What changed in this filing

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Item 1. Financial Statements

2023-05-19 compared with 2022-11-14 · 247 added, 287 removed, 248 unchanged (68% of the section changed)

1 unchanged sentence

Condensed Balance Sheets (Unaudited)

September 30,

Current assets:

Accounts receivable, net

Prepaids and other current assets

Prepaid insurance

Total current assets

Non-current assets:

Property and equipment, net

Software development costs, net

Property and equipment, net of accumulated depreciation

Software development costs, net of accumulated amortization

Deferred offering costs

Prepaids and other non-current assets

Total non-current assets

LIABILITIES AND STOCKHOLDERS' EQUITY

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued liabilities

Share-based compensation liability

Note payable to related party, net of debt issuance costs

Stock awards liability

Total current liabilities

Commitments and contingencies

Stockholders' equity:

Preferred stock - $ 0.001 par value, 100,000,000 authorized and 0 shares issued and outstanding at September 30, 2022 and December 31, 2021

Common stock - $ 0.001 par value, 100,000,000 authorized and 12,514,763 and 12,416,408 shares issued and outstanding at September 30, 2022 and December 31, 2021

Shareholders’ equity:

Preferred stock - $ 0.001 par value, 10,000,000 authorized and 0 shares issued and outstanding at March 31, 2023 and December 31, 2022

Common stock - $ 0.001 par value, 100,000,000 authorized and 12,850,709 and 12,654,949 shares issued and outstanding at March 31, 2023 and December 31, 2022

Additional paid-in capital

2 unchanged sentences

( 71,735,834 )

Total stockholders’ equity

Total liabilities and stockholders’ equity

Total shareholders’ equity

Total liabilities and shareholders’ equity

The accompanying notes are an integral part of

1 unchanged sentence

Condensed Statements of Operations (Unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

Three Months Ended March 31,

Operating expenses:

8 unchanged sentences

( 1,752,248 )

( 5,128,901 )

( 3,923,305 )

Other income (expense):

Finance charge – convertible debt

( 8,141,424 )

PPP loan extinguishment

Other (expense) income:

Interest expense

Interest income

Total other income (expense)

( 8,176,116 )

Net loss before income taxes

( 1,330,314 )

( 2,049,403 )

( 5,133,959 )

( 12,099,421 )

Total other expense

Net loss before taxes

( 2,155,312 )

2 unchanged sentences

$ ( 1,753,258 )

Net loss per share attributable to common stockholders

Net loss per share attributable to common shares

Basic and diluted

3 unchanged sentences

these unaudited condensed financial statements.

Condensed Statements of Changes in Stockholders’

Condensed Statements of Changes in Shareholders’

Equity (Unaudited)

Nine Months Ended September 30, 2021

Three Months Ended March 31, 2022

Additional Paid-In

Balance, December 31, 2021

$ ( 64,838,389 )

$ ( 13,103,250 )

Issuance of common shares

Exercise of warrants

Conversion of debt obligations

Exercise of restricted stock units and warrants

Share-based compensation

Reclassification of shared-based compensation award to liability

( 1,753,258 )

Balance, September 30, 2021

Balance, March 31, 2022

$ ( 66,591,647 )

Nine Months Ended September 30, 2022

Three Months Ended March 31, 2023

Additional Paid-In

Balance, December 31, 2022

$ ( 71,735,834 )

Exercise of restricted stock units and warrants

Exercise of restricted stock units

Share-based compensation

Reclassification of share-based compensation award to liability

( 2,155,312 )

Balance, September 30, 2022

Balance, March 31, 2023

$ ( 73,891,147 )

2 unchanged sentences

Condensed Statements of Cash Flows (Unaudited)

Nine Months Ended September 30,

Three Months Ended March 31,

Cash flows from operating activities:

2 unchanged sentences

Adjustments to reconcile net loss to net cash used in operating activities:

Finance charge associated with debt to equity conversion

Finance charge associated with debt issuance cost

Depreciation and amortization

Share-based compensation

Gain on PPP loan extinguishment

Share-based compensation expense

Change in assets and liabilities:

Accounts receivable

Prepaid insurance

Prepaids and other non-current assets

5 unchanged sentences

Software capitalization

( 1,673,517 )

