Worksport (WKSP) Q3 2026 Earnings Call Transcript

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DATE

Tuesday, Nov. 10, 2026

CALL PARTICIPANTS

• Chief Executive Officer - Steven Rossi
• Chief Financial Officer - Jennifer Kartychak

TAKEAWAYS

• Net Sales -- $7.2 million, representing a 44% increase year over year and a 38% increase from the second quarter.
• Gross Profit -- $2.2 million, an increase of 40% year over year driven by higher sales volume.
• Gross Margin -- 30.3%, compared to 31.3% in the prior year and 31.5% in the second quarter, reflecting a higher mix of B2B sales and increased landed costs.
• Operating Expenses -- $5.6 million, a 12% decline from $6.4 million in the prior year due to reduced investor relations spending.
• Operating Loss -- $3.4 million, narrowing 28% from the prior year as revenue growth outpaced the cost base.
• Net Loss -- $3.6 million, compared to $4.9 million in the prior year quarter.
• Net Loss Per Share -- $0.26, an improvement from $0.75 in the prior year period.
• Operating Cash Use -- $0.4 million, a decrease from $3.4 million in the second quarter, aided by $2 million provided by working capital.
• Inventory -- $9.6 million, representing a 21% reduction from $12.1 million at the end of June.
• NEXUS Revenue -- $4.8 million, accounting for approximately two-thirds of total quarterly net sales and growing 150% from the second quarter.
• SOLIS Revenue -- $96,000, more than quadrupling compared to the second quarter.
• Total Nine-Month Sales -- $15.8 million, an increase of 39% compared to the first nine months of the prior year.
• Sales Orders -- $7.9 million, exceeding invoiced revenue by $600,000 during the quarter.
• Backlog -- $740,000 as of Sept. 30, up from $117,000 at the end of June.
• B2B Sales Mix -- 41% of quarterly net sales, with large distributor orders growing sevenfold during the quarter.
• B2C Sales Growth -- 48% increase compared to the previous quarter.
• Sales and Marketing Expense -- $1.8 million, down from $2.4 million in the prior year as investor relations spending fell by $1 million.
• Cash Balance -- $2.5 million at quarter end, including $2.3 million raised from a warrant inducement in August.
• Hard Tonneau Cover Sales -- $7.2 million for the segment, representing 47% growth year over year.
• Manufacturing Equipment Investment -- $0.3 million through nine months, compared to $1.1 million in the same period last year.
• Research and Development -- $213,000, down from $301,000 as major products transitioned to production.

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RISKS

• Rossi stated, "The cost of aluminum has gone up and doubled in the past just over a year," noting that tariffs and geopolitical issues are increasing material costs.
• Rossi noted that despite high demand for premium products, "inflation because of tariffs have eroded some of" the potential 40% to 45% gross margin on the NEXUS line.
• Management acknowledged that the company has until February 2027 to comply with the NASDAQ $1 minimum bid price rule.

SUMMARY

Worksport Ltd. (NASDAQ:WKSP) reported record quarterly revenue and a significant reduction in operating cash requirements as it transitioned toward a just-in-time manufacturing model. Management stated that the company achieved a more even distribution between its business-to-business and direct-to-consumer channels while maintaining gross margins above 30%. The company is focused on inventory conversion and operational efficiency to narrow the remaining gap to reaching sustained operating cash flow positivity. Management also highlighted a shift in marketing strategy, directing more capital toward customer-facing activities rather than investor relations and awareness programs.

• The company signed a nonbinding term sheet to acquire a patented American-made truck-bed accessory business to complement its existing hard tonneau cover line.
• Management transitioned the West Seneca facility to a just-in-time fulfillment model, aligning raw material purchasing more closely with actual sales patterns to optimize working capital.
• Terravis Energy targets AetherLux Heat Pump certification in the fourth quarter of 2026, with pilot installations in the continental U.S. planned for the first quarter of 2027.
• CEO Rossi stated, "NEXUS sales reached approximately $4.8 million, up 150% from the quarter before and represented roughly 2/3 of quarterly net sales."
• The company released approximately $2.7 million in equipment purchase obligations and renewed its credit facility through July 2028.
• CFO Kartychak noted that customer-facing marketing increased by $500,000, supporting the 44% increase in net sales.
• Rossi indicated that the factory currently has the equipment capacity to double production without significant additional capital expenditure.

INDUSTRY GLOSSARY

• AL4: The company's competitively priced hard-folding tonneau cover.
• BOM: Bill of Materials, the list of raw materials and components required to manufacture a product.
• COR: A portable energy storage system designed to work with solar covers or independently.
• NEXUS: A premium hard-folding tonneau cover featuring an automatic flip-up design.
• SOLIS: A tonneau cover with integrated solar power generation capabilities.
• Tonneau Cover: A protective cover designed to secure and shield the bed of a pickup truck.
• ZeroFrost: Patented technology for heat pumps designed to reduce or eliminate energy-consuming defrost cycles in cold weather.

Full Conference Call Transcript

Steven Rossi: Good afternoon, everyone, and thank you for joining Worksport's Third Quarter '26 Earnings Call. I'm Steve Rossi, Founder and Chief Executive Officer of Worksport. With me today is Jennifer Kartychak, our Chief Financial Officer. Today, we'll discuss our results for the quarter ended September 30, 2026, the discipline and efficiency gains that are increasingly enabling us to fund our own growth and the next steps for our product portfolio. Our remarks follow the accompanying slides. We'll then open up the line for analyst questions. You can find our earnings release and Form 10-Q for the quarter ended September 30, 2026, on the Worksport Investor Relations website at www.investors.worksport.com/#reports, I repeat www.investors.worksport.com/#reports. Our safe harbor statements.

During this call, we will make forward-looking statements, including statements regarding our expectations for financial and business trends, our market position, our go-to-market growth initiatives and our product programs and their expected benefits. These statements are predictions based on our current beliefs, expectations and assumptions. Because they relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Actual results may differ materially, and you should not place undue reliance on them. These statements are subject to the risks discussed in our SEC filings, including our annual report on Form 10-K and our quarterly reports on Form 10-Q.

They speak only as of today's date, and we assume no obligation to update them, except as required by law. Any supplemental operating metrics discussed today should be considered together with and not as a substitute for the underlying GAAP results. All right. With that, we have our agenda. First item of discussion is Q3 performance, liquidity and capital resources, followed by financial results, monthly sales and backlog, followed by inventory, manufacturing and our conversion, followed by product portfolio outlook, followed by an update on Terravis Energy's AetherLux certification and the next step, followed by and finally, strategic priorities. So with that, Q3 was the strongest revenue quarter in Worksport's history. Let me say that again.

Q3 was the strongest revenue quarter in Worksport's history and our second consecutive quarterly sales record. Net sales reached approximately $7.2 million, up 38% from Q2 and 44% from a year ago today. What makes this quarter especially encouraging is the way business supported that growth. Gross margin remained above 30%, operating expenses stayed close to Q2's level and inventory converted to revenue by approximately $2.5 million. The business shifted from a higher revenue concentration of B2C sales to now a more even split of B2B and B2C sales. Achieving this while increasing revenues and keeping margins stable is something management believes strengthens the foundation of our future growth. Cash use came down sharply in the quarter.

Operating cash use was approximately $0.4 million, helped by favorable working capital timing, so we don't view it as a quarterly run rate. What we do see is durable in the improvement of our core business. Revenue grew 44% year-over-year to $7.2 million, and gross profit rose 40%, while total operating expenses came down by roughly $740,000. Together, that narrowed our net loss by 27%. With inventory already in place to support COR, SOLIS and NEXUS, our focus now is turning that volume into margin. We'll continue to use our credit facility and the capital markets as needed while we target closing the remaining gap to profitability. That's so important to us.

On our last call, we committed to 3 things: convert inventory, turn distribution access into repeat orders and grow sales volumes faster than our operating cash requirements. This quarter gives shareholders concrete progress against those commitments, and we've executed there. Inventory decreased by $2.5 million during a record sales quarter, and sales grew 38% alongside relatively flat operating expenses. Large distributor orders during Q3 grew by a factor of 7 and resulted in nearly equal contribution of net sales from both of our sales channels, B2B and B2C. Much of this quarter's improvement in operating cash came from working capital as that inventory converted, and Jennifer will elaborate more on that success.

The work ahead is to keep narrowing the underlying cash gap so that cash generation holds up without relying on inventory release. Now the most important liquidity development this quarter is how much of our own operating needs the business cover. Operating cash use was approximately $0.4 million, and the working capital we converted during the quarter allowed us to reduce the balance on our credit line. In August, we also completed a warrant inducement, which brought in about $2.3 million. That is the main reason cash ended the quarter at $2.5 million. We view it as a balance sheet strength, not what carries the quarter's operations.

Several things that required capital over the past 2 years are now largely behind us. Our Phase 1 manufacturing equipment is in place. Our investing cash flow was about $0.3 million through the 9 months compared to $1.1 million last year. We released -- we were released from roughly $2.7 million equipment purchase obligation. Inventory has been essentially flat this year after last year's build, and our credit facility has renewed through to July 2028. Our goal was to make outside financing a choice rather than a necessity. I'll repeat that. Our goal is to make outside financing a choice rather than a necessity.

The path is the one we've been describing, more volume to the plant we've already built, better margins on that volume and disciplined spending. Q3 is an early sign of that path working for us. Execution is critical here. With that, I'm going to turn it over to our CFO, Ms. Kartychak. Over to you, Jen.

Jennifer Kartychak: Thanks, Steven. Third quarter net sales were approximately $7.2 million, compared to $5.2 million in Q2 and $5 million a year ago. This is our fifth consecutive quarter of double-digit year-over-year revenue growth. Through September, net sales were approximately $15.8 million, up 39% from the same period last year. In 9 months, we have generated nearly as much revenue as $16.1 million we reported for the entirety of 2025. Both channels contributed to the sequential increase. Direct-to-consumer sales grew approximately 48% and B2B sales grew about 26%. Because direct sales grew faster, B2B represented approximately 41% of quarterly net sales compared with 45% in Q2. The mix moved the other way as the quarter closed.

