What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-31 compared with 2022-03-31 · 335 added, 208 removed, 47 unchanged (92% of the section changed)

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investors should read the following discussion and analysis of our financial condition and results of operations together with our financial

statements and the related notes and other financial information included elsewhere in this annual report.

Some of the information contained

in this discussion and analysis or set forth elsewhere in this annual report, including information with respect to our plans and strategy

for our business, includes forward-looking statements that involve risks and uncertainties.

See “Cautionary Note Regarding Forward-Looking

Statements.” This discussion should be read in conjunction with our audited consolidated financial statements and the notes thereto

included elsewhere in this report.

outbreak of the coronavirus, specifically identified as “COVID-19,” has resulted in governments worldwide enacting emergency

statements and the related notes and other financial information included elsewhere in this Annual Report on Form 10-K.

Some of the information

contained in this discussion and analysis or set forth elsewhere in this annual report, including information with respect to our plans

and strategy for our business, includes forward-looking statements that involve risks and uncertainties.

See “Cautionary Note Regarding

Forward-Looking Statements.” This discussion should be read in conjunction with our audited consolidated financial statements and

the notes thereto included elsewhere in this Annual Report on Form 10-K .

Ltd., through its subsidiaries, designs, develops, manufactures, and owns the Intellectual Property on a portfolio of tonneau cover,

solar integration, portable power station, and NP (Non-Parasitic), Hydrogen-based green energy products and solutions for the automotive

aftermarket accessories, power storage, residential heating, and electric vehicle-charging industries.

We seek to provide consumers with

next-generation automotive aftermarket accessories while capitalizing on growing consumer interest in clean energy solutions and power

grid independence.

Popularity of Electric Vehicles

Vehicles (EVs) have been exponentially increasing in consumer interest, whether that interest take the form of vehicle pre-orders, sales,

or investments.

As we begin marketing our Worksport SOLIS and COR, we plan to market the SOLIS as a must-have accessory for electric

light duty vehicle owners while simultaneously riding the coattails of EV popularity to promote our other products (COR and conventional

tonneau covers) to the very large population of Americans that have an interest in EVs without the funds to purchase them.

Further, participating

in the EV space allows us to target consumers with an interest in cutting-edge technologies – a great market in which to promote

Environment Favoring Electric Vehicles

Build Back Better Bill was a strong indication of upcoming and favorable USA regulations.

Many regulations that improve North America’s

Electric Vehicle (EV) charging infrastructure or provide grants to businesses operating in the EV space will benefit us.

primarily focused on the light duty vehicle market, our energy products are particularly useful for electric light duty pickup trucks

and, therefore, are positioned to benefit greatly from any bill that increases the prevalence of such vehicles.

Competitive Landscape

conventional tonneau covers are engineered for enhanced user experience and resistance to wear-and-tear, making them strong and competitive

products in an otherwise consolidated and saturated market.

The Worksport COR, however, operates in a much wider yet unsaturated market.

The global Portable Power Station market is quickly growing, and the competitive landscape is far from consolidated.

The solar tonneau

cover market is in its infancy, and it’s a market in which we have first-mover advantage.

To ensure we do not fall behind future

competitors, we are highly focused on protecting our intellectual property both domestically and abroad.

following highlights recent material developments in our business:

May 2022, we closed on the purchase of a commercial property for $8,125,000 in the town of

West Seneca, Erie County, New York pursuant to a Purchase and Sale Agreement that we entered

into with J&M Distributing, Inc.

We financed $5,300,000 in connection with the closing

of the Acquisition pursuant to a Loan Agreement that we entered into with Northeast Bank,

of which we issued a Promissory Note to the Lender guaranteed by Worksport Ltd.

by the Property per a Mortgage and Security Agreement entered into with the Lender.

consists of two parcels of land:

(i) one parcel consisting of approximately 14 acres improved

by a building containing approximately 152,847 square feet;

and (ii) a second parcel consisting

of approximately four acres of vacant land.

Currently, our manufacturing operations are in

With the acquisition of the Property, we plan to move our manufacturing operations

to the United States.

We believe that by moving our manufacturing operations to the United

States, we can (i) have better control over design and manufacturing quality of our products,

(ii) lessen supply chain risk, (iii) decrease shipping costs, and (iv) cut overall manufacturing

September 30, 2022, we filed a shelf registration statement on Form S-3 (File No.

which was declared effective by the SEC on October 13, 2022, containing a base prospectus

covering the offering, issuance and sale by us of up to $30,000,000 of our common stock and

prospectus supplement covering the offering, issuance and sale by us of up to $13,000,000

of our common stock that may be issued and sold under an At The Market Offering Agreement

dated as of September 30, 2022.

Pursuant to the ATM Agreement, Wainwright is entitled to

a commission equal to 3.0% of the gross sales price of the shares of common stock sold.

of the date of this Annual Report, no securities have been sold pursuant to the Form S-3.

November 14, 2022, our shareholders approved the Worksport Ltd.

2022 Equity Incentive Plan.

A total of 750,000 shares of common stock

were initially reserved for the issuance of awards under the 2022 Plan.

The 2022 contains an “evergreen formula” pursuant

to which the number of shares of common stock available for issuance under the 2022 Plan will automatically increase on January 1

of each calendar year during the ten-year term of the 2022 Plan, beginning with the calendar year 2023, by an amount of shares of

common stock so that the total amount of common stock available under the 2022 Plan is equal to 15% of the total number of shares

of common stock outstanding on December 31 st of the prior calendar year minus the total number of shares reserved and

available for issuance under the Worksport Ltd.

2015 Equity Incentive Plan and Worksport Ltd.

2021 Equity Incentive Plan.

1, 2023, the authorized number of shares of common stock of the 2022 Plan was 2,518,502.

November 18, 2022, we engaged Lumsden & McCormick, LLP to replace Haynie & Company

as our independent registered public accounting firm.

Factors Affecting our Performance

a result of a number of factors, our historical results of operations may not be comparable to our results of operations in future periods,

and our results of operations may not be directly comparable from period to period.

Set forth below is a brief discussion of the key

factors impacting our results of operations.

outbreak of the coronavirus, specifically identified as “COVID-19,” resulted in governments worldwide enacting emergency

measures to combat the spread of the virus.

These measures, which include the implementation of travel bans, self-imposed quarantine

These measures, which included the implementation of travel bans, self-imposed quarantine

periods, and social distancing, have caused material disruption to businesses globally, resulting in an economic slowdown.

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Governments and central banks have reacted with significant monetary and

fiscal interventions designed to stabilize economic conditions.

The duration and impact of the COVID-19 outbreak is unknown at this time,

as is the efficacy of the government and central bank interventions.

Additionally,

while the potential economic impact brought by, and the duration of the COVID-19 pandemic is difficult to assess or predict, the

impact of the COVID-19 pandemic on the global financial markets may reduce our ability to access capital, which could negatively

impact our short-term and long-term liquidity.

The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to

We do not yet know the full extent of potential delays or impacts on our business, financing or the global economy as a

However, these effects could have a material impact on our liquidity, capital resources, operations and business and those of

the third parties on which we rely.

The management and board of the Company is constantly monitoring this situation to minimize

potential losses.

an inflationary economy, Worksport benefits from debt financing.

While Worksport ended December 31, 2021 with little to no long term

debt, Worksport is currently in the process of securing a mortgage for its West Seneca production facility.

Worksport has the benefit

of mortgaging the facility in a low interest rate environment – locking in a lower rate – while also benefiting from the

lower real cost of mortgage payments in an inflationary environment.

an inflationary environment also increases Worksport’s costs, however.

These costs include direct costs such as the cost of raw

goods or processed goods for its OEM manufacturing as well as indirect costs such as overhead and rent.

Due to these forecasted price

increases and the high increases in ocean freight and container handling costs as a result of 2021 supply chain issues, Worksport has

updated its product pricing for 2022.

fiscal interventions designed to stabilize economic conditions – many of which have deeply impacted capital markets.

a safety precaution, we created a policy such that any personnel exposed to an infectious disease or virus was not to report to the office

until the completion of a variable length quarantine.

While this resulted in fewer average R&D personnel working in our offices or

labs on a given day, it likely prevented further contamination and sick leave.

We do not believe this policy has impacted revenue nor

timelines towards upcoming product launches;

however, supply chain issues caused by COVID-19 did result in higher cost of goods sold

during 2021 and 2022.

While freight costs have since returned to pre-COVID-19 levels, 2021 freight costs were, in some cases, more than

four times higher than those shortly before COVID-19.

response of many governments to the COVID-19 pandemic has resulted in higher interest rates and destabilized equity markets – particularly

among micro- or low-capitalization companies – effectively increasing the cost of and decreasing easy access to capital, which

could negatively impact our short-term and long-term liquidity.

These factors, combined with the consequences of possible future waves

of the disease, could have a material impact on our liquidity, capital resources, operations, and business as well as those of the third

parties on which we rely.

The management and Board is constantly monitoring this situation to minimize potential losses.

of certain commodity products, including raw materials, are historically volatile and are subject to fluctuations arising from changes

in domestic and international supply and demand, labor costs, competition, market speculation, government regulations, trade restrictions

Increasing prices in the component materials for the parts of our goods may impact the availability, quality and price of

our products as suppliers search for alternatives to existing materials and increase the prices they charge.

