What changed in this filing

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Item 1. Financial Statements

2022-08-11 compared with 2022-05-12 · 930 added, 753 removed, 253 unchanged (87% of the section changed)

FINANCIAL STATEMENTS

March 31, 2022

December 31, 2021

June 30, 2022

Current Assets

3 unchanged sentences

Prepaid expenses and other current assets

Deferred IPO costs

Total current assets

22 unchanged sentences

Stockholders’ equity

June 30, 2022

Preferred stock, par value $ .001 ;

3 unchanged sentences

200,000,000 shares authorized;

4,300,000 issued and outstanding as of March 31, 2022 and December 31, 2021

6,802,464 and 4,300,000 issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

5 unchanged sentences

accompanying notes are an integral part of these financial statements

of Operations for the Three Months Ended March 31, 2022 and 2021 (Unaudited)

of Operations (Unaudited)

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Cost of sales

1 unchanged sentence

Loss from operations

Other (Income)

( 2,915,246 )

( 3,249,768 )

Other (Income) / Expense

Interest income

1 unchanged sentence

Interest expense

Miscellaneous

Other expense

Total other expense

Loss before taxes

( 4,090,886 )

( 4,787,589 )

Franchise taxes

1 unchanged sentence

$ ( 130,436 )

$ ( 4,787,889 )

$ ( 377,628 )

Net loss per share (basic and diluted)

1 unchanged sentence

accompanying notes are an integral part of these financial statements

of Stockholders’ Equity (Deficit) for Three Months ended March 31, 2022 and 2021 (Unaudited)

Additional Paid-in Capital

Accumulated Deficit

Total Stockholders’ Equity (Deficit)

of Stockholders’ Equity (Deficit) for Six Months ended June 30, 2022 and 2021 (Unaudited)

Stockholders’

Balance at December 31, 2020

1 unchanged sentence

$ ( 1,379,662 )

Issuance of membership units (shares) upon conversion of convertible notes

Issuance of shares upon conversion of convertible notes

Effect of induced conversion of debt

Issuance of membership units (shares) in exchange for building signage

Issuance of membership units (shares) for cash

Issuance of shares in exchange for building signage

Issuance of shares for cash

Balance at March 31, 2021

1 unchanged sentence

$ ( 1,051,565 )

Issuance of shares for cash

Balance at June 30, 2021

$ ( 1,759,721 )

Balance at December 31, 2021

2 unchanged sentences

$ ( 6,799,804 )

Issuance of shares, net of issuance costs

Issuance of shares in exchange for IPO services

Issuance of stock options

( 4,091,036 )

Balance at June 30, 2022

( 10,890,840 )

accompanying notes are an integral part of these financial statements

Statements of Cash Flows for the Three Months ended March 31, 2022 and 2021 (Unaudited)

Statements of Cash Flows for the Six Months ended June 30 (Unaudited)

Cash flows from operating activities

2 unchanged sentences

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Accrued interest on convertible notes

Amortization of debt discount (sale of future revenues)

1 unchanged sentence

Debt conversion expense on induced conversion of convertible notes

Increase in allowance for doubtful accounts

Stock-based compensation

Changes in operating assets and liabilities:

(Increase) Decrease in accounts receivable

Increase in inventory

Decrease in prepaid/in-transit inventory

Increase in accounts receivable

(Increase) Decrease in inventory

Increase in prepaid/in-transit inventory

Increase in prepaid expenses and other current assets

2 unchanged sentences

Decrease in customer deposits

Increase (Decrease) in accrued expenses and other current liabilities

Decrease in accrued expenses and other current liabilities

Decrease in liability for refunds

Increase in right-of-use assets and lease liabilities

Net cash provided by (used in) operating activities

Net cash used in operating activities

( 2,727,928 )

Cash flows from investing activities

2 unchanged sentences

Cash flows from financing activities

Increase in deferred IPO costs

Payments on line of credit and short-term revolving loans

Proceeds from sale of future revenues

1 unchanged sentence

Principal payments on long-term debt

Proceeds from issuance of membership units (shares)

Net cash provided by (used in) financing activities

( 1,726,850 )

Proceeds from issuance of convertible notes, net of discount

Net proceeds from issuance of common stock

Net cash provided by financing activities

Net change in cash and cash equivalents

1 unchanged sentence

Cash and cash equivalents, ending

of Cash Flows for the Three Months ended March 31, 2022 and 2021 (Unaudited) - Continued

of Cash Flows for the Six Months ended June 30, 2022 and 2021 (Unaudited) - Continued

Supplemental disclosure of cash flow information:

2 unchanged sentences

Non-cash operating activities:

Purchases of property and equipment in exchange for membership units (shares) of common stock

Purchases of property and equipment in exchange for accrued expenses and other current liability

Reclassification of deposit to property and equipment

Reclassification of convertible note to long-term debt

Acquisition of operating lease right-of-use asset and lease liability

Conversion of 2020 convertible notes to membership units (shares) of common stock

Convertible notes and accrued interest converted to common stock

Reclassification of accrued interest to long-term debt

Reclassification of modified convertible note to long-term debt

Reclassification of modified member promissory note to convertible notes

Issuance of common stock in exchange for property and equipment

Acquisition/modification of operating lease right-of-use asset and lease liability

Purchases of property and equipment in exchange for long-term debt

Purchases of property and equipment in exchange for short-term payable

accompanying notes are an integral part of these financial statements

Organization and Nature of Operations

(formerly Yozamp Products Company, LLC dba Expion360) (“the Company”) was incorporated in the state of Nevada in November

(formerly Yozamp Products Company, LLC dba Expion360) (“the Company”) was incorporated in the state of Nevada

in November 2021.

Effective November 1, 2021, the Company converted to a C corporation.

Prior to conversion, the Company was a limited liability

company (LLC) with an indefinite life organized in the State of Oregon in June 2016.

The LLC elected to be treated as a Subchapter S

corporation effective January 1, 2017.

Net profits and losses of the LLC and all distributions were allocated among the members in proportion

to the ownership units held.

The Original LLC Agreement was amended and restated on January 1, 2021 to add additional members and a non-voting

class of member units.

Upon conversion to a C corporation, all existing LLC members at the time of conversion were issued shares of common

stock and became shareholders of the Company.

(See Note 15 – Conversion to a C Corporation).

Prior to conversion, the Company was a

limited liability company (LLC) with an indefinite life organized in the State of Oregon in June 2016.

The LLC elected to be treated

as a Subchapter S corporation effective January 1, 2017.

Net profits and losses of the LLC and all distributions were allocated

among the members in proportion to the ownership units held.

The Original LLC Agreement was amended and restated on January 1,

2021 to add additional members and a non-voting class of member units.

Upon conversion to a C corporation, all existing LLC members

at the time of conversion were issued shares of common stock and became shareholders of the Company.

(See Note 11 – Conversion

to a C Corporation).

Company designs, assembles, and distributes premium lithium batteries for RV, Marine, Golf, Industrial, Residential, and Off-The-Grid

The Company uses lithium iron phosphate (LiFePO4) batteries.

LiFePO4 batteries are considered a top choice for high energy density,

dependability, longevity, and safety, providing the ability to power anything, anywhere.

in March 2020, the COVID-19 pandemic and the measures imposed to contain this pandemic have disrupted and are expected to continue to

impact the Company’s business.

LiFePO4 batteries are considered a top choice for high energy

density, dependability, longevity, and safety, providing the ability to power anything, anywhere.

in March 2020, the COVID-19 pandemic and the measures imposed to contain this pandemic have disrupted and may continue to impact

the Company’s business.

The magnitude of the impact of the COVID-19 pandemic on the Company’s productivity, results

of operations and financial position, and its disruption to the Company’s business and battery development and timeline, will depend

in part, on the length and severity of these restrictions and on the Company’s ability to conduct business in the ordinary course.

of operations, and financial position, and its disruption to the Company’s business and battery development and timeline,

will depend in part on the length and severity of these restrictions and on the Company’s ability to conduct business in

the ordinary course.

Summary of Significant Accounting Policies

of Presentation

accompanying unaudited condensed financial statements have been prepared by the Company in accordance with accounting principles generally

accompanying unaudited financial statements have been prepared by the Company in accordance with accounting principles generally

accepted in the United States of America (U.S.

GAAP) for interim financial information, and pursuant to the instructions to Form 10-Q

and Article 10 of Regulation S-X promulgated by the Securities and Exchange Commission (SEC).

Accordingly, they do not include all of

the information and footnotes required by U.S.

GAAP) for interim financial information, and pursuant to the instructions to Form

10-Q and Article 10 of Regulation S-X promulgated by the Securities and Exchange Commission (SEC).

Accordingly, they do not include

all of the information and footnotes required by U.S.

GAAP for complete financial statement presentation.

However, the Company believes that

the disclosures are adequate to make the information presented not misleading.

In the opinion of management, all adjustments (consisting

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

results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending

However, the Company

believes that the disclosures are adequate to make the information presented not misleading.

In the opinion of management, all

adjustments (consisting primarily of normal recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the three

and six month periods ended June 30, 2022 are not necessarily indicative of the results that may be expected for the year ending

December 31, 2022.

The unaudited interim condensed financial statements should be read in conjunction with the Company’s financial

statements and related notes as of and for the year ended December 31, 2021, as disclosed in the Company’s prospectus, dated March

31, 2022, filed with the SEC in accordance with Rule 424(b) of the Securities Act on April 4, 2022 (the “Prospectus”) in

connection with the Company’s initial public offering.

The unaudited interim financial statements should be read in conjunction with the Company’s financial

statements and related notes as of and for the year ended December 31, 2021, as disclosed in the Company’s prospectus, dated

March 31, 2022, filed with the SEC in accordance with Rule 424(b) of the Securities Act on April 4, 2022 (the “Prospectus”)

in connection with the Company’s initial public offering.

otherwise noted, all references to shares and shareholders in the accompanying financial statements have been restated retrospectively,

1 unchanged sentence

and Capital Resources

Company has sustained recurring losses up until first quarter of 2022 and has negative cash flows from operations through December 31,

Over the past year, the Company’s growth has been funded through a combination of private equity, third party debt, and working

capital loans.

Throughout 2021, the Company incurred substantial costs and expenses to build its infrastructure and prepare for growth,

including the addition of new facilities, human resources with competitive benefits, and incurred legal, tax and accounting fees in preparation

for an initial public offering (IPO).

Company’s sales for the three months ended March 2022 increased 143% over sales for the three months ended March 31, 2021, as product

demand continued to rise.

On April 1, 2022, the Company completed an initial public offering

(see Note 21 – Subsequent Events).

Net proceeds from the IPO totaled $ 15,735,870 , net of issuance costs of $1,531,380, of which

approximately $2,250,000 was used to pay down principal on high interest-bearing debt, which will help to improve monthly cash flows going

The remaining proceeds will be used, in part, to stock inventory and keep up with demand and to build in-house assembly lines

to improve the cash-flow cycle, side-stepping the four-month turn-around that the Company currently experiences from suppliers in China.

In the first quarter of 2022, a distribution warehouse was set up in Indiana to better service customers throughout the U.S.

Additionally,

management has secured a secondary source for lithium-ion phosphate cells used in its batteries that is based in Denmark, should supply

disruption issues with China arise.

Management believes that these factors will contribute to achieving operating efficiency and profitability.

However, there can be no assurance that the Company will be successful in achieving its objectives, including achieving operating efficiency

and profitability.

Company believes that as a result of the IPO, it currently has sufficient cash to meet its funding requirements over the next eighteen

However, the Company has experienced and continues to experience negative operating margins, although, as noted above, achieved

positive cash flows from operations for the three months ended March 31, 2022.

The Company expects that it may need to raise additional

capital in the future to expand its presence in the marketplace and achieve operating efficiencies, and to accomplish its long-term business

plan over the next several years.

There can be no assurance as to the availability or terms upon which such financing and capital might

be available.

The Company has sustained recurring losses and has negative cash flows from operations for

the six months ended June 30, 2022.

Historically, the Company’s growth has been funded through a combination of sales of

equity interests, third party debt, and working capital loans.

The Company’s sales for the six months ended June 2022 increased

132% over sales for the six months ended June 30, 2021, as product demand continued to rise.

On April 1, 2022, the Company completed

an initial public offering and listing of its shares on the Nasdaq Stock Market (IPO).

Proceeds from the IPO, net of costs, totaled

$14,772,487, of which approximately $2,464,000 was used to pay down principal and accrued interest on high interest-bearing debt,

which will help to improve monthly cash flows going forward.

The remaining proceeds will be used, in part, to stock inventory to

keep up with demand and to build in-house assembly lines to improve the cash-flow cycle, side-stepping the four-month turnaround

that the Company currently experiences from suppliers in China.

In the first half of 2022, a distribution warehouse was set up

in Indiana to better service customers throughout the U.S and an assembly facility was leased in Redmond, Oregon for future expansion

of the in-house assembly lines.

Additionally, management has secured a secondary source for lithium iron phosphate cells used in

its batteries that is based in Denmark, should supply disruption issues with China arise.

Management believes that these factors

will contribute to achieving operating efficiency and profitability.

However, there can be no assurance that the Company will be

successful in achieving its objectives, including achieving operating efficiency and profitability.

Company believes that as a result of the IPO, it currently has sufficient cash to meet its funding requirements for at least twelve

months after the date of the issuance of these financial statements.

However, the Company has experienced and continues to experience

negative operating margins.

The Company expects that it may need to raise additional capital in the future to expand its presence

in the marketplace and achieve operating efficiencies, and to accomplish its long-term business plan over the next several years.

