The following discussion and analysis is intended to help investors understand
our business, financial condition, results of operations, liquidity, and capital
resources. You should read this discussion together with our consolidated
financial statements and related notes thereto included elsewhere in this Form
10-Q and in conjunction with the Company's Form 10-K for the year ended December
31, 2021 filed with the Securities Exchange Commission ("SEC") on April 18,
2022. All common share and per common share numbers have been retroactively
adjusted to reflect the 1-for-10 reverse stock split effected on April 15, 2020
and the 1-for-150 reverse stock split effected on April 25, 2022.

 23



                           FORWARD LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains "forward-looking statements," which
include information relating to future events, future financial performance,
financial projections, strategies, expectations, competitive environment and
regulation. Words such as "may," "should," "could," "would," "predicts,"
"potential," "continue," "expects," "anticipates," "future," "intends," "plans,"
"believes," "estimates," and similar expressions, as well as statements in
future tense, identify forward-looking statements. Forward-looking statements
should not be read as a guarantee of future performance or results and may not
be accurate indications of when such performance or results will be achieved.
Forward-looking statements are based on information we have when those
statements are made or management's good faith belief as of that time with
respect to future events and are subject to significant risks and uncertainties
that could cause actual performance or results to differ materially from those
expressed in or suggested by the forward-looking statements. Important factors
that could cause such differences include, but are not limited to:

? the impact of the worldwide COVID-19 pandemic and government actions, on our


   business;



 ? supply chain disruptions;

? our limited operating history;

? our ability to manufacture, market and sell our products;

? our ability to maintain or protect the validity of our U.S. and other patents

and other intellectual property;

? our ability to launch and penetrate markets;

? our ability to retain key executive members;

? our ability to internally develop new inventions and intellectual property;

? interpretations of current laws and the passages of future laws; and

? acceptance of our business model by investors.

The foregoing does not represent an exhaustive list of matters that may be covered by the forward-looking statements contained herein or risk factors that we are faced with that may cause our actual results to differ from those anticipated in our forward-looking statements.



Moreover, new risks regularly emerge and it is not possible for our management
to predict or articulate all risks we face, nor can we assess the impact of all
risks on our business or the extent to which any risk, or combination of risks,
may cause actual results to differ from those contained in any forward-looking
statements. All forward-looking statements included in this Quarterly Report on
Form 10-Q are based on information available to us on the date of this Quarterly
Report on Form 10-Q. Except to the extent required by applicable laws or rules,
we undertake no obligation to publicly update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise.
All subsequent written and oral forward-looking statements attributable to us or
persons acting on our behalf are expressly qualified in their entirety by the
cautionary statements contained above and throughout this Quarterly Report on
Form 10-Q.

Business Overview

Our Company was formed to design, manufacture, and distribute innovative tools
and accessories to the building industry. The global tool market industry is a
multibillion-dollar business.

ToughBuilt's business is based on development of innovative and state-of-the-art
products, primarily in tools and hardware category, with particular focus on
building and construction industry with the ultimate goal of making life easier
and more productive for the contractors and workers alike.

Our three major categories contain a total of 11 product lines, consisting of
(i) Soft Goods, which includes kneepads, tool bags, pouches and tool belts, (ii)
Metal Goods, which consists of sawhorses, tool stands and workbench and (iii)
Utility Products, which includes utility knives, aviation snips, shears, lasers
and levels. The Company also has several additional categories and product lines
in various stages of development.

24





We are continuing to focus our efforts on increased marketing campaigns, and
distribution programs to strengthen the demand for our products globally.
Management anticipates that our capital resources will improve and our products
gain wider market recognition and acceptance resulting in increased product
sales.

As discussed below, while the Company has faced the impacts of COVID-19 and
inflation, we have been able to obtain significant revenue growth.
Notwithstanding, we have incurred substantial operating losses since our
inception and anticipate incurring additional losses for the foreseeable future
until such time, if ever, that we can commercialize our technology currently in
development. In their audit report included in the Quarterly Report on Form
10-Q, our auditors have expressed that there is substantial doubt as to our
ability to continue as a going concern. To fund our operations and grow our
business, we will require to fund our capital requirements through the sale of
debt or equity securities or other arrangements to fund operations. There can be
no assurances that will be able to obtain additional financing on acceptable
terms, if at all. If the Company is unable to obtain such additional financing,
future operations would need to be scaled back or discontinued. See "
Liquidity and Capital Resources; Going Concern
" below and Item 1A. Risk Factors "
Going Concern
" and "
We will require additional capital in order to achieve commercial success and,
if necessary, to finance future losses from operations as we endeavor to build
revenue, but we do not have any commitments to obtain such capital and we cannot
assure you that we will be able to obtain adequate capital as and when required
" in
the Company's Annual Report on Form 10-K for the year ended December 31, 2021
filed with the SEC on April 18, 2022.

Corporate History



We were incorporated in the State of Nevada on April 9, 2012, as Phalanx, Inc.
We changed our name to ToughBuilt Industries, Inc. on December 29, 2015. On
September 18, 2018, we effected a 1-for-2 reverse stock split of our common
stock. We consummated our initial public offering pursuant to a registration
statement on Form S-1 (File No: 333- 22610) declared effective by the SEC on
November 8, 2018, and became an Exchange Act reporting company pursuant to a
Form 8-A (File No. 001-38739) on November 8, 2018. On April 15, 2020, we
effected a 1-for-10 reverse stock split of our outstanding common stock. On
April 25, 2022, we effected a 1-for-150 reverse stock split of our outstanding
common stock. All share amounts and dollar amounts have been adjusted for the
reverse stock splits.

Business Developments

The following highlights material business developments in our business during
the fiscal year ended December 31, 2021 and during the first quarter ended March
31, 2022:

· On February 17, 2021, we announced that we have grown our business from four

stock keeping units (SKUs) to 25 SKUs with Toolstation, a Netherlands based

company with over 60 stores in the Netherlands, Belgium and Luxembourg and one

of the highly respected single-source suppliers of tools, accessories, and

building products for professionals and serious do-it-yourselfers. These SKUs

include current ranges of ToughBuilt's steel sawhorse line, soft-sided tool

storage, and kneepads and have been slotted for immediate placement in all

stores and in Toolstation's catalog;

· In November 2021, we launched two new product lines, ToughBuilt lasers and

levels, and fully integrated with our mobile application, ToughBuilt Connect,

allowing professional and DIY builders to quickly measure rooms, seamlessly

upload information to a smartphone, and create shareable information with the


   touch of a button;

· In December 2021, we launched a new product line, the ToughBuilt Workbench,

available for purchase across our strategic global partners and buying groups

servicing over 14,400 stores worldwide;

· In August 2021, we launched a new product line, the ToughBuilt utility knives;

· In September 2021, we launched ToughBuilt Brazil;





 25

· In 2021, our total revenues, net of allowances, totaled approximately $70.0

million as compared to approximately $39.4 million in 2020, including a 71%

increase in online sales through Amazon.com from $7 million for 2020 to $12


   million for 2021; and

· Since the beginning of 2021, we have raised a total of approximately

$87.5 million in net proceeds in registered equity offerings.

Our Products



TOUGHBUILT® manufactures and distributes an array of high-quality and rugged
toolbelts, tool bags, and other personal tool organizer products. We also
manufacture and distribute a complete line of knee pads for various construction
applications, and a variety of metal goods, including utility knives, aviation
snips, shears, and digital measures such as lasers and levels. Our line of job
site tools and material support products consists of a full line of miter saw
and table saw stands, sawhorses/job site tables, roller stands, and workbench.
All of our products are designed and engineered in the United States and
manufactured in China, India, and the Philippines under our quality control
supervision. We do not need government approval for any of our products.

Soft Goods



The flagship of the product line is the soft goods line that consists of over
100 variations of tool pouches, tool rigs, toolbelts and accessories, tool bags,
totes, a variety of storage solutions, and office organizers/bags for
laptop/tablet/cellphones, etc. Management believes that the breadth of the line
is one of the deepest in the industry and has specialized designs to suit
professionals from all sectors of the industry including plumbers, electricians,
framers, builders, and more.

We have a selection of over 10 models of kneepads, some with unique patented
design features that allow the users to interchange components to suit
particular conditions of use. Management believes that these kneepads are among
the best performing kneepads in the industry. Our "all terrain" knee pad
protection with snapshell technology is part of our interchangeable kneepad
system which helps to customize the job site needs. They are made with superior
quality using multilevel layered construction, heavy-duty webbing, and
abrasion-resistant PVC rubber.

Metal Goods



Sawhorses and Work Support Products
The second major category consists of Sawhorses and Work Support products with
unique designs targeted at the most discerning users in the industry. The
innovative designs and construction of the more than 15 products in this
category have led to the sawhorses becoming among the best sellers of the
category everywhere they are sold. The newest additions in this category include
several stands and work support products that are quickly gaining recognition in
the industry and are expected to position themselves in the top tier products in
a short time. Our sawhorse line, miter saw, table saw & roller stands, and
workbench are built to very high standards. Our sawhorse/job site table is fast
to set up, holds 2,400 pounds, has adjustable heights, is made of all-metal
construction, and has a compact design. We believe that these lines of products
will become the standard in the construction industry.

Electronic Goods

Digital measures and levels



TOUGHBUILT's third major product line is the digital measure and levels. These
digital measures are targeted toward the PROs for accurate job site measuring,
to make sure the job is done right and in time. These digital measures help
calculate what amount of construction product is needed to finish the job, such
as measures for floors, tile, and paint.

Our Business Strategy



Our product strategy is to develop product lines in a number of categories
rather than focus on a single line of goods. We believe that this approach
allows for rapid growth, wider brand recognition, and may ultimately result in
increased sales and profits within an accelerated time period. We believe that
building brand awareness of our current ToughBuilt lines of products will expand
our share of the pertinent markets. Our business strategy includes the following
key elements:

· A commitment to technological innovation achieved through consumer insight,

creativity, and speed to market;





 26

· A broad selection of products in both brand and private labels;

· Prompt response;

· Superior customer service; and




 · Value pricing.

We will continue to consider other market opportunities while focusing on our customers' specific requirements to increase sales.

Market



In addition to the construction market, our products are marketed to the
"Do-It-Yourself" and home improvement marketplace. The U.S. housing stock of
more than 130 million homes requires regular investment merely to offset normal
depreciation. According to Statista.com
1
, in recent years, the U.S. home improvement industry has witnessed steady
growth, and the trend is expected to continue in the near future. A significant
increase occurred in 2020, mostly due to the outbreak of the coronavirus
(COVID-19) pandemic and the lockdowns which ensued, leading people to stay home
more often than before and take up hobbies and projects such as DIY home
improvement. According to a Joint Center for Housing Studies forecast, homeowner
improvements and repair expenditures were expected to reach roughly 370 billion
U.S. dollars in the first quarter of 2022. Aside from the COVID pandemic
2
, the rising real estate prices in many Western countries were a likely
contributing factor to the increase in home improvement projects. With real
estate price changes outperforming wage increases, homeowners may have opted for
upgrading their homes instead of purchasing a new house.

TOUGHBUILT® products are available worldwide in many major retailers ranging
from home improvement and construction products and services stores to major
online outlets. Currently, we have placements in Lowes, Home Depot, Menards,
Bunnings (Australia), Princess Auto (Canada), Dong Shin Tool PIA (S. Korea) as
well as seeking to grow our sales in global markets such as Western and Central
Europe, Eastern Europe, South America, and the Middle East.


1
"Home Depot and Lowe's: average amount spent by consumers 2011-2021"; published
by C. Simionato (April 26, 2022);
https://www.statista.com/statistics/240861/average-amount-spent-by-consumers-at-the-home-depot-and-lowes/
2
"Home improvement projects - statistics & facts"; published by C. Simionato;
(Jan 12, 2022); https
://www.statista.com/topics/7899/home-improvement-projects/#topicHeader__wrapper

 27



Retailers by region include:

• United States: Lowe's, Home Depot, Menards, GM products, Fire Safety, Hartville

Hardware, ORR, Pooley, YOW, Wesco, Buzzi, and Western Pacific Building


   Materials.


 • Canada: Princess Auto.

• United Kingdom: Toolbank (distribution throughout the UK and online selling for

Europe).

• Australia: Kincrome, and Bunnings.

• New Zealand: Kincrome, and Bunnings.

• Russia: VSEInstrumenti.ru.

• South Korea: Dong Shin Tool PIA Co., Ltd.

We are actively expanding into markets in Mexico and other Latin American countries, the Middle East, and South Africa.



We are currently in product line reviews and discussions with Home Depot Canada,
Do It Best, True Value, and other major retailers both domestically and
internationally. A product line review requires the supplier to submit a
comprehensive proposal that includes product offerings, prices, competitive
market studies, relevant industry trends, and other information. Management
anticipates, within the near term, adding to its customer base up to three major
retailers, along with several distributors and private retailers within six
sectors and among fifty-six targeted countries.

New Products

Tools

In 2021, we launched the following product lines:



 • Lasers;


 • Levels;


 • Utility knives; and


 • Workbench.



Mobile Device Products

Since 2013, we have been planning, designing, engineering, and sourcing the
development of a new line of ToughBuilt mobile devices and accessories to be
used in the construction industry and by building enthusiasts. We are planning
to have our mobile device products ready to market in 2024 at which time we
intend to commence marketing and sell our mobile device products to our current
global customer base. We believe that an increasing number of companies in the
construction industry are requiring their employees to utilize mobile devices
not just to communicate with others but to utilize the special apps that will
allow the construction workers to do their job better and more efficiently. All
of our mobile devices are designed and built in accordance with IP-68 and to a
military standard level of durability.

Our ruggedized mobile line of products was created to place customized
technology and wide varieties of data in the palm of building professionals and
enthusiasts such as contractors, subcontractors, foremen, general laborers, and
others. We are designing the devices, accessories, and custom apps to allow the
users to plan with confidence, organize faster, find labor and products faster,
estimate accurately, purchase wisely, protect themselves, workers, and their
business, create and track invoicing faster and easier.

Commencing in 2024, we intend to launch the following accessories: car charger,
QI charger, car mounts, and earbud pack, and we will focus on sales in the
following industries: construction, industrial, military, and law enforcement
and "dotcoms." In late 2024, we intend to launch our T.55 rugged mobile phones
and earbud headphones, as well as a "T-Dock," attachable battery, tri lens
camera, and tough shield cover and accessories.

28

In late 2024, we also intend to launch applications for our mobile phones relating to the following topics:



 1. National building codes


 2. Inspection booking


 3. Labor ready

4. Estimating apps & programs




 5. Structural engineers


 6. Architects


 7. Building plans


 8. Workers comp


 9. Equipment insurance

10. Project insurance & bonds




 11. Vehicle insurance


 12. Liability insurance


 13. Umbrella insurance


 14. Collection agencies


 15. Construction loans


 16. Small business loans


 17. Job listings


 18. Tool exchange



Intellectual Property

We hold several patents and trademarks of various durations and believe that we
hold or have applied for, or license all of the patent, trademark, and other
intellectual property rights necessary to conduct our business. We utilize
trademarks (licensed and owned) on nearly all of our products and believe having
distinctive marks that are readily identifiable is an important factor in
creating a market for our goods, in identifying our brands and our Company, and
in distinguishing our goods from the goods of others. We consider our ToughBuilt
®
, Cliptech
®
, and Fearless
®
trademarks to be among our most valuable intangible assets. Trademarks
registered both in and outside the U.S. are generally valid for 10 years,
depending on the jurisdiction, and are generally subject to an indefinite number
of renewals for a like period on appropriate application.

In 2019, the United States Patent and Trademark Office (USPTO) granted two new
design patents (U.S. D840,961 S and US D841,635 S) that cover ToughBuilt's
ruggedized mobile devices, which are valid for a period of 15 years. We also
have several patents pending with the USPTO and anticipate three or four of them
to be granted in the near future.

Competition



The tool equipment and accessories industry is highly competitive on a worldwide
basis. We compete with a significant number of other tool equipment and
accessories manufacturers and suppliers to the construction, home improvement
and Do-It-Yourself industry, many of which have the following:

? Significantly greater financial resources than we have;

? More comprehensive product lines;

? Longer-standing relationships with suppliers, manufacturers, and retailers;

? Broader distribution capabilities;

? Stronger brand recognition and loyalty; and

? The ability to invest substantially more in product advertising and sales.





 29



Our competitors' greater capabilities in the above areas enable them to better
differentiate their products from ours, gain stronger brand loyalty, withstand
periodic downturns in the construction and home improvement equipment and
product industries, compete effectively on the basis of price and production,
and more quickly develop new products. These competitors include DeWalt,
Caterpillar, and Samsung Active.

The markets for our mobile products and services are also highly competitive and
we are confronted by aggressive competition in all areas of its business. These
markets are characterized by frequent product introductions and rapid
technological advances that have substantially increased the capabilities and
use of mobile communication and media devices, personal computers and other
digital electronic devices. Our competitors who sell mobile devices and personal
computers based on other operating systems have aggressively cut prices and
lowered their product margins to gain or maintain market share. Our financial
condition and operating results can be adversely affected by these and other
industry-wide downward pressures on gross margins. Principal competitive factors
important to us include price, product features, relative price/performance,
product quality and reliability, design innovation, a strong third-party
software and peripherals ecosystem, marketing and distribution capability,
service and support, and corporate reputation.

We are focused on expanding its market opportunities related to mobile
communication and media devices. These industries are highly competitive and
include several large, well-funded and experienced participants. We expect
competition in these industries to intensify significantly as competitors
attempt to imitate some of the features of the Company's products and
applications within their own products or, alternatively, collaborate with each
other to offer solutions that are more competitive than those they currently
offer. These industries are characterized by aggressive pricing practices,
frequent product introductions, evolving design approaches and technologies,
rapid adoption of technological and product advancements by competitors, and
price sensitivity on the part of consumers and businesses. Competitors include
Apple, Samsung, and Qualcomm, among others.

Key factors affecting our performance



As a result of a number of factors, our historical results of operations may not
be comparable to our results of operations in future periods, and our results of
operations may not be directly comparable from period to period. Set forth below
is a brief discussion of the key factors impacting our results of operations.

Known Trends and Uncertainties

Seasonality



Our business is a seasonal business as a result of our China-based production.
For the first calendar quarter, we are not able to ship our products from China
due to the hiatus as a result of their New Year holidays. We typically make up
the lost sales from the first calendar quarter in the subsequent quarters.

COVID-19



In March 2020, the World Health Organization declared the outbreak of a novel
coronavirus (COVID-19) as a pandemic which continues to spread throughout the
United States and the world. We are currently monitoring the outbreak of
COVID-19 and the related business and travel restrictions and changes to
behavior intended to reduce its spread. All of our Chinese facilities were
temporarily closed for a period of time. All of these facilities have been
reopened. Depending on the progression of the outbreak, our ability to obtain
necessary supplies and ship finished products to customers may be partly or
completely disrupted globally. To date we have been able to obtain supplied and
products needed. Also, our ability to maintain appropriate labor levels could be
disrupted. If the coronavirus continues to progress, it could have a material
negative impact on our results of operations and cash flow, in addition to the
impact on its employees.

Due to the speed and fluidity with which the COVID-19 pandemic continues to
evolve, and the emergence of highly contagious variants, we do not yet know the
full extent of the impact of COVID-19 on our business operations. The ultimate
extent of the impact of any epidemic, pandemic, outbreak, or other public health
crisis on our business, financial condition and results of operations will
depend on future developments, which are highly uncertain and cannot be
predicted, including new information that may emerge concerning the severity of
such epidemic, pandemic, outbreak, or other public health crisis and actions
taken to contain or prevent the further spread, including the effectiveness of
vaccination and booster vaccination campaigns, among others. Accordingly, we
cannot predict the extent to which our business, financial condition and results
of operations will be affected. We have concluded that while it is reasonably
possible that the virus could have a negative impact on the results of
operations, the specific impact is not readily determinable as of the date of
these financial statements. The financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

 30



Inflation

Prices 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 and tariffs. Increasing prices in the
component materials for the parts of our goods may impact the availability, the
quality and the price of our products, as suppliers search for alternatives to
existing materials and increase the prices they charge. Our suppliers may also
fail to provide consistent quality of product as they may substitute lower cost
materials to maintain pricing levels. Rapid and significant changes in commodity
prices may negatively affect our profit margins if the Company is unable to
mitigate any inflationary increases through various customer pricing actions and
cost reduction initiatives. To offset increased prices charged by our
manufacturers and increased shipping rates, we increased the prices of our
products in 2021.

Supply Chain



We acquire a majority of our products from manufacturers and distributors
located in China, India and the Philippines. We do not have any long-term
contracts or exclusive agreements with our foreign suppliers that would ensure
our ability to acquire the types and quantities of products we desire at
acceptable prices and in a timely manner. We utilize a number of techniques to
address potential disruption in and other risks relating to our supply chain,
including in certain cases the use of other qualified suppliers. We increased
our inventory from $38,432,012 at December 31, 2021 to $41,342,689 at March 31,
2022. Due to our increased inventory levels in 2021 and the quarter ended March
31, 2022, the ongoing supply chain disruptions have not had a material adverse
effect on our operations and we do not currently anticipate that any continued
supply chain disruptions will have a material adverse effect on our operations
for fiscal year 2022.

