclassified professional fees of $637,493 and $1,063,534 for thethree andsix months ended* June 30, 2025* from professional fees to general and administrative expense in the condensed consolidated statements of operations and comprehensive loss. This change better aligns the nature of the expenses that support the Company’s administrative efforts. The Company reclassified interest income of $11,303 and $19,437 for thethree andsix months ended* June 30, 2025* from interest income to other in the condensed consolidated statements of operations and comprehensive loss to conform with current year presentation. The Company reclassified investments of $67,033 at* December 31, 2025* from investment to other noncurrent asset on the condensed consolidated balance sheet to conform with current period presentation.

Recent accounting pronouncements

Recent accounting pronouncementsnot* yet adopted*

In* November 2024,the FASB issued ASU2024*-03, Income Statement–* Reporting Comprehensive Income*–* Expense Disaggregation Disclosures.* This ASU enhances disclosure of specified categories of expenses (purchases of inventory, employee compensation, depreciation and amortization) included in certain expense captions presented on the face of the income statement. ASU2024-03 is effective for fiscal years beginning after* December 15, 2026,and for interim periods within fiscal years beginning after December 15, 2027,*with early adoption permitted. The Company is currently evaluating the potential effect that the updated standard will have on the consolidated financial statements and related disclosures.

In* September 2025,the FASB issued ASU2025*-06, Intangibles–* Goodwill and Other-Internal-Use Software (Subtopic350-40): Targeted Improvements to the Accounting for Internal-Use Software*. This ASU removes all references to prescriptive and sequential software development stages and will now require public business entities to start capitalizing software costs when management has authorized and committed to funding the software project and is probable that project will be completed and the software will be used to perform the function intended. The ASU also specifies that the disclosures in Subtopic360-10, Property, Plant and Equipment – Overall, are required for all capitalized internal-use software costs. ASU2025-06 is effective for fiscal years beginning after* December 15, 2027,*with early adoption permitted. The Company is currently evaluating the disclosure requirements of this standard and the impact on its consolidated financial statements.

In* December 2025,the FASB issued ASU2025*-11, Interim Reporting (Topic270*): Narrow Scope Improvements*. This ASU amends Topic270 by improving the navigability of the required interim disclosures and clarifying when the guidance is applicable. The amendment provides additional guidance on when disclosures should be provided in interim reporting periods and requires entities to disclose events since the end of the last annual reporting period that have a material impact on the Company. ASU2025-11 is effective for interim reporting periods within annual reporting periods beginning after* December 15, 2026,*with early adoption permitted. The Company is currently evaluating the disclosure requirements of this standard and the impact on its consolidated financial statements.

The Company considers the applicability and impact of all ASUs. ASUsnot listed were assessed and determined to be eithernot applicable or had or are expected to have an immaterial impact on the consolidated financial statements and related disclosures.

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Note2 - Going Concern

As of* June 30, 2026*, the Company had $1,160,158 in cash and cash equivalents. The Company also has availability on its revolving line of credit of $818,339. The Company has generated only limited revenues and has relied primarily upon capital generated from public and private offerings of its securities. Since the Company’s acquisition of Worksport in2014, it has never generated a profit. As of* June 30, 2026*, the Company had an accumulated deficit of $93,721,747.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. During thethree months ended* June 30, 2026*, the Company had net losses of $3,965,303 (2025 - $3,734,484). During thesix months ended* June 30, 2026*, the Company had net losses of $9,793,824 (2025 - $8,194,948). As of* June 30, 2026*, the Company had working capital of $10,961,087 (* December 31, 2025* - $10,061,578) and had an accumulated deficit of $93,721,747 (* December 31, 2025* - $83,873,790). The Company hasnot generated profit from operations since inception and to date has relied on debt and equity financing for continued operations. The Company’s ability to continue as a going concern is dependent upon the ability to generate cash flows from operations and obtain equity and/or debt financing. The Company intends to continue funding operations through equity and debt financing arrangements, which* maybe insufficient to fund its capital expenditures, working capital and other cash requirements in the long term. There can beno* assurance that the steps management is taking will be successful.

The Company has historically operated at a loss, although that* maychange as sales volumes increase and margins improve. As of June 30, 2026*, the Company had cash and cash equivalents of $1,160,158 (* December 31, 2025* - $5,945,894). Despite the Company having completed its purchasing of large manufacturing machinery for phaseone output levels, operational costs are expected to remain elevated and, thus, further decrease cash and cash equivalents. Concurrently, the Company intends to continue its ramp-up of manufacturing and increasing sales volumes in2026, which should mitigate the effects of operational costs on cash and cash equivalents as it releases new product lines; this view is supported by the fact that the manufacturing facility of the Company was completed for initial production output in2023 and quickly began improving output and sales beginning in2024 and continuing into2026.

The Company has successfully raised capital in recent periods and believes it is positioned to do so again if deemed necessary or strategically advantageous.

On* September 30, 2022,the Company entered into an At The Market Offering Agreement (the “ATM Agreement”) with H.C. Wainwright & Co., LLC (“Wainwright”), pursuant to which the Company could offer and sell shares of its common stock having an aggregate offering price of up to $13.0 million through Wainwright as sales agent under the Company’s shelf registration statement on Form S-3 (FileNo.* 333-267696), including the related base prospectus and prospectus supplement dated* October 13, 2022.Sales of shares of common stock through Wainwright, if any, were made pursuant to an “at the market offering” as defined in Rule415*(a)(4) under the Securities Act of1933, as amended. Under the ATM Agreement, Wainwright is entitled to a commission equal to 3.0% of the gross proceeds from shares sold under the ATM Agreement, and the Company also agreed to reimburse Wainwright for certain specified expenses.

Because the Company’s public float was below*$75.0* million, sales under the ATM Agreement were subject to the limitations of General InstructionI.B.6 of Form S-3. Accordingly, on* November 5, 2024and December 13, 2024,the Company filed prospectus supplements to update the amount of securities then eligible for sale under the ATM Agreement based on the Company’s public float and prior sales during the applicable rolling12*-month period. The Company’s registration statement on Form S-3 (FileNo. 333-267696) expired on* October 13, 2025.*Through the expiration date, the Company had sold 872,027 shares of common stock under the ATM Agreement for aggregate gross proceeds of approximately $6,751,381.

On* November 14, 2025,the Company and Wainwright entered into an amendment to the ATM Agreement in connection with the Company’s new shelf registration statement on Form S-3 (FileNo.* 333-291582). Pursuant to the amended ATM Agreement and the related base prospectus and prospectus supplement dated* December 12, 2025,the Company mayoffer and sell shares of its common stock having an aggregate offering price of up to $4.0 million through Wainwright as sales agent. Because the Company’s public float remains below$75.0* million, sales under the ATM Agreement remain subject to the limitations of General InstructionI.B.6 of Form S-3, which limits the amount of securities the Company* maysell in primary offerings during any rolling12*-month period. During thesix months ended* June 30, 2026*, the Company sold 3,157,774 shares of common stock pursuant to the ATM Agreement for aggregate gross proceeds of approximately $4,003,273, resulting in net proceeds to the Company of approximately $3,869,882 after deducting commissions and offering expenses.

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On* November 2, 2023,the Company consummated a registered direct offering pursuant to which the Company issued 192,500 shares of common stock and 157,500 pre-funded warrants to an institutional investor for a total net proceeds of $4,261,542. Concurrently with the registered direct offering, the Company issued the same institutional investor 700,000 warrants in a private sale. The warrants are exercisable for 700,000 shares of common stock for $13.40 per sharesix* months after issuance and untilfive andone-half (5.5) years from the issuance date, subject to beneficial ownership limitations as described in the warrants. The Company registered the 700,000 shares of common stock underlying the warrants on a registration statement on Form S-1 (FileNo. 333-276241) declared effective by the SEC on* December 29, 2023.*

On* March 20, 2024,the Company consummated a registered direct offering pursuant to the prospectus supplement dated March 18, 2024to the Company’s effective shelf registration statement on Form S-3 (FileNo.* 333-267696), pursuant to which the Company issued 237,224 shares of common stock and 147,789 pre-funded warrants to purchase shares of common stock to the same institutional investor as in the Company’s registered direct offering on* November 2, 2023,for a total net proceeds of $2,629,083. Concurrently with the registered direct offering, the Company issued the institutional investor 770,026 warrants in a private sale. The warrants became exercisablesix* months following issuance at an exercise price of $7.40 per share and expire five andone-half years from the issuance date, subject to beneficial ownership limitations contained. The Company registered the resale of the 770,026 shares of common stock underlying the warrants pursuant to a registration statement on Form S-1 (FileNo. 333-278461) which was declared effective by the SEC on* April 8, 2024.*

