NEXTNRG, INC. 10-K

Item 8. Financial Statements EzFill Holdings, Inc. Consolidated Balance Sheets December 31, 2022 December 31, 2021 Assets Current Assets: Cash and cash equivalents $ 2,066,793 $ 13,561,266 Investment in debt securities 2,120,082 3,362,880 Accounts receivable, net of allowance for doubtful accounts of $ 0 and $ 5,665 , respectively 766,692 100,194 Prepaid expenses and other 329,351 186,349 Inventory 151,248 46,343 Total Current Assets 5,434,166 17,257,032 Fixed assets, net of accumulated depreciation of $ 1,134,680 and $ 284,216 , respectively 4,589,159 2,286,320 Goodwill and other indefinite lived intangibles - 129,983 Other intangible assets, net of accumulated amortization of $ 0 and $ 1,205,379 , respectively - 3,207,327 Operating lease right of use asset 521,782 - Other assets 52,737 43,456 Total Assets $ 10,597,844 $ 22,924,118 Liabilities and Stockholders’ Equity (Deficit) Current Liabilities: Accounts payable and accrued liabilities $ 1,256,479 $ 579,365 Loans payable - current 811,516 178,871 Borrowings under revolving line of credit 1,000,000 - Operating lease liabilities 230,014 - Total Current Liabilities 3,298,009 758,236 Loans payable - net of current portion 1,198,380 297,436 Operating lease liabilities, net of current portion 316,008 - Total Liabilities 4,812,397 1,055,672 Commitments and Contingencies - - Stockholders’ Equity (Deficit) Preferred stock, $ .0001 and $ .0001 par value; 50,000,000 and 50,000,000 shares authorized; - 0 - and - 0 - shares issued and outstanding - - Common stock, $ .0001 and $ .0001 par value; 500,000,000 and 500,000,000 shares authorized; 26,685,392 and 26,243,474 shares issued and outstanding at December 31, 2022 and December 31, 2021, respectively 2,669 2,624 Additional paid in capital 40,672,529 39,210,291 Accumulated deficit ( 34,845,161 ) ( 17,339,396 ) Accumulated other comprehensive loss ( 44,590 ) ( 5,073 ) Total Stockholders’ Equity (Deficit) 5,785,447 21,868,446 Total Liabilities and Stockholders’ Equity (Deficit) $ 10,597,844 $ 22,924,118 The accompanying notes are an integral part of the consolidated financial statements. 25 EzFill Holdings, Inc. Consolidated Statements Of Operations and Comprehensive Loss Year ended December 31, 2022 2021 REVENUES Revenues $ 15,044,721 $ 7,233,957 TOTAL REVENUES 15,044,721 7,233,957 COSTS & EXPENSES Cost of sales 15,218,234 7,027,274 Operating expenses 12,648,629 8,102,934 Impairment of goodwill and intangible assets 2,636,402 - Impairment of fixed assets 258,114 - Depreciation and amortization 1,769,621 872,834 TOTAL COSTS AND EXPENSES 32,531,000 16,003,042 OPERATING LOSS ( 17,486,279 ) ( 8,769,085 ) OTHER INCOME AND EXPENSES Interest income 84,603 - Other income - 161,572 Interest expense ( 104,089 ) ( 775,884 ) LOSS BEFORE INCOME TAXES ( 17,505,765 ) ( 9,383,397 ) PROVISION FOR INCOME TAXES - - NET LOSS $ ( 17,505,765 ) $ ( 9,383,397 ) NET LOSS PER SHARE Basic and diluted $ ( 0.66 ) $ ( 0.46 ) Basic and diluted weighted average number of common shares outstanding 26,411,874 20,199,444 Comprehensive Loss: Net loss $ ( 17,505,765 ) $ ( 9,383,397 ) Other comprehensive loss: Change in fair value of debt securities ( 39,517 ) ( 5,073 ) Total comprehensive loss $ ( 17,545,282 ) $ ( 9,388,470 ) The accompanying notes are an integral part of the consolidated financial statements. 26 EzFill Holdings, Inc. Consolidated Statements of Stockholders’ Equity (Deficit) Shares Amount Shares Amount Capital Deficit Loss (Deficit) Preferred stock Common stock Additional Paid-in Accumulated Accumulated Other Comprehensive Stockholder’s Equity Shares Amount Shares Amount Capital Deficit Loss (Deficit) Balance December 31, 2020 - $ - 17,199,912 $ 1,720 $ 6,472,536 $ ( 7,956,000 ) $ - $ ( 1,481,744 ) Initial public offering, net of expenses - - 7,187,500 719 25,248,855 - - 25,249,574 Stock based compensation – related party - - 230,724 23 949,619 949,642 Stock based compensation – other - - 211,787 21 871,678 - - 871,699 Options granted - - - - 74,733 - - 74,733 Debt discount, related parties - - 7,972 1 29,999 - - 30,000 Issuance of acquisition shares - - 193,398 19 749,981 - - 750,000 Issuance of bonus and settlement shares - - 384,437 38 1,499,962 - - 1,500,000 Warrants and shares to lender - - 13,286 1 248,010 - - 248,011 Issuance of shares for technology - - 783,899 79 2,949,921 - - 2,950,000 Sale of shares - - 30,559 3 114,997 - - 115,000 Other comprehensive loss - - - - - - - ( 5,073 ) Net loss - - - - - ( 9,383,397 ) ( 5,073 ) ( 9,383,397 ) Balance December 31, 2021 - $ - 26,243,474 $ 2,624 $ 39,210,291 $ ( 17,339,396 ) $ ( 5,073 ) $ 21,868,446 Stock based compensation – related party - - 367,453 37 1,309,487 - - 1,309,524 Stock based compensation - other 34,142 4 102,755 - - 102,759 Consideration for acquisition - - 40,323 4 49,996 - - 50,000 Other comprehensive loss - - - - - - ( 39,517 ) ( 39,517 ) Net loss - - - - - ( 17,505,765 ) ( 17,505,765 ) Balance December 31, 2022 - $ - 26,685,392 $ 2,669 $ 40,672,529 $ ( 34,845,161 ) $ ( 44,590 ) $ 5,785,447 The accompanying notes are an integral part of the consolidated financial statements. 27 EzFill Holding, Inc. Consolidated Statements of Cash Flows 2022 2021 Year ended December 31, 2022 2021 Cash flows from operating activities: Net loss $ ( 17,505,765 ) $ ( 9,383,397 ) Adjustments to reconcile net loss to net cash provided by/(used in) operating activities: Stock based compensation 1,412,283 1,896,074 Warrants and shares to lender - 248,011 Depreciation and amortization 1,769,621 872,834 Impairment of goodwill and other intangible assets 2,636,402 - Impairment of fixed assets 258,114 - Amortization of bond premium and realized loss on investments 52,096 - Amortization of debt discount, related party - 105,000 Bad debt expense 17,489 17,644 PPP loan forgiveness - ( 154,673 ) Changes in operating assets and liabilities: Accounts receivable ( 688,425 ) 75,802 Inventory ( 104,905 ) ( 5,288 ) Prepaid expenses and other ( 147,845 ) ( 69,727 ) Operating lease assets and liabilities 24,240 - Accounts payable and accrued expenses 677,114 462,900 Accounts payable and accrued expenses - related party - ( 371,940 ) Net cash used in operating activities ( 11,599,581 ) ( 6,306,761 )   Cash flows from investing activities: Maturity of debt securities 1,151,186 - Acquisition of business ( 321,250 ) - Acquisition of fixed assets ( 3,258,417 ) ( 1,998,151 ) Acquisition of intangible assets - ( 19,204 ) Purchase of debt securities - ( 3,367,953 ) Net cash used in investing activities ( 2,428,481 ) ( 5,385,308 )   Cash flows from financing activities: Proceeds from Initial Public Offering - 28,750,000 Initial Public Offering expenses - ( 3,500,426 ) Borrowings under line of credit 1,000,000 - Proceeds from issuance of common stock - 115,000 Proceeds from issuance of debt and loans 2,191,308 1,440,572 Proceeds from issuance of related party debt - 1,550,000 Repayment of debt ( 657,719 ) ( 2,136,283 ) Repayment of related party debt - ( 1,848,399 ) Net cash provided by financing activities 2,533,589 24,370,464   Net change in cash and cash equivalents ( 11,494,473 ) 12,678,395   Cash and cash equivalents at beginning of period 13,561,266 882,871   Cash and cash equivalents cash at end of period $ 2,066,793 $ 13,561,266   Noncash investing and financing activities: Debt discount $ - $ 105,000 Issuance of acquisition, bonus, and settlement shares $ - $ 2,250,000 Shares issued for technology $ - $ 2,950,000 Supplemental disclosure of cash flow information: Cash paid for interest $ 101,075 $ 455,791 Cash paid for taxes $ - $ - The accompanying notes are an integral part of the consolidated financial statements. 