Q2 2025 Worksport Ltd Earnings Call

Speaker 2: You have joined the meeting as an attendee and will be muted throughout the meeting.

Speaker #2: Steven Rossi, Chief Executive Officer of Worksport, and with me today is our Chief Financial Officer, Michael Johnston. This quarter represents another significant step forward in our growth story.

Steven Rossi: Steven Rossi, Chief Executive Officer of Worksport, and with me today is our Chief Financial Officer, Michael Johnston. This quarter represents another significant step forward in our growth story. We achieved record quarterly revenues, meaningfully expanded our gross margins, and continued to build the operational commercial foundation that will carry us through the rest of 2025 and beyond. We will be reviewing the financial results for the quarter ended June 30, 2025, which were filed earlier today in our Form 10-Q and can be accessed in our investor relations website at investors.worksport.com/hashtagreports. At the end of today's call, both our prepared remarks and the accompanying presentation will be available for download. After these remarks, we will open the line up for questions from the attending analysts. So with that, let's begin. Safe Harbor Statements.

Speaker #2: We achieved record quarterly revenues, meaningfully expanded our gross margins, and continue to build the operational commercial foundation that will carry us through the rest of 2025 and beyond.

Speaker #2: We will be reviewing the financial results for the quarter ended June 30, 2025, which were filed earlier today in our Form 10-Q and can be accessed in our Investor Relations website at investors.worksport.com/reports.

Speaker #2: At the end of today's call, both are prepared remarks and the accompanying presentation will be available for download. After these remarks, we will open the lineup for questions from the attending analysts, so with that, let's begin.

Speaker #2: Safe harbor, Steven. During this call, we will make forward-looking statements, including statements regarding our financial outlook for the full year 2025 and 2026. Our expectations regarding financial and business trends, impacts from the macroeconomic environment, market positions, opportunities, go-to-market initiatives, growth strategies, and business aspirations.

Steven Rossi: During this call, we will make forward-looking statements, including statements regarding our financial outlook for the full year 2025 and 2026, our expectations regarding financial and business trends, impacts from the macroeconomic environment, our market positions, opportunities, go-to-market initiatives, growth strategies, 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 our circumstances that may be difficult to predict, and many of which are outside our control. Actual results or events may differ materially. Therefore, you should not rely on any of these forward-looking statements.

Speaker #2: 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.

Speaker #2: Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks, and changes in our circumstances that may be difficult to predict, many of which are outside our control.

Speaker #2: 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 risk and other factors that could affect our performance and financial results.

Steven Rossi: These forward-looking statements are subject to risk and other factors that could affect our performance and financial results, which we will discuss in details in our filings with SEC, including our annual report on Form 10-K and quarterly report 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 with that, on today's call, we're going to cover: one, Q2 2025 performance highlights, financial and operational; two, growth and market expansion insights and updates, including dealer network, e-commerce, B2B, and B2B initiatives; three, innovation pipeline, progress on our HD3, the Solis, the Core, and Aetherlux. Four, we're going to cover current operations, production scaling, cost management, and operational readiness.

Speaker #2: Which we will discuss in detail in our filings with the SEC, including our annual report on Form 10-K, our quarterly report on Form 10-Q, and other SEC filings.

Speaker #2: The forward-looking statements made during this earnings call are made only as of today's date. Worksport assumes no obligation to update any forward-looking statements we may make in today's webinar.

Speaker #2: So with that, on today's call, we're going to cover: one, Q2 2025 performance highlights, both financial and operational. Two, growth and market expansion insights and updates, including dealer network, e-commerce, B2B, and B2B initiatives.

Speaker #2: Three, innovation pipeline: progress on our HD3, the Solus, the Core, and Aetherlux. Four, we're going to cover current operations, production scaling, cost management, and operational readiness.

Speaker #2: And on number five, we're going to update our 2025 guidance: revenues, margins, cash flow targets, and capital priorities. With that, let's move into the numbers.

Steven Rossi: And on number five, we're going to update our 2025 guidance, revenues, margins, cash flow targets, and capital priorities. With that, let's move into the numbers. Michael, walk us through the Q2 2025 financial highlights.

Speaker #2: Michael, walk us through the Q2 2025 financial highlights.

Speaker #3: Thanks, Steve. Q2 2025 is our highest revenue quarter in company history. Net sales reached $4.1 million, representing 114% year-over-year growth compared to $1.92 million in Q2 of 2024, and an 83% sequential increase from Q1 of 2025.

Michael Johnston: Thanks, Steve. Q2 2025 is our highest revenue quarter in company history. Net sales reached 4.1 million, representing 114% year-over-year growth compared to 1.92 million in Q2 of 2024, and an 83% sequential increase from Q1 of 2025. This growth was driven by the continued ramp-up of our flagship AL4 premium tunnel cover, expanding dealer adoption and order frequency, and sustained strength in e-commerce sales across our direct-to-consumer channels. Gross profit for the quarter rose 173% to 1.08 million compared to $396,000 in Q1 of 2025. Gross margin improved under 800 basis points to 26.4%, up from 17.7% in Q1 and 15.4% in Q2 of last year, marking our third consecutive quarter of market margin expansion. This sustained improvement reflects continued operational efficiencies and a favorable mix of new B2B and B2C sales.

Speaker #3: This growth was driven by the continued ramp-up of our flagship AL4 premium tunnel cover, expanding dealer adoption and order frequency, and sustained strength in e-commerce sales across our direct-to-consumer channels.

Speaker #3: Gross profit for the quarter rose 173 percent to $1.08 million compared to $396,000 in Q1 of 2025. Gross margin improved 800 basis points to 26.4 percent, up from 17.7 percent in Q1, and 15.4 percent in Q2 of last year, marking our third consecutive quarter of market margin expansion.

Speaker #3: This sustained improvement reflects continued operational efficiencies and a favorable mix of new B2B and B2C sales. Operating expenses were $4.7 million, up modestly from Q2 2024's $4.21 million, but essentially flat compared to Q1's $4.65 million, despite significantly higher revenues.

Michael Johnston: Operating expenses were 4.7 million, up modestly from Q2 of 2024's 4.21 million, but essentially flat compared to Q1's 4.65 million, despite significantly higher revenues. Within the operating expenses, sales and marketing increased to 1.31 million, supporting dealer growth and digital marketing campaigns. General demand declined to 2.45 million from 2.99 million in Q1 of 2025, showing early results from cost discipline. We note this occurred while production went up nearly 100%. Our belief is that the G&A of the company will not increase proportionately with exponential revenue growth. R&D was down $300,000, down significantly year-over-year due to prior year development peaks. Our operating loss improved to 3.62 million for Q1 versus 4.26 million in Q1 and 3.91 million in Q2 of last year. Net loss for Q2 narrowed to 3.73 million from 4.46 million in Q1 of 2025. We remain committed to achieving our near-term operational cash flow positivity.

Speaker #3: Within the operating expenses, sales and marketing increased to $1.31 million, supporting dealer growth and digital marketing campaigns. General amendments declined to $2.45 million from $2.99 million in Q1 of 2025, showing early results from cost discipline.

Speaker #3: We note this occurred while production went up nearly 100 percent. Our belief is that the G&A of the company will not increase proportionally with exponential revenue growth.

Speaker #3: R&D was down $300,000, down significantly year-over-year due to prior year development peaks. Our operating loss improved to $3.62 million for Q1, versus $4.26 million in Q1, and $3.91 million in Q2 of last year.

Speaker #3: Net loss for Q2 narrowed to $3.73 million from $4.46 million in Q1 of 2025. We remain committed to achieving our near-term operational cash flow positivity.

Speaker #3: While the tunnel cover division is currently our sole revenue-generating unit, we believe that it can sustain the broader corporate structure, including R&D for Core and Solis, the Aetherlux product line, and general corporate expenses.

Michael Johnston: While the tunnel cover division is currently our sole revenue-generating unit, we believe it can sustain the broader corporate structure, including R&D for Core and Solis, the Aetherlux product line, and general corporate expenses. This outlook is further supported by our expectation that Core and Solis will transition from R&D expenses to revenue-generating products later this year. Since we believe that general corporate expenses will not increase proportional to business growth and profitability, a true path to cash flow positivity in the near term is possible. Cash and cash equivalents ended the quarter at $1.39 million compared to $5.08 million on March 31, 2025. However, at the end of Q2, $4.6 million was the available borrowing capacity on our credit facility. Operating cash usage in Q2 was approximately $3.1 million, a 19% improvement from Q1's $3.84 million cash outflow.

Speaker #3: This outlook is further supported by our expectation that Core and Solis will transition from R&D expenses to revenue-generating products later this year. Since we believe that general corporate expenses will not increase proportional to business growth and profitability, a true path to cash flow positivity in the near term is possible.

Speaker #3: Cash and cash equivalents ended the quarter at $1.39 million compared to $5.08 million on March 31, 2025. However, at the end of Q2, $4.6 million was the available borrowing capacity on our credit facility.

Speaker #3: Operating cash usage in Q2 was approximately $3.1 million, representing a 19 percent improvement from Q1's $3.84 million cash outflow. Accounts receivable increased in line with higher dealer sales volumes, while inventory remained stable at $5.88 million—approximately 90 percent in raw materials and 10 percent in finished goods.

