Company: WKSP
Filing Date: 2025-03-27
Form Type: 10-K
Source: 0001641172-25-000850
Chunk: 317

Company: Worksport Ltd
Filing Date: 2025-03-27
Form: 10-K
Item: Item 7
Chunk 317
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Currencies

We
are subject to foreign exchange risk as we manufacture certain products and components in China, market extensively in both Canadian
and U.S. markets, employ people residing in both the U.S. and Canada and, to date, have raised funds in Canadian Dollars. Meanwhile,
we report results of operations in USD. Since our Canadian customers pay in Canadian Dollars, we are subject to gains and losses due
to fluctuations in the USD relative to the Canadian Dollar. Our manufacturers in China are paid in USD to better avoid the relatively
greater fluctuation of the Chinese Yuan. To the extent the USD strengthens against any of these foreign currencies, the translation of
these foreign currencies denominated transactions results in reduced revenue, operating expenses and net income for our operations.

Critical
Accounting Policies

Our
discussion and analysis of consolidated results of operations and financial condition are based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation
of these consolidated financial statements requires us to make estimates assumptions and judgments that affect the amounts reported.
These estimates, assumptions and judgments are affected by our application of accounting principles, which are discussed in Note 1 –
Description of Business and Summary of Significant Accounting Policies of Part II, Item 8, Financial Statements and Supplementary Data,
of this report. We believe the accounting policies discussed below are the most critical in understanding and evaluating our financial
results. These critical accounting policies have been reviewed with the Audit Committee of our Board of Directors.

Revenue
Recognition – In accordance with Accounting Standards Codification (ASC) 606 Revenue from Contracts with Customers, sales are
recognized when (1) products are shipped, with no right of return except for defective products, and the title and risk of loss has passed
to customers; and (2) when they are delivered based on the terms of the sale, and there is an identifiable contract with a customer with
defined performance obligations, the transaction price is determinable, and the entity has fulfilled its performance obligation. Revenue
related to shipping and handling costs billed to customers is included in net sales, and the related shipping and handling costs are
included in cost of sales.

Inventory
Valuation – At December 31, 2024, we had inventories of $5,190,054, or 50% of our current assets. Inventories are stated at
the lower of cost or net realizable value with cost determined on a weighted average basis. We record valuation reserves to provide for