In September, B2B and distribution accounted for about half of monthly sales compared with 40% in June. This is a progress we committed to in our last call, turning distribution access into recurring demand. Having both channels gives us flexibility in how we reach customers and what it costs to reach them. The monthly progression helps explain this quarter. Preliminary net sales were about $2.2 million in July, $2.3 million in August and $2.7 million in September. Each month since January has exceeded the month before, and September is our strongest month to date. Demand also ran ahead of shipments. Third quarter sales orders were approximately $7.9 million, about $0.6 million more than we invoiced.

As a result, estimated backlog increased to approximately $740,000 in -- at September 30 from approximately $117,000 at the end of June. Backlog was lower at the end of August as September's record shipments filled orders already on hand. Gross profit was approximately $2.2 million, up approximately 40% year-over-year and about $540,000 from Q2. Gross margin was 30.3%, compared to 31.3% a year ago and 31.5% in Q2. For the first 9 months, gross margin improved to 29.8% from 26.8%. Our margin was modestly lower than Q2, reflecting higher material and landed costs, including tariffs and a larger share of sales contributed by B2B. We also consider the cost of customer outreach to secure a sale.

B2B generally carries a lower gross margin than B2C sales, but lower marketing cost per unit and sales and marketing fell to 25% of net sales from 47% a year ago. If we continue to increase volume while maintaining healthy margins and disciplined spending, our goal is to convert more of that additional gross margin into operating cash flow. Operating expenses were $5.6 million, down 12% from $6.4 million a year ago and flat when compared with Q2. Operating expenses represented about 77% of sales, down from 127% a year ago. Over the past few years, we built our operating base, including our West Seneca facility and team to be a strong foundation for the volume we believe will come.

This quarter, the sales are beginning to fill out that profile. Sequentially, sales increased 38%, while total operating expenses were relatively unchanged. We don't expect that work -- or sorry, we don't consider that work finished, which is a true statement. And we are actively looking for ways to make our spending more efficient. Sales and marketing expense declined to $1.8 million from $2.4 million a year ago. That decline came from Investor Relations and awareness programs, where we spent approximately $1 million less than in the prior year quarter. Customer-facing marketing increased by about $0.5 million, supporting a 44% increase in net sales. We are directing more of our marketing budget towards activities that generate sales.

General and administrative expense was $3.6 million, down from $3.7 million a year ago. Research and development expense was $213,000, down from $301,000 as NEXUS and AL4 moved from development into production. Operating expense (sic) [ loss ] narrowed 28% year-over-year to approximately $3.4 million. Net loss was $3.6 million compared with $4.9 million a year ago and $4.0 million in Q2. Loss per share was $0.26 compared with $0.75 a year ago. Net per share improvement also reflects a higher weighted average share count. Operating cash use was approximately $0.4 million, as Steve mentioned, compared with $3.4 million in Q2. Within Q3, operating cash use was approximately $34,000 in July, $278,000 in August and $75,000 in September.

Those monthly results show how much cash operations required through the quarter. The bridge starts with our $3.6 million net loss. Noncash adjustments of approximately $1.3 million, primarily share-based payments of approximately $835,000 and depreciation and amortization of approximately $421,000 brought cash used before working capital movements to approximately $2.3 million. Working capital then provided approximately $2 million. Inventory conversion is doing what we intended, releasing capital back into the business as sales grow. The next task is to narrow the underlying cash flow gap through more gross profit and disciplined focus on cost efficiencies. For the first 9 months, operating cash use was $12 million compared with $11.2 million a year ago.

Most of that came from the first half of the year when we invested approximately $3.5 million in working capital, mainly with materials and supplier payments behind the launch of NEXUS and the build-out of SOLIS and COR. With that investment largely behind us, Q3 reflects a meaningful -- meaningfully lower cash requirement. Sustaining it depends on the operating progress and inventory discipline we have discussed. Inventory declined to $9.6 million from approximately $12.1 million in June, a reduction of about 21%, while quarterly sales grew 38%. This is an important change in how we are using the capital already invested in the business. Inventory supported a record sales quarter, while the balance came down, releasing working capital.

Just as important, the composition held steady. Raw materials were about 54% of total inventory at quarter end compared with 57% at year-end. That tells us the reduction isn't just a drawdown of finished goods that we need to rebuild. Our purchasing of inputs is moving with increased proximity to sales, which suggests our working capital needs are beginning to normalize. Our production model began to shift towards a just-in-time fulfillment model, aligning purchasing and manufacturing more closely with the B2C sell-through patterns and B2B distributor reorders. The objective is to keep products available without committing more working capital to the process to fulfill and produce our finished goods ahead of demand.

Our factory gives us control over the balance, what we purchase, what we build and when we replenish finished goods. Improving those decisions supports both customer service and working capital efficiency. Back to you, Steven.

