アプライドUVの四半期報告

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, 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

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, NY 10550

(Address of principal executive offices)

(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 ☒ 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 ☒ 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)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	AUVI	The Nasdaq Stock Market LLC

10.5% Series A Cumulative Perpetual Preferred Stock, $0.0001 par value per share	AUVIP	The Nasdaq Stock Market LLC

As of November 17, 2023, the Company has 13,852,870 shares of common stock 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, 2023 and December 31, 2022	3
Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022	4
Condensed Consolidated Statements of Redeemable Preferred Stock and Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2023 and 2022	5
Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022	6
Notes to Condensed Consolidated Financial Statements	7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	35
Item 3. Quantitative and Qualitative Disclosures About Market Risk	44
Item 4. Controls and Procedures	44
PART II - OTHER INFORMATION
Item 1. Legal Proceedings	45
Item 1A. Risk Factors	45
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	45
Item 3. Defaults Upon Senior Securities	45
Item 4. Mine Safety Disclosures	45
Item 5. Other Information	45
Item 6. Exhibits	45
Signatures	46

PART I

Item 1. Financial Statements

Applied UV, Inc. and Subsidiaries

Unaudited Condensed Consolidated Balance Sheets

As of September 30, 2023 and December 31, 2022


	September 30,			December 31.
	2023			2022
Assets
Current Assets
Cash and cash equivalents	$	1,546,911		$	2,734,485
Accounts receivable, net of allowance for doubtful accounts		6,126,692			1,508,239
Costs and estimated earnings in excess of billings		2,883,057			1,306,762
Inventory, net		7,570,331			5,508,086
Vendor deposits		1,176,065			75,548
Prepaid expense and other current assets		2,064,870			1,187,223
Total Current Assets		21,367,926			12,320,343

Property and equipment, net of accumulated depreciation		1,250,350			1,133,468
Other assets		431,500			153,000
Goodwill		17,809,235			3,722,077
Other intangible assets, net of accumulated amortization		27,334,870			11,354,430
Right of use assets		3,396,751			4,044,109
Total Assets	$	71,590,632		$	32,727,427
Liabilities, Redeemable Preferred Stock and Stockholders' Equity
Current Liabilities
Accounts payable and accrued expenses	$	10,278,076		$	2,982,760
Contingent consideration		18,375,672			—
Deferred revenue		6,113,192			4,730,299
Due to landlord (Note 2)		281,123			229,234
Warrant liability		7,863			9,987
Financing lease obligations		42,445			33,712
Operating lease liability		1,739,092			1,437,308
Notes payable, net		5,136,610			2,098,685
Total Current Liabilities		41,974,073			11,521,985
Long-Term Liabilities
Due to landlord - less current portion (Note 2)		174,938			393,230
Notes payable, net - less current portion		4,810,922			765,144
Financing lease obligations - less current portion		143,575			158,070
Operating lease liability - less current portion		1,731,923			2,655,103
Total Long-Term Liabilities		6,861,358			3,971,547
Total Liabilities		48,835,431			15,493,532

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 September 30, 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 September 30, 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 September 30, 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 September 30, 2023 and December 31, 2022, respectively		1			1
Common Stock $0.0001 par value, 150,000,000 shares authorized 9,872,228 shares issued and 9,849,531 outstanding as of September 30, 2023 and 2,735,290 shares issued and 2,712,593 outstanding as of December 31, 2022, respectively		987			274
Additional paid-in capital		57,665,013			45,620,764
Treasury stock at cost, 22,697, respectively		(149,686	)		(149,686	)
Accumulated deficit		(39,537,658	)		(28,237,513	)
Total Equity		17,978,712			17,233,895
Total Liabilities, Redeemable Preferred Stock and Stockholders' Equity	$	71,590,632		$	32,727,427

The accompanying notes are an integral part of these unaudited 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, 2023 and 2022


	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2023			2022			2023			2022
Net Sales	$	11,446,048		$	5,875,611		$	32,944,217		$	15,139,347
Cost of Goods Sold		8,790,764			5,036,997			25,956,853			11,847,842
Gross Profit		2,655,284			838,614			6,987,364			3,291,505

Operating Expenses
Research and development		91,085			93,522			460,588			234,885
Selling General and Administrative Expenses		5,013,988			3,505,097			15,200,486			10,637,538
Loss on impairment of goodwill and intangibles		—			—			—			1,138,203
Total Operating Expenses		5,105,073			3,598,619			15,661,074			12,010,626
Operating Loss		(2,449,789	)		(2,760,005	)		(8,673,710	)		(8,719,121	)

Other Income (Expense)
Change in Fair Market Value of Warrant Liability		1,206			34,804			2,124			46,521
Interest expense		(558,268	)		(43,037	)		(1,434,329	)		(96,113	)
Gain (Loss) on change in Fair Market Value of Contingent Consideration		434,000			—			1			(240,000	)
Gain on Settlement of Contingent Consideration (Note 2)		—			—			—			1,700,000
Other Income		—			67,765			—			69,713
Total Other Income (Expense)		(123,062	)		59,532			(1,432,204	)		1,480,121

Loss Before Provision for Income Taxes		(2,572,851	)		(2,700,473	)		(10,105,914	)		(7,239,000	)
Benefit from Income Taxes		—			—			—			—
Net Loss	$	(2,572,851	)	$	(2,700,473	)	$	(10,105,914	)	$	(7,239,000	)

Net Loss attributable to common stockholders:
Dividends to preferred shareholders		(424,750	)		(362,250	)		(1,194,231	)		(1,086,750	)
Net Loss attributable to common stockholders		(2,997,601	)		(3,062,723	)		(11,300,145	)		(8,325,750	)

Basic and Diluted Loss Per Common Share	$	(0.32	)	$	(1.21	)	$	(1.95	)	$	(3.26	)
Weighted Average Shares Outstanding - basic and diluted		9,351,478			2,531,219			5,794,689			2,550,272

The accompanying notes are an integral part of these unaudited 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, 2023 and 2022


