UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarterly Period Ended: March 31, 2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 001-40681

Worksport Ltd.

(Exact Name of Small Business Issuer as specified in its charter)

Nevada		35-2696895
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

2500 N America Dr, West Seneca, NY		14224
(Address of principal executive offices)		(Zip Code)

Registrant’s Telephone Number, including area code: (888) 554-8789

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:		Trading Symbol(s)		Name of each exchange on which registered:
Common Stock		WKSP		The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit post such files). Yes ☒ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of May 15, 2025, the Registrant had 5,200,130 shares of common stock, par value $0.001 per share, issued and outstanding.

Worksport Ltd.

TABLE OF CONTENTS

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets as at March 31, 2025 (Unaudited) and December 31, 2024	3
Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2025 and 2024 (Unaudited)	4
Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2025 and 2024 (Unaudited)	5
Condensed Consolidated Statements of Cash Flow for the three months ended March 31, 2025 and 2024 (Unaudited)	6
Notes to the Condensed Consolidated Financial Statements (Unaudited)	7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	17

Item 3. Quantitative and Qualitative Disclosures About Market Risk	23

Item 4. Controls and Procedures	23

PART II OTHER INFORMATION

Item 1. Legal Proceedings	24

Item 1A. Risk Factors	24

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	24

Item 3. Defaults Upon Senior Securities	24

Item 4. Mine Safety Disclosures	24

Item 5. Other Information	24

Item 6. Exhibits	25

SIGNATURES	26

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Worksport Ltd.

Condensed Consolidated Balance Sheets

(Unaudited)

	March 31, 2025			December 31, 2024
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	5,080,372		$	4,883,099
Accounts receivable, net		67,951			42,589
Other receivable		196,743			169,728
Inventory (Note 3)		5,725,592			5,190,054
Prepaid expenses and deposits (Note 6)		384,263			192,192
Total current assets		11,454,921			10,477,662
Investments (Note 11)		66,308			66,308
Property and equipment, net (Note 4)		13,497,178			13,644,226
Operating lease right-of-use assets (Note 12)		531,122			595,415
Intangible assets, net (Note 5)		1,113,473			953,049
Total assets	$	26,663,002		$	25,736,660
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	1,763,556		$	1,526,630
Accrued liabilities and other		852,103			800,283
Accrued compensation		431,479			377,112
Long-term debt, current portion (Note 13)		227,056			222,992
Lease liability, current portion (Note 12)		244,477			246,535
Total current liabilities		3,518,671			3,173,552
Lease liability, excluding current portion (Note 12)		310,337			368,472
Long-term debt, excluding current portion (Note 13)		2,708,497			4,781,005
Total liabilities		6,537,505			8,323,029

Shareholders’ Equity
Series A & B Preferred Stock, $0.001 par value, 10,010 shares authorized, 100 Series A and 0 Series B issued and outstanding, respectively (Note 7)		-			-
Common stock, $0.001 par value, 29,900,000 shares authorized, 4,795,521 and 4,016,205 shares issued and outstanding, respectively (Note 7)		4,795			4,016
Additional paid-in capital		84,126,734			79,781,674
Share subscriptions receivable		(1,577	)		(1,577	)
Share subscriptions payable		4,941,555			2,115,064
Accumulated deficit		(68,937,430	)		(64,476,966	)
Cumulative translation adjustment		(8,580	)		(8,580	)
Total shareholders’ equity		20,125,497			17,413,631
Total liabilities and shareholders’ equity	$	26,663,002		$	25,736,660

See accompanying Notes to Condensed Consolidated Financial Statements which form an integral part of the Condensed Consolidated Financial Statements.

Worksport Ltd.

Condensed Consolidated Statements of Operations and Comprehensive Loss

For the Three Months Ended March 31, 2025 and 2024

(Unaudited)

	2025			2024
	Three Months ended March 31,
	2025			2024

Net sales	$	2,240,005		$	512,637
Cost of sales		1,843,784			475,181
Gross profit		396,221			37,456

Operating expenses
Research and development		369,601			381,000
General and administrative		2,988,781			2,293,318
Sales and marketing		869,749			66,777
Professional fees		426,041			943,778
Gain on foreign exchange		(1,645	)		(7,951	)
Total operating expenses		4,652,527			3,676,922
Loss from operations		(4,256,306	)		(3,639,466	)

Other income (expense)
Interest expense		(195,438	)		(123,598	)
Interest income		8,134			3,054
Rental income		-			45,353
Other		(16,854	)		-
Total other income (expense)		(204,158	)		(75,191	)

Net loss	$	(4,460,464	)	$	(3,714,657	)

Loss per share (basic and diluted)	$	(1.05	)	$	(1.75	)
Weighted average number of shares (basic and diluted)		4,262,474			2,118,807

See accompanying Notes to Condensed Consolidated Financial Statements which form an integral part of the Condensed Consolidated Financial Statements.

