What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-05-16 compared with 2023-11-14 · 257 added, 346 removed, 171 unchanged (78% of the section changed)

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otherwise stated, all information presented herein is based on the Company’s fiscal calendar, and references to particular years,

quarters, months or periods refer to the Company’s fiscal years ended in March and the associated quarters, months and periods

quarters, months or periods refer to the Company’s fiscal years ended December 31st and the associated quarters, months and periods

of those fiscal years.

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and its subsidiaries, unless otherwise stated.

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

following discussion should be read in conjunction with the Company’s Annual Report Form 10-K for the fiscal year ended December 31, 2023 filed with the U.S.

Securities and Exchange Commission (the

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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 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.

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

Environment Favoring Electric Vehicles

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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.

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

While we are primarily focused

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

positioned to benefit greatly from any bill that increases the prevalence of such vehicles.

Competitive Landscape

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

competitive products in an otherwise consolidated and saturated market.

The Worksport COR 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

local assembly people, machine operators, and clerical workers.

Both job fairs proved to

be a success, the former of which attracted nearly 100 applicants.

May 2023, Worksport had completed its installation of its custom manufacturing line, at which

point it was ready to conduct training sessions and test production runs.

That same month,

Worksport sent a potential private-label customer hard-folding tonneau cover samples –

samples that were approved shortly thereafter.

Further, much of the raw materials required

for a first full production run were received in May 2023.

June 2023, Worksport announced the launch of a new product line:

the SC4 PRO, a soft, quad-fold

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

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

in West Seneca, New York.

This change symbolizes Worksport’s focus on domestic manufacturing

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.

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 three months ended March 31, 2024:

March 28, 2024, we announced receipt of solar panels required to begin production of the

highly anticipated SOLIS Solar Tonneau Cover.

This milestone marks a significant step forward,

allowing the Company to begin initial production of the SOLIS Solar Tonneau Cover.

● On February

23, 2024, we announced a new arrangement with Dix Performance North, Canada’s leading

wholesaler of aftermarket car and truck products, for Dix to include our tonneau covers

in their catalog.

This strategic alliance is expected to make the Company’s range of

covers widely available throughout Canada, accelerate our growth, and contribute to significant

sales and revenue increases.

● On 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.

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.

Factors Affecting our Performance

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factory in West Seneca, NY.

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.

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

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

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.

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

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

container handling costs faced in recent periods, Worksport factors in all costs when assessing proper pricing of its goods for sale.

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 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.

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.

We continue to explore debt

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

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

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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 the Company have not faced dramatic

Regardless, the Company 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 will prioritize transport by rail when possible to avoid high trucking costs.

2022, Russia initiated significant military action against Ukraine.

February 2022, Russia initiated significant military action against Ukraine.

In response, the U.S.

and certain other countries imposed significant

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

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

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

other retaliatory actions should the conflict continue or worsen.

It is not possible to predict the broader consequences of 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.

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.

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 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.

we do not have any direct operations or significant sales in the Middle East, geopolitical tensions and ongoing conflicts in the region,

particularly between Israel and Hamas, may lead to global economic instability and fluctuating energy prices that could materially affect

our business.

It is not possible to predict the broader consequences of the Israel-Hamas war, 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, the Israel-Hamas

war 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

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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.

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 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.

Months Ended March 31, 2024 compared to the Three Months Ended March 31, 2023

the three months ended March 31, 2024, revenues from our entire line of products was $512,637, as compared to $31,925 for the three months

ended March 31, 2023.

Year-over-year sales increased by approximately 1,506%.

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.

For the three months ended March 31, 2024, revenue generated

in Canada was $20,007, as compared to $5,522 for the same period in 2023.

For the three months ended March 31, 2024, revenue generated

in the United States was $492,630, compared to $26,403 for the same period in 2023, an increase of 1,766%.

increased during the three months ended March 31, 2024 compared to the same period the prior year due to increased sales of soft

tonneau covers to a private label partner.

The Company 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 United States and Canada.

We intend to gradually increase output capacity through refined

production processes and increased personnel.

from online retailers of our products increased from $26,434 during the three months ended March 31, 2023, to $45,886 during the

three months ended March 31, 2024.

Online retailers accounted for 5% of total revenue for the three months ended March 31, 2024,

compared to 83% for the three months ended March 31, 2023.

Distributor sales decreased for the three months ended March 31, 2024,

compared with the three months ended March 31, 2023, with sales of $0 and $5,491, respectively.

Private label sales increased from

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

$0 for the three months ended March 31, 2023, to $466,751 for the three months ended March 31, 2024.

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.

for 91% of total revenue for the three months ended March 31, 2024.

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 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

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

This does not

include multiple independent online retailers.

We currently support a network of dealers and distributors, and we intend to continue expanding

our business and online sales channels in 2024.

of sales increased by 2,305%, from $19,757 for the three months ended March 31, 2023, to $475,181 for the three months ended March 31,

Our cost of sales, as a percentage of sales, was approximately 93% and 62% for the three months ended March 31, 2024 and 2023,

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.

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.

Our overhead per domestic unit was particularly high during the three months ended March 31, 2024 due

to this allocation of resources.

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 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 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.

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

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.

expenses increased for the three months ended March 31, 2024 by $134,806, from $3,542,116 for the three months ended March 31, 2023 to

$3,676,922, due to the following factors:

General and administrative

expenses increased by $544,706, from $2,129,612 in 2023 to $2,674,318 in 2024.

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.

Sales and marketing expenses

decreased by $477,574, from $544,351 for 2023 to $66,777 for 2024.

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.

Professional fees, which

include accounting, legal, and consulting fees, increased from $868,611 in 2023 to $943,778 in 2024.

The increase in professional

fees was due primarily to increased expenditure related to stock options and restricted stock compensation with consultants and employees.

We realized a gain on foreign

exchange of $7,951 during 2024, compared to a gain on foreign exchange of $458 for the prior period due to conversions between CAD

Income and Expenses

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.

reported other expenses for the three months ended March 31, 2024 of $75,191, compared to a gain of $6,678 for three months ended March 23, 2023.

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 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 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

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 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 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.

This includes any import duty charges, taxes,

and shipping charges.

Discounts are applied if the distributor or retailer chooses to use their own shipping process.

Certain exceptions

apply on rare occasions where product is shipped outside the contiguous United Sates or from the United States to Canada.

Volume discounts

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

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

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.

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 $479,333 from $1,953,243 for 2022 to $1,473,910 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 $4,160,059 in 2022 to $2,899,190 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 $2,407 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 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

loss for the three months ended March 31, 2024 was $3,714,657, compared to a net loss of $3,523,270 for the three months ended March 31,

2023 – an increase of 5%.

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

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.

the three months ended March 31, 2024 ,

the Company had a net loss of $3,714,657 (2023 - $3,523,270).

As of March 31, 2024 , the

Company has working capital of $2,901,401 (December 31, 2023 - $1,956,894) and had an accumulated deficit of $52,027,834 (December

31, 2023 - $48,313,177).

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.

During the year ended

December 31, 2021, the Company, through its Reg-A public offering, private placement offering, underwritten public offering, and exercises

of warrants, raised an aggregate of approximately $32,500,000.

On 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, 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

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

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 continue its ramp-up of manufacturing and increasing sales volumes in 2024, 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 was completed for initial production output in 2023 and has started to generate revenue in the third quarter of 2023.

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

year ended December 31, 2021, the Company, through its Reg-A public offering, private placement offering, underwritten public offering,

and exercises of warrants, raised an aggregate of approximately $32,500,000.

On 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, 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”), with H.C.

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

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 March 31, 2024, the Company has sold and issued 604,048 shares of common

stock in consideration for net proceeds of $780,356 under the ATM Agreement.

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.

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

November 2, 2023, the Company consummated a registered direct offering pursuant to which it sold 1,925,000 shares of common stock

and 1,575,000 pre-funded warrants to an institutional investor for a total net proceeds of $4,261,542.

Concurrently with the

registered direct offering, the Company issued the same institutional investor 7,000,000 warrants in a private sale.

are exercisable for 7,000,000 shares of common stock for $1.34 per share six months after issuance until five and a half years from the issuance date, subject to beneficial ownership limitations as described in the warrants.

The Company registered the 7,000,000

shares of common stock underlying the warrants on a Form S-1 (333-276241) which was declared effective by the SEC on December 29, 2023.

March 20, 2024, the Company consummated a registered direct offering pursuant to which it sold 2,372,240 shares of common stock and

1,477,892 pre-funded warrants to the same institutional investor as in the Company’s registered direct offering on November 2,

2023, for a total net proceeds of $2,629,083.

Concurrently with the registered direct offering, the Company issued the

institutional investor 7,700,264 warrants in a private sale.

The warrants are exercisable for 7,700,264 shares of common stock for $0.74 per share six months after issuance until five and a half years from

the issuance date, subject to beneficial ownership limitations contained in the warrants.

The Company registered the 7,700,264 shares of common stock underlying the warrants on a Form S-1 (333-278461) which was declared effective by the SEC on April 8, 2024.

disclosed in the footnotes to our financial statements, on May 14, 2024, the Company and Worksport New York Operations Corporation (“Worksport

New York”) entered into an Omnibus Amendment of Loan Documents (the “Loan Amendment”) with Northeast Bank (the “Lender”).

This amendment pertains to the secured loan agreement dated May 4, 2022, which was originally used to finance the purchase of our facility

and land in West Seneca, New York.

Effective as of May 10, 2024, the Lender extended the maturity date of the loan from May 10, 2024,

to August 10, 2024.

This extension alleviates immediate cash flow pressures by postponing the loan repayment, allowing us to manage our

resources more effectively and focus on other operational needs.

As part of the Loan Amendment, we agreed to pay the Lender an extension

fee of $106,000.

This fee is deemed fully earned but will be waived if the loan is repaid in full on or before the new maturity date.

If the loan is not repaid by the extended maturity date or is accelerated due to default, the fee will become payable.

Additionally,

we agreed to an exit fee of $106,000 under similar conditions.

This fee will be waived if the loan is repaid on or before the new maturity

date without acceleration.

This loan extension demonstrates our ability to negotiate favorable terms with our creditors and underscores

our commitment to maintaining strong liquidity.

This strategic decision supports our long-term growth and helps us navigate the current

economic and interest rate environment more effectively.

The details of the Loan Amendment have been filed as an exhibit to this report

and are incorporated by reference herein.

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

exercises of outstanding warrants.

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.

Company 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.

4 unchanged sentences

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

Flow Activities

increased from $3,365,778 at December 31, 2023, to $3,536,980 at March 31, 2024 – an increase of $171,202 or 5%.

The increase was

primarily due to the closing of sale of shares during the three months ended March 31, 2024, raising approximately $3,200,000.

of March 31, 2024, we had current assets of $10,744,959 (December 31, 2023 - $9,123,506) and current liabilities of $7,843,558 (December

31, 2023 – $7,166,612).

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.

As of March 31, 2024, we had working capital of $2,901,401 (December 31, 2023 – $1,956,894) and an

accumulated deficit of $52,027,834 (December 31, 2023 - $48,313,177).

cash used by operating activities for the three months ended March 31, 2024 was $2,794,604, compared to $2,934,410 in the prior period,

primarily driven by a larger net loss during the three months ended March 31, 2024, and partially offset by the issuance of shares, stock

options, and warrants for services.

receivable decreased at March 31, 2024 by $306,778 and increased by $38,013 in the prior period.

The decrease in accounts receivable

was due to the collection of accounts receivable from a private label partner.

increased at March 31, 2024 by $2,908,354, and at March 31, 2023 by $257,423, as a result of our stockpiling components for

production as well as finished goods in anticipation of the launch of targeted sales campaigns expected to drive significant sales

volumes in our business to consumer department.

Prepaid expenses decreased by $1,155,090 at March 31, 2024, and increased by

$742,590 at March 31, 2023 due to deposits used and made by us for the purchase of

manufacturing equipment and inventory, respectively.

payable and accrued liabilities increased at March 31, 2024 by $810,688 compared to an decrease of $6,799 in the prior period.

cash used in investing activities for the three months ended March 31, 2024 was $212,969 compared to $1,153,229 in the prior period.

The decrease in investing activities was primarily attributable to higher capital expenditure on various manufacturing equipment in

cash generated by financing activities for the three months ended March 31, 2024 was $3,178,775 compared to net cash used from

financing activities of $43,904 in the prior period.

Sheet Arrangements

18 unchanged sentences

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What changed 10-Q

Item 2. Management’s Discussion and Analysis