	Preferred Stock Series B			Preferred Stock Series C			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	2,555,135		$	256		—	$	—		$	42,878,644	$	(10,213,196	)	$	32,665,760
Settlement of stock in connection with prior acquisition (Note 2)	—		—	—		—	—		—	—		—	(80,000	)		(8	)	—		—			8		—			—
Common stock issued for in public offering (over-allotment), net of costs	—		—	—		—	—		—	—		—	80,000			8		—		—			1,091,992		—			1,092,000
Stock-based compensation	—		—	—		—	—		—	—		—	22,500			2		—		—			287,997		—			287,999
Dividends paid to preferred shareholder	—		—	—		—	—		—	—		—	—			—		—		—			—		(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	2,577,635			258		—		—			44,258,641		(12,225,318	)		32,033,637
Cancellation of restricted shares	—		—	—		—	—		—	—		—	(10,500	)		(1	)	—		—			1		—			—
Stock-based compensation	—		—	—		—	—		—	—		—	19,000			2		—		—			112,449		—			112,451
Treasury shares repurchased	—		—	—		—	—		—	—		—	—			—		22,697		(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	2,586,135		$	259		22,697	$	(149,686	)	$	44,371,091	$	(15,476,223	)	$	28,745,497
Cancellation of restricted shares	—		—	—		—	—		—	—		—	—			—		—		—			—		—			—
Stock-based compensation	—		—	—		—	—		—	—		—	—			—		—		—			159,530		—			159,530
Treasury shares repurchased	—		—	—		—	—		—	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	2,586,135		$	259		22,697	$	(149,686	)	$	44,530,621	$	(18,538,946	)	$	25,842,304
Balance, January 1, 2023	—	$	—	—	$	—	552,000	$	55	10,000	$	1	2,735,290		$	274		22,697	$	(149,686	)	$	45,620,764	$	(28,237,513	)	$	17,233,895
Common and Preferred stock issued for acquisition	1,250,000		3,712,500	399,996		1,063,989	—		—	—		—	774,999			78		—		—			4,029,922		—			4,030,000
Common stock issued in public offering (ATM), net of costs	—		—	—		—	—		—	—		—	352,862			35		—		—			2,242,891		—			2,242,926
Stock-based compensation	—		—	—		—	—		—	—		—	11,000			1		—		—			192,020		—			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	552,000		55	10,000		1	3,874,151		$	388		22,697	$	(149,686	)	$	52,085,597	$	(33,141,602	)	$	18,794,753
Common stock issued in public offering ,net of costs	—		—	—		—	—		—	—		—	4,930,000			493		—		—			4,383,504		—			4,383,997
Common stock issued in public offering (ATM), net of costs	—		—	—		—	—		—	—		—	10,781			1		—		—			3,875		—			3,876
Common stock issued in connection with conversion of debt	—		—	—		—	—		—	—		—	110,131			11		—		—			217,489		—			217,500
Stock-based compensation	—		—	—		—	—		—	—		—	3,267			—		—		—			192,788		—			192,788
Dividends paid to preferred shareholder	—		—	—		—	—		—	—		—	—			—		—		—			—		(407,231	)		(407,231	)
Net Loss	—		—	—		—	—		—	—		—	—			—		—		—			—		(2,991,224	)		(2,991,224	)
Balance, June 30, 2023	1,250,000	$	3,712,500	399,996	$	1,063,989	552,000	$	55	10,000	$	1	8,928,330		$	893		22,697	$	(149,686	)	$	56,883,253	$	(36,540,057	)	$	20,194,459
Common stock issued in settlement	—		—	—		—	—		—	—		—	50,000			5		—		—			38,995		—			39,000
Common stock issued in connection with conversion of debt	—		—	—		—	—		—	—		—	893,898			89		—		—			549,911		—			550,000
Stock-based compensation	—		—	—		—	—		—	—		—	—			—		—		—			192,854		—			192,854
Dividends paid to preferred shareholder	—		—	—		—	—		—	—		—	—			—		—		—			—		(424,750	)		(424,750	)
Net Loss	—		—	—		—	—		—	—		—	—			—		—		—			—		(2,572,851	)		(2,572,851	)
Balance, September 30, 2023	1,250,000	$	3,712,500	399,996	$	1,063,989	552,000	$	55	10,000	$	1	9,872,228		$	987		22,697	$	(149,686	)	$	57,665,013	$	(39,537,658	)	$	17,978,712

The accompanying notes are an integral part of these unaudited interim consolidated financial statements

Applied UV, Inc. and Subsidiaries

Unaudited Condensed Interim Consolidated Statements of Cash Flows

For the Nine Months Ended September 30, 2023 and 2022


	2023			2022
Cash flows from Operating Activities
Net Loss	$	(10,105,914	)	$	(7,239,000	)
Adjustments to Reconcile Net Loss to Net Cash Used in Operating Activities
Stock based compensation		616,660			559,980
Bad debt (recovery) expense		(59,839	)		94,714
Change in fair market value of warrant liability		(2,124	)		(46,521	)
Change in fair market value of contingent consideration		—			240,000
Gain on settlement of contingent consideration		—			(1,700,000	)
Loss on impairment of goodwill and intangible assets		—			1,138,203
Amortization of right-of-use asset		647,358			834,889
Depreciation and amortization		2,187,321			1,484,968
Amortization of debt discount		617,664			53,646
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable		(2,822,579	)		(103,343	)
Cost and estimated earnings excess of billings		(1,042,657	)		(234,869	)
Inventory		1,948,852			(2,612,773	)
Vendor deposits		(724,845	)		697,558
Prepaid expenses and other current assets		(146,197	)		(161,797	)
Accounts payable and accrued expenses		3,112,862			582,297
Other assets		(253,681	)
Billings in excess of costs and earnings on uncompleted contracts		—			(1,254,496	)
Deferred revenue		(915,205	)		1,151,496
Due to landlord		(279,515	)		(138,724	)
Operating lease payments		(621,396	)		(819,828	)
Net Cash Used in Operating Activities		(7,843,235	)		(7,473,600	)

