NASDAQ: WKSP

On
March 18, 2025, the Company effected a 1-for-10 reverse stock split of its issued and outstanding common stock in order to regain compliance
with the minimum bid price requirement under Nasdaq Listing Rule 5550(a)(2). In connection with the reverse stock split, the authorized
number of shares of common stock was proportionally reduced from 299,000,000 shares to 29,900,000 shares.

On
April 17, 2025, the Company filed an amendment to its amended and restated articles of incorporation, effective May 19, 2025, increasing the total number of authorized
shares of capital stock from 30,900,000 to 55,000,000, consisting of 45,000,000 shares of common stock and 10,000,000 shares of preferred
stock

Recent
Offerings

At-the-Market
(“ATM”) Offering Program

During 2025, we raised capital through our at-the-market
offering program and other registered offerings of our common stock, generating aggregate gross proceeds of approximately $521,835 and
net proceeds of $504,372 after commissions and offering expenses. These financings were undertaken to support our operations, fund growth
initiatives and strengthen our balance sheet. In November 2025, we entered into an amendment to our at-the-market offering agreement to
permit the sale of up to $4.0 million of our common stock from time to time. See “Item 5. Market for Registrant’s Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity Securities—At-The-Market Offering” for additional information regarding
these transactions.

December
2025 Warrant Inducement

On
December 11, 2025, the Company entered into a warrant exercise inducement agreement with the holder of certain existing warrants originally
issued on March 20, 2024 and March 3, 2025. Pursuant to the agreement, the holder exercised warrants to purchase 2,194,526 shares of
the Company’s common stock at a reduced exercise price of $2.90 per share, resulting in gross proceeds of approximately $6.4 million,
before placement agent fees and other offering expenses. In consideration for the exercise, the Company issued new warrants to purchase
up to 3,840,421 shares of common stock. The shares of common stock issuable upon exercise of the new warrants were registered for resale
pursuant to the Company’s registration statement on Form S-3 (File No. 333-292823), filed with the SEC on January 20, 2026 and declared effective
on January 28, 2026. The Company intends to use the net proceeds from the transaction for general corporate and working capital purposes.
The Company engaged Maxim Group LLC as its exclusive financial advisor in connection with the transaction.

Regulation
A Offering

Between
June 2025 and October 2025, the Company conducted a Regulation A offering pursuant to which it sold units consisting of shares of Series
C Preferred Stock and accompanying warrants, resulting in aggregate gross proceeds of approximately $10.0 million, before fees and expenses.

February
2025 Warrant Inducement

On February 27, 2025, the Company entered into
a warrant exercise inducement agreement with the holder of certain existing warrants originally issued on May 29, 2024. Pursuant to the
agreement, the holder exercised warrants to purchase 1,295,000 shares of the Company’s common stock at a reduced exercise price
of $5.198 per share, resulting in gross proceeds of approximately $6.7 million, before placement agent fees and other offering expenses.

In consideration for such exercise, the Company
issued new warrants to purchase up to 1,424,500 shares of its common stock at an exercise price of $6.502 per share, subject to adjustment.
The new warrants become exercisable six months from the date of issuance and expire on the fifth anniversary of the date of issuance.
The shares of common stock issuable upon exercise of the new warrants were registered for resale pursuant to the Company’s registration
statement on Form S-1 (File No. 333-286255), filed with the SEC on March 28, 2025 and declared effective on April 3, 2025. The Company
used the net proceeds from the transaction for working capital and general corporate purposes. The Company engaged Maxim Group LLC as
its exclusive financial advisor in connection with the transaction.

4

Business
Developments

The
following highlights recent material developments in our business since the beginning of the fiscal year covered by this Form 10-K:

●
On December 11, 2025, we held our 2025 Annual Meeting of Shareholders. At the Annual Meeting, a total of 12,369,649
shares of common stock were represented in person or by proxy, constituting 73.8% of the total outstanding common shares and a quorum
under our bylaws.

●
On December 11, 2025, we entered into a common stock warrant exercise inducement offer letter with a certain holder
of existing warrants to purchase shares of our common stock, par value 0.001 per share, at a weighted average exercise price of $6.82,
issued on March 20, 2024 and March 3, 2025, respectively. The holder agreed to exercise for cash its existing warrants to purchase an
aggregate of 2,194,526 shares of common stock at a reduced exercise price of $2.90 per share, in consideration for our agreement to issue
new warrants to purchase up to 3,840,421 shares of common stock. We received aggregate gross proceeds of approximately $6.4 million before
deducting placement agent fees and other offering expenses paid by us.