Purchase of property and equipment

Net cash used in investing activities

( 1,677,326 )

Cash flows from financing activities:

Net settlement of share-based compensation awards

Proceeds from issuance of common shares

Repayments of related party debt and deferred salary

Repayments of line of credit

Net cash used in financing activities

Net decrease in cash

( 1,422,394 )

Proceeds from issuance of PPP loan

Proceeds from issuance of promissory notes payable

Net cash (used in) provided by financing activities

Net (decrease) increase in cash

( 1,983,741 )

4 unchanged sentences

Cash paid for income taxes

Supplemental disclosures of non-cash activity:

Shares issued for conversion of indebtedness

PPP loan extinguishment

$ ( 268,662 )

The accompanying notes are an integral part of

8 unchanged sentences

Clip Interactive,

LLC was initially formed as a Colorado limited liability company on January 14, 2012 and on November 25, 2019 changed its trade name to

LLC was initially formed as a Colorado limited liability company on January 14, 2012, and on November 25, 2019, changed its trade name

On February 16, 2021, the Company completed an

17 unchanged sentences

Unaudited interim financial information

The condensed financial statements of the Company

included herein have been prepared, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the

Certain information and footnote disclosures normally included in financial statements prepared in accordance with

GAAP have been condensed or omitted from this Quarterly Report, as is permitted by such rules and regulations.

Accordingly, these condensed

financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual

Report on Form 10-K.

The results for any interim period are not necessarily indicative of results for any future period.

condensed financial statements of the Company included herein have been prepared, without audit, pursuant to the rules and regulations

of the Securities and Exchange Commission (the “SEC”).

Certain information and footnote disclosures normally included in

financial statements prepared in accordance with GAAP have been condensed or omitted from this Quarterly Report, as is permitted by such

rules and regulations.

Accordingly, these condensed financial statements should be read in conjunction with the financial statements

and notes thereto included in the Company’s Annual Report on Form 10-K.

The results for any interim period are not necessarily

indicative of results for any future period.

The Company recorded

all adjustments necessary for a fair statement of the results for the interim period and all such adjustments are of a normal recurring

Use of Estimates

The preparation of condensed financial statements

in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities

and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and

expenses during the reporting period.

The preparation of financial statements in conformity

with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures

of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during

the reporting period.

Actual results could differ from those estimates.

17 unchanged sentences

There can be no guarantee that the Company will be successful in addressing these or other such

At March 31, 2023 the Company had cash of

As described below (see Note 8 –

Subsequent Events), in April 2023 the Company raised $1.87 million that we believe will fund our operations into the third quarter

of fiscal 2023.

The Company has based this estimate, however, on assumptions that may prove to be wrong.

We will need additional funding

to complete the development of our full product line, scale products with a demonstrated market fit and generate revenue and cash

Management has plans to secure such additional funding.

If we are unable to raise capital when needed or on acceptable terms,

we would be forced to delay, reduce, or eliminate our technology development and commercialization efforts.

As a result of the Company’s recurring losses

from operations, and the need for additional financing to fund its operating and capital requirements, there is uncertainty regarding

the Company’s ability to maintain liquidity sufficient to operate its business effectively, which raises substantial doubt as to

the Company’s ability to continue as a going concern.

Cash and Future Funding Requirements

1 unchanged sentence

purchased with an original maturity of three months or less to be cash equivalents.

The Company had no cash equivalents at September 30,

The Company had no cash equivalents at March 31, 2023

or December 31, 2022.

3 unchanged sentences

may at times exceed these limits.

At September 30, 2022 and December 31, 2021, the Company had $ 628,330 and $ 5,910,758 , respectively,

in excess of federally insured limits.

The Company continually monitors its positions with, and the credit quality of, the financial institutions

with which it invests.

The Company historically has incurred significant

losses and negative cash flows from operations since our inception.

As of September 30, 2022, the Company had cash of approximately $ 1.0

As described in more detail in Note 10, on November 14, 2022, the Company entered into a secured debt financing agreement

for $2.0 million and an equity line facility for additional proceeds.

