Company: WKSP
Filing Date: 2025-11-13
Form Type: 10-Q
Source: 0001493152-25-022113
Chunk: 46

Company: Worksport Ltd
Filing Date: 2025-11-13
Form: 10-Q
Item: Part I, Item 1
Chunk 46
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 Equipment Manufacturers with the intention of distributing through them as well.

We currently work closely with six large U.S. distributors, one retail auto chain, and online retailers to
grow our customer base. We added two of these U.S. distributors within the period, which will allow us to promote to dealers and sell to
jobbers in strategic regions. Lastly, we partnered with a network of nationwide U.S. dealers capable of bringing our product to all U.S.
continental states.

Cost
of Sales

Cost
of sales increased by 67%, from $4,975,277 for the nine months ended September 30, 2024, to $8,311,718 for the nine
months ended September 30, 2025. Our cost of sales, as a percentage of sales, was 73% and 90% for the nine months
ended September 30, 2025 and 2024, respectively. The decrease in the cost of sales as a percentage of sales was primarily
driven by improved production efficiencies resulting from the continued maturation of our manufacturing processes. As production
volumes increased, we achieved greater economies of scale and more efficient overhead absorption, resulting in lower per-unit
manufacturing costs. This improvement in operational throughput allowed fixed and semi-variable overhead costs to be allocated
across a higher number of units, thereby reducing the cost of sales on a per-unit basis.

We
provide our distributors and online retailers an “all-in” wholesale price. This includes any import duty charges, taxes,
and shipping charges. Discounts are applied if the distributor or retailer chooses to use their own shipping process. Certain exceptions
apply on rare occasions where product is shipped outside the contiguous U.S. or from the U.S. to Canada. Volume discounts
are offered to certain high-volume customers, and we also offer a “dock price” or “pickup program” whereby clients
are able to pick up product directly from our stocking warehouse.

Operating
Expenses

Operating
expenses increased for the nine months ended September 30, 2025 by $3,693,990, from $12,036,688 for the nine months ended September
30, 2024 to $15,730,678, mainly due to the following factors:

    ●
    Research
    and development expense decreased by $836,382, from $1,811,911 in 2024 to $975,529 in 2025. The decrease was related to developmental
    progress of our AL3