●
On
December 1, 2025, we announced the commercial launch of our SOLIS™ truck-mounted folding solar array and COR™ portable
battery system, which together form a modular, vehicle-mounted clean-energy solution. The products are available for purchase through
our direct-to-consumer platform.

●
On
November 25, 2025, we announced that our HD3 heavy-duty hard-folding tonneau cover entered commercial sales through our business-to-business
dealer network following the commencement of production in mid-October 2025.

●
On
November 18, 2025, we announced the opening of a newly leased facility in Missouri to support the assembly, testing, and distribution
of our SOLIS™ solar-integrated tonneau cover and COR™ energy products.

●
On
November 10, 2025, we announced final pricing and initial vehicle compatibility for our SOLIS™ solar-integrated tonneau cover
in advance of its commercial launch, with initial availability covering a range of popular pickup truck models and bed configurations.

●
On
September 30, 2025, we announced a 42% increase in national dealer partnerships over the preceding quarter

●
On
August 7, 2025, we announced that we had doubled our Bitcoin holdings and invested in additional manufacturing machinery to double
its production output

●
On
August 5, 2025, we announced our strongest 4-week production run since beginning domestic production.

●
On
July 16, 2025, we announced we doubled our R&D footprint by beginning a new lease at a larger R&D facility in Ozark, Missouri
for the development of upcoming product lines.

●
On
July 16, 2025, we announced that the AetherLux Pro heat pump with high-performance Zerofrost technology – a product of its
subsidiary, Terravis Energy - had received the attention of multi-billion dollar corporations and U.S. government entities, with
site visits and due diligence underway.

●
On
June 10, 2025, we announced the addition of a second national automotive distributor, expanding our partnered dealer network to
over 550 locations across the U.S. —representing a nearly sixfold increase since the beginning of 2025.

●
On
June 5, 2025, we confirmed a Fall 2025 commercial launch for our much-anticipated modular nano-grid system, known as SOLIS &
COR. This announcement follows the successful completion of key engineering milestones and validation benchmarks across both systems.

●
On
June 2, 2025, we announced that 80% of the AL4 product line—20 out of 25 planned models—had been successfully rolled out
to market.

●
On
May 28, 2025, we announced that we secured ISO 9001 Certification at our U.S. Factory, expected to pave new inroads towards substantial
new OEM and global supply chain opportunities. This certification cycle officially commenced in April 2025 and remains valid through
April 2028, contingent upon continued compliance.

●
On
April 29, 2025, we announced our strategic partnership with Patriot Automotive Technologies to accelerate nationwide expansion through
Patriot’s network of over 200 dealer locations.

●
On
March 18, 2025, we effectuated a 1-for-10 reverse stock split of its common stock. Our common stock continues to trade on the Nasdaq
under our existing trading symbol, “WKSP”, and a new CUSIP number, 98139Q308, was assigned as a result of the reverse
stock split.

●
On
February 27, 2025, we entered into a warrant inducement agreement (the “Inducement”) with the holder of existing warrants
to purchase an aggregate 1,295,000 shares at a revised price of $5.20 in consideration for us to issue new warrants to purchase up
to 1,424,500 additional shares of common stock at an exercise price of $6.502 each – resulting in gross proceeds of approximately
$6,734,000.

●
On
February 25, 2025, we announced that our dealer network has expanded by 30% in the first two months of 2025, and, following an ongoing
production ramp-up driven by strong early feedback, initial models of its AL4 Premium Tonneau Cover were now officially available
for purchase at www.worksport.com.

●
On
February 13, 2025, we announced our strategic partnership with KULR Technology Group, Inc. (NASDAQ: KULR), focused on advancing battery
technology and strengthening domestic manufacturing, including, without limitation, joint battery pack development, thermal runaway
protection and AI-integrated battery management system software design.

●
On
February 11, 2025, we announced two major breakthroughs in cold climate heat pump technology developed by its subsidiary, Terravis
Energy. These breakthroughs eliminate the need of defrost cycles, a common heat pump drawback, and allow the heat pump (the
AetherLux heat pump system) to operate in temperatures as low as -57°F, which is lower than the operating capabilities of
commercially available heat pumps.