On* May 29, 2024,the Company sent an inducement letter to a shareholder offering an option to exercise their warrants at a reduced exercise price of $5.198 per warrant. In turn, the Company offered the shareholder new warrants to purchase up to 1,295,000 warrant shares with an exercise price of $5.198. The shares had a term of 5.5 years, with a6*-month required holding period.

On* February 27, 2025,the Company entered into a warrant inducement agreement with a shareholder to exercise 755,558 of their 1,295,000 * May 2024Warrants at a price of $5.198 per share. The remaining unexercised 539,442 warrants are included in share subscription payable. In return, the Company issued 1,424,500 new2025 Inducement Warrants. Each Inducement Warrant has an exercise price of $6.502, will become exercisablesix months after issuance, and have a 5.5-year life. Worksport raised approximately $6,731,000 in gross proceeds before fees and expenses, with the funds earmarked for general corporate and working capital purposes.

On* June 13, 2025,the Company completed the initial closing of its Regulation A offering whereby up to 3,100,000 Units maybe sold at an offering price of $3.25 per unit. Each Unit consists ofone share of 8% Series C Convertible Preferred Stock, par value $0.001 per share (the “Series C Preferred Stock”) andone warrant for the right to purchaseone* (1) share of common stock, $0.001 par value with an exercise price of $4.50 per share. The qualified Regulation A offering is expected to generate gross proceeds of $10,000,000. The Company completed the Regulation A offering in* October 2025.The Company completed32* tranches and received proceeds of $9,092,414 (net of issuance cost of $899,997).

On* December 11, 2025,the Company entered into a warrant inducement agreement (the “Inducement”) with the holder of existing warrants to purchase an aggregate of 2,194,526 shares at a reduced exercise price of $2.90. Pursuant to the Inducement, the exercising holder of the existing warrants received 3,840,421 inducement warrants, and the Company received $6,364,000 from the exercise of the existing warrants. As a result of the inducement and subsequent exercise, the Company determined the incremental fair value provided to the holder from both the adjustment in exercise price of the existing warrants and the fair value of the inducement warrants issued using the Black Scholes model. The total incremental fair value of $4,485,000 is recorded as a non-cash deemed dividend. The proceeds of the warrant inducement and issuance of 916,000 shares of common stock are recorded as additional paid in capital. The obligation to issue the remaining 1,278,526 shares was satisfied during thethree* months ended* March 31, 2026.*

On* June 17, 2026,the Company entered into a securities purchase agreement (the “First Agreement”) with an institutional accredited investor pursuant to which the Company issued and sold, in a registered direct offering,208,333 shares of common stock and common stock purchase warrants to purchase up to 208,333 shares of common stock at an offering price of $1.20 per unit, with each unit consisting ofone share of common stock andone warrant. The shares of common stock and the shares of common stock issuable upon exercise of the warrants were offered pursuant to the Company’s shelf registration statement on Form S-3 (FileNo.* 333-291582), filed with the SEC on* November 14, 2025and declared effective on December 12, 2025,and a prospectus supplement dated June 18, 2026and filed with the SEC on June 18, 2026.The registered direct offering closed on June 18, 2026*and resulted in gross proceeds of $250,000 (net of issuance costs of $65,000).

The warrants issued in the registered direct offering have an exercise price of $1.50 per share, are immediately exercisable and expire five years from the date of issuance. The warrants include a cashless exercise feature pursuant to which the holder is entitled to receive 1.4 shares of common stock for each share underlying the warrant being exercised, without payment of the exercise price, resulting in the potential issuance of up to 291,667 shares of common stock upon cashless exercise.

