Worksport Ltd

Overview

Worksport Ltd., through its subsidiaries, designs, develops, and manufactures innovative products for various markets including automotive accessories, consumer electronics, and both residential and commercial HVAC system markets. Worksport is able to monetize and protect its products through a large and growing intellectual property (“IP”) portfolio with patents and trademarks relating to, among other things, tonneau covers, solar integrated tonneau covers, portable power stations, NP (non-parasitic) hydrogen-based green energy systems, residential heating and cooling systems (heat pumps), and electric vehicle-charging stations. Worksport seeks to provide consumers with next-generation automotive accessories through the production of our innovative line of tonneau covers for light trucks while capitalizing on growing consumer interest in clean energy solutions and power grid independence through the launch of its forthcoming solar tonneau cover (Worksport SOLIS) and mobile battery generator system (Worksport COR). Worksport’s subsidiary, Terravis Energy, is poised to revolutionize the local and global markets for efficient home and commercial heat pumps through its groundbreaking Aetherlux Heat Pump.

Corporate History

The Company’s corporate history and business overview are described in detail in our most recent registration statement on Form S-1, filed with the SEC on July 3, 2024, which is incorporated herein by reference. Since that filing, the Company has undertaken certain material developments, as described below.

Recent Offerings

February 2025 Inducement Letter; New Warrants

On February 27, 2025, we entered into a common stock warrant exercise inducement offer letter (the “2025 Inducement Letter”) with a certain holder (the “Holder”) of existing warrants to purchase shares of our common stock at an exercise price of $5.198 per share, issued on May 29, 2024 (the “May 2024 Existing Warrants”), pursuant to which the Holder agreed to exercise for cash its May 2024 Existing Warrants to purchase an aggregate of 1,295,000 shares of our common stock at $5.198 per share, in consideration for our agreement to issue new warrants (the “2025 Inducement Warrants”), to purchase an aggregate of 1,424,500 shares of our common stock at an exercise price of $6.502 per share, subject to adjustment for stock splits, recapitalizations and reorganizations and beneficial ownership limitations as described therein. Each 2025 Inducement Warrant is exercisable six months after issuance, or August 27, 2025, until five and a half-year anniversary from the date of issuance. We received proceeds of $6,731,410 before deducting placement agent fees and other offering expenses payable by the Company upon the exercise of the May 2024 Existing Warrants. If all of the 2025 Inducement Warrants are exercised for cash, we will receive gross proceeds of approximately $9.3 million. We will file a registration statement on Form S-1 registering the shares of common stock issuable upon the exercise of the May 2024 Existing Warrants. The New Warrants can be exercised on a cashless basis if there is not an effective registration statement effective or prospectus available for the shares of common stock underlying the such warrants. 539,500 hares that are issuable from the exercise of the May 2024 Existing Warrants are held in abeyance as of March 27, 2025.

ATM Offering

On November 5, 2024, we increased our at-the-market offering program, filing a prospectus supplement to register the sale of an additional $4,134,000 in shares of our common stock under the sales agreement with H.C. Wainwright & Co.

Offering to Chief Executive Officer

On November 19, 2024, our Chief Executive Officer and President, Steven Rossi, entered into a Stock Purchase Agreement, pursuant to which he acquired 3,334 shares of common stock at a purchase price of $7.50 per share, representing a 44% premium above the then-market price. The transaction was executed as a private placement, and the shares were issued pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D. The proceeds from the sale, totaling approximately $25,000, were designated for working capital and general corporate purposes.

2024 Private Offering

On September 19, 2024, we entered into a Securities Purchase Agreement with an investor pursuant to which we issued and sold 95,000 shares of our common stock at a purchase price of $4.00 per share. As part of the agreement, we also issued warrants to purchase up to 190,000 shares of common stock at an exercise price of $4.00 per share, exercisable for a period of five years from the date of issuance. The warrants contain standard adjustment provisions for stock splits, recapitalizations and reorganizations and include beneficial ownership limitations to prevent the purchaser from exceeding certain ownership thresholds. The offering was conducted pursuant to an exemption from registration under Section 4(a)(2) of the Securities Act or Rule 506 of Regulation D pursuant to the purchaser’s representation as an accredited investor.