●
On
January 28, 2025, we executed an agreement to appoint Coinbase as the official custodian for our cryptocurrency holdings.

5

Segments
and Products

We
conduct our business in two reportable business segments, which are the same as our operating segments: Soft Tonneau Covers and Hard
Tonneau Covers. Additional information describing the comparative segment revenues, operating profits and related financial information
for 2025 and 2024 are provided in Note 16 – Segment Reporting, of Part III Item 8, Financial Statements and Supplementary Data,
of this Report.

We
have developed and are commercializing a series of soft and hard folding tonneau covers and energy products designed for mobile and off-grid
use cases.

Soft
Tonneau Covers

Our
soft tonneau cover offerings consist primarily of vinyl-wrapped tri-fold and quad-fold tonneau covers manufactured by third-party suppliers
overseas in accordance with our specifications. Soft covers include powder-coated lightweight aluminum frames, rear cam latches, quick
latch functionality, and UV-protected vinyl tri-layer materials intended to seal around the truck bed and protect cargo from moisture
and debris.

Tri-fold
soft covers are generally positioned as lower-cost options, while quad-fold covers provide additional functionality by allowing fuller
truck bed access by folding upward toward the rear window. Certain quad-fold configurations are designed to provide full bed access while
limiting obstruction of the rear window in typical configurations.

Hard
Tonneau Covers

Our
hard folding tonneau cover offerings include tri-fold and quad-fold aluminum covers manufactured and assembled in the United States.
Our hard covers incorporate Quick Latch functionality intended to allow single-sided operation. Hard cover panels are formed aluminum
and are coated using proprietary finishing processes intended to enhance durability. These covers are designed to provide a low-profile
appearance and are engineered to align within the truck bed for fit and ease of installation. Certain hard cover offerings may be purchased
with optional rail system configurations intended to expand utility and improve weather resistance and sealing.

We
continue to expand our hard cover lineup to address consumer, commercial, and fleet requirements, and we expect to continue expanding
applications and fitments across major truck makes, models, and bed configurations.

Our
tonneau cover portfolio includes multiple soft and hard folding platforms developed over time, including soft folding products marketed
under the SC platform and hard folding products marketed under the AL and HD platforms. These product families encompass a range of tri-fold
and quad-fold configurations designed to address differing customer needs related to price point, durability, access to the truck bed,
and intended use, including consumer, commercial, and fleet applications. We continue to expand applications and configurations across
these platforms as part of our broader product development and commercialization strategy.

Up
and Coming Products: Clean-Energy Products

We
are expanding beyond traditional automotive accessories into clean-energy products designed to integrate power generation and energy
storage into pickup truck platforms and other mobile environments.

SOLIS™
Solar-Integrated Tonneau Cover

SOLIS™
is a folding solar-integrated tonneau cover designed to combine cargo protection with on-vehicle renewable power generation. SOLIS™
is designed to generate power that may be used to charge compatible energy storage systems or support mobile and off-grid power applications.
SOLIS™ is intended for use in a variety of settings, including outdoor recreation, worksite operations, emergency preparedness,
and other mobile use cases. We may offer SOLIS™ as a standalone product and/or in combination with other compatible energy products.

COR™
Portable Energy System.

COR™
is a portable energy storage system designed to store and deliver electrical power for mobile, off-grid, and backup power applications.
COR™ is designed for use as a standalone power source and is also designed to integrate with SOLIS™ for certain charging
and power use cases. COR™ represents the Company’s initial entry into the portable energy storage market and is intended
to support a range of applications, including vocational activities, emergency backup, disaster readiness, and recreational use. Our
next-generation COR Pro unit is expected to allow for battery swapping without a drop in power output for 15 seconds at 2000W and can
be used for various activities. It can be purchased separately or with the SOLIS tonneau cover and is Worksport’s first product
in the energy storage market.

We
have also developed and may offer related power management components, including charging and power regulation functionality, that may
be offered as part of integrated solutions or as complementary components.

6

Terravis
Energy™ – Aetherlux™ ZeroFrost™ Heat Pump Systems

Developed
by Worksport’s subsidiary Terravis Energy (TVE), the AetherLux platform introduces the company’s breakthrough ZeroFrost™
heat pump technology. The AetherLux Pro model is designed as a Combined Cooling, Heating, and Power (CCHP) system that redefines energy
efficiency in cold climates. By virtually eliminating frost buildup, it maintains high performance even in extreme temperatures, while
providing superior efficiency in all temperatures. AetherLux systems are intended for use in residential, commercial, and industrial
environments, offering scalable power management, integrated smart controls, and compatibility with renewable energy inputs - aligning
with Worksport’s long-term vision of a clean, decentralized energy ecosystem.