Our suppliers may also fail

to provide consistent quality of product as they may substitute lower cost materials to maintain pricing levels.

Rapid and significant

changes in commodity prices may negatively affect our profit margins, and it may be difficult to mitigate worsened margins through customer

pricing actions and cost reduction initiatives.

an inflationary environment also increases our direct cost of raw goods or processed goods for our OEM manufacturing as well as indirect

costs such as overhead and rent.

Due to these present and forecasted price increases and the temporary increases in ocean freight and

container handling costs faced during the majority of 2022 as a result of 2021 supply chain issues, we updated our product pricing in

addition, as central governments and the U.S.

Federal Reserve increase interest rates to combat global inflation, the cost of debt financing

While we currently do not have material debt other than our $5.3 million mortgage on our West Seneca facility, our mortgage’s

variable rate increases and decreases along with interest rates, which resulted in an increase of monthly premiums throughout 2022.

are still susceptible to variable monthly mortgage interest costs as a result of changes in interest rates.

We continue to explore debt

financing options at reasonable interest rates in order to strengthen our cash position.

interest rates have also resulted in a shift in institutional holdings away from micro-cap equities, which has negatively influenced

our stock’s trading volume.

We continue to forge relationships with institutional investors and analysts in order to maintain a

healthy trading volume.

Prices and Supply Chain Issues

has faced significantly higher ocean freight, trucking, and container handling costs in 2021 than it did in previous years.

last mile delivery costs have recently increased – all of which have increased the Company’s products’ landed

This more recent rise in gasoline prices has worsened these costs, and the Company is operating under the assumption

these higher costs will remain throughout 2022.

Worksport’s transition

towards Made in America manufacturing will largely offset these higher costs, as the Company will be less exposed to higher

international shipping costs.

Worksport is also identifying North American suppliers of its products’ components

faced significantly higher ocean freight, trucking, and container handling costs as well as last mile delivery costs in 2021 and 2022

than we did in previous years – all of which have increased our products’ landed costs.

Higher oil and gasoline prices further

increased these costs, and we are operating under the assumption most of these higher costs will remain throughout 2023.

transition towards domestic manufacturing and assembly is anticipated to largely offset these higher costs, as we believe we will be

less exposed to higher international shipping costs.

We are also identifying North American suppliers of our products’ components

and will prioritize transport by rail when possible to avoid high trucking costs.

Popularity of Electric Vehicles

Electric Vehicles (EVs) have

been exponentially increasing in consumer interest, whether that interest take the form of vehicle pre-orders, sales, or investments.

As Worksport begins marketing its Terravis SOLIS and COR, the Company plans to market the SOLIS as a must-have accessory

for electric light duty vehicle owners while simultaneously riding the coattails of EV popularity to promote its other products

(COR and conventional tonneau covers) to the very large population of Americans that have an interest in EVs without the funds to purchase

Further, participating in the EV space allows the Company to target consumers with an interest in cutting-edge technologies

– a great market to which to promote its COR.

Environment Favoring Electric Vehicles

The Build Back Better Bill was

a strong indication of upcoming and favorable USA regulations.

Any regulation that improves North America’s Electric Vehicle

(EV) charging infrastructure or provide grants to businesses operating in the EV space will benefit Worksport.

While the Company is

primarily focused on the light duty vehicle market, it is the only existing participant in the electric-specific, light duty

vehicle aftermarket accessories market and, therefore, is positioned to benefit greatly from any bill that increases the prevalence

of electric light duty vehicles.

Competitive Landscape

Worksport’s conventional

tonneau covers are engineered for enhanced user experience and resistance to wear-and-tear, making them strong and competitive products

in an otherwise consolidated and saturated market.

The Terravis COR, however, operates in a much wider yet unsaturated market.

global Portable Power Station market is quickly growing, and the competitive landscape is far from consolidated.

The solar tonneau cover

market is in its infancy, and it’s a market in which the Company has first-mover advantage.

To ensure it does not

fall behind future competitors, the Company is highly focused on protecting its intellectual property both domestically

February 2022, Russia initiated significant military action against Ukraine.

In response, the U.S.

and certain other countries imposed

significant sanctions and export controls against Russia, Belarus and certain individuals and entities connected to Russian or Belarusian

political, business, and financial organizations, and the U.S.

and certain other countries could impose further sanctions, trade restrictions,

and other retaliatory actions should the conflict continue or worsen.

It is not possible to predict the broader consequences of the conflict,

including related geopolitical tensions, and the measures and retaliatory actions taken by the U.S.

and other countries in respect thereof

as well as any counter measures or retaliatory actions by Russia or Belarus in response, including, for example, potential cyberattacks

or the disruption of energy exports, is likely to cause regional instability and geopolitical shifts, which could materially adversely

affect global trade, currency exchange rates, regional economies and the global economy.

The situation remains uncertain, and while it

is difficult to predict the impact of any of the foregoing, the conflict and actions taken in response to the conflict could increase

our costs, reduce our sales and earnings, impair our ability to raise additional capital when needed on acceptable terms, if at all,

or otherwise adversely affect our business, financial condition, and results of operations.

are subject to foreign exchange risk as we manufacture our products in China, market extensively in both Canadian and U.S.

markets, employee

people residing in both the U.S.

and Canada and, to date, have raised funds in Canadian Dollars.

Meanwhile, we report results of operations

Since our Canadian customers pay in Canadian Dollars, we are subject to gains and losses due to fluctuations in the

USD relative to the Canadian Dollar.

While having our products manufactured in China, our manufacturers are paid in USD to better avoid

the relatively greater fluctuation of the Chinese Yuan.

To the extent the U.S.

dollar strengthens against any of these foreign currencies,

the translation of these foreign currencies denominated transactions results in reduced revenue, operating expenses and net income for

our operations.

of Operations

the year ended December 31, 2021, revenues from the entire line of Worksport products were $303,750, as compared to $346,144 for

the year ended, December 31, 2020.

The year over year sales decreased by approximately 12% due to the Company shifting its focus to building

up its inventory to mitigate against potential supply chain issues in anticipation of launching its e-commerce platform, while it repositions

to domestic manufacturing.

the year ended December 31, 2021, revenue generated in Canada was $40,683, as compared to $28,917 for the same period in 2020, an increase

For the year ended December 31, 2021, revenue generated in the United States was $263,067, compared to $317,227 for the same

period in 2020.

This represents a decrease in US-source revenue of approximately 17% year-over-year.

Similar to above, the decrease in

revenue was a result of the Company shifting its focus to building up its inventory to mitigate against potential supply chain issues

in anticipation of launching its e-commerce platform, while it repositions to domestic manufacturing.

In addition, increase cost of

shipping and delivery as a result of supply chain disruption, gas prices and inflation contributing to overall sales decrease for fiscal

from online retailers of the Worksport products decreased from $337,053 in 2020 to $263,116 in 2021, a decrease of 22%.

Online retailers accounted for 87% of total revenue for the year ended December 31, 2021, compared to 90% for the year ended December

Distributor sales increased for the year ended December 31, 2021 compared with the year ended December 31, 2020 with sales

of $40,349 and $29,699, respectively.

Worksport expects to continue to grow its fields of business as it develops unique and non-competing

products to offer to other prospective clients in the US and Canadian markets.

Worksport works closely with one distributor in Canada, along with its own contracted distribution and inventory facility in Breinigsville,

PA and Depew, NY.

This does not include multiple independent online retailers.

Worksport currently supports a total of nine dealers and distributors, Worksport will return to a focus on online sales with new inventory

being received in the US market for 2021.

Worksport continues to believe the trend of increasing sales through online retailers will

continue to outpace the traditional distribution business model.

Moreover, reputable online retailers’ customers tend to provide

larger sales volumes, greater margin of profit, and greater protection against price erosion.

of sales increased by 17%, from $298,996 for the year ended December 31, 2020 to $350,702 for the year ended December 31,

The Company’s cost of sales, as a percentage of sales, was approximately 115% and 86% for the years

ended December 31, 2021 and 2020, respectively.

The increase in percentage of sales resulted in a gross margin decrease from 14% for

the year ended December 31, 2020 to negative 15% for the year ended December 31, 2021.

The increase in cost of sales as a percentage

of sales and decrease in gross margin was primarily due to increased cost associated with acquiring and selling inventory translating

to increased cost of sales for the year ended December 31, 2021, compared to the prior year.

cost of sales, shipping and freight costs accounted for 79% of cost of sales during the year ended December 31, 2021, whereas

in 2020, it accounted for 28% of cost of sales.

This increase is primarily attributed to an increase in international shipping expense

due to supply chain issues and rising oil prices as well as increase in sales volume resulting in higher overall shipping and freight

provides its distributors and online retailers an “all-in” wholesale price.

the year ended December 31, 2022, revenues from our entire line of products was $116,502, as compared to $303,750 for the year ended

December 31, 2021.

The year-over-year sales decreased by approximately 62%.

For the year ended December 31, 2022, revenue generated in

Canada was $14,572, as compared to $40,683 for the same period in 2021, a decrease of 64%.

For the year ended December 31, 2022, revenue

generated in the United States was $101,930, compared to $263,067 for the same period in 2021, a decrease of 61%.

decreased for the year ended December 31, 2022 compared to the prior year due to our focus on establishing new business-to-consumer and

business-to-business sales channels, while strengthening the support of those channels to increase customer satisfaction and enable high

product turnover once domestic production begins.