Steven Rossi: Thanks, Jennifer. NEXUS shows what product innovation can contribute to the business. As I say, the NEXUS sells itself. In Q3, NEXUS sales reached approximately $4.8 million, up 150% from the quarter before and represented roughly 2/3 of quarterly net sales. We've also been watching closely how NEXUS interacts with the rest of our lineup, particularly AL4. We've seen the 2 as good-better pairing on the same platform, not competing products. AL4 is our competitively priced, hard-folding tonneau cover, a proven trifold, flip-up design for value-focused truck owners and daily work truck use, sold broadly through the retail and online channels. NEXUS, however, is a premium cover.

It's built on the AL4 platform and adds an auto flip design that opens and locks from one side of the truck for buyers willing to pay for convenience. Nothing like it exists in the market. Because both are built on the same platform in our own factory, a customer who chooses NEXUS over AL4 is trading up within our portfolio, and we gain efficiency from shared components and production. At the segment level, hard tonneau cover sales grew 47% year-over-year to $7.2 million. On the 4th of November, we announced points to how we could build our growing sales channels and innovative capabilities. We signed a nonbinding term sheet for a business selling a patented American-made truck-bed accessory.

If we complete acquiring this business, this acquisition would add a complementary product to our product line that could be sold independently or bundled with our hard tonneau cover products offering, including the AL4, AL3, HD3 and of course, NEXUS. We already have the manufacturing capacity, dealer relationships and more than 50,000 targetable customers, bringing a complementary product into that network that people are going to love could give us more offer to each customer -- more to offer to each customer and improve the return on our existing marketing investments. The transition remains subject to due diligence -- sorry, this transaction remains subject to due diligence, definitive agreements and closing conditions, of course.

Our ambition is to build a broader U.S.-based manufacturing business using the capabilities established by our covers already. We're looking at leveraging what we already have. We intend to pursue that ambition with positive operating cash flow as our first financial priority. On to SOLIS and COR. SOLIS and COR are product offerings that emerge from our hard tonneau cover product offerings. SOLIS adds solar energy generation into our hard tonneau covers. So the surface that protects the truck bed also produces power, again the first and only of its kind. COR (sic) [ SOLIS ] has a folding solar tonneau cover.

COR, however, stores power and works with SOLIS or as an independent product, allowing customers to take usable energy anywhere. We approach portable energy as an extension of a product we already know how to build, sell and support rather than a separate business. Meanwhile, we add energy storage solutions to our capabilities. SOLIS net sales more than quadrupled from Q2 to approximately $96,000 in Q3. We believe SOLIS is among the early entrants in the solar tonneau cover market, and we're not aware of any major industry player currently offering a comparable solar integrated truck bed cover. The early progress of this patented innovative product is very encouraging, while still representing just a small share of our total revenue.

COR's UL and CSA certification support access to retail, fleet and commercial channels, all a work in progress. In September, we also made COR available on Amazon, giving customers another way to discover and purchase it. Our focus now is to turn that product availability into a repeatable sales model. And believe me, we are working on it. We'll measure progress through our customer adoption, channel development and the cost-generating demand. Now on to Terravis Energy, very exciting. At Terravis Energy, our commercial discussions include government organizations, massive large distributors and major installers as we prepare for the next stage of commercialization, which is subject to successful certification, testing and product readiness.

For me, this is an exciting technology and a significant opportunity. I'll repeat that, a very significant opportunity for us. In cold weather climates, conventional heat pumps must manage frost buildup on the outdoor coil, resulting in defrost cycles that consume energy and interrupt the heating that you need during winter. Terravis Energy's patented ZeroFrost technology is designed to reduce or eliminate those cycles, addressing limitation that customers and installers understand well and have been struggling with since the first heat pump in the mid-1950s. The objective is more consistent heating when customers need it most.

A real-world scale pilot will be the next step towards demonstrating that technology, our technology in real installs and developing the installation, service and distribution relationships needed to support the launch. Certification remains targeted for Q4 of this year 2026, with first production expected before year-end, subject to such certification, testing and production readiness. Initial pilot installation in the Continental U.S. states are targeted for Q1 of next year, 2027, following the aforementioned certification and initial products -- production. We have spent years developing this technology, and believe me, we are tremendously excited for it. Seeing it move towards field deployment is a meaningful milestone for our team, one of which has not been realized by the market.

We're going to report on certification, production and pilot installation as they are achieved. But stay tuned. Very exciting things are ahead. Let's move on to our strategic outlook. Q3 gives us a stronger basis for confidence in our path towards operating cash flow positivity. The cover business is generating more sales and more gross profits and inventory conversion is releasing capital that we already had committed. The intention is to continue increasing contribution from that business without expanding spend at the same pace. We have a factory, we have equipment, products and production and established routes to customers.

As we make more efficient use of those resources and leverage them, we can expect more gross profits and those profits to go up towards closing the remaining cash flow gap. We've shown it quarter-over-quarter, and believe me, we are going to continue to execute there. Our objective is sustained operating cash flow positivity. Reaching it would allow us to fund more growth internally and reduce our dependence on equity financings or financing altogether. Progress will depend on revenue, margins, recurring cash requirements and working capital discipline. We are not providing a new calendar target today, however.

