~~UNITED STATES~~

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒

☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30, 2022~~March 31, 2023

☐

☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________ to ___________

Commission file number 001-39480

~~001-39480~~APPLIED UV, INC.

(Exact name of registrant as specified in its charter)

~~APPLIED UV, INC.~~

~~(Exact name of registrant as specified in its charter)~~

Delaware		84-4373308
(State or other jurisdiction of incorporation)		(I.R.S. Employer Identification No.)

150 N. Macquesten Parkway

Mount Vernon, NY10550

(Address of principal executive offices)

(914) ~~(914)~~665-6100

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ~~Yes~~☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ~~Yes~~☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company", and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated Filer	☐
Smaller reporting company	☒	Emerging Growth Company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in 12b-2 of the Exchange Act):

Yes ☐ No☒

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	~~Trading Symbol(s)~~	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share		AUVI	The NasdaqStock Market LLC
10.5% Series A Cumulative Perpetual Preferred Stock, $0.0001 par value per share		AUVIP	The NasdaqStock Market LLC

As of ~~November 15, 2022,~~May 22, 2023, the Company has ~~12,817,189~~19,339,225 shares of common stock issued and outstanding.

APPLIED UV, INC. & SUBSIDIARIES

INDEX TO FORM 10-Q

	Page #
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022	3
Condensed ~~Interim~~ Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~	4
Condensed Consolidated Statements of Redeemable Preferred Stock and Changes in Stockholders’ Equity for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~	5
Condensed ~~Interim~~ Consolidated Statements of Cash Flows for the ~~Nine months~~Three Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~	6
Notes to Condensed Consolidated Financial Statements	7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	3135
Item 3. Quantitative and Qualitative Disclosures About Market Risk	4043
Item 4. Controls and Procedures	4043
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	4244
Item 1A. Risk Factors	4244
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	4244
Item 3. Defaults Upon Senior Securities	4244
Item 4. Mine Safety Disclosures	4244
Item 5. Other Information	4244
Item 6. Exhibits	4244
Signatures	4345

PART I

Item 1. Financial Statements

Applied UV, Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022


	2022			2021			2023			2022
Assets
Current Assets
Cash and cash equivalents	$	1,056,233		$	7,922,906		$	2,081,886		$	2,734,485
Restricted cash		—			845,250
Accounts receivable, net of allowance for doubtful accounts		1,631,432			986,253			4,758,883			1,508,239
Costs and estimated earnings in excess of billings		416,021			—			2,087,553			1,306,762
Inventory, net		4,435,594			1,646,238			8,609,494			5,508,086
Vendor deposits		294,484			992,042			1,313,244			75,548
Prepaid expense and other current assets		900,340			419,710			2,208,058			1,187,223
Total Current Assets		8,734,104			12,812,399			21,059,118			12,320,343

Property and equipment, net of accumulated depreciation		1,183,791			196,611			1,243,800			1,133,468
Other assets								—			153,000
Goodwill		3,722,077			4,809,811			17,809,235			3,722,077
Other intangible assets, net of accumulated amortization		17,651,286			18,976,556			28,629,853			11,354,430
Right of use asset		2,276,384			1,730,615
Right of use assets								4,211,326			4,044,109
Total Assets	$	33,567,642		$	38,525,992		$	72,953,332		$	32,727,427

Liabilities and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses	$	2,224,405		$	1,642,108		$	8,855,698		$	2,982,760
Contingent consideration		—			1,460,000			18,995,673			—
Billings in excess of costs and earnings on uncompleted contracts		134,342			—
Deferred revenue		1,940,272			788,776			6,555,496			4,730,299
Due to landlord (Note 2)		214,766			—			244,532			229,234
Warrant liability		21,742			68,263			7,685			9,987
Financing lease obligations		2,402			7,671			47,608			33,712
Operating lease liability		1,265,505			389,486			1,645,250			1,437,308
Note payable		277,103			—
Loan payable		97,500			97,500
Notes payable, net								4,469,196			2,098,685
Total Current Liabilities		6,178,037			4,453,804			40,821,138			11,521,985
Long-term Liabilities
Due to landlord-less current portion (Note 2)		456,062			—
Loan payable- less current portion		60,000			60,000
Operating lease liability-less current portion		1,031,239			1,346,428
Long-Term Liabilities
Due to landlord - less current portion (Note 2)								325,557			393,230
Notes payable, net - less current portion								5,448,572			765,144
Financing lease obligations - less current portion								160,871			158,070
Operating lease liability - less current portion								2,625,952			2,655,103
Total Long-Term Liabilities		1,547,301			1,406,428			8,560,952			3,971,547
Total Liabilities		7,725,338			5,860,232			49,382,090			15,493,532

Stockholders' Equity
Preferred stock, Series A Cumulative Perpetual, $0.0001 par value, 19,990,000 shares authorized, 552,000 shares issued and outstanding as of both September 30, 2022 and December 31, 2021		55			55
Preferred stock, Series X, $0.0001 par value, 10,000 shares authorized, 10,000 shares issued and outstanding as of September 30, 2022, and 2,000 shares issued and outstanding as of December 31, 2021		1			1
Common stock $.0001 par value, 150,000,000 shares authorized; 12,930,674 shares issued and 12,817,189 outstanding as of September 30, 2022, and 12,775,674 shares issued and outstanding as of December 31, 2021		1,294			1,278
Treasury stock at cost, 113,485 shares as of September 30, 2022, and 0 shares as of December 31, 2021, respectively		(149,686	)		—
Redeemable Preferred Stock
Preferred Stock, Series B Cumulative Perpetual, $0.0001 par value, 1,250,000 shares authorized, 1,250,000 shares issued and outstanding as of March 31, 2023 and no shares issued and outstanding as of December 31, 2022								3,712,500			—
Preferred Stock, Series C Cumulative Perpetual, $0.0001 par value, 2,500,000 shares authorized, 399,996 shares issued and outstanding as of March 31, 2023 and no shares issued and outstanding as of December 31, 2022								1,063,989			—
Total Redeemable Preferred Stock								4,776,489			—
Equity
Preferred Stock, Series A Cumulative Perpetual, $0.0001 par value, 1,250,000 shares authorized, 552,000 shares issued and outstanding as of March 31, 2023 and December 31, 2022.								55			55
Preferred Stock, Series X, $0.0001 par value, 10,000 shares authorized, 10,000 shares issued and outstanding as of March 31, 2023 and December 31, 2022 respectively								1			1
Common Stock $0.0001 par value, 150,000,000 shares authorized 19,370,758 shares issued and 19,257,273 shares outstanding as of March 31, 2023 and 13,676,450 shares issued and 13,562,965 shares outstanding as of December 31, 2022 respectively								1,937			1,368
Additional paid-in capital		44,529,586			42,877,622			52,084,048			45,619,670
Treasury stock at cost, 113,485 shares, respectively								(149,686	)		(149,686	)
Accumulated deficit		(18,538,946	)		(10,213,196	)		(33,141,602	)		(28,237,513	)
Total Stockholders' Equity		25,842,304			32,665,760
Total Liabilities and Stockholders' Equity	$	33,567,642		$	38,525,992
Total Equity								18,794,753			17,233,895
Total Liabilities, Redeemable Preferred Stock and Stockholders' Equity							$	72,953,332		$	32,727,427

~~See~~The accompanying notes ~~to the~~are an integral part of these unaudited ~~condensed~~interim consolidated financial statements.

Applied UV, Inc. and Subsidiaries

Unaudited Condensed Interim Consolidated Statements of Operations

For the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021			2023			2022
Net Sales	$	5,875,611		$	3,551,564		$	15,139,347		$	7,748,499		$	10,654,483		$	3,356,090
Cost of Goods Sold		5,036,997			2,500,163			11,847,842			5,231,155			8,732,097			2,206,991
Gross Profit		838,614			1,051,401			3,291,505			2,517,344			1,922,386			1,149,099

Operating Expenses
Research and development		93,522			—			234,885			53,408			189,210			59,314
Selling general and administrative expenses		3,505,097			2,683,025			10,637,538			6,991,472
Loss on impairment of goodwill		—			—			1,138,203			—
Selling General and Administrative Expenses														5,264,379			3,101,226
Loss on impairment of goodwill and intangibles														—			1,138,203
Total Operating Expenses		3,598,619			2,683,025			12,010,626			7,044,880			5,453,589			4,298,743

Operating Loss		(2,760,005	)		(1,631,624	)		(8,719,121	)		(4,527,536	)		(3,531,203	)		(3,149,644	)

Other Income (Expense)
Change in Fair Market Value of Warrant Liability		34,804			151,570			46,521			(148,882	)		2,302			43,828
Interest expense		(43,037	)		—			(96,113	)		—			(392,939	)		(4,056	)
Loss on change in Fair Market Value of Contingent Consideration		—			—			(240,000	)		—			(619,999	)		(240,000	)
Gain on Settlement of Contingent Consideration (Note 2)		—			—			1,700,000			—			—			1,700,000
Other Income		67,765			1,068			69,713			26,250
Forgiveness of paycheck protection program loan		—			296,827			—			296,827
Total Other Income (Expense)		59,532			449,465			1,480,121			174,195			(1,010,636	)		1,499,772

Loss Before Provision for Income Taxes		(2,700,473	)		(1,182,159	)		(7,239,000	)		(4,353,341	)		(4,541,839	)		(1,649,872	)
Benefit from Income Taxes		—			(101,354	)		—			(101,354	)		—			—
Net Loss	$	(2,700,473	)	$	(1,080,805	)	$	(7,239,000	)	$	(4,251,987	)	$	(4,541,839	)	$	(1,649,872	)

Net Loss attributable to common stockholders:
Dividends to preferred shareholders		(362,250	)		(241,500	)		(1,086,750	)		(241,500	)		(362,250	)		(362,250	)
Net Loss attributable to common stockholders		(3,062,723	)		(1,322,305	)		(8,325,750	)		(4,493,487	)		(4,904,089	)		(2,012,122	)

Basic and Diluted Loss Per Common Share	$	(0.24	)	$	(0.14	)	$	(0.65	)	$	(0.48	)	$	(0.28	)	$	(0.16	)
Weighted Average Shares Outstanding - basic and diluted		12,656,093			9,421,908			12,751,360			9,282,675			17,328,564			12,928,174

~~See~~The accompanying notes ~~to the~~are an integral part of these unaudited ~~condensed~~interim consolidated financial statements.

Applied UV, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Redeemable Preferred Stock and Changes in Stockholders' Equity

For the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2023 and 2022~~and 2021~~


	Preferred Stock Series B			Preferred Stock Series C			Total Redeemable Preferred Stock			Preferred Stock Series A			Preferred Stock Series X			Common Stock					Treasury Stock					Additional Paid-In Capital		Accumulated Deficit			Total Stockholders Equity
Balance, January 1, 2022	—	$	—	—	$	—	—	$	—	552,000	$	55	2,000	$	1	12,775,674		$	1,278		—	$	—		$	42,877,622	$	(10,213,196	)	$	32,665,760
Settlement of stock in connection with prior acquisition (Note 2)	—		—	—		—	—		—	—		—	—		—	(400,000	)		(40	)	—		—			40		—			—
Common stock issued for in public offering (over-allotment), net of costs	—		—	—		—	—		—	—		—	—		—	400,000			40		—		—			1,091,960		—			1,092,000
Stock-based compensation	—		—	—		—	—		—	—		—	—		—	112,500			11		—		—			287,988		—			287,999
Dividends paid to preferred shareholders	—		—	—		—	—		—	—		—	—		—	—			—		—		—			—		(362,250	)		(362,250	)
Cancellation of restricted stock	—		—	—		—	—		—	—		—	—		—	—			—		—		—			—		—			—
Net loss	—		—	—		—	—		—	—		—	—		—	—			—		—		—			—		(1,649,872	)		(1,649,872	)
Balance, March 31, 2022	—	$	—	—	$	—	—	$	—	552,000	$	55	2,000	$	1	12,888,174		$	1,289		—	$	—		$	44,257,610	$	(12,225,318	)	$	32,033,637

Balance, January 1, 2023	—	$	—	—	$	—	—	$	—	552,000	$	55	10,000	$	1	13,676,450		$	1,368		113,485	$	(149,686	)	$	45,619,670	$	(28,237,513	)	$	17,233,895
Common and Preferred stock issued for acquisition	1,250,000		3,712,500	399,996		1,063,989	1,649,996		4,776,489	—		—	—		—	3,874,997			387		—		—			4,029,613		—			4,030,000
Common stock issued in public offering (ATM), net of costs	—		—	—		—	—		—	—		—	—		—	1,764,311			176		—		—			2,242,750		—			2,242,926
Stock-based compensation	—		—	—		—	—		—	—		—	—		—	55,000			6		—		—			192,015		—			192,021
Dividends paid to preferred shareholder	—		—	—		—	—		—	—		—	—		—	—			—		—		—			—		(362,250	)		(362,250	)
Net Loss	—		—	—		—	—		—	—		—	—		—	—			—		—		—			—		(4,541,839	)		(4,541,839	)
Balance, March 31, 2023	1,250,000	$	3,712,500	399,996	$	1,063,989	1,649,996	$	4,776,489	552,000	$	55	10,000	$	1	19,370,758		$	1,937		113,485	$	(149,686	)	$	52,084,048	$	(33,141,602	)	$	18,794,753

Preferred Stock
Series A Cumulative

Preferred Stock
Series X

Common Stock

Treasury Stock

Additional
Paid-In
Capital

Retained
Earnings

Total Stockholders Equity

Balance, January 1, 2021 —   $ —   2,000 $ 1 7,945,034 $ 795 —   $ —   $ 11,973,051 $ (2,219,091 ) $ 9,754,756
Shares granted to settle previously recorded liability —   —   —   —   3,000 —   —   —   21,420 —   21,420
Warrant liability recognized in connection with initial issuance of November offering (See Note 7) —   —   —   —   —   —   —   —   (135,125 ) —   (135,125 )
Exercise of warrants —   —   —   —   17,135 2 —   —   1,155 —   1,157
Common stock issued for acquisition —   —   —   —   1,375,000 137 —   —   7,122,363 —   7,122,500
Stock-based compensation —   —   —   —   62,500 6 —   —   210,735 —   210,741
Net loss —   —   —   —   —   —   —   —   —   (1,032,951 ) (1,032,951 )
Balance, March 31, 2021 —   —   2,000 1 9,402,669 940 —   —   19,193,599 (3,252,042 ) 15,942,498
Exercise of warrants —   —   —   —   717 —   —   —   —   —   —
Stock-based compensation —   —   —   —   12,000 2 —   —   465,598 —   465,600
Net loss —   —   —   —   —   —   —   —   —   (2,138,232 ) (2,138,232 )
Balance, June 30, 2021 —   —   2,000 1 9,415,386 942 —   —   19,659,197 (5,390,274 ) 14,269,866
Preferred stock issued in public offering, net of costs 552,000 55 —   —   —   —   —   —   12,272,385 —   12,272,440
Common stock issued for acquisition —   —   —   —   300,000 30 —   —   1,958,970 —   1,959,000
Stock-based compensation —   —   —   —   —   —   —   —   426,268 —   426,268
Dividends paid to preferred shareholders —   —   —   —   —   —   —   —   —   (241,500 ) (241,500 )
Net loss —   —   —   —   —   —   —   —   —   (1,080,804 ) (1,080,804 )
Balance, September 30, 2021 552,000 $ 55 2,000 $ 1 9,715,386 $ 972 —   $ —   $ 34,316,820 $ (6,712,578 ) $ 27,605,270

Balance, January 1, 2022 552,000 55 2,000 1 12,775,674 1,278 —   —   42,877,622 (10,213,196 ) 32,665,760
Settlement of stock in connection with prior acquisition (note 2) —   —   —   —   (400,000 ) (40 ) —   —   40 —   —
Common stock issued in public offering (over-allotment), net of costs —   —   —   —   400,000 40 —   —   1,091,960 —   1,092,000
Stock-based compensation —   —   —   —   112,500 11 —   —   287,988 —   287,999
Dividends paid to preferred shareholders —   —   —   —   —   —   —   —   —   (362,250 ) (362,250 )
Net loss —   —   —   —   —   —   —   —   —   (1,649,872 ) (1,649,872 )
Balance, March 31, 2022 552,000 55 2,000 1 12,888,174 1,289 —   —   44,257,610 (12,225,318 ) 32,033,637
Cancellation of restricted shares —   —   —   —   (52,500 ) (5 ) —   —   5 —   —
Stock-based compensation —   —   —   —   95,000 10 —   —   112,441 —   112,451
Treasury Shares repurchased —   —   —   —   (113,485 ) —   113,485 (149,686 ) —   —   (149,686 )
Dividends paid to preferred shareholder —   —   —   —   —   —   —   —   —   (362,250 ) (362,250 )
Net Loss —   —   —   —   —   —   —   —   —   (2,888,655 ) (2,888,655 )
Balance, June 30, 2022 552,000 55 2,000 1 12,817,189 1,294 113,485 (149,686 ) 44,370,056 (15,476,223 ) 28,745,497
Stock-based compensation —   —   —   —   —   —   —   —   159,530 —   159,530
Reissuance of preferred stock Series X —   —   8,000 —   —   —   —   —   —   —   —
Dividends paid to preferred shareholder —   —   —   —   —   —   —   —   —   (362,250 ) (362,250 )
Net Loss —   —   —   —   —   —   —   —   —   (2,700,473 ) (2,700,473 )
Balance, September 30, 2022 552,000 $ 55 10,000 $ 1 12,817,189 $ 1,294 113,485 $ (149,686 ) $ 44,529,586 $ (18,538,946 ) $ 25,842,304

~~See~~The accompanying notes ~~to the~~are an integral part of these unaudited ~~condensed~~interim consolidated financial statements.

Applied UV, Inc. and Subsidiaries

Condensed Interim Consolidated Statements of Cash Flows

For the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~


	2022			2021			2023			2022
Cash flows from Operating Activities
Net Loss	$	(7,239,000	)	$	(4,251,987	)	$	(4,541,839	)	$	(1,649,872	)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities
Stock based compensation		559,980			1,102,609			192,021			287,999
Bad debt expense (recovery)		94,714			(70,004	)
Forgiveness of paycheck protection program loan		—			(296,827	)
Bad debt (recovery) expense								(93,562	)		48,151
Change in fair market value of warrant liability		(46,521	)		148,882			(2,302	)		(43,828	)
Gain on settlement of loan payable		—			(20,000	)
Loss on change in fair market value of contingent consideration (Note 2)		240,000			—
Loss on change in Fair Market Value of Contingent Consideration								619,999			240,000
Gain on settlement of contingent consideration		(1,700,000	)		—			—			(1,700,000	)
Loss on impairment of goodwill		1,138,203			—
Loss on impairment of goodwill and intangible assets								—			1,138,203
Amortization of right-of-use asset		834,889			539,692			396,098			97,618
Depreciation and amortization		1,484,968			481,040			660,505			467,746
Amortization of debt discount		53,646			—			184,218			4,036
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable		(103,343	)		113,967			(1,421,047	)		19,140
Cost and estimated earnings excess of billings		(234,869	)		—			(247,153	)		(8,898	)
Inventory		(2,612,773	)		(313,994	)		909,789			(1,624,368	)
Vendor deposits		697,558			(925,366	)		(862,024	)		619,070
Prepaid expenses and other current assets		(161,797	)		84,828
Income taxes payable		—			(173,716	)
Prepaid expense and other current assets								(373,552	)		(182,273	)
Other non-current assets								177,819			—
Accounts payable and accrued expenses		582,297			(645,183	)		2,081,981			468,667
Billings in excess of costs and earnings on uncompleted contracts		(1,254,496	)		—			—			(121,665	)
Deferred revenue		1,151,496			(422,793	)		(472,901	)		175,780
Due to landlord		(138,724	)		—			(93,171	)		—
Operating lease payments		(819,828	)		(537,712	)		(384,524	)		(94,299	)
Net Cash Used in Operating Activities		(7,473,600	)		(5,186,564	)		(3,269,645	)		(1,858,793	)

Cash Flows From Investing Activities
Cash paid for patent costs		(682	)		(19,001	)		—			(672	)
Purchase of machinery and equipment		(46,196	)		—			(75,959	)		(16,111	)
Acquisitions, net of cash acquired (Note 2)		(10	)		(5,060,193	)		(4,115,709	)		(10	)
Payments on note payable		(41,730	)		—			(83,131	)		—
Note receivable, related party		—			(500,000	)
Net Cash Used in Investing Activities		(88,618	)		(5,579,194	)		(4,274,799	)		(16,793	)

Cash Flows From Financing Activities
Payments on financing leases		(5,269	)		(4,943	)		(8,534	)		(1,738	)
Proceeds from warrant exercise		—			1,157
Shares repurchased		(149,686	)		—
Dividends to preferred shareholders		(1,086,750	)		(241,500	)		(362,250	)		(362,250	)
Settlement of loan payable		—			(65,000	)
Payments on note payable								(1,793,688	)		—
Proceeds from equity raises, net		1,092,000			12,272,440			2,242,926			1,092,000
Net Cash (Used in) Provided by Financing Activities		(149,705	)		11,962,154
Proceeds from note payable, net								6,813,391			—
Net Cash Provided by Financing Activities								6,891,845			728,012

Net (Decrease) Increase in Cash and equivalents		(7,711,923	)		1,196,396
Cash, restricted cash, and cash equivalents beginning		8,768,156			11,757,930
Cash, restricted cash, and cash equivalents ending	$	1,056,233		$	12,954,326
Net Decrease in Cash and equivalents								(652,599	)		(1,147,574	)
Cash and cash equivalents at January 1,								2,734,485			8,768,156
Cash and cash equivalents at December 31,							$	2,081,886		$	7,620,582

Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest	$	101,365		$	1,022		$	57,534		$	1,022
Income taxes	$	—		$	185,105		$	—		$	—
Supplemental Non-Cash Items
Initial recognition of warrant liability	$	—		$	135,125
Shares granted to settle previously recorded liability	$	—		$	21,420
Recognition ofright of use asset – operating lease	$	1,380,658		$	—
Issuance of Note Payable for payment of prepaid expense	$	318,833		$	—
Supplemental Non-Cash Items of Investing and Financing Activities:
Recognition of right of use asset and corresponding lease liability							$	563,315		$	—

~~See~~The accompanying notes ~~to the~~are an integral part of these unaudited ~~condensed~~interim consolidated financial statements.

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Applied UV, Inc. (the "Parent") was formed and incorporated in the State of Delaware for the intended purpose of holding the equity of SteriLumen, Inc. (“SteriLumen”) ~~and~~, MunnWorks, LLC (“MunnWorks”), and together ~~“the Subsidiaries”,~~with SteriLumen, the “Subsidiaries”) and other companies acquired or created by the Parent in the future. The Parent acquired the Subsidiaries pursuant to three share exchanges whereby the equity holders of the Subsidiaries exchanged all of their equity interests in the Subsidiaries for shares of voting stock of the Parent. As a result of the share exchanges, each Subsidiary became a wholly-owned subsidiary of the Parent. The Parent and each Subsidiary are collectively referred to herein as (the "Company").

SteriLumen is engaged in the design, manufacture, assembly and distribution of (i) automated disinfecting mirror systems for use in hospitals and other healthcare facilities and (ii) air purification and pathogen elimination systems through its purchase of substantially all of the assets and certain liabilities of Akida Holdings, LLC, KES Science & Technology, and Scientific Air Management LLC, as described below. MunnWorks, LLC is engaged in the manufacture of fine mirrors and custom furniture specifically for the hospitality and retail industries.

In February of 2021, the Company acquired all the assets and assumed certain liabilities of Akida Holdings, LLC (“Akida”). At the time of this acquisition, Akida owned the Airocide™ system of air purification technologies, originally developed for NASA, with assistance from the University of Wisconsin at Madison, that uses a combination of UVC and a proprietary, titanium dioxide based photocatalyst (“PCO”) to eliminate airborne bacteria, mold, fungi, viruses, volatile organic compounds, and many odors without producing any harmful by-products, with applications in the hospitality, hotel, healthcare, nursing homes, grocer, wine, commercial buildings and retail sectors. The Airocide™ system has been used by brands and organizations such as NASA, Whole Foods, Dole, Chiquita, Opus One, Sub-Zero Refrigerators and Robert Mondavi Wines. Akida contracted KES Science & Technology, Inc. (“KES”) to manufacture, warehouse and distribute the Airocide™ system and Akida’s contractual relationship with KES was assigned to and assumed by the Company as part of the acquisition.

