Company: WKSP
Filing Date: 2025-11-13
Form Type: 10-Q
Source: 0001493152-25-022113
Chunk: 67

Company: Worksport Ltd
Filing Date: 2025-11-13
Form: 10-Q
Item: Part I, Item 8
Chunk 67
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9.
Financial Instruments and Fair Value

Fair
value is defined as the price that would be received to sell an asset or paid to transfer a liability in an ordinary transaction between
market participants at the measurement date. Depending on the nature of the asset or liability, various techniques and assumptions can
be used to estimate fair value. The definition of the fair value hierarchy is as follows:

Level
1 – Quoted prices in active markets for identical assets and liabilities.

Level
2 – Observable inputs other than quoted prices in active markets for similar assets and liabilities.

Level
3 – Inputs for which significant valuation assumptions are unobservable in a market and therefore value is based on the best available
data, some of which is internally developed and considers risk premiums that a market participant would require.

The
Company’s financial instruments include cash and cash equivalents, accounts receivable, accounts payable, revolving line of credit,
and long-term debt. The fair values of cash and cash equivalents, accounts receivable and accounts payable approximate their carrying
value because of the short-term nature of these instruments. The Company’s revolving line of credit is based on a variable interest
rate and is reflected in the financial statements at carrying value which approximates fair value at September 30, 2025. The Company’s
long-term debt is based on a fixed interest rate, and its carrying amount approximates fair value at September 30, 2025. The fair value
of the revolving line of credit and long-term debt is classified as Level 2 within the fair value hierarchy and is estimated based on
quoted market prices.

10.
Changes in Cash Flows from Operating Assets and Liabilities

The
changes to the Company’s operating assets and liabilities for the nine months ended September 30, 2025 and 2024 are as follows:

Schedule of Changes in Operating Assets and Liabilities 

    2025  
    2024 
  
    Decrease (increase) in accounts receivable 
    $(472,485) 
    $(3,320)
  
    Decrease (increase) in other receivable 
     (39,974) 
     11,898 
  
    Decrease (increase) in inventory 
     (1,645,437) 
     (2,506,568)
  
    Decrease (increase) in prepaid expenses and deposits 
     (865,634) 
     1,240,649 
  
    Increase (decrease) in accounts payable and accrued liabilities