Manufacturing

Our
manufacturing updates reflect our commitment to quality and expansion. We outsource the production of our soft tonneau covers to a facility
in Foshan, China, which we began to utilize for increased output in late 2023. We have also diversified our list of raw material suppliers
and, in May 2022, acquired and set up a state-of-the-art partially automated production facility in West Seneca, New York for domestic
manufacturing. In 2023, we initiated early production of our first hard folding tonneau cover (made in the USA with domestic and foreign
parts), the Worksport AL3 Pro; it is now in active production for most major makes and models of light trucks in North America. In early
2025, we introduced the American-made AL4 hard cover to the market, which was followed by the HD3 cover in late 2025. These updates
demonstrate our dedication to meeting the growing demand for our products.

We
utilize a hybrid manufacturing and assembly model. Our soft tonneau covers and portable energy systems are manufactured by third-party
suppliers overseas in accordance with our specifications, our hard folding tonneau covers are manufactured and assembled in the U.S.,
and our solar-integrated tonneau covers are assembled in the U.S. with components supplied from overseas.

We
operate a manufacturing, storage, and distribution facility in West Seneca, New York and a facility in Ozark, Missouri that supports
operations related to assembly, testing, and distribution activities. We continue to invest in tooling, fixtures, and process improvements
intended to improve production efficiency, quality, and scalability across our product lines.

We
also maintain a supplier network across multiple geographies for components used in both our tonneau covers and energy products. We believe
this diversified supplier approach reduces reliance on any single supplier or region and helps mitigate geopolitical and supply chain
risks.

Intellectual
Property

We
seek to protect our products and technologies through a combination of patents, trademarks, design registrations, and other
intellectual property rights. Our intellectual property portfolio includes patents, designs, and trademarks covering aspects of
tonneau cover designs, latching mechanisms, solar integration, portable energy systems, heat pump systems and components, and
related technologies. We currently hold a broad collection of intellectual property rights relating to certain aspects of our parts
and accessories and services. This includes patents, designs, trademarks, copyrights and trade secrets. Although we believe the
ownership of such intellectual property rights is an important factor in our business and that our success does depend in part on
such ownership, we rely primarily on the innovative skills, technical competence and marketing abilities of our
personnel.

Patents

As
of December 31, 2025, our patent portfolio includes approximately fourteen (14) issued utility patents in the U.S., approximately ten
(10) issued utility patents outside of the U.S., and approximately fifty-six (56) pending utility patent applications in various jurisdictions
worldwide. Our portfolio further includes approximately eleven (11) issued design patents in the U.S., approximately thirty-nine (39)
design patents and registrations outside the U.S., and approximately twenty-six (26) pending design applications in various jurisdictions
worldwide. We are also in the process of preparing and filing several other utility and design patent applications across various countries
and jurisdictions.

Trademarks

As
of December 31, 2025, the Company had approximately forty-three (43) trademark registrations and fifteen (15) pending trademark applications
in various jurisdictions worldwide.

7

The
Market

The
markets in which we operate are competitive and include a number of established domestic and international manufacturers. In the automotive
accessories market, competition includes large consolidated suppliers and smaller independent manufacturers. In portable power and clean-energy
markets, competition includes a range of companies offering alternative energy generation and storage solutions. We compete primarily
on product design, functionality, quality, pricing, manufacturing capabilities, intellectual property, customer support, and distribution
reach.

Tonneau
Cover Market

There
are various forms of tonneau covers, each with their advantages and disadvantages, available for consumption through direct-to-consumer
and retailer and dealer sales channels. These mainly include but are not limited to: solid one-piece caps and lids; retractable covers;
soft folding & roll-up covers; and hard folding & standing covers. Solid one-piece covers and retractable covers tend to have
limited functionality and tend to be priced higher when compared to other types of tonneau covers. Soft and hard folding/rolling tonneau
covers, in contrast, tend to be priced more competitively and, as such, are a popular choice among tonneau cover consumers. Given these
factors and our belief that we can develop less cumbersome, high functioning, and low cost soft and hard folding covers, we focus primarily
on developing soft and hard folding covers.

