What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-11-14 compared with 2023-08-14 · 288 added, 221 removed, 229 unchanged (69% of the section changed)

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of those fiscal years.

Each of the terms “Company” and “Worksport” as used herein refers collectively to

Worksport Ltd.

and its wholly owned subsidiaries, unless otherwise stated.

Each of the terms “Company” and “Worksport” as used herein refers collectively to Worksport

and its subsidiaries, unless otherwise stated.

following discussion should be read in conjunction with the 2022 Form 10-K filed with the U.S.

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Popularity of Electric Vehicles

Vehicles (EVs) have been exponentially increasing in consumer interest, whether that interest takes 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

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

sales, or investments.

As we begin marketing our Worksport SOLIS and COR products, we plan to market the SOLIS tonneau cover 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 portable energy storage systems 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 our COR battery system.

Environment Favoring Electric Vehicles

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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 in the six months ended June 30, 2023:

January 2023, a Worksport representative traveled to a European vendor who was manufacturing a portion of Worksport’s assembly

line to assess the quality of said machinery.

Later that month, Worksport announced its

approval of the machinery following a rigorous on-site inspection, after which the machine was shipped to Worksport’s

USA production facility with an arrival date of March 14, 2023.

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 portable energy storage system, 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 is a market in which we have first-mover advantage.

ensure we do not fall behind future competitors, we are highly focused on protecting our intellectual property both domestically and

following highlights recent material developments in our business in the nine months ended September 30, 2023:

January 2023, a Worksport representative traveled to a European vendor who was manufacturing

a portion of Worksport’s assembly line to assess the quality of said machinery.

that month, Worksport announced its approval of the machinery following a rigorous on-site

inspection, after which the machine was shipped to Worksport’s USA production facility

with an arrival date of March 14, 2023.

February and June of 2023, Worksport hosted job fairs at its production facility to attract

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the SC4 PRO, a soft, quad-fold

cover with enhanced usability compared to Worksport’s SC4.

cover with enhanced usability compared to Worksport’s SC4 tonneau cover.

June 2023, Worksport officially relocated its corporate headquarters to its production facility

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and investment of resources into its West Seneca production facility.

● In July 2023, Worksport announced the opening of its state-of-the-art R&D

facility in Springfield, Missouri to house the Company’s tonneau cover research and development team.

● Also in July 2023, Worksport received $720,000 in purchase orders for its

innovative soft-folding tonneau covers and commenced shipping from its West Seneca manufacturing facility.

The $720,000 consists of four

(4) individual purchase orders each representing a value of $180,000.

● In July 2023, Worksport completed its qualification for “Made in the USA” designation for its

upcoming line of hard tonneau covers.

● In July 2023, Worksport announced an approximate $1,600,000 purchase order

for its advanced hard-folding tonneau covers along with scheduled production of the hard-folding covers scheduled to begin within the

following month utilizing its multi-million dollar custom manufacturing line.

Worksport fulfilled its first shipment of hard-folding tonneau

covers in the following month.

● In September 2023, Worksport announced it has identified a potential

supply partnership with a top-tier solar panel provider for its highly-anticipated SOLIS Solar Tonneau Cover.

The SOLIS Solar Cover,

complemented by the development of Worksport’s COR Battery System, has already piqued the interest of multiple automotive

manufacturers.

One notable major auto manufacturer partnership has already been announced with Hyundai’s North American

design, technology, and engineering division.

● In September 2023, Worksport signed a long-term supply agreement

with an established, US-based automotive aftermarket reseller in which it expects annual sales of an estimated $16,000,000 of its advanced

hard-folding and soft-folding tonneau covers.

Factors Affecting our Performance

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markets experienced significant volatility and weakness.

Governments and central banks have reacted with significant monetary and

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

Governments and central banks have reacted with significant monetary and 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

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This particular result of COVID-19 primarily affects the sourcing of components for the Worksport

In order to mitigate these supply chain issues, we have invested more resources into sourcing power electronics in the interest of finding

reliable suppliers with manageable lead times and competitive pricing.

In order to mitigate these supply chain issues, we have invested more resources into sourcing power electronics in the interest

of finding reliable suppliers with manageable lead times and competitive pricing.

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

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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

Increasing prices of the component materials for 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.

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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.

Additionally,

as central banks 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.

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 and 2023.

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

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

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

February 2022, Russia initiated significant military action against Ukraine.

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,

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 these conflicts,

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.

as well as whether any counter measures or retaliatory actions in response, including, for example, potential cyberattacks or the disruption

of energy exports, are likely to cause regional instability and geopolitical shifts, which could materially adversely affect global trade,

currency exchange rates, regional economies and the global economy.

These situations remain uncertain, and while it is difficult to predict

the impact of any of the foregoing, the conflicts and actions taken in response to these conflicts 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.

while we do not have any direct operations or significant sales in the Middle East nor Africa, geopolitical tensions and ongoing conflicts

in these regions, particularly between Israel and Palestine as well as within Sudan, may lead to further global economic instability and

fluctuating energy prices that could materially affect our business.

It is not possible to predict the broader consequences of these conflicts,

including related geopolitical tensions, and the measures and actions taken by other countries in respect thereof, which could materially

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

While it is difficult to predict the

impact of any of the foregoing, these conflicts may increase our costs, disrupt our supply chain, 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 certain products and components in China, market extensively in both Canadian

markets, employ 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

we report results of operations in U.S.

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.

Our manufacturers in China 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.

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

Months Ended June 30, 2023 compared to the Three Months Ended June 30, 2022

the three months ended June 30, 2023, revenues from our entire line of products was $199,851, as compared to $11,305 for the three

months ended June 30, 2022.

Months Ended September 30, 2023 compared to the Three Months Ended September 30, 2022

the three months ended September 30, 2023, revenues from our entire line of products was $458,483, as compared to $18,350 for the three

months ended September 30, 2022.

Year-over-year sales increased by approximately 2,399%.

For the three months ended June 30, 2023, revenue

generated in Canada was $0, as compared to $5,855 for the same period in 2022.

For the three months ended June 30, 2023, revenue generated

in the United States was $199,851, compared to $5,450 for the same period in 2022, an increase of 3,567%.

increased for the three months ended June 30, 2023 compared to the same period 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.

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.

relationships with various sales agencies, and more.

We intend to gradually increase output capacity through refined production processes

and increased personnel.

from online retailers of our products increased from $5,450 during the three months ended June 30, 2022 to $18,163 during the three months

ended June 30, 2023, an increase of 233%.

Online retailers accounted for 9% of total revenue for the three months ended June 30, 2023,

compared to 48% for the three months ended June 30, 2022.

Distributor sales decreased for the three months ended June 30, 2023, compared

with the three months ended June 30, 2022, with sales of $0 and $5,855, respectively.

Private label sales increased from $0 for the three

months ended June 30, 2022, to $181,688 for the three months ended June 30, 2023.

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.

For the three months ended September 30, 2023,

revenue generated in Canada was $4,225, as compared to $5,216 for the same period in 2022.

For the three months ended September 30, 2023,

revenue generated in the United States was $454,258, compared to $13,134 for the same period in 2022, an increase of 3,359%.

increased for the three months ended September 30, 2023 compared to the same period the prior year due to increased sales of soft tonneau covers to a private label

partner during the three months ended September 30, 2023.

Worksport continues to 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.

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 gradually increase output capacity

through refined production processes and increased personnel.

from online retailers of our products increased from $13,134 during the three months ended September 30, 2022, to $21,599 during the three

months ended September 30, 2023.

Online retailers accounted for 5% of total revenue for the three months ended September 30, 2023, compared

to 72% for the three months ended September 30, 2022.

Distributor sales decreased for the three months ended September 30, 2023, compared

with the three months ended September 30, 2022, with sales of $4,225 and $5,216, respectively.