2024 Note

On September 4, 2024, we entered into a Credit and Security Agreement with a lender, pursuant to which we issued a $1,487,200 term promissory note (the “2024 Note”). The 2024 Note bears interest at the lesser of (i) the prime rate plus 7.00% per annum and (ii) the maximum rate allowed by law and is secured by a mortgage on the Company’s industrial equipment collateral. The repayment of the 2024 Note is structured in 155 weekly installments. In the event of default, the lender has the right to demand immediate repayment of the outstanding balance, including accrued interest, fees and all other amounts due under the agreement.

May 2024 Inducement Letter; New Warrants

On May 29, 2024, we entered into an Inducement Letter with a certain investor who had purchased warrants on November 2, 2023 (the “Existing Warrants”), exercisable for 700,000 shares of our common stock for $13.40 per share. As part of the agreement, the investor exercised their Existing Warrants to buy 700,000 shares of our common stock at a reduced price of $5.198 per share. In consideration for the investor exercising the Existing Warrants, we issued the investor warrants (the “New Warrants”) to purchase 1,295,000 shares of our common stock for $5.198 per share, subject to adjustment for stock splits, recapitalizations, and reorganizations and beneficial ownership limitations as described therein(or via a cashless exercise in the event there is not a registration statement effective at the time of exercise). Each New Warrant is exercisable six months after issuance, or November 29, 2024, until five and a half-year anniversary from the date of issuance. We received net proceeds of $3,363,898, after deducting commissions and expenses, upon the exercise of the Existing Warrants. If all of the New Warrants are exercised for cash, we will receive gross proceeds of approximately $6.7 million. We filed a registration statement on Form S-1 (File No. 333-280676) registering the shares of common stock issuable upon the exercise of the New Warrants. The SEC declared the registration statement effective on July 12, 2024. The New Warrants can be exercised on a cashless basis if there is not an effective registration statement effective or prospectus available for the shares of common stock underlying the such warrants.

March 2024 Direct Offering and Concurrent Private Offering

On March 18, 2024, we entered into a securities purchase agreement (the “2024 Securities Purchase Agreement”) with a certain institutional investor (the “2024 Purchaser”) pursuant to which we sold, in a registered direct offering, an aggregate of (i) 237,224 shares (the “2024 Shares”) of common stock and (ii) 147,790 Pre-Funded Warrants (the “2024 Pre-Funded Warrants”) to purchase up to 147,790 shares of common stock (the “2024 Pre-Funded Warrant Shares”). The offering price per 2024 Share was $7.40, and the offering price per 2024 Pre-Funded Warrant was $7.399.

The 2024 Shares, the 2024 Pre-Funded Warrants and the 2024 Pre-Funded Warrants Shares were offered pursuant to our Form S-3 Registration Statement (File No. 333-267696) (the “Form S-3”) as supplemented by a prospectus supplement and accompanying base prospectus dated March 18, 2024, filed with the SEC on March 19, 2024 pursuant to Rule 424(b)(5) promulgated under the Securities Act. The registered direct offering closed on March 20, 2024.

We received net proceeds of approximately $2.59 million from the offering, after deducting the estimated offering expenses payable by us, including the tail fees payable to Maxim Group LLC. We intend to use the net proceeds from the offering for general corporate purposes, including working capital.

In a concurrent private placement, we issued the 2024 Purchaser warrants to purchase an aggregate of 770,027 shares of common stock for $7.40 per share. Under the warrants, we are obligated to register the shares underlying the warrants on a registration statement on Form S-3 (or other applicable form). If at the time, there is no effective registration statement available for the shares of common stock underlying the warrants, the warrants may be exercised via a “cashless exercise.” We will not receive any proceeds from any warrants exercised by a “cashless exercise.”

