What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-03-28 compared with 2023-03-31 · 292 added, 225 removed, 157 unchanged (77% of the section changed)

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Popularity of Electric Vehicles

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

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

or investments.

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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.

Many regulations that improve North

America’s 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

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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.

August 2023, we announced the successful dispatch of our first shipment of hard-folding tonneau covers, which are made in the U.S.

with domestic and imported components.

This major development follows our initiating manufacturing earlier that month and aligns

with recent sizable orders, notably a $700,000 order for soft-folding covers and a staggering $1,600,000 order for hard-folding covers,

both from a national U.S.

customer and reseller of automotive aftermarket accessories.

September 2023, we announced that we had found a top-tier solar panel provider for our highly anticipated SOLIS Solar Tonneau Cover.

We believe that this provider, renowned for its state-of-the-art solar panels and underlying technology, will help us set a new standard

in renewable energy tech for vehicles and provide the most durable and highest quality flexible solar panels.

September 2023, we announced significant strides in the development of our groundbreaking COR battery system, designed to complement

the launch of the SOLIS solar cover.

This cutting-edge duo is poised to empower remote power supply and extend the driving range

of electric pickup trucks, thereby underscoring our commitment to sustainability and innovation as a cleantech company.

September 19, 2023, we announced that we had secured a long-term supply agreement with an established, leading automotive aftermarket

reseller in the United States.

January 3, 2024, we announced our strategic arrangement with NeuronicWorks Inc., a Toronto-based high-tech custom electronic product

development and manufacturing company, to manufacture and assemble our COR battery system in preparation for the system’s anticipated

Alpha release.

February 7, 2024, we announced a collaboration with Infineon Technologies AG (FSE:

IFNNY) pursuant to which we will

use Infineon’s GaN power semiconductors GS-065-060-5-B-A in the converters for our portable power stations to increase efficiency

and power density.

February 23, 2024, we announced a new arrangement with Dix Performance North, Canada’s leading wholesaler of aftermarket car and

truck products, for Dix would include our tonneau covers in their catalog.

This strategic alliance is expected to make Worksport’s

range of covers widely available throughout Canada, accelerate our growth, and contribute to significant sales and revenue increases.

Factors Affecting our Performance

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Global equity

markets have 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.

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.

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.

While this resulted in fewer 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.

supply chain for certain raw materials has been disproportionately, negatively impacted when compared to supply chains of other raw materials.

The supply chain for power electronics, specifically, is still facing supply chain issues as a result of COVID-19, for the globe faced

a simultaneous supply shock and heightened demand for these goods – increasing the prices for such raw materials while simultaneously

slowing suppliers’ order fulfillments.

Further, due to such shortages, many suppliers of power electronics have focused their attention

on large customers such as those more directly aligned within the electric vehicle supply chain as compared to companies on the outskirts

of this supply chain such as Worksport.

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.

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

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parties on which we rely.

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

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

change threatens to cause many foreseeable as well as unforeseeable ramifications.

In cautious preparation for those that are foreseeable,

we have strategically begun domestic manufacturing operations in Western New York – an economically growing region not immediately

threatened by climate change to the same extent as other regions and possibly one that may benefit from future population migrations

within the United States of America.

Further, we intend to lower our own carbon footprint by investing in energy-saving measures in our

factory in West Seneca, NY.

Considering climate change may also exacerbate geopolitical tensions, we are working to diversify our supply

chain and lower our reliance on any particular region or country for raw materials in order to lower our exposure to climate change-induced

economic or political instability.

believe our Worksport SOLIS and Worksport COR products will be received positively by the public for their resilience to, and even increased

utility as a result of, Climate Change.

However, we acknowledge the potentially negative environmental impacts of poor battery recycling

and increasing demand for precious metals.

We are actively researching ways to lower such environmental impacts.

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.

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.

Our suppliers may also fail

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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.

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.

Additionally,

as central banks and the U.S.

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

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.

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

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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.

increased these costs, and while such prices have come down from their 2022 highs, we continue to closely monitor gasoline and shipping

While the Freight Rate Index has significantly increased since late 2023 as a result of Houthi attacks against cargo ships in

the Red Sea and the concurrent decline in activity across the Panama Canal, the shipping routes used by Worksport have not faced dramatic

Regardless, Worksport is closely monitoring international shipping costs.

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

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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

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 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.

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

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.

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.

addition, 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 in Gaza, northern Israel and southern Lebanon, the Red Sea, Sudan, and Ethiopia,

may lead to further global economic instability and fluctuating energy prices that could materially affect our business.

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 and 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

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

the relatively greater fluctuation of the Chinese Yuan.

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

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%.

the year ended December 31, 2023, revenues from the entire line of our products were $1,529,632, as compared to $116,502 for the year

ended December 31, 2022.

Year-over-year sales increased by approximately 1,213%.

For the year ended December 31, 2023, revenue generated

in Canada was $6,811, as compared to $14,572 for the same period in 2022, a decrease of 53%.

For the year ended December 31, 2023, 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.

generated in the United States was $1,522,821, compared to $101,930 for the same period in 2022, an increase of 1,394%.

increased the year ended December 31, 2023 compared to the same period the prior year due to increased sales of soft tonneau covers to

a private label partner during the year ended December 31, 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 have configured our product offerings in a manner conducive with cost-effective

marketing, allowing us to securely invest in marketing during 2024.

For business-to-business channels, we have created all necessary

marketing/sales materials and policies, and we are now actively presenting our product offerings to various dealers, jobbers, and retailers

across the USA and Canada.

We intend to gradually increase output capacity through refined production processes and increased personnel.

from online retailers of our products increased from $101,930 in 2022 to $104,352 in 2023, an increase of 2%.

Online retailers accounted

for 7% of total revenue for the year ended December 31, 2023 compared to 87% for the year ended December 31, 2022.

Distributor sales

decreased for the year ended December 31, 2023 compared with the year ended December 31, 2022 with sales of $6,811 and $14,572, respectively.

Private label sales accounted for 93% or $1,418,869 of total revenue for the year ended December 31, 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.

we work closely with two distributors in Canada, and we are close to setting up a distribution network within the USA.

This does not

include multiple independent online retailers.

We currently support a network of dealers and distributors, and we will continue to expand

our business and online sales channels in 2024.

of sales increased by 2,163%, from $56,967 for the year ended December 31, 2022 to $1,289,118 for the year ended December 31, 2023.

cost of sales, as a percentage of sales, was approximately 84% and 49% for the years ended December 31, 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.

We consistently secure a 20% gross margin on soft covers sold to private labels, as these soft covers are drop shipped

from our Chinese suppliers at a fixed cost.

However, our margins on domestically manufactured hard covers is dependent on the cost of

raw materials, which fluctuates, as well as overhead, which is expected to decrease in future quarters as we realize manufacturing efficiencies

and allocate more existing human capital and machinery resources away from design engineering and testing towards production.

per domestic unit was particularly high during the year ended December 31, 2023 due to this allocation of resources.

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

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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 $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 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.

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

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

expenses increased for the year ended December 31, 2023 by $2,143,925, from $12,833,250 for the fiscal year ended December 31, 2022 to

$14,977,175 for the fiscal year ended December 31, 2023, due to the following factors.

General and administrative expense increased by $4,665,098 from $4,978,582

in 2022 to $9,643,680 in 2023.

The increase was related to increased research and development activities,

increased employment of production personnel including engineers, machine operators, and assembly people, and increases in wages and salaries

as we seek to expand our operations and further develop our products.

and marketing expenses decreased by $963,212, from $2,446,266 for 2022 to $1,483,054 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.

fees, which include accounting, legal, and consulting fees, decreased from $5,418,863 in 2022 to $3,853,134 in 2023.

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

realized a gain on foreign exchange of $2,693 during 2023, compared to a gain on foreign exchange of $10,461 for the prior year due

to conversions between CAD and USD.

Income and Expenses

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.

reported other expenses for the year ended December 31, 2023 of $192,297 compared to other income of $239,301 the prior year.

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 year ended December 31, 2023 was $14,928,958 compared to a net loss of $12,534,414 for the year ended December 31, 2022

– an increase of 19%.

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

of December 31, 2023, we had $3,365,778 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.

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.

During the year ended December 31, 2023, we had net losses of $14,928,958 (2022

- $12,534,414).

As of December 31, 2023, the Company had working capital of $1,956,894 (2022 – $15,870,377) and

had an accumulated deficit of $48,313,177 (2022 - $33,384,219).

In their audit report, our independent auditors expressed that there is substantial doubt as to our ability to continue

as a going concern.

Our ability to continue as a going concern is dependent upon our ability to generate cash flows from operations and

obtain equity and/or debt financing.

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

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

There can be no assurance

that the steps our management is taking will be successful.

date, our principal sources of liquidity consist of net proceeds from public and private securities offerings and cash exercises of

outstanding warrants.

During the year ended December 31, 2023, the Company received net proceeds of $4,475,869 from offerings.

is focused on transitioning towards revenue as our principal source of liquidity by growing our existing product offerings and customer

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

We may need to raise additional capital in the future.

However, we cannot ensure that we

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

Subject to the foregoing, 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

6 unchanged sentences

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.

Pursuant to the ATM Agreement, H.C.

Co., LLC 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, 2023,

the Company has issued 99,127 shares for net proceeds of $214,238.

Underwritten Offering

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, 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, 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

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 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.

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 the 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.

September 2022 At-The-Market

Sales Agreement

September 30, 2022, the Company filed a shelf registration statement on Form S-3, which was declared effective by the SEC on October

13, 2022 (“Form S-3 Registration Statement”), allowing the Company to issue up to $ 30,000,000 of

common 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”),

Wainwright & Co., LLC, as the sales agent (“HCW”).

Pursuant to the ATM Agreement, HCW 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, 2023, the Company has sold and issued 604,048 shares of common stock in consideration for net proceeds of $ 812,551 under

the ATM Agreement.

November 2023 Registered

Direct Offering and Concurrent Private Offering

2, 2023, we raised roughly $4.7 million from a registered direct offering and concurrent private placement before deducting the placement

agent’s fees and other estimated offering expenses payable by the Company.

The registered direct offering entailed the sale of 3,500,000

shares of common stock (or pre-funded warrants to purchase shares of common stock in lieu thereof) to a single institutional investor.

The concurrent private placement entailed the issuance and sale of warrants to purchase up to 7,000,000 shares of common stock to the

same institutional investor.

The combined effective offering price for each share of common stock (or pre-funded warrant in lieu thereof)

and accompanying warrant was $1.34.

The warrants will become exercisable six months from issuance, expire five and a half years from the

issuance date and have an exercise price of $1.34 per share.

The shares of common stock (or pre-funded warrants in lieu thereof) were

offered by the Company pursuant to the Company’s Form S-3 Registration Statement.

The warrants issued in the concurrent private

placement and the shares issuable upon exercise of such warrants were offered in a private placement under Section 4(a)(2) and/or Rule

506 of Regulation D.

The 7,000,000 shares of common stock underlying the warrants were registered for resale by the institutional investor

on a registration statement on Form S-1 (File No.

333-276241) filed with the SEC on December 22, 2023 and declared effective by the SEC

on December 29, 2023.

If at time, there is no effective registration statement available for the shares of common stock underlying the

warrants, the warrants may be exercised via a “cashless exercise.” We will not receive any proceeds from any warrants exercised

by a “cashless exercise.”

March 2024 Direct Offering

and Concurrent Private Offering

18, 2024, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) with a certain institutional

investor (the “Purchaser”) pursuant to which we sold, in a registered direct offering, an aggregate of (i) 2,372,240 shares

(the “Shares”) of common stock and (ii) 1,477,892 pre-funded warrants (the “Pre-funded Warrants”) to purchase

up to 1,477,892 shares of Common Stock (the “Pre-funded Warrant Shares”).

The offering price per Share was $0.74 and the offering

price per Pre-funded Warrant was $0.7399.

The Shares, Pre-funded Warrants and Pre-funded Warrants Shares were offered pursuant to our

Form S-3 Registration as supplemented by a prospectus supplement and accompanying base prospectus dated March 18, 2024, filed with the

SEC on March 19, 2024 pursuant to Rule 424(b)(5) promulgated under the Securities Act.

The registered direct offering closed on March

Company received net proceeds of approximately $2.59 million

from the offering, after deducting the estimated offering expenses payable by the Company, including the tail fees payable to Maxim Group

The Company intends to use the net proceeds from the offering for general corporate purposes, including working capital.

In a concurrent

private placement, we issued the Purchaser warrants to purchase an aggregate of 7,700,264 shares

of common stock for $0.74 per share.

Under the warrants, we are obligated to register the shares underlying the warrants on a

registration statement on Form S-3 (or other applicable form).

If at the time of exercise of the Warrant there is no effective registration statement

available for the shares of common stock underlying the warrants, the warrants may be exercised via a “cashless

exercise.” We will not receive any proceeds from any warrants exercised by a “cashless exercise.”

Flow Activities

decreased from $14,620,757 at December 31, 2022 to $3,365,778 at December 31, 2023 – a decrease of $11,254,979 or 77%.

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.

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.

of December 31, 2023, we had current assets of $9,123,506 (2022 - $18,332,107) and current liabilities of 7,166,612 (2022 –

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$48,313,177 (2022 - $33,384,219).

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.

cash used by operating activities for the year ended December 31, 2023 was $11,930,580, compared to $7,977,960 in the prior year, driven

by a larger net loss during the year ended December 31, 2023, and partially offset by the issuance of shares, options, and warrants for

receivable increased at December 31, 2023 by $400,525 and decreased by $83 in the prior year.

The increase in accounts receivable was

due to higher sales to private labels near the end of the year in 2023 compared to that of 2022.

increased at December 31, 2023 by $2,285,120 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.

of the launch of our e-commerce platform and our purchasing of raw materials for domestic production.

Prepaid expenses increased by $776,703

at December 31, 2023 and by $529,438 at December 31, 2022 due to deposits made by us for the purchase of manufacturing equipment and

payable and accrued liabilities decreased at December 31, 2023 by $577,124 and increased at December 31, 2022 by $995,340, respectively.

cash used in investing activities for the year ended December 31, 2023 was $3,756,364 compared to $11,150,776 in the prior year.

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

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

cash provided by financing activities for the year ended December 31, 2023 was $4,431,965 compared to $5,182,160 in the prior year.

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.

the year ended December 31, 2023 the Company received net proceeds of $4,475,869 from the sale of shares and pre-funded warrants.

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

Cash Requirements from Known Contractual and Other Obligations

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Equipment purchases

Contractual Obligations

Total Contractual

intend to fund our contractual obligations with working capital.

Sheet Arrangements

Accounting Policies

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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.

and Cash Equivalents - Cash and cash equivalents includes cash on account and demand deposits with maturities of three months or

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 risk.

Cash and cash equivalents include restricted cash at December 31, 2023 and 2022 totaling $730,802

and $411,016, respectively.

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

Receivables are reviewed individually for collectability.

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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

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

review of accounts receivable at the end of each period.

At December 31, 2023 and 2022, 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:

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

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

Recognition – In accordance with Accounting Standards Codification (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;

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

useful lives:

and equipment

Manufacturing

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