What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-05-11 compared with 2022-11-10 · 506 added, 692 removed, 422 unchanged (74% of the section changed)

FINANCIAL STATEMENTS

Sheets (Unaudited)

of September 30, 2022

of December 31, 2021

and cash equivalents

receivable, net

Prepaid/in-transit

expenses and other current assets

Expion360 Inc.

Balance Sheets

March 31, 2023 (unaudited)

December 31, 2022

Current Assets

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

Cash and cash equivalents

Accounts receivable, net

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

Current liabilities

debt, net of current portion and discount

lease liability, net of current portion

promissory notes

Accounts payable

Customer deposits

Accrued expenses and other current liabilities

Current portion of operating lease liability

Current portion of stockholder promissory notes

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

Stockholder promissory notes, net of current portion

Total liabilities

on next page)

Sheets (Unaudited) – Continued

of September 30, 2022

of December 31, 2021

Stockholders’

stock, par value $ .001 ;

(continued on next page)

Expion360 Inc.

Balance Sheets

March 31, 2023 (unaudited)

December 31, 2022

Stockholders’ equity

Preferred stock, par value $ .001 ;

20,000,000 shares authorized;

0 zero shares issued and outstanding

stock, par value $ .001 ;

shares issued and outstanding

Common stock, par value $ .001 ;

200,000,000 shares authorized;

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 )

6,900,566 and 6,802,464 issued and outstanding as of March 31, 2023 and December 31, 2022, respectively

Additional paid-in capital

Accumulated deficit

( 15,616,769 )

stockholders’ equity

liabilities and stockholders’ equity

accompanying notes are an integral part of these financial statements

of Operations (Unaudited)

the Three Months Ended September 30,

the Nine Months Ended September 30,

general and administrative

( 13,639,491 )

Total stockholders’ equity

Total liabilities and stockholders’ equity

The accompanying notes are an integral

part of these financial statements

Expion360 Inc.

Statements of Operations

For the Three Months Ended March 31,

Cost of sales

Selling, general and administrative

Loss from operations

( 1,677,447 )

Other (Income)

conversion expense

on sale of property and equipment

(income) expense

other (income) / expense

( 1,279,304 )

( 6,066,894 )

$ ( 1,279,304 )

Interest income

Interest expense

Settlement expense

Other expense

Total other expense

Loss before taxes

( 1,977,278 )

Franchise taxes

$ ( 1,977,278 )

$ ( 696,853 )

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 Nine Months ended September 30, 2022 and 2021 (Unaudited)

Net loss per share (basic and diluted)

Weighted-average number of common shares outstanding

The accompanying notes are an integral

part of these financial statements

Expion360 Inc.

Statements of Stockholders’

Equity (Deficit) for Three Months ended March 31, 2023 and 2022 (Unaudited)

Paid-in Capital

Stockholders’ Equity (Deficit)

Balance at December

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,

Issuance of shares for

Balance at June 30,

Balance at September

Stock-holders’ Equity (Deficit)

Balance at December

$ ( 6,102,951 )

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

$ ( 6,799,804 )

Balance at December 31, 2022

$ ( 13,639,491 )

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

Proceeds received from exercise

Stock issued as a result of

litigation settlement

( 1,977,278 )

/ Decrease in prepaid/in-transit inventory

( 1,977,278 )

in prepaid expenses and other current assets

/ (Decrease) in accounts payable

in customer deposits

/ (Decrease) in accrued expenses and other current liabilities

in liability for refunds

in right-of-use assets and lease liabilities

used in operating activities

at March 31, 2023

$ ( 15,616,769 )

The accompanying notes are an integral

part of these financial statements

Expion360 Inc.

Statements of Cash Flows (Unaudited)

For the Three Months Ended March 31,

Cash flows from operating activities

$ ( 1,977,278 )

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

$ ( 696,853 )

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

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

Amortization of debt discount (sale of future revenues)

Amortization of debt discount - notes

Decrease in allowance for doubtful accounts

Stock-based settlement

Changes in operating assets and liabilities:

(Increase) / Decrease in accounts receivable

(Increase) / Decrease in inventory

(Increase) / Decrease in prepaid/in-transit inventory

( 1,086,577 )

Increase in prepaid expenses and other current assets

Decrease in deposits

Increase in accounts payable

Increase / (Decrease) in customer deposits

Increase / (Decrease) in accrued expenses and other current liabilities

Increase in right-of-use assets and lease liabilities

Net cash provided by / (used in) operating activities

( 1,422,702 )

Cash flows from investing activities

Purchases of property and equipment

Net cash used in investing activities

Cash flows from financing activities

Increase in deferred IPO costs

Payments on liability for sale of future revenues

Principal payments on long-term debt

Net proceeds from exercise of warrants

Net cash used in financing activities

Net change in cash and cash equivalents

( 1,475,049 )

Cash and cash equivalents, beginning

Cash and cash equivalents, ending

The accompanying notes are an integral

part of these financial statements

Expion360 Inc.

Statements of Cash

Flows (Unaudited) - Continued

For the Three Months Ended March 31,

Supplemental disclosure of cash flow information:

Cash paid for interest

Cash paid for franchise taxes

Non-cash operating activities:

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

Non-cash financing activities:

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

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

The accompanying notes are an integral

part of these financial statements

Organization and Nature of Operations

11 unchanged sentences

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

2 unchanged sentences

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.

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

While certain restrictions have eased recently, the magnitude of the impact of any new measures from a resurgence in 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

Basis of Presentation

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

9 unchanged sentences

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

results for the three-month periods ended March 31, 2023 and 2022 are not necessarily indicative of the results that may be expected

for the year ending December 31, 2023.

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.

The unaudited interim financial statements should be read in conjunction with our Annual Report

on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 30, 2023.

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

to reflect the equity structure of the C corporation as of the beginning of the first period presented.

and Capital Resources

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

Reclassification

of Prior Year Presentation

prior year amounts have been reclassified for consistency with current year presentation.

These reclassifications had no effect on the

reported results of operations.

Going Concern,

Liquidity and Capital Resources

Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding before

the Company achieves sustainable revenues and profit from operations.

The Company expects to continue

to incur additional losses for the foreseeable future, and the Company may need to raise additional debt or equity financing to expand

its presence in the marketplace, develop new products, achieve operating efficiencies, and 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.

presented in the accompanying financial statements, the Company has sustained recurring losses and negative cash flows from operations.

These factors raise substantial doubt about the Company’s ability to continue as a going concern within twelve months after the

date that the financial statements for the three months ended March 31, 2023 are issued.

However, management is working to address its

cash flow challenges, including raising additional capital, alternative supply chain resources, and in-house assembly lines.

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.

The Company’s sales for the three months ended March 31, 2023 decreased 30.1% compared to the same period in 2022.

March 31, 2023, we received net proceeds of $49,787 from warrant exercises.

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.

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 and help

reduce 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.

The accompanying

financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization

of assets and the settlement of liabilities and commitments in the normal course of business;

however, the above conditions raise substantial

doubt about the Company’s ability to do so.

The financial statements do not include any adjustments to reflect the possible future

effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result should the

Company be unable to continue as a going concern.

Use of Estimates

preparation of financial statements in conformity with U.S.

8 unchanged sentences

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

and Cash Equivalents

Cash and Cash

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

2 unchanged sentences

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

Accounts are secured by the Federal Deposit Insurance Corporation

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

Investment accounts are

placed in funds consisting of US Treasury related ultra-short paper.

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.

March 31, 2023, cash balances exceeded FDIC limits by $ 388,011 and investment accounts totaling $ 5,019,907 are invested in US Treasury

related ultra-short paper.

Company has two accounts at Silicon Valley Bank (SVB).

As of March 31, 2023 all funds were transferred to another banking institution

and no exposure currently exists.

Accounts Receivable

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

7 unchanged sentences

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.

For the three months

ended March 31, 2023 the Company wrote off $18,804.

There was no allowance for doubtful accounts as of March 31, 2023 or December 31,

2022, as management believed all outstanding amounts to be fully collectible.

Customer Deposits

As of March 31, 2023 and December 31,

2022, the Company had customer deposits totaling $ 208,611 and $ 58 , 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.

As of March 31, 2023 and December 31, 2022, the Company had inventory that consisted of finished

assemblies totaling $ 2,153,057 and $ 2,722,765 , respectively, and raw materials (inventory components, parts, and packaging) totaling

$ 1,773,509 and $ 1,807,371 , 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

The Company determined that no such reserve was necessary as of March 31, 2023 or December 31, 2022.

The Company prepays for

inventory purchases from foreign suppliers.

Prepaid inventory totaled $1,228,188 and $141,611 at March 31, 2023 and December 31, 2022,

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 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.

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

and Equipment

Vendor and Foreign

Concentrations of Inventory Suppliers

the three months ended March 31, 2023 and 2022, respectively, approximately 86% and 60%, respectively, of inventory purchases were made

from foreign suppliers in China and Hong Kong.

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.

Property and Equipment

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

4 unchanged sentences

Manufacturing

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

Leasehold improvements

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

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

5 unchanged sentences

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

the Company’s

obligation to make lease payments arising from the lease.

Operating leases are included in ROU assets, current operating lease liabilities,

and long-term operating lease liabilities on the Company’s Balance Sheets.

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

9 unchanged sentences

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

of Long-Lived Assets

Impairment of

Long-Lived Assets

assets consist primarily of property and equipment.

7 unchanged sentences

No long-lived asset impairment was

recognized during the three months or nine months ended September 30, 2022 and 2021.

recognized during the three months ended March 31, 2023 or 2022.

Product Warranties

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

5 unchanged sentences

Management estimates no liability

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

as of March 31, 2023 and December 31, 2022 because, historically, there have been very few claims and costs for repairs or replacement

parts have been nominal.

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

the near term.

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

Liability for

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

Returns have historically been minimal.

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

As of December 31, 2020, the liability

totaled $58,000.

During the three months 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 had been returned and the Company had no further refund liability.

Revenue is recorded net of this amount.

Any returns of discontinued

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

Revenue Recognition

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

The Company recognizes

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

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

To determine revenue recognition, the Company performs the following five

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

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

To determine revenue recognition, the Company

performs the following five steps:

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

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

(iii) determine

the transaction price;

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

and (v) recognize

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

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

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

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

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

Concentration

of Major Customers

(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

Concentration of Major Customers

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.

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.

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

the three months ended March 31, 2023, sales to two customers totaled $381,048, comprising approximately 25% of total sales.

These customers

represented 43% of total accounts receivable as of March 31, 2023.

Accounts receivable from one additional customer totaled $72,184,

representing approximately 12% of total accounts receivable as of March 31, 2023.

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

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

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

receivable as of March 31, 2022.

Shipping and Handling

and handling fees billed to customers are classified on the Statement of Operations as “Sales, net” and totaled $9,532 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

$4,151 during the three months ended March 31, 2023 and 2022, respectively.

Shipping and handling costs for shipping product to customers

totaled $43,208 and $38,724 during the three months ended March 31, 2023 and 2022, respectively, and are classified in selling, general,

and administrative expense in the accompanying Statements of Operations.

Advertising and

Marketing Costs

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

Advertising and marketing expense totaled $155,159 and $160,038 for the

three months ended March 31, 2023 and 2022, respectively, and is included in selling, general and administrative expense in the accompanying

Statements of Operations.

Research and Development

and development costs are expensed as incurred.

Research and development costs charged to expense amounted to $ 77,180 and $ 5,316 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.

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.

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

the three months ended March 31, 2023 and 2022, and are included in selling, general and administrative expenses in the accompanying

Statements of Operations.

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

state income taxes.

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

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

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

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

The effect on deferred tax

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

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

assets are reduced by a valuation allowance

when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

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

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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.

As of March 31, 2023 and December 31, 2022, 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”).

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impact of the CAA and its impact on its financial statements in 2023 and beyond.

Value of Financial Instruments

Fair Value of

Financial Instruments

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

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

Segment Reporting

Company currently operates in one reportable segment.

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

and Diluted Net Loss Per Share

Basic and Diluted

Net Loss Per Share

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

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Schedule of net loss per share

Months Ended September 30,

$ ( 1,279,304 )

$ ( 352,776 )

Three Months Ended March 31,

$ ( 1,977,278 )

$ ( 696,853 )

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.

Schedule of anti-dilutive shares

Months Ended September 30,

Weighted average common shares outstanding – basic and diluted

Basic and diluted net loss per share

of March 31, 2023 and December 31, 2022, the Company has outstanding warrants and options convertible into 1,629,936 and 1,717,936 shares

of common stock, respectively.

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

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

Schedule of anti-dilutive share

March 31, 2023

December 31, 2022

Stock options

Stock-Based Compensation

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

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Changes to assumptions could cause significant adjustments to the valuation.

Accounting Pronouncements

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

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

(Subtopic 815-40):

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

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

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

of the modification or exchange.

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

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

ASU 2021-04 is applied prospectively and is

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

The Company adopted this

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

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

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

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

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

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

substantial premiums accounted for as paid-in capital.

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

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

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

feature needs to be bifurcated under Topic 815.

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

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

for diluted earnings per share calculation.

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

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

ASU 2020-06 is effective for fiscal

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

Adoption of the standard requires using either a modified retrospective

or a full retrospective approach.

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

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

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

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

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

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

measuring certain purchased options and forward contracts to acquire investments.

ASU 2020-01 is effective for fiscal years beginning

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

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

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

Guidance Issued but Not Yet Adopted

New Accounting

Pronouncements

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

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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.

The Company adopted this standard effective January 1, 2023, and the adoption of this guidance did not have an impact on the

Company’s financial statements or disclosures.

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

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including interim periods within those fiscal years).

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

The Company adopted this standard effective January 1, 2023, and the adoption of

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

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

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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.

Company adopted this standard effective January 1, 2023, and the adoption of this guidance did not have an impact on the Company’s

financial statements or disclosures.

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

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after December 15, 2022.

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

The Company adopted this standard effective January 1, 2023, and the adoption of this guidance did not have

an impact on the Company’s financial statements or disclosures.

Accounting Guidance

Issued but Not Yet Adopted

March 2023, the FASB issued ASU 2023-02, “Investments—Equity Method and Joint Ventures (Topic 323):

Accounting for Investments

in Tax Credit Structures Using the Proportional Amortization Method.” This ASU was issued to allow reporting entities to consistently

account for equity investments made primarily for the purpose of receiving income tax credits and other income tax benefits.

is effective for the Company for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years.

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.

Property and Equipment, Net

and equipment consist of the following:

Property and equipment

consist of the following:

Schedule of property and equipment

and transportation equipment

Office furniture

and equipment

Manufacturing

December 31, 2022

Vehicles and transportation equipment

Leasehold improvements

Office furniture and equipment

Manufacturing equipment

Warehouse equipment

Tooling and Molds

accumulated depreciation

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

Property and equipment, net

expense was $ 48,120 and $ 29,026 for the three months ended March 31, 2023 and 2022, respectively.

Accrued Expenses and Other Current Liabilities

expenses and other current liabilities consist of the following:

Accrued expenses

and other current liabilities consist of the following:

Schedule of accrued expenses and other current liabilities

of September 30, 2022

of December 31, 2021

salaries and payroll liabilities

As of March 31, 2023

As of December 31, 2022

Accrued salaries and payroll liabilities

Rebate liability

income and deposit (sublease)

Deferred income and deposit (sublease)

Franchise tax

Accrued interest

expenses and other current liabilities

Accrued expenses and other current liabilities

Liabilities for Sale of Future Revenues

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

During the three months ended September 30, 2021, the Company repaid a total of

During the three months ended March 31, 2022, the Company repaid a total of $11,797,

including $295 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 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).

There were no payments made in the three months ended March 31, 2023.

Interest was recognized at an effective

annual interest rate of approximately 71%.

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.

of March 31, 2023 and December 31, 2022, the Company had no remaining liability related to the Purchase Agreements.

Short-Term Revolving Loans

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;

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.

2020, the Company received funds under four unsecured Working Capital Loan Agreements (“WC Loans”).

As of December 31, 2022,

the loans had been repaid and a balance of $0 was 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

The terms of each WC Loan are summarized

$200,000 limit –

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

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

The modification

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

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

of 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,

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

Long-Term Debt

debt consisted of the following at September 30, 2022 and December 31, 2021:

Long-term debt consisted

of the following at March 31, 2023 and December 31, 2022:

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.

March 31, 2023

December 31, 2022

Senior secured promissory notes – various investors.

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

A minimum of one year interest is due at maturity.

Matures the earlier of (a)

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

The notes are senior

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

The notes 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

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 10 – 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 method.

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

Interest expense related to these notes includes

amortization of debt issuance costs and discount in the amount of $ 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 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 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 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.

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

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.

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 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.

The agreement

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

The notes are payable in aggregate monthly installments

of $ 4,676 , including interest at rates ranging from 5.89% to 7.29 % per annum, mature at various dates from October 2027 to May of

2028, and are secured by the related vehicles.

Two of the notes are personally guaranteed by the current CEO.

Less unamortized debt issuance

costs and discount

Interest expense related to these notes includes amortization of debt issuance costs and discount in the amount of $0 and $214,527, respectively, for the three months ended March 31, 2023 and 2022, respectively.

The notes were paid in full in April 2022.

Note payable – bank.

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

Note payable – credit union.

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

Note payable – SBA.

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

Note payable – individual.

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

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 and paid the note in full in April 2022.

Note payable – finance company.

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

The Note was paid in full September 2022.

Note payable – finance company.

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

The note was paid in full January 2023.

Notes payable – The Company has six notes payable to GM Financial for vehicles at March 31, 2023 and December 31, 2022.

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

The agreementexpired in April 2023 but

was renewed for a commercial line up to $350,000 and prevailing GM Financial existing term notes will remain.

The new agreement expires in April 2024.

The notes are payable in aggregate monthly installments of $4,679, 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 a co-founder.

Less 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:

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

Future maturities of long-term debt are

Schedule of long term debt payment

Years ending September 30,

Twelve months ending March 31,

Promissory 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”).

of both March 31, 2023 and December 31, 2022, 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:

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

August 2023 - $500,000;

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and December 2024

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,

paid to the shareholders under the Notes totaled $ 20,627 and $ 20,627 during the three months ended March 31, 2023 and March 31, 2022,

respectively.

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

30, 2022 and 2021, respectively.

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

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

was modified into a term loan effective January 1, 2021 (see Note 7 – Long Term Debt).

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).

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, $1,820,000 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.

There was no accrued interest as of March 31, 2023 or December 31, 2022 related to these Notes.

Commitments and Contingencies

Operating Leases

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

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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.

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

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The lease is guaranteed by

the current CEO.

a co-founder.

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

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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 the

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

The lease is guaranteed by the a co-founder.

Company has two other leases—one that expired in January 2023 and one that expires in 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.

leases are guaranteed by the a co-founder.

The following is

a summary of total lease costs during the three months ended March 31, 2023 and 2022:

Schedule of lease cost

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

Three Months Ended

Operating lease cost

Short-term lease costs

Variable lease costs

Sublease income

weighted-average remaining lease term was 5.25 years and 5.49 years as of March 31, 2023 and December 31, 2022, respectively.

average discount rate was 8.49% and 8.48%, as of March 31, 2023 and December 31, 2022, respectively.

Operating cash flows from the operating

leases totaled $92,107 and $93,756 for the three months ended March 31, 2023 and 2022, respectively.

total lease liability as of March 31, 2023 and December 31, 2022 was $3,113,919 and $3,220,019, respectively.

following is a maturity analysis of the annual undiscounted cash flows of the operating lease liabilities as of March 31, 2023, for years

ending March 31:

of future minimum lease payment

Total future minimum lease payments

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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:

on a straight-line basis over the lease term and totaled $20,161 and $36,113 during the three months ended March 31, 2023 and 2022, respectively.

As of March 31, 2023 and December 31, 2022, deferred income and a sublease deposit totaled $4,445 and $14,168, 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 March 31, 2023:

Schedule of future minimum sublease payments

Years ending September 30,

Total future minimum lease payments

Twelve months ending March 31,

Total future minimum lease

Company may be involved from time to time in litigation or claims arising in the ordinary course of its business.

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matters will not likely have a material adverse effect on the Company’s financial statements.

Conversion to a C Corporation

November 1, 2021, the Company converted from an LLC to a C corporation under the State of Nevada statutes in anticipation of an upcoming

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.

November 22, 2022, Expion360 Inc.

(the “Company”) received notice of a complaint (the

“Complaint”) filed against it in Oregon state court by Ravi Sinha.

