Worksport, Ltd.

Good afternoon, everyone, and thank you for joining WorkSport's first quarter 2026 earnings call. I'm Stephen Rossi, Chief Executive Officer of WorkSport Limited. With me today is our Chief Financial Officer, Jennifer Kardachak, 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 31st, 2026. These results were just filed today at 4 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 forward slash hashtag reports. Again, www.investors.worksport.com forward slash hashtag 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, State's 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. 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 Solus and Core 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. Core 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 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 compared with approximately 18% in Q1 of last year. These are meaningful year-over-year improvements. Since Q1 2026 was the launch ready this 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 tunnel cover business. During Q1 of 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 entered Q2 with a stronger product portfolio, continued growth with our distribution relationships, and deeper sales channel opportunity than any prior period in Workforce history. Our cash position reflects the cost of operational strategic growth efforts, and we will address that directly. But the key investor highlight for Q1 of 2026 is this. We built product availability, funded launch activity, and expanded our commercial platform. Q2 2026 and the second half are about conversion, shipment sales channels and activation, margin efficiency improvement, and lower operational cash burn. We're projecting strong growth in both B2B and B2C sales channels, as well as a focus on meaningful efforts towards profitability from the operations in the 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 two key elements. First, we are an innovation-focused U.S. manufacturer. Second, we are building a clean energy solution. or multiple solutions. These two 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 two 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 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 and several other key utility design patent applications across various countries and jurisdictions. We started production of our tunnel covers just in late 2023. And based on internal sales data, we have sold approximately 26,000 funnel covers through WorkSport.com and the 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 tunnel 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 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 tunnel covers at prices that compete and, in many cases, can beat 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 tunnel cover market in 2026 and build a tunnel cover core business into a nine-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 tunnel cover sales alone. And that's just our foundation. That's our core of this business. Our vision does not stop at tunnel covers. We imagine a future where pickup trucks evolve from power-consuming utility vehicles into mobile power platforms and nanogrids that support owners at the campsite, worksite, emergency site, and on fleet levels. That is where our newly launched SOLUS and CORE product offerings enter the picture. The tunnel cover is the physical platform. SOLUS adds solar generation, and CORE adds portable energy storage and usable power wherever you go. Together, Solus and Core allow WorkSport to move from an aftermarket automotive accessory business into an anticipated $13 billion-plus portable power market. Importantly, Core is not limited to truck owners. Core 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 other 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 core 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, Charity's Energy, is at the forefront of developing energy-saving HVAC technology. The Ather Lux Zero Plus Frost heat pump has all the elements to become a significant breakthrough in energy saving as a product solution alone. 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're also currently evaluating efficiencies within data center cooling technologies. The breakthrough AetherLux heat pump is expected to advance towards certification in 2026 and address a $150 billion plus HVACR market. and we have received a strong level of interest through initial inbound inquiries, achieved support through the U.S. Department of Energy, including the 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 tunnel cover business, what I call our foundational business. Second, the SOLUS and core power ecosystem. And third, the longer-term, highly efficient, eight or less HVAC opportunity through TerraVis Energy. And we'll provide more information and more details on TerraVis later in this 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 Solus, Core, 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 payables 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 in 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 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 S3 public float limitations and market conditions, 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, Stephen. 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 segments, hard tunnel covers generated approximately 3.3 million in net sales, accounting for approximately 99% of total Q1 net sales. Our soft tunnel cover segment contributed approximately 0.04 million. The concentration in net sales in the hard tunnel 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 the 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 resulted from the combination of intentional brand awareness and product launch directly linked to the launch of multiple product offerings in early 2026. We launched three products and initiated large-scale digital marketing campaigns to drive awareness for both the core and sole list, 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 Stephen noted, this decline reflects working capital deployed to fund multiple product launches and reduce costs 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 non-cash 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 core and SOLUS 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 Stephen to review our operational milestones. Stephen?

Thanks, Jen. On January 13, 2026, we announced the commercial launch of our flagship energy product deal, the Solva Solar Tunnel Covering, the core 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. SOLUS is the world's only commercially available solar-integrated hard-boiling tonneau cover. CORE is a modular portable energy system that integrates with SOLUS or functions as a standalone unit for the job site, off-grid, or emergency power needs. Together, they represent WorkSport's entry into the multi-billion-dollar clean energy and portable power market. We're so excited about it. With the initial product launches behind us, our 2026 focus is scaling, solace, and core revenue. In April of 26, core received the safety and regulatory certifications needed for North American retail and commercial distribution, including all applicable UL and CSA approvals. The certification package is important because it expands the universe of retailers, distributors, fleets, and commercial customers that we can evaluate to carry the product. We also strengthened our commercial sales channels around these products. On February 26th, we announced a strategic partnership with Protomac International Partners to help position the SOLUS and core ecosystem for federal 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. SOLUS also carries credibility through our active conversations with OEMs. 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-to-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 through which channels core and solace did not represent a meaningful amount of sales in Q1. As emerging products, we're developing marketing assets, product awareness, and sales pipelines to target strong sales towards the rest of the year. We're just getting started. With a focus on certification, channel onboarding, repeatable fulfillment, and measure customer acquisition economics, the path for market adoption is becoming accessible. We note it took approximately one year for our initial made-in-the-USA tunnel cover lines to build traction. I will repeat that. We note it took approximately one year for our initial made-in-the-USA tunnel covers, the AL3, to build traction. And we believe that we can achieve a similar speed or better with the SOLUS and the core. The third major commercial milestone of the quarter was the unveiling of our Nexus tunnel cover. Boy, is it exciting. On March 19, 2026, we presented Nexus to industry buyers at the Keystone Big Show. Keystone is 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 in 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 of 26, early distributor interest is and remains significant. This supports management's expectation that Nexus can contribute meaningfully in net sales for this year. Nexus is a premium tunnel cover featuring a newly engineered operating system designed to improve the ease of use safety and speed for truck owners unlike conventional folding tunnel 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 practical innovation that's 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 tunnel cover lineup, inclusive of 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 seven-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 and nearly six-fold 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 Enterprise Partnership announced in April of this year is our first major distributor relationship and gives us the broader penetration to 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-selling categories. That alignment matters because it increases the likelihood the distribution reach can translate into real sell-through. We're also in closing discussions with nationwide dealer network capable of bringing our products to all U.S. continental states. We will update investors as these discussions move from pipeline to signed commercial relationships. Each of these relationships represent a potential step change in distribution reach. But our standard for reporting progress will remain execution, orders, channel activation, repeat purchase behavior. We're strictly focused on execution this year. Our U.S. manufacturing and quality credentials also matter to the strategy. The West Seneca facility that we built is an 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 the friction in conversations with larger counterparties that require this for quality systems. Our B2B go-to-market strategy continues to complement our direct-to-consumer e-commerce sales channel. We believe that the combination of strong online presence and expanding dealer network and new distributor partnerships is the right model to capture demand across the $4 billion plus tonneau cover market. The investors' takeaway is straightforward. The channel bases become larger, more diversified, increasingly capable of absorbing a broader product lineup. Let's talk Aetherlux. Therapist Energy, our clean energy subsidiary, continues 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 ACLS 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 America certification milestones targeted within 2026. To be clear, no procurement decision has been made. We're not currently projecting initial AcerBucks 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 towards third-party validation, certification, and potential early commercialization in the $150 billion-plus HVACR market. We believe that Atherlux 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 zero-frost technology eliminates defrosting cycles entirely, opening the doors to markets and applications that have historically been difficult for conventional heat pump technologies to serve. Aetherlust can also be viewed as a strategic upside driver beyond the revenue drivers embedded in our 2026 pipeline. The core 2026 revenue is expected to be driven by the panel cover business and early solace and core contribution. Aetherlust is a separate platform advancing through testing, certification, and commercialization work. We intend to update investors as lab results and certification milestones are achieved. 26 outlooks. Let's talk about this for a second. This is the strongest commercial position WorkSport has occupied to start any of the fiscal years in our history. We provided revenue 2026 guidance of $35 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 conduct a high growth and construct, sorry, 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, 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 every 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 are 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. Three 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 disciplines. 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 solace, launch core, unveil nexus, added major distribution, and completed core certifications, 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 tunnel cover sales. Q1 was the investment and launch readiness quarter. Q2 of 2026 and the second half are about proving improving conversions, turning inventory into revenue, dealer growth into orders, nexus demand into shipments, and margin expansion into lower cash flow. We're also building strategic vectors around federal channels, OE targeting for Solus and Core, and AetherLux certification progress, none of which are required for making the overall business operationally cash flow positive. We expect the tunnel 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 and interest in Worksport.