On September 28, 2021, the Company acquired all the assets and assumed certain liabilities of KES. At the time of the acquisition, KES was principally engaged in the manufacturing and distribution of the Airocide™ system of air purification technologies and misting systems. KES also had the exclusive right to the sale and distribution of the Airocide™ system in certain markets. This acquisition consolidates all of manufacturing, sale and distribution of the Airocide™ system under the SteriLumen brand and expands the Company’s market presence in food distribution, post-harvest produce, wineries, and retail sectors. The Company sells its products throughout the United States, Canada, and Europe.

On October 13, 2021, the Company acquired all the assets and assumed certain liabilities of Scientific Air Management LLC, ("SciAir"). SciAir is a provider of whole-room, aerosol chamber and laboratory certified air disinfection machines. SciAir is a provider of whole-room, aerosol chamber and laboratory certified air disinfection machines that use a combination of UVC and a proprietary, patented system to eliminate airborne bacteria, mold, fungi, viruses, volatile organic compounds, and many odors without producing any harmful by-products. The units are well suited for larger spaces within a facility and are mobile with industrial grade casters allowing for movement throughout a facility to address increased bio burden from larger meetings or increased human traffic.

On March 25, 2022, the Company acquired the assets and assumed certain liabilities of VisionMark, LLC, ("~~Visionmark"~~VisionMark"). ~~Visionmark~~VisionMark is engaged in the business of manufacturing ~~customized~~ furniture using wood and metal components for the hospitality and retail industries.

~~Applied~~On January 26, 2023 we closed on the merger agreement with PURO Lighting LLC and LED Supply Co. LLC along with its operating subsidiaries (“PURO merger”). PURO and LED Supply Co. own a powerful suite of products used in education, government, and healthcare that incorporates UV ~~Inc.~~Lighting and ~~Subsidiaries~~a HVAC monitoring software platform; LED Supply Co. provides design, distribution, and implementation services for lighting, controls and smart building technologies.

~~Notes to the Condensed Consolidated Financial Statements~~

~~NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)~~

Principles of Consolidation

The consolidated financial statements include the accounts of Applied UV, Inc., ~~Munnworks,~~MunnWorks, LLC and SteriLumen, Inc. All significant intercompany transactions and balances are eliminated in consolidation.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”) set forth in Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented. Unaudited interim results are not necessarily indicative of the results for the full fiscal year. These financial statements should be read along with the Annual Report filed of the Company for the annual period ended December 31, ~~2021.~~2022. The consolidated balance sheet as of December 31, ~~2021~~2022 was derived from the audited consolidated financial statements as of and for the year then ended.

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Concentration of Credit and Business Risk

At times throughout the year, the Company maintains cash balances at various institutions, which may exceed the Federal Deposit Insurance Corporation limit. As of March 31, 2023, the Company was approximately $1,760,000 in excess of FDIC insured limits. The Company provides credit in the normal course of business. The Company performs ongoing credit evaluations of its customers and maintains allowances for doubtful accounts based on factors surrounding the credit risk of specific customers, historical trends and other information.

For the three months ended March 31, 2023 and 2022, the Company had no major suppliers that accounted for over 10% of supplies and materials used by the Company.

Use of Estimates

The preparation of consolidated 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, as of the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the valuation and accounting for equity awards related to warrants and stock-based compensation, determination of fair value for derivative instruments, the accounting for business combinations and allocating purchase price and estimating the useful life of intangible assets.

Cash, Restricted Cash and Cash Equivalents

Cash and equivalents include highly liquid investments that have original maturities less than 90 days at the time of their purchase. These investments are carried at cost, which approximates market value because of their short maturities. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the Company had approximately $~~26,801~~27,000 ~~and $1,076,664~~, respectively, in cash equivalents. ~~The Company also maintains a restricted cash balance to satisfy its preferred shareholder redemption requirements (Refer to Note 7).~~

Accounts receivable

AnThe Company’s accounts receivable balance consists of amounts due from its customers. The Company records accounts receivable at the invoiced amount less an allowance for ~~uncollectible~~any potentially uncollectable accounts ~~receivable is~~under the current expected credit loss (“CECL”) impairment model and presents the net amount of the financial instrument expected to be collected. The CECL impairment model requires an estimate of expected credit losses, measured over the contractual life of an instrument, which considers forecasts of future economic conditions in addition to information about past events and current conditions. Based on this model, the Company considers many factors, including the age of the balance, collection history, and current economic trends. Bad debts are written off after all collection efforts have ceased. Allowances for credit losses are recorded as a direct reduction from an asset’s amortized cost basis. Credit losses and recoveries are recorded in selling, general and administrative expenses in the consolidated statements of operations. Recoveries of financial assets previously written off are recorded when ~~management believes~~received. For the ~~collectability~~three months ended March 31, 2023 and 2022, the Company had credit losses (recoveries) of $ (93,562) and $48,151, respectively. Based on the ~~accounts receivable is confirmed. Subsequent recoveries, if any, are credited to~~Company’s current and historical collection experience, the ~~allowance. The allowance is determined based on management’s review of the debtor’s ability to repay and repayment history, aging history, and estimated value of collateral, if any. The~~ Company ~~had~~recorded an allowance for doubtful accounts ~~approximating~~of $~~9,000~~118,000 and $35,000as of ~~both September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Inventory

Inventories consist of raw materials, work-in-process, and finished goods. Raw materials and finished goods are valued at the lower of cost or net realizable value, using the first-in, first-out (“FIFO”) valuation method. Work-in-process and finished goods includes the cost of materials, freight and duty, direct labor and overhead. The Company writes down inventory for estimated obsolescence equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. The company had a reserve for inventory approximating ~~$88,000~~ $187,000and ~~$140,000~~ $88,000 as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, respectively.

Property and Equipment

Property and equipment are recorded at cost. Depreciation of furniture and fixtures is provided using the straight-line method, generally over the terms of the lease. Repairs and maintenance expenditures, which do not extend the useful lives of the related assets, are expensed as incurred. Depreciation of machinery and equipment is based on the estimated useful lives of the assets.

Schedule of estimated useful lives
Machinery and equipment		5 to 7 years
Leasehold improvements		Lesser of term of lease or useful life
Furniture and fixtures		5 to 7 years

Business Acquisition Accounting

The Company applies the acquisition method of accounting for those that meet the criteria of a business combination. The Company allocates the purchase price of its business acquisitions based on the fair value of identifiable tangible and intangible assets. The difference between the total cost of the acquisition and the sum of the fair values of acquired tangible and identifiable intangible assets less liabilities is recorded as goodwill. Transaction costs are expensed as incurred in general and administrative expenses.

Goodwill and Intangible Assets

The Company has recorded intangible assets, including goodwill, in connection with business combinations. Estimated useful lives of amortizable intangible assets are determined by management based on an assessment of the period over which the asset is expected to contribute to future cash flows.

In accordance with U.S. GAAP for goodwill and other indefinite-lived intangibles, the Company tests these assets for impairment annually and whenever events or circumstances make it more likely than not that impairment may have occurred. For the purposes of that assessment, the Company has determined to assign assets acquired in business combinations to a single reporting unit including all goodwill and indefinite-lived intangible assets acquired in business combinations.

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

Income Taxes

The Company files income tax returns using the cash basis of accounting. Income taxes are accounted for under the asset and liability method. Current income taxes are based on the year's income taxable for federal and state tax

reporting purposes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be recovered.

~~Applied UV, Inc. and Subsidiaries~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)~~

Derivative Instruments

The Company evaluates its warrants to determine if those contracts or embedded components of those contracts qualify as derivatives. The result of this accounting treatment is that the fair value of the embedded derivative is marked-to-market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statements of operations as other income or expense.

The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. The Company has concluded that there are no such reclassifications required to be made as of and for the periods ended ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021.~~2022.

The Company utilizes the Black-Scholes valuation model to value the derivative warrants as stipulated in the agreement for the warrant holders to receive cash based on that value.

Fair Value of Financial Instruments

The carrying amounts reported in the unaudited condensed consolidated balance sheets for loans payable approximate fair value because of the immediate or short-term maturity of the financial instruments. The Company's financial assets and liabilities are measured using inputs from the three levels of the fair value hierarchy.

Loss Per Share

Basic loss per share is computed by dividing net loss attributable to common shareholders (the numerator) by the weighted-average number of common shares outstanding (the denominator) for the period. In periods of losses, diluted loss per share is computed on the same basis as basic loss per share as the inclusion of any other potential shares outstanding would be anti-dilutive.

The following table sets forth the number of potential shares of common stock that have been excluded from diluted net loss per share because their effect was anti-dilutive:

Schedule of anti dilutive securities excluded from computation of earnings per share
As of September 30,
2022 2021
Common stock options 890,028 589,314
Common stock warrants 192,419 192,419
Total 1,082,447 781,733

Schedule of Anti-dilutive Securities Excluded from Computation of Loss Per Share:

Schedule of anti dilutive securities excluded from computation of earnings per share
	As of March 31,
	2023		2022
Common stock options		1,301,195		833,314
Series B Preferred Stock		1,250,000		—
Series C Preferred Stock		399,996		—
Common stock warrants		192,419		192,419
Total		3,143,610		1,025,733

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Stock-Based Compensation

The Company accounts for its stock-based compensation awards in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification Topic 718 ("ASC"), Compensation-Stock Compensation ("ASC 718"). ASC 718 requires all stock-based payments to employees, including grants of employee stock options and restricted stock and modifications to existing stock options, to be recognized in the statements of operations based on their fair values over the requisite service period.

~~Applied UV, Inc. and Subsidiaries~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)~~

Research and Development

The Company accounts for research and development costs in accordance with Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, research and development costs are expensed as incurred.

Revenue Recognition

The Company recognizes revenue when the performance obligations in the client contract has been achieved. A performance obligation is a contractual promise to transfer product to the customer. The transaction price of a contract is allocated to each distinct performance obligation and recognized as revenue when or as, the customer receives the benefit of the performance obligation. Under ASC 606, revenue is recognized when a customer obtains control of goods in an amount that reflects the consideration the Company expects to receive in exchange for those goods. To achieve this core principle, the Company applies the following five steps:

Identify the contract with a customer.

Identify the performance obligations in the contract.

Determine the transaction price.

Allocate the transaction price to performance obligations in the contract.

Recognize revenue when or as the Company satisfies a performance obligation.

MunnWorks projects, including those from the VisionMark acquisition, are completed within the Company’s facilities. For these projects, the company designs, manufactures and sells custom mirrors and furniture for the hospitality and retail industries through contractual agreements. These sales require the company to deliver the products within three to nine months from commencement of order acceptance. Revenue is recognized using the input method of accounting. Deferred revenue represents amounts billed in excess of revenues recognized. Revenues recognized in excess of amounts billed typically does not occur as the Company will not perform any work in excess of the amount the company bills to its customers. If work is performed in excess of amounts billed, the Company will record an unbilled receivable.

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Revenue Recognition (Continued)

The company applied the five-step model to the sales of PURO's disinfection solution, LED's lighting products, Akida’s and KES’s Airocide™ and misting system products, and SciAir’s whole-room aerosol chamber and laboratory certified air disinfection machines. At contract inception and once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract and determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company sells Airocide™ air sterilization units, misting systems, and whole-room aerosol chamber and laboratory certified disinfection machines to both consumer and commercial customers. These products are sold both domestically and internationally. The cycle from contract inception to shipment of products is typically one day to three months. The Company’s contracts for both its consumer and commercial customers each contain a single performance obligation (delivery of Airocide™, KES, and SciAir products), as the promise to transfer the individual goods or services is not separately identifiable from other promises in the contracts and, therefore, not distinct. As a result, the entire transaction price is allocated to this single performance obligation. The Company recognizes revenues at a point in time when the customer obtains control of the Company’s product, which typically occurs upon shipment of the product by the Company or upon customer pick-up via third party common carrier.

Revenue recognized over time and revenue recognized at a point in time for the three months ended:

Schedule of revenue:

Schedule of revenue
	September 30,				March 31,
	2022		2021		2023		2022
Recognized over time	$	3,306,739	$	322,656	$	5,286,443	$	529,237
Recognized at a point in time		2,568,872		3,228,909		5,368,040		2,826,853
	$	5,875,611	$	3,551,565	$	10,654,483	$	3,356,090

~~Revenue recognized over time and revenue recognized at a point in time for the nine months ended:~~

~~Schedule of revenue:~~

September 30,
2022 2021
Recognized over time $ 6,719,888 $ 1,097,793
Recognized at a point in time 8,419,459 6,650,706
$ 15,139,347 $ 7,748,499

Deferred revenue was comprised of the following as of:

	September 30,		December 31,		March 31,		December 31,
	2022		2021		2023		2022
Recognized over time	$	1,035,444	$	94,868	$	2,661,199	$	3,581,195
Recognized at a point in time		904,828		693,908		3,894,297		1,149,104
	$	1,940,272	$	788,776	$	6,555,496	$	4,730,299

The Company recognized $~~48,112~~2,702,034 of deferred revenue as of December 31, ~~2021~~2022 as revenue during the three months ended ~~September 30, 2022. The Company recognized $786,707~~ ~~of deferred revenue as of December~~March 31, ~~2021 as revenue during the nine months ended September 30, 2022.~~

~~Applied UV, Inc. and Subsidiaries~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)~~2023.

Advertising

Advertising costs consist primarily of online search advertising and placement, trade shows, advertising fees, and other promotional expenses. Advertising costs are expensed as incurred and are included in sales and marketing on the consolidated statements of operations. Advertising expense for the three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ was $~~264,614~~151,618 and $~~315,115~~197,995~~. Advertising expense for the nine months ended September 30, 2022 and 2021 was $810,986~~ ~~and $624,549~~., respectively.

Vendor deposits

Vendor payments to third manufactures are capitalized until completion of the project and are recorded as vendor deposits. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, the vendor deposit balance was $~~294,484~~1,313,244 and $~~992,042~~75,548, respectively.

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Patent Costs

The Company capitalizes costs consisting principally of outside legal costs and filing fees related to obtaining and maintaining patents. The Company amortizes patent costs over the useful life of the patent which is typically 20 years, beginning with the date the patent is filed with the U.S. Patent and Trademark Office, or foreign equivalent. As of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021,~~2022, capitalized patent costs net of accumulated amortization was $~~1,618,757~~1,568,725 and $~~1,693,124~~1,593,741, respectively. For the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company recorded $~~25,016~~41,495 and $~~7,030~~25,016~~, respectively, of amortization expense for these patents. For the nine months ended September 30, 2022 and 2021, the Company recorded $75,048~~ ~~and $11,957~~, respectively, of amortization expense for these patents.

~~Applied UV, Inc. and Subsidiaries~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)~~

Recently adopted accounting standards:

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that the Company adopts as of the specified effective date. The Company does not believe that the impact of recently issued standards that are not yet effective will have a material impact on the Company’s financial position or results of operations upon adoption.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The FASB subsequently issued amendments to ASU 2016-13, which have the same effective date and transition date of January 1, 2023. These standards replace the existing incurred loss impairment model with an expected credit loss model and requires a financial asset measure at amortized cost to be presented at the net amount expected to be collected. The Company determined that this change does not have a material impact to the financial statements or financial statement disclosures.

Recently issued accounting pronouncements:

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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) (“ASU 2020-06”) to simplify accounting for certain financial instruments. ASU 2020-06 eliminates the current models that require separation of beneficial conversion and cash conversion features from convertible instruments and simplifies the derivative scope exception guidance pertaining to equity classification of contracts in an entity’s own equity. The new standard also introduces additional disclosures for convertible debt and freestanding instruments that are indexed to and settled in an entity’s own equity. ASU 2020-06 amends the diluted earnings per share guidance, including the requirement to use the if converted method for all convertible instruments. The amendments in this update will be effective for the Company on January 1, 2024 and may be early adopted at the beginning of fiscal year 2023. The Company is currently assessing the impact, if any, that ASU 2020-06 would have on its financial position, results of operations or cash flows.

NOTE 2 – BUSINESS ACQUISITION

The Company accounted for the acquisitions as a business combinations using the purchase method of accounting as prescribed in Accounting Standards Codification 805, Business Combinations (“ASC 805”) and ASC 820 – Fair Value Measurements and Disclosures (“ASC 820”). In accordance with ASC 805 and ASC 820, the Company used its best estimates and assumptions to accurately assign fair value to the tangible assets acquired, identifiable intangible assets and liabilities assumed as of the acquisition dates. Goodwill as of the acquisition date is measured as the excess of purchase consideration over the fair value of tangible and identifiable intangible assets acquired and liabilities assumed. The results of operations of the acquired businesses since the date of acquisition are included in the consolidated financial statements of the Company for the three ~~and nine~~ months ended ~~September 30, 2022~~March 31, 2023 and ~~2021.~~2022. The total purchase consideration was allocated to the assets acquired and liabilities assumed at their estimated fair values as of the date of acquisition, as determined by management. The excess of the purchase price over the amounts allocated to assets acquired and liabilities assumed has been recorded as goodwill. The value of the goodwill from the acquisitions described below can be attributed to a number of business factors including, but not limited to, cost synergies expected to be realized and a trained technical workforce.

1413

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 2 – BUSINESS ACQUISITION (CONTINUED)

In conjunction with acquisitions noted below, we used various valuation techniques to determine fair value of the assets acquired, with the primary techniques being discounted cash flow analysis, relief-from-royalty, a form of the multi-period excess earnings and the with-and-without valuation approaches, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy. Inputs to these valuation approaches require significant judgment including: (i) forecasted sales, growth rates and customer attrition rates, (ii) forecasted operating margins, (iii) royalty rates and discount rates used to present value future cash flows, (iv) the amount of synergies expected from the acquisition, (v) the economic useful life of assets and (vi) the evaluation of historical tax positions. In certain acquisitions, historical data is limited, therefore, we base our estimates and assumptions on budgets, business plans, economic projections, anticipated future cash flows and marketplace data.

~~Akida Holdings LLC~~

~~On February 8, 2021 Applied UV, Inc. (the “Company”), entered into an asset~~In relation with the purchase ~~agreement (the “APA”)~~ by ~~and among the Company,~~ SteriLumen, Inc., ~~a New York corporation and wholly-owned subsidiary~~ of the Company (the “Purchaser”) and Akida Holdings LLC, a Florida limited liability company (the “Seller”) pursuant to which the Purchaser acquired substantially all of the assets of the Seller and assumed certain of its current liabilities and contract obligations, as set forth in the APA (the “Acquisition”). In the Acquisition, the Purchaser acquired all the Seller’s assets and was assigned its contracts related to the manufacturer and sale of the Airocide™ system, originally developed for NASA with assistance from the University of Wisconsin at Madison, that uses a combination of UV-C and a proprietary, titanium dioxide-based photocatalyst that has applications in the hospitality, hotel, healthcare, nursing homes, grocer, wine, commercial buildings, and retail sectors.

~~Applied UV, Inc. and Subsidiaries~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~NOTE 2 – BUSINESS ACQUISITION (CONTINUED)~~

~~The purchase price and purchase price allocation as of the acquisition completion date follows.~~

Schedule of recognized identified assets acquired and liabilities assumed
Purchase Price:
Cash $ 760,293
Fair market value of common stock issued (1,375,000 shares) 7,122,500
Total Purchase Price, Net of Cash Acquired 7,882,793

Assets Acquired:
Accounts receivable 233,241
Inventory 211,105
Prepaid expenses 285,490
Machinery and equipment 168,721
Customer relationships 539,000
Trade names 1,156,000
Technology and know how 3,468,000
Total Assets Acquired: 6,061,557

Liabilities Assumed:
Accounts payable (415,341 )
Deferred revenue (491,702 )
Total Liabilities Assumed (907,043 )
Net Assets Acquired 5,154,514
Excess Purchase Price "Goodwill" $ 2,728,279

~~The excess purchase price has been recorded as goodwill in the amount of approximately $2,728,279. The estimated useful life of the identifiable intangible assets (see note 5) is seven to ten years. The goodwill is amortizable for tax purposes.~~

~~Applied UV, Inc. and Subsidiaries~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~NOTE 2 – BUSINESS ACQUISITION (CONTINUED)~~

~~KES Science & Technology, Inc.~~

~~On September 28, 2021, SteriLumen, Inc. completed an Asset Purchase Agreement with KES Science & Technology, Inc. (“KES”), a Georgia corporation.~~

~~The purchase price and purchase price allocation as of the acquisition completion date follows.~~

Purchase Price:
Cash $ 4,299,900
Fair market value of common stock issued (300,000 shares) 1,959,001
Total Purchase Price, Net of Cash Acquired 6,258,901

Assets Acquired:
Accounts receivable 392,367
Inventory 602,746
Prepaid expenses 10,995
Machinery and equipment 36,146

Trade names 914,000
Technology and know how 3,656,000
Total Assets Acquired: 5,612,254

Liabilities Assumed:
Accounts payable (296,681 )

Total Liabilities Assumed (296,681 )
Net Assets Acquired 5,315,573
Excess Purchase Price "Goodwill" $ 943,328

~~The excess purchase price has been recorded as goodwill in the amount of $943,328. The estimated useful life of the identifiable intangible assets is ten years (see note 5). The goodwill is amortizable for tax purposes.~~

~~Old SAM Partners (Scientific Air)~~

On October 13, 2021, the Company entered into an asset purchase agreement by and among the Company, SteriLumen, Inc., a New York corporation and wholly-owned subsidiary of the Company (the “Purchaser”) and Old SAM Partners, LLC, a Florida limited liability company (the “Seller”), pursuant to which the Purchaser acquired substantially all of the assets of the Seller, including the assignment of an exclusive distribution agreement. On October 13, 2021 the Seller received, as consideration for the Acquisition (i) $9,500,000 in cash; and (ii) 200,000 shares of the Company’s common stock and (iii) 200,000 unvested shares of the Company’s common stock, which are subject to cancellation if the earnout is not met. On the date of acquisition, the fair market value of the 200,000 vested shares was $5.57 for a total value of $1,114,000. An additional liability was recorded for $886,000 as a result of the agreement calling for additional cash consideration to the extent the share price is below $10 on the free trading date, as defined in the agreement. On December 31, 2021, the share price of our common stock was $2.70 per share and a loss on contingent consideration of $574,000 was recorded in the consolidated statements of operations and increased the liability to $1,460,000.

~~Applied UV, Inc. and Subsidiaries~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~NOTE 2 – BUSINESS ACQUISITION (CONTINUED)~~

~~The purchase price and purchase price allocation as of the acquisition completion date follows.~~

Purchase Price:
Cash $ 9,500,000
Fair market value of common stock issued 1,114,000
Contingent consideration based on stock price 886,000
Total Purchase Price, net of cash acquired 11,500,000

Assets Acquired:
Accounts receivable 129,845
Inventory 369,970
Machinery and equipment 1,982
Customer relationships 6,784,000
Patents 1,533,000
Technology and know how 1,217,000
Trade names 326,000
Total Assets Acquired: 10,361,797

Assets Acquired 10,361,797
Excess Purchase Price "Goodwill" $ 1,138,203

~~The excess purchase price has been recorded as goodwill in the amount of approximately $1,138,203. The estimated useful life of the identifiable intangible assets (see note 5) is ten years. The goodwill is amortizable for tax purposes.~~

On March 31, 2022, there was a settlement of a dispute that arose during the first quarter of 2022 between both parties regarding certain representations and warranties in the purchase agreement which resulted in a settlement and mutual release agreement where the seller agreed to relinquish any right, title, and interest in the previously issued 400,000shares. During the three months ended March 31, 2022, the company recorded a loss on change in fair market value of contingent consideration of $240,000and, as a result of the settlement agreement, the company recorded a gain on settlement of contingent consideration of $1,700,000. The Company also determined that a triggering event had occurred as a result of the settlement agreement. A quantitative impairment test on the goodwill and intangible assets determined that the fair value was below the carrying value and as a result the Company recorded a full goodwill impairment charge of $1,138,203 onin the ~~Unaudited Condensed Consolidated Statements~~first quarter of ~~Operations during the nine months ended September 30, 2022. There was~~ no ~~impairment of goodwill recorded during the mime months ended September 30,~~ 2022.

On March 25, 2022, the Company entered into an asset purchase agreement by and among the Company, ~~Munnworks,~~MunnWorks, LLC., a New York Limited Liability Company and wholly-owned subsidiary of the Company (the “Purchaser”) and VisionMark LLC, a New York limited liability company (the “Seller”), pursuant to which the Purchaser acquired substantially all of the assets of the Seller in exchange for the assumption of obligations of buyer under the sublease and sublease guarantee.

The purchase price and purchase price allocation as of the acquisition completion date follows.