Cash Flows From Investing Activities
Cash paid for patent costs		(66,023	)		(682	)
Purchase of machinery and equipment		(248,319	)		(46,196	)
Acquisitions, net of cash acquired (Note 2)		(4,115,709	)		(10	)
Payments on notes payable		(166,262	)		(41,730	)
Net Cash Used in Investing Activities		(4,596,313	)		(88,618	)

Cash Flows From Financing Activities
Payments on financing leases		(30,994	)		(5,269	)
Shares repurchased		—			(149,686	)
Dividends to preferred shareholders		(769,481	)		(1,086,750	)
Proceeds from equity raises, net		6,630,799			1,092,000
Proceeds from note payable, net		5,421,650			—
Net Cash Provided by (Used in) Financing Activities		11,251,974			(149,705	)

Net Decrease in Cash and equivalents		(1,187,574	)		(7,711,923	)
Cash and cash equivalents at January 1,		2,734,485			8,768,156
Cash and cash equivalents at September 30,	$	1,546,911		$	1,056,233

Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest	$	642,877		$	101,365
Supplemental Non-Cash Disclosures of Investing and Financing Activities
Conversion of debt into common stock	$	767,500		$	—
Recognition of right of use asset and corresponding lease liability	$	563,315		$	1,380,658
Accrued dividends	$	424,750		$	—
Issuance of note payable for payment of prepaid expense	$	279,347		$	318,833

The accompanying notes are an integral part of these unaudited 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”), MunnWorks, LLC (“MunnWorks” and together 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").

The Parent was subsequently re-incorporated in the State of Nevada, effective October 25, 2023 (See Note 13).

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 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.

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

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 Lighting and a HVAC monitoring software platform; LED Supply Co. provides design, distribution, and implementation services for lighting, controls and smart building technologies.

Principles of Consolidation

The consolidated financial statements include the accounts of Applied UV, Inc., Munnworks, LLC, SteriLumen, Inc., Puro Lighting, LLC, and LED Supply Co. LLC. 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, 2022.

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 September 30, 2023, the Company was approximately $1,264,000 in excess of FDIC insured limits. The Company provides credit in the normal course of business.

For the nine months ended September 30, 2023 and 2022, the Company had no major suppliers that accounted for more than 10% of supplies and materials used by the Company.

For the three months ended September 30, 2023, the Company had one major supplier that accounted for 12.7% of supplies and materials used by the Company, and none for September 30, 2022.

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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 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, 2023 and December 31, 2022, the Company had $27,000, respectively, in cash equivalents.

Accounts receivable

The 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 any potentially uncollectable accounts 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 received. For the three months ended September 30, 2023 and 2022, the Company had (recoveries) of $(75,629) and $(60,512), respectively. For the nine months ended September 30, 2023 and 2022, the Company had (recoveries) credit losses of $(59,839) and $94,714, respectively. Based on the Company’s current and historical collection experience, the Company recorded an allowance for doubtful accounts of approximately $108,000 and $35,000 as of September 30, 2023 and December 31, 2022, respectively.

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 $187,000 and $88,000 as of September 30, 2023 and December 31, 2022, respectively.

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Property and Equipment

Property and equipment are recorded at cost. Repairs and maintenance expenditures, which do not extend the useful lives of the related assets, are expensed as incurred. Depreciation of machinery and equipment and furniture and fixtures are 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.

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.

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, 2023 and December 31, 2022.

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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 Loss Per Share:
	As of September 30,
	2023		2022
Common stock options		254,256		178,006
Series B Preferred Stock		1,250,000		—
Series C Preferred Stock		399,996		—
Common stock warrants		308,484		38,484
Total		2,212,736		216,490

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.

Reverse Stock Split

Applied UV, Inc. (the “Company”) filed a Certificate of Amendment to the Company’s Certificate of Incorporation with the Secretary of State of the State of Delaware (the “Certificate of Amendment”) to effect a 1-for-5 reverse stock split (the “reverse stock split”) of the shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”), on May 30, 2023. The Certificate of Amendment has no effect on the number of authorized shares of Common Stock or their par value. No fractional shares will be issued in connection with the reverse stock split and stockholders will receive cash in lieu of fractional shares.

All historical share and per share amounts in these financial statements have been retroactively adjusted to reflect the reverse stock split.

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:

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

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:

	September 30,
	2023		2022
Recognized over time	$	4,080,130	$	3,306,739
Recognized at a point in time		7,365,918		2,568,872
Total	$	11,446,048	$	5,875,611

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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

Schedule of revenue:

	September 30,
	2023		2022
Recognized over time	$	12,565,031	$	6,719,888
Recognized at a point in time		20,379,186		8,419,459
Total	$	32,944,217	$	15,139,347

Deferred revenue was comprised of the following as of:

	September 30,		December 31,
	2023		2022
Recognized over time	$	3,156,192	$	3,581,195
Recognized at a point in time		2,957,000		1,149,104
Total	$	6,113,192	$	4,730,299

The Company recognized $1,179,381 and $4,426,522 of deferred revenue as of December 31, 2022 as revenue during the three and nine months ended September 30, 2023, respectively.

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, 2023 and 2022 was $110,111 and $264,614, respectively. Advertising expense for the nine months ended September 30, 2023 and 2022 was $405,829 and $810,986, 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, 2023 and December 31, 2022, the vendor deposit balance was $1,176,065 and $75,548, respectively.

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, 2023 and December 31, 2022, capitalized patent costs net of accumulated amortization was $3,167,213 and $1,593,741, respectively. For the three months ended September 30, 2023 and 2022, the Company recorded $47,516 and $25,016, respectively, of amortization expense for these patents. For the nine months ended September 30, 2023 and 2022, the Company recorded $136,528 and $75,048, respectively, of amortization expense for these patents.

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.

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

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, 2023 and 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.

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.

In relation with the purchase by SteriLumen, Inc., of Old SAM Partners, LLC, 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 80,000 shares. During the nine months ended September 30, 2022, the company recorded a loss on change in fair market value of contingent consideration of $240,000 and, 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 in the first quarter of 2022.