Worksport Ltd.

Condensed Consolidated Statements of Shareholders’ Equity

For the Three Months Ended March 31, 2025 and 2024

(Unaudited)

	Shares		Amount		Shares		Amount		Capital		Receivable			Payable		Deficit			Adjustment			(Deficit)
	Preferred Stock				Common Stock				Additional Paid-in		Share Subscriptions			Share Subscription		Accumulated			Cumulative Translation			Total Stockholders’ Equity
	Shares		Amount		Shares		Amount		Capital		Receivable			Payable		Deficit			Adjustment			(Deficit)
Balance at January 1, 2024		100	$	-		2,032,050	$	2,032	$	64,685,693	$	(1,577	)	$	1,814,152	$	(48,313,177	)	$	(8,580	)	$	18,178,543
Issuance for services and subscriptions payable		-		-		21,454		21		1,138,109		-			103,433		-			-			1,241,563
Shares issued (Note 7)		-		-		287,716		288		3,194,913		-			-		-			-			3,195,201
Warrant exercise		-		-		68,800		69		-		-			-		-			-			69
Net loss		-		-		-		-		-		-			-		(3,714,657	)		-			(3,714,657	)
Balance at March 31, 2024		100	$	-		2,410,020	$	2,410	$	69,018,715	$	(1,577	)	$	1,917,585	$	(52,027,834	)	$	(8,580	)	$	18,900,719

Balance at January 1, 2025		100	$	-		4,016,205	$	4,016	$	79,781,674	$	(1,577	)	$	2,115,064	$	(64,476,966	)	$	(8,580	)	$	17,413,631
Balance		100	$	-		4,016,205	$	4,016	$	79,781,674	$	(1,577	)	$	2,115,064	$	(64,476,966	)	$	(8,580	)	$	17,413,631
Issuance for services and subscriptions payable		-		-		1,033		1		579,445		-			22,170		-			-			601,616
Shares issued (Note 7)		-		-		22,725		22		185,852		-			-		-			-			185,874
Warrant Exercise (Note 15)		-		-		755,558		756		3,579,763		-			2,804,321		-			-			6,384,840
Net loss		-		-		-		-		-		-			-		(4,460,464	)		-			(4,460,464	)
Balance at March 31, 2025		100	$	-		4,795,521	$	4,795	$	84,126,734	$	(1,577	)	$	4,941,555	$	68,937,430	)	$	(8,580	)	$	20,125,497
Balance		100	$	-		4,795,521	$	4,795		84,126,734	$	(1,577	)	$	4,941,555	$	68,937,430	)	$	(8,580	)	$	20,125,497

See accompanying Notes to Condensed Consolidated Financial Statements which form an integral part of the Condensed Consolidated Financial Statements.

Worksport Ltd.

Condensed Consolidated Statements of Cash Flows

For the Three Months Ended March 31, 2025 and 2024

(Unaudited)

	2025			2024
Operating activities
Net loss	$	(4,460,464	)	$	(3,714,657	)
Adjustments to reconcile net loss to net cash from operating activities:
Shares, options and warrants issued for services		608,353			1,241,563
Depreciation and amortization		444,966			383,147
Change in operating lease		4,100			1,988
		(3,403,045	)		(2,087,959	)
Changes in operating assets and liabilities (Note 10)		(436,873	)		(706,645	)
Net cash used in operating activities		(3,839,918	)		(2,794,604	)

Cash flows from investing activities
Purchase of property and equipment		(201,459	)		(212,969	)
Purchase of intangible assets		(256,883	)		-
Net cash used in investing activities		(458,342	)		(212,969	)

Financing activities
Shareholder assumption of debt		-			(16,495	)
Proceeds from warrant exercise		6,384,840			69
Proceeds from line of credit		110,821			-
Repayments on line of credit		(2,131,871	)		-
Repayments on long-term debt		(47,394	)		-
Proceeds from issuance of common share, net of issuance cost		179,137			3,195,201
Net cash received from financing activities		4,495,533			3,178,775

Change in cash		197,273			171,202
Cash, restricted cash and cash equivalents - beginning of period		4,883,099			3,365,778
Cash, restricted cash and cash equivalents end of period	$	5,080,372		$	3,536,980

Supplemental Disclosure of cash flow information
Income tax paid	$	-		$	-
Interest paid	$	140,000		$	144,000

See accompanying Notes to Condensed Consolidated Financial Statements which form an integral part of the Condensed Consolidated Financial Statements.