On* June 18, 2026,the Company entered into asecond* securities purchase agreement (the “Second Agreement”) with the same institutional accredited investor pursuant to which the Company issued and sold, in a separate registered direct offering,675,529 shares of common stock at an offering price of $0.70 per share. The shares were offered pursuant to the Company’s shelf registration statement on Form S-3 (FileNo. 333-291582), filed with the SEC on* November 14, 2025and declared effective on December 12, 2025,and a prospectus supplement dated June 18, 2026and filed with the SEC on June 18, 2026.The registered direct offering closed on June 18, 2026*and resulted in gross proceeds of $472,870 (net of issuance costs of $58,643).No warrants or other derivative securities were issued in connection with the offering.

To date, the Company’s primary sources of liquidity consist of net proceeds from public and private securities offerings and cash exercises of outstanding warrants. Management is focused on transitioning towards revenue as its primary source of liquidity by growing existing product offerings as well as the Company’s customer base. The Company cannot give assurance that it can increase its cash balances or limit its cash consumption and thus maintain sufficient cash balances for planned operations or future business developments. Future business development and demands* maylead to cash utilization at levels greater than recently experienced. The Company may*need to raise additional capital in the future. However, the Company cannot provide assurances it will be able to raise additional capital on acceptable terms, or at all.

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The Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern withinone year after the date the consolidated financial statements are issued. Still, certain factors indicate the existence of a material uncertainty that cast substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements donot include any adjustments that might result from the outcome of this uncertainty. These adjustments could be material.

Note3 - Inventories

Inventories, net of reserves, consists of:

Note4 - Property and Equipment

Property and equipment consists of:

On* June 30, 2026*, the Company amended an agreement whereby it was released from an outstanding contractual obligation of approximately $2.7 million and oustanding duties payable of $0.3 million related to the acquisition of manufacturing equipment valued with a cost of approximately $3.0 million. Equipment deposits paid totaling $300,000 are included as a component of other noncurrent assets, pursuant to the terms of the amendment. Further, $38,857 of capital expenditures related were included in accounts payable as of* June 30, 2026*.

Depreciation expense for thethree months ended* June 30, 2026and2025* was $323,306 and $347,443, respectively. Depreciation expense for thesix months ended* June 30, 2026and2025* was $653,076 and $695,950, respectively.

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Note5 - Intangible Assets

Intangible assets consist of costs incurred to establish the patent rights related to the quick latch and soft vinyl quad-fold tonneau cover technologies, Worksport trademarks, licenses, and software costs. The Company’s utility patents and design registrations were issued between2014 and2025. The patents and software are amortized on a straight-line basis over their useful life. The Company’s trademark, licenses, and other indefinite life intangible assets are reassessed every year for impairment. The Company determined that impairment isnot necessary for the prior year ended* December 31, 2025* and for thethree andsix months ended* June 30, 2026*.

The components of intangible assets are as follows:

Amortization expense for thethree months ended* June 30, 2026and2025* was $96,215 and $96,459, respectively. Amortization expense for thesix months ended* June 30, 2026and2025* was $192,674 and $192,918, respectively.

Estimated amortization of the patent and software over the nextfive calendar years and beyond* June 30, 2026* is as follows:

Note6 - Prepaid Expenses and Other

Prepaid expenses and other consists of:

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Note 7- Shareholders’** Equity**

The Company is authorized to issue up to 55,000,000 shares of capital stock, par value $0.001 per share. Capital stock is divided intotwo classes designated as common stock and preferred stock.

Common stock– The Company is authorized to issue up to 45,000,000 shares of common stock.

Preferred stock–* The Company is authorized to issue up to 10,000,000 shares of preferred stock. The board of directors mayauthorize, without further shareholder action, the issuance of preferred stock inone* or more classes or series. Preferred stock ranks senior to common stock with respect to payment of dividends and the distribution of assets on liquidation. Each class or series of preferred stock, when issued, must include its designation and a description of certain rights, including voting privileges, dividend preferences, conversion features, restrictions and redemption rights.

Duringsix* months ended* June 30, 2026*, the following transactions occurred:*

During thesix months ended* June 30, 2026*, the Company sold an aggregate of 3,157,774 shares of its common stock pursuant to the ATM Agreement for aggregate gross proceeds of $4,003,273, net of issuance costs of $133,391. The shares in a shelf takedown from the Company were sold pursuant to the base prospectus and prospectus supplement filed with the Securities and Exchange Commission as part of the Company’s registration statement on Form S-3 (FileNo. 333-291582), which was declared effective on* December 12, 2025.*

The Company recognized consulting expense of $54,901 for share subscriptions payable from restricted shares to be issued. As of* June 30, 2026*, $23,325 of restricted shares havenot been issued. The Company also recognized consulting expense of $107,833 related to warrants. As of* June 30, 2026*, the warrants vested and were issued. Transactions reflected in consulting expense are included as a component of general and administrative expense in the Condensed Consolidated Statements of Operations and Comprehensive Loss.