On March 25, 2022, the Company entered into an asset purchase agreement by and among the Company, 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.

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	$	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	)
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 $31,057 of 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 $34,493 and $47,620 for the three months ended September 30, 2023 and 2022, respectively. Amortization of discount included in interest expenses was $113,113 and $101,266 for the nine months ended September 30, 2023 and 2022, respectively.

As of September 30, 2023, the future maturity of the lease liability is as follows:

Schedule of future maturity of the lease liability
Years Ended December 31,
2023 (3 months)	$	93,174
2024		372,684
2025		93,174
Total		559,032
Less: Unamortized discount		(102,971	)
Total amount due to landlord		456,061
Less: current portion of amount due to landlord, net of discount		(281,123	)
Total long-term portion of amount due to landlord	$	174,938

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 2 – BUSINESS ACQUISITION (CONTINUED)

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) 499,444 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 $3,828,967 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.

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	$	3,828,967
Common stock		2,597,111
Series B Preferred Stock		3,712,500
Series C Preferred Stock		667,947
Contingent consideration-Make Whole***		2,397,334
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 and accrued expenses		(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”). The Make Whole provision cannot exceed $2,397,331. In the event any PURO Equity holder 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 Equity holder within ten (10) Business Days following the consummation of such sale to an account designated in writing by such PURO Equity holder 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). In September 2023, the change in the Make Whole provision of $279,689 was recorded to other income within the consolidated statements of operations.

The excess purchase price has been recorded as goodwill in the amount of approximately $5,939,272. The goodwill is amortizable for tax purposes.

On January 26, 2023, the Company 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) 275,555 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	$	286,742
Common stock		1,432,889
Series C Preferred Stock		396,042
Contingent considerations-Common Stock True Up***		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
Trademarks/tradenames		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		(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)

***Represents the difference in fair value of common stock on the date of acquisition versus agreed upon $2 per share (“Make Whole”). The Make Whole provision cannot exceed $1,322,666. 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). In September 2023, the change in the Make Whole provision of $154,311 was recorded to other income within the consolidated statements of operations.

The excess purchase price has been recorded as goodwill in the amount of approximately $8,147,886. The goodwill is amortizable for tax purposes

NOTE 3 – INVENTORY

Inventory consists of the following as of:

Schedule of Inventory
	September 30,			December 31,
	2023			2022
Raw materials	$	2,873,493		$	3,485,040
Finished goods		4,883,677			2,110,838
Inventory at cost		7,757,170			5,595,878
Less: Reserve		(186,839	)		(87,792	)
Inventory, net	$	7,570,331		$	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,
	2023			2022
Machinery and Equipment	$	1,476,834		$	1,266,189
Leasehold improvements		145,558			67,549
Furniture and Fixtures		274,326			203,256
Property and equipment at cost		1,896,718			1,536,994
Less: Accumulated Depreciation		(646,368	)		(403,526	)
Net Property and Equipment	$	1,250,350		$	1,133,468

Depreciation expense, including amortization of assets under Financing leases, for the three months ended September 30, 2023 and 2022 was $88,516 and $64,489, respectively.

Depreciation expense, including amortization of assets under Financing leases, for the nine months ended September 30, 2023 and 2022 was $242,842 and $159,016, respectively.

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 5 – INTANGIBLE ASSETS

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

Schedule of Intangible Assets
	September 30,			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		3,475,045			1,730,771
Technology/know-how/trade secrets		11,383,943			8,341,000
Vendor relationships		1,416,000			—
Rebate program		1,894,703			—
		31,860,819			13,935,899
Less: Accumulated Amortization		(4,525,949	)		(2,581,469	)
	$	27,334,870		$	11,354,430

During the three months ended September 30, 2023 and 2022, the Company recorded total amortization expense related to intangible assets of $680,678 and $441,984, respectively. During the nine months ended September 30, 2023 and 2022, the Company recorded total amortization expense related to intangible assets of $1,944,479 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 are as follows:

Future amortization of intangible assets
For the year ending December 31,
2023 (3 months)		764,465
2024		3,050,982
2025		3,050,982
2026		3,033,272
Thereafter		17,435,169
Total	$	27,334,870

NOTE 6 – FINANCING LEASE OBLIGATION

The Company’s future minimum principal and interest payments under a financing lease for machinery and equipment are as follows:

Schedule of future minimum principal and interest payments under capital lease arrangements
2023 (3 months)	$	18,389
2024		54,901
2025		54,901
2026		49,260
2027		36,109
Total lease payments		213,560
Less: Amount representing interest		(27,540	)
Present value of future minimum lease payments		186,020
Less: current portion		(42,445	)
Financing lease obligations, net of current	$	143,575

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 7 – NOTES PAYABLE

As of September 30, 2023, the Company had the following notes payable outstanding:

Schedule of notes payable
	September 30,			December 31,
	2023			2022
Loan Agreement	$	157,500		$	157,500
Streeterville Note #1		2,405,000			2,807,500
Streeterville Note #2		2,575,754			—
Directors and Officers Liability Insurance Agreement		206,239			166,262
Pinnacle Note		4,810,922			—
Total		10,155,415			3,131,262
Less: Unamortized debt discount		(207,883	)		267,433
Total notes payable		9,947,532			2,863,829
Notes payable, current		(5,136,610	)		(2,098,685	)
Notes payable, non current	$	4,810,922		$	765,144

Minimum obligations under these loan agreement are as follows:

Schedule of minimum obligations under loan agreement
2023 (three months)	$	2,123,971
2024	$	8,031,444
Total	$	10,155,415

Loan Agreement

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

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 applicable law.

On May 1, 2023, the Company paid an amendment fee of $65,000 which was added to principal and recorded as a debt discount. The amendment was to extend the required principal payments to September of 2023. In May of 2023, the noteholders converted $217,500 of principal in exchange for 110,131 common shares. In August of 2023, the noteholders converted an additional $250,000 of principal in exchange for 413,975 common shares.

