0001903596-22-000281 | 10-Q | XBRL Viewer

Total future minimum lease payments

Cover - shares	3 Months Ended
Cover - shares	Mar. 31, 2022	May 05, 2022
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Quarterly Report	true
Document Transition Report	false
Document Period End Date	Mar. 31, 2022
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2022
Current Fiscal Year End Date	--12-31
Entity File Number	333-262285
Entity Registrant Name	EXPION360 INC.
Entity Central Index Key	0001894954
Entity Tax Identification Number	81-2701049
Entity Incorporation, State or Country Code	NV
Entity Address, Address Line One	2025 SW Deerhound Ave
Entity Address, City or Town	Redmond
Entity Address, State or Province	OR
Entity Address, Postal Zip Code	97756
City Area Code	(541)
Local Phone Number	797-6714
Title of 12(b) Security	Common Stock, $.001 par
Trading Symbol	XPON
Security Exchange Name	NASDAQ
Entity Current Reporting Status	No
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	true
Elected Not To Use the Extended Transition Period	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		6,790,560

Balance Sheets (Unaudited) - USD ($)	Mar. 31, 2022	Dec. 31, 2021
Current Assets
Cash and cash equivalents	$ 799,349	$ 773,238
Accounts receivable	579,638	775,160
Inventory	2,303,497	2,051,880
Prepaid/in-transit inventory	294,846	1,081,225
Prepaid expenses and other current assets	95,112	71,703
Deferred IPO costs	423,634
Total current assets	4,496,076	4,753,206
Property and equipment	704,527	523,419
Accumulated depreciation	(125,216)	(96,190)
Property and equipment, net	579,311	427,229
Other Assets
Operating leases – right-of-use asset	3,527,335	1,281,371
Deposits	63,901	63,901
Total other assets	3,591,236	1,345,272
Total assets	8,666,623	6,525,707
Current liabilities
Accounts payable	341,700	63,180
Customer deposits	423,985	436,648
Accrued expenses and other current liabilities	266,700	140,618
Line of credit and short-term revolving loans	550,000	550,000
Current portion of operating lease liability	466,013	218,788
Liability for sale of future revenues, net		11,502
Note payable in default	100,000	100,000
Current portion of long-term debt	50,465	51,135
Total current liabilities	2,198,863	1,571,871
Long-term debt, net of current portion and discount	982,735	779,486
Operating lease liability, net of current portion	3,100,389	1,092,861
Shareholder promissory notes	825,000	825,000
Total liabilities	7,106,987	4,269,218
Stockholders’ equity
Preferred stock, par value $.001; 20,000,000 shares authorized; 0 zero shares issued and outstanding
Common stock, par value $.001; 200,000,000 shares authorized; 4,300,000 issued and outstanding as of March 31, 2022 and December 31, 2021	4,300	4,300
Additional paid-in capital	8,355,140	8,355,140
Accumulated deficit	(6,799,804)	(6,102,951)
Total stockholders’ equity	1,559,636	2,256,489
Total liabilities and stockholders’ equity	$ 8,666,623	$ 6,525,707

Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Mar. 31, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Preferred stock, par value	$ 0.001	$ 0.001
Preferred stock, shares authorized	20,000,000	20,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	200,000,000	200,000,000
Common stock, shares issued	4,300,000	4,300,000
Common stock, shares outstanding	4,300,000	4,300,000

Statements of Operations (Unaudited) - USD ($)	3 Months Ended
Statements of Operations (Unaudited) - USD ($)	Mar. 31, 2022	Mar. 31, 2021
Income Statement [Abstract]
Sales, net	$ 2,155,345	$ 884,993
Cost of sales	1,293,490	609,971
Gross profit	861,855	275,022
Selling, general and administrative	1,196,376	317,415
Loss from operations	(334,521)	(42,393)
Other (Income)
Interest Income		(147)
Debt conversion expense		112,133
Interest expense	362,114	92,814
Miscellaneous	68
Total other expense	362,182	204,800
Loss before taxes	(696,703)	(247,193)
Franchise taxes	150	0
Net loss	$ (696,853)	$ (247,193)
Net loss per share (basic and diluted)	$ (0.16)	$ (0.10)
Weighted-average number of common shares outstanding	4,300,000	2,501,929

Statements of Stockholders' Equity (Deficit) (Unaudited) - USD ($)	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Total
Beginning balance, value at Dec. 31, 2020	$ 2,431		$ (1,382,093)	$ (1,379,662)
Balance at beginning, Shares at Dec. 31, 2020	2,430,514
Issuance of membership units (shares) upon conversion of convertible notes	$ 59	173,098		173,157
Issuance of membership units (shares) upon conversion of convertible notes, Shares	59,515
Effect of induced conversion of debt		112,133		112,133
Issuance of membership units (shares) in exchange for building signage	$ 7	19,993		20,000
Issuance of membership units (shares) in exchange for building signage, Shares	6,667
Issuance of membership units (shares) for cash	$ 81	269,919		270,000
Issuance of membership units (shares) for cash, Shares	81,106
Net loss			(247,193)	(247,193)
Ending balance, value at Mar. 31, 2021	$ 2,577	575,143	(1,629,286)	(1,051,565)
Balance at ending, Shares at Mar. 31, 2021	2,577,802
Beginning balance, value at Dec. 31, 2021	$ 4,300	8,355,140	(6,102,951)	2,256,489
Balance at beginning, Shares at Dec. 31, 2021	4,300,000
Net loss			(696,853)	(696,853)
Ending balance, value at Mar. 31, 2022	$ 4,300	$ 8,355,140	$ (6,799,804)	$ 1,559,636
Balance at ending, Shares at Mar. 31, 2022	4,300,000

Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
Statements of Cash Flows (Unaudited) - USD ($)	Mar. 31, 2022	Mar. 31, 2021
Cash flows from operating activities
Net loss	$ (696,853)	$ (247,193)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation	29,026	10,314
Amortization of debt discount (sale of future revenues)	295	33,471
Amortization of debt discount - notes	214,527
Debt conversion expense on induced conversion of convertible notes		112,133
Changes in operating assets and liabilities:
(Increase) Decrease in accounts receivable	195,522	(230,779)
Increase in inventory	(251,617)	(67,304)
Decrease in prepaid/in-transit inventory	786,379	149,777
Increase in prepaid expenses and other current assets	(23,409)	(5,461)
Increase in deposits		(17,971)
Increase (Decrease) in accounts payable	278,520	(19,261)
Decrease in customer deposits	(12,663)
Increase (Decrease) in accrued expenses and other current liabilities	(22,088)	9,775
Decrease in liability for refunds		(33,020)
Increase in right-of-use assets and lease liabilities	8,789	7,067
Net cash provided by (used in) operating activities	506,428	(298,452)
Cash flows from investing activities
Purchases of property and equipment	(32,938)	(27,424)
Net cash used in investing activities	(32,938)	(27,424)
Cash flows from financing activities
Increase in deferred IPO costs	(423,634)
Proceeds from sale of future revenues		125,000
Payments on liability for sale of future revenues	(11,797)	(72,865)
Principal payments on long-term debt	(11,948)	(3,823)
Proceeds from issuance of membership units (shares)		270,000
Net cash provided by (used in) financing activities	(447,379)	318,312
Net change in cash and cash equivalents	26,111	(7,564)
Cash and cash equivalents, beginning	773,238	290,675
Cash and cash equivalents, ending	799,349	283,111
Supplemental disclosure of cash flow information:
Cash paid for interest	119,854	87,354
Cash paid for franchise taxes	150
Non-cash operating activities:
Purchases of property and equipment in exchange for membership units (shares) of common stock		20,000
Purchases of property and equipment in exchange for accrued expenses and other current liability	148,170	16,633
Reclassification of deposit to property and equipment		2,000
Reclassification of convertible note to long-term debt		100,000
Acquisition of operating lease right-of-use asset and lease liability	2,348,509	1,268,089
Conversion of 2020 convertible notes to membership units (shares) of common stock		$ 173,157

Organization and Nature of Operations

3 Months Ended

Mar. 31, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Nature of Operations

1. Organization and Nature of Operations

Expion360 Inc. (formerly Yozamp Products Company, LLC dba Expion360) (“the Company”) was incorporated in the state of Nevada in November 2021. Effective November 1, 2021, the Company converted to a C corporation. Prior to conversion, the Company was a limited liability company (LLC) with an indefinite life organized in the State of Oregon in June 2016. The LLC elected to be treated as a Subchapter S corporation effective January 1, 2017. Net profits and losses of the LLC and all distributions were allocated among the members in proportion to the ownership units held. The Original LLC Agreement was amended and restated on January 1, 2021 to add additional members and a non-voting class of member units. Upon conversion to a C corporation, all existing LLC members at the time of conversion were issued shares of common stock and became shareholders of the Company. (See Note 15 – Conversion to a C Corporation).

The Company designs, assembles, and distributes premium lithium batteries for RV, Marine, Golf, Industrial, Residential, and Off-The-Grid needs. The Company uses lithium iron phosphate (LiFePO4) batteries. LiFePO4 batteries are considered a top choice for high energy density, dependability, longevity, and safety, providing the ability to power anything, anywhere.

Beginning in March 2020, the COVID-19 pandemic and the measures imposed to contain this pandemic have disrupted and are expected to continue to impact the Company’s business. The magnitude of the impact of the COVID-19 pandemic on the Company’s productivity, results of operations and financial position, and its disruption to the Company’s business and battery development and timeline, will depend in part, on the length and severity of these restrictions and on the Company’s ability to conduct business in the ordinary course.

Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information, and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X promulgated by the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statement presentation. However, the Company believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (consisting primarily of normal recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. The unaudited interim condensed financial statements should be read in conjunction with the Company’s financial statements and related notes as of and for the year ended December 31, 2021, as disclosed in the Company’s prospectus, dated March 31, 2022, filed with the SEC in accordance with Rule 424(b) of the Securities Act on April 4, 2022 (the “Prospectus”) in connection with the Company’s initial public offering.

Unless 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.

Liquidity and Capital Resources

The Company has sustained recurring losses up until first quarter of 2022 and has negative cash flows from operations through December 31, 2021. Over the past year, the Company’s growth has been funded through a combination of private equity, third party debt, and working capital loans. Throughout 2021, the Company incurred substantial costs and expenses to build its infrastructure and prepare for growth, including the addition of new facilities, human resources with competitive benefits, and incurred legal, tax and accounting fees in preparation for an initial public offering (IPO).

The Company’s sales for the three months ended March 2022 increased 143% over sales for the three months ended March 31, 2021, as product demand continued to rise.

On April 1, 2022, the Company completed an initial public offering (see Note 21 – Subsequent Events). Net proceeds from the IPO totaled $15,735,870, net of issuance costs of $1,531,380, of which approximately $2,250,000 was used to pay down principal on high interest-bearing debt, which will help to improve monthly cash flows going forward. The remaining proceeds will be used, in part, to stock inventory and keep up with demand and to build in-house assembly lines to improve the cash-flow cycle, side-stepping the four-month turn-around that the Company currently experiences from suppliers in China. In the first quarter of 2022, a distribution warehouse was set up in Indiana to better service customers throughout the U.S. Additionally, management has secured a secondary source for lithium-ion phosphate cells used in its batteries that is based in Denmark, should supply disruption issues with China arise. Management believes that these factors will contribute to achieving operating efficiency and profitability. However, there can be no assurance that the Company will be successful in achieving its objectives, including achieving operating efficiency and profitability.

The Company believes that as a result of the IPO, it currently has sufficient cash to meet its funding requirements over the next eighteen months. However, the Company has experienced and continues to experience negative operating margins, although, as noted above, achieved positive cash flows from operations for the three months ended March 31, 2022. The Company expects that it may need to raise additional capital in the future to expand its presence in the marketplace and achieve operating efficiencies, and to accomplish its long-term business plan over the next several years. There can be no assurance as to the availability or terms upon which such financing and capital might be available.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could vary materially from the estimates that were used. The Company’s significant accounting estimates include the carrying value of accounts receivable and inventory, the depreciable lives of fixed assets, and reserves for returns and allowances.

Future events, including the extent and the duration of the COVID-19-related economic impacts and their effects, cannot be predicted with certainty and, accordingly, the Company’s accounting estimates require the exercise of judgment.

Cash and Cash Equivalents

The Company considers all cash amounts which are not subject to withdrawal restrictions or penalties and all highly liquid investments purchased with an original maturity of three months or less from the date of purchase to be cash equivalents. The Company maintains its cash balances with high-quality financial institutions located in the United States. Accounts are secured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000 per institution. At times, balances may exceed federally insured limits. The Company has not experienced any losses in such accounts and management believes that the Company is not exposed to any significant credit risk with respect to its cash and cash equivalents. At March 31, 2022, cash balances exceeded FDIC limits by approximately $373,380.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount, are due within a year or less, and generally do not bear any interest. The Company performs ongoing credit evaluations of its customers and generally requires no collateral. An allowance for uncollectible accounts is recorded to reduce accounts receivable to the estimated amount that will be collected. The allowance is based upon management’s review of the accounts receivable aging and specific identification of potentially uncollectible balances. Recoveries of accounts previously written off and adjustments to the allowance for uncollectible accounts are recorded as adjustments to bad debt expense. There was no allowance for doubtful accounts at March 31, 2022 and December 31, 2021, as management believed all outstanding amounts to be fully collectible.

Customer Deposits

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

Inventory

Inventory is stated at the lower of cost (first in, first out) or net realizable value and consists of batteries and accessories, resale items, components, and related landing costs. Through 2020, the Company operated primarily as a distributor, and inventory consisted of inventory parts and products purchased for resale. The Company began in-house assembly in 2021 and as of March 31, 2022 and December 31, 2021, inventory consisted of finished assemblies totaling $1,039,554 and $985,537, respectively, and raw materials (inventory components, parts, and packaging) totaling $1,263,943 and $1,066,343, respectively. The valuation of inventory includes fixed production overhead costs based on normal capacity of the assembly warehouse.

The Company periodically reviews its inventory for evidence of slow-moving or obsolete inventory and provides for an allowance when considered necessary. The Company determined that no such reserve was necessary as of March 31, 2022 and December 31, 2021. The Company prepays for inventory purchases from foreign suppliers. Prepaid inventory totaled $294,846 and $1,081,225 at March 31, 2022 and December 31, 2021, respectively, and included inventory in transit where title had passed to the Company but had not yet been physically received.

Vendor and Foreign Concentrations of Inventory Suppliers

During the three months ended March 31, 2022 and 2021, approximately 59% and 93%, respectively, of inventory purchases were made from foreign suppliers in China and Hong Kong. An adverse change in either the economic or political conditions abroad could negatively impact the Company’s supply chain. The inability to obtain product to meet sales demand could adversely affect results of operations. 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

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

Schedule of estimated useful lives
Vehicles and transportation equipment			5 - 7 years
Office furniture and equipment			3 - 7 years
Molds			5 – 10 years
Warehouse equipment			3 - 10 years

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

Betterments, renewals, and extraordinary repairs that extend the lives of the assets are capitalized; other repairs and maintenance charges are expensed as incurred. The cost and related accumulated depreciation and amortization applicable to assets retired are removed from the accounts, and the gain or loss on disposition is recognized in the Statements of Operations.

Leases

The Company determines if an arrangement is a lease at inception. Operating lease right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset during the lease term, and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating leases are included in ROU assets, current operating lease liabilities, and long-term operating lease liabilities on the Company’s Balance Sheets. The Company does not have any finance leases.

Lease ROU assets and lease liabilities are initially recognized based on the present value of the future minimum lease payments over the lease term at commencement date calculated using the Company’s incremental borrowing rate applicable to the lease asset, unless the implicit rate is readily determinable. ROU assets also include any lease payments made at or before lease commencement and exclude any lease incentives received. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Leases with a term of 12 months or less are not recognized on the Company’s Balance Sheet. The Company’s leases do not contain any residual value guarantees. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

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

Impairment of Long-Lived Assets

Long-lived assets consist primarily of property and equipment. When events or circumstances indicate the carrying value of a long-lived asset may be impaired, the Company estimates the future undiscounted cash flows to be derived from the use and eventual disposition of the asset to assess whether or not a potential impairment exists. If the carrying value exceeds the estimate of future undiscounted cash flows, the impairment is calculated as the excess of the carrying value of the asset over the estimate of its fair value. Fair value is determined primarily using the estimated cash flows discounted at a rate commensurate with the risk involved. No long-lived asset impairment was recognized during the three months ended March 31, 2022 and 2021.

Product Warranties

The Company sells the majority of its products to customers along with unconditional repair or replacement warranties. The Company’s branded DC mobile chargers are warranted for two years from date of sale and its branded VPR 4EVER Classic and Platinum batteries are warranted at gradually lesser levels over a twelve-year period from date of sale. The Company determines its estimated liability for warranty claims based on the Company’s experience of the amount of claims actually made. Management estimates no liability as of March 31, 2022 and December 31, 2021 because, historically, there have been very few claims and costs for repairs or replacement parts have been nominal. It is reasonably possible that the Company’s estimate of a liability for product liability claims will change in the near term.

Liability for Refunds

The Company does not have a formal return policy but does accept returns under its warranty policies. Returns have historically been minimal. However, during 2020 the Company sold discontinued products and recorded a liability for refunds. As of December 31, 2020, the liability totaled $58,000. During the three months ended March 31, 2021, the Company issued credit totaling $33,020 reducing the liability to $24,980 as of March 31, 2021. As of December 31, 2021, all allowable discontinued product had been returned and the Company has no further refund 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

The 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 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

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

During the three months ended March 31, 2022, sales to one customer totaled $896,984, comprising approximately 42% of total sales. Accounts receivable from this customer totaled $114,674, representing approximately 20% of total accounts receivable as of March 31, 2022. Amounts from two additional customers totaled $151,494 and $73,065, representing in aggregate approximately 39% of total accounts receivable as of March 31, 2022.

During the three months ended March 31, 2021, sales to two customers totaled $143,652 and $123,980, respectively, comprising approximately 16% and 14%, respectively, of total sales. Accounts receivable from these customers totaled $59,340 and $123,980, representing in aggregate approximately 42% of total accounts receivable as of March 31, 2021.

Shipping and Handling Costs

Shipping and handling fees billed to customers are classified on the Statement of Operations as “Sales, net” and totaled $4,151 and $5,191 during the three months ended March 31, 2022 and 2021, respectively. Shipping and handling costs for shipping product to customers totaled $38,724 and $24,634 during the three months ended March 31, 2022 and 2021, respectively, and are classified in selling, general and administrative expense in the accompanying Statements of Operations.