Worksport Ltd.

Notes to the Condensed Consolidated Financial Statements

(Unaudited)

1. Description of Business and Significant Accounting Policies

The accompanying unaudited consolidated condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. In the opinion of management, all adjustments consisting of normal recurring adjustments considered necessary for the fair presentation of results for the interim period have been included. The results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results expected for the full year. The accompanying unaudited consolidated condensed financial statements should be read in conjunction with the financial statements and notes thereto included in our Form 10-K for the fiscal year ended December 31, 2024. All references to years in these financial statements are fiscal years.

Reclassifications – Certain prior year amounts have been reclassified to conform to current year’s presentation. The Company reclassified research and development of $369,601 and $381,000 for the three months ended March 31, 2025 and 2024, respectively, which were reclassified from general and administrative expense, to research and development expense. This change improves the disclosure of costs to develop new products and technologies and reflects the Company’s ongoing investment in innovation. The change also provides a more accurate depiction of the Company’s operating performance.

Recent accounting pronouncements

Recent accounting pronouncements adopted

In November 2023, the Financial Standards Accounting Board (FASB) issued Accounting Standards Update (ASU) 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. ASU 2023-07 is effective for our annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption permitted. We adopted this standard for the year ended December 31, 2024, and applied the amendments retrospectively to all prior periods presented. Refer to Note 17, Segment Reporting. The adoption of this standard did not have a material effect on the financial statements and related disclosures.

Recent accounting pronouncements not yet adopted

In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topics 740): Improvements to Income Tax Disclosures” to expand the disclosure requirements for income taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the potential effect that the updated standard will have on the financial statements and related disclosures.

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

The company considers the applicability and impact of all ASUs. ASUs not listed were assessed and determined to be either not applicable or had or are expected to have an immaterial impact on the financial statements and related disclosures.

2. Going Concern

As of March 31, 2025, the Company had $5,080,372 in cash and cash equivalents. The Company also has availability on its revolving line of credit of $2,858,700. 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 in 2014, it has never generated a profit. As of March 31, 2025, the Company had an accumulated deficit of $68,937,430.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. During the three months ended March 31, 2025, the Company had net losses of $4,460,464 (2024 - $3,714,657). As of March 31, 2025, the Company had working capital of $7,936,250 (December 31, 2024 – $2,901,401) and had an accumulated deficit of $68,937,430 (December 31, 2024 - $64,476,966). The Company has not 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 may be insufficient to fund its capital expenditures, working capital and other cash requirements in the long term. There can be no assurance that the steps management is taking will be successful.

The Company has historically operated at a loss, although that may change as sales volumes increase and margins improve. As of March 31, 2025, the Company had cash and cash equivalents of $5,080,372 (December 31, 2024 - $4,883,099). Despite the Company having completed its purchasing of large manufacturing machinery for phase one 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 in 2025, 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 in 2023 and quickly began improving output and sales during 2024 and into 2025.

The Company has successfully raised cash, and it is positioned to do so again if deemed necessary or strategically advantageous. During the year ended December 31, 2021, the Company, through its Reg-A public offering, private placement offering, underwritten public offering, and exercises of warrants, raised an aggregate of approximately $32,500,000. On September 30, 2022, the Company filed a shelf registration statement on Form S-3, which was declared effective by the SEC on October 13, 2022, allowing the Company to issue up to $30,000,000 of common stock and prospectus supplement covering the offering, issuance and sale of up to $13,000,000 of common stock that may be issued and sold under an At The Market Offering Agreement dated September 30, 2022 (“ATM Agreement”), with H.C. Wainwright & Co., LLC, as the sales agent (“HCW”). Pursuant to the ATM Agreement, HCW is entitled to a commission equal to 3.0% of the gross sales price of the shares of common stock sold. Through March 31, 2025, the Company has sold and issued 784,133 shares of common stock in consideration for net proceeds of $6,432,971 under the ATM Agreement.

