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DATE
Wednesday, August 13, 2025 at 1 p.m. ET
CALL PARTICIPANTS
Chief Executive Officer — Steven Rossi
Chief Financial Officer — Michael Johnston
Chief Strategy Officer — Faran Ali
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RISKS
Tariff-related cost inflation increased material costs by 5%-10% due to recent pressures. Management noted, "domestic inflation. So that's taking small bites out of some of the gross margin." Though operational efficiencies are currently offsetting these pressures.
Cash and cash equivalents (GAAP) declined to $1.39 million in the second quarter of fiscal 2025 (period ended June 30, 2025) from $5.08 million in the first quarter, indicating negative free cash flow and continued reliance on the credit facility and external capital.
TAKEAWAYS
Revenue-- Net sales reached $4.1 million, up 114% year-over-year and up 83% sequentially (second quarter of fiscal 2025 vs. first quarter of fiscal 2025; period designation not specified) driven by AL4 tonneau cover ramp-up and dealer adoption.
Gross Profit--
Operating Expenses-- $4.7 million in operating expenses flat sequentially while revenues expanded significantly.
Operating Loss--.
Net Loss-- Net loss narrowed to $3.73 million
Cash Used in Operations-- Operating cash usage was approximately $3.1 million. 19% improvement compared to $3.84 million the previous quarter (period designation not specified).
Liquidity-- $1.39 million in cash and $4.76 million in unused credit facility totaling $6 million in available liquidity.
Inventory-- $5.88 million in inventory with approximately 90% raw materials and 10% finished goods; finished goods share down due to demand outpacing production.
Dealer Network Expansion-- 450 new US dealer accounts added year-to-date up from 94 at the end of 2024 supporting estimated $21.5 million in repeatable annual revenue potential, excluding direct-to-consumer sales.
E-commerce Sales-- Accounted for over 50% of unit volumes with three consecutive months of record sales: $1.2 million in April, $1.28 million in May, and $1.6 million in June.
Production Scaling-- Daily production increased to approximately 115 units in July 2025 climbing to 130 units later in July with a recorded high of 160 units in a single day in July; target of 200 units per day by late third quarter of fiscal 2025.
New Product Launches-- HD3 scheduled for third quarter of fiscal 2025, Solace and Core expected in fourth quarter of fiscal 2025 with initial batch targets of up to 1,000 units for Core in 2025 and 250-1,000 units for Solace projected for fourth quarter of fiscal 2025.
AetherLux Heat Pump-- Commercial testing initiated, with management noting "inquiries potentially surpassing hundreds of millions of dollars in revenue opportunities for AetherLux."
Patent Portfolio-- Nearly 200 issued, registered, and pending IP assets reported.
2025 Revenue Guidance-- Reaffirmed at a minimum $20 million revenue target for fiscal 2025 with gross margin guidance of 30% by year-end fiscal 2025 and expected operational cash flow breakeven by late fourth quarter of fiscal 2025 or early first quarter of 2026.
Regulation A Offering-- Expected to close at the end of August 2025; offers preferred shares with 8% dividend and $4.50 warrant, targeting up to $10 million total capital raise through the Regulation A offering.
Capital Expenditure-- $3 million purchase order placed on August 1, 2025, for manufacturing equipment to be delivered as early as first quarter of 2026 with zero-interest terms and no cash flow impact expected for 2025.
SUMMARY
Management underscored a rapid dealer network build-out, noting over 450 new accounts year-to-date, enabling expanded B2B growth opportunities. E-commerce initiatives delivered more than half of quarterly unit volumes with ongoing margin improvement supported by production scaling and new product introductions. Multiple supply-side innovations—including lean manufacturing, material optimization, and expanded capacity via new equipment commitments—were disclosed as margin and throughput drivers. Guidance reinforcement for at least $20 million in annual revenue and operational cash flow breakeven by the fourth quarter of fiscal 2025 highlights continued confidence in topline momentum and operational efficiency gains. Strategic priority was placed on higher-margin product launches (HD3, Solace, Core) and commercial progress for the AetherLux heat pump, with positive early signals on market demand and pilot evaluation. Substantial potential from proprietary clean energy technology was characterized as an undervalued balance-sheet asset, with management explicitly framing AetherLux as a major long-term catalyst forWorksport(WKSP -10.32%).