There can be no assurance as to the availability or terms upon which such financing and capital might be available.

preparation of financial statements in conformity with U.S.

GAAP requires management to make estimates and assumptions that affect the

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

and the reported amounts of revenues and expenses during the reporting period.

Actual results could vary materially from the estimates

that were used.

The Company’s significant accounting estimates include the carrying value of accounts receivable and inventory,

the depreciable lives of fixed assets, and reserves for returns and allowances.

events, including the extent and the duration of the COVID-19-related economic impacts and their effects, cannot be predicted with certainty

and, accordingly, the Company’s accounting estimates require the exercise of judgment.

GAAP requires management to make estimates and assumptions that affect

the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial

statements and the reported amounts of revenues and expenses during the reporting period.

Actual results could vary materially

from the estimates that were used.

The Company’s significant accounting estimates include the carrying value of accounts

receivable and inventory, the depreciable lives of fixed assets, and stock-based compensation.

events, including the extent and the duration of the COVID-19-related economic impacts and their effects, cannot be predicted

with certainty and, accordingly, the Company’s accounting estimates require the exercise of judgment.

and Cash Equivalents

Company considers all cash amounts which are not subject to withdrawal restrictions or penalties and all highly liquid investments purchased

with an original maturity of three months or less from the date of purchase to be cash equivalents.

The Company maintains its cash balances

with high-quality financial institutions located in the United States.

Accounts are secured by the Federal Deposit Insurance Corporation

(“FDIC”) up to $250,000 per institution.

Company considers all cash amounts which are not subject to withdrawal restrictions or penalties and all highly liquid investments

purchased with an original maturity of three months or less from the date of purchase to be cash equivalents.

The Company maintains

its cash balances with high-quality financial institutions located in the United States.

Accounts are secured by the Federal Deposit

Insurance Corporation (“FDIC”) up to $250,000 per institution.

At times, balances may exceed federally insured limits.

The Company has not experienced

any losses in such accounts and management believes that the Company is not exposed to any significant credit risk with respect to its

cash and cash equivalents.

At March 31, 2022, cash balances exceeded FDIC limits by approximately $ 373,380 .

The Company has not experienced any losses in such accounts and management believes that the Company is not exposed to any significant

credit risk with respect to its cash and cash equivalents.

As of June 30, 2022, cash balances exceeded FDIC limits by $ 2,050,818 .

receivable are recorded at the invoiced amount, are due within a year or less, and generally do not bear any interest.

The Company performs

ongoing credit evaluations of its customers and generally requires no collateral.

An allowance for uncollectible accounts is recorded

to reduce accounts receivable to the estimated amount that will be collected.

The allowance is based upon management’s review of

the accounts receivable aging and specific identification of potentially uncollectible balances.

Recoveries of accounts previously written

off and adjustments to the allowance for uncollectible accounts are recorded as adjustments to bad debt expense.

There was no allowance

for doubtful accounts at March 31, 2022 and December 31, 2021, as management believed all outstanding amounts to be fully collectible.

March 31, 2022 and December 31, 2021, the Company had customer deposits totaling $423,985 and $436,648, respectively, for a custom order.

is stated at the lower of cost (first in, first out) or net realizable value and consists of batteries and accessories, resale items,

components, and related landing costs.

Through 2020, the Company operated primarily as a distributor, and inventory consisted of inventory

parts and products purchased for resale.

The Company began in-house assembly in 2021 and as of March 31, 2022 and December 31, 2021,

inventory consisted of finished assemblies totaling $1,039,554 and $985,537, respectively, and raw materials (inventory components, parts,

and packaging) totaling $1,263,943 and $1,066,343, respectively.

The valuation of inventory includes fixed production overhead costs

based on normal capacity of the assembly warehouse.

Company periodically reviews its inventory for evidence of slow-moving or obsolete inventory and provides for an allowance when considered

The Company determined that no such reserve was necessary as of March 31, 2022 and December 31, 2021.

The Company prepays

for inventory purchases from foreign suppliers.

Prepaid inventory totaled $ 294,846 and $ 1,081,225 at March 31, 2022 and December 31,

2021, respectively, and included inventory in transit where title had passed to the Company but had not yet been physically received.

performs ongoing credit evaluations of its customers and generally requires no collateral.

An allowance for uncollectible accounts

is recorded to reduce accounts receivable to the estimated amount that will be collected.

The allowance is based upon management’s

review of the accounts receivable aging and specific identification of potentially uncollectible balances.

Recoveries of accounts

previously written off and adjustments to the allowance for uncollectible accounts are recorded as adjustments to bad debt expense.

The allowance for doubtful accounts totaled $19,604 as of June 30, 2022.

There was no allowance for doubtful accounts as of December

31, 2021, as management believed all outstanding amounts to be fully collectible.

of June 30, 2022 and December 31, 2021, the Company had customer deposits totaling $ 249,109 and $ 436,648 , respectively.

is stated at the lower of cost (first in, first out) or net realizable value and consists of batteries and accessories, resale

items, components, and related landing costs.

The Company began in-house assembly in 2021 and as of June 30, 2022 and December

31, 2021, inventory consisted of finished assemblies totaling $1,455,428 and $985,537, respectively, and raw materials (inventory

components, parts, and packaging) totaling $1,302,729 and $1,066,343, respectively.

The valuation of inventory includes fixed

production overhead costs based on normal capacity of the assembly warehouse.

Company periodically reviews its inventory for evidence of slow-moving or obsolete inventory and provides for an allowance when

considered necessary.

The Company determined that no such reserve was necessary as of June 30, 2022 and December 31, 2021.

Company prepays for inventory purchases from foreign suppliers.

Prepaid inventory totaled $1,367,219 and $1,081,225 at June 30,

2022 and December 31, 2021, respectively, and included inventory in transit where title had passed to the Company but had not

yet been physically received.

and Foreign Concentrations of Inventory Suppliers

the three months ended March 31, 2022 and 2021, approximately 59 % and 93 %, respectively, of inventory purchases were made from foreign

suppliers in China and Hong Kong.

An adverse change in either the economic or political conditions abroad could negatively impact the

Company’s supply chain.

The inability to obtain product to meet sales demand could adversely affect results of operations.

the Company has secured a secondary source for lithium iron phosphate cells used in its batteries from a supplier in Denmark, enabling

the Company to source materials outside of China in the event it becomes necessary to do so.

the three months ended June 30, 2022 and 2021, approximately 96% and 93%, respectively, of inventory purchases were made from

foreign suppliers in China and Hong Kong.

During the six months ended June 30, 2022 and 2021, approximately 91% and 92%, respectively,

of inventory purchases were made from foreign suppliers in China and Hong Kong.

An adverse change in either the economic or political

conditions abroad could negatively impact the Company’s supply chain.

The inability to obtain product to meet sales demand

could adversely affect results of operations.

However, the Company has secured a secondary source for lithium iron phosphate cells

used in its batteries from a supplier in Denmark, enabling the Company to source materials outside of China in the event it becomes

necessary to do so.

and Equipment

and equipment are stated at cost less depreciation calculated on the straight-line basis over the estimated useful lives of the related

assets as follows:

and equipment are stated at cost less depreciation calculated on the straight-line basis over the estimated useful lives of the

related assets as follows:

Schedule of estimated useful lives

Vehicles and transportation equipment

Office furniture and equipment

Warehouse equipment

and transportation equipment

furniture and equipment

Manufacturing

improvements are amortized over the shorter of the lease term or their estimated useful lives.

renewals, and extraordinary repairs that extend the lives of the assets are capitalized;

other repairs and maintenance charges are expensed

The cost and related accumulated depreciation and amortization applicable to assets retired are removed from the accounts,

and the gain or loss on disposition is recognized in the Statements of Operations.

other repairs and maintenance charges

are expensed as incurred.

The cost and related accumulated depreciation and amortization applicable to assets retired are removed

from the accounts, and the gain or loss on disposition is recognized in the Statements of Operations.

Company determines if an arrangement is a lease at inception.

Operating lease right-of-use (“ROU”) assets represent the Company’s

right to use an underlying asset during the lease term, and operating lease liabilities represent the Company’s obligation to make

lease payments arising from the lease.

Operating leases are included in ROU assets, current operating lease liabilities, and long-term

operating lease liabilities on the Company’s Balance Sheets.

Operating lease right-of-use (“ROU”) assets

represent the Company’s right to use an underlying asset during the lease term, and operating lease liabilities

represent the Company’s obligation to make lease payments arising from the lease.

Operating leases are included

in ROU assets, current operating lease liabilities, and long-term operating lease liabilities on the Company’s Balance

The Company does not have any finance leases.

ROU assets and lease liabilities are initially recognized based on the present value of the future minimum lease payments over the lease

term at commencement date calculated using the Company’s incremental borrowing rate applicable to the lease asset, unless the implicit

rate is readily determinable.

ROU assets also include any lease payments made at or before lease commencement and exclude any lease incentives

The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the

Company will exercise that option.

Leases with a term of 12 months or less are not recognized on the Company’s Balance Sheet.

Company’s leases do not contain any residual value guarantees.

Lease expense for minimum lease payments is recognized on a straight-line

basis over the lease term.

ROU assets and lease liabilities are initially recognized based on the present value of the future minimum lease payments over

the lease term at commencement date calculated using the Company’s incremental borrowing rate applicable to the lease asset,

unless the implicit rate is readily determinable.

ROU assets also include any lease payments made at or before lease commencement

and exclude any lease incentives received.

The Company’s lease terms may include options to extend or terminate the lease

when it is reasonably certain that the Company will exercise that option.

Leases with a term of 12 months or less are not recognized

on the Company’s Balance Sheet.

The Company’s leases do not contain any residual value guarantees.

Lease expense for

minimum lease payments is recognized on a straight-line basis over the lease term.

Company accounts for lease and non-lease components as a single lease component for all its leases.

1 unchanged sentence

assets consist primarily of property and equipment.

When events or circumstances indicate the carrying value of a long-lived asset may

be impaired, the Company estimates the future undiscounted cash flows to be derived from the use and eventual disposition of the asset

to assess whether or not a potential impairment exists.

If the carrying value exceeds the estimate of future undiscounted cash flows,

the impairment is calculated as the excess of the carrying value of the asset over the estimate of its fair value.

Fair value is determined

primarily using the estimated cash flows discounted at a rate commensurate with the risk involved.

No long-lived asset impairment was

recognized during the three months ended March 31, 2022 and 2021.

Company sells the majority of its products to customers along with unconditional repair or replacement warranties.

When events or circumstances indicate the carrying value of a long-lived asset

may be impaired, the Company estimates the future undiscounted cash flows to be derived from the use and eventual disposition

of the asset to assess whether or not a potential impairment exists.

If the carrying value exceeds the estimate of future undiscounted

cash flows, the impairment is calculated as the excess of the carrying value of the asset over the estimate of its fair value.

Fair value is determined primarily using the estimated cash flows discounted at a rate commensurate with the risk involved.

long-lived asset impairment was recognized during the three months or six months ended June 30, 2022 and 2021.

Company sells the majority of its products to customers along with conditional repair or replacement warranties.

The Company’s

branded DC mobile chargers are warranted for two years from date of sale and its branded VPR 4EVER Classic and Platinum batteries are

warranted at gradually lesser levels over a twelve-year period from date of sale.

The Company determines its estimated liability for

warranty claims based on the Company’s experience of the amount of claims actually made.

Management estimates no liability as of

March 31, 2022 and December 31, 2021 because, historically, there have been very few claims and costs for repairs or replacement parts

have been nominal.

It is reasonably possible that the Company’s estimate of a liability for product liability claims will change

in the near term.

Company does not have a formal return policy but does accept returns under its warranty policies.

branded DC mobile chargers are warranted for two years from date of sale and its branded VPR 4EVER Classic and Platinum batteries

are warranted at gradually lesser levels over a twelve-year period from date of sale.

The Company determines its estimated liability

for warranty claims based on the Company’s experience of the amount of claims actually made.

Management estimates no liability

as of June 30, 2022 and December 31, 2021 because, historically, there have been very few claims and costs for repairs or replacement

parts have been nominal.

It is reasonably possible that the Company’s estimate of a liability for product liability claims

will change in the near term.

The Company does not have a formal return policy but does accept returns under its warranty policies.

Returns have historically been minimal.

However, during 2020 the Company sold discontinued products and recorded a liability for refunds.

As of December 31, 2020, the liability

totaled $58,000.

During the three months ended March 31, 2021, the Company issued credit totaling $33,020 reducing the liability to $24,980

as of March 31, 2021.

As of December 31, 2021, all allowable discontinued product had been returned and the Company has no further refund

However, during 2020 the Company sold discontinued products and recorded a liability for

As of December 31, 2020, the liability totaled $58,000.

During the three months and six months ended June 30, 2021, the

Company issued credits totaling $16,352 and $49,372,

respectively, which were included in the refund liability as of December 31, 2020.

As of December 31, 2021, all allowable discontinued

products have been returned and the Company had no further refund liability.

Revenue is recorded net of this amount.

Any returns of discontinued product are not added back to inventory and therefore

related costs are nominal and not recorded as an asset.

of discontinued product are not added back to inventory and therefore related costs are nominal and not recorded as an asset.

Company’s revenue is generated from the sale of products consisting primarily of batteries and accessories.

The Company recognizes

revenue when control of goods or services is transferred to its customers in an amount that reflects the consideration it is expected

to be entitled to in exchange for those goods or services.