While
the product lifetime of a tonneau cover is shorter than that of a pickup truck, higher pickup truck sales provide greater market opportunity
for the tonneau cover industry. As of the third quarter of 2024, there were roughly 61 million pickup trucks in operation within the
U.S.1 We offer tonneau covers for each of the 5 most popular pickup truck makes/models sold in 2025,2 as well as
the top 10 most accessorized pickup truck makes/models projected in 2022-2029.3 Within the U.S., the pickup truck market is
expected to grow at a compound annual growth rate of 5.3% between 2025 and 2030.4

Electric
pickup trucks are projected to gain a larger portion of the U.S. pickup truck market share each year through 2035;1 in fact,
the electric pickup truck market is expected to grow at a compound annual growth rate of 29.86% between 2025 and 2029 within North America.5
However, a large headwind acting against this trend is that pickup trucks tend to be more popular in areas with less-developed
charging infrastructure3 – a headwind that the SOLIS cover directly addresses and positions us favorably for possible
partnerships and deals with electric pickup truck manufacturers.

The
Specialty Equipment Aftermarket provides more specific insight into how often and for what reasons vehicle owners or renters are purchasing
accessories for their vehicles. Pickup trucks are the largest market by sales within the U.S. for specialty equipment – constituting
32% of the specialty equipment market6. Within this pickup truck accessory market, 34% of accessories are truck bed &
utility modifications,3 which is the submarket in which we operate. Truck bed covers were among the top product categories
for aftermarket accessory purchases in 2021,3 and the size of the tonneau cover market within the U.S., which was estimated
to be $2.56 billion in 2024, is expected to grow at a compound annual growth rate of 7.1% from between 2025 and 2030.7

1.
SEMA. Future Trends Report. 2024. Retrieved from www.sema.org

2.
Statista. Best-selling pickup trucks in the United States in 2025. 2026. Retrieved from https://www.statista.com/statistics/204473/best-selling-trucks-in-the-united-states-from-january-to-october-2011/

3.
SEMA. Pickup Accessorization Report. 2022. Retrieved from www.sema.org

4.
TechNavio. Pickup Truck Market in the US 2026-2030. 2026. Retrieved from https://www.researchandmarkets.com/report/united-states-pickup-truck-market?utm_source=GNE&utm_medium=PressRelease&utm_code=3xc3fr&utm_campaign=2003670+-+US+Pickup+Truck+Analysis+Report+2024%3a+Market+to+Grow+by+%2449.4+Billion+During+2023-2028%2c+Driven+by+Increasing+Product+Portfolio+and+Development+of+Electric+Pickup+Trucks&utm_exec=chdomspi

5.
Mordor Intelligence. North America Electric Truck Market Size & Share Analysis – Growth Trends & Forecasts up to 2029. 2026. Retrieved from https://www.mordorintelligence.com/industry-reports/north-america-electric-truck-market

6.
SEMA. SEMA Market Report. 2025. Retrieved from www.sema.org

7.
Grand View Research. U.S. Truck Bed Accessories Market Size, Share & Trends Analysis Report By Product Type, By Sales Channels, And Segment Forecasts, 2025 – 2030. 2024. Retrieved from https://www.grandviewresearch.com/industry-analysis/us-truck-bed-accessories-market-report

8

Worksport
looks to maximize market share by manufacturing industry-leading products at competitive margins as well as by exploring horizontal and
vertical integration opportunities.

Portable
Power Station Market

Compared
to the Tonneau Cover Market, the Portable Power Station Market is much younger and globalized. Gas and diesel generators have long been
used by consumers to generate electricity when they could not rely on the grid, whether it be due to grid damage or the lack of grid
in remote areas. Unlike such generators, portable power stations do not generate electricity themselves, but they too can be used to
provide electricity during times of grid unreliability. These portable power stations are often charged by the grid via home outlets
or independent of the grid via external power sources – often solar panels.

The
global Portable Power Station Market is large and growing with a compound annual growth rate of 5.3% between 2025 and 2035.1
The segments within the North American market that have the largest market share are power stations utilizing lithium-ion batteries and
those used for off-grid power applications,1 which match the COR system’s battery type as well as intended usage. When
paired with the SOLIS cover, the COR energy storage system will be a market outlier in that it can be charged safely while mobile whereas
competing portable power stations are intended to be stationary during charging.