Refer to Note14, Warrants, and Note15, Equity Compensation, for additional disclosures related to shareholders’ equity.

Duringsix* months ended* June 30, 2025*, the following transactions occurred:*

During thesix months ended* June 30, 2025*, the Company sold an aggregate of 22,725 shares of its common stock pursuant to an At the Market Offering Agreement, dated* September 30, 2022,for aggregate gross proceeds of $192,612, net of issuance costs of $6,738. The shares were sold pursuant to the Company’s base prospectus and the related prospectus supplements filed with the Securities and Exchange Commission as part of the Company’s registration statement on Form S-3 (FileNo.* 333-267696), which was declared effective on* October 13, 2022.*

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The Company recognized consulting expense of $26,000 to share subscriptions payable from restricted shares and stock options to be issued. As of* June 30, 2025*, $13,000 of restricted shares havenot been issued. Transactions reflected in consulting expense are included as a component of general and administrative expense in the Condensed Consolidated Statements of Operations and Comprehensive Loss. During thesix months ended* June 30, 2025*, the Company issued 90,076 restricted shares with a value of $452,100.

During thesix months ended* June 30, 2025*, in connection with the inducement of 1,295,091 warrants at $5.198 per share, the Company also sold 1,424,500 warrants exercisable at $6.502 per share. The Company received proceeds of $6,731,410 before deducting placement agent fees of $346,570 and other offering expenses payable by the Company upon the exercise of the* May 2024*Existing Warrants.

Note8 - Income Taxes

The effective tax rate for thethree andsix months ended* June 30, 2026and2025* was 22.9% before 100% allowance adjustments on net deferred income tax assets. The effective tax rate for thethree andsix months ended* June 30, 2026and2025* was higher than expected from applying the U.S. federal statutory rate of 21% to loss before income taxes due to tax benefits on losses generated outside the U.S. with higher statutory rates.

Note 9 - Financial Instruments and Fair Value

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an ordinary transaction between market participants at the measurement date. Depending on the nature of the asset or liability, various techniques and assumptions can be used to estimate fair value. The definition of the fair value hierarchy is as follows:

Level1 – Quoted prices in active markets for identical assets and liabilities.

Level2 – Observable inputs other than quoted prices in active markets for similar assets and liabilities.

Level3 – Inputs for which significant valuation assumptions are unobservable in a market and therefore value is based on the best available data, some of which is internally developed and considers risk premiums that a market participant would require.

The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, revolving line of credit, and long-term debt. The fair values of cash and cash equivalents, accounts receivable, and accounts payable approximate their carrying value because of the short-term nature of these instruments. The Company’s revolving line of credit and long-term debt are based on a variable interest rate, and are reflected in the financial statements at carrying value which approximates fair value at* June 30, 2026*. The fair value of the revolving line of credit and long-term debt is classified as Level2 within the fair value hierarchy.

The Company is exposed to market risks such as fluctuation in foreign currency exchange rates and interest rates. Derivative instruments* maybe used to offset some of the effects of these market risks on the expected future cash flows and on certain existing assets and liabilities. The Company maychoosenot* to hedge certain exposures for a variety of reasons including, butnot limited to, accounting considerations and the prohibitive economic cost of hedging particular exposures.

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Market Risks

Foreign Currency Risk

The Company is exposed to currency risk on its sales and purchases denominated in Canadian Dollars. The Company actively manages these risks by adjusting its pricing to reflect currency fluctuations and purchasing foreign currency at advantageous rates.

Interest Rate Risk

The borrowing under the Company’s Line of Credit Facility and Equipment Financing is at variable interest rates and exposes the Company to interest rate risk. If interest rates increase, debt service obligations on variable rate indebtedness will increase even though the amount borrowed* may**not* change.