Alongside that immediate financial priority of cash flow positivity, we are developing complementary product opportunities and preparing the AetherLux Heat Pump for its pilot, all of which are going to really, really help. We will manage those programs against the resources available and the milestones they need to achieve. In essence, we know how to execute, we know how to deliver, we're going to get there. So with that, we'll get into my closing remarks. For me, Q3 was an important step in the business, and we have spent several years building this. We delivered on our highest quarterly revenue. NEXUS became our largest product revenue contributor and operating cash use declined significantly.

I know shareholders want that progress to continue. Our responsibility is to turn our factory and its products and customer relationships into a business that can increasingly support itself. This quarter shows the progress towards that goal. It's right in front of us. Thank you for the employees and those I get to share the privilege of working together with on every day to help deliver the products and make the products, the customers who partnered with us and chose Worksport and the shareholders who have supported us unwaveringly. Jennifer and I look forward to answering your questions. With that, I'll turn it over to the operator. You could please open up the line.

Faran Ali: Thanks, Steve. We have a few analysts here that joined us from Maxim. We'll take live questions from them, followed by live and submitted questions from our shareholders on this call. Shareholders can use the Q&A function inside of the Zoom webinar to submit additional questions. Tate, I see your hands up.

Tate Sullivan: Thank you, Steven. I think one of your prior press releases referred to a just-in-time inventory strategy. And with that strategy, should we expect inventory balance to decline again in the current quarter?

Steven Rossi: That's a good -- yes. So a very good question. And we -- because we're made in America and the majority of our components come within the contiguous 48 states, we now have an idea of lead times. We have very solid and maturing vendor relationships, and we frankly can forecast a lot better. We front-loaded our inventory buys because we were kind of blind. We didn't know how many tonneau covers we'd sell.

Now that we have an idea and we could see and schedule for this, we're able to forecast, we're able to purchase just in time, and we're able to reduce our inventory and those mitigate the risks of maintaining those inventory levels and rely on vendor relationships. And that's really one of the key benefits to being made in America.

Tate Sullivan: And is the relationship with the distributors and with Meyer, that you called out earlier this year, part of that just-in-time inventory strategy? Or is it more B2C versus the B2B?

Steven Rossi: No, no. First off, we're keenly -- and I'll reiterate it a million times over, we're keenly focused on supporting Main Street America businesses. For those interested to know, that's where I started. My first business was an auto parts store. So I know what it's like to open up a shop every day, and we're going to support those businesses. Meyer and all of our distribution and B2B partners have been fantastic in allowing us the lead time to be able to maintain lean inventory levels.

So in essence, we've approached all of our customers saying, "Hey, we need 4 weeks to ship an order," and they're working with us perfectly in placing orders in advance and allowing their models to forecast our buy.

Tate Sullivan: And then SOLIS and COR, thank you for the updates on the product, too. And when customers are buying the SOLIS to start -- I mean, without the COR, what are they -- do they use as a competitor portable battery or would be...

Steven Rossi: Yes. So each product can be used independent of itself, and the SOLIS is just beginning. So to put it into perspective, the AL3, our first tonneau cover took about a year to get off the ground from when we launched it, and the SOLIS has been launched for less than a year in essence. So we're following a strong trajectory. We've been here before. So SOLIS is going to grow. COR is going to grow. That wasn't your question, but what -- why we designed the products the way we have is the COR and SOLIS complement each other, but they could be used independent.

So we're not making the consumer -- the customer we're trying to find too hard to find, if that makes sense. Finding a customer that has a pickup truck that wants a solar tonneau cover is already challenging. It's a small percent of the truck population. Finding an individual truck [ owner ] that needs a battery generator is obviously a larger market. If we were to start saying you need to have -- you need to buy them together, you're focusing in a very niche, very small amount of customers.

So the SOLIS can be sold to anybody that owns a pickup truck that needs a solar tonneau cover, that wants a tonneau cover and will spend a little bit more, such a small amount more if you make an electrical -- sorry, solar. And then it will integrate with any battery generator, not just ours if they already have their own or a brand that they prefer. And then the COR, once again, can take solar charge from most other solar panel arrays, not just the SOLIS. So they -- but paired together, they make a beautiful combination. Any other questions that I'll take?

Tate Sullivan: No, no.

Steven Rossi: Okay. Faran, open it up and happy to take any other questions.

Faran Ali: Thanks, Steve. A lot of great questions coming in. So we'll try to answer our best to as many as we can. The first question that I see here refers to the difference between book value of the business, which the shareholder quotes at $18.8 million compared to the current market cap, which the shareholder quotes as $6 million. They're wondering if the Board and management will consider strategic partners or strategic M&A that may get to unlock a more realistic value of the business than the market cap is what the shareholder has stated.

Steven Rossi: Sure. Yes, good question. First off, let me say that automotive in whole, specific automotive businesses, not all of them follow the statement I'm about to make, but most automotive businesses, specifically in manufacturing and aftermarket in our kind of markets tend to underperform the markets for the most part. So the fact that Worksport's real value is not reflected in the share price, albeit exasperated. I think that it's crazy how low our valuation is, understandable that there is a disconnect, just ours is multiplied. So as I believe among one of the largest stockholders in the business with stock that I've recently purchased, we all want the same thing.