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 7 – NOTES PAYABLE (continued)

Streeterville Note #1 (Continued)

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 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% 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.

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, $8,333 of 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 21.84%. The Company recorded $98,632 and $263,259 due to debt discount amortization to interest expense in the accompanying Statement of Operations for the three and nine months ended September 30, 2023. As a result, at September 30, 2023, the remaining unamortized balance was $57,632. The Company paid an amendment fee in May of 2023 of $65,000 which was added to debt discount.

Interest expense recorded in the accompanying Statements of Operations by the Company was $61,945 and $172,792 for the three and nine months ended September 30, 2023, respectively.

Streeterville Note #2

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 22.63%. The Company recorded $100,416 and $240,119 due to debt discount amortization to interest expense in the accompanying Statement of Operations for the three and nine months ended September 30, 2023. As a result, at September 30, 2023, the remaining unamortized balance was $135,240. The Company paid an amendment fee in May of 2023 of $35,000 which was added to debt discount. In August of 2023, the noteholders converted $266,746 of principal and $33,254 of accrued interest in exchange for 479,923 common shares.

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 7 – NOTES PAYABLE (continued)

Streeterville Note #2 (Continued)

Interest expense recorded in the accompanying Statements of Operations by the Company was $32,510 and $130,311 for the three and nine months ended September 30, 2023, respectively.

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 made in June 2023. At September 30, 2023, the outstanding balance on the note payable was $0.

On August 28, 2023, the Company entered into a one-year Directors and Officers Liability Insurance agreement for $279,347. Under the terms of the agreement, the Company made a down payment of $42,115 and an additional payment of $30,933 prior to September 30, 2023, with the remaining balance financed over the remaining term at an annual percentage rate of 6.28%. Beginning in September 2023, the Company is making 10 monthly payments of $24,411, with the last payment made in June 2024. At September 30, 2023, the outstanding balance on the note payable was $206,239 and interest expense for the three months and nine months ended September 30, 2023 were 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 facility was later amended and increased to $6,000,000 on May 23, 2023. The loan is subject to a maximum advance amount 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 $6 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 meet 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 of 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 $4,810,922 outstanding balance under the Loan Facility as of September 30, 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 $1,800,198, 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 September 30, 2023 and December 31, 2022:

Fair value, assets measured on recurring basis
	Carrying Amount		Fair Value		Level 1		Level 2		Level 3
	As of September 30, 2023
Assets
Money market funds	$	27,064	$	27,064	$	27,064	$	—	$	—
Total assets	$	27,064	$	27,064	$	27,064	$	—	$	—
Liabilities
Contingent consideration	$	18,375,672	$	18,375,672	$	3,719,999	$	—	$	14,655,673
Warrant liability		7,863		7,863		—		—		7,863
Total liabilities	$	18,383,535	$	18,383,535	$	3,719,999	$	—	$	14,663,536

		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 September 30, 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 September 30, 2023

Money market funds – Cash equivalents of $27,064 and $26,828 as of September 30, 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 common stock true-up 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 our acquisitions 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 160,962 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 September 30, 2023, an additional 363,642 shares have been sold for gross proceeds of $2,342,084, and the compensation paid by the Company to the Sales Agent was $70,262, leaving a balance of $5,693,833 on the ATM facility. The ATM facility expired July 1, 2023. The shelf registration statement will expire on July 12, 2025.

Reverse Stock Split

The Common Stock began trading on a reverse stock split-adjusted basis on the Nasdaq Capital Market when the market opened on May 31, 2023. The trading symbol for the Common Stock will remain “AUVI.” The Common Stock was assigned a new CUSIP number (03828V402) following the reverse stock split.The Company has adjusted the number of shares available for future grant under its equity incentive plan as well as the number of outstanding awards, the exercise price per share of outstanding stock options and other terms of outstanding awards issued to reflect the effects of the reverse stock split

All historical share and per share amounts in these financial statements have been retroactively adjusted to reflect the reverse stock split.

June Public Offering

On June 16, 2023, the Company entered into an underwriting agreement, pursuant to which the Company agreed to sell to the Underwriters, an aggregate of (i) 4,730,000 shares of its common stock, at a public offering price of $1.00 per share and (ii) pre-funded warrants to purchase 270,000 shares of Common Stock at a price of $1 per share, minus $0.001. In addition, the Company granted the Underwriters a 45-day over-allotment option to purchase up to an additional 750,000 shares of Common Stock at the public offering price per security, less underwriting discounts, and commissions, of which was 200,000 shares were purchased. As a result of the offering, the Company received gross proceeds of $5,200,000 and incurred $816,000 of deal related costs. Each pre-funded warrant is exercisable for one share of our common stock, with an exercise price equal to $0.001 per share, at any time that the pre-funded warrant is outstanding. There is no expiration date for the pre-funded warrants. The holder of a pre-funded warrant will not be deemed a holder of our underlying common stock until the pre-funded warrant is exercised. On August 14, 2023, the Company entered into a settlement and release agreement with Maxim Group LLC related to the June Public Offering whereby the company issued 50,000 common shares valued at $0.78 per share.

Amendment of the Certificate of Designation

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. The Company has a total 22,697 of treasury shares as of September 30, 2023, all of which were purchased during April 2022.

Pursuant to the Company’s amended and restated certificate of incorporation, as amended, the Company is authorized to designate and issue up to 20,000,000 shares of preferred stock, par value $0.0001 per share, in one or more classes or series. During the year ended December 31, 2022, the Company had 10,000 preferred shares designated as Series X Preferred Stock, 1,250,000 shares of preferred stock designated as 10.5% Series A Cumulative Perpetual Preferred Stock (the “Series A Preferred Stock”), and 18,740,000 shares undesignated. As of September 30, 2023 the Company had 1,250,000 preferred shares designated 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, and 14,990,000 shares undesignated.

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 9 – STOCKHOLDERS' EQUITY (CONTINUED)

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 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. 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. 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 $6 per 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 therefore; 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 therefore. 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

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 9 – STOCKHOLDERS' EQUITY (CONTINUED)

Preferred Stock, Series B Cumulative Perpetual (Continued)

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.

Preferred Stock, Series C Cumulative Perpetual

On January 25, 2023, the Company filed the Certificate of Designations, Rights, and Preferences for the Series C 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 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 2,500,000 shares of the Company’s authorized shares of preferred stock, $0.0001 par value per share, as Series 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 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 option of the holder, into one share of Common Stock. The 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.

Suspension of Preferred Dividends

On June 19, 2023, the Board of Directors of Applied UV, Inc (“Applied UV” or the “Company”) temporarily suspended the Company’s: (i) monthly $0.21875 dividend on its 10.5% Series A Cumulative Perpetual Preferred Stock (“Series A Preferred Stock”), commencing with the July dividend, that would have been paid on July 17, 2023; (ii) quarterly $0.03 dividend on its 2% Series B Cumulative Perpetual Preferred Stock (“Series B Preferred Stock”), commencing with the dividend for the quarter ending June 30, 2023, that would have been paid on July 17, 2023; and (iii) quarterly $0.0625 dividend on its 5% Series C Cumulative Perpetual Preferred Stock (“Series C Preferred Stock”), commencing with the dividend for the quarter ending June 30, 2023, that that would have been paid on July 17, 2023. The dividends on each Series cited above have been suspended by the Board for the next eleven (11) months, or until the month of May 2024 for the Series A Preferred Stock or the quarter ending March 31, 2024 for the Series B and C Preferred Stock but may be re-instated at any time in the Board’s discretion (the “Suspension Period”). The suspension of these dividends will defer approximately $1.5 million in cash dividend payments until after the Suspension Period.

Notwithstanding anything contained herein to the contrary, dividends on the Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall accrue whether or not the Company has earnings, whether or not there are funds legally available for the payment of such dividends, and whether or not such dividends are authorized or declared. No interest is payable in respect of any dividend payment or payments on the Series A, B or C Preferred Stock which may be in arrears. The Company previously paid a monthly cash dividend of $0.21875 per share on the Series A Preferred Stock having a record date of June 2, 2023, a quarterly cash dividend of $0.03 per share on the Series B Preferred Stock having a record date of March 31, 2023, and a quarterly cash dividend of $0.0625 on the Series C Preferred Stock having a record date of March 31, 2023.

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 9 – 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		128,863		$	35.55	$	25.15		8.47	$	—
Options granted outside of the plan		127,800			8.30		5.30		10.00		—
Options forfeited		(56,657	)		35.10		—				—
Options exercised		—			—		—				—
Balances, December 31, 2022		200,006		$	18.05	$	—		9.03	$	—
Options granted outside of the plan		96,000			10.00		4.37		10.0		—
Options forfeited		(41,750	)		9.02		—				—
Options exercised		—			—		—				—
Balances, September 30, 2023		254,256		$	16.50	$	—		8.90	$	—
Vested and Exercisable		99,418		$	23.46					$	—

Share-based compensation expense for options totaling $161,465 and $118,030 was recognized for the three months ended September 30, 2023 and 2022, respectively, based on requisite service periods.

Share-based compensation expense for options totaling $483,527 and $448,270 was recognized for the nine months ended September 30, 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, 2023, there was $978,721 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 1.80 years.

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 9– STOCKHOLDERS' EQUITY (continued)

The weighted average fair value of options granted, and the assumptions used in the Black-Scholes model during the nine months ended September 30, 2023 and 2022 are set forth in the 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 3.46%
Volatility		90.27% to 91.01%			78.95% to 88.41%
Expected life (years)		5.83-6.06			5.75-6.08
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 Warrants		Weighted-Average Exercise Price
Balances, January 1, 2022		38,484	$	29.20
Granted		—		—
Exercised		—		—
Balances, March 31, 2022		38,484	$	29.20
Granted		—		—
Exercised		—		—
Balances, June 30, 2022		38,484	$	29.20
Granted		—		—
Exercised		—		—
Balances, September 30, 2022		38,484	$	29.20

Balances, January 1, 2023		38,484	$	29.20
Granted		—		—
Exercised		—		—
Balances, March 31, 2023		38,484	$	29.20
Pre-funded warrants		270,000	$	1.00
Exercised		—		—
Balances, June 30, 2023		308,484	$	4.52
Granted		—		—
Exercised		—		—
Balances, September 30, 2023		308,484	$	4.52

At September 30, 2023
Vested and Exercisable		308,484	$	4.52

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 9 – STOCKHOLDERS' EQUITY (continued)

In relation to the common stock offering that was closed last December 28, 2021, On January 5, 2022, the underwriters fully exercised their over-allotment option to purchase an additional 80,000 shares of common stock at the public offering price of $15.00 per share. The Company received gross proceeds of $1,200,000 for 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.

The following table presents the restricted stock units activity from January 1, 2022 through September 30, 2023

Schedule of unvested restricted stock units activity
	Number of Shares			Weighted-Average Fair Market Value
Unvested shares at January 1, 2022		58,500		$	23.55
Granted and unvested		41,500			10.50
Vested		(20,193	)		19.40
Forfeited/Cancelled		(62,307	)	$	22.25
Unvested shares at December 31, 2022		17,500		$	11.90
Granted and unvested		11,000			5.05
Vested		(6,833	)		14.15
Forfeited/Cancelled		(3,000	)		5.80
Unvested shares, March 31, 2023		18,667		$	6.80
Vested		(833	)	$	13.50
Unvested shares, June 30, 2023		17,834		$	6.85
Vested		(833	)		13.50
Unvested shares, September 30, 2023		17,001		$	8.71

Vested as of September 30, 2023		69,834		$	22.04

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 $31,390 and $41,500 of compensation expense within its statements of operations for the three months ended September 30, 2023 and 2022, respectively.

In connection with the grant of restricted shares, the Company recognized $89,835 and $111,708 of compensation expense within its statements of operations for the nine months ended September 30, 2023 and 2022, respectively.