Michael Johnston: Accounts receivable increased in line with higher dealer sales volumes, while inventory remained stable at $5.88 million, approximately 90% in raw materials and 10% in finished goods. In Q1, inventory stood at $5.7 million, with a 60/40 split between raw materials and finished goods. The reduced finished goods share reflects demand consistently outpacing production. Later in this report, we will outline the steps being taken to expand production capacity to meet this growth. We're happy to share these steps have been successful thus far. Our inventory profile positions us to fulfill ongoing dealer and e-commerce demand without requiring significant near-term investment. Our long-term debt, excluding amounts repayable in the next 12 months, declined to $2.09 million compared to $4.78 million as of December 31, 2024, and $2.7 million as of March 31, 2025.

Speaker #3: In Q1, inventory stood at $5.7 million, with a 60/40 split between raw materials and finished goods. The reduced finished goods share reflects demand consistently outpacing production.

Speaker #3: Later in this report, we will outline the steps being taken to expand production capacity to meet this growth. We're happy to share these steps have been successful thus far.

Speaker #3: Our inventory profile positions us to fulfill ongoing dealer and e-commerce demand without requiring significant near-term investment. Our long-term debt, excluding amounts repayable in the next 12 months, declined to $2.09 million, compared to $4.78 million as of December 31, 2024, and $2.7 million as of March 31, 2025.

Speaker #3: Of special note, on August 1, 2025, the company submitted a $3 million purchase order and placed a deposit with an established manufacturing equipment supplier, for additional machinery with delivery currently as early as Q1 of 2026, at the company's discretion.

Michael Johnston: Of special note, on August 1, 2025, the company submitted a $3 million purchase order and placed a deposit with an established manufacturing equipment supplier for additional machinery with delivery currently as early as Q1 of 2026, at the company's discretion. This occurred with extremely favorable financing terms with the manufacturer and is not expected to place a cash flow concern to the business. This additional equipment is expected to meaningfully increase production capacity at the company's West Seneca, New York, manufacturing facility, enabling the company to meet anticipated customer demand more efficiently, improve operational throughput, and support future revenue growth. However, management emphasizes and expects that Worksport's current equipment and supply chain can allow the company to generate positive cash flows from operations. Now back to Steven for key insights on business operations.

Speaker #3: This will curve with extremely favorable financing terms with the manufacturer, is not expected to place a cash flow concern to the business. This additional equipment is expected to meaningfully increase production capacity at the company's West Seneca and New York manufacturing facility, enabling the company to meet anticipated customer demand more efficiently, improve operational throughput, and support future revenue growth.

Speaker #3: However, management emphasizes that it expects that Worksport's current equipment and supply chain can allow the company to generate positive cash flows from operations. Now back to Steven for key insights on business operations.

Speaker #2: Thanks, Mike. Beyond the financial numbers, Q2 marks the foundation of what we can expect for the year ahead. I'd like to highlight some of the key milestones we achieved that are setting the stage for our future.

Steven Rossi: Thanks, Mike. Beyond the financial numbers, Q2 marks the foundation of what we can expect for the year ahead. I'd like to highlight some of the key milestones we achieved that are setting the stage for our future. Our growth engine continues to accelerate across both B2B and B2C channels. Dealer network, B2B growth. In Q2 2025, we added two national distributors to our dealer network. In April, we added Patriot Auto Group, which brought with them 200 dealers under the Worksport dealer network. In June, we added another national distributor with access to approximately an additional 250 dealer accounts. At full activation, Worksport estimates that our distribution network as of Q2 can support over $21.5 million in repeatable annual revenue alone, not including business-to-consumer direct sales via our online platforms. Driven by ongoing B2B traction and demand for our premium American-made tunnel covers.

Speaker #2: Our growth engine continues to accelerate across both B2B and B2C channels. Dealer network, B2B growth. In Q2 2025, we added two national distributors to our dealer network.

Speaker #2: In April, we added Patriot Auto Group, which brought with them 200 dealers under the Worksport dealer network. In June, we added another national distributor with access to approximately an additional 250 dealer accounts.

Speaker #2: At full activation, Worksport estimates that our distribution network, as of Q2, can support over $21.5 million in repeatable annual revenue alone, not including business-to-consumer direct sales via our online platforms.

Speaker #2: Driven by ongoing B2B traction and demand for our premium American-made tunnel covers, importantly, this figure reflects revenue potential at current dealer size—a number that management expects to grow meaningfully as dealer onboarding continues through the second half of this year.

Steven Rossi: Importantly, this figure reflects revenue potential at current dealer size, a number that management expects to grow meaningfully as dealer onboarding continues through the second half of this year, which is expected to bring significant demand, with fall being among the busiest seasons for our product among customers. With more than 450 new accounts added year to date, up from 94 at the end of last year, Worksport's US dealer network is expanding rapidly, with new accounts joining weekly. E-commerce, direct online sales via both our own website remain a high margin growth driver and accounted for over 50% of total unit volumes in the quarter. Online sales continue to grow at rapid paces. From this e-commerce and B2B growth, Worksport posted three months of consecutive record sales in Q2 2025. April, we did $1.2 million. May, we did $1.28 million. In June, we did $1.6 million.

Speaker #2: Which is expected to bring significant demand, with fall being among the busiest seasons for our product among customers. With more than 450 new accounts added year-to-date, up from 94 at the end of last year, Worksport's U.S. dealer network is expanding rapidly, with new accounts joining weekly.

Speaker #2: E-commerce. Direct online sales via both our website remain at a high margin growth driver and accounted for over 50 percent of total unit volumes in the quarter.

Speaker #2: Online sales continue to grow at rapid paces. From this e-commerce and B2B growth, Worksport posted three months of consecutive record sales in Q2 2025.

Speaker #2: In April, we did $1.2 million. In May, we did $1.28 million. In June, we did $1.6 million. By June, we already had an internal run rate of $19.2 million.

Steven Rossi: In June, we already had an internal run rate of $19.2 million. We expect the revenue increase will continue every quarter. Each month, that gross margin improved. This is why we are extremely excited for Q3 and Q4. Notably, Black Friday and December holiday sales are expected to bring significant demand later on this year. Our strategy remains focused on giving local retailers and dealers the tools, margins, and product quality that they need to succeed, creating a long-term mutually beneficial relationship that drives volume for Worksport. We mentioned previously, demand continues to outpace production. We are proud to report that our US manufacturing facility here, where I sit from in West Seneca, continues to scale efficiently. We are targeting 200 units per day production by late Q3, compared to approximately 50 units a day at the start of this year.

Speaker #2: We expect the revenue increase will continue every quarter. Each month, gross margin improved; this is why we are extremely excited for Q3 and Q4. Notably, Black Friday and December holiday sales are expected to bring significant demand later on this year.

Speaker #2: Our strategy remains focused on giving local retailers and dealers the tools, margins, and product quality that they need to succeed. Creating a long-term, mutually beneficial relationship that drives volume for Worksport.

Speaker #2: We mentioned previously that demand continues to outpace production. We are proud to report that our U.S. manufacturing facility here, where I sit in West Seneca, continues to scale efficiently.

Speaker #2: We are targeting 200 units per day production by late Q3, compared to approximately 50 units a day at the start of this year. This quadrupling of daily throughput will drive significant fixed cost absorption benefits and push gross margins towards our late 2025 target of 30% plus.

Steven Rossi: This quadrupling of daily throughput will drive significant fixed cost absorption benefits and push gross margins towards our late 2025 target of 30% plus. Recruitment and training of our skilled assembly technicians have kept pace with our production ramp-up, supported by the implementation of lean manufacturing practices to streamline workflows and reduce waste. In July of 2025, average daily production was approximately 115 units, climbing to around 130 units in the later half of the month. We also achieved a record single-day high output of 160 units, setting a strong foundation for Q3 and beyond of this year. Let's talk about the HD3. On track for Q3 of this year's launch, with production already scheduled, the HD3 is a heavy-duty tunnel cover designed for commercial and fleet applications. Building on the AL3, it features upgraded materials, seals, and latching for maximum durability.

Speaker #2: Recruitment and training of our skilled assembly technicians have kept pace with our production ramp-up, supported by the implementation of lean manufacturing practices to streamline workflows and reduce waste.

Speaker #2: In July 2025, average daily production was approximately 115 units, climbing to around 130 units in the latter half of the month. We also achieved a record single-day high output of 160 units, setting a strong foundation for Q3 and beyond this year.

Speaker #2: Let's talk about the HD3. On track for Q3 of this year launch, with production already scheduled, the HD3 is a heavy-duty tunnel cover designed for commercial and fleet applications.

Speaker #2: 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 segment, adding new revenue streams and completing our U.S.-made tunnel cover lineup.

Steven Rossi: While available through all channels, its primary focus is driving growth to our wholesale and B2B segment, adding new revenue streams, and completing our US-made tunnel cover lineup. Let's talk a little bit about Solis. Beta testing has commenced with select customers for the Solis solar integrated tunnel cover. The redesign announced late in 2024 is delivering anticipated cost savings and expanding compatibility with third-party portable power systems. We remain on track for a Q4 launch. A little bit about Core. The Core portable power station is nearing mass production readiness. Core's modular design enables integration with Solis or standalone use, targeting job site, overlanding, and the emergency backup markets. The Worksport Core is projected to launch at the same time as the Solis cover. Core and Solis together function as Worksport's portable nanogrid.