Everybody on this call, whether it's a stockholder or not, wants the same thing. They want Worksport's value to be as high as possible. And management internal to the business and, of course, the Board and everything else -- everybody else in the business will do everything that we can to find ways to unlock that value, whether it's strategic partnerships, opportunities and these types of things. The last thing I'll say is there's our market value, right, which is about $6 million. There's our book value, which is about $20 million. And that book value, by definition is what your assets are, how much is your factory worth, how much is your inventory worth?

And if you were to liquidate it or sell it, what's that value? But the combination of those with the brand of Worksport and our patents and all these types of things should be a multiple of the book value. So Worksport and -- so we would love to be even valued at book value, $20 million. But I will make a bold statement, and I'll stand by it or swear by it, that Worksport's value, just our tonneau covers business, is worth a multiple of our book value, which is around $20 million. So I think that Worksport's actual valuation in terms of a business is a multiple of $20 million.

And other businesses in our space, tonneau cover businesses in our space have sold for -- in excess of $100 million, having arguably less than what Worksport has today. So I think that we have a lot of value, and we are going to find ways to unlock it. And that will either happen today -- sorry, soon or down the line, but at some point, that will happen for all of us, and we're working towards that.

Faran Ali: Thanks, Steve. I'll ask the next question here. We'll direct this question for Jennifer. Jen, the question asked with $9.6 million in inventory, they're estimating that we have about 15 weeks of inventory. They're wondering if we can provide additional input on cycle time, target cycle time, inventory levels and turns and more specifically about our just-in-time inventory program that we want to work towards.

Jennifer Kartychak: Sure. Thanks so much. So as far as our inventory turns are concerned, we've been around the 3 times a year, if you will, going into Q3 with our inventory. And what I will say is that we've transitioned, especially with a lot of our enhancement in the B2B space, to this whole notion of having a backlog, right? And with us having a backlog, we have clarity in terms of what our forecasted production needs are going to be within a coming 4-week period.

And that allows us in combination with our trends in the B2C space to more appropriately understand the needs and be more responsive, if you will, to the inventory levels from a raw material standpoint that we need to be able to fulfill those particular orders. So throughout our time period, we really have transitioned into being a little bit faster in the way of our turns. And I would imagine that with us having a disciplined approach to this matter, that we will be able to continue to increase our turns as the quarters progress.

Faran Ali: Thanks, Jen. The next question here is related to the stock price. The question is, specifically, why is the stock price so low? And what are you doing to get it up before we get delisted? I think, Steve, part of this question is obviously related to the stock price dynamics, which you did touch base on in your first answer. And the second half of this question is related to the delisting rules, and I can take this question. We want to let all shareholders know that we have until February in 2026 (sic) [ 2027 ] to get compliant with the $1 minimum bid price rule for NASDAQ.

But that does mean we have a few months before any action needs to be taken -- February 2027, sorry about that. That does mean we have a few months to take -- before any action needs to be taken. And beyond that, NASDAQ actually offers a 6-month extension period related to this rule, which means that we can apply for an additional 6 months beyond February 2027 and get that before we have to take any action. The company is able to do corrective action, and we don't anticipate any level of delisting events happen nor are we concerned about a delisting event at this time.

Steven Rossi: Yes. I'll further that by, yes, NASDAQ gives you 6 months. And then subject to certain rules and conditions, you may get another 6 months. And we think that at the trajectory that we're growing with the strategic opportunities present for Worksport as a public company, Worksport tonneau covers as a subsidiary and Terravis Energy as another subsidiary. We think that within the initial 6-month window from now until February -- mid-February and with the possibility of an additional extension being available to us, we think that within the first window and definitely within the second window, we should be able to cure that price per share deficiency.

Nobody wants to consolidate the stock, and we remain pretty optimistic on the path forward.

Faran Ali: Thanks, Steve. We still have a lot of questions coming in. So I'm trying to -- let's try and get these cleared out. A question from [ Joe ] is we see all this great financial news coming out. How can we get this out to more investors?

Steven Rossi: Sorry, repeat the question, Faran, it broke up for me.

Faran Ali: The investor is asking, all this great financial news is coming out, how can we get it to more investors?

Steven Rossi: Investor Relations is synonymous with significant spends, which we did a lot last year during our Reg A raising. So I think that good stories just organically grow. We have a lot of customers and distributors and dealers that are supporters and fans of Worksport and what we're building. So I think that as long as we just continue to work on building the business and staying lean, the good news will spread over time through execution. But marketing is -- marketing a product is expensive. We spent 6 figures a month in marketing our product to get people to buy it.

And then marketing -- the story of the underlying stock, for example, could also be very expensive, and we just don't want to deploy cash there. So we're just going to let our good work tell the story for itself. And I think that we're always a good buy-and-hold opportunity for investors, although that hasn't proven much recently, I think that we're going to turn the corner. So we know there's a huge disconnect. We're trading below book value, as I said, and we think that there's only up to go, but we're going to just focus on execution and then the execution should drive the reward.

Faran Ali: Thanks, Steve. We have another question here related to sales and marketing percentage for marketing and sales and marketing percentage for IR. And I do believe we touched a little bit on these numbers during the slide show, but if you don't mind repeating that insight and giving an insight on where we expect sales and marketing to be for IR in the future.

Jennifer Kartychak: Yes. So we did note the fact that we had a reduction in our use of our sales and marketing and that we had a more significant reduction in our Investor Relations type spend when we're comparing year-over-year as opposed to customer-facing spend. But that customer-facing spend, which was about a $0.5 million increase, actually helped us lift our top line by 44%. So I would believe that as we continue to gain more brand recognition, it will naturally help us to reduce and become more efficient with our marketing spend that's aimed at securing that customer sale, if you will.

Faran Ali: Thanks, Jen. We have a question -- submitted question via e-mail related to the expected decision time on the recently announced nonbinding acquisition. Steve, I know we can't disclose too much, but could you give shareholders an update on how that process is going to work out in your head?

Steven Rossi: First off, the business is the coolest thing. Second off, the leadership in that business is amazing. We absolutely love the business, and we love the people there. So just so excited. And, of course, when you're in love with something, you want to marry it as quickly as possible. So we're hoping to move while enacting our fiduciary responsibility. So we're hoping that we could close the transaction as soon as possible, and that could be a matter of weeks. But it's going to take as long as it's going to take for us to make sure that we're appropriating Worksport resources and cash and all these types of things with fiduciary responsibility.

So for all intents and purposes, I would want it as fast as possible because it's the greatest thing. But -- we got to do our job, and we've got to take the right time to make sure we've done our job and act in the best interest of Worksport and its shareholders.

Faran Ali: Thanks, Steve. And the next question here is for either of you and it's, where does AetherLux certification stand? And what could production require from the balance sheet related to AetherLux?

Steven Rossi: Very good question. I'll underscore to anyone listening that AetherLux and Terravis Energy are just massive opportunities. The market paired with the innovation is I can't say it loud enough. It's just a huge opportunity. And I'm so proud that we get to be a part of it. Lorenzo, my father, and the team at Terravis Energy have been working tirelessly here. The path to certification, there's a lot more certifications required for HVACR products. So we're hoping that, that gets done. It could be any day now. It's literally in the midst of those certifications. But because it's a third-party lab and it's a global certification standard, these types of things can't be timed.

These third-party labs are regulatory bodies, and they work at their own pace. So you can push them, call them, you can e-mail them, but they just kind of work at their own pace. So could they e-mail us tomorrow saying, Hey, good news, you're ready to go? Yes. But is that -- it could be also a week or a month from now? Yes as well. Once again, like similar to my last question, we want it as fast as possible. In terms of the opportunity and the cash requirements, we're looking at -- there's 2 different things that are going to work in our favor here.

Number one is the product is so good that we think that customers are going to be willing to place orders and fund some of that for us. So it will alleviate some, most or all of the cash burden if we're lucky. And then secondly, the management team with me and the management team at Terravis as well as the Board of Directors are working on creative financing structures that will utilize credit as opposed to equity. We just don't want to issue more stock here, especially at these levels. So what -- things are looking pretty good.

So we have multiple other options available to finance Terravis and AetherLux outside of like an equity offering and these types of things.

Faran Ali: Thanks, Steve. We have a question here on tariffs. You spoke of tariffs as an issue. If so, how much does it get passed on and/or absorbed by the company? And then they said percentage of sales in the U.S. versus Canada. I think, number one, we can focus on U.S. since the Canadian tariffs are not so relevant and our Canadian sales is not so relevant to the current business. Number two, the tariff language, Steve, I think it's important to highlight to shareholders how we have direct tariffs and then we also have the indirect tariff.

Steven Rossi: Tariffs. Yes. So direct tariffs are things you buy from a tariffed country, mostly Asia or specifically China. So do we have headwinds there? No, because a lot of our product does not come from China. At one point, we were 93% domestically sourced raw goods. I think that we hover somewhere in that range, like, let's call it, 90%, 89%. We do get some brackets and some plastics out of China, and there are some tariffs there, but not a huge impact at all, maybe dollars literally dollars on our bill of material. So our bill of material is, let's say, $1,000, it probably represent less than $5 or even between 1% and 5% of the BOM cost.

So we have no real exposure. These tariffs and these geopolitical issues that are going on within North America -- within the U.S. right now are just crushing the U.S. economy in terms of inflation. The cost of aluminum, we buy all of our aluminum. It's U.S.-sourced aluminum, U.S. ingot. So it's like U.S. aluminum made in U.S. factories and all these different things. The cost of aluminum has gone up and doubled in the past just over a year. So under 2 years, it's doubled. The demand is very soft. So the doubling isn't because of a frothy economy. The doubling is because tariffs from -- mostly in Canada -- on Canadian aluminum.

So it's affecting us in what -- in reports even as early as today out of the continent of Asia and even here in North America is that manufacturers are absorbing as much as they can of those tariff inflation impacts to try to avoid price increases, which will reduce sales volumes. And we're doing the same, although we're maintaining a very strong margin. So it shows it's very difficult, and I'll give applause to the team for doing that. The NEXUS could be a 40%, 45% gross margin product. But inflation because of tariffs have eroded some of that margin.

But we hope that this absolute disaster goes away at some point and things go back to somewhat close to normal, and then we'll recapture that margin at a later date within, let's say, hopefully next year.

Faran Ali: Thanks, Steve. Jen, how much of the $0.4 million in operating cash use was repeatable, i.e., where may it occur in the future again that type of lower use?

Jennifer Kartychak: Well, that lower use is mainly a function of being able to effectively convert our inventory without requiring additional material use during the period. So as we move forward and again, as we transition more into that just-in-time format, I would imagine that we would be able to narrow our view of operating cash use by looking at a combination of the timing of our working capital movements in addition to looking at operational efficiencies overall and just working smarter, not harder.

Faran Ali: Thank you for that. We have another question related to the heat pump, Steven. It's saying, is the heat pump an inversion (sic) [ inverter ] compressor unit? Or if not, what type of unit it is? Steve, when do you think shareholders might be able to learn more information about the final spec of the heat pump?

Steven Rossi: Final specs are -- if I have it my way, be within this month, but if not within the rest of this year, we'll have an in-depth look at the product. I think inverter compressor is relating to -- I think if they're listening, they can answer live, but I think that they're referring to a reversing compressor or a defrost cycle. And our heat pump produces heat at negative 47 degrees Celsius without ever frosting, without ever needing a defrost cycle. It's capable of defrosting itself, but it doesn't need it because of the unique ingenuity and what makes the product so revolutionary.

But outside of that, I'm not an expert on the heat pump, and I'm not familiar with that particular phrase. So I'm making a bold assumption. But the heat pump -- heat pumps right now are not furnace replacements. If you're in a cold climate, like anywhere that gets around 5 degrees-ish or with a bit of humidity, heat pumps are like a good source of heating, but they're not your primary. You're going to need baseboard electric, propane gas, some secondary form of heat. Our heat pump is the first of its kind ever in the existence of humanity. As bold of a statement as I could possibly make to literally be a furnace replacement while being highly efficient.

So it's something that everybody -- anybody can use. And it does not require a defrost cycle and it produces very efficient heat. So it's revolutionary. I'm not going to steal too much more thunder from Lorenzo because Lorenzo, my father, is the inventor of the product and is heading up the -- he's the one-man band in running the whole business. So in the future, we'll do a Terravis Energy Q&A session when we launch it formally and officially once it's certified.

Faran Ali: Thanks, Steve. And we have additional questions here, but let's try to take one more, and we will ask that investors send us an e-mail at investors@worksport.com for any unanswered question or new questions that they come up with. This question was submitted by e-mail. It's related to the current production capacity at the factory and how much of it we're using. If you can comment on what we said about current production capacity and the investments that we've already done, how much that can lead to versus what we might need to do in terms of future investments to get additional capacity out of the factory.

Steven Rossi: Okay. Well, so it's a good question. Capacity underlies 2 different sides of the house at the factory. And I once again say that any investor is warmly welcome to visit our factory. If they just e-mail us, they could book that visit in beautiful Buffalo region to visit and see. But there's 2 sides of the house. There's the production side and then there's the machining side. In terms of production, we have 2 lines. We use 1, 1.5 right now, and we're slowly ramping up. So we can, in effect, double -- we have almost all the equipment we need to double. We just need -- that needs humans.

That needs human beings, which need to be hired, vetted, trained, and there's a slower, methodical ramp there. On the machining side of the house, we have all the equipment we need to make -- I would argue that we have all, if not most of the equipment we need to make double what we're also making right now. So if you look at our run rate and you double it, I think that we have all of the equipment, if we ran the equipment lights out like 24/7. Now equipment shouldn't be run 24/7.

So if we were to say, okay, we're going to buy a few more profile machines, aluminum extrusion, milling centers, and we're going to buy more bending machines or a bending machine, that would represent something like $4 million, but it would unlock, let's call it, $20 million or $30 million in additional revenue, if not more. So probably pay for itself in 6 months. So with all things said and done, to double our production from what it is now, I would argue with you that we don't need to spend any more money.

But if I'm wrong and we do, the most we would need to spend is $3 million to $4 million, and we would probably get credit terms, we could finance it with very modest interest rates and these types of things anyway. So it's not like we're going to do an equity financing for $4 million to pay for the equipment. But again, if I'm wrong, the most, I think that we'd be spending is for some additional machining equipment or panel.

Faran Ali: Fantastic. Thank you, Steve. We've managed to get through a lot of the questions. There are some more, but we are running against the scheduled time for this call. So we are requesting investors to once again e-mail us at investors@worksport.com, and we'll be glad to get back to you. We will try to host an investor town hall again in the coming months as decided, we will share with you. And thank you so much for taking your time to be here with us today. A recording of this call will be available on our website as well as the deck presented and the transcript. Have a great evening.

Steven Rossi: Thank you, everybody.

Jennifer Kartychak: Thank you. Take care.

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