Advertising and Marketing Costs

The Company expenses advertising and marketing costs as incurred. Advertising and marketing expense totaled $35,946 and $14,069 for the three months ended March 31, 2022 and 2021, respectively, and is included in selling, general and administrative expense in the accompanying Statements of Operations.

Research and Development

Research and development costs are expensed as incurred. Research and development costs charged to expense amounted to $5,316 and $6,759 for the three months ended March 31, 2022 and 2021, respectively, and are included in selling, general and administrative expenses in the accompanying Statements of Operations.

Income Taxes

From January 1, 2017 to October 31, 2021, the Company was not subject to federal or state income taxes since it was a limited liability company taxed as an S corporation. The Company’s taxable income or losses were allocated to its members in accordance with their respective ownership percentage. Therefore, no provision or liability for federal income taxes had been included in the accompanying financial statements. Certain states impose minimum franchise taxes on entities taxed as an S corporation. Accordingly, the accompanying financial statements include provisions for state franchise tax fees.

Effective November 1, 2021, the Company converted from an LLC to a C corporation and, as a result, became subject to corporate federal and state income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of exiting assets and liabilities and their respective tax basis. Deferred tax assets, including tax loss and credit carryforwards, and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. Deferred income tax expense represents the change during the period in the deferred tax assets and deferred tax liabilities. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.

On March 27, 2020, the United States enacted the Coronavirus Aid, Relief and Economic Security Act (CARES Act). The Cares Act is an emergency economic stimulus package that includes spending and tax breaks to strengthen the United States economy and fund a nationwide effort to curtail the effect of COVID-19. The CARES Act provides sweeping tax changes in response to the COVID-19 pandemic. Some of the more significant provisions are removal of certain limitations on utilization of net operating losses, increasing the loss carryback period for certain losses to five years, and increasing the ability to deduct interest expense, as well as amending certain provisions of the previously enacted Tax Cuts and Jobs Act. At March 31, 2022 and December 31, 2021, the Company has not recorded any income tax provision/(benefit) resulting from the CARES Act, mainly due to the Company’s history of net operating losses generated.

On December 27, 2020, the United States enacted the Consolidated Appropriations Act of 2021 (“CAA”). The CAA includes provisions extending certain CARES Act provisions and adds coronavirus relief, tax and health extenders. The Company will continue to evaluate the impact of the CAA and its impact on its financial statements in 2022 and beyond.

Fair Value of Financial Instruments

The Company accounts for its financial assets and liabilities in accordance with ASC Topic 820, Fair Value Measurement. ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value, as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities that are accessible at the measurement date. The fair value hierarchy gives the highest priority to Level 1 inputs.

Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data. These inputs include quoted prices for similar assets or liabilities; quoted market prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. In determining fair value, we utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible, as well as consider counterparty credit risk in the assessment of fair value.

The Company’s financial instruments consist principally of cash and cash equivalents, accounts receivable, accounts payable, short-term revolving loans, shareholder promissory notes, convertible notes, and long-term debt. The fair value of cash and cash equivalents, accounts receivable, accounts payable, and short-term revolving loans approximates their respective carrying values because of the short-term nature of those instruments. The fair value of the shareholder promissory notes, convertible notes, and long-term debt approximates their respective carrying values because the interest rate approximates market rates available to the Company for similar obligations with the same maturities.

Segment Reporting

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

Basic and Diluted Net Loss Per Share

The basic net loss per share is calculated by dividing the net loss by the weighted average number of shares outstanding during the period. Diluted earnings or loss per share adjusts the basic earnings or loss per share for the potentially dilutive impact of securities (e.g., options and warrants).

As of March 31, 2022, the Company has outstanding warrants and options convertible into 740,431 shares of common stock (see Note 20 – Stockholders’ Equity). For the three months ended March 31, 2022, the basic loss and diluted loss per share was ($.16). For the three months ended March 31, 2021, the Company did not have any dilutive securities and the basic net loss per share of ($.10) equaled the diluted net loss per share.

We calculate basic and diluted net loss per share using the weighted average number of common shares outstanding during the periods presented. In periods of a net loss position, basic and diluted weighted average common shares are the same. For the diluted earnings per share calculation, we adjust the weighted average number of common shares outstanding to include dilutive stock options, warrants, unvested restricted stock units and shares associated with the conversion of any convertible notes or preferred stock, when applicable. We use the if-converted method for calculating any potential dilutive effect of convertible notes and convertible preferred stock on diluted net loss per share.

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

Schedule of net loss per share
	March 31, 2022			March 31, 2021
Net loss	$	(696,853	)	$	(247,193	)
Weighted average common shares outstanding – basic and diluted		4,300,000			2,501,929
Basic and diluted net loss per share	$	(0.16	)	$	(0.10	)

The following table sets forth the number of shares excluded from the computation of diluted loss per share, as their inclusion would have been anti-dilutive.

Schedule of anti-dilutive shares
	March 31, 2022		March 31, 2021
Stock options		30,000		—
Warrants		710,431		—
		740,430		—

New Accounting Pronouncements

In 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.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Under ASU 2020-06, the embedded conversion features are no longer separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives under Topic 815, Derivatives and Hedging, or that do not result in substantial premiums accounted for as paid-in capital. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost, as long as no other features require bifurcation and recognition as derivatives. Similarly, equity-classified convertible preferred stock instruments will be accounted for as single units of account in equity unless the conversion feature needs to be bifurcated under Topic 815. The new guidance also made amendments to the earnings per share guidance in Topic 260, Earnings Per Share, for convertible instruments, the most significant impact of which is requiring the use of the if-converted method for diluted earnings per share calculation. 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.

In 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.

Accounting Guidance Issued but Not Yet Adopted

In March 2022, the FASB issued ASU 2022-02, “Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures,” which addresses and amends areas identified by the FASB as part of its post-implementation review of the accounting standard that introduced the current expected credit losses (“CECL”) model. The amendments eliminate the accounting guidance for troubled debt restructurings by creditors that have adopted the CECL model and enhance the disclosure requirements for loan refinancings and restructurings made with borrowers experiencing financial difficulty. In addition, the amendments require disclosure of current-period gross write-offs for financing receivables and net investment in leases by year of origination in the vintage disclosures. For entities, such as Expion360 Inc., that have not yet adopted the CECL accounting model in ASU 2016-13, the effective date for the amendments in ASU 2022-02 is the same as the effective date in ASU 2016-13 (i.e., fiscal years beginning after December 15, 2022, including interim periods within those fiscal years). The Company is currently evaluating the impact of this standard on our financial statements.

In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” ASU 2021-08 requires contract assets and contract liabilities acquired in a business combination to be recognized and measured in accordance with Topic 606, Revenue from Contracts with Customers, on the acquisition date as if the acquirer had entered into the original contract at the same date and on the same terms as the acquiree. ASU 2021-08 is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years for public business entities. The Company is currently evaluating the impact of this standard on our financial statements.

In June 2016, the FASB issued ASU 2016-13, Measurement of Credit Losses on Financial Instruments. This ASU replaces the incurred loss impairment methodology in current U.S. GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information for credit loss estimates on certain types of financial instruments, including trade receivables. In addition, new disclosures are required. The ASU, as subsequently amended, is effective for the Company for fiscal years beginning after December 15, 2022. The Company is currently evaluating the impact of adopting this guidance.

Property and Equipment, Net

3 Months Ended

Mar. 31, 2022

Property, Plant and Equipment [Abstract]

Property and Equipment, Net

3. Property and Equipment, Net

Property and equipment consist of the following:

Schedule of property and equipment
	March 31, 2022			December 31, 2021

Vehicles and transport	$	298,752		$	298,752
Leasehold improvements		207,486			59,316
Office furniture and equipment		131,039			105,003
Warehouse equipment		51,258			44,356
Molds		15,992			15,992
		704,527			523,419

Less: accumulated depreciation		(125,216	)		(96,190	)
Property and equipment, net	$	579,311		$	427,229

The Company recorded $29,026 and $10,314 of depreciation expense related to its property and equipment for the three months ended March 31, 2022 and 2021, respectively.

Accrued Expenses and Other Current Liabilities

3 Months Ended

Mar. 31, 2022

Payables and Accruals [Abstract]

Accrued Expenses and Other Current Liabilities

4. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consist of the following:


	March 31, 2022		December 31, 2021

Accrued salaries and payroll liabilities	$	135,270	$	12,449
Accrued interest		54,035		26,301
Rebate liability		26,015		23,010
Commissions		19,046		29,120
Deferred income and deposit (sublease)		14,038		13,690
Franchise tax		9,300		9,300
Credit cards		6,928		23,933
Other		2,068		2,815
Accrued expenses and other current liabilities	$	266,700	$	140,618

Liabilities for Sale of Future Revenues

3 Months Ended

Mar. 31, 2022

Liabilities For Sale Of Future Revenues

Liabilities for Sale of Future Revenues

5. Liabilities for Sale of Future Revenues

On December 8, 2020 and January 26, 2021, Reliant Funding, under two separate ACH Total Receipts Purchase Agreements (“Purchase Agreements”), purchased a 50% interest in the Company’s future revenues for a total aggregate purchase price of $250,000. Pursuant to the terms of the Purchase Agreements, the purchased percentage shall continue to be owned by Reliant Funding, until the Company has paid the full purchased amount of $349,750. Repayment of the purchased amount is achieved through 252 daily bank account withdrawals of $1,388 through December 15, 2021 and $694 thereafter through January 26, 2022. During the three months ended March 31, 2022 and 2021, the Company repaid a total of $11,797 and $72,865, respectively, including $295 and $33,471, respectively, of interest at an effective annual interest rate of approximately 71%. As of March 31, 2022 the Company had no remaining liability related to the Purchase Agreements. As of December 31, 2021, the Company had a total remaining liability related to the Purchase Agreements of $11,502 and total remaining payments of $11,797 (including interest). The Purchase Agreements were secured by substantially all of the assets of the Company.

Line of Credit and Short-Term Revolving Loans

3 Months Ended

Mar. 31, 2022

Debt Disclosure [Abstract]

Line of Credit and Short-Term Revolving Loans

6. Line of Credit and Short-Term Revolving Loans

From January 2020 to October 2020, the Company received proceeds totaling $900,000 pursuant to four unsecured Working Capital Loan Agreements (“WC Loans”) with two different outside investors. Pursuant to the terms of the WC Loans, the Company may borrow, repay and reborrow loans within the limit established within each WC Loan.

The 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.

$200,000 limit – dated March 22, 2020; monthly interest-only payments at 15% 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. The Company paid $50,000 towards the principal balance in November 2021. The balance of $150,000 was paid in full in April 2022 (see below).

$400,000 limit – dated August 31, 2020; monthly interest-only payments at 10% annual interest; pursuant to the WC Loan, the maturity was to be determined by mutual agreement and was to be at least 30 days after a maturity date is agreed upon. The note was modified effective January 1, 2021 to establish a maturity date of December 31, 2021, and was paid in full in April 2022 (see below).

Effective 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.

As of March 31, 2022 and December 31, 2021, a balance of $550,000 remains outstanding under the WC Loan Agreements and in accordance with the modified terms, the Company is subject to monthly extended maturity interest of one percent on the ending outstanding monthly balance which increases one percent for each month beyond the extended maturity date. The Company remained in compliance with all interest payments and paid the WC Loans in full in April 2022 (see Note 21 – Subsequent Events).

All fees incurred in connection with obtaining and modifying these agreements were nominal and, given the short-term maturity of one year, were expensed as incurred. There was no accounting impact to the financial statements related to the modifications.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-URI https://asc.fasb.org/topic&trid=2208564

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-Subparagraph (h)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1C
-Subparagraph (c)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1I
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1I
-Subparagraph (d)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(c))
-URI https://asc.fasb.org/extlink&oid=120395691&loc=d3e23780-122690

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-Subparagraph (g)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1C
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1C
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495334-112611

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1E
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495348-112611

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1I
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495371-112611

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 470
-SubTopic 20
-Section 50
-Paragraph 1B
-Subparagraph (i)
-URI https://asc.fasb.org/extlink&oid=123466505&loc=SL123495323-112611

+ Details

Long-Term Debt

3 Months Ended

Mar. 31, 2022

Debt Disclosure [Abstract]

Long-Term Debt

7. Long-Term Debt

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

Schedule of long-term debt
	March 31, 2022			December 31, 2021
Senior secured promissory notes – various investors. Monthly payments of interest only at 10% plus deferred interest of 5% accrued monthly to be paid at maturity. A minimum of one year interest is due at maturity. Matures the earlier of (a) May 15, 2023, (b) the closing of a qualified subsequent financing or (c) the closing of a change of control. The notes are senior to all other debt and are secured by substantially all assets of the Company. The notes include detachable warrants to purchase 482,268 shares of common stock at an exercise price of $3.32 per share (see Note 21 – Stockholders’ Equity). Debt issuance costs and discount totaling $1,287,160 at date of issuance are being amortized and recognized as additional interest expense over the term of the notes using the straight-line method because it is not substantially different from the effective interest rate method. We determined the expected life of the notes to be the contractual term. Interest expense related to these notes includes amortization of debt issuance costs and discount in the amount of $214,527 for the three months ended March 31, 2022. Paid in full in April 2022 (see Note 21 – Subsequent Events)	$	1,600,000		$	1,600,000
Note payable – bank. Payable in monthly installments of $332, including interest at 5.8% per annum, due August 2025, secured by equipment and personally guaranteed by a shareholder.		12,325			13,135
Note payable – credit union. Payable in monthly installments of $508, including interest at 5.45% per annum, due July 2026, secured by a vehicle and personally guaranteed by a shareholder.		23,060			24,259
Note payable – SBA. Economic Injury Disaster Loan payable in monthly installments of $731, including interest at 3.75% per annum, due May 2050, and personally guaranteed by a shareholder.		152,435			153,193
Note payable – individual. Monthly payments of interest only at 10% per annum, matured December 31, 2021 resulting in the entire principal balance recorded in current portion of long-term debt on the accompanying Balance Sheets; pursuant to the note, the past due balance is subject to 1% additional monthly interest which increases one percent for each month beyond maturity date, unsecured. The Company remained in compliance with the extended maturity interest payments; paid in full in April 2022 (see Note 21 – Subsequent Events)		100,000			100,000
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.		43,809			45,832
Note payable – finance company. Payable in monthly installments of $2,204, including interest at 11.21% per annum, due August 2026, secured by a vehicle and personally guaranteed by a shareholder.		92,294			96,155
Note payable – finance company. Payable in monthly installments of $834, including interest at 7.29% per annum, due October 2027, secured by a vehicle and personally guaranteed by a member/shareholder.		45,797			47,445
Note payable – finance company. Payable in monthly installments of $834, including interest at 7.29% per annum, due October 2027, secured by a vehicle and personally guaranteed by a shareholder.		45,797			47,445
Total	$	2,115,517		$	2,127,464
Less unamortized debt issuance costs and discount		(982,317	)		(1,196,843	)
Less current portion		(50,465	)		(51,135	)
Less note payable in default (paid April 2022)		(100,000	)		(100,000	)
Long-term debt, net of unamortized debt discount and current portion	$	982,735		$	779,486

Schedule of long term debt payment
	Future maturities of long-term debt are as follows:

	Years ending March 31,
	2023	$	150,465
	2024		1,655,061
	2025		60,133
	2026		63,362
	2027		39,441
	Thereafter		147,055
	Total	$	2,115,517

Shareholder Promissory Notes

3 Months Ended

Mar. 31, 2022

Shareholder Promissory Notes

Shareholder Promissory Notes

8. Shareholder Promissory Notes

As of March 31, 2022 and December 31, 2021, the Company had an outstanding principal balance of $825,000 due to shareholders (formerly LLC members) under unsecured Promissory Notes Agreements (“Notes”). The Notes require monthly interest-only payments at 10% per annum. The Notes mature at various dates from August 2023 to December 2024 as follows: August 2023 - $500,000; January 2024 - $125,000; and December 2024 - $200,000. Interest paid to the shareholders under the Notes totaled $20,627 and $26,876 during the three months ended March 31, 2022 and March 31, 2021, respectively. There was no accrued interest as of March 31, 2022 and December 31, 2021 related to these Notes.

On May 15, 2021, the Company modified one shareholder Note in the amount of $250,000 to be a convertible note for the same amount. The shareholder also invested additional proceeds of $24,000 for a total convertible note of $274,000. The convertible note included detachable warrants to purchase 548,000 shares of the Company’s common stock. The convertible note bore interest at a rate of 10% per annum, had an initial maturity of two years from date of issue, and was convertible at $.50 per share. The modification resulted in a new effective annual interest rate of 9.15%. There was no accounting impact to the financial statements related to these modifications. On October 29, 2021, concurrent with the anticipated conversion from an LLC to a C corporation, the convertible note and warrants were modified under a Convertible Debenture Exercise and Waiver and Release Agreement and the shareholder agreed to convert the note and accrued interest into 236,498 shares of common stock resulting in a conversion price of $1.21 per share (see Note 10 – 2021 Convertible Notes/Extinguishment Loss on Debt Settlement).

2020 Convertible Notes

3 Months Ended

Mar. 31, 2022

Convertible Notes

2020 Convertible Notes

9. 2020 Convertible Notes

In August and October of 2020, the Company received proceeds totaling $270,000 from the issuance of four Convertible Notes (“Notes”). The Notes accrued monthly interest at 6% per annum and included two options for conversion: (1) Automatic conversion of the principal balance and accrued interest into new financing securities issued in a new financing round of at least $1 million, not including the Notes — the conversion price to equal 85% of the price per unit at which the investor in the new financing purchased their equity securities; and (2) Optional conversion in founder securities if (a) the Company gives the investor notice of its intent to prepay the Note or (b) the Company has not consummated a new financing prior to maturity. The conversion price was equal to $17 million divided by the number of founder securities outstanding at the date of the Notes (100,000 LLC units), or $170 per unit. The Notes were to mature three years from date of issue. The outstanding balance at December 31, 2020 was $273,157, including accrued interest of $3,157, which was recognized as interest expense during 2020.

Under the first conversion option, the conversion was contingent upon a future event, and therefore the difference between the conversion price and the fair value of the equity units on the commitment date (transaction date) was not recognized. Under the second option, the conversion price of $170 exceeded the fair value of the Company’s units of $85 at date of issue and therefore no beneficial conversion feature was recorded.

In late 2020, all convertible debt holders were offered the opportunity for early conversion of their convertible notes into Class B LLC member units effective January 1, 2021. Three of the four convertible note holders converted notes with a principal balance of $170,000 and accrued interest of $3,157 into 2,338 Class B member units (the equivalent of 59,515 shares of common stock) at per unit conversion prices ranging from $67 - $76 (per share prices ranging from $2.66 - $3.00). In accordance with FASB ASC 470-20, Debt with Conversion and Other Options, the fair value of the additional units issued under the induced conversion over the value of the number of units issuable under the original terms of the convertible note agreements is recognized as debt conversion expense. Accordingly, upon early conversion on January 1, 2021, the Company recognized $112,133 of debt conversion expense with a corresponding entry to equity of $285,290 consisting of the $173,157 of principal and accrued interest converted and the excess fair value of $112,133.

The 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 – Line of Credit and 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 (see Note 21 – Subsequent Events)

2021 Convertible Notes/Extinguishment Loss on Debt Settlement

3 Months Ended

Mar. 31, 2022

Convertible Notesextinguishment Loss On Debt Settlement

2021 Convertible Notes/Extinguishment Loss on Debt Settlement

10. 2021 Convertible Notes/Extinguishment Loss on Debt Settlement

From May to September 2021, the Company received gross proceeds of $2,929,000 from the issuance of unsecured convertible notes (the “Notes”), of which $44,000 was received from existing shareholders. Additionally, a shareholder converted a promissory note to a convertible note identical in terms discussed below (see Note 8 – Shareholder Promissory Notes).

At 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 recognized. Accordingly, the proceeds received from the issuance of the Notes were recorded as a single liability measured at amortized cost on the consolidated Balance Sheet. The Company incurred $148,000 of debt issuance costs relating to the issuance of the Notes, which were recorded as a reduction to the Notes on the Balance Sheet. The debt issuance costs were being amortized and recognized as additional interest expense over the term of the Notes using the straight-line method because it is not substantially different from the effective interest rate. Amortization of debt discount totaled $27,271 through the effective date of the conversion from LLC to a C corporation (see Note 15 – Conversion to a C Corporation). 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.

On October 29, 2021, in anticipation of conversion from LLC to a C corporation, the Notes and Warrants were modified under Convertible Debenture Exercise and Waiver and Release Agreements with the individual creditors. The Note holders agreed to settle the debt for an aggregate of 1,527,647 shares of common stock with a fair value of $5,545,359 ($3.63 per share). Since this transaction involved contemporaneous issuance of shares of common stock by the Company to the Note holders, we evaluated the transaction for modification and extinguishment accounting and determined that the debt was extinguished as a result of the issuance of shares that do not represent the exercise of a conversion right contained in the original terms of the Notes at issuance.

The settlement of the debt resulted in a recognized loss of $2,262,658 recorded as extinguishment loss on debt settlement in November 2021, calculated as the excess of the fair value of shares issued over the carrying amount of the debt. In addition, the fair value of warrants of $407,700 issued in exchange for services related to the extinguished debt (see Note 20 – Stockholders’ Equity) and the unamortized portion of debt discount remaining at date of settlement of $120,729 were also recorded as extinguishment loss on debt settlement for an aggregate loss of $2,791,087.

Trust Agreement for Designated Beneficiaries

3 Months Ended

Mar. 31, 2022

Trust Agreement For Designated Beneficiaries

Trust Agreement for Designated Beneficiaries

11. Trust Agreement for Designated Beneficiaries

In March 2020, the LLC members established a Trust for the granting of membership interests to three individuals. At the time of grant, the existing LLC members (“Settlors”) transferred 8% of the ownership and membership interests (8,000 membership units, equivalent to 192,234 shares of common stock) of the Company to a Trust for the purpose of holding the vested interests for the three beneficiaries. The Settlors continued to hold title to the membership interests conveyed to the Trust until the Company operating agreement was restated, and the Settlors continued to receive their pro rata distribution of profits and losses from the interests until that occurred. At the date of issuance, the fair value of the membership interests issued was determined to be nominal and no expense was recorded in connection with the grants. The operating agreement was amended and restated effective January 1, 2021 and the units/shares were allocated from the Trust to the grantees.

Commitments and Contingencies

3 Months Ended

Mar. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

12. Commitments and Contingencies

Operating Leases

The Company leases its warehouses and office space under long-term lease arrangements. None of its leases include characteristics specified in ASC 842, Leases, that require classification as financing leases, and accordingly, these leases are accounted for as operating leases. The Company does not recognize a right-of-use asset and lease liability for short term leases, which have terms of 12 months or less. For longer-term lease arrangements that are recognized on the Company’s Balance Sheet, the right-of-use asset and lease liability are initially measured at the commencement date based upon the present values of the lease payments due under the leases.

The implicit interest rates of the Company’s lease arrangements are generally not readily determinable and as such, the Company applies an incremental borrowing rate, which is established based upon the information available at the lease commencement date, to determine the present value of lease payments due under the arrangement. Under ASC 842, the incremental borrowing rate (IBR) for leases must be (1) a rate of interest over a similar term, and (2) for an amount that is equal to the lease payments. The Company uses both the Federal Reserve Economic Data (FRED) U.S. corporate debt effective yield and the U.S. Treasury rates adjusted for credit spread as the primary data points for purposes of determining the IBR.

During the three months ended March 31, 2022, the Company entered into two new long-term, non-cancelable operating lease agreements for office and warehouse space resulting in the Company recognizing an additional lease liability totaling of $238,947 and $2,109,562, respectively, representing the present value of the lease payments discounted using an effective interest rate of 8.07% and 8.86%, respectively, and corresponding right-of-use assets of $238,947 and $2,109,562, respectively. The leases expire in December 2026 and December 2028, respectively. The second lease contains one three-year option to renew. The lease is guaranteed by the majority shareholder.

During the three months ended March 31, 2021, the Company entered into a long-term, non-cancelable operating lease agreement for office and warehouse space resulting in the Company recognizing an additional lease liability totaling of $1,268,089, representing the present value of the lease payments discounted using an effective interest rate of 7.47% and a corresponding right-of-use asset of $1,268,089. The lease expires in January 2028 and contains one three-year option to renew. The lease is guaranteed by the majority shareholder.

The Company has two other leases that expire in January 2023 and February 2025. The leases generally provide for annual increases based on a fixed amount and generally require the Company to pay real estate taxes, insurance, and repairs. Both leases are guaranteed by the majority shareholder.

Schedule of lease cost
The following is a summary of total lease costs during the three months ended:
	March 31, 2022			March 31, 2021
Operating lease cost	$	164,230		$	61,312
Short-term lease costs		1,968			517
Variable lease costs		—			—
Sublease income		(48,598	)		(3,477	)
Lease Cost	$	117,600		$	58,352

The weighted-average remaining lease term is 6.16 years and 5.64 years as of March 31, 2022 and December 31, 2021, respectively. The weighted average discount rate is 8.52% and 8.02%, as of March 31, 2022 and December 31, 2021, respectively. Operating cash flows from the operating leases totaled $93,755 and $31,856 for the three months ended March 31, 2022 and 2021, respectively.

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

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

Total

2023 $ 750,783

2024 713,822

2025 729,599

2026 717,328

2027 722,542

Thereafter 992,735

Total future minimum lease payments $ 4,626,809

Less imputed interest (1,060,407 )

Total $ 3,566,402

Current lease liability $ 466,013

Noncurrent lease liability $ 3,100,389

Total $ 3,566,402

Subleases

The Company subleases office and warehouse space under three of its existing operating leases with similar terms as the Company’s lease agreements. Because the Company is not relieved of its primary obligations under the original lease, the Company accounts for the subleases as a lessor. Sublease rental income is recorded based on the contractual rental payments which are not substantially different from recognition on a straight-line basis over the lease term and totaled $48,598 and $3,477 during the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022 and December 31, 2021, deferred income and a sublease deposit totaled $14,038 and $13,690, respectively, and is included in accrued expenses and other current liabilities on the accompanying Balance Sheets.

The following are the total future minimum sublease payments as of March 31, 2022:

Years ending March 31,

2023 $ 91,132

2024 35,447

2025 33,384

Total future minimum lease payments $ 159,963

Litigation

The Company may be involved from time to time in litigation or claims arising in the ordinary course of its business. While the ultimate liability, if any, arising from these claims cannot be determined with certainty, the Company believes that the resolution of any such matters will not likely have a material adverse effect on the Company’s financial statements.

401(k) Plan

3 Months Ended

Mar. 31, 2022

Retirement Benefits [Abstract]

401(k) Plan

13. 401(k) Plan

During 2021, the Company adopted a 401(k) Plan (“Plan”) for the benefit of its employees. Employees may contribute to the Plan within defined limits as defined by the Internal Revenue Service. Substantially all employees are eligible to participate. The Company has the option to make profit sharing contributions at its discretion. No profit-sharing contributions have been made.

Issuance of Shares/Membership Units

3 Months Ended

Mar. 31, 2022

Issuance Of Sharesmembership Units

Issuance of Shares/Membership Units

14. Issuance of Shares/Membership Units

On January 1, 2021, the Company issued 2,338 Class B member units (equivalent to 59,515 shares of common stock) upon the conversion of convertible notes and accrued interest totaling $173,157 (see Note 9 – 2020 Convertible Notes).

On January 1, 2021, the Company issued 262 Class B membership units (equivalent to 6,667 shares of common stock) in exchange for building signage valued at $20,000.

In March 2021, the Company sold 3,185 Class B membership units (equivalent to 81,106 shares of common stock) to three new members for gross proceeds of $270,000.

Conversion to a C Corporation

3 Months Ended

Mar. 31, 2022

Conversion To C Corporation

Conversion to a C Corporation

15. Conversion to a C Corporation

Effective November 1, 2021, the Company converted from an LLC to a C corporation under the State of Nevada statutes in anticipation of an upcoming initial public offering, and changed its name to Expion360 Inc. The membership units of the existing LLC members and all existing convertible note holders (see Note 10 - 2021 Convertible Notes/Extinguishment Loss on Debt Settlement) converted into an aggregate of 4,181,111 shares of common stock. Additionally, investors purchased 88,889 shares of common stock for total proceeds of $316,400 and 30,000 shares of common stock were issued in exchange for legal services. The 30,000 shares issued in exchange for legal services were valued at $108,900 at date of grant based on the per share price of $3.63 paid for shares issued at the time of the conversion to a C corporation. The Company’s issued and outstanding shares of common stock totaled 4,300,000 upon conversion to a C corporation.

Interest Expense

3 Months Ended

Mar. 31, 2022

Interest Expense

Interest Expense

16. Interest Expense

During the three months ended March 31, 2022, interest expense of $362,114, as shown on the accompanying Statements of Operations, includes interest expense related to amortization of debt discount totaling $214,527 (See Note 7 – Long-Term Debt).

Income Taxes

3 Months Ended

Mar. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

17. Income Taxes

In anticipation of an initial public offering, the Company converted from a limited liability company to a C corporation, a taxable entity, effective November 1, 2021.

Through October 31, 2021, the Company had been treated as an S corporation for federal and state income tax purposes, such that the Company’s taxable income is reported by members in their respective tax returns. The Company was only subject to state franchise taxes and fees. For the three months ended March 31, 2022 and 2021, the Company incurred a provision for state franchise fees of $150 and 0 zero, respectively.

Since converting to a C corporation, the Company has incurred losses and consequently has recorded no provision for state or federal income taxes for the three months ended March 31, 2022. The Company maintains a full valuation allowance on all deferred tax assets, as it has concluded that it is more likely than not that these assets will not be realized. As of March 31, 2022 and December 31, 2021, there were no material unrecognized tax benefits included in the accompanying balance sheets that would, if recognized, affect the effective tax rate.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

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+ Details

Related Party Transactions

3 Months Ended

Mar. 31, 2022

Related Party Transactions

18. Related Party Transactions

During the three months ended March 31, 2022 and 2021, related party transactions consisted of Shareholder Promissory Notes, one of which was modified in May 2021 to be a convertible note with warrants. During the year ended December 31, 2021, the Company also received proceeds totaling $44,000 for the issuance of convertible notes from existing LLC members/shareholders. The notes included warrants to purchase common stock. The notes and warrants were subsequently modified (see Note 8 – Shareholder Promissory Notes and Note 10 – 2021 Convertible Notes/Extinguishment Loss on Debt Settlement).

Stock Option Plans

3 Months Ended

Mar. 31, 2022

Stock Option Plans

Stock Option Plans

19. Stock Option Plans

The Company has adopted the 2021 Employee Stock Option Plan and the 2021 Incentive Award Plan, which will become effective upon an initial public offering.

Stockholders’ Equity

3 Months Ended

Mar. 31, 2022

Equity [Abstract]

Stockholders’ Equity

20. Stockholders’ Equity

The Company is authorized to issue an aggregate of 220,000,000 shares of capital stock, par value $0.001 per share, consisting of 200,000,000 shares of common stock and 20,000,000 shares of preferred stock. As of March 31, 2022 and December 31, 2021, 4,300,000 shares of common stock were issued and outstanding and as of March 31, 2021, 2,501,927 shares of common stock, were issued and outstanding. No shares of preferred stock have been issued.

A holder of common stock is entitled to one vote for each share of common stock. The holders of common stock have no conversion, redemption or preemptive rights and shall be entitled to receive dividends when, as, and if declared by the board of directors. Upon dissolution, liquidation, or winding up of the Company, after payment or provision for payment of debts and other liabilities of the Company, subject to the rights, if any, of the holders of any class or series stock having a preference over the right to participate with common stock with respect to the distribution of assets of the Company upon such dissolution, liquidation, or winding up of the Company, the holders of common stock shall be entitled to receive the remaining assets of the Company available for distribution to its stockholders ratably in proportion to the number of shares of common stock held.

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

In November 2021, the Company received gross proceeds of $1,600,000 ($1,385,000, net of issuance costs of $215,000), for the issuance of senior secured promissory notes (see Note 7 – Long-Term Debt). The notes include detachable warrants to purchase 482,268 shares of common stock at an exercise price of $3.32 per share. The warrants are exercisable for a period of 10 years from date of grant. Of the total gross proceeds received of $1,600,000, $809,806 was allocated to the warrants and $790,194 to the notes, based on their relative fair values. The relative fair value of the warrants of $809,806 at the time of issuance was recorded as additional paid-in capital with a corresponding debt discount reducing the carrying value of the notes. Additionally, the Company issued 77,163 warrants to purchase shares of common stock to underwriters in connection with obtaining 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 of $262,354 was recorded as additional paid-in capital and reduced the carrying value of the notes. The total discount on the notes of $1,287,160, including cash paid for fees of $215,000, is being amortized to interest expense over the term of the notes using the straight-line method because it is not substantially different from the effective interest rate method. As of March 31, 2022 and December 31, 2021, $214,527 and $90,317, respectively, was amortized to expense and the unamortized discount on the note as of March 31, 2022 and December 31, 2021 was $982,317 and $1,196,843, respectively. The fair value of the warrants was determined at date of issuance using the Black-Scholes option-pricing model and the following assumptions: per share price of common stock on date of grant of $3.63, expected dividend yield of 0%, expected volatility of 110.8%, risk-free interest rate of 1.63% and expected life based on contractual life of 10 years.

The Company also issued warrants to purchase 151,000 shares of common stock in in exchange for prior services related to the extinguished 2021 convertible notes. The warrants are exercisable at $2.90 per share for a period of 3 years from date of grant. The fair value of the warrants of $407,700 was recorded as additional paid-in-capital and expensed to extinguishment loss on debt settlement (see Note 10 - 2021 Convertible Notes/Extinguishment Loss on Debt Settlement).

In November 2021, the Company issued 30,000 options for the purchase of common stock in exchange for legal services. The options issued were not issued under the Company’s stock option plans (see Note 19 – Stock Option Plans). The options are exercisable at $3.32 per share for a period of 3 years from date of grant. The fair value of the options of $79,200 was recorded as additional paid-in capital with a corresponding charge to legal expense.

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 3 years.

As of March 31, 2022 and December 31, 2021, a total of 710,431 warrants and 30,000 options were outstanding, all of which are exercisable at any time at the option of the holder. Of the warrants, a total of 559,431 warrants are exercisable at $3.32 per share and have a remaining life of approximately 9.92 years and 151,000 are exercisable at $2.90 per share and have a remaining life of approximately 2.83 years. The 30,000 options have an exercise price of $3.32 per share and a remaining life of approximately 2.83 years. There were no options or warrants issued as of March 31, 2021.

Common Stock Reserved for Future Issuance

As of March 31, 2022 and December 31, 2021, approximately 740,431 shares of common stock were issuable upon conversion or exercise of rights granted under warrant and stock option agreements. Additionally, as of March 31, 2022, 35,714 shares of common stock are reserved for issuance under a service agreement. The following is a summary of common stock shares reserved for future issuance as of March 31, 2022:


Exercise of warrants			710,431
Issuance of shares pursuant to a services agreement			35,714
Exercise of stock options			30,000
Total shares of common stock reserved for future issuances			776,145

- Definition

The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.

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+ Details

Subsequent Events

3 Months Ended

Mar. 31, 2022

Subsequent Events [Abstract]

Subsequent Events

21. Subsequent Events

The date to which events occurring after March 31, 2022, the date of the most recent Balance Sheets, have been evaluated for possible adjustment to the financial statements or disclosures is May 5, 2022, which is the date the financial statements were issued.

On April 1, 2022, the Company completed an initial public offering. A total of 2,466,750 shares of common stock were sold at $7 per share in the IPO, including 321,750 shares sold to underwriters, for total gross proceeds of $17,267,250, or net proceeds of $15,735,870 after issuance costs of $1,531,380. The net proceeds of $15,735,870 resulted in an increase to common stock of $2,467, representing 2,466,750 shares at $.001 par value, and an increase to additional paid in capital of $15,733,403. During the three months ended March 31, 2022, the Company incurred additional costs related to the IPO of $423,634, which are shown as Deferred IPO costs on the accompanying Balance Sheets. These costs, plus any IPO-related costs incurred subsequent to March 31, 2022, shall reduce additional paid-in capital.

Upon the completion of the IPO, both of the Company’s stock option plans became effective (see Note 19 – Stock Option Plans) and the Company has reserved 3,500,000 additional shares of common stock pursuant to the plans.

In March 2022, the Company entered into a services agreement with a consultant whereby the Company is committed to pay the consultant $250,000 in shares of common stock valued at $7 per share, restricted under SEC rule 144, to be earned and distributed in three installments commencing with the date of the IPO. In April and May of 2022, the consultant earned, and the Company issued, the first two installments totaling 23,810 shares.

From the IPO proceeds, in April 2022 the Company paid off working capital loans totaling $550,000 (see Note 6 – Line of Credit and Short-Term Revolving Loans) and notes payable of $100,000 and $1,600,000 (see Note 7 – Long-Term Debt), plus related interest totaling $213,895.

In May 2022, the Board of Directors and the Compensation Committee of the Company approved awards of 930,000 stock options to certain advisors, officers, employee directors, non-employee directors, and other employees pursuant to the Corporation’s 2021 Incentive Award Plan.

Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

Liquidity and Capital Resources

Liquidity and Capital Resources

The Company’s sales for the three months ended March 2022 increased 143% over sales for the three months ended March 31, 2021, as product demand continued to rise.

Use of Estimates

Use of Estimates

Cash and Cash Equivalents

Cash and Cash Equivalents

Accounts Receivable

Accounts Receivable

Customer Deposits

Customer Deposits

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

Inventory

Inventory

Vendor and Foreign Concentrations of Inventory Suppliers

Vendor and Foreign Concentrations of Inventory Suppliers

Property and Equipment

Property and Equipment

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

Schedule of estimated useful lives
Vehicles and transportation equipment			5 - 7 years
Office furniture and equipment			3 - 7 years
Molds			5 – 10 years
Warehouse equipment			3 - 10 years

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

Leases

Leases

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

Impairment of Long-Lived Assets

Impairment of Long-Lived Assets

Product Warranties

Product Warranties

Liability for Refunds

Liability for Refunds

Revenue Recognition

Revenue Recognition

Concentration of Major Customers

Concentration of Major Customers

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

Shipping and Handling Costs

Shipping and Handling Costs

Advertising and Marketing Costs

Advertising and Marketing Costs

Research and Development

Research and Development

Income Taxes

Income Taxes

Fair Value of Financial Instruments

Fair Value of Financial Instruments

Segment Reporting

Segment Reporting

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

Basic and Diluted Net Loss Per Share

Basic and Diluted Net Loss Per Share

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

Schedule of net loss per share
	March 31, 2022			March 31, 2021
Net loss	$	(696,853	)	$	(247,193	)
Weighted average common shares outstanding – basic and diluted		4,300,000			2,501,929
Basic and diluted net loss per share	$	(0.16	)	$	(0.10	)

The following table sets forth the number of shares excluded from the computation of diluted loss per share, as their inclusion would have been anti-dilutive.

Schedule of anti-dilutive shares
	March 31, 2022		March 31, 2021
Stock options		30,000		—
Warrants		710,431		—
		740,430		—

New Accounting Pronouncements

New Accounting Pronouncements

Accounting Guidance Issued but Not Yet Adopted

Accounting Guidance Issued but Not Yet Adopted

Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2022

Accounting Policies [Abstract]

Schedule of estimated useful lives

Schedule of estimated useful lives
Vehicles and transportation equipment			5 - 7 years
Office furniture and equipment			3 - 7 years
Molds			5 – 10 years
Warehouse equipment			3 - 10 years

Schedule of net loss per share

Schedule of net loss per share
	March 31, 2022			March 31, 2021
Net loss	$	(696,853	)	$	(247,193	)
Weighted average common shares outstanding – basic and diluted		4,300,000			2,501,929
Basic and diluted net loss per share	$	(0.16	)	$	(0.10	)

Schedule of anti-dilutive shares

Schedule of anti-dilutive shares
	March 31, 2022		March 31, 2021
Stock options		30,000		—
Warrants		710,431		—
		740,430		—

Property and Equipment, Net (Tables)

3 Months Ended

Mar. 31, 2022

Property, Plant and Equipment [Abstract]

Schedule of property and equipment

Schedule of property and equipment
	March 31, 2022			December 31, 2021

Vehicles and transport	$	298,752		$	298,752
Leasehold improvements		207,486			59,316
Office furniture and equipment		131,039			105,003
Warehouse equipment		51,258			44,356
Molds		15,992			15,992
		704,527			523,419

Less: accumulated depreciation		(125,216	)		(96,190	)
Property and equipment, net	$	579,311		$	427,229

Accrued Expenses and Other Current Liabilities (Tables)

3 Months Ended

Mar. 31, 2022

Payables and Accruals [Abstract]

Schedule of accrued expenses and other current liabilities


	March 31, 2022		December 31, 2021

Accrued salaries and payroll liabilities	$	135,270	$	12,449
Accrued interest		54,035		26,301
Rebate liability		26,015		23,010
Commissions		19,046		29,120
Deferred income and deposit (sublease)		14,038		13,690
Franchise tax		9,300		9,300
Credit cards		6,928		23,933
Other		2,068		2,815
Accrued expenses and other current liabilities	$	266,700	$	140,618

Long-Term Debt (Tables)

3 Months Ended

Mar. 31, 2022

Debt Disclosure [Abstract]

Schedule of long-term debt

Schedule of long-term debt
	March 31, 2022			December 31, 2021
Senior secured promissory notes – various investors. Monthly payments of interest only at 10% plus deferred interest of 5% accrued monthly to be paid at maturity. A minimum of one year interest is due at maturity. Matures the earlier of (a) May 15, 2023, (b) the closing of a qualified subsequent financing or (c) the closing of a change of control. The notes are senior to all other debt and are secured by substantially all assets of the Company. The notes include detachable warrants to purchase 482,268 shares of common stock at an exercise price of $3.32 per share (see Note 21 – Stockholders’ Equity). Debt issuance costs and discount totaling $1,287,160 at date of issuance are being amortized and recognized as additional interest expense over the term of the notes using the straight-line method because it is not substantially different from the effective interest rate method. We determined the expected life of the notes to be the contractual term. Interest expense related to these notes includes amortization of debt issuance costs and discount in the amount of $214,527 for the three months ended March 31, 2022. Paid in full in April 2022 (see Note 21 – Subsequent Events)	$	1,600,000		$	1,600,000
Note payable – bank. Payable in monthly installments of $332, including interest at 5.8% per annum, due August 2025, secured by equipment and personally guaranteed by a shareholder.		12,325			13,135
Note payable – credit union. Payable in monthly installments of $508, including interest at 5.45% per annum, due July 2026, secured by a vehicle and personally guaranteed by a shareholder.		23,060			24,259
Note payable – SBA. Economic Injury Disaster Loan payable in monthly installments of $731, including interest at 3.75% per annum, due May 2050, and personally guaranteed by a shareholder.		152,435			153,193
Note payable – individual. Monthly payments of interest only at 10% per annum, matured December 31, 2021 resulting in the entire principal balance recorded in current portion of long-term debt on the accompanying Balance Sheets; pursuant to the note, the past due balance is subject to 1% additional monthly interest which increases one percent for each month beyond maturity date, unsecured. The Company remained in compliance with the extended maturity interest payments; paid in full in April 2022 (see Note 21 – Subsequent Events)		100,000			100,000
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.		43,809			45,832
Note payable – finance company. Payable in monthly installments of $2,204, including interest at 11.21% per annum, due August 2026, secured by a vehicle and personally guaranteed by a shareholder.		92,294			96,155
Note payable – finance company. Payable in monthly installments of $834, including interest at 7.29% per annum, due October 2027, secured by a vehicle and personally guaranteed by a member/shareholder.		45,797			47,445
Note payable – finance company. Payable in monthly installments of $834, including interest at 7.29% per annum, due October 2027, secured by a vehicle and personally guaranteed by a shareholder.		45,797			47,445
Total	$	2,115,517		$	2,127,464
Less unamortized debt issuance costs and discount		(982,317	)		(1,196,843	)
Less current portion		(50,465	)		(51,135	)
Less note payable in default (paid April 2022)		(100,000	)		(100,000	)
Long-term debt, net of unamortized debt discount and current portion	$	982,735		$	779,486

Schedule of long term debt payment

Schedule of long term debt payment
	Future maturities of long-term debt are as follows:

	Years ending March 31,
	2023	$	150,465
	2024		1,655,061
	2025		60,133
	2026		63,362
	2027		39,441
	Thereafter		147,055
	Total	$	2,115,517

Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

Schedule of lease cost

Schedule of lease cost
The following is a summary of total lease costs during the three months ended:
	March 31, 2022			March 31, 2021
Operating lease cost	$	164,230		$	61,312
Short-term lease costs		1,968			517
Variable lease costs		—			—
Sublease income		(48,598	)		(3,477	)
Lease Cost	$	117,600		$	58,352

Schedule of future minimum lease payment


2023	$	750,783
2024		713,822
2025		729,599
2026		717,328
2027		722,542
Thereafter		992,735
Total future minimum lease payments	$	4,626,809
Less imputed interest		(1,060,407	)
Total	$	3,566,402

Current lease liability	$	466,013
Noncurrent lease liability	$	3,100,389
Total	$	3,566,402

Schedule of future minimum sublease payments

Stockholders’ Equity (Tables)

3 Months Ended

Mar. 31, 2022

Equity [Abstract]

Schedule of common stock shares reserved for future issuance


Exercise of warrants			710,431
Issuance of shares pursuant to a services agreement			35,714
Exercise of stock options			30,000
Total shares of common stock reserved for future issuances			776,145