Note10 - Changes in Cash Flows from Operating Assets and Liabilities

The changes to the Company’s operating assets and liabilities for thesix months ended* June 30, 2026and2025* are as follows:

Note11 - Leases

The Company accounts for leases under ASC842, whereby it recognizes a lease liability and a right-of-use asset. The lease liability is measured at the present value of the remaining lease payments, discounted by the Company’s incremental borrowing rate. The Company measured the right of use asset at an initial amount equal to the lease liability.

On* April 1, 2025,the Company signed a lease agreement for 12,500 square feet of office space to be used as a R&D facility pursuant to athree-year lease with an option to extend the lease for an additionaltwo years. The lease was effective on May 1, 2025at a rate of $9,659 per month with a termination date of April 30, 2028.*The Company’s incremental borrowing rate used to initially measure the present value of the remaining lease payments was 15%.

On* July 14, 2025,the Company signed a lease agreement for 1,992 square feet of office space to be used as an R&D facility for its Terravis Energy subsidiary pursuant to atwo-year lease effective July 18, 2025*for an average monthly rent of $3,154. The Company’s incremental borrowing rate used to initially measure the present value of the remaining lease payments was 15%.

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The Company’s right-of-use asset and lease liability as of* June 30, 2026*, and* December 31, 2025*, are as follows:

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

The following is a summary of cash paid during thesix months ended* June 30, 2026and2025* for amounts included in the measurement of lease liabilities:

The following are future calendar year minimum lease payments as of* June 30, 2026*:

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Note12 - Indebtedness

Long-term debt consists of:

Note13 - Loss per Share

For thethree andsix months ended* June 30, 2026*, loss per share is ($0.33) and ($0.87) (basic and diluted) using the weighted average number of shares of 11,858,684 and 11,318,444 (basic and diluted), respectively. For thethree andsix months ended* June 30, 2025*, loss per share is ($0.71) and ($1.71) (basic and diluted) using the weighted average number of shares of 5,285,705 and 4,778,426 (basic and diluted), respectively.

There are 45,000,000 common shares authorized with 15,282,595 and 5,519,130 shares issued and outstanding, at* June 30, 2026and2025*, respectively. The computation of loss per share is based on the weighted average number of shares outstanding during the period in accordance with ASC TopicNo. 260, “Earnings Per Share.” Shares underlying the Company’s outstanding warrants and convertible promissory notes were excluded due to the anti-dilutive effect they would have on the computation.

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Note14 - Warrants

On* June 17, 2026,the Company entered into a Securities Purchase Agreement with an investor. The terms of the agreement provided for the issuance of 208,333 units at a price of $1.20 per unit. Each unit consisted ofone share of common stock with a par value of $0.001 per share andone warrant to purchaseone share of common stock, par value $0.001 per share, at an exercise price of $1.50 per share. The warrants were immediately exercisable and expire on July 17, 2031.The warrants contained a cashless feature, in which the holder was entitled to receive 1.4 shares of common stock for each warrant exercised without transfer of cash. The Company determined the fair value provided to the investor at the date of the agreement using the Black-Scholes model. The investor immediately exercised the cashless feature of the warrants on June 17, 2026.*

On* December 11, 2025,the Company entered into a warrant inducement agreement with the holder of existing warrants to purchase an aggregate of 2,194,526 shares at a reduced exercise price of $2.90. Pursuant to the inducement, the existing holder of the existing warrants received 3,840,421 inducement warrants, and the Company received $6,364,000 from the exercise of the existing warrants. As a result of the inducement and subsequent exercise, the Company determined the incremental fair value provided to the holder from both the adjustment in exercise price of the existing warrants and the fair value of the inducement warrants issued using the Black Scholes model. The total incremental value of $4,485,000 is recorded as a non-cash deemed dividend as a reduction of additional paid-in capital based on the Company’s history of net operating losses. The proceeds of the warrant inducement and issuance of 916,000 shares of common stock are recorded as additional paid-in capital. During December 2025,the Company partially satisfied its obligation to issue 636,526 shares of common stock. During January 2026,*the Company satisfied its remaining obligation to issue 642,000 shares of common stock. Shares subsequently issued after the inducement agreement are recorded as additional paid-in capital.