The Company believes that its cash on hand as

of September 30, 2022 combined with the $2.0 million of cash received from the November 14, 2022 secured debt financing plus funds available

from the equity line facility will be sufficient to fund current operations for the next twelve months.

The Company has based these estimates,

however, on assumptions that may prove to be wrong, and could spend available financial resources much faster than we currently expect.

The Company will need to raise additional funds to continue funding our technology development and commercialization efforts beyond twelve

At March 31, 2023, the Company had no deposits in excess of federally insured limits.

At December 31,

2022, the Company had approximately $ 1.4 million in excess of federally insured limits.

The Company continually monitors its positions

with, and the credit quality of, the financial institutions with which it invests.

The Company historically has incurred

significant losses and negative cash flows from operations since our inception.

At March 31, 2023, the Company had cash of $ 239,040 .

As described below (see Note 8 – Subsequent Events), in April 2023 the Company raised $1.87 million that we believe will fund

our operations into the third quarter of fiscal 2023.

The Company has based this estimate, however, on assumptions that may prove to be

We will need additional funding to complete the development of our full product line, scale products with a demonstrated

market fit and generate revenue and cash flow.

Management has plans to secure such additional funding.

If we are unable to raise

capital when needed or on acceptable terms, we would be forced to delay, reduce, or eliminate our technology development and

commercialization efforts.

Management has secured additional funding after

March 31, 2023, as described in more detail in Note 8 – Subsequent Events:

- As previously disclosed, on November 14, 2022, the Company entered into a Secured Bridge Note (“Prior

Note”) financing with one accredited investor who is a significant existing stockholder of the Company.

On April 17, 2023, the Company

entered into an additional Secured Bridge Note (“New Note”) financing with the same accredited investor.

On April 18, 2023,

the Company received $750,000 of gross proceeds in connection with the New Note.

- In addition, on April 17 and April 20, 2023, the Company closed on two sales of

Common Stock under our existing equity line purchase agreement with White Lion.

The Company issued an aggregate of 1,962,220 common

shares and received aggregate proceeds of approximately $1.12 million from these sales.

The Company believes that with its cash on

hand as of March 31, 2023, of 239,040, combined with the proceeds from the New Note and the White Lion common stock sales of

$750,000 and $1.12 million, respectively, and by exercising our option to extend the Prior Note to November 30, 2023, we will be

able to fund our operations into the third quarter of fiscal 2023.

The Company has based this estimate, however, on assumptions that may

prove to be wrong.

We will need additional funding to complete the development of our full product line, scale products with a

demonstrated market fit and generate revenue and cash flow.

Management intends to secure such additional funding.

If we are unable

to raise capital when needed or on acceptable terms, we would be forced to delay, reduce, or eliminate our technology development

and commercialization efforts.

Software Development Costs

5 unchanged sentences

Software development costs are amortized

over a useful life estimated by the Company’s management of five years.

over a useful life estimated by the Company’s management of three years.

Costs associated with significant upgrades and enhancements

4 unchanged sentences

determined to be in excess of anticipated future net revenues are considered impaired and expensed during the period of such determination.

Software development costs of $ 394,893 and $ 353,418 were capitalized for the three months ended September 30, 2022 and 2021, respectively

and $ 1,673,517 and $ 904,956 were capitalized for the nine months ended September 30, 2022 and 2021, respectively.

Amortization of capitalized

software development costs were $ 262,703 and $ 73,369 for the three months ended September 30, 2022 and 2021, respectively and $ 693,441

and $ 73,369 for the nine months ended September 30, 2022 and 2021, respectively and are included in depreciation and amortization expense.

Software development costs of $ 270,574 and $ 661,214 were capitalized for the three months ended March 31, 2023, and 2022, respectively.

Amortization of capitalized software development costs were $ 436,425 and $ 168,036 for the three months ended March 31, 2023, and 2022,

respectively and are included in depreciation and amortization expense.

Revenue Recognition

Revenue will be measured according to Accounting

Standards Codification (“ASC”) 606, Revenue – Revenue from Contracts with Customers, and will be recognized based on

consideration specified in a contract with a customer and will exclude any sales incentives and amounts collected on behalf of third parties.

We will recognize revenue when we satisfy a performance obligation by transferring control over a service or product to a customer.

will report revenues net of any tax assessed by a governmental authority that is both imposed on, and concurrent with, a specific revenue-producing

transaction between a seller and a customer in our condensed statements of operations.

Collected taxes will be recorded within Other current

liabilities until remitted to the relevant taxing authority.

Standards Codification (“ASC”) 606, Revenue – Revenue from Contracts with Customers, and is recognized based on consideration

specified in a contract with a customer, and excludes any sales incentives and amounts collected on behalf of third parties.

We will recognize

revenue when we satisfy a performance obligation by transferring control over a service or product to a customer.

We will report revenues

net of any tax assessed by a governmental authority that is both imposed on, and concurrent with, a specific revenue-producing transaction

between a seller and a customer in our condensed statements of operations.

Collected taxes will be recorded within Other current liabilities

until remitted to the relevant taxing authority.

Subscriber revenue will consist primarily of subscription

25 unchanged sentences

apply to private companies.

The Company has elected to use this extended transition period for complying with certain new or revised accounting

standards that have different effective dates for public and private companies.

The Company has elected to use this extended transition period for complying with certain new or revised

accounting standards that have different effective dates for public and private companies.

Note 2 – Property & Equipment

12 unchanged sentences

The Company recognized depreciation expense of

$ 28,529 and $ 10,426 for the nine months ended September 30, 2022 and 2021, respectively related to property and equipment and amortization

expense of $ 693,441 and $ 73,369 for the nine months ended September 30, 2022 and 2021, respectively related to software development costs.

$ 6,610 and $ 8,091 for the three months ended March 31, 2023, and 2022, respectively related to property and equipment and amortization

expense of $ 436,425 and $ 168,036 for the three months ended March 31, 2023, and 2022, respectively related to software development costs.

Note 3 – Balance Sheet Disclosures

2 unchanged sentences

Schedule of accounts payable and accrued liabilities

September 30,

Accounts payable and accrued expenses

Accounts payable and accrued liabilities

Credit cards payable

Accrued interest

Accounts payable and accrued liabilities

Note 4 – Line of Credit

The Company had a line of credit which was repaid

in full on July 8, 2021.

Interest accrued at a variable rate based on the bank’s prime rate plus 1% (4.25% at December 31, 2020)

but at no time less than 4.0%.

Monthly interest payments were required, with any outstanding principal due on July 10, 2021.

expense for the nine months ended September 30, 2022 and 2021 was $ 0 and $ 66,412 , respectively.

The line of credit was collateralized by all assets

of the Company, including $2,000,000 of cash held in a control account at the lender.

The Company also maintained a minimum balance at

the lender to cover two months of interest payments.

Prior to our IPO, the line of credit was collateralized by $6,000,000 of cash assets

of two shareholders held in control accounts at the lender.

Following the Company’s IPO in February

2021 the line of credit was amended and the Company paid down the outstanding principal balance on its bank line of credit from $6,000,000

to $2,000,000 and the available principal balance for the line of credit was reduced from $6,000,000 to $2,000,000.

Further, the $6,000,000

of cash collateral previously provided by the two shareholders was released.

The remaining principal balance of $2,000,000 was repaid

in full and the line of credit was terminated on July 8, 2021.

The shareholder who previously provided the $2,000,000

control account had a collateral agreement with the Company which is described in Note 6.

This agreement was terminated in March 2021.

Note 5 – Convertible Notes Payable,

Notes Payable to Related Parties and Promissory Notes

Convertible notes payable

The Company had convertible notes outstanding

at December 31, 2020 in the amount of $ 2,295,305 , inclusive of accrued interest.

These convertible notes accrued interest at 6.0 % per

year and were scheduled to mature on December 31, 2021 .

In conjunction with the February 2021 IPO, the Notes automatically converted into

2,066,176 shares of common stock at discounts ranging from 50% to 75% of the IPO price.

Interest expense for the nine months ended September

30, 2022 and 2021 was $ 0 and $ 16,586 , respectively.

Accrued fees to a related party

The Company had an agreement with a shareholder

to provide collateral for a bank line of credit described in Note 4 – Line of Credit.

The amount of the cash collateral provided

by the shareholder to the bank was $2,000,000.

The collateral agreement required a commitment to pay collateral fees of $710,000 (comprised

of annual interest of $660,000 plus the $50,000 renewal fee) to the shareholder and issue 3,454 common stock warrants.

In January 2019,

in connection with the collateral agreement, the Company converted accrued fees of $ 725,000 into an unsecured note payable, which bore

interest at 33% annually and had a maturity date of December 31, 2021.

The fees that accrued on the collateral arrangement were 33% percent

of the collateral amount annually plus an annual renewal fee of $50,000.

Interest expense for the nine months ended September 30, 2022

and 2021 was $ 0 and $ 208,727 , respectively.

This collateral agreement terminated in March 2021.

In conjunction with the February 2021 IPO, the

notes payable and accrued interest due to this shareholder were converted to 1,667,859 shares of common stock.

Promissory notes payable

The Company had promissory notes payable outstanding

that were scheduled to mature on December 31, 2021 and accrue interest at 6%.

The notes and accrued interest would convert into equity,

upon a qualified IPO at a per share valuation equal to $40.0 million.

In addition, each investor in the Promissory Notes would receive

shares and warrants based on a formula that takes into account the number of shares and warrants the investor owned before the investment

in these Promissory Notes, as well as a portion of the bonus allocation of 1,038,342 shares made available to the investors.

expense for the nine months ended September 30, 2022 and 2021 was $ 0 and $ 14,454 , respectively.

In conjunction with the February 2021 IPO, all

of the Promissory Notes collectively converted into 3,080,535 shares of common stock.

The Company recognized a finance charge to interest

expense of $ 8,141,424 related to the conversion of the convertible notes, notes payable to related parties and promissory notes in February

Note 6 – Notes Payable

Notes payable to related parties and deferred

An executive officer of the Company agreed to

defer receipt of compensation to preserve liquidity in the Company.

The accumulated amount of compensation owed to this executive officer

was approximately $ 631,000 .

The Company paid this deferred compensation in the first quarter of 2021.

The Company had convertible notes payable to related

parties in the amounts of $ 200,000 and $ 50,000 , without a stated interest rate or stated maturity date.

Two other existing investors entered

into a convertible note related to services provided to the Company in the amount of $ 17,197 .

The Company also issued a convertible note

payable to a related party for consulting services incurred by the Company in the amount of $ 486,198 .

The Company paid these Notes in

the first quarter of 2021.

The Company had a short term loan of $ 500,000

short term loan from a related party.

The balance was repaid in February 2021.

Cares Act Paycheck Protection Program loan

The Company entered into a promissory note evidencing

an unsecured loan (the “First Loan”) in the amount of $ 268,662 made to the Company under the Paycheck Protection Program (the

In January 2021, the Company entered into a second promissory note (the “Second Loan” or combined with

the first loan, the “PPP Loans”) of $ 267,482 under the PPP.

The PPP was established under the CARES Act and is administered

Small Business Administration.

The First Loan was set to mature in April 2022

and the Second Loan was set to mature in January 2023.

The PPP Loans bore interest at a rate of 1% per annum.

Beginning November 2020,

the Company was required to make 18 monthly payments of principal and interest in the amount of $14,370 related to the First Loan.

PPP Loans may be prepaid by the Company at any time prior to maturity with no prepayment penalties.

The proceeds from the Loans may only

be used for payroll costs (including benefits), interest on mortgage obligations, rent, utilities and interest on certain other debt obligations.

The PPP Loans contained customary events of default

relating to, among other things, payment defaults, making materially false and misleading representations to the lender or breaching the

terms of the Loan documents.

The occurrence of an event of default will result in an increase in the interest rate to 18 % per annum and

provides the lender with customary remedies, including the right to require immediate payment of all amounts owed under the PPP Loans.

Pursuant to the terms of the CARES Act and the

PPP, the Company applied for forgiveness for both the PPP Loans.

On June 15, 2021, the Company received confirmation that the First Loan

was approved for forgiveness and the Company recorded $ 268,662 in PPP loan extinguishment to other income during the year ended December

On November 2, 2021, the Company received confirmation that the Second Loan was approved for forgiveness and the Company recorded

$ 267,482 in PPP loan extinguishment to other income during the year ended December 31, 2021.

The amount eligible for forgiveness was based

on the amount of Loan proceeds used by the Company (during the eight-week period after the lender makes the first disbursement of Loan

proceeds) for the payment of certain covered costs, including payroll costs (including benefits), interest on mortgage obligations, rent

and utilities, subject to certain limitations and reductions in accordance with the CARES Act and the PPP.

Note 4 – Note Payable to Related Party

In November 2022, the Company entered into a Secured

Bridge Note (“Prior Note”) financing with an existing stockholder of the Company.

The principal amount of the Note is $ 2,200,000

including an original issue discount of $ 200,000 .

The Prior Note bears interest an annual rate of 10 % and matures in May 2023.

Note is secured by a lien on substantially all of the Company’s assets.

At maturity, the lender has the option to convert any original

issue discount and accrued but unpaid interest into shares of the Company’s common stock at a fixed conversion price of $ 1.23 per

The conversion right is available to the lender at the earlier of (i) maturity, or (ii) payback of all the principal.

In connection

with the Prior Note financing, the Company issued 300,000 common stock warrants with a five-year term and an exercise price of $ 2.10 per

The warrants were valued at $ 361,878 , which was recorded as an additional debt discount.

The Company has the option to extend the

maturity date by six months to November 2023.

In the event of an extension, the interest rate on the Prior Note will increase to 20% and

the Company will issue to the lender an additional 300,000 warrants.

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

balance of the Note, net of debt issuance costs, was $ 2,026,897 and $ 1,775,956 , respectively.

Interest expense related to the Note for

the three months ended March 31, 2023, was $305,941.

On April 17, 2023, the Company entered into an

additional Secured Bridge Note (“New Note”) financing with the same accredited investor and significant existing stockholder

and also amended the terms of the Prior Note as described in more detail in Note 8 – Subsequent Events.

Note 5 – Commitments and Contingencies

1 unchanged sentence

In April 2021, the Company entered into a lease

agreement for a new primary office space in Boulder, Colorado comprising of 8,639 square feet.

The lease commenced on May 15, 2021 and

terminates after 12 months.

The lease has an initial base rent of $7,150 per month, with the first 15 days rent free and includes three

separate six month renewal options, subject to fixed rate escalation increases.

The Company exercised its first six month renewal option

to extend the lease through November 2022.

The Company previously leased approximately 3,000 square feet of office space that expired

on April 30, 2021.

Rent expense was as follows:

Schedule of rent expenses

Three Months Ended September 30

Nine Months Ended September 30

agreement for office space in Boulder, Colorado comprising 8,639 square feet.

The lease commenced on May 15, 2021, and terminated after

The Company subsequently extended the lease through November 2022.

In November 2022, the Company amended the lease, reducing

the square footage rented to 2,160 with a base rent of $4,018 per month.

The amended lease terminates after 13 months.

Rent expense was

$ 12,053 and $ 21,449 for the three months ended March 31, 2023, and 2022, respectively.

In the normal course of business, the Company

2 unchanged sentences

litigation will not have a material adverse effect on the Company.

Contingencies

A pre-IPO investor has contacted the Company claiming

damages caused by alleged acts and omissions arising from a private financing by the Company.

No complaint has been filed by the investor.

The alleged damages asserted by the investor are less than approximately $300,000.

The Company believes it has meritorious defense to

the investor's claims.

Note 6 - Share-based Issuances

7 unchanged sentences

Forfeited/canceled

Outstanding – September 30, 2022

The following table presents the composition of

options outstanding and exercisable:

Outstanding - March 31, 2023

The following table presents the composition

of options outstanding and exercisable:

Options outstanding and exercisable

2 unchanged sentences

Exercise Prices

Total – September 30, 2022

Total - March 31, 2023

________________________

Price and Life reflect the weighted average exercise price and weighted average remaining contractual life, respectively.

During the nine months ended September 30, 2022,

the Company granted 683,136 stock options to certain executives and key employees.

Under the terms of the option agreements, the options

are subject to certain vesting requirements.

The fair value of each award is determined using the Black-Scholes option-pricing model which

values options based on the stock price at the grant date, the expected life of the option, the estimated volatility of the stock, and

the risk-free interest rate over the expected life of the option.

The expected volatility was determined considering comparable companies

historical stock prices as a peer group for the fiscal year the grant occurred and prior fiscal years for a period equal to the expected

life of the option.

The risk-free interest rate was the rate available from the St.

Louis Federal Reserve Bank with a term equal to the

expected life of the option.

During the three months ended March 31, 2023,

the Company granted 150,200 stock options to an executive.

Under the terms of the option agreement, the options are subject to certain

vesting requirements.

The fair value of each award is determined using the Black-Scholes option-pricing model which values options based

on the stock price at the grant date, the expected life of the option, the estimated volatility of the stock, and the risk-free interest

rate over the expected life of the option.

The expected volatility was determined considering comparable companies historical stock prices

as a peer group for the fiscal year the grant occurred and prior fiscal years for a period equal to the expected life of the option.

risk-free interest rate was the rate available from the St.

Louis Federal Reserve Bank with a term equal to the expected life of the option.

The expected life of the option was estimated based on a mid-point method calculation.

2 unchanged sentences

restricted stock units outstanding:

Schedule of warrant activity

Exercise Price

Schedule of restricted stock outstanding

Average Grant

Date Fair Value

Outstanding - December 31, 2022

1 unchanged sentence

Vested/issued

Outstanding – September 30, 2022

During the nine months ended September 30, 2022,

Outstanding – March 31, 2023

During the three months ended March 31, 2023,

the Company granted 37,500 restricted stock units.

Under terms of the restricted stock agreements, the restricted stock units are subject

to a four year vesting schedule.

During the nine months ended September 30, 2022,

certain restricted stock unit holders elected a net-share settlement for vested shares to satisfy income tax requirements.

applied modification accounting in accordance with ASC 718, and reclassified these share-based awards from equity classification to liability

classification.

The Company recognized a share-based compensation liability as of September 30, 2022 of $ 119,388 related to the fair value

of vested shares over the service period.

Under terms of the restricted stock agreement, the restricted stock units are subject

to a certain vesting schedule.

In 2023, certain restricted stock unit holders

elected a net-share settlement for vested shares to satisfy income tax requirements.

The Company applied modification accounting in accordance

with ASC 718 and recorded the expected value of these share-based awards as a liability.

The Company recognized a share-based compensation

liability as of March 31, 2023, of $ 17,739 related to the fair value of vested shares over the service period.

The Company recognized share-based compensation

expense related to stock options and restricted stock units in the amounts of $ 698,486 and $ 767,543 for the nine months ended September

30, 2022 and 2021, respectively.

The remaining unvested share-based compensation expense of $ 2,444,906 is expected to be recognized over

the next 45 months.

expense related to stock options and restricted stock units of $ 357,680 and $ 385,908 for the three months ended March 31, 2023, and 2022,

respectively.

The remaining unvested share-based compensation expense of $ 1,616,569 is expected to be recognized over the next 37 months.

The following table presents the activity for

4 unchanged sentences

Forfeited/cancelled/restored

Outstanding – September 30, 2022

In connection with the February 2021 IPO, the

Company issued 4,590,590 Series A warrants to purchase shares of common stock.

The Company also issued 319,346 of representative warrants

to its underwriters to purchase shares of common stock and these representative warrants contain a cashless exercise feature.

During the nine months ended September 30, 2022

certain holders of our Pre-IPO warrants exercised 148 warrants for 112 shares of common stock at the net exercise price of $ 0.87 per share.

Outstanding - March 31, 2023

All of the outstanding warrants are exercisable

and have a weighted average remaining contractual life of approximately 3.19 years as of September 30, 2022.

and have a weighted average remaining contractual life of approximately 2.82 years as of March 31, 2023.

Note 7 – Net Loss Per Share

4 unchanged sentences

for basic net loss per share is adjusted by the effect of dilutive securities, including awards under our equity compensation plans.

As of September 30, 2022 and 2021, 6,271,219 shares

As of March 31, 2023, and 2022, 6,669,184 shares

and 6,248,131 shares, respectively of potentially dilutive weighted average shares were excluded from the calculation of diluted net loss

1 unchanged sentence

Note 8 – Subsequent Events

On November 14, 2022, the Company entered

into a secured debt financing agreement (the “Convertible Note”) with one accredited investor who is a current existing

stockholder of the Company.

The Convertible Note has a face value of $2.2 million with a 10% discount, in which the Company

will receive $2 million in net proceeds.

The Convertible Note has a maturity date of May 31, 2023 and can be extended at the

Company’s option to November 30, 2023.

The Convertible Note bears interest at 10%.

The Convertible Note includes 300,000

warrants at a strike price of 150% of the most recent closing price.

In addition, on November 14, 2022, the Company entered

into an equity line stock purchase agreement with one accredited investor.

The equity line facility is for up to $10 million

of potential sales subject to certain limitations, would occur, at the Company's option, from time to time over the period ending

December 31, 2023.

The equity line will be structured as a registered take down off of the Company's existing universal shelf S-3

registration statement which was declared effective on April 18, 2022.

Interim Bridge Financing

Additional Secured Bridge Note Financing

As previously disclosed, on November 14, 2022,

the Company entered into a Secured Bridge Note (“Prior Note”) financing with one accredited investor who is a significant

existing stockholder of the Company.

The Company received $2,000,000 of gross proceeds in connection with that financing.

On April 17, 2023, the Company entered into an

additional Secured Bridge Note (“New Note”) financing with the same accredited investor.

The Company received $750,000 of

gross proceeds in connection with the New Note financing.

The principal amount of the New Note is $825,000.

The New Note has a 10% interest rate and matures on July 31, 2023.

The New Note is secured by a lien on substantially all of the Company’s

At maturity, the investor has the option to convert

any original issue discount and accrued but unpaid interest on the New Note into shares of the Company’s common stock.

conversion price is $0.61 per share.

In connection with the New Note financing, the

Company issued to the investor 650,000 common stock warrants with a five-year term and a fixed $0.61 per share exercise price.

of such warrants are exercisable immediately.

The other 325,000 of such warrants would only become exercisable if the maturity date of

the New Note is extended in accordance with the terms of the New Note.

If the New Note remains outstanding as of July

31, 2023, the Company has the option to extend the maturity date of the New Note to November 30, 2023.

Upon such extension, the interest

rate on the New Note will be increased to 20% rather than 10%, and the 325,000 portion of the warrants shall become exercisable.

Amendments to Prior Secured Bridge Note Financing

In connection with the New Note financing, the

parties agreed to make certain amendments to the Prior Note financing.

The parties agreed to cancel the 300,000 common

stock warrants issued November 14, 2022, in connection with the Prior Note financing.

In addition, the Company issued to the investor

common stock warrants for 600,000 common shares, with an exercise price of $0.61 per common share and a five-year term.

300,000 of such

warrants are exercisable immediately.

The other 300,000 of such warrants would only become exercisable if the maturity date of the Prior

Note is extended in accordance with the terms of the Prior Note.

The investor will not be able to receive shares

upon conversion or exercise, unless prior stockholder approval is obtained, if the number of shares to be issued to the investor, when

aggregated with all other shares of common stock then owned by the investor beneficially or deemed beneficially owned by the investor,

would (i) result in the investor owning more than the Beneficial Ownership Limitation (as defined below), as determined in accordance

with Section 13 of the Securities Exchange Act of 1934 or (ii) otherwise constitute a Change of Control within the meaning of Nasdaq Rule

The “Beneficial Ownership Limitation” shall be 19.99% of the number of shares of the common stock outstanding immediately

prior to the proposed issuance of shares of common stock.

Equity Line Sales of Common Stock

As previously disclosed, on November 14, 2022,

the Company entered into a Common Stock Purchase Agreement (the “White Lion Purchase Agreement”) with White Lion Capital,

LLC, a Nevada limited liability company (“White Lion”) for an equity line facility.

On April 17 and April 20, 2023, the Company closed

on two sales of Common Stock under the White Lion Purchase Agreement.

The Company issued an aggregate of 1,962,220 common shares and received

aggregate proceeds of approximately $1.12 million.

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