Summary of Significant Accounting Policies (Details)	3 Months Ended
Summary of Significant Accounting Policies (Details)	Mar. 31, 2022
Vehicles And Transportation Equipment [Member] \| Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Lives	5 years
Vehicles And Transportation Equipment [Member] \| Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Lives	7 years
Office Equipment [Member] \| Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Lives	3 years
Office Equipment [Member] \| Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Lives	7 years
Tools, Dies and Molds [Member] \| Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Lives	5 years
Tools, Dies and Molds [Member] \| Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Lives	10 years
Warehouse Equipment [Member] \| Minimum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Lives	3 years
Warehouse Equipment [Member] \| Maximum [Member]
Property, Plant and Equipment [Line Items]
Estimated Useful Lives	10 years

Summary of Significant Accounting Policies (Details 1) - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Accounting Policies [Abstract]
Net loss	$ (696,853)	$ (247,193)
Weighted average common shares outstanding – basic and diluted	4,300,000	2,501,929
Basic and diluted net loss per share	$ (0.16)	$ (0.10)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

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+ Details

Summary of Significant Accounting Policies (Details 2) - shares	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Shares	740,430
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Shares	30,000
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Shares	710,431

Summary of Significant Accounting Policies (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Product Information [Line Items]
Proceeds from IPO	$ 15,735,870
FDIC limits	373,380
Inventory purchases	$ 294,846	$ 1,081,225
Concentarion percentage	59.00%	93.00%
Revenue	$ 2,155,345	$ 884,993
Shipping and handling fees billed	4,151	5,191
Shipping and handling fees	38,724	24,634
Advertising and Marketing Costs	35,946	14,069
Research and Development	$ 5,316	6,759
Revenue Benchmark [Member] \| One Customer [Member]
Product Information [Line Items]
Concentarion percentage	42.00%
Revenue	$ 896,984
Accounts receivable		$ 114,674
Revenue Benchmark [Member] \| First Customer [Member]
Product Information [Line Items]
Concentarion percentage		16.00%
Revenue	151,494	$ 143,652
Revenue Benchmark [Member] \| Second Customer [Member]
Product Information [Line Items]
Concentarion percentage		14.00%
Revenue	$ 73,065	$ 123,980
Accounts Receivable [Member]
Product Information [Line Items]
Concentarion percentage	39.00%	42.00%
Accounts Receivable [Member] \| First Customer [Member]
Product Information [Line Items]
Concentarion percentage		20.00%
Accounts receivable		$ 59,340
Accounts Receivable [Member] \| Second Customer [Member]
Product Information [Line Items]
Accounts receivable		$ 123,980

Property and Equipment, Net (Details) - USD ($)	Mar. 31, 2022	Dec. 31, 2021
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 704,527	$ 523,419
Less: accumulated depreciation	(125,216)	(96,190)
Property and equipment, net	579,311	427,229
Vehicles And Transportation Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	298,752	298,752
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	207,486	59,316
Office Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	131,039	105,003
Warehouse Equipment [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	51,258	44,356
Tools, Dies and Molds [Member]
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 15,992	$ 15,992

Property and Equipment, Net (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2022	Mar. 31, 2021
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 29,026	$ 10,314

Accrued Expenses and Other Current Liabilities (Details) - USD ($)	Mar. 31, 2022	Dec. 31, 2021
Payables and Accruals [Abstract]
Accrued salaries and payroll liabilities	$ 135,270	$ 12,449
Accrued interest	54,035	26,301
Rebate liability	26,015	23,010
Commissions	19,046	29,120
Deferred income and deposit (sublease)	14,038	13,690
Franchise tax	9,300	9,300
Credit cards	6,928	23,933
Other	2,068	2,815
Accrued expenses and other current liabilities	$ 266,700	$ 140,618

Long-Term Debt (Details) - USD ($)	3 Months Ended
Long-Term Debt (Details) - USD ($)	Mar. 31, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Total	$ 2,115,517	$ 2,127,464
Less unamortized debt issuance costs and discount	(982,317)	(1,196,843)
Less current portion	(50,465)	(51,135)
Less note payable in default (paid April 2022)	(100,000)	(100,000)
Long-term debt, net of unamortized debt discount and current portion	$ 982,735	779,486
Senior Secured Promissory Notes [Member]
Debt Instrument [Line Items]
Interest rate	10.00%
Maturity date	May 15, 2023
Warrants to purchase	482,268
Amortization of debt issuance costs and discount	$ 214,527
Total	$ 1,600,000	1,600,000
Notes Payable to Banks [Member]
Debt Instrument [Line Items]
Interest rate	5.80%
Total	$ 12,325	13,135
Monthly installments	$ 332
Note Payable Credit Union [Member]
Debt Instrument [Line Items]
Interest rate	5.45%
Total	$ 23,060	24,259
Monthly installments	$ 508
Note Payable S B A [Member]
Debt Instrument [Line Items]
Interest rate	3.75%
Total	$ 152,435	153,193
Monthly installments	$ 731
Note Payable Individual [Member]
Debt Instrument [Line Items]
Interest rate	10.00%
Maturity date	Dec. 31, 2021
Total	$ 100,000	100,000
Note Payable Finance Company [Member]
Debt Instrument [Line Items]
Interest rate	8.50%
Total	$ 43,809	45,832
Monthly installments	$ 994
Note Payable Finance Company 1 [Member]
Debt Instrument [Line Items]
Interest rate	11.21%
Total	$ 92,294	96,155
Monthly installments	$ 2,204
Note Payable Finance Company 2 [Member]
Debt Instrument [Line Items]
Interest rate	7.29%
Total	$ 45,797	47,445
Monthly installments	$ 834
Note Payable Finance Company 3 [Member]
Debt Instrument [Line Items]
Interest rate	729.00%
Total	$ 45,797	$ 47,445
Monthly installments	$ 834

Long-Term Debt (Details 1) - USD ($)	Mar. 31, 2022	Dec. 31, 2021
Debt Disclosure [Abstract]
2023	$ 150,465
2024	1,655,061
2025	60,133
2026	63,362
2027	39,441
Thereafter	147,055
Total	$ 2,115,517	$ 2,127,464

- Definition

Amount, excluding unamortized premium (discount) and debt issuance cost, of long-term debt. Excludes lease obligation.

+ References + Details

Line of Credit and Short-Term Revolving Loans (Details Narrative) - USD ($)	Mar. 31, 2022	Dec. 31, 2021
Debt Disclosure [Abstract]
Line of credit and short-term revolving loans	$ 550,000	$ 550,000

- Definition

The carrying value as of the balance sheet date of the current portion of long-term obligations drawn from a line of credit, which is a bank's commitment to make loans up to a specific amount. Examples of items that might be included in the application of this element may consist of letters of credit, standby letters of credit, and revolving credit arrangements, under which borrowings can be made up to a maximum amount as of any point in time conditional on satisfaction of specified terms before, as of and after the date of drawdowns on the line. Includes short-term obligations that would normally be classified as current liabilities but for which (a) postbalance sheet date issuance of a long term obligation to refinance the short term obligation on a long term basis, or (b) the enterprise has entered into a financing agreement that clearly permits the enterprise to refinance the short-term obligation on a long term basis and the following conditions are met (1) the agreement does not expire within 1 year and is not cancelable by the lender except for violation of an objectively determinable provision, (2) no violation exists at the BS date, and (3) the lender has entered into the financing agreement is expected to be financially capable of honoring the agreement.

+ References + Details

Commitments and Contingencies (Details) - USD ($)	3 Months Ended
Commitments and Contingencies (Details) - USD ($)	Mar. 31, 2022	Mar. 31, 2021
Commitments and Contingencies Disclosure [Abstract]
Operating lease cost	$ 164,230	$ 61,312
Short-term lease costs	1,968	517
Variable lease costs
Sublease income	(48,598)	(3,477)
Lease Cost	$ 117,600	$ 58,352

Commitments and Contingencies (Details 1) - USD ($)	Mar. 31, 2022	Dec. 31, 2021
Commitments and Contingencies Disclosure [Abstract]
2023	$ 750,783
2024	713,822
2025	729,599
2026	717,328
2027	722,542
Thereafter	992,735
Operating Leases, Future Minimum Payments Due	4,626,809
Less imputed interest	(1,060,407)
Operating Lease, Liability	3,566,402	$ 1,311,649
Operating Lease, Liability, Current	466,013	218,788
Noncurrent lease liability	$ 3,100,389	$ 1,092,861

Commitments and Contingencies (Details 2)	Mar. 31, 2022 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2023	$ 91,132
2024	35,447
2025	33,384
Total future minimum lease payments	$ 159,963

Commitments and Contingencies (Details Narrative) - USD ($)	Mar. 31, 2022	Dec. 31, 2021
Commitments and Contingencies Disclosure [Abstract]
Lease liability	$ 3,566,402	$ 1,311,649

Interest Expense (Details Narrative) - USD ($)	3 Months Ended
Interest Expense (Details Narrative) - USD ($)	Mar. 31, 2022	Mar. 31, 2021
Interest Expense	$ 362,114	$ 92,814
Interest Expense [Member]
Amortization of debt discount	$ 214,527

Stockholders' Equity (Details)	Mar. 31, 2022 shares
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Total shares of common stock reserved for future issuances	776,145
Warrant [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Total shares of common stock reserved for future issuances	710,431
Services Agreement [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Total shares of common stock reserved for future issuances	35,714
Stock Options [Member]
Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items]
Total shares of common stock reserved for future issuances	30,000