Speaker #2: Let's talk a little bit about Solus. Beta testing has commenced with select customers for the Solus Solar Integrated Tunnel Cover. The redesign announced late in 2024 is delivering anticipated cost savings and expanding compatibility with third-party portable power systems.

Speaker #2: We remain on track for a Q4 launch. A little bit about Core: The Core portable power station is nearing mass production readiness. Core's modular design enables integration with Solus or standalone use, targeting jobsite overlanding and the emergency backup markets.

Speaker #2: The Worksport Core is projected to launch at the same time as the Solus cover. Core and Solus together function as Worksport's portable nanogrid. In Q2 of 2025, this system will be selected by a multi-billion dollar U.S. construction agency for a pilot project for fleet use.

Steven Rossi: In Q2 of 2025, this system was selected by a multi-billion dollar US construction agency for a pilot project for fleet use. Testing and use is ongoing. Together, Core and Solis position Worksport within the fast-growing broader portable energy market, a space the company believes will be a key to long-term profitability. Talk a little bit about Aetherlux. On February 11, 2025, we introduced Aetherlux, a cold-climate heat pump featuring two industry-first innovations. First, zero frost, no defrost cycles, continuous operation without the traditional defrost interruptions that reduce efficiency in freezing conditions, and ultra-low temperature performance. The Aetherlux operates in ambient temperatures as low as negative 59.6 degrees Fahrenheit, which is about 51 degrees Celsius, far beyond the capabilities of typical commercial heat pumps, enabling its use in extreme Arctic environments.

Speaker #2: Testing and use are ongoing. Together, Core and Solus position Worksport within the fast-growing broader portable energy market, a space the company believes will be key to long-term profitability.

Speaker #2: Talk a little bit about Aetherlux. On February 11, 2025, we introduced Aetherlux, a cold climate heat pump featuring two industry-first innovations. First, zero frost, no defrost cycles, continuous operation without traditional defrost interruptions that reduces efficiency in freezing conditions.

Speaker #2: And ultra-low temperature performance. The Aetherlux operates in ambient temperatures as low as -59.6 degrees Fahrenheit, which is about 51 degrees Celsius, far beyond the capabilities of typical commercial heat pumps, enabling its use in extreme Arctic environments.

Speaker #2: Since the launch of Aetherlux, we have attracted significant interest from major global corporations, federal governments, and numerous distributors, with inbound inquiries potentially surpassing hundreds of millions of dollars in potential revenue opportunities.

Steven Rossi: Since the launch of Aetherlux, we have attracted significant interest from major global corporations, federal governments, and numerous distributors, with inbound inquiries potentially surpassing hundreds of millions of dollars in potential revenue opportunities. In Q2 2025, Taravis Energy, our subsidiary company, had achieved numerous milestones on this disruptive technology. It has advanced Aetherlux heat pumps from lab testing to commercial testing, initiated manufacturer selection for product certification, continued R&D optimization of zero frost technology, and began evaluating strategic business opportunities. Management believes Aetherlux could have a meaningful impact on Worksport's 2026 balance sheet, supported by its position in the $123 billion global market. Intellectual property. Worksport holds a robust and growing portfolio of nearly 200 issues, issued, registered, and pending patents, designs, and trademarks. We believe our intellectual property protects our innovations and branding, strengthening our competitive positions and helping us address potential challenges in the market. Tariffs.

Speaker #2: In Q2 2025, TerraBeast Energy, our subsidiary company, had achieved numerous milestones on this disruptive technology. It has advanced Aetherlux heat pumps from lab testing to commercial testing.

Speaker #2: Initiated manufacturer selection for product certification, continued R&D optimization of zero frost technology, and began evaluating strategic business opportunities. Management believes Aetherlux could have a meaningful impact on Worksport's 2026 balance sheet, supported by its position in the $123 billion global market.

Speaker #2: Intellectual property. Worksport holds a robust and growing portfolio of nearly 200 issues issued registered and pending patents designs and trademarks. We believe our intellectual property protects our innovations and branding, strengthening our competitive positions and helping us address potential challenges in the market.

Speaker #2: Tariffs. While our current revenue-generating tunnel cover line is manufactured within the US, with approximately 90 percent or more domestically sourced components, recent tariff-related pressures have contributed to a 5 or 10 percent inflationary increase in our costs, including Worksport's domestic material cost.

Steven Rossi: While our current revenue-generating tunnel cover line is manufactured within the US, with approximately 90% or more domestically sourced components, recent tariff-related pressures have contributed to a 5% or 10% inflationary increase in our costs, including Worksport's domestic material costs. To date, these increases have been offset by operational efficiencies that have lowered per unit cost. While Worksport's management team has outlined several alternative strategies as well to offset the effects of inflation as a result of tariffs, we remain confident that these strategies will only prove to increase long-term profitability once domestic material price inflation eventually and inevitably subsides. For upcoming products, particularly those incorporating solar cells and lithium-ion batteries sourced internationally, the potential impact of tariffs may remain less uncertain.

Speaker #2: To date, these increases have been offset by operational efficiencies that have lowered per-unit cost. While Worksport's management team has outlined several alternative strategies as well to offset the effects of inflation as a result of tariffs, they remain confident that these strategies will only prove to increase long-term profitability once domestic material price inflation eventually and inevitably subsides.

Speaker #2: For upcoming products, particularly those incorporating solar cells and lithium-ion batteries, sourced international, the potential impact of tariffs remains less uncertain. However, we note that such products such cost pressures affect our competitors equally and in some cases more severely, especially where their reliance on global supply chains is greater than ours.

Steven Rossi: However, we note that such cost pressures affect our competitors equally, and in some cases, more severely, especially where the reliance on global supply chains is greater than ours. Given the continued growth and healthy margins in our tunnel cover business, we are 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 over to Mike with our updated financial fiscal year 2025 outlook and guidance.

Speaker #2: Given the continued growth and healthy margins in our tunnel cover business, we are confident in our ability to manage tariff-related cost inflations while advancing towards near-term cash flow positivity and maintaining our 2026 profitability target.

Speaker #2: I'm going to pass it over to Mike with our updated financial fiscal year 2025 outlook and guidance.

Speaker #3: Thanks, Steve. We reaffirm our full year 2025 gross revenue target of at least $20 million. Based on Q2 results and current order momentum, we remain confident in meeting this goal, supported by continued dealer adoption, production growth, and the successful launches of HD3, Solis, and Core in the second half of the year.

Michael Johnston: Thanks, Steve. We reaffirm our full year 2025 gross revenue target of at least $20 million. Based on Q2 results and current orderable methods, we remain confident in meeting this goal, supported by continued dealer adoption, production growth, and successful launches of HD3, Solis, and Core in the second half of the year. Gross margins have exceeded initial forecasts and are expected to rise each quarter, reaching our 30% target by year-end. Operating expenses are projected to grow at a slower rate than revenues, enhancing operating leverage. Despite tariff-related headwinds, we are targeting operational cash flow break-even by late Q4 2025 or early Q1 2026. While a successful launch of Core and Solis could accelerate profitability in 2026, we believe our Core tunnel cover business alone could drive us into profitability next year. We view Core, Solis, and Aetherlux as significant profitability enhancers in 2026.

Speaker #3: Gross margins have exceeded initial forecasts and are expected to rise each quarter, reaching our 30% target by year end. Operating expenses are projected to grow at a slower rate than revenues, enhancing operating leverage.

Speaker #3: Despite tariff-related headwinds, we are targeting operational cash flow break-even by late Q4 2025 or early Q1 2026. While a successful launch of Core and Solis could accelerate profitability in 2026, we believe our core tunnel cover business alone can drive us into profitability next year.

Speaker #3: We view Core, Solis, and Aetherlux as significant profitability enhancers in 2026. Current expectations are 2 to 3 million dollars in revenue, from the first batch of Core and Solis, with Aetherlux anticipated to deliver a meaningful, positive impact to the 2026 balance sheet.

Michael Johnston: Current expectations are $2 to $3 million in revenue from the first batch of Core and Solis, with Aetherlux anticipated to deliver a meaningful positive impact to the 2026 balance sheet. More detailed projections will be provided in Q4 this year. As of June 30, 2025, we have access to approximately $6 million in total liquidity, consisting of our $1.39 million in cash and cash equivalents, $4.76 million in unused capacity on a revolving credit facility. In addition, we hold $5.88 million in inventory, providing a strong foundation to support ongoing sales growth without significant near-term investment in working capital. Cash used in operating activities improved meaningfully in Q2, declined to approximately $3.1 million compared to $3.84 million in Q1. The 19% improvement reflects both higher gross profit and disciplined expense management. We expect further efficiencies in the second half of the year as production continues to scale.

Speaker #3: More detailed projections will be provided in Q4 of this year. As of June 30, 2025, we have access to approximately $6 million in total liquidity, consisting of $1.39 million in cash and cash equivalents and $4.76 million in unused capacity on our evolving credit facility.

Speaker #3: In addition, we hold $5.88 million in inventory, providing a strong foundation to support ongoing sales growth without significant near-term investment in working capital. Cash used in operating activities improved meaningfully in Q2, declining to approximately $3.1 million compared to $3.84 million in Q1.

