Company: WKSP
Filing Date: 2025-08-13
Form Type: 10-Q
Source: 0001641172-25-023334
Chunk: 84

Company: Worksport Ltd
Filing Date: 2025-08-13
Form: 10-Q
Item: Part I, Item 8
Chunk 84
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 retailers to grow our customer base. We are progressing well in conversations with two other major distributors with
strong market presences, 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 approximately 132%, from $2,100,091 for the six months ended June 30, 2024, to $4,866,630 for the six months ended June 30, 2025.
Our cost of sales, as a percentage of sales, was approximately 77% and 86% for the six months ended June 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 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 six months ended June 30, 2025 by $1,467,970, from $7,884,299 for the six months ended June 30, 2024 to $9,352,269,
mainly due to the following factors:

    ●
    Research and development expense decreased by $741,031, from $1,415,465
in 2024 to $674,434 in 2025. The decrease was related to developmental progress of our AL3 product line and release of our AL4 product
line, both of which required less development efforts as resources were shifted to normal-course production.

    ●
    General and