28 EzFill Holdings, Inc. Notes to Consolidated Financial Statements For the years ended December 31, 2022 and 2021 (1) Nature of Organization and Summary of Significant Accounting Policies Nature of Organization EzFill Holdings, Inc. (the Company) was incorporated on March 28, 2019, in the State of Delaware and operates in South Florida providing an on-demand mobile gas delivery service. Its wholly-owned subsidiary Neighborhood Fuel Holdings, LLC is inactive. Basis of Presentation The Company’s financial statements are presented on the accrual basis of accounting principles generally accepted in the United States of America (“GAAP”) and include the years ended December 31, 2022 and 2021. Initial Public Offering In September 2021, the Company issued 7,187,500 shares in its initial public offering (“IPO”) at a price of $ 4.00 per share, for net proceeds of approximately $ 25,250,000 after deducting underwriting discounts and commissions of $ 2,406,250 and expenses of $ 1,093,750 . Immediately prior to the IPO, all shares of stock then outstanding converted into an aggregate of 18,750,000 shares of common stock following a one for 3.763243 reverse stock split approved by the Company’s board of directors and its shareholders. Use of Estimates The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. The significant estimates and assumptions made by management include allowance for doubtful accounts, valuation allowance for deferred tax assets, depreciation lives of property and equipment, recoverability of long-lived assets, fair value of equity instruments and the assumptions used in Black-Scholes valuation models related to stock options and warrants. Actual results could differ from those estimates as the current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions. Cash and Cash Equivalents The Company considers all highly liquid securities with original maturities of three months or less when acquired, to be cash equivalents. At December 31, 2022 and 2021, the Company had $ 2,066,793 and $ 13,561,266 in cash and cash equivalents, respectively, of which $ 250,000 was federally insured. Investments Available-for-sale debt securities are recorded at fair value with the net unrealized gains and losses (that are deemed to be temporary) reported as a component of other comprehensive income (loss). Realized gains and losses and charges for other-than-temporary impairments are included in determining net income, with related purchase costs based on the first-in, first-out method. Premiums or discounts on debt are amortized straight line over the term. The Company evaluates its available-for-sale-investments for possible other-than-temporary impairments by reviewing factors such as the extent to which, and length of time, an investment’s fair value has been below the Company’s cost basis, the issuer’s financial condition, and the Company’s ability and intent to hold the investment for sufficient time for its market value to recover. For impairments that are other-than-temporary, an impairment loss is recognized in earnings equal to the difference between the investment’s cost and its fair value at the balance sheet date of the reporting period for which the assessment is made. The fair value of the investment then becomes the new amortized cost basis of the investment, and it is not adjusted for subsequent recoveries in fair value. The following is a summary of the unrealized gains, losses, and fair value by investment type: December 31, 2022: Schedule of Unrealized Gains, Losses, and Fair Value Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Corporate bonds $ 2,164,672 $ - $ 44,590 $ 2,120,082 December 31, 2021 Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Corporate bonds $ 3,367,953 $ - $ 5,073 $ 3,362,880 29 Realized losses on bonds during the years ended December 31, 2022 and 2021 were $ 5,255 and $ 0 , respectively. During the year ended December 31, 2022 corporate bonds totaling $ 1,151,186 matured. The corporate bonds remaining at December 31, 2022 mature during 2023. Accounts Receivable The Company reviews accounts receivable periodically for collectability and establishes an allowance for doubtful accounts and records bad debt expense when deemed necessary. The Company records an allowance for doubtful accounts that is based on historical trends, customer knowledge, any known disputes, and considers the aging of the accounts receivable balances combined with management’s estimate of future potential recoverability. Accounts are written off against the allowance after all attempts to collect a receivable have failed. At December 31, 2022 and December 31, 2021, the allowance was $ 0 and $ 5,665 respectively in the consolidated financial statements. Concentrations Major Customers For the year ended December 31, 2022, the Company had two customers that made up approximately 32 % and 11 % of revenue. For the year ended December 31, 2021, the Company had one customer that made up approximately 58 % of revenue. The Company had two customers that made up 47 % and 8 % of accounts receivable as of December 31, 2022, and 37 % and 23 % of accounts receivable as of December 31, 2021. Major Vendors The Company purchases substantially all of its fuel from three vendors. Inventory Inventory is valued at the lower of the inventory’s cost or market using the first-in, first-out method. Management compares the cost of inventory with its net realizable value and an allowance is made to write down inventory to net realizable value, if lower. Inventory consists solely of fuel. At December 31, 2022 and 2021, the allowance was $ 0 and $ 0 in the consolidated financial statements. Cost of sales includes the cost of fuel sold and wages paid to drivers. Deferred Offering Costs The Company includes offering costs directly associated with its IPO and anticipated share offerings in prepaid expenses and other costs in the consolidated balance sheet. Deferred offering costs were offset against additional paid in capital upon completion of the offering. As of December 31, 2022, and 2021, the Company recorded $ 129,635 and $ 0 respectively, to deferred offering costs. Property, Equipment and Depreciation Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the related assets. Expenditures for additions and improvements are capitalized, while repairs and maintenance costs are expensed as incurred. The cost and related accumulated depreciation of property and equipment sold or otherwise disposed of are removed from the accounts and any gain or loss is recorded in the year of disposal. Acquisitions and Intangible Assets The Company accounts for acquisitions in accordance with ASC 805, Business Combinations (“ASC 805”) and ASC 350, Intangibles- Goodwill and Other (“ASC 350”). The acquisition method of accounting requires that assets acquired and liabilities assumed be recorded at their fair values on the date of a business acquisition. The consolidated financial statements and results of operations reflect an acquired business from the completion date of an acquisition. The judgments that the Company makes in determining the estimated fair value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact net income in periods following an asset acquisition. The Company generally uses either the income, cost or market approach to aid in their conclusions of such fair values and asset lives. The income approach presumes that the value of an asset can be estimated by the net economic benefit to be received over the life of the asset, discounted to present value. The cost approach presumes that an investor would pay no more for an asset than its replacement or reproduction cost. The market approach estimates value based on what other participants in the market have paid for reasonably similar assets. Although each valuation approach is considered in valuing the assets acquired, the approach ultimately selected is based on the characteristics of the asset and the availability of information. 