Schedule of recognized identified assets acquired and liabilities assumed
Purchase Price:
Cash paid at closing	$	10
Due to landlord		755,906
Total Purchase Price, net of cash acquired		755,916

Assets Acquired:
Accounts receivable, net		636,550
Inventory		176,583
Costs and estimated earnings in excess of billings		181,152
Machinery and equipment		1,100,000
Total Assets Acquired:		2,094,285

Liabilities Assumed:
Billings in excess of costs and earnings on uncompleted contracts		(1,388,838	)
Net Assets Acquired		705,447
Excess Purchase Price "Goodwill"	$	50,469

1814

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 2 – BUSINESS ACQUISITION (CONTINUED)

~~The purchase price and purchase price allocation as of the acquisition completion date follows.~~

Purchase Price:
Cash paid at closing $ 10
Due to landlord 755,906
Total Purchase Price, net of cash acquired 755,916

Assets Acquired:
Accounts receivable, net 636,550
Inventory 176,583
Contract asset 181,152
Machinery and equipment 1,100,000
Total Assets Acquired: 2,094,285

Liabilities Assumed:
Contract liability (1,388,838 )
Total Liabilities Assumed (1,388,838 )
Net Assets Acquired 705,447
Excess Purchase Price "Goodwill" $ 50,469

The excess purchase price has been recorded as goodwill in the amount of approximately $50,469. The goodwill is amortizable for tax purposes.

In connection with the VisionMark LLC acquisition, the Company is obligated to repay $31,057of past due lease payments per month for the next 36 months commencing on April 1, 2022. The Company recognized a discount and related liability equal to the present value of the past due lease liability, and amortizes the difference between such present value and the liability through interest expense using a rate of 38.7% as per the effective interest rate method over the repayment period. Amortization of discount included in interest expenses was $40,797 and $0 for the three months ended March 31, 2023 and 2022, respectively.

~~At September 30, 2022,~~As of March 31, 2023, the future ~~maturities~~maturity of ~~past due~~the lease ~~payments are~~liability is as follows:

Schedule of future maturity of the lease liability
For Years Ended December 31,
2022 (3 months)	$	93,172
2023		372,684
Years Ended December 31,
2023 (9 months)				$	279,512
2024		372,684			372,684
2025		93,174			93,174
Total		931,714			745,370
Less: Unamortized discount		(260,886	)		(175,281	)
Total amount due to landlord		670,828			570,089
Less: current portion of amount due to landlord, net of discount		(214,766	)		(244,532	)
Total long-term portion of amount due to landlord	$	456,062		$	325,557

On January 26, 2023, the Company entered into an asset purchase agreement by the Company (the "Buyer") and PURO Lighting, LLC, (the "Seller") a limited liability company under the laws of the State of Colorado, pursuant to which the Purchaser acquired substantially all of the assets of the Seller in exchange for cash, common stock and preferred stock of the buyer. The Company paid or issued, as applicable (i) 2,497,220 shares of the Company’s common stock, (ii) 251,108 shares of the Company’s 5% Series C Cumulative Perpetual Preferred Stock, par value $0.0001 per share (“Series C Preferred Stock”), (iii) cash of $3,828,702 and, (iv) 1,250,000 shares of the Company’s 2% Series B Cumulative Perpetual Preferred Stock (the “Series B Preferred Stock”). In addition, the seller has the right to receive earnout payments subject to certain conditions, including achieving certain revenue targets and gross profit margins and payable as set forth in the PURO Merger Agreement.

1915

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 2 – BUSINESS ACQUISITION (CONTINUED)

The purchase price and purchase price allocation as of the acquisition completion date follows.

Schedule of recognized identified assets acquired and liabilities assumed
Purchase Price:
Cash paid at closing, net of cash acquired	$	3,828,972
Common stock		2,597,111
Series B Preferred Stock		3,712,500
Series C Preferred Stock		667,947
Contingent consideration-Make Whole***		2,397,329
Contingent consideration-Earnout		4,046,232
Total Purchase Price, net of cash acquired		17,250,091

Assets Acquired:
Accounts receivable, net		274,574
Inventory		2,085,912
Other current assets		415,188
Fixed assets, net		5,075
Tradenames/trademarks		1,228,000
Technology/know-how/trade secrets		1,842,000
Patented technology		1,710,000
Customer relationships		4,705,000
Total Assets Acquired:		12,265,749

Liabilities Assumed:
Accounts payable		(936,448	)
Deferred revenue		(18,482	)
Total Liabilities Assumed		(954,930	)
Net Assets Acquired		11,310,819
Excess Purchase Price "Goodwill"	$	5,939,272

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 2 – BUSINESS ACQUISITION (CONTINUED)

***Represents the difference in fair value of common stock on the date of acquisition versus agreed upon $2 per share ("Make Whole"). In the event any PURO Equityholder sells any shares of Common Stock obtained pursuant to the terms of the Agreement through a registered broker/dealer on or after the first anniversary of the Closing Date for a price per share of the Common Stock less than $2.00 (the “Sale Price”), Parent will pay to such PURO Equityholder within ten (10) Business Days following the consummation of such sale to an account designated in writing by such PURO Equityholder an amount equal to (a) (i) $2.00 less (ii) the Sale Price, multiplied by (b) the number of shares of Common Stock sold in such sale (the “Make Whole Amount”). The Make Whole Amount payment shall be 50% in cash and 50% in shares of Common Stock (with the number of shares of Common Stock to be issued determined based on a price per share equal to 90% of the Sale Price). As a result of the make-whole provision, the liability was increased to $2,796,889 as of March 31, 2023 with the change in fair market value of $399,555 being recorded to other expense within the consolidated statements of operations.

The excess purchase price has been recorded as goodwill in the amount of approximately $5,603,818. The goodwill is amortizable for tax purposes.

On January 26, 2023, the Company also entered into an asset purchase agreement by the Company (the "Buyer") and LED Supply Co, LLC, (the “Seller”), a limited liability company under the laws of the State of Colorado, pursuant to which the Purchaser acquired substantially all of the assets of the Seller in exchange for cash, common stock and preferred stocks of the buyer. The Company paid or issued, as applicable (i) 1,377,777 shares of the Company’s common stock; (ii) 148,888 shares of Series C Preferred Stock; and (iii) cash of $286,742. In addition, the seller has the right to receive earnout payments subject to certain conditions, including achieving certain revenue targets and gross profit margins and payable as set forth in the LED Merger Agreement.

The purchase price and purchase price allocation as of the acquisition completion date follows.

Schedule of recognized identified assets acquired and liabilities assumed
Purchase Price:
Cash paid at closing, net of cash acquired	$	286,742
Common stock		1,432,889
Series C Preferred Stock		396,042
Contingent considerations - Make Whole***		1,322,665
Contingent considerations - Earnout		10,609,442
Total Purchase Price, net of cash acquired		14,047,780

Assets Acquired:
Accounts receivable, net		1,461,461
Inventory		1,925,285
Other current assets		232,095
Vendor deposits		375,672
Costs and estimated earnings in excess of billings		533,638
Fixed assets, net		106,330
Tradenames/trademarks		1,806,000
Technology/know-how/trade secrets		1,169,193
Vendor relationships		1,416,000
Rebate program		1,894,703
Customer relationships		2,088,000
Other non-current assets		24,819
Total Assets Acquired:		13,033,196

Liabilities Assumed:
Accounts payable and accrued expenses		(2,854,509	)
Deferred revenue		(2,279,616	)
Notes payable		(1,973,946	)
Financing lease liability		(25,231	)
Total Liabilities Assumed		(7,133,302	)
Net Assets Acquired		5,899,894
Excess Purchase Price "Goodwill"	$	8,147,886

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 2 – BUSINESS ACQUISITION (CONTINUED)

***The amount represents the difference in fair value of common stock on the date of acquisition versus the agreed upon $2 per share ("Make Whole"). In the event any LED Equityholder sells any shares of Common Stock obtained pursuant to the terms of the Agreement through a registered broker/dealer on or after the first anniversary of the Closing Date for a price per share of the Common Stock less than $2.00 (the “Sale Price”), Parent will pay to such LED Equityholder within ten (10) Business Days following the consummation of such sale to an account designated in writing by such LED Equityholder an amount equal to (a) (i) $2.00 less (ii) the Sale Price, multiplied by (b) the number of shares of Common Stock sold in such sale (the “Make Whole Amount”). The Make Whole Amount payment shall be 50% in cash and 50% in shares of Common Stock (with the number of shares of Common Stock to be issued determined based on a price per share equal to 90% of the Sale Price). As a result of the make-whole provision, the liability was increased to $1,543,110 as of March 31, 2023 with the change in fair market value of $220,444 being recorded to other expense within the consolidated statements of operations.

The excess purchase price has been recorded as goodwill in the amount of approximately $7,622,091. The goodwill is amortizable for tax purposes.

NOTE 3 – INVENTORY

Inventory consists of the following as of:

Schedule of Inventory
	September 30,			December 31,			March 31,			December 31,
	2022			2021			2023			2022
Raw materials	$	436,408		$	356,759		$	3,348,225		$	3,485,040
Work in process		402,445			—
Finished goods		3,684,533			1,429,479			5,448,108			2,110,838
Inventory at cost	$	4,523,386		$	1,786,238			8,796,333			5,595,878
Less: Reserve		(87,792	)		(140,000	)		(186,839	)		(87,792	)
Inventory	$	4,435,594		$	1,646,238		$	8,609,494		$	5,508,086

NOTE 4 – PROPERTY AND EQUIPMENT

Property and equipment (including machinery and equipment under capital leases) are summarized by major classifications as follows:

Schedule of property and equipment
	September 30,			December 31,			March 31,			December 31,
	2022			2021			2023			2022
Machinery and Equipment	$	1,251,666		$	254,685		$	1,319,974		$	1,266,189
Leasehold improvements		67,549			67,549			130,058			67,549
Furniture and Fixtures		203,256			54,041			274,326			203,256
		1,522,471			376,275			1,724,358			1,536,994
Less: Accumulated Depreciation		(338,680	)		(179,664	)		(480,558	)		(403,526	)
	$	1,183,791		$	196,611		$	1,243,800		$	1,133,468

Depreciation expense, including amortization of assets under Financing leases, for the three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ was $~~64,489~~77,303 and $~~26,840~~25,762, respectively.

~~Depreciation expense, including amortization of assets under Financing leases, for~~Applied UV, Inc. and Subsidiaries

Notes to the ~~nine months ended September 30, 2022 and 2021 was $159,016~~ ~~and $109,482, respectively.~~Condensed Consolidated Financial Statements

NOTE 5 – INTANGIBLE ASSETS

Intangible assets as of ~~September 30, 2022~~March 31, 2023 and December 31, ~~2021~~2022 consist of the following:

Schedule of Intangible Assets
September 30, December 31,
2022 2021
Intangible assets subject to amortization
Customer Relationship $ 7,323,000 $ 7,323,000
Trade Names 2,396,000 2,396,000
Patents 1,730,771 1,730,089
Technology and Know How 8,341,000 8,341,000
19,790,771 19,790,089
Less: Accumulated Amortization (2,139,485 ) (813,533 )
$
17,651,286
$ 18,976,556

Schedule of Intangible Assets
	March 31,			December 31,
	2023			2022
Intangible assets subject to amortization
Customer Relationships	$	8,448,598		$	1,655,598
Tradenames/trademarks		5,242,530			2,208,530
Patented technology		3,440,771			1,730,771
Technology/know-how/trade secrets		11,352,193			8,341,000
Vendor relationships		1,416,000			—
Rebate program		1,894,703			—
		31,794,795			13,935,899
Less: Accumulated Amortization		(3,164,942	)		(2,581,469	)
	$	28,629,853		$	11,354,430

~~Applied UV, Inc. and Subsidiaries~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~NOTE 5 – INTANGIBLE ASSETS (CONTINUED)~~

During the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ the Company recorded total amortization expense related to intangible ~~assets~~ assets of $~~441,984~~583,473 and $~~134,850~~441,984, respectively. ~~During the nine months ended September 30, 2022 and 2021, the Company recorded total amortization expense related to intangible assets of $1,325,953~~ ~~and $359,600, respectively.~~

The useful lives of tradenames ranges from 5 to 10 years, technology is 10 years, customer relationships ranges from 7 to 14 years, and patents range from 17 to 20 years.

Future amortization of intangible assets isare as follows:

Future amortization of intangible assets
For the year ending December 31,	For the year ending December 31,			For the year ending December 31,
2022 (3 months)		$	439,629
2023			1,767,181
2023 (9 months)					$	2,102,916
2024			1,767,181			3,044,016
2025			1,767,181			3,044,016
2026			1,750,881			3,029,260
Thereafter			10,159,233			17,409,645
Total		$	17,651,286		$	28,629,853

NOTE 6 – ~~NOTE PAYABLE~~FINANCING LEASE OBLIGATION

~~On August 28, 2022, the Company entered into~~The Company's future minimum principal and interest payments under a ~~one-year Directors~~financing lease for machinery and ~~Officers Liability Insurance agreement for $~~equipment are as follows:

Schedule of future minimum principal and interest payments under capital lease arrangements
2023 (9 months)	$	47,949
2024		54,901
2025		54,901
2026		49,260
2027		36,109
Total lease payments		243,120
Less: Amount representing interest		(34,641	)
Present value of future minimum lease payments		208,479
Less: current portion		(47,608	)
Financing lease obligations, net of current	$	160,871

~~318,833. Under the terms of the agreement, the Company made a down payment of $~~

~~41,730, with the remaining balance financed over the remaining term at an annual percentage rate of~~

~~5.05%. Beginning in September 2022, the Company is making 10 monthly payments of $27,710, with the last payment expected to be made in June 2023. At September 30, 2022, the outstanding balance on the note payable was $277,103. The interest expense for the three~~Applied UV, Inc. and ~~nine months ended September 30, 2022 was immaterial~~Subsidiaries

Notes to the ~~consolidated financial statements.~~Condensed Consolidated Financial Statements

NOTE 7 – ~~LOAN~~NOTES PAYABLE

As of March 31, 2023 the Company had the following notes payable outstanding:

Schedule of notes payable
	March 31,			December 31,
	2023			2022
Loan Agreement	$	157,500		$	157,500
Streeterville Note #1		2,807,500			2,807,500
Streeterville Note #2		2,807,500			—
Netsuite Cloud Services Financing Agreement		180,258			—
Directors and Officers Liability Insurance Agreement		83,131			166,262
Pinnacle Note		4,351,040			—
Total		10,386,929			3,131,262
Less: Unamortized debt discount		(469,161	)		(267,433	)
Total notes payable		9,917,768			2,863,829
Notes payable, current		(4,469,196	)		(2,098,685	)
Notes payable, non current	$	5,448,572		$	765,144

Minimum obligations under these loan agreements are as follows:

Schedule of minimum obligations under loan agreement
2023 (nine months)	$	3,434,500
2024		6,952,429
Total	$	10,386,929

Loan Agreement

The Company entered into a loan agreement in April of 2019 where the company was required to pay $157,500in five payments in the amount of $30,000per year, with an additional $7,500, representing interest, in year two to a loan holder. As of ~~September 30,~~December 31, 2022, the company has an outstanding balance of $157,500, and no payments have been made as of ~~November 15, 2022.~~March 31, 2023.

~~Minimum obligations~~Streeterville Note #1

On October 7, 2022, the Company entered into a Security Purchase Agreement with Streeterville Capital, LLC whereby the Company issued an 8% unsecured redeemable note in the principal amount of $2,807,500. The Company received net proceeds of $2,462,500, after the deduction of debt issuance costs of $345,000. These fees were recorded as debt discounts, net of the carrying value of the debt, and are being amortized over the life of the loan using the effective interest rate method. The note has a maturity date of April 7, 2024. At any time following the occurrence of any event of default, interest shall accrue on the outstanding balance beginning on the date the applicable event of default occurred at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted under ~~this loan agreement are~~applicable law.

The lender has the right at any time 6 months after the effective date, at its election, to redeem all or part of the maximum redemption amount as ~~follows:~~set forth in the promissory note. Payments of each redemption amount may be made (a) in cash, or (b) in common stock per the following formula: the portion of the applicable Redemption amount being paid in common stock divided by the common stock redemption price, or (c) by any combination of the foregoing. Whereas common stock redemption price means 87.5

Schedule of minimum obligations under loan agreement
For the year ending December 31,
2022 $ 97,500
2023 30,000
2024 30,000
Total $ 157,500

% multiplied by the Nasdaq minimum price. Whereas Nasdaq minimum price means the lower of: (i) the closing price on the trading day immediately preceding the date the common stock redemption price is measured; or (ii) the average closing price of the common stock for the five trading days immediately preceding the date the common stock redemption price is measured.

2120

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 7 – NOTES PAYABLE (continued)

Streeterville Note #1 (Continued)

The principal amount of the Note may be prepaid in full, or any portion of the outstanding balance earlier than it is due; provided that in the event borrower elects to prepay all or any portion of the outstanding balance it shall pay to lender 120% of the portion of the outstanding balance borrower elects to prepay. The prepayment premium will not apply if borrower repays the Note in full on the anniversary date, which is one year from the purchase price date.

If prior to the anniversary date all redemption amounts are paid as common stock redemptions, then each time after the anniversary date that borrower makes a common stock redemption, $8,333of the monitoring fee will be deducted from the outstanding balance, not to exceed $50,000. No interest will accrue on the monitoring fee.

Debt discount related to the note amounts to $345,000 and is being amortized using the effective interest method over the term of the note. The effective interest rate of the note is 22.23%. The Company recorded $86,612 due to debt discount amortization to interest expense in the accompanying Statement of Operations and as a result, at March 31, 2023, the remaining unamortized balance was $180,821.

Interest expense recorded in the accompanying Statements of Operations by the Company was $56,150 for the three months ended March 31, 2023.

Streeterville Note #2

On January 25, 2023, the Company entered into a Security Purchase Agreement with Streeterville Capital, LLC whereby the Company issued an 8% unsecured redeemable note in the principal amount of $2,807,500. The Company received net proceeds of $2,463,000, after the deduction of debt issuance costs of $344,500. These fees were recorded as debt discounts, net of the carrying value of the debt, and are being amortized over the life of the loan using the effective interest rate method. The note has a maturity date of July 25, 2024. At any time following the occurrence of any event of default, interest shall accrue on the outstanding balance beginning on the date the applicable event of default occurred at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted under applicable law.

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 7 – NOTES PAYABLE (continued)

Streeterville Notes (Continued)

The features and conditions relating to this note is similar with the Streeterville note issued on October 7, 2022.

Debt discount recognized during 2023 related to the note amounts to $344,500 and is being amortized using the effective interest method over the term of the note. The effective interest rate of the note is 22.23%. The Company recorded $56,660 due to debt discount amortization to interest expense in the accompanying Statement of Operations and as a result, at March 31, 2023, the remaining unamortized balance was $287,840.

Interest expense recorded in the accompanying Statements of Operations by the Company was $40,553 for the three months ended March 31, 2023.

Netsuite Cloud Services Financing Agreement

On November 1, 2022, PURO entered into a financing arrangement for $225,323 to finance its Netsuite cloud services. The Company is required to pay $7,511 per month through April 1, 2025. The liability was assumed in connection with the business combination on January 26, 2023. As of March 31, 2023, the outstanding balance of the financing agreement was $180,258.

Directors and Officers Liability Insurance Agreement

On August 28, 2022, the Company entered into a one-year Directors and Officers Liability Insurance agreement for $318,833. Under the terms of the agreement, the Company made a down payment of $41,730, with the remaining balance financed over the remaining term at an annual percentage rate of 5.05%. Beginning in September 2022, the Company is making 10 monthly payments of $27,710, with the last payment expected to be made in June 2023. At March 31, 2023, the outstanding balance on the note payable was $83,131. The interest expense for the three months ended March 31, 2023 was immaterial to the consolidated financial statements.

Pinnacle Note

In December 2022, the Company entered into a Loan and Security Agreement, or (the “Loan Agreement”), with Pinnacle Bank, which provides for a $5,000,000 secured revolving credit facility (the “Loan Facility”). The loan is subject to a maximum advance rate of up to 85% of net face amount of eligible accounts, plus the lessor a) of the sum of 20% of the aggregate eligible inventory value of raw materials and 35% of the aggregate eligible inventory value of finished goods, b) $1 million, c) 80% of the net orderly liquidation value of raw materials and finished goods, or d) 100% of the aggregate outstanding principal amount of advances. In no event shall the aggregate amount of the outstanding advances under the Loan Facility be greater than $5 million. The loan matures on December 9, 2024.The principal amount of outstanding revolving loan, together with accrued and unpaid interest, is due on the maturity date.

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 7 – NOTES PAYABLE (continued)

Pinnacle Note (Continued)

The loan accrues interest at a 1.50% margin above the greater of the prime rate or 4.00%. The interest margin is increased to 2.00% in respect to the advances against eligible inventory. If the Company fails to perform any covenant, term or provision of the Loan Agreement, then interest shall accrue at the rate of 6.0% above the interest rate. If after the occurrence of an event of default and the loan is not paid in full by the maturity date, the loan shall bear interest at the rate of 18.0% above the interest rate.

Obligations under the Loan Agreement are secured by all the Company's assets. On the effective date the Company paid a loan fee of 2% of the amount of the Loan Facility and will be required to pay a loan fee of 1.5% of the amount of the Loan Facility annually thereafter.

The Loan Agreement contains customary representations and warranties and customary affirmative and negative covenants applicable to the Company and the Subsidiaries, including, without limitation, restrictions on liens, indebtedness, fundamental changes, capital expenditures, consignments of inventory and distributions.

The Loan Agreement contains customary events of default, including, without limitation, payment defaults, covenant defaults, breaches of certain representations and warranties, certain events of bankruptcy and insolvency, certain events under ERISA and judgments. If an event of default occurs and is not cured within any applicable grace period or is not waived, the Lender is entitled to take various actions, including, without limitation, the acceleration of amounts due thereunder and termination of commitments under the Loan Facility.

There was a $4,351,040 outstanding balance under the Loan Facility as of March 31, 2023 which has all been classified as long term.

Chase Credit Facility

In connection with the acquisition of LED Supply Co, LLC, the Company assumed $1,728,474 in principal and $71,724 in accrued interest relating to a credit facility issued by JP Morgan Chase Bank. On March 15, 2023, the Company paid the principle in full and accrued interest of $71,724, for an aggregate payment of $1,800,199, by drawing down on the Company’s credit facility with Pinnacle Bank.

NOTE 8 – FAIR VALUE MEASUREMENTS

Accounting guidance on fair value measurements requires that financial assets and liabilities be classified and disclosed in one of the following categories of the fair value hierarchy:

Level 1 – Based on unadjusted quoted prices for identical assets or liabilities in an active market.

Level 2 – Based on observable market-based inputs or unobservable inputs that are corroborated by market data.

Level 3– Based on unobservable inputs that reflect the entity’s own assumptions about the assumptions that a market participant would use in pricing the asset or liability.

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 8 – FAIR VALUE MEASUREMENTS (CONTINUED)

We did not have any transfers between levels during the periods presented.

The following table presents assets and liabilities that were measured at fair value in the Consolidated Balance Sheets on a recurring basis as of March 31, 2023 and December 31, 2022:

Fair value, assets measured on recurring basis
	Carrying Amount		Fair Value		Quoted Priced in active markets (Level 1)		Significant other observable inputs (Level 2)		Significant unobservable inputs (Level 3)
	As of March 31, 2023
Assets
Money market funds	$	26,906	$	26,906	$	26,906	$	—	$	—
Total assets	$	26,906	$	26,906	$	26,906	$	—	$	—
Liabilities
Contingent consideration	$	18,995,673	$	18,995,673	$	4,339,999	$	—	$	14,655,674
Warrant liability		7,685		7,685		—		—		7,685
Total liabilities	$	19,003,358	$	19,003,358	$	4,339,999	$	—	$	14,663,359

		As of December 31, 2022
Assets
Money market funds	$	26,828	$	26,828	$	26,828	$	—	$	—
Total assets	$	26,828	$	26,828	$	26,828	$	—	$	—
Liabilities
Warrant liability		9,987		9,987		—		—		9,987
Total liabilities	$	9,987	$	9,987	$	—	$	—	$	9,987

The carrying amounts of accounts receivable, accounts payable and short-term debt approximated fair values as of March 31, 2023 and December 31, 2022 because of the relatively short maturity of these instruments. There were no other level 3 or level 1 assets or liabilities as of March 31, 2023.

Money market funds – Cash equivalents of $26,906and $26,828 as of March 31, 2023 and December 31, 2022, respectively, consisted of money market funds. Money market funds are classified as Level 1 of the fair value hierarchy because they are valued using quoted market prices in active markets.

Contingent consideration – The fair value of the contingent consideration related to the Make Whole is derived through the quoted market price of our stock, which represents a Level 1 measurement within the fair value hierarchy. As a result of the merger transaction, the company assumed an Earn-out liability, which is remeasured each reporting period. Given the unobservable nature of the inputs, the fair value measurement of the deferred earn-out is deemed to use Level 3 inputs. The Earn-out liability was accounted for as a liability as of the date of the merger transaction and will be remeasured to fair value until the Earnout Triggering Events are met.

