Company: WKSP
Filing Date: 2025-03-27
Form Type: 10-K
Source: 0001641172-25-000850
Chunk: 515

Company: Worksport Ltd
Filing Date: 2025-03-27
Form: 10-K
Item: Item 8
Chunk 515
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 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 December 31, 2024. The Company’s
long-term debt is based on a fixed interest rate, and its carrying amount approximates fair value at December 31, 2024. 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.

The
Company is exposed to market risks such as fluctuation in foreign currency exchange rates and interest rates. Derivative instruments
may be used to offset some of the effects of these market risks on the expected future cash flows and on certain existing assets and
liabilities. The Company may choose not to hedge certain exposures for a variety of reasons including, but not limited to, accounting
considerations and the prohibitive economic cost of hedging particular exposures.

Market
Risks

Foreign
Currency Risk

The
Company is exposed to currency risk on its sales and purchases denominated in Canadian Dollars. The Company actively manages these risks
by adjusting its pricing to reflect currency fluctuations and purchasing foreign currency at advantageous rates.

Interest
Rate Risk

The
borrowing under the Company’s Line of Credit Facility and Equipment Financing is at variable interest rates and exposes the Company
to interest rate risk. If interest rates increase, debt service obligations on variable rate indebtedness will increase even though the
amount borrowed may not change.

    57

Worksport
Ltd.

Notes
to the Consolidated Financial Statements

December
31, 2024 and 2023

9.
Financial Instruments and Fair Value (continued)

Concentration
of Risk

Concentration
of Supplier Risk

The
Company has historically purchased all of its soft tonneau cover finished goods from Meizhou, China, and it began purchasing soft tonneau
cover finished goods from a second supplier in Foshan, China in late 2023. The Company carries significant strategic inventories of these
materials and is increasing its purchasing from the supplier in Foshan to lower supplier concentration risk . Further, the Company
has established domestic assembly of its hard tonneau cover product line to further reduce the risk associated with this concentration
of finished good suppliers. The company primarily sources raw materials for domestic production and assembly from vendors in Europe,
Southeast Asia, and North America. Strategic inventories are managed