ATLANTIC INTERNATIONAL CORP. (ATLN) FY 2021 MD&A

ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

You should read the following discussion of
our financial condition and results of operations in conjunction with our audited consolidated financial statements for the year ended
December 31, 2021, and related notes included elsewhere in this report. This discussion and analysis and other parts of this report contain
forward-looking statements based upon current beliefs, plans and expectations that involve risks, uncertainties and assumptions. Our actual
results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result
of several factors, including those set forth under “Risk Factors” and elsewhere in this report. You should carefully read
the “Risk Factors” section of this report to gain an understanding of the important factors that could cause actual results
to differ materially from our forward-looking statements. Please also see the section entitled “Cautionary Note Regarding Forward-Looking
Statements and Industry and Market Data” in this report.

Overview

This overview and outlook provide a high-level
discussion of our operating results and significant known trends that affect our business. We believe that an understanding of these trends
is important to understanding our financial results for the periods being reported herein as well as our future financial performance.
This summary is not intended to be exhaustive, nor is it intended to be a substitute for the detailed discussion and analysis provided
elsewhere in this report.

About SeqLL

We are a development-stage life sciences instrumentation
and research services company engaged in the development of scientific assets and novel intellectual property across multiple “omics”
fields. We leverage our expertise with True Single Molecule Sequencing (tSMS) technology enabling researchers and clinicians to contribute
major advancements to scientific research and development.

Our customers are primarily the early adopters
of genomics technology and tSMS in academic research, biomarker discovery, and molecular diagnostic product development.

Our financial results have been, and will continue
to be, impacted by several significant trends, which are described below. While these trends are important to understanding and evaluating
our financial results, this discussion should be read in conjunction with our consolidated financial statements and the notes thereto
within the Consolidated Financial Statements section of this report, and trends discussed in “Risk Factors” within the Business
& Market Information section of this report.

Financial Overview

Beginning in 2020, the COVID-19 pandemic and international
efforts to control its spread have significantly curtailed the movement of people, goods, services and research worldwide, including in
the areas in which we conduct our business and collaborations. We expect the COVID-19 pandemic to continue to impact our business and
collaborations in 2022, the size and duration of which is significantly uncertain.

Consolidated financial highlights for 2021 included
the following:

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Results of Operations

Comparison of the Years Ended December 31, 2021 and 2020

The following table summarizes our results of operations for the years
ended December 31, 2021 and 2020:

Revenues

Our revenues during the year ended December 31,
2021, were $209,995 as compared to revenues of $329,495 during the year ended December 31, 2020, representing a decrease of $119,500,
or 36%. During 2021, revenue included product sales of $31,537, grants of $161,974 and $16,484 from research services as compared to revenue
in the same period of 2020 from product sales of $0, grants of $278,907 and $50,588 in research services. The change in revenue was primarily
a result of the reduction in research services and business activities due to the COVID-19 pandemic, as well as the reduction of the NIH
grant revenue.

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Gross Profit

Gross profit for the year ended December 31, 2021, was $152,305, as
compared to gross profit of $158,692 for the year ended December 31, 2020, resulting in a decrease of $6,387, or 4%. The gross profit
as the percentage of revenues was 72% as compared to 48% in 2020 as a result of the reduction in cost of sales attributed to the decrease
in the sales of products and services, including significantly reduced salaries, due to the COVID-19 pandemic.

Research and Development Expenses

Research and development expenses increased by $199,097, or 60%, for
the year ended December 31, 2021, as compared to the prior year. The increase in expenses was a result of the ramp up in our research
and development activities to levels of pre-COVID-19 pandemic.

We expect these expenditures to increase over the
first half of 2022 and beyond as we grow our research and development efforts to advance certain projects that were on hold during the
COVID-19 pandemic.

General and Administrative Expenses

General and administrative expenses increased $1,393,422, or 179%, for
the year ended December 31, 2021 as compared to the prior year. The increase was primarily attributable to increased operating expenses
related to the preparation for our initial public offering in August 2021, including professional fees for accounting and legal of approximately
$870,000, increased personnel expenses of approximately $275,000 (inclusive of $215,000 of one-time bonuses), increase rent expense of
approximately $55,000 due to higher rent prices, as well as increase of approximately $90,000 in Directors and Officers pro-rated insurance
premiums.

General and administrative expenditures should not increase, and possibly
decrease, during 2022, in comparison to 2021. This is due to no recurrence of the one-time professional fees related to the IPO. However,
this reduction will be mitigated somewhat due to the additional costs to support ongoing financial reporting and compliance activities.

Interest and Other Income/Loss

We recognized interest expense of $208,289 and $287,197 in the years
ended December 31, 2021, and 2020, respectively, representing a decrease of $78,908, or 27%, in 2021 over 2020. The decrease in interest
expense was due to a decrease in our outstanding indebtedness as a result of the conversion of $2.1 million in notes to equity concurrently
with the consumption of our initial public offering on August 31, 2021.

We recognized Other Income of $190,193 and $191,566 related to the
PPP loan forgiveness in the years ended December 31, 2021, and 2020, respectively, resulting in a decrease of $1,373, or 1%.

We recognized $36,463 and $43,078 of investment
income and unrealized losses on marketable securities for the year ended December 31, 2021, which was attributable to our
short-term investments held in mutual funds. We did not hold such investments during the year ended December 31, 2020.

We recognized a loss on extinguishment of
debt totaling $934,257 and a change of $195,962 in the fair value of convertible notes for the year ended December 31, 2021. The loss on the extinguishment of debt represented the excess of the fair value of certain
convertible notes totaling $3,075,987 over their carrying value of $2,141,730 at their amendment date in the first quarter of 2021.
The accounting loss of $195,962 was due to the change in fair value of the convertible notes carried at fair value between the
amendment date and their conversion at the IPO date.

Net Loss

Our net loss for the year ended December 31, 2021, increased by $2,658,205,
or 254%, to $3,703,558 as compared to $1,045,353 for the year ended December 31, 2020 due primarily to the extinguishment loss of $934,257
for the conversion features added to $2.1 million aggregate principal amount of promissory notes, and the increase in general and administrative
expenses as a result of our becoming a public company.

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Liquidity and Capital Resources

As of December 31, 2021, we had approximately $9.9 million in cash
and cash equivalents and marketable securities. Cash and cash equivalents increased significantly from prior year due to the “Financing
Activities” described in the “Cash Flow Summary” below. Since inception, we have funded our operations primarily through
equity and debt financings, as well as from modest sales of products and research services. As of December 31, 2021, we had an accumulated
deficit of $14,413,851.

From January to March 2021, we issued senior secured
convertible promissory notes to investors totaling $250,000 which were converted into shares of common stock upon our initial public offering
in August 2021.

In July and August of 2021, Daniel Jones our CEO
loaned us $90,000 and $50,000, respectively, of which both loans were repaid in full with proceeds from the IPO.

In August 2021, we issued 3,060,000 shares of common stock to investors
in our initial public offering. The gross proceeds from our initial public offering was $13.0 million. We incurred offering expenses of
$1.6 million in cash. We also converted $2.1 million of debt into 641,895 shares of common stock at our initial public offering.

On September 29, 2021, we issued 189,000 shares of common stock to
the underwriters at a price of $4.24 per share from the partial exercise of the overallotment option, increasing the net proceeds by approximately
$730,000, net of offering costs.

We
believe the net proceeds from our initial public offering, together with our cash generated from commercial sales and research
activity, will enable us to fund our operations for at least one year from the date this Annual Report on Form 10-K is
filed with the SEC. However, our forecast of the period of time through which our financial resources will be adequate to support
our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We
have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we
expect.

Our future capital requirements will depend on many factors, including:

We plan to continue seeking additional
financing sources from time to time to meet our working capital requirements, make continued investment in research and development
and make capital expenditures needed for us to maintain and expand our business. We may not be able to obtain additional financing
on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we
require it, or if we expend capital on projects that are not successful, our ability to continue to support our business growth and
to respond to business challenges could be significantly limited. In addition, if we raise additional funds through further
issuances of equity or debt securities, our existing stockholders could suffer significant dilution, and any new equity securities
we issue could have rights, preferences and privileges superior to those of holders of our common stock.

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Cash Flows

The following table sets forth the primary sources
and uses of cash and cash equivalents for each of the periods presented.

Net cash used in operating activities

Net cash used in operating activities was approximately
$2.0 million and $0.8 million for the years ended December 31, 2021 and 2020, respectively. The decreases in 2020 were primarily attributable
to reduced research and development and operating expenses as a result of the COVID-19 pandemic-related slowdown, including salary reductions,
furloughs and reduced spending. The increase in 2021 was primarily attributable to the significant expenses related to our operating as
a public company starting in the third quarter of 2021.

We anticipate our research and development efforts
and on-going general and administrative costs will generate negative cash flows from operating activities for the foreseeable future.

Net cash used in investing activities

Net cash used in investing activities was $6.0 million for the year
ended December 31, 2021, and none in the year ended December 31, 2020. The investing activities are related to the acquisition of highly
liquid short-term investments with the proceeds from our initial public offering.

Net cash provided by financing activities

Net cash provided by financing activities was approximately
$12.0 million and $0.75 million for the years ended December 31, 2021 and 2020, respectively. The increase was primarily attributable
to the proceeds raised in our initial public offering on August 31, 2021.

Recent Accounting Pronouncements

In August 2020, Financial Accounting Standards
Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2020-06, Debt—Debt with Conversion and Other
Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible
Instruments and Contracts in an Entity’s Own Equity, which, among other things, provides guidance on how to account for contracts
on an entity’s own equity. This ASU eliminates the beneficial conversion and cash conversion accounting models for convertible instruments.
It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because
of specific settlement provisions. In addition, this ASU modifies how particular convertible instruments and certain contracts that may
be settled in cash or shares impact the diluted EPS computation. The amendments in this ASU are effective for the public companies for
fiscal years beginning after December 15, 2021, including interim periods within those fiscal years.   Early adoption is permitted,
but no earlier than fiscal years beginning after December 15, 2020. We adopted this standard on January 1, 2022, for which, there was
no material impact to our consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (“ASU
2016-02”) which establishes new accounting and disclosure requirements for leases. ASU No. 2016-02 requires recognition in the statement
of operations of a single lease cost, calculated so that the cost of the lease is allocated over the lease term, generally on a straight-line
basis. ASU 2016-02 requires classification of all cash payments within operating activities in the statement of cash flows. Disclosures
are required to provide the amount, timing and uncertainty of cash flows arising from leases. We will adopt the provisions of ASU 2016-02
in the quarter beginning January 1, 2022, using the modified retrospective approach and will record right of use assets and lease liabilities
on its consolidated balance sheet for the leases with terms in excess of one year. A modified retrospective transition approach is required
for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented
in the financial statements, with certain practical expedients available. We adopted this standard on January 1, 2022.

We do not believe that any other recently
issued but not yet effective accounting pronouncements will have a material effect on the accompanying consolidated financial statements.

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Critical Accounting Policies and Estimates

Stock-based Compensation

Our share-based compensation program grants awards
including stock options and restricted stock awards. The fair value of stock option grants is estimated as of the date of the grant using
the Black-Scholes option pricing model. The fair value of restricted stock awards is based on the fair value of our common stock on the
date of the grant. The fair value of the stock-based awards are expensed over the requisite service period, generally the vesting period,
for each award.

Our expected stock price volatility assumption
is based on the volatility of comparable public companies. The expected term of a stock option granted to employees and directors (including
non-employee directors) is based on the average of the contractual term (generally 10 years) and the vesting period. For non-employee
options, the expected term is the contractual term. The risk-free interest rate is based on the yield of U.S. Treasury securities consistent
with the life of the option. No dividend yield was assumed as we do not pay dividends on common stock. We recognize forfeitures related
to stock-based awards as they occur.

We have periodically granted stock options and
restricted stock awards to consultants for services, pursuant to our stock plans at the fair market value on the respective dates of grant.
Should we terminate any of our consulting agreements, the unvested options underlying the agreements would be cancelled. For awards granted
to consultants and non-employees, compensation expense is recognized over the vesting period of the awards, which is generally the period
services are rendered by such consultants and non-employees.

We granted stock options to purchase an aggregate of 100,000 shares
of common stock in the year ended December 31, 2021, and did not grant any stock options during the year ended December 31, 2020.

Revenue Recognition

Our revenue is generated primarily from the sale
of products and research services. Product revenue primarily consists of sales of genetic sequencing equipment and sequencing reagent
kits. Research service revenue primarily consists of revenue generated from gene sequencing services and grants.

We recognize revenue in accordance with Accounting
Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). Under ASC 606, we
recognize revenue when control of our products and services is transferred to our customers in an amount that reflects the consideration
we expect to receive from our customers in exchange for those products and services. To determine the appropriate amount of revenue to
be recognized for arrangements determined to be within the scope of ASC 606, we perform a five-step process. This process involves identifying
the contract with a customer, determining the performance obligations in the contract, determining the contract price, allocating the
contract price to the distinct performance obligations in the contract, and recognizing revenue when (or as) the performance obligations
have been satisfied. A performance obligation is considered distinct from other obligations in a contract when it provides a benefit to
the customer either on its own or together with other resources that are readily available to the customer and is separately identified
in the contract. We only apply the five-step process to contracts when it is probable that we will collect consideration we expect to
be entitled to in exchange for the goods or services we transfer to the customer.

We evaluate contingent payments to estimate the
amount which is not probable of a material reversal to include in the transaction price using the most likely amount method. Future payments
that are not within our control and are not considered probable of being achieved until the contingencies are resolved.

Revenue from product sales, including customized
sequencing instruments and sequencing reagent kits and off-the-shelf consumables, is recognized generally upon delivery, which is when
control of the product is deemed to be transferred.

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Revenue from gene sequencing services, using the tSMS platform, is
recognized generally as the services are provided to the customer. The components of the sequencing process, including reagent kits and
off-the-shelf consumables, sample loader and sequencer, are not distinct within the context of the genetic sequencing service contract.
This is because in a gene sequencing service contract the reagent kits and other components, such as off-the-shelf consumables, used in
the sequencing process become required inputs to achieve the specified gene sequencing analysis, and the components in the sequencing
process are sequential in nature and highly interrelated as they work together to generate sample-specific data.

As our standard payment terms are less than one
year, we have elected the practical expedient under ASC 606-10-32-18 to not assess whether a contract has a significant financing component.

We have elected to exclude sales tax from revenue.
We generally have no obligations for returns, refunds and other similar obligations and do not provide separate equipment warranties.
We recognized $16,484 and $50,588 in revenue from gene sequencing services for the years ended December 31, 2021 and 2020, respectively.
We recognized $31,537 and $0 in revenue from product sales for the years ended December 31, 2021 and 2020, respectively.

Grant Revenue

Our grant revenues are derived from research programs
by various departments of the National Institute of Health (“NIH”).

Grants awarded to us for research and development
by government entities are outside the scope of the contracts with customers and contributions guidance. This is because these granting
entities are not considered to be customers and are not receiving reciprocal value for their grant support provided to us. These grants
provide us with payments for certain types of expenditures in return for research and development activities over a contractually defined
period.

We recognize NIH grant revenue as reimbursable grant costs that are
incurred up to pre-approved award limits within the budget period. The costs associated with these reimbursements are reflected as a component
of research and development expense in the accompanying consolidated statements of operations. In the years ended December 31, 2021, and
2020, we recognized grant revenue of $161,974 and $278,907, respectively.

JOBS Act

Section 107 of the JOBS Act provides that
an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the
Securities Act for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption
of new or revised accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected to
avail ourselves of this exemption from new or revised accounting standards and, therefore, we will not be subject to the same new or revised
accounting standards as other public companies that are not emerging growth companies.

For as long as we remain an emerging growth
company under the recently-enacted JOBS Act, we will, among other things:

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Although we are still evaluating the JOBS Act,
we currently intend to take advantage of some or all of the reduced regulatory and reporting requirements that will be available to us
so long as we qualify as an “emerging growth company.” Among other things, this means that our independent registered public
accounting firm will not be required to provide an attestation report on the effectiveness of our internal control over financial reporting
so long as we qualify as an emerging growth company, which may increase the risk that weaknesses or deficiencies in our internal control
over financial reporting go undetected.

Likewise, so long as we qualify as an emerging
growth company, we may elect not to provide certain information, including certain financial information and certain information regarding
compensation of our executive officers, that we would otherwise have been required to provide in filings we make with the SEC, which may
make it more difficult for investors and securities analysts to evaluate our company. As a result, investor confidence in our company
and the market price of our common stock may be materially and adversely affected.