March 2024 S-3 Shelf Bringdown

On March 20, 2024, we received net proceeds of approximately $2.63 million through a registered direct offering pursuant to which the Company issued 237,224 shares of common stock and 147,790 Pre-Funded Warrants to the same institutional investor as in the Company’s registered direct offering on November 2, 2023. Concurrently with the registered direct offering, we issued the institutional investor 770,027 warrants in a private sale. The warrants are exercisable for 770,027 shares of common stock for $7.40 per share six months after issuance until five and a half years from the issuance date, subject to beneficial ownership limitations as described in the warrants. We. registered the 770,027 shares of common stock underlying the warrants on a Form S-1 (333-278461) which was declared effective by the SEC on April 8, 2024.

November 2023 S-3 Shelf Bringdown

On November 2, 2023, we received net proceeds of approximately $4.26 million through a registered direct offering pursuant to which we issued 192,500 shares of common stock and 157,500 Pre-Funded Warrants to an institutional investor. Concurrently with the registered direct offering, we issued the same institutional investor 700,000 warrants in a private sale. The warrants are exercisable for 700,000 shares of common stock for $13.40 per share six months after issuance and until five and a half years from the issuance date, subject to beneficial ownership limitations as described in the warrants. The Company registered the 700,000 shares of common stock underlying the warrants on a Form S-1 (333-276241) which was declared effective by the SEC on December 29, 2023.

Revolving Financing and Assignment Agreement

On July 19, 2024, the Company, through its wholly-owned subsidiaries, Worksport New York Operations Corporation and Worksport USA Operations Corporation entered into a Revolving Financing and Assignment Agreement with Amerisource Funding, Inc. for a revolving credit facility of $6 million. The facility was used to refinance the Company’s mortgage on the Company’s West Seneca, New York property, with $937,000 remaining for future financing at the Company’s discretion. The agreement also includes a guaranty from the company and its subsidiary, as well as a security interest in assets and a springing equipment lien. The transaction closed on the same day and contains standard provisions for such deals.

Business Developments

The following highlights recent material developments in our business:

Segments and Products

We conduct our business in two reportable business segments, which are the same as our operating segments: Hard Tonneau Covers and Soft Tonneau Covers. Additional information describing the comparative segment revenues, operating profits and related financial information for 2024 and 2023 are provided in Note 18 – Segment Reporting, of Part III Item 8, Financial Statements and Supplementary Data, of this report.

Hard Tonneau Covers

Our hard line of tonneau covers includes tri- and quad-fold, aluminum covers. Our entire line of hard folding tonneau covers is manufactured in the U.S. and include our Quick Latch technology to allow single-sided operation. Our hard covers’ panels are made with ultra-thick, formed aluminum that provides superior dent resistance compared to those of other hard covers, and we protect those panels with a proprietary ceramic paint technology that’s scratch- and dent-resistant. Designed to auto index (center) in the truck bed and be only 7.5mm above the truck bed, the cover provides a low profile, sleek look and yet is easy to install.

Our hard tonneau cover line includes:

We began to produce our AL3 hard tonneau cover in August of 2023. We successfully launched the product and quickly began to ramp up production to meet demand. We have continuously made enhancements to our assembly line and machining configurations/investments to maximize production efficiency and lower costs of manufacturing each unit; we are currently capable of producing 90+units within a single 8-hour shift.

Our AL3, HD3, and AL4 hard tonneau covers will be available across both business-to-consumer and business-to-business sales channels. However, HD3 will be unique in that it will be exclusively priced for business-to-business customers, meaning its pricing in business-to-consumer sales channels will not be discounted in a way that undermines our business customers’ ability to effectively market and sell HD3s that they purchase from us. The HD3 builds on our AL3 design but uses enhanced materials and includes an extra latch to enhance robustness and user experience.

Soft Tonneau Covers

Our soft tonneau cover offering consists of vinyl wrapped tri- and quad-fold tonneau covers manufactured overseas in Meizhou, China and Foshan, China. These soft covers include our patented Quick Latch system, which allows the operator to open the cover by simply pulling a release cable – enabling single-sided operation. Each soft cover is fitted with a powder-coated, lightweight aluminum frame and rear cam latches as well as ultra-violet (UV) protected, vinyl tri-layer material that seals around the truck bed with a rubber gasket designed to protect cargo from moisture and debris.