Private label sales increased from $0

for the three months ended September 30, 2022, to $432,659 for the three months ended September 30, 2023.

Private label sales accounted

for 94% of total revenue for the three months ended September 30, 2023.

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 U.S.

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 increased by 1,819%, from $7,987 for the three months ended June 30, 2022 to $153,288 for the three months ended June 30, 2023.

Our cost of sales, as a percentage of sales, was approximately 77% and 71% for the three months ended June 30, 2023 and 2022, respectively.

The increase in the cost of sales as a percentage of sales was primarily due to increased inflationary pressure increasing the cost of

materials for production.

sales channels in the fourth quarter of 2023.

of sales increased by 2,826% from $12,602 for the three months ended September 30, 2022, to $368,796 for the three months ended September

Our cost of sales, as a percentage of sales, was approximately 80% and 69% for the three months ended September 30, 2023 and

2022, respectively.

The increase in the cost of sales as a percentage of sales was primarily due to increased sales to private labels

at a lower agreed upon sales price compared to online retail sales.

Accordingly, cost of sales to private labels are lower compared to

that of online retail sales, as indirect costs are assumed by the private labels.

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

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

expenses increased for the three months ended June 30, 2023 by $473,773, from $3,331,509 for the three months ended June 30, 2022 to

$3,785,282 for the three months ended June 30, 2023, due to the following factors.

expenses increased for the three months ended September 30, 2023 by $1,060,620, from $2,948,576 for the three months ended September

30, 2022 to $4,009,196 for the three months ended September 30, 2023, due to the following factors:

and administrative expenses increased by $1,571,100, from $1,520,388 in 2022 to $3,091,488 in 2023.

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.

The increase was related to

increased research and development activities and an increase in wages and salaries as we seek to expand our operations and further

develop our products.

and marketing expenses decreased by $205,541, from $586,388 for 2022 to $380,847 for 2023.

The decrease in sales and marketing is primarily

attributable to the completion of several marketing agreements and lower cost of in-house marketing campaigns to create brand and

product awareness.

The decrease in sales and marketing is

primarily attributable to the completion of several marketing agreements and lower cost of in-house marketing campaigns to create

brand and product awareness.

fees, which include accounting, legal, and consulting fees, decreased from $858,605 in 2022 to $539,126 in 2023.

in professional fees was due to the completion of consulting engagements with various third-party consultants.

realized a loss on foreign exchange of $316 during 2023, compared to a loss on foreign exchange of $352 for the prior period due

to conversions between CAD and USD.

The decrease in

professional fees was due primarily to the completion of consulting engagements with various third-party consultants.

realized a gain on foreign exchange of $2,265 during 2023, compared to a gain on foreign exchange of $16,805 for the prior period

due to conversions between CAD and USD.

Income and Expenses

reported other loss for the three months ended June 30, 2023 of $58,736 compared to a loss of $64,128 in the prior period.

loss can be attributed to increased interest expense partially offset by interest and rental income.

loss for the three months ended June 30, 2023 was $3,797,455 compared to a net loss of $3,372,319 for the three months ended June 30,

reported other expenses for the three months ended September 30, 2023 of $29,789 compared to a gain of $65,168 in the prior period.

expenses can be attributed to increased interest expense partially offset by interest and rental income.

loss for the three months ended September 30, 2023 was $3,949,298 compared to a net loss of $2,877,660 for the three months ended September

30, 2022 – an increase of 37%.

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.

Months Ended June 30, 2023 compared to the Six Months Ended June 30, 2022

the six months ended June 30, 2023, revenues from the entire line of our products were $231,776, as compared to $59,089 for the six months

ended June 30, 2022.

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.

Months Ended September 30, 2023 compared to the Nine Months Ended September 30, 2022

the nine months ended September 30, 2023, revenues from the entire line of our products were $690,259, as compared to $77,439 for the

nine months ended September 30, 2022.

Year-over-year sales increased by approximately 791%.

For the six months ended June 30, 2023, revenue generated

in Canada was $2,655, as compared to $5,802 for the same period in 2022.