On* September 2, 2025,the Company entered into a consulting agreement with athird* party to perform certain services for asix-month period in exchange for both cash consideration and the issuance of warrants. The warrant agreement was issued on* March 2, 2026and is exercisable to purchase up to 100,000 shares for $4.00 per share and 100,000 shares of common stock at $5.00 per share. The warrants expiretwo* years from the date of issuance. The Company determined the fair value provided to the holder at the date of the consulting agreement using the Black-Scholes model, as the warrants were earned by the holder over the term of the consulting agreement. For the fiscal year ended* December 31, 2025*, the Company recognized $216,000 as a component of general and administrative expense. For thesix months ended* June 30, 2026*, the Company recognized $108,000 as a component of general and administrative expense.

The Company commenced its Regulation A offering pursuant to which it offered up to 3,100,000 units at a price of $3.25 per unit. Each unit consisted ofone share of 8% Series C Convertible Preferred Stock, par value $0.001 per share (the “Series C Preferred Stock”), andone warrant to purchaseone share of common stock, par value $0.001 per share, at an exercise price of $4.50 per share.

On* June 13, 2025,the Company completed the initial closing of the Regulation A offering. On October 15, 2025,the Company completed the Regulation A offering, pursuant to which it sold an aggregate of 3,074,586 units for gross proceeds of approximately $9.99 million, before deducting fees and expenses. The proceeds from the Regulation A offering are recorded as additional paid-in capital. Through June 30, 2026*, the Company issued 3,074,586 warrants to investors. During thesix months ended* June 30, 2026*, the Company received $54,107 of previously escrowed proceeds related to the Regulation A offering.

On* February 27, 2025,the Company entered into a warrant inducement agreement (the “Inducement Agreement”) with the holder of existing warrants to purchase an aggregate of 1,295,000 shares for a reduced exercise price of $0.5198 per share. Pursuant to the Inducement Agreement, the exercising holder of the existing warrants received 1,425,000 inducement warrants, and the Company received $6,731,000 from the exercise of the existing warrants, before deducting placement agent fees and other offering expenses payable by the Company. As a result of the inducement and subsequent exercise, the Company determined the incremental fair value provided to the holder from the inducement warrants issued using the Black Scholes model. The total incremental fair value of $7,602,000, is recorded as a non-cash deemed dividend. The proceeds of the warrant inducement and issuance of 1,295,000 shares of common stock are recorded as additional paid-in capital. The Company registered the shares of common stock issuable upon the exercise of the inducement warrants on a registration statement on Form S-1 (FileNo.* 333-286255) declared effective by the Securities and Exchange Commission on* April 3, 2025.*

During the year ended* December 31, 2024,*in connection with the sale of 237,224 shares of common stock, the Company also sold 147,789 pre-funded warrants and issued 770,026 warrants exercisable for a total of 770,026 shares of common stock for $0.001 and $7.40, respectively, per share. The Company received net proceeds of $1,093,492 associated with the sale of the pre-funded warrants. The pre-funded warrants are immediately exercisable until all of the pre-funded warrants are exercised. During the same period,147,789 pre-funded warrants were exercised for 147,789 shares of common stock for $150.

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During the year ended* December 31, 2024,the Company closed a sale of 95,000 shares of common stock. In connection with the sale of common stock, the Company issued 190,000 warrants. The warrants have an exercise price of $4.00 and an expiration date of September 21, 2029.*

During the year ended* December 31, 2023,the Company and a stock options holder agreed to cancel all 40,000 stock options in exchange for extending the exercisable period of 30,000 warrants to December 31, 2024.Later in the year ended December 31, 2023,the expiration date for these warrants was extended to December 31, 2026,*and the stock option holder was issued an additional 40,000 restricted stock units.

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As of* June 30, 2026*, the Company has the following warrants outstanding:

The average remaining contractual life of outstanding warrants that expire is 3.63 years.

Note15 - Equity Compensation

The Company has adopted three equity incentive plans: the2015 Equity Incentive Plan, the2021 Equity Incentive Plan, and the2022 Equity Incentive Plan. The2015 Equity Incentive Plan expired in2025 upon reaching the end of itsten-year term. The2015 and2021 plans each authorized a fixed number of shares for issuance. Under the2022 Equity Incentive Plan, the number of shares of common stock reserved for issuance shallnot exceed 18% of the issued and outstanding shares of common stock of the Company. Awards under each plan have a maximum term of 10 years and vest at the discretion of the Board of Directors.

