Worksport Ltd Aktie

Good morning, everyone. Thanks for joining us. I'm Steve Rossi, Founder and CEO of Worksport, and I'm here with Faran Ali, Investor Relations here at Worksport.

We last had this conversation in June of this year, and we spoke again during our August earnings call. And since then, shareholders have had several more things to take in. So today, I want to put those pieces together. We'll talk about the business, the latest operating results, capital and the shareholder meeting. We'll also spend time on Terravis Energy and take your questions.

And Steve, I think there's a fairly straightforward question behind a lot of what investors are asking. We see that sales are growing, but how does that get to a point where as a business, we can support ourselves without having to rely on dilution or further capital raises. We'll spend some time there today.

But before we start, we want to make sure that we stay with information that's already disclosed publicly. That means that we can explain it, we can provide context, but we can't give unpublished sales figures, discuss undisclosed transactions or get ahead of company announcements. We ask that you stay focused and stay tuned, and we'll be sharing that information as it happens.

Yes. So of course, I must say our discussions today may include forward-looking statements about our operating objectives, products, distribution, financing and certification plans. These statements involve risks and assumptions and actual sales may differ materially. Please review them and all of our disclosures alongside our SEC filings, including our risk factors. We do undertake no obligation to update forward-looking statements, except as required by law.

So with that, let's kick things off. In June, we talked quite a bit about the new products, the distribution relationships and what those really could do for Worksport. And we have another quarter of reported results under our belt. And let's assess what those can look like or what those do look like. So Q2 revenue increased nearly 58% from Q1. Gross profit also increased approximately 93%, while operating expenses came in lower at about 17%. That combination really encouraging to us, and it shows that we're improving beyond the sales line.

So let's stop there for a moment. People hear percentages all the time. But Steve, when you look at it, what changed for you?

This really gives us something concrete to work from. As we build the business, we need to understand what parts improve with volume and which expenses require more attention. So we're really always fine-tuning towards that kind of improvement. So a strong sales month is really useful, and it helps us understand how to repeat it and how much of it contributes after the cost of getting the sale. And it really helps us make better decisions to just become better quicker and fast -- quicker and generally healthier.

And I think that one people -- one thing a lot of people have been talking about is the concept of net loss. We know that net loss has improved from Q1, but it was still slightly larger compared to the second quarter of last year. Where do you see net loss happening? And what's your commentary on that as we proceed forward?

Correct. Yes. So net losses -- I mean, we have really 2 net losses to think about. Our operational expenses -- sorry, expenses to think about, we have as a public company, and then we have Worksport as an operation within that public company. So we did report a quarterly net loss of approximately $3.9 million.

And we have work to do, lots of work to do. And I want shareholders to understand the progress without losing sight of really how far we've come and how much we've been able to improve sales, reduce that burn and fundamentally grow the business. So we're really doing quite well in such a short period of time.

And I think that's what July starts to tell us, right? We reported a strong news update with July being the seventh consecutive month of revenue growth. And what's your commentary on that, right? July update, we had a record attention for orders. There were 2 figures that people are talking about, orders and sales. Can you explain the difference between what we saw in July for the $2.2 million in orders -- $2.5 million in orders, but $2.2 million in sales? And how does that work towards the net loss that we're going to be working through?

Yes, good question. So July orders were approximately $2.52 million, which is very healthy. And the net sales were $2.2 million. So we had $300,000 in backlog. So when we first started building tunnel covers at our factory, we were really estimating educated guess that we were putting a new product on the shelves kind of if you build it, they will come.

Well, now that metaphor plays true where we are building it and they are coming in. And in fact, we're having more demand than we can fulfill immediately, which is great. To be in a position where we're building to orders is much more risk averse than building to forecasted orders. What we notice is, for example, RAM runs a sale on RAM trucks and more RAM trucks sell and therefore, the demand for tunnel cover sell into. So we don't have insight on those sales. So it's better to build with a backlog and build towards pending orders and a huge demand that exceeds our capacity and then to make the inventory.

And that finished good becomes a liability. It's something that sits on the shelf, and we may not sell it, and we haven't had that problem, but it is definitely a risk. So an order has to meet the revenue recognition requirement before it becomes a reported sale. And that distinction matters when we assess that month in general. And we're able to build products, we're able to invoice those products, and we're able to see good profit from those products, all in a -- on a backlog basis, which is a really healthy position for us.

So it sounds like we're growing so fast that there's orders coming in. And then beyond that, there's orders that haven't been fulfilled yet, but could be revenue attribution coming up. Essentially, what you're saying is the follow-through matters as well for the orders that are coming in.

Absolutely, 100%. So you want to -- in business, you want to fulfill it properly, collect the cash and leave the customer the reason to buy from you again. Obviously, on the B2B side, that's more prevalent. But this applies to an individual truck owner as well as to port distributor. That first sale opens up the relationship, the experience after the sale determines whether it grows.

So what we do is we focus, so keenly on putting the best product in a box, getting it out the door as fast as possible and then looking to that 5-star review from the consumer, from the reseller and building works sports culture and DNA is so important to being able to see that demand. We're such a great company. We've built such a fantastic machine that we're seeing a demand that's increasing faster than we could facilitate it, which is a fantastic position.

Yes, that's fantastic. And I guess another clarification in July, we said that the annualized run rate is approaching $30 million. And I think the next segment, Steve, I want to talk about what $30 million and what $35 million really means for the company in terms of cash flow positivity, right? There's been this conversation that at this current market cap, we are not believing that the intrinsic value of the company is captured. We think that as the company heads towards $35 million as it has to reach $40 million, you have a company that's making $40 million a year, might be cash flow positive at that $40 million and market cap is at $10 million.

So there seems to be this inherent gap between that point and now. But reality is we're closing in on that $40 million target quickly. And so one thing with annualized run rate, it's a snapshot, right? It does change. But in terms of our trajectory, the run rate and annualized run rate is tending to get bigger. So one thing we want to keep investors in mind is that while annualized run rate is a fantastic measure, it isn't a full year guidance, but we want to guide people towards the idea that at this $35 million, $40 million annualized run rate, the business will be self-sufficient or is expected to be self-sufficient at least, and we're getting there quite fast.

Yes. So I mean, you said it earlier. I mean that's the seventh consecutive quarter of growth. So when we look at a run rate, on the first quarter, we sold $1 million, and we thought, okay, so 1 million times 4, we're going to do just forward math, we're going to do $4 million this year. And then the next quarter, we sold $2 million. And then, of course, you just multiply that again as a run rate.

As the business continues to grow, I mean, and healthy growth, we continue to improve our top line. And as a tunnel cover manufacturer, we know that the ceiling is a 9-figure business. Where in 9 figures, we don't know. But we know that we could sell 9 figures in tunnel covers, whether it's $100 million or $99 million. We know that the market is there, and we're thinking about ways to get there.

But we're so much more than just the tunnel cover brand. We produce solar accessories. We're augmenting that and improving that market. And we also sell battery technology, which is the global consumer market. So we're building all of that out simultaneously. But in order to figure out run rate, investors should use the latest reported figures, but of course, those are always improving. So July was the third consecutive month above 30% gross margin. and which has progressed from the beginning of the year, but it wasn't 35%.

And we can't take one strong month and assume that the margin holds every single month after that. A lot of different things are at play there. So a 35% gross margin, $100 of sale produces $35 in gross profit before operating expenses at a lower margin, the same sale produces less in terms of margin contribution. And that's why growth and margin have to be discussed together. The important thing is that our gross margin remains stable at elevated levels. So we sell more and we're making almost the same, and we see a path to continuing to increase.

We're finding ways of making product more efficiently. And like hell, we're fighting inflation. There's a significant amount of domestic inflation, and I keep saying this in American aluminum, and we produce our product using mostly American sourced components, where we were 80%, 90% of American sourced raw materials and we're fighting inflation there. So it's important to keep that in mind that as inflation simmers and maybe prices god willing, those of raw materials go back down to where they used to be. It's a lot of margin that like.

No, I think that it's a strong story for anyone that does analyze the aluminum prices from 2021 to now. We're seeing in the last 2 years from 2024 to 2026, we saw aluminum go up 50%. Our product is approximately 85% aluminum. So despite having to inherit that 50% cost increase, the margins went up and they stayed up. If aluminum prices have revert back to the 20-year medium, which is, I think, still about 30% less than today's price, we would be in a very healthy cash position and/or in a position to lower our prices and increase sales.

So I think ultimately, Steve, that brings us back to cash flow. What I believe is one of the telling signs of the business he is, is it going to be able to sustain its own cash needs? Or will it need to continue to raise capital from the market? I think investors are watching that carefully, especially as we're getting to this critical point.

We talked about a revenue threshold at the end of our Q2 call, where we said, hey, $9 million at 35% gross margin would require a 17% OpEx reduction, and we'd be cash flow positive. Alternatively, with no OpEx reduction, we would need about $12 million a quarter. Reflecting back right now, we're at about $6 million to $7 million as of the July ARR. Let's talk about that. Could you give some more detail to investors about that?

Yes. And all the assumptions under these statements kind of matter. A change in gross margin changes the contribution in sales. How important is that dollar of what we sell or what does it do in terms of operational cash flow. So you really said a few different things. Number one is maintaining margin; number two, increasing sales, which we're doing. We're maintaining and increasing margin, although we've discussed how that ebbs and flows. We're increasing sales significantly. And in a period of time that no other tonneau cover brand or brand like us has been able to do. No other brand has grown to an ARR like ours in such a short period of time.

It took one of our competitors 2 decades to get a little bit beyond where we are today and what we've been able to do in just a few short years. And then expenses underneath that affects working capital and the cash requirement. So right now, we project that Worksport will be operationally cash flow positive at about $9 million a quarter or $3 million a month, which we're getting towards with a 35% gross margin.

If we reduce our OpEx, if we get leaner and smarter faster, which we will, at about $12.9 million a quarter -- sorry, if we hit $9 million a quarter and we reduced our OpEx by 17%, we'll be cash flow positive. But at a sales rate of about just over $4 million or $12.9 million a quarter with the same gross margin of 35%, we're cash flow positive.

So what's important is that we're growing sales on average 10% a month this year. And at this case, we're still on track to hit operational cash flow positivity. And in my eyes, it just matters when we're looking at these types of rates. So I want to underscore that statement that we're going to be cash flow positive within this year in my eyes. And I really feel like that's going to be a big message to the market that we just our humble tunnel cover market not inclusive of revenue contribution for the upcoming solar growth and the battery energy system growth and the other things that we're doing that are incredible that we're working on today, we're going to be a cash flow positive business within the year. That's what we're anticipating.

No, that's fantastic. And let's talk about the inventory and liquidity involved in getting increased sales. You mentioned that sales have went up 7 months in a row. I imagine that inventory still is a point where investors want to know more about. We showed a $12 million inventory balance at the end of Q2. And it's easy to hear a number like that, but -- and think maybe the cash problem is solved, but that inventory needs to convert. So what does that look like?

So inventory needs to become a sale, and that's what I underlined earlier in the conversation. We prefer keeping raw goods in inventory rather than finished goods, which right now, we're building towards demand, a backlog of demand. So -- and the sale needs to become cash. So we buy inventory, which is our bet. We place our bet on inventory, which we know we can convert to any model. And then we convert it to a product and then that product converts to cash. There are costs and execution along that way.

And our June end balance included raw materials with work in progress and finished goods, and they were all at different stages of the process. And I think that we maintained a pretty healthy inventory balance in excess, we may know better, I think in excess of $10 million.

Yes. No, it's definitely higher. I think it was at $12 million at the end of the quarter, and that's where it's an important point, like you said, to convert that to sales. As we look towards future reporting results, what should investors look for?

Whether it's important to look at a few key things is whether we're managing purchases and production sensibly against demand, so for building towards the backlog versus building towards inventory, whether goods are moving through the business channels and selling and converting to cash and whether we can support customers while avoiding unnecessary cash tied up in stock and inventory, especially finished good inventory. Selling inventory at any price wouldn't answer the question either. But what we have to consider is the economics of the sales. What does it cost us to put a product in a box and get the box out the door and turn that into cash.

Okay. So Steve, if the operating picture is improving, where there's a plan to convert inventory to sales, where sales are continuing to grow, the margin remains healthy and this $30 million ARR needs to get towards a $40 million ARR and the business might be cash flow positive at that point. Where does the remaining financing look like? What does it look like? What can we talk to investors with information we've already shared publicly about that remaining finance requirement?

Yes. So improvement in sufficient cash is required. We need cash as the cash flow is the lifeblood of our business, and we're generating a significant amount of cash flow. But we have to manage things at different stages. So we still have obligations to meet while we work towards a stronger operational position. And the financing agreement disclosed in August contemplated about $2.3 million in gross proceeds that we really to put to work towards that growth.

Obviously, when we land a new account, that account, let's just say it's a national distributor, which there are more that we're working towards, that national distributor is going to come in with a pretty big order, and we need to finance that order. They're going to want truckloads of tunnel covers to get started, and we're not going to see the cash from those truckloads of tunnel covers for what the market right now is 60 or 90-day payment term. But financing the growth is critical. And when investors see small cap companies like ours financing, they think, oh, boy, they're dilutive and they're raising capital to keep the lights on.

No, this is growth capital. This is a totally fantastic thing because when we're raising capital today, we're literally -- that's fuel for the fire, that's fuel to grow, not fuel to pay burn. So we -- it also is involved in -- we're also very -- we have a significant amount of effort going into reducing our exercise -- sorry, the financing also reduced the exercise price of the additional warrants, which we understand and shareholders could consider all of this together. Now of course, we didn't want to raise capital. But under the circumstances we did and that growth capital, that's actually a very bullish thing.

No, I think that those are great points said together that the business is growing, margins are elevated. They're projected to increase, and we're projected to hit cash flow positivity. But before we hit that, we do need cash to remain the current obligations. But hitting the shareholder points in the head, dilution is a real cost. And then also, there are some statements in our financial files about going concern. Let's talk about that a little bit.

Yes. So the disclosure remains part of the financial picture. It needs to be read alongside the operating progress. There are things that we're working towards these disclosures remain there, and we're trying to get rid of them. Obviously, going concerns are very important, and we want to get these team stones off of our filings and become a healthy cash flow positive business, which we're working tirelessly towards getting -- achieving for us and for our shareholders.

And in regards to the annual meeting that we just completed about 10 days ago, could we talk a little bit about the 2 core items inside of that meeting, one being the minimum bid price notice and the related filing we did about -- sorry, an option to do a forward or backwards reverse split. And the second being a question that we got a few times about the special dividend advisory item that we did vote on and passed [indiscernible].

Yes, absolutely. So on the bid price notice, yes, the company did receive a minimum bid price deficiency notice from NASDAQ. And the initial compliance period to get back above $1 per share for 10 trading days runs till February 9, 2027. So trading continues during the period, and there's no issue. We can get additional -- we believe we can get an additional compliance period of another 6 months after that. So we really have a year to fix that problem.

And I think that within a year, if you see how far we've come and how fast we've gotten here within -- from this year to last year or where we are today to a year ago, you can extrapolate how -- just how strong we're going to continue to get operationally between today and almost a year from now, which is a little under. So the filing describes the requirement from NASDAQ to regain compliance and the options available to the company. And of course, one of them is the dreaded reverse split, reverse stock split to get back above $1, but nobody wants that.

And you know what, Steve, I think it's really important to distinguish a deficiency notice from an actual action that's been implemented, right? We've received a minimum bid price deficiency notice in August, but that doesn't mean that there's any level of action that needs to be or should necessarily be taken at this point. We have till February 9 to regain compliance. And if we don't regain it at that point, we could actually apply for an additional 180 days or 6 months beyond February 9, 2027. So that means that NASDAQ rules allow for numerous methods to cure the deficiency without use of a reverse stock split.

And I think that management is looking at cash flow positivity this year, the period of time between then where we might need to take such action and now is significant enough for management to try and raise or try and see the stock price get up organically if it can. And that's sort of what the company is thinking at this point, right? Steve, that's what you've been trying to sell to shareholders? Or do you have additional thoughts on that in regards to when the company would need to do a reverse split?

Sorry, if at all necessary, we have about a year to get there. And I think, again, the business is going to be night and day different, although we're very strong. I mean at today's market cap, our book value, just our liquidation value -- well, maybe not liquidation value, but our net assets are more than double -- well, probably closer to triple we trade at today. So we're already bringing value. The market hasn't recognized it, and we're going to get there. So we can't control daily market pricing. We don't trade our stock. We don't participate in the market. We're not doing anything.

So the primary focus for management which is to execute, reduce uncertainty, improve the financial position of the company and preserve the ability to take appropriate compliance action. Obviously, what we did is the AGM was just to kind of give us all the tools we need in the tool belt to renew them. But if you look at what we actually are doing, we're just focused on execution. And having all these consecutive quarters of growth and being a $20 million, $30 million run rate business in just such a short period of time is something where we have to pat ourselves on the back door because it's not easy to do.

And for the second core item in the AGM, could you talk about that proposal for the special dividend? We did touch base about it in the end of the quarter 2 call, but maybe just a reminder.

Yes. So what we did is on an advisory basis, we had the approval from the Board in essence, to consider special dividends in connection with a business unit or material asset sale. So it doesn't announce the sale or declare dividend. It's nothing material, but the Board noted that if we were to sell a business unit or some assets to the business that we could dividend shareholders appropriately for that sale. So you got to look at it works for it as a public company, and that's a public entities, but works for the tunnel covered business is actually a business unit for the public company.

And so with Terravis Energy. So someone comes along and says, I want to buy Terravis Energy for $100 million or whatever, $1, $100 million, $1 billion, it doesn't matter. This is just figuratively. We could take that cash and we've now gotten the approval to dividend shareholders a portion of the proceeds.

And so that's the insight on why the Board wants to include that. Is there some sort of sale planned? Or is there something else that people should know?

So I want to be very careful what I say here, but of course, we believe the individual business assets and units like work for, Terravis and what we're working towards are worth significantly more in my eyes of a strategic partner than the value being reflected to them in the market. especially again in case of Terravis Energy. If we ever get the opportunity to deliver a strong return to shareholder via a sale or divestiture of the business unit and a dividend, we may take full advantage of that. And we feel that Worksport as a business unit could be worth significantly more than what it's priced at today. And we also believe that same thing with Terravis.

So you got to think that the public markets value the share -- the value of the business, but it doesn't preclude us from having a business come and approach us saying, "Hey, how much to buy Worksport?" And we can't say, oh, $0.43 a share that buys Worksport. No, it's its own value. So within reason, it follows logically that Worksport could be sold for $50 million or $100 million or whatever amount we want for, not what it's trading for.

So the trading price is so disconnected from the real asset value of the business that if there's an opportunity to sell either of those businesses, of course, with all the approvals and everyone being for it, we could look at it. And then we've already got approval from the Board to dividend any investor or stockholder of record of that sale, a portion of that. That could be a big upside for long-term shareholders.

Yes. No, I get it. And I think to be very clear, all we're saying is that we believe the intrinsic value of the assets is not entirely reflected into the market cap price. So the public value is not fully reflecting the intrinsic value of some of the assets, whether that's TV or whether that's the book value of Worksport, which is still currently higher than the market value trading. But moving on from that topic, and we're welcome to take questions at the end.

Let's come back to the NEXUS. It's been a major part of the growth. The company keeps talking about it, investors, shareholders and customers. They all seem to love it. In June, I asked you to explain why that product mattered. This time, why don't we talk about what makes someone choose it when they're standing beside a truck comparing covers. Why is that like a big selling point for them?

Value is a big word, team value. So our competitors are selling the same product for a myriad of decades that you have to walk around the truck, pro left side, walk around the truck, on the right side, and it sells, say $1,200. The NEXUS sells for the same price and a single side of operation. Also, I mean, it's just such a basic statement.

If you look at the F-150 20 years ago and you look at the F-150 today, it's a totally different truck, right? 20 years ago, it was like a work truck more, maybe for farmers or contractors. And today, people just drive them because they're so well endowed. F-150 is the best of the best go into pickup truck. So how is it okay that the same tunnel cover gets bolted on a truck that's wildly different, the same tunnel cover from 20 years ago.

So the NEXUS and the title of the product itself and even the product itself is the next generation of tunnel covers where it meets the well-endowed nature and features in terms of its appearance, fit and finish, its quality, its installation. It's just a better product, and it brings better value. So as I said earlier, we can't build them fast enough. We cannot build them fast enough. We are full. If the King of England asked for a tunnel cover today, the answer would be we'd have to wait in mind because there's a line of people out the door that are buying this product. We're gaining significant market share. The product just delivers huge value and we saw that, and that's why we initiated the design and launch the product.

And as far as the dealers are concerned, which are front market, talking about our product, hundreds of them across the U.S., thousands of them that we're aiming for. It gives them something they can show, right? Like we're giving them a physical product that's just different from everything else.

Yes. So exactly. So we just we just checked again, and there's actually about 30,000 dealers in America. We thought it was 17,000, but there's 30,000 dealers that are automotive stores that either do or would fit nicely within selling tunnel covers in that pocket and a good demonstration helps. So every time we show up to a dealer, we show them the tunnel cover and their eyes just light up when they see that automatic latching mechanism. And they always -- and that's where they say -- they coined the phrase dealers are like, that's a game changer. This just sells itself.

So in speaking to my management team in Buffalo last week at the factories, I pointed all them and I said, you don't sell the NEXUS. You don't sell the NEXUS. You don't sell the NEXUS. We don't sell the NEXUS. The NEXUS sells itself. Our brilliant engineering team that developed such an amazing product developed in NEXUS and it sells itself. So the product has to be available. Now that we built it, they're coming and we have to deliver. And the dealer needs to understand it. So we need to go and display it and the customer needs to get support afterwards, which is critical.

So distribution takes a long time. It's an iterative process, and it's a mature market. But signing relationships creates access as we get distribution and then building familiarity and then keeping our spirit and our culture as one of the best customer service-related companies with the highest quality is very important.

And that makes sense. Now where does Solis and core fit into this discussion, whether it's distribution or just our direct-to-consumer market?

Yes. So they require and involve a different kind of buying decision, someone who understands immediately why they might want a truck that cover would look at the if they're looking for mobile power. So we need to show the customer what they can do with their bed and they control it, and it's the first and still only of its kind. So it needs being specific about the use cases, contractors, outdoors, people, these types of things. And it's also trying to control the cost of reaching those customers.

So we're seeing an increase in demand for both and core, and it's only been 7 months, 8 months into the year that we've been really at market with the product, and it took us quite some time to ramp up the marketing messaging. But we're also actively targeting advanced OEM relationships. So stay tuned there, but it's a perfect fit for OEM relationships.

Fantastic. And we saw an active Car and Driver article that was published on September 3. What does that kind of coverage contribute to Worksport? And how do you get it?

Yes. So Car and Driver reached out to us. It was a long process because it's not paid. That was organic media. People would -- it's priceless to get Car and Driver to cover you. It's such a prestigious publication. So it gives customers another perspective. And the reviewers inspected our demo we drove, I think, to Ditroit to show them the product. They observed the solar output. They saw it firsthand, and they noted the price and access trade-offs. And it's a useful -- it's very useful for product coverage. Car and Driver is independent. They don't take payments for any of the coverage, like I said. So that means our workforce brand equity is evolving and people are starting to take notice to it. So it's just another great notch in the belt.

Yes. And the Car and Driver report is easily accessible. If anyone does want to read it, just search up Car and Driver Solis, and you'll see this article published. What I love about it is it is not paid. Everyone can see an organic review of experts in their field talking about our product. Now regarding Terravis, let's give it a little bit of time in this discussion. A shareholder who listened in June knows about the patent. I guess what people keep asking about is the sequence from getting the product from a point of a patent to a commercial product. We talked about this a lot interchangeably throughout the year, but could you give a summary so that investors have a clear idea of what's going on?

Yes. So I want to underline that we know what we're doing here. The core was a very similar product that needed to be designed, developed, tested then validated. So the test -- the validation tests are like ETL, UL and AetherLux, HVAC products have way more certification. So you develop a product in a lab and you see that it works, then you build it based on the certification that you need, then you have to send it once you're sure that it's in a pack, then you send it for certification. And then once you get it certified, that's the stance that it is able to be sold and then you commercialize the product. And that's the same steps that the core had to undergo.

So let's give Terravis some proper time. A shareholder and certification is a key step, as I said. There's a lot of work involved in producing and delivering a finished product to the customer. It's not easy and it takes a significant amount of time investment. So our August discussion described fall certification expectations, which we're just knocking on falls door right now and subject to the process, potential manufacturing interval afterwards. So those are the expectations that we continue to work on, and we really do believe they're going to be met.

Worksport and Terravis team are hard at work there, and I have no reason to report that we're not going to be successful at bringing this breakthrough products to the market. I'm going to underline breakthroughs. There's nothing in this world that produces the same general efficiency of the AetherLux. That market it blows my mind on how big the HVAC market is.

Without getting ahead and speaking about a material announcement that we hope to give in the coming weeks, if not -- coming months, if not weeks, what can you explain a little bit about those steps and why they really matter?

Yes. We can explain why they matter. Testing and certifications establish important requirements for the market entry. It sets a precedent. Manufacturing readiness concerns our ability to supply that product and commercial demand has to become actual customer commitment. So each deserves a clear update. And when there is progress that we can disclose, we will. But once the product is certified, we can work towards things like initial orders, pilot programs and key account initiatives, and that's when the real value of Terravis can start to be unlocked.

So we want to have it certified first one could certify all the fun stuff, which is exactly what we're doing with Worksport right now. We have the product certified, ready to manufacture, patented, all of that. And then we go out there and we start getting the interest in the business there.

So essentially, we should keep the discussions sort of grounded around those key milestones before talking about the financial projections and what that means, maybe that's an item for next year.

Yes. It could be an item for next year, but we want Worksport management and Worksport are also Worksport shareholders and Worksport shareholders, not women management, we all want the same thing, which is we want everything as fast as possible. So we're all working towards the same thing. So there's plenty we need to execute on and the products that are already being sold and Terravis should be evaluated against its own milestones as we get there.

Fantastic. Well, this marks the end of the prepared conversation point. We're open to taking questions. We have some themed questions from investors that have submitted in the past as well as some discussion points. However, if anyone wants to submit a live question to be answered live, they can click the Q&A button and insert the question for us to read and answer. Now Steve, before we get into those questions, a question that we did get e-mailed to us is that what gives you confidence that the recent sales, so we've seen growth 7 months in a row, what gives you confidence that it could continue?

That sales can continue because the market -- first off, the market is faster. We know that other brands in our space are 9 figures, and we know that we make a better product. We deliver better value as we assess. So we have no signs of stopping. And we've only picked up one national distributor. There's multiple.

We've only picked up a few hundred dealer accounts, there's 30,000. So there's just a big market for us to get to. While truck sales continue to grow, F-150 is still the most popularly sold vehicle in North America. So we just know that there's a big market for us to get to. And we're also working on other tunnel cover models that we feel will help us capture the lion's share of the market.

Okay. Steve, we've just got an anonymous question. It's a little bit related to a forward-looking projection that we can't share, but I'll read the question anyways and see if you can give some insight on it. The question reads that the investor knows we've been concentrating on warehouse expansion for distribution. But they're asking if we're executing any auto manufacturers in the sale volume?

Or is it just individual and small solar sales for now? They know that we can't disclose contracts, but they're asking if we're coming close to a contract or aiming for possible near-term opportunities.

So yes, the answer is yes. The answer isn't yes that we have OEM contracts, but the answer is yes, that we feel that Worksport is fit for OEM business, at least in the near future. And the proof is in what we're doing. In order to be OEM ready, you need to have an ISO certification or you should have ISO certification and the proper manufacturing processes, proper quality processes. So we're showing the market that we're preparing for all of these things because we believe that eventually, the Worksport product will be a factory installed item, whether it's the solar products or conventional items.

Thanks, Steve. In regards to a question on inventory, could you explain if reducing inventory is going to make it harder to fulfill customers on a repeated basis? If not, how are you managing?

I mean we have the best financial team led by Jen Kartychak, our CFO, who's brilliant and just lives read anything on the dollars and spend side of our business. And we feel that we're able to manage MRP, which is the procurement of materials in a just-in-time format. So we're trying to get just in time so that we have inventory raw goods just in time for us to be able to make it. So we're not really sitting on inventory. We're getting it just in time. We're building it to order, and we're shipping it just in time. That's the gold standard of our production.

The only time you really want to have a lot of inventory is something that we need to strategically buy the hedge, like if aluminum is a good price, for example, and you want to buy for the year, then you might go out and spend $10 million, $20 million, $50 million in aluminum because you think the price is going to go up because go down. So the idea for us is to buy inventory at different time, make the product different time and ship it and sell at different time so that you don't really -- you shouldn't really need a significant amount of investment in inventory.

So at the start, when we started producing, we've had to buy a lot of inventory. We didn't really know how much we would sell. And now we're rightsizing everything, every compartment in the business to match demand.

And then there is a question about how the company hasn't made an official statement on the 2 recent massive volume days and the associated price movements only for the fall in share price following those days. Do you think that there's something unusual going on related to the high volume? Is it naked shorting question mark?

Yes. So I mean, I want to say I would make a bad politician because I can't veil the real answers in political statements or fake answers. The market, if anyone needs to know, the stock market, especially for nano cap and micro cap companies is highly manipulated. There is native sorting, there's massive shorting. There's all kinds of weird things, and it's really not the company that's doing it. On a day like I think one day, Faran messaged me it was like 5 in the morning, and he's like the stock is going crazy. I wasn't bet. I had -- I was still sleezing at 5 in the morning. I wasn't doing anything. So we have no idea.

But we know that the market does have peaks and all we're focused on, like we -- the market has peaks and flows and all these different weird things that do happen. And we don't know. We're not usually a part of any of that. And what we're doing is just focused on executing on the business. And I personally bought this year $120,000 of stock at [ $0.007080, ] I think. So I'm invested in having the stock price as high as possible as fast as possible. But why the stock -- our stock goes up and then down or why it's even going down, for example, while the business is growing, we have no idea.

All we can -- all we know that will work for sure is just focusing on building the hell of our businesses. And then we know that the rest will fall into place eventually. So we're patient, and we'll continue to just build it. But the market, especially for nano cap, small cap companies is highly manipulated. And if you look at even bigger cap companies, Faran, you mentioned like Snapchat or SpaceX went from $200-plus dollars down to $140. These wild swings are happening and the market is just more fickle today than it was maybe a few years ago.