30 The Company amortizes finite lived intangible assets over their estimated useful lives, which range between two and five years. as follows: Schedule of Amortization Finite Lived Intangible Assets Useful Life Intangible Asset Useful Life Customer list 5 years Mobile app 3 years Non-compete 2 years Trade name 5 years Loading rack license 5 years Long-lived Assets The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Determining whether an impairment has occurred typically requires various estimates and assumptions, including determining which cash flows are directly related to the potentially impaired asset, the useful life over which cash flows will occur, their amount and the asset’s residual value, if any. In turn, measurement of an impairment loss requires a determination of fair value, which is based on the best information available. The Company uses quoted market prices when available and independent appraisals and management estimates of future operating cash flows, as appropriate, to determine fair value. Fair Value of Financial Instruments The carrying amounts of cash, accounts receivable, and accounts payable approximate fair value because of the relative short-term maturity of these items and current payment expected. These fair value estimates are subjective in nature and involve uncertainties and matters of significant judgment, and therefore cannot be determined with precision. Changes in assumptions could significantly affect these estimates. The Company does not hold or issue financial instruments for trading purposes, nor does it utilize derivative instruments. ASC 825, Financial Instruments, clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. It also requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows: Level 1: Quoted prices in active markets for identical assets or liabilities. Level 2: Quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability. Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The carrying value of financial assets and liabilities recorded at fair value is measured on a recurring or nonrecurring basis. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. The Company measures its available for sale securities on a recurring basis based on level 1 prices. Revenue Recognition The Company generates its revenue from mobile fuel sales, either as a one-time purchase, or through a monthly membership. Revenue is recognized at the time of delivery and includes a delivery fee for each delivery or a subscription fee on a monthly basis for memberships. Under Accounting Standards Update (“ASU”) No. 2014-09 (Topic 606) “Revenue from Contracts with Customers”, revenue from contracts with customers is measured based on the consideration specified in the contract with the customer, and excludes any sales incentives and amounts collected on behalf of third parties. A performance obligation is a promise in a contract to transfer a distinct good or service to a customer and is the unit of account under Topic 606. The Company’s contracts with its customers do not include multiple performance obligations. The Company recognizes revenue when a performance obligation is satisfied by transferring control over a product or service to a customer. The amount of revenue recognized reflects the consideration the Company expects to be entitled to in exchange for such products or services. 31 Operating Leases The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in our consolidated balance sheets. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses an incremental borrowing rate based on the estimated rate of interest for collateralized borrowing over a similar term of the lease payments at commencement date. The lease payments used to determine the Company’s operating lease asset may include lease incentives and stated rent increases. Our lease term may include the option to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Advertising Costs Advertising costs are expensed as incurred. The Company incurred advertising costs for the year ended December 31, 2022, and 2021 of approximately $ 1,182,815 and $ 216,946 , respectively. Income Taxes The Company accounts for income taxes in accordance with ASC 740, Income Taxes , (“ASC 740”) which prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim period, disclosure, and transition. Stock-based compensation The Company accounts for employee stock awards for services based on the grant date fair value of the instrument issued and those issued to non-employees are recorded based on the grant date fair value of the consideration received or the fair value of the equity instrument, whichever is more reliably measurable. Compensation expense from stock awards is expensed over the service period. Forfeitures are recognized as they occur. Net loss per share Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflect the potential dilution that could occur if stock options or other contracts to issue common stock were exercised or converted during the period. FASB ASC 260, Earnings per Share , requires a dual presentation of basic and diluted earnings per share. Any instruments that would have an anti-dilutive effect have been excluded from the computation of earnings per share. The number of such shares excluded from the computations of diluted loss per share are as follows: Schedule of Shares Excluded from Computations of Diluted Loss Per Share Description 2022 2021 Year ended December 31, Description 2022 2021 Stock options under treasury stock method 0 0 Recent accounting pronouncements In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) . ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted. ASU 2016-02 and additional ASUs are now codified as ASC 842, Leases . ASC 842 supersedes the lease accounting guidance in ASC 840 Leases and requires lessees to recognize a lease liability and a corresponding lease asset for virtually all lease contracts. It also requires additional disclosures about leasing arrangements. Topic 842 was effective January 1, 2020, and was adopted with the Company’s office lease that began on January 1, 2022. In June 2016, the FASB issued ASU No. 2016-13, “ Financial Instruments—Credit Losses (Topic 326).” The standard introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses and will apply to trade receivables. The new guidance will be effective for the Company’s annual and interim periods beginning after December 15, 2022. The Company is currently evaluating the impact of the adoption of the standard on the consolidated financial statements. 32 All other newly issued accounting pronouncements not yet effective have been deemed either immaterial or not applicable. (2) Going Concern The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has sustained a net loss since inception and does not have sufficient revenues and income to fully fund the operations. As a result, the Company has relied on loans from stockholders and others as well as stock sales to fund its activities to date. For the year ended December 31, 2022, the Company had a net loss of $ 17,505,765 . At December 31, 2022, the Company had an accumulated deficit of $ 34,845,161 . The Company anticipates that it will continue to generate operating losses and use cash in operations through the foreseeable future. In September 2021, the Company completed its Initial Public Offering and raised $ 25,250,000 in net proceeds after deducting the underwriting discount and offering expenses. The Company anticipates that it will need to raise additional capital by March 31, 2023, in order to continue to fund its operations. There is no assurance that the Company will be able to obtain funds on commercially acceptable terms, if at all. There is also no assurance that the amount of funds the Company might raise will enable the Company to complete its initiatives or attain profitable operations. The Company’s operating needs include the planned costs to operate its business, including amounts required to fund working capital and capital expenditures. The Company’s future capital requirements and the adequacy of its available funds will depend on many factors, including the Company’s ability to successfully expand to new markets, competition, and the need to enter into collaborations with other companies or acquire other companies to enhance or complement its product and service offerings. There can be no assurances that financing will be available on terms which are favorable, or at all. If the Company is unable to raise additional funding to meet its working capital needs in the future, it will be forced to delay, reduce, or cease its operations. The Company’s management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that may result from the outcome of this uncertainty. (3) Related Party Transactions During the year ended December 31, 2021, the Company issued 26,573 shares to an executive as a signing bonus. The Company also issued 53,144 signing shares and 104,093 restricted shares to directors. During the year ended December 31, 2022, the Company issued 182,540 shares of restricted stock and 522,462 stock options to executives. Included in these amounts are 75,893 shares of stock and 125,951 stock options granted to two former executives for which vesting was accelerated upon their termination. The Company also granted a total of 776,761 restricted shares to directors during the year ended December 31, 2022. The aforementioned grants were made pursuant to the Company’s 2020 Incentive Compensation Plan. The Company entered into a consulting agreement, dated November 18, 2020, with Balance Labs, Inc. Pursuant to the Consulting Agreement, Balance Labs provided consulting services including assisting with the Company’s IPO and assisting with introductions to, and assistance with, negotiating and entering agreements with potential fleet, residential, marine, and corporate customers that Balance Labs has relationships with. Balance Labs also assisted with the Company’s expansion efforts. Under the Consulting Agreement, in payment of services that Balance Labs had already provided, the Company issued Balance Labs 265,728 shares of its common stock in November 2020. Upon the completion of the Company’s IPO, the Company made a one-time payment of $ 200,000 to Balance Labs. During the first year of the term of the Consulting Agreement, the Company paid Balance Labs $ 25,000 per month. In the second year of the agreement, the payment decreased to $ 22,500 per month. On November 18, 2021, and each anniversary of the initial term and the renewal terms the Company will issue Balance Labs 132,905 shares of its common stock. The term of the Consulting Agreement is for two years and expired on November 18, 2022, without being renewed. The President, CEO, CFO and Chairman of the Board of Balance Labs is also the former president of the Company and beneficially owns approximately 26 % of the Company’s common stock as of December 31, 2022. The Company is party to a technology license agreement with Fuel Butler LLC, which is owned 20 % by a former executive of the Company. See Note 5. 33 (4) Fixed Assets Fixed assets consisted of the following: Schedule of Fixed Assets Description Estimated Useful Lives December 31, 2022 December 31, 2021 Fixed assets: Equipment 5 years $ 265,637 $ 175,068 Leasehold improvements Lease term 29,422 16,265 Vehicles 5 years 5,142,828 975,377 Office furniture 5 years 129,475 - Office equipment 5 years 9,471 9,471 Vehicle construction in process 147,006 1,394,355 Total fixed assets 5,723,839 2,570,536 Accumulated depreciation ( 1,134,680 ) ( 284,216 ) Fixed assets, net $ 4,589,159 $ 2,286,320 Depreciation expense totaled $ 850,464 and $ 140,398 for the years ended December 31, 2022, and 2021, respectively. The Company recorded impairment of $ 258,114 related to materials purchased for construction of delivery vehicles to reduce the carrying value of vehicle construction in progress to the expected realizable value. (5) Intangible Assets Intangible assets consisted of the following: Schedule of Intangible Assets Description December 31, 2022 December 31, 2021 Indefinite lived intangible assets: Domain name - 20,000 Goodwill $ - $ 109,983 Total indefinite lived intangible assets $ - $ 129,983 Other intangible assets: Trademarks $ - $ 103,258 Software - 503,517 Customer list - 855,073 Non-compete - 858 Loading rack license - - Technology license - 2,950,000 Total other intangible assets $ - $ 4,412,706 Accumulated amortization - ( 1,205,379 ) Total other intangible assets, net $ - $ 3,207,327 On April 7, 2021, the Company entered into a Technology License Agreement with Fuel Butler LLC (“Licensor”), under which the Company licensed certain proprietary technology. Under the terms of the license, the Company issued 265,728 shares of its common stock to the Licensor upon signing. The Company also issued 332,160 shares to the Licensor in May 2021 upon the filing of a patent application related to the licensed technology. Upon completion of the Company’s IPO, 186,010 shares were issued to the Licensor. The Company will issue up to 730,752 additional shares to the Licensor upon the achievement of certain milestones. In addition, the Company has granted stock options for 531,456 shares at an exercise price of $ 3.76 per share that will become exercisable for three years after the end of the fiscal year in which certain sales levels are achieved using the licensed technology. The Company has the option for four years after the achievement of certain milestones to either acquire the technology or acquire the Licensor for the purchase price of 1,062,913 of its common shares. Until the Company exercise one of these options, it will share with the Licensor 50% of pre-revenue costs and 50% of the net revenue, as defined, from the use of the technology. Under the Technology Agreement, the Company licensed proprietary technology that it believed would enable the Company to expand its services to provide its fuel service in high density areas. Fuel Butler has delivered a purported notice of termination of the Technology Agreement based on certain alleged breaches arising from our failure to issue equity securities to Fuel Butler. The Company has been in communications with Fuel Butler regarding the termination of the Technology Agreement and continues to believe that the Company is in compliance with the Technology Agreement and that the Technology Agreement continues to be in force. While the Company contests Fuel Butler’s claims of breach and contends that in fact Fuel Butler is in breach, the Company has communicated to Fuel Butler that it wishes to terminate the Technology Agreement. The Company has sent a proposal to Fuel Butler whereby it would cease utilizing the Technology and Fuel Butler would return any shares it received under the Technology Agreement. Accordingly, the Company considers the license to be fully impaired and has fully amortized the license as of December 31, 2022. The impairment loss of $ 1,987,500 is included in Accumulated Amortization as of December 31, 2022. 34 See Note 13 for details of intangibles from an acquisition during the year ended December 31, 2022. Amortization expense on intangible assets totaled $ 919,158 and $ 732,436 for the years ended December 31, 2022, and 2021, respectively. Goodwill is considered impaired, and the Company recognized an impairment loss of $ 166,838 , or the remaining balance of goodwill, during the year ended December 31, 2022. This loss was primarily due to the fall in the Company’s stock price and the decrease of the Company’s market capitalization as well as past operating performance. As a consequence, management forecasts were revised, and additional risk factors were applied. The fair value of the intangibles was estimated using a combination of market comparables (level 1 inputs) and expected present value of future cash flows (level 3 inputs) and as a result impairment was recorded for a total of $ 482,064 . (6) Accounts Payable and Accrued Liabilities The Company had accounts payable and accrued liabilities as follows: Schedule of Accounts Payable and Accrued Liabilities December 31, 2022 December 31, 2021 Accounts Payable and Accrued Liabilities: Accounts payable $ 987,012 $ 491,598 Accrued payroll 266,453 82,080 Accrued expenses - 5,687 Accrued interest 3,014 - Total Accounts Payable and Accrued Liabilities $ 1,256,479 $ 579,365 (7) Debt Bank Line of Credit On December 10, 2021, the Company entered into a Securities-Based Line of Credit, Promissory Note, Security, Pledge and Guaranty Agreement (the “Line of Credit”) with City National Bank of Florida. Pursuant to the revolving Line of Credit, the Company may borrow up to the Credit Limit, determined from time to time in the sole discretion of the Bank. The Credit Limit was approximately $ 3.0 million and $ 16.2 million at December 31, 2022, and December 31, 2021, respectively. Outstanding borrowings were $ 1.0 million and $ 0 as of December 31, 2022, and December 31, 2021, respectively. To secure the repayment of the Credit Limit, the Bank will have a first priority lien and continuing security interest in the securities held in the Company’s investment portfolio with the Bank. The amount outstanding under the Line of Credit shall bear interest equal to the Reference Rate plus the Spread (as defined in the Line of Credit) in effect each day. Interest is due and payable monthly in arrears. The interest rate on the Line of Credit was 5.75 % at December 31, 2022, and 1.50 % at December 31, 2021. The Bank may, at any time, without notice, and at its sole discretion, demand the repayment of the outstanding borrowing. Vehicle Loans The Company has entered into various loans for the purchase of vehicles in the ordinary course of business. Each loan is secured by the vehicle that is financed. One of the lenders has provided a commercial line of credit of $ 4.0 million, under which approximately $ 2.4 million remained available as of December 31, 2022, for the financing of vehicles under retail installment contracts through May 31, 2023. The vehicle loans under the commercial line of credit and from other sources have interest rates that range from 3.5 % to 9.0 % (primarily 3.5 %). Other Debt On November 24, 2020, the Company issued a note payable in the amount of $ 1,000,000 ; the loan bore interest at a rate of 1 % per month; the maturity date on the loan was April 21, 2021 ; the Company had the option to extend the maturity date for seven one-month terms. As part of the terms of the loan, the note holder was issued 100,000 shares of common stock. The Company exercised the option to extend the loan from April 21, 2021, to August 21, 2021, and issued 10,000 shares to the note holder for each monthly extension. On March 10, 2021, the Company borrowed a total of $ 300,000 and issued promissory notes for $ 100,000 to each of three related parties. The notes bore interest at a rate of 1 % per month. The principal and interest thereon were payable on March 10, 2022 , or upon completion of the Company’s initial public offering if earlier. In connection with these loans, each lender was issued 10,000 shares of the Company’s common stock for a total of 30,000 shares. 35 On April 16, 2021, the Company issued a promissory note to a lender for $ 1,166,000 , including $ 66,000 of interest at the rate of 8 % per annum. The loan maturity was the earlier of January 16, 2022, or two weeks after the Company’s initial public offering. In the event the loan matured earlier than January 16, 2022 , the full amount of interest for the nine-month term was due. As additional consideration for the loan, the Company granted the lender 400,000 shares in stock warrants, each of which may be exchanged for one share common stock of the stock offered to the public in the Company’s initial public offering, at a price of 125 % of the offering price of such initial public offering. Such warrants may, be need not, be exercised by the lender for a period of three years from their issuance. On June 25, 2021, the Company issued promissory notes to two related parties for $ 265,958 each, including an original issue discount of $ 15,958 . The notes each bore interest at 1 % per month on the unpaid principal balance. The notes matured on the earlier of December 25, 2021, or the consummation of the Company’s initial public offering. On July 26, 2021, the company issued promissory notes to two related parties for $ 132,979 each, including an original issue discount of $ 7,979 . The notes bore interest at 1 % per month on the unpaid principal balance. The notes matured on the earlier of January 26, 2022, or the consummation of the Company’s initial public offering. On August 18, 2021, the Company issued a promissory note to a related party in the amount of $ 265,000 , including an original issue discount of $ 15,000 . The note bore interest at 12 % per year and all interest accrued until the Maturity date. The maturity date of the note was August 18, 2022 , however if the Company completed a capital raise of at least $7,000,000 the entire outstanding principal and interest through August 18, 2022, was immediately due and payable within two business days of such occurrence. On August 19, 2021, the Company issued a promissory note to a lender in the amount of $ 265,000 , including an original issue discount of $ 15,000 . The note bore interest at 12 % per year and all interest accrued until the Maturity date. The maturity date of the note was August 19, 2022 , however if the Company completed a capital raise of at least $7,000,000 the entire outstanding principal and interest through August 19, 2022, was immediately due and payable within two business days of such occurrence. All debt except for vehicle loans was repaid in September 2021 after the consummation of the Company’s IPO. Amounts remaining in debt discount were included in interest expense. Maturities of debt as of December 31, 2022, are as follows: Schedule of Maturities of Long-Term Debt 2023 $ 811,516 2024 820,844 2025 307,365 2026 55,852 2027 14,319 Total $ 2,009,896 (8) SBA PPP Loan On April 20, 2020, the Company received loan proceeds in the amount of $ 154,673 under the Paycheck Protection Program (“PPP”). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”), provides for loans to qualifying businesses for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable after eight weeks provided the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and maintains its payroll levels. The amount of loan forgiveness will be reduced if the borrower terminates employees or reduces salaries during the eight-week period. On September 17, 2021, 100 % of the PPP loan in the amount of $ 154,673 and accrued interest was forgiven by the SBA, and no repayment is required. (9) Shareholders Equity Authorized shares include 500 million common shares and 50 million preferred shares. Immediately prior to the Company’s IPO in December 2022, all shares of common stock then outstanding converted into an aggregate of 18,750,000 shares of common stock following a one for 3.763243 reverse stock split approved by the Company’s board of directors and its shareholders. On August 1, 2020, the Company’s board of directors approved the EzFill Holdings, Inc. 2020 Equity Incentive Plan (Plan), which plan has also been approved by the Company’s shareholders. The Company has reserved 1,913,243 of its outstanding shares of common stock for issuance under the Plan. On June 3, 2022, the Company’s board of directors approved the EzFill Holdings, Inc. 2022 Equity Incentive Plan (2022 Plan), which plan has also been approved by the Company’s shareholders. The Company has reserved 2,600,000 of its outstanding shares of common stock for issuance under the 2022 Plan. Participation in the Plans will continue until the benefits to which the participants are entitled have been paid in full. 36 Common stock During the year ended December 31, 2021, 30,559 shares of common stock were sold for cash proceeds of $ 115,000 . During the year ended December 31, 2021, the Company issued 26,573 shares to an executive as a signing bonus and recorded related stock compensation expense of $ 100,000 and issued 53,144 signing shares to directors and recorded related stock compensation expense of $ 200,000 . During the year ended December 31, 2021, the Company recorded stock-based compensation expense of $ 345,000 related to shares granted for sponsorships and $ 110,000 related to shares granted to consultants. During the year ended December 31, 2021, the Company issued 600,000 shares related to accrued bonuses, and 375,000 shares related to an acquisition that had previously been accrued in 2020. During the year ended December 31, 2022, the Company issued 20,000 shares to a consultant for services rendered and recorded stock compensation of $ 68,500 . During the year ended December 31, 2022, the Company issued 40,323 shares to the sellers of the assets of Full Service Fueling. See note 13. During the year ended December 31, 2022, the Company issued 182,540 shares of restricted stock and 522,462 stock options to executives. Total stock compensation expense of $ 587,500 is being recorded over the vesting period. Included in these amounts are 75,893 shares of stock and 125,951 stock options granted to two former executives for which vesting was accelerated upon their termination. The Company also granted a total of 776,761 restricted shares to directors during the year ended December 31, 2022, for which stock compensation expense of $ 365,000 is being recorded over the vesting period. The aforementioned grants were made pursuant to the Company’s 2020 Incentive Compensation Plan. A total of 966,801 shares of restricted stock were issued to employees, board members and consultants during the year ended December 31, 2022. The restricted shares vest over periods from one to three years and are being recognized as expense on a straight-line basis over the vesting period of the awards. A total expense of $ 1,195,053 and 177,510 was recorded for the years ended December 31, 2022, and 2021, respectively. A summary of the restricted stock activity is presented as follows: Schedule of Restricted Stock Activity Weighted Average Grant Date Shares Fair Value Outstanding at December 31, 2021 317,586 $ 3.27 Granted 966,801 0.63 Vested ( 405,542 ) 2.69 Forfeited ( 35,000 ) 2.00 December 31, 2022 843,845 $ 0.56 The Company recognizes forfeitures of restricted shares as they occur rather than estimating a forfeiture rate. The reduction of stock compensation expense related to the forfeitures was $ 2,365 and $ 0 for the years ended December 31, 2022, and 2021, respectively. Unrecognized stock compensation expense related to restricted stock was approximately $ 206,000 as of December 31, 2022, which will be recognized over a weighted-average period of 0.7 years. 37 Stock Options and Warrants The following table represents option activity during the year ended December 31, 2022: Schedule of Stock Option Activity Number of Weighted Average Weighted Average Remaining Contractual Term Options Exercise Price (years) Outstanding at December 31, 2021 175,384 $ 1.78 3.3 Options granted 572,462 1.26 7.0 Outstanding at December 31, 2022 747,846 $ 1.36 4.2 Exercisable at December 31, 2022 428,962 $ 1.46 3.4 The fair value of the stock options granted in 2022 was determined using the Black-Scholes option pricing model with the following assumptions: Schedule of Fair Value Assumptions Year Ended December 31, 2022 Valuation assumptions: Risk-free rate 1.64 % Expected volatility 62 % Expected term (years) 5 Dividend yield 0 Unrecognized stock compensation expense related to stock options was approximately $ 131,000 as of December 31, 2022, which will be recognized over a weighted-average period of 2.0 years. The underwriter’s representatives for the Company’s IPO received warrants to purchase up to 359,375 shares. The warrants are exercisable from March 14, 2022, until September 14, 2026, at an exercise price of $ 5.00 per share. In April 2021, the Company issued 106,291 warrants to a lender in connection with a loan that has been repaid. The warrants are exercisable until September 14, 2024 , at $ 5.00 per share. The intrinsic value of options and warrants outstanding at December 31, 2022, and December 31, 2021 was $ 0 and $ 0 , respectively. (10) Commitments and Contingencies Litigation The Company is subject to litigation claims arising in the ordinary course of business. The Company records litigation accruals for legal matters which are both probable and estimable and for related legal costs as incurred. The Company does not reduce these liabilities for potential insurance or third-party recoveries. As of December 31, 2022, and 2021, the Company is not aware of any litigation, pending litigation, or other transactions that would require accrual or disclosure under GAAP. Lease Commitment On December 3, 2021, the Company signed a lease for 5778 square feet of office space, for occupancy effective January 1, 2022. The lease term is 39 months, and the total monthly payment is $ 21,773 , including base rent, estimated operating expenses and sales tax. The base rent of $ 14,743 including sales tax was abated for months 1, 13 and 25 of the lease, and is subject to a 3% annual increase. An initial Right of Use (“ROU”) asset of $ 735,197 was recognized as a non-cash asset addition with the adoption of the lease accounting standard. Cash paid for amounts included in the present value of operating lease liabilities was $ 246,538 for the year ended December 31, 2022, and is included in cash flows from operating activities in the accompanying consolidated statement of cash flows. The operating lease expense for this lease was $ 245,777 for the year ended December 31, 2022, and is included in operating expenses in the consolidated statements of operations. 38 Future minimum payments under non-cancellable leases as of December 31, 2022, were as follows: Schedule of Future Minimum Payments Under Non-Cancellable Leases Future Minimum Payments 2023 $ 251,403 2024 256,414 2025 69,421 Total undiscounted operating leases payments 577,238 Less: Imputed interest 31,217 Present Value of Operating Lease Liabilities 546,021 Other Information Weighted-average remaining lease term 2.25 years Weighted-average discount rate 5.0 % As a practical expedient, short-term leases with an initial term of 12 months or less are excluded from the consolidated balance sheets and charges from these leases are expensed as incurred. The Company has offices at several of its operating locations under leases that are cancellable upon short notice. Total rent expense for these leases (including the prior headquarters office) was approximately $ 121,415 and $ 89,935 for the year ended December 31, 2022, and 2021, respectively. (11) Income Taxes The components of the deferred tax assets at December 31, 2022 and 2021 were as follows: Schedule of Deferred Tax Assets 2022 2021 Deferred tax assets: Stock-based compensation $ 202,510 $ 165,567 Intangibles 908,204 219,369 Net operating loss 8,147,005 4,413,292 Lease liabilities 138,389 - Capitalized research expenditures 354,157 - Other 8,058 1,612 Total gross deferred tax asset $ 9,758,323 $ 4,799,840 Deferred tax liabilities: Depreciation ( 872,157 ) ( 196,334 ) Prepaid assets ( 33,769 ) ( 32,057 ) Right of use asset ( 132,246 ) - Less: Valuation allowances ( 8,720,151 ) ( 4,571,449 ) Net deferred tax asset $ - $ - The components of the income tax benefit and related valuation allowance for the years ended December 31, 2022, and 2021 are as follows: Schedule of Income Tax Benefit and Related Valuation Allowance 2022 2021 Current $ - $ - Deferred ( 4,148,702 ) ( 2,544,004 ) Valuation allowance 4,148,702 2,544,004 Total Tax Provision $ - $ - 39 A reconciliation of the provision for income taxes for the years ended December 31, 2022, and 2021 as compared to statutory rates is as follows: Schedule of Reconciliation of Provision for Income Taxes 2022 2021 Provision at federal statutory rate of 21 % $ ( 3,676,210 ) $ ( 1,970,514 ) Permanent differences, net 254,526 ( 51,348 ) State income tax benefit ( 760,625 ) ( 407,709 ) Deferred adjustments 33,607 ( 126,995 ) Change in valuation allowance 4,148,702 2,544,004 Total income tax provision $ - $ - Federal net operating loss carryforwards at December 31, 2022 and December 31, 2021 totaled approximately $ 32.9 million and $ 17.5 million, respectively, for tax purposes, which will be available to offset 80 % of future taxable income indefinitely. The Company reviews its filing positions for all open tax years in all U.S. federal and state jurisdictions where the Company is required to file. The tax years subject to examination include the years 2019 and forward. There are no uncertain tax positions that would require recognition in the consolidated financial statements. If the Company incurs an income tax liability in the future, interest on any income tax liability would be reported as interest expense and penalties on any income tax liability would be reported as income taxes. The Company’s conclusions regarding uncertain tax positions may be subject to review and adjustment at a later date based upon ongoing analyses of tax laws, regulations and interpretations thereof as well as other factors. (12) Bank Credit Line On December 10, 2021, the Company entered into a Securities-Based Line of Credit, Promissory Note, Security, Pledge and Guaranty Agreement (the “Line of Credit”) with City National Bank of Florida. Pursuant to the revolving Line of Credit, the Company may borrow up to the Credit Limit, determined from time to time in the sole discretion of the Bank. The Credit Limit was approximately $ 3.4 million at December 31, 2022. To secure the repayment of the Credit Limit, the Bank will have a first priority lien and continuing security interest in the securities held in the Company’s investment portfolio with the Bank. The amount outstanding under the Line of Credit shall bear interest equal to the Reference Rate plus the Spread (as defined in the Line of Credit) in effect each day. Interest is due and payable monthly in arrears. The interest rate on the Line of Credit was 5.75 % at December 31, 2022. The Bank may, at any time, without notice, and at its sole discretion, demand the repayment of the outstanding balance and accrued interest thereon, be immediately repaid in full, and the Bank may terminate the Line of Credit. Outstanding balances under the Line of Credit were $ 1,000,000 and $ 0 at December 31, 2022, and 2021, respectively. (13) Business Combination On March 11, 2022, the Company acquired substantially all of the assets of Full Service Fueling (“Seller”), a mobile fueling service provider, for (a) a net amount of $ 321,250 cash after a credit of $ 3,750 , and (b) 40,323 common shares, with a value of $ 50,000 based upon the Company’s closing stock price on the Nasdaq on the date immediately preceding the Closing Date. Further, the Purchase Agreement includes provisions wherein the Company agrees to utilize Seller’s affiliate Palmdale Oil Company, Inc. (“Palmdale”) as one if its main fuel suppliers throughout the state of Florida. Palmdale will also provide the Company with access to vehicle parking at their locations throughout the state in order to support the expansion of the Company’s mobile fueling business. This acquisition was considered an acquisition of a business under ASC 805. A summary of the purchase price allocation at fair value is below. Schedule of Purchase Price Allocation at Fair Value Purchase Allocation Vehicles $ 153,000 Customer list 66,413 Loading rack license 58,857 Other identifiable intangibles 56,124 Goodwill 36,856 Purchase Allocation $ 371,250 40 The purchase price was paid as follows: Schedule of Business Acquisitions by Acquisition Issued or Issuable Cash $ 321,250 Common stock 50,000 Purchase Allocation $ 371,250 The vehicles and the identifiable intangibles will be depreciated and amortized over their estimated useful lives. Transaction costs related to the acquisition were not material. The results of operations for the year ended December 31, 2022, include approximately $ 113,000 of revenue and $ 4,000 net loss related to the acquired business since the March 11, 2022 , acquisition date. The accompanying unaudited pro forma combined statement of operations presents the accounts of EzFill Holdings, Inc. and Neighborhood Fuel for the year ended December 31, 2021, assuming the acquisition occurred on January 1, 2021. Schedule of Unaudited Pro Forma Combined Statement of Operations Year ended December 31, 2021 Summary Statement of Operations EzFill Holdings Full Service Fueling Combined Revenue $ 7,233,957 $ 242,271 $ 7,476,228 Net Loss $ ( 9,383,397 ) $ ( 122,507 ) $ ( 9,505,904 ) Net Loss per common share – basic and diluted $ ( 0.46 ) $ ( 0.47 ) Weighted average common shares – basic and diluted 20,199,444 20,199,444 (14) Subsequent Events The Company evaluates subsequent events that occur after the balance sheet date through the date the financial statements were issued. On January 23, 2023, the Company entered into an agreement (the “Consulting Agreement”) with Lunar Project LLC (the “Consultant”). For a term of two years unless terminated sooner as provided in the Consulting Agreement (the “Term”), the Consultant has agreed to provide the Company with certain services including, but not limited to, increasing the Company’s customer base through assembly of a contract sales team, assisting the Company in reducing its current operating expenses and assisting the Company with franchising its business. In exchange for its services, the Consultant will receive options to purchase 1,600,000 restricted shares of the Company’s common stock (the “Options”). The Options’ exercise prices, vesting requirements, and expiration dates will be set forth in an option agreement between the Consultant and the Company. At the end of the Term, unless extended by the parties in writing, all unvested Options will immediately expire. In conjunction with the Consulting Agreement, the Consultant entered into several Non-Qualified Stock Option Agreements (“Option Agreements”) with the Company. The first Option Agreement is for 500,000 option shares that have an exercise price of $ 0.60 per share and an expiration date five years from the vesting date. The second Option Agreement is for 400,000 option shares that have an exercise price of $ 1.00 per share and an expiration date five years from the vesting date. The third Option Agreement is for 400,000 option shares that have an exercise price of $ 1.25 per share and an expiration date five years from the vesting date. The fourth Option Agreement is for 300,000 option shares that have an exercise price of $ 1.75 per share and an expiration date five years from the vesting date. Within each of the aforementioned Option Agreements, there are performance conditions and vesting dates with specific percentages of shares to vest. To exercise the Option, the Consultant (or in the case of exercise after the Consultant’s death or incapacity, the Consultant’s executor, administrator, heir or legatee, as the case may be) must deliver to the Company a written notice of exercise per the Consulting Agreement. On February 10, 2023, the Board of Directors appointed Mr. Daniel Arbour as a non-independent director. Mr. Arbour’s term will continue until its expiration or renewal at the Company’s next annual meeting of shareholders or until his earlier resignation or removal. Mr. Arbour will not serve on any of the Board’s committees. Mr. Arbour will receive a Board equivalent stock fee of $ 130,000 . Stock compensation will be based on a specific dollar amount translated into a specific number of shares of stock. Stock grant equivalent shares will be granted annually at the Company’s annual meeting date and will fully vest in 12 months or one day before the following yearʼs annual meeting whichever is sooner. Grants will be based on the closing price of the Company on the effective date of the grant, or the Company’s annual shareholder meeting date. On February 15, 2023, the Company entered into a consulting agreement (the “Consulting Agreement”) with Mountain Views Strategy Ltd (“Mountain Views”). Daniel Arbour is the principal and founder of Mountain Views. Pursuant to the Consulting Agreement, Mountain Views agrees to provide services as an outsourced chief revenue officer The Company will pay Mountain Views $ 13,000 USD per month and cover other certain expenses. The term of the Consulting Agreement is for twelve months from the effective date however, either party may terminate the Consulting Agreement on two weeks written notice to the other party. 41 On February 17, 2023, the Company entered into a Sales Agreement (the “Sales Agreement”) with ThinkEquity LLC (the “Sales Agent”), pursuant to which the Company may offer and sell, from time to time through the Sales Agent, shares (the “Shares”) of the Company’s common stock, par value $ 0.0001 per share (the “Common Stock”), having an aggregate offering price of up to $ 2,096,000 , subject to the terms and conditions of the Sales Agreement. The Company filed a prospectus supplement to its registration statement on Form S-3 (File No. 333-268960) offering the Shares. Under the Sales Agreement, the Sales Agent may sell the Shares in sales deemed to be an “at-the-market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended (the “Securities Act”), including sales made directly on or through The NASDAQ Capital Market or any other existing trading market for the Common Stock, in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices, and/or any other method permitted by law. The Company may instruct the Sales Agent not to sell the Shares if the sales cannot be affected at or above the price designated by the Company from time to time. The Company is not obligated to make any sales of the Shares under the Sales Agreement. The offering pursuant to the Sales Agreement will terminate upon the earlier of (i) the sale of all of the Shares subject to the Sales Agreement and (ii) termination of the Sales Agreement as permitted therein. The Company will pay the Sales Agent a fixed commission rate of 3.0 % of the aggregate gross proceeds from the sale of the Shares pursuant to the Sales Agreement and has agreed to provide the Sales Agent with customary indemnification and contribution rights. The Company also agreed to reimburse the Sales Agent the fees and expenses of the Sales Agent including but not limited to the fees and expenses of the counsel to the Sales Agent, payable upon the execution of the Sales Agreement, in an amount not to exceed $ 50,000 . In addition, the Company will reimburse the Sales Agent upon request for such costs, fees and expenses incurred in connection with the Sales Agreement in an amount not to exceed $ 7,500 on a quarterly basis for the first three quarters of each year and $ 10,000 for the fourth quarter of each year. As of March 10, 2023, a total of 67,141 shares had been sold under the ATM for gross proceeds of $ 26,601 . Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure There were no disagreements related to accounting principles or practices, financial statement disclosure, internal controls or auditing scope or procedure during the two fiscal years and their respective interim periods.