Reverse Stock Split

On April 25, 2022, we effected a 1-for-150 reverse stock split of our issued and
outstanding common stock as part of our plan to regain compliance with Nasdaq
Listing Rule 5550(a)(2) (the "Minimum Bid Price Requirement").  On May 9, 2022,
we were notified by Nasdaq that we regained compliance with Nasdaq's Minimum Bid
Price Requirement and that the matter was closed.

Results of Operations

The three months ended March 31, 2022 compared to the three months ended March 31, 2021.



Revenues

Revenues for the three months ended March 31, 2022 and 2021 were $17,220,744 and
$12,282,255, respectively, which consisted of metal goods, soft goods and
electronic goods sold to customers. Revenues increased in 2022 over 2021 by
$4,938,489, or 40.21%, primarily due to wide acceptance of our products in the
tools industry and receipt of recurring sales orders for metal goods and soft
goods from our existing and new customers, and introduction and sale of new soft
goods products to our customers.

Cost of Goods Sold



Cost of goods sold for the three months ended March 31, 2022 and 2021 was
$14,217,617 and $8,819,127, respectively. Cost of goods sold increased in 2022
over 2021 by $5,398,490, or 61.21%, primarily due to our increased sales as well
as increases in materials (e.g., steel and plastics polyester) to manufacture
metal goods and soft goods and increase in labor cost in China. Cost of goods
sold as a percentage of revenues in 2022 was 82.56% as compared to cost of goods
sold as a percentage of revenues in 2021 of 71.80%.

 31



Operating Expenses

Operating expenses consist of selling, general and administrative expenses and
research and development costs. Selling, general and administrative expenses
(the "SG&A Expenses") for the three months ended March 31, 2022 and 2021 were
$15,934,045 and $7,949,783, respectively. SG&A Expenses increased in 2022 over
2021 by $7,984,262, or 100.43%, primarily due to an increase in shipping costs,
marketing and advertising expenses for product launches and the hiring of
additional employees. SG&A Expense for the quarter ended March 31, 2022 as a
percentage of revenues was 92.53% compared to 64.73% for the quarter ended March
31, 2021. We expect our SG&A Expenses will start to increase at a lower rate as
our business matures, and we develop economies of scale.

Research and development costs ("R&D") for the three months ended March 31, 2022
and 2021 were $2,514,050 and
$1,406,385, respectively. R&D costs increased by $1,107,665, or 78.76%. This
increase was primarily due to the Company developing new tools for the
construction industry.

Other Expense



Other expense for the three months ended March 31, 2022 consisted of warrant
issuance costs in the amount of $275,130 and change in fair value of warrant
liabilities in the amount of $3,616,160. Other expense for the three months
ended March 31, 2021 consisted of interest expense of $160,619.

Net Income (Loss)



Due to factors set forth above, we recorded a net loss of $12,103,938 for the
three months ended March 31, 2022 as compared to a net loss of $6,053,659 for
the three months ended March 31, 2021.

Liquidity and Capital Resources; Going Concern



We had $936,000 in cash at March 31, 2022 compared to $7.5 million at December
31, 2021. The Company has incurred substantial operating losses since its
inception. As reflected in the consolidated financial statements, the Company
had an accumulated deficit of approximately $110.3 million at March 31, 2022, a
net loss of approximately $12.1 million, and approximately $10 million of net
cash used in operating activities for the three months ended March 31, 2022. The
accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and satisfaction of
liabilities in the normal course of business. The financial statements do not
include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amounts and classification of liabilities that
might result from the outcome of this uncertainty. The Company anticipates
incurring additional losses until such time, if ever, that it can obtain
marketing approval to sell, and then generate significant sales, of its
technology that is currently in development. As such it is likely that
additional financing will be needed by the Company to fund its operations and to
develop and commercialize its technology. These factors raise substantial doubt
about the Company's ability to continue as a going concern for the next twelve
months from issuance of this Quarterly Report on Form 10-Q.

We will seek to obtain additional capital through the sale of debt or equity
financings or other arrangements to fund operations; however, there can be no
assurance that the Company will be able to raise needed capital under acceptable
terms, if at all. The sale of additional equity may dilute existing stockholders
and newly issued shares may contain senior rights and preferences compared to
currently outstanding shares of common stock. Issued debt securities may contain
covenants and limit the Company's ability to pay dividends or make other
distributions to stockholders. If the Company is unable to obtain such
additional financing, future operations would need to be scaled back or
discontinued. Due to the uncertainty in the Company's ability to raise capital,
management believes that there is substantial doubt in the Company's ability to
continue as a going concern for the next twelve months from the issuance of
these consolidated financial statements.

32





On January 19, 2021, the Company filed a prospectus supplement dated January 15,
2021  to the Company's shelf registration statement on Form S-3 (File No.
333-251185) (the "First Form S-3") declared effective by the SEC on December 13,
2020 for the offer and sale of shares of common stock having an aggregate value
of $8,721,746 through H.C. Wainwright & Co., LLC, as sales agent ("Wainwright"),
pursuant to that certain At The Market Offering Agreement, dated December 7,
2020 (the "ATM Agreement"), between the Company and Wainwright. Pursuant to the
prospectus supplement, the Company sold an aggregate of 99,748 shares of common
stock for net proceeds of $16,242,904 after deducting underwriting discounts and
expenses.

On February 2, 2021, the Company filed a second registration statement on Form
S-3 (File No. 333-252630) (the "Second Form S-3") containing a base prospectus
covering the offering, issuance and sale by the Company of up to $100,000,000 of
the Company's common stock, preferred stock, warrants and units; and a sales
agreement prospectus covering the offering, issuance and sale by the Company of
up to a maximum aggregate offering price of $100,000,000 (which amount was
included in the aggregate offering price set forth in the base prospectus) of
the Company's common stock that may be issued and sold under that certain At The
Market Offering Agreement, dated February 1, 2021, between the Company and
Wainwright, as sales agent. The Second S-3 was declared effective by the SEC on
February 8, 2021. The Company terminated the First S-3 simultaneously with the
filing of the Second S-3. From February 2021 to July 2021, the Company sold an
aggregate of 125,508 shares of common stock through Wainwright with net proceeds
of $24,602,110, after deducting underwriting discounts and expenses.

On July 14, 2021, the Company sold an aggregate of 306,855 shares of common
stock to several institutional and accredited investors in a registered direct
offering pursuant to the Second Form S-3 for net proceeds of $36,259,050, after
deducting underwriting discounts and expenses.

On February 15, 2022, the Company entered into a Securities Purchase Agreement
(the "Purchase Agreement") with certain institutional investors, pursuant to
which the Company issued, in a registered direct offering, an aggregate of
$5,000,000 of Preferred Stock (split evenly among 2,500 shares Series F
Convertible Preferred Stock, par value $0.0001 per share ("Series F Preferred
Stock"), and 2,500 shares of Series G Convertible Preferred Stock, par value
$0.0001 per share ("Series G Preferred Stock"). The Series F Preferred Stock and
Series G Preferred Stock have a stated value of $1,000 per share and are
convertible into common stock at any time after the date of issuance. The
conversion rate, subject to adjustment as set forth in the Certificate of
Designation, is determined by dividing the stated value of the Series F
Preferred Stock and Series G Preferred Stock by $30 (the "Conversion Price").
The Conversion Price can be adjusted as set forth in the Certificate of
Designation for stock dividends and stock splits or the occurrence of a
fundamental transaction. The 2,500 shares of Series F Preferred Stock and 2,500
shares of Series G Preferred Stock are each convertible into 83,334 shares of
common stock. The Series F Preferred Stock and Series G Preferred Stock and the
underlying shares of common stock were offered pursuant to the Second Form S-3
(as defined above).

In a concurrent private placement, the Company also issued to such investors
unregistered warrants to purchase up to an aggregate of 125,000 shares of the
Company's common stock for $37.65 per share from April 15, 2022 until the fifth
year from the date of issuance.

The Company paid the placement agent a cash fee of 7% of the aggregate gross
proceeds raised in the offering, plus a management fee equal to 0.5% of the
gross proceeds raised in the offering and reimbursement of certain expenses and
legal fees. The Company also issued to designees of the placement agent warrants
to purchase up to 10,000 shares of Common Stock for $7.50

per share, subject to adjustment, from April 15, 2022 until February 15, 2027.

The Company plans to use its cash within the twelve months from March 31, 2022 and beyond for working capital and research and development.

33

© Edgar Online, source Glimpses