Thanks, Steve. There's a question related to the special dividend again. The question is, why is management even thinking about selling something that might be a future revenue generator? And maybe it's related to the market cap versus the sales price, but what's your thoughts on that if you're able to give any?

So we're not thinking about it. So we're not planning it. We have no intentions of selling the business. Remember, I built this business from when I was in my mid-20s when I was doing this from a garage and there's a lot of blood sweat and tears. Worksport is evolving. Worksport as well is now a team of people that for their blood sweat and tears. But there's also the idea of being strategic. So we're not thinking about selling Worksport. We're not thinking about selling any business. But if a strategic opportunity came along, we wanted to just have Board and shareholder approval to be able to just be nimble and make decisions based on what the facts are at hand.

So there's no real easy answer to the question, but the answer is I built this business and now we as a team are building this business with a lot of blood, sweat and tears, and we're in love with it, and we be Worksport on a daily basis. So we have no intentions of selling it. But if a strategic opportunity came up, we want to just have all the tools in the tool belt to be able to capitalize and bring shareholder value ultimately, which, again, we're shareholders as well as you, but we're just building the hell of this business on a day-to-day basis, and that's our primary focus.

Yes. And I think that the question from the investor was actually a little bit more focused on the subsidiary, but I think that exact answer applies to the subsidiary as well that it's more about a strategic availability and opportunity based on the facts. So if there's a very strong opportunity to realize a return that's hedged, we just want to have options. It's not about thinking or planning for something that's specific or in intent or in motion at the moment.

Steve, speaking of subsidiary, we have another question about the ZeroFrost heat pump. I know we recently just spoke about it, the process of the steps. But I think maybe just a quick recap, I can answer that question is the ZeroFrost heat pump is still under the final stages of certification. We've been talking about second half of 2026, and we expect it to hit certification in second half of 2026.

What certification means to us, it means AHRI, it means Energy Star, it means ETL. It means the product is ready and available to be sold in the United States of America as well as Canada. Those are the 2 initial markets that we're targeting. And when we get that certification, the first thing we'll do is work towards getting initial sales partnerships and initial units on the ground of key purchase partners that could be part of the future volume. So that's sort of the view on Terravis, and we expect to deliver good announcements on that this year within the second half of this year.

Yes. So not to tile on the statements, but if Ferrari were to invent the vehicle, well, let's say, a lesser known brand, but a new car brand were to bring out a vehicle and they say that it gets 50 miles to the gallon and it can be 0 to 60 in 1 second, you'd want to -- especially as a new brand like works, which is relatively unknown, you would kind of be amused by that statement, but you'd want to see an official test report filling to get 50 miles to the gallon metaphorically or 0 to 50 in 1 second.

So we are saying that the heat pump produces heat in negative 40 and negative 50 Celsius, and it's way better than anything else out there in the world. But us saying it versus getting the certifications that from these government entities or the regulatory entities that confirm that are far more valuable in terms of getting notoriety and being able to sell that notoriety to distributors and these types of things. So we want the certification we ha that validate our funds and then we can go out there and build the business.

Thanks, Steve. And I think we'll take one of the last question here, which is related to our confidence level on cash flow positivity. Now that's a subjective answer, I believe, but maybe what we could talk about is, again, the steps that are needed for cash flow positivity and the traction that we've seen in our historical filings that support that evidence.

Yes. So I mean we're working -- we're fighting like hell to get cash flow positive, and I think we're going to get there. I don't have a crystal ball if aluminum prices double overnight or something crazy happens, then there's no guarantees. But right now, the way things look is we should hit cash flow positivity this year and then our reliance on capital from the outside markets becomes significantly less. And I think everything improves from there inclusive of the value of the company, the stock price and then we're just off to the races and growing.

So we're focused on maintaining margin. We're focused on growing, as we've been growing quarter-over-quarter for a long time. We're focused now on leaning out our operations so that we're efficient in how we put product in boxes and boxes out the door. So with all of those 3 points, a keen focus of ours, I have no reason to believe that we're not going to hit cash flow positivity this year. And then from there, that's when the fund really begins. We think that there's a lot more markets we get after that.

Fantastic. Well, thanks, Steve, and thank you for everyone who attended. I know that there's always going to be more questions, always going to be more interest. Number one, you can always e-mail us or call us with your questions. book a calendar meeting with us. Number two, we look forward to doing these town halls on a monthly, if not every 45-day cadence. So that's your opportunity for us to talk with you, for you to talk about the recent events. And we hope that between every town hall that there is some level of news or update that's going to make the business materials materially stronger, and that's our wish for these town halls.

We thank you for your attendance. We thank you for your questions, and we thank you for your interest in the company. We look forward to the future. And thank you. Have a great day.

Thank you, everyone.

Good afternoon, everyone, and thank you for joining Worksport's Second Quarter 2026 Earnings Call. I'm Steve Rossi, Founder and Chief Executive Officer. With me is Jennifer Kartychak, our Chief Financial Officer.

Jennifer was appointed CFO effective May 1, following Michael Johnston's resignation at the end of April. She has served as our Vice President of Finance since January and started working with the company in 2023. So, this is a continuation rather than a transition. This is our second earnings call in the role, and I'm glad to have her here today with me.

Our quarterly report on Form 10-Q for the period ended June 30, 2026, was filed today and will be available on the SEC's website and on our Investor Relations website, along with these remarks and accompanying presentation. Our remarks will follow the slides. We will open the line for questions. Let me start with some safe harbor statements.

During this call, we'll make forward-looking statements, including statements regarding our expectations for financial and business trends, our market position, our go-to-market growth initiatives and our product programs and their expected benefits. These statements are predictions based on current beliefs, expectations and assumptions. Because they relate to the future, they are inherently subject to uncertainties, risks and change in circumstances that are difficult to predict and many of which are outside of our control.

Actual results may differ materially, and you should not place undue reliance on them. These statements are subject to risks discussed in our SEC filings included in our annual report Form 10-K and our quarterly report 10-Qs. They speak only as of today's date. We assume no obligation to update them, except as required by law, any supplemental operating metrics discussed today should be considered together with and not as a substitute for the underlying GAAP results.

With that, let's kick off the agenda. So today, we're going to review our 2026 scorecard in this quarter, Q2 or last quarter, the Worksport platform, liquidity and capital resources, financial review, inventory strategy, commercial execution and 2026 outlook and cash flow framework.

So a lot to go through, stay buckled in. We're going to go quick, and we're going to take questions at the end.

We are entering a phase where scale efficiencies are becoming evident. In Q2 2026, quarter-to-date revenue grew sequentially by 58%, while total operating expenses declined by 17% and cash used in operations also declined by 58%. Our results reflected improved operating leverage and a more efficient cost structure. We are beginning to generate revenue more efficiently and with a greater proportion of sales converting our operating cash flow.

The following Q2 2026 results support our positive scaling dynamics.

Point number one, net sales were approximately $5.2 million for the quarter. This is the strongest quarterly result we've had in Worksport history, up 27% year-over-year and 58% sequentially. Gross profit was approximately $1.6 million, up approximately 52% year-over-year and 93% sequentially with gross margins expanding to approximately 32% from approximately 26% in the same quarter last year, or sorry, in Q1 of this year. Operating expenses were approximately $5.5 million, down approximately 17% from Q1 2026.

Operating expenses as a percentage of net sales declined from 128% to just 68% during the same time period. And net cash used in operating activities was approximately $3.4 million, an improvement of 58% from $8.2 million in Q1 of this year.

The quarter also strengthened as it progressed. June was our strongest revenue month on record at approximately $2.1 million in sales, with monthly gross profit rising during the quarter to 35% in June alone. We believe June is a strong indicator of our ability to scale the business as it continues to expand both in the consumer direct and commercial reseller sales channels. This quarter, we focused on improving our operating cash burn, and we made good traction. Jennifer will provide more insights on factors contributing to our improvements.

We will also speak to how do we intend to convert our strong operational progress into sustainable operating cash flow breakeven, while Q2 2026 established is that the cost base and the revenue line can move in opposite directions in the same quarter.

Moving forward, we intend to continue targeting increased revenue with efficient cost basis. We continue to evolve into a diversified platform with multiple products serving multiple channels and generating multiple revenue streams. As we scale, we are mindful of prioritizing our organizational strengths.

Our core economic engine is the hard-folding Tonneau Covers we proudly make in our ISO 9001 2015 certified facility in West Seneca, New York. We launched our newest tonneau cover NEXUS in last quarter, Q2 of 2026. Our near-term growth levers include distribution onboarding, distribution reorders, expanding e-commerce and conversion of inventory into working capital.

We will continue making new product innovations for our products, and we're going to continue to pursue larger partnerships on our energy products. Our SOLIS Solar Tonneau Cover COR portable energy system are an emerging commercial option that extends the truck bed from a covered platform into a mobile power system. And really excitingly, our AetherLux heat pump system through our subsidiary, Terravis Energy is a very exciting strategic opportunity that is expected to be certified within the second half of this year.

We prioritize and emphasize operational excellence ahead of additional growth vectors. Our core business strategy must be executed with discipline, and our results in Q2 2026 support our commitment to the success of our platform.

I will address liquidity directly, and then I will go through our recent business updates. At June 30, 2026, we held approximately $1.2 million in cash and cash equivalents. Separately, we had about $820,000 of remaining availability on our revolving line of credit, which is borrowing capacity, not cash. We reported an inventory balance of $12 million, which we expect to be a strong source for additional liquidity, and we'll discuss this further below.

Our Q2 Form 10-Q continues to disclose substantial doubt about our ability to continue as a going concern. While this disclosure reflects uncertainties associated with our current liquidity and capital resources, management has implemented a clear plan forward on revenue growth, margin expansion, disciplined cost management and active analysis of additional financing opportunities.

We remain focused on executing our strategy and strengthening our financial position. Our plan for closing the gap in the same period we are executing operationally. convert inventory into sales and cash, grow gross profit faster than reoccurring costs, cash costs and improve marketing productivity.

Our objective during the first half of this year was to strategically support growth initiatives that we believe will create value over time. Our strategy included funding working capital and operations to support scaling, and we are now well positioned to convert inventory into working capital efficiently in the second half of this year. We continue to prioritize a reduction in our reliance on dilutive capital as our gross profit expands and operating cash flow improves.

Our greatest source of liquidity, inventory is being managed during the balance of this year. We are strategically producing our products to function in a Just-In-Time environment such that we maximize our use of raw materials while minimizing our concentration risk of inventory buildup.

More on the subject to come. To align my incentives further with the stock, I elected to receive previously accrued and unpaid bonus compensation of $125,000 in stock at the market's closing prices. I continue to believe in the future of the company that reflects the strong values we continue to actively target cash flow positivity.

With that, I will hand the call to Jennifer.

Thank you, Steven, and good afternoon, everyone. Net sales for Q2 2026 was $5.2 million compared to $4.1 million in Q2 2025 and $3.3 million in Q1 2026, growth of approximately 27% year-over-year and 58% sequentially.

First half net sales were $8.5 million or about 11,574 units. The shape of the most recently completed quarter matters as much as the total. Monthly net sales during Q2 2026 were approximately $1.4 million in April, $1.7 million in May and $2.1 million in June, each month larger than the one before it.

June 2026 was the strongest revenue month in our company's history. That progression reflected stronger production output, broader product availability and channel execution rather than any single order.

We sold 7,010 units. 2,957 through B2B and 4,053 units through B2C, generating approximately $2.3 million and $2.9 million of net sales, respectively. Our mix between sales channels was consistent between Q1 and Q2 2026. The mix matters because B2B carries a lower gross margin, but a materially lower marketing cost per unit. And the balance between the two is what determines both blended margin and cost efficiency.

Having both channels gives us a direct customer insight and wholesale reach at the same time.

Gross profit was $1.6 million compared with $1.1 million in Q2 2025 and approximately $850,000 in Q1 2026, an increase of approximately 52% year-over-year and approximately 93% sequentially.

Gross margin was approximately 32% compared with 26% in Q2 2025 and approximately 26% in Q1 2026. Gross profit rose from approximately 26% in March 2026 to 35% in June 2026. The improvement was driven by higher sales volume, efficiencies and overhead absorption and product mix. These gains offset higher input and landed costs, including tariff pressure.

That is worth emphasizing.

We expanded margin more than 5 points against a rising cost base. Sustaining gross margin at its current run rate as volume increases and sales mix shifts is a principal objective for the back half of 2026.

On to operating expenses and our net loss. Total operating expenses were about $5.5 million, up approximately 16% year-over-year. However, operating expense as a percentage of sales decreased 9 percentage points year-over-year. In addition, operating expense decreased approximately $1.1 million or 17% from Q1 2026.

Research and Development expense was $214,000. A4 and NEXUS have moved out of development and into production, which is why this expense caption fell $91,000 or approximately 30% year-over-year.

Spend converted into product we are now selling.

General and Administrative expense was about $3.5 million, up approximately 15% year-over-year. As a percentage of net sales, G&A decreased by approximately 7 percentage points year-over-year. Further, this expense caption declined by approximately $690,000 or 16% from Q1 2026.

Sales and Marketing expense was $1.7 million, up approximately 31% year-over-year. However, Sales and Marketing expense as a percentage of net sales only increased 1% compared with net sales increase of 27%. Further, this expense caption decreased approximately $449,000 or 21% from Q1 of 2026, the first evidence of a marketing discipline we committed to during our Q1 2026 earnings call.

Net loss was $3.97 million compared with $3.73 million in Q2 2025 and $5.83 million in Q1 2026. That is a 32% sequential improvement and a 6% reduction in net loss year-over-year.

Loss per share improved from $0.33 from $0.71 for the prior year quarter. This year-over-year comparison is the one that keeps our attention.

Revenue growth alone has not yet outrun our recurring cost base. The sequential comparison is the one that shows the mechanism working. Our objective for the second half is straightforward, focus on gross margin expanding at a faster rate than operating cash requirements, creating a path to positive operating cash flow.

Speaking of cash flow, net cash used in operating activities in Q2 2026 was $3.4 million compared with $8.2 million in Q1 of 2026 and approximately $3.1 million in Q2 2025, a 58% sequential reduction. For the first half of 2026, operating cash use was $11.7 million compared with $6.9 million in the prior year period, an increase of approximately 68%.

The Q2 2026 bridge is straightforward. We begin with a net loss of $3.97 million, approximately $1.1 million is related to noncash items, principally share-based compensation and depreciation and amortization, leaving a loss before working capital movements of approximately $2.74 million.

Working capital used approximately $555,000, a substantial normalization from the roughly $3.6 million consumed in Q1 2026 and the clearest sign that the balance sheet build phase is believed to be behind us.

Cash and cash equivalents was $1.2 million at June 30, 2026, compared with $567,000 at March 31, 2026, and $5.9 million at December 31, 2025.

On to inventory. Inventory consists of raw materials that have already been purchased, work in progress and finished goods. Converting this inventory into sales represents the largest internal source of working capital available to the company without the need to raise external financing.

Net inventory was $12.1 million at June 30, 2026, up $2.5 million from year-end. Inventory included approximately $6.6 million of raw materials, $4.6 million of finished goods and $845,000 of work-in-progress. We are actively optimizing new production against growing sales channels and expect our raw materials and finished goods components to meaningfully reduce during Q3 2026.

We are optimizing our inventory in the following initiatives:

Number one, procurement. We are actively managing procurement requirements for our raw materials against our forecasted projections. First half 2026 procurement of approximately $8.1 million was front-loaded to support production requirements for expanding sales channels, with approximately $1 million of those purchases still in accounts payable at June 30, 2026. That spend, including the amounts outstanding at the end of Q2 2026 are now behind us.

Number two, production. The process to manufacture our Hard-Folding Tonneau Covers is managed against demonstrated sell-through and distribution reorder cadence rather than launch forecasts.

Number three, fulfillment. Finished goods of approximately $4.6 million or 6,800 covers is the balance most directly convertible in the near term. We manage fulfillment by product family and sales channel with the goal to sell more than what is produced in a given month. Working capital conversion is the measure we will report against.

For insight, in July, we sold about 30% more covers than we made, and that continues to be the goal for the balance of Q3. We are prepared to take questions on inventory aging and the split between inventory supporting confirmed orders versus forecasted demand.

Back to you, Steven.

Thank you, Jennifer. NEXUS entered commercial production on April 13, 2026, with sales shortly thereafter, making Q2 2026 its first quarter in our product portfolio. Its proprietary single-sided operation allows a person to secure and release the NEXUS tonneau cover without making laps around the pickup truck, practical solution to a real complaint of the real-world utility of NEXUS creates a differentiated premium product for our customers.

The product launch followed the shape you want to see. Following its introduction, NEXUS achieved $1 million in cumulative sales across all sales channels in just about 10 weeks. Margin contribution increased across both sales channels during Q2 of 2026. A product went from its first unit to contributing meaningful margin inside of a single quarter. The focus is now to maximize margin capture through manufacturing efficiencies and channel expansion, including established sales cadence.

Into July, NEXUS sales continue to grow with NEXUS-related sales orders commanding nearly $1.5 million. Two distribution partners were added in Q2 of this year, one at the end of April and the other one in June. Both distribution partners had orders fulfilled during the quarter.

Meyer Distributing joined in June of 2026 as our first multinational distribution partner, bringing a substantially larger North American wholesale network serving dealers, installers and aftermarket resellers. That is the widest wholesale access the company has ever had.

However, Tri-State enterprises began carrying our product, including NEXUS and broadened our reach across four U.S. states. This matters because distributor-driven sales in our commercial channel, including repeat orders, expands our reach while reducing our blended market burden per unit. We plan to focus on creating distributor programs during the second half of this year that emphasize active order frequency.

Our filing also describes conversations with three additional major distributors. We remain focused on achieving successful contractual arrangements to maximize our distribution network of nationwide U.S. dealers. I want to characterize those accurately. There are opportunities at present, and we will announce updates as they become available. Let's talk SOLIS.

SOLIS integrates solar generation directly into a Tonneau Cover platform, the first of its kind. COR is a modular portable energy system that pairs with SOLIS to operate on its own, or operates on its own rather. Together, they extend the truck bed from storage into a power source. Both entered Q2 2026 with launch and certification work substantially complete.

COR's UL and CSA certification package removes a real commercialization barrier and expands the set of distributors, retail, fleets and commercial customers that can evaluate the system. SOLIS and COR did not represent a material share of Q2 2026 revenue. Our near-term objective is product market fit and acquisition economics that do not require customer acquisition costs to rise in step with gross profit.

We continue to develop federal fleet and OEM-oriented opportunities, and we assume no material revenue from them in our near-term plan. However, I can confirm that we believe we have made notable progress on that front.

Let me repeat. I believe. and I can confirm that we believe that we have made notable progress on this front in commercializing both SOLIS and COR. Moving aside into Terravis Energy, we received U.S. patent #12624872 during the quarter, covering heat pump systems architecture related to ZeroFrost and designed to reduce or eliminate conventional defrost cycle.

Certification work is expected to continue in the second half, subject to testing and customary certification time. AetherLux remains pre-commercial, no procurement decision has been made, and we do not rely on AetherLux revenue to achieve our 2026 operating plan.

The next date is third-party validation and certification. We will allocate capital to it against measurable milestones and nothing else.

We believe we may hit momentary operational cash flow positivity within Q3 2026. This is huge. At this time, we are not providing guidance of specific calendar targets for sustained operating cash flow positivity, though we remain focused on reaching sustainable operating cash flow breakeven in 2026. Our priority is disciplined cash generation rather than optimizing around a single quarter. Rather than focus on a projected date, we believe investors should focus on the underlying drivers of operating cash flow.

Our path to positive earning cash flow is straightforward: grow revenue, expand gross profit, maintain disciplined control over reoccurring costs and convert working capital more efficiently, all of which we've shown that we can do in this past quarter.

During Q2 of 2026, we made progress across all four areas simultaneously.

Gross profit totaled approximately $1.7 million compared to $4.5 million of cash operating needs before working capital, resulting in an operating cash flow gap of roughly $2.9 million before working capital movements.

Working capital usage accounted for an additional $0.6 million during the quarter. Viewed differently, gross profit covered approximately 32% of our reoccurring cash operating requirements during the quarter.

Closing the remaining gap can be achieved through some combination of higher revenue, sustained or improved gross margins, disciplined reoccurring expenditures and improved inventory conversion.

At a 35% gross margin and using our most recent run rate of $2.1 million of sales, quarterly revenue of approximately $12 million, $12.9 million would fully cover the current pre-working capital cost structure.

Alternatively, if we expand our margin contribution by just 300 basis points and recognize approximately $9.3 million of quarterly net sales, reoccurring costs would need to decline by approximately $1.2 million per quarter for us to fully cover our reoccurring expenditures, assuming relatively neutral working capital.

We offer these figures as a sensitivity guidepost rather than revenue guidance. The key takeaway is that the gap continues to narrow, and we believe the progress achieved during these quarters demonstrates a clear trajectory towards a self-sustaining cash flow positive operating business.

Q2 of this year showed that Worksport can generate stronger revenues, expand margin, reduce operating expenses and materially improve cash efficiency in the same quarter against a rising input cost basis. The combination results in a business which we believe is on its way to scaling successfully. We are aware that there is still work ahead of us. We must convert our inventory, expand our commercial distribution reach while maintaining gross profits that meaningfully contribute to our operations.

This is a question of execution, and it's the right question to be judged on. So we are committing to three things: convert inventory into cash, turn distributor access into repeat large orders and grow sales volumes faster than operational cash requirements.

On that, thank you very much for your continued interest in Worksport. This concludes our prepared remarks.

Operator, please open the line for analyst questions and our investor town hall call will follow.

[Operator Instructions] We welcome live questions from any analysts on the call and investors may submit questions through the Q&A feature or by e-mail to [email protected]. Selected investor questions may be answered live during the town hall that immediately follows the end of this call. I see that Tate Sullivan from Maxim Group has his hand up.

Thank you for having the town hall. And first question on the inventory management. One of your slides showed in finished goods inventory, you have about 6,800 covers. Can you talk about how the pricing in the current tonneau cover market will work to get those 6,800 covers out the door? Maybe might pricing improve quarter-over-quarter? And if so, in what channel?

Sure, yes. So most of the inventory that we have on hand was AL3, AL4. We've been finding good success in running small promotions on AL3. June was a small trial run, on direct-to-consumer website sales, and we ran a small promo, and we liquidated a significant amount of inventory, which is great. So we're going to offer incentives on reseller channels and online channels that make sure we satisfy both sides of our business, reseller and direct-to-consumer.

Then as we burn through that inventory, we're going to, as we said in the call, we're going to focus on just in time to mitigate keeping too much inventory.

And second for me is in the quarter, sales and marketing expenses were about $1.7 million. Can you break that down going forward? Will you have more or less sales and marketing expenses on SOLIS and COR initiatives? Or now they have more distributor relationships, Will that number decline? Can you talk about that mix and outlook, please for sales and marketing expenses?

It's a difficult question because of the volatility of the underlying platforms. The biggest platforms, there's just really two. It's Meta or Facebook, which was Instagram and then Google. And those two networks are very volatile. They tend to get a little bit more expensive for us to remain competitive in terms of,, during the winter months like the month of November, Black Friday. So we're going to try to keep things. We outlined in this call that we're able to raise sales. I think it was the 17% or 18%, while sales and marketing will increase 1%. I may have those numbers wrong. I haven't committed them to memory yet.

So we think that sales and marketing will remain as much flat as possible while sales continues to increase because we're more efficient at how we market and we're becoming much more recognized as a brand. But on the other side, we're prepared to invest more in sales and marketing to continue to grow sales if that's what we need to do. So the answer to the question is we're going to try to keep it sideways so that our sales increase while sales and marketing does not. However, if it means adding significant revenues, we will invest there because it's just going to get us to that cash flow breakeven and positivity that we want to sustain.

Steve, we have some questions here from investors on the call. One of the first questions is from Robert A. speaking to tariffs and aluminum raw prices. Could you comment on how that is currently impacting Worksport?

Yes. Yes. I read that question. So Robert, great question and one that when I look at my wrist watch, I can see my heart rate raising, not because of you, but because of the underlying frustrations I have.

Look, the #1 selling vehicle in America is the F-150. The average individual buying that is our farmer, our vet, our serving members, the average American. And that vehicle in the past two or three years has gone from in the mid-30,000s to the high 40,000s. And why? Because that vehicle is made primarily with aluminum. I think the frame is steel, the body is completely aluminum. That's significant inflation that the American individual, the population is paying for.

So the cost of aluminum has risen from approximately $1.30 a pound to double over the past few years, directly correlated to the tariffs that have been imposed by the current administration. It's not speculatory. It's something that anyone could see through the open LME and MWP markets. You're aware of it, of course. And the rise in aluminum cost is not because demand is higher. In fact, demand for aluminum is quite weak and soft, at least within this continent.

So how it's affected things is it's reduced the NEXUS and the AL4 were meant to be very profitable. They were meant to be 40%, 50%. Don't quote me on it, but we engineered them to make significant margins. Making 35%, obviously, is to us still very healthy, but bronze metal. These products should be making us 45%, 55%.

So how it's impacted us is it's not, I don't think it's held us back on our sales side of things, but it's impacted our ability to offer better pricing programs to our distribution partners, better incentives, deeper discounts during our Black Friday months for dealers and distributors.

The last thing I'll say is the AL 4 is something that we're not really that keen on selling through distribution because the margin isn't there because of the rising cost. And we don't want to raise our cost anymore of our product because that's just the American individual paying for inflation. So how it's impacted things is the margin is not quite as high, although I think that our sales are close to being where they should be, except for us maybe not selling the AL4 through distribution as a result.

But it's fine to the NEXUS is taking that demand anyway. So we're seeing the same volume just through a different channel, if that makes sense.

Thanks, Steve. We do have a question here from an investor that submitted it via e-mail. They were asking for specific clarity on Item #3 of the upcoming Worksport Annual General Meeting, AGM. To specify for all people listening, Item #3 was to approve on an advisory basis, a proposal expressing shareholder support to the Board of Directors to consider declaring special dividends in connection with the sale of any business unit or material asset of the company, subject to applicable law and the Board's fiduciary duties. Steve, could you provide some insight on why the company decided to include this for the upcoming AGM.

We're working really hard to build a business. There has not been a business like ours that has done what we're able to do in as quick of a time as we were able to do it. The growing Worksport from zero from $1 million to $8 million to $16 million to a run rate of 20s and hopefully 30s before the end of the year is in the short period of time that we've been able to do has never been done before. As much as investors always have an appetite like us for more, we've broken all records at anyone in our industry.

As a result, obviously, we're going to have a significant amount of interest as we grow in divesting. The opportunity is going to be there as we grow to divest ourselves of certain business units. Terravis Energy as a quiet subsidiary to Worksport, the public company is developing heat pump technology for a $150 billion market that is needed and does not exist.

Once again, we're achieving on that business unit what hasn't ever been done before with a track record of execution behind us. So as we grow, there may be an opportunity for divesting ourselves of a certain business unit, whether that's Worksport or Terravis or something that we haven't even done yet. If we were to look at it, it could be significant. And then if it is significant, there could be a special dividend to shareholders paid. What I will reference, if I can, and I'll ask for forgiveness versus permission, is that a competitor of ours about 1.5 decades ago, sold their business.

Top line revenues were in the mid-$50s million. EBITDA was marginal, and they sold just about a decade, 1.5 decades ago privately for about $120 million. So Worksport's trending towards those same revenues, probably healthier margins, and we trade at, what is it for like a $16 million, $10 million mark. I haven't checked our market cap, but what I mean is the business underlying the stock is very valuable.

If we see that there's an opportunity to capture that value through a divestiture, there's an opportunity, of course, no guarantees that investors could receive a special dividend during that time. So that's how that would work mechanically and the logic behind it, but there's no guarantees of any of it.

Thanks, Steve. I have a question from. He said, he is a big fan of SOLIS and COR combination for trucking. What are your plans to extend this to more general use and increase the potential market purposes?

Good question. SOLIS, we're probably going to be looking at ESL systems to be able to remove it from the truck and mount it anywhere in a field, job site can these types of things, more universal mounting applications. We're still going to be focused on OEM integrations, more to come on that. And we're still going to be focused on broader applications on the vehicle side of things. But the SOLIS, we're going to look at universal mounting solutions, which would be pretty easy for us.

Then the COR, we're going to, I can't say much about it, but we're going to look at more use cases for our battery blocks as well so that people can integrate our batteries into other devices that consume electricity, 36 and 48 volts.

Thanks, Steve. You spoke about tariff costs since tariffs were declared illegal, in this context, this is the question from the investor, but I think they're referring to the recent government mandate from the Supreme Court talking about the legality of the tariffs. Their question is, will Worksport receive any money back like some other companies may have received?

Good question. So yes, on the aluminum side of things, it's inflation. We didn't pay tariffs on our aluminum. We paid inflation on our aluminum because of the tariffs. So there's, unfortunately, no one and 350 million people are paying for it. No one is going to get any money back. Also realistically, we were in a meeting with Toyota Corporation. Don't misread this. There was a seminar by Toyota, not a business meeting, but there was a seminar. Even Toyota Motor vehicles, one of the biggest car manufacturers in the world during the seminar was indicating that they don't believe that the reduction of tariffs will reduce the price of aluminum because now the U.S. economy has absorbed that extra income.

So if you notice, I don't want to get into the political side of things, but on the inflation as a result of the tariffs, I'm not sure it's going to be reversed in a very short period of time. On tariffs that we did pay on imports from China or foreign countries that are tariffed, the Section 301 tariffs, yes, we can apparently get some of these tariffs back, but I believe that the process is still very foggy or unclear, and it's also not immediate.

So we're working with a consultant that will help us with some of the tariffs that we paid. But because we're significantly American-based materials, the majority of our product is sourced, the materials are sourced in America. We're just paying just brutal inflation for our material and not tariffs. So there's not much we can do about it. But anything that we did pay tariffs on, we'll look to get the credit back for them, but it probably won't be this year.

Thanks, Steve. And we have a question here from Shane C. I'm going to direct this towards Jennifer. Jennifer, the question is, as you sell down inventory for cash, do you foresee any inventory shortfalls? Or is that baked into the plan?

Great question. In terms of our plan, we are forecasting a reduction in our finished goods inventory while we move closer to a just-in-time format, if you will, for the balance of the year. So we are well positioned to be able to meet demand as well as distribute as we receive orders and we receive commitments from our customers.

Thank you, Jen. Steve, we have here two questions related to AetherLux. I am going to combine them because they're very similar. The question is asking if there is any way to accelerate AetherLux revenues. They believe that it might be far into the future. They're asking if it is. And they're wondering if Worksport found a way to manufacture AetherLux products to get to the market faster. Are we working with a partner on that front? They're asking.

Yes, very good question. I'll keep the answer brief, not because I don't want to hide from it, but I'll keep things direct so I answer them, not with words solid. Number one is Worksport's partnered with a very large manufacturer of heat pumps to manufacture our design and the immediacy in which that we could receive finished AetherLux products post certification is about 45 to 60 days. So I'm not worried about that.

The certification process is necessary, and there's a lot of certifications, AHRI, ENERGY STAR, UL, ETL, I think. So there's a lot of certifications. That process should conclude in the fall months of this year, so September, October, I'd say probably October. And then after we're certified, 45 to 60 days as early as we could see product.

I could also say that we're working feverishly on some initial orders from various public or private sector businesses. So what that means is it could be governmental or it could be private sector, but we are looking at orders to get the what's on the balance sheet. But we feel pretty optimistic that the product is everything we've said and more of what it's supposed to be in terms of a breakthrough product, and we think that the demand is going to be there.

Then also, you tend to judge, people judge based on history. And I understand that we've had some black eyes as a business. But one thing that you should judge us on, too, is that when we say we're going to execute, we do. We said we're going to do SOLIS and COR. It took a little while longer, very complicated products. We executed. They're in the market. You could buy them right now. AL3, AL4, HD3,NEXUS, execution, execution, execution.

So no investor here should wonder whether we're going to execute on this product. We've shown nothing but nothing other than our ability to be able to execute on bringing products to market and then monetizing those products. So I don't think it's a question of if now, it's just when. And our intention is to expedite the win for within, let's say, Q4 of this year to get the product out and contributing to the balance sheet.

Thank you, Steve. We have a question here from Fred T. Could you walk us through the NEXUS ramp-up in any more detail, specifically perhaps an ASP by channel, margin profile relative to AL4, number of active SKUs or a July versus August sell-through run rate and whether NEXUS is expanding the market or cannibalizing A4 demand. I think I'm going to point this to Jen because there are some levels of that question that we can't answer publicly. But Jen, do you understand the question? Or would you like me to repeat?

I would prefer if you repeat, please.

Okay. So the question is about the NEXUS ramp-up, specifically if we could comment about any of the following ASP by channel, margin profile relative to A4, number of active SKUs for NEXUS, current July/August sell-through run rate and/or whether NEXUS is expanding the market or cannibalizing the AL4 demand.

Okay. So our margin is moderately more healthy on our NEXUS versus our AL4. And with the introduction of the NEXUS, we were able to achieve our first $1 million in sales on NEXUS within a single quarter. So it took us about 10 weeks from the initial production of our NEXUS product to securing that first $1 million, which is the best ramp-up rate that we've had to date on any of our product introductions. So it's a great testament to the product itself and what it can deliver in terms of values to our end customers.

That being said, the mix between NEXUS and AL4, I would say, in general, they offer different opportunities to our customers. So it really depends on what our customers are looking for in terms of a product. I think they both have benefit to them. In terms of the mix and the resulting impact of that, I would say it hasn't cannibalized. I do not believe that it will cannibalize our mix in general with the introduction of the NEXUS.

But in general, we have seen and continue to see a healthy contribution to margin, not only in our B2C space, but also in our B2B space. It's just a product in general that is not well, it doesn't have any natural competitors, if you will. I'm sure that Steven will be able to speak to that.

Yes. I just wanted to Jen answer the question brilliantly, but also, ASPs are, I'm a little acronyms typically, but I think that, that means average sell price and margin profile. Margin profile is strong. Average sell price is confidential, not because I don't want to answer it, but because we really don't want to speak to what channels pay, but we are uniformed and do have UPP, which means that everyone pays the same in a certain channel like a distributor pays distributor pricing, jobber pays jobber pricing. So we're not giving unfair advantages to anybody in generalities.

I think, 35 SKUs, and we're thinking about 8-foot bed applications. So that should increase SKU coverage and penetration on the products within this year by about six, maybe a little bit less. So we're going to be in the 40s with the NEXUS. So we have all the major A, B and C movers, Ridgeline, Tacoma, Gladiator, and we're working, I think, on Colorado/Canyon, so the more obscure, less popular trucks.

Yes, so we still sell thousands of AL4, thousands and thousands. So the demand is there, and it's not cannibalizing it, but it is offering something that just doesn't exist. So we think that AL4 markets, I think that the Rod Flip-Up Tonneau Cover business is going to be challenged come the end of the year for various reasons, but we've secured our success with the NEXUS. And you know what, if we switch every sale of a Prop Rod Tonneau Cover to the NEXUS, all the better because they're more profitable and they're just a better cover anyway.

But I think that the Prop Rod AL4 type business is going to survive for the foreseeable future and be quite healthy for us. So we're okay either way, if that makes sense. But for the rest of the sense of, a very good question, Fred. But for the rest of the sensitive information, I'd love to answer it, but we've got to keep some numbers under our hat.

Thanks, Steve. And I think one aspect that we can also highlight for investors listening to this call is we mentioned that in 10 weeks, NEXUS generated about $1 million in sales. And then I think, Steve, right at the end, you sped in there that for July, NEXUS amounted to an order volume of $1.5 million in July. So to reiterate, $1 million for the first 10 weeks and then $1.5 million for July, if that gives you an idea on what we're projecting for Q3 as well as the continued growth for NEXUS.

The last question on the call today is from Gary B, and I would like Steve to answer this. Steve, what is the avenue towards making this $1 million a week company in sales?

Over $50 million a year in sales for us is not impossible. We just got to keep on working on bringing the COR and SOLIS deeper into market without spending too much money on that, the marketing side of things so that we're profitable on those sales. And we just signed a distribution within the last quarter, just recently.

So these relationships are new, and we need time to have them mature. The 17,000, maybe even more, there's probably 18,000 dealers in America at this point, that could sell our product, and it just takes time to get them acclimated to the product, get displayed, get sales reps out there and get them moving the Worksport product line. So I think it's just a bit of time.

You could see $1 million to $8 million to $16 million to, we're hoping to hit at least a run rate in the $30-plus million range this year. That's significant growth. So if you follow even similar growth, not even duplicative, it could be within the cards for next year, I think, and then upwards and onwards from there.

Thanks, Steve. I'm going to sneak in one more final question from Ramesh B. Ramesh is asking if you see any reason to raise new funds for the rest of the year or if you can give any profile on maybe the amount of funds that need to be raised. Jen, do you want to answer this?

So in terms of our overall outlook for the remainder of the year, we are challenging ourselves, if you will, to see that we can see it through to cash flow positivity. So our plan is if there's opportunity out there, certainly, we will explore that with a potential investor. But for the balance of the year, we really would like to see ourselves stand on our own two feet. Steven, do you have anything else to add?

No, no, last year, we raised, I think, over $20 million last year in cash that we needed to continue to fund the growth and a lot of it ended up in inventory. This year, we've raised significantly less. So our reliance on outside investor capital is already significantly lower than it was this time last year, and it's going to continue to reduce. So I think that's exactly we're going to stand on our own two feet, which at that point puts Worksport in a very, very strong position that, frankly, a lot of small companies like ours on the NASDAQ don't ever get the chance to achieve.

That does mark the end of this call. We ask any investors that have any further questions to e-mail us at [email protected]. We look forward to keeping you updated on our journey as well as sharing more news and information as it happens. Thank you very much for your time and attention today.

Good afternoon, everyone, and thank you for joining Worksports Second Quarter 2026 Earnings Call. I'm Steve Rossi, Founder and Chief Executive Officer. With me is Jennifer Kartychak, our Chief Financial Officer. Jennifer was appointed CFO effective May 1, following Michael Johnson's presentation at the end of April.

She has served as our Vice President of Finance since January and started working with the company in 2023. So this is the continuation rather than the transition. This is our second earnings call on the role, and I'm glad to have her here today with me.

Our quarterly report on Form 10-Q for the period ended June 30, 2026 was filed today and will be available on the SEC's website and on our Investor Relations website along with these remarks and accompanying presentation. Our remarks will follow the slides.

We will open the line for questions. Let me start with some safe harbor statements. During this call, we'll make forward-looking statements, including statements regarding our expectations for financial and business trends, our market position, our go-to-market growth initiatives and our product programs and their expected benefits.

These statements are predictions based on current beliefs, expectations and assumptions because they relate to the future, they are inherently subject to uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control.

Actual results may differ materially and you should not place undue reliance on that these statements are subject to risks discussed in our SEC filings included in our annual report, Form 10-K and our quarterly report 10-Q -- they speak only as of today's date.

We assume no obligation to update them, except as required by law. Any supplemental operating metrics discussed today should be considered together with and not as substitute for the underlying GAAP results. With that, let's kick off the agenda.

So today, we're going to review our 2026 scorecard in this quarter, Q2 or last quarter, the Worksport platform, liquidity and capital resources, financial review, inventory strategy, commercial execution and 2026 outlook and cash flow framework. So a lot to go through, stay buckled in. We're going to go quick, and we're going to take questions at the end.

We are entering a phase where scale efficiencies are becoming evident. In Q2 2026, quarter-to-date revenue grew sequentially by 58% while total operating expenses declined by 17% and cash used in operations also declined by 58%. Our results reflected improved operating leverage and a more efficient cost structure.

We are beginning to generate revenue more efficiently and with a greater proportion of sales converting our operating cash flow. The following Q2 2026 results support our positive scaling dynamics, point number one. Net sales were approximately $5.2 million for the quarter. This is the strongest quarterly result we've had in Worksport history, up 27% year-over-year and 58% sequentially.

Gross profit was approximately $1.6 million, up approximately 52% year-over-year, 93% sequentially with gross margins expanding to approximately 32% from approximately 26% in the same quarter last year -- or sorry, in Q1 of this year. Operating expenses were approximately $5.5 million, down approximately 17% from Q1 2026 and operating expenses as a percentage of net sales declined from 128% to just 68% during the same time period.

And net cash used in operating activities was approximately $3.4 million, an improvement of 58% from $8.2 million in Q1 of this year. The quarter also strengthened as it progressed. June was our strongest revenue month on record at approximately $2.1 million in sales with monthly gross profit rising during the quarter to 35% in June alone.

We believe June is a strong indicator of our ability to scale the businesses continues to expand, both in the consumer direct and commercial reseller sales channels. This quarter, we focused on improving our operating cash burn, and we made good traction.

Jennifer will provide more insights on factors contributing to our improvements. We will also speak to how do we intend to convert our strong operational progress into sustainable operating cash flow breakeven while Q2 2026 established is that the cost base and the revenue line can move in opposite directions in the same quarter.

Moving forward, we intend to continue targeting increased revenue with efficient cost basis. We continue to evolve into a diversified platform with multiple products serving multiple channels and greater and generating multiple revenue streams.

As we scale, we are mindful of prioritizing our organizational strength. Our core economic engine is the hard holding tunnel covers we proudly make in our ISO 9001-2015 certified facility in West Seneca, New York. We launched our newest tunnel covered Nexus in last quarter, Q2 of 2026.

Our near-term growth levers include distribution onboarding, distribution reorders, expanding e-commerce and conversion of inventory into working capital. We will continue making new product innovations for our products, and we're going to continue to pursue larger partnerships in our energy products. Our SOLIS solar tonneau cover core portable energy system are an emerging commercial option that extends the truck bed from a covered platform into a mobile power system.

And really excitingly, our AetherLux pump system through our subsidiary [ TerrAviEnergy, ] is a very exciting strategic opportunity that is expected to be certified within the second half of this year. We prioritize and emphasize operational excellence ahead of additional growth vectors.

Our core business strategy must be executed with discipline and our results in Q2 2026 support our commitment to the success of our platform. I will address liquidity directly, and then I will go through our recent business updates. At June 30, 2026, we held approximately $1.2 million in cash and cash equivalents.

Separately, we had about $820,000 of remaining availability on a revolving line of credit which is borrowing capacity, not cash. We reported an inventory balance of $12 million, which we expect to be a strong source for additional liquidity, and we'll discuss this further below.

Our Q2 Form 10-Q continues to disclose substantial doubt about our ability to continue as a going concern. Will this disclosure reflects uncertainties associated with our current liquidity and capital resources, management has implemented a clear plan forward on revenue growth margin expansion, disciplined cost management and active analysis of additional financing opportunities.

We remain focused on executing our strategy and strengthening our financial position. are planning for closing the gap in the same period we are executing operationally, convert inventory into sales and cash, grow gross profit faster than reoccurring costs, cash costs and improved marketing productivity.

Our objective during the first half of this year was to strategically support growth initiatives that we believe will create value over time. Our strategy included funding working capital operations to support scaling and we are now well positioned to convert inventory into working capital efficiently in the second half of this year.

We continue to prioritize a reduction in our reliance on dilutive capital as our gross profit expands and operating cash flow improves. Our greatest source of liquidity, inventory of liquidity, inventory is being managed during the balance of this year. We are strategically producing our products to function in a distant time environment such that we maximize our use of raw materials while minimizing our concentration risk of inventory buildup, more on the subject to come.

To align my incentives further with stock, I elected to receive previously accrued and unpaid bonus compensation of $125,000 in stock at the market's closing prices. I continue to believe in the future of the company that reflects the strong values we continue to actively target cash flow positivity.

With that, I will hand the call to Jennifer.

Thank you, Steven. Good afternoon, everyone. Net sales for Q2 2026 was $5.2 million compared to $4.1 million in Q2 2025 and $3.3 million in Q1 2026. growth of approximately 27% year-over-year and 58% sequentially.

First half net sales were $8.5 million or about 11,574 units. The shape of the most recently completed quarter matters as much as the total. Monthly net sales during Q2 2026 were approximately $1.4 million in April, $1.7 million in May and $2.1 million in June.

Each month larger than the one before it. June 2026 was the strongest revenue month in our company's history. That progression reflected stronger production output broader product availability and channel execution rather than any single order. We sold 7,010 units. 2,957 through B2B and 4,053 units through B2C, generating approximately $2.3 million and $2.9 million of net sales, respectively.

Our mix between sales channels was consistent between Q1 and Q2 2020. the mix matters because B2B carries a lower gross margin, but a materially lower marketing cost per unit and the balance between the 2 is what determines both blended margin and cost efficiency.

Having both channels gives us a direct customer insight and wholesale reach at the same time. Gross profit was $1.6 million compared with $1.1 million in Q2 2025 and approximately $850,000 in Q1 2026. An increase of approximately 52% year-over-year and approximately 93% sequentially.

The gross margin was approximately 32% compared with 26% in Q2 2025 approximately 26% in Q1 2026. Gross profit rose from approximately 26% in margin -- in March 2026 to 35% in June 2026. The improvement was driven by higher sales volume, efficiencies and overhead absorption and product mix.

These themes offset higher input in lended costs, including tariff pressure. That is worth emphasizing. We expanded margin more than 5 points against a rising cost base. sustaining gross margin at its current run rate as volume increases and sales mix shifts is a principal objective for the back half of 2026.

On to operating expenses and our net loss. Total operating expenses were about $5.5 million, up approximately 16% year-over-year. However, operating expense as a percentage of sales decreased percentage points year-over-year. In addition, operating expense decreased approximately $1.1 million or 17% from Q1 2026.

Research and development expense was $214,000. AL4 and NEXUS have moved out of development and into production, which is why the expense caption fell $91,000 or approximately 30% year-over-year. Spend converted into products we are now selling.

General and administrative expense was about $3.5 million, up approximately 15% year-over-year. As a percentage of net sales, G&A decreased by approximately 7 percentage points year-over-year. Further, this expense caption declined by approximately $690,000 or 16% from Q1 2026. Sales and marketing expense was $1.7 million up approximately 31% year-over-year.

However, sales and marketing expense as a percentage of net sales only increased 1% compared with net sales increase of 27%. Further, this expense caption decreased approximately $449,000 or 21% from Q1 of 2026. The first evidence of a marketing discipline we committed to during our Q1 2026 earnings call.

Net loss was $3.97 million compared with $3.73 million in Q2 2025 and $5.83 million in Q1 2026. That is a 32% sequential improvement and a 6% reduction in net loss year-over-year. Loss per share improved from $0.33 from $0.71 for the prior year quarter.

This year-over-year comparison is the one that keeps our attention. Revenue growth alone has not yet outrun our recurring cost base. The sequential comparison is the 1 that shows the mechanism working.

Our objective for the second half is straightforward. Focus on gross margin, expanding at a faster rate than operating cash requirements, creating a path to positive operating cash flow. Speaking of cash flow, Net cash used in operating activities in Q2 2026 was $3.4 million compared with $8.2 million in Q1 of 2026 and approximately $3.1 million in Q2 2025, a 58% sequential reduction.

For the first half of 2026, operating cash use was $11.7 million compared with $6.9 million in the prior year period, an increase of approximately 68%. The Q2 2026 bridge is straightforward. We begin with a net loss of $3.97 million, approximately $1.1 million is related to noncash items principally share-based compensation and depreciation and amortization, leaving a loss before working capital movements of approximately $2.7 million.

Working capital used approximately $555,000, a substantial normalization from the roughly $3.6 million consumed in Q1 2026 and the clearest sign that the balance sheet build phase is believed to be behind us. Cash and cash equivalents was $1.2 million at June 30, 2026, compared with 567,000 at March 31, 2026 and $5.9 million at December 31, 2025.

On the inventory. Inventory consists of raw materials that have already been purchased, work in progress and finished goods. Converting this inventory into sales represents the largest internal source of working capital available to the company without the need to raise external financing.

Net inventory was $12.1 million at June 30, 2026 up $2.5 million from year-end. Inventory included approximately $6.6 million of raw materials, $4.6 million of finished goods and $845,000 of work in progress. We are actively optimizing new production against growing sales channels and expect our materials and finished goods components to meaningfully reduce during Q3 2026.

We are optimizing our inventory and the following initiatives: number one, procurement. We are actively managing procurement requirements for our raw materials against our forecasted projections. First half 2026 procurement of approximately $8.1 million was front-loaded to support production requirements for expanding sales channels with approximately 1 million of those purchases still in accounts payable at June 30, 2026.

That spend, including the amounts outstanding at the end of Q2 2026 are now behind us. Number two, production. The process to manufacture our hard tunnel covers is managed through managed against demonstrated sell-through and distribution reorder cadence rather than match forecast. Number three, fulfillment. Finished goods of approximately $4.6 million or 68 under covers is the balance most directly convertible in the near term. We manage fulfillment by product family and sales channel with the goal to sell more than what is produced in a given month.

Working capital conversion is the measure we will report against. For Insight in July, we sold about 30% more covers than we made, and that continues to be the goal for the balance of Q3. We are prepare to take questions on inventory aging and the split between inventory supported between inventory supporting confirmed orders versus forecasted demand. Back to you, Steven.

Thank you, Jennifer. Nexus entered commercial production on April 13, 2026, with sales shortly that are after, making Q2 2026 its first quarter in our product portfolio. its proprietary single-sided operation allows a person to secure and release the Nexus tunnel cover without making laps around the pickup truck, practical solution to a real complaint of the real-world utility of NEXUS creates a differentiated premium product for our customers.

The product launch -- the product launch followed the shape you want to see. Following this introduction, NEXUS achieved $1 million in cumulative sales across all sales channels in just about 10 weeks. Margin contributed -- the contribution increased across both sales channels during Q2 of 2026.

A product went from this first unit to contributing meaningful margin inside of a single quarter. The focus is now to maximize margin capture through manufacturing efficiencies and channel expansion, including established sales cadence.

Into July, NEXUS sales continue to grow with Nexus related sales orders commanding nearly $1.5 million. 2 distribution partners were added in Q2 of this year one at the end of April and the other one in June. Both distribution partners had orders fulfilled during the quarter.

Meyer distributing joined in June of 2026 is our first multinational distribution partner, bringing a substantially larger North American wholesale network serving dealers, installers and aftermarket resellers. That is the widest wholesale access the company has ever had.

However, tri-state enterprises began carrying our products, including Nexus and broaden our reach across for U.S. states. This matters because distributor-driven sales in our commercial channel, including repeat orders expands our reach while reducing our blended market burden per unit.

We plan to focus on creating distributor programs during the second half of this year that emphasize active order frequency. Our filing also describes conversations with 3 additional major distributors -- we remain focused on achieving successful contractual arrangements to maximize our distribution network of nationwide U.S. dealers. I want to characterize those accurately.

There are opportunities at present, and we will announce updates as they become available. Solus integrate solar generation directly into a tonne cover platform, the first with its kind. Core is a modular portable energy system that pairs with Solus to operate on its own or operates on its own rather.

Together, they extend the truck bed from storage into a power source. Both entered Q2 2026 with launch and certification work substantially complete. Core ULCSA certification package removes a real commercialization barrier and expands the set of distributors, retail fleets and commercial customers that can evaluate the system.

Solis and Core did not represent a material share of Q2 2026 revenue. Our near-term objective is product market fit and acquisition economics that do not require customer acquisition costs to rise in step with gross profit. We continue to develop federal in OEM-oriented opportunities, and we assume no material revenue from them in our near-term plan.

However, I can confirm that we believe we have made notable progress on that front. Let me repeat. I believe we had -- and I can confirm that we believe that we have made notable progress on this front in commercializing both Solis and Core.

Moving aside into Tervis Energy, we received U.S. patent #12624872 during the quarter, covering heat pump systems architecture related to Zero Frost and designed to reduce or eliminate conventional defrost cycle. Certification work is expected to continue in the second half, subject to testing and customary certification time.

AetherLux of us remains pre-commercial, no procurement decision has been made, and we do not rely on AetherLux revenue to achieve our 2026 operating plan. The next date is third-party validation and certification. We will allocate capital to it against measurable milestones and nothing else.

We believe we may hit momentary operational cash flow positivity within Q3 2026. This is huge. At this time, we are not providing guidance of specific calendar targets for sustained operating cash flow positivity though we remain focused on reaching sustainable operating cash flow breakeven in 2026.

Our priority is disciplined cash generation rather than optimizing around a single quarter. Rather than focus on a projected date, we believe investors should focus on the underlying drivers of operating cash flow.

Our path to positive earnings cash flow is straightforward, for revenue, expand gross profit, maintain disciplined control over reoccurring costs and convert working capital more efficiently, all of which we've shown that we can do in this past quarter.

During Q2 of 2026, we made progress across all 4 areas simultaneously. Gross profit totaled approximately $1.7 million compared to $4.5 million of cash operating needs before working capital, resulting in an operating cash flow gap of roughly $2.9 million before working capital movements.

Working capital usage accounted for an additional $0.6 million during the quarter. viewed differently gross profit covered approximately 32% of our recurring cash operating requirements during the quarter. Closing the remaining gap can be achieved through some combination of higher revenue, sustained or improved gross margins disciplined reoccurring expenditures and improved inventory conversion.

At a 35% gross margin and using our most recent run rate of $2.1 million of sales quarterly revenue of approximately $12 million, $12.9 million, would fully cover the current preworking capital cost structure. Alternatively, if we expand our margin contribution by just 300 basis points and recognize approximately $9.3 million of quarterly net sales, recurring costs would need to decline by approximately $1.2 million per quarter for us to fully cover our reoccurring expenditures, assuming relatively neutral working capital.

We offer these figures as a sensitivity -- we offer these figures as sensitivity guidepost rather than revenue guidance. The key takeaway is that the gap continues to narrow, and we believe the progress achieved during these quarters demonstrates a clear trajectory towards a self-sustaining cash flow positive operating business.

Q2 of this year showed that Worksport can generate stronger revenues, expand margin, reduce operating expenses and materially improved cash efficiency in the same quarter against a rising input cost basis. The combination -- the combining results in the combination results in a business, which we believe is on its way to scaling successfully.

We are aware that there is still work ahead of us. We must convert our inventory, expand our commercial distribution reach while maintaining gross profits that meaningfully contribute to our operations. This is a question of execution and it's the right question to be judged on. So we are committing to 3 things: convert inventory into cash, turn distributor access into repeat large orders and grow volume -- sales volumes faster than operational cash requirements.

On that, thank you very much for your continued interest in Works port. This concludes our prepared remarks. Operator, please open the line for analyst questions and our investor town hall call will follow.

[Operator Instructions] I see that taped for [indiscernible]

And first question on the inventory management. One of your slides showed in finished goods inventory, you have about 6,800 covers. Can you talk about how the pricing in the current tonneau cover market will work for those -- to get those 6,800 covers out the door maybe might pricing improve quarter-over-quarter. And if so, in what channel, please?

Sure, yes. So most of the inventory that we have on hand was AL3, AL4 we've been finding good success in running small promotions on AL3. June was a small trial run on direct to consumer website sales and we ran a small promo, and we liquidated a significant amount of inventory which is great. So we're going to offer incentives on reseller channels and online channels that make sure we satisfy both sides of our business, reseller and direct-to-consumer.

And then as we burn through that inventory, we're going to -- as we said in the call, we're going to focus on just in time to mitigate keeping too much inventory. And second for me is -- in the quarter, sales and marketing expenses were about $1.7 million.

Can you break that down going forward? Will we have more or less sales and marketing expenses on solar Symcor initiatives or now they have more distributor relationships? Will that number decline? Can you talk about that mix and outlook? For sales and marketing expenses?

It's a difficult question because of the volatility of the underlying platforms. The biggest platforms, there's just really 2. It's Meta or Facebook which owns Instagram and in Google. And those 2 networks are very volatile. They tend to get a little bit more expensive for us to remain competitive in terms of -- sorry, during the winter months, like the month of November, Black Friday.

So we're going to try to keep things we outlined in this call that we're able to raise sales, I think it was the 17% or 18%, while sales and marketing will increase 1%. I may have those numbers wrong. I haven't committed to number yet. So we think that sales and marketing will remain as much flat as possible while sales continues to increase because we're more efficient at how we market, and we're becoming much more recognized as a brand.

But on the other side, we're prepared to invest more in sales and marketing to continue to grow sales, if that's what we need to do. So the answer to the question is we're going to try to keep it sideways so that our sales increase, while sales and marketing does not.

However, if it means adding significant revenues, we will invest there because it's just going to get us to that cash flow breakeven and positivity that we want to sustain.

Steve, we have some questions here from investors on the call. One of the first questions is from Robert A. Speaking to tariffs and minium rod prices. Could you comment on how the discretely impacting workforce?

Yes. Yes. I read that question. So Robert, great question. And one that when I look at my risk launch, I could see my heart rate raising, not because of you, but because of the underlying frustrations I have.

Look, the #1 selling vehicle in Americas, the F-150, the average individual buying that is our farmer, our bets, our serving members, the average American. And that vehicle in the past 2 or 3 years has gone from in the mid-30,000 to the high 40,000s. And why because the vehicle is made primarily with aluminum, I think the frame us steel, the body is completely aluminum, that significant inflation with the American -- the American individual the population is paying for.

So the cost of aluminum has risen from approximately $1.30 a pound to double over the past few years, directly correlated to the tariffs that have been imposed by the current administration. It's not speculatory, it's something that you can see through the open LME and MWA markets.

You're aware of it, of course. And the raise -- the rise in aluminum cost is not because demand is higher. In fact, demand for aluminum is quite weak and soft at least within this continent. So how expected things is it's reduced the Nexus and the AL4 were meant to be very profitable.

They are meant to be 40%, 50%. Don't hold me on it, but we engineered them to make significant margins making 35%, obviously, is, to us, still very healthy, but bronze metal. These products should be making us 45%, 55%. So how it impacted us is it's -- not -- I don't think it's held us back on our sales side of things, but it's impacted our ability to offer better pricing programs to our distribution partners, better incentives, deeper discounts during our Black Friday months for dealers and distributors.

The last thing I'll say is the AL4 is something that we're not really that keen on selling through distribution because the margin isn't there because of the rising costs. And we don't want to raise our cost any more of our product because that's just the American individual pain for inflation.

So how it impacted things is the margin is not quite as high, although I think that our sales are close to being where they should be, except for us maybe not selling the AL 4 through distribution as a result. But it's 5 the Nexus is taking that demand anyway. So we're seeing the same volume just through a different channel, if that makes sense.

We can have a question here from an investor that submitted via e-mail. They were asking for specific clarity on Item #3 of the upcoming work port Annual General Meeting, AGM, to specify for all people list on item number 3 was to approve on an advisory basis a proposal expressing shareholder support to the Board of Directors to consider declaring special dividends in connection with the sale of a new business unit or a material asset of the company subject to applicable law and the core sidecar duties.

Steve, could you provide some insight on why the company decided to include this through the upcoming AGM.

We're working really hard to build a business. There has not been a business like ours that has done what we're able to do and as quick of a time as we were able to do it. growing work port from 0 from $1 million to $8 million to $16 million to a run rate of $20 million and hopefully 30s before the end of the year.

Is in the short period of time that we've been able to do has never been done before as much as investors always have an appetite like us for more, we've broken all records of anyone in our industry.

And as a result, obviously, we're going to have a significant amount of interest as we grow in divesting the opportunity is going to be there as we grow to divest ourselves of certain business units. [indiscernible] Energy has a quiet subsidiary to work for the public company is developing key pump technology for a $150 billion market that is needed and does not exist.

Once again, we're achieving on that business unit, what hasn't ever been done before with a track record of execution behind us. So as we grow, there may be an opportunity for divesting ourselves of a certain business unit, whether that's work sport or [indiscernible] or something that we haven't even done yet. And if we were to look at it, it could be significant.

And then if it is significant, there could be a special dividend to shareholders paid. What I will reference, if I can, and I'll ask for forgiveness versus permission is that a competitor of ours, about 1.5 decades ago sold their business.

Top line revenues were in the mid-50s million. EBITDA was marginal, and they sold just about a decade, 1.5 decades ago privately for about $120 million. So work sports trending towards those same revenues, probably healthier margins, and we trade at a, what is it for on like a $10 million mark. I haven't checked our market cap.

What I mean is the business underlying the stock is very valuable. And if we see that there's an opportunity to capture that value through divestiture, there's an opportunity, of course, no guarantees that investors could receive a special dividend during that time.

So that's how that would work mechanically and the long behind it, but there's no guarantees of any of that.

I have a question from [indiscernible] he said, hi, big fan Solis and Core combination for trucking. What are your plans to expand this to more general use and increase the potential market purposes.

Good question. Solus, we're probably going to be looking at EASL systems to be able to move it from the truck and mount it anywhere in a field, jobsite cans, these types of things, more universal mounting applications -- we're still going to be focused on OEM integrations, more to come on that, and we're still going to be focused on broader applications on the vehicle side of things.

But the SOLIS, we're going to look at universal solutions which would be pretty easy for us. And in the core, we're going to -- I can't say much about it, but we're going to look at more use cases for our battery blocks as well so that people can integrate our batteries into other devices that consume electricity, 36 and 48 volts.

You focus on tariff costs since tariffs [indiscernible] in this context, this is the question from the investor, but I think you're referring to the recent government mandates on the Supreme Court talking about the [ metality ] of the tariff your question is, will we support receive any money back like some of the companies may have perceived.

Good question. So yes, on the aluminum side of things, it's inflation. We didn't take tariffs on our aluminum. We paid inflation in our aluminum because of the tariffs. So there's unfortunately no one and 350 million people are paying for -- no one's going to get any money back. And also, realistically, we were in a meeting with Toyota Corporation. -- don't misread this. There was a seminar by Toyota, not a business meeting, but there was a seminar and even Toyota motor vehicles, one of the biggest car manufacturers in the world during the seminar was indicating that they don't believe that the reduction of tariffs will reduce the price of aluminum because now the U.S. economy is absorbed that extra income.

So if you notice, I don't want to get into the political side of things, but on the inflation as a result of the tariffs, I'm not sure it's going to be reversed in a very short period of time.

On tariffs that we did pay on imports from China or foreign countries that are tariffed at the Section 301 tariffs, yes, we can apparently get some of our -- some of these tariffs back, but I believe that the process is still very foggy or unclear and it's also not immediate.

So we're working with the consultants that will help us with some of the tariffs that we paid. But because we're significantly American-based materials, the majority of our product is sourced the materials are sourced in America.

We're just paying just brutal inflation for our material and not tariffs. So there's not much we can do about it, but anything that we did pay cars on, we'll look to get the credit back on, but it probably won't be this year.

And we have a question here from James C. I'm going to direct this to a Jen. Jen the question is, as you sell down inventory for cash, do you foresee any inventory shortfalls or is that baked into the plan?

Great question. In terms of our plan, we are forecasting a reduction in our finished goods inventory while we move closer to a just-in-time format, if you will, for the balance of the year. So we are well positioned to be able to meet demand as well as distribute as we receive orders and we gave commitments from our customers.

See, we have here 2 questions related to AetherLux. I'm going to combine them because they're very similar. The question is asking if there's any way to accelerate AetherLux revenues. They believe that it might be for into the future. They're asking if it is. And we're wondering if we're towards found way to manufacture AetherLux products to get the market faster are we working with a partner on that front, they're asking?

Yes. Very good question. I'll keep the answer brief, not because I want to hide from it, but I'll keep things direct, so I answer them, not with where [indiscernible] Number one is work sports partnered with a very large manufacturer of heat pumps to manufacture our design and the immediacy in which we could receive finished AetherLux products post certification is for 45 to 60 days.

So I'm not worried about that. The certification process is necessary, and there's a lot of certifications, AHRI, ENERGY STAR, UL, ETL, I think, -- so there's a lot of certifications. That process should conclude in the fall months of this year, so September, October, I'd say, probably October. And then after we certified 45 to 60 days as early as we could see product and I could also say that we're working feverishly on some initial orders from various public or private sector businesses.

So what that means is it could be governmental or it could be private sector, but we are looking at orders to get the Atlas on the balance sheet. But we feel pretty optimistic that the product is everything we've said and more of what it's supposed to be in terms of a breakthrough product and do you think that the demand is going to be there.

And then also, do you kind of judge people judge based on history. And I understand that we've had some black eyes as a business. But one thing that you should judge us on to is that when we say we're going to execute, we do.

We said we're going to do SOLIS and Core. It took a little while longer, very complicated products. We executed. They're in the market. You can buy them right now. AL3, AL4, HD3 Nexus, execution, execution, execution. So no investor here should wonder whether we're going to execute on this product.

We've shown nothing but nothing other than our ability to be able to execute on bringing products to market and then monetizing those products. So I don't think it's a question of if now it's just in and out my intention, our intention is to expedite the win for within, let's say, Q4 of this year to get the product out. and contributing to the balance sheet.

Thank you, Steve. We have a question here from Brad. Could you walk us through the Nexus ramp-up in any more detail, specifically, perhaps an ASP by channel margin profile relative to AL4, number of asset SKUs or a July versus August sell-through run rate and whether Nexus is expanding the market or cannibalizing fortunate.

I think I'm going to point this to Jen. I think if there are some levels of that question that we can't answer publicly -- but then do you understand the question? Or would you like to repeat?

I would prefer you repeat, please.

Okay. So the question is about the Nexus ramp-up. Specifically, if you could comment about any of the following ASP by channel margin profile relative to L4, a number of active SKUs for Nexus early July/August sell-through run rate. and/or whether Nexus is expanding the market or cannibalizing the L4 demand.

Okay. So our margin is moderately more healthy on our Nexus versus our AL 4. And with the introduction of the Nexus, we were able to achieve our first $1 million in sales on NEXUS within a single quarter. So it was about 10 weeks from the initial production of our Nexus product to securing net first million, which is the best ramp-up rate that we've had to date on any of our product introductions.

So it's a great testament to the product itself and what it can deliver in terms of values to our end customers. That being said, the mix between Nexus and AL 4, I would say, in general, they offer different opportunities to our customers. So it really depends on what our customers are looking for. in terms of a product.

So I think they both have benefit to them in terms of the mix and the resulting impact of that. I would say it hasn't cannibalized. I do not believe that it will cannibalize our mix in general with the instruction of the Nexus. But in general, we have seen and continue to see a healthy contribution to margin not only in our B2C space, but also in our B2B space.

It's a product in general, that is not well, it doesn't have any natural competitors, if you will, I'm sure that Steven will be able to speak to that.

Yes. I just wanted to Jen answer the question brilliantly, but also ASPs are -- I'm [indiscernible] typically, but I think that, that means average sell price and margin profile, margin profile is strong, average sell price is confidential.

Not because I don't want to answer it, but because we really don't want to speak to what channels pay, but we are uniform and do have UPP, which means that everyone pays the same in a certain channel like a distributor-based distributor pricing, coverage job pricing.

So we're not giving unfair advantages to anybody. In generalities. We have, I think, 35 SKUs, and we're thinking about 8-foot bed applications, so that should increase SKU coverage and penetration on the products within this year by maybe a little bit less.

So we're going to be in the 40s with the Nexus. So we have all the major ABC movers, Ridgeline, Tacoma gladiator and we're working, I think, on Colorado Canyon. So we have smart less popular trucks. And yes, so we still sell thousands of AL, thousands and thousands.

So the demand is there, and it's not cannibalizing it, but it is offering something that just doesn't exist. So we think that AL4 markets I think that the broad flip up funnel cover business is going to be challenged come the end of the year for various reasons, but we've secured our success with the Nexus.

And you know what, if we switch every sale of a proper tunnel cover to the Nexus, all the better because they're more profitable and they're just better cover anyway. But I think that the [indiscernible] type business is going to survive for the foreseeable future and be quite healthy for us.

So we're okay either way, if that makes sense. But for the rest of the sense, very good question, Fred. But for the rest of the sensitive information, I'd love to answer it, but we've got to keep some numbers under our hat.

And I think one aspect that we can also highlight for investors listening to this call is we mentioned that in 10 weeks, Texas generated about $1 million in sales. And then I think, Steve, right at than you see in there, that for July, NEXUS amounted to an order volume of $1.5 billion in July.

So to reiterate $1 million for the first 10 weeks and then $1.5 million in July, if that gives you an idea on what we're projecting for Q3 as well as the continued growth for Nexus.

The last question on the call today is from Gary D. And I would like Steve to answer this. Steve, what is the avenue towards making this a million REIT company in sales?

It's over $50 million a year in sales for us is not impossible. We just got to keep on working on bringing the [ chlorine ] SOLIS deeper into market without spending too much money on that on the marketing side of things, so that we're profitable on those sales. And we just signed a distribution within the last quarter. It just recently.

So these relationships are new and we need time to have them mature. The 17,000, maybe even more, there's probably 18,000 dealers in America at this point that could sell our product but it just takes time to get them acclimated to the product, get display things, get sales reps out there. and get them moving the work sport product line.

So I think it's just a bit of time. And you could see $1 million to $8 million to $16 million to -- we're hoping to hit at least a run rate in the $30-plus million range this year. That's significant growth. So if you follow even similar growth, not even duplicated, it could be within the cards for next year, I think, and then upwards and onwards from there.

See, I am going to sneak in one more final question from Ramesh. Ramesh is asking ASTC any reason to raise new funds for the rest of the year? Or if you can give any profile on maybe the amount of funds that need to be raised. Jen, do you want to answer this?

So in terms of our overall outlook for the remainder of the year, we are challenging ourselves, if you will, to see that we can see it through to cash flow positivity. So our plan is if there's opportunity out there, certainly, we will explore that with a potential investor.

But for the balance of the year, we really would like to see ourselves stand on our own 2s. Steven, do you have anything else to add?

No. No. I think last year, we raised, I think, over $20 million last year in cash so we needed to continue to fund the growth and a lot of it ended up in inventory this year will be very significantly less. So our reliance on outside investor capital is already significantly lower than it was this time last year, and it's going to continue to reduce.

So I think that's exactly is we're going to say our own 2 feet, which at that front puts much on in a very, very strong position that, frankly, a lot of small companies like ours on the NASDAQ don't ever get the chance to achieve.

That does mark the end of this call, we ask any investors that have any further questions to e-mail us at [email protected]. We look forward to keeping you updated on our journey as well as sharing more news and information as of happens. Thank you very much for your time and attention today.

Hi, everybody. Thanks for joining, everybody, so far. Quite a few people, which is good to see. Let's get things kicked off. What do you think, Faran?

I'm excited.

So good afternoon, everyone. A lot of this, we spent some time kind of preparing remarks, but then we're going to also let the conversation flow naturally as well. We really, really, really insist that you guys engage, ask questions, and we'll try our best to answer everything. And we're not going to gate -- so far, we're not getting any questions.

We're just going to answer all of them to the best of our abilities. Of course, we cannot provide any -- we can't see into the future. We also can't provide nonpublic or material information. So we do have some bounding blocks. But with that, I'll kick things off. So good afternoon, everyone, and thanks for joining Worksport's first Town Hall to end June, a little late, better late than never, and I appreciate you all being here.

I'm Steve Rossi. As you all know, CEO and Founder of Worksport. Joining with me today is Faran Ali, my right-hand man, Investor Relations and Corporate Strategist leads here at Worksport.

Today's format is intentionally simple. We're not going to go slide by slide through a deck. I want us to do direct camera on and useful. We want to spend roughly 20 or 30 minutes probably going to go over a little bit walking through what has changed in the business, how recent announcements connect and what we as management are focused on in the second half of this year. Then we're going to spend the balance of the session engaging with you, answering shareholder questions submitted previously and some live questions to the best of our ability. So get your thinking caps on with us and let's get right into it.

So before we begin, I want to make the disclosure boundary clear today, as I already said, we may reiterate previous forward-looking statements about our business outlook, operating objectives, expected trends, margins opportunities, distribution expansion, product adoption, certification, financing possibilities and our path toward cash flow positivity and profits. Some of these statements are based on current expectations and assumptions and some are subject to risks and uncertainties that we've described in our SEC filings. Actual results, of course, may differ materially, and we're not undertaking to update forward-looking statements except where as required by law.

One more note. As we read the questions at the end, I do have to say that we'll have to keep the conversation within the realm of public information. I know there are often shareholders that call me and ask me over e-mail if they want real-time answers. Hey, how is sales going? How is sales for the Solstice? How is the strategic opportunity? And can we do XYZ?

When we answer your questions, we have to answer within the realm of public information. And when something requires formal disclosure, we will be upfront about it, and we'll do a press release informing all investors at the same time. So with your questions, I do have to stay in the realm of what's already publicly available, but we do look forward to giving clarity and speaking to those comments.

So the reason we scheduled the town hall is that Worksport's story has moved quickly since our Q1 earnings call. And at Q1, we gave investors a baseline. Revenue is growing, gross profit was growing faster than revenue. SOLIS and COR were moving into commercialization. Nexus had launched. We landed our first national distributor, Tri-State, and we continue to target operational cash flow positivity within this year.

But since then, the company has released several key updates that we believe need to be understood altogether. We achieved a preliminary 35% gross margin in May. We added another multinational distributor or Meyer distributing as a major partner. We outlined a $36 million plus annualized revenue opportunity supported by direct-to-consumer sales and B2B expansion. Complemented by our existing run rate of $21 million and growing. So to be clear on that press release, if it wasn't already clear, we have a run rate of in the 20s of millions. And then with the addition of these new businesses, we think that we have a run rate of the $35 million, $36 million.

Run rate means a year from that day, not within this year. We're going to try our absolute best to hit as many millions of sales within this year, but at least we hit that run rate, which is a really, really good uptake for us. We completed direct investments, including one at a premium to the then trading price. I have twice taken equity in lieu of cash compensation this year. Our shares closed back above $1 on June 24, which was a huge milestone for us. We were never delinquent or in violation of the NASDAQ rules, which is great. And we believe this keeps the company in full compliance with NASDAQ's minimum bid price requirement. And of course, super exciting Terravis Energy continues to be progressing with its revolutionary AetherLux platform following the recent U.S. patent that we got to, which is fantastic.

It's a lot, Steve. I mean, individually, those are important updates. Collectively, they tell a much stronger story, a story that I love speaking with investors about. It's about us moving from a point where we invested tens of millions of dollars and years to build the foundation to now we're building out operating conversion growth, scale, margins, revenue, business partnerships. And everything is finally aligning to the point where manufacturing efficiency is turning into more revenue higher margin and ultimately bringing us closer to that operational cash flow positivity goal that we've been repeatedly saying we anticipate to target in the...

Yes. So let me start with what changed since our first quarter earnings call. Q1 was a launch readiness and inventory readiness quarter. We reported net sales of $3.3 million, $3.31 million, which was up year-over-year, almost 50%, 47.9% and gross profits of almost $1 million, $855,000, up 115% year-over-year. The quarter-over-quarter wasn't strong, but Black Friday quarter, Q4 is always our strongest quarter. And this is important because gross profit grew faster than revenue, which is exactly what investors should want to see as the manufacturing platform scales. But we notably didn't have -- we notably did have a net operating loss and revenue was up sharply from Q4. This had to do -- revenue wasn't up sharply. And this had to do with seasonality, inventory investments and some final foundational investments.

So we reinvested in Q1, not a bad quarter, but definitely a quarter we're going to continue to build off of. But since then, we've had several key commercial and operating developments, very, very important things have happened in Q2. Most significantly, the NEXUS is now up market, so on Worksport.com and check it out. It's the only one of its kind and reinvented it. We're so proud of it. This is an important product because it's not just another cover. It addresses practical consumer pain points, especially with ease of operation, single-sided operation, speed and safety. And for a competitive tonneau cover market, the product differentiator matters for sure.

Steve you know, I wonder if investors are truly aware of how important Nexus is to our business line, considering that our last financials reported in March and this product came out in April. Could you describe the Nexus in your own words and speak to why it's very relevant?

Yes. So there's a couple of key things to pay attention to. Number one, our competitors have a flip-up tonneau cover like ours. They came up with it first actually. Ours has done a little bit better. There's no drilling involved. So our AL4 Flip-Up against the back window. But as an operator, so if you have a truck, you have to go around the truck a few different times. You have to fold it up, you have to buckle it, then you flip it up against the back window. You engage one prop rod, you have to do a trip around the truck, engage another prop rod, lock that in, do another trip around the truck. So it's kind of unsafe if you're on a road side, parking lots, it's inconvenient if it's raining and you want to get out of the elements or snowing.

Inconvenient if you're up against the curb, snow bank, depending on weather. You just don't want to do laps around the truck. It's not -- it's just not necessarily conducive to ease of operation. So you have this fully loaded truck with all of these amazing endowments and then you've got this kind of dumb technology on the back of it. That is directly referring to our AL4. It's a more basic flip-up tonneau cover. But now we have this NEXUS. And the NEXUS is the only cover of its kind. We own this market. We own the IP around it that offers you tail light to door operation. You get out, you fold it open from the -- you open up your tailgate, you fold it open, it automatically locks up nice and easy and you get back in your truck and you carry on with your day.

So it really is the NEXUS of tonneau covers. And we think that the 17,000 stores in America are going to start really catching on to it. They already have. It's outpacing the growth that we had from the AL4 by double. And we think it's the next generation of covers that complement the well-endowed pickup trucks, the best features come first in a pickup truck, the GMC Sierra Denali, the F-150 Platinums. They all have the latest and greatest features. So we wanted to make a cover that met that truck and the NEXUS really is that. And it also recently directly contributed to recent distributor movements and it's really aided in our growth. So we're able to land Tri-State. It was an important first step as a distributor that services the Midwest, South and very key truck states. And that distributor is actively growing.

Meyer distributing multinational services Canada and the U.S.A., a much larger validation point. And Meyer is a respected automotive aftermarket distributor with a broad reach of distributors, government installers, upfitters, fleets, these types of things. So the initial purchase order was important. But the larger potential for these distributors is the B2B channel flow as Worksport kind of works its way through all the different aftermarket networks and reseller channels.

Yes. That's really important to highlight for investors. I think one of the key stats that I like quoting, we did $4 million in B2B revenue in 2025 approximately. In 2026, we're already at a run of approximately $8 million. And within 12 months, we're expecting that B2B run rate to be about $25 million annually. So sometime around June 2027, we expect a $25 million B2B run rate as opposed to $4 million in 2025 and $8 million currently today. I think that's a tremendous jump, and that speaks to what the NEXUS as well as the Worksport brand is doing in terms of growth.

Yes. We got a fully stacked deck of cards at this point, metaphorically speaking. So we couldn't be many more excited -- much more excited. Speaking of the excitement on Terravis Energy, super excited about that. I feel like the market overlooked the issuance of the patent of the ZeroFrost otherwise apply to the AetherLux heat pump in general. It's strengthened our IP foundation on the platform. And I want to be clear, Terravis Energy is not the core 2026 revenue driver, but it's important for long-term strategic upside assets and certification work continues to progress.

So investors should know that we're just finalizing certification. we're knee deep in certification work right now to get it all the certifications it needs to meet all the standards to be bought by government agencies, entities, businesses sold in the U.S. and abroad. And it's something that's getting a strong amount of interest. It has a 50x larger total addressable market than Worksport's tonneau cover and COR business. And this is -- this product is expected to be certified within 2026, so within the rest of this year. When? The answer is not soon enough.

Obviously, we want it certified right away, but we're pushing and it will happen when it happens. And with such a large market and the fact that it's so innovative, all of these things aggregate to a significant opportunity for investors to participate in and Worksport owns most of that business. So it's very exciting. So continuing forward on the topic of capital and alignment. I've taken Worksport equity twice this year in lieu of cash compensation at $75,000 worth at $0.85 and in April at $50,000 worth of stock at $0.63 in early June.

My only source of income is Worksport. I wish I had other businesses. I don't wish I had other businesses, but if I was -- Worksport is the only thing that I focus on. So my only income is there and I exchanged a compensation for stock, doubling down on my -- I believe that this is going to be worth a lot more than the cash would have been to me. And I did this because I believe in the company's long-term value, the value creation, the opportunity and because I believe we, as management, should be aligned with the shareholders. I want to put more of my skin in the game.

So we also completed a recent direct investment. So while no emerging growth company likes issuing equity, I understand that. The key point is how capital is used and whether it supports value creation. So can we multiply those investor dollars. And our goal is to reduce reliance on external capital by growing revenue, gross margin and converting inventory and improving operational efficiencies. So we're almost out of that at this point, and we're able to -- and once we're cash flow positive, we won't have to rely on any outside source of capital, and we'll be generating profits on our side, and we're right there.

So the most important recent operating key metric is the preliminary May gross margins that were 35%. That's a major change from where the company was a year ago. We've disclosed that gross margins were roughly only 11% in December of last year -- or sorry, 2024, approximately 30% of December in 2025. They dipped a little bit in Q4 of 2026 -- Q1 of 2026 to just under 29%, 28.4% and approximately 35% in May based on preliminary internal results. And this really does matter with our base materials being a little inflated at this point, aluminum being so expensive.

Yes. No, it's really interesting, right, because of the higher gross margin, every dollar that the company makes has potential to cover our fixed costs. And that's what operating leverage really means. The factory, the people, the systems, equipment, product infrastructure have been built now. And now our job is to push them through more contribution so that they have stronger impact. We estimate that at 35% gross margin, Worksport would need $9 million of quarterly revenue to achieve operational cash flow positivity.

Earlier, our cash run rate annual revenue is about $20 million-ish. So that's already at a $5 million quarter as of the date that we quoted that, which I believe was in May. So we're already trajectory -- the trajectory is already moving nicely towards that $9 million. That number is not a magic line. It can move depending on product mix, channel mix, marketing, efficiency, working capital, operating expenses. But I think it's a useful framework for investors to know that we're aiming for 35% at $9 million a quarter. And we believe in the near term, near term is defined within 12 months can achieve that goal. And given that in May 2025 -- May 2026, we achieved that 35% gross margin and revenues are looking stronger and new deals are coming in. Cash flow positivity is looking more viable day after day, and we expect to continue targeting it strong.

And very important to mention is we're actively working to make that $9 million a quarter revenue target smaller. We're looking at leaning out the operation of the business and finding efficiencies where possible. So the practical way to do that is not complicated, improve gross margins, improve channel mix, reduce unnecessary costs, increase throughput, optimize marketing returns, reduce fulfillment friction and keep SG&A discipline. If we can generate more contribution from every dollar of revenue and keep operating costs controlled, the revenue level required to get to operational cash flow positive can come down, and that's really a gold medal for us.

And I think that's what we mean when we say hidden operating leverage, Worksport looks very different at a 35% margin than it did at 11%. The same dollar has a different impact. And our objective is to increase sales velocity while preserving the margin improvements that we have earned.

Yes. So let's talk a little bit about our commercial engine. We have 2 major channels, B2B and B2C business-to-consumer, business-to-business, resellers, retail. So business-to-consumer is valuable because it gives us customer data, it gives us higher margin, direct brand engagement, faster feedback. The reseller or B2B is valuable because it can create a broader reach, dealer penetration, repeat ordering and distribution at scale.

In our June '25 update, we described our current revenue as $21 million. That's not the same as the full year revenue guidance, and it's not a guarantee, but it's an important momentum marker because it shows that the company is no longer only talking about these future orders and future commercialization. We're actively converting to commercial demand. B2C is coming at about $1 million per month or $12 million annualized, and that continues to grow every single day. It's an important channel because it helps validate consumer demand. It can be margin accretive as managed with disciplined marketing spend.

And importantly, on the B2B side, as we were talking about earlier, it's already at $8 million plus annual run rate. And with now Meyers, Tri-State, Patriot, All-Pro, our existing wholesale relationships as well as the broader dealer network that we're actively targeting, management believes B2B annualized revenue has the potential to exceed over $24 million in the next 12 months. Put simply, B2B has the potential to become a much larger contributor, and it's already showing that it's working and it's headed that way.

Yes. And when you combine current B2C with the B2B opportunity, we described a $36 million annualized revenue opportunity. That number should be understood as a revenue opportunity supported by channel rent, not a guarantee, but it's also where we are today, and we're obviously fighting and pushing towards more. So it gives shareholders a framework for why these distribution announcements matter. Meyer is not just a headline, it's a potential access to more dealers, deeper installer networks and repeatable wholesale order flow. It basically covers more ground for us than we could just on our own.

So our core focus for 2026 revenue driver really remains tonneau covers, SOLIS, COR and NEXUS and distribution growth. The COR and the NEXUS are going to get a lot of focus for the rest of this year. The NEXUS, we just wrapped up all the marketing assets on. So NEXUS, as we discussed, is important because it gives us the tonneau cover portfolio fresh product with clear differentiation. The tonneau cover market is competitive, and we need products that are easier to use, durable, secure and positioned better for consumer and pro install channels. The SOLIS and the COR remain strategically important because they extend Worksport beyond the truck bed protection into mobile power, so a much bigger market kind of for anybody and everyone.

The strategic idea is simple. It covers solar generation, portable energy storage and utility for truck owners, overlanders, workers, emergency uses and potentially commercial customers with fleets and maybe the government. COR certification was an important execution milestone because certification is often a gatekeeper for large retailers, distributors, fleets and commercial opportunities. So we're really excited that we have that certification, and now we're switching our focus to the energy side of the business for the back half of this year, for the second half. So I think that things are going to be a lot better when we start mixing in more COR sales and more SOLIS sales into the mix that we don't already have.

So on that, I wanted to talk a little bit more about Terravis and the AetherLux. It remains a separate upside platform. The ZeroFrost patent strengthens our IP position. Certification remains a key milestone. We're working hard towards it. And we're not building the 2026 revenue plan around the AetherLux, and I don't want shareholders to misunderstand that. The current operating focus is works for commercial product lineup and distribution scale, while Terravis remains a strategic upside, and we'll update investors when the certification, commercialization, we'll update you guys on partnerships or licensing milestones as they become appropriate to disclose.

I also want to address to shareholders directly on capital and share price. We know dilution matters. We know shareholders are sensitive to financing, so am I. Management is sensitive to it, too. And my view is that capital must be tied to operational return, inventory conservation, distribution scale, product launches, manufacturing efficiencies and really ultimately a path to cash flow positivity. So the recent financing we did was an investment price of $1.20 per unit with warrants exercised at $1.50 and the additional years -- and additional interest expressed up to $10 million of potential future financing subject to market conditions and their appetite and also available registration capacity and regulatory requirements, to the documents, approvals, all of these things.

So there's a lot to get to $10 million, but we're going to take it in stride, and we're going to raise capital and avoid -- we're going to raise capital as needed, and we're going to avoid dilution as much as possible as well. But what matters is we're attracting capital interest while we're trying to execute through key operating through a transformative year for us. And we don't want to take any more capital than strategically necessary at this stage. We'd rather take enough aim to increase the enterprise value and then take more capital at a strategic level and they need debt financing that's not dilutive in these types of things.

Thanks, Steve. I think that context is really important, and we're always going to be happy to chat with investors and have that commentary and conversation as it needs to. A lot of the key questions that I received over the last few weeks had to do with the common stock and closing above $1. Thankfully, and fortunately, I think that the market has started to see a better reception of Worksport's press releases. And on June 24, we did close above $1, and we believe that keeps Worksport fully in compliance with the minimum bid requirement.

Compliance matters. But our deep focus is on the business behind the ticker in the stock price. We do not control the daily market pricing. We do not -- we do control execution. And we believe that as a company that is closer to operational cash flow positivity, reduces uncertainty, the intrinsic value of the business should be better reflected on the stock price over time. Currently, we are still trading below book value, and we are painting this picture of an operational cash flow positive future coming high revenue growth rate. And we expect that to have better opportunity inside the market as it continues and as it executes.

No doubt, no doubt. So to close the prepared portion kind of where Faran and I wanted to have some of this open conversation, I want shareholders to understand our priorities for the second half of this year. First, grow revenue; second, maintain and expand margin progress. So we're going to try to squeeze every percent of margin, and we're going to try to get as many sales as possible. We, as shareholders, I say this all the time on X or Twitter, we all want the exact same things. So third is we're going to try to convert inventory into sales. Fourth, we're going to scale distributor and dealer relationships. Fifth, we're going to continue with the Nexus. We're going to start really, really diving deep into the SOLIS and COR commercialization.

Sixth, we're really going to advance Terravis Energy certifications and really position that business unit strategically. And seven, we're going to maintain capital discipline and keep working towards operational cash flow positivity. This is the phase that we've really been working so hard towards, and the company has more products, stronger margins, broader distribution, more public visibility and a cleaner operating framework. also like a much more visible path towards cash flow improvement than it had a year ago. There's still execution risk. We're still working hard. still, I say also all the time, it's not a straight line. It's not always pretty. We're going to try not to overpromise, and we believe in the foundation. We believe it is stronger what we built today, and we're focused on turning the foundation into execution and results.

Thanks, Steve. I think that's a perfect segue into Q&A. We did get a decent amount of questions in advance via e-mail, and I encourage investors that as we continue to do e-mail us at [email protected] and ask your questions. Today, we are joined by our analysts covering the stock from Maxim Group, and we'll let him go first with a live question before we proceed with the other investor questions.

Thanks, Faran. It's Tate Sullivan. Thanks, Steven, for all the comments. Can you update on potential relationships with truck manufacturers? Or is that a sales channel you still want to pursue or more on the B2B business on the distributor end? Can you comment on the OEM?

Yes. Good question. So Tic Tac Toe, we needed to get our house in order. So we got production under really, really well established under control. Then we needed to be able to memorialize that, and we did that with the ISO certification, which is a very important milestone for us to reach to be able to achieve or access OEM distribution OEM type business. So now that we've checked, we've gotten everything in order on our side, and now we've memorialized that with ISO, we are able to start proceeding with the OEM conversations.

So obviously, we're not going to be able to talk much about it specifically, but look out for that in the near term. Well, at some point, hopefully, this year, we're going to start looking at OEM relationships and getting those covers sold through truck manufacturers or installed directly on brands that would include, obviously, the big 3 domestic Ford, General Motors, Stellantis, Ram, but then obviously, we have Nissan, Hyundai, Honda, Toyota, and then we have EV automakers like Rivian and Slate.

And what does the ideal partnership look like with the truck manufacturers/OEMs pay you directly and then just deliver the trucks with your tonneau covers on there? Or would it be a customer choice? How might it work?

So like when we talk about Ram as an example, Ram has Ram Direct, where we ship them product and they install it at the factory floor. And then there's 3 options. Option one is we install it -- they install it directly on the factory as a base accessory. Number two is they sell it through their parts like instead of going like through RAM, it goes through Mopar if that metaphor makes sense. And then number three is they become just -- not just, but they become a dealer or a marketplace for our product. And usually, one transitions to the next the fluid.

So it will go from like maybe like they'll sell your product to they'll operate in their accessory catalog to they'll install it on the vehicle itself. Usually going direct to like direct to install at the factory could be dangerous. There's a risk there while you're establishing that relationship and the warranty and quality required by OEMs is significant. So it's better to ease into these types of relationships as opposed to going straight for the biggest side of it, like going direct to install our cover on the Tesla Cybertruck at the factory. We may not want that strategically until we've dipped our foot in the water of the business relationship because otherwise, the warranty risk and the cash required is crazy.

Just so you know, in the industry, for every dollar you sell on OEM on a tonneau cover, you have to -- a warranty cost you $8. So if we sell them $1,000 tonneau cover and something goes awry, it's going to cost us $8,000 on the back end between assessments. There's a full -- you have to tear down the cover, you have to have outside companies report on what failed and why, all of these things. So we want to make sure that we're -- we ease into these types of relationships.

And just one more, if I may, I'll turn it over to the audience for more questions. Now that is NEXUS going to be most of your revenue? Or do you still sell prior versions of hard covers? Or how might that mix change?

We have a strategy. So NEXUS is going to be, obviously, I think, probably the clear revenue driver. AL4 is going to probably transition to like a jobber or installer direct type product. And then the AL3 product is probably going to be like a door crasher on the Worksport ecosystem. And we're going to try to get the AL3 platform, our first more basic cover to be as cost competitive as possible to really compete with the imported products. I've said this before many times, there's nothing worse than a foreign product sold by a foreign company, that vacuums cash out of the economy.

So we want to stay competitive with those Chinese -- for lack of a better phrase of saying it, Chinese Amazon products because every time someone buys a Chinese-made Chinese-owned company, tonneau cover on Amazon, their $500 gets vacuumed out of the economy into China, whereas we want to be able to make the AL3 a door crasher kind of products so we can keep the cash in the economy here. I it's still 93% American sourced and made by American hands. We're gold medal of made in America.

Thanks, Tate, for your questions. Steve, we have a question here in the chat from [ Jack B ]. From a macro perspective, what's your perspective on foreign and Chinese imports in the U.S. truck bed cover industry and market? And what are the trends you have seen in the past? And what do you expect going forward, specifically around the tariff market?

Yes. That's -- Jack, what -- if I met you, I'd shake your hand right now. It's a great question. I want to say that I personally -- I dislike Amazon as a marketplace, and I'll tell you why because Amazon has quickly turned into like a low-cost alternative. It's where like more foreign products go to be very cost competitive. So you have like Dyson vacuums that are $400, $500 and then you have this like kind of almost a replica for $50 or $60. And it's helping us but it hurts us first. The average American consumer has been bitten by that lower-cost product too many times now. And they bought something that they think is going to save them a few dollars and then it just doesn't last or it doesn't work as well.

So my perspective on foreign or Chinese imported products is that the quality just isn't there. You really do get what you pay for. And when you could buy an American-made product with the best domestic customer service for $600 and the equivalent imported product is only like 10% or 15% less, it just doesn't make sense. And we've got to try to get our costs down while still being profitable. The trends I see are very cyclical, but now they're really cycling in favor of Made in America. I think that the average consumer, as I said earlier, has been bitten by the low-cost product that you buy a copycat Dyson vacuum and you think that you saved $400 because it's only $50 instead of $450 and then it just doesn't work. And there's only a few times that the consumer is going to want to deal with that before they just say, you know what, I'm going to bite the bullet.

The problem is the economy right now in North America is a little stressed. The consumer is a little stressed out with inflation. So we think we're going to weather a little bit of a storm while consumers are being more cautious on where they spend their dollars. But I think in the years coming, when inflation hopefully gets reversed finally, things will come full circle and people will be spending more and they'll, at that point, be very focused on trying to get the best value for the dollar, which is going to be Made in America product.

Thanks, Steve. I think that's a pretty sufficient answer. We have a question here from a [ Robert T ] surrounding the COR. The question is, where do you stand with negotiations in getting the COR into big box outlets? Do you have the capital and capacity to support this type of large-scale initiative?

I think that we can't talk too much about where we stand with the active negotiations, but we can definitely talk about the second part on capita and capacity and how we would target it.

Yes. So we have 7 figures, Faran, right, in inventory of the core. So we have enough to jump start that cycle. Obviously, big box stores are a good marketplace, but the same kind of metaphor with the OEMs like going direct to ram trucks and like installing your cover on the factor is like the biggest contract, but it has the biggest risk and then going direct to like big box stores is really -- I think going straight there is difficult. What a more prudent path might look like is like partnering with like Home Depot, for example, and becoming like a marketplace vendor and seeing how it sells through there where they just take a commission and then maybe trying some key stores like they have like 1,000 stores, I think.

So trying like 50 of their best stores and then legging into these types of relationships. And then while you leg into it, you mitigate risks of downside like warranty, maybe sell-through challenges or returns, but then you also are able to ramp up the revenue to self-finance that as opposed to that one big like the risk with Home Depot being like, fine, we're going to buy $10 million right now. Well, now you have $10 million of revenue, but you have probably more than $10 million in risk, whereas starting a little slow and modestly allows you to leg into things with much more reduced risk and being able to fix problems as they come up before they become too big.

If that makes sense, if we've shown anything is that maybe we're not the fastest to grow, and it's not because of lack of demand, but because we really like to mitigate risk and otherwise, things go sideways quickly. I don't want to talk much longer about it, but I will say a friend of mine came to me a decade ago and he said, "Hey, I got this Costco contract for winter wheels. And he says they're going to buy all the winter steel rims from me." And I said, I don't know if you want to do that. Costco is pretty nefarious, and he's went ahead and mortgaged this house to buy -- to sell, I think, $1.5 million of Costco aluminum rims, but then Costco return $1 million of them at the end of the year, and he went bankrupt. These big box stores are difficult. And we know what they do, and we just got to leg into these types of relationships methodically.

Thanks, Steve. We have to...

Bob, I know you very well, and thanks for communicating with me all the time. Hi Bob.

We have here a question from [ Kresimir ] and it actually aligns with question 11 that we received over e-mail. The question is, where are you with SOLIS and COR? Are you in line with expectations that you initially had with the products? And where is the revenue target for this year or maybe next? So far publicly, we have talked about the COR and SOLIS in Q1. We didn't give revenue targets for this year and next. So maybe going outside of revenue target specifically, I think maybe we can reflash the conversation of where we are with this product and sort of what we're seeing and how we're targeting it in the market.

Yes. So it's difficult. So the COR and the SOLIS are a product that never existed before. So when you make an AL3 and it's similar to a solid fold by Extang or a Rugged Liner cover, it's easy to target existing customers. There's already a market. So that's why people copy other products because there's already existing market, you just got to be cheaper and wile you're into the market. SOLIS never existed before, ever. COR versions of it existed. I did a video that we're going to launch pretty soon showing like a drill that has a built-in battery. So the built-in battery, battery generator system exists.

Nothing like our COR exists where it's an unlimited amount of energy kind of system. So it takes a lot of time to be able to develop the marketing assets and then find the right marketing channels, influencers, affiliates, all of these things. So we -- at the beginning of the year, we did launch the COR and the SOLIS, but we were also launching the NEXUS, which was the more clear opportunity. So we put all of our marketing efforts into NEXUS. And now the NEXUS is done. It's basically done. And all of our marketing departments, which is -- you see everything that they do online, all of the brilliant minds there are going to be focused for the second half of the year exclusively on COR and SOLIS.

So CORs, we're not selling a heck of a lot of them, and that's on purpose. I can't give you a number, but we're -- not because I'm veiling anything, but because it's like we've sold maybe between 50 to 100 CORs, for example. But that's on purpose. We just haven't focused on it. We're going to sell millions of dollars. Our intention is to sell millions of dollars of COR throughout the years as much as possible, but we have to focus the marketing departments to get that built out.

The SOLIS is actually selling quite well. We're selling on a frequent basis. They sell daily, which -- and there's no marketing dollars there. So that's a very positive sign. So we're excited for the second half of the year now that our focus is going to be switching to that.

And I'd like to complement that question with 2 more insights. Number one, Worksport did $1.5 million in tonneau covers the first year we started selling U.S. tonneau covers. Then the next year, it was $8.5 million. So this is our first year of selling the -- so in COR, and we do anticipate to scale up. With the COR, one of the key aspects that we have had faced from an environmental and broader economic perspective is the tariffs. With the lithium-ion battery specifically, we did end up paying a high percentage on the COR pricing on the tariffs. We noticed that competitors placed large orders well in demand of the tariffs. And we anticipate that either when the tariffs phase out or their inventory phases out, the pricing scheme between competitors and us does balance.

On the SOLIS side, we're the only ones doing it. The margins are healthy and the pricing is also healthy, and we do anticipate that to grow quickly as well. I will move to the next question, Steve. It's from [ Stephen El ] and it's related to patent protection for our products. He's asking what type of coverage we have across the globe.

Yes, good question. So we have Nilay Choksi is our on-staff General Counsel, started as our patent counsel coming from Philips, and I value Nilay immensely as a colleague of mine in the upper management of the company. And it's very expensive and very strategic on the patent side of things. So we try to do PCTs, which allow us to pull down patents over a year or 2 on a global scale. But otherwise, we tend to focus on patent products. Our recipe, we patent our products in China so that we could obviously stop the export of copycats. And then we try to patent within North, South and Central America. Sometimes we pick like Eurasia or Australia and New Zealand. And then sometimes we pick Europe. But getting into some of these European countries in the EU can be expensive and very challenging with translations and weird patent laws.

So you can assume that most of our products are patented in North America and in China at minimum. And then we may touch Europe, we may touch Eurasia, Australia, New Zealand, and we may look selectively at some of Central and South America. What I will say is the ZeroFrost patent is going to be the most expensive one for us. We're going to go everywhere with that because the heat pump market is not just a North America thing. It's a global thing. It's a massive market. So that's kind of our strategy there.

Thanks, Steve. And we have an anonymous question here that I'll take myself. The question is if we can give insight on the book-to-bill ratio monthly or quarterly as part of our public information and congratulating us on great growth so far. I believe the answer to that best stated is we've been doing build-to-order as well as using our existing inventory.

Thankfully, we have not had a situation where we've had a large backlog, especially as our B2B orders start building up and the volumes starting to come in much more aggressive banners. We have been having discussions about backlog and who gets what and which priority goes where. So we'd be happy to disclose that better into public financials as it happens. But currently, we have no backlog that's a significant amount. And as we start building a backlog, you can imagine that the largest distribution would have a little bit of longer backlog than perhaps the dealer network would or the B2C individuals would. And I'll top it off with we never want backlog to be into the weeks. We would try our best to keep it into the days.

Faran, I do want to get through all of these questions, the live ones. So let's get through all of them, if possible, please.

Yes, sir. Mike T, his question is, what is your biggest challenge overall right now? And what do you need to fix it?

I know Mike. The biggest challenge is finding the right amount of sales growth. B2B, as you know, is very difficult and growing within those markets is challenging, covering so much ground. Also making sure that we don't overspend, making sure that we're fighting inflation is very difficult. With the prices of aluminum having gone from $1.30 a pound to $2.60 a pound for American aluminum doesn't help anybody. But thank God, all of our competitors have to raise -- they're dealing with the same problem that they're raising the pricing as well.

Actually, we're not really raising our pricing. We're just reducing our discount. So the challenges are growing as fast as possible, striking while the iron is hot and being strategic and then also not jumping on landmines. As you can see right here, investors want that brand partnership and they want that Cabela's partnership, and they want that Home Depot PO and Walmart PO. But investors sometimes -- and I'm not knocking investors, I want it to, but they don't understand the inherent risks. And I think you know coming from aftermarket that if you go straight to an OEM and you become a factory installed item, if something goes wrong, which can and usually does, you're losing way more money than you ever thought about making.

So it's being highly strategic in our growth and making sure that we're stable. But meanwhile, yes, we within a handful of years, grown tonneau cover business to $30 million in run rate. I don't think that's ever been heard of. I think BAK Industries was around for 30 years, and they were at $50 million after their 30th year, we're going to be in the 30s of millions of run rate in our third year. So I think we're doing quite well. But otherwise, just keeping it all together and pushing -- keeping everyone rolling together and pushing that and hold it up.

Thanks. I did answer a few questions over chat, but I did want to ask this one quickly because I think it will be interesting for everyone here is what were the initial purchase orders for Meyers and Tri-State and maybe you can speak to that because you at least talk to the reorder cadence and seasonality. Are you assuming from them within the revenue run rate. So I guess, within that $25 million or projection that we have spoken about?

I see it Steve, Steve Wang. So thanks for asking the question, Steve. I want to answer the first part of it, but I can't. It's nonpublic. I just can't. I promise you I can't. But I can say that we've gotten reorders from one and the other one just went out like a week ago. So we expect more orders from the other. And I don't see a lot of seasonality. So the seasonality we have in the business is the doldrum of summer, like August is not a bad month. It's just a slower month because everyone is on that last minute vacation, but June and July are busy because they're getting ready for that road trip or whatever.

As soon as September hits, we got the fall -- late summer and fall markets, which are strong. And then we've got Black Friday, November, which is a wild. It could be a $2 million a month and it could be a $10 million month. It just depends. But then as soon as Christmas, do you think that people would buy tonneau covers for Christmas, they don't. They don't. So as soon as December, as soon as Black Friday is over and December hits, you're quiet December, January, February. Like those 3 months are pretty quiet. So it's not like dead quiet, just sales are slower.

We could run promos more strategically at that point, but it depends on our cost. It depends on if there's any additional inflation. The higher our cost goes, the lower that we could -- the less we could discount is the way you got to look at it. So yes, what I can say is with distribution, though, we reach deeper into like fleets, governments and these types of things where we're more sheltered from the seasonality of direct-to-consumer sales, if that makes sense.

Thanks, Steve. I think that's a great answer. And I'll go ahead and answer a question for Ramesh B. He was asking a question related to the heavy volume and millions of shares that have traded in the last 10 days compared to the historical averages.

I think that, Ramesh, the best answer here is the only answer, which is we have no insight to what's caused abnormally high volume over the last few days. Outside of the recent news releases surrounding the recent business financings, revenue growth, margin growth as well as us as a business landing Meyers distribution. We posted those press releases to the market. It seemed like there was a positive reaction both in price and volume. But what specifically caused it to trade hundreds of millions of shares with this versus $5 million or $500,000, we have no idea.

I remember one time, Faran, as an anecdote, Ramesh, one time the stock was like going crazy and we were trading a lot of stock. And I remember my phone started buzzing and buzzing and buzzing and someone -- I just answered arbitrarily and it was like an investor or a bank. And he's like, "Oh my God, what are you doing? What are you doing?" Like the stock is going crazy and your price is up and your volume is up, and I'm like, I'm presently in my mother's living room getting yelled at by her, like lectured by her. Like -- so it's an anecdote and it's a stupid one, but investors think that we're in a roundtable with computers and screen doing deals and talking to bankers and stuff.

Sometimes you know better than we do. Faran and I are on calls talking strategy and opportunities and then something just happens in the market. It will go down 20%. Investors like, what did you do? And it's like we were talking about sales. I don't know what we did. We did nothing. So the answer sometimes is boring, which we don't know. And I promise you if we did know, we'd tell you, but a lot of our days are just spent doing this Zoom meetings and team meetings or meeting in person talking to sales and strategy. And what happens in the markets up or down, usually, we have no idea. We don't -- we find out about it through you guys.

Thanks, Steve. And I do want to wrap this up. I know that there's a lot of others left on e-mail as well as one question here related to ZeroFrost. But we want to give the note that we will be doing this again. We will try to continue engaging investors through this sort of medium. And if you have some feedback on how we can make this better, more suitable and more informative for you, please go ahead and e-mail us, and we look forward to continue giving investors positive updates as well as speaking to investors about past updates and this great company together with you.

We're going to try to do these every month. So continue to engage with me. I think it's at @steverossiWKSP on X. You X me or tweet me on there, e-mail as you get Faran, so we're always open to conversations. And then from there, we'll have these on a monthly basis and just continue to answer questions and give updates. So I guess we'll wrap it up at that, right Faran?

Yes, sir. Thank you all. Thank you so much, and hope to see you soon.

Thanks everyone. See you soon.

Good afternoon, everyone, and thank you for joining Worksport's First Quarter 2026 Earnings Call.

I'm Steven Rossi, Chief Executive Officer of Worksport Limited. With me today is our Chief Financial Officer, Jennifer Kartychak, who many of you will be meeting on earnings calls for the first time.

Jennifer officially joined Worksport in January 2026 as our VP of Finance and has recently been promoted to CFO. Jennifer first began providing advisory services for Worksport in August 2023. Her short-term focus is to help strengthen our financial discipline, reporting processes and our internal control environments as we scale towards profitable operations.

We will be reviewing the financial results for the quarterly period ending March 31, 2026. These results were just filed today at 4:00 p.m. Eastern Time in our Form 10-Q and can be downloaded from the link provided in the chat.

At the end of today's call, our prepared remarks and presentation deck will be available for download at www.investors.worksport.com/#reports, again, www.investors.worksport.com.com/#reports. Our remarks will follow on a slide presentation. After our prepared remarks, we will open the line for questions. On that, let's begin.

First, safe harbor statements. During this call, we will make forward-looking statements, including statements regarding our financial outlook for the full year 2026, our expectations regarding financial and business trends, impacts from the macroeconomic environment and our market position, opportunities, go-to-market initiatives, growth strategy and business aspirations and product initiatives and the expected benefits of such initiatives.

These statements are only predictions that are based on our current beliefs, expectations and assumptions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control.

Actual results or events may differ materially. Therefore, you should not rely on any of these forward-looking statements. These forward-looking statements are subject to risks and other factors that could affect our performance and financial results, which we discuss in detail in our filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Qs and other SEC filings.

The forward-looking statements made in this earnings call are only made as of today's date. Worksport assumes no obligation to update any forward-looking statements we may make on today's webinar.

So with that, we have our agenda. On today's call, we'll be covering the following: First, key highlights from our Q1 2026 that we just filed. number two, liquidity position and capital strategy; number three, financial review; number four, update on Worksport operations; number five, an update on Terravis Energy and AetherLux, the exciting product; and number six, the 2026 outlook in general.

With that, let's jump to key highlights, and let's dive into it. Q1 2026 was the investment and launch readiness quarter, and we executed it with that objective in mind. In January, the SOLIS and COR started commercial shipping. In March, we unveiled NEXUS to industry buyers at the Keystone BIG Show and initiated pre-order activity on this product offering. In April 2026, NEXUS launched commercially, COR received the applicable UL and CSA certification package needed to support broader North American retail and commercial distribution, and we secured distribution with Tri-State Enterprises, including their placement of an initial purchase order.

Revenue grew approximately 48% year-over-year to $3.3 million, and gross profit more than doubled, increasing approximately 116% to $854,000. Gross margin was approximately 26% in Q1 2026, compared with approximately 18% in Q1 2025. These are meaningful year-over-year improvements.

Since Q1 2026 was a launch-readiness quarter, our current product portfolio has yet to meaningfully contribute to our results, including gross margin contribution. We are at the eve of our broadest product revenue opportunity to date for our tonneau cover business.

During Q1 2026, we funded inventory, conducted multiple product launches, refined our marketing strategy, and allocated resources to bolster our distribution network. We can now focus on converting our working capital investments for the balance of the year.

We enter Q2 with a stronger product portfolio, continued growth with our distribution relationships, and a deeper sales channel opportunity than any prior period in Worksport's history.

Our cash position reflects the cost of operational and strategic growth efforts, and we will address that directly. But the key investor highlight for Q1 2026 is this. We built product availability, funded launch activity, and expanded our commercial platform. Q2 2026 and the second half are about conversion. Shipments, sales channel activation, margin efficiency improvement, and lower operational cash burn. We are projecting strong growth in both B2C and B2B sales channels as well as a focus on meaningful efforts towards profitability from operations in second half of 2026 and beyond, but more on that soon.

First, and before we move deeper into the financial review, let's step back for a second and review what Worksport actually is. At its core, Worksport as a business consists of 2 key elements. First, we are an innovation-focused U.S. manufacturer. Second, we are building a clean energy solution or multiple solutions. These 2 areas are not separate. They move together. Our manufacturing platform gives us the ability to design, build and scale physical products.

Our clean energy focus gives our products a larger strategic purpose. These are the 2 core capabilities we believe that can drive the company towards profitability within the near term. We are a U.S.-based manufacturer, with approximately $11.6 million in inventory, $13.3 million in net property and equipment, including approximately $8.3 million of building and land net value and $6.6 million of manufacturing equipment net value.

We have more than 500 dealer locations and target more than 1,500 dealer locations by the end of this year. Our global intellectual property portfolio alone includes approximately 26 issued and 57 patent pending utility patents, 51 issued and 25 pending design patents and registrations and 44 registered and 15 pending trademarks.

We're also in the process of preparing a file on several other key utility and design patent applications across various countries and jurisdictions. We started production of our tonneau covers just in late 2023. And based on internal sales data, we have sold approximately 26,000 tonneau covers through worksport.com and related direct online channels from 2024 through Q1 of 2026, including approximately 8,000 covers in 2024, 16,000 covers in 2025 and 2,000 covers alone just in Q1 of 2026.

In 2025 alone across both B2B and B2C channels, Worksports sold approximately 25,000 tonneau covers and generated $16.1 million in net sales. We're quite proud of these statistics. Worksports started on the foundation of roughly 61 million pickup trucks in the U.S.A. on U.S. roads alone, and pickup trucks remain among the top-selling vehicles in the U.S. every single year.

People buy pickup trucks regardless of broader economic conditions. We started by making high-quality tonneau covers at prices that compete and in many cases, can be competitors that primarily source raw material and components from foreign markets. We believe we can continue to capture market share in the estimated $4 billion-plus tonneau cover market in 2026 and build the tonneau cover core business into a 9-figure profitable middle market company over time.

Said plainly, we believe Worksport has the potential to become a $100 million-plus middle market revenue company profitably from tonneau cover sales alone, and that's just our foundation. That's our core of this business.

Our vision does not stop at tonneau covers. We imagine a future where pickup trucks evolve from power-consuming utility vehicles into mobile power platforms and nano-grids that support owners at the camp site, work site, emergency site and on fleet levels. That is where our newly launched SOLIS and COR product offerings enter the picture. The tonneau cover is the physical platform. SOLIS adds solar generation and COR adds portable energy storage and usable power wherever you go.

Together, SOLIS and COR allow Worksport to move from aftermarket automotive accessories into the anticipated $13 billion-plus portable power market. Importantly, COR is not limited to truck owners. COR is a modular portable power system that can function as a standalone product for job-site, off-grid, emergency, recreational, and general portable-power use cases, for anybody anywhere globally. We are actively targeting OEM, fleet, dealer direct, distributor, and direct consumer relationships, while continuing to build brand and consumer awareness around this new line of product offerings.

Our next steps could be to look at integrating our COR battery backup technology for residential and commercial power; a possible first of its kind modular battery system for emergency power, or key energy savings and off peak cost savings for businesses, with strong apparent opportunities in industrial applications.

Now our subsidiary, Terravis Energy is at the forefront of developing energy saving HVAC technologies. The AetherLux ZeroFrost heat pump has all the elements to become a significant breakthrough energy saving product solution. It is expected to be the only heat pump platform capable of operating without traditional defrost cycles, and it has been tested to operate smoothly in extreme temperatures rarely seen by conventional systems. In fact, I'll say, not seen by conventional systems.

Aetherlux can provide heating and cooling highly efficiently, and we have a keen focus on home heating. We are also currently evaluating efficiencies within data center cooling technologies. The breakthrough AetherLux heat pump is expected to advance toward certification in 2026 and address a $150 billion-plus HVACR market. We have received a strong level of interest through initial inbound inquiries, achieved support through the U.S. Department of Energy, including their National Renewable Energy Laboratory, and are engaged in active government-related and strategic conversations.

AetherLux sits on top of the core Worksport product platform as an important additional opportunity. In short, Worksport has three related but distinct layers: first, the core tonneau cover business; what I call our foundational business; second, the SOLIS and COR power ecosystem; and third, the longer-term highly efficient AetherLux HVAC opportunity through Terravis Energy. We will provide more information -- more detail on Terravis later in the call.

Let's talk about liquidity. I will now address our liquidity position directly. Our fiscal 2025 Form 10-K included a going concern explanatory disclosure. That disclosure is important, and we are addressing it through a clear operating plan, convert inventory into revenue, grow gross margins in each of our sales channels and reduce operating cash consumption as our product launch spending normalizes and maintain a disciplined approach to working capital and capital market funding resources as needed.

Our ability to continue as a going concern remains dependent on generating future cash flows from operations while maintaining access to debt and equity capital markets. The largest use of cash in Q1, we were working was the capital-intensive launch-related investments. The primary use of cash was working capital to support production of our existing product offerings and the expected growth of additional product offerings launched in 2026, including SOLIS, COR and the new NEXUS. We received approximately $5.1 million of inventory to support the expanded product lineup with approximately $1 million of these raw material purchases remaining in accounts payable as of March 31, 2026. We also used cash to settle prior period working capital obligations.

The objective from here is clear: turn that inventory into revenue, continue to improve our gross margin for each sales channel and reduce operating cash used quarter-over-quarter. Our West Seneca facility also remains a substantial meaningful asset on the balance sheet, reflected in our $13.3 million of net property and equipment. We are a manufacturing company with real assets, real inventory and an expanding order and distribution base.

The question is execution velocity, and Q2 2026 begins answering that question. Our priority is to reduce our reliance on capital -- on equity capital and potential additive dilution or additional dilution to existing shareholders as revenue scales and working capital normalizes.

Capital strategy. We remain transparent with our use of capital tools. During Q1 of 2026, we raised approximately $2.2 million, including net proceeds through our amended at-the-market offering with H.C. Wainwright. As a result, we issued 1.46 million shares of common stock. We recognize the impact of dilution, and we are mindful of our shareholder responsibilities.

Our strategy remains to use the ATM as a tactical tool, subject to applicable Form S-3 public-float limitations and market conditions, not our primary -- and not as our primary capital vehicle. Where capital tools are used, we will continue to evaluate them through one lens, whether the operational return justifies the dilution and improves the long-term shareholder value equation.

With that, I'll hand the call over to Jennifer to walk through our financial results.

Thank you, Steven. Good afternoon, everyone. It's a pleasure to be speaking with you, and I look forward to continuing these conversations as we progress through fiscal 2026.

Net sales for Q1 2026 were $3.3 million, an increase of approximately $1.1 million or 47.9% compared to $2.2 million in Q1 2025. Geographically, the U.S. continues to represent an overwhelming majority of our net sales at 99%, up 48.5% year-over-year.

Within our segment, hard tonneau covers generated approximately $3.3 million in net sales, accounting for approximately 99% of total Q1 net sales. Our soft tonneau cover segment contributed approximately $0.04 million. The concentration in net sales in the hard tonneau covers segment reflects our ongoing strategic focus on higher-margin American-made product offerings.

From a channel perspective, Q1 also reflects a deliberate transition in how we are building the business. In Q1 2026, B2C or direct-to-consumer online channel contributed approximately $1.8 million in net sales on approximately 1,700 covers, while B2B generated approximately $1.5 million on approximately 2,300 covers.

Direct-to-consumer activity remains an important sales channel to develop, but our growth strategy includes an enhanced concentration in the B2B sales channel, including dealers, distributors, fleets and potential OEM partnerships.

Moving on to gross margin. Gross margin for Q1 2026 was approximately $0.9 million, more than doubling from approximately $0.4 million in Q1 2025, a 115.5% year-over-year improvement. Our Q1 2026 gross margin was approximately 26% compared to approximately 18% in Q1 2025 and approximately 30% in Q4 2025. The sequential movement from Q4 2025 to Q1 2026 was primarily driven by our sales channel mix. In Q4 2025, our sales mix was weighted more heavily towards the direct-to-consumer sales channel, while in Q1 2026, our mix shifted closer to an even split between B2C and B2B.

Importantly, our B2C margin improved sequentially from approximately 30% to approximately 34%, but the higher relative concentration from B2B sales channel, which has a lower margin, impacted that blended gross margin.

On to operating expenses. Total operating expenses for Q1 2026 was approximately $6.6 million compared to $4.7 million in Q1 2025, an increase of approximately $1.9 million or 41%. Let me walk you through some of the key line items.

Research and development expenses decreased by approximately $0.2 million or 44% between Q1 2025 and Q1 2026. This decrease reflects the natural progression of our product development projects. The AL4 and HD3 moved out of active development and into full production during 2025.

Our R&D spend is increasingly directed towards next-generation innovation rather than ongoing refinement of production-ready products. General and administrative expenses increased by approximately $0.8 million or 24% from $3.4 million in Q1 2025 to $4.3 million in Q1 2026. This increase is primarily attributable to the timing of costs incurred to support capital market positioning and promotion of our enterprise value amidst a perceived valuation gap in our market value. We continue to manage this expense caption with strategic discipline.

Sales and marketing expenses increased by approximately $1.3 million or 148% from $0.9 million in Q1 2025 to $2.1 million in 2026. The increase reflected from -- sorry, the increase resulted from the combination of intentional brand awareness and product launch campaigns directly linked to the launch of multiple product offerings in early 2026.

We launched 3 products and initiated large-scale digital marketing campaigns to drive awareness for both the COR and SOLIS as well as to support the overall brand validation. We are closely monitoring the ROI on each marketing channel and plan to optimize accordingly.

On to cash flows and the balance sheet. Cash and cash equivalents were $566,000, down from $5.9 million approximately at December 31, 2025. As Steven noted, this decline reflects working capital deployed to fund multiple product launches and reduce prior period obligations. Net cash used in operating activities in Q1 2026 was approximately $8.2 million.

Let's further discuss the cash used from operations. Our net loss of approximately $5.8 million included approximately $1.1 million of noncash items, primarily stock-based compensation, depreciation and amortization. That implies a cash-based operating loss of approximately $4.7 million.

Working capital used an additional approximately $3.5 million, driven primarily by inventory build and the settlement of prior period payable obligations. I would like to reinforce that we do not expect the level of working capital use in Q1 2026 to repeat at the same magnitude as inventory begins converting into revenue and prior period obligations normalize. That normalization, combined with a growing revenue base across multiple sales channels is how we close the gap and achieve cash flow positivity.

Inventory increased by $2.1 million to $11.6 million as of March 31, 2026. Of that total, raw goods grew from $3.4 million to $5.3 million, a direct reflection of our investments in COR and SOLIS as well as the NEXUS product readiness.

Raw materials of $5.4 million reflects our near-term production pipeline. We are not anticipating a significant use of cash for further material purchases until Q3 2026.

Working capital as of March 31, 2026, was approximately $6.6 million compared to $10.1 million at December 31, 2025. This reflects our strategic decision to proactively convert working capital into operational assets to support the launch of multiple product lines in early 2026.

Our asset base anchored by approximately $13.3 million of net property and equipment represents our investment in our West Seneca manufacturing facility and continues to provide a strong foundation to support our future production growth.

I will now turn the mic back to Steven to review our operational milestones. Steven?

Thanks, Jenn.

On January 13, 2026, we announced the commercial launch of our flagship energy product duo: the SOLIS Solar Tonneau Cover and the COR Portable Energy System. This was a defining moment for Worksport: years of R&D, engineering, certification work, and manufacturing preparation culminating in real products shipping to real customers from our facilities. SOLIS is the world's only commercially available solar-integrated hard folding tonneau cover. COR is a modular portable energy system that integrates with SOLIS or functions as a standalone unit for job site, off-grid, and emergency power needs.

Together, they represent Worksport's entry into the multi-billion-dollar clean energy and portable power market, so excited about it. With the initial product launches behind us, our 2026 focus is scaling SOLIS and COR revenue.

In April '26, COR received the safety and regulatory certifications needed for North American retail and commercial distribution, including all applicable UL and CSA approvals. That certification package is important because it expands the universe of retailers, distributors, fleets, and commercial customers that can evaluate and carry the product.

We also strengthened our commercial sales channel around these products. In February 2026, we announced a strategic partnership with Potomac International Partners to help position the SOLIS and COR ecosystem for federal, fleet, and commercial adoption channels. We do not consider these channels as immediate revenue sources, but it is an important awareness channel for products that can serve worksite, emergency, mobile power, and off-grid applications.

SOLIS also carries credibility through our active conversations with OEM's. The point is not that OEM revenue is assumed in our 2026 sales pipeline; The point is that the product platform has strategic relevance beyond direct consumer sales, and we are building the channel architecture to pursue that opportunity responsibly. The question we are focused on answering is how quickly these products scale and through which channels. COR & SOLIS did not represent a meaningful amount of sales in Q1, as emerging products, we are developing marketing assets, product awareness, and sales pipeline to target strong sales towards the rest of the year, we're just getting stated.

With focus on certification, channel onboarding, repeatable fulfillment, and measured customer acquisition economics, the path for market adoption is becoming accessible. We note it took approximately 1 year for our initial made-in-USA tonneau cover lines to build traction, and we believe we can achieve similar speed, or better, for this SOLIS and COR.

The third major commercial milestone of the quarter was the unveiling of our NEXUS tonneau cover, boy that's exciting. On March 19, 2026, we presented NEXUS to industry buyers at the Keystone BIG Show, Keystone's one of the biggest aftermarket distributors in North America. One of the premier aftermarket distributors in North America. And this is one of the most premier events North America.

At the Keystone BIG Show, our NEXUS product generated immediate buyer interest and pre-order activity. Following production and commercial launch in April 2026, early distributor interest is and remains significant, this supports management's expectation that NEXUS can contribute meaningful net sales in 2026. NEXUS is a premium tonneau cover featuring a newly engineered operating system designed to improve ease of use, safety, and speed for truck owners. Unlike conventional folding tonneau covers that often require users to walk around both sides of the truck to secure latches or prop rods, NEXUS is designed to allow full operation from a single side of the truck while maintaining full-bed access.

This is a practical innovation focused on a clear customer pain point, and early distributor demand supports our view that the product can accelerate adoption across both existing and new sales channels. I encourage everyone to check the product out at www.worksport.com. It's astonishing.

In late 2026, we announced that we secured Tri-State Enterprises as a new cross-regional distribution partner and our biggest at the time. For our full tonneau cover lineup, including NEXUS. Tri-State expands our distribution reach across Arkansas, Missouri, Oklahoma, and Texas. Tri-State, operates approximately 1 million square feet of warehouse space, and has already placed initial purchase orders and reorders. Management believes Tri-State can become a 7-figure near-term account with recurring multi-million-dollar potential.

Our distribution strategy remains a central pillar of our 2026 growth plan. We entered the year with a dealer network that exceeded 500 locations, a nearly sixfold increase from the start of last year. Our target is to reach 1,500-plus locations by the end of this year through a combination of direct dealer onboarding and new distributor partnerships. Remember, there's 17,000 dealers in America. So we're just getting started.

The Tri-State Enterprises partnership announced in April 2026 is our first major distributor relationship and gives us broader penetration into new geographic markets. Importantly, this is not just a logo announcement; Tri-State has already placed initial purchase orders, and truck bed covers are among its top product categories. That alignment matters because it increases the likelihood that distribution reach can translate into real sell-through.

We are also in closing discussions with a nationwide dealer network capable of bringing our products to all U.S. continental states. We will update investors as those discussions move from pipeline to signed commercial relationships. Each of these relationships represents a potential step-change in distribution reach, but our standard for reporting progress will remain execution: orders, channel activation, and repeat purchase behavior. We're strictly focused on execution this year.

Our U.S. manufacturing and quality credentials also matter to this strategy. The West Seneca facility that we built is ISO 9001:2015 certified facility, which supports our ability to pursue larger dealer, distributor, fleet, and potential OEM relationships. Quality certification does not create revenue by itself, but it removes friction in conversations with larger counterparties that require formal quality systems.

Our B2B go-to-market strategy continues to complement our direct-to-consumer e-commerce sales channel. We believe the combination of strong online presence, an expanding dealer network, and new distributor partnerships is the right model to capture demand across the full $4 billion-plus tonneau cover market. The investor takeaway is straightforward: the channel base is becoming larger, more diversified, and increasingly capable of absorbing a broader product lineup.

Let's talk AetherLux. Terravis Energy, our clean energy subsidiary continued to make progress in the first quarter of this year. In February 2026, we confirmed that a large government entity is actively monitoring upcoming laboratory performance results for the AetherLux heat pump as a part of an internal evaluation process.

We also announced that the certification work is progressing with AHRI, ENERGY STAR, and other North American certification milestones targeted within 2026. To be clear, no procurement decision has been made, but we are not currently projecting initial AetherLux revenue within this year. However, we anticipate commercial opportunities within 12 months. What we are saying is that a credible government-related evaluation process is underway and that the technology is advancing toward third-party validation, certification, and potential early commercialization in this $150 billion plus HVACR market.

We believe that AetherLux is the only heat pump technology in the world tested to operate at temperatures as low as negative 57 degrees Fahrenheit without the need for energy-intensive defrost cycles. Our proprietary ZeroFrost technology eliminates defrost cycling entirely, opening doors to markets and applications that have historically been difficult for conventional heat pump technologies to serve.

AetherLux can be viewed as a strategic upside driver beyond the revenue drivers embedded in our 2026 sales pipeline. The core 2026 revenue is expected to be driven by the tonneau business and early SOLIS/COR contribution. AetherLux is a separate platform advancing through testing, certification, and commercialization work, and we intend to update investors as lab results and certification milestones are achieved.

'26 outlook. So let's talk about this for a second. This is the strongest commercial position Worksport has occupied at the start any of the fiscal years in our history. We provided revenue 2026 guidance of $35 million to $42 million in our 2025 Form 10-K. We believe our revenue will increase substantially from 2025 and will actively target operational cash flow positivity this fiscal year.

As part of our recent key leadership transition, we re-evaluated our strategic priorities. We believe it is in the best interest of all shareholders to construct a high-growth and durable business that can compound shareholder value over the long-term. Although, it's not going to be a straight line, we are going to get there. And we are relatively young, and we are a dynamic business with consistent growth in design, production and distribution of quality and innovative products, which offers us a promising future and opportunities.

We believe our approach to support this achievement of our strategic priorities includes a more holistic evaluation of our guidance policies. Accordingly, we plan to provide annual financial guidance early each calendar year.

The primary driver for moving away from quarterly guidance updates is to increase our emphasis on allocation of resources on long-term strategy, including a focus on shareholder value. We believe a change in the frequency of providing guidance updates from a quarterly basis to an annual basis allows us to prioritize long-term vision over short-term metrics, which will allow us to focus and align our near-term priorities to meaningfully contribute to the successful execution of our strategic objectives.

With countless potential operational variables alongside emerging sales and product channel mixtures, we will hold off on specific guidance updates, but reaffirm our previous broader guidance. fiscal 2026 is about achieving cash flow positivity from operations and continued upward revenue trajectory. As I said earlier, we are executing and we're going to continue to grow, and we're going to hit cash flow positivity, but it is never a straight line.

So in closing, to our investors and our analysts, I want to close with this. 3 years ago, Worksport was generating under $2 million in annual revenue. Last year, we crossed $16 million. This year, we're on the path to achieving operational cash flow positivity just with our foundational product and significant revenue uptake. This is the company we have all built together. We have done this by manufacturing in America, building products that dealers and consumers want and expanding our distribution with discipline.

I also want to know that I recently purchased shares on the open market, reflecting my personal conviction in the company's long-term direction. Our responsibility now is to turn that conviction into measurable execution, and I will purchase shares again if I have to.

In Q1 of '26, it's not a perfect quarter from a cash flow perspective. It will be a quarter -- it was a quarter where we did what we said we were going to do, launch SOLIS and launch COR, unveiled NEXUS, added a major distributor, completed the COR certification package, expanded gross margin year-over-year, and improved loss per share, all while it was the slowest quarter of the year, Q1 tends to be the slowest quarter seasonally of the year for tonneau cover sales.

Q1 was the investment and launch-readiness quarter. Q2 2026 and the second half are about proving conversion, turning inventory into revenue, dealer growth into orders, NEXUS demand into shipments, and margin expansion into lower cash burn. We are also building strategic vectors around federal channels, OE targeting for SOLIS and COR, and AetherLux certification progress, none of which are required for making the overall business operationally cash flow positivity.

We expect the tonneau cover business, our foundational business to be capable of that on its own and everything else is accretive to that. We are not managing this business for a single quarter. We are building a durable, American-made manufacturing platform with growing channel reach, expanding product breadth, and clean-energy optionality. We intend to earn investor confidence quarter by quarter through results, not promises. Thank you for your continued support of and interest in Worksport.

Thank you, Steve. We have Tate Sullivan here from Maxim.

Thank you for the comments on inventory. That was the first thing -- one of the first things I saw. And then with finished goods balance of $5.3 million of the $11.6 million, is most of that NEXUS, I assume, and other tonneau covers or a relatively large amount in SOLIS and COR?

COR takes a chunk of it. It's in the millions for COR means we have to manufacture batches of 1,000 at a time. And then the rest of the blend, AL3, HD3, AL4 and NEXUS only just started being made at the tail end of the quarter. So Jen may have a bit more back of the napkin insight on that, but it's an even blend in my perspective. Am I right, Jen?

Yes, it's an even blend, but there isn't a concentration in our NEXUS and NEXUS concentration really in our raw materials at this point.

Okay. Understood. And were there -- does that imply first sales of SOLIS and COR in 2Q or not necessarily given the timing of the marketing on those products?

Sorry, asked that again, Tate. Do the sales represent SOLIS and COR?

Do you think you'll have first sales, first revenue from SOLIS and COR in the second quarter? Or did you already have some in the first quarter?

We had some. We were building the plane while we were flying it with the SOLIS and COR. Unfortunately, the final production units of both were also at the same time, concurrent with initial productions like launch. So when we get -- when we got the first batches of COR's, it was those very CORs that we used to give to influencers, generate media content. And it takes it takes probably a quarter in itself to produce the media content.

And if you look on our web page, Facebook, all social media, you're just starting to see that content get out there and then we have to do ad spend on it and invigorate the markets as well as the process to get it into distribution and dealers is difficult because there's pricing, there's agreements, there's negotiations.

So like I said numerous times during the earnings call and the transcript is it's not a straight line. But at the end of the day, the dots connect one higher than the next, and we've delivered that. So to answer the question, we did clip sales COR and SOLIS, but they just weren't that meaningful, although we -- you look at the AL3, our first product, it took a year to get that to market, and that product is an existing market.

When we're forging a new market, the likes of never -- which has never existed, it's to be expected that it's going to take at least this year to get that product off the ground into meaningful revenue territory.

Okay. And last for me, one more, please. You had a slide on the B2C and B2B to covers and then the combined price per cover, I mean, back of the envelope a little above $800, that's well above from the level per tonneau covered last year from the Q information. Is that because of the hard cover mix from soft cover primarily?

And then also the margins with B2B, those are lower than B2C by a meaningful amount. Is that what you said? Sorry, 2 questions.

Yes. So our cost -- the average sell -- the average order value has gone up by about 35%, if I'm not wrong, maybe even more. So we're just selling more expensive items. And then also with domestic inflation of our -- we're 90% -- over 90% domestically sourced material. So we don't have any very little foreign content. But domestic inflation is real. The price of aluminum has doubled. in the past year. So our cost has also increased, and that's eroding margin. But as fast as it's eroding margin, which was a real thing last year as well, we're picking up efficiencies as well in how we make the product. So we're improving as fast as domestic inflation might be nibbling away. But the good thing, the light at the end of the tonneau is aluminum is not going to stay at an all-time high. And when it increases, so will our margin exponentially while we maintain discipline in manufacturing.

So I think that might answer your question if it's not a giant run on sentence. And what was the second one, Tate?

And then you had a 35% gross margin target, not understanding doing the guidance on an annual basis. And I think you answered that, how you get there with even if you have more B2B sales lower aluminum prices, that will help you get to that 35%. Is that a fair?

Yes. With any luck, so there's a few different things that we're doing. Number one is B2B is back in the napkin lower margin, but there's also a general lower cost to service the account, both in warranty, freight, marketing, CAC costs, CAC is customer acquisition cost of Google, Meta, these types of ads. So what we discount them is actually at times less than what we have to spend to sell it directly on our website.

So net-net is very similar. And then we have the economies of scale from them reaching like Tri-State Enterprises, let's block and tackle this question. Tri-State services Texas same day. There's absolutely no way that Worksport has the infrastructure this year to be able to service that state same day.

So now we have massive economies of scale by having -- relying on their infrastructure to just sell more covers to more people quicker and better. And then we, in essence, their discount on the product is the equivalent of our CAC cost, our customer acquisition cost on direct-to-consumer. So almost nets out the same.

And then again, and then the upside is economies of scale. So we have overhead absorption over more units. But then the other thing is as soon as we have with any luck, a trade deal specifically on aluminum and some of this craziness that's happening in the broader geopolitical environment, where aluminum starts coming back down, that's when we're really going to reap the benefit. So we're weathering a storm right now that everybody is weathering.

The last thing I'll say is the most popular vehicle in North America is the F-150. And I believe the price tag of the F-150 for the average American has gone up $20,000 in a year for the base model, maybe if not $20,000 very close. That's because it's an all aluminum truck. So Ford feels it, we're going to feel it. And you can't paint Worksport with a different brush than what Ford Motor Company gets painted with.

Tate also in your -- now that we're starting to grow as a business, we're starting to see like it's insane to think that Q1, that's measurably the slowest quarter of the year for tonneau cover sales. Now that we're growing, we're seeing this. Just a lot of snow in most of the U.S. cold weather, truck sales are down. So as we're maturing, we're learning this. But it's also to note that it's going to almost be impossible to ever have a Q1 be higher revenue than the previous Q4, with Q4 being Christmas, all the holidays as well as Black Friday, which is by measure our biggest month in November. There's almost no way.

So while we're doing guidance and looking at following Worksport and any investor and shareholder listening, it's important to note that Q4 will always be higher. Even if it's $1 billion Q4, we're never going to have a $1.1 billion at least with the foundational products that Tonneau covers unless there's a massive liquidity event and a new product like the AetherLux that might be a more winter seasonal product. Does that make sense?

Yes. Understood.

All right, Steve, thanks for those replies. We did want to open the floor and give some commentaries to the shareholders attending the call today that going forward, Worksport will be hosting monthly town halls that will be speaking to commentary on the business, recent press releases and updates to the day-to-day developments that the business is happening.

This is to boost transparency, but also to show the investors and shareholders all the wonderful things that are currently developing. As part of the town hall sessions, we do open up a Q&A portion to people attending the call as well as people that have submitted questions before the call. In this case, we do have a host of questions that are available to us that people have submitted over the last 10 days. And Steve, I will now open the floor with some of those questions.

Here, we have question number one, which is around our cash position. The question is stating that how we plan to fund the company, with the current cash balance we have as well as commentary on any expected dilution.

It's a good question. I think that investors have to understand that I'm the biggest shareholder of Worksport recently having bought shares. And of course, I don't want dilution, nobody does. So what all shareholders and investors want is exactly the same. We all want Worksport to be $1,000 a share. We all want Worksport to pay dividends. We all want Worksport to be highly successful, and we also don't want any more shares ever to be issued.

So you could see that over the past 6 months, we've been very modest in at the market. So at the market, the offering we do at the market is just selling from time to time stock at the market. It saves us warrants. It saves us discounts to hedge funds. Hedge funds often want discounts. It saves manipulation and shorting. It saves banker fees. It saves investor relations fees, which were significant last year during our Reg A.

So to speak to dilution, we don't want it, and we've tried to sip not gulp for almost half a year since December of last year was our last offering. So we're doing our absolute best there. We're going to -- we fund our operations through an operating line. We have a significant book value. The book value of the business is close to $30 million, if I'm not being too forthright in saying that. So that's a financeable assets that we have that we're able to borrow against. So when borrowing money is cheaper than issuing securities at a $10 million market cap, we do that. But we are going to maybe raise some money this year.

Last year, we were very active in the markets. We raised, I think, $25 million. This year would be a fraction of that, if 10% of that through the markets or through debt instruments. The minute we're cash flow positive, we'll qualify for lines of credit of senior lines of credits at regional banks at KeyBank in Buffalo. And that's what I'm really hoping that we can qualify for that $10 million, $20 million, $30 million line of credit.

And I'm really thinking that as we land more distribution, that's going to be a pretty quick I said numerous times, and I hope that investors are listening when I say that it's not a straight line, but I think that the rank this year in revenues is going to be as close to straight as you could get in real business, which is always pretty. It's ugly, but it's -- we're getting there.

Thanks, Steve. I appreciate that. Now we have a question for the CFO regarding a breakdown of G&A, if we could get some more insights there for shareholders.

Sure. So in terms of our breakdown of G&A, I'll talk about G&A in its totality and then what gets absorbed up into our margin, if you will. So in our G&A pool, about 66% of our G&A cost is with salaries, wages and benefits, inclusive of equity compensation. About 11% of that is depreciation and amortization, about 10% relates to facility support and then the remainder relates primarily to professional fees, and professional fees does include noncash expense related to equity compensation. But of that 66%, it should be noted that about 20% of that actually gets absorbed into our margin.

Fantastic. Thanks for that insight, Jen. And we had a question for Steve regarding the company's view on how AetherLux should be valued or at least looked at, at this current time.

I think that if -- if AetherLux -- if Terravis Energy was private, I feel that it would have a significant valuation. I'm going to disclaim that disclaimer that I'm not making any representations or warranties by saying this, but I believe that Terravis Energy and just the technology with the AetherLux should be a 9-figure valuation.

The significance of interest that we've had from businesses that are global as the likes of which we've never seen before. So at its current stage, I feel that it's a 9-figure valuation because I feel that it presents 9- or 10-figure revenue opportunities very, very quickly. And we're going to get there. I mean we've shown that we know how to get a product to market and selling. So this is just the same.

So I think that the valuation, although is basically nothing right now. We're trading at 1/3 of our book value. I think that Terravis Energy is a significant value, $50 million to $100 million at minimum, if it was private.

Thank you, Steve. And we have a question here regarding sales and marketing spend. Could you comment on the jump of Q1 sales and marketing expense and what we think is going to be more likely through this time of the year?

Yes, absolutely. So because of the increase in costs that we've had as a result of inflation, domestic aluminum prices doubling, we've had to reduce the ability to discount. So before we -- if you guys saw, we were doing AL3s for $7.99 and now AL3s are almost $1,000. So we can't discount our product as much. So to that extent, we've had to spend more on marketing to be able to get higher average order value.

So we think that the marketing, we got it under control now. It took a little -- it took all of this quarter -- sorry, Q1 to get it under control with a reduction of discounts. And we think that the spend is going to be probably about 20% to 30% of the sales. So it's going to keep going up. We're going to spend more because we want to sell more, but the idea is it's all profitable.

We had a question here about Tri-State. There was a recent distribution partnership with Tri-State. Could you comment on how big that really is quote-unquote and if it is likely to lead to other partnerships with other distributors?

Yes. So Tri-State is massive, Tri-State services Texas same day. We can't do that. There's no way we can compete with their service level. They're a big business. They have 1 million square feet of warehouse space, and they sell tens of millions of dollars of tonneau covers a year, and the Nexus is the best tonneau cover in the market. I can guarantee that

So Tri-State could be a 7-figure, maybe even 8-figure account for Worksport. And we've heard of distributors buying tens of millions of dollars a month from our competitors. So I don't think that Worksport would not be able to at least aspire towards that as time goes. And the Tri-State, there's 3 distributors in America, Tri-State is one is more regional. They're not national. They don't service all of the U.S., then there's Myer and Keystone that's owned by LKQ Corporation.

Typically, they compete with each other. So whatever Tri-State does, Myers does and then Keystone does. So the fact that we landed one means that we are very confident that we're going to land the other 2. And the other 2 are larger in revenue and in size, and they service all of North America, inclusive of Canada and maybe even Latin America.

So the answer is whatever Tri-State does, typically Keystone and Myers does as well and Keystone and Myers are bigger in terms of top line revenue. So the opportunity becomes exponentially larger while Tri-State in itself is still very meaningful for top line revenue opportunities.

Thank you. We have another question regarding the certification of the COR that has recently passed through in Q1 of 2026. Does that mean that we can expect revenues to start coming in from that product line? Or what does that mean in terms of commercialization?

Yes. So we don't need to ISO -- sorry, we don't need to have certification. There's Chinese units on Amazon right now that aren't certified. We don't sell on Amazon. Amazon is, I think, where products go to die. But as we talk to OEMs, governments and fleets, a good qualifier. So ISO certification opens the door to commercial B2B. Meanwhile, on direct-to-consumer B2C, we've got the marketing assets live now. We're just rolling them out now, and we're going to start the marketing engine.

The AL3 took a year to get off the ground. And we think that within the same year time frame, so let's say, Q1 of this year to the end of Q1 of next year, we think that the COR is going to be significant.

One thing I'll say is EcoFlow, which is Chinese-owned Chinese operated, Farhan, you got the statistic. I think it was about $1 billion in sales a few years ago.

Reported to sell over $1 billion in 2023.

Yes. So in 2023, EcoFlow, which is a Chinese owned and operated business was an inferior product, not modular at least like ours, sold $1 billion 3 years ago. So we know that even if we got 10% of that over time, that's still $100 million in top line revenue. And the product is done. We're not -- we've turned off the R&D engine for that product. So there's no more spend. It's just a matter of getting it out there and getting it selling. So the rest of this year is extremely right looking for the quarter.

Thanks, Steve. And we have an interesting question here regarding the revenue guidance from 2025, where we initially stated a guidance of $20 million on the side. And the year ended up posing to $16 million, which was still an improvement by almost 100% year-over-year. The shareholder has a question regarding missing that guidance and why that kind of happened and what that means for the future revenue guidances that we might speak to or issue.

Yes, good question. Revenue guidance, we're a $10 million market cap company. I was saying internally today that we have no business issuing guidance. We're just doing it to be as transparent as possible. So we don't have to issue guidance. We're doing it to be able to let shareholders participate in the business and see what our aspirations and dreams are. But we don't -- we're just a brand-new business. It's not like after 10 or 20 years of operations, you could really kind of go based on real metrics.

Last year was the first year for us to be in business with 2 product lines. This year is the first year for us to be in business with 7 product lines. So we're really just doing educated guesses, and we could spend more and sell more, but then the gross margin goes down. So to be able to maintain profitability, it's always a balancing act. We want to be able to sell more. But yes, we don't -- we have to spend more on Google or we have to spend more on sales reps and agents and commissions and then the profit is very low and then that looks even worse.

So we had to call it at the end of the year to say towards the second half of the year saying, let's focus on profit to be able to finance the operations versus the growth. The growth is going to be there. It's just a matter of getting there profitably, and that's a very difficult balancing act. So we're going to get to a middle margin business, but we want to get there profitably, which may take us a little longer, but it's better than getting there fast, but not profit.

We have another question regarding evidence that NEXUS could be a meaningful revenue driver. Could you speak about the NEXUS product and where you think it falls in terms of the revenue mix of 2023?

A good friend of mine, Julian Maimin was the founder of BAK Industries. He's a friend that I do keep in touch with. He exited the business. He had BAK Industries at $80 million in revenues over a decade ago with the BAKFlip G2, which is measurably inferior to the NEXUS. BAK Industries is rumored to be over $200 million in revenues today. And their product, I believe, are measurably inferior. They -- if you see some of the videos I did a year ago online, they have paper thin aluminum panels. They have rubber seals. You have to drill holes in the bed, you have to walk around and do prop rods up, and they're just not as good of a product. And I'm sure -- I'm not even -- I'm not trying to talk really about the company, I look up to their parent company.

But I do know that of BAK Industries product, the rumor was about $200 million of sales, whether that was a high a few years ago or it's something that they're still doing today, I don't really know because they are private still, but that was the rumors from credible sources. So the answer is if BAK Industries is selling an inferior product, albeit longer-standing product and about over $100 million, I think that Worksport can be able to get to $50 million or $100 million in top line revenues with an improved -- a significantly better product that you don't have to walk around the truck. It doesn't dent as easily and doesn't require drilling and doesn't fall apart after a year.

Fantastic. Thanks for that insight, Steve. We do have one more question here regarding the sales and marketing percentage, and I'm going to direct this to Jen. The percentage of sales and marketing that is variable on B2C. Could you comment on how that was in Q4, Q1 and now heading into Q2 2026?

Sure. I'd be happy to do so. So in terms of sales and marketing, the variability really rests with a lot of our IR efforts that we've done to promote our brand, combined with a concentration not only in performance marketing, but also overall brand awareness. We did complete a multi-month campaign with a vendor to evaluate our overall brand awareness and found that the performance marketing that we have actually been doing so intensely over the past year, or so has really contributed towards broader brand awareness and our primary server in the B2C space being those good old truck owners.

So we really took that information towards the end of Q1 2026 and said, let's just keep honing in on the awareness that we are doing in terms of our product awareness and refining our strategies there so that we can get closer to a more normal rate, if you will, to achieve growth certainly within the B2C space, but not having to do as much in the way of promotions as we have in the past 12 months.

Speaking specifically to the product margins in B2C, could you comment on how we saw a change of marketing cost as described inside the transcript. We're hoping to ask little bit on more insight on how that played out and what we expect to happen?

Could you repeat the question? I apologize. You were a little bit muffled.

Yes, you mumbled, Farhan.

Sorry about that. Is this a little bit more clear?

Somewhat, yes.

The question is related to the product cost of marketing. If you could give some more insight on how the product marketing cost has changed in the last few months and where it's expected to go?

How product marketing costs have changed in the last few months and where it's expected to go?

Well, we've done a lot of work in terms of making sure that we understand the level of effort that's necessary in order to contribute towards a successful campaign. And to that end, we've employed some outside consultants to help us assess our existing campaigns, augment those campaigns and produce more credible reporting for which we are able to use that information in order to build better algorithms, if you will, and achieve our objectives.

So we very much have been able to use a lot of what we've learned in the AL3, AL4 initiatives to essentially zoom in on our effort in AL4 space, which is a really great revenue driver for us and then also use that information as a springboard for the COR and SOLIS because the COR and SOLIS, honestly, from a marketing standpoint, direct-to-consumer marketing standpoint is a different approach because it achieves the ability to capture market at a broader -- on a broader scale as opposed to just a niche market. Hopefully, that addresses your question.

It does.

It does. Also, I'll just chime in real quick Farhan. Marketing is very volatile. So for example, one of our competitors has 2 million site visitors a month. So they're -- and that's not very organic. That's paid visitors. Let's say, it's $1 per visitor, they're spending $2 million a month in ads, and we're competing directly with them and other competitors as well. So the space is just highly competitive. I think that the U.S. economy is challenged.

So the marketing costs are more significant this year because businesses need to continue to find growth and get sales. So it's just more competitive in marketing mode right now and it just -- it's expensive. So to that extent, marketing costs are very volatile, and it takes a level of basically geniuses to navigate this on an active almost 24/7 basis.

Thanks, Steve. And the last question here is, if you have any final remarks for shareholders that are currently listening to this call and have read the queue, what would you want them to know as the key takeaway from this call?

Key takeaway is that growth is ugly, and it's not in a straight line that in the uplisting era of 2021, when we listed to NASDAQ from OTC, we uplisted with companies, my comrades that none of which exist, which is a testament to how difficult it is to grow a business and that as easy as it is to judge us for our losses, our victories are significant and meaningful in this space while we had COVID, hyperinflation, multiple wars, and a lot of economic challenges.

But the point is that we remain steadfast in execution, and we remain steadfast in delivering on our business from $1 million to $6 million -- sorry, from $1 million to $8 million to $16 million and this year with the 30-plus in line our in sight, I think the key takeaways are that we're executing, but it's not a straight line and it's not easy. And if it was easy, those that judge easily would be doing it themselves.