1.
Market
Research Future. Portable Power Station Market Size, Share & Growth Analysis Report by Operation Type, By Technology Type,
By Capacity Type, by Application And By Region - Trends & Industry Forecast to 2035. 2023. Retrieved from https://www.marketresearchfuture.com/reports/portable-power-station-market-10079

Distribution

We
distribute our tonneau covers in U.S. and Canada through an expanding network of wholesalers, private labels, distributors, and dealers,
and through online channels, including major online marketplaces and our direct-to-consumer e-commerce platform. We intend to continue
expanding both business-to-business and direct-to-consumer channels. We also pursue relationships with original equipment manufacturers
and fleet customers where appropriate. The specialty equipment aftermarket consists of three major types of customers, which include
master warehouse distributors and big box stores, dealers and wholesalers, and retail end consumers. Master warehouse distributors and
big box stores stock and distribute products to their customers, which are usually local dealers and wholesalers. Dealers and wholesalers
are local stores which sell products to some businesses and retail consumers in their area and online. Dealers purchase most of their
products from their local distributor who delivers to them regularly. Retail end consumers are the end users of the products.

Competition

Tonneau
Cover Competitors

The
Tonneau Cover market is dominated by RealTruck, but we compete with other brands as well, such as Truck Accessories Group, Agri-Cover,
Truck Covers USA, and Paragon. We aim to gain market share by being independent, innovative, lean, and competitively priced. Our small
sales and customer support teams focus on building strong relationships and enforcing MAP policies. Our SOLIS cover offers unique features
and potential partnerships with electric truck manufacturers.

We
believe that being independent, innovative, operationally lean, and competitively priced will enable us to acquire a larger portion of
the existing market share. To execute on this, we have a small and effective sales team to forge strong business-to-business relationships
as well as a small and effective customer support team to service both business-to-business and direct-to-consumer sales. Selling above
MAP (Minimum Advertised Price) and enforcing this policy will allow business customers to sell without competing with us and, in return,
support the growth of the distribution base. We also plan to work alongside distributors as our relationships develop – utilizing
aggressive phone, mail and email campaigns in our distributors’ coverage areas to help grow our shared consumer bases and show
commitment to our B2B customers. Our innovative covers are designed to serve purposes that no other tonneau cover is currently capable
of, some of which are specifically geared towards improving margins for distributors. Further, the SOLIS cover’s inclusion of solar
panels may be particularly attractive to electric pickup truck original equipment manufacturers, paving the path towards an original
equipment manufacturer relationship that may be lucrative beyond standard tonneau cover partnerships.

Portable
Power Station Competitors

The
Portable Power Station market is global and highly fragmented, with numerous competitors such as EcoFlow, Alpha ESS Co., Ltd., Anker
Technology, and Bluetti. Our strategy is to focus on the COR Portable Power Station Product Line and offer modular batteries for consumers
to customize their stored energy capacity and upgrade over time.

At
Worksport, we differentiate ourselves from our competitors through innovation, quality, onshoring, and customer focus. We believe our
unique selling propositions, such as the SOLIS solar tonneau cover and the COR portable power station, set us apart in the market by
offering integrated solutions that address the growing demand for renewable energy and sustainable products. Unlike others, we have successfully
leveraged cutting-edge technology to transform traditional pickup truck accessories into multifunctional tools that enhance the utility
and efficiency of vehicles. Our commitment to sustainability is not just a business strategy, but a core value that resonates with environmentally
conscious consumers. Moreover, our agile business model and strategic partnerships enable us to quickly adapt to industry trends and
consumer needs, ensuring we stay ahead of the curve. In a market dominated by conventional products, Worksport stands out as a forward-thinking
brand that delivers innovative, high-quality solutions designed to meet the evolving demands of modern consumers and the environment.

9

Supply
of Components

Our
soft and hard tonneau cover production requires various components such as plastics, rubber, foam, aluminum, and metal. We have a diverse
supplier network in countries like the U.S., the People’s Republic of China (“China”), Vietnam, and Canada. We are
actively reducing our reliance on countries with potential geopolitical risks.

Research
and Development

We
continually invest in research and development, acquiring new assets and developing unique tonneau cover designs and sustainable materials.
Our design and engineering teams are based in the U.S. and Canada and work on product design, materials selection, manufacturing optimization,
and the development of new product platforms across our tonneau cover and clean-energy offerings. We also engage third parties from time
to time to support testing, validation, and development activities. Our recently announced partnership with KULR Group aims to develop
technology that may be used in future generations of the COR. Our subsidiary, TerraVis Energy, Inc., is researching and developing green
energy solutions, such as heat pump technologies, for homes and communities.