To determine revenue recognition, the Company performs the following five

recognizes revenue when control of goods or services is transferred to its customers in an amount that reflects the consideration

it is expected to be entitled to in exchange for those goods or services.

To determine revenue recognition, the Company performs

the following five steps:

(i) identify the contract(s) with a customer;

(ii) identify the performance obligation(s) in the contract;

(iii) determine

the transaction price;

(iv) allocate the transaction price to the performance obligation(s) in the contract;

and (v) recognize

revenue when (or as) the performance obligation(s) are satisfied.

Revenue is recognized upon shipment or delivery to the customer, as

that is when the customer obtains control of the promised goods and the Company’s performance obligation is considered satisfied.

As such, accounts receivable is recorded at the time of shipment or will call, when the Company’s right to the consideration becomes

unconditional and the Company determines there are no uncertainties regarding payment terms or transfer of control.

(ii) identify the performance obligation(s)

in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligation(s)

in the contract;

and (v) recognize revenue when (or as) the performance obligation(s) are satisfied.

Revenue is recognized

upon shipment or delivery to the customer, as that is when the customer obtains control of the promised goods and the Company’s

performance obligation is considered satisfied.

As such, accounts receivable is recorded at the time of shipment or will call,

when the Company’s right to the consideration becomes unconditional and the Company determines there are no uncertainties

regarding payment terms or transfer of control.

Concentration

of Major Customers

are considered major customers when net revenue exceeds 10% of total revenue for the period or outstanding receivable balances exceed

10% of total receivables.

the three months ended March 31, 2022, sales to one customer totaled $ 896,984 , comprising approximately 42 % of total sales.

receivable from this customer totaled $ 114,674 , representing approximately 20 % of total accounts receivable as of March 31, 2022.

from two additional customers totaled $ 151,494 and $ 73,065 , representing in aggregate approximately 39 % of total accounts receivable

as of March 31, 2022.

the three months ended March 31, 2021, sales to two customers totaled $ 143,652 and $ 123,980 , respectively, comprising approximately 16 %

A customer is

considered a major customer when net revenue attributable to the customer exceeds 10% of total revenue for the period or outstanding

receivable balances exceed 10% of total receivables.

the three months ended June 30, 2022, sales to two customers totaled $350,583 and $321,597, respectively, comprising approximately

16% and 15% of total sales, respectively.

During the six months ended June 30, 2022, sales to one customer totaled $1,218,581,

comprising approximately 28% of total sales.

Accounts receivable from this customer totaled $ 281,474 , representing approximately

35% of total accounts receivable as of June 30, 2022.

Accounts receivable from two additional customers totaled $115,399 and $87,318,

representing approximately 14% and 11%, respectively of total accounts receivable as of June 30, 2022.

the three months ended June 30, 2021, sales to two customers totaled $217,664 and $172,376, respectively, comprising approximately

22% and 18%, respectively, of total sales.

Accounts receivable from these customers totaled $ 59,340 and $ 123,980 , representing in aggregate

approximately 42 % of total accounts receivable as of March 31, 2021.

During the six months ended June 30, 2021, sales to two customers totaled $316,028

and $237,264, respectively, comprising approximately 17% and 13%, respectively, of total sales.

Accounts receivable from these

customers totaled $71,378 and $32,898, representing approximately 23% and 11% of total accounts receivable as of June 30, 2021.

Accounts receivable from two additional customers totaled $54,614 and $39,900, representing approximately 18% and 13%, respectively

of total accounts receivable as of June 30, 2021.

and Handling Costs

and handling fees billed to customers are classified on the Statement of Operations as “Sales, net” and totaled $ 4,151 and

$ 5,191 during the three months ended March 31, 2022 and 2021, respectively.

Shipping and handling costs for shipping product to customers

totaled $ 38,724 and $ 24,634 during the three months ended March 31, 2022 and 2021, respectively, and are classified in selling, general

and administrative expense in the accompanying Statements of Operations.

and handling fees billed to customers are classified on the Statement of Operations as “Sales, net” and totaled $7,230

and $9,781 during the three months ended June 30, 2022 and 2021, respectively and $11,380 and $14,973 during the six months ended

June 30, 2022 and 2021, respectively.

Shipping and handling costs for shipping product to customers totaled $43,934 and $25,096

during the three months ended June 30, 2022 and 2021, respectively, and $82,658 and $49,730 during the six months ended June 30,

2022 and 2021, respectively, and are classified in selling, general and administrative expense in the accompanying Statements

of Operations.

and Marketing Costs

Company expenses advertising and marketing costs as incurred.

Advertising and marketing expense totaled $ 35,946 and $ 14,069 for the three

months ended March 31, 2022 and 2021, respectively, and is included in selling, general and administrative expense in the accompanying

Statements of Operations.

The Company expenses advertising and marketing costs as incurred.

Advertising and marketing expense

totaled $34,808 and $21,456 for the three months ended June 30, 2022 and 2021, respectively and $70,754 and $35,525 for

the six months ended June 30, 2022 and 2021, respectively, and is included in selling, general and administrative expense in the

accompanying Statements of Operations.

and Development

and development costs are expensed as incurred.

Research and development costs charged to expense amounted to $ 5,316 and $ 6,759 for the

three months ended March 31, 2022 and 2021, respectively, and are included in selling, general and administrative expenses in the accompanying

Statements of Operations.

January 1, 2017 to October 31, 2021, the Company was not subject to federal or state income taxes since it was a limited liability company

taxed as an S corporation.

The Company’s taxable income or losses were allocated to its members in accordance with their respective

ownership percentage.

Therefore, no provision or liability for federal income taxes had been included in the accompanying financial statements.

Research and development costs charged to expense amounted to $100,905 and $4,952

for the three months ended June 30, 2022 and 2021, respectively and $106,221 and $11,712 for the six months ended June 30, 2022

and 2021, respectively, and are included in selling, general and administrative expenses in the accompanying Statements of Operations.

From January 1, 2017 to October 31, 2021, the Company was not subject to federal or state income taxes

since it was a limited liability company taxed as an S corporation.

The Company’s taxable income or losses were allocated

to its members in accordance with their respective ownership percentages.

Therefore, no provision or liability for federal income taxes was included in the accompanying financial statements for the relevant

periods in 2021.

Certain states impose minimum franchise taxes on entities taxed as an S corporation.

Accordingly, the accompanying financial statements

include provisions for state franchise tax fees.

Effective November 1, 2021, the Company converted from an LLC

to a C corporation and, as a result, became subject to corporate federal and state income taxes.

Deferred tax assets and liabilities are

recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of exiting assets

and liabilities and their respective tax basis.

Deferred tax assets, including tax loss and credit carryforwards, and liabilities are

measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected

to be recovered or settled.

The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the

period that included the enactment date.

Deferred income tax expense represents the change during the period in the deferred tax assets

and deferred tax liabilities.

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more

likely than not that some portion or all of the deferred tax assets will not be realized.

Accordingly, the accompanying

financial statements include provisions for state franchise tax fees.

November 1, 2021, the Company converted from an LLC to a C corporation and, as a result, became subject to corporate federal and

state income taxes.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences

between the financial statement carrying amounts of exiting assets and liabilities and their respective tax basis.

assets, including tax loss and credit carryforwards, and liabilities are measured using the enacted tax rates expected to apply

to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on deferred

tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date.

income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities.

assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or

all of the deferred tax assets will not be realized.

March 27, 2020, the United States enacted the Coronavirus Aid, Relief and Economic Security Act (CARES Act).

The Cares Act is an emergency

economic stimulus package that includes spending and tax breaks to strengthen the United States economy and fund a nationwide effort

to curtail the effect of COVID-19.

The CARES Act provides sweeping tax changes in response to the COVID-19 pandemic.

Some of the more

significant provisions are removal of certain limitations on utilization of net operating losses, increasing the loss carryback period

for certain losses to five years, and increasing the ability to deduct interest expense, as well as amending certain provisions of the

previously enacted Tax Cuts and Jobs Act.

At March 31, 2022 and December 31, 2021, the Company has not recorded any income tax provision/(benefit)

resulting from the CARES Act, mainly due to the Company’s history of net operating losses generated.

The Cares Act is

an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States economy and fund

a nationwide effort to curtail the effect of COVID-19.

The CARES Act provides sweeping tax changes in response to the COVID-19

Some of the more significant provisions are removal of certain limitations on utilization of net operating losses, increasing

the loss carryback period for certain losses to five years, and increasing the ability to deduct interest expense, as well as

amending certain provisions of the previously enacted Tax Cuts and Jobs Act.

As of June 30, 2022 and December 31, 2021, the Company

has not recorded any income tax provision/(benefit) resulting from the CARES Act, mainly due to the Company’s history of

net operating losses.

December 27, 2020, the United States enacted the Consolidated Appropriations Act of 2021 (“CAA”).

The CAA includes provisions

extending certain CARES Act provisions and adds coronavirus relief, tax and health extenders.

The Company will continue to evaluate the

impact of the CAA and its impact on its financial statements in 2022 and beyond.

The CAA includes

provisions extending certain CARES Act provisions and adds coronavirus relief, tax and health extenders.

The Company will continue

to evaluate the impact of the CAA and its impact on its financial statements in 2022 and beyond.

Value of Financial Instruments

Company accounts for its financial assets and liabilities in accordance with ASC Topic 820, Fair Value Measurement .

820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value, as follows:

Quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date.

Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value, as

Quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement

The fair value hierarchy gives the highest priority to Level 1 inputs.

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quoted market prices in markets that are not active;

or other inputs that are observable

or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

or other inputs that are

observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Unobservable inputs are used when little or no market data is available.

The fair value hierarchy gives the lowest priority to

Level 3 inputs.

In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the

use of unobservable inputs to the extent possible, as well as consider counterparty credit risk in the assessment of fair value.

Company’s financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable, short-term

revolving loans, shareholder promissory notes, convertible notes, and long-term debt.

The fair value hierarchy gives the lowest priority

to Level 3 inputs.

In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize

the use of unobservable inputs to the extent possible, as well as consider counterparty credit risk in the assessment of fair

Company’s financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable,

short-term revolving loans, shareholder promissory notes, and long-term debt.

The fair value of cash and cash equivalents, accounts

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nature of those instruments.

The fair value of the shareholder promissory notes, convertible notes, and long-term debt approximates their

respective carrying values because the interest rate approximates market rates available to the Company for similar obligations with

the same maturities.

currently operate in one reportable segment and our Chief Executive Officer is the chief operating decision maker.

The fair value of the shareholder promissory notes, convertible notes, and long-term debt approximates

their respective carrying values because the interest rate approximates market rates available to the Company for similar obligations

with the same maturities.

currently operate in one reportable segment.

An operating segment is defined as a component of an enterprise for which discrete

financial information is available and is reviewed regularly by the Chief Operating Decision Maker (“CODM”) to evaluate

performance and make operating decisions.

The Company has identified its CODM as the Chief Executive Officer.

and Diluted Net Loss Per Share

basic net loss per share is calculated by dividing the net loss by the weighted average number of shares outstanding during the period.

Diluted earnings or loss per share adjusts the basic earnings or loss per share for the potentially dilutive impact of securities (e.g.,

options and warrants).

of March 31, 2022, the Company has outstanding warrants and options convertible into 740,431 shares of common stock (see Note 20 –

Stockholders’ Equity).

For the three months ended March 31, 2022, the basic loss and diluted loss per share was ($.16).

three months ended March 31, 2021, the Company did not have any dilutive securities and the basic net loss per share of ($.10) equaled

the diluted net loss per share.

We calculate basic and diluted net loss per share using the

weighted average number of common shares outstanding during the periods presented.

In periods of a net loss position, basic and diluted

weighted average common shares are the same.

For the diluted earnings per share calculation, we adjust the weighted average number of

common shares outstanding to include dilutive stock options, warrants, unvested restricted stock units and shares associated with the

conversion of any convertible notes or preferred stock, when applicable.

We use the if-converted method for calculating any potential

dilutive effect of convertible notes and convertible preferred stock on diluted net loss per share.

basic net loss per share is calculated by dividing the net loss by the weighted average number of shares outstanding during the

Diluted earnings or loss per share adjusts the basic earnings or loss per share for the potentially dilutive impact of

securities (e.g., options and warrants).

calculate basic and diluted net loss per share using the weighted average number of common shares outstanding during the periods

In periods of a net loss position, basic and diluted weighted average common shares are the same.

For the diluted earnings

per share calculation, we adjust the weighted average number of common shares outstanding to include dilutive stock options, warrants,

unvested restricted stock units and shares associated with the conversion of any convertible notes or preferred stock, when applicable.

We use the if-converted method for calculating any potential dilutive effect of convertible notes and convertible preferred stock

on diluted net loss per share.

following shows the amounts used in computing net loss per share:

Schedule of net loss per share

March 31, 2022

March 31, 2021

Three Months Ended June 30,

Six Months Ended June 30,

$ ( 4,091,036 )

$ ( 130,436 )

$ ( 4,787,889 )

$ ( 377,629 )

Weighted average common shares outstanding – basic and diluted

Basic and diluted net loss per share

following table sets forth the number of shares excluded from the computation of diluted loss per share, as their inclusion would have

been anti-dilutive.

of June 30, 2022 and December 31, 2021, the Company has outstanding warrants and options convertible into 1,717,936 and 740,431

shares of common stock, respectively.

The following table sets forth the number of shares excluded from the computation of diluted

loss per share, as their inclusion would have been anti-dilutive.

Schedule of anti-dilutive shares

March 31, 2022

March 31, 2021

Three Months Ended June 30,

Six Months Ended June 30,

Stock options

Company accounts for stock-based compensation in accordance with ASC 718, “Compensation—Stock Compensation”,

which requires compensation costs to be recognized at grant date fair value over the requisite service period of each of the awards.

The Company recognizes forfeitures of awards as they occur.

fair value of stock options is determined using the Black-Scholes-Merton option pricing model.

In order to calculate the fair

value of the options, certain assumptions are made regarding the components of the model, including risk-free interest rate, volatility,

expected dividend yield and expected life.

Changes to assumptions could cause significant adjustments to the valuation.

Accounting Pronouncements

May 2021, the FASB issued ASU 2021-04, “Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic

470-50), Compensation — Stock Compensation (Topic 718), and Derivatives and Hedging — Contracts in Entity’s Own Equity

(Subtopic 815-40):

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options

(a consensus of the Emerging Issues Task Force).” ASU 2021-04 requires issuers to account for modifications or exchanges of freestanding

equity-classified written call options that remain equity classified after the modification or exchange based on the economic substance

of the modification or exchange.

Under the guidance, an issuer determines the accounting for the modification or exchange based on whether

the transaction was done to issue equity, to issue or modify debt, or for other reasons.

ASU 2021-04 is applied prospectively and is

effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years.

The Company adopted this

standard in the first quarter of fiscal 2022, which did not have a material impact on the Company’s financial statements or disclosures.

August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts

in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity.

Under ASU 2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion

features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in

substantial premiums accounted for as paid-in capital.

Consequently, a convertible debt instrument will be accounted for as a single

liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives.

equity-classified convertible preferred stock instruments will be accounted for as single units of account in equity unless the conversion

feature needs to be bifurcated under Topic 815.

The new guidance also made amendments to the earnings per share guidance in Topic 260,

Earnings Per Share, for convertible instruments, the most significant impact of which is requiring the use of the if-converted method

for diluted earnings per share calculation.

Further, ASU 2020-06 made revisions to Subtopic 815-40, which provides guidance on how an

entity must determine whether a contract qualifies for a scope exception from derivative accounting.

ASU 2020-06 is effective for fiscal

years beginning after December 15, 2021, with early adoption permitted.

Adoption of the standard requires using either a modified retrospective

or a full retrospective approach.

470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own

Equity (Subtopic 815-40):

Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written

Call Options (a consensus of the Emerging Issues Task Force).” ASU 2021-04 requires issuers to account for modifications

or exchanges of freestanding equity-classified written call options that remain equity classified after the modification or exchange

based on the economic substance of the modification or exchange.

Under the guidance, an issuer determines the accounting for the

modification or exchange based on whether the transaction was done to issue equity, to issue or modify debt, or for other reasons.

ASU 2021-04 is applied prospectively and is effective for fiscal years beginning after December 15, 2021, and interim periods

within those fiscal years.

The Company adopted this standard in the first quarter of fiscal 2022, which did not have a material

impact on the Company’s financial statements or disclosures.

August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives

and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts

in an Entity’s Own Equity.

Under ASU 2020-06, the embedded conversion features are no longer separated from the host contract

for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815,

Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital.

Consequently, a convertible

debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require

bifurcation and recognition as derivatives.

Similarly, equity-classified convertible preferred stock instruments will be accounted

for as single units of account in equity unless the conversion feature needs to be bifurcated under Topic 815.

The new guidance

also made amendments to the earnings per share guidance in Topic 260, Earnings Per Share, for convertible instruments, the most

significant impact of which is requiring the use of the if-converted method for diluted earnings per share calculation.

ASU 2020-06 made revisions to Subtopic 815-40, which provides guidance on how an entity must determine whether a contract qualifies

for a scope exception from derivative accounting.

ASU 2020-06 is effective for fiscal years beginning after December 15, 2021,

with early adoption permitted.

Adoption of the standard requires using either a modified retrospective or a full retrospective

Effective January 1, 2021, the Company early adopted ASU 2020-06 using the modified retrospective approach.

Adoption of the new standard did not have a material impact on the Company’s financial statements or disclosures.

January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint

Ventures (Topic 323), and Derivatives and Hedging (Topic 815):

Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.

The new guidance clarifies the interaction of accounting for the transition into and out of the equity method and the accounting for

measuring certain purchased options and forward contracts to acquire investments.

ASU 2020-01 is effective for fiscal years beginning

after December 15, 2020, including interim periods within those fiscal years.

Effective January 1, 2021, the Company adopted ASU 2020-01.

The adoption of this guidance did not have an impact on the Company’s financial statements or disclosures.

of the new standard did not have a material impact on the Company’s financial statements or disclosures.

January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and

Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815):

Clarifying the Interactions between Topic 321, Topic 323,

and Topic 815.

The new guidance clarifies the interaction of accounting for the transition into and out of the equity method and

the accounting for measuring certain purchased options and forward contracts to acquire investments.

ASU 2020-01 is effective

for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years.

Effective January 1,

2021, the Company adopted ASU 2020-01.

The adoption of this guidance did not have an impact on the Company’s financial statements

or disclosures.

Guidance Issued but Not Yet Adopted

March 2022, the FASB issued ASU 2022-02, “Financial Instruments—Credit Losses (Topic 326):

Troubled Debt Restructurings and

Vintage Disclosures,” which addresses and amends areas identified by the FASB as part of its post-implementation

review of the accounting standard that introduced the current expected credit losses (“CECL”) model.

Troubled Debt Restructurings

and Vintage Disclosures,” which addresses and amends areas identified by the FASB as part of its post-implementation review

of the accounting standard that introduced the current expected credit losses (“CECL”) model.

The amendments eliminate

the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements

for loan refinancings and restructurings made with borrowers experiencing financial difficulty.

In addition, the amendments require disclosure

of current-period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures.

For entities, such as Expion360 Inc., that have not yet adopted the CECL accounting model in ASU 2016-13, the effective date for

the amendments in ASU 2022-02 is the same as the effective date in ASU 2016-13 (i.e., fiscal years beginning after December 15, 2022,

including interim periods within those fiscal years).

The Company is currently evaluating the impact of this standard on our financial

the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure

requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty.

In addition, the

amendments require disclosure of current-period gross write-offs for financing receivables and net investment in leases by year

of origination in the vintage disclosures.

For entities, such as Expion360 Inc., that have not yet adopted the CECL accounting

model in ASU 2016-13, the effective date for the amendments in ASU 2022-02 is the same as the effective date in ASU 2016-13 (i.e.,

fiscal years beginning after December 15, 2022, including interim periods within those fiscal years).

The Company is currently

evaluating the impact of this standard on our financial statements.

October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities

from Contracts with Customers.” ASU 2021-08 requires contract assets and contract liabilities acquired in a business combination

to be recognized and measured in accordance with Topic 606, Revenue from Contracts with Customers, on the acquisition date as if the

acquirer had entered into the original contract at the same date and on the same terms as the acquiree.

ASU 2021-08 is effective for

fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for public business entities.

Company is currently evaluating the impact of this standard on our financial statements.

Accounting for Contract Assets and Contract

Liabilities from Contracts with Customers.” ASU 2021-08 requires contract assets and contract liabilities acquired in a

business combination to be recognized and measured in accordance with Topic 606, Revenue from Contracts with Customers, on the

acquisition date as if the acquirer had entered into the original contract at the same date and on the same terms as the acquiree.

ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years

for public business entities.

The Company is currently evaluating the impact of this standard on our financial statements.

June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments.

This ASU replaces the incurred loss impairment

methodology in current U.S.

GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range

of reasonable and supportable information for credit loss estimates on certain types of financial instruments, including trade receivables.

This ASU replaces the incurred

loss impairment methodology in current U.S.

GAAP with a methodology that reflects expected credit losses and requires consideration

of a broader range of reasonable and supportable information for credit loss estimates on certain types of financial instruments,

including trade receivables.

In addition, new disclosures are required.

The ASU, as subsequently amended, is effective for the Company for fiscal years beginning

after December 15, 2022.

The ASU, as subsequently amended, is effective for the

Company for fiscal years beginning after December 15, 2022.

The Company is currently evaluating the impact of adopting this guidance.

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and equipment consist of the following:

Schedule of property

and equipment

March 31, 2022

Schedule of property and equipment

June 30, 2022

December 31, 2021

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Warehouse equipment

Tooling and Molds

Manufacturing equipment

Property and equipment, gross

accumulated depreciation

Property and equipment, net

Company recorded $ 29,026 and $ 10,314 of depreciation expense related to its property and equipment for the three months ended March 31,

2022 and 2021, respectively.

expense was $ 38,280 and $ 11,440 for the three months ended June 30, 2022 and 2021, respectively.

Depreciation expense was $ 67,306

and $ 21,754 for the six months ended June 30, 2022 and 2021, respectively.

Accrued Expenses and Other Current Liabilities

expenses and other current liabilities consist of the following:

Schedule of accrued

expenses and other current liabilities

March 31, 2022

Schedule of accrued expenses and other current liabilities

June 30, 2022

December 31, 2021

Accrued salaries and payroll liabilities

Accrued interest

Rebate liability

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Franchise tax

Accrued interest

Accrued expenses and other current liabilities

Liabilities for Sale of Future Revenues

December 8, 2020 and January 26, 2021, Reliant Funding, under two separate ACH Total Receipts Purchase Agreements (“Purchase Agreements”),

purchased a 50% interest in the Company’s future revenues for a total aggregate purchase price of $250,000.

Pursuant to the terms

of the Purchase Agreements, the purchased percentage shall continue to be owned by Reliant Funding, until the Company has paid the full

purchased amount of $349,750.

Repayment of the purchased amount is achieved through 252 daily bank account withdrawals of $1,388 through

December 15, 2021 and $694 thereafter through January 26, 2022.

During the three months ended March 31, 2022 and 2021, the Company repaid

a total of $11,797 and $72,865, respectively, including $295 and $33,471, respectively, of interest at an effective annual interest rate

of approximately 71%.

As of March 31, 2022 the Company had no remaining liability related to the Purchase Agreements.

As of December

31, 2021, the Company had a total remaining liability related to the Purchase Agreements of $11,502 and total remaining payments of $11,797

(including interest).

The Purchase Agreements were secured by substantially all of the assets of the Company.

Line of Credit and Short-Term Revolving Loans

January 2020 to October 2020, the Company received proceeds totaling $900,000 pursuant to four unsecured Working Capital Loan Agreements

(“WC Loans”) with two different outside investors.

Pursuant to the terms of the WC Loans, the Company may borrow, repay and

reborrow loans within the limit established within each WC Loan.

December 8, 2020 and January 26, 2021, Reliant Funding, under two separate ACH Total Receipts Purchase Agreements (“Purchase

Agreements”), purchased a 50% interest in the Company’s future revenues for a total aggregate purchase price of $250,000.

Pursuant to the terms of the Purchase Agreements, the purchased percentage continued to be owned by Reliant Funding, until the

Company paid the full purchased amount of $349,750.

Repayment of the purchased amount was achieved through 252 daily bank account

withdrawals of $1,388 through December 15, 2021 and $694 thereafter through January 26, 2022.

During the three months ended June

30, 2022 and 2021, the Company repaid a total of $11,797 and $88,826, respectively, including $295 and $32,449, respectively,

During the six months ended June 30, 2021, the Company repaid a total of $161,691, including $65,921 of interest.

Interest was recognized at an effective annual interest rate of approximately 71%.

As of June 30, 2022 the Company had no remaining

liability related to the Purchase Agreements.

As of December 31, 2021, the Company had a total remaining liability related to

the Purchase Agreements of $11,502 and total remaining payments of $11,797 (including interest).

The Purchase Agreements were

secured by substantially all of the assets of the Company.

Short-Term Revolving Loans

From January 2020 to October 2020, the Company received funds

totaling $900,000 under four unsecured Working Capital Loan Agreements (“WC Loans”) from two different third-party

As of December 31, 2021, a balance of $550,000 remained outstanding under the WC Loan Agreements and in accordance with

the modified terms, the Company was subject to monthly extended maturity interest of one percent on the ending outstanding monthly

balance which increased one percent for each month beyond the extended maturity date.

The WC Loans were repaid in full in April

terms of each WC Loan are summarized below:

$150,000 limit - dated

January 25, 2020;

monthly interest-only payments at 10% annual interest, principal payment of $70,000 paid during the year ended

December 31, 2020, balance of $80,000 due 12 months from date of issue and paid in full at maturity in 2021.

$150,000 limit - dated

January 28, 2020;

$150,000 limit -

dated January 25, 2020;

monthly interest-only payments at 10% annual interest, principal payment of $70,000 paid during the

year ended December 31, 2020, balance of $80,000 due 12 months from date of issue and paid in full at maturity in 2021.

$150,000 limit -

dated January 28, 2020;

monthly interest-only payments at 12% annual interest;

principal due 12 months from date of issue.

This note was

modified effective January 1, 2021 to extend the maturity date to December 31, 2021 (see below) and was paid in full with a payment

of $50,000 in July 2021 and $100,000 in September 2021.

This note was modified effective January 1, 2021 to extend the maturity date to December 31, 2021 (see below) and was paid

in full with a payment of $50,000 in July 2021 and $100,000 in September 2021.

$200,000 limit –

2 unchanged sentences

principal due 12 months from date of issue.

was modified effective January 1, 2021 to extend the maturity date to December 31, 2021.

The Company paid $50,000 towards the principal

balance in November 2021.

note was modified effective January 1, 2021 to extend the maturity date to December 31, 2021.

The Company paid $50,000 towards

the principal balance in November 2021.

The balance of $150,000 was paid in full in April 2022 (see below).

2 unchanged sentences

monthly interest-only payments at 10% annual interest;

pursuant to the WC Loan, the maturity was to be determined

by mutual agreement and was to be at least 30 days after a maturity date is agreed upon.

The note was modified effective January

1, 2021 to establish a maturity date of December 31, 2021, and was paid in full in April 2022 (see below).

pursuant to the WC Loan, the maturity was to

be determined by mutual agreement and was to be at least 30 days after a maturity date is agreed upon.

The note was modified

effective January 1, 2021 to establish a maturity date of December 31, 2021, and was paid in full in April 2022 (see below).

January 1, 2021, as noted above, three of the working capital loan agreements, all from the same investor, were modified.

The modification

was to extend the maturity date on two of the notes from January 28, 2021 and March 22, 2021 to December 31, 2021, and to establish a

maturity date of December 31, 2021 for the WC Loan that left the maturity date open to negotiations in the original agreement.

of March 31, 2022 and December 31, 2021, a balance of $ 550,000 remains outstanding under the WC Loan Agreements and in accordance with

the modified terms, the Company is subject to monthly extended maturity interest of one percent on the ending outstanding monthly balance

which increases one percent for each month beyond the extended maturity date.

The Company remained in compliance with all interest payments

and paid the WC Loans in full in April 2022 (see Note 21 – Subsequent Events).

fees incurred in connection with obtaining and modifying these agreements were nominal and, given the short-term maturity of one year,

were expensed as incurred.

modification was to extend the maturity date on two of the notes from January 28, 2021 and March 22, 2021 to December 31, 2021,

and to establish a maturity date of December 31, 2021 for the WC Loan that left the maturity date open to negotiations in the

original agreement.

of December 31, 2021, a balance of $ 550,000 remained outstanding under the WC Loan Agreements and in accordance with the modified

terms, the Company was subject to monthly extended maturity interest of one percent on the ending outstanding monthly balance

which increased one percent for each month beyond the extended maturity date.

The Company remained in compliance with all interest

payments and paid the WC Loans in full in April 2022.

fees incurred in connection with obtaining and modifying these agreements were nominal and, given the short-term maturity of one

year, were expensed as incurred.

There was no accounting impact to the financial statements related to the modifications.

Long-Term Debt

debt consists of the following at March 31, 2022 and December 31, 2021:

Schedule of long-term

March 31, 2022

December 31, 2021

Senior secured promissory notes – various investors.

Monthly payments of interest only at 10 % plus deferred interest of 5% accrued monthly to be paid at maturity.

Long-term debt consisted

of the following at June 30, 2022 and December 31, 2021:

Schedule of long-term debt

secured promissory notes – various investors.

Monthly payments of interest only at 10 % plus deferred interest

of 5% accrued monthly to be paid at maturity.

A minimum of one year interest is due at maturity.

Matures the earlier of (a) May 15, 2023 , (b) the closing of a qualified subsequent financing or (c) the closing of a change of control.

The notes are senior to all other debt and are secured by substantially all assets of the Company.

The notes include detachable warrants to purchase 482,268 shares of common stock at an exercise price of $3.32 per share (see Note 21 – Stockholders’ Equity).

Debt issuance costs and discount totaling $1,287,160 at date of issuance are being amortized and recognized as additional interest expense over the term of the notes using the straight-line method because it is not substantially different from the effective interest rate method.

Matures the earlier

of (a) May 15, 2023 , (b) the closing of a qualified subsequent financing or (c) the closing of a change of control.

are senior to all other debt and are secured by substantially all assets of the Company.

The notes included detachable warrants

to purchase 482,268 shares of common stock at an exercise price of $3.32 per share (see Note 12 – Stockholders’

Debt issuance costs and discount totaling $1,287,160 at date of issuance were being amortized and recognized as additional

interest expense over the term of the notes using the straight-line method because it was not substantially different from

the effective interest rate method.

We determined the expected life of the notes to be the contractual term.

Interest expense related to these notes includes amortization of debt issuance costs and discount in the amount of $ 214,527 for the three months ended March 31, 2022.

Paid in full in April 2022 (see Note 21 – Subsequent Events)

Note payable – bank.

Payable in monthly installments of $ 332 , including interest at 5.8 % per annum, due August 2025, secured by equipment and personally guaranteed by a shareholder.

Note payable – credit union.

Payable in monthly installments of $ 508 , including interest at 5.45 % per annum, due July 2026, secured by a vehicle and personally guaranteed by a shareholder.

Note payable – SBA.

Economic Injury Disaster Loan payable in monthly installments of $ 731 , including interest at 3.75 % per annum, due May 2050, and personally guaranteed by a shareholder.

Note payable – individual.

Monthly payments of interest only at 10 % per annum, matured December 31, 2021 resulting in the entire principal balance recorded in current portion of long-term debt on the accompanying Balance Sheets;

pursuant to the note, the past due balance is subject to 1% additional monthly interest which increases one percent for each month beyond maturity date, unsecured.

Interest expense

related to these notes includes amortization of debt issuance costs and discount in the amount of $ 982,317 and $ 1,196,843 ,

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

Paid in full in April 2022

payable – bank.

Payable in monthly installments of $ 332 , including interest at 5.8 % per annum, due August 2025, secured

by equipment and personally guaranteed by a shareholder.

payable – credit union.

Payable in monthly installments of $ 508 , including interest at 5.45 % per annum, due July 2026,

secured by a vehicle and personally guaranteed by a shareholder.

payable – SBA.

Economic Injury Disaster Loan payable in monthly installments of $ 731 , including interest at 3.75 % per

annum, due May 2050, and personally guaranteed by a shareholder.

payable – individual.

Monthly payments of interest only at 10 % per annum, matured December 31, 2021 resulting in the

entire principal balance recorded in current portion of long-term debt on the accompanying Balance Sheets;

pursuant to the

note, the past due balance is subject to 1% additional monthly interest which increases one percent for each month beyond

maturity date, unsecured.

The Company remained in compliance with the extended maturity interest payments;

paid in full in April 2022 (see Note 21 – Subsequent Events)

Note payable – finance company.

Payable in monthly installments of $ 994 , including interest at 8.5 % per annum, due July 2026, secured by a vehicle and personally guaranteed by a shareholder.

Note payable – finance company.

Payable in monthly installments of $ 2,204 , including interest at 11.21 % per annum, due August 2026, secured by a vehicle and personally guaranteed by a shareholder.

Note payable – finance company.

Payable in monthly installments of $ 834 , including interest at 7.29 % per annum, due October 2027, secured by a vehicle and personally guaranteed by a member/shareholder.

Note payable – finance company.

Payable in monthly installments of $ 834 , including interest at 7.29 % per annum, due October 2027, secured by a vehicle and personally guaranteed by a shareholder.

Less unamortized debt issuance costs and discount

( 1,196,843 )

paid in full in

payable – finance company.

Payable in monthly installments of $ 994 , including interest at 8.5 % per annum, due July 2026,

secured by a vehicle and personally guaranteed by a shareholder.

payable – finance company.

Payable in monthly installments of $ 2,204 , including interest at 11.21 % per annum,

due August 2026, secured by a vehicle and personally guaranteed by a shareholder.

payable – The Company has six and two notes payable to GM Financial for vehicles at June 30, 2022 and December 31, 2021.

April 2022, the Company secured a commercial line up to $300,000 to be used to finance vehicle purchases.

The agreement

expires in April 2023 but prevailing GM Financial existing term notes will remain.

The notes are payable in aggregate monthly

installments of $ 4,676 , including interest at rates ranging from 5.89% to 7.29 % per annum, mature at various dates from October

2027 to May of 2028, and are secured by the related vehicles.

Two of the notes are personally guaranteed by John Yozamp, CEO.

Less unamortized

debt issuance costs and discount

Less current portion

Less note payable in default (paid April 2022)

Long-term debt, net of unamortized debt discount and current portion

Less note payable

in default (paid April 2022)

Long-term debt,

net of unamortized debt discount and current portion

maturities of long-term debt are as follows:

Schedule of long term debt payment

Future maturities of long-term debt are as follows:

Years ending March 31,

Years ending June 30,

Promissory Notes

of March 31, 2022 and December 31, 2021, the Company had an outstanding principal balance of $825,000 due to shareholders (formerly LLC

members) under unsecured Promissory Notes Agreements (“Notes”).

The Notes require monthly interest-only payments at 10% per

The Notes mature at various dates from August 2023 to December 2024 as follows:

As of June 30, 2022 and December 31, 2021, the Company had an outstanding principal balance of $825,000

due to shareholders under unsecured Promissory Notes

Agreements (“Notes”).

The Notes require monthly interest-only payments at 10% per annum.

The Notes mature at various

dates from August 2023 to December 2024 as follows:

August 2023 - $500,000;

1 unchanged sentence

and December 2024 - $200,000.

Interest paid to the shareholders under the Notes totaled $20,627 and $26,876 during the three months ended

March 31, 2022 and March 31, 2021, respectively.

There was no accrued interest as of March 31, 2022 and December 31, 2021 related to

Interest paid to the shareholders under the Notes totaled $13,751 and $25,961 during the three months ended June 30, 2022 and June

30, 2021, respectively.

Interest paid to the shareholders totaled $34,378 and $52,837 during the six months ended June 30, 2022

and 2021, respectively.

Accrued interest due to the shareholders totaled $6,876 as of June 30, 2022.

There was no accrued interest

as of December 31, 2021 or June 30, 2022 related to these Notes.

May 15, 2021, the Company modified one shareholder Note in the amount of $250,000 to be a convertible note for the same amount.

The shareholder

also invested additional proceeds of $24,000 for a total convertible note of $274,000.

The convertible note included detachable warrants

to purchase 548,000 shares of the Company’s common stock.

The convertible note bore interest at a rate of 10% per annum, had an

initial maturity of two years from date of issue, and was convertible at $.50 per share.

The modification resulted in a new effective

annual interest rate of 9.15%.

There was no accounting impact to the financial statements related to these modifications.

29, 2021, concurrent with the anticipated conversion from an LLC to a C corporation, the convertible note and warrants were modified

under a Convertible Debenture Exercise and Waiver and Release Agreement and the shareholder agreed to convert the note and accrued interest

into 236,498 shares of common stock resulting in a conversion price of $1.21 per share (see Note 10 – 2021 Convertible Notes/Extinguishment

Loss on Debt Settlement).

The shareholder also invested additional proceeds of $24,000 for a total convertible note of $274,000.

The convertible note included

detachable warrants to purchase 548,000 shares of the Company’s common stock.

The convertible note bore interest at a rate

of 10% per annum, had an initial maturity of two years from date of issue, and was convertible at $.50 per share.

The modification

resulted in a new effective annual interest rate of 9.15%.

There was no accounting impact to the financial statements related

to these modifications.

On October 29, 2021, concurrent with the anticipated conversion from an LLC to a C corporation, the convertible

note and warrants were modified under a Convertible Debenture Exercise and Waiver and Release Agreement and the shareholder agreed

to convert the note and accrued interest into 236,498 shares of common stock resulting in a conversion price of $1.21 per share

(see Note 9 –Convertible Notes).

Convertible Notes

Convertible Notes – Converted January 1, 2021

August and October of 2020, the Company received proceeds totaling $270,000 from the issuance of four Convertible Notes (“Notes”).

1 unchanged sentence

(1) Automatic conversion of the principal

balance and accrued interest into new financing securities issued in a new financing round of at least $1 million, not including the

Notes — the conversion price to equal 85% of the price per unit at which the investor in the new financing purchased their equity

and (2) Optional conversion in founder securities if (a) the Company gives the investor notice of its intent to prepay the

Note or (b) the Company has not consummated a new financing prior to maturity.

The conversion price was equal to $17 million divided

by the number of founder securities outstanding at the date of the Notes (100,000 LLC units), or $170 per unit.

The Notes were to mature

three years from date of issue.

The outstanding balance at December 31, 2020 was $273,157, including accrued interest of $3,157, which

was recognized as interest expense during 2020.

the first conversion option, the conversion was contingent upon a future event, and therefore the difference between the conversion price

and the fair value of the equity units on the commitment date (transaction date) was not recognized.

Under the second option, the conversion

price of $170 exceeded the fair value of the Company’s units of $85 at date of issue and therefore no beneficial conversion feature

was recorded.

In late 2020, all convertible debt holders were offered the

opportunity for early conversion of their convertible notes into Class B LLC member units effective January 1, 2021.

Three of the four

convertible note holders converted notes with a principal balance of $170,000 and accrued interest of $3,157 into 2,338 Class B member

units (the equivalent of 59,515 shares of common stock) at per unit conversion prices ranging from $67 - $76 (per share prices ranging

from $2.66 - $3.00).

In accordance with FASB ASC 470-20, Debt with Conversion and Other Options , the fair value of the additional

units issued under the induced conversion over the value of the number of units issuable under the original terms of the convertible note

agreements is recognized as debt conversion expense.

Accordingly, upon early conversion on January 1, 2021, the Company recognized $112,133

of debt conversion expense with a corresponding entry to equity of $285,290 consisting of the $173,157 of principal and accrued interest

converted and the excess fair value of $112,133.

balance and accrued interest into new financing securities issued in a new financing round of at least $1 million, not including

the Notes — the conversion price to equal 85% of the price per unit at which the investor in the new financing purchased

their equity securities;

and (2) Optional conversion in founder securities if (a) the Company gives the investor notice of its

intent to prepay the Note or (b) the Company has not consummated a new financing prior to maturity.

The conversion price was equal

to $17 million divided by the number of founder securities outstanding at the date of the Notes (100,000 LLC units), or $170 per

The Notes were to mature three years from date of issue.

The outstanding balance at December 31, 2020 was $273,157, including

accrued interest of $3,157, which was recognized as interest expense during 2020.

the first conversion option, the conversion was contingent upon a future event, and therefore the difference between the conversion

price and the fair value of the equity units on the commitment date (transaction date) was not recognized.

Under the second option,

the conversion price of $170 exceeded the fair value of the Company’s units of $85 at date of issue and therefore no beneficial

conversion feature was recorded.

late 2020, all convertible debt holders were offered the opportunity for early conversion of their convertible notes into Class

B LLC member units effective January 1, 2021.

Three of the four convertible note holders converted notes with a principal balance

of $170,000 and accrued interest of $3,157 into 2,338 Class B member units (the equivalent of 59,515 shares of common stock) at

per unit conversion prices ranging from $67 - $76 (per share prices ranging from $2.66 - $3.00).

In accordance with FASB ASC 470-20,

Debt with Conversion and Other Options , the fair value of the additional units issued under the induced conversion over

the value of the number of units issuable under the original terms of the convertible note agreements is recognized as debt conversion

Accordingly, upon early conversion on January 1, 2021, the Company recognized $112,133 of debt conversion expense with

a corresponding entry to equity of $285,290 consisting of the $173,157 of principal and accrued interest converted and the excess

fair value of $112,133.

fourth convertible note holder opted out of the early conversion and instead, the original note with a principal balance of $100,000

1 unchanged sentence

The modification included the elimination

of the conversion feature, an increase in the interest rate from the original 6% per annum to 10% per annum, to be paid monthly instead

of accrued, and an earlier maturity date of December 31, 2021.

The modification resulted in a new effective annual interest rate of 9.58%,

and a revised one-year maturity on December 31, 2021 (see Note 6 – Line of Credit and Short-Term Revolving Loans).

accounting impact to the financial statements related to this modification.

The note was paid in full in April 2022 (see Note 21 –

Subsequent Events)

of the conversion feature, an increase in the interest rate from the original 6% per annum to 10% per annum, to be paid monthly

instead of accrued, and an earlier maturity date of December 31, 2021.

The modification resulted in a new effective annual interest

rate of 9.58%, and a revised one-year maturity on December 31, 2021 (see Note 6 –Short-Term Revolving Loans).

no accounting impact to the financial statements related to this modification.

The note was paid in full in April 2022.

Convertible Notes/Extinguishment Loss on Debt Settlement

May to September 2021, the Company received gross proceeds of $2,929,000 from the issuance of unsecured convertible notes (the “Notes”),

of which $44,000 was received from existing shareholders.

Additionally, a shareholder converted a promissory note to a convertible note

identical in terms discussed below (see Note 8 – Shareholder Promissory Notes).

the option of the Note holders and after the completion of a merger with a Special Purpose Acquisition Company (“SPAC”) or

an Initial Public Offering (“IPO”), the holder could convert all or a part of the outstanding principal and accrued interest

into shares of common stock of the merged or public company.

The Notes included detachable warrants (“Warrants”) to purchase

3,862,000 shares of the merged or public company.

The Notes bore interest at a rate of 10% per annum, had an initial maturity of two

years from date of issue, and were convertible at per-share prices ranging from $0.50 to $2.50.

Effective January 1, 2021, the Company

early adopted ASU 2020-06, and accordingly, no beneficial conversion features were recognized.

The Notes were accounted for in accordance

with ASC 470-20, Debt with Conversion and Other Options (“ASC 470-20”) and ASC 815-40, Contracts in Entity’s

Own Equity (“ASC 815-40”) .

Under ASC 815-40, to qualify for equity classification (or nonbifurcation, if embedded)

the instrument (or embedded feature) must be both (1) indexed to the issuer’s stock and (2) meet the requirements of the equity

classification guidance.

Based upon the Company’s analysis, it was determined the Notes do contain embedded features indexed to

its own stock, but do not meet the requirements for bifurcation and recognition as derivatives, and therefore do not need to be separately

Accordingly, the proceeds received from the issuance of the Notes were recorded as a single liability measured at amortized

cost on the consolidated Balance Sheet.

The Company incurred $148,000 of debt issuance costs relating to the issuance of the Notes, which

were recorded as a reduction to the Notes on the Balance Sheet.

The debt issuance costs were being amortized and recognized as additional

interest expense over the term of the Notes using the straight-line method because it is not substantially different from the effective

interest rate.

Amortization of debt discount totaled $27,271 through the effective date of the conversion from LLC to a C corporation

(see Note 15 – Conversion to a C Corporation).

May to September 2021, the Company received gross proceeds of $2,929,000 from the issuance of unsecured convertible notes (the

“Notes”), of which $44,000 was received from existing shareholders.

Of the total proceeds, $1,359,000 was received

during the three months ended June 30, 2021.

Additionally, in May 2021, a shareholder converted a promissory note to a convertible

note identical in terms discussed below (see Note 8 – Shareholder Promissory Notes).

the option of the Note holders and after the completion of a merger with a Special Purpose Acquisition Company (“SPAC”)

or an Initial Public Offering (“IPO”), the holder could convert all or a part of the outstanding principal and accrued

interest into shares of common stock of the merged or public company.

The Notes included detachable warrants (“Warrants”)

to purchase 3,862,000 shares of the merged or public company.

The Notes bore interest at a rate of 10% per annum, had an initial

maturity of two years from date of issue, and were convertible at per-share prices ranging from $0.50 to $2.50.

Effective January

1, 2021, the Company early adopted ASU 2020-06, and accordingly, no beneficial conversion features were recognized.

were accounted for in accordance with ASC 470-20, Debt with Conversion and Other Options (“ASC 470-20”) and

ASC 815-40, Contracts in Entity’s Own Equity (“ASC 815-40”) .

Under ASC 815-40, to qualify for

equity classification (or nonbifurcation, if embedded) the instrument (or embedded feature) must be both (1) indexed to the issuer’s

stock and (2) meet the requirements of the equity classification guidance.

Based upon the Company’s analysis, it was determined

the Notes do contain embedded features indexed to its own stock, but do not meet the requirements for bifurcation and recognition

as derivatives, and therefore do not need to be separately recognized.

Accordingly, the proceeds received from the issuance of

the Notes were recorded as a single liability measured at amortized cost on the consolidated Balance Sheet.

The Company incurred

$148,000 of debt issuance costs relating to the issuance of the Notes, which were recorded as a reduction to the Notes on the

Balance Sheet.

Of this amount, $92,000 was incurred during the three months ended June 30, 2021.

The debt issuance costs were

being amortized and recognized as additional interest expense over the term of the Notes using the straight-line method because

it is not substantially different from the effective interest rate.

Amortization of debt discount totaled $4,721 during the three

and six months ended June 30, 2021 and $27,271 through the effective date of the conversion from LLC to a C corporation (see Note

11 – Conversion to a C Corporation).

Since the Warrants were not exercisable until a merger with a SPAC or an IPO, there

was no impact on the financial statements at date of grant.

October 29, 2021, in anticipation of conversion from LLC to a C corporation, the Notes and Warrants were modified under Convertible Debenture

Exercise and Waiver and Release Agreements with the individual creditors.

The Note holders agreed to settle the debt for an aggregate

of 1,527,647 shares of common stock with a fair value of $5,545,359 ($3.63 per share).

Since this transaction involved contemporaneous

issuance of shares of common stock by the Company to the Note holders, we evaluated the transaction for modification and extinguishment

accounting and determined that the debt was extinguished as a result of the issuance of shares that do not represent the exercise of

a conversion right contained in the original terms of the Notes at issuance.

October 29, 2021, in anticipation of conversion from LLC to a C corporation, the Notes and Warrants were modified under Convertible

Debenture Exercise and Waiver and Release Agreements with the individual creditors.

The Note holders agreed to settle the debt

for an aggregate of 1,527,647 shares of common stock with a fair value of $5,545,359 ($3.63 per share).

Since this transaction

involved contemporaneous issuance of shares of common stock by the Company to the Note holders, we evaluated the transaction for

modification and extinguishment accounting and determined that the debt was extinguished as a result of the issuance of shares

that do not represent the exercise of a conversion right contained in the original terms of the Notes at issuance.

settlement of the debt resulted in a recognized loss of $2,262,658 recorded as extinguishment loss on debt settlement in November

2021, calculated as the excess of the fair value of shares issued over the carrying amount of the debt.

In addition, the fair value of warrants

of $407,700 issued in exchange for services related to the extinguished debt (see Note 20 – Stockholders’ Equity) and the

unamortized portion of debt discount remaining at date of settlement of $120,729 were also recorded as extinguishment loss on debt settlement

for an aggregate loss of $2,791,087.

Trust Agreement for Designated Beneficiaries

March 2020, the LLC members established a Trust for the granting of membership interests to three individuals.

At the time of grant,

the existing LLC members (“Settlors”) transferred 8% of the ownership and membership interests (8,000 membership units, equivalent

to 192,234 shares of common stock) of the Company to a Trust for the purpose of holding the vested interests for the three beneficiaries.

The Settlors continued to hold title to the membership interests conveyed to the Trust until the Company operating agreement was restated,

and the Settlors continued to receive their pro rata distribution of profits and losses from the interests until that occurred.

date of issuance, the fair value of the membership interests issued was determined to be nominal and no expense was recorded in connection

with the grants.

The operating agreement was amended and restated effective January 1, 2021 and the units/shares were allocated from

the Trust to the grantees.

In addition, the fair

value of warrants of $407,700 issued in exchange for services related to the extinguished debt (see Note 12 – Stockholders’

Equity) and the unamortized portion of debt discount remaining at date of settlement of $120,729 were also recorded as extinguishment

loss on debt settlement for an aggregate loss of $2,791,087.

Commitments and Contingencies

Company leases its warehouses and office space under long-term lease arrangements.

None of its leases include characteristics specified

in ASC 842, Leases , that require classification as financing leases, and accordingly, these leases are accounted for as operating

The Company does not recognize a right-of-use asset and lease liability for short term leases, which have terms of 12 months

For longer-term lease arrangements that are recognized on the Company’s Balance Sheet, the right-of-use asset and lease

liability are initially measured at the commencement date based upon the present values of the lease payments due under the leases.

implicit interest rates of the Company’s lease arrangements are generally not readily determinable and as such, the Company applies

an incremental borrowing rate, which is established based upon the information available at the lease commencement date, to determine

the present value of lease payments due under the arrangement.

Under ASC 842, the incremental borrowing rate (IBR) for leases must be

(1) a rate of interest over a similar term, and (2) for an amount that is equal to the lease payments.

The Company uses both the Federal

Reserve Economic Data (FRED) U.S.

None of its leases include characteristics

specified in ASC 842, Leases , that require classification as financing leases, and accordingly, these leases are accounted

for as operating leases.

The Company does not recognize a right-of-use asset and lease liability for short term leases, which

have terms of 12 months or less.

For longer-term lease arrangements that are recognized on the Company’s Balance Sheet,

the right-of-use asset and lease liability are initially measured at the commencement date based upon the present values of the

lease payments due under the leases.

implicit interest rates of the Company’s lease arrangements are generally not readily determinable and as such, the Company

applies an incremental borrowing rate, which is established based upon the information available at the lease commencement date,

to determine the present value of lease payments due under the arrangement.

Under ASC 842, the incremental borrowing rate (IBR)

for leases must be (1) a rate of interest over a similar term, and (2) for an amount that is equal to the lease payments.

Company uses both the Federal Reserve Economic Data (FRED) U.S.

corporate debt effective yield and the U.S.

Treasury rates adjusted for credit spread as the primary

data points for purposes of determining the IBR.

the three months ended March 31, 2022, the Company entered into two new long-term, non-cancelable operating lease agreements for office

and warehouse space resulting in the Company recognizing an additional lease liability totaling of $238,947 and $2,109,562, respectively,

representing the present value of the lease payments discounted using an effective interest rate of 8.07% and 8.86%, respectively, and

corresponding right-of-use assets of $238,947 and $2,109,562, respectively.

The leases expire in December 2026 and December 2028, respectively.

Treasury rates adjusted

for credit spread as the primary data points for purposes of determining the IBR.

the first quarter of 2022, the Company entered into two new long-term, non-cancelable operating lease agreements for office and

warehouse space resulting in the Company recognizing an additional lease liability totaling of $2,348,509, representing the present

value of the lease payments discounted using an effective interest rate of 8.07% and 8.86, and corresponding right-of-use assets

of $2,348,509.

The leases expire in December 2026 and December 2028.

The second lease contains one three-year option to renew.

The lease is guaranteed by the majority shareholder.

the three months ended March 31, 2021, the Company entered into a long-term, non-cancelable operating lease agreement for office and

warehouse space resulting in the Company recognizing an additional lease liability totaling of $1,268,089, representing the present value

The lease is guaranteed by a shareholder.

the first quarter of 2021, the Company entered into a long-term, non-cancelable operating lease agreement for office and warehouse

space resulting in the Company recognizing an additional lease liability totaling of $1,268,089, representing the present value

of the lease payments discounted using an effective interest rate of 7.47% and a corresponding right-of-use asset of $1,268,089.

lease expires in January 2028 and contains one three-year option to renew.

The lease is guaranteed by the majority shareholder.

The lease expires in January 2028 and contains one three-year option to renew.

The lease is guaranteed by a shareholder.

Company has two other leases that expire in January 2023 and February 2025.

The leases generally provide for annual increases based on

a fixed amount and generally require the Company to pay real estate taxes, insurance, and repairs.

Both leases are guaranteed by the

majority shareholder.

The leases generally provide for annual increases

based on a fixed amount and generally require the Company to pay real estate taxes, insurance, and repairs.

Both leases are guaranteed

by a shareholder.

The following is a

summary of total lease costs during the three months and six months ended June 30, 2022 and 2021:

Schedule of lease cost

The following is a summary of total lease costs during the three months ended:

March 31, 2022

March 31, 2021

Three Months Ended June 30,

Six Months Ended June 30,

Operating lease cost

2 unchanged sentences

Sublease income

weighted-average remaining lease term is 6.16 years and 5.64 years as of March 31, 2022 and December 31, 2021, respectively.

average discount rate is 8.52% and 8.02%, as of March 31, 2022 and December 31, 2021, respectively.

Operating cash flows from the operating

leases totaled $93,755 and $31,856 for the three months ended March 31, 2022 and 2021, respectively.

total lease liability as of March 31, 2022 and December 31, 2021 was $ 3,566,402 and $ 1,311,649 , respectively.

following is a maturity analysis of the annual undiscounted cash flows of the operating lease liabilities as of March 31, 2022, for years

ending March 31:

The weighted-average remaining lease term was

5.93 years and 5.64 years as of June 30, 2022 and December 31, 2021, respectively.

The weighted average discount rate was 8.51%

and 8.02%, as of June 30, 2022 and December 31, 2021, respectively.

Operating cash flows from the operating leases totaled $112,914

and $47,522 for the three months ended June 30, 2022 and 2021, respectively and $206,670 and $79,378 for the six months ended June

30, 2022 and 2021, respectively.

The total lease liability

as of June 30, 2022 and December 31, 2021 was $3,453,487 and $1,311,649, respectively.

The following is a

maturity analysis of the annual undiscounted cash flows of the operating lease liabilities as of June 30, 2022, for years ending

Schedule of future minimum lease payment

1 unchanged sentence

Less imputed interest

( 1,060,407 )

Current lease liability

Noncurrent lease liability

Company subleases office and warehouse space under three of its existing operating leases with similar terms as the Company’s lease

The Company subleases

office and warehouse space under three of its existing operating leases with similar terms as the Company’s lease agreements.

Because the Company is not relieved of its primary obligations under the original lease, the Company accounts for the subleases

Sublease rental income is recorded based on the contractual rental payments which are not substantially different from recognition

on a straight-line basis over the lease term and totaled $48,598 and $3,477 during the three months ended March 31, 2022 and 2021, respectively.

As of March 31, 2022 and December 31, 2021, deferred income and a sublease deposit totaled $14,038 and $13,690, respectively, and is

included in accrued expenses and other current liabilities on the accompanying Balance Sheets.

following are the total future minimum sublease payments as of March 31, 2022:

ending March 31,

Sublease rental income is recorded based on the contractual rental payments which are not substantially different

from recognition on a straight-line basis over the lease term and totaled $24,743 and $20,840 during the three months ended June

30, 2022 and 2021, respectively, and $73,342 and $24,317 during the six months ended June 30, 2022 and 2021, respectively.

June 30, 2022 and December 31, 2021, deferred income and a sublease deposit totaled $14,168 and $13,690, respectively, and is included

in accrued expenses and other current liabilities on the accompanying Balance Sheets.

The following are the

total future minimum sublease payments as of June 30, 2022:

Schedule of future minimum sublease payments

Years ending June 30,

Total future minimum lease payments

Company may be involved from time to time in litigation or claims arising in the ordinary course of its business.

While the ultimate

liability, if any, arising from these claims cannot be determined with certainty, the Company believes that the resolution of any such

matters will not likely have a material adverse effect on the Company’s financial statements.

2021, the Company adopted a 401(k) Plan (“Plan”) for the benefit of its employees.

Employees may contribute to the Plan within

defined limits as defined by the Internal Revenue Service.

Substantially all employees are eligible to participate.

The Company has the

option to make profit sharing contributions at its discretion.

No profit-sharing contributions have been made.

Issuance of Shares/Membership Units

January 1, 2021, the Company issued 2,338 Class B member units (equivalent to 59,515 shares of common stock) upon the conversion of convertible

notes and accrued interest totaling $173,157 (see Note 9 – 2020 Convertible Notes).

January 1, 2021, the Company issued 262 Class B membership units (equivalent to 6,667 shares of common stock) in exchange for building

signage valued at $20,000.

March 2021, the Company sold 3,185 Class B membership units (equivalent to 81,106 shares of common stock) to three new members for gross

proceeds of $270,000.

The Company may be involved

from time to time in litigation or claims arising in the ordinary course of its business.

While the ultimate liability, if any,

arising from these claims cannot be determined with certainty, the Company believes that the resolution of any such matters will

not likely have a material adverse effect on the Company’s financial statements.

Conversion to a C Corporation

November 1, 2021, the Company converted from an LLC to a C corporation under the State of Nevada statutes in anticipation of an upcoming

Effective November

1, 2021, the Company converted from an LLC to a C corporation under the State of Nevada statutes in anticipation of an upcoming

initial public offering, and changed its name to Expion360 Inc.

The membership units of the existing LLC members and all existing convertible

note holders (see Note 10 - 2021 Convertible Notes/Extinguishment Loss on Debt Settlement) converted into an aggregate of 4,181,111 shares

of common stock.

Additionally, investors purchased 88,889 shares of common stock for total proceeds of $316,400 and 30,000 shares of

common stock were issued in exchange for legal services.

The 30,000 shares issued in exchange for legal services were valued at $108,900

at date of grant based on the per share price of $3.63 paid for shares issued at the time of the conversion to a C corporation.

The membership units of the existing LLC members and all existing

convertible note holders (see Note 9 - Convertible Notes) converted into an aggregate of 4,181,111 shares of common stock.

Additionally,

investors purchased 88,889 shares of common stock for total proceeds of $316,400 and 30,000 shares of common stock were issued

in exchange for legal services.

The 30,000 shares issued in exchange for legal services were valued at $108,900 at date of grant

based on the per share price of $3.63 paid for shares issued at the time of the conversion to a C corporation.

The Company’s

issued and outstanding shares of common stock totaled 4,300,000 upon conversion to a C corporation.

Interest Expense

the three months ended March 31, 2022, interest expense of $ 362,114 , as shown on the accompanying Statements of Operations, includes

interest expense related to amortization of debt discount totaling $ 214,527 (See Note 7 – Long-Term Debt).

anticipation of an initial public offering, the Company converted from a limited liability company to a C corporation, a taxable entity,

effective November 1, 2021.

October 31, 2021, the Company had been treated as an S corporation for federal and state income tax purposes, such that the

Company’s taxable income is reported by members in their respective tax returns.

The Company was only subject to state

franchise taxes and fees.

For the three months ended March 31, 2022 and 2021, the Company incurred a provision for state franchise

and 0 zero, respectively.

converting to a C corporation, the Company has incurred losses and consequently has recorded no provision for state or federal income

taxes for the three months ended March 31, 2022.

The Company maintains a full valuation allowance on all deferred tax assets, as it has

concluded that it is more likely than not that these assets will not be realized.

As of March 31, 2022 and December 31, 2021, there were

no material unrecognized tax benefits included in the accompanying balance sheets that would, if recognized, affect the effective tax

Related Party Transactions

the three months ended March 31, 2022 and 2021, related party transactions consisted of Shareholder Promissory Notes, one of which was

modified in May 2021 to be a convertible note with warrants.

During the year ended December 31, 2021, the Company also received proceeds

totaling $44,000 for the issuance of convertible notes from existing LLC members/shareholders.

The notes included warrants to purchase

common stock.

The notes and warrants were subsequently modified (see Note 8 – Shareholder Promissory Notes and Note 10 –

2021 Convertible Notes/Extinguishment Loss on Debt Settlement).

Stock Option Plans

Company has adopted the 2021 Employee Stock Option Plan and the 2021 Incentive Award Plan, which will become effective upon an initial

public offering.

Stockholders’ Equity

Company is authorized to issue an aggregate of 220,000,000 shares of capital stock, par value $0.001 per share, consisting of 200,000,000

shares of common stock and 20,000,000 shares of preferred stock.

As of March 31, 2022 and December 31, 2021, 4,300,000 shares of common

stock were issued and outstanding and as of March 31, 2021, 2,501,927 shares of common stock, were issued and outstanding.

of preferred stock have been issued.

holder of common stock is entitled to one vote for each share of common stock.

The holders of common stock have no conversion, redemption

or preemptive rights and shall be entitled to receive dividends when, as, and if declared by the board of directors.

Upon dissolution,

liquidation, or winding up of the Company, after payment or provision for payment of debts and other liabilities of the Company, subject

to the rights, if any, of the holders of any class or series stock having a preference over the right to participate with common stock

with respect to the distribution of assets of the Company upon such dissolution, liquidation, or winding up of the Company, the holders

of common stock shall be entitled to receive the remaining assets of the Company available for distribution to its stockholders ratably

in proportion to the number of shares of common stock held.

no shares of preferred stock have been issued, no rights and privileges of preferred stockholders have been defined.

In November 2021, the Company received gross proceeds of $1,600,000

($1,385,000, net of issuance costs of $215,000), for the issuance of senior secured promissory notes (see Note 7 – Long-Term Debt).

The notes include detachable warrants to purchase 482,268 shares of common stock at an exercise price of $3.32 per share.

are exercisable for a period of 10 years from date of grant.

Of the total gross proceeds received of $1,600,000, $809,806 was allocated

to the warrants and $790,194 to the notes, based on their relative fair values.

The relative fair value of the warrants of $809,806 at

the time of issuance was recorded as additional paid-in capital with a corresponding debt discount reducing the carrying value of the

Additionally, the Company issued 77,163 warrants to purchase shares of common stock to underwriters in connection with obtaining

The warrants are exercisable at $3.32 per share for a period of 10 years from date of grant.

The fair value of the warrants

of $262,354 was recorded as additional paid-in capital and reduced the carrying value of the notes.

The total discount on the notes of

$1,287,160, including cash paid for fees of $215,000, is being amortized to interest expense over the term of the notes using the straight-line

method because it is not substantially different from the effective interest rate method.

As of March 31, 2022 and December 31, 2021,

$214,527 and $90,317, respectively, was amortized to expense and the unamortized discount on the note as of March 31, 2022 and December

31, 2021 was $982,317 and $1,196,843, respectively.

The fair value of the warrants was determined at date of issuance using the Black-Scholes

option-pricing model and the following assumptions:

per share price of common stock on date of grant of $3.63, expected dividend yield

of 0%, expected volatility of 110.8%, risk-free interest rate of 1.63% and expected life based on contractual life of 10 years.

Company also issued warrants to purchase 151,000 shares of common stock in in exchange for prior services related to the extinguished

2021 convertible notes.

The warrants are exercisable at $2.90 per share for a period of 3 years from date of grant.

The fair value of

the warrants of $407,700 was recorded as additional paid-in-capital and expensed to extinguishment loss on debt settlement (see Note

10 - 2021 Convertible Notes/Extinguishment Loss on Debt Settlement).

November 2021, the Company issued 30,000 options for the purchase of common stock in exchange for legal services.

The options issued

were not issued under the Company’s stock option plans (see Note 19 – Stock Option Plans).

The options are exercisable at

$3.32 per share for a period of 3 years from date of grant.

The fair value of the options of $79,200 was recorded as additional paid-in

capital with a corresponding charge to legal expense.

fair value of the warrants and options was determined at date of issuance using the Black-Scholes option-pricing model and the following

The Company is authorized

to issue an aggregate of 220,000,000 shares of capital stock, par value $0.001 per share, consisting of 200,000,000 shares of common

stock and 20,000,000 shares of preferred stock.

As of June 30, 2022 and December 31, 2021, 6,802,464 and 4,300,000 shares, respectively,

of common stock were issued and outstanding.

No shares of preferred stock have been issued.

A holder of common

stock is entitled to one vote for each share of common stock.

The holders of common stock have no conversion, redemption or preemptive

rights and shall be entitled to receive dividends when, as, and if declared by the board of directors.

Upon dissolution, liquidation,

or winding up of the Company, after payment or provision for payment of debts and other liabilities of the Company, subject to

the rights, if any, of the holders of any class or series stock having a preference over the right to participate with common stock

with respect to the distribution of assets of the Company upon such dissolution, liquidation, or winding up of the Company, the

holders of common stock shall be entitled to receive the remaining assets of the Company available for distribution to its stockholders

ratably in proportion to the number of shares of common stock held.

Since no shares of

preferred stock have been issued, no rights and privileges of preferred stockholders have been defined.

Initial Public Offering

On April 1, 2022, the Company completed an initial public offering (“IPO”).

total of 2,466,750 shares of common stock were sold at $7.00 per share in the IPO, for total gross proceeds of $17,267,250.

Company incurred IPO costs of $2,494,763 resulting in net proceeds of $14,772,487.

Additionally, during the three months ended

June 30, 2022, the Company issued 35,714 shares of common stock at $7.00 per share to an outside third party in exchange for IPO

The fair value of the shares of $249,998 were recorded as an increase to common stock of $36 (35,714 shares at $.001

par value) and additional paid in capital of $249,962 and a corresponding reduction to additional paid in capital of $249,998,

resulting in a net decrease in additional paid in capital of $36.

Issuance of Shares

Prior to conversion from an LLC to a C corporation, the

following membership units were issued and included in the membership units that were converted into 4,181,111 shares of common

stock upon the Company’s conversion to a C corporation (see Note 11 – Conversion to a C corporation).

● On January 1, 2021, 8,000 membership units (equivalent to 192,234 shares) that were held in

Trust were granted to three individuals.

● On January 1, 2021, the Company issued 2,338 Class B member units (equivalent to 59,515 shares

of common stock) upon the conversion of convertible notes and accrued interest totaling $173,157 (see Note 9 - Convertible Notes).

● On January 1, 2021, the Company issued 262 Class B membership units (equivalent to 6,667 shares

of common stock) in exchange for building signage valued at $20,000.

● In March 2021, the Company sold 3,185 Class B membership units (equivalent to 81,106 shares

of common stock) to two new members for gross proceeds of $270,000.

● In April 2021, the company sold 2,972 Class B membership units (equivalent to 75,662 shares

of common stock) to one new member for gross proceeds of $252,000.

Warrants/Options

On April 1, 2022, the

Company issued warrants to IPO underwriters to purchase 148,005 shares of common stock at an exercise price of $9.10 per share.

The warrants are exercisable 180 days after grant (September 27, 2022) and expire 5 years from date of grant (March 31, 2027).

The fair value of the warrants was determined at date of issuance using the Black-Scholes option-pricing model and the following

per share price of common stock on date of grant of $7, expected dividend yield of 0%, expected volatility of 110.03%,

risk-free interest rate of 2.55% and expected life based on contractual life of 5 years.

of March 31, 2022 and December 31, 2021, a total of 710,431 warrants and 30,000 options were outstanding, all of which are exercisable

at any time at the option of the holder.

Of the warrants, a total of 559,431 warrants are exercisable at $3.32 per share and have a remaining

life of approximately 9.92 years and 151,000 are exercisable at $2.90 per share and have a remaining life of approximately 2.83 years.

The 30,000 options have an exercise price of $3.32 per share and a remaining life of approximately 2.83 years.

There were no options

or warrants issued as of March 31, 2021.

Stock Reserved for Future Issuance

of March 31, 2022 and December 31, 2021, approximately 740,431 shares of common stock were issuable upon conversion or exercise of rights

granted under warrant and stock option agreements.

Additionally, as of March 31, 2022, 35,714 shares of common stock are reserved for

issuance under a service agreement.

The following is a summary of common stock shares reserved for future issuance as of March 31, 2022:

The fair value of $916,238 was recorded

as an increase in additional-paid-in capital and a reduction to additional paid-in capital since the warrants were issued as IPO

fees to underwriters, resulting in a zero impact to additional paid-in capital.

In November 2021, the

Company issued 482,268 detachable warrants with secured promissory notes (see Note 7 – Long-Term Debt) for the purchase of

common stock The relative fair value of the warrants of $809,806 at the time of issuance was recorded as additional paid-in capital

with a corresponding debt discount reducing the carrying value of the notes.

Additionally, the Company issued 77,163 warrants to

purchase shares of common stock to underwriters in connection with obtaining the notes.

The fair value of the warrants of $262,354

was recorded as additional paid-in capital and reduced the carrying value of the notes.

The warrants are exercisable at $3.32 per

share for a period of 10 years from date of grant.

The fair value of the warrants was determined at date of issuance using the

Black-Scholes option-pricing model and the following assumptions:

per share price of common stock on date of grant of $3.63, expected

dividend yield of 0%, expected volatility of 110.8%, risk-free interest rate of 1.63% and expected life based on contractual life

Also in November 2021, the Company issued warrants to purchase 151,000 shares of common stock in in

exchange for prior services related to extinguished 2021 convertible notes and 30,000 options for the purchase of common stock

in exchange for legal services.

The warrants are exercisable at $2.90 per share for a period of three

years from the date of grant.

The options are exercisable at $3.32 per share for a period of three years from the date of grant.

The options issued were not issued under the Company’s stock option plans.

The fair value of the warrants of $407,700 was

recorded as additional paid-in-capital and expensed to extinguishment loss on debt settlement (see Note 9 – Convertible Notes.)

The fair value of the options of $79,200 was recorded as additional paid-in capital with a corresponding charge to legal expense.

The fair value of the warrants and options was determined at date of issuance using the Black-Scholes option-pricing model and

the following assumptions:

per share price of common stock on date of grant of $3.63, expected dividend yield of 0%, expected volatility

of 122.7%, risk-free interest rate of 0.71% and expected life based on contractual life of three years.

As of June 30, 2022

and December 31, 2021, a total of 858,436 and 710,431 warrants were issued and outstanding, respectively.

As of June 30, 2022 and

December 31, 2021, a total of 30,000 options, which were not issued under a specified plan, were outstanding.

As of June 30, 2022,

below is a summary of the various warrants/options issued and outstanding:

Schedule of various warrants/options issued and outstanding

warrants/options

Exercise Price

Stock Option Plans

As of June 30, 2022, the Company had

adopted two stock-based compensation plans, the 2021 Incentive Award Plan and the 2021 Employee Stock Purchase Plan, both of which

are described below and became effective upon the initial public offering.

On May 2, 2022, the Company granted 829,500 options

under the 2021 Incentive Award Plan.

No shares have been issued to date under the 2021 Employee Stock Purchase Plan.

The compensation

cost that has been charged against operations was $2,114,529 for the three and six month periods ended June 30, 2022.

2021 Incentive Award Plan

The purpose of the

Company’s 2021 Incentive Award Plan is to enhance the Company’s ability to attract, retain and motivate persons who

make (or are expected to make) important contributions to the Company by providing these individuals with equity ownership opportunities.

Various stock-based awards may be granted under the plan to eligible employees, consultants, and non-employee directors.

of shares issued under the plan is subject to limits and is adjusted annually.

No more than 1,000,000 shares may be issued pursuant

to the exercise of incentive stock options.

The aggregate share limit will be subject to an annual increase on the first day of

each calendar year ending on and including January 1, 2031, by a number of shares equal to the lesser of (i) a number equal to

5% of the aggregate number of shares of the Company's common stock outstanding on the final day of the immediately preceding calendar

year and (ii) such smaller number of shares as is determined by the Company's board or committee.

As of June 30, 2022, the aggregate

number of shares that can be issued under the Plan is 859,500 of which 829,500 have been granted.

The number of shares granted,

the exercise price, and the terms will be determined at date of grant, however, the exercise price shall not be less than 100%

of the fair value on the grant date (110% for options granted to greater than 10% shareholders) and the term shall not exceed ten

2021 Employee Stock Purchase

The purpose of the Company’s 2021 Employee Stock Purchase

Plan is to assist eligible employees of the Company in acquiring a stock ownership in the Company and to help such employees provide

for their future security and to encourage them to remain in the employment of the Company.

The plan consists of a Section 423

Component and Non-Section 423 Component.

The Section 423 Component is intended to qualify as an employee stock purchase plan and

also authorizes the grant of options.

Options granted under the Non-Section 423 Component shall be granted pursuant to separate

offerings containing sub-plans.

The Company may make one or more offerings under the plan.

The duration and timing of each offering

period may be established or changed by the board, but in no event may an offering period exceed 27 months and in no event may

the purchase period for the option exceed the duration of the offering period under which it is established.

On each exercise date

for an offering period, each participant shall automatically be deemed to have exercised the option to purchase the largest number

of whole shares which can be purchased under the offering.

Option awards are generally granted with an exercise price equal to

85% of the lesser of the fair market value of a share on (a) the applicable grant date and (b) the applicable exercise date, or

such other price as designated by the administrator, provided that in no event shall the option price be less that the per share

par value price.

The maximum number of shares granted under the plan shall not exceed 2,500,000 shares.

The fair value of each

option is estimated on the date of grant using the Black-Scholes option pricing model.

The option-pricing model requires a number

of assumptions, of which the most significant are the expected stock price volatility and the expected option term.

Expected volatility

was calculated based upon similar traded companies’ historical share price movements as adequate historical experience is

not available to provide a reasonable estimate.

Expected term is calculated based on the simplified method as adequate historical

experience is not available to provide a reasonable estimate.

The simplified method will continue to apply until enough historical

experience is available to provide a reasonable estimate of the expected term.

The risk-free interest rate is calculated based

on the yield from U.S.

Treasury zero-coupon bonds with an equivalent term.

The Company has historically not paid dividends and

have no foreseeable plans to pay dividends.

The Company has computed

the fair value of all options granted during the six months ended June 30, 2022 using the following assumptions:

Schedule of assumptions used

Expected volatility

109.48 % - 113.32 %

Expected dividends

Expected term (in years)

Risk free rate

2.83 % – 3.01 %

The following table summarizes the Company’s

stock option activity under the 2021 Incentive Plan:

Schedule of stock option activity

(in thousands except number of options and per options data)

Number of options

Weighted average exercise price

Weighted average remaining contractual term (in years)

Aggregate intrinsic value (1)

Outstanding at beginning of period

Outstanding at end of period

Exercisable at end of period

(1) The aggregate intrinsic value of options outstanding and options exercisable as of June 30,

2022 is $0, as all options are out of the money.

The weighted-average grant-date fair value

of the options granted during the three and six months ended June 30, 2022 to employees and non-employees was $1,847,193 and $267,336,

respectively.

All options were immediately vested and there was no unrecognized compensation expense as of June 30, 2022.

Common Stock Reserved for Future Issuance

The following is a

summary of common stock shares reserved for future issuance as of June 30, 2022:

Schedule of common stock shares reserved for future issuance

Exercise of warrants

Issuance of shares pursuant to a services agreement

Exercise of stock options

Exercise of options unrelated to any Plan

Exercise of stock options – 2021 Incentive Award Plan

Total shares of common stock reserved for future issuances

In anticipation of

an initial public offering, the Company converted from a limited liability company to a C corporation, a taxable entity, effective

November 1, 2021.

Through October

31, 2021, the Company was treated as an S corporation for federal and state income tax purposes, such that the Company’s

taxable income is reported by members in their respective tax returns.

The Company was only subject to state franchise taxes and

For the three and six months ended June 30, 2022 the Company incurred a provision for state franchise fees of $150 and $300,

respectively.

There was no provision recorded for the three and six months ended June 30, 2021.

Since converting to

a C corporation, the Company has incurred losses and consequently has recorded no provision for state or federal income taxes for

the three and six months ended June 30, 2022.

The Company maintains a full valuation allowance on all deferred tax assets, as it

has concluded that it is more likely than not that these assets will not be realized.

As of June 30, 2022 and December 31, 2021,

there were no material unrecognized tax benefits included in the accompanying balance sheets that would, if recognized, affect

the effective tax rate.

The Company adopted

a 401(k) Plan (“Plan”) for the benefit of its employees.

Employees may contribute to the Plan within defined limits

as defined by the Internal Revenue Service.

Substantially all employees are eligible to participate.

The Company has the option

to make profit sharing contributions at its discretion.

No profit-sharing contributions have been made.

Related Party Transactions

As of June 30, 2022

and December 31, 2021, related party transactions consisted of Shareholder Promissory Notes (see Note 8 – Shareholder Promissory

Subsequent Events

date to which events occurring after March 31, 2022, the date of the most recent Balance Sheets, have been evaluated for possible adjustment

to the financial statements or disclosures is May 5, 2022, which is the date the financial statements were issued.

April 1, 2022, the Company completed an initial public offering.

A total of 2,466,750 shares of common stock were sold at $7 per share

in the IPO, including 321,750 shares sold to underwriters, for total gross proceeds of $17,267,250, or net proceeds of $15,735,870 after

issuance costs of $1,531,380.

The net proceeds of $15,735,870 resulted in an increase to common stock of $2,467, representing 2,466,750

shares at $.001 par value, and an increase to additional paid in capital of $15,733,403.

During the three months ended March 31, 2022,

the Company incurred additional costs related to the IPO of $423,634, which are shown as Deferred IPO costs on the accompanying Balance

These costs, plus any IPO-related costs incurred subsequent to March 31, 2022, shall reduce additional paid-in capital.

the completion of the IPO, both of the Company’s stock option plans became effective (see Note 19 – Stock Option Plans) and

the Company has reserved 3,500,000 additional shares of common stock pursuant to the plans.

March 2022, the Company entered into a services agreement with a consultant whereby the Company is committed to pay the consultant $250,000

in shares of common stock valued at $7 per share, restricted under SEC rule 144, to be earned and distributed in three installments commencing

with the date of the IPO.

In April and May of 2022, the consultant earned, and the Company issued, the first two installments totaling

23,810 shares.

the IPO proceeds, in April 2022 the Company paid off working capital loans totaling $550,000 (see Note 6 – Line of Credit and Short-Term

Revolving Loans) and notes payable of $100,000 and $1,600,000 (see Note 7 – Long-Term Debt), plus related interest totaling $213,895.

May 2022, the Board of Directors and the Compensation Committee of the Company approved awards of 930,000 stock options to certain advisors,

officers, employee directors, non-employee directors, and other employees pursuant to the Corporation’s 2021 Incentive Award Plan.

The date to which events

occurring after June 30, 2022, the date of the most recent Balance Sheets, have been evaluated for possible adjustment to the financial

statements or disclosures is August 4, 2022, which is the date the financial statements were issued.

There were no material subsequent

events that require recognition of additional disclosure in these financial statements.

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