Tri-fold soft covers are a lower cost option when compared to quad-fold tonneau covers which have the additional benefit of enabling full truck bed access by being foldable upwards toward the rear window of the truck. Worksport’s full bed access quad-fold soft cover is the market’s only soft vinyl flip up cover that can be either folded against the truck’s rear window while avoiding obstruction of the rear brake light on most truck models or secured like a traditional cover to avoid obstruction of the rear window.

Our soft tonneau cover line includes:

Up and Coming Products: Energy Products

We are researching and developing various energy-based products, two of which are standalone items nearing production readiness - the Worksport SOLIS tonneau cover (“SOLIS”) and the Worksport COR energy storage system (“COR”). The COR has a Maximum Power Point Tracking (MPPT) system integrated into its design that allows for more flexible configurations of solar panels and our COR system, meaning the COR will be usable with our SOLIS or with other solar panels on the market with varying voltage inputs. If a consumer purchases our SOLIS without our COR, we will be able to offer similar flexibility by selling standalone MPPT units – allowing consumers to pair our SOLIS with various energy storage systems. The SOLIS and COR, which are both designed to mount tightly to the bed of a pickup truck, are unique in that, when paired, they have the capability of converting a pickup truck to a mobile microgrid power station – allowing Worksport to compete within niche markets in each the automotive aftermarket accessory, solar energy, and portable power station markets.

We are additionally researching and developing heat pumps that operate more efficiently in cold climates than other commercially available heat pumps. We have already developed and sold a first iteration of our cold climate heat pump – the Aetherlux Heat Pump – which has showcased exceptional efficiency test results, and we are developing an enhanced version that has demonstrated in a lab environment remarkable efficiency in heating and cooling across both extreme hot and cold climates.

Worksport SOLIS

The SOLIS, a tonneau cover with integrated solar panels, is a unique, folding tonneau cover design influenced by that of our top mounted hard tonneau cover but capable of handling additional solar panel weight without sacrificing user experience. It additionally includes cutting edge, monocrystalline, semi-flexible solar panels and a wiring management system designed to prevent wear and tear to its wires. Its solar panels are secured to aluminum alloy panels both mechanically and using specialized adhesives, which ensure the covers are extremely strong, durable, and secure. The SOLIS cover is intended to be sold as an Original Equipment Manufacturer product, as it can be integrated into the design of leading electric pickup trucks; consequently, we have and will continue to forge and develop relationships with such Original Equipment Manufacturers, including but not limited to Workhorse, Rivian, and Tesla as well as Toyota, Stellantis, General Motors, Ford, Nissan, Fisker, and Honda, as they develop and continue to release updated versions of their electric pickup truck lineups. The SOLIS will additionally be purchasable with or without a rail system add-on, which provides enhanced utility and enhanced weather resistance and sealing.

The solar panels that we plan to integrate into the SOLIS cover are capable of generating 170-180 watts per square meter. For example, as tested outdoors, the SOLIS cover is capable of generating approximately 460 watts of power on a RAM 6’5” truck bed. When integrated into the design of an electric pickup truck, this power generation can be converted to additional vehicle mileage. The specific added mileage is dependent on many factors including but not limited to the region of the world in which the vehicle is driven, weather conditions, season, temperature, hours of sunlight per day, and average irradiance. For example, assuming a solar power density of 170 W/m 2, battery capacity of 98 kWh, mileage range of 300 miles, average hours of sun per day of 6 hours, average irradiance per day of 700 W/m 2, and surface area of 2.7 m 2, the SOLIS cover is estimated to provide 5.6 additional miles of range to an electric pickup truck per day.

Worksport COR

The COR or COR ESS (energy storage system) is a modular, portable power station uniquely designed to mount to the inside of a pickup truck bed and enable battery swapping without an immediate drop in power output. The COR built-in inverter with an output voltage of 120V AC (frequency of 60Hz) is capable of powering loads up to 3000W. Combined with its modular 48V batteries, it can store up to 6kWh of energy on the go. Each additional modular battery adds 1.5kWh of energy storage. The COR main battery, a Lithium battery, boasts a capacity of 1534Wh while its Hot Swap Nickel Manganese Cobalt (NMC) battery has a capacity of around 200Wh. The system allows Bluetooth connection for monitoring and controlling the COR system and its external batteries.

