What changed in this filing

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Item 1. Financial Statements

2023-08-24 compared with 2023-05-19 · 389 added, 291 removed, 204 unchanged (77% of the section changed)

Financial Statements

Condensed Balance Sheets (Unaudited)

Condensed Balance Sheets

Current assets:

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Accounts payable and accrued liabilities

Note payable to related party, net of debt issuance costs

Notes payable to related party, net of debt issuance costs

Stock awards liability

Total current liabilities

Commitments and contingencies

Total liabilities

Commitments and contingencies (Note 5)

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

Preferred stock - $ 0.001 par value, 10,000,000 authorized and 0 shares issued and outstanding

Common stock - $ 0.001 par value, 100,000,000 authorized and 19,947,223 and 12,654,949 shares issued and outstanding June 30, 2023 and December 31, 2022

Additional paid-in capital

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Total liabilities and shareholders' equity

The accompanying notes are an integral part of

these unaudited condensed financial statements.

The accompanying notes are an integral part of these

unaudited condensed financial statements.

Condensed Statements of Operations (Unaudited)

Three Months Ended March 31,

Three Months Ended

Six Months Ended

Operating expenses:

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Interest expense

Interest income

Total other expense

Net loss before taxes

Loss before income taxes

( 2,322,862 )

( 2,050,385 )

Provision for income taxes

$ ( 2,322,862 )

$ ( 2,050,385 )

Net loss per share attributable to common shares

Net loss per share attributable to common stockholders

Basic and diluted

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Basic and diluted

The accompanying notes are an integral part of

these unaudited condensed financial statements.

The accompanying notes are an integral part of these

unaudited condensed financial statements.

Condensed Statements of Changes in Shareholders’

Equity (Unaudited)

Three Months Ended March 31, 2022

Additional Paid-In

Balance, December 31, 2021

For The Three and Six Months Ended June 30, 2023

Paid-In-Capital

Balance, January 1, 2023

$ ( 71,735,834 )

Exercise of restricted stock units and warrants

Exercise of Restricted Stock Units

Share-based compensation

Reclassification of shared-based compensation award to liability

( 2,155,312 )

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$ ( 73,891,146 )

Three Months Ended March 31, 2023

Additional Paid-In

Balance, December 31, 2022

Issuance of common shares, net of costs

Issuance of warrants

Share-based compensation

Reclassification of share-based compensation liability

( 2,322,862 )

Balance, June 30, 2023

$ ( 76,214,008 )

For The Three and Six Months Ended June 30, 2022

Paid-In-Capital

Balance, January 1, 2022

$ ( 64,838,389 )

Exercise of restricted stock units

Share-based compensation

Reclassification of share-based compensation liability

( 1,753,258 )

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$ ( 66,591,647 )

The accompanying notes are an integral part of

these unaudited condensed financial statements.

Share-based compensation

Reclassification of share-based compensation liability

( 2,050,385 )

Balance, June 30, 2022

$ ( 68,642,033 )

The accompanying notes are an integral part of these

unaudited condensed financial statements.

Condensed Statements of Cash Flows (Unaudited)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

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Software capitalization

( 1,278,625 )

Purchase of property and equipment

Net cash used in investing activities

Cash flows from financing activities:

Net settlement of share-based compensation awards

Net cash used in financing activities

Net decrease in cash

( 1,282,433 )

Cash flows from financing activities:

Net settlement of share-based compensation liability

Proceeds from related party debt, net of original issue discount

Proceeds from issuance of common shares, net of issuance costs

Net cash provided by (used in) financing activities

Net increase (decrease) in cash

( 4,004,002 )

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Cash paid for Interest

Cash paid for income taxes

The accompanying notes are an integral part of

these unaudited condensed financial statements.

Supplemental disclosures of non-cash activity:

Reclassification of deferred offering cost

Original issue discount and issuance of warrants on related party debt

The accompanying notes are an integral part of these

unaudited condensed financial statements.

Notes to Condensed Financial Statements (Unaudited)

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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

initial public offering (the “IPO”) of 3,991,818 units, at $4.125 per unit, consisting of one share of common stock and one

Series A warrant to purchase one share of common stock at an exercise price of $4.54 per share.

In addition, the underwriters exercised

their option to purchase 598,772 Series A warrants to cover over-allotments and were issued 319,346 in representative warrants at an exercise

On February 16, 2021, the Company completed an initial

public offering (the “IPO”) of 3,991,818 units, at $4.125 per unit, consisting of one share of common stock and one Series

A warrant to purchase one share of common stock at an exercise price of $4.54 per share.

In addition, the underwriters exercised their

option to purchase 598,772 Series A warrants to cover over-allotments and were issued 319,346 in representative warrants at an exercise

price of $5.15625 per share.

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into 6,814,570 shares of the Company’s common stock.

Concurrently with the IPO the Company converted

from a Colorado limited liability company to a Delaware corporation.

This accounting change has been given retrospective treatment in

the condensed financial statements.

Concurrently with the IPO the Company converted from

a Colorado limited liability company to a Delaware corporation.

Basis of Presentation

The accompanying financial statements have been

prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

The accompanying financial statements have been prepared

in accordance with generally accepted accounting principles in the United States of America (“GAAP”).

Unaudited interim financial information

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

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

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.

The condensed balance sheet as of December 31, 2022 has been derived

from the financial statements included in the Company’s annual report on Form 10-K.

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.

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

recurring nature.

Use of Estimates

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Actual results could differ from those estimates.

The condensed financial statements include some

amounts that are based on management's best estimates and judgments.

The most significant estimates relate to valuation of capital stock,

warrants and options to purchase shares of the Company's common stock, and the estimated recoverability and amortization period for capitalized

The condensed financial statements include some amounts

that are based on management's best estimates and judgments.

The most significant estimates relate to valuation of capital stock, warrants

and options to purchase shares of the Company's common stock, and the estimated recoverability and amortization period for capitalized

software development costs.

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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

Emerging Growth Company Status

The Company is an emerging growth company, as

defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

Under the JOBS Act, emerging growth companies

can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards

apply to private companies.

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

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

Going Concern

The Company had cash of $ 3,605,144

as of June 30, 2023.

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

Management has plans to secure such additional funding.

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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

the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.

has plans to mitigate the conditions or events that raise substantial doubt about the entity’s ability to continue as a going concern,

such as the White Lion equity line of credit (refer to Note 8) and additional future financing agreements.

However, management cannot

provide any assurances that the Company will be successful in accomplishing any of its plans.

These financial statements do not include

any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might

be necessary should the Company be unable to continue as a going concern.

The Company’s current

level of cash are not sufficient to execute our business plan.

For the foreseeable future, we will incur significant operating expenses,

capital expenditures and working capital funding that will deplete our cash on hand by November 2023.

The Company considers all highly liquid instruments

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

The Company had no cash equivalents at March 31, 2023

The Company had no cash equivalents as of June 30,

2023 or December 31, 2022.

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financial institutions, which are insured by the Federal Deposit Insurance Corporation up to $250,000.

The Company’s cash balance

may at times exceed these limits.

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.

The Company’s cash

balance may at times exceed these limits.

At June 30, 2023, the Company had approximately $ 3.4

million in excess of federally insured limits.

As 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.

Software Development Costs

The Company accounts for costs incurred in the

development of computer software as software research and development costs until the preliminary project stage is completed, management

has committed to funding the project, and completion and use of the software for its intended purpose is probable.

The Company ceases capitalization of development

costs once the software has been substantially completed and is available for its intended use.

Software development costs are amortized

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

The Company accounts for costs incurred in the development

of computer software as software research and development costs until the preliminary project stage is completed, management has committed

to funding the project, and completion and use of the software for its intended purpose is probable.

The Company ceases capitalization of development costs

once the software has been substantially completed and is available for its intended use.

Software development costs are amortized over

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

Costs associated with significant upgrades and enhancements

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on anticipated future revenues and changes in software technologies.

Unamortized capitalized software development costs

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 $ 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.

Unamortized capitalized software development

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

determination.

