10-Q: Worksport Q3 2025: Sales Surge 104%, Gross Margin Expands

Sentiment:

Quarterly Report 13 November 2025 7:31 AM

Worksport Ltd. reported record net sales and significant gross margin expansion for Q3 and the nine months ended September 30, 2025, despite an increased net loss.

Capital raiseSuccessfully completed a Regulation A offering, expected to generate gross proceeds of $10,000,000. Through September 30, 2025, received net proceeds of $6,927,922, including $458,720 of share subscriptions receivable.Subsequent to September 30, 2025, completed eight additional tranches of the Regulation A offering, receiving net proceeds of $2,164,492.Received $6,731,410 in gross proceeds from a warrant inducement agreement on February 27, 2025, where existing warrants were exercised and new inducement warrants were issued.Sold 110,619 shares of common stock under an At The Market (ATM) Agreement for net proceeds of $504,372 during the nine months ended September 30, 2025.The company's ability to continue as a going concern is dependent on obtaining equity and/or debt financing, and it intends to continue funding operations through such arrangements.

Better than expectedNet sales increased by 61% for the three months and 104% for the nine months ended September 30, 2025, representing the highest net sales in company history.Gross margin expanded significantly to 31.3% in Q3 2025 (from 7.9% in Q3 2024) and 26.8% for the nine months (from 10.5% in nine months 2024), indicating improved production efficiencies.Loss per share improved from $(1.40) to $(0.75) for the three months and from $(4.64) to $(2.44) for the nine months, despite an increase in absolute net loss, due to a higher weighted average number of shares outstanding.Achieved highest monthly production volume and expanded distribution network.

Summary

Net sales for the three months ended September 30, 2025, increased by 61% to $5.0 million from $3.1 million in 2024.
Net sales for the nine months ended September 30, 2025, increased by 104% to $11.4 million from $5.6 million in 2024.
Gross margin for the three months ended September 30, 2025, expanded to 31.3% from 7.9% in 2024.
Gross margin for the nine months ended September 30, 2025, expanded to 26.8% from 10.5% in 2024.
Net loss for the three months ended September 30, 2025, was $4.9 million, up from $4.1 million in 2024.
Net loss for the nine months ended September 30, 2025, was $13.1 million, up from $11.9 million in 2024.
Loss per share (basic and diluted) for the three months ended September 30, 2025, was $(0.75), an improvement from $(1.40) in 2024.
Loss per share (basic and diluted) for the nine months ended September 30, 2025, was $(2.44), an improvement from $(4.64) in 2024.
Cash and cash equivalents decreased to $3.76 million as of September 30, 2025, from $4.88 million at December 31, 2024.
Working capital decreased to $6.31 million as of September 30, 2025, from $7.30 million at December 31, 2024.
The company expanded its distribution network to six national distributors, adding two new relationships in Q3 2025.
U.S. production facilities achieved their highest monthly production volume in company history.
Terravis Energy subsidiary continues prototype development, including facility setup.
Successfully completed its Regulation A offering, raising $10 million in gross proceeds.
HD3 Heavy-Duty tonneau cover officially entered production.
SOLIS Solar Tonneau Cover and COR Portable Energy Storage System launched for order on November 28, 2025.

Sentiment

Score: 6

Explanation: While the company achieved significant sales growth and margin expansion, indicating operational progress, it continues to incur substantial net losses and has a going concern warning from its auditors. The capital raises are positive for liquidity but also highlight ongoing reliance on external funding. The improved loss per share is a positive sign, but the absolute net loss increased.

Positives

Record net sales for both the three months ($5.0M, +61%) and nine months ($11.4M, +104%) ended September 30, 2025.
Significant gross margin expansion: 31.3% in Q3 2025 vs. 7.9% in Q3 2024; 26.8% for nine months 2025 vs. 10.5% for nine months 2024.
Expanded distribution network to six national distributors, adding two new partners in Q3 2025.
Achieved highest monthly production volume in U.S. facilities history.
Terravis Energy subsidiary is progressing with prototype development and facility setup.
Loss per share improved significantly for both the three months (from $(1.40) to $(0.75)) and nine months (from $(4.64) to $(2.44)) ended September 30, 2025.
Successful completion of Regulation A offering, raising $10 million in gross proceeds.
Launch of new HD3 Heavy-Duty tonneau cover and upcoming launch of SOLIS Solar Tonneau Cover and COR Portable Energy Storage System.
Increased available capacity on revolving line of credit to $3.29 million from $0.81 million.