Not only does the COR system allow users to swap a depleted battery for a fully charged one, but it does so without a drop in power output for up to 15 seconds with a load of 3000W. This unique feature allows the COR system to be used in a variety of applications, including but not limited to sporting and outdoor activities, disaster relief and general emergencies, and vocational activities ranging from contractor to drone operator. While the COR system is designed to nicely complement the SOLIS tonneau cover, it will be purchasable as a standalone product – allowing consumers to utilize stored energy, whether captured via grid or grid-independent energy sources, anywhere. As Worksport’s first step into the energy storage market, the COR system is Worksport’s pioneer product within its future COR platform.

AetherLux Heat Pump

The AetherLux Heat Pump is engineered for extreme cold climates, outperforming conventional systems with its ZeroFrost technology. Unlike traditional heat pumps that struggle in subzero temperatures, AetherLux maintains high efficiency even at -56.9°F (-49.4°C), delivering consistent indoor heating up to 85.9°F ((30C) without requiring defrost cycles. This breakthrough eliminates energy-wasting recovery periods, ensuring continuous performance while reducing overall energy consumption. By optimizing heat transfer and utilizing AI-driven system adjustments, the heat pump adapts dynamically to environmental conditions, maximizing output while minimizing power usage.

The system’s estimated exceptional efficiency is reflected in its Coefficient of Performance of 3.0-3.5 at -57°F and a Heating Seasonal Performance Factor rating between 11.0 and 12.5, making it a leader in extreme climate heating solutions. Unlike fossil-fuel-based heating systems, which generate heat by burning fuel, AetherLux’s technology extracts and amplifies ambient thermal energy, making it significantly more efficient and environmentally friendly. With up to 61.4% cost savings on heating bills and a reduction of 11-12 metric tons of CO₂ emissions per household annually, this innovation directly supports the transition to sustainable, high-performance heating for the coldest regions on Earth.

Manufacturing

In 2022, we purchased a 152,847 square foot production facility for domestic production, storage, and distribution, located in West Seneca, New York. Management believes that having manufacturing capability in North America increases quality control and production efficiency, as well as lowers landed costs and geopolitical risks. At this time, we are consistently manufacturing two product lines – the AL3 and AL4 – in this facility as well as fulfilling orders from this facility. We are currently using a fraction of the facility’s available space for manufacturing, and we are investing in additional personnel and assembly lines in line with forecasted demand for our domestically manufactured goods. At the same time, our manufacturing engineering team continuously develops rigs and fixtures to increase the efficiency of our manufacturing process in order to scale manufacturing lines rather than investing in additional lines and personnel when possible, and we will continue to allocate resources towards improving manufacturing efficiency and product quality on an on-going basis.

We have purchased many production tools including injection molds, die cast molds, extrusion dies, and stamping dies – many of which are residing among foreign suppliers who are currently utilizing said tooling to produce needed components for manufacturing or assembly within the U.S.. We are concurrently diversifying this list of raw material suppliers who can use our production tools to continue producing our tonneau cover components in order to lower the risk that trade with any particular or preferred raw material supplier become more expensive or difficult . During 2024, we onboarded several additional long-term suppliers for long lead-time components, began sourcing more materials domestically to mitigate costs and supply chain risks, lowered lead times for critical components by approximately two weeks, and successfully reduced costs in targeted raw material categories.

As of December 31, 2024, all Worksport soft tonneau covers were manufactured in one of two facilities located in Meizhou, China and Foshan, China according to Worksport’s specifications, schematics and blueprints. The facility in Meizhou has been a long-term supplier of soft tonneau covers for Worksport, and the facility in Foshan was commissioned to produce Worksport soft tonneau covers in late 2023. This second outsourced manufacturing facility has an output capacity two times greater than that of the manufacturing facility in Meizhou, China, and we believe we can scale production at this newer facility without sacrificing quality or craftsmanship.

