What changed in this filing

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Item 1. Financial Statements

2023-08-18 compared with 2023-08-11 · 172 added, 151 removed, 414 unchanged (44% of the section changed)

1 unchanged sentence

Consolidated Financial Statements:

Condensed Consolidated Balance Sheets as of March 31, 2023 (unaudited) and December 31, 2022

Condensed Consolidated Statements of Operations for the three months ended March 31, 2023 and 2022 (unaudited)

Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2023 and 2022 (unaudited)

Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (unaudited)

Condensed Consolidated Balance Sheets as of June 30, 2023 (unaudited) and December 31, 2022

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2023 and 2022 (unaudited)

Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022 (unaudited)

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2023 and 2022 (unaudited)

Notes to Condensed Consolidated Financial Statements

26 unchanged sentences

Stockholders’ Equity

Preferred Stock, par value $ .001 - Authorized 3,000,000 shares, 0 shares outstanding, at both March 31, 2023 and December 31, 2022.

Common Stock - Par Value $ .001 - Authorized 6,000,000 Shares, 3,259,367 and 3,247,937 Shares Issued and Outstanding as of March 31, 2023 and December 31, 2022, respectively

Preferred Stock, par value $ .001 - Authorized 3,000,000 shares, 0 shares outstanding, at both June 30, 2023 and December 31, 2022.

Common Stock - Par Value $ .001 - Authorized 6,000,000 shares, 3,274,597 and 3,247,937 shares issued and outstanding as of June 30, 2023 and December 31, 2022, respectively

Additional Paid-In Capital

6 unchanged sentences

INDUSTRIES GROUP

Consolidated Statements of Operations

the Three Months Ended March 31,

Condensed Consolidated Statements of Operations

Three Months Ended

Six Months Ended

Cost of Sales

Operating Expenses

(Loss) Income from Operations

Income (Loss) from Operations

Interest and Financing Costs

2 unchanged sentences

Loss before Benefit From Income Taxes

( 1,013,000 )

Provision for Income Taxes

$ ( 395,000 )

$ ( 1,013,000 )

(Loss) Income per share - Basic and diluted

3 unchanged sentences

Consolidated Statements of Stockholders’ Equity

the Three Months Ended March 31, 2023 and 2022

the Three and Six Months Ended June 30, 2023 and 2022

Stockholders’

5 unchanged sentences

$ ( 66,228,000 )

Common Stock issued for directors fees

Stock Compensation Expense

Balance, June 30, 2023

$ ( 66,623,000 )

Balance January 1, 2022

4 unchanged sentences

$ ( 64,562,000 )

Common Stock issued for directors fees

Stock Compensation Expense

Balance, June 30, 2022

$ ( 64,569,000 )

Notes to Condensed Consolidated Financial Statements

1 unchanged sentence

Consolidated Statements of Cash Flows

the Three Months Ended March 31,

For the Six Months Ended June 30,

CASH FLOWS FROM OPERATING ACTIVITIES

$ ( 1,013,000 )

Adjustments to reconcile net loss to net cash provided by

operating activities

Adjustments to reconcile net loss to net cash provided by operating activities

Depreciation of property and equipment

2 unchanged sentences

Non-cash other income recognized

Amortization of Right-of-Use Assets

Amortization of Operating Lease Right-of-Use Assets

Deferred gain on sale of real estate

15 unchanged sentences

Purchase of property and equipment

( 1,383,000 )

( 1,327,000 )

NET CASH USED IN INVESTING ACTIVITIES

( 1,383,000 )

( 1,327,000 )

CASH FLOWS FROM FINANCING ACTIVITIES

Payments for revolving loan - Webster Bank

Proceeds from note payable - term note - Webster Bank

Payments of term note - Webster Bank

Note payable - revolver - net - Webster Bank

Proceeds from term loan - Webster Bank

Payments of term loan - Webster Bank

( 1,251,000 )

Payments of finance lease obligations

Payments of loan payable - financed asset

NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES

( 1,118,000 )

NET INCREASE (DECREASE) IN CASH

NET CASH PROVIDED BY FINANCING ACTIVITIES

NET INCREASE IN CASH

CASH AT BEGINNING OF PERIOD

1 unchanged sentence

Notes to Condensed Consolidated Financial Statements

AIR INDUSTRIES GROUP

Condensed Consolidated

Statements of Cash Flows

For the Three Months

Ended March 31, (Continued)