For business-to-consumer channels, we established our own e-commerce platform as well

as listed our products on online marketplaces including eBay, Amazon, and Walmart.

For business-to-business channels, we updated our

terms and conditions, created improved product brochures for distributors, strategically created a Minimum Advertised Price policy to

prevent our business-to-consumer channels from interfering with our business-to-business channels, established sales representation across

the continental U.S.

by forging relationships with various sales agencies, and more.

We intend to begin domestic manufacturing in the

second quarter of fiscal year 2023, barring unforeseeable delays, and gradually increase output capacity through refined production processes

and increased personnel during following quarters.

from online retailers of our products decreased from $263,116 in 2021 to $101,930 in 2022, a decrease of 61%, due to our focus on establishing

new sales channels.

Online retailers accounted for 87% of total revenue for the year ended December 31, 2022 compared to 87% for the

year ended December 31, 2021.

Distributor sales decreased for the year ended December 31, 2022 compared with the year ended December

31, 2021, with sales of $14,572 and $40,349, respectively.

We expect to continue to grow our fields of business as we develop unique

products with enhanced utility to offer to other prospective clients in the US and Canadian markets.

currently support a network of dealers, distributors, and independent resellers, and we will continue to expand our business and online

sales channels in 2023.

of sales decreased by 84%, from $350,702 for the year ended December 31, 2021 to $56,967 for the year ended December 31, 2022.

of sales, as a percentage of sales, was approximately 49% and 115% for the years ended December 31, 2022 and 2021, respectively.

decrease in the cost of sales as a percentage of sales was primarily due to increased efficiency associated with acquiring and manufacturing

inventory for the year ended December 31, 2022, compared to the previous year.

provide our distributors and online retailers an “all-in” wholesale price.

This includes any import duty charges, taxes,

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Volume discounts

are also offered to certain higher volume customers.

Worksport also offers a “dock price” or “pickup program,”

where clients are able to pick up product directly from one of Worksport stocking warehouses.

expenses increased for year ended December 31, 2021 by $6,481,392, from $1,033,387 for the fiscal year ended December 31, 2020

are offered to certain high-volume customers, and we also offer a “dock price” or “pickup program” in which clients

are able to pick up product directly from our stocking warehouse.

expenses increased for the year ended December 31, 2022 by $5,318,471, from $7,514,779 for the fiscal year ended December 31, 2021

to $12,833,250 for the fiscal year ended December 31, 2022, due to the following factors.

and administrative expense increased by $1,653,309 from $201,929 for 2020 to $1,855,238 for 2021.

The increase was related to research

and development and salaries as the Company seeks to expand its operations and further develop its products.

and administrative expense increased by $3,123,344 from $1,855,238 in 2021 to $4,978,582 in 2022.

The increase was related to increased

research and development activities and an increase in salaries as we seek to expand our operations and further develop our products.

and marketing expenses increased by $1,059,574, from $1,386,692 for 2021 to $2,446,266 for 2022.

The increase in sales and marketing

is a result of building brand and product awareness.

is primarily attributable to compensation for investor relations consulting services.

fees, which include accounting, legal, and consulting fees, increased from $4,268,684 in 2021 to $5,418,863 in 2022.

The increase was

due to the employment of various third-party consultants to help expand the Company’s business operations and in connection

with the Company’s underwritten public offering of common stock and warrants in August 2021.

Company realized a loss on foreign exchange of $4,165 during 2021, an increase of $369 compared to $3,796 during 2020.

was due to the engagement of various third-party consultants to expand our business operations.

realized a gain on foreign exchange of $10,461 for 2022, compared to a loss on foreign exchange of $4,165 for the prior year due

to conversions between CAD and USD.

Income and Expenses

income and expenses for the year ended December 31, 2021 was $335,354, compared to $201,381 the prior year, representing an increase

The difference can be attributed to the Company recognizing a gain on settlement of debt in the prior year and recognition

of bad debt for 2021.

reported other income for the year ended December 31, 2022 of $239,301 compared to a loss of $335,354 in the prior year.

The change can

be attributed to an increase in the gain on settlement of debt, as well as increases in rental and interest income and a reduction in

bad debt expense, which are partially offset by an increase in interest expense.

loss for the year ended December 31, 2022 was $12,534,414 compared to a net loss of $7,897,085 for the year ended December 31, 2021 –

an increase of 59%.

The increase in the net loss can be attributed to the increase of various operating expenses as the

Company focuses on expanding its operations, research and development programs and manufacturing and supply chains.

The increase in the net loss can be attributed to the increase in various operating expenses as we focus on expanding

our operations, research and development, manufacturing, and supply chain.

and Capital Resources;

of December 31, 2021, the Company had $28,567,333 in cash, restricted cash and cash equivalents.