For the six months ended June 30, 2023, revenue generated in

the United States was $229,121, compared to $53,287 for the same period in 2022, an increase of 330%.

increased for the six months ended June 30, 2023 compared to the same period the prior year due to our focus on establishing new business-to-consumer

For the nine months ended September 30, 2023,

revenue generated in Canada was $6,961, as compared to $11,981 for the same period in 2022.

For the nine months ended September 30, 2023,

revenue generated in the United States was $683,298, compared to $65,458 for the same period in 2022, an increase of 944%.

Revenue increased for the

nine months ended September 30, 2023 compared to the same period the prior year increased sales of soft tonneau covers

to a private label partner during the three months ended September 30, 2023.

Worksport continues to 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

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relationships with various sales agencies, and more.

We intend to gradually increase output capacity through refined production processes

and increased personnel.

from online retailers of our products decreased from $53,287 during the six months ended June 30, 2022 to $42,437 during the six months

ended June 30, 2023, a decrease of 20%.

Online retailers accounted for 18% of total revenue for the six months ended June 30, 2023 compared

to 90% for the six months ended June 30, 2022.

Distributor sales decreased for the six months ended June 30, 2023 compared with the six

months ended June 30, 2022 with sales of $2,655 and $5,802, respectively.

Private label sales increased from $0 for the three months

ended June 30, 2022 to $188,684 for the three months ended June 30, 2023.

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.

We intend to gradually increase output

capacity through refined production processes and increased personnel.

from online retailers of our products decreased from $65,458 during the nine months ended September 30, 2022 to $62,827 during the nine

months ended September 30, 2023, a decrease of 4%.

Online retailers accounted for 9% of total revenue for the nine months ended September

30, 2023 compared to 85% for the nine months ended September 30, 2022.

Distributor sales decreased for the nine months ended September

30, 2023 compared with the nine months ended September 30, 2022 with sales of $6,961 and $11,981, respectively.

Private label sales increased

from $0 for the three months ended September 30, 2022 to $620,471 for the three months ended September 30, 2023.

Private label sales

accounted for 90% of total revenue for the nine months ended September 30, 2023.

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 U.S.

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 increased by 276%, from $45,964 for the six months ended June 30, 2022 to $173,045 for the six months ended June 30, 2023.

cost of sales, as a percentage of sales, was approximately 75% and 78% for the six months ended June 30, 2023 and 2022, respectively.

The cost of sales as a percentage of sales decreased compared with prior period primarily due to increased efficiency associated with

improved supply chain logistics for the six months ended June 30, 2023.

sales channels in the fourth quarter of 2023.

of sales increased by 825%, from $58,566 for the nine months ended September 30, 2022, to $541,841 for the nine months ended September

Our cost of sales, as a percentage of sales, was approximately 78% and 76% for the nine months ended September 30, 2023 and

2022, respectively.

The increase in the cost of sales as a percentage of sales was primarily due to increased sales to private labels

at a lower agreed upon sales price compared to online retail sales.

Accordingly, cost of sales to private labels are lower compared to

that of online retail sales, as indirect costs are assumed by the private labels.

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

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

expenses increased for the six months ended June 30, 2023 by $1,208,302, from $6,119,096 for the six months ended June 30, 2022 to $7,327,398

for the six months ended June 30, 2023, due to the following factors.

expenses increased for the nine months ended September 30, 2023 by $2,268,922, from $9,067,672 for the nine months ended September 30,

2022 to $11,336,594 for the nine months ended September 30, 2023, due to the following factors:

and administrative expenses increased by $3,993,740 from $2,972,161 in 2022 to $6,965,901 in 2023.

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research and development activities, increased employment of production personnel including engineers, machine operators, and assembly

people, and increases in salaries as we seek to expand our operations and further develop our products.

people, and increases in wages and salaries as we seek to expand our operations and further develop our products.

and marketing expenses decreased by $479,333 from $1,953,243 for 2022 to $1,473,910 for 2023.