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 share six months after issuance and until five and a half years5.5 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.

On March 20, 2024, the Company consummated a registered direct offering pursuant to which the Company issued 237,224 shares of common stock and 147,789 pre-funded warrants 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 are exercisable for 770,026 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. The Company registered the 770,026 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.

On May 29, 2024, Worksport sent an inducement letter to a shareholder offering an option to exercise their warrants at a reduced exercise price of $0.5198 per warrant. In turn for doing so, Worksport offered the shareholder new warrants to purchase up to 1,295,000 warrant shares with an exercise price of $0.5198. The shares had a term of 5.5 years, with a 6-month required holding period.

On December 13, 2024, the Company filed a Prospectus Supplement to amend Amendment No. 1 to the prospectus supplement dated as of November 5, 2024, prospectus supplement dated as of October 13, 2022, and the prospectus dated as of October 13, 2022 to increase the maximum amount of shares that we are eligible to sell pursuant to the Sales Agreement under General Instruction I.B.6. to $4,962,092 of shares of our common stock not including whatever had been sold prior to this filing date.

On February 27, 2025, Worksport entered into a warrant inducement agreement with a shareholder to exercise 755,558 of their 1,295,000 May 2024 Warrants at 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 new 2025 Inducement Warrants. Each Inducement Warrant has an exercise price of $6.502, will become exercisable six 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.

To date, the Company’s principal 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 principal source of liquidity by growing existing product offerings as well as the Company’s customer base. The Company cannot give assurance that it can increase its cash balances or limit its cash consumption and thus maintain sufficient cash balances for planned operations or future business developments. Future business development and demands may lead to cash utilization at levels greater than recently experienced. The Company may need to raise additional capital in the future. However, the Company cannot provide assurances it will be able to raise additional capital on acceptable terms, or at all.

The Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued. Still, certain factors indicate the existence of a material uncertainty that cast substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. These adjustments could be material.

3. Inventories

Inventories, net of reserves, consists of:

Schedule of Inventory

	March 31, 2025		December 31, 2024
Raw materials	$	3,462,797	$	3,373,704
Finished goods		1,627,295		1,343,006
Work in progress		635,500		473,344
Inventories, net	$	5,725,592	$	5,190,054

4. Property and Equipment

Property and equipment consist of:

Schedule of Property and Equipment

	March 31, 2025			December 31, 2024
Building	$	6,079,410		$	6,079,410
Manufacturing equipment		6,043,398			5,830,999
Land		2,239,405			2,239,405
Leasehold improvements		867,756			862,504
Product molds		524,476			524,476
Warehouse equipment		512,700			512,700
Electrical equipment		185,261			185,261
Automobile		172,645			172,645
Furniture		154,065			154,065
Computers		98,594			114,786
Property and equipment, at cost		16,877,710			16,676,251
Less accumulated depreciation		(3,380,532	)		(3,032,025	)
Property and equipment, net	$	13,497,178		$	13,644,226

Depreciation expense for the three months ended March 31, 2025 and 2024 was $348,507 and $382,520, respectively.

5. Intangible Assets

Intangible assets consist of costs incurred to establish the patent rights related to the quick latch and soft vinyl quad-fold tonneau cover technologies, Worksport trademarks, licenses, and software costs. The Company’s utility patents and design registrations were issued between 2014 and 2025. The patents and software are amortized on a straight-line basis over their useful life. The Company’s trademark, licenses, and other indefinite life intangible assets are reassessed every year for impairment. The Company determined that impairment is not necessary for the prior year ended December 31, 2024 and for the three months ended March 31, 2025.

The components of intangible assets are as follows:

	March 31, 2025			December 31, 2024
Software	$	1,150,000		$	1,150,000
License		218,329			103,329
Patent		62,706			62,706
Trademark		5,150			5,150
Other		171,334			29,451
Intangible assets, gross carrying amount		1,607,519			1,350,636
Less accumulated amortization		(494,046	)		(397,587	)
Intangible assets, net	$	1,113,473		$	953,049

Amortization expense for the three months ended March 31, 2025 and 2024 was $96,459 and $627, respectively.

Estimated amortization of the patent and software over the next five calendar years and beyond March 31, 2025 is as follows:


2025	$	289,383
2026	$	385,842
2027	$	2,508
2028	$	2,508
2029	$	2,508
Thereafter	$	35,911

6. Prepaid Expenses and Deposits

Prepaid expenses and deposits consist of:

	March 31, 2025		December 31, 2024
Consulting, services and advertising	$	187,158	$	35,740
Insurance		37,510		65,938
Deposits		159,595		90,514
Prepaid expenses and deposits	$	384,263	$	192,192

7. Shareholders’ Equity

During three months ended March 31, 2025, the following transactions occurred:

During the three months ended March 31, 2025, the Company sold 22,725 shares of common stock for total gross proceeds of $185,874. The sale of shares was in connection with the shelf registration statement on Form S-3 effective on October 13, 2022, allowing the Company to issue up to $30,000,000 of common stock and prospectus supplement covering the offering, issuance and sale of up to $13,000,000 of common stock that may be issued and sold under an At The Market Offering Agreement dated as of September 30, 2022.

The Company recognized consulting expense of $22,017 to share subscriptions payable from restricted shares and stock options to be issued. As of March 31, 2025, the restricted shares have not been issued. During the three months ended March 31, 2025, the Company issued 1,000 restricted shares with a value of $82,100.

During the three months ended March 31, 2025, in connection with the inducement of 1,295,000 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.

Refer to Note 15, Warrants and Note 16, Equity Compensation for additional disclosures related to shareholders’ equity.

During three months ended March 31, 2024, the following transactions occurred:

During the three months ended March 31, 2024, the Company sold 50,492 shares of common stock for a total net proceeds of $566,118. The sale of shares was in connection with the shelf registration statement on Form S-3 effective on October 13, 2022, allowing the Company to issue up to $30,000,000 of common stock and prospectus supplement covering the offering, issuance and sale of up to $13,000,000 of common stock that may be issued and sold under an At The Market Offering Agreement dated as of September 30, 2022.

The Company recognized consulting expense of $407,621 to share subscriptions payable from restricted shares and stock options to be issued. As of March 31, 2024, the Company issued 21,454 restricted shares with a value of $304,188.

During the three months ended March 31, 2024, the Company closed a sale of 237,224 shares of common stock for net proceeds of $1,535,591. In association with the sale of common stock, the Company issued 147,789 pre-funded warrants and 770,026 warrants totaling proceeds of $1,093,492.

8. Income Taxes

The effective tax rate for the three months ended March 31, 2025 and 2024 was 22.9% before 100% allowance adjustments on net deferred income tax assets. The effective tax rate for the three months ended March 31, 2025 and 2024 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.

9. Financial Instruments and Fair Value

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

Level 1 – Quoted prices in active markets for identical assets and liabilities.

Level 2 – Observable inputs other than quoted prices in active markets for similar assets and liabilities.

Level 3 – Inputs for which significant valuation assumptions are unobservable in a market and therefore value is based on the best available data, some of which is internally developed and considers risk premiums that a market participant would require.

The Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, revolving line of credit, and long-term debt. The fair values of cash and cash equivalents, accounts receivable and accounts payable approximate their carrying value because of the short-term nature of these instruments. The Company’s revolving line of credit is based on a variable interest rate and is reflected in the financial statements at carrying value which approximates fair value at March 31, 2025. The Company’s long-term debt is based on a fixed interest rate, and its carrying amount approximates fair value at March 31, 2025. The fair value of the revolving line of credit and long-term debt is classified as Level 2 within the fair value hierarchy and is estimated based on quoted market prices.

10. Changes in Cash Flows from Operating Assets and Liabilities

The changes to the Company’s operating assets and liabilities for the three months ended March 31, 2025 and 2024 are as follows:

	2025			2024
Decrease (increase) in accounts receivable	$	(25,362	)	$	306,778
Decrease (increase) in other receivable		(27,015	)		10,538
Decrease (increase) in inventory		(583,116	)		(2,908,354	)
Decrease (increase) in prepaid expenses and deposits		(192,071	)		1,155,090
Increase (decrease) in accounts payable and accrued liabilities		390,691			729,303
	$	(436,873	)	$	(706,645	)

11. Investments

During the three months ended March 31, 2025, $66,308 ($90,000 CAD) of the Company’s Guaranteed Investment Certificate (“GIC”) matured and the Company received $2,499 ($3,603.69 CAD) in interest income. During the same period, the Company reinvested the principal amount of $66,308 ($90,000 CAD) in a GIC. The GIC bears a variable interest rate and will mature on February 27, 2026. The anticipated earned interest on the GIC at maturity is $2,499 ($3,603.69 CAD).

12. Leases

During the year ended December 31, 2022, the Company signed a lease agreement for approximately 20,296 square feet to be used as its primary corporate office and research and development (“R&D”) facility pursuant to a five-year lease, dated June 1, 2022, for a variable rate averaging $20,242 per month over the lifetime of the lease not inclusive of additional fees, which also vary and average $5,033 per month in 2025 not inclusive of taxes.

During the year ended December 31, 2023, the Company signed a lease agreement for office space to be used as an R&D facility pursuant to a one-year lease with an option to extend the lease for an additional year, dated June 1, 2023, for a monthly rent of $3,350. The lease was renewed effective June 1, 2024 at a rate of $3,600 per month with a termination date of May 31, 2025.

The Company has accounted for its leases upon adoption of ASC 842 whereby it recognizes a lease liability and a right-of-use asset at the date of initial application beginning January 1, 2019. The lease liability is measured at the present value of the remaining lease payments, discounted using the Company’s incremental borrowing rate of 10%. The Company has measured the right-of-use asset at an initial amount equal to the lease liability.

The Company’s right-of-use asset and lease liability as of March 31, 2025, and December 31, 2024, are as follows:

	March 31, 2025		December 31, 2024
Right-of-use asset	$	531,122	$	595,415
Current lease liability	$	244,477	$	246,535
Long-term lease liability	$	310,337	$	368,472

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

		March 31, 2025				March 31, 2024
Operating lease cost		$	78,407			$	133,796

The following is a summary of cash paid during the three months ended March 31, 2025 and 2024 for amounts included in the measurement of lease liabilities:

		March 31, 2025				March 31, 2024
Operating cashflow		$	78,471			$	135,784

The following are future minimum lease payments as of March 31, 2025:


2026	$	286,627
2027		279,815
2028		46,975
Total future minimum lease payments		613,417
Less: amount representing interest		(58,603	)
Present value of future payments		554,814
Current portion		244,477
Long term portion	$	310,337

13. Indebtedness

Long-term debt consists of:

	March 31, 2025			December 31, 2024
Revolving Credit Facility (a)	$	1,735,414		$	3,808,025
Other (b)		1,404,991			1,456,485
Long-term debt		3,140,405			5,264,510
Less deferred debt issuance cost		(204,851	)		(260,513	)
Less current installments		(227,056	)		(222,992	)
Long-term debt	$	2,708,497		$	4,781,005

	a)	On July 19, 2024, the Company, as the guarantor, and Worksport New York Operations Corporation as well as Worksport USA Operations Corporation, entered into a $6,000,000 Revolving Financing and Assignment Agreement with an external lending entity with a maturity date of July 18, 2026, or 24 months. Upon transaction close, the Company drew down approximately $5.06 million of the Revolving Credit Facility, net of $790,000 of interest reserve required to be withheld to ensure interest payments by the Company. The Company used $4.73 million of the drawn down amount to refinance the Company’s mortgage on the Company’s real property located at 2500 North America Dr. in West Seneca, New York, and additionally drew approximately $330,000 to fund operations. At March 31, 2025, the outstanding balance of this loan was $1,570,197 (net of issuance costs of $165,217).

		For collateral, the lender holds a first position on the Company’s major asset classes (accounts receivable, the factory in New York, and inventory) other than the Company’s equipment. A non-usage fee of 0.25% is assessed quarterly and applied to the difference between the quarter’s average daily outstanding loan balance and the total credit facility amount. As of March 31, 2025, the Company had an available balance of $2,858,700 to borrow on the Revolving Credit Facility.

	b)	On September 4, 2024, the Company, through its wholly owned subsidiary, Worksport USA Operations Corporation, entered into a $1,487,200 credit and security agreement with an external lending entity with a maturity date of September 1, 2027, which is 36 months from initial funding. Upon transaction close, the Company received net proceeds of $1,412,750 (net of issuance costs of $43,735). The Company and its wholly owned subsidiary, Worksport New York Operations Corporation, serve as guarantors on the loan. For collateral, the lender holds a first position on the Company’s equipment, which is primarily manufacturing and warehousing equipment.

14. Loss per Share

For the three months ended March 31, 2025, loss per share is $1.05 (basic and diluted) compared to that of the three months ended March 31, 2024, of $1.75 (basic and dilu

SEC Form 10-Q filed by Worksport Ltd.