Speaker #3: This 19 percent improvement reflects both higher gross profit and disciplined expense management. We expect further efficiencies in the second half of the year as productions continue to scale.

Speaker #3: We expect to spend moderately in the second half of 2025. Key expenses will relate to the final tooling of the Core and Solis, as well as an increased production growth in the U.S. factory.

Michael Johnston: We expect to spend moderately in the second half of 2025. Key expenses will relate to the final tooling of the Core and Solis and increased production growth in the US factory. Most of our required equipment for tunnel cover production is already in place, although management has invested in additional equipment for growth in 2026 with zero interest payment terms offered by this vendor. This would allow Worksport to essentially double its production throughput without significant cash outlay or interest expenses in 2026. We also continue to make progress on a Regulation A crowdfunding offering, which has been highly successful in attracting new retail investors to the Worksport shareholder base. This offering has enhanced our shareholder base, increased trading liquidity, and strengthened market visibility. We are announcing today that we expect to close this Reg A offering at the end of August 2025.

Speaker #3: Most of our required equipment for tunnel cover production is already in place, although management has invested in additional equipment for growth in 2026, with zero interest payment terms offered by this vendor.

Speaker #3: This would allow Worksport to essentially double its production throughput without significant cash outlay or interest expenses in 2026. We also continue to make progress on our Regulation A crowdfunding offering, which has been highly successful in attracting new retail investors to the Worksport shareholder base.

Speaker #3: This offering has enhanced our shareholder-based increased trading liquidity and strengthened market visibility. We are announcing today that we expect to close this reg A offering at the end of August 2025.

Speaker #3: If we achieve the full $10 million allotment, management believes the company will be fully funded for the remainder of 2025 and into 2026. While we consider optimistic access to capital markets, our intent is to limit further notable equity dilution.

Michael Johnston: If we achieve the full $10 million allotment, management believes the company will be fully funded for the remainder of 2025 and into 2026. While we consider opportunistic access to capital markets, our intent is to limit further notable equity dilution. We aim to leverage the company's existing outstanding warrants, which are exercisable in the $4.50 to $6.70 range as a potential source of growth capital for 2026. This approach is aligned with our path forward towards cash flow positivity and eventual profitability. Management believes that as we execute in Q3 and Q4, the market will better recognize the company's intrinsic value, creating the potential for these warrants to be exercised at prices that benefit both shareholders and the company.

Speaker #3: We aim to leverage the company's existing outstanding warrants which are exercisable in the $4 and 50 cents to $6 and 70 cent range. As a potential source of growth capital for 2026, this approach is aligned with our path forward towards cash flow positivity and eventual profitability.

Speaker #3: Management believes that as we execute in Q3 and Q4, the market will better recognize the company's intrinsic value and creating the potential for these warrants to be exercised at prices that benefit both shareholders and the company.

Speaker #3: Importantly, we believe that the successful execution of our operational and growth initiatives will enable the company to approach near profitability without requiring capital beyond the targeted $10 million from the current Regulation A offering.

Michael Johnston: Importantly, we believe that the successful execution of our operational and growth initiatives will enable the company to approach near profitability without requiring capital beyond the targeted $10 million from the current Regulation A offering. We further believe access to efficient debt tools will be available as we approach cash flow positivity. Finally, we would like to highlight that we review Aetherlux, a proprietary cold climate heat pump technology, as a significant strategic asset whose value is not currently reflected in our share price. We believe that as the market gains greater awareness of its potential applications and commercial opportunities, this technology could represent a meaningful source of long-term shareholder value. Now back to Steve with our concluding remarks.

Speaker #3: We further believe access to efficient debt tools will be available as we approach cash flow positivity. Finally, we would like to highlight that we review Aetherlux for proprietary cold climate heat pump technology as a significant strategic asset whose value is not currently reflected in our share price.

Speaker #3: We believe that, as the market gains greater awareness of its potential applications in commercial opportunities, this technology could represent a meaningful source of long-term shareholder value.

Speaker #3: Now back to Steve with our concluding remarks.

Speaker #2: Thanks, Mike. Q2 of this year was a pivotal quarter for Worksport. In just one quarter, we increased revenue by 83 percent while improving gross profits by 173 percent compared to the prior quarter.

Steven Rossi: Thanks, Mike. Q2 of this year was a pivotal quarter for Worksport. In just one quarter, we increased revenue by 83% while improving gross profits by 173% compared to the prior quarter. We also decreased operational loss by 15%. We believe that in Q3, this growth in revenues, and this will grow our revenues and decrease our operational loss. We're optimistic about cash flow positivity and profitable cash flow within 2026. Our priorities for the remainder of 2025 are clear. First, we're going to scale production to meet demand while maintaining quality. Second, we're going to launch the HD3, Solis, and Core successfully and on schedule. Third, we're going to continue to expand dealer relationships and deepen e-commerce reach. Fourth, we're going to continue innovation leadership in both automotive accessories and clean energy. Five, we're going to create increased brand awareness utilizing key media and influencers.

Speaker #2: We also decreased operational loss by 15 percent. We believe that in Q3, this growth in revenues and this will grow our revenues and decrease our operational loss.

Speaker #2: We're optimistic about cash flow positivity and profitable cash flow within 2026. Our priorities for the remainder of 2025 are clear. First, we're going to scale production to meet demand while maintaining quality.

Speaker #2: Second, we're going to launch the HD3 Solus and Core successfully and on schedule. Third, we're going to continue to expand dealer relationships and deepen e-commerce reach.

Speaker #2: Fourth, we're going to continue innovation leadership in both automotive accessories and clean energy. Fifth, we're going to create increased brand awareness utilizing key media and influencers.

Speaker #2: And six, we're going to execute with discipline towards cash flow positivity. I want to thank our employees, partners, leaders, and shareholders for their continued support and commitment.

Steven Rossi: And six, we're going to execute with discipline towards cash flow positivity. I want to thank our employees, partners, leaders, and shareholders for their continued support and commitment. We're building a company with the potential to lead at the intersection of automotive and clean energy, and Q2 showed that our strategy is working.

Speaker #2: We're building a company with the potential to lead at the intersection of automotive and clean energy in Q2 showed that our strategy is working.

Speaker #3: Thank you, everyone. This concludes our prepared remarks. Operative, please open the line for questions.

Michael Johnston: Thank you, everyone. This concludes our prepared remarks. Operative, please open the line for questions.

Speaker #4: Worksport is now opening the floor for Q&A, starting with the analyst. We welcome live questions from analysts attending the call, investors attending the call, or encouraged to type their questions in the Q&A section of the Zoom or email us at investors@worksport.com.

Farhan: Worksport is now opening the floor for Q&A, starting with the analysts. We welcome live questions from analysts attending the call. Investors attending the call are encouraged to type their questions in the Q&A section of the Zoom or email us at investors@worksport.com. We will get back to you. I see a hand up from Scott Buck. Go ahead, Scott.

Speaker #4: We will get back to you. I see a hand up from Scott Buck. Go ahead, Scott.

Speaker #5: Yeah, hi, guys. Thanks for taking my questions. Steven, I guess my first question is on gross margin. Where are the incremental gains coming through for the remainder of the year?

Scott Buck: Yeah, hi guys. Thanks for taking my questions. Steven, I guess my first question is on gross margin. Where are the incremental gains coming through the remainder of the year? Is that entirely volume driven? And how should we think about volumes for some of the new products that you have coming out here in 3Q and 4Q?

Speaker #5: Is that entirely volume driven? And how should we think about volume for some of the new products that you have coming out here in 3Q and 4Q?

Speaker #2: All good questions. In terms of the new products and volumes, are you looking at the broad picture, like Solus Core, HD3, or specifically?

Steven Rossi: All good questions. In terms of the new products and volumes, are you looking like broad picture, like Solis Core HD3 or specifically like this one?

Speaker #5: Exactly.

Speaker #2: Okay, okay. Sure. So gross margins, so yeah, obviously we have, I mean, I don't know why it's not more broadly broadcast yet, but we definitely have domestic inflation.

Scott Buck: Exactly.

Steven Rossi: Okay, okay. Sure. So gross margins. So yeah, obviously we have, I mean, I don't know why it's not more broadly broadcast yet, but we definitely have domestic inflation. So that's taking small bites out of our profit, out of some of the gross margin. But what we're doing is we're offsetting it, you know, with operational efficiencies. So in essence, the human interaction or the human hours per units required to make 50 tunnel covers or 100 tunnel covers a day is really what we see in some of the SG&A or overhead absorption side of things. So in essence, economies of scale, mostly through efficiencies in production, is where we're going to see the most margin uptake. So to put it into dollars and cents, you know, right now we're somewhere between three to five hours of human interaction to make one of our tunnel covers.

Speaker #2: So that's taking small bites out of our out of some of the gross margin, but what we're doing is we're offsetting it, you know, with operational efficiencies.

Speaker #2: So in essence, the human interaction or the human the hours per units required to make 50 tunnel covers or 100 tunnel covers a day is really what we see in some of the SG&A or overhead absorption side of things.

Speaker #2: So, in essence, economies of scale, mostly through efficiencies in production, is where we're going to see the most margin uptake. To put it into dollars and cents, you know, right now we're somewhere between 3 to 5 hours of human interaction to make one of our tunnel covers.