Warrant liability – The fair value of the warrant liability is derived through the Black Scholes method and is based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 8 – FAIR VALUE MEASUREMENTS (CONTINUED)

Other Fair Value Measurements

In addition to assets and liabilities that are recorded at fair value on a recurring basis, GAAP requires that, under certain circumstances, we also record assets and liabilities at fair value on a nonrecurring basis.

In connection with the acquisitions of VisionMark in 2022, and PURO Lighting and LED Supply Co. in 2023, as discussed in Note 2, we used various valuation techniques to determine fair value, with the primary techniques being discounted cash flow analysis and the relief-from-royalty, a form of the multi-period excess earnings, which use significant unobservable inputs, or Level 3 inputs, as defined by the fair value hierarchy.

NOTE 9 – STOCKHOLDERS' EQUITY

At the Market Sales Agreement

On July 1, 2022, the Company filed a $50,000,000 mixed use shelf registration (Form S-3) and entered into an At The Market sales agreement ("ATM") with Maxim Group, LLC for a total of $9,000,000, as a readily available source of funding if needed. During the year ended December 31, 2022 the Company sold 804,811 ATM shares through the sales agent with gross proceeds of $964,083. In connection with the sale of these ATM Shares, the compensation paid by the Company to the Sales Agent was $28,922. As of March 31, 2023, an additional 1,764,311 shares have been sold for gross proceeds of $2,314,860, and the compensation paid by the Company to the Sales Agent was $69,446, leaving a balance of $5,721,057 on the ATM facility. The shelf registration statement will expire on July 12, 2025.

In May 2023 the Company sold an additional 53,903 ATM shares, with gross proceeds of $27,224, and sales agent compensation of $817, yielding net proceeds of $26,407. The balance on the ATM facility is currently $5,693,833.

Amendment of the Certificate of Designation

~~On June 17, 2021, the Company filed an amendment of the certificate of designation of Series A Preferred Stock. The Board of Directors, by unanimous written consent, duly adopted resolutions~~In relation to amend the Series A Preferred Stock Certificate of Designations and changed the name from “Series A Preferred Stock” to “Series X Super Voting Preferred Stock”. All dividend, liquidation preference, voting, conversion, and redemption rights, did not change from the originally filed Certificate of Designation of Series A Preferred Stock. There are now 10,000 Series X Super Voting Preferred Shares issued and outstanding as of September 30, 2022. On July 11, 2022, the Board of Directors had approved the reissuance of ~~8,000~~designated shares of the Company’s Series X Super Voting Preferred ~~Shares,~~stock, on July 11, 2022, the Board of Directors approved the reissuance of 8,000 of these shares which ~~represented~~represent the remainder of the designated but unissued shares of Super Voting Preferred Stock.

On March 9, 2022, the Board of Directors approved a resolution that authorized the senior management of the Company to purchase up to and limited to one million shares of common stock between March 10, 2022 and September 30, 2022. As of ~~September 30, 2022,~~March 31, 2023, the Company has a total of 113,485 of treasury ~~shares, all of which were purchased during the three months ended June 30, 2022.~~ shares.

Pursuant to the Company’s amended and restated certificate of incorporation, as amended, the Company is authorized to designate and issue up to 20,000,000shares of preferred stock, par value $0.0001per share, in one or more classes or series. During the year ended December 31, ~~2021,~~2022, the Company had 10,000preferred shares designated as Series X Preferred Stock and 19,990,000shares of preferred stock designated as 10.5% Series A Cumulative Perpetual Preferred Stock (the “Series A Preferred Stock”). ~~There are 552,000~~As of March 31, 2023 the Company had 1,250,000 preferred shares ofdesignated as Series B Preferred Stock, 2,500,000 preferred shares designated as Series C Preferred Stock, 10,000 preferred shares designated as Series X Preferred Stock, 1,250,000 shares designated as 10.5% Series A Cumulative Perpetual Preferred Stock, ~~issued~~ and ~~outstanding as of September 30, 2022. Upon certain events,~~14,990,000shares undesignated.

Applied UV, Inc. and Subsidiaries

Notes to the ~~Company may, subject to certain conditions, at the Company’s option, redeem the Series A Preferred Stock. See below for a further description of the Series A Preferred Stock:~~Condensed Consolidated Financial Statements

NOTE 9 – STOCKHOLDERS' EQUITY (CONTINUED)

~~Dividends:~~ Preferred Stock, Series A Cumulative Perpetual

Holders are entitled to receive cumulative cash dividends at the annual rate of 10.5% on $25.00 liquidation preference per share of the Series A Perpetual Preferred Stock. Dividends accrue and are payable in arrears beginning August 15, 2021, regardless of whether declared or there are sufficient earnings or funds available for payment. Sufficient net proceeds from the offering must be set aside to pay dividends for the first twelve months from issuance. The ~~company has classified $-~~0~~- and $845,250~~ ~~as restricted cash as of September 30, 2022 and December 31, 2021, respectively, as a reserve to pay the remaining required dividends for the first year.~~

~~Redemption:~~ Company has an optional redemption right beginning July 16, 2022, which redemption price declines annually. The initial redemption price after year 1 is $30 and decreases annually over 5 years to $25 per share. The Company also has a special optional redemption right upon the occurrence of a Delisting Event or Change of Control, as defined, at $25 per share plus accrued and unpaid dividends.

~~Voting Rights:~~ The holders have no voting rights, except for voting on certain corporate decisions, or upon default in payment of dividends for any twelve periods, in which case the holders would have voting rights to elect two additional directors to serve on the Board of Directors.

~~Conversion Rights~~: Such shares are not convertible unless and until the occurrence of a Delisting Event or Change of Control and when the Company has not exercised its special optional redemption right. The conversion price would be the lesser of the amount converted based on the $25.00 liquidation preference plus accrued dividends divided by the common stock price of the Delisting Event or Change of Control (as defined) or $5.353319 (Share Cap). Effectively, the Share Cap limits the common stock price to no lower than $4.67.

Preferred Stock, Series B Cumulative Perpetual

On January 25, 2023, the Company filed the Certificate of Designations, Rights, and Preferences for the Series B Preferred Stock with the Secretary of State of the State of Delaware, which became effective upon acceptance for record. On January 26, 2023, the Company filed the Amendment to the Series B Certificate of Designation (together with the Certificate of Designations, Rights, and Preferences for the Series B Preferred Stock, the “Series B Certificate of Designation”), which became effective upon acceptance for record. The Series B Certificate of Designation classified a total of 1,250,000 shares of the Company’s authorized shares of preferred stock, $0.0001 par value per share, as Series B Preferred Stock. As set forth in the Series B Certificate of Designation, the Series B Preferred Stock ranks, as to dividend rights and rights upon the Company’s liquidation, dissolution or winding up: (i) senior to all classes or series of Common Stock and to all other equity securities issued by the Company expressly designated as ranking junior to the Series B Preferred Stock; (ii) on parity with the Company’s 10.5% Series A Cumulative Perpetual Preferred Stock; (iii) at least on parity with any future class or series of the Company’s equity securities designated on or after January 25, 2023, including the Company’s 5% Series C Cumulative Perpetual Preferred Stock; and (iv) effectively junior to all the Company’s existing and future indebtedness (including indebtedness convertible into Common Stock or preferred stock) and to the indebtedness and other liabilities of the Company’s existing or future subsidiaries. Holders of Series B Preferred Stock, when and as authorized by the Company’s Board of Directors, are entitled to cumulative cash dividends at the rate of 2% of the $6per share liquidation preference per year (equivalent to $0.12 per share per year). Dividends will be payable quarterly in arrears, on or about the 15th day after the end of a quarterly period, beginning on April 15, 2023. The holders of Series B Preferred Stock, at his, her, or its option, can require the Company to redeem all or a portion of the Series B Preferred Stock at any time and from time to time held by such holder after 30 months from the original issue date at a redemption price of $2.00 per share, plus any accrued and unpaid dividends (whether or not authorized or declared), up to but not including the date fixed for redemption, without interest, to the extent the Company has funds legally available therefor; provided that if a holder requires the Company to redeem all or a portion of the Series B Preferred Stock at any time and from time to time held by such holder on or after the five (5) year anniversary of the original issue date, the redemption price will be $6.00 per share, plus any accrued and unpaid dividends (whether or not authorized or declared), up to but not including the date fixed for redemption, without interest, to the extent the Company has funds legally available therefor. The Series B Certificate of Designation provides for a special optional redemption by the Company upon a change of control, in whole or in part, for $6.00 per share, plus accrued but unpaid dividends to, but not including the redemption date. The holders of Series B Preferred Stock neither have voting nor preemptive rights. Each share of Series B Preferred Stock is convertible, at any time and from time to time from and after the original issue date, at the option of the holder, into one share of Common Stock. The Series B Preferred Stock has no stated maturity and will not be subject to any sinking fund for the payment of the redemption price or mandatory redemption. The Series B Preferred Stock has been classified as temporary equity, outside of permanent equity, as they are redeemable at the option of the holder.

Upon any voluntary or involuntary liquidation, dissolution, or winding up of the Corporation, before any distribution or payment shall be made to holders of shares of Common Stock or any other class or series of capital stock of the Corporation ranking, as to rights upon any voluntary or involuntary liquidation, dissolution, or winding up of the Corporation, junior to the Series B Preferred Stock, the holders of shares of Series B Preferred Stock shall be entitled to be paid out of the assets of the Corporation legally available for distribution to its stockholders, a liquidation preference of $6.00 per share, plus an amount equal to any accrued and unpaid dividends (whether or not authorized or declared) up to the date of payment. In the event that, upon such voluntary or involuntary liquidation, dissolution, or winding up, the available assets of the Corporation are insufficient to pay the full amount of the liquidating distributions on all outstanding shares of Series B Preferred Stock and the corresponding amounts payable on all shares of other classes or series of capital stock of the Corporation ranking, as to rights upon the Corporation's liquidation, dissolution, or winding up, on parity with the Series B Preferred Stock in the distribution of assets, then the holders of the Series B Preferred Stock and each such other class or series of capital stock ranking, as to rights upon any voluntary or involuntary liquidation, dissolution, or winding up, on parity with the Series B Preferred Stock shall share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. Written notice of any such voluntary or involuntary liquidation, dissolution, or winding up of the Corporation, stating the payment date or dates when, and the place or places where, the amounts distributable in such circumstances shall be payable, shall be given not fewer than thirty (30) days or more than sixty (60) days prior to the payment date stated therein, to each record holder of shares of Series B Preferred Stock at the respective addresses of such holders as the same shall appear on the stock transfer records of the Corporation. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Series B Preferred Stock will have no right or claim to any of the remaining assets of the Corporation. The consolidation, merger, or conversion of the Corporation with or into any other corporation, trust, or entity, or the voluntary sale, lease, transfer, or conveyance of all or substantially all of the property or business of the Corporation, shall not be deemed to constitute a liquidation, dissolution, or winding up of the Corporation.

2226

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 89 – STOCKHOLDERS' EQUITY ~~(continued)~~(CONTINUED)

Preferred Stock, Series C Cumulative Perpetual

On ~~July 11, 2022,~~January 25, 2023, the ~~Board~~Company filed the Certificate of ~~Directors~~Designations, Rights, and Preferences for the Series C Preferred Stock with the Secretary of ~~Applied UV, Inc. (the “Company”) approved~~State of the ~~reissuance~~State of Delaware, which became effective upon acceptance for record. On January 26, 2023, the Company filed the Amendment to the Series C Certificate of Designation (together with the Certificate of Designations, Rights, and Preferences for the Series C Preferred Stock, the “Series C Certificate of Designation”), which became effective upon acceptance for record. The Series C Certificate of Designation classified a total of ~~8,000~~2,500,000 shares of the Company’s Series X Super Voting Preferred Stock (the “Super Voting Preferred Stock”) to The Munn Family 2020 Irrevocable Trust, for which Max Munn, the founder, a director and President of the Company is the trustee, which represent the remainder of the designated but unissued shares of Super Voting Preferred Stock. ~~The Company has 10,000~~authorized shares of preferred stock, $0.0001 par value per share, as Seftificate of Designation classified a totalries C Preferred Stock. As set forth in the Series C Certificate of Designation, the Series C Preferred Stock will rank, as to dividend rights and rights upon the Company’s liquidation, dissolution or winding up: (i) senior to all classes or series of Common Stock and to all other equity securities issued by the Company expressly designated as ~~Super Voting~~ranking junior to the Series C Preferred Stock; (ii) on parity with any future class or series of the Company’s equity securities expressly designated as ranking on parity with the Series C Preferred Stock; (iii) junior to all equity securities issued by the Company with terms specifically providing that those equity securities rank senior to the Series C Preferred Stock with respect to the payment of dividends and the distribution of assets upon liquidation, dissolution or winding up; and (iv) effectively junior to all the Company’s existing and future indebtedness (including indebtedness convertible into Common Stock or preferred stock) and to the indebtedness and other liabilities of the Company’s existing or future subsidiaries. Holders of Series C Preferred Stock, when and as authorized by the Company’s Board of Directors, are entitled to cumulative cash dividends at the rate of 5% of the $5.00 per share liquidation preference per year (equivalent to $0.25 per share per year). Dividends will be payable quarterly in arrears, on or about the 15th day after the end of a quarterly period, beginning on April 15, 2023. The Company, to the extent it has legally available funds, must redeem all shares of Series C Preferred Stock on the date that is three years from January 26, 2023. The Series C Certificate of Designation provides for a special optional redemption by the Company upon a change of control, in whole or in part, for $5.00 per share, plus accrued but unpaid dividends to, but not including the redemption date. The holders of Series C Preferred Stock neither have voting nor preemptive rights. Each share of Series C Preferred Stock will be convertible, at any time and from time to time from and after January 26, 2023, at the ~~issuance~~option of the ~~8,000 shares, Mr. Munn will beneficially own all 10,000 shares~~holder, into one share of ~~the Super Voting Preferred Stock.~~ Mr. Munn previously held all 10,000 shares of Super Voting Preferred Stock prior to a reverse stock split that was effected by the Company. In accordance with Nasdaq rules, the Company will not be able to designate or issue any additional shares of the Super Voting PreferredCommon Stock. The ~~Super Voting~~Series C Preferred Stock has no stated maturity and will not be subject to any sinking fund for the payment of the redemption price or mandatory redemption. The Series C Preferred Stock shall be classified as temporary equity, outside of permanent equity, as they are redeemable at a fixed or determinable price on a fixed or determinable date.

Upon any voluntary or involuntary liquidation, dissolution, or winding up of the Corporation, before any distribution or payment shall be made to holders of shares of Common Stock or any other class or series of capital stock of the Corporation ranking, as to rights upon any voluntary or involuntary liquidation, dissolution, or winding up of the Corporation, junior to the Series C Preferred Stock, the holders of shares of Series C Preferred Stock shall be entitled to be paid out of the assets of the Corporation legally available for distribution to its stockholders, after payment of or provision for the debts and other ~~than~~liabilities of the ~~right~~Corporation and any class or series of capital stock of the Corporation ranking, as to ~~1,000 votes~~ rights upon any voluntary or involuntary liquidation, dissolution, or winding up of the Corporation, senior to the Series C Preferred Stock, a liquidation preference of $5.00 per share, ~~(voting along~~plus an amount equal to any accrued and unpaid dividends (whether or not authorized or declared) up to the date of payment. In the event that, upon such voluntary or involuntary liquidation, dissolution, or winding up, the available assets of the Corporation are insufficient to pay the full amount of the liquidating distributions on all outstanding shares of Series C Preferred Stock and the corresponding amounts payable on all shares of other classes or series of capital stock of the Corporation ranking, as to rights upon the Corporation's liquidation, dissolution, or winding up, on parity with the ~~common~~Series C Preferred Stock in the distribution of assets, then the holders of the Series C Preferred Stock and each such other class or series of capital stock ranking, as ~~a single class~~to rights upon any voluntary or involuntary liquidation, dissolution, or winding up, on ~~all matters). The~~parity with the Series C Preferred Stock shall share ratably in any such distribution of assets in proportion to the full liquidating distributions to which they would otherwise be respectively entitled. Written notice of any such voluntary or involuntary liquidation, dissolution, or winding up of the Corporation, stating the payment date or dates when, and the place or places where, the amounts distributable in such circumstances shall be payable, shall be given not fewer than thirty (30) days or more than sixty (60) days prior to the payment date stated therein, to each record holder of shares of ~~Super Voting~~Series C Preferred Stock ~~was issued~~at the respective addresses of such holders as the same shall appear on ~~July 13, 2022.~~

~~2020 Incentive Plan~~

~~On March 31, 2020,~~ the ~~Company adopted the Applied UV, Inc. 2020 Omnibus Incentive Plan (the “Plan”) with~~ ~~600,000~~ ~~shares of common~~ stock ~~available for issuance under the terms~~transfer records of the ~~Plan. On May 17, 2022, the shareholders~~Corporation. After payment of the Company approved an amendment to the Plan, increasing the shares available for issuance to 2,500,000. The Plan permits the granting of Nonqualified Stock Options, Incentive Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Performance Shares, Performance Units and Other Awards. The objectivesfull amount of the ~~Plan~~liquidating distributions to which they are entitled, the holders of Series C Preferred Stock will have no right or claim to ~~optimize the profitability and growth~~any of the ~~Company through incentives that are consistent with the Company’s goals and that link the personal interests of Participants to those~~remaining assets of the ~~Company’s stockholders.~~Corporation. The ~~Plan is further intended to provide flexibility to the Company in its ability to motivate, attract and retain the services of Participants who make~~consolidation, merger, or ~~are expected to make significant contributions to the Company’s success and to allow Participants to share in the success~~conversion of the ~~Company. From time to time,~~Corporation with or into any other corporation, trust, or entity, or the ~~Company may issue Incentive Awards pursuant to the Plan. Each~~voluntary sale, lease, transfer, or conveyance of all or substantially all of the ~~awards will be evidenced by and issued under a written agreement.~~

~~If an incentive award granted under the Plan expires, terminates, is unexercised~~property or is forfeited, or if any shares are surrendered to the company in connection with an incentive award, the shares subject to such award and the surrendered shares will become available for future awards under the Plan. The number of shares subject to the Plan, and the number of shares and terms of any Incentive Award may be adjusted in the event of any change in our outstanding common stock by reason of any stock dividend, spin-off, stock split, reverse stock split, recapitalization, reclassification, merger, consolidation, liquidation, business ~~combination or exchange of shares, or similar transaction. There are~~ ~~1,609,972~~ ~~shares available for future grants under the plan.~~

~~A summary~~ of the ~~Company’s option activity and related information follows:~~

Schedule of the Company's option activity
Number of
Options Weighted-Average Exercise Price Weighted-Average Grant Date Fair Value Weighted- Average Remaining Contractual Life (in years) Aggregate intrinsic value
Balances, January 1, 2021 136,750 $ 4.96 $ 2.27 9.95 $ —
Options granted 602,564 7.81 5.43 10 —
Options forfeited (95,000 ) 4.96 3.73 —
Options exercised —   —   —   —
Balances, December 31, 2021 644,314 $ 7.11 $ 5.03 8.47 $ —
Options granted 529,000 1.63 1.16 10 —
Options forfeited (283,286 ) 7.20 4.53 —
Options exercised —   —   —   —
Balances, September 30, 2022 890,028 $ 3.83 $ 2.78 8.22 $ —
Vested and Exercisable 260,768 $ 6.78 $ —

~~Share-based compensation expense for options totaling $118,030~~ ~~and $236,043~~ ~~was recognized for~~Corporation, shall not be deemed to constitute a liquidation, dissolution, or winding up of the ~~three months ended September 30, 2022 and 2021, respectively, based on requisite service periods.~~

~~Share-based compensation expense for options totaling $448,270~~ ~~and $432,933~~ ~~was recognized for the nine months ended September 30, 2022 and 2021, respectively, based on requisite service periods.~~Corporation.

2327

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 89 – STOCKHOLDERS' EQUITY (continued)

A summary of the Company’s option activity and related information follows:

Schedule of the Company’s option activity
	Number of Options			Weighted-Average Exercise Price		Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Contractual Life (in years		Aggregate intrinsic value
Balances, January 1, 2022		644,314		$	7.11	$	5.03		8.47	$	—
Options granted		639,000			1.66		1.06		10.00		—
Options forfeited		(283,286	)		7.02		—				—
Options exercised		—			—		—				—
Balances, December 31, 2022		1,000,028		$	3.61	$	—		9.03	$	—
Options granted		480,000			2.00		0.87		10.0		—
Options forfeited		(178,833	)		1.85		—				—
Options exercised		—			—		—				—
Balances, March 31, 2023		1,301,195		$	3.27	$	—		9.39	$	—
Vested and Exercisable		346,867		$	5.55					$	—

Share-based compensation expense for options totaling $160,598 and $222,062 was recognized for the three months ended March 31, 2023 and 2022, respectively, based on requisite service periods.

The valuation methodology used to determine the fair value of the options issued during the year was the Black-Scholes option-pricing model. The Black-Scholes model requires the use of a number of assumptions including volatility of the stock price, the average risk-free interest rate, and the weighted average expected life of the options.

The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds whose maturity period is appropriate for the term of the options.

Estimated volatility is a measure of the amount by which the Company’s stock price is expected to fluctuate each year during the expected life of the award. The Company’s calculation of estimated volatility is based on historical stock prices of peer entities over a period equal to the expected life of the awards. The Company uses the historical volatility of peer entities due to the lack of sufficient historical data of its stock price.

As of ~~September 30, 2022~~March 31, 2023, there was $~~1,166,641~~1,301,651 of total unrecognized compensation expense related to unvested employee options granted under the Company’s share-based compensation plans that is expected to be recognized over a weighted average period of approximately ~~2.7~~2.65 years.

~~The weighted average fair value of options granted, and the assumptions used in the Black-Scholes model during the nine months ended September 30, 2022 and 2021 are set forth in the table below.~~

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions
2022 2021
Risk-free interest rate 1.26% to 3.46% 1.02% to 1.54%
Volatility 78.95% to 88.41% 75.04% to 85%
Expected life (years) 5.75 to 6.08 5.36 to 10
Dividend yield 0.00 % 0.00 %

~~Common Stock Warrants~~

~~A summary of the Company’s warrant activity and related information follows:~~

Schedule of the Company's warrant activity
Number of
Shares Weighted-
Average Exercise Price
Balances, January 1, 2021 235,095 $ 5.89
Granted —   —
Exercised (42,676 ) —
Balances, December 31, 2021 192,419 $ 5.84
Granted —   —
Exercised —   —
Balances, September 30, 2022 192,419 $ 5.84

At September 30, 2022
Vested and Exercisable 192,419 $ 5.84

2428

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 8–9– STOCKHOLDERS' EQUITY (continued)

~~For~~The weighted average fair value of options granted, and the assumptions used in the Black-Scholes model during the three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021, the Company recorded a gain on the change in fair value of warrant liability~~are set forth in the ~~amount of $~~table below.

Schedule of share-based payment award, stock options, valuation assumptions
	2023		2022
Risk-free interest rate		3.53% to 3.60%		1.26% to 2.39%
Volatility		90.27% to 91.01%		78.95% to 79.91%
Expected life (years)		5.83-6.06		5.75-6.08
Dividend yield		0.00%		0.00%

~~34,804~~ ~~and $151,570, respectively. For the nine months ended September 30, 2022 and 2021, the Company recorded a gain (loss) on the change in fair value of warrant liability in the amount of $46,521~~ ~~and ($148,882~~), respectively. The Company valued the warrant using the Black-Scholes option pricing model with the following terms on date of grant of: (a) exercise price of $6.5625, (b) volatility rate of 50.39%, (c) risk free rate of 0.26%, (d) term of five years, and (e) dividend rate of 0%. The Company valued the warrant using the Black-Scholes option pricing model with the following terms on September 30, 2022: (a) exercise price of $6.5625, (b) volatility rate of 85.32%, (c) risk free rate of 3.09%, (d) term of 3.12 years, and (e) dividend rate of 0%. The Company valued the warrant using the Black-Scholes option pricing model with the following terms on December 31, 2021: (a) exercise price of $6.5625, (b) volatility rate of 77.34%, (c) risk free rate of 0.98%, (d) term of 3.86 years, and (e) dividend rate of 0%.