The Complaint alleges, inter alia ,

Sinha is entitled to 282,284 shares of the Company’s common stock, or in the alternative, $300,000 plus interest in connection

with services he previously rendered the Company as its chief executive officer.

On March 21, 2023, the Company entered into a settlement

agreement with Mr.

Sinha and the matter has been resolved with cash and the issuance of common stock (see Note 10 – Stockholders’

Stockholders Equity

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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.

On March 31, 2023, at the closing price of $4.84 per share, the Company

issued 52,000 shares of common stock as part of the settlement agreement with Mr.

Sinha dated March 21, 2023.

As of March 31, 2023 and

December 31, 2022, 6,900,566 and 6,802,464 shares,

respectively, of common stock were issued and outstanding.

No shares of preferred stock have been issued.

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no shares of preferred stock have been issued, no rights and privileges of preferred stockholders have been defined.

Public Offering

Initial Public

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

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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

Additionally, during the year ended December 31, 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.

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.

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.

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

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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 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.

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:

the period ending March 31, 2023, 15,000 warrants exercisable at $3.32 per share were exercised on a cash basis which resulted in the

issuance of 15,000 shares of common stock.

This leaves 544,431 warrants remaining with an exercise price of $3.32.

the period ending March 31, 2023, 73,000 warrants exercisable at $2.90 per share were exercised using the cashless conversion option

which resulted in the issuance of 31,102 shares of common stock.

This leaves 78,000 warrants remaining with an exercise price of $2.90.

of March 31, 2023 and December 31, 2022, a total of 770,436 and 858,436 warrants were issued and outstanding, respectively.

31, 2023 and December 31, 2022, a total of 30,000 options, which were not issued under a specified plan, were outstanding.

31, 2023, below is a summary of the various warrants/options issued and outstanding:

Schedule of various warrants/options issued and outstanding

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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.

Stock Option Plans

of March 31, 2023, 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 year ended December 31, 2022.

2021 Incentive Award Plan

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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.

As of March 31, 2023, the aggregate number of shares that

can be issued under the Plan is 1,199,623 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.

2021 Employee Stock Purchase Plan

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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:

Company has computed the fair value of all options granted during the year ended December 31, 2022 using the following assumptions:

Schedule of assumptions used

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2.83 % – 3.01 %

following table summarizes the Company’s stock option activity under the 2021 Incentive Plan:

Company did not grant any options during the three months ending March 31, 2023.

The following table

summarizes the Company’s stock option activity under the 2021 Incentive Plan:

Schedule of stock option activity

7 unchanged sentences

Exercisable at end of period

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

30, 2022 is $0, as all options are out of the money.

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:

The aggregate intrinsic

value of options outstanding and options exercisable as of March 31, 2023 is $1,173,130, as all options are in the money.

The weighted-average

grant-date fair value of the options granted during the three months ended March 31, 2023 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 March 31, 2023.

Common Stock Reserved

for Future Issuance

following is a summary of common stock shares reserved for future issuance as of March 31, 2023:

Schedule of common stock shares reserved for future issuance

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.

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

Company has incurred losses and consequently recorded no provision for state or federal income taxes for the three months ended March

The Company maintains a full valuation allowance on all deferred tax assets, as it has concluded that it is more likely than

not that these assets will not be realized.

As of March 31, 2023 and December 31, 2022, there were no material unrecognized tax benefits

included in the accompanying balance sheets that would, if recognized, affect the effective tax rate.

For the three months ended March

31, 2023 and 2022, the Company incurred a provision for state franchise fees of $ 0 and $ 150 , respectively.

Company adopted a 401(k) Plan (“Plan”) for the benefit of its employees.

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Related Party Transactions

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

Shareholder Promissory Notes).

of March 31, 2023 and December 31, 2022, related party transactions consisted of Shareholder Promissory Notes (see Note 8 – Shareholder

Promissory Notes).

Subsequent Events

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.

date to which events occurring after March 31, 2023, the date of the most recent Balance Sheets, have been evaluated for possible adjustment

to the financial statements or disclosures is May 10, 2023, which is the date the financial statements were issued.

April 2023, the Company had 22,606 cashless warrants exercised resulting in 10,151 additional shares of common stock issued.

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