Intellectual Property

We currently hold a broad collection of intellectual property rights relating to certain aspects of our parts and accessories and services. This includes patents, trademarks, copyrights and trade secrets. Although we believe the ownership of such intellectual property rights is an important factor in our business and that our success does depend in part on such ownership, we rely primarily on the innovative skills, technical competence and marketing abilities of our personnel.

Patents

As of December 31, 2024, our patent portfolio includes eleven (11) issued utility patents in the U.S., seven (7) issued utility patents outside of the U.S., and thirty-seven (37) pending utility patent applications in various jurisdictions worldwide. Our portfolio further includes five (5) issued design patents in the U.S., eighteen (18) design patents and registrations outside the U.S., and forty-two (42) pending design applications in various jurisdictions worldwide. We are also in the process of preparing and filing several other utility and design patent applications across relevant countries and jurisdictions.

Trademarks

As of December 31, 2024, the Company has 37 trademark registrations and 13 pending trademark applications in various jurisdictions worldwide.

The Market

We primarily compete in the automotive aftermarket accessories and new energy industries with a focus on the tonneau cover and the portable power station markets.

Tonneau Cover Market

There are various forms of tonneau covers, each with their advantages and disadvantages, available for consumption through direct-to-consumer and retailer and dealer sales channels. These mainly include but are not limited to : solid one-piece caps and lids; retractable covers; soft folding & roll-up covers; and hard folding & standing covers. Solid one-piece covers and retractable covers tend to have limited functionality and tend to be priced higher when compared to other types of tonneau covers. Soft and hard folding/rolling tonneau covers, in contrast, tend to be priced more competitively and, as such, are a popular choice among tonneau cover consumers. Given these factors and our belief that we can develop less cumbersome, high functioning, and low cost soft and hard folding covers, we focus primarily on developing soft and hard folding covers.

While the product lifetime of a tonneau cover is shorter than that of a pickup truck, higher pickup truck sales provide greater market opportunity for the tonneau cover industry. As of Q3 2024, there were roughly 61 million pickup trucks in operation within the U.S.1 We offer tonneau covers for each of the 5 most popular pickup truck makes/models sold in 2024,2 as well as the top 10 most accessorized pickup truck makes/models projected in 2022-2029.3 Within the United States, the pickup truck market is expected to grow at a compound annual growth rate of 4.6% between 2023 and 2028.4

Electric pickup trucks are projected to gain a larger portion of the U.S. pickup truck market share each year through 2035;1 in fact, the electric pickup truck market is expected to grow at a compound annual growth rate of 31.15% between 2024 and 2029 within North America.5 However, a large headwind acting against this trend is that pickup trucks tend to be more popular in areas with less-developed charging infrastructure 3 – a headwind that the SOLIS cover directly addresses and positions us favorably for possible partnerships and deals with electric pickup truck manufacturers.

The Specialty Equipment Aftermarket provides more specific insight into how often and for what reasons vehicle owners or renters are purchasing accessories for their vehicles. Pickup trucks are the largest market by sales within the U.S. for specialty equipment – constituting 32% of the specialty equipment market 6. Within this pickup truck accessory market, 34% of accessories are truck bed & utility modifications,3 which is the submarket in which we operate. Truck bed covers were among the top product categories for aftermarket accessory purchases in 2021,3 and the size of the tonneau cover market within the U.S., which was estimated to be $2.56 billion in 2024, is expected to grow at a compound annual growth rate of 7.1% from between 2025 and 2030.7

Worksport looks to maximize market share by manufacturing industry-leading products at competitive margins as well as by exploring horizontal and vertical integration opportunities.

Portable Power Station Market

Compared to the Tonneau Cover Market, the Portable Power Station Market is much younger and globalized. Gas and diesel generators have long been used by consumers to generate electricity when they could not rely on the grid, whether it be due to grid damage or the lack of grid in remote areas. Unlike such generators, portable power stations do not generate electricity themselves, but they too can be used to provide electricity during times of grid unreliability. These portable power stations are often charged by the grid via home outlets or independent of the grid via external power sources – often solar panels.

The global Portable Power Station Market is large and growing with a compound annual growth rate of 5.39% between 2024 and 2032.1 The segments within the North American market that have the largest market share are power stations utilizing lithium-ion batteries and those used for off-grid power applications,1 which match the COR system’s battery type as well as intended usage. When paired with the SOLIS cover, the COR energy storage system will be a market outlier in that it can be charged safely while mobile whereas competing portable power stations are intended to be stationary during charging.

Distribution

We distribute our tonneau covers in Canada and the U.S. through an expanding network of wholesalers, private labels , distributors, and online retail channels, including eBay, Amazon, Walmart , Meta, and our own e-commerce platform hosted on Shopify. Distribution via each aforementioned channel is expected to increase during 2025. We have pursued and will continue to pursue relationships with Original Equipment Manufacturers with the intention of distributing through them as well.

The specialty equipment aftermarket consists of three major types of customers, which include master warehouse distributors and big box stores, dealers and wholesalers, and retail end consumers. Master warehouse distributors and big box stores stock and distribute products to their customers, which are usually local dealers and wholesalers. Dealers and wholesalers are local stores which sell products to some businesses and retail consumers in their area and online. Dealers purchase most of their products from their local distributor who delivers to them regularly. Retail end consumers are the end users of the products.

Competition

Tonneau Cover Competitors

The Tonneau Cover market is relatively consolidated with one industry leader, Real Truck (formerly Truck Hero), having the largest market share. Real Truck has acquired upwards of 16 independent tonneau cover brands in North America, allowing it to concurrently target many different niche markets but also potentially causing it to cannibalize its own sales. We compete directly with Real Truck. Other competitors in this space include Truck Accessories Group (Primarily Leer), Agricover (primarily Access), Truck Covers USA, and Paragon.

We believe that being independent, innovative, operationally lean, and competitively priced will enable us to acquire a larger portion of the existing market share. To execute on this, we have a small and effective sales team to forge strong business-to-business relationships as well as a small and effective customer support team to service both business-to-business and direct-to-consumer sales. Selling above MAP (Minimum Advertised Price) and enforcing this policy will allow business customers to sell without competing with us and, in return, support the growth of the distribution base. We also plan to work alongside distributors as our relationships develop – utilizing aggressive phone, mail and email campaigns in our distributors’ coverage areas to help grow our shared consumer bases and show commitment to our B2B customers. Our innovative covers are designed to serve purposes that no other tonneau cover is currently capable of, some of which are specifically geared towards improving margins for distributors. Further, the SOLIS cover’s inclusion of solar panels may be particularly attractive to electric pickup truck original equipment manufacturers, paving the path towards an original equipment manufacturer relationship that may be lucrative beyond standard tonneau cover partnerships.

Portable Power Station Competitors

The Portable Power Station market is global and highly fragmented and includes many competitors from across the world including but not limited to Alpha ESS Co., Ltd., Anker Technology, Bluetti, Chilwee Group Co., Ltd, Duracell, GES Group Limited Company, Jackery Inc., Lion Energy, Milwaukee Tool, and Mitsubishi Corporation. Some of these competitors offer a line of Portable Power Stations, each with different power capacities, sizes, and price points, while others specialize in a few or even one Portable Power Station to target a specific or niche submarket.

We intend to be competitive in this space by focusing on one Portable Power Station specifically designed to mount to the inside of a truck bed – allowing charging while mobile – while selling additional modular batteries to allow consumers not only to determine for themselves their ideal stored energy capacity and price point but also to upgrade their COR system over time based on their evolving needs.

Supply of Components

Production of our soft and hard cover product lines requires components including but not limited to injection molded plastics, rubber hinges, rubber seals, foam corners, aluminum coils, aluminum extrusions, and metal brackets. For raw materials that are manufactured by third parties per our specifications and designs, we believe we have the proper network, team, and purchasing/stocking strategy to readily source such materials from alternative suppliers for domestic tonneau cover production without major delays in production.

For our domestically assembled products, we have developed an extensive network of suppliers based in a diverse range of countries, including but not limited to the U.S., China, Romania, Türkiye, and Canada, and we are continuously working to further diversity our supply chain and network of suppliers to mitigate supply chain risks . For our COR and SOLIS components, we are establishing relationships with suppliers based in countries, including but not limited to the U.S., Canada, China, Germany, Romania, Türkiye, Philippines, and India . We actively seek to lower reliance on any country deemed a potential geo-political supply chain risk.

Research and Development

We invest in research and development activities on an ongoing basis; we are actively acquiring new engineering and design assets. Our design engineers are based in the United States, and they have developed and are further developing unique tonneau cover designs with enhanced user experience, cost-effective and sustainable materials, and automatable manufacturing potential. Additionally, we work with research and development consultants from other countries including Canada. We allocate resources to support the continued development of portable energy storage and home heating solutions that are competitive in the market and efficiently produced to maximize profitability.

Governmental Programs, Incentives and Regulations

Globally, both the operation of our business and the ownership of our products by our customers are impacted by various government programs, incentives, and other arrangements. Our business and products are also subject to numerous governmental regulations that vary among jurisdictions.

Programs and Incentives

We have applied for and been granted tax, mortgage, wage, and energy cost relief in New York in addition to wage cost and R&D cost relief in Ontario. These programs are provided by several agencies including the Erie County Industrial Development Agency, Empire State Development, NY Power Authority, and The Canada Revenue Agency. Each of these incentive programs includes its own set of guidelines and requirements, including but not limited to timely eligibility reporting, environmental regulation compliance, and headcount projection realization – each of which we have agreed to and must abide by in order to continue realizing said incentives. We additionally receive incentives related to the hiring and employment of interns in Ontario.

We continue to seek additional incentives and grants in order to lower our operational costs as well as commit less capital to new product initiatives.

Regulations

Our COR portable power station is subject to various domestic and international regulations that govern transport of “dangerous goods,” defined to include lithium-ion batteries, which may present a risk in transportation. We plan to conduct testing to demonstrate our compliance with such regulations.

We use lithium-ion cells in our energy storage products. The use, storage, and disposal of our battery packs are regulated under existing laws and are the subject of ongoing regulatory changes that may add additional requirements in the future.

Environmental Matters

We are committed to high environmental standards and carry out our activities and operations in compliance with all relevant and applicable environmental regulations and best industry practices. Costs of environmental regulatory compliance are not expected to be significant.

Human Capital Resources

We employ fourteen full-time employees and one part-time employees in Canada and further employ sixty-six full-time employees in the U.S. We intend to hire additional employees as operations grow – particularly within our West Seneca, NY manufacturing facility. We additionally work with temporary laborers in our factory – often with the goal of converting them to full time employees – and we sparingly and selectively contract independent contractors and consultants when needed.

Compensation and Benefits

We believe that compensation should be competitive and equitable and should enable employees to share in our success. We recognize our employees are most likely to thrive when they have resources and support to meet their needs and succeed in their professional and personal lives. In support of this, we offer a variety of benefits for employees, such as group insurance, HRAs, supplemental insurance, paid time off, and 401k benefits, and we invest in tools and resources that are designed to support employees’ growth and development.

Inclusion and Diversity

We remain committed to our vision to build and sustain a more inclusive workforce that is representative of the communities we serve. We continue to work to increase diverse representation, foster an inclusive culture, and support equitable pay and access to opportunity for all employees.

Engagement

We believe that open and honest communication among team members, managers, and leaders helps create an open, collaborative work environment, where everyone can contribute, grow and succeed. Team members are encouraged to come to their managers with questions, feedback or concerns.

Health and Safety

We are committed to protecting our team members everywhere we operate and, as such, supporting employees with general safety training. We have also taken additional health and safety measures during and after the COVID-19 pandemic.

Available Information

Our internet address is www.worksport.com. The information contained on or connected to our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this or any report filed with the SEC. We make our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and, if applicable, amendments to those reports, available on the investor relations portion of our website. The reports are free of charge and are available as soon as reasonably possible after they are filed with the SEC. The SEC maintains a website at www.sec.gov that contains reports, proxy statements and other information regarding SEC registrants, including Worksport.