~~Preferred~~Common Stock ~~Offering~~Warrants

On July 13, 2021, Applied UV, Inc. (the “Company”) entered into an underwriting agreement (the “Underwriting Agreement”) with Ladenburg Thalmann & Co. Inc. as representative (“Representative”) of the underwriters (“Underwriters”), related to the offering of 480,000 shares (the “Shares”)A summary of the Company’s 10.5% Series A Cumulative Perpetual Preferred Stock [non-convertible], par value $0.0001 per share (“Series A Preferred Stock”), at a public offering price of $25.00 per share, which excludes 72,000 shares of Series A Cumulative Perpetual Preferred Stock that may be purchased by the Underwriters pursuant to their overallotment option granted to the Underwriters under the terms of the Underwriting Agreement. The Shares were offeredwarrant activity and sold by the Company pursuant to the terms of the Underwriting Agreement and registered pursuant to the Company’s registration statement on (i) Form S-1 (File No. 333-257197), as amended, which was filed with the SEC and declared effective by the Commission on July 12, 2021 and (ii) the Company’s registration statement on Form S-1 (File No. 333-257862), which was filed with the Commission on July 13, 2021 and declared effective upon filing. The closing of the offering for the Shares took place on July 16, 2021 and were approved for listing on Nasdaq under the trading symbol “AUVIP”. On July 29, 2021, in connection with its offering of its 10.5% Series A Cumulative Perpetual Preferred Stock, par value $0.0001 per share, the Company closed the exercise of the underwriter’s overallotment option of 72,000 shares at $25.00 per share. Aggregate gross proceeds including the exercise of the underwriter’s overallotment option was $12,272,440 after deducting underwriting discounts and commissions and fees and other offering expenses.related information follows:

Schedule of the Company's warrant activity
	Number of Options		Weighted-Average Exercise Price
Balances, January 1, 2022		192,419	$	5.84
Granted		—		—
Exercised		—		—
Balances, December 31, 2022		192,419	$	5.84
Granted		—		—
Exercised		—		—
Balances, March 31, 2023		192,419	$	5.84
At March 31, 2023
Vested and Exercisable		192,419	$	5.84

2529

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 89 – STOCKHOLDERS' EQUITY (continued)

~~Common Stock Offering~~

OnIn relation to the common stock offering that was closed last December 28, 2021, ~~the Company closed a common stock offering in which it issued~~ ~~2,666,667~~ ~~common shares at a public offering price of $3.00~~ ~~per share. In connection with the Offering, the Company (i) received $8,000,000~~ ~~less underwriting fees of $560,000~~ ~~and offering Costs in the amount of $440,073, resulting in net proceeds of $6,999,928~~.

Onon January 5, 2022, the underwriters fully exercised their over-allotment option to purchase an additional 400,000shares of common stock at the public offering price of $3.00per share. The Company received gross proceeds of $1,200,000for the over-allotment, which resulted in net proceeds to us of $1,092,000, after deducting underwriting discounts and commissions of $108,000.

Restricted Stock Awards

The Company records compensation expense for restricted stock awards based on the quoted market price of our stock at the grant date and the expense is amortized over the vesting period. These restricted stock awards are subject to time-based vesting conditions based on the continued service of the restricted stock award holder. ~~Restricted stock awards granted typically have an initial annual cliff vest and then vest quarterly over the remaining service period, which is generally one to four years.~~

The following table presents the restricted stock ~~unit~~units activity from January 1, ~~2021~~2022 through ~~September 30, 2022~~March 31, 2023:

Schedule of Unvested Restricted Stock Units Activity
Schedule of unvested restricted stock units activity
	Number of Shares			Weighted- Average Fair Market Value		Number of Shares			Weighted-Average Fair Market Value
Unvested shares at January 1, 2021		187,555		$	5.00
Unvested shares at January 1, 2022							292,500		$	4.71
Granted and unvested							207,500			2.10

Vested							(100,966	)		3.88
Forfeited/Cancelled							(311,535	)		4.45
Unvested shares, December 31, 2022							87,499		$	2.38
Granted and unvested		274,500			5.16		55,000			1.01
Vested		(163,176	)		5.24		(34,167	)		2.83
Forfeited/Cancelled		(6,379	)		5.00		(15,000	)		1.16
Unvested shares, December 31, 2021		292,500		$	4.71
Granted and unvested		207,500			2.10
Vested		(87,084	)		—
Forfeited/Cancelled		(252,500	)		—
Unvested shares, September 30, 2022		160,416		$	2.12

Vested as of September 30, 2022		292,788		$	4.90
Unvested shares, March 31, 2023							93,332		$	1.36
Vested as of March 31, 2023							340,837		$	4.57

Upon vesting, the restricted stock units are converted to common shares. Based on the terms of the restricted share and restricted stock unit grants, all forfeited shares revert back to the Company.

In connection with the grant of restricted shares, the Company recognized $~~41,501~~29,017 and $~~190,225~~65,938 of compensation expense within its statements of operations for the three months ended ~~September 30,~~March 31, 2023 and 2022, ~~and 2021,~~ respectively.

~~In connection with the grant~~An additional 28,049 shares of restricted ~~shares, the Company recognized $111,710~~ ~~and $669,676~~ ofstock were issued on April 19, 2023, as compensation ~~expense within its statements of operations~~ for ~~the nine months ended September 30, 2022 and 2021, respectively.~~

~~The unvested shares as of September 30, 2022 represent $270,813~~ ~~in unrecognized stock based compensation which will be recognized over a weighted average period of 2.28 years.~~consulting expenses.

2630

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 910 - LEASING ARRANGEMENTS

The Company determines whether an arrangement qualifies as a lease under ASC 842 at inception. The Company has operating leases for office space and office equipment. The Company’s leases have remaining lease terms of one year to seven years, some of which include options to extend the lease term for up to five years. The Company considered these options to extend in determining the lease term used to establish the Company’s right-of use assets and lease liabilities once reasonably certain of exercise. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease. Operating lease ROU assets and operating lease liabilities are recognized at the lease commencement date based on the present value of the future lease payments over the lease term. The operating lease ROU asset also includes any lease payments made in advance of lease commencement and excludes lease incentives. The lease terms used in the calculations of the operating ROU assets and operating lease liabilities include options to extend or terminate the lease when the Company is reasonably certain that it will exercise those options. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

As the Company’s leases do not provide an implicit rate, the Company uses an incremental borrowing rate of 7.6% based on the information available at commencement date in determining the present value of lease payments.

~~Munnworks,~~MunnWorks, LLC entered into a lease agreement in Mount Vernon, New York for a term that commenced on April 1, 2019 and will expire on the 31st day of March 2024 at a monthly rate of $13,400. In March of 2021, the Company obtained additional lease space and the agreement was amended to increase rent expense to $15,000 per month. On July 1, 2021, the Company again obtained additional lease space and rent expense was increased to $27,500 per month through July 1, 2024 and $29,150 per month from July 1, 2024 through July 1, 2026.

On September 28, 2021, the Company entered into a lease agreement in Kennesaw, Georgia for office and production space for a term that commenced on September 29, 2021 and will expire on October 1, 2024, with a rate ranging from $14,729 to $15,626 per month.

On April 1, 2022, the Company entered into a lease agreement in Brooklyn, New York for office and production space ~~the~~that commenced on April 1, 2022 and will expire on June 1, 2023, with a rate ranging from $94,529 to $97,365 per month. On December 31, 2022, the Company exercised its option to renew the first renewal term, commencing on July 1, 2023 and ending on June 30, 2025. As a result of the extension of the lease, the Company recorded an additional $2,146,785 of ROU asset and liability on the balance sheet on December 31, 2022.

On January 26, 2023, the Company entered into a lease agreement in Lakewood, Colorado for office and production space that commenced on January 27, 2023 and will expire on January 27, 2026, with a rate ranging from $17,000 to $18,387 per month.

Rent expense for the three months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ was $~~380,852~~420,107 and $~~177,013~~101,799, ~~respectively. Rent expense for the nine months ended September 30, 2022 and 2021 was $909,873~~ ~~and $223,813~~ respectively.

Schedule maturities of operating lease liabilities outstanding as of ~~September 30, 2022~~March 31, 2023 are as follows:

Schedule of maturities of operating lease liabilities
2023 (9 months)	$	1,432,211
2024		1,914,174
2025		1,190,213
Thereafter...		174,900
Total lease payments		4,711,498
Less: Imputed Interest		(440,296	)
Present value of future minimum lease payments	$	4,271,202

~~Year Ended December 31,~~

Schedule of maturities of operating lease liabilities
2022 (3 months) $ 420,107
2023 1,097,603
2024 480,532
2025 349,800
Thereafter... 174,900
Total lease payments 2,522,942
Less: Imputed Interest (226,198 )
Present value of future minimum lease payments $ 2,296,744

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 10 - LEASING ARRANGEMENTS (CONTINUED)

Consistent with ASC 842-20-50-4, the Company calculated its total lease cost based solely on its monthly rent obligation. The Company had no cash flows arising from its lease, no finance lease cost, short term lease cost, or variable lease costs. The Company’s lease does not produce any sublease income, or any net gain or loss recognized from sale and leaseback transactions. As a result, the Company did not need to segregate amounts between finance and operating leases for cash paid for amounts included in the measurement of lease liabilities, segregated between operating and financing cash flows; supplemental non-cash information on lease liabilities arising from obtaining right-of-use assets; weighted-average calculations for the remaining lease term; or the weighted-average discount rate.

~~Applied UV, Inc. and Subsidiaries~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~NOTE 10 -~~ ~~PAYROLL PROTECTION PROGRAM~~

~~In April of 2020, the Company submitted a Paycheck Protection Program (“PPP”) application to Chase Bank for a loan amount equal to $296,827~~. The amount was approved, and the Company has received the funds. The PPP Loan, which is in the form of a PPP promissory note and agreement, matures in April of 2025 and bears interest at a rate of 1.00% per annum. The Lender will have 90 days to review borrower’s forgiveness application and the SBA will have an additional 60 days to review the Lender’s decision as to whether the borrower’s loan may be forgiven. Under the CARES Act, loan forgiveness is available for the sum of documented payroll costs, covered rent payments, covered utilities, and certain covered mortgage interest payments during the twenty-four-week period beginning on the date of first disbursement of the PPP Loan. For purposes of the CARES Act, payroll costs exclude compensation of an individual employee earning more than $~~100,000, prorated annually.~~ Not more than 40% of the forgiven amount may be for non-payroll costs. Forgiveness is reduced if full-time headcount declines, or if salaries and wages for employees with salaries of $100,000 or less annually are reduced by more than 25%. The loan was forgiven in July of 2021 and in accordance with ASC 470, the amount was recorded as other income.

~~NOTE 11-~~ ~~NOTE RECEIVABLE- RELATED PARTY~~

The company contemplated an acquisition with an entity where certain board members of the Company were also board members of the potential acquiree. In February of 2021, the Company entered into a non-interest bearing note receivable agreement whereby the Company loaned $~~500,000~~ to the entity. The note receivable was recorded at cost basis which approximates fair value because of the short-term maturity of the instrument. The loan matures on the earlier of (i) 180 days from the issuance date or (ii) the closing of the transactions set forth in a definitive acquisition entered into between the lender and the borrower. In the event the loan is paid in full on or before the maturity date, there shall be no interest accrued or payable on the outstanding principal amount. If an acquisition occurs, the $~~500,000~~ will be applied against the total acquisition price. If the company decides not to execute a definitive agreement within 180 days from the issuance date, the maturity date shall be the one-year anniversary of the issuance date. The maturity date has since been extended to November 30, 2021. The acquisition did not occur and the full amount of $~~500,000~~ ~~was repaid on November 30, 2021.~~

NOTE 1211 - SEGMENT REPORTING

FASB Codification Topic 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. The Company has two reportable segments: the design, manufacture, assembly and distribution of disinfecting systems for use in healthcare, hospitality, and commercial municipal and residential markets (disinfectant segment) and the manufacture of fine mirrors ~~and custom furniture~~ specifically for the hospitality ~~and retail industries~~industry (hospitality segment). The segments are determined based on several factors, including the nature of products and services, the nature of production processes, customer base, delivery channels and similar economic characteristics.

An operating segment’s performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income is defined as net sales less cost of sales, segment selling, general and administrative expenses, research and development costs and stock-based compensation. It does not include other charges (income), net and interest and other, net.

Schedule of segment reporting
	Hospitality		Disinfection/Healthy Building Technologies		Corporate		Total
Balance sheet at March 31, 2023
Assets	$	10,738,154	$	59,698,939	$	2,516,239	$	72,953,332
Liabilities	$	10,306,177	$	29,743,519	$	9,332,394	$	49,382,090
Balance sheet at December 31, 2022
Assets	$	9,638,828	$	19,831,097	$	3,257,502	$	32,727,427
Liabilities	$	10,666,643	$	1,545,217	$	3,281,672	$	15,493,532

2832

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 11 - SEGMENT REPORTING (CONTINUED)

	Hospitality		Disinfection/Healthy Building technologies		Corporate		Total
Income Statement for the three months ended March 31, 2023:
Net Sales	$	6,081,373	$	4,573,110	$	—	$	10,654,483
Cost of Goods Sold	$	5,306,186	$	3,425,911	$	—	$	8,732,097
Research and development	$	—	$	189,210	$	—	$	189,210
Stock based compensation	$	56,854	$	36,176	$	96,585	$	189,615
Income Statement for the three months ended March 31, 2022:
Net Sales	$	1,409,250	$	1,946,840	$	—	$	3,356,090
Cost of Goods Sold	$	1,158,644	$	1,048,347	$	—	$	2,206,991
Research and development	$	—	$	59,314	$	—	$	59,314
Stock based compensation	$	86,011	$	22,286	$	179,702	$	287,999
Loss on impairment of goodwill	$	—	$	1,138,203	$	—	$	1,138,203
Selling, General and Administrative expenses	$	659,088	$	1,785,210	$	368,929	$	2,813,227

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 12 ~~- SEGMENT REPORTING (continued)~~

Schedule of segment reporting
Hospitality Disinfectant Corporate Total
Balance sheet at September 30, 2022
Assets $ 6,563,520 $ 26,469,870 $ 534,252 $ 33,567,642
Liabilities 5,747,415 1,259,278 718,645 7,725,338
Balance sheet at December 31, 2021
Assets $ 2,158,789 $ 27,851,691 $ 8,515,512 $ 38,525,992
Liabilities 2,481,186 1,528,706 1,850,340 5,860,232

Hospitality Disinfectant Corporate Total
Income Statement for the three months ended September 30, 2022:
Net Sales $ 4,282,030 $ 1,593,581 $ —   $ 5,875,611
Cost of Goods Sold 4,117,717 919,280 —   5,036,997
Research and development —   93,522 —   93,522
Selling, General and Administrative expenses 965,511 1,932,858 606,728 3,505,097
Income Statement for the three months ended September 30, 2021:
Net Sales $ 1,750,227 $ 1,801,337 $ —   $ 3,551,564
Cost of Goods Sold 1,451,560 1,048,603 —   2,500,163
Selling, General and Administrative expenses 788,173 1,894,852 —   2,683,025

Hospitality Disinfectant Corporate Total
Income Statement for the nine months ended September 30, 2022:
Net Sales $ 9,860,392 $ 5,278,955 $ —   $ 15,139,347
Cost of Goods Sold 8,971,628 2,876,214 —   11,847,842
Research and development —   234,885 —   234,885
Loss on impairment of goodwill —   1,138,203 —   1,138,203
Selling, General and Administrative expenses 2,936,219 5,811,228 1,890,091 10,637,538
Income Statement for the nine months ended September 30, 2021:
Net Sales $ 4,282,696 $ 3,465,803 $ —   $ 7,748,499
Cost of Goods Sold 3,269,335 1,961,820 —   5,231,155
Research and development —   53,408 —   53,408
Selling, General and Administrative expenses 2,351,533 4,639,939 —   6,991,472

~~Applied UV, Inc. and Subsidiaries~~

~~Notes to the Condensed Consolidated Financial Statements~~

~~NOTE 13~~ – PROFORMA FINANCIAL STATEMENTS (UNAUDITED) ~~(UNAUDITED)~~

Unaudited Supplemental Pro Forma Data

Unaudited pro forma results of operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2023 and 2022 ~~and 2021~~ as though the company acquired Akida, KES, ~~Visionmark,~~VisionMark, SciAir, PURO, and ~~SciAir~~LED (the “Acquired Companies”) on January 1, ~~2021~~2022 is set forth below.

Business Acquisition, Pro Forma Information
Business acquisition, pro forma information
	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2022			2021			2022			2021			2023			2022
Net Sales	$	5,875,611		$	5,894,136		$	15,139,347		$	16,149,817		$	11,173,416		$	9,415,436
Net Loss		(2,700,473	)		(1,629,337	)		(7,239,000	)		(5,181,575	)	$	(4,541,839	)	$	(2,777,628	)

Net Loss attributable to common stockholders:
Dividends to preferred shareholders		(362,250	)		—			(1,086,750	)		—			(362,250	)		(362,250	)
Net Loss attributable to common stockholders		(3,062,723	)		1,629,337			(8,325,750	)		(5,181,575	)		(4,904,089	)		(3,139,878	)
Basic and Diluted Loss Per Common Share	$	(0.24	)	$	(0.17	)	$	(0.65	)	$	(0.53	)	$	(0.29	)	$	(0.19	)
Weighted Average Shares Outstanding - basic and diluted		12,656,093			9,799,123			12,751,360			9,764,634			18,448,008			16,810,671

NOTE 1413 – SUBSEQUENT EVENTS

On ~~October 7, 2022,~~May 1, 2023 the Company ~~executed a Redeemable Promissory Note~~entered into an agreement to amend certain terms in its redeemable promissory notes with Streeterville Capital, LLC ~~in the amount of $2,807,500 (the “Note”). The Note matures eighteen (18) months from its issuance date of~~which were previously issued on October 7, 2022 and ~~bears~~January 24, 2023. The amendment to the notes makes the accrued interest ~~at 8% per annum on~~incurred from these notes part of the ~~outstanding~~ principal balance of the ~~Note, except no interest accrues on any amount attributable to~~note. The new principal balances for the ~~monitoring fee referred to below. The original principal balance~~2022 and 2023 notes are $3,003,993 and $2,903,030, respectively. In addition, in consideration of lender's grant of the ~~Note consists~~extension of Redemption date, which is initially 6 months from the Purchase Price Date to 11 months from the Purchase Price Date, its fees incurred in preparing the amendment and other accommodations, an extension fee of $65,000 and $35,000 for the 2022 and 2023 notes, respectively, are to be paid.

Amortization of the ~~purchase price of $2,500,000, an original discount of $237,000, a monitoring fee of $50,000 and a transaction fee of $20,000. Beginning~~amended notes begin on ~~April~~September 7, 2023 for the ~~Investor shall have~~2022 note and September 24, 2023 for the right in any month to cause the Company to redeem up to $247,500 of the principal amount of the Note in such month. The Company may elect, in its sole discretion, to redeem such portions of the Note in cash or in its common stock or in any combination thereof. If redemptions are made by the Company with its common stock, such stock will be valued at 87.5% of the Nasdaq Minimum Price.2023 note.

3034

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Certain statements made in this prospectus are “forward-looking statements” regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the “Company” to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company’s plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and therefore, there can be no assurance the forward-looking statements included in this prospectus will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and in other parts of this prospectus. Our fiscal year ends on December 31.

Overview

Applied UV, Inc. (“AUVI”) is a leading sales and marketing company that develops, acquires, markets and sells proprietary surface and air disinfection technology focused on ~~the development~~Improving Indoor Air Quality (IAQ), specialty LED lighting and ~~acquisition~~luxury mirrors and commercial furnishings, all of ~~technology that addresses infection control~~which serves clients globally in the healthcare, commercial & public venue, hospitality, ~~government,~~ food preservation, cannabis, education, and ~~beverage, education, cannabis, entertainment~~winery vertical markets.

With its established strategic manufacturing partnerships and ~~consumer markets. The Company has two~~alliances including Canon, Acuity, Johnson Controls, USHIO, Siemens, Grainger, and a global network of 89 dealers and distributors in 52 countries, 47 manufacturing representatives, and 19 US based internal sales representatives, AUVI offers a complete suite of products through its four wholly owned subsidiaries - SteriLumen, Inc. (“SteriLumen”) ~~and MunnWorks,~~, Munn Works, LLC (“MunnWorks”), PURO Lighting, LLC (‘PURO Lighting’), and LED Supply Co. LLC (“LED Supply Co.).

SteriLumen owns, brands, and markets a portfolio of research backed and clinically proven products utilizing advanced UVC Carbon, Broad Spectrum UVC LED’s, and Photo-catalytic oxidation (PCO) pathogen elimination technology, branded as Airocide ™, Scientific Air™, Airoclean™ 420, Lumicide™, PUROAir, PUROHealth, PURONet, and LED Supply Company. Sterilumen’s proprietary platform suite of patented surface and air technologies offers one of the most complete pathogen disinfection platforms including mobile, fixed, and HVAC systems and software solutions interconnecting its entire portfolio suite into the IoT, allowing customers to implement, manage and monitor IAQ measures recommended by the EPA across any enterprise. Additionally, the Lumicide™ platform applies the power of ultraviolet light (UVC) to destroy pathogens ~~safely, thoroughly, and~~ automatically, addressing the challenge of healthcare-acquired infections ("~~HAIs"). Targeted for use in facilities that have high customer turnover such as hospitals, hotels, commercial facilities, and other public spaces, the Company’s Lumicide™ platform uses UVC LEDs~~HAI’s) in several patented designs for infection control in healthcare. LED Supply Company is a full-service, wholesale distributor of LED lighting and ~~around high-traffic areas, including sinks~~controls throughout North America. MunnWorks manufactures and ~~restrooms, killing bacteria, viruses,~~sells custom luxury and other pathogens residing on hard surfaces within the devices’ proximity. The Company’s patented in-drain disinfection device, Lumicide™ Drain, is the only product on the market that addresses this critical pathogen-intensive location.backlit mirrors, conference room and living spaces furnishings.

~~SteriLumen’s Airocide™ air purification devices are research backed, clinically proven and developed for NASA with assistance from the~~Our global list of Fortune 100 end users including Kaiser Permanente, NY Health+Hospitals, MERCY Healthcare, University of ~~Wisconsin. Airocide™ is listed as an FDA Class II~~Chicago Medical, device, utilizes a proprietary photocatalytic (PCO) bioconversion technology that draws air into a reaction chamber that converts damaging molds, microorganisms, dangerous airborne pathogens, destructive VOCs, allergens, odorsBaptist Health South Florida, New York City Transit, Samsung, JB Hunt, Boston Red Sox’s Fenway Park, JetBlue Park, France’s Palace of Versailles, Whole Foods, Del Monte Foods, U.S. Department of Veterans Affairs, Marriott, Hilton, Four Seasons and ~~biological gasses into harmless water vapor~~Hyatt, and green carbon dioxide without producing ozone or other harmful byproducts. Airocide™ applications include healthcare, hospitality, food preservation, wineries, dairy, commercial real estate, education, dental offices, post-harvest, grocery, food processing, transportation, correctional facilities, cannabis,more. For information on Applied UV, Inc., and ~~consumer.~~

SteriLumen’s Scientific Air product was developed initially for healthcare facilities and is helping hospitals across the country address the growing need for effective and safe airborne infection prevention. Utilizing Scientific Air systems, hospitals report significant reductions in viable airborne pathogens as well as significant declines in non-viable particulates including elimination of odor and VOC's. Scientific Air products produce no harmful by-products, provide rapid, portable, whole-room disinfection via a patented 3-phase design, are safe and fast-acting in occupied spaces, and have been proven and tested in facilities with EPA and FDA guidance compliance.its subsidiaries, please visit https://www.applieduvinc.com

According to ~~Resource~~Research and Markets, the UV Disinfection market is expected to reach $9 billion by ~~2026~~2027 as technology continues to improve and the focus on stopping the spread of contagious diseases increases. The Center for Disease Control states that 1 in 25 patients have at least one Hospital Associated Infection (HAI) annually and that 3 million serious infections occur every year in long-term care facilities. Losses from contagious infections, pathogens, and viruses cost the U.S. economy more than $270B every year as per the CDC: $28B lost through HAI’s; $225B in lost productivity due to absenteeism; and $25B in losses due to Student/Teacher absenteeism. Scientists globally have been advocating improving air quality post pandemic, significantly boosting global adoption to control airborne pathogen transmission. Governments globallymandating health agencies to address improving indoor air quality (IAQ) via grants and mechanisms to ease visitation and protect facilities against future pathogens (Centers for Medicare and Medicaid Services– ~~CMS)~~CMS, February 2022 Long-term Care ~~Initiative.~~Initiative April 2022 White House Clean Air Initiatives).