We determined that no such impairments were required during the three months and six month period ended June 30,

Software development costs of $ 258,929

and $ 617,411

were capitalized for the three months ended June 30, 2023, and 2022, respectively and $ 529,503

and $ 1,278,625

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

Amortization of capitalized software development

costs were $ 436,425

and $ 262,703

for the three months ended June 30, 2023, and 2022, respectively and $ 872,850

and $ 430,739

for the six months ended June 30, 2023 and 2022, respectively and are included in depreciation and amortization expense in the

Company’s condensed statement of operations.

Revenue Recognition

Revenue will be measured according to Accounting

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.

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 excludes any sales incentives and amounts collected on behalf of third

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

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

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There is no revenue recognized for unpaid trial subscriptions.

Customers may pay for the services in advance

of the performance obligation and therefore these prepayments are recorded as deferred revenue.

The deferred revenue will be recognized

as revenue in our statement of operations as the services are provided.

Customers may pay for the services in advance of the

performance obligation and therefore these prepayments are recorded as deferred revenue.

The deferred revenue will be recognized as revenue

in our statement of operations as the services are provided.

Share-Based Compensation

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fair value of the awards on the date of grant in accordance with ASC 718.

Compensation expense for all share-based awards

is based on the estimated grant-date fair value and recognized in earnings over the requisite service period (generally the vesting period).

Compensation expense for all share-based awards is

based on the estimated grant-date fair value and recognized in earnings over the requisite service period (generally the vesting period).

The Company records share-based compensation expense related to non-employees over the related service periods.

Certain stock awards include a net-share settlement

feature that provides the grantee an option to withhold shares to satisfy tax withholding requirements and are classified as a share-based

compensation liability.

Cash paid to satisfy tax withholdings is classified as financing activities in the condensed statements of cash

Emerging Growth Company Status

The Company is an emerging growth company, as

defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”).

Under the JOBS Act, emerging growth companies

can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards

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.

Note 2 – Property & Equipment

and Software Development Costs

Property and equipment and software development

costs consisted of the following as of:

Certain share-based compensation awards include a

net-share settlement feature that provides the grantee an option to withhold shares to satisfy tax withholding requirements and are classified

as a share-based compensation liability.

Cash paid to satisfy tax withholdings is classified as financing activities in the condensed

statements of cash flows.

Recently Adopted ASUs

ASU 2016-13-Financial Instruments-Credit Losses-

The new guidance makes significant changes to the accounting for credit losses on financial instruments and disclosures about them.

Specifically,

the new CECL impairment model requires an estimate of expected credit losses, measured over the contractual life of an instrument, that

considers forecasts of future economic conditions in addition to information about past events and current conditions.

The Company adopted

the new standard beginning January 1, 2023.

The adoption of the new standard did not have a material impact to the Company’s financial statements.

Note 2 – Property & Equipment and

Software Development Costs

Property and equipment and software development costs

consisted of the following as of:

Schedule of property, equipment and software development costs

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The Company recognized depreciation expense of

$ 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

$ 6,193 and $ 8,302 for the three months ended June 30, 2023, and 2022, respectively related to property and equipment and

amortization expense of $ 436,425 and $ 262,703 for the three months ended June 30, 2023, and 2022, respectively related to software

development costs.

The Company recognized depreciation expense of $ 12,803

and $ 16,393 for the six

months ended June 30, 2023, and 2022, respectively related to property and equipment and amortization expense of $ 872,850

and $ 430,739

for the six months ended June 30, 2023, and 2022, respectively related to software development costs.

Note 3 – Accounts Payable and Accrued

Accounts payable and accrued liabilities consist

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Accounts payable and accrued liabilities

Note 4 – Note Payable to Related Party

Note 4 – Notes Payable to Related Party,

net of debt issuance costs

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

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

The principal amount of the Prior Note

was $ 2,200,000 including an original issue discount of $ 200,000 .

The Prior Note bears interest at a stated rate of 10% and had an original

maturity date of May of 2023.

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

At maturity, the

lender had 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 share.

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 share.

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

During May of 2023, the Company extended the maturity date by six months to November 2023 at an increased annual interest rate

of 20% and the issuance of an additional 300,000 warrants.

The additional warrants were valued at $ 94,083 , which was also recorded as

an additional debt discount.

The embedded conversion option was not accounted for separately as, in accordance with the guidance outlined

in ASC 815-40, it was considered indexed to the Company’s shares.

Similarly, the issued warrants were classified in equity as they

were also considered indexed to the Company’s shares in accordance with ASC 815-40.

In connection with an additional financing with the

same related party during April of 2023, the Company cancelled the original 300,000 warrants issued with the Prior Note and issued 600,000

new common stock warrants with a five-year term and an exercise price of $0.61

The Company recognized the modification in accordance with ASC 815-40-35, which resulted in the recognition of additional

debt discount in the amount of $ 35,981 .

Upon issue of the new common stock warrants, 300,000 were fully vested and immediately exercisable upon issue.

The remaining 300,000

warrants were unvested.

During May of 2023, the Company extended the maturity

date of the Prior Notes by six months to November 2023 at an increased annual interest rate of 20%.

In connection with this extension,

the 300,000 outstanding unvested warrants became vested and exercisable.

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

balance of the Prior Note, net of debt issuance costs, was $2,121,341

and $1,775,956,

respectively.

Interest expense related to the Prior Note for the three and six months ended June 30, 2023, was $261,861 and $567,802.

As noted above, the Company entered into an additional

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

April of 2023.

In addition, the Company also amended the terms of the Prior Note.

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

including an original issue discount of $ 75,000 .

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 New Note bears interest at an annual stated rate of 10%

and matures in July 2023.

The New 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 $0.61

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.

In connection with the New Note financing, the Company issued 325,000

common stock warrants with a

five-year term and an exercise price of $0.61

per share and an additional 325,000

common stock warrants with a five-year term and an exercise price of $0.61

per share that are exercisable in the event that the loan term is extended.

The warrants were valued at $ 252,940 ,

which was recorded as additional debt discount.

Similar to the accounting for the Prior Note, the embedded conversion option was not

accounted for separately as, in accordance with the guidance outlined in ASC 815-40, it was considered indexed to the Company’s

In addition, the issued warrants were classified in equity as they were also considered indexed to the Company’s shares

in accordance with ASC 815-40.

As of June 30, 2023, the balance of the New Note

issued in April 2023, net of debt issuance costs, was $ 717,557 .

Interest expense related to the New Note for the three and six months ended June 30, 2023 was $ 273,204 ,

respectively.

On July 31, 2023, the Company extended the maturity

date of the New Note to November 30, 2023.

In connection with such extension, 325,000 outstanding unvested warrants became vested and

Note 5 – Commitments and Contingencies

Operating Lease

In April 2021, the Company entered into a lease

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

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

In April 2021, the Company entered into a lease agreement

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

The lease commenced on May 15, 2021, and terminated after 12 months.

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.

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

is party to litigation from time to time.

The Company maintains insurance to cover certain actions and believes that resolution of such

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.

Rent expense, as part of general and administrative expenses as included in the

Condensed Statement of Operations, was $ 25,385 and

$ 21,733 for the three months ended June 30, 2023, and 2022, respectively and $ 37,438 and $ 43,182 for the six months ended June 30, 2023,

and 2022, respectively.

In the normal course of business, the Company is party

to litigation from time to time.

The Company maintains insurance to cover certain actions and believes that resolution of such litigation

will not have a material adverse effect on the Company.

There are no active litigations as of the date the financial statements were issued.

However, 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.

The alleged damages asserted by

the investor are less than approximately $300,000.

The outcome of the complaint was neither probable or estimable as of the date the financial

statements were issued.

NASDAQ deficiency

On May 23, 2023, we received a letter (the “Notice”)

from the Listing Qualifications Staff of the Nasdaq Stock Market, LLC (“Nasdaq”) indicating that, based upon the Company’s

reported stockholder’s equity of $ 2,095,247 at the end of March 31, 2023, we are not in compliance with the requirement to maintain

a minimum stockholder’s equity of $2,500,000 for continued listing on the Nasdaq Capital Market, as set forth in Nasdaq Listing

Rule 5550(b)(1) the “Stockholder’s Equity”).

We were provided a compliance period of 45 calendar days from the date

of the Notice, or until July 7, 2023, to submit a plan to regain compliance with the Stockholder’s Equity Requirement, pursuant

to Nasdaq Listing Rule 5810(c)(2)(A).

On July 10, 2023, the Company received a letter

from Nasdaq advising that the Company had been granted an extension to file a Form 10-Q for the quarter-ended June 30, 2023 evidencing

compliance with Stockholder’s Equity requirement.

If we do not regain compliance within the allotted compliance period, Nasdaq will

provide notice that the Company’s Common Stock will be subject to delisting.

The Company would then be entitled to appeal that determination

to a Nasdaq hearings panel.

As disclosed elsewhere in the Quarterly Report,

the Company’s stockholder’s equity as of June 30, 2023 is $ 4,331,778 , which is $1,831,778 over the $2.5 million Nasdaq continued

listing requirement.

Separately, on April

24, 2023 we received a letter from Nasdaq indicating that the Company is not in compliance with the $1.00 Minimum Bid Price requirement

set forth in Nasdaq Listing Rule 5550(a)(2) for continued listing on the Nasdaq Capital Market (the “Bid Price Requirement”).

The letter indicated

that the Company will be provided 180 calendar days (or until October 23, 2023) in which to regain compliance.

If at any time during this

180 calendar day period the bid price of the Company’s common stock closes at or above $1.00 per share for a minimum of ten consecutive

business days, Nasdaq will provide the Company with a written confirmation of compliance and the matter will be closed.

Alternatively, if the

Company fails to regain compliance with Rule 5550(a)(2) prior to the expiration of the initial 180 calendar day period, the Company may

be eligible for an additional 180 calendar day compliance period, provided (i) it meets the continued listing requirement for market value

of publicly held shares and all other applicable requirements for initial listing on the Nasdaq Capital Market (except for the Bid Price

Requirement) and (ii) it provides written notice to Nasdaq of its intention to cure this deficiency during the second compliance period

by effecting a reverse stock split, if necessary.

In the event the Company does not regain compliance with Rule 5550(a)(2) prior to the

expiration of the initial 180 calendar day period, and if it appears to the Staff that the Company will not be able to cure the deficiency,

or if the Company is not otherwise eligible, the Staff will provide the Company with written notification that its securities are subject

to delisting from The Nasdaq Capital Market.

At that time, the Company may appeal the delisting determination to a Hearings Panel.

The Company intends to

consider all options to regain compliance with all Nasdaq continued listing requirements.

The Company’s receipt

of these Nasdaq letters does not affect the Company’s business, operations or reporting requirements with the Securities and Exchange

Note 6 - Share-based Issuances

Stock Options

The following table presents the activity for

stock options outstanding:

The following table presents the activity for stock

options outstanding:

Schedule of stock option activity

Non-Qualified

Exercise Price

Weighted Average Exercise Price

Outstanding - December 31, 2022

Forfeited/canceled

Outstanding - March 31, 2023

The following table presents the composition

of options outstanding and exercisable:

Outstanding - June 30, 2023

The following table presents the composition of options

outstanding and exercisable:

Options outstanding and exercisable

2 unchanged sentences

Exercise Prices

Total - March 31, 2023

Total - June 30, 2023

________________________

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

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.

During the six months ended June 30, 2023, the Company

granted 200,200 stock options.

Under the terms of the option agreements, the options are subject to certain vesting requirements.

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.

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

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

Restricted Stock Units

The following table presents the activity for

restricted stock units outstanding:

The following table presents the activity for restricted

stock units outstanding:

Schedule of restricted stock outstanding

Average Grant

Date Fair Value

Restricted Stock Units

Weighted Average Grant Date Fair Value

Outstanding - December 31, 2022

1 unchanged sentence

Vested/issued

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 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.

Outstanding -June 30, 2023

During the six months ended June 30, 2023, the Company

granted 37,500 restricted stock units.

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

1 unchanged sentence

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 of $ 357,680 and $ 385,908 for the three months ended March 31, 2023, and 2022,

respectively.

liability as of June 30, 2023, of $ 30,090 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 of $ 582,536 and $ 671,829 for the six months ended June 30, 2023, and 2022, respectively.

The remaining unvested share-based compensation expense of $ 1,664,419 is expected to be recognized over the next 93 months.

The following table presents the activity for

warrants outstanding:

The following table presents the activity for warrants

Schedule of warrant activity

Exercise Price

Weighted Average Exercise Price

Outstanding - December 31, 2022

Forfeited/cancelled/restored

Outstanding - March 31, 2023

All of the outstanding warrants are exercisable

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

Forfeited/canceled

Outstanding - June 30, 2023

5,097,099 of the outstanding warrants are currently

exercisable and have a weighted average remaining contractual life of approximately 2.94 years as of June 30, 2023.

Note 7 – Net Loss Per Share

Basic net loss per share is computed by dividing

net loss, which is allocated based upon the proportionate amount of weighted average shares outstanding, to each class of stockholder’s

Basic net loss per share is computed by dividing net

loss, which is allocated based upon the proportionate amount of weighted average shares outstanding, to each class of shareholder’s

stock outstanding during the period.

For the calculation of diluted net loss per share, net loss per share attributable to common stockholders

For the calculation of diluted net loss per share, net loss per share attributable to common shareholders

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

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

As of June 30, 2023, and 2022, 8,505,540 shares and

6,325,245 shares, respectively of potentially dilutive weighted average shares were excluded from the calculation of diluted net loss

per share because their effect would have been anti-dilutive for the periods presented.

Note 8 – Equity Financings

Equity Line Sales of Common

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.

In April and June 2023, the

Company closed on three sales of Common Stock under the White Lion Purchase Agreement.

As a result, the Company issued an aggregate of

2,361,514 common shares and received aggregate proceeds of approximately $ 1.3 million .

Any proceeds that the

Company receives under the White Lion Purchase Agreement are expected to be used for working capital and general corporate purposes.

The aggregate number of shares of common stock that

the Company can sell to White Lion under the White Lion Purchase Agreement (including the Commitment Shares) may in no case exceed 2,501,700

shares of the common stock (which is equal to approximately 19.99% of the shares of the common stock outstanding immediately prior to

the execution of the White Lion Purchase Agreement) (the “Exchange Cap”), unless shareholder approval is obtained to issue

purchase shares above the Exchange Cap, in which case the Exchange Cap will no longer apply.

The Company recognized all offering costs related

to the equity line of credit as deferred offering costs in accordance with the guidance in ASC 835-30-S45.

Sale of Common Shares

(S-3 offering)

In June 2023, the Company sold 4,735,000

shares of common stock with net proceeds of $ 2.7

Note 9 – Subsequent Events

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.

The Company extended the maturity

date of the April 2023 note (described in note 4 to the financial statements) to November 30, 2023.

As a result of the extension, the

annual interest rate increased to 20% effective August 1 st .

Further, the 325,000 contingently exercisable warrants issued with

the loan became immediately exercisable.

Nasdaq Non-Compliance

On August 23, 2023, the Company received a notice from Nasdaq notifying

the Company that because the Company remains delinquent in filing its Form 10-Q, the Company no longer complies with Nasdaq Listing Rule

5250(c)(1), which requires companies with securities listed on Nasdaq to timely file all required periodic reports with the SEC.

The notice received from Nasdaq has no immediate effect on the listing

or trading of the Company’s securities on Nasdaq.

However, if the Company would fail to timely regain compliance with Rule 5250(c)(1),

the Company’s securities would be subject to delisting from Nasdaq.

Under the Nasdaq rules, the Company has until October 22, 2023 (60

days after Nasdaq’s notice) to submit a plan to regain compliance with the Rule 5250(c)(1).

The Company expects that with the filing

of this Form 10-Q , we have regained compliance with Rule 5250(c)(1).

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