Speaker #2: We should be able to get that down to 2 to 4. And, you know, when you look at the salary underlying that human element, you know, that's a meaningful dollar savings per unit.

Steven Rossi: We should be able to get that down to two to four. And you know, when you look at, you know, the salary underlying that human element, you know, that's a meaningful dollar savings per unit. But also just yesterday, we kicked off an optimization program for our more expensive materials, the aluminum sheet and aluminum extrusion. And on some particular tunnel cover models, we were able to see almost $20 in cost savings or elimination of scrap from the production or inefficiency in the production of that particular unit, some of our best-selling units. So the intersection of being smarter in how we make them and being faster in how we make our products is really where we're going to see a significant amount of savings. So that's going to get us into that 30 plus percent while the inflation's kind of nipping at our heels.

Speaker #2: But also, just yesterday, we kicked off an optimization program for our more expensive materials, the aluminum sheet and aluminum extrusion. On some particular tunnel cover models, we were able to see almost $20 in cost savings or elimination of scrap from the production or inefficiency in the production of that particular unit—some of our best-selling units.

Speaker #2: So the intersection of being smarter in how we make them and being faster in how we make our products is really where we're going to see a significant amount of savings.

Speaker #2: So that's going to get us into that 30 plus percent while the inflation's kind of nipping at our heels. But I think that inflation, it always tends to kind of go, it gets ets corrected.

Steven Rossi: But I think that inflation, it always tends to kind of go, it's corrected. And you know, when some of these raw material costs come down, I think that we're going to see a really strong positive from all this, and margins will exceed, you know, what we were thinking. Does that answer the margin question?

Speaker #2: And, you know, when some of these raw material costs come down, I think that we're going to see a really strong positive from all this.

Speaker #2: And margins will exceed what we were thinking. Does that answer the margin question?

Speaker #5: Yes, it does. Thanks, Steve.

Scott Buck: Yes, it does. Thanks, Steve.

Speaker #2: Sure, okay. And then in terms of Core and Solus, so the HD3 will go into normal production if our factory capacity ceiling, you know, this year is anticipated to be plus 200 units produced per day.

Steven Rossi: Sure. Okay. And then in terms of Core and Solis, so the HD3 will go into normal production. You know, if our factory capacity ceiling, you know, this year is anticipated to be plus 200 units produced per day, you know, the HD3 will fit into that somehow. So whether that's 200, you know, in a day, once a week, we don't think it's going to be the biggest seller because it's going to be a new product. So it's going to take some time. But you know, the HD3 will fall into production of our hard covers. So it'll fit in the production scheduling of a ceiling of about 200 covers per day within September, October. And that could be a mix of AL3, HD3, or AL4. AL4, I think, is going to continue to be the number one volumetric seller for us.

Speaker #2: You know, the HD3 will fit into that somehow. So whether that's 200 in a day, once a week, we don't think it's going to be the biggest seller because it's going to be a new product.

Speaker #2: So it's going to take some time. But, you know, the HD3 will fall into production of our hard covers. So it'll fit into production scheduling of a ceiling of about 200 covers per day within September, October.

Speaker #2: And that could be a mix of AL3, HD3, or AL4. AL4, I think, is going to continue to be the number one volumetric seller for us.

Speaker #2: But HD3 is going to pack a pretty powerful punch. When we go into Solus and Core, the Solus is going to be produced in batches of 250 to 500.

Steven Rossi: But HD3 is going to pack a pretty powerful punch. When we go into Solis and Core, the Solis is going to be produced somewhere in the batches of 250 to 500. It's going to be probably our starting run. I think that it'll have a ceiling of about 1,000 this year. And then the Core, we're planning on producing somewhere around 1,000 initial units. And we're going to plan on producing about 3,000 batteries because we expect that, you know, consumers, some of the most inventive parts of the Core, is that consumers can buy more power to go do more before having to stop and charge. So for all intents and purposes, I think that the Core is going to be a big revenue driver, but then the battery uptake, I think, is going to be pretty exciting for us too.

Speaker #2: It's going to be probably our starting run. I think that it'll have a ceiling of about a thousand this year. And then the Core, we're planning on producing somewhere around a thousand initial units.

Speaker #2: And we're going to plan on producing about 3,000 batteries. Because we expect that, you know, consumers—some of the most inventive parts of the Core—is that consumers can buy more power to go do more before having to stop and charge.

Speaker #2: So, for all intents and purposes, I think that the Core is going to be a big revenue driver, but then the battery uptake, I think, is going to be pretty exciting for us too.

Speaker #5: That's really helpful. Core and Solus, aren't there any sales in your current 25 guide, or is that pure covers at this point?

Scott Buck: That's really helpful. Core and Solis, are there any stale in your current 25 guide, or is that pure covers at this point?

Speaker #2: I think we have a. Yeah, go ahead, Farhan, yeah.

Steven Rossi: I think we have, yeah, go ahead, Farhan. Yeah.

Speaker #4: If you 20 million projection as shown on this slide, if made from tunnel covers, we say 20 million plus factoring into 2 to 3 million dollar estimate for Solus and Core.

Farhan: The 20 million projection, as shown on this slide, is made in tunnel covers. We say 20 million plus, factoring in a $2 to $3 million estimate for Solis and Core. With the changing tariff environment and volatility, we think it's safer to just keep the number at 20 million, and we look forward to updating investors in Q3 and Q4.

Speaker #4: With the change in tariff environment and volatility, we think it's safer to just keep the number at 20 million and we look forward to updating investors in Q3 and Q4.

Speaker #5: Okay, perfect. And then on distribution, do your distributors buy and hold inventory? I just want to try to understand revenue cadence through the second half of the year, whether or not there are people buying inventory ahead of the Q4 holiday season, and we see some of that in Q3. I'm just curious what the dynamics are there.

Scott Buck: Okay, perfect. And then on distribution, do your distributors buy and hold inventory? I just want to try to understand revenue cadence through the second half of the year, whether or not there are people buying inventory ahead of, you know, the 4Q holiday season, and we see some of that in Q3, or just curious what the dynamics are there.

Speaker #2: Yeah, no, absolutely. Huge amount of it. Actually, we just, it was funny, I was speaking to our shipping and receiving one of the clerks here this morning and they were loading they're loading a full truck this morning and they were, you know, it started with a skid, you know, to a distributor distributors will start with opening orders that are strong but modest.

Steven Rossi: Yeah, no, absolutely. A huge amount of it. Actually, we just, it was funny, I was speaking to our shipping and receiving one of the clerks here this morning, and they were, you know, loading, they're loading a full truck this morning, and they were, you know, it started with a skid, you know, to a distributor. Distributors will start with opening orders that are strong but modest, and now it's like full trucks. So distributors, our distribution, in fact, even our dealers are stocking significant volumes of our products. And as the product becomes more widely adopted and known, those volume orders continue to go up. So, you know, putting it tactically, you know, it started as skids, and now we're looking at trucks in terms of volume out.

Speaker #2: And now it's like full trucks. So distributors, our distribution, in fact, even our dealers are stocking significant volumes of our products. And as the product becomes more widely adopted and known, those volume orders continue to go up.

Speaker #2: So, you know, putting it tactically, it started as skids, and now we're looking at trucks in terms of volume out.

Speaker #5: That's great. That's great. And then one last one, if I can squeeze it in, on Aetherlux, the heat pump, the long-term intent to manufacture and sell under the Worksport brand or are there opportunities to potentially sell the technology or even license to other folks?

Scott Buck: That's great. That's great. And then one last one, if I can squeeze it in. On Aetherlux heat pump, is the long-term intent to manufacture and sell under the Worksport brand, or are there opportunities to potentially sell the technology or even license to other folks?

Speaker #2: Oh boy, you're going to make me rosy-cheeked on that one. So, the conversations we've had when we launched Solus, you know, the inbound interest from OEMs was fairly strong.

Steven Rossi: Oh boy, you're going to make me rosy-cheeked on that one. So the conversations we've, when we launched Solis, you know, the inbound interest from OEMs was fairly strong, and we were pretty proud of that. So we had fairly strong expectations of launching Aetherlux in terms of inbound interest, you know, from small brands. The quality of inbound interest that we had relating to the Aetherlux and looking at the technology were from, frankly, some of the largest companies in the world. And when we speak with those companies, obviously there's, you know, collaborative opportunities like, "Hey, you know, can we make it with you?" But then there's also the potential for these companies to have a position of acquisitions. You know, we don't know, we can't forecast, but management will always evaluate opportunities that drive the most shareholder value and bring success.

Speaker #2: And we were pretty proud of that. We had, so we had a fairly strong expectations of launching Aetherlux in terms of inbound interest, you know, from, you know, small brands.

Speaker #2: The quality of inbound interest that we had relating to the Aetherlux and looking at the technology was, frankly, from some of the largest companies in the world.

Speaker #2: And when we speak to those companies, obviously there's, you know, collaborative opportunities like, hey, you know, can we make it with you? But then there's also, the potential for these companies to have a position of acquisitions.

Speaker #2: You know, we don't know; we can't forecast, but management will always evaluate opportunities that drive the most shareholder value and bring success.

Speaker #2: But, you know, one of the companies we spoke to does have a very strong track record of acquisitions and M&A. So, you know, we can't rule that out, but we're obviously going to do the best that serves Worksport the best.

Steven Rossi: But, you know, one of the companies we spoke to does have a very strong track record of acquisitions and M&A. So, you know, we can't rule that out, but we're obviously going to do the best, what serves Worksport the best.

Speaker #5: Great. Well, I appreciate the added color guides and congrats on all the progress.

Scott Buck: Great. Well, I appreciate the added color, guys, and congrats on all the progress.

Speaker #2: Thank you, Scott.

Steven Rossi: Thank you, Scott.

Speaker #4: Thank you, Scott.

Farhan: Thanks, Scott.

Speaker #2: Hey, Tate, how are you?

Steven Rossi: Hey, Tate, how are you?

Speaker #6: Hey, Tate. Can you hear me okay?

Tate Sullivan: Hey. Hey, can you hear me okay?

Speaker #2: Sure can, loud and clear.

Steven Rossi: Sure can, loud and clear.

Speaker #6: Oh, great, great. Thanks. Thanks for the updates too. The units per day you put in some metrics in terms of where you are in production units per day.

Tate Sullivan: Oh, great, great. Thanks. Thanks for the updates too. On the units per day, you put in some metrics in terms of where you are in terms of production units per day. Can you talk about total units produced in 2Q or where you were at the end of 2Q in terms of units per day?

Speaker #6: Can you talk about total units produced in Q2 or where you were at the end of Q2? In terms of units per day?

Speaker #2: I just went through that with us this morning. Did you have those numbers for the month?

Steven Rossi: Farhan, you just went through that with us this morning. Did you have those numbers for the month?

Speaker #6: We produced roughly 46,000 units at the end of Q2. We note that in July we produced 2,500 units in one month. So we do believe that the production from Q2 to Q3 will expand by another 50 percent.

Farhan: We produced roughly 4,600, 4,700 units at the end of Q2. We note that in July, we produced 2,500 units in one month. So we do believe that the production from Q2 to Q3 will expand by another 50%.

Speaker #2: That was 4,700 units for the month, right, Farhan?

Steven Rossi: That was 4,700 units for the month, right, Farhan?

Speaker #6: It's 47 for Q2 and then $2,500 for the month of July.

Farhan: 4,700 for the Q2 and then 2,500 for the month of July.

Speaker #2: Understood.

Steven Rossi: Understood.

Speaker #6: Okay, thank you. And then can you get on the Reg A offering? Is it structured? So it's structured as preferred equity, but then can you — are the warrants attached?

Tate Sullivan: Okay, thank you. And then can you on the Reg A offering, is it structured? So it's structured as preferred equity, but then can you, are the warrants attached? Can you talk about the structure of it, please?

Speaker #6: Can you talk about the structure of it, please? The Reg A offering is structured as preferred shares that are available and targeted to predominantly retail investors.

Farhan: The Reg A offering is structured as the preferred share that's available and targeted to predominantly retail investors. The goal of the offering is to offer a preferred equity instrument that's designed for long-term investors that believe in the story. We incentivize investors to hold by offering them an 8% dividend attached to the preferred share, and they get a warrant that's priced above the market at $4.50. We believe, as the company executes, that the warrant will be a powerful tool for potential upside, and the dividend is a nice incentive to continue holding the stock. Now, investors are able to convert the craft to a common share and have access to a freely traded common via that, but they do give up on the dividend by doing so.

Speaker #6: The goal of the offering is to provide a preferred equity instrument designed for long-term investors who believe in the story. We incentivize investors to hold by offering them an 8% dividend attached to the preferred share.

Speaker #6: And they get a warrant priced above the market at $4.50. We believe that as the company executes, the warrant will be a powerful tool for potential upside.

Speaker #6: And the dividend is a nice incentive to continue holding the stock. Now, investors are able to convert the craft to a common share and have access to a freely trading common via that, but they do give up on the dividend by doing so.

Speaker #6: Understood. And the increase in those shares outstanding from June 30th to mid-August, is that probably from some of those Reg A participants converting to common?

Tate Sullivan: Understood. And the increase in the shares outstanding from June 30th to mid-August, is that probably from some of those Reg A participants converting to common?

Speaker #6: Is that fair? We've seen a mixture of conversions. We have seen a large number of investors that continue to hold, and there have been some larger investors that do convert.

Farhan: We've seen a mixture of conversions. We have seen a large number of investors that do continue to hold, and there are, and they have been some larger investors that do convert.

Speaker #6: Okay, thank you. And Steven, on the heat pump opportunity, you notice it's sort of implying that you could have meaningful revenue in '26. Is it a faster commercialization process for the heat pump than, let's say, the Solus cover and Core?

Tate Sullivan: Okay, thank you. And Steven, on the heat pump opportunity, you notice it's sort of implying that you could have meaningful revenue in '26. Is it a faster commercialization process for the heat pump than, let's say, the Solis cover and Core? Can you talk about that?

Speaker #6: Can you talk about that, please?

Speaker #2: Yeah, it's our company's evolution in terms of how we bring things to market. We learned a lot of lessons from the Core.

Steven Rossi: Yeah, it's our company's, you know, evolution in terms of how we bring things to market. We learned a lot of lessons from the Core, you know, and we're applying all of the lessons we learned from the production of the Core, like getting it this far, and it's taken quite some time. But we've taken everything we learned from getting the Core to market, and we've applied it to Aetherlux. So now we're a lot more lean, and we're a lot more efficient in being able to get things to market. We understand testing. We understand rules, regulations. We understand design, supply chain, you know, and production. Ultimately, the Aetherlux, if Worksport was to produce it, which is the intention as of right now, if we're able to, it's not going to be Worksport. It'll be Taravis that produces as a subsidiary.

Speaker #2: You know, we're applying all of the lessons we learned from the production of the Core. It's taken quite some time to get it this far.

Speaker #2: And, but we've taken everything we learned from getting the Core to market and applied it to Aetherlux. So now we're a lot more lean and we're a lot more efficient in being able to get things to market.

Speaker #2: We understand testing; we understand rules and regulations; we understand design. Supply chain, you know, and production ultimately. The Aetherlux, if Worksport was to produce it, which is the intention as of right now, we're able to. It's not going to be Worksport; it'll be TerraBeast that produces it as a subsidiary.

Speaker #2: You know, it'll be outsourced manufacturing, but we're a lot smarter, and we've got a lot of deep connections in terms of obviously power electronics, you know, sheet metals—all the parts that we need. Most of the parts we need, we've established those relationships, and we've learned a lot.

Steven Rossi: You know, it'll be outsourced manufacturing, but we're a lot smarter, and we've got a lot of deep connections in terms of, obviously, power electronics, you know, sheet metals, all the parts that we need. Most of the parts we need are, we've established those relationships, and we've learned a lot. So yeah, to answer the question is we're just smarter.

Speaker #2: So yeah, to answer the question, we're just smarter.

Speaker #6: Okay, thank you all.

Tate Sullivan: Thank you all.

Speaker #4: Thank you, Tate. Thank you, Scott. Steve, we do have some questions from retail investors attending the call. I noticed two investors; I have answered some questions via chat, and we will answer some questions live here.

Farhan: Thank you, Tate. Thank you, Scott. Steve, we do have some questions from retail investors attending the call. I noticed two investors that have answered some questions via chat, and we will answer some questions live here.

Speaker #2: I could see them, Farhan. I could read some of them, or if you want to read them, go ahead.

Steven Rossi: I can see them, Farhan. I can read some of them, or if you want to read them, go ahead.

Speaker #4: Yeah, sure, I'll read it. A question from Troy M. Analysts see a 240% upside. From current price levels, what do you think investors are underestimating about Worksport's business model?

Farhan: Yeah, sure, I'll read it. A question from Troy M. Analysts see a 240% upside from current price levels. What do you think investors are underestimating about Worksport's business model, scalability, and/or clean energy positioning that could drive value further from where it is today?

Speaker #4: Scalability and/or clean energy positioning that could drive value further from where it is today?

Speaker #2: So I think that predominantly Worksport displays itself. Like when a new investor picks up on Worksport, they go to worksport.com and they see tunnel covers.

Steven Rossi: So I think that predominantly Worksport displays itself. Like when you go, when a new investor, you know, picks up on Worksport, they go to worksport.com and they see tunnel covers. So I think that, you know, really deep diving into where we're going to be and where we started is where the maybe the loss in translation comes. I think that an investor that's looking at, you know, crypto opportunities or AI opportunities is looking for something exciting. I think energy is probably going to be, well, if you look at crypto, the crypto is all about hashing, and hashing is all powered through computers, and computers are all powered with energy. So if you look at the base commonality, I think energy is going to be our future, and that's what we're betting big on with Worksport.

Speaker #2: So I think that, you know, really deep diving into where we're going to be and where we started is where maybe the loss in translation comes.

Speaker #2: I think that an investor who's looking at, you know, crypto opportunities or AI opportunities is looking for something exciting. I think energy is probably going to be well, if you look at crypto, the crypto is all about hashing, and hashing is all powered through computers, and computers are all powered with energy.

Speaker #2: So if you look at the base commonality, I think energy is going to be our future, and that's what we're betting big on with Worksport.