The Company has generated only limited

revenues and has relied primarily upon capital generated from public and private offerings of its securities.

Since the Company’s

acquisition of Worksport in fiscal 2014, it has never generated a profit.

As of December 31, 2021 the Company had an accumulated deficit

of $20,849,805.

date, the Company’s principal sources of liquidity consisted net proceeds from public and private securities offerings and cash

exercises of outstanding warrants.

During the year ended December 31, 2021 the Company received $32,852,630 of proceeds from public offerings,

private placement offering and exercises of warrants net of share issuance costs.

During the year ended December 31, 2021, the

Company made repayments of $62,905 of promissory notes.

The Company believes its current cash balances coupled with anticipated

cash flow from operating activities will be sufficient to meet its working capital requirements for at least one year from the date of

issuance of the accompanying consolidated financial statements.

on current internal projections, the Company believes it has and/or will generate sufficient cash for its operational needs, for at least

Going Concern

of December 31, 2022, we had $14,620,757 in cash, restricted cash, and cash equivalents.

We have generated only limited revenues and

have relied primarily upon capital generated from public and private offerings of our securities.

Since the Company’s acquisition

of Worksport in fiscal year 2014, it has never generated a profit.

As of December 31, 2022, we had an accumulated deficit of $33,384,219.

In their audit report for the fiscal year ended December 31, 2022 included in this report, our auditors have expressed their consent

as to our ability to continue as a going concern.

date, our principal sources of liquidity consists of net proceeds from public and private securities.

During the year ended December

31, 2022, we did not receive any proceeds from public offerings nor private placement offerings.

Management is focused on transitioning

towards revenue as our principal source of liquidity by growing our existing product offerings, as well as our customer base, to increase

our revenues.

We cannot give assurance that we can increase our cash balances or limit our cash consumption and thus maintain sufficient

cash balances for our planned operations or future business developments.

Future business development and demands may lead to cash utilization

at levels greater than recently experienced.

Our ability to continue as a going concern is dependent upon our ability to generate cash

flows from operations and obtain financing.

We intend to continue funding our operations through equity and debt financing arrangements,

which may be insufficient to fund its capital expenditures, working capital and other cash requirements in the long term.

no assurance that the steps management is taking will be successful.

Subject to the foregoing, however, we believe our current cash balances

coupled with anticipated cash flow from operating activities will be sufficient to meet our working capital requirements for at least

one year from the date of issuance of the accompanying consolidated financial statements.

Management is focused on growing the Company’s

existing product offerings, as well as its customer base, to increase its revenues.

The Company cannot give assurance that it can increase

its cash balances or limit its cash consumption and thus maintain sufficient cash balances for its planned operations or future business

developments.

Future business development and demands may lead to cash utilization at levels greater than recently experienced.

may need to raise additional capital in the future.

However, the Company cannot assure that it will be able to raise additional capital

on acceptable terms, or at all.

Subject to the foregoing, management believes that the Company has sufficient capital and liquidity to

fund its operations for at least one year from the date of issuance of the accompanying consolidated financial statements.

have conducted the following public and private offerings since the beginning of the 2021 fiscal year:

September 30, 2022, we filed a shelf registration statement on Form S-3 (File No.

333-267696), which was declared effective by the SEC

on October 13, 2022, containing a base prospectus covering the offering, issuance and sale by us of up to $30,000,000 of our common stock

and prospectus supplement covering the offering, issuance and sale by us of up to $13,000,000 of our common stock that may be issued

and sold under an At The Market Offering Agreement dated as of September 30, 2022.

Pursuant to the ATM Agreement, Wainwright is entitled

to a commission equal to 3.0% of the gross sales price of the shares of common stock sold.

As of December 31, 2022, no securities have

been sold pursuant to the Form S-3.

Underwritten Offering

August 6, 2021, the Company consummated an underwritten public offering (the “Public Offering”) of an aggregate of 3,272,727

units, pursuant to a registration statement on Form S-1, as amended (File No.

333-256142) and a registration statement on Form S-1 (File

The public offering price was $5.50 per unit and each unit consisted of one share of common stock and one warrant (“Public

Warrant”) to purchase one share of common stock for $6.05 per share (110% of the unit offering price) from the date of issuance

until the third anniversary of the issuance date.

The Company received gross proceeds of approximately $18.0 million from the Public

Offering, and after deducting the underwriting commissions, discounts, and offering expenses payable by the Company, the Company received

net proceeds of approximately $16.1 million.