Management stated, "We believe our intellectual property protects our innovations and branding, strengthening our competitive positions, and helping us address potential challenges in the market."
Dealer inventory stocking has shifted from initial "skid" orders to full-truck volumes as product adoption accelerates within the distributor network, according to management commentary during the second quarter of fiscal 2025 earnings call.
The Reg A preferred equity issuance features an 8% dividend and warrants exercisable at $4.50, with conversion mechanics providing investors flexibility but requiring dividend forfeiture upon conversion to common shares.
Initial Solace and Core beta units have been sold with anticipated full-scale launch and production in the fourth quarter of fiscal 2025 pending UL certification for Core; management cites "90% of the way there" with only one test remaining.
Management indicated, "Gross margins have exceeded initial forecasts" attributing gains to scale, operational efficiencies, and higher average selling prices from new product mix.
INDUSTRY GLOSSARY
AL4: Worksport's premium flagship tonneau cover model, a key revenue and margin driver.
HD3: Heavy-duty tonneau cover targeted at commercial and fleet applications, set to further expand Worksport's product lineup.
Solace: Solar-integrated tonneau cover designed to provide portable power, part of Worksport's clean energy segment.
Core: Portable power station product designed to integrate with Solace or operate stand-alone as part of Worksport's nano grid offering.
AetherLux: Proprietary cold-climate heat pump technology, focused on ultra-low-temperature and continuous operation, in commercial testing and targeting industrial markets.
Regulation A (Reg A) Offering: A public securities offering exempt from SEC registration, intended to raise capital from both accredited and non-accredited investors under specified limits and structures.
Full Conference Call Transcript
Operator: That's 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 that will carry us through the rest of 2025 and beyond. We will be reviewing the financial results for the quarter ended 06/30/2025, which were filed earlier today in our Form 10-Q and can be accessed on our Investor Relations website at investors.works.com/reports. 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.
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 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.
These forward-looking statements are subject to risk and other factors that could affect our performance and financial results, which we will discuss in detail in our filings with the 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: 1) 2025 performance highlights, financial and operational; 2) growth and market expansion insights and updates, including dealer network, e-commerce, B2B, and B2C initiatives; 3) innovation pipeline, progress on our HD3, the Solace, the Core, and Aetherlux; 4) current operations, production scaling, cost management, and operational readiness; and 5) 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.
Michael Johnston: Thanks, Steve. Q2 2025 is our highest revenue quarter in company history. Net sales reached $4.1 million, representing a 114% year-over-year growth compared to $1.92 million in 2024 and an 83% sequential increase from 2025. This growth was driven by the continued ramp-up of our flagship AL4 premium tonneau 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 $1.8 million compared to $396,000 in 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. Operating expenses were $4.7 million, up modestly from 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 and admin declined to $2.45 million from $2.99 million in 2025, showing early results from cost discipline. We know 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 2025. We remain committed to achieving our near-term operational cash flow positivity. While the Tonneau 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 EtherLuxe 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 03/31/2025. 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. Accounts receivable increased in line with higher dealer sales volume while inventory remained stable at $5.88 million, approximately 90% in raw materials and 10% finished goods.
In Q1, inventory stood at $5.7 million with a 60/40 split between raw materials and finished goods. 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 twelve months, declined to $2.09 million compared to $4.78 million as of 12/31/2024 and $2.7 million as of 03/31/2025.
Of special note, on 08/01/2025, 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 2026, at the company's discretion. This occurred with extremely favorable financing terms with the manufacturer. It's not expected to place a cash flow concern on 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 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.
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 tonneau 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, which is expected to bring significant demand, 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 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. 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.
This quadrupling of daily throughput will drive significant fixed cost absorption benefits and push gross margin 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 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 launch with production already scheduled, the HD3 is a heavy-duty tonneau cover designed for commercial and fleet applications. Building on the AL3, it features upgraded materials, seals, and latching for maximum durability. While available through all channels, its primary focus is driving growth to our wholesale and B2B segments, adding new revenue streams, and completing our US-made tonneau cover lineup. Let's talk a little bit about Solas. Beta testing has commenced with select customers for the Solas solar integrated tonneau 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 solar or standalone use targeting job site, overlanding, and the emergency backup market. The Worksport Core is projected to launch at the same time as the Solace cover. Core and Solis together function as Worksport's portable nano grid. In 2025, this system was selected by a multi-dollar US construction agency for a pilot project for fleet use. Testing and use are 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. 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. 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 revenue opportunities.
In Q2 2025, TerraVise 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 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.
While our current revenue-generating tonneau 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 cost, including Worksport's domestic material cost. To date, these increases have been offset by operational efficiencies that have lowered per-unit costs. While Worksport's management team has outlined several alternative strategies as well to offset the effects of inflation as a result of tariffs, and remain confident that these strategies will only prove to increase long-term profitability once domestic material prices eventually and inevitably subside. For upcoming products, particularly those incorporating solar cells and lithium-ion batteries sourced internationally, the potential impact of tariffs may remain less uncertain.
However, we note that 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. Given the continued growth and healthy margins in our tonneau 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 gonna pass it over to Mike with our updated financial fiscal year 2025 outlook and guidance.
Michael Johnston: Thanks, Steve. We reaffirm our full-year 2025 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, successful launches of HD3, Solis, and Core in the second half of the year. Gross margins have exceeded initial forecasts and are projected 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 breakeven by late Q4 2025 or early Q1 2026.
While the successful launch of Core and Solis could accelerate profitability in 2026, we believe our core tonneau cover business alone can drive us into profitability next year. We view Core, Solis, and AetherLux as significant profitability enhancers in 2026. Current expectations are $2 million to $3 million in revenue for the first batch of Core and Solis. With Aetherlux anticipated to deliver a meaningful positive impact on the 2026 balance sheet. More detailed projections will be provided in Q4 of this year. As of 06/30/2025, we have access to approximately $6 million in total liquidity, consisting of our $1.39 million in cash and cash equivalents, and $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, declining to approximately $3.1 million compared to $3.84 million in Q1. This 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. We expect to spend moderately in 2025. Key expenses will relate to the final tooling of the Core Solis and increased production growth in the US factory.
Most of our required equipment for tonneau 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're announcing today that we expect to close this Reg A offering at the end of August 2025.
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.
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 view AetherLux, our 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.
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 will continue 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 gonna scale production to meet demand while maintaining quality. Second, we're gonna launch the HD3, Solace, and Core successfully and on schedule. Third, we're gonna continue to expand dealer relationships and deepen e-commerce reach.
Fourth, we're gonna continue innovation leadership in both automotive accessories and clean energy. Fifth, we're gonna create increased brand awareness utilizing key media and influencers. And sixth, we're gonna 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.
Michael Johnston: Thank you, everyone. This concludes our prepared remarks. Operator, please open the line for questions. We will now open for questions, starting with the analyst. 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 [email protected]. We will get back to you. I see a hand up from Scott Buck. Go ahead, Scott.
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 Q3 and Q4?
Steven Rossi: All good questions. In terms of the new products and volumes, are you looking, like, broad picture, like, Core HD3, or specific to, like, just...
Scott Buck: Okay. Okay. Sure. So gross margins...
Steven Rossi: 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 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 unit required to make 50 tonneau covers or 100 tonneau 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 efficiencies in production, is where we're gonna 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 tonneau covers. 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 and aluminum extrusion. And on some particular tonneau 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 gonna see a significant amount of savings that's gonna get us into that 30% plus while the inflation's kind of nipping at our heels. But I think that inflation, it always tends to kind of go, it gets corrected. And, you know, when some of these raw material costs come down, I think that we're gonna see a really strong positive from all this. And margins will exceed, you know, what we were thinking. Does that answer the margin question?
Scott Buck: Yes. It does. Thanks, Steve.
Steven Rossi: Sure. Okay. And then in terms of Core and Solace, so the HD3 will go into normal production, you know, for 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 gonna be the biggest seller because it's gonna be a new product, so it's gonna take some time.
But you know, the HD3 will fall into production of our hardcover, so it'll fit in the production scheduling 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 gonna continue to be the number one volumetric seller for us. But HD3 is gonna pack a pretty powerful punch. When we go into Solace and Core, the Solace is gonna be produced somewhere in the batches of 250 to 500. It's gonna be probably our starting run. I think 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.
And we're gonna plan on producing about 3,000 batteries. Because we expect that, you know, consumers, some of the most inventive parts of the Core is 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 gonna be a big revenue driver, but then the battery uptake, I think, is gonna be pretty exciting for us too.
Scott Buck: That's really helpful. Core and Solace, aren't there any sales in your current 25 guide or is that pure covers at this point?
Faran Ali: I think we, yeah. Go ahead, Farron. Yep. The $20 million projection has shown on this slide is made from tonneau covers. Okay. We say $20 million plus factoring in a $2 to $3 million estimate for Solace 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.
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 April '3 or just curious what the dynamics are there?
Steven Rossi: 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, you know, loading a full truck this morning, and they're, 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, started as skids, and now it's now we're looking at trucks in terms of volume.
Scott Buck: Oh, 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 it to other folks?
Steven Rossi: Oh, boy. You're gonna make me rosy-cheeked on that one. So the conversations we've, when we launched Solace, you know, the inbound interest from OEMs was fairly strong. And we were pretty proud of that. We had a fairly strong expectation of launching AetherLux in terms of inbound interest, you know, from, you know, small brands. The quality of inbound interest that we had relating to the AetherLux in looking at the technology were from, frankly put, 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. But, you know, one of the companies we spoke to does have a very strong track record of acquisitions and M&A. You know, we can't rule that out, but we're obviously gonna do what's best for Worksport.
Scott Buck: Great. Well, I appreciate the added color, guys, and congrats on all the progress.
Steven Rossi: Thank you, Scott. Thank you, Scott. Hey, Tate. How are you?
Tate Sullivan: Hey. Hey. Can you hear me okay?
Steven Rossi: Sure can. Loud and clear.
Tate Sullivan: Oh, great. Great. Thanks. Thanks for the updates too. 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 Q2 or where you were at the end of Q2? In terms of units per day?
Steven Rossi: Went through that with us this morning. Did you have those numbers for the month?
Faran Ali: We produced roughly 4,600 to 4,700 units in 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%. That was 4,700 units for the month. Right, and then 2,500 for the month of July. 47 for the Q2. Understood.
Tate Sullivan: Thank you. And then on the Reg A offering, is it structured as preferred equity but then can you, are the warrants attached? Can you talk about the structure of it, please?
Faran Ali: 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 pref to a common share and have access to a really trading common via that, but they do give up on the dividend by doing so.
Tate Sullivan: Understood. And the increase in those shares outstanding from June 30 to mid-August, is that probably from some of those Reg A participants converting to common? Is that fair?
Faran Ali: We've seen a mixture of conversions. We have seen a large number of investors that do continue to hold. And there have been some larger investors that do convert.
Tate Sullivan: Okay. Thank you. And, Steven, on the heat pump opportunity, you noticed it's sort of implying that you could have meaningful revenue in 2026. Is it a faster commercialization process for the heat pump than, let's say, the Solis cover and Core? Can you talk about that?
Steven Rossi: 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, 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 taking 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, we're able to, it's not gonna be Worksport. It'll be TerraVise that produces it as a subsidiary. You know, it'll be outsourced manufacturing, but we're a lot smarter, 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, we're just smarter.
Tate Sullivan: Okay. Thank you all.