Through
our subsidiary, TerraVis Energy (“TerraVis”), we are developing
advanced heat pump technology intended for residential, commercial, and industrial heating and cooling applications. TerraVis’s
AetherLux™ platform incorporates proprietary ZeroFrost™ design features intended to address performance challenges associated
with conventional heat pumps in cold-climate environments. The AetherLux™ Pro concept is designed as a CCHP system and is intended
to maintain operating efficiency across a wide range of temperatures by reducing or eliminating performance losses associated with frost
buildup. AetherLux™ systems are being designed with scalability, integrated control functionality, and compatibility with renewable
energy inputs in mind. TerraVis’s activities are currently focused on research, development, and evaluation, and these technologies
have not yet been commercialized.

Governmental
Programs, Incentives and Regulations

Globally,
both the operation of our business and the ownership of our products by our customers are impacted by various government programs, incentives,
and other arrangements. Our business and products are also subject to numerous governmental regulations that vary among jurisdictions.

Programs
and Incentives

We
have applied for and been granted tax, mortgage, wage, and energy cost relief in New York in addition to wage cost and R&D cost relief
in Ontario. These programs are provided by several agencies including the Erie County Industrial Development Agency, Empire State Development,
NY Power Authority, and the Canada Revenue Agency. Each of these incentive programs includes its own set of guidelines and requirements,
including but not limited to timely eligibility reporting, environmental regulation compliance, and headcount projection realization
– each of which we have agreed to and must abide by in order to continue realizing said incentives. We additionally receive incentives
related to the hiring and employment of interns in Ontario.

We
continue to seek additional incentives and grants in order to lower our operational costs as well as commit less capital to new product
initiatives.

Regulations

Our
energy storage products involve lithium-ion batteries and are subject to evolving domestic and international regulations related to the
manufacture, labeling, transportation, storage, and disposal of lithium-ion battery products. We also operate in jurisdictions subject
to various governmental programs, incentives, and regulatory regimes applicable to manufacturing operations and clean-energy related
activities.

10

Environmental
Matters

We
are committed to high environmental standards and carry out our activities and operations in compliance with all relevant and applicable
environmental regulations and best industry practices. Costs of environmental regulatory compliance are not expected to be significant.

Human
Capital Resources

As
of December 31, 2025, we employed one hundred and three (103) full-time employees and five (5) part-time employees in the U.S. and further
employed thirteen (13) full-time employees and one (1) part-time employee in Canada. We intend to hire additional employees as operations
grow – particularly within our West Seneca, NY manufacturing facility. We utilize temporary labor and, from time to time, engage
independent contractors and consultants to support our operations.

Compensation
and Benefits

We
believe that compensation should be competitive and equitable and should enable employees to share in our success. We recognize our employees
are most likely to thrive when they have resources and support to meet their needs and succeed in their professional and personal lives.
In support of this, we offer a variety of benefits for employees, such as group insurance, HRAs, supplemental insurance, paid time off,
and 401k benefits, and we invest in tools and resources that are designed to support employees’ growth and development.

Inclusion
and Diversity

We
remain committed to our vision to build and sustain a more inclusive workforce that is representative of the communities we serve. We
continue to work to increase diverse representation, foster an inclusive culture, and support equitable pay and access to opportunity
for all employees.

Engagement

We
believe that open and honest communication among team members, managers, and leaders helps create an open, collaborative work environment,
where everyone can contribute, grow and succeed. Team members are encouraged to come to their managers with questions, feedback or concerns.

Health
and Safety

We
are committed to protecting our team members everywhere we operate and, as such, supporting employees with general safety training. We
have also taken additional health and safety measures during and after the COVID-19 pandemic.

Available
Information

We
file our annual, quarterly and current reports, proxy statements and other information with the SEC. The SEC maintains a website that contains reports, proxy and information statements and other information regarding
issuers that file electronically with the SEC. We also make available, free of charge, on the Investor Relations section of its website,
our Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports, as soon as reasonably practicable
after such reports are filed with, or furnished to, the SEC. Our website address is www.worksport.com. Information contained on,
or accessible through, our website is not incorporated by reference into this Form 10-K.

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