Company: WKSP
Filing Date: 2025-05-15
Form Type: 10-Q
Source: 0001641172-25-010837
Chunk: 90

Company: Worksport Ltd
Filing Date: 2025-05-15
Form: 10-Q
Item: Part I, Item 2
Chunk 90
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 network of wholesalers, private
labels, distributors, and other online retailers, including eBay, Amazon, Walmart, and our own e-Commerce platform hosted on Shopify.
Distribution via each aforementioned channel is expected to increase during 2025. We have pursued and will continue to pursue relationships
with Original Equipment Manufacturers with the intention of distributing through them as well.

We
currently work closely with a large Canadian and a large U.S. distributor as well as online retailers to grow our customer base. We are
progressing well in conversations with three other major distributors with strong market presences, which will allow us to promote to
dealers and sell to jobbers in strategic regions. Lastly, we are in closing discussions 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 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