Company: WKSP
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001641172-25-010837
Chunk: 35

Company: Worksport Ltd
Filing Date: 2025-05-15
Form: 10-Q
Item: Part I, Item 1
Chunk 35
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of bringing our product to all U.S. continental states.

Cost
of Sales

Cost
of sales increased by 288%, from $475,181 for the three months ended March 31, 2024, to $1,843,784 for the three months ended March 31,
2025. Our cost of sales, as a percentage of sales, was approximately 82% and 93% for the three months ended March 31, 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 United Sates or from the United States 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 three months ended March 31, 2025 by $975,605, from $3,676,922 for the three months ended March 31, 2024 to
$4,652,527, mainly due to the following factors:

●Research
                                            and development expense decreased by $11,399, from $381,000 in 2024 to $369,601 in 2025. The
                                            decrease was related to developmental progress of our AL3 product line which required less
                                            R&D efforts as resources were shifted to normal-course production.

●General
and administrative expense increased by $695,463, from $2,293,318 in 2024 to $2,988,781 in 2025. The increase was related to a shift
in overhead absorption driven by production volume requirements as well as an increase in labor costs to support production efforts.

●Sales
                                            and marketing expense increased by $802,972