All equity-settled, share-based payments are ultimately recognized as an expense in the statement of operations with a corresponding credit to “Additional Paid-in Capital.” If vesting periods or other non-market vesting conditions apply, the expense is allocated over the vesting period, based on the best available estimate of the number of share options expected to vest. Estimates are subsequently revised if there is any indication that the number of share options expected to vest differs from previous estimates. Any cumulative adjustment prior to vesting is recognized in the current period.No adjustment is made to any expense recognized in prior periods if share options ultimately exercised are different than that estimated on vesting.

Performance Share Units

On* May 1, 2023,the Company and Steven Rossi reached an agreement to modify 160,000 restricted stock units and 40,000 performance stock units (“PSUs”) issued on November 11, 2022,and December 29, 2021,*respectively, and replace them with 200,000 stock options, as described below.

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On* November 11, 2022,40,000 and 30,000 PSUs granted on December 29, 2021,as described below, were modified to include new terms pertaining to the PSU vesting schedule. The PSUs vest in 5% increments according to the modified schedule that correlates with the Company’s stock price. Thefirst* 5% of the PSUs vest upon the Company’s stock price closing at $22.50,50% will have vested at a closing price of $53.10, and 100% will have vested at a closing price of $137.60 as measured using the volume weighted average of the Company’s common stock forten (10) consecutive trading days, with over $100,000 of trading volume on each of those days. The fair value of the PSUs was estimated to be $1,254,460. As of* June 30, 2026*,7,500 PSUs of the remaining 30,000 PSUs had vested, and the Company recognized $26,881 and $53,762 for thethree andsix months ended* June 30, 2026* ($26,881 and $53,762 for thethree andsix months ended* June 30, 2025*) in general and administrative expense.

On* December 29, 2021,the Company granted 40,000 and 30,000 PSUs to the Company’s Chief Executive Officer and a director, respectively. The PSUs were to vest in 5% increments according to a schedule that correlates with the Company’s stock price. Thefirst* 5% of the PSUs was to have vested upon the Company’s stock price closing at$30.00; 50% was to have vested at a closing price of $165.00, and 100% was to have vested at a closing price of $315.00. The fair value of the PSUs was estimated to be $1,344,570.

Stock Options

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

During thesix months ended* June 30, 2026*, the Company issued the following stock options to various directors:

During thesix months ended* June 30, 2026*, the Company issued the following stock options to various employees and consultants:

During thesix months ended* June 30, 2026*, the Company issued the following stock options to Steven Rossi:

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As of* June 30, 2026* and* December 31, 2025*, Terravis Energy Inc., a wholly owned subsidiary of the Company, has the following options outstanding:

Note16 - Segment Reporting

The Company manages its business on a product basis and operates in the followingtwo reporting segments for financial reporting purposes: (1) Hard Tonneau Covers and (2) Soft Tonneau Covers. The accounting policies of both reporting segments are the same as those described in Note1, Description of Business and Summary of Significant Accounting Policies.

The Company’s chief operating decision maker (“CODM”) is the Chief Executive Officer, who regularly reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance of the Company’s reporting segments. The CODM primarily focuses on net income (loss) from continuing operations to evaluate its reporting segments. The CODM also uses net income (loss) from continuing operations for evaluating pricing strategy and assessing the performance for determining the compensation of certain employees. Significant segment expenses reviewed, which represent the differences between segment net sales and segment net loss from continuing operations, consist of the following:

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

No asset information has been provided for the reported segments as the CODM doesnot regularly review asset information by reportable segment. As of* June 30, 2026* and* December 31, 2025*, assets held in the U.S. accounted for 93% and 93% of total assets for each period, respectively.

Note17 - Commitments and Contingencies

From time to time, the Company is involved in lawsuits, claims, investigations and proceedings arising in the ordinary course of business, including opposition proceedings involving patents. As of* June 30, 2026,the Company wasnot* a party to any legal proceeding that management believed would have a material adverse effect on the Company’s business, financial condition or results of operations.

Note 18 - Subsequent Events

The Company has evaluated subsequent events through* August 11, 2026*. The following events occurred after thesix months ended* June 30, 2026*:

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