The Company used the net proceeds for Working Capital, R&D, Marketing, and Equipment.

the years ended December 31, 2020 and 2021, the Company sold 497,590 and 1,502,410 units respectively, $2.00 per unit in a Reg

A/Tier 2 public offering pursuant to a Form 1-A (File No:

24-11271) qualified by the Securities and Exchange Commission on November 9,

2020 (the “Reg A Offering”).

Each unit consisted of one share of common stock and one warrant to purchase one share of common

stock for $4.00 per share during the 12 months following the date of issuance.

August 6, 2021, we consummated an underwritten public offering of an aggregate of 3,272,727 units, pursuant to a registration statement

on Form S-1, as amended (File No.

333-256142) and a related registration statement on Form S-1 (File No:

The public offering

price was $5.50 per unit, and each unit consisted of one share of common stock and one warrant to purchase one share of common stock

for $6.05 per share (110% of the unit offering price) from the date of issuance until the third anniversary of the issuance date.

received gross proceeds of approximately $18.0 million from the Public Offering, and after deducting the underwriting commissions, discounts,

and offering expenses payable by us, we received net proceeds of approximately $16.1 million.

We used the net proceeds for working capital,

R&D, marketing, and equipment.

the year ended December 31, 2021, we sold 1,502,410 units at $2.00 per unit in a Reg A/Tier 2 public offering pursuant to a Form 1-A

24-11271) qualified by the Securities and Exchange Commission on November 9, 2020 (the “Reg A Offering”).

unit consisted of one share of common stock and one warrant to purchase one share of common stock for $4.00 per share during the 12 months

following the date of issuance.

The gross proceeds from the sale of units were $3,048,199.

As of December 31, 2021, the Company received $7,104,090 from the exercise of 1,776,023 warrants.

As of December 31, 2022, we received $7,104,090

from the exercise of 1,776,023 warrants.

The warrants issued pursuant to the Reg A Offering have expired.

506(b)/Reg D Private Placement

2021, the Company sold an aggregate of 2,040,990 units on the same terms as the units sold in the Reg A Offering in a private placement

2021, we sold an aggregate of 2,040,990 units on substantially similar terms as the units sold in the Reg A Offering in a private placement

under Section 4(a)(2) and/or Rule 506(b) of Regulation D under the Securities Act.

Each unit consisted of one share of common stock and

two warrants to purchase two shares of common stock for $4.00 per share during the 16 months following the date of issuance.

one warrant to purchase two shares of common stock for $4.00 per share during the 18 months following the date of issuance.

proceeds from the sale of units in the private placement were $4,081,980.

As of the date of this annual report, 700,000 warrants sold

in the private offering have been exercised on a cashless basis.

As of December 31, 2022, 700,000 warrants sold in the private

offering have been exercised on a cashless basis.

The warrants issued pursuant to this offering have expired.

Flow Activities

increased from $1,107,812 at December 31, 2020 to $28,567,333 at December 31, 2021, an increase of $27,459,521 or 2.487%.

increase in cash was primarily due to warrants exercises, public offerings and private placement offerings which generated of approximately

of December 31, 2021, the Company had current assets of $34,032,005 (2020 - $1,684,764) and current liabilities of $1,796,789

decreased from $28,567,333 at December 31, 2021 to $14,620,757 at December 31, 2022 – a decrease of $13,946,576 or 49%.

was primarily due to the acquisition of assets for domestic production, such as the building in West Seneca, NY and industrial manufacturing

equipment, as well as increased spending for inventory in anticipation of launching our e-commerce platform, research and development,

and overhead.

of December 31, 2022, we had current assets of $18,332,107 (2021 - $34,032,005) and current liabilities of $2,461,730 (2021 – $1,796,789).

As of December 31, 2022, we had working capital of $15,870,377 (2021 – $32,235,216) and an accumulated deficit of $33,384,219 (2021

- $20,849,805).

As of December 31, 2021, Company had working capital of $32,235,216 (2020 – working capital deficiency

of $33,289) and an accumulated deficit of $20,849,805 (2020 - $12,866,033)

cash used by operating activities for the year ended December 31, 2021 was $4,046,705, compared to $695,112 in the prior year,

primarily driven by a larger net loss in 2021 and partially offset by the issuance of shares, options, and warrants for services.

addition, the following contributed to the balance of net cash used in operating activities:

Accounts receivable increased at December 31,

2020 by $119,813 and December 31, 2021 by $2,228, which reduced cashflow from operations to their respective years

Other receivables increased at December 31, 2021

by $16,883 and by $121,396 in the prior year due to the Company’s increases in sales tax refund to be received in future periods.

Inventory decreased at December 31, 2020 by $72,353

and increased at December 31, 2021 by $460,969.

Prepaid expenses increased by $382,067 at December 31, 2021 and decreased at December

31, 2020 by $43,201, due to increased consulting and marketing expenditures during the year ended December 31, 2021.