4 unchanged sentences

in professional fees was due to the completion of consulting engagements with various third-party consultants.

realized a gain on foreign exchange of $142 during 2023, compared to a gain on foreign exchange of $986 for the prior period due

to conversions between CAD and USD.

realized a gain on foreign exchange of $2,407 during 2023, compared to a gain on foreign exchange of $17,791 for the prior period

due to conversions between CAD and USD.

Income and Expenses

reported other expenses for the six months ended June 30, 2023 of $52,058 compared to $83,957 in the prior period.

in other expenses can be attributed to our gain on loan forgiveness from the Government of Canada as well as rental and interest income,

which are partially offset by an increase in interest expense.

loss for the six months ended June 30, 2023 was $7,320,725, compared to a net loss of $6,189,928 for the six months ended June 30, 2022

reported other expenses for the nine months ended September 30, 2023 of $81,847 compared to $18,789 in the prior period.

in other expenses can be attributed to higher interest expense in the current period compared to the prior period, offset by interest

income and rental income.

loss for the nine months ended September 30, 2023 was $11,270,023, compared to a net loss of $9,067,588 for the nine months ended September

30, 2022 – an increase of 24%.

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.

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;

Going Concern

As of June 30, 2023, the

Company had $5,902,235 in cash and cash equivalents.

The Company has generated only limited revenues and have relied primarily upon capital

generated from public and private offerings of its securities.

As of September 30, 2023,

the Company had $2,965,578 in 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 year

2014, it has never generated a profit.

As of June 30, 2023, the Company had an accumulated deficit of $40,704,944.

accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern,

which contemplates the realization of assets and the liquidation of liabilities in the normal course of business.

During the three and

six months ended June 30, 2023, the Company had net loss of $3,797,455 (2022 - $3,372,319) and $7,320,725 (2022 - $6,189,928).

June 30, 2023, the Company has working capital of $3,554,410 (December 31, 2022 - $15,870,377) and had an accumulated deficit of $40,704,944

As of September 30, 2023, the Company had an accumulated deficit of $44,654,242.

The accompanying

condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates

the realization of assets and the liquidation of liabilities in the normal course of business.

During the three and nine months ended

September 30, 2023, the Company had net loss of $3,949,298 (2022 - $2,877,660) and $11,270,023 (2022 - $9,067,588).

As of September 30,

2023, the Company has working capital of $330,423 (December 31, 2022 - $15,870,377) and had an accumulated deficit of $44,654,242

(December 31, 2022 - $33,384,219).

The Company has not generated profit from operations since inception and to date has relied on debt

equity financings for continued operations.

The Company’s ability to continue as a going concern is dependent upon the ability

to generate cash flows from operations and obtain equity and/or debt financing.

The Company intends to continue funding 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.

The Company has not generated profit from operations since inception

and to date has relied on debt and equity financings for continued operations.

The Company’s ability to continue as a going concern

is dependent upon the ability to generate cash flows from operations and obtain equity and/or debt financing.

The Company intends to continue

funding 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.

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

Company has historically operated at a loss, although that may change as sales volumes increase.

As of June 30, 2023, the Company

had working capital of $3,554,410 (December 31, 2022 – $15,870,377) and an accumulated deficit of $40,704,944 (December 31,

As of September 30, 2023, the

Company had working capital of $330,423 (December 31, 2022 – $15,870,377) and an accumulated deficit of $44,654,242 (December

31, 2022 - $33,384,219).

As of June 30, 2023, the Company had cash and cash equivalents of $5,902,235 (December 31, 2022 - $14,620,757).

Despite the Company almost having completed its purchasing of large manufacturing

machinery, operational costs are expected to remain elevated and, thus, decrease cash and cash equivalents.

Concurrently, the

Company intends to begin manufacturing and increasing sales volumes within the second half of

2023, which should mitigate the effects of operational costs on cash and cash equivalents .

This view is supported by the fact that

the manufacturing facility of the Company is near completion and is expected to start generating more substantial revenue in the

third quarter of 2023, barring unforeseeable delays.

As of September 30, 2023, the Company had cash and cash equivalents of $2,965,578 (December 31, 2022 -

$14,620,757).

Despite the Company having mostly completed its purchasing of large manufacturing machinery, operational costs are

expected to remain elevated and, thus, further decrease cash and cash equivalents.

Concurrently, the Company intends to begin

manufacturing and increasing sales volumes in 2023, which should mitigate the effects of operational costs on

cash and cash equivalents.

This view is supported by the fact that the manufacturing facility of the Company is near completion and

has started to generate further revenue in the third quarter of 2023.

has successfully raised cash, and it is positioned to do so again if deemed necessary or strategically advantageous.

4 unchanged sentences

on Form S-3, which was declared effective by the SEC on October 13, 2022, allowing the Company to issue up to $30,000,000 of common

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

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

and sold under an At The Market Offering Agreement dated September 30, 2022 (“ATM Agreement”), with H.C.

2 unchanged sentences

the gross sales price of the shares of common stock sold.

As of June 30, 2023, the Company has sold and issued 4,434 shares of common

As of September 30, 2023, the Company has sold and issued 27,429 shares of common

stock in consideration for net proceeds of $95,541 under the ATM Agreement.

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

exercises of outstanding warrants.

During the six months ended June 30, 2023, the Company received nominal proceeds from public offerings,

private placement offerings, and from the exercise of any outstanding warrants or options.

Management is focused on transitioning

towards revenue as its principal source of liquidity by growing existing product offerings as well as the Company’s customer base.

The Company cannot give assurance that it can increase its cash balances or limit its cash consumption and thus maintain sufficient cash

balances for planned operations or future business developments.

Future business development and demands may lead to cash utilization

at levels greater than recently experienced.

On November 2, 2023, the Company closed a sale of

1,925,000 shares of common stock and 1,575,000 pre-funded warrants for a total net proceeds of $4,261,542.

In association with sale, the

Company also issued 7,000,000 warrants convertible for 7,000,000 shares of common stock at an exercise price of $1.34.

The warrants are

exercisable six months after issuance and will expire five and a half years from the issuance date.

To date, the Company’s

principal sources of liquidity consist of net proceeds from public and private securities offerings and cash exercises of outstanding

During the nine months ended September 30, 2023, the Company received nominal proceeds from public offerings, private placement

offerings, and from the exercise of any outstanding warrants or options.

Management is focused on transitioning towards revenue as its

principal source of liquidity by growing existing product offerings as well as the Company’s customer base.

The Company cannot give

assurance that it can increase its cash balances or limit its cash consumption and thus maintain sufficient cash balances for planned

operations or future business developments.

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

recently experienced.

The Company may need to raise additional capital in the future.

However, the Company cannot

provide assurances it will be able to raise additional capital on acceptable terms, or at all.

Subject to the foregoing, 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 condensed consolidated financial statements.

Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s

However, the Company cannot provide assurances it

will be able to raise additional capital on acceptable terms, or at all.

has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s

ability to continue as a going concern within one year after the date the financial statements are issued.

Based on its current operating

plans and anticipated cash flows, the Company believes it has a sufficient level of funding for anticipated operations, capital expenditures

and debt repayments for a period of at least 12 months from the issuance date of this Quarterly Report.

Still, these factors, among others,

indicate the existence of a material uncertainty that cast substantial doubt

about the Company’s ability to continue as a going concern.

The accompanying financial statements do not include any adjustments

that might result from the outcome of this uncertainty.

These adjustments could be material.

Flow Activities

decreased from $14,620,757 at December 31, 2022, to $5,902,235 at June 30, 2023 – a decrease of $8,718,522 or 60%.

was primarily due to the acquiring of assets for domestic production, such as industrial manufacturing equipment, as well as increasing

spending for inventory in anticipation of launching our e-commerce platform, research and development, production personnel, and overhead.

of June 30, 2023, we had current assets of $10,454,976 (December 31, 2022 - $18,332,107) and current liabilities of $6,900,566 (December

Still, certain factors indicate

the existence of a material uncertainty that cast substantial doubt about the Company’s ability to continue as a going concern.

The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

These adjustments

could be material.

Cash Flow Activities

Cash decreased from $14,620,757

at December 31, 2022, to $2,965,578 at September 30, 2023 – a decrease of $11,655,179 or 80%.

The decrease was primarily due to

the acquiring of assets for domestic production, such as industrial manufacturing equipment, as well as increasing spending on production

personnel, and for raw materials in anticipation of domestic production, research and development, and overhead.

As of September 30, 2023,

we had current assets of $7,894,134 (December 31, 2022 - $18,332,107) and current liabilities of $7,563,771 (December

31, 2022 – $2,461,730).

As of June 30, 2023, we had working capital of $3,544,410 (December 31, 2022 – $15,870,377) and an

accumulated deficit of $40,704,944 (December 31, 2022 - $33,384,219).

cash used by operating activities for the six months ended June 30, 2023 was $6,018,704, compared to $5,042,882 in the prior period,

primarily driven by a larger net loss during the six months ended June 30, 2023, and partially offset by the issuance of shares, options,

and warrants for services.

receivable increased at June 30, 2023 by $263,874 and by $3,850 in the prior period.

The increase in accounts receivable was due to higher

sales to distributors near the end of the period in 2023 compared to 2022.

increased at June 30, 2023 by $1,533,492, and at June 30, 2022 by $600,940, as a result of our stockpiling components for production as

well as finished goods in anticipation of the launch of our e-commerce platform.

Prepaid expenses increased by $14,280 at June 30, 2023,

and by $1,658,508 at June 30, 2022, due to deposits made by us for the purchase of machinery and equipment, inventory, and professional

payable and accrued liabilities decreased at June 30, 2023 by $828,757, and increased by $585,813 in the prior period.

cash used in investing activities for the six months ended June 30, 2023 was $2,663,046 compared to $9,051,810 in the prior period.

decrease in investing activities was primarily due to the purchase of a manufacturing facility in 2022.

cash used by financing activities for the six months ended June 30, 2023 was $36,772 compared to net cash received from financing activities

of $5,285,712 in the prior period.

As of September 30, 2023, we had working capital of $330,423 (December 31, 2022 – $15,870,377) and

an accumulated deficit of $44,654,242 (December 31, 2022 - $33,384,219).

Operating Activities

Net cash used by operating

activities for the nine months ended September 30, 2023 was $8,194,347, compared to $6,361,539 in the prior period, primarily driven by

a larger net loss during the nine months ended September 30, 2023, and partially offset by the issuance of shares, options, and warrants

for services.

Accounts receivable increased

at September 30, 2023 by $455,509 and by $390 in the prior period.

The increase in accounts receivable was due to higher sales to private

labels near the end of the period in 2023 compared to that of 2022.

Inventory increased at September

30, 2023 by $2,205,692, and at September 30, 2022 by $785,014, as a result of our stockpiling components for production as well as finished

goods in anticipation of the launch of our e-commerce platform.

Prepaid expenses decreased by $26,200 at September 30, 2023, and increased

by $1,063,680 at September 30, 2022.

Accounts payable and accrued

liabilities decreased at September 30, 2023 by $152,474, compared to an increase of $647,996 in the prior period.

Investing Activities

Net cash used in investing

activities for the nine months ended September 30, 2023 was $3,512,469 compared to $10,212,245 in the prior period.

The decrease in investing

activities was primarily due to the purchase of a manufacturing facility in 2022.

Financing Activities

Net cash generated by financing activities for the nine months ended September

30, 2023 was $51,637 compared to net cash generated from financing activities of $5,285,712 in the prior period.

Sheet Arrangements

18 unchanged sentences

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-Q

Item 2. Management’s Discussion and Analysis