Negatives

Continued net losses: $4.9 million for Q3 2025 and $13.1 million for nine months 2025.
Accumulated deficit increased to $77.6 million as of September 30, 2025, from $64.5 million at December 31, 2024.
Cash and cash equivalents decreased by $1.12 million from December 31, 2024, to September 30, 2025.
Working capital decreased to $6.31 million from $7.30 million.
Operating expenses increased significantly due to higher general & administrative and sales & marketing costs.
Auditors expressed substantial doubt about the company's ability to continue as a going concern.
Material weakness in internal control over financial reporting identified.

Risks

Ability to continue as a going concern is dependent on generating cash flows from operations and obtaining further equity and/or debt financing.
Inability to raise additional capital on acceptable terms or at all.
Operational costs are expected to remain elevated, potentially further decreasing cash and cash equivalents.
Uncertainty in the future of the U.S. regulatory environment surrounding electric vehicles, including potential reversals of mandates and paused funding.
Volatility in commodity prices, raw materials, and labor costs impacting profit margins.
Increased cost of debt financing due to high interest rates; susceptibility to variable debt interest costs.
High interest rates have negatively influenced trading volume of micro-cap equities.
Potential for increased ocean freight, trucking, and container handling costs, despite current shipping routes not facing dramatic price hikes.
Geopolitical conditions (Russia-Ukraine, Israel-Hamas) could lead to global economic instability, fluctuating energy prices, increased costs, supply chain disruptions, reduced sales, and impaired ability to raise capital.
Foreign exchange risk due to manufacturing in China, marketing in Canada/U.S., and reporting in USD.
Tariffs on components sourced internationally (e.g., solar panels from India, COR portable power system components).
Potential negative environmental impacts of poor battery recycling and increasing demand for precious metals.
Material weakness in internal control over financial reporting, increasing the risk of material misstatement.

Future Outlook

The company intends to continue its ramp-up of manufacturing and increasing sales volumes in 2025 and 2026, mitigating the effects of operational costs as new product lines are released. Management is focused on transitioning towards revenue as its principal source of liquidity by growing existing product offerings and customer base. The company expects the new manufacturing equipment to be delivered and installed in the first half of 2026, increasing production capacity. Distribution via wholesalers, private labels, distributors, and online retailers is expected to increase during 2026.

Management Comments

"We recognized the highest net sales in our Company's history."
"We continued our focus to increase efficiency in our production process."
"We expanded our distribution network and now partner with six (6) national distributors, including two (2) new relationships during the three months ended September 30, 2025."
"Our U.S. production facilities achieved its highest monthly production volume in our Company's history."
"Our Terravis Energy subsidiary continues its prototype development efforts, including facility setup."
"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."
"We believe our Worksport SOLIS and Worksport COR products will be received positively by the public for their resilience to, and even increased utility as a result of, Climate Change."
"We are actively researching ways to lower such environmental impacts [of poor battery recycling and increasing demand for precious metals]."
"Our transition towards domestic manufacturing and assembly is anticipated to largely offset these higher costs [shipping], as we believe we will be less exposed to higher international shipping costs."
"We are also identifying North American suppliers of our products components and will prioritize transport by rail when possible to avoid high trucking costs."
"We remain committed to optimizing our operations, including managing our supply chain to minimize the impact of tariffs on our results of operations."

Industry Context

The company operates in the growing market for tonneau covers, solar integrations, portable power systems, and clean heating & cooling solutions. It aims to capitalize on the increasing consumer interest in Electric Vehicles (EVs) and clean energy, positioning its SOLIS and COR products as essential accessories for EV owners and those interested in cutting-edge technologies. The portable power station market is described as "unsaturated," and the solar tonneau cover market is in its "infancy" where the company has a "first-mover advantage." The regulatory environment for EVs is uncertain, with potential for both favorable policies (Build Back Better Bill) and reversals (Trump administration executive order).