Speaker #2: But it's not clearly apparent when you visit, you know, worksport.com, without diving into our investor section. So we're going to continue to improve our messaging and continue to court new investors.

Steven Rossi: But it's not clearly apparent when you visit, you know, worksport.com without diving into our investor section. So we're going to continue to improve our messaging, continue to court new investors. We're going to shift our investor relations focus to journalistic coverage and outreach so that we can have various high-visibility publications kind of summarize who we are a little bit easier for investors to understand. Today, we had a USA Today article, I believe, that came out that summarized the company very well. So I think that we're just augmenting how we present the company, and driving that value proposition is that, you know, I think energy is going to be the biggest thing in the future of the biggest economy in the future, and I think that will be a big part of it.

Speaker #2: We're going to shift our investor relations focus to journalistic coverage and outreach so that we can have various high-visibility publications kind of summarize who we are a little bit easier for investors to understand.

Speaker #2: Today we had a USA Today article, I believe that came out that summarized the company very well. So I think that we're just augmenting how we present the company and driving that value proposition is that, you know, I think energy is going to be the biggest thing in the future of the biggest economy in the future.

Speaker #2: And I think that we'll be a big part of it.

Speaker #4: Thanks, Tate, for that answer. We have another question regarding the rollout of higher margin products like the AL4, Solus, and Core. Could you walk us through how these innovations contribute to unit economics and margin expansion?

Farhan: Thanks, Steve, for that answer. We have another question regarding the rollout of higher margin products like the AL4, Solis, and Core. Could you walk us through how these innovations contribute to unit economics and margin expansion? Should we model the ramp-up later this year?

Speaker #4: Should we model the ramp-up later this year?

Speaker #2: Yeah, so AL4 was just launched earlier this year, and it's just getting into the market now. It's already exceeding our revenues; it started at zero.

Steven Rossi: Yeah, so AL4 was just launched earlier this year, and it's just getting into market now, and it's already exceeding our revenue. So it started as like zero, the AL4, and it's by far our highest margin product. So we started with nothing in terms of sales, and now it's actually outpacing all other sales we have, dollar for dollar on a day-to-day basis. So we're going to continue to focus on, obviously, the highest margin sales for us that'll serve the company best. And then, of course, Solis and Core will start as a direct-to-consumer product, which will be, you know, fairly strong or enviable margins. So I think that we're going to continue to, I think that it's difficult to explain it, but we're going to continue to focus on selling higher order value items.

Speaker #2: The AL4 is by far our highest-margin product. We started with nothing in terms of sales, and now it's actually outpacing all other sales we have, dollar for dollar, on a day-to-day basis.

Speaker #2: So we're going to continue to focus on, obviously, the highest margin sales for us that'll serve the company best. And then, of course, Solus and Core. We'll start as a direct-to-consumer product, which will be, you know, fairly strong or enviable margins.

Speaker #2: So I think that we're going to continue to, I think that it's difficult to explain it, but we're going to continue to focus on selling higher order value items. So our AL3 is what we started with, and it was a $700 price tag.

Steven Rossi: So our AL3 is what we started with, and it was a $700 price tag. The AL4 is an $1,100 price tag. The Solis is going to be closer to $2,000, and the Core with two batteries is going to be closer to over $2,000. So I think that we're going to sell a lot of items that have a higher order value. So that'll represent very, very nicely in terms of our gross sales. But with the Solis and Core being high margin direct-to-consumer primarily, we'll also represent ourselves in high profit. And there's two different types of ways of looking at profit. One of my mentors, many, many, many years ago when I first started my business, said you can't take percentages to the bank. And what I understand by that statement is 30% of a dollar is 30 cents, and that's nothing.

Speaker #2: The AL4 has an $1,100 price tag. The Solus is going to be closer to $2,000, and the Core with two batteries is going to be closer to over $2,000.

Speaker #2: So I think that we're going to sell a lot of items that have a higher order value. So that'll represent very, very nicely in terms of our gross sales.

Speaker #2: But with the Solus and Core being high-margin direct-to-consumer primarily, we'll also represent ourselves in high profit. And there's two different types of ways of looking at profit.

Speaker #2: One of my mentors, many, many, many years ago, when I first started my business, said, "You can't take percentages to the bank." What I understand by that statement is 30 percent of a dollar is 30 cents, and that's nothing.

Speaker #2: But when you start looking at high margin percentages in terms of a $2,000 sale, you know, the Core, for example, let's say it's 30 percent.

Steven Rossi: But when you start looking at high margin percentages in terms of a $2,000 sale, you know, the Core, for example, let's say it's 30%. 30% of $2,000 is rough math is $600. If we repeat those sales tens or hundreds of times a day, that's very meaningful for shareholders alike in Worksport. So if that answers the questions, we're going to be focused on higher order values at high margins, which are going to be highly beneficial, and it's not yet realized in the balance sheet.

Speaker #2: Thirty percent of $2,000 is roughly $600. If we repeat those sales tens or hundreds of times a day, that's very meaningful for shareholders alike in Worksport.

Speaker #2: So, if that answers the questions, we're going to be focused on higher order values at high margins, which are going to be highly beneficial, and it's not yet realized in the balance sheet.

Speaker #4: Thank you, Steve. We have a question regarding the quality of the solar cells and panels. An investor has personally purchased solar cells and panels from different popular brands and has found quality concerns.

Farhan: Thank you, Steve. We have a question regarding the quality of the solar cells and panels. An investor has personally purchased solar cells and panels from different popular brands and has found quality concerns. Their question is, where are we producing our units to ensure that our finished product is dependable and high quality?

Speaker #4: Their question is, where are we producing our units to ensure that our finished product is dependable and of high quality?

Speaker #2: So it's a trade secret on where we get our panels. We went through somewhere, I'm going to estimate, but I think it was around between 25 to 50 different solar manufacturers across the world, from wafer cells to panel assemblies.

Steven Rossi: So it's a trade secret on where we get our panels. We went through somewhere, I'm going to estimate, but I think it was around between 25 to 50 different solar manufacturers across the world, from wafer cells to panel assemblies. So solar panels are made from wafers or cells individually, and the cells usually come from like SunPower or other manufacturers around the world. So it's getting the best out there. What we've settled on, it's a trade secret in terms of who the manufacturer is and where they're coming from. Unfortunately, we looked at a lot of US-based cell manufacturers and panel manufacturers, and they just didn't pass our testing. So the panels are coming from the east side of the world, not China. But the panels that we're using are also used on various space stations.

Speaker #2: So, solar panels are made from wafers or cells individually, and the cells usually come from manufacturers like SunPower or others around the world. So, it's getting the best out there.

Speaker #2: What we've settled on is a trade secret in terms of who the manufacturer is and where they're coming from. Unfortunately, we looked at a lot of U.S.-based cell manufacturers and panel manufacturers, and they just didn't pass our testing.

Speaker #2: So, the panels are coming from the east side of the world, not China. But the panels that we're using are also used on various space stations.

Speaker #2: So, NASA agrees that these cells, these panels and cells, are the best out there. So, there's no better quality than the panels and cells we're using.

Steven Rossi: So NASA agrees that these panels and cells are the best out there. So there's no better quality than the panels and cells we're using when they're used also again on some of the space stations out there. And we're highly selected. And that's for taking Solis to market, that was probably the biggest time delay for us is finding the best solar cell and panel manufacturers.

Speaker #2: When they're used also again on some of the space stations out there. And we're highly selective. And that's for taking Solus to market; that was probably the biggest time delay for us, is finding the best solar cell and panel manufacturers.

Speaker #4: Thank you, Steve. We had a question about the battery chemistry of Core. At that moment, the battery chemistry is a trade secret.

Farhan: Thank you, Steve. We had a question about the battery chemistry of Core. At the current moment, the battery chemistry is a trade secret. We will reveal the specs of the unit as the unit comes closer to launch later this year. We had a question about government contracts for any of our products, specifically the hard covers, the heat pump, or the Solis and Core.

Speaker #4: We will reveal the specs of the unit as the unit comes closer to launch later this year. We had a question about government contracts for any of our products, specifically the hard covers, the heat pumps, or the Solus and Core.

Speaker #2: So yeah, obviously government and OEM contracts are always something that I think won't come to us naturally. So we've done business with government entities, and we're well connected within various government agencies through our boards of directors.

Steven Rossi: So yeah, obviously, government and OEM contracts are always something that I think won't come to us naturally. So we've done business with government entities, and we're well connected within various government agencies through our boards of directors and through just our business connections. So we'll continue to work with various federal and local agencies, OEMs, which wasn't part of the question, but they're always correlated. We'll obviously keep those conversations coming. We've got to do what's best for Worksport in terms of, you know, working with companies that'll give us revenues, but of course, at margins that we need. So government contracts, we've sold our hard covers to government agencies, yes. Do we have contracts? Not necessarily contracts, but open kind of order relationships. Solis have gone to various private businesses that are fairly large. Core, we're not there yet, but we're going to get there pretty soon.

Speaker #2: Through just our business connections. So we'll continue to work with various federal and local agencies, OEMs, which wasn't part of the question, but they're always correlated.

Speaker #2: We'll obviously keep those conversations coming. We've got to do what's best for Worksport in terms of, you know, working with companies that'll give us revenues, but of course at margins that we need.

Speaker #2: So, government contracts. We've sold our hard covers to government agencies, yes. Do we have contracts? Not necessarily contracts, but open kind of order relationships.

Speaker #2: Solus has gone to various private businesses that are fairly large. Core, we're not there yet, but we're going to get there pretty soon. And the heat pump, we're not there yet either, but it's all a work in progress.

Steven Rossi: And the heat pump, we're not there yet either, but it's all a work in progress.

Speaker #4: And I will add that Michael, the heat pump product has the largest potential for government contracts. We did a press release about two weeks ago that we're in discussions with some governments about that technology.

Farhan: And I will add that, Michael, the heat pump product has the largest potential for government contracts, and we did press release about two weeks ago that we're in discussions with some governments about that technology. A question from James C. With all the good news today, could you comment on the stock price and recent action?

Speaker #4: A question from James C. With all the good news today, could you comment on the stock price and recent action?

Speaker #2: It's very difficult. You know, we've seen similar volatility in our stock during previous earnings releases. I think the last three or four quarters of this year.

Steven Rossi: It's very difficult. You know, we've seen similar volatility in our stock during previous earnings releases. I think the last three or four, or at least the quarters of this year, you know, we have no idea. A lot of times when our stock is volatile, we're busy in meetings and on the production floor working. We're not, you know, behind a trading desk or doing anything. So it's, you know, the secondary market for shares in a company, which is what NASDAQ and NYSE, in essence, is, and brokers, is really up to, you know, investors and traders and stuff like that, and how they trade and what shorting or whatever may happen is the least in control of the company. So all we're focused on is putting more products in boxes and getting those boxes out the door.

Speaker #2: You know, we have no idea. A lot of times when our stock is volatile, we're busy in meetings and on the production floor working. We're not, you know, behind a trading desk or doing anything.

Speaker #2: So it's, you know, the secondary market for shares in a company, which is what NASDAQ and NYSE, in essence, is. Brokers are really up to, you know, investors and traders and stuff like that.

Speaker #2: And how they trade and what shorting or whatever may happen is the least in control of the company. So, all we're focused on is putting more products in boxes and getting those boxes out the door in terms of volatility in the stock price.

Steven Rossi: In terms of volatility in the stock price, that's up to the traders. And, you know, we have no real control. All we could do is continue to execute on the business side. But yeah, the company's, you know, net assets are worth a significant amount, plus patents, plus intrinsic growth and value. So there's a strong upside here. But, you know, when stocks go down, you know, it's just, it's because of, I guess, trade errors or the open market.

Speaker #2: That's up to the traders. And, you know, we have no real control. All we can do is continue to execute on the business side.

Speaker #2: But, yeah, the company's net assets are worth a significant amount, plus patents, plus intrinsic growth and value. So there's a strong upside here. But, you know, when stocks go down, it's because of, I guess, traders or the open market.

Speaker #4: And James, the only thing we'll add to the question about stock price and stock price volatility is, going forward, the company does believe that the warrants that are in play between $4.50 and $6.70 may come to fruition.

Farhan: And James, the only thing we'll add also to the question about stock price and stock price volatility is going forward, the company does believe that the warrants that are in play between $4.50 and $6.70 may come to fruition. And that means that we believe that the company's stock price is not matched to where we see the intrinsic value of the company. We think that our assets, our growth, our margins improvement, intellectual property is undervalued. And we believe that as Q3, Q4, and Aetherlux Core Solis come out, the stock's overlying and underlying health will be better reflected into its price. Next question, and I'm going to take two more questions, Steve, here.

Speaker #4: And that means that we believe that the company's stock price is not matched to where we see the intrinsic value of the company. We think that our assets, growth, margin improvements, and intellectual property are undervalued.

Speaker #4: And we believe that as Q3, Q4, and you know, Aetherlux, Core, and Solus come out, the stocks underlying health will be better reflected in its price.

Speaker #4: Next question, and I'm going to take two more questions, Steve, here. The first question is, what is your plan to increase analyst coverage of the stock?

Steven Rossi: Okay.

Farhan: Next question is, what is your plan to increase analyst coverage of this stock?

Speaker #2: So, you know, earned coverage is important. There's a lot of paid research out there, which we try to avoid. Although there are very good firms, I think that our dollars should go into selling more and making more versus some of the analyst coverage.

Steven Rossi: So, you know, earned coverage is important. There's a lot of paid research out there, which we try to avoid. Although there are very good firms, I think that, you know, our dollars should go into selling more and making more versus some of the analyst coverage. So we're going to continue to work with, you know, some of the analysts that are well-known and reputable to cover the story earned. But that's an iterative process. Meeting various, you know, research firms and speaking to analysts is a very, it's a relationship that needs to be built, and there has to be trust, and the analysts have to believe that the company is worthwhile. So we're going to continue to meet new research partners and continue to try to find organic coverage, but it's going to take, you know, time, like all the other things that we do.

Speaker #2: So we're going to continue to work with, you know, some of the analysts that are well-known and reputable to cover the story earned, but that's an iterative process.

Speaker #2: Meeting various research firms and speaking to analysts is a very important relationship that needs to be built and must be trusted. The analyst has to believe that the company is worthwhile.

Speaker #2: So, we're going to continue to meet new research partners and continue to try to find organic coverage, but it just, it's going to take, you know, time like all the other things that we do.

Speaker #4: Thanks, Steve. And last question for today: When exactly are the first Solus Plus Core sets expected to be shipped? What stage are we on?

Farhan: Thanks, Steve. And last question for today. When exactly is the first Solis plus Core sets expected to be shipped? What stage are we on? What else is left to do before we hit the market?

Speaker #4: What else is left to do before we hit the market?

Speaker #2: Yeah, good question. So, Solus, we made a handful, and we sold them. So the beta program—Alpha was like internal testing. That was done.

Steven Rossi: Yeah, good question. So Solis, we made a handful, and we sold them. So the beta program, Alpha, was like internal testing. That was done. That's where we redesigned it and made some changes. Beta testing is when we actually sold units to select users. We've had really good feedback. One, you know, I just found out this morning that one guy was able to put a good amount of miles recharged from his Solis into his truck with a level one charger connected to the Core. That was really cool to hear. So betas, you know, we had some revenues from it, and then now that goes to full release. So full release, we've ordered solar panels to be manufactured. We're going to be making, I think, somewhere around 200, but we're probably going to up that closer to 500 units.

Speaker #2: That's where we redesigned it and made some changes. Beta testing is when we actually sold units to select users. We've had really good feedback.

Speaker #2: One, you know, I just found out this morning that one guy was able to put a good amount of miles recharged from his Solus into his truck with a Level 1 charger connected to the Core.

Speaker #2: That was really cool to hear. So, betas, you know, we had some revenues from it, and now that goes to full release. For full release, we've ordered solar panels.

Speaker #2: To be manufactured, we're going to be making, I think, somewhere around 200 units, but we're probably going to up that closer to 500 units. And that should be sometime, you know, the panels have to be made and shipped, and then we have everything else to make the covers here.

Steven Rossi: And that should be sometime, you know, the panels have to be made and shipped, and then we have everything else to make the covers here at this factory that I'm in today at our factory. So that should be, you know, within the second half of this year. Where it is is anyone's guess, but I would expect in Q4, probably, like maybe October, November. But that's the Solis. The Core, UL certification, there were 10 tests. We passed nine of them. We're on the last test now. And once we pass that test, we can go into and get UL certification, and we can go into production. So we have, you know, we're 90% of the way there in terms of UL. Once we pass UL, we can go into production. And again, it's production. We've got most of the components ready.

Speaker #2: At this factory that I'm in today, at our factory, so that should be, you know, within the second half of this year. Where it is, is anyone's guess, but I would expect in Q4, probably.

Speaker #2: Like maybe October or November. But that's the Solus. The core, you all certification, there were 10 tests. We passed 9 of them. We're on the last test now.

Speaker #2: And once we pass that test, we can go in and get UL certification. We can go into production. So we have, you know, we're 90 percent of the way there in terms of UL.

Speaker #2: Once we pass UL, we can go into production and, again, it's production. We've got most of the components ready. It's getting into production of the first thousand units and then stocking them.

Steven Rossi: It's getting into production of the first 1,000 units and then stocking them. So that should all happen within this year. If there's any challenges, it might be geopolitical issues, which I doubt, but more maybe relating to the testing process and time it takes to get, you know, UL certification is the most prestigious certification. So it does take time.

Speaker #2: So, that should all happen within this year. If there are any challenges, they might be geopolitical issues, which I doubt, but more likely related to the testing process and the time it takes to get, you know, UL certification, which is the most prestigious certification.

Speaker #2: So it does take time.

Speaker #4: Thank you very much, Steve. And Mike, Scott, and Tate, thank you for attending as analysts. We'd like to thank all of our investors today for their time and attention.

Farhan: Thank you very much, Steve and Mike, Scott, and Tate. Thank you for attending as analysts. And we'd like to thank all of our investors today for their time and attention. This marks the end of the Q2 2025 call. Have a great day.

Speaker #4: This marks the end of the Q2 2025 call. Have a great day.

Steven Rossi: Thank you, everyone.

Speaker 8: Goodbye.