Accounts payable and accrued liabilities increased

at December 31, 2021 and decreased at December 31, 2020 by $187,510 and $59,284 respectively.

cash used by operating activities for the year ended December 31, 2022 was $7,977,960, compared to $4,210,623 in the prior year, primarily

driven by a larger net loss in 2022, which was partially offset by the issuance of shares, options, and warrants for services.

receivable decreased at December 31, 2022 by $83 and increased by $2,228 in the prior year.

The decrease in accounts receivable was due

to lower sales in 2022 compared to 2021.

increased at December 31, 2021 by $460,969 and at December 31, 2022 by $844,600 as a result of our stockpiling inventory in anticipation

of the launch of our e-commerce platform.

Prepaid expenses increased by $529,438 at December 31, 2022 and by $382,067 at December 31,

2021 due to deposits for manufacturing equipment and professional services.

payable and accrued liabilities increased at December 31, 2022 and 2021 by $995,340 and $187,510, respectively.

cash used in investing activities for the year ended December 31, 2022 was $11,150,776 compared to $1,131,735 in the prior year.

in investing activities was primarily due to the purchase of property and equipment of $1,101,784 and intangible assets of $29,951.

increase in investing activities was primarily due to the purchase of the manufacturing facility and equipment.

cash provided by financing activities for the year ended December 31, 2022 was $5,182,160 compared to $32,801,879 in the prior year.

During the year ended December 31, 2021 the Company received $32,852,630 of proceeds from public offerings, private placement offering

and exercises of warrants net of share issuance cost.

During the year ended December 31, 2021 the Company made repayment of $62,905 of

promissory notes.

Sheet Arrangements

During the year ended December 31, 2022, we received $5,300,000 in loans for the purchase of a manufacturing facility.

During the year

ended December 31, 2021, we received $32,852,630 of proceeds from a public offering, a private placement offering, and exercises of warrants

net of share issuance cost.

Cash Requirements from Known Contractual and Other Obligations

following table summarizes our contractual obligations as of December 31, 2022 and 2023:

Operating lease

Equipment purchases

Contractual Obligations

intend to fund our contractual obligations with working capital.

Accounting Policies

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consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities,

revenues and expenses, and related disclosure of contingent assets and liabilities.

We evaluate our estimates on an ongoing basis, including

those related to provisions for uncollectible accounts receivable, inventories, valuation of intangible assets and contingencies and

revenues, and expenses as well as related disclosure of contingent assets and liabilities.

We evaluate our estimates on an ongoing basis,

including those related to provisions for uncollectible accounts receivable, inventories, valuation of intangible assets, and contingencies

and litigation.

We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under

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Actual results may differ from these estimates under different assumptions or conditions.

accounting policies that we follow are set forth in Note 3 to our financial statements as included in this annual report.

These accounting

policies conform to accounting principles generally accepted in the United States and have been consistently applied in the preparation

of the financial statements.

accounting policies conform to accounting principles generally accepted in the United States and have been consistently applied in the

preparation of the financial statements.

and Cash Equivalents

and cash equivalents includes cash on account and demand deposits with maturities of three months or less.

Cash and cash equivalents

in financial institutions may exceed insured limits at various times during the year and subject the Company to concentrations of credit

Cash and cash equivalents include restricted cash at December 31, 2022 and 2021 totaling $411,016 and $0, respectively.

accounts receivable are stated at the amount the Company expects to collect.

Receivables are reviewed individually for collectability.

If the financial condition of the Company’s customers were to deteriorate, adversely affecting their ability to make payments,

allowances may be required.

Company offers credit terms on the sale of the Company’s products to a significant majority of the Company’s customers and

requires no collateral from these customers.

The Company performs ongoing credit evaluations of customers’ financial condition

and, if needed, maintains an allowance for doubtful accounts receivable based upon the Company’s historical experience and a specific

review of accounts receivable at the end of each period.

At December 31, 2022 and 2021, the Company had no allowance for doubtful accounts.

is stated at the lower of cost or net realizable value, with cost being determined on a weighted average basis.

Cost includes purchase

price of materials, freight, and related costs required to bring the goods to Company warehouses.

accordance with ASC 606 Revenue from Contracts with Customers, sales are recognized when (1) products are shipped, with no right of return

except for defective products, and the title and risk of loss has passed to customers;

and (2) when they are delivered based on the terms

of the sale, and there is an identifiable contract with a customer with defined performance obligations, the transaction price is determinable,

and the entity has fulfilled its performance obligation.

Revenue related to shipping and handling costs billed to customers is included

in net sales, and the related shipping and handling costs are included in cost of goods sold.

and Equipment

assets are recorded at cost and are depreciated using the straight-line method over the following estimated useful lives:

and equipment

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis