Restatement of Quarterly Consolidated Financial Statements (Unaudited) | 13. Restatement of Quarterly Consolidated Financial Statements (Unaudited) As further described below, our unaudited consolidated financial statements covering the quarterly reporting periods during fiscal year 2022, consisting of the quarters ended March 31, 2022 , June 30, 2022, September 30, 2022 have been restated to reflect the correction of material errors. Restatement Background The need for the restatement arose out of the results of certain financial analysis the Company performed in the course of preparing for the audit of its December 31, 2022 consolidated financial statements. Upon reevaluation, the Series A and Series B Warrants issued in the February 2022 equity offering, it was determined that the Warrants contained a pricing reset feature that required the Warrants to be classified as a liability and marked to market at each reporting date as required under GAAP. Therefore, the Company recognized other income (expense) for the change in the fair value of the warrant liability at each reporting date. Restatement Adjustments The Company inadvertently did not classify the Warrants as a derivative liability, which led to accounting adjustments to correct the errors identified. The Company is providing restated quarterly and year-to-date unaudited consolidated financial information for interim periods occurring within the year ended December 31, 2022 in its audited financial statements for the year ended December 31, 2022. The following table summarizes the effect of the errors on the Company’s consolidated balance sheets as of March 31, 2022, June 30, 2022, and September 30, 2022, and on the respective consolidated statements of operations and consolidated statements of cash flows. Schedule of Restatement of Consolidated Financial Statements The restated consolidated balance sheet line items for the first, second and third fiscal quarters of 2022 are as follows: Originally Reported Adjustment Restated March 31, 2022 (Unaudited) Originally Reported Adjustment Restated Total assets $ 31,620,528 $ - $ 31,620,528 Warrant derivative liability - 11,466,300 11,466,300 Total liabilities 1,826,408 11,466,300 13,292,708 Additional paid-in capital 111,153,252 (8,783,800 ) 102,369,452 Accumulated deficit (81,420,559 ) (2,682,500 ) (84,103,059 ) Total stockholders’ equity 29,794,120 (11,466,300 ) 18,327,820 Total liabilities and stockholders’ equity 31,620,528 - 31,620,528 Originally Reported Adjustment Restated June 30, 2022 (Unaudited) Originally Reported Adjustment Restated Total assets $ 29,834,743 $ - $ 29,834,743 Warrant derivative liability - 6,108,700 6,108,700 Total liabilities 1,693,194 6,108,700 7,801,894 Additional paid-in capital 111,202,470 (8,783,800 ) 102,418,670 Accumulated deficit (83,122,522 ) 2,675,100 (80,447,422 ) Total stockholders’ equity 28,141,549 (6,108,700 ) 22,032,849 Total liabilities and stockholders’ equity 29,834,743 - 29,834,743 Originally Reported Adjustment Restated September 30, 2022 (Unaudited) Originally Reported Adjustment Restated Total assets $ 28,228,212 $ - $ 28,228,212 Warrant derivative liability - 5,235,500 5,235,500 Total liabilities 1,733,226 5,235,500 6,968,726 Additional paid-in capital 111,252,019 (8,783,800 ) 102,468,219 Accumulated deficit (84,818,634 ) 3,548,300 (81,270,334 ) Total stockholders’ equity 26,494,986 (5,235,500 ) 21,259,486 Total liabilities and stockholders’ equity 28,228,212 - 28,228,212 The restated line items of the consolidated statements of operations for the three months ended March 31, 2022, June 30, 2022, and September 30, 2022 are as follows: Originally Reported Adjustment Restated Three months ended March 30, 2022 (Unaudited) Originally Reported Adjustment Restated Revenue $ 2,384,619 $ - $ 2,384,619 Cost of goods sold and operating expenses 5,004,667 - 5,004,667 Change in fair value of warrant