INDUSTRIES GROUP

Consolidated Statements of Cash Flows

For the Six Months Ended June 30, (Continued)

Supplemental cash flow information

Cash paid during the period for interest

Supplemental disclosure of non-cash investing and financing activities

Acquisition of financed lease asset

Notes to Condensed Consolidated Financial Statements

3 unchanged sentences

Air Industries Group is a Nevada corporation (“AIRI”).

of and for the three months ending March 31, 2023 and 2022, the accompanying condensed consolidated financial statements presented are

those of AIRI, and its wholly-owned subsidiaries;

of June 30,2023, and for the three and six months ended June 30, 2023 and 2022, the accompanying condensed consolidated financial statements

presented are those of AIRI, and its wholly-owned subsidiaries;

Air Industries Machining Corp.

(“AIM”), Nassau Tool Works, Inc.

and the Sterling Engineering Corporation (“Sterling”), (together, the “Company”).

(“AIM”), Nassau Tool Works,

(“NTW”), and the Sterling Engineering Corporation (“Sterling”), (together, the “Company”).

Basis of Presentation

7 unchanged sentences

recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the three months ended March

31, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

These unaudited condensed

consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included

in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities and Exchange Commission,

from which the accompanying condensed consolidated balance sheet dated December 31, 2022 was derived.

Operating results for the three and six months ended

June 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023.

These unaudited

condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes

thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022, as filed with the Securities

and Exchange Commission, from which the accompanying condensed consolidated balance sheet dated December 31, 2022 was derived.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Inventory Valuation

As of March 31,2023, the Company values inventory

As of June 30, 2023, the Company values inventory

at the lower of cost on a first-in-first-out basis or estimated net realizable value.

21 unchanged sentences

Credit and Concentration Risks

There were four customers that represented 57.1 %

and three customers that represented 70.8 % of total net sales for the three months ended March 31, 2023 and 2022, respectively.

set forth in the table below.

Percentage of Sales

* Customer was less than 10 % of sales for the three months ended March 31, 2023

** Customer was less than 10 % of sales for the three months ended March 31, 2022

were two customers that represented 33.1 % and three customers 70.3 % of gross accounts receivable at March 31, 2023 and December 31, 2022,

respectively.

There were three customers that represented 62.7 %

and 66.2 % of total net sales for the three months ended June 30, 2023 and 2022, respectively.

This is set forth in the table below.

Percentage of Sales

There were three customers that represented 54.5 %

and four customers that represented 77.9 % of total net sales for the six months ended June 30, 2023 and 2022, respectively.

forth in the table below.

Percentage of Sales

* Customer was less than 10 % of sales for the six months ended

June 30, 2023

** Customer was less than 10 % of sales for the six months ended

June 30, 2022

There were two customers that represented 60.8 %

and three customers that represented 70.3 % of gross accounts receivable at June 30, 2023 and December 31, 2022, respectively.

set forth in the table below.

Percentage of Accounts

* Customer was less than 10 % of accounts receivable at March 31,

* Customer was less than 10 % of accounts receivable at June

** Customer was less than 10 % of accounts receivable at June

Disaggregation of Revenue

The following table summarizes revenue from contracts with customers

for the three month periods ended March 31, 2023 and 2022:

for the three and six month periods ending June 30, 2023 and 2022:

Three Months Ended

Six Months Ended

During the period, the Company had occasionally

12 unchanged sentences

At that time, the entire amount will be recognized as revenue and the deposit will be applied to the customer’s

At March 31, 2023 and December 31, 2022, customer

At June 30, 2023 and December 31, 2022, customer

deposits were $ 467,000 and $ 781,000 respectively.

The Company recognized revenue of $ 272,000 during the three ended March 31, 2023, that

was included in the customer deposits balance as of December 31, 2022.

The Company recognized revenue of $ 45,000 during the three months

ended March 31, 2022, that was included in the customer deposits balance as of December 31, 2021.

Backlog represents anticipated revenue from remaining

performance obligations under executed non-cancellable contracts in the form of firm purchase orders that are deliverable over the next

18-month period.

As of March 31, 2023, backlog was approximately $ 72,200,000 .

The Company expects to recognize revenue amounts in future

periods related to these remaining performance obligations as follows:

approximately $ 40,300,000 during the period April 1to December

31, 2023, and approximately $ 31,900,000 during the period from January 1, 2024, to September 30, 2024.

This expectation assumes that raw

material suppliers and outsourced processing is delivered and completed on-time and that the Company’s customers will accept delivery

as scheduled.

The Company anticipates that sales during the aforementioned periods will also include sales pursuant to customer orders

and contracts that are not currently in the 18-month backlog.

The Company recognized revenue of $ 42,000 and $ 314,000 during the three and six months

ended June 30, 2023, respectively, that was included in the customer deposits balance as of December 31, 2022.

The Company recognized

revenue of $ 8,000 and $ 53,000 during the three and six months ended June 30, 2022, respectively, that was included in the customer deposits

balance as of December 31, 2021.

Backlog represents executed non-cancellable contracts

that represent firm orders that are deliverable over the next 18- month period.

As of June 30, 2023, backlog relating to remaining performance

obligations in contracts was approximately $ 73,000,000 .

We expect to recognize revenue amounts in future periods related to these remaining

performance obligations as follows:

approximately $ 22,500,000 to $ 25,000,000 of our backlog during the remainder of 2023, approximately

$ 25,000,000 to $ 27,000,000 from January 1, 2024 through June 30, 2024, and approximately $ 21,000,000 to $ 25,500,000 from July 1, 2024

through December 31, 2024.

This expectation is based on the Company’s belief that raw material will be delivered on time from its

suppliers, and that its customers will accept delivery as scheduled.

Contract Costs Receivable

3 unchanged sentences

Contract costs receivable

totals $ 296,000 of both March 31, 2023 and December 31, 2022.

totals $ 296,000 at both June 30, 2023 and December 31, 2022.

The Company accounts for leases under ASC 842,

“Leases.” All leases are required to be recorded on the balance sheet and are classified as either operating leases or finance

The lease classification affects the expense recognition in the income statement.

Operating lease charges are recorded entirely

in operating expenses.

Finance lease charges are split, amortization of the right-of- use asset is recorded in operating expenses and

an implied interest component is recorded in interest expense.

The lease classification affects expense recognition in the income statement.

Operating lease charges are recorded entirely in

operating expenses.

Finance lease charges are split, amortization of the right-of- use asset is recorded in operating expenses and an

implied interest component is recorded in interest expense.

Earnings (Loss) per share

3 unchanged sentences

For purposes of calculating diluted earnings per

common share, the numerator includes net income plus interest on convertible notes payable assumed converted as of the first day of the

The denominator includes both the weighted-average number of shares of common stock outstanding during the period and the number

of common stock equivalents if the inclusion of such common stock equivalents is dilutive.

common share, the numerator includes net income (loss) plus interest on convertible notes payable assumed converted as of the first day

of the period.

The denominator includes both the weighted-average number of shares of common stock outstanding during the period and the

number of common stock equivalents if the inclusion of such common stock equivalents is dilutive.

Dilutive common stock equivalents potentially

1 unchanged sentence

The following securities have been excluded from

the calculation as the exercise price was greater than the average market price of the common stock:

the calculation as the exercise price was greater than the average market price of the common shares:

Three Months Ended

Six Months Ended

Stock Options

The following securities have been excluded from

the calculation even though the exercise price was less than the average market price of the common shares because the effect of including

these potential shares was anti-dilutive due to the net loss incurred during that period:

Three Months Ended

the calculation because the effect of including these potential shares was anti-dilutive due to the net loss incurred during that period:

Three and Six Months

Stock Options

7 unchanged sentences

Stock based compensation expense

for employees amounted to $ 45,000 and $ 66,000 for the three months ended March 31, 2023 and 2022, respectively.

Stock compensation expense

for directors amounted to $ 54,000 and $ 54,000 for the three months ended March 31, 2023 and 2022, respectively.

Stock compensation expenses

for employees and directors were included in operating expenses on the accompanying Condensed Consolidated Statements of Operations.

for employees amounted to $ 187,000 and $ 141,000 for the three months ended June 30, 2023 and 2022, respectively, and $ 232,000 and $ 207,000

for the six months ended June 30, 2023 and 2022, respectively.

Stock compensation expense for directors amounted to $ 54,000 and $ 54,000

for the three months ended June 30, 2023 and 2022, respectively and $ 108,000 and $ 108,000 for the six months ended June 30, 2023 and 2022,

respectively.

Stock compensation expense for employees and directors was included in operating expenses on the accompanying Condensed

Consolidated Statements of Operations.

Recently Issued Accounting Pronouncements

23 unchanged sentences

PROPERTY AND EQUIPMENT

The components of property and equipment at March

The components of property and equipment at June

30, 2023 and December 31, 2022 consisted of the following:

13 unchanged sentences

Depreciation expense for the three months ended

March 31, 2023 and 2022 was approximately $ 617,000 and $ 665,000 , respectively.

Assets held under finance lease obligations are

June 30, 2023 and 2022 was $ 622,000 and $ 643,000 , respectively.

Depreciation expense for the six months ended June 30, 2023 and 2022 was

$ 1,239,000 and $ 1,308,000 , respectively.

Assets held under financed lease obligations are

depreciated over the shorter of their related lease terms or their estimated productive lives.

1 unchanged sentence

is included in depreciation expense.

Accumulated depreciation on these assets was approximately $ 13,000 and $ 0 as of March 31, 2023 and

Accumulated depreciation on these assets was approximately $ 25,000 and $ 0 as of June 30, 2023 and

December 31, 2022, respectively.

OPERATING LEASE LIABILITIES

The Company has operating leases for leased office

1 unchanged sentence

The leases have remaining lease terms of one to five years , some of which include options to extend or terminate

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30, June 30, June 30,

2023 2022 2023 2022

Operating lease cost:

$ 273,000 $ 292,000 $ 544,000 $ 563,000

Total lease cost $ 273,000 $ 292,000 $ 544,000 $ 563,000

1 unchanged sentence

Cash paid for amounts included in the measurement lease liability:

258,000 251,000 515,000 500,000

Operating cash flow from operating leases $ 258,000 $ 251,000 $ 515,000 $ 500,000

1 unchanged sentence

Weighted Average discount rate - %

The aggregate undiscounted cash flows of operating lease payments as

of March 31, 2023, with remaining terms greater than one year are as follows:

The aggregate undiscounted cash flows of operating

lease payments for leases with remaining terms greater than one year are as follows:

December 31, 2023 (remainder of year)

31 unchanged sentences

in March 2023 with a balloon payment due on December 30, 2025 .

As of March 31, 2023, there is currently $ 13,220,000

As of June 30, 2023, there is currently $ 13,837,000

outstanding under the Webster Revolving Loan and $ 5,506,000 under the Webster term loan, inclusive of amounts drawn under the Equipment

11 unchanged sentences

Current portion of Webster Term Loan payable

( 1,141,000 )

Total long-term portion of Webster Term Loan payable

3 unchanged sentences

Interest expense related to the Webster Facility

amounted to approximately $ 332,000 and $ 155,000 for the three months ended March 31, 2023 and 2022, respectively.

amounted to approximately $ 372,000 and $ 147,000 for the three months ended June 30, 2023 and 2022, respectively, and $ 704,000 and $ 302,000

for the six months ended June 30, 2023 and 2022.

The below summarizes historical amendments to

the facility and various terms:

the Webster Facility and various terms:

For so long as the Webster term loan remains outstanding,

3 unchanged sentences

following such fiscal year.

The Company made Excess Cash Flow payments of $ 854,000 in April 2022 (for fiscal year ended December 31, 2021).

The Company made an Excess Cash Flow payments of $ 854,000 in April 2022 (for fiscal year ended December 31,

As required, the Company provided the calculation for the Excess Cash Flow payment of $ 195,000 for fiscal year ended December 31,

2022 to Webster prior to the April 15, 2023 deadline for such payment and authorized such payment to be made from the Revolving Loan.

13, 2023, Webster applied this payment to the term loan.

On June 13, 2023, Webster applied this payment to the term loan.

On May 17, 2022, the Company entered into the

13 unchanged sentences

for corporate loans at the nation’s largest commercial bank, less sixty-five hundredths (-0.65%) of one percent per annum.

interest rate charged was 7.04 % and 3.50 % for the three months ended March 31, 2023 and 2022, respectively.

Amendment fees paid in connection with the Webster

Facility are included in Deferred Financing Costs, Net, Deposits and Other Assets, in the accompanying Condensed Consolidated Balance

Sheets and are amortized over the term of the loan.

interest rate charged was 7.51 % and 3.60 % the three months ended June 30, 2023 and 2022, respectively and was 7.27 % and 3.55 % for the

six months ended June 30, 2023 and 2022, respectively.

All amendment fees paid in connection with the Webster

Facility that are for a future benefit of the Company are included in Deferred Financing Costs, Net, Deposits and Other Assets, in the

accompanying Condensed Consolidated Balance Sheets and are amortized over the term of the loan.

In connection with the Webster Facility, the Company

4 unchanged sentences

assets are pledged as collateral under the Webster Facility.

As of March 31, 2023, the Company was not in compliance

with one of its financial covenants.

On August 4, 2023, the Company entered into the Fifth Amendment to

the Webster Facility (“Fifth Amendment”).

The purpose of the amendment was to waive the default caused by the failure to achieve

the required Fixed Coverage Charge Ratio for the Fiscal Quarter ended March 31, 2023 and decrease the required Fixed Coverage Charge Ratio

On August 4, 2023, the Company entered into the Fifth

Amendment to the Webster Facility (“Fifth Amendment”).

The amendment waived the default caused by the failure to achieve the

required Fixed Coverage Charge Ratio for the Fiscal Quarter ended March 31, 2023 and decreased the required Fixed Coverage Charge Ratio

to 0.95 to 1.00 for the Fiscal Quarters ending June 30, 2023 and September 30, 2023.

3 unchanged sentences

with these changes, the Company paid an amendment fee of $10,000.

As a result of the Company’s entry into the

Fifth Amendment, the Company was in compliance with all financial covenants of the Webster Facility for the Fiscal Quarter ended June

Finance Lease Obligations

1 unchanged sentence

of 2022 for the purchase of new manufacturing equipment.

The obligation for the finance lease totaled $ 308,000 and $ 328,000 as of March

31, 2023 and December 31, 2022, respectively.

The lease has an imputed interest rate of 7.48 % per annum and is payable monthly with the

final payment due in September of 2026.

Additionally, during May of 2023, the Company entered into an additional finance

lease for the purchase of additional manufacturing equipment.

The obligations for the finance leases totaled $ 962,000 and $ 328,000 as

of June 30, 2023 and December 31, 2022, respectively.

The leases have an average imputed interest rate of 7.32 % per annum and are payable

monthly with the final payments due between September of 2026 and May of 2030.

Three Months Ended

Six Months Ended

Finance Lease cost:

9 unchanged sentences

Weighted Average Discount rate - %

As of March 31, 2023, the aggregate future minimum

As of June 30, 2023, the aggregate future minimum

finance lease payments, including imputed interest are as follows:

4 unchanged sentences

December 31, 2026

December 31, 2027

December 31, 2028

Total future minimum finance lease payments

5 unchanged sentences

vehicle in July 2020.

The loan obligation totaled $ 28,000 and $ 30,000 as of March 31, 2023 and December 31, 2022, respectively.

The loan obligation totaled $ 27,000 and $ 30,000 as of June 30, 2023 and December 31, 2023, respectively.

bears no interest and a final payment is due and payable for all unpaid principal on July 20, 2026.

39 unchanged sentences

is now allowed, subject to certain limitations, to make principal payments of $ 250,000 per quarter of this subordinated debt.

For the three months ended March 31, 2023 and

2022, no principal payments have been made on these notes.

For the three and six months ended June 30, 2023

and 2022, no principal payments have been made on these notes.

The note holders and the principal balance of

the notes of March 31, 2023 and December 31, 2022 are shown below:

the notes of June 30, 2023 and December 31, 2022 are shown below:

Michael Taglich,

Robert Taglich,

Brothers, Inc.

Taglich Brothers,

Convertible Subordinated Notes

Subordinated Notes

Interest expense for the three months ended March

31, 2023 and 2022 on all related party notes payable was $ 118,000 and $ 125,000 , respectively.

Interest expense amounted to approximately $ 118,000

and $ 126,000 for the three months ended June 30, 2023 and 2022, respectively, and $ 236,000 and $ 251,000 for the six months ended June

30, 2023 and 2022.

STOCKHOLDERS’ EQUITY

Common Stock – Issuances of Securities

Common Stock – Issuance of Securities

The Company issued 15,230 and 6,429 shares of

common stock in payment of director fees totaling $ 54,000 and $ 54,000 for the three months ended March 31, 2023 and 2022, respectively.

During the second quarter of 2023, the Company

issued 15,230 shares of common stock in payment of directors’ fees totaling $ 54,000 .

common stock in payment of director fees totaling $ 54,000 and $ 54,000 for the three months ended June 30, 2023 and 2022, respectively,

and 26,660 and 11,951 shares totaling $ 108,000 and $ 108,000 for the six months ended June 30, 2023 and 2022, respectively.

During the third quarter of 2023, the Company

issued 15,230 shares of common stock in payment of director’s fees totaling $ 54,000

issued 15,230 shares of common stock in payment of directors’ fees totaling $ 54,000 .

CONTINGENCIES

On October 2, 2018, Contract Pharmacal Corp.

(“Contract Pharmacal”)

commenced an action, relating to a Sublease entered into between the Company and Contract Pharmacal in May 2018 with respect to the property

that was formerly occupied by the Company’s former subsidiary WMI, at 110 Plant Avenue, Hauppauge, New York.

In the action Contract

Pharmacal sought damages for an amount in excess of $ 1,000,000 for the Company’s failure to make the entire premises available by

the Sublease commencement date.

Pharmacal”) commenced an action, relating to a Sublease entered into between the Company and Contract Pharmacal in May 2018 with

respect to the property that was formerly occupied by the Company’s former subsidiary WMI, at 110 Plant Avenue, Hauppauge, New York.

In the action Contract Pharmacal sought damages for an amount in excess of $ 1,000,000 for the Company’s failure to make the entire

premises available by the Sublease commencement date.

On July 8, 2021, the Court denied Contract Phamacal’s motion for summary judgement.

In the Order,

the court granted Contract Pharmacal’s Motions to drop its claim for specific performance and to amend its Complaint to reduce its

claim for damages to $ 700,000 .

In the Order, the court granted Contract Pharmacal’s Motions to drop its claim for specific performance and to amend its Complaint

to reduce its claim for damages to $ 700,000 .

Subsequently, Contact Pharmacal moved to amend its Complaint.

The Company opposed and the Court denied

the request to amend the Complaint.

The Company opposed and the

Court denied the request to amend the Complaint.

Contract Pharmacal filed a Motion to reargue which the Court denied on November 30, 2021.

10, 2022, Contract Pharmacal filed an appeal to the Court’s decision with the Appellate Division which the Company has opposed.

On March 10, 2022, Contract Pharmacal filed an appeal to the Court’s decision with the Appellate Division which the Company has

The date for argument of the appeal has not been set by the Appellate Division.

The Company disputes the validity of the claims asserted

by Contract Pharmacal and intends to contest them vigorously.

The Company disputes the validity of the claims

asserted by Contract Pharmacal and intends to contest them vigorously.

The Company recorded no income tax expense for

the three months ended March 31, 2023 and 2022 because the estimated annual effective tax rate was zero.

the three and six months ended June 30, 2023 and 2022 because the estimated annual effective tax rate was zero.

In determining the estimated

2 unchanged sentences

and net operating loss carry forwards, and available tax planning alternatives.

As of March 31, 2023, and December 31, 2022, the

As of June 30, 2023, and December 31, 2022, the

Company provided a full valuation allowance against its net deferred tax assets since the Company believes it is more likely than not

that its deferred tax assets will not be realized.

SUBSEQUENT EVENTS

On May 23, 2023, the Company received a notice

from NYSE American (the “Exchange”) stating that the Company is not in compliance with the continued listing standards of

the Exchange under the timely filing criteria included in Section 1007 of the NYSE American Company Guide because the Company failed to

file by the extended due date of May 23, 2023, its Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 (the “Form

In accordance with Section 1007 of the Company

Guide, the Company will have six months from the date of the filing delinquency, or until November 22, 2023 (the “Initial Cure Period”),

to file the Form 10-Q with the Securities and Exchange Commission.

If the Company fails to file the Form 10-Q during the Initial Cure

Period, the Exchange may, in its sole discretion, provide an additional six-month cure period depending on the Company’s specific

circumstances.

Upon filing of the Form 10-Q, the Company will cure this delinquency.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements