What changed in this filing

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Item 1. Financial Statements

2022-11-10 compared with 2022-08-11 · 881 added, 950 removed, 233 unchanged (89% of the section changed)

FINANCIAL STATEMENTS

June 30, 2022

Sheets (Unaudited)

of September 30, 2022

of December 31, 2021

and cash equivalents

receivable, net

Prepaid/in-transit

expenses and other current assets

current assets

Cash and cash equivalents

Accounts receivable

Prepaid/in-transit inventory

Prepaid expenses and other current assets

Total current assets

Property and equipment

Accumulated depreciation

Property and equipment, net

Operating leases – right-of-use asset

Total other assets

Liabilities and stockholders’ equity

and equipment

and equipment, net

leases – right-of-use asset

and stockholders’ equity

expenses and other current liabilities

of credit and short-term revolving loans

portion of operating lease liability

for sale of future revenues, net

payable in default

portion of long-term debt

current liabilities

Accounts payable

Customer deposits

Accrued expenses and other current liabilities

Line of credit and short-term revolving loans

Current portion of operating lease liability

Liability for sale of future revenues, net

Note payable in default

Current portion of long-term debt

Total current liabilities

Long-term debt, net of current portion and discount

Operating lease liability, net of current portion

Shareholder promissory notes

debt, net of current portion and discount

lease liability, net of current portion

promissory notes

Total liabilities

Expion360 Inc.

Balance Sheets - Continued

Stockholders’ equity

June 30, 2022

Preferred stock, par value $ .001 ;

on next page)

Sheets (Unaudited) – Continued

of September 30, 2022

of December 31, 2021

Stockholders’

stock, par value $ .001 ;

shares authorized;

0 zero shares issued and outstanding

Common stock, par value $ .001 ;

stock, par value $ .001 ;

200,000,000 shares authorized;

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

Additional paid-in capital

Accumulated deficit

6,802,464 and 4,300,000 issued and outstanding as of September 30, 2022 and

December 31, 2021, respectively

paid-in capital

( 12,170,144 )

( 6,102,951 )

Total stockholders’ equity

Total liabilities and stockholders’ equity

stockholders’ equity

liabilities and stockholders’ equity

accompanying notes are an integral part of these financial statements

of Operations (Unaudited)

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Cost of sales

Selling, general and administrative

Loss from operations

the Three Months Ended September 30,

the Nine Months Ended September 30,

general and administrative

( 1,259,135 )

( 4,508,904 )

Other (Income)

conversion expense

on sale of property and equipment

(income) expense

other (income) / expense

Interest income

Debt conversion expense

Interest expense

Other expense

Total other expense

Loss before taxes

( 1,279,304 )

( 6,066,894 )

Franchise taxes

$ ( 1,279,304 )

2 unchanged sentences

$ ( 730,403 )

Net loss per share (basic and diluted)

Weighted-average number of common shares outstanding

loss per share (basic and diluted)

Weighted-average

number of common shares outstanding

accompanying notes are an integral part of these financial statements

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

Stockholders’

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

Paid-in Capital

Stockholders’ Equity (Deficit)

Balance at December

$ ( 1,382,093 )

$ ( 1,379,662 )

Issuance of shares upon conversion of convertible notes

Effect of induced conversion of debt

Issuance of shares in exchange for building signage

Issuance of shares for cash

of shares upon conversion of convertible notes

of induced conversion of debt

of shares in exchange for building signage

of shares for cash

Balance at March 31,

$ ( 1,629,286 )

$ ( 1,051,565 )

Issuance of shares for cash

Issuance of shares for

Balance at June 30,

$ ( 1,759,721 )

Balance at September

Balance at December

$ ( 6,102,951 )

Balance at March 31, 2022

$ ( 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 )

at March 31, 2022

of shares, initial public offering, net of issuance costs

of shares in exchange for IPO services

of stock options

at June 30, 2022

at September 30, 2022

accompanying notes are an integral part of these financial statements

Statements of Cash Flows (Unaudited)

the Nine Months Ended September 30,

from operating activities

$ ( 6,067,193 )

Balance at June 30, 2022

$ ( 730,403 )

accompanying notes are an integral part of these financial statements

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

Cash flows from operating activities

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

interest on convertible notes

of debt discount (sale of future revenues)

of debt discount - notes

conversion expense on induced conversion of convertible notes

on sale of property and equipment

in allowance for doubtful accounts

operating assets and liabilities:

/ Decrease in accounts receivable

( 2,984,177 )

/ Decrease in prepaid/in-transit inventory

( 1,177,264 )

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)

Amortization of debt discount - notes

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 in accounts receivable

(Increase) Decrease in inventory

Increase in prepaid/in-transit inventory

Increase in prepaid expenses and other current assets

Increase in deposits

Increase (Decrease) in accounts payable

Decrease in customer deposits

in prepaid expenses and other current assets

/ (Decrease) in accounts payable

in customer deposits

/ (Decrease) in accrued expenses and other current liabilities

Decrease in liability for refunds

Increase in right-of-use assets and lease liabilities

Net cash used in operating activities

in liability for refunds

in right-of-use assets and lease liabilities

used in operating activities

( 4,699,620 )

Cash flows from investing activities

Purchases of property and equipment

Net cash used in investing activities

Cash flows from financing activities

Payments on line of credit and short-term revolving loans

Proceeds from sale of future revenues

Payments on liability for sale of future revenues

Principal payments on long-term debt

( 2,772,511 )

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

Cash and cash equivalents, beginning

Cash and cash equivalents, ending

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

Supplemental disclosure of cash flow information:

Cash paid for interest

from investing activities

of property and equipment

proceeds from sale of property and equipment

used in investing activities

from financing activities

on line of credit and short-term revolving loans

from sale of future revenues

on liability for sale of future revenues

payments on long-term debt

( 1,784,500 )

from issuance of convertible notes, net of discount

proceeds from issuance of common stock

provided by financing activities

in cash and cash equivalents

and cash equivalents, beginning

and cash equivalents, ending

of Cash Flows (Unaudited) - Continued

the Nine Months Ended September 30,

disclosure of cash flow information:

Cash paid for

Cash paid for franchise taxes

Non-cash operating activities:

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

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

of common stock in exchange for property and equipment

Acquisition/modification

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

of property and equipment in exchange for long-term debt

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 2021.

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

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 11 – 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 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.

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.

Summary of Significant Accounting Policies

of Presentation

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.

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 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.

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 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”)

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- and nine-month periods ended September 30, 2022 are not necessarily indicative of the results that may be expected

for the year ending December 31, 2022.

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.

2 unchanged sentences

and Capital Resources

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.

Company has sustained recurring losses and has negative cash flows from operations for the nine months ended September 30, 2022.

Historically,

the Company’s growth has been funded through a combination of sales of equity interests, third party debt, and working capital

The Company’s sales for the nine months ended September 2022 increased 79% over sales for the nine months ended September

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

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 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.

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.

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

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 September 30, 2022, cash balances exceeded FDIC limits by $ 1,064,880 .

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

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.

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.

The allowance for doubtful

accounts totaled $19,604 as of September 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 September 30, 2022 and December 31, 2021, the Company had customer deposits totaling $ 161,791 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 September 30, 2022 and December 31, 2021,

inventory consisted of finished assemblies totaling $2,436,475 and $985,537, respectively, and raw materials (inventory components, parts,

and packaging) totaling $2,599,582 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 September 30, 2022 or December 31, 2021.

The Company prepays

for inventory purchases from foreign suppliers.

Prepaid inventory totaled $268,663 and $1,081,225 at September 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 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,

the three months ended September 30, 2022 and 2021, approximately 91% and 92%, respectively, of inventory purchases were made from foreign

suppliers in China and Hong Kong.

During the nine months ended September 30, 2022 and 2021, approximately 92% 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

Any 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.

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

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

4 unchanged sentences

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

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.

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.

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

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 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.

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

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.

The Company does not have any finance

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.

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.

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

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 or nine months ended September 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.

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

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

The Company determines its estimated liability

1 unchanged sentence

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

as of September 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.

It is 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.

Returns have historically been minimal.

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,

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 and nine months ended September 30, 2021, the Company issued credits totaling $8,628 and $58,000,

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.

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

Revenue is recorded net of this amount.

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

Any returns 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.

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:

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

(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

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

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 September 30, 2022, sales to two customers totaled $220,300 and $174,636, respectively, comprising approximately

16% and 13% 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

There were no accounts receivable for these customers as of September 30, 2022.

nine months ended September 30, 2022, sales to two customers totaled $1,264,344 and $552,477, respectively, comprising approximately

22% and 10%, respectively, of total sales.

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.

Accounts receivables for these customers totaled $7,486 and $0, respectively, representing

approximately 3% of total accounts receivable as of September 30, 2022.

Accounts receivable from two additional customers totaled $47,758

and $43,031, representing approximately 17% and 15%, respectively, of total accounts receivables as of September 30, 2022.

the three months ended September 30, 2021, sales to one customer totaled $132,870, comprising approximately 10% of total sales.

receivable for this customer totaled $104,562, representing approximately 14% of total accounts receivable as of September 30, 2021.

During the nine months ended September 30, 2021, sales to two customers totaled $440,036 and $370,134, respectively, comprising approximately

14% and 12%, respectively, of total sales.

Accounts receivable from these customers totaled $97,127 and $104,562, respectively, representing

approximately 13% and 14%, respectively, of total accounts receivable as of September 30, 2021.

Accounts receivable from one additional

customer totaled $104,405, representing approximately 14% of total accounts receivable as of September 30, 2021.

and Handling Costs

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 handling fees billed to customers are classified on the Statement of Operations as “Sales, net” and totaled $6,133 and

$5,839 during the three months ended September 30, 2022 and 2021, respectively and $17,514 and $20,812 during the nine months ended September

30, 2022 and 2021, respectively.

Shipping and handling costs for shipping product to customers totaled $54,840 and $23,664 during the

three months ended September 30, 2022 and 2021, respectively, and $137,497 and $73,393 during the nine months ended September 30, 2022

and 2021, respectively, and are classified in selling, general and administrative expense in the accompanying Statements of Operations.

and Marketing Costs

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.

Company expenses advertising and marketing costs as incurred.

Advertising and marketing expense totaled $93,364 and $11,025 for the three

months ended September 30, 2022 and 2021, respectively and $164,118 and $46,550 for the nine months ended September 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 $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

Research and development costs charged to expense amounted to $39,180 and $3,205 for

the three months ended September 30, 2022 and 2021, respectively and $145,401 and $14,917 for the nine months ended September 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.

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.

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.

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.

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

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

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.

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.

As of September 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 .

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

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.

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

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

receivable, accounts payable, and short-term revolving loans approximates their respective carrying values because of the short-term

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.

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, and long-term debt.

The fair value of cash and cash equivalents, accounts receivable,

accounts payable, and short-term revolving loans approximates their respective carrying values because of the short-term nature of those

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.

Company currently operates 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.

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

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

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).

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.

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.

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

Three Months Ended June 30,

Six Months Ended June 30,

Months Ended September 30,

$ ( 1,279,304 )

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$ ( 730,403 )

Weighted average common shares outstanding – basic and diluted

Basic and diluted net loss per share

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

average common shares outstanding – basic and diluted

and diluted net loss per share

of September 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.

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

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.

Months Ended September 30,

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.

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.

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.

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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.

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

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.

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

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.

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.

Guidance Issued but Not Yet Adopted

September 2022, the FASB issued ASU 2022-04, “Liabilities—Supplier Finance Programs (Subtopic 405-50):

Disclosure of Supplier

Finance Program Obligations,” which is intended to enhance the transparency surrounding the use of supplier finance programs in

connection with the purchase of goods and services.

Supplier finance programs may also be referred to as reverse factoring, payables

finance, or structured payables arrangements.

The amendments in ASU 2022-04 require a buyer that uses supplier finance programs to disclose

sufficient qualitative and quantitative information about the program to allow a user of financial statements to understand the program’s

nature, activity during the period, changes from period to period, and potential magnitude.

ASU 2022-04 is effective for all entities

for fiscal years beginning after December 15, 2022 on a retrospective basis, including interim periods with those fiscal years, except

for the requirement to disclose roll forward information, which is effective prospectively for fiscal years beginning after December

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

June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject

to Contractual Sale Restrictions,” which amends the guidance in Topic 820, Fair Value Measurement , to clarify that a contractual

restriction on the sale of an equity security is not considered part of the unit of account of the equity security and, therefore, is

not considered in measuring fair value.

The amendments also clarify that an entity cannot, as a separate unit of account, recognize and

measure a contractual sale restriction.

In addition, the ASU introduces new disclosure requirements for equity securities subject to

contractual sale restrictions that are measured at fair value.

ASU 2022-03 is effective for fiscal years beginning after December 15,

2023, 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.

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.

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 statements.

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

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.

The 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.

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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Schedule of property and equipment

June 30, 2022

December 31, 2021

Vehicles and transport

Leasehold improvements

Office furniture and equipment

Warehouse equipment

Tooling and Molds

Manufacturing equipment

Property and equipment, gross

and transportation equipment

Office furniture

and equipment

Manufacturing

accumulated depreciation

Property and equipment, net

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

and equipment, net

expense was $ 48,364 and $ 16,422 for the three months ended September 30, 2022 and 2021, respectively.

Depreciation expense was $ 115,670

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

and $ 38,176 for the nine months ended September 30, 2022 and 2021, respectively.

Accrued Expenses and Other Current Liabilities

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Schedule of accrued expenses and other current liabilities

June 30, 2022

December 31, 2021

Accrued salaries and payroll liabilities

of September 30, 2022

of December 31, 2021

salaries and payroll liabilities

Rebate liability

Deferred income and deposit (sublease)

Franchise tax

income and deposit (sublease)

Accrued interest

Accrued expenses and other current liabilities

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 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.

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 September 30, 2021, the Company repaid a total of

$88,826, including $21,299 of interest.

There were no payments made in the three months ended September 30, 2022.

During the nine months

ended September 30, 2022 and 2021, the Company repaid a total of $11,797 and $250,516, respectively, including $295 and $87,219, respectively,

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

As of June 30, 2022 the Company had no remaining

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.

As of September 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

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 lenders.

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.

were repaid in full in April 2022.

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.

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.

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.

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.

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 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

Long-term debt consisted

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

debt consisted of the following at September 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.

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.

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.

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 included detachable warrants to purchase

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

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

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 $ 982,317 and $ 1,196,843 ,

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

Interest expense related to these notes includes

amortization of debt issuance costs and discount in the amount of $ 0 and $ 1,196,843 , respectively, for the three months and nine

months ended September 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 in monthly installments of $ 332 , including interest at 5.8 % per annum, due August 2025, secured by

equipment and personally guaranteed by the current CEO.

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

by a vehicle and personally guaranteed by the current CEO.

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.

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

due May 2050, and personally guaranteed by the current CEO.

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.

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

paid in full in April 2022

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 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.

Paid in full September 2022.

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.

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 the current CEO.

payable – The Company has six and two notes payable to GM Financial for vehicles at September 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.

1 unchanged sentence

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

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 the current 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

Years ending June 30,

Years ending September 30,

Promissory Notes

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”).

of September 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:

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 $13,751 and $25,961 during the three months ended June 30, 2022 and June

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

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 $0.50 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 9 –Convertible Notes).

paid to the shareholders under the Notes totaled $20,627 and $48,444 during the three months ended September 30, 2022 and September 30,

2021, respectively.

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

Interest paid to the shareholders totaled $61,881 and $101,281, respectively, during the nine months ended September

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.

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).

There was no accrued interest as of September 30, 2022 or December 31, 2021 related to these 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”).

The Notes accrued monthly interest at 6% per annum and included two options for conversion:

(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 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.

January 1, 2021, convertible debt holders were offered the opportunity for early conversion of their convertible notes into Class B LLC

member units.

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.

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 –Short-Term Revolving Loans).

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

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).

There was 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.

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.

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, $1,820,000 was received during the three months ended

September 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.

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.

Of this amount, $56,000 was incurred during the three months ended September

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

$16,383 and $21,104 during the three and six months ended September 30, 2021, respectively.

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, the Company 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 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.

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 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.

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.

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 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.

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.

leases expire in December 2026 and December 2028.

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

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.

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

The lease is guaranteed by a shareholder.

The lease is guaranteed by

the current CEO.

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.

The lease expires

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

The lease is guaranteed by the current CEO.

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 a shareholder.