Faran Ali: Thank you, Tate. Thank you, Scott. Steve, we do have some questions from retail investors attending the call. Notice to investors that I have answered some questions via chat. And we will answer some questions live here.
Steven Rossi: I could see them wrong. I could read some of them. If you wanna read them, go...
Faran Ali: 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 farther from where it is today?
Steven Rossi: 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 tonneau covers. So I think that really deep diving into where we're going to be and where we started is where 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 gonna 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 gonna be our future, and that's what we're betting big on with Worksport. But it's not clearly apparent when you visit, you know, worksport.com. Without diving into our investor section. So we're gonna continue to improve our, continue to court new investors. We're gonna 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.
Faran Ali: Thanks, Steve, for that answer. We have another question regarding the rollout of higher-margin products like the AL4, Solace, 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?
Steven Rossi: Yeah. So AL4 was just launched earlier this year. And it's just getting into the market now, and it's already exceeding our revenues. 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. Gonna continue to focus on, obviously, the highest margin sales for us that'll serve the company best. And then, of course, Solace and Core will start as a direct-to-consumer product, which will be, you know, fairly strong or enviable margins.
So I think that gonna continue to, I think that it's difficult to explain it, but we're gonna continue to focus on selling higher-order value items. So our AL3 is what we started with, and it was a $700 price tag. The AL4 is a $1,100 price tag. The Solace is gonna be closer to $2,000, and the Core with two batteries is gonna be closer to over $2,000. So I think that we're gonna sell a lot of items that have a higher order value, so that'll represent very, very nice in terms of our gross sales. But with the Solace and Core being high margin 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¢, and that's nothing. 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 gonna be focused on higher order values at high margins, which are gonna be highly beneficial, and it's not yet realized in the balance sheet.
Faran Ali: Thank you, Steve. We have a question regarding the quality of the solar cells 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?
Steven Rossi: So it's a trade secret on where we get our panels. We went through somewhere, I'm gonna 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 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. 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 selective, and that's for taking Solas to market. That was probably the biggest time delay for us is finding the best solar cell and panel manufacturers.
Faran Ali: Thank you, Steve. We had a question about 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 or any of our products, specifically the hardcovers, the heat pump, or the Solis and Core.
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. 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 coming. We gotta 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 hardcovers to government agencies. Yes. Do we have contracts?
Not necessarily contracts, but open kind of order relationships. Solis has gone to various private businesses that are fairly large. Core, we're not there yet, but we're gonna get there pretty soon. And the heat pump, not there yet either, but it's all a work in progress.
Faran Ali: 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 were 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?
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. 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 the secondary market for shares in a company, is what Nasdaq and NYSE in essence is in 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. 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 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 because of, I guess, traders or the open market.
Faran Ali: And, James, the only thing we'll add also to the question about 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 improvements, and intellectual property are undervalued. And we believe that as Q3, Q4, and, you know, AetherLux, Core, and Solis come out, the stock's underlying health will be better reflected in its price. Question. And I'm gonna take two more questions, Steve, here. Okay.
Next question is, what is your plan to increase analyst coverage of the stock?
Steven Rossi: So, you know, earned coverage is important. There's a lot of paid 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, making more versus some of the analyst coverage. We're gonna 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 has to be trust. And the analyst has to believe that the company is worthwhile.
So we're gonna continue to meet new research partners and continue to try to find organic coverage, but it's gonna take, you know, time like all the other things that we do.
Faran Ali: Thanks, Steven. Last question for today. When exactly is the first Solace Plus Core set expected to be shipped? What stage are we on? What else is left to do before we hit the market?
Steven Rossi: Yeah. Good question. So Solace, we made a handful, 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 recharge from his Solace 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 gonna be making, I think, somewhere around 200, but we're probably gonna up 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 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 anyone's guess, but I would expect in Q4 probably, like, maybe October, November. But that's the Solace. 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 and get UL certification.
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. It's getting into production of the first thousand 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. 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.
Faran Ali: 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.
Steven Rossi: Thank you, everyone.