Indoor air quality (IAQ) has become an even more important issue as world economies ~~start~~transition beyond the ~~recovery process.~~COVID 19 pandemic. In 2021, 39 scientists reiterated the need for a "paradigm shift" and called for improvements in, "how we view and address the transmission of respiratory infections to protect against unnecessary suffering and economic losses." In mid-2022 we began to see this seismic shift from pandemic related mobile apparatuses to complete systems within systems for facilities designed to monitor, improve, and report on a more permanent basis. While there are opportunities for mobile systems, our emphasis will be on this growing market trend.

In addition to this, the global air purifier market size is set to grow exponentially. It was valued at $9.24 billion in 2021 and is predicted to grow to approximately $22.84 billion by 2030. According to Precedence Research, the immense demand for air purification and sterilization in the US will be driven by the commercial sector.

~~SteriLumen’s~~Sterilumen’s product portfolio is one of the only research-backed, clinically proven pure-play air and surface disinfection technology companies with international distribution and globally recognized end users, with product developed for NASA. In addition to the numerous recognized research institutions and globally recognized names who published the reports that were completed by the acquired companies, ~~Airocide™~~Airocide was independently proven to kill SARS, ~~MRSA~~MERSA and ~~Anthrax, in addition to removing damaging molds, microorganisms, destructive VOC’s, allergens, odors, and biological gases. Also, SteriLumen’s~~Anthrax. Sterilumen’s air purification ~~(Airocide™)~~(Airocide, Scientific Air & PURO Lighting) and surface disinfection ~~Lumicide™)~~(Lumicide) were independently tested and proven to kill both Candida Auris (Resinnova Laboratories) and SARS CoV-2 (COVID-19) (MRIGlobal), MRSA (Resinnova Laboratories), Salmonella enterica (Ressinnova Laboratories) and Escherichia coli (Resinnova Laboratories).

~~SteriLumen’s product portfolio~~Our goal is ~~used~~to build a company that successfully designs, develops, and markets our air and surface disinfection solutions that will enable US and global economies to implement “Clean Air” initiatives aimed at improving indoor air quality (IAQ) as recommended by globally recognized names including: Walmart, Whole Foods, SuperValue, Delmonte, Esmeralda, Joel Gott Wines, Opus One, Athena Healthcare, NYC Health and Hospitals, Kaiser Permanente, Advent Health, University Rochester Medical Center and Baptist Health South Florida. Additionally, the ~~SteriLumen product portfolio expanded its reach and deployed its air purification~~US Government’s EPA. We will seek to achieve this goal by having our products into Boston Red Sox Fenway Park and Jet Blue Park, The Palace Versaille , Uruguayan School Systems, Tennessee Department of Corrections, Armed Forces Research Institute of Medical Sciences (AFRIMS), US Army Aberdeen Proving Grounds and Schools throughout South Korea.actively involved in the following activities:

~~The Company works with a global base~~Focus on key target verticals that have proven business use cases including:

▪ Food Preservation

• Post-Harvest and Distribution/Logistics from ”farm-to-table”

▪ Healthcare

• Hospitals, Long-Term Care, Dental

▪ Food and Beverage

• Winery, Dairy, Meat & Seafood

▪ Hospitality

• Hotels, Restaurants

▪ Education

• Public/Non-Public Schools and Universities

▪ Public Spaces

• Sports Arenas, Office Buildings (HVAC)

▪ Cannabis

▪ Correctional Facilities

In addition to further developing Airocide, Scientific Air, PURO, Lumicide and LED Supply specific sales efforts, we intend to leverage the Company’s hospitality business (MunnWorks) for cross-selling opportunities of ~~distributors to sell both SteriLumen~~our air purification and ~~disinfection products~~surface disinfectant solutions and products. Our initial research indicates that the ~~MunnWorks product lines. The past year,~~key stakeholders in this market value the ~~Company~~asset management and reporting capabilities of our platform and provide key points of differentiation.

•

Expand our global distributor channels into new markets not currently served.

•

Continue scientific validation through lab testing and data from real world deployments; publish case studies in peer reviewed journals.

Manufacturing

In an effort to improve operationally, after analyzing each of the points in our supply chain to tighten integration to optimize inventory, improve quality control, and mitigate against supply chain disruptions that were witnessed globally throughout the pandemic, on December 18^th, 2022, Applied UV announced that it has signed ~~distribution agreements covering Africa (360BioPharma)~~a strategic manufacturing and related services agreement with Canon Virginia, Inc., ~~US Healthcare (Axis), Lootah Batta Water~~(“CVI”) a global manufacturing, engineering and ~~Environment Sign Exclusive Distribution Agreement for Airocide™ Air Purification Systems~~technical operation for the ~~United Arab Emirates,~~Canon family and ~~Plandent~~ a wholly owned subsidiary of ~~Planmeca Oy (Scandinavia). SteriLumen~~Canon U.S.A, Inc. The agreement establishes CVI’s status as the primary manufacturer, assembler, and logistical authority for Applied UV’s entire suite of air purification solutions. The Manufacturing Agreement, the first of a series of anticipated agreements, enables the Company to leverage the resources of CVI’s two million-square-foot state-of-the-art engineering, manufacturing, and distribution facility. Applied UV plans to ~~continue~~leverage CVI’s almost 40 years of innovative and efficient production methods to ~~expand its global distribution base~~manufacture the Company’s patented, FDA Class II Listed Airocide PCO commercial and consumer devices, as well as the patented advanced Activated Carbon UVC and HEPA Mobile disinfection Scientific Air portfolio. From an R&D perspective, working closely with Canon, we are also beginning to formulate our new product roadmap and making substantial improvements to our entire line of ~~significant breadth~~mobile and ~~scale to introduce the entire SteriLumen’s~~fixed air purification ~~product lines~~products, further differentiating our patented PCO and UVC Carbon based solutions from that of our competition. Applied UV also plans to ~~new markets, including building~~collaborate with Canon Financial Services, Inc. to enable better cash flow management ~~commercial real estate, retail, healthcare, cannabis and environmental health and safety, leveraging~~in regard to its growing supply chain requirements. Further, the ~~networks~~Company will look to work with CVI’s extensive field support team to promote the sale of the ~~recent acquisitions described above.~~Company’s products, as well as service capabilities.

MunnWorks is a manufacturer of custom designed fine mirrors and furniture specifically for the hospitality industry with one manufacturing facility in Mount Vernon, New York and, with the acquisition of the assets of VisionMark, another manufacturing facility in Brooklyn, New York. Our goal is to contribute to the creation of what our design industry clients seek: manufacturing better framed mirrors and customized furniture on budget and on time. As part of our long-term strategy, the Company has instituted multi-site production for high-value items, complicated designs and finishes. Our headquarters in Mount Vernon, NY serves as the center for multi-country manufacturing. The Company works with a satellite network of artisans and craftsmen, including gilders, carvers, and old-world finishers.

Acquisitions

~~In February of 2021, the Company acquired all the assets~~Air Disinfection Solutions & LED Lighting: Airocide, Scientific Air, PURO and ~~assumed certain liabilities of Akida Holdings, LLC (“Akida”). At the time of the acquisition, Akida owned the~~LED Supply Co.

The Airocide™ system of air purification technologies, originally developed for ~~NASA~~the National Aeronautics and Space Administration (“NASA”) with assistance from the University of Wisconsin at Madison, ~~that~~ uses a combination of UVC and a proprietary, titanium dioxide based photocatalyst to eliminate airborne bacteria, mold, fungi, viruses, volatile organic compounds and many odors. The core Airocide™ technology has been in use on the International Space Station and is based on photo-catalytic oxidation (PCO), a bioconversion process that ~~may help~~continuously converts damaging molds, microorganisms, dangerous pathogens, destructive volatile organic chemicals (VOCs) and biological gasses into harmless water vapor. Unlike other air purification systems that provide “active” air cleaning, ozone producing systems, ionization or “photo-electrochemical oxidation”, Airocide’s™ nanocoating technology permanently bonds titanium dioxide to ~~accelerate~~ the ~~reopening~~surface of the ~~global economy with applications in~~catalytic bed. This permits the ~~hospitality, hotel, healthcare, nursing homes, grocer, wine, commercial buildings~~perpetual generation of surface-bound (OH-) radicals over the large surface area created by their advanced geometric design and ~~retail sectors.~~prevents the generation and release of ozone and other harmful byproducts. The proprietary formulation and methods for creating the catalyst are the basis of Airocide’s™ competitive advantage, making it the only consistently robust, highly effective, ozone free PCO technology on the market. Airocide™ ~~system~~ has been ~~used~~tested over the past 12 years by ~~brands and organizations~~governmental agencies such as NASA, ~~Whole Foods, Dole, Chiquita, Opus One, Sub-Zero Refrigerators~~the National Renewable Energy Laboratory, independent universities including the University of Wisconsin, Texas Tech University, and ~~Robert Mondavi Wines. Akida had contracted KES Science & Technology, Inc. (“KES”) to manufacture, warehouse and distribute the~~Texas A&M, as well as air quality science laboratories. Airocide™ ~~system and Akida’s contractual relationship with KES was assigned to and assumed by the Company~~technology is listed as ~~part of the acquisition.~~

On September 28, 2021, the Company acquired all the assets and assumed certain liabilities of KES. At the time of the acquisition, KES was principally engaged in the manufacturing and distribution of the Airocide™ system ofa FDA Class II Medical Device, making it a suitable for providing medical grade air purification ~~technologies~~in critical hospital use cases. Airocide™ Product lines include APS (consumer units), the GCS and ~~misting systems. KES~~HD lines (commercial units that will include the Sterilumen App to bring connectivity, reporting and asset management to our suite of products). The APS series provides true choice, low maintenance filter-less PCO or a filtered PCO air purification option ideal for restaurants, conference rooms, residential and small business or home office spaces. The GCS series is suitable for larger public spaces and enclosed rooms that may have high occupancy such as offices, waiting rooms and hotel lobbies, and airport gate areas. The HD series is the most powerful, providing two-stage purification for fast sanitization of larger or industrial spaces such as sporting venues and locker rooms, airports, museums, winery cellars, warehouses, and food-processing facilities. All Airocide™ products also ~~had~~extend the ~~exclusive right to the sale and distribution~~life of the Airocide™ system in certain markets. This acquisition consolidates all of manufacturing, sale and distribution of the Airocide™ system under the SteriLumen brand and expands the Company’s market presence in food distribution, post-harvestany perishables like fruit, produce ~~wineries, and retail sectors. The Company sells its products throughout the United States, Canada, and Europe.~~or flowers.

On October 13, 2021, we acquired substantially all of the assets of Old SAM Partners, LLC F/K/A Scientific Air Management, LLC (“Old SAM”), which owned a line of air purification technologies (“Scientific ~~Air’~~Air”). The Scientific Air ~~is a provider of whole-room, aerosol chamber and laboratory certified air disinfection machines that use~~product line uses a combination of UVC and a proprietary, patented system to eliminate airborne bacteria, mold, fungi, viruses, volatile organic compounds, and many odors without producing any harmful by-products. ~~The units~~Scientific Air’s products are well suited for larger spaces within a facility ~~and~~due to the higher air flow of these units. The units are also mobile with industrial grade casters, allowing for movement throughout a facility to address increased bio burden from larger meetings or increased human traffic. Both of these key items extend our Airocide line, creating a comprehensive air disinfection portfolio that spans from small to large spaces and mobile applications. Scientific Air’s products are currently sold predominantly in North America and into the healthcare market.

PURO Lighting

On ~~March 25, 2022,~~January 26, 2023 we closed on the merger agreement with PURO Lighting LLC and LED Supply Co. LLC along with its operating subsidiaries (“PURO merger”). PURO Lighting LLC and LED Supply Co. own a powerful suite of products used in education, government, and healthcare that incorporates UV Lighting and a HVAC monitoring software platform; LED Supply Co. provides design, distribution, and implementation services for lighting, controls and smart building technologies.

PURO Lighting was founded in 2019 with the goal of using light technology to promote health and wellness within spaces. Today PURO provides a suite of UV disinfection systems that have the ability to disinfect air and surfaces in commercial and industrial spaces. They focus their sales efforts in three primary verticals: Education, Government, and Healthcare. The acquisition of PURO Lighting, LLC adds PUROHealth and PURONet - a powerful suite of products used in education, government, and healthcare that incorporates UV Lighting and a HVAC monitoring software platform. With its UL listed and patented portfolio of independently tested (Resonova Labs) synergistic surface and air disinfection technologies that help facility managers protect against multiple pathogens; PURO opens new opportunities for cross marketing sales to existing distribution channels. Additionally, the potential to inter-connect our entire portfolio of disinfection technology solutions into the IoT will provide our customers with both products and smart tools to manage and monitor indoor air quality (IAQ) across any enterprise. Applied UV’s proprietary platform suite of patented technologies offers the most complete pathogen disinfection platform including mobile, fixed and HVAC systems and solutions allowing companies to implement the IAQ measures recommended by the EPA. PURO boast a strong domestic sales network with reps in 43 states, and distribution in all 50 states. Their product offerings encompass a range of innovative solutions, including UVC systems for air handling, in-room continuous disinfection using cutting-edge Far-UVC technology, and specialized surface disinfection solutions designed specifically for the healthcare industry.

The PURO Acquisition further positions the Company ~~acquired~~to address a growing air disinfection market trend that aligns with the ~~assets~~White House “Clean Air Initiatives” implemented during the height of the COVID 19 Pandemic designed to protect consumers and ~~assumed certain liabilities~~businesses against existing and future airborne pathogens allowing economies globally to remain open. The merged entities have proven applications that can now be included in improving indoor air quality (IAQ) at the facility level including HVAV systems in public, government, municipal, retail spaces and buildings. The PURO Acquisition positions Applied UV to be one of ~~VisionMark, LLC, ("Visionmark"). Visionmark is engaged~~the only companies in the ~~business~~world to offer a complete air and surface disinfection platform that includes consumer, fixed and mobile, and commercial applications that are research backed, clinically tested and that are used by global Fortune 100 end users in multiple verticals.

LED Supply Company

Founded in 2009, LED Supply Company is a national, Colorado-based company that provides design, distribution, and implementation services for lighting, controls and smart building technologies. LED Supply Co continues to expand its market reach with a focus on new types of ~~manufacturing custom furniture using wood~~energy efficiency and ~~metal components~~sustainable technologies. Along with its robust e-commerce component, LED Supply Company has recently taken the next step in revenue growth by repositioning itself as a preferred supplier for not only the latest in LED technologies, but the source for emerging technologies and product categories that the construction and retrofit market need; from electric vehicle charging to smart home technology, emergency and safety equipment, and much more.

We see synergies across our entire air and surface disinfection/healthy building technologies portfolio. First, we look to leverage Airocide’s global distribution capabilities to facilitate the sale of Scientific Air’s and PURO’s offerings internationally. Second, we look to leverage PURO’s strength in healthcare to pull through existing Airocide™ units, creating a broad healthcare product line, from small clinics, patient rooms and doctor’s offices to larger spaces such as nursing stations, waiting rooms and cafeterias. Third, we look to leverage the national MunnWorks hospitality reach with leading luxury hotel chain operators to pull through our entire air and ~~retail industries. This acquisition is synergistic with our legacy MunnWorks operations,~~surface disinfection/healthy building technologies portfolio (Airocide™ and ~~allows for further market expansion and business diversification,~~Lumicide™) as well as ~~improvement~~PURO’s offerings into future hotel, condo and other renovation, upgrade and remodeling projects. Fourth, the Company will look to work with Canon Virginias’ (CVI) extensive field support team to promote the sale of the Companys’ products as well as service capabilities. Finally, we look to incorporate the PUROAir, PUROHealth and PURONet (a powerful suite of products used in ~~cost~~healthcare that incorporates UV Lighting and ~~onshore manufacturing efficiencies.~~a HVAC monitoring software platform) into our IoT integration plans via the Teralumen App across our entire platform connecting all our units, thereby creating a leading smart asset management, reporting, and control system tool that can be incorporated across all enterprises.

Principal Factors Affecting Our Financial Performance

Our operating results are primarily affected by the following factors:

•

our ability to acquire new customers or retain existing customers.

•

our ability to offer competitive product pricing.

•

our ability to broaden product offerings.

•

industry demand and competition; and

•

market conditions and our market ~~positions~~positions.

3338

Results of Operations

	Three Months Ended March 31, 2023												Three Months Ended March 31, 2022
	Hospitality			Disinfection/Healthy Building Technologies			Corporate			Total			Hospitality			Disinfection/Healthy Building Technologies			Corporate			Total
Net Sales	$	6,081,373		$	4,573,110		$	—		$	10,654,483		$	1,409,250		$	1,946,840		$	—		$	3,356,090
Cost of Goods Sold		5,306,186			3,425,911			—			8,732,097			1,158,644			1,048,347			—			2,206,991
Gross Profit		775,187			1,147,199			—			1,922,386			250,606			898,493			—			1,149,099
Research and development		—			189,210			—			189,210			—			59,314			—			59,314
Stock based compensation		56,854			36,176			96,585			189,615			86,011			22,286			179,702			287,999
Loss on impairment of goodwill		—			—			—			—			—			1,138,203			—			1,138,203
Selling, General and Administrative		1,033,589			2,883,973			1,157,202			5,074,764			659,087			1,785,210			368,930			2,813,227
Total Operating expenses		1,090,443			3,109,359			1,253,787			5,453,589			745,098			3,005,013			548,632			4,298,743
Operating Loss		(315,256	)		(1,962,160	)		(1,253,787	)		(3,531,203	)		(494,492	)		(2,106,520	)		(548,632	)		(3,149,644	)
Other Income
Change in Fair Market Value of Warrant Liability		—			—			2,302			2,302			—			—			43,828			43,828
Interest expense		—			—			(392,939	)		(392,939	)		(4,102	)		—			46			(4,056	)
Gain on settlement of contingent consideration		—			—			—			—			—			—			1,700,000			1,700,000
Loss on change in contingent consideration		—			—			(619,999	)		(619,999	)		—			—			(240,000	)		(240,000	)
Total Other Income (Expense)		—			—			(1,010,636	)		(1,010,636	)		(4,102	)		—			1,503,874			1,499,772
Loss Before Provision for Income Taxes		(315,256	)		(1,962,160	)		(2,264,423	)		(4,541,839	)		(498,594	)		(2,106,520	)		955,242			(1,649,872	)
Provision for Income Taxes		—			—			—			—			—			—			—			—
Net Loss	$	(315,256	)	$	(1,962,160	)	$	(2,264,423	)	$	(4,541,839	)	$	(498,594	)	$	(2,106,520	)	$	955,242		$	(1,649,872	)
Non-GAAP Financial Measures
Adjusted EBITDA
Operating Loss	$	(315,256	)	$	(1,962,160	)	$	(1,253,787	)	$	(3,531,203	)	$	(494,492	)	$	(2,106,520	)	$	(548,632	)	$	(3,149,644	)
Depreciation and Amortization		57,463			603,313			—			660,776			7,975			459,771			—			467,746
Loss on impairment of goodwill		—			—			—			—			—			1,138,203			—			1,138,203
Stock based compensation		56,854			36,176			96,585			189,615			86,011			22,286			179,702			287,999
Adjusted EBITDA	$	(200,939	)	$	(1,322,671	)	$	(1,157,202	)	$	(2,681,083	)	$	(400,506	)	$	(486,260	)	$	(368,930	)	$	(1,255,696	)

~~Three Months Ended September 30, 2022 Compared to the Three Months Ended September 30, 2021~~

Three Months Ended
September 30, 2022 Three Months Ended
September 30, 2021
Hospitality Disinfection Corporate Total Hospitality Disinfection Corporate Total
Net Sales $ 4,282,030 $ 1,593,581 $ —   $ 5,875,611 $ 1,750,227 $ 1,801,337 $ —   $ 3,551,564
Cost of Goods Sold 4,117,717 919,280 —   5,036,997 1,451,560 1,048,603 —   2,500,163
Gross Profit 164,313 674,301 —   838,614 298,667 752,734 —   1,051,401
Research and development —   93,522 —   93,522 —   —   —   —
Selling, General and Administrative 965,511 1,932,858 606,728 3,505,097 788,173 1,894,852 —   2,683,025
Total Operating expenses 965,511 2,026,380 606,728 3,598,619 788,173 1,894,852 —   2,683,025
Operating Loss (801,198 ) (1,352,079 ) (606,728 ) (2,760,005 ) (489,506 ) (1,142,118 ) —   (1,631,624 )
Other Income
Change in Fair Market Value of Warrant Liability —   —   34,804 34,804 —   —   151,570 151,570
Forgiveness of paycheck protection program loan —   —   —   —   —   —   296,827 296,827
Other income (expense) 24,728 —   —   24,728 —   —   1,068 1,068
Total Other Income (Expense) 24,728 —   34,804 59,532 —   —   449,465 449,465
Loss Before Provision for Income Taxes (776,470 ) (1,352,079 ) (571,924 ) (2,700,473 ) (489,506 ) (1,142,118 ) 449,465 (1,182,159 )
Provision for Income Taxes —   —   —   —   —   —   (101,354 ) (101,354 )
Net Loss $ (776,470 ) $ (1,352,079 ) $ (571,924 ) $ (2,700,473 ) $ (489,506 ) $ (1,142,118 ) $ 550,819 $ (1,080,805 )
Non-GAAP Financial Measures
Adjusted EBITDA
Operating Loss $ (801,198 ) $ (1,352,079 ) $ (606,728 ) $ (2,760,005 ) $ (489,506 ) $ (1,142,118 ) $ —   $ (1,631,624 )
Depreciation and Amortization 56,009 452,068 —   508,077 23,235 145,486 �� —   168,721
Stock based compensation 35,519 39,647 84,364 159,530 216,568 209,700 —   426,268
Adjusted EBITDA $ (709,681 ) $ (860,364 ) $ (522,353 ) $ (2,092,398 ) $ (249,703 ) $ (786,932 ) $ —   $ (1,036,635 )

The Company utilizes Adjusted EBITDA, a non-GAAP financial measure, to assist in analyzing our segment operating performance by removing the impact of certain key items that management believes do not directly reflect our underlying operations. In addition, we consider certain non-GAAP (or "adjusted") measures to be useful to management and investors evaluating our operating performance for the periods presented, and provide a tool for evaluating our ongoing operations, liquidity, and management of assets. This information can assist investors in assessing our financial performance and measures our ability to generate capital. These adjusted metrics are consistent with how management views our business and are used to make financial, operating and planning decisions. These metrics, however, are not measures of financial performance under GAAP and should not be considered a substitute for revenues, operating income, net income (loss), earnings (loss) per share (basic and diluted) or net cash from operating activities as determined in accordance with GAAP. Adjusted EBITDA is defined as Operating Profit (Loss), excluding Depreciation and Amortization, and excluding Stock Based Compensation and Loss on Impairment of ~~Goodwill.~~Goodwill/Intangible Assets. Adjusted EBITDA was a loss of ~~($2,092,398)~~$2.7 million for the three months ended ~~September 30, 2022,~~March 31, 2023, which was ~~($1,055,763) higher~~an increase of $1.4 million as compared to the three ~~months~~ ended ~~September 30, 2021. Adjusted EBITDA loss by segment:~~March 31, 2022. By segment, Hospitality decreased $0.2 million, Disinfection/Healthy Building Technologies increased ~~($459,967), Disinfection increased ($73,432)~~$0.8 million, and Corporate increased ~~($522,364).~~$0.8 million.

Segments

The Company has three reportable segments: the design, manufacture, assembly and distribution of disinfecting pathogen elimination systems for use in food preservation, healthcare, hospitality, ~~food, wine~~education and public spaces, cannabis, correctional facilities, and commercial, municipal and residential markets ~~(Disinfection~~(Disinfection/Healthy Building Technologies segment); the manufacture of fine mirrors and custom furniture specifically for the hospitality ~~and retail industries~~industry (Hospitality segment); and the Corporate Segment, which includes expenses primarily related to corporate governance, such as board fees, legal expenses, audit fees, executive management, and listing costs. See NOTE 11 – Segment Reporting.

Net Sales

Net sales of ~~$5,875,611~~$10.7 million represented an increase of $7.3 million, or 217.5% for the three months ended ~~September 30, 2022~~March 31, 2023 as compared to net sales of ~~$3,551,564~~$3.4 million for the three months ended ~~September 30, 2021 represented an increase of $2,324,047, or 65.4%.~~March 31, 2022. This increase was primarily attributable to the Hospitality segment, which increased ~~$2,531,803, primarily~~$4.7 million, largely as a result of the ~~fulfilment~~strategic acquisition on March 25, 2022 of ~~orders from~~ the operations of VisionMark ~~acquisition, offset by a decrease~~in Brooklyn, NY, which contributed $3.9 million of ~~($207,756) in~~ the ~~Disinfection segment, primarily~~increase, and also due to the ~~push-out~~organic growth of ~~orders into~~our legacy MunnWorks business, which contributed $0.8 million of the ~~next two quarters.~~increase. The Disinfection/Healthy Building Technologies segment increased $2.6 million, primarily due the acquisition of PURO Lighting and LED Supply Co. on January 26, 2023.

Gross Profit

Gross profit ~~decreased ($212,787)~~increased $0.8 million from $1.1m, or 34% vs. sales, for the three months ended ~~September 30,~~March 31, 2022 ~~as compared~~ to $1.9m, or 18% vs. sales for the three months ended ~~September 30, 2021, due~~March 31, 2023. The decrease from 34% to ~~the decrease in sales in the Disinfection segment, and~~18% was driven primarily by the higher sales mix of ~~the~~our Hospitality segment ~~at a lower gross profit.~~as compared to the same period last year. For Q1 2023, Hospitality accounted for 57% of total sales for the quarter as compared to 42% in the prior year quarter. The ~~reduction in Hospitality gross profit is driven primarily by~~last of the ~~costs required to complete~~ lower margin projects that we acquired that were in process from the VisionMark asset acquisition ~~and the additional costs to integrate and absorb the VisionMark operations. Hospitality pricing and~~have been substantially completed. Additionally, Q1 2023 was impacted by “one-time” lower margins ~~are expected to improve~~ in Q4our Disinfection/Healthy Building Technologies segment as we ~~are now focused on new projects. As the Company continues to integrate~~sold approximately half of our ~~strategic acquisitions, the focus will be on realizing cost reduction synergies from the consolidation and streamlining of the manufacturing and distribution operations.~~consumer Airocide inventory at special discounted pricing.

Operating Expenses

Selling, General, and Administrative – S,G&A costs for the three months ended ~~September 30, 2022,~~March 31, 2023, increased to ~~$3,505,097~~$5.1 million as compared to ~~$2,683,025~~$2.8 million for the three months ended ~~September 30, 2021.~~March 31, 2022. This increase of ~~$822,072~~$2.3 million was driven primarily by the expansion of the ~~Disinfection~~Disinfection/Healthy Building Technologies segment with the ~~additional~~ acquisitions of ~~KES~~PURO Lighting and ~~SciAir; the expansion~~LED Supply Co. These acquisitions accounted for $1.4 million of the ~~Hospitality segment with the addition of the VisionMark acquisition; and~~increase. In Corporate, ~~segment~~legal expenses ~~due to~~ increased consulting, legal, accounting, and infrastructure costs related to the initial integration of the operations of our strategic acquisitions. S,G&A costs decreased ($526,118) from last quarter, and we anticipate efficiency gains in the coming year as we fully integrate our acquisitions and leverage synergies where practical.

~~Net Loss~~

The Company recorded a net loss of ($2,700,473) for the three months ended September 30, 2022, compared to a net loss of ($1,080,805) for the three months ended September 30, 2021. The increase of ($1,619,668) in the net loss was mainly due to the reduction in gross profit of ($212,787) and the increase is S, G&A costs of $822,072 incurred in support of the business acquisitions and expansion of the both the Disinfection and Hospitality segments. The Company also realized a gain last year of $296,827 due to the forgiveness of their PPP loan. The Company anticipates improvements in gross profit$0.6 million primarily as the ~~initial VisionMark projects are now completed and also as the Disinfection sales pipeline accelerates revenue realization.~~

~~Nine Months Ended September 30, 2022 Compared to the Nine Months Ended September 30, 2021~~

Nine Months Ended
September 30, 2022 Nine Months Ended
September 30, 2021
Hospitality Disinfection Corporate Total Hospitality Disinfection Corporate Total
Net Sales $ 9,860,392 $ 5,278,955 $ —   $ 15,139,347 $ 4,282,696 $ 3,465,803 $ —   $ 7,748,499
Cost of Goods Sold 8,971,628 2,876,214 —   11,847,842 3,269,335 1,961,820 —   5,231,155
Gross Profit 888,764 2,402,741 —   3,291,505 1,013,361 1,503,983 —   2,517,344
Research and development —   234,885 —   234,885 —   53,408 —   53,408
Loss on impairment of goodwill —   1,138,203 —   1,138,203 —   —   —   —
Selling, General and Administrative 2,936,219 5,811,228 1,890,091 10,637,538 2,351,533 4,639,939 —   6,991,472
Total Operating expenses 2,936,219 7,184,316 1,890,091 12,010,626 2,351,533 4,693,347 —   7,044,880
Operating Loss (2,047,455 ) (4,781,575 ) (1,890,091 ) (8,719,121 ) (1,338,172 ) (3,189,364 ) —   (4,527,536 )
Other Income
Change in Fair Market Value of Warrant Liability —   —   46,521 46,521 —   —   (148,882 ) (148,882 )
Loss on change in contingent consideration —   (240,000 ) —   (240,000 ) —   —   —   —
Gain on settlement of contingent consideration —   1,700,000 —   1,700,000 —   —   —   —
Forgiveness of paycheck protection program loan —   —   —   —   —   —   296,827 296,827
Other income (expense) (26,400 ) —   —   (26,400 ) 26,250 —   —   26,250
Total Other Income (Expense) (26,400 ) 1,460,000 46,521 1,480,121 26,250 —   147,945 174,195
Loss Before Provision for Income Taxes (2,073,855 ) (3,321,575 ) (1,843,570 ) (7,239,000 ) (1,311,922 ) (3,189,364 ) 147,945 (4,353,341 )
Provision for Income Taxes —   —   —   —   —   —   (101,354 ) (101,354 )
Net Loss $ (2,073,855 ) $ (3,321,575 ) $ (1,843,570 ) $ (7,239,000 ) $ (1,311,922 ) $ (3,189,364 ) $ 249,299 $ (4,251,987 )
Non-GAAP Financial Measures
Adjusted EBITDA
Operating Loss $ (2,047,455 ) $ (4,781,575 ) $ (1,890,091 ) $ (8,719,121 ) $ (1,338,172 ) $ (3,189,364 ) $ —   $ (4,527,536 )
Depreciation and Amortization 119,157 1,367,415 —   1,486,572 46,470 434,570 —   481,040
Loss on impairment of goodwill —   1,138,203 —   1,138,203 —   —   —   —
Stock based compensation 151,679 99,733 308,568 559,980 559,698 542,911 —   1,102,609
Adjusted EBITDA $ (1,776,619 ) $ (2,176,224 ) $ (1,581,523 ) $ (5,534,366 ) $ (732,004 ) $ (2,211,883 ) $ —   $ (2,943,887 )

The Company utilizes Adjusted EBITDA, a non-GAAP financial measure, to assist in analyzing our segment operating performance by removing the impact of certain key items that management believes do not directly reflect our underlying operations. In addition, we consider certain non-GAAP (or "adjusted") measures to be useful to management and investors evaluating our operating performance for the periods presented, and provide a tool for evaluating our ongoing operations, liquidity, and management of assets. This information can assist investors in assessing our financial performance and measures our ability to generate capital. These adjusted metrics are consistent with how management views our business and are used to make financial, operating and planning decisions. These metrics, however, are not measures of financial performance under GAAP and should not be considered a substitute for revenues, operating income, net income (loss), earnings (loss) per share (basic and diluted) or net cash from operating activities as determined in accordance with GAAP. Adjusted EBITDA is defined as Operating Profit (Loss), excluding Depreciation and Amortization, and excluding Stock Based Compensation and Loss on Impairment of Goodwill. Adjusted EBITDA was a loss of ($5,534,366) for the nine months ended September 30, 2022, which was an increase of ($2,590,479) as compared to the nine ended September 30, 2021. Adjusted EBITDA loss by segment: Hospitality increased ($1,044,615), Disinfection decreased $35,659, and Corporate increased ($1,581,523).

~~Segments~~

The Company has three reportable segments: the design, manufacture, assembly and distribution of disinfecting systems for use in healthcare, hospitality, food, wine, and commercial municipal and residential markets (Disinfection segment); the manufacture of fine mirrors and custom furniture specifically for the hospitality and retail industries (Hospitality segment); and the Corporate Segment, which includes expenses primarily related to corporate governance, such as board fees, legal expenses, audit fees, executive management, and listing costs. See NOTE 11 – Segment Reporting.

~~Net Sales~~

Net sales of $15,139,347 for the nine months ended September 30, 2022 as compared to net sales of $7,748,499 for the nine months ended September 30, 2021 represented an increase of $7,390,848, or 95.4%. This increase was attributable to both the Disinfection segment, which increased $1,813,152, largely as a result of the strategic acquisitions of KES and Scientific Air in Q3 and Q4 of 2021, respectively, and the Hospitality segment, which increased $5,577,696, primarily due to orders that were delayed from Q2 and fulfilled in Q3, and from the fulfillment of orders related to the VisionMark acquisition.

~~Gross Profit~~

~~Gross profit increased $774,161 for the nine months ended September 30, 2022 as compared to the nine months ended September 30, 2021, driven by volume growth in the Disinfection segment, offset by~~ a decrease in gross profit in the Hospitality segment, mainly due to the costs necessary to complete lower margin projects that were in process at the time of the VisionMark asset acquisition, and the costs incurred to integrate and absorb the VisionMark operations. Hospitality pricing and margins are expected to improve in Q4 as we are now focused on new projects. As the Company continues to integrate our strategic acquisitions, the focus will be on realizing cost reduction synergies from the consolidation and streamlining of the manufacturing and distribution operations.

~~Operating Expenses~~

~~Selling, General, and Administrative~~ – S,G&A costs for the nine months ended September 30, 2022, increased to $10,637,538 as compared to $6,991,472 for the nine months ended September 30, 2021. This increase of $3,646,066 was driven primarily by the expansion of both the Disinfection segment, with the additional acquisitions of KES and SciAir, and the Hospitality segment, with the addition of the VisionMark acquisition, and Corporate segment expenses due to increased consulting, legal, accounting, and infrastructure costs related to the initial integration of the operations of our strategic acquisitions. The Company anticipates efficiency gains in the coming year as we fully integrate our acquisitions and leverage synergies where practical.“one-time” arbitration case.

Loss on Impairment of Goodwill ~~- The~~– In the first quarter of 2022, the Company had determined that a triggering event had occurred as a result of a settlement agreement with Scientific Air (“Old SAM Partners”) - see explanation of Other Income/Expense below. A quantitative impairment test on the goodwill determined that the fair value was below the carrying value and as a result the Company recorded a full goodwill impairment charge of ~~$1,138,203~~$1.1 million on the Condensed Consolidated Statements of Operations during the ~~nine~~three months ended ~~September 30,~~March 31, 2022.

Operating Loss

The Company recorded an operating loss of $3.5 million for the three months ended March 31, 2023, compared to an operating loss of $3.1 million for the three months ended March 31, 2022. The increase of $0.4 million in the operating loss was primarily due to the decrease in the gross profit percentage year over year as explained above, and the impairment charge of $1.1 million that was incurred last year. On a percentage basis, the operating loss improved to 33% in the first quarter of 2023 as compared to 94% in the first quarter of 2022.

Other Income/Expense

The Company incurred interest expense of $0.4 million due to the borrowings of Streeterville Capital and Pinnacle Bank., primarily to help fund the acquisitions of PURO Lighting and LED Supply Co. and to also fund additional working capital requirements.

The Company incurred a non-cash loss on change in fair market value of contingent consideration of $0.6 million because of the make whole provision within the PURO Lighting and LED Supply Co. merger agreement. The change related to the decrease in our stock price from the date of acquisition of January 26, 2023 as compared to March 31, 2023.

On March 31, 2022, there was a dispute between the Company and Scientific Air (“Old SAM Partners”) regarding certain representations and warranties in the purchase agreement which resulted in a settlement and mutual release agreement where Old Sam Partners agreed to relinquish such Partner’s right, title, and interest in the previously issued 400,000 shares that were part of the original asset acquisition transaction. The Company recorded a loss on change in fair market value of contingent consideration of ~~$240,000,~~$0.24 million, and as a result of the settlement, the company recorded a gain on settlement of ~~$1,700,000~~$1.7 million during the ~~nine~~three months ended ~~September 30,~~March 31, 2022.

Net Loss

The Company recorded a net loss of ~~($7,239,000)~~$4.5 million for the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, compared to a net loss of ~~($4,251,987)~~$1.6 million for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The increase of ~~($2,987,013)~~$2.9 million in the net loss was mainly due to the $1.4 million increase isin S,G&A costs incurred as a result of the acquisitions of PURO Lighting and LED Supply Co. in support of the ~~business acquisitions~~expansion to the Disinfection/Healthy Building Technologies segment; the $0.6 million increase in Corporate legal expenses largely as a result of a “one-time” arbitration case and ~~expansion~~the non-cash loss on change in fair market value of ~~both~~contingent consideration of $0.6 million because of the ~~Disinfection~~make whole provision within the PURO Lighting and ~~Hospitality segments.~~LED Supply Co. merger agreement (see comment above in Other Income/Expense).

Liquidity and Capital Resources

~~Nine~~Three Months Ended ~~September 30, 2022~~March 31, 2023 Compared to the ~~Nine~~Three Months Ended ~~September 30, 2021~~March 31, 2022

Net Cash Used in Operating Activities	$	(7,473,600	)	$	(5,186,564	)	$	(3,269,645	)	$	(1,858,793	)
Net Cash Used in Investing Activities		(88,618	)		(5,579,194	)		(4,274,799	)		(16,793	)
Net Cash Provided by (Used In) Financing Activities		(149,705	)		11,962,154
Net increase (decrease) in cash and cash equivalents		(7,711,923	)		1,196,396
Net Cash Provided by Financing Activities								6,891,845			728,012
Net Decrease in cash and cash equivalents								(652,599	)		(1,147,574	)
Cash and equivalents at beginning of period		8,768,156			11,757,930			2,734,485			8,768,156
Cash and equivalents at end of period		1,056,233			12,954,326			2,081,886			7,620,582

In the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, net cash used in operating activities was ~~($7,473,600),~~$3.3 million, as compared to ~~($5,186,465)~~$1.9 million in the ~~nine~~three months ended ~~September 30, 2021. The~~March 31, 2022. This increase in net cash used was due mainly to the increase in net loss of $2.9 million, from $1.6 million in Q1 2022 to ~~($7,239,000)~~$4.3 million in Q1 2023. Additionally, after adjusting for the ~~nine months ended September 30, 2022, as compared to a net loss~~acquisitions of ~~($4,251,987) for the nine months ended September 30, 2021. Working capital~~PURO Lighting and LED Supply Co., accounts receivable decreased $1.4 million, which was ~~largely impacted~~offset by an increase in ~~inventory for the nine months ended September 30, 2022 as the Company has secured parts in advance~~accounts payable of ~~production to mitigate supply chain disruptions.~~$2.1 million.

In the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, net cash used in investing activities decreased to ~~($88,618) as compared~~$4.3 million primarily due to ~~($5,579,194) in the nine months ended September 30, 2021.~~ ~~The decrease in cash used was mainly attributable to~~net cash paid ~~in 2021 in connection with~~of $4.1 million for the ~~Akida~~acquisitions of PURO Lighting and ~~KES/JJS asset acquisitions, net of cash acquired, ($760,293) and ($4,299,900) respectively, and a loan of ($500,000) to a related party in the form of a secured note receivable.~~LED Supply Co. on January 26, 2023.

In the ~~nine~~three months ended ~~September 30, 2022,~~March 31, 2023, cash ~~used in~~provided by financing activities was ~~($149,705)~~$6.9 million, as compared to cash provided by financing activities of ~~$11,962,154~~$0.7 million in the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The ~~decrease in cash for the nine months ended September 30, 2022 was~~increase of $6.2 million is primarily due to our borrowings on our Streeterville Capital note and on our Pinnacle Bank credit facility. The Company also raised net proceeds $2.3 million through its ATM facility with Maxim Group with 1,818,214 shares sold. In the first quarter of 2022, the Company raised $1.1 million through the full exercise of ~~the~~their common stock offering ~~over-allotment, which~~over-allotment.

On July 1, 2022, the Company filed a $50,000,000 mixed use shelf registration (Form S-3) and entered into an At The Market sales agreement ("ATM") with Maxim Group, LLC for a total of $9,000,000, as a readily available source of funding if needed. During the year ended December 31, 2022, the Company sold 804,811 ATM shares through the sales agent with gross proceeds of $964,083. In connection with the sale of these ATM Shares, the compensation paid by the Company to the Sales Agent was ~~$1,092,000 net, offset by dividends to preferred shareholders~~$28,922. As of ~~($1,086,750)~~March 31, 2023, an additional 1,764,311 shares have been sold for gross proceeds of $2,314,860, and the ~~purchase of treasury shares ($149,686). The increase in cash for~~compensation paid by the ~~nine months ended September 30, 2021 was~~ ~~primarily due~~Company to the ~~net proceeds from~~Sales Agent was $69,446, leaving a balance of $5,721,057 on the ~~equity raise~~ATM facility. The shelf registration statement will expire on July 12, 2025.

The Company has filed a Registration Statement with the Securities and Exchange Commission with its plans to commence a public offering of ~~$12,272,440, offset by dividends paid to~~its securities for an amount that satisfies the ~~preferred shareholders of ($241,500), and a liability settlement of ($65,000),~~Company’s’ current working capital needs.

The Company believes our sources of liquidity and capital will be sufficient to finance our continued operations and growth strategy. On July 1, the Company filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission to register and aggregate $50,000,000 of securities which may be issued in the form of common stock, preferred stock, warrants, debt securities, rights or units. Such securities will be offered pursuant to the base prospectus contained in the shelf registration statement and a prospectus supplement that will be prepared and filed at the time of any offering. Also, included in the registration statement was a second prospectus which provides for the issuance of $9,000,000 of the Company’s common stock in at-the-market transactions pursuant to an equity distribution agreement dated July 1, 2022 between the Company and Maxim Group LLC, as sales agent. The shelf registration statement will expire on July 12, 2025.

On October 7, 2022, the Company executed a Redeemable Promissory Note with Streeterville Capital, LLC, in the amount of $2,807,500 (the “Note”). The Note matures eighteen (18) months from its issuance date of October 7, 2022 and bears interest at 8% per annum on the outstanding principal balance of the Note, except no interest accrues on any amount attributable to the monitoring fee referred to below. The original principal balance of the Note consists of the purchase price of $2,500,000, an original discount of $237,000, a monitoring fee of $50,000 and a transaction fee of $20,000. Beginning on April 7, 2023, the Investor shall have the right in any month to cause the Company to redeem up to $247,500 of the principal amount of the Note in such month. The Company may elect, in its sole discretion, to redeem such portions of the Note in cash or in its common stock or in any combination thereof. If redemptions are made by the Company with its common stock, such stock will be valued at 87.5% of the Nasdaq Minimum Price.

3841

Contractual Obligations and Other Commitments

	Payment due by period										Payment due by period
	Total		2022		2023-2025		2026-2027		Thereafter		Total		2023		2024-2026		2027-2028		Thereafter
Financing lease obligations	$	2,402	$	2,402	$	—	$	—	$	—		243,120		47,949		159,062		36,109		—
Operating lease obligations (1)		2,522,942		420,107		1,927,935		174,900		—		4,125,692		1,279,211		2,846,481		—		—
Loan payable (2)		157,500		97,500		60,000		—		—
Assumed lease liability (3)		931,714		93,172		838,542		—		—
Note payable (4)		277,103		110,840		166,263
Notes payable (2)												157,500		127,500		30,000		—		—
D&O Insurance Loan (3)												83,131		83,131
Streeterville notes (4)												5,615,000		3,156,270		2,458,730		—		—
Pinnacle loan (5)												4,351,040				4,351,040		—		—
Netsuite Financing Agreement (6)												180,258		67,599		112,659		—		—
Assumed lease liability (7)												6,972,173		1,279,211		2,846,481		2,846,481		—
Total	$	3,891,661	$	724,021	$	2,992,740	$	174,900	$	—		21,727,914		6,040,871		12,804,453		2,882,590		—

(1)

The Company entered into a lease agreement in Mount Vernon, New York for a term that commenced on April 1, 2019 and expires on the 31st day of March 2024 at a monthly rate of $15,000. On July 1, 2021, the Company obtained additional lease space and rent expense was increased to $27,500 per month through July 1, 2024 and $29,150 per month from Jul 1, 2024 through July 1, 2026. On September 28, 2021, the Company entered into a lease agreement in Kennesaw, Georgia for a term that commenced on September 29, 2021 and will expire on October 1, 2024, with monthly payments ranging from approximately $14,700 to $15,600 per month.

On April 1, 2022, the Company entered into a lease agreement in Brooklyn, New York for office and production space that commenced on April 1, 2022 and will expire on June 1, 2023, with monthly payments ranging from approximately $94,500 to $97,400 per month.

(2)

In March 2020, as part of the On-Deck Capital settlement, the Company issued a promissory note for the principal amount of $157,500 due within the next 5 years. The Company is required to pay $157,500 in five payments in the amount of $30,000 per year, with an additional $7,500 in year two.

(3)		~~In connection with the VisionMark LLC acquisition, the Company is obligated to repay $31,057 of prior lease payments per month for the next 36 months commencing on April 1, 2022.~~
~~(4)~~		On August 28, 2022, the Company entered into a one-year Directors and Officers Liability Insurance agreement for $318,833. Under the terms of the agreement, the Company made a down payment of $41,730, with the remaining balance financed over the remaining term at an annual percentage rate of 5.05%. Beginning in September 2022, the Company is making 10 monthly payments of $27,710, with the last payment expected to be made in June 2023.

(4)

On October 7, 2022 and January 25, 2023, the Company entered into a Security Purchase Agreement with Streeterville Capital, LLC whereby the Company issued 8% unsecured redeemable notes in the principal amount of $2,807,500 and $2,807,500, respectively. The notes mature 18 months from the original issuance date.

(5)

In December 2022, the Company entered into a Loan and Security Agreement, or (the “Loan Agreement”), with Pinnacle Bank, which provides for a $5,000,000 secured revolving credit facility (the “Loan Facility”). The loan is subject to a maximum advance rate of up to 85% of net face amount of eligible accounts, plus the lessor a) of the sum of 20% of the aggregate eligible inventory value of raw materials and 35% of the aggregate eligible inventory value of finished goods, b) $1 million, c) 80% of the net orderly liquidation value of raw materials and finished goods, or d) 100% of the aggregate outstanding principal amount of advances. In no event shall the aggregate amount of the outstanding advances under the Loan Facility be greater than $5 million. The loan matures on December 9, 2024. The principal amount of outstanding revolving loan, together with accrued and unpaid interest, is due on the maturity date.

(6)

On November 1, 2022, PURO entered into a financing arrangement for $225,323 to finance its NetSuite cloud services. The Company is required to pay $7,511 per month through April 1, 2025. The liability was assumed in connection with the business combination on January 26, 2023. As of March 31, 2023, the outstanding balance of the financing agreement was $180,258.

(7)

In connection with the VisionMark LLC acquisition, the Company is obligated to repay $31,057 of prior lease payments per month for the next 36 months commencing on April 1, 2022.

Off-Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

3942

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of ~~September 30, 2022.~~March 31, 2023. Based on that evaluation, the Company’s Chief Executive Officer and the Company’s Chief Financial Officer have concluded that as of ~~September 30,~~March 31, 2022, due to the existence of the material weakness in the Company’s internal control over financial reporting described below, the Company’s disclosure controls and procedures were not effective.

Evaluation of Disclosure Controls and Procedures

Our Chief Financial Officer is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act as a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our Board, senior management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We continue to review our internal control over financial reporting and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in “Internal Control — Integrated Framework (2013)” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on the control deficiencies identified during this evaluation and set forth below, our senior management has concluded that we did not maintain effective internal control over financial reporting as of ~~September 30, 2022~~March 31, 2023 due to the existence of a material weakness in internal control over financial reporting as described below.

As set forth below, management will continue to take steps to remediate the control deficiencies identified below. Notwithstanding the control deficiencies described below, we have performed additional analyses and other procedures to enable management to conclude that our consolidated financial statements included in this Form 10-Q fairly present, in all material respects, our financial condition and results of operations as of and for the three ~~and nine~~ months ended ~~September 30, 2022.~~March 31, 2023.

A material weakness is a deficiency, or a combination of deficiencies, in internal controls over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis.

The Company’s management has developed a remediation plan to address the material weakness and as of January 1, 2021 began using a new cloud-based software which tracks the progress of jobs and more accurately reflects the percentage of job completeness ensure such revenue is recognized in the appropriate period. In addition, the Company intends to further remediate the deficiency by performing the following:

•

design and implement additional internal controls and policies to ensure that we routinely review and document our application of established significant accounting policies; and

•

implement additional systems and technologies to enhance the timeliness and reliability of financial data within the organization.