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 10 - 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, 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 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, 2023 and 2022 was $501,305 and $380,852, respectively. Rent expense for the nine months ended September 30, 2023 and 2022 was $1,438,482 and $909,873, respectively.

Schedule maturities of operating lease liabilities outstanding as of September 30, 2023 are as follows:

Schedule of maturities of operating lease liabilities
2023 (3 months)	$	481,235
2024		1,914,174
2025		1,190,213
2026		174,900
Total lease payments		3,760,522
Less: Imputed Interest	$	(289,507	)
Present value of future minimum lease payments	$	3,471,015

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.

NOTE 11 - 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 specifically for the hospitality 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		Disinfectant		Corporate		Total
Balance sheet at September 30, 2023
Assets	$	12,041,295	$	58,169,140	$	1,380,197	$	71,590,632
Liabilities	$	10,731,810	$	29,656,765	$	8,446,856	$	48,835,431
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

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 11 - SEGMENT REPORTING (CONTINUED)

	Hospitality		Disinfectant		Corporate		Total
Income Statement for the three months ended September 30, 2023:
Net Sales	$	5,715,354	$	5,730,694	$	—	$	11,446,048
Cost of Goods Sold	$	4,454,534	$	4,336,230	$	—	$	8,790,764
Research and development	$	—	$	91,085	$	—	$	91,085
Stock based compensation	$	57,821	$	34,188	$	139,845	$	231,854
Selling, General and Administrative Expenses	$	1,123,073	$	3,130,810	$	528,251	$	4,782,134
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
Stock based compensation	$	30,149	$	37,800	$	44,502	$	112,451
Selling, General and Administrative Expenses	$	929,992	$	1,893,211	$	522,364	$	3,345,567
Income Statement for the nine months ended September 30, 2023:
Net Sales	$	16,944,409	$	15,999,808	$	—	$	32,944,217
Cost of Goods Sold	$	13,895,604	$	12,061,249	$	—	$	25,956,853
Research and development	$	—	$	460,588	$	—	$	460,588
Stock based compensation	$	172,495	$	104,552	$	339,613	$	616,660
Selling, General and Administrative Expenses	$	3,362,775	$	9,002,786	$	2,588,265	$	14,953,826
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
Stock based compensation	$	151,679	$	99,733	$	308,568	$	559,980
Selling, General and Administrative Expenses	$	2,784,540	$	5,711,495	$	1,581,523	$	10,077,558
Loss on impairment of goodwill	$	—	$	1,138,203	$	—	$	1,138,203

Applied UV, Inc. and Subsidiaries

Notes to the Condensed Consolidated Financial Statements

NOTE 12 – PROFORMA FINANCIAL STATEMENTS (UNAUDITED)

Unaudited Supplemental Pro Forma Data

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

Schedule of business acquisition, pro forma information
	For the Three Months Ended September 30,						For the Nine months Ended September 30,
	2023			2022			2023			2022
Net Sales	$	11,446,048		$	10,667,880		$	33,655,737		$	29,290,789
Net Loss	$	(2,572,851	)	$	(3,148,510	)	$	(10,452,632	)	$	(8,323,964	)

Net Loss attributable to common stockholders:
Dividends to preferred shareholders		(424,750	)		(362,250	)		(1,194,231	)		(1,086,750	)
Net Loss attributable to common stockholders		(2,996,601	)		(3,510,760	)		(11,646,863	)		(9,410,714	)
Basic and Diluted Loss Per Common Share	$	(0.32	)	$	(0.86	)	$	(1.98	)	$	(2.30	)
Weighted Average Shares Outstanding - basic and diluted		9,351,478			4,079,271			5,867,961			4,099,615

NOTE 13 – SUBSEQUENT EVENTS

Pre-Funded Warrant Exercise

On October 4, 2023, the 270,000 pre-funded warrants sold to Underwriters, pursuant to the underwriting agreement entered into on June 16, 2023, were exercised at a price of $0.001 per share. On the date of exercise, the fair value of the stock price was at $0.31 per share and 270,000 common shares were issued.

Re-Domestication of the Company

On October 25, 2023 (the “Effective Time”), Applied UV, Inc. (the “Company”) completed its reincorporation from a Delaware corporation to a Nevada corporation (the “Reincorporation”) pursuant to that certain Agreement and Plan of Merger dated as of September 1, 2023 (“Plan of Merger”). As of the Effective Time, the Company is known as Applied UV, Inc., a Nevada corporation, and the rights of the Company’s stockholders began to be governed by the Nevada corporation laws, the Nevada Articles of Incorporation, the Nevada Bylaws, and the certificates of designation of preferred stock.

The Reincorporation was approved by the Company’s majority stockholder and a description of the changes in the rights of stockholders as a result of the change in the state of incorporation and the adoption of the Nevada Articles of Incorporation, Nevada Bylaws, the Series X Certificate of Designation, the Series A Certificate of Designation, the Series B Certificate of Designation, and Series C Certificate of Designation, can be found in the section of Company’s definitive information statement captioned “APPROVAL OF THE RE-DOMESTICATION FROM DELAWARE TO NEVADA” filed with the Securities and Exchange Commission on October 2, 2023.

Other than the change in the state of incorporation of the Company, the Reincorporation did not result in any change in the business, physical location, management, assets, liabilities, or net worth of the Company, nor did it result in any change in location of the Company’s employees, including the Company’s management.

The Reincorporation did not alter any stockholder’s percentage ownership interest or number of shares owned in the Company and the Company’s common stock and Series A Preferred Stock continue to be listed on The Nasdaq Capital Market. As of the Effective Time, the CUSIP number of the Company’s common stock is 037988102 and the CUSIP number of the Company’s Series A Preferred Stock is 037988201.