Corporate Governance

Change Type	Description	Effective Date	Impact Assessment
Accounting Standard Adoption	Adopted ASU 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, expanding annual and interim disclosure requirements for reportable segments, applied retrospectively.	2024-01-01	Did not have a material effect on the financial statements and related disclosures.
Internal Control Weakness	Identified material weaknesses in internal control over financial reporting, including insufficient written policies, inadequate documentation of control effectiveness, and inappropriate access/segregation of duties.	2025-09-30	Raises substantial doubt about the ability to prevent or timely detect material misstatements in financial statements.

Legal Proceedings

No material pending or threatened legal proceedings, only routine litigation incidental to the business.

Stakeholder Impact

Shareholders: Potential for dilution from ongoing equity raises, but also potential for value creation from sales growth, margin expansion, and new product launches. Risk of continued losses and going concern uncertainty.
Employees: Continued R&D and production efforts suggest stable or growing employment. Stock options are part of compensation.
Customers: Expanded distribution network and new product launches (HD3, SOLIS, COR) indicate increased product availability and choice.
Suppliers: Diversifying supply chain and identifying North American suppliers could shift business. Increased raw material orders.
Creditors: Revolving credit facility and long-term debt are in place, with compliance with covenants. Repayments on debt obligations.

Next Steps

Continue ramp-up of manufacturing and increasing sales volumes in 2025 and 2026.
Release new product lines to mitigate operational costs.
Grow existing product offerings and customer base to transition towards revenue as the principal source of liquidity.
Deliver and install new manufacturing equipment in the first half of 2026 to increase production capacity.
Increase distribution via wholesalers, private labels, distributors, and online retailers during 2026.
Pursue relationships with Original Equipment Manufacturers for distribution.
File a new shelf registration statement in November 2025 as the previous one expired in October 2025.
Actively research ways to lower environmental impacts of battery recycling and demand for precious metals.
Identify North American suppliers for product components and prioritize rail transport.
Monitor international trade developments and manage supply chain to minimize tariff impact.
Address material weaknesses in internal control over financial reporting by designing written policies, maintaining adequate documentation, and ensuring appropriate access and segregation of duties.