derivative liability - (2,682,500 ) (2,682,500 ) Total other income (expense): 1,561 (2,682,500 ) (2,680,939 ) Net loss (2,618,487 ) (2,682,500 ) (5,300,987 ) Net loss per common share – basic and diluted (3.50 ) (3.50 ) (7.00 ) Originally Reported Adjustment Restated Three months ended June 30, 2022 (Unaudited) Originally Reported Adjustment Restated Revenue $ 3,275,213 $ - $ 3,275,213 Cost of goods sold and operating expenses 4,986,791 - 4,986,791 Change in fair value of warrant derivative liability - 5,357,600 5,357,600 Total other income (expense): 9,615 5,357,600 5,367,215 Net loss (1,701,963 ) 5,357,600 3,655,637 Net income (loss) per common share – basic and diluted (1.50 ) 4.50 3.00 Originally Reported Adjustment Restated Three months ended September 30, 2022 (Unaudited) Originally Reported Adjustment Restated Revenue $ 2,663,550 $ - $ 2,663,550 Cost of goods sold and operating expenses 4,402,944 - 4,402,944 Change in fair value of warrant derivative liability - 873,200 873,200 Total other income (expense): 43,282 873,200 916,482 Net loss (1,696,112 ) 873,200 (822,912 ) Net loss per common share – basic and diluted (1.50 ) 0.50 (0.50 ) The restated line items of the consolidated statements of operations for the six months ended June 30, 2022; and the nine months ended September 30, 2022 are as follows: Originally Reported Adjustment Restated Originally Reported Adjustment Restated Six months ended June 30, 2022 (Unaudited) Nine months ended September 30, 2022 (Unaudited) Originally Reported Adjustment Restated Originally Reported Adjustment Restated Revenue $ 5,659,832 $ - $ 5,659,832 $ 8,323,382 $ - $ 8,323,382 Cost of goods sold and operating expenses 9,991,458 - 9,991,458 14,394,402 - 14,394,402 Change in fair value of warrant derivative liability - 2,675,100 2,675,100 - 3,548,300 3,548,300 Total other income (expense): 11,176 2,675,100 2,686,276 54,458 3,548,300 3,602,758 Net loss (4,320,450 ) 2,675,100 (1,645,350 ) (6,016,562 ) 3,548,300 (2,468,262 ) Net loss per common share – basic and diluted (4.50 ) 2.50 (1.50 ) (5.50 ) 3.50 (2.50 ) While the adjustments changed net loss and added a change in fair value of warrant derivative liability in the consolidated statements of cash flow statements, they did not have an impact on total net cash provided by operating activities, net cash used in investing activities, or net cash provided by (used in) financing activities for any of the applicable periods. The restated line items of the consolidated statements of cash flows for the three months ended March 31, 2022; the six months ended June 30, 2022; and the nine months ended September 30, 2022 are as follows: Originally Reported Adjustment Restated Three months ended March 30, 2022 (Unaudited) Originally Reported Adjustment Restated Net Loss $ (2,618,487 ) $ (2,682,500 ) $ (5,300,987 ) Change in fair value of warrant derivative liability - 2,682,500 2,682,500 Net cash used in operating activities (2,226,473 ) - (2,226,473 ) Non-cash financing activities: Issuance of warrant derivative liability - 8,783,800 8,783,800 Originally Reported Adjustment Restated Six months ended June 30, 2022 (Unaudited) Originally Reported Adjustment Restated Net Loss $ (4,320,450 ) $ 2,675,100 $ (1,645,350 ) Change in fair value of warrant derivative liability - (2,675,100 ) (2,675,100 ) Net cash used in operating activities (4,800,765 ) - (4,800,765 ) Non-cash financing activities: Issuance of warrant derivative liability - 8,783,800 8,783,800 Originally Reported Adjustment Restated Nine months ended September 30, 2022 (Unaudited) Originally Reported Adjustment Restated Net Loss $ (6,016,562 ) $ 3,548,300 $ (2,468,262 ) Change in fair value of warrant derivative liability - (3,548,300 ) (3,548,300 ) Net cash used in operating activities (6,082,906 ) - (6,082,906 ) Non-cash financing activities: Issuance of warrant derivative liability - 8,783,800 8,783,800 |