The following is a

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

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

following is a summary of total lease costs during the three months and nine months ended September 30, 2022 and 2021:

Schedule of lease cost

Three Months Ended June 30,

Six Months Ended June 30,

Operating lease cost

Short-term lease costs

Variable lease costs

Sublease income

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

Months Ended September 30,

weighted-average remaining lease term was 5.71 years and 5.64 years as of September 30, 2022 and December 31, 2021, respectively.

weighted average discount rate was 8.50% and 8.02%, as of September 30, 2022 and December 31, 2021, respectively.

Operating cash flows

from the operating leases totaled $115,442 and $48,602 for the three months ended September 30, 2022 and 2021, respectively and $322,112

and $127,980 for the nine months ended September 30, 2022 and 2021, respectively.

total lease liability as of September 30, 2022 and December 31, 2021 was $3,338,046 and $1,311,649, respectively.

following is a maturity analysis of the annual undiscounted cash flows of the operating lease liabilities as of September 30, 2022, for

years ending September 30:

Schedule of future minimum lease payment

3 unchanged sentences

Noncurrent lease liability

The Company subleases

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

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

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 $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:

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

term and totaled $25,022 and $30,360 during the three months ended September, 2022 and 2021, respectively, and $98,364 and $54,677 during

the nine months ended September 30, 2022 and 2021, respectively.

As of September 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.

following are the total future minimum sublease payments as of September 30, 2022:

Schedule of future minimum sublease payments

Years ending June 30,

Years ending September 30,

Total future minimum lease payments

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.

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

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

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 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.

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.

Stockholders’ Equity

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.

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 September 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

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.

Public Offering

April 1, 2022, the Company completed an initial public offering (“IPO”).

A 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.

The Company incurred IPO costs of $2,494,763 resulting in

net proceeds of $14,772,487.

Additionally, during the nine months ended September 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 services.

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.

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).

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

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).

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

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

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.

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

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.

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 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 $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.

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.

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 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 of 10 years.

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.

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:

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.

of September 30, 2022 and December 31, 2021, a total of 858,436 and 710,431 warrants were issued and outstanding, respectively.

September 30, 2022 and December 31, 2021, a total of 30,000 options, which were not issued under a specified plan, were outstanding.

As of September 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.

warrants/non-plan options

Average Remaining Life (Yrs)

of September 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

The compensation cost that has been charged against operations was $2,114,529 for the nine-month period ended September 30, 2022.

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.

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 number 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 September 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 years.

Employee Stock Purchase Plan

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.

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

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.

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.

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.

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

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:

The Company has historically not paid dividends and have no foreseeable plans

to pay dividends.

Company has computed the fair value of all options granted during the nine months ended September 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

term (in years)

2.83 % – 3.01 %

The following table summarizes the Company’s

stock option activity under the 2021 Incentive Plan:

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)

(in thousands

except number of options and per options data)

average exercise price

average remaining contractual term (in years)

intrinsic value (1)

Outstanding at beginning of period

1 unchanged sentence

Exercisable at end of period

(1) The aggregate intrinsic value of options outstanding and options exercisable as of June 30,

aggregate intrinsic value of options outstanding and options exercisable as of September

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:

weighted-average grant-date fair value of the options granted during the nine months ended September 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 September 30, 2022.

Stock Reserved for Future Issuance

following is a summary of common stock shares reserved for future issuance as of September 30, 2022:

Schedule of common stock shares reserved for future issuance

Exercise of warrants

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,

of options unrelated to any Plan

of stock options – 2021 Incentive Award Plan

shares of common stock reserved for future issuances

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 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 and the Company was only subject to state franchise taxes and fees.

For the three and nine months ended September 30, 2022 the Company incurred a provision for state franchise fees of $0 and $300, respectively.

There was no provision recorded for the three and nine months ended September 30, 2021.

converting to a C corporation, the Company has incurred losses and consequently recorded no provision for state or federal income taxes

for the three and nine months ended September 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 September 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.

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.

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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

of September 30, 2022 and December 31, 2021, related party transactions consisted of Shareholder Promissory Notes (see Note 8 –

Shareholder Promissory Notes).

Subsequent Events

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.

date to which events occurring after September 30, 2022, the date of the most recent Balance Sheets, have been evaluated for possible

adjustment to the financial statements or disclosures is November 3, 2022, which is the date the financial statements were issued.

October 26,2022, the Company filed an S-8 related to its Employee Benefit Plan Security Offering.

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