Key Dates

Date	Description
2014-01-01	Worksport acquired by the company.
2019-01-01	Series A preferred stock created and issued.
2021-08-03	Expiration of 13,091 warrants issued on this date.
2021-08-06	Expiration of 344,652 warrants issued on this date.
2021-12-27	Company granted 40,000 PSUs to CEO and 30,000 PSUs to a director.
2021-12-29	Company granted 40,000 PSUs to CEO and 30,000 PSUs to a director.
2022-09-30	Company filed a shelf registration statement on Form S-3.
2022-10-13	Shelf Registration Statement declared effective by SEC.
2022-11-11	Modification of 40,000 and 30,000 PSUs granted on December 29, 2021, to include new vesting schedule.
2023-05-01	Agreement with Steven Rossi to modify 160,000 restricted stock units and 40,000 PSUs, replacing them with 200,000 stock options.
2023-11-02	Company consummated a registered direct offering, issuing 192,500 shares and 157,500 pre-funded warrants, and 700,000 warrants in a private sale.
2023-12-29	Form S-1 (333-276241) for 700,000 shares underlying warrants declared effective by SEC.
2024-03-18	Company effected a 1-for-10 reverse stock split.
2024-03-20	Company consummated a registered direct offering, issuing 237,224 shares and 147,789 pre-funded warrants, and 770,026 warrants in a private sale.
2024-04-08	Form S-1 (333-278461) for 770,026 shares underlying warrants declared effective by SEC.
2024-05-09	Company entered into a warrant inducement agreement with a holder of existing warrants to purchase 700,000 shares at a reduced exercise price of $5.198.
2024-05-29	Worksport sent an inducement letter to a shareholder offering an option to exercise warrants at a reduced price of $5.198 per warrant.
2024-06-01	Lease for R&D facility renewed at $3,600 per month, with termination date of May 31, 2025.
2024-07-19	Company entered into a $6,000,000 Revolving Financing and Assignment Agreement.
2024-07-23	Company engaged in stock option repricing for certain employees, executive officers, and directors.
2024-09-04	Company entered into a $1,487,200 credit and security agreement.
2024-09-21	Expiration date of 190,000 warrants.
2024-12-13	Company filed a prospectus supplement to increase the maximum amount of shares eligible to sell under the ATM Agreement to $4,962,092.
2025-02-27	Worksport entered into a warrant inducement agreement with a shareholder to exercise 755,558 May 2024 Warrants at $5.198 per share.
2025-03-07	Expiration date of 10,000 stock options.
2025-04-01	Company signed a lease agreement for 12,500 sq ft of office space for R&D facility.
2025-04-04	Expiration date of 14,000 stock options and 30,000 stock options issued to Steven Rossi.
2025-05-01	Lease for 12,500 sq ft R&D facility became effective.
2025-05-31	Termination date of R&D facility lease renewed on June 1, 2024.
2025-06-05	Maturity date of second Guaranteed Investment Certificate (GIC).
2025-06-13	Worksport completed initial closing of its Regulation A offering.
2025-07-12	Expiration date of 30,000 stock options, 50,000 stock options, 81,940 stock options, and 76,500 stock options.
2025-07-14	Company signed a lease agreement for 1,992 sq ft of office space for Terravis Energy subsidiary R&D facility.
2025-07-16	Worksport announced AetherLux Pro heat pump received attention from multi-billion dollar corporations and U.S. government entities.
2025-07-16	Worksport announced it doubled its R&D footprint by beginning a new lease at a larger R&D facility in Ozark, Missouri.
2025-07-18	Lease for Terravis Energy R&D facility became effective.
2025-08-05	Worksport announced its strongest 4-week production run since beginning domestic production.
2025-08-07	Worksport announced it doubled its Bitcoin holdings and invested in additional manufacturing machinery.
2025-09-30	End of the reporting period for the 10-Q filing.
2025-09-30	Worksport announced a 42% increase in national dealer partnerships over the preceding quarter.
2025-10-01	Company received share subscriptions receivable of $458,720.
2025-10-06	Terravis Energy selected for NREL Technical Assistance Program award.
2025-10-15	Company announced successful completion of its Regulation A offering.
2025-10-23	Company announced new HD3 Heavy-Duty tonneau cover officially entered production.
2025-10-30	Company announced official launch date for SOLIS Solar Tonneau Cover and COR Portable Energy Storage System.
2025-11-13	Date of filing of the 10-Q report.
2025-11-28	SOLIS Solar Tonneau Cover and COR Portable Energy Storage System available for order.
2026-02-27	Maturity date of Guaranteed Investment Certificate (GIC).
2026-07-18	Maturity date of $6,000,000 Revolving Financing and Assignment Agreement.
2026-12-31	Extended expiration date for 30,000 warrants.
2027-09-01	Maturity date of $1,487,200 credit and security agreement.
2028-04-30	Termination date of 12,500 sq ft R&D facility lease.
2028-06-13	Earliest expiration date for some Regulation A offering warrants.
2028-09-30	Latest expiration date for some Regulation A offering warrants.
2029-09-20	Expiration date of 770,026 warrants.
2029-09-21	Expiration date of 190,000 warrants.
2030-08-27	Expiration date of 1,424,500 inducement warrants.

Recommendation

hold

Worksport Ltd. demonstrates strong operational momentum with record sales growth and significant gross margin expansion, indicating successful product launches and improved production efficiencies. The improved loss per share, despite an increased absolute net loss, suggests a positive trend in per-share performance. The successful completion of the Regulation A offering and other capital raises provide necessary liquidity for ongoing operations and expansion. However, the company continues to operate at a net loss, has a substantial accumulated deficit, and faces a going concern warning from its auditors, highlighting significant financial risks. The identified material weakness in internal controls also warrants caution. While the long-term potential in EV accessories and clean energy is attractive, the current financial instability and reliance on external funding suggest a "hold" position until there is clear evidence of sustained profitability and resolution of the going concern issue.

Keywords

Tonneau Covers, Solar Energy, Portable Power, EV Accessories, Truck Accessories, Terravis Energy, Cold-Climate Heat Pump, Manufacturing, SEC Filing, 10-Q, Worksport, WKSP

Disclaimer:The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.