•

continue to engage third-party subject matter experts to aid in identifying and applying US GAAP rules related to complex financial instruments as well as to enhance the financial reporting function.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Changes in Internal Control ~~Over~~over Financial Reporting

There have been no changes in our internal ~~controls~~control procedures over financial reporting ~~since December~~(as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during our fiscal quarter ended March 31, ~~2021.~~ 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

4143

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

The Company is a smaller reporting company and therefore not required to provide the information required by this item.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3. Defaults Upon Senior Securities.

None

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None

Item 6. Exhibits

EXHIBIT INDEX

~~Exhibit~~ No.		~~Description~~
~~1.1~~	~~Equity Distribution Agreement, dated July 1, 2022 between the Registrant and Maxim Group LLC (incorporated by reference to~~ Exhibit 1No..~~2 of the Registrant’s Registration Statement on Form S-3 (File No. 333-266015).~~
3.1		Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the ~~Registrant’s~~Company’s Registration Statement on Form S-1 (File No. 333-239892) filed with the SEC as of July 16, 2020).
3.2		Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.2 of the ~~Registrant’s~~Company’s Registration Statement on Form S-1 (File No. 333-239892) filed with the SEC as of July 16, 2020).
3.3		Bylaws of the Registrant (incorporated by reference to Exhibit 3.3 of the ~~Registrant’s~~Company’s Registration Statement on Form S-1 (File No. 333-239892) filed with the SEC as of July 16, 2020).
3.4		Certificate of Designation, Preferences and Rights of Series A Preferred Stock (incorporated by reference to Exhibit 3.4 of the ~~Registrant’s~~Company’s Registration Statement on Form S-1 (File No. 333-239892) filed with the SEC as of July 16, 2020).
3.5		Certificate of Amendment of Certificate of Incorporation filed on June 17, 2020 (incorporated by reference to Exhibit 3.5 of the ~~Registrant’s~~Company’s Registration Statement on Form S-1 (File No. 333-239892) filed with the SEC as of July 16, 2020).
3.6		Certificate of Amendment of Certificate of Incorporation filed on June 23, 2020 (incorporated by reference to Exhibit 3.6 of the ~~Registrant’s~~Company’s Registration Statement on Form S-1 (File No. 333-239892) filed with the SEC as of July 16, 2020).
3.7		Certificate of Amendment of Certificate of Incorporation filed July 14, 2020 (incorporated by reference to Exhibit 3.7 of the ~~Registrant’s~~Company’s Registration Statement on Form S-1 (File No. 333-239892) filed with the SEC as of July 16, 2020).
3.8		Certificate of Amendment to Certificate of Designation of Series A Preferred Stock, filed on June 17, 2021 (incorporated by reference to Exhibit 3.1 of the ~~Registrant’s~~Company’s Current Report on Form 8-K, filed on July 19, 2021).
3.9		Certificate of Designation, Preferences and Rights of 10.5% Series A Cumulative Perpetual Preferred Stock (incorporated by reference to Exhibit 3.9 of the ~~Registrant’s~~Company’s Registration Statement on Form S-1 (File No. 333-257197) filed with the SEC as of June 25, 2021).
3.10		Certificate of Amendment to the Amended and Restated Certificate of Incorporation, filed on October 7, 2021
3.11		Certificate of Amendment to the Certificate of Designation of Series A Preferred Stock, filed on December 8, 2021
3.12		Certificate of Designations, Rights, and Preferences of 2% Series B Cumulative Perpetual Preferred Stock (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 1, 2023)
3.13		Certificate of Designations, Rights, and Preferences of 5% Series C Cumulative Perpetual Preferred Stock (incorporated by reference to Exhibit 3.2 to the Company’s Current Report on Form 8-K filed with the SEC on February 1, 2023)
10.1		Warrant, dated April 1, 2020 issued to Max Munn (incorporated by reference to Exhibit 10.4 of the ~~Registrant’s~~Company’s Registration Statement on Form S-1 (File No. 333-239892) filed with the SEC as of July 16, 2020).
10.2		The ~~Registrant’s~~Company’s 2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.5 of the ~~Registrant’s~~Company’s Registration Statement on Form S-1 (333-239892) filed with the SEC as of July 16, 2020).
10.3		Form of Option Agreement and Grant issued under February 18, 2020 Board Approval (incorporated by reference to Exhibit 10.6 of the ~~Registrant’s~~Company’s Registration Statement on Form S-1 (File No. 333-239892) filed with the SEC as of July 16, 2020).
10.4		Agreement, dated April 20, 2020 between Icahn School of Medicine at Mount Sinai and SteriLumen, Inc. (incorporated by reference to Exhibit 10.7 of the ~~Registrant’s~~Company’s Registration Statement on Form S-1 (File No. 333-239892) filed with the SEC as of July 16, 2020).
10.5		Common Stock Purchase Warrant, dated July 1, 2020 (incorporated by reference to Exhibit 10.10 of the Company’s Registration Statement on Form S-1 (File No. 333-239892) filed with the SEC as of July 16, 2020).
10.6		Common Stock Purchase Warrant, dated July 1, 2020 (incorporated by reference to Exhibit 10.11 of the Company’s Registration Statement on Form S-1 (File No. 333-239892) filed with the SEC as of July 16, 2020).
10.7		Form of Option issued to Medical Advisory Board members (incorporated by reference to Exhibit 10.12 of the ~~Registrant’s~~Company’s Registration Statement on Form S-1 (File No. 333-239892) filed with the SEC as of July 16, 2020).
~~10.6~~10.8		~~Employment Offer to Michael Riccio (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed with the SEC as of April 20, 2021).~~
~~10.7~~			Employment Agreement, dated June 30, 2020 between the ~~Registrant~~Company and Max Munn (incorporated by reference to Exhibit 10.9 of the ~~Registrant’s~~Company’s Registration Statement on Form S-1 (File No. 333-239892) filed with the SEC as of July 16, 2020).
~~10.8~~10.9		Employment Agreement, dated ~~April 11,~~January 1, 2022 between the ~~Registrant~~Company and ~~John F. Andrews~~Michael Ricco (incorporated by reference to Exhibit 10.1 of the ~~Registrant’s~~Company’s Current Report on Form 8-K filed with the SEC on ~~April 8,~~January 3, 2022)
~~10.9~~10.10		~~Sublease,~~Agreement and Plan of Merger dated as of ~~March 29,~~December 19, 2022, ~~between VisionMark,~~by and among the Company, PURO Acquisition Sub I, Inc., PURO Acquisition Sub II, LLC, ~~Munn Works,~~PURO Lighting, LLC, Brian Stern, Andrew Lawrence, and ~~Randolph Associates and Randolph Associates~~the Member Representative (incorporated by reference to Exhibit 10.1 of the ~~Registrant’s~~Company’s Current Report on Form 8-K filed with the SEC on ~~March 31, 2022).~~February 1, 2023)
~~10.10~~10.11		~~Guaranty~~Agreement and Plan of ~~Sublease~~Merger dated as of ~~March 29,~~December 19, 2022, ~~made~~ by ~~Applied UV,~~and among the Company, LED Supply Acquisition Sub I, Inc. ~~in favor of VisionMark,~~, LED Supply Acquisition Sub II, LLC, LED Supply Co. LLC, Brian Stern, Andrew Lawrence, and the Member Representative (incorporated by reference to Exhibit 10.2 to the ~~Registrant’s~~Company’s Current Report on Form 8-K filed with the SEC on ~~March 31, 2022).~~February 1, 2023)
~~31.1~~10.12		Amendment to Agreement and Plan of Merger dated as of January 26, 2023, by and among the Company, PURO Acquisition Sub I, Inc., PURO Acquisition Sub II, LLC, PURO Lighting, LLC, Brian Stern, Andrew Lawrence, and the Member Representative (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on February 1, 2023)
10.13		Amendment to Agreement and Plan of Merger dated as of January 26, 2023, by and among the Company, LED Supply Acquisition Sub I, Inc., LED Supply Acquisition Sub II, LLC, LED Supply Co. LLC, Brian Stern, Andrew Lawrence, and the Member Representative (incorporated by reference to Exhibit 10.4 to the Company’s Current Report on Form 8-K filed with the SEC on February 1, 2023)
10.14		Securities Purchase Agreement dated October 7, 2022 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 14, 2022)
10.15		Note dated October 7, 2022 in the principal amount of $2,807,500 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on October 14, 2022)
10.16		Loan and Security Agreement dated as of December 9, 2022, by and between the Company, SteriLumen, Inc., Munn Works, LLC and Pinnacle Bank (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 15, 2022)
10.17		First Modification to Loan and Security Agreement and Loan Documents dated as of December 9, 2022, by and between the Company, SteriLumen, Inc., Munn Works, LLC and Pinnacle Bank (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on December 15, 2022)
10.18		Note Purchase and Cancellation Agreement dated as of January 5, 2023, by and between the Company, PURO Lighting, LLC, and Acuity Brands Lighting, Inc. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 11, 2023)
10.19		Securities Purchase Agreement dated January 25, 2023 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 31, 2023)
10.20		Amendment to Securities Purchase Agreement dated January 25, 2023 (incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on January 31, 2023)
10.21		Note dated January 25, 2023 in the principal amount of $2,807,500 (incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on January 31, 2023)
21.1*		List of Subsidiaries of the Registrant
31.1*	Certification of the ~~Principal~~Chief Executive Officer pursuant to ~~Rule 13a-14(a)~~Section 302 of the Sarbanes-Oxley Act of 2002.
~~31.2~~31.2*	Certification of the Principal Financial Officer pursuant to ~~Rule 13a-14(a)~~Section 302 of the Sarbanes-Oxley Act of 2002.
~~32.1~~32.1**	Certification ~~of Principal~~by the Chief Executive Officer ~~Pursuant~~pursuant to 18 U.S.C. ~~Section~~ 1350 as ~~Adopted Pursuant~~adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
~~32.2~~32.2**	Certification of Principal Financial Officer ~~Pursuant~~pursuant to 18 U.S.C. Section 1350, as ~~Adopted Pursuant~~adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
~~104~~			~~Cover Page Interactive Data File (embedded within the Inline XBRL document)~~

*~~XBRL (Extensible Business Reporting Language) information is~~ Filed herewith

** Exhibits 32.1 and 32.2 are being furnished and shall not ~~filed~~be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or ~~a part~~otherwise subject to the liability of athat section, nor shall such exhibits be deemed to be incorporated by reference in any registration statement or ~~prospectus for purposes of Sections 11 or 12 of~~other document filed under the Securities Act of 1933, as amended, ~~is deemed not filed for purposes of Section 18 of~~or the ~~Securities~~ Exchange Act, ~~of 1934,~~except as ~~amended, and~~ otherwise ~~is not subject to liability under these sections.~~specifically stated in such filing.

4244

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	APPLIED UV, INC.
	(Registrant)

Date: ~~November 14, 2022~~May 22, 2023	By:	/s/ ~~John Andrews~~Max Munn
		~~John Andrews~~Max Munn
		Chief Executive Officer

Date: ~~November 14, 2022~~May 22, 2023	By:	/s/ Michael Riccio
		Michael Riccio
		Chief Financial Officer

4345


	Preferred Stock Series A Cumulative			Preferred Stock Series X			Common Stock					Treasury Stock					Additional Paid-In Capital			Retained Earnings			Total Stockholders Equity
Balance, January 1, 2021	—	$	—	2,000	$	1	7,945,034		$	795		—	$	—		$	11,973,051		$	(2,219,091	)	$	9,754,756
Shares granted to settle previously recorded liability	—		—	—		—	3,000			—		—		—			21,420			—			21,420
Warrant liability recognized in connection with initial issuance of November offering (See Note 7)	—		—	—		—	—			—		—		—			(135,125	)		—			(135,125	)
Exercise of warrants	—		—	—		—	17,135			2		—		—			1,155			—			1,157
Common stock issued for acquisition	—		—	—		—	1,375,000			137		—		—			7,122,363			—			7,122,500
Stock-based compensation	—		—	—		—	62,500			6		—		—			210,735			—			210,741
Net loss	—		—	—		—	—			—		—		—			—			(1,032,951	)		(1,032,951	)
Balance, March 31, 2021	—		—	2,000		1	9,402,669			940		—		—			19,193,599			(3,252,042	)		15,942,498
Exercise of warrants	—		—	—		—	717			—		—		—			—			—			—
Stock-based compensation	—		—	—		—	12,000			2		—		—			465,598			—			465,600
Net loss	—		—	—		—	—			—		—		—			—			(2,138,232	)		(2,138,232	)
Balance, June 30, 2021	—		—	2,000		1	9,415,386			942		—		—			19,659,197			(5,390,274	)		14,269,866
Preferred stock issued in public offering, net of costs	552,000		55	—		—	—			—		—		—			12,272,385			—			12,272,440
Common stock issued for acquisition	—		—	—		—	300,000			30		—		—			1,958,970			—			1,959,000
Stock-based compensation	—		—	—		—	—			—		—		—			426,268			—			426,268
Dividends paid to preferred shareholders	—		—	—		—	—			—		—		—			—			(241,500	)		(241,500	)
Net loss	—		—	—		—	—			—		—		—			—			(1,080,804	)		(1,080,804	)
Balance, September 30, 2021	552,000	$	55	2,000	$	1	9,715,386		$	972		—	$	—		$	34,316,820		$	(6,712,578	)	$	27,605,270

Balance, January 1, 2022	552,000		55	2,000		1	12,775,674			1,278		—		—			42,877,622			(10,213,196	)		32,665,760
Settlement of stock in connection with prior acquisition (note 2)	—		—	—		—	(400,000	)		(40	)	—		—			40			—			—
Common stock issued in public offering (over-allotment), net of costs	—		—	—		—	400,000			40		—		—			1,091,960			—			1,092,000
Stock-based compensation	—		—	—		—	112,500			11		—		—			287,988			—			287,999
Dividends paid to preferred shareholders	—		—	—		—	—			—		—		—			—			(362,250	)		(362,250	)
Net loss	—		—	—		—	—			—		—		—			—			(1,649,872	)		(1,649,872	)
Balance, March 31, 2022	552,000		55	2,000		1	12,888,174			1,289		—		—			44,257,610			(12,225,318	)		32,033,637
Cancellation of restricted shares	—		—	—		—	(52,500	)		(5	)	—		—			5			—			—
Stock-based compensation	—		—	—		—	95,000			10		—		—			112,441			—			112,451
Treasury Shares repurchased	—		—	—		—	(113,485	)		—		113,485		(149,686	)		—			—			(149,686	)
Dividends paid to preferred shareholder	—		—	—		—	—			—		—		—			—			(362,250	)		(362,250	)
Net Loss	—		—	—		—	—			—		—		—			—			(2,888,655	)		(2,888,655	)
Balance, June 30, 2022	552,000		55	2,000		1	12,817,189			1,294		113,485		(149,686	)		44,370,056			(15,476,223	)		28,745,497
Stock-based compensation	—		—	—		—	—			—		—		—			159,530			—			159,530
Reissuance of preferred stock Series X	—		—	8,000		—	—			—		—		—			—			—			—
Dividends paid to preferred shareholder	—		—	—		—	—			—		—		—			—			(362,250	)		(362,250	)
Net Loss	—		—	—		—	—			—		—		—			—			(2,700,473	)		(2,700,473	)
Balance, September 30, 2022	552,000	$	55	10,000	$	1	12,817,189		$	1,294		113,485	$	(149,686	)	$	44,529,586		$	(18,538,946	)	$	25,842,304

Schedule of anti dilutive securities excluded from computation of earnings per share
	As of September 30,
	2022		2021
Common stock options		890,028		589,314
Common stock warrants		192,419		192,419
Total		1,082,447		781,733

Schedule of recognized identified assets acquired and liabilities assumed
Purchase Price:
Cash	$	760,293
Fair market value of common stock issued (1,375,000 shares)		7,122,500
Total Purchase Price, Net of Cash Acquired		7,882,793

Assets Acquired:
Accounts receivable		233,241
Inventory		211,105
Prepaid expenses		285,490
Machinery and equipment		168,721
Customer relationships		539,000
Trade names		1,156,000
Technology and know how		3,468,000
Total Assets Acquired:		6,061,557

Liabilities Assumed:
Accounts payable		(415,341	)
Deferred revenue		(491,702	)
Total Liabilities Assumed		(907,043	)
Net Assets Acquired		5,154,514
Excess Purchase Price "Goodwill"	$	2,728,279

Purchase Price:
Cash	$	4,299,900
Fair market value of common stock issued (300,000 shares)		1,959,001
Total Purchase Price, Net of Cash Acquired		6,258,901

Assets Acquired:
Accounts receivable		392,367
Inventory		602,746
Prepaid expenses		10,995
Machinery and equipment		36,146

Trade names		914,000
Technology and know how		3,656,000
Total Assets Acquired:		5,612,254

Liabilities Assumed:
Accounts payable		(296,681	)

Total Liabilities Assumed		(296,681	)
Net Assets Acquired		5,315,573
Excess Purchase Price "Goodwill"	$	943,328

Purchase Price:
Cash	$	9,500,000
Fair market value of common stock issued		1,114,000
Contingent consideration based on stock price		886,000
Total Purchase Price, net of cash acquired		11,500,000

Assets Acquired:
Accounts receivable		129,845
Inventory		369,970
Machinery and equipment		1,982
Customer relationships		6,784,000
Patents		1,533,000
Technology and know how		1,217,000
Trade names		326,000
Total Assets Acquired:		10,361,797

Assets Acquired		10,361,797
Excess Purchase Price "Goodwill"	$	1,138,203

Schedule of the Company's option activity
	Number of Options			Weighted-Average Exercise Price		Weighted-Average Grant Date Fair Value		Weighted- Average Remaining Contractual Life (in years)		Aggregate intrinsic value
Balances, January 1, 2021		136,750		$	4.96	$	2.27		9.95	$	—
Options granted		602,564			7.81		5.43		10		—
Options forfeited		(95,000	)		4.96		3.73				—
Options exercised		—			—		—				—
Balances, December 31, 2021		644,314		$	7.11	$	5.03		8.47	$	—
Options granted		529,000			1.63		1.16		10		—
Options forfeited		(283,286	)		7.20		4.53				—
Options exercised		—			—		—				—
Balances, September 30, 2022		890,028		$	3.83	$	2.78		8.22	$	—
Vested and Exercisable		260,768		$	6.78					$	—

Schedule of the Company's warrant activity
	Number of Shares			Weighted- Average Exercise Price
Balances, January 1, 2021		235,095		$	5.89
Granted		—			—
Exercised		(42,676	)		—
Balances, December 31, 2021		192,419		$	5.84
Granted		—			—
Exercised		—			—
Balances, September 30, 2022		192,419		$	5.84

At September 30, 2022
Vested and Exercisable		192,419		$	5.84

Schedule of segment reporting
	Hospitality		Disinfectant		Corporate		Total
Balance sheet at September 30, 2022
Assets	$	6,563,520	$	26,469,870	$	534,252	$	33,567,642
Liabilities		5,747,415		1,259,278		718,645		7,725,338
Balance sheet at December 31, 2021
Assets	$	2,158,789	$	27,851,691	$	8,515,512	$	38,525,992
Liabilities		2,481,186		1,528,706		1,850,340		5,860,232

	Three Months Ended September 30, 2022												Three Months Ended September 30, 2021
	Hospitality			Disinfection			Corporate			Total			Hospitality			Disinfection			Corporate			Total
Net Sales	$	4,282,030		$	1,593,581		$	—		$	5,875,611		$	1,750,227		$	1,801,337		$	—		$	3,551,564
Cost of Goods Sold		4,117,717			919,280			—			5,036,997			1,451,560			1,048,603			—			2,500,163
Gross Profit		164,313			674,301			—			838,614			298,667			752,734			—			1,051,401
Research and development		—			93,522			—			93,522			—			—			—			—
Selling, General and Administrative		965,511			1,932,858			606,728			3,505,097			788,173			1,894,852			—			2,683,025
Total Operating expenses		965,511			2,026,380			606,728			3,598,619			788,173			1,894,852			—			2,683,025
Operating Loss		(801,198	)		(1,352,079	)		(606,728	)		(2,760,005	)		(489,506	)		(1,142,118	)		—			(1,631,624	)
Other Income
Change in Fair Market Value of Warrant Liability		—			—			34,804			34,804			—			—			151,570			151,570
Forgiveness of paycheck protection program loan		—			—			—			—			—			—			296,827			296,827
Other income (expense)		24,728			—			—			24,728			—			—			1,068			1,068
Total Other Income (Expense)		24,728			—			34,804			59,532			—			—			449,465			449,465
Loss Before Provision for Income Taxes		(776,470	)		(1,352,079	)		(571,924	)		(2,700,473	)		(489,506	)		(1,142,118	)		449,465			(1,182,159	)
Provision for Income Taxes		—			—			—			—			—			—			(101,354	)		(101,354	)
Net Loss	$	(776,470	)	$	(1,352,079	)	$	(571,924	)	$	(2,700,473	)	$	(489,506	)	$	(1,142,118	)	$	550,819		$	(1,080,805	)
Non-GAAP Financial Measures
Adjusted EBITDA
Operating Loss	$	(801,198	)	$	(1,352,079	)	$	(606,728	)	$	(2,760,005	)	$	(489,506	)	$	(1,142,118	)	$	—		$	(1,631,624	)
Depreciation and Amortization		56,009			452,068			—			508,077			23,235			145,486		��	—			168,721
Stock based compensation		35,519			39,647			84,364			159,530			216,568			209,700			—			426,268
Adjusted EBITDA	$	(709,681	)	$	(860,364	)	$	(522,353	)	$	(2,092,398	)	$	(249,703	)	$	(786,932	)	$	—		$	(1,036,635	)

	Nine Months Ended September 30, 2022												Nine Months Ended September 30, 2021
	Hospitality			Disinfection			Corporate			Total			Hospitality			Disinfection			Corporate			Total
Net Sales	$	9,860,392		$	5,278,955		$	—		$	15,139,347		$	4,282,696		$	3,465,803		$	—		$	7,748,499
Cost of Goods Sold		8,971,628			2,876,214			—			11,847,842			3,269,335			1,961,820			—			5,231,155
Gross Profit		888,764			2,402,741			—			3,291,505			1,013,361			1,503,983			—			2,517,344
Research and development		—			234,885			—			234,885			—			53,408			—			53,408
Loss on impairment of goodwill		—			1,138,203			—			1,138,203			—			—			—			—
Selling, General and Administrative		2,936,219			5,811,228			1,890,091			10,637,538			2,351,533			4,639,939			—			6,991,472
Total Operating expenses		2,936,219			7,184,316			1,890,091			12,010,626			2,351,533			4,693,347			—			7,044,880
Operating Loss		(2,047,455	)		(4,781,575	)		(1,890,091	)		(8,719,121	)		(1,338,172	)		(3,189,364	)		—			(4,527,536	)
Other Income
Change in Fair Market Value of Warrant Liability		—			—			46,521			46,521			—			—			(148,882	)		(148,882	)
Loss on change in contingent consideration		—			(240,000	)		—			(240,000	)		—			—			—			—
Gain on settlement of contingent consideration		—			1,700,000			—			1,700,000			—			—			—			—
Forgiveness of paycheck protection program loan		—			—			—			—			—			—			296,827			296,827
Other income (expense)		(26,400	)		—			—			(26,400	)		26,250			—			—			26,250
Total Other Income (Expense)		(26,400	)		1,460,000			46,521			1,480,121			26,250			—			147,945			174,195
Loss Before Provision for Income Taxes		(2,073,855	)		(3,321,575	)		(1,843,570	)		(7,239,000	)		(1,311,922	)		(3,189,364	)		147,945			(4,353,341	)
Provision for Income Taxes		—			—			—			—			—			—			(101,354	)		(101,354	)
Net Loss	$	(2,073,855	)	$	(3,321,575	)	$	(1,843,570	)	$	(7,239,000	)	$	(1,311,922	)	$	(3,189,364	)	$	249,299		$	(4,251,987	)
Non-GAAP Financial Measures
Adjusted EBITDA
Operating Loss	$	(2,047,455	)	$	(4,781,575	)	$	(1,890,091	)	$	(8,719,121	)	$	(1,338,172	)	$	(3,189,364	)	$	—		$	(4,527,536	)
Depreciation and Amortization		119,157			1,367,415			—			1,486,572			46,470			434,570			—			481,040
Loss on impairment of goodwill		—			1,138,203			—			1,138,203			—			—			—			—
Stock based compensation		151,679			99,733			308,568			559,980			559,698			542,911			—			1,102,609
Adjusted EBITDA	$	(1,776,619	)	$	(2,176,224	)	$	(1,581,523	)	$	(5,534,366	)	$	(732,004	)	$	(2,211,883	)	$	—		$	(2,943,887	)