So to that extent, we're just -- we're focused on this exclusively and working our rear ends off, and we're going to get there. This year is the first year we have 7 products with AetherLux coming down the pipeline as well. So the key takeaways are as much as we didn't sell as much this quarter than Q4, which is unrealistic and crazy to think that a business would sell more in the middle of winter than Christmas and Black Friday, we also spent less and we came out basically even.

So if we had sold $5 million, we would have made basically the same amount of profit from having to spend so much in marketing. So to that extent, we're being prudent, and we're showing stable, disciplined growth, and we have the best in front of us. Meanwhile, we're focused on delivering shareholder value, which is selfish because I'm a big shareholder in Worksport. So I want what everybody on this call wants, which is continued success. So that's in short what it is. It's not a straight line, and it's not pretty, but we're grinding.

Thank you very much, Steve. Thank you, Jen, and thank you for everyone attending the call. This does mark the end of the conversation. We do encourage you to send any additional questions or remaining questions to us at [email protected], and we look forward to posting monthly town halls going forward.

Yes. I'll close, Farhan, just to say, yes, we're going to -- in order to do a following -- to increase our following and our appreciation of our hard work and be able to listen to shareholders, we're going to do monthly town halls. So what we're going to do now is every month, we're going to do major press releases that have to go out, we'll go out. We'll do press releases at the end of the month for smaller town hall-related matters and updates, so a larger press release that outlines smaller important elements that are not as material. And so anything material comes out right away, of course, by requirement.

And then immediately adjacent to that press release, we're going to schedule, I think, about a week later, a town hall, where I'm going to be live on -- like today, I'm everywhere, but we're going to be live on video, just answering questions live. Shareholders will be able to go live. They'll answer -- they'll ask questions not tight, so we'll welcome them to voice their questions, they can share video. And we're just going to -- we're going to have an open and frank conversation when lose or draw on a monthly basis where we'll give updates on sales, revenues, answer questions.

You want to know about G&A. I see a question here about salaries and payroll. Jen, actually, you should answer that. Salaries and payroll, if you're still here on G&A. That's -- is there a round number you could throw out there on what that looks like?

Yes, I can address that from 2 different perspectives. So from the perspective of what makes up our payroll, meaning the components of payroll, our base wages over time is a little bit north of 95%. And then our benefits is -- I'm sorry, I gave you the wrong number, I apologize.

And I'll shift over just briefly in terms of giving you information as to who's in that payroll number. So as of Q1 2026, about 51% of our salaries and wages was actually from our production rate, and most of that gets absorbed back into our inventory and about 28% of that is coming from our admin function and the balance is a smattering between our sales function as well as our warehousing function and facilities function. So hopefully, that addresses your thoughts there.

And then in terms of our wages and salaries, as I said about -- I apologize, about 70% of our salaries and wages is base wages and overtime. -- about 30% of that is relating to -- or 17% of that is related to benefits and then the balance is related to that compensation expense, which is noncash in nature.

Great. Thanks, Jen. And then I see [ Nachin ], you're asking the questions about Terravis -- and with Terravis, you can ask me -- I think we talk on LinkedIn, so you can message me. But obviously, we'll always explore divestitures, sales, mergers, acquisitions, these types of things. But I think that we want to continue to bring value there so that it's accretive to the Worksport shareholder base.

Worksport owns about 70% of Terravis and the other 30% is held by the key executives. Another thing I'll note with respect to Terravis it's headed by my father, Lorenzo Rossi, who's the primary shareholder of Terravis Energy and options. But also Lorenzo to continue to support the business has reduced his salary to be able to -- he still works full time at Terravis Energy, and he has no salary as a CEO of that business. He just has basic compensation as a director that serves on the Board since 2014, which is $5,000. So to that extent, he's working for Terravis and leading this charge and bringing the Brilliance and Genius for $60,000 a year. And I think that, that shows that we're all very committed -- me with my base salary and compensation, I invested a good chunk of that into buying Worksport stock. So to that extent, about 1/3 of it. So to that extent, we're all doing everything we can and working with Lorenzo to get there.

Like I said, it's not a straight line. We see an $0.85 stock or a $10 million market cap, but every quarter, we continue to deliver better book value now that's closer to $30 million in asset value for Worksport with all of these great upside opportunities. So it's going to go eventually. It's going now, but eventually, the valuation is going to be better, and we're very, very positive for this year ahead specifically.

Fantastic. Thank you very much, Steven, and thank you for everyone attending the call. This does mark the end of the earnings call, and we look forward to meeting again in our next periodic town hall. Thank you.

Thanks, everyone.

Thank you.

Good afternoon, everyone, and thank you for joining Worksport's Fiscal Year 2025 and Q4 2025 Earnings Call.

I'm Steven Rossi, Chief Executive Officer of Worksport. With me is our Chief Financial Officer, Michael Johnston.

We will be reviewing the financial results for the quarterly period ending December 31, 2025, and our full fiscal 2025. These results filed today at 4:01 p.m. or thereabouts in our Form 10-K and can be downloaded from the link provided in the chat.

On today's call, alongside our financial performance, we'll review our operating execution across the flagship hard tonneau cover offerings, progress on the commercial launch of our SOLIS and COR offerings, our capital position, the key strategic priorities we're focused on as we move into 2026.

Before I begin -- before we begin, I wanted to frame this call the right way. 2025 was a year of real top line growth and significant margin improvement. Full year net sales nearly doubled to $16.1 million, and gross margins improved to 2,800 basis points from 11% in 2024. Both are significant milestones that we achieved and were achieved through a combination of expanding our product offerings and increasing our presence in both direct-to-consumer and business-to-business sales channels.

Our fiscal 2025 strategies to expand our presence in multiple sales channels, introduce new products and increase our market capture result in a net operating loss and increased use of our cash otherwise generated from our growing operations. Our use of cash to support operations did not grow at the same rate as our net sales. To address our need for both operating and investing activities during fiscal 2025, we supplemented our cash flows with external capital.

This strategy complements our intentions to capture a more meaningful market share from our very large competitors. That is the right context for evaluating our results. That stated, we still have work ahead of us. We're evolving with additional product offerings and recent learned experience of navigating entry and growth in different sales channels. We have all the pieces in place to make the years ahead transformative with a keen focus on lean operations and generating positive operating cash flows.

Our time and investments through the end of fiscal '25 have set the right foundation for fiscal '26 and beyond. We successfully transformed the product capitalization to market delivery. We increased our brand and sales channel distribution presence, both with direct-to-consumer and business-to-business customers. Most importantly, the lessons we learned along the way now create a clear pathway forward.

Our recent remarks will follow a slide presentation. After our prepared remarks, we'll open the line for questions. At the end of today's call, our prepared remarks and presentation deck will be available for download as always, at www.investors.worksport.com/#reports [Audio Gap].

So with that, let's begin. Safe harbor statements. During this call, we will make forward-looking statements, including statements regarding our financial outlook for the full year 2026, our expectations regarding the financial and business trends, impact from the macroeconomic environment, our market positions, opportunities, go-to-market initiatives, growth strategies and business aspirations; our product initiatives and the expected benefit of such initiatives.

These statements are only predictions that are based on current beliefs, expectations and assumptions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Actual results or events may differ materially. Therefore, you should not rely on any of these forward-looking statements. These forward-looking statements are subject to risks and other factors that could affect our performance and financial results which we discuss in details in our filings with the SEC, including our annual report on Form 10-K and quarterly reports on Form 10-Q and other SEC filings.

The forward-looking statements made in the earnings call are made only as of today's date. Worksport assumes no obligation to update any forward-looking statements we may make on today's webinar.

We will begin with key takeaways from fiscal 2025, including net sales growth, margin expansion, and the transition from development to early commercialization across multiple product lines. We will then address our risk profile, liquidity position and capital strategy to provide clear context on our financial profile.

From there, we will walk through a detailed financial review, including full year and sequential performance, margin expansion, net sales quality and operating leverage. We will then cover our operational execution, including manufacturing scale-up, distribution expansion and key product milestones across our tonneau cover product offerings Next, we will review the commercial launch and positioning of SOLIS and COR, followed by progress at our subsidiary, Terravis Energy and its AetherLux platform. We will also address supply chain dynamics, tariff impacts and our intellectual property strategy. Finally, we will conclude with our fiscal 2026 financials, including key milestones, our path to cash flow positivity and the strategies -- strategic priorities driving the next phase of growth.

Let me start with 4 key takeaways. First, fiscal 2025 was a year of strong net sales expansion. Net sales increased 89.8% year-over-year to $16.1 million, following fiscal '24 net sales of $8.5 million. The scale-up of our business over the last 2 years is clear. Last year's jump from $8 million to $16 million demonstrates a clear demand for our product offering. The recent and forthcoming product launches provide fresh offerings to market participants. We're still growing and expanding our brand presence in the markets across multiple sales channels.

Second, our gross margin profile improved materially. First year gross margins moved to 28% in fiscal '25 from 11% in fiscal 2024. On a derived basis, fourth quarter 2025 gross margin was about 30% compared with roughly 11% in the fourth quarter of the year before 2024. Our margin expansion consistently grew as we enhanced our market presentation in -- our market presence in 2025. Third, we turned several long-running development programs into commercial activity. Our HD3 cover transition into production began contributing to net sales in the late fourth quarter of 2025.

Our SOLIS and COR product offerings launched commercially in December of 2025. These are important developments, but investors should also understand that these launches came late in the year and do not significantly contribute to our fiscal 2025 financial results. Further, these efforts impacted our need for operating cash flow without complementary liquidity conversion. We expect liquidity conversions from these efforts to otherwise enhance our financial production in 2026.

Fourth, Worksport has evolved from an emerging brand into a recognized player in the $4 billion tonneau cover market. Our product offering differentiation and focus on quality have allowed us to increase our market presence in the last 2 fiscal years. Our dealer network alone expanded sixfold in fiscal 2025, now encompassing over 550 locations across the United States and Canada. But with over 17,000 dealers nationwide, we've only just begun.

We're targeting aggressive expansion in fiscal 2026. More on that later. Our brand identity matured -- our brand maturity is supported by our ISO 9001 certification, which we received in April 2025. This certification is not just a badge, it's the prerequisite for Tier 1 OEM relationships, and we are actively pursuing those. As we enter fiscal 2026, Worksport stands as the only company currently offering a fully integrated solar and energy storage ecosystem for the light-duty truck market.

I will now address our risk profile directly. Our fiscal 2025 Form 10-K includes an explanatory paragraph outlining management's assessment of the company's ability to continue as a going concern. This is a standard reporting requirement given our history of operating loss and as a growth stage entity. Importantly, our growth has been outpacing our cost structure, reflecting improving operating leverage as we scale.

With the foundational investments of 2025 now largely in place, our focus in 2026 shifts towards disciplined execution, monetization and efficient capital deployment. Despite continued increases to one of our key raw components, aluminum, our margins continue to expand, and we expect our operating cash burn to normalize as production overhead is further absorbed by growing sales volumes in fiscal 2026.

We are targeting and managing initial signals of operating cash flow positivity in 2026. More on that later. We remain transparent regarding our use of the at-the-market offering program, otherwise known as an ATM. In 2025, we raised approximately $0.5 million, $0.5 million in net proceeds via the ATM. In November 2025, we amended our agreement to permit sales of up to an additional $4 million to ensure tactical flexibility.

We recognize the impact of dilution on our shareholders. We all feel the same. Our strategy is to use the ATM only as a secondary tool. We evaluate and select the capital tools that are most advantageous to operating while being mindful of our shareholder responsibilities. We have historically prioritized the use of certain capital events such as the high-impact warrant inducement completed in December of 2025, which brought in $6.4 million at a fixed price.

Every dollar of capital raised in fiscal 2025 has been tied directly to current and future operational return on investments, specifically doubling our overall production capacity and strategically controlled R&D investments.

With that, I'll hand it over to Mike.

Thanks, Steve. Let's take a deeper look at the net sales growth. The net sales growth was driven by the rapid scale-up of our Made in America hard tonneau covers. In fiscal 2025, our hard tonneau covers segment generated $15.7 million in net sales, while our soft cover segment contributed net sales of $500,000. The shift toward our hard cover product offerings is intentional as it reinforces our commitment to quality production while supporting higher market price points and better margin profiles.

On a sequential basis, Q4 of 2025 net sales were $4.7 million compared to $5 million in Q3 2025. In late Q3 of 2025, management responded to continued pricing pressure of our raw material components by implementing a product price increase to both direct-to-consumer and business-to-business customers. The 5.4% sequential decline is attributed to the product price increase and indirect impact to our promotional marketing efforts, which in turn, both increased our marketing spend and decreased our sales volume.

The impact is further amplified by the large contribution of the direct-to-consumer sales channel to net sales. Despite the price increase, our sales channels are stable and are on track to continue growth in fiscal 2026. More on this later. In Q4 of 2025, our operational KPIs remained strong. We maintained a gross margin of 30.1% in Q4, which is a significant improvement over the 26.4% we recorded in Q2 of 2025. This sequential stability proves that our manufacturing processes are maturing and can handle product mix shifts without significant margin erosion.

Gross margin expansion is the most critical metric for our fiscal 2026 outlook. Our fiscal 2025 gross margin was 28%. Our fiscal 2024 gross margin was 10.7%. The expansion to nearly 30% in the latter half of fiscal 2025 was driven by 2 factors: higher capacity utilization at our New York factory and becoming more efficient with our production efforts. We plan to continue our focus on margin expansion and have set a stable target of 35% gross margin for fiscal 2026. We will continue to employ lean manufacturing principles while adding to our product portfolio and maximizing our production capabilities. Passing it back to Steve to talk about net sales mix and unit economics.

Thanks, Mike. The quality of net sales generating products also improved in fiscal 2025. Online retailer net sales increased 142% to $11.9 million from $5 million in 2024. Online retailers represented 74% of total net sales in 2025 compared with just 58% in 2024. Distributor and jobber net sales increased to $4.2 million from $400,000 the year before.

Most notably, there were no private label sales in fiscal 2025, whereas private label represented $3.1 million or 37% of net sales in fiscal 2024. Every product that left our warehouse, our factory last year had a Worksport label on it, we're proud of that. That strategic shift matters because our decisions to focus on proprietary production efforts complement our resulting margin expansion. We are no longer responding to the same sales channel mix demand that characterized fiscal 2024.

The net sales mix in fiscal 2025 can be attributed to demand for our own branded products, especially through e-commerce and growing indirect distribution relationships. A mix within both channels complements our strategy to grow our brand without significant channel concentration of specific customers. We reduced customer concentration risk this way. Geographically, net sales remain...

Steve, this is operator. Just confirming that audience can hear you.

Am I coming through clearly?

Yes, you are. You can continue at geographically net sales.

My apologies, guys. Geographically, net sales remain overwhelmingly U.S.-based. U.S. net sales were $16 million, up 91% from fiscal 2024. That concentration is not surprising given our current sales channel footprint and market strategy. However, it does indicate meaningful room to broaden distribution over time, especially to international markets. Operator, am I still coming through clearly?

Yes, you are.

Okay. Just chime in if I don't, I apologize for the unstable Internet. Let's discuss the hard metrics of our production. Our primary production facility is located in West Seneca, New York and is currently capable of producing over 125 units within a single 8-hour shift. In August 2025, we announced our strongest 4-week production run since domestic operations began. Our unit economics have improved dramatically.

In early 2024, our overhead absorption was a headwind due to low volumes. Today, as we approach Phase 1 output levels, fixed costs are being allocated across a much larger base. To reach company-wide cash flow breakeven, we calculate that we need to sustain a quarterly revenue level between $9 million and $11 million at about 35% gross margin. This quarterly revenue target is highly influenced by the underlying sales mix between direct-to-consumer and indirect distribution, but is also influenced by our product mix. At our current growth rate, we are aggressively closing that gap and anticipate achieving net sales of $9 million a quarter within the balance of this year.

Mike will comment on our OpEx and cash position.

Our strategic focus as we enter fiscal 2026 includes diligent monitoring of our cash operating expenses. Fiscal 2025, our general and administrative expenses were $14.8 million. The $3.1 million or 26% increase was related to increased employment as we expanded our operations and further developed our product offerings. Excluding noncash items, our growth in operational expenses is trending below our revenue growth.

We have successfully in-sourced several business processes that were previously handled by high-cost third-party consultants, reducing our professional fees as a percentage of net sales. This is the definition of operating leverage. Our infrastructure is strong and now every additional dollar margin contribution has an even greater potential to impact our bottom line.

Our net cash used in operating activities for fiscal 2025 was $17.2 million compared to $10.1 million in 2024. This increase reflects scaling our inventory resources as we begin to offer additional products to the market in Q4 2025, while also supporting our continued growth in multiple sales channels for our legacy tonneau cover offerings.

At December 31, 2025, we had approximately $9.5 million of inventory, of which 56% were raw materials. We're well positioned as we begin fiscal 2026 with diversified product offerings for multiple sales channels and expect higher liquidity to them to reinvest in our production efforts. With $5.95 million in cash and $3.4 million available on our revolving line of credit as of December 31, 2025, we have a total liquidity position of over $9.3 million.

Given our projected margin expansion and the expected revenue contribution from SOLIS and COR in 2026, we believe this provides sufficient runway to reach initial operational cash flow positivity within the second half of 2026. Our expectation is to monitor our results and use our existing liquidity resources in a manner that both supports operational goals and decreases the need to seek financing through ongoing capital efforts.

I will now turn the call back to Steven to discuss our operational execution and product commercialization.

Thanks, Michael. The financial results Michael just detailed are the output; the input is our operational execution on the factory floor and throughout our distribution network. Fiscal 2025 was about proving that Worksport can manufacture at scale in the United States with rigorous quality control. Quality is top of mind for us as we continue to achieve manufacturing milestones. Our initial ISO 9001 certification evidences our commitment to quality product and demonstrates our ability to scale reliably even with our abbreviated active product production history.

Our business-to-business sales channel is still in its infancy. During fiscal 2025, we rapidly expanded our footprint. In the third quarter alone, we grew our national dealer partnerships by 42%. By mid-2025, our partner dealer network exceeded 550 locations across the United States, a nearly sixfold increase from the start of the year. This includes our strategic partnership with Patriot Automotive Technologies, which will support our efforts to accelerate our national penetration.

Our tonneau cover business is systematically becoming a moat. By manufacturing high-quality hard covers in New York enforcing strict minimum advertised price policies to protect our dealers' margin and supporting them with aggressive marketing, we are becoming a preferred vendor in the business-to-business sales channel.

In November 2025, we announced a major expansion at our R&D facility in Ozark, Missouri. This facility serves 2 vital roles. First, it is the primary assembly, testing and distribution hub for our SOLIS solar integrated covers and COR portable energy products. Second, it effectively doubles our R&D footprint. By separating our high-volume tonneau cover production in New York from our complex clean tech assembly in Missouri, we have derisked the commercial launch of SOLIS and COR.

This geographical diversification also improves our logistics network, allowing us faster shipping to the critical Midwest and Southern markets. Our tonneau cover portfolio has never been stronger. By mid-2025, the premium AL4 achieved an 80% rollout, covering 20 of the 25 targeted vehicle models. In late October, we began production of the HD3 heavy-duty tonneau cover, which entered commercial sales in November. The HD3 is strategically priced for our business-to-business dealer network, protecting dealer margins while strengthening relationships within the jobber community.

With the tiered lineup from entry-level SC3 [indiscernible] AL4 and the professional HD3, we are now positioned to capture demand across the full $4 billion tonneau cover market. Importantly, with a now mature product lineup, ISO-certified manufacturer, strength in branding and the investments made throughout 2025, we believe Worksport is entering a new phase. We are operationally ready to scale.

As we move into 2026, our focus shifts towards monetization and expansion, prioritizing the largest revenue opportunities through national distribution, deeper penetration of our dealer network and initial expansion into international markets such as Europe and Australia. In parallel, we'll seek to advance OEM level relationships with leading automotive manufacturers, including Ford, General Motors and RAM along with along with upcoming debutant like Slate EV.

A bonus note. In 2026, we plan to launch a next-generation cover that we believe will help shape the future of Worksport's hard cover product lineup. Featuring patented capabilities not currently offered by competitors. Early feedback from select partners and prospective customers has been highly encouraging, many labeling this new cover as a game changer.

We expect this product to see strong adoption within our sales channels and contribute meaningfully to net sales as we scale. Additional details, including product specifications and preorder campaign outcomes are expected in early 2026. In late Q4 2025, we marked the commercial launch of our SOLIS and COR product offerings. This is an important milestone for us as it validates our successful development journey of a long-running R&D program.

The product positioning is clear. SOLIS is a solar integrated folding tonneau cover aimed at power generation on vehicle. COR is a portable energy storage system for mobile, off-grid, backup and vocational use and it is designed for both function and as a standalone or to integrate with SOLIS. We initially disclosed pricing direction during our Q3 2025 prepared remarks, the COR starter kit at $949 and the SOLIS beginning at $1,999 and moving up to $2,499 depending on fitment.

We also described an initial rollout plan for 1,000 COR units and 900 additional battery packs and a limited SOLIS release representing about $2.5 million of near-term initial revenue opportunity. The key 2026 question is not whether these products launched, it's how fast they scale with acceptable margins and working capital discipline.

Let's touch on Terravis Energy. Terravis Energy continues to deliver breakthrough innovation. In February 2025, we announced that AetherLux can operate in temperatures as low as negative 57 degrees without energy-intensive defrost cycles, the only heat pump in the entire world that has been tested to achieve this feat. Importantly, AetherLux is not limited to extreme climates. Our proprietary ZeroFrost technology has been tested to eliminate frost cycling altogether, a common source of energy loss, system strain and inconsistent performance in everyday winter conditions, including major markets like Toronto here in Canada or New York.

This enables more consistent efficiency, improved comfort and reduced mechanical wear across a broad range of environments. AetherLux Pro has undergone due diligence and some site visits from multibillion-dollar corporations and U.S. government entities, including the Department of Energy's NREL Alaska laboratory. While tonneau covers drive the current revenue, Terravis' intellectual property represents a compelling opportunity tied to the global shift towards clean energy products, including high-efficiency HVAC.

In late Q1 2026, we selected an established manufacturing partner. The product is expected to achieve certification in 2026 and is currently being evaluated by multiple government entities. Management believes this intellectual property represents a compelling addition to Worksport's overall value proposition.

Before closing, I wanted to address the macroeconomic environment, specifically tariffs and supply chain risks, which remain top of mind for many investors. Our soft tonneau covers, along with a small percentage of raw material used for our hard folding tonneau covers are sourced from China. While we experienced overall increased input costs during fiscal 2025 as a result of tariffs on imported goods, these cost increases did not impact our soft tonneau covers as no additional components were sourced during that time period.

Our hard covers are made in the U.S.A. In fiscal 2025, domestic aluminum prices increased by more than 35% and are up over 50% since the start of fiscal 2024, driven by supply constraints and primarily tariff-related pricing pressures. In response, we implemented a pricing adjustment across our tonneau cover portfolio. While this led to a temporary decline in sales volume in Q4 2025, demand has started to stabilize across each of our product channels, our sales channels, while also offering higher-margin products, and we are regaining momentum heading into 2026 -- into Q2 2026.

Our portable energy products are currently manufactured using foreign lithium-ion supply chains. The current tariff environment has required adjustment to our pricing and go-to-market strategy. That said, we believe our unique SOLIS + COR system will be well received once the proper commercialization of the product is achieved across all sales channels.

We are also actively evaluating opportunities to transition towards a more domestic supply chain for the COR over time. We continue to manage these risks proactively and strategically. As of December 31, 2025, we hold 24 issued utility patents and 50 issued design patents and registrations globally with 95 utility and design applications currently pending.

In addition, we have 43 trademark registrations and 15 pending trademark applications in various jurisdictions worldwide. We take a clinical approach to intellectual property enforcement, ensuring that our first-mover status in the solar tonneau space is defended against both domestic and international imitators. We are really excited about our recently submitted patent application for the AetherLux ZeroFrost system. Our intellectual property portfolio continues to serve as our defensible competitive advantage. Now to Mike.

To reiterate the scalability of our product offerings, in fiscal 2025, our net sales grew by nearly 90%. During that same period, our core manufacturing and distribution infrastructure matured and expanded to complement our customer demand across all sales channels. In fiscal 2026, we do not anticipate the need for major step-ups in each channel. We have the floor space, we have the machinery and we have the ISO certification.

Our focus is now exclusively on increasing throughput and optimizing our sales funnel. This is the classic S-curve of growth: The heavy lifting of building the platform is done, and we are now entering the phase of accelerated margin capture.

Looking ahead to the first half of fiscal 2026, we have set clear measurable milestones: one, initial SOLIS and COR ramp-up and margin contribution; two, full rollout of the HD3, AL4 and AL3 lines to all 550-plus dealer locations; three, launch of the game Changer hard folding tonneau cover, expected to be a best seller.

For the second half of the year, we target aggressive dealer network expansion to 1,500 locations through new distribution partnerships expected later this year; operational cash flow positivity; B2B and OEM partnership expansions for the SOLIS and COR by getting our system across to additional customers via synergistic partnerships with other businesses.

To Mike.

Our path to net cash flow positivity is driven by 3 pillars. First is net sales volume. Reaching the $9 million net sales quarterly threshold that meaningfully produces contributions in excess of operational needs depends on a combination of sales volume mix and product mix. It is also impacted by our production efficiency.

We plan to monitor these components regularly and anticipate reaching this target outcome in fiscal 2026. Second is margin mix. Increasing overall production provides margin lift as we use our resources more efficiently to support our sales growth. We also have diversified our product offerings, some of which provide more meaningful margin lift. Both product mix and sales channel mix will directly impact our ability to maximize margin efficiencies.

Third is capital efficiency. We plan to concentrate our efforts on performance marketing efforts that reinforce our brand rather than solely focusing on brand impression to drive sales volumes. We also plan to monitor our need to incur additional costs to increase our visibility and impression given our size and the stage of our operations.

We entered fiscal 2026 with a stronger cash position and double the availability on our line of credit facility when compared with the start of fiscal '25, providing us the stability to execute this plan.

We are entering fiscal 2026 with a focused plan to continue our accelerated growth strategy, but with a focus on leveraging our previous investments in brand awareness as well as commercialization of additional product offerings. We believe this approach will continue to generate margin lift and provide additional operating cash flows.

For 2026, we expect revenue of $35 million to $42 million with gross margins of approximately 35%. Some highlights. Our guidance includes a full year's impact of 3 product offerings launched in late fiscal 2025. Our guidance includes the introduction of our Game Changer product offering in early 2026. Our guidance reflects our commitment to driving efficiencies with operations as our company and our product offerings mature in the market.

Our guidance assumes continued growth in our business-to-business sales channel, a market which grew during 2025 to be 26% of our sales mix. Some important notes. We remain focused on metrics such as EBITDA and positive operating cash flow within the strategy that includes responsible management of our liquidity.

We plan to update investors as we continue to evaluate how the combination of sales mix and product mix impact key performance indicators. Our guidance excludes contributions from AetherLux, which is expected to reach commercial readiness in the second half of 2026. Our guidance also does not assume upside from a potentially faster than expected ramp-up of SOLIS and COR. Our guidance excludes potential impacts that may arise from the current geopolitical environment. For example, our guidance assumes that aluminum prices stay stable at the current prices and do not decrease back to a more normal baseline.

Why Worksport, Why Now? To our investors, I encourage you to consider the transformation we have achieved. Just 2 years ago, Worksport was a pre-revenue development stage company. Today, we have demonstrated our ability to scale and grow, growing net sales from approximately $1.5 million in 2023 to $8.5 million in 2024 to $16.1 million in 2025. Over that same period, gross margins improved from 11% to 28%, exceeding 30% later -- in late 2025.

At the same time, we have significantly strengthened the foundation of our operations. We expanded our sales channels positioning, reducing our indebtedness and brought multiple products to market, including HD3, SOLIS and COR. We also continue to invest our efforts to develop our AetherLux product, which may serve as a long-term value driver.

Our efforts with our intellectual property provide a comfortable competitive advantage. With these milestones achieved, we can now focus on execution, scaling throughput and driving towards sustained profitability. Thank you. This marks the end of our presentation. Turning the call back to the operator for Q&A.

Worksport is now opening for Q&A. [Operator Instructions] We have Scott Buck here.

Steven, I'm curious, how should we think about the difference between the high end and the low end of the '26 revenue guide? What needs to go right to end up closer to that high end?

Well, we've -- there's a lot of different things, bottom up, top down. Top-down faces the market and the demand. Fuel prices, purses get tighter, right? So to that extent, we're hoping that the economy stays strong. We're hoping that base fuels and energy stays affordable and doesn't pinch a pocket. And we're hoping that the consumer stays active in the market. Tonneau covers are a must-have, but I mean, if people are more budget conscious, of course, premium tonneau covers and SOLIS and COR-type products might be something that's not purchased as actively.

So we might feel economic constraints. From the bottom up, we're obviously very, very cognizant. Domestic inflation as a result of global tariffs has been significant. 50% increase on American aluminum because of foreign tariffs, definitely not what I think the intention was with foreign tariffs. So if we continue -- if it goes to 55% and 60%, 70%, eroded margin leads to price increases that ultimately the average consumer pays and that $1,000 product turns into an $1,100 product, which might have some dropouts in terms of conversions, if that makes sense. So we're hoping that just everything stays stable on the bottom up, cost up, supply chain and then everything stays strong on the consumer side and the economy continues to show signs of strength.

Great. That's very helpful. And then I wanted to ask about the heat pump business. How do you envision the monetization there? Are you going to manufacture and market and sell or potentially license that technology? Or could that even be a potential divestiture down the road?

It's -- we've considered and had meaningful conversations about almost all options from divestitures to licensing. So when we released the SOLIS, the quality customer that reached out to us by LinkedIn, e-mails, these types of things, it was huge. I mean, various OEMs, and we were so excited. I could say that it shadows the interest in terms of what came from AetherLux. The global $1 billion and $1 trillion dollar entities that reached out to Worksport, Terravis on that, being interested on helping bring the product to market or M&A and these types of things continues to be significant.

So we're going to explore all options. But what I think is important for you as an analyst and any investor or shareholders to know is we know how to bring something from nothing to market. Like if nothing were to happen or we chose the path of bringing a product to market and you were to say, build it, stock it and sell it, we know how to do that. And we've shown that from our ramp in sales. And a product that is something for everybody like the heat pump has a much larger -- I mean, it dwarfs the tonneau cover market. I think it's...

Steven, on sales and marketing expense, a nice step-up in '25. Should we continue to see that move higher in '26? Or have you reached kind of a steady state there on the marketing budget?

Steady state. It's -- we're going to tighten up -- we front-loaded expenses for marketing and branding, and we're going to try to tighten that up for this year.

Okay. Perfect. Well, congrats on all the progress, guys. Looking forward to '26.

Steve, we have a question from the audience. [ Doug Will L. ]. His question is if there's any new relationships with truck lines, I'm assuming he means OEM trucks like a partnership and plan.

Yes. So obviously, OEM discussions are always a conversation. We know all the major automakers, and we think that there's a right time for that. So I think that we're mature now, and that's what ISO is for. So we do have relationships. As they become material, we'll announce them. And I think OEM is definitely in the cards for us this year.

Fantastic. There is another question about the SOLIS and COR and if we can comment on the sales -- current sales as well as sales forecast.

Yes. So we have 1,000 core products and almost 1,000 additional batteries because it's an unlimited energy system. Sales initially have been pretty strong, but you got to think that when we receive the product from contract manufacturing is when we received assets to be able to make marketing. We didn't have prototypes. We just -- if you're going to make one, you're going to make 1,000, if that makes sense. So all the marketing has just -- all the marketing assets have just become released. So to that extent, sales were -- interest in sales were okay for January, February and March, but we only just released all the right marketing assets to get it to dealers, to get it online, to get it on our website, the videos, these types of things.

So we continue -- we've always expected that there'd be a 90- to 120-day delay to get the product really cooking. So we'll have more news in the second half of this year or at least in Q2 and beyond.

Awesome, Steve. And we're going to take one more question here. There is a lot of other questions that are left unanswered. I encourage investors to e-mail me at [email protected]. But we will take this question regarding the strength of intellectual property regarding AetherLux and if we anticipate any competitors in the shadow with the same technology.

So far, we do freedom to operates . We do patent checks. We do disclosure checks. We check the market. We're fairly thorough. We have on-staff legal expertise on patents. So to that extent, we think that we have a very strong IP asset in the making with AetherLux patent. We think it's defensible, very defensible. We protect our intellectual property with vigor, and we don't think that anything like this exists that we've been able to find, hear about or there's been nothing close to it.

And no other government entity or other business, including other manufacturers that we've spoken to, global manufacturers, none of them have said that they have anything close to this type of technology. So we remain very, very enthusiastic about the opportunity for AetherLux.

Fantastic. Well, thank you again, Steve and Mike for doing the presentation. I have put my e-mail in the chat to any remaining questions, which is [email protected]. And if you would like to meet with management one-to-one, feel free to e-mail us, and we're happy to get that scheduled. Thank you for being an investor, and have a great day.

Thank you, everyone.

Good morning, everyone, and thank you for joining Worksport's Quarter 3 2025 Earnings Call. I'm Steven Rossi, Chief Executive Officer and Founder of Worksport Limited. With me today is our Chief Financial Officer, Michael Johnston. Today, we'll walk through our financial performance, operating progress, liquidity position and how these results align with our strategy to build a high-margin, scalable platform in truck accessories and clean tech-enabled power solutions.

We will be reviewing the financial results for the quarter ended September 30, 2025, which we filed earlier today in our Form 10-Q and can be accessed on our Investor Relations website at investors.worksport.com/#reports. Once again, investors.worksport.com/#reports. At the end of today's call, both our prepared remarks and the accompanying presentation deck will be available for download as well.

After these remarks, we will open the line for questions from attending analysts. So on that, let's begin.

First, safe harbor statements. During this call, we will make forward-looking statements, including statements regarding our financial outlook for the full year '25 and '26, our expectations regarding financial and business trends, impacts from the macroeconomic environment, our market position, opportunities, go-to-market initiatives, growth strategy and business aspirations, our product initiatives and the expected benefits of such initiatives.

These statements are only predictions that are based on our current beliefs, expectations and assumptions based on forward -- because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that may be difficult to predict and many of which are outside of our control.

Actual results or events may differ materially. Therefore, you should not rely on any of these forward-looking statements. These forward-looking statements are subject to risks and other factors that could affect our performance and financial results, which we discuss in detail in our filings with the SEC, included in our annual report on our Form 10-K and quarterly reports on Form 10-Q and other SEC filings. The forward-looking statements made in this earnings call are made only as of today's date. Worksport assumes no obligation to update any forward-looking statements we may make on today's webinar.

So here's today's agenda. On today's call, we will cover Q3 2025 Key Performance Outcomes. Production Scaling and Operational Execution, Tariff Environment and Cost Management, SOLIS & COR Commercial Launch Roadmap, R&D next steps, including AetherLux, Cash & Capital Strategy, 2025 to 2026 Outlook and Path to Cash Flow Positivity and Key Takeaways as well as some Q&A. With that, let's move into our numbers. Mike will walk us through the Q3 2025 financial highlights.

Thanks, Steve. Q3 was another solid step forward in Worksport's growth journey, the third consecutive quarter of growth. Net sales reached $5 million, representing a 61% growth year-over-year and 22% sequential growth from Q2's net sales of $4.1 million. Gross margin continued to expand 31.3% this quarter compared to 7.9% in Q3 of last year and 26.4% in Q2 of 2025. demonstrating the impact of operational efficiencies and a stronger product mix.

Our net loss of $4.9 million reflects an ongoing expansion of product offerings and commitment to investing in scaling our manufacturing ahead of commercialization milestones. While our revenues and margins are getting stronger, we continue to invest in growth in brand and corporate awareness. We believe it will position us to reflect operational cash flow positivity and profitability in 2026.

We ended the quarter with $3.8 million in cash and an additional $3.3 million available on our line of credit.

Total working capital was $6.3 million. Importantly, total indebtedness reduced to $2.9 million, down from $5.3 million at year-end 2024, a meaningful strengthening of our financial stability. Overall, Q3 demonstrates that our revenue growth and margin expansion are structural with some future phasing expenditures. In Q4, our expenditure profile is projected to begin transitioning from investment mode toward long-term profitability.

Worksport's growth is being led by the rapid scale-up of our U.S.-made tonneau cover production. Q3 net sales reached $5 million, up from $3.1 million a year ago. Year-to-date sales are $11.4 million, more than double the $5.6 million for the 9 months ended September 30, 2024. Our strength this quarter came from strong continued growth from the AL4 hard cover launched in late Q1 of 2025, expanded relationships with several national distributors and major national retail auto chain, continued growth in our dealer, jobber and e-commerce channels.

Our performance this fiscal year represents a recurring and diversified revenue base, not a single channel surge. With new product launches and revenue streams entering the mix in the months ahead, we believe Worksport is on a path toward profitability in 2026. More on the upcoming product lines later.

Gross margin is one of the clearest proof points of our strategy. Q3 gross profit was $1.6 million, a 31.3% margin, up sharply from 7.9% in Q3 of 2024 and 26.4% in Q2 this year. Year-to-date gross margin is 26.7% compared to 10.5% in 2024. Key drivers of this include higher production throughput and fixed cost absorption in our U.S. production facility, a higher volume -- a higher value product mix with maturing and emerging sales channels and greater operational efficiency as processes mature.

We are now operating solidly in the 30% plus margin range, setting the stage for future operating leverage. We expect margins to approach 35% by year-end with continued improvement targeted for 2026. We remain committed to achieving near-term operational cash flow positivity. In Q3, operating expenses totaled $6.4 million compared with $4.2 million in Q3 of 2024 and $4.7 million in Q2 of 2025. The increase mainly reflects growth investments and marketing costs tied to the AL4 product launch and our Regulation A offering.

We completed our offering in October 2025. Operationally, we supported 60% revenue growth from Q3 of 2024 to Q3 of 2025 while increasing G&A expenses only 20%. This shows improved scalability and cost discipline, and this path includes the following factors: Breakdown of the operating expenses for Q3 of 2025. R&D spend was $300,000, lower year-over-year as we move past COR tonneau cover development. G&A was $3 million, was supporting -- which supported higher volumes, compliance and facilities. Sales and marketing was $2.4 million, the main driver of our growth spending, and this is focused on channel activation, brand marketing and investor awareness.

Professional fees were $700,000 and included advisory, compliance and stock-based compensation items. Our operating loss was $4.8 million compared with $3.9 million in Q3 2024 and $3.6 million in Q2 2025. This investment in Q3 will partly carry into Q4 before reaching the tail end of our investment phase as we position the company for stronger leverage going forward. For the first 9 months of 2025, our cash position reflects disciplined investment in growth financing activities.

Our net cash used in operations was $11.2 million compared to $8 million in the same period last year. Our Q3 operating cash burn was approximately $4.3 million, slightly higher than Q2 as we completed major production and marketing initiatives. We also incurred onetime expenses related to the Reg A marketing efforts. Our investing cash outflow is $485,000 and represented mainly spending on machinery, tooling and some intangible assets. Our financing inflows were $7.1 million. This is from warrant exercises, the issuance of Series C preferred stock and warrants in connection with the Reg A units offering, net repayments on revolving credit facility and the issuance of common stock.

With respect to long-term debt, we continue to improve our leverage profile while managing our obligations. As of September 30, 2025, our total indebtedness, current and long term equaled $2.9 million, which is down from $4.8 million on December 31, 2024. Our revolving credit facility had a balance of $1.6 million and our other term debt had a balance of $1.3 million. Availability on our revolving credit facility. We've got $3.3 million unused, which provides additional liquidity and flexibility to support our strategic priorities.

Our path to profitability is becoming clear each quarter, they are supported by stronger unit economics and upcoming revenue catalysts. Our gross margin is now consistently above 30%, up from under 10% last year, showing true structural improvement in profitability generated from production activities. Our operating leverage, while year-to-date revenue is up more than 60%, G&A expenses have risen only about 20%, signaling scalability across our product offerings.

On a revenue scale, applying our current margins to an annualized sales run rate approaching $20 million positions us meaningfully closer to breakeven. Importantly, much of R&D investment over the last few years is now at the finish line with the HD3 tonneau cover line launching in Q4 and the SOLIS and COR system set for commercial orders in late 2025. These are not cost centers anymore. They are next revenue engines.

As these products enter production and sales channels, we expect sustained gross margins in the 35% plus range, continued expense efficiency and a clear trajectory towards cash flow positivity in 2026. We are building this profitability bridge step by step, product by product. We anticipate Worksport's need for cash provided by financing activities to decrease in 2026, given our projected path to cash flow positivity.

Now back to Steven for key insights into business operations.

Thanks, Mike. In Q3, we built a scalable ISO 9001 certified manufacturing base. Q3's 31.3% gross margin is the financial proof of that operational capability. It is expected to only improve from here. We produced 2,499 tonneau covers by hand in a 4-week stretch from early to late July 2025, more than double our March '25 total monthly output. In Q4, we expect to increase production by another 50% compared to Q3.

An increase in production will benefit our margins and selling the demand we have meticulously invested in creating the market over the last year. We achieved without proportional headcount increase, validating process efficiency. And Q3 margins confirm better utilization of U.S. -- of our U.S. production facility, improved fixed cost absorption, continued focus on quality and throughput sufficient to support national distribution and dealers.

Let's talk a bit about our tonneau cover business, our profit engine. After years of strategic investment, our hard folding tonneau cover division is now Worksports near-term economic engine. They're made in the U.S.A. with rising brand recognition and multichannel distribution. We have proven ability to increase margins with scale, 35% plus gross margins at current volumes with margins projected to grow even further. And as production scales, the -- our tonneau cover division can absorb a significant share of fixed cost overhead, reduce reliance on external capital and generate cash to fund clean tech initiatives.

The tonneau cover product offering provide the financial backbone on which COR and SOLIS and AetherLux are being built, giving Worksport a strong and self-funded foundation for growth. Now let's talk a little bit about tariffs and how we're managing them. We continue to operate in a dynamic tariff trade environment. We all know this. While tariffs remain a headwind, they are manageable and in the tonneau cover market increasingly serve as a competitive tailwind for Worksport.

First, U.S. manufacturing advantage. The majority of tonneau cover production value is U.S.-based, reducing exposure compared to our import-heavy competitors. Cost containment. Historical, 5% to 10% material cost pressure has been offset through efficiency gains, scale-driven overhead absorption and pricing discipline. This is through domestic pricing inflation.

Our competitive position. Tariffs often impact imported competing products more severely, while domestic -- while our domestic footprint, brand marketing and product quality is a clear differentiator, especially if trade frictions continue. COR and SOLIS considerations. While some components are globally sourced for COR and SOLIS tariff exposure is modeled into our pricing and margin forecast with flexibility to adjust and mix pricing as needed further.

Further to this, the November 10, 2025 tariff suspension provides additional near-term relief and validates our proactive planning. The thing everyone has been waiting for, let's talk a little bit about SOLIS and COR from investment to revenue pipeline. As of October 21, 2025, the Worksport HD3 tonneau cover is now in production with initial sales expected to begin to B2B customers in November 2025, followed by sales to online customers later this year.

Sorry, I wanted to talk -- we're going to talk about SOLIS and COR. Let's talk about HD3 first, which we just did for a second. The HD3 is a heavy-duty tonneau cover designed for commercial and fleet applications. Building on the AL3, it features upgraded materials, seals and latching for maximum durability. While available through all channels, its primary focus is driving growth in our wholesale and B2B channels, adding a new revenue stream and completing our U.S.-made tonneau cover lineup.

So we're very, very excited about the HD3 and what it's going to do for our B2B business channels. Innovation pipeline, our SOLIS and COR. After years of engineering, tooling, certifications and partnership investments, SOLIS and COR are now set to be released for orders later this month. What has been pure operating and capital expense is expected to become a visible high-margin revenue stream beginning in late Q4 2025 and scaling through 2026 and beyond. Let's highlight some of our most recent announcements.

First, the official launch date for the SOLIS solar tonneau cover, COR portable power energy system is now November 28, 2025. Customers will be able to place initial orders with expected delivery in late December or early January 2026. The COR starter kit is priced at $949, which includes the COR inverter hub as well as one COR battery.

The solar system starting price is at $1,999 and will go up as high as $2,499 depending on the model size or bed size of your truck. And our initial rollout plan for the COR is 1,000 COR units plus 900 additional battery packs with a limited SOLIS release, representing a roughly $2.5 million in near-term revenue opportunity with scaling -- significant scaling plan through 2026. In terms of strategic positioning, SOLIS is a margin-accretive product leveraging our tonneau cover expertise to enter into the premium solar tonneau cover market channel.

COR is a modular portable energy system designed as a recurring revenue platform, driving stable cash flow positive sales across work, overlanding, emergency and industrial markets. Together, these two platforms transform Worksport from a single product channel manufacturer in a somewhat niche market into a multi-market clean tech company with recurring scalable revenue potential.

Let's talk a little bit about R&D in our next steps. In 2026, we aim to transition R&D from heavy foundational build to commercial optimization and platform leverage. What this means is we're going to switch from all the operational expenses relating to heavy R&D and developing new products to perfecting those new products and being able to increase margin and efficiencies. For SOLIS and COR, we're planning to finalize launch execution and early customer feedback loop, optimize bill of material and logistics for margin enhancement post launch, explore rapid scale cost savings and expand integrations and form factors based on usage data, expanding the COR platform for multiple product lines. For tonneau covers, we're going to grow the HD3 product and launch an HD4 equivalent cover labeled internally as the Worksport B2. We expect this B2 cover to be extremely well received in all markets. More details will come on this -- will come in later in 2026.

Incremental product improvements to maintain quality, compatibility and margin strength. AetherLux. We're going to advance pilots and partnerships, including evaluations with leading institutions to validate performance and use cases, finalize and select manufacturing partners and focus spend on projects with clear commercialization paths and potential for 2026 impacts and beyond. A little bit about operating leverage and the road map there. Bringing it together, our operational model priorities for 2025 and 2026 are as follows: First, we're going to obtain and sustain 35% gross margins.

We're going to get this by maintaining manufacturing efficiency and pricing discipline. We're going to slow our operational expense OpEx growth as a percentage of net sales, especially in sales and marketing, and we're going to treat Q3's elevated spending as a peak investment, not the new baseline. We're going to improve working capital turns by monetizing existing inventory and further align production scale with growing demand.

And we're going to layer new products into our existing cost stabilized offerings, tunnels, SOLIS, COR, and we're going to share the infrastructure that we've built and we're spending on and amplify our leverage. Our priorities support our transition from capital-funded mindset to operations funded growth. A little bit about risk management and mitigation. We are clear eyed about key risks.

Ongoing net loss and going concern language in our 10-Q reflect reliance on external capital and execution risks. Tariff and supply chain volatility, particularly for globally sourced components and launch risks that we see for COR and SOLIS, timing, adoption and margin realizations, equity and warrant overhang impacting shareholder perception. This is how we're going to mitigate them. We're going to tighten our spend to initiatives with measurable ROI. We're going to maintain and selectively use diversified capital sources, and we're going to stage clean tech production and inventory to complement demand signals, communicate transparently about milestones and capital deployment.

Given the continued growth and healthy margins in our tonneau cover business, we are very confident in our ability to manage tariff-related cost inflations while advancing towards near-term cash flow positivity and maintaining our 2026 profitability target. I'm going to pass it back to Mike with our updated fiscal year 2025 outlook and guidance.

Thanks, Steve. So as far as our 2025 revenue framework is concerned, in Q3 of 2025, we had an ARR of $20.4 million, substantially from $8.5 million in 2024. Q4 of 2025 is expected to benefit from continued tonneau growth and channel expansion, initial SOLIS and COR orders commencing November 28, 2025, with early but measure contribution. We project year-end revenues of $17 million to $21 million, and that depends on when the revenue recognition for the COR and SOLIS. Our 2026 revenue growth drivers, we believe the base case for our U.S. tonneau cover net sales will be $27 million to $35 million next year.

Further, we believe SOLIS and COR product lines can lead to an additional net sales in the tens of millions. We will update our shareholders on guidance after this product is rolled out later this year. In 2026, we'll have the full year impact of the U.S.-made tonneau platform cover sale of 35% to 40% target gross margins and first full year commercialization of the COR portable power system and SOLIS solar tonneau covers.

Selective progress on AetherLux as a complementary cleantech platform aligned with defined technical and commercial milestones and our focused OpEx discipline, OpEx growth below revenue growth to unlock operating leverage. And now our path to cash flow positivity. Our target is that operating cash flow becomes positive during Q1 2026 -- first half -- sorry, the first half of 2026, driven by stable 35% gross margins.

Increasing sales will lead to higher utilization of existing manufacturing and distribution infrastructure with no major step-up in fixed costs, our tighter control of G&A, sales and marketing professional fees with the spend tied to measurable ROI and our launch of HD3, SOLIS and COR product lines, our new margin sources. And now back to Steve with our concluding remarks.

Thanks, Mike. Well, we've built a high-margin U.S. manufacturing platform with rapid revenue growth. We've established national distribution, and that's growing. And we positioned SOLIS, COR and AetherLux on top of that foundation. Our focus now is precise, disciplined execution towards sustainable cash flow and profitability. We're seeing here on the charts, Worksport's revenue growth, Worksport's margin growth and Worksport's new products set to improve 2026 profitability.

Thanks, everyone. This concludes our prepared remarks. Operator, please open the line for questions.

I am going to start with you Tate?

Can you talk about the -- the market for tonneau covers in general in the United States? Are you seeing total demand growth in the market versus are you taking share to start, please.

Yes. So we're still seeing -- we're still getting bits of information from the market. We're seeing that we're taking -- the market is still very healthy. We're seeing a slight shift into smaller trucks, different SKUs. So we're pivoting, and that's what's really good as a domestic manufacturer because we could literally make whatever selling the day that we need to sell it, for instance.

So in terms of the market, usually when there's difficult times, things start to sell less. However, in our market, when we have geopolitical issues and other small issues that are happening or other issues happening within our economy, what we see is we just see a shift of what types of trucks are sold, not the amount of them.

So we're still seeing the tonneau cover market in that $3 billion plus range, maybe a bit more. We're just seeing a shift to different applications that we make. And in fact, -- the different applications that are being sold more of are actually higher profit for us. So it's actually quite a benefit. So everything is still as healthy as it was 2 or 3 years ago. And I feel that the market is primed for a strong '26 in terms of growth within the economy in the U.S. specifically. And I think that we're going to be able to capitalize on that.

And then I saw in your 10-Q a mention about working with on the OEM sales channel, but related to the COR and SOLIS suit, can you leverage your existing distribution, your sales channels for the tonneau covers for SOLIS and COR? Or will it be different type of distribution, maybe starting more online? Or can you comment on that, tonneau?

Yes. No, great question. We're going to start online. We're going to start direct-to-consumer. That way, we get that feedback loop with no broken telephone, no other way to say it. So we started with our beta testers. Those are individuals that we work with, and now we're going to open it up to instead of select individuals, the broad consumer market. And then we have a significant amount of interest on the dealer side.

We just presented -- we just had a booth at the SEMA Show in Las Vegas. Some of it's available on our socials like Facebook and Instagram, where Worksport posts. We used Twitter and LinkedIn more for investor stuff. But anyone that goes follow us on Instagram and Facebook at Worksport Ltd, and you'll see some videos, we had these booths powered by our new energy products. And there is a significant amount of interest. So I think that we could leverage. We're just going to be strategic in when we do so, so that it's accretive to the target.

Next Scott.

Steven, I was hoping that you might be able to give us a little bit of insight into your visibility on demand for SOLIS and COR. The language around the opportunity in '26 is pretty robust. So any kind of color you can give us there, I think, would be very helpful.

So I think that the demand for the SOLIS is going to be bigger than what I had otherwise believed. So me as the leader of the company, I always have to be a blend of optimism and pessimism. So with that in mind, I think that a new product that the likes of which has never existed is always a difficult path. And I believe that, that's going to be true. I think that it's going to be difficult and challenging to market and to attract customers for the SOLIS.

But I also believe that the -- what we've been able to launch in terms of an offering price at $1,900 is almost a no-brainer. And I think that the average consumer, when they look at something as a 2%, 3% or 4% of the cost of the truck expense while offering such measurable amounts of benefit. I think that it becomes a no-brainer. So I think that the SOLIS is poised to possibly become a trending item, something that becomes a trend, almost like a fashion accessory for your truck.

Like look what my otherwise analog accessory can do. It could power our battery generator, the COR or any battery generator. And when it's only a little bit more than other tonneau covers, other tonneau covers in our other competing tonneau covers are $1,500 for an extra $400, $499, you get a SOLIS. So I think the demand as we market it and we message what it does and how meaningful that is for individuals, I think that, that's going to be very, very popular for us.

The COR is nebulous because the market is so big, what we've been able to do with the COR is tap in from -- you got to think, Scott, that the tonneau cover market is a subset of a subset of a subset. It's an individual that has a license that buys a truck that needs a tonneau cover and then that wants ours. So it's a very, very niche market.

And still, we're seeing massive growth there. But the COR is literally for anybody anywhere, any demographic on a global scale. So I think that when you look at that, it becomes nebulous because now it's a much broader market to market to, so it could become expensive there. But I think that as we look at explaining how innovative our COR is and integrating the COR into other products that we plan on speaking about more next year. I think that we know that one of our competitors, which was a foreign company, foreign-produced foreign-owned company did about $1 billion.

So we think that even a percentage of that market without the massive CAGR we're seeing, I think that the COR market could be highly accretive to the balance sheet. And in fact, I think that our Clean Energy division of the business could become bigger than the tonneau cover business within a period of time.

I appreciate all that added color, Steve. That was helpful. And then my second question, just on margins. Clearly, you guys have made a ton of progress there. I'm curious, what is just volume driven in that improvement versus actual improvements in the manufacturing and production process?

That's a good question. So we have the best -- Worksport is around 100 people, and everybody working at Worksport is beneficial. Our engineering team is a shout out and our management team, our leadership team in general has a lot to do with being able to find cost efficiencies without -- the phrase we use in the market is thinning the product out. And thinning means using a thinner aluminum or cheaper plastic or a cheaper corrugate. So we haven't -- we've, in fact, increased the robustness of our product, but we've been able to find efficiencies through keen purchasing, leveraging demand and volumes.

But the biggest, I would say, 70% -- 60% to 70% of the cost saving is just -- is overhead absorption. When we started making our tonneau covers, our hours per unit, how many man hours it took to make 1 unit range between 4 and 6 hours per unit. Yesterday or on an average day today, we're kissing below 2. And when you look at the cost of domestic labor in the $20, $30 an hour range, that's significant.

And we think that we can get that labor component down even more. And then -- but what we're fighting against, Scott, is domestic inflation. We're significantly U.S. -- our paint comes from the 48 states, our aluminum, everything that -- most of what our product is made out of is sourced domestically. And even though the tariffs are for foreign products, we've been seeing a lot of domestic inflation. And once that eases, which it will eventually, whether it's a week, a month, a year or a decade from now, we're going to see even better bill of material cost savings.

And are we kind of capped out at around 35% on the current product mix? Or when -- a year from now, are we talking about pushing 40% going into '27?

It's going to be -- there's going to be two different things that -- so first off, we may reduce discounts as the brand becomes more popular. So right now, we have a Black Friday sale. And that sale is just us reducing our margin in essence. That's what all sales are to sell more. So we're finding ways of being able to attract customers.

So there's marketing costs are going to decrease while our branding increases, our brand recognition increases. Operational efficiencies. And then as we become a more popular brand, well faceted in the marketplace, we could -- we'll be more selective on sale price because I think that the value will be driven by the product's quality and our name brand to begin with.

So all of those in aggregate, I think that we could see higher than. And in times, our targets are 50-plus percent margin, but it's going to take a lot of hard work.

Steve, we have three more questions from the audience in the Q&A bubble. The first question is, if someone was to order the SOLIS and COR on the November 28 release date, when would they reasonably expect to receive the product?

Great question. So the SOLIS is made to order. It's made domestically here within our facilities in the U.S. It will be -- yes, mostly made to order. We may stock some. So it's all handmade white glove service. And we're thinking that it will be 1 or 2 weeks for us to make the product, test the product, package it and then the concierge service with respect to having it delivered to you. So we're not just going to throw it on a USPS truck and wave it away.

It's a concierge white glove experience with the SOLIS. You have your own dedicated team for support and install and these types of things, even though it's very easy. So the SOLIS should be a couple of weeks depending on our availability for the photovoltaic panels and that supply chain there. The COR, our first batch are 1,000 batch of tonneau -- sorry, of COR units is expected to arrive in December. The reason why we're offering them for sale in late November is just because we expect significant demand.

So we want to make sure that we have everyone's name in the hat that wants to be a part of it. And the COR is interesting, again, because you can buy multiple batteries. It's the only of its kind that offers a fully modular system. So the SOLIS to recap should be a 2-week lead time handmade and the COR should be shipping sometime in late December -- mid- to late December, depending on the receipt of the products through our contract manufacturer.

Thanks, Steve. And then we have another question about sales to the international market. Are we looking at international markets such as EU or Middle East?

We had recently at the SEMA show in Las Vegas, the biggest automotive show in North America, we had an unprecedented amount of sales from -- interest in sales in Latin America, which we didn't expect. We knew that the market was strong. We didn't know it was that strong. So it looks like we're going to continue to focus our growth geo-centric. What that means is closer to home than further. So I think that we're going to start looking at the Latin American like Puerto Rican and Central and South American markets.

First, that should be relatively not easy, but it should be quick because we know everyone we need to know there. Set up distribution. And then we're going to look at European Union and the Middle East for mostly the COR products. We feel that portable energy systems and small home power systems are going to be very, very strong there. And also, we've been looking at over the past years, the Australian market, which is big for both -- all of the product lines we sell, inclusive of a unit of the heat pump.

Thank you. Another question on the heat pump specifically. When do we expect it to go into production?

So I want to underline the amount of excitement that we all have internally about the AetherLux because it's so revolutionary and it is revolutionary within such a large and growing market. I mean there's really like a trident of amazing things that are happening here. It's revolutionary. The market is existingly large, and it's also growing massively for heat pumps. So we're very excited about that.

So we have production intent or preproduction intent prototypes working. We're building additional prototypes for additional testing. So that's what November and December looks like. And then we're working with contract manufacturers to start looking at manufacturing the product. I'm broad in my wording because obviously, we can't disclose nonpublic information, but our intention is to begin manufacturing the product as quickly as possible once we've tooled it, tested it and certified it.

And we, the company, want exactly what the shareholders want, which is that date to be as close to today as possible. So the answer to the question is as fast as possible. We want the same things as every shareholder and investor does. But there's -- the UL certification alone could be 3 to 6 months. Tooling and supply chain could be significantly -- significant time drags. But we're much smarter than we -- today than we were a year ago, having done this now, executed on similar initiatives like the COR. So we're going to keep it as tight as possible.

Thanks, Steve. And I think it's important to mention that we'll continue to deliver transparent updates to investors as we get better alignment on the time line and the progression on certification. So stay tuned for that. We have one other question regarding the COR battery system, how much extra miles it would enable a truck to be charged, say the truck is out of -- the electric truck is out of energy.

I can take that question, Steve. And I think the answer to that question is just mathematical calculation. So each battery is about 1 kilowatt hours of energy, and you can have easily about 4 batteries in your truck system. So if you're, let's say, electric truck is 50 kilowatts, that would provide 4 out of 50, almost an 11% range boost. It could be 30 miles, 40 miles depending on the efficiency of your truck. So the answer is 4 kilowatt hours.

Yes. We also want to be clear to state that the SOLIS itself is not presently configured to recharge or directly integrate into an electric truck. So the SOLIS will charge battery systems and the battery systems can be used for Level 1 charging of the trucks. which is relatively slow, but it will get you enough power to get out of a difficult situation where you might be out of energy on the side of the road, for instance. We have not yet integrated the SOLIS directly with an EV manufacturer, although that is a cog in the wheel for us.

Thank you, Steve. There is no other questions here on the Q&A box. Any other investor that does want to ask questions about our future progress, please do e-mail us or call us at our line. We thank you very much for attending this call.

Thank you, everyone.