Closing of $6.4 Million Underwritten Public Offering

On November 14, 2023, the Company closed on an underwritten public offering with Aegis Capital Corp. with gross proceeds to the Company of approximately $6.4 million, before deducting underwriting discounts and other estimated expenses payable by the Company. The base offering consisted of 42,666,666 units or pre-funded units (the “Units”), each Unit consisting of one share of common stock (“Common Stock”) or one pre-funded warrant (“Pre-Funded Warrant”) to purchase one share of Common Stock, one-tenth (1/10) of a Series A warrant (“Series A Warrant”) to purchase one a share of Common Stock and one-tenth (1/10) of a Series B Warrant to purchase one a share of Common Stock (“Series B Warrant” and, together with the Series A Warrant, the “Warrants”), at an offering price of $0.15 per Unit. The purchase price of each Unit including a Pre-Funded Warrant is equal to the price per Unit including one share of Common Stock, minus $0.00001, and the remaining exercise price of each Pre-Funded Warrant is equal to $0.00001 per share. The Pre-Funded Warrants are immediately exercisable and may be exercised at any time until all of the Pre-Funded Warrants are exercised in full. The Company intends to use the net proceeds to us from this offering for the repayment of notes, and for general corporate purposes, including working capital.

In addition, the Company has granted Aegis Capital Corp. a 45-day option to purchase additional shares of Common Stock and/or Pre-Funded Warrants, representing up to 15% of the number of Common Stock and/or Pre-Funded Warrants sold in the offering, and additional Warrants representing up to 15% of the Warrants sold in the offering, solely to cover over-allotments, if any.

As a result of this offering, an additional 3,733,339 shares of our common stock were issued on November 16, 2023.

Gross proceeds from the offering are approximately $6.4 million, and net proceeds are approximately $5.5 million after deducting underwriter discounts and commissions and other estimated offering expenses payable by the Company. $4.25 million of the net proceeds will be used to payoff in full both Streeterville Capital LLC notes having a book value of approximately $5.1 million. The remainder of the net proceeds of the offering of approximately $1.3 million will be used for working capital and general corporate purposes.

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 Improving Indoor Air Quality (IAQ), specialty LED lighting and luxury mirrors and commercial furnishings, all of which serves clients globally in the healthcare, commercial & public venue, hospitality, food preservation, cannabis, education, and winery vertical markets.

With its established strategic manufacturing partnerships and 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”), 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 automatically, addressing the challenge of healthcare-acquired infections ("HAI’s) in several patented designs for infection control in healthcare. LED Supply Company is a full-service, wholesale distributor of LED lighting and controls throughout North America. MunnWorks manufactures and sells custom luxury and backlit mirrors, conference room and living spaces furnishings.

Our global list of Fortune 100 end users including Kaiser Permanente, NY Health+Hospitals, MERCY Healthcare, University of Chicago Medical, Baptist Health South Florida, Mt. Sinai Hospital in New York, 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 Hyatt, and more. For information on Applied UV, Inc., and its subsidiaries, please visit https://www.applieduvinc.com

According to Research and Markets, the UV Disinfection market is expected to reach $9 billion by 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 globally mandating 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, February 2022 Long-term Care Initiative April 2022 White House Clean Air Initiatives).

Indoor air quality (IAQ) has become an even more important issue as world economies transition beyond the 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 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 was independently proven to kill SARS, MERSA and Anthrax. SteriLumen’s air purification (Airocide, Scientific Air & PURO Lighting) and surface disinfection (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).

The Company recently received approval for its patented Lumicide™ drain disinfecting device, currently undergoing rigorous testing at Mt. Sinai Hospital in New York.

The Company has submitted a new patent for its groundbreaking Fighter Flex™ LED technology, which is designed to further enhance the Company’s advanced HVAC and Smart Buildings solutions for improving indoor air quality and building efficiency.

The Company recently introduced its new Airocide™ Pro+ air purification system at the Global Produce & Floral Show. The Airocide™ Pro+ system was engineered and manufactured through the collaborative efforts of the Company and Canon Virginia, Inc., a subsidiary of Canon U.S.A. Inc. Airocide’s proprietary PCO technology removes ethylene safely and effectively, which is critical to reducing ripening, aging, and spoilage of fruits and vegetables. It is estimated that food waste of fruits and vegetables on a global scale approximates $680 billion. The Airocide™ Pro+ smaller size is designed for refrigerated truck trailers and shipping containers, which will nicely complement the Airocide™ products already in use by Del Monte, Dole, and Whole Foods, and most recently Freah Taste Produce.

Our goal is 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 the US Government’s EPA. We will seek to achieve this goal by having our products actively involved in the following activities:

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 our air purification and surface disinfectant solutions and products. Our initial research indicates that the key stakeholders in this market value the 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 18th, 2022, Applied UV announced that it has signed a strategic manufacturing and related services agreement with Canon Virginia, Inc., (“CVI”) a global manufacturing, engineering and technical operation for the Canon family and a wholly owned subsidiary of 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 leverage CVI’s almost 40 years of innovative and efficient production methods to 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 mobile and fixed air purification products, further differentiating our patented PCO and UVC Carbon based solutions from that of our competition. Applied UV also plans to collaborate with Canon Financial Services, Inc. to enable better cash flow management in regard to its growing supply chain requirements. Further, the Company will look to work with CVI’s extensive field support team to promote the sale of the 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

Air Disinfection Solutions & LED Lighting: Airocide, Scientific Air, PURO and LED Supply Co.

In February of 2021, the Company acquired all the assets and assumed certain liabilities of Akida Holdings, LLC (“Akida”). At the time of the 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 that has helped to accelerate the reopening of the global economy with applications in the hospitality, hotel, healthcare, nursing home, grocer, wine, commercial building and retail sectors. The Airocide™ system has been used by brands such as NASA, Whole Foods, Dole, Chiquita, Opus One, Sub-Zero Refrigerators and Robert Mondavi Wines. Akida had 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 consolidated all of manufacturing, sale and distribution of the Airocide™ system under the SteriLumen brand and expanded 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.

The Airocide™ system of air purification technologies, originally developed for the National Aeronautics and Space Administration (“NASA”) with assistance from the University of Wisconsin at Madison, 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 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 the surface of the catalytic bed. This permits the perpetual generation of surface-bound (OH-) radicals over the large surface area created by their advanced geometric design and 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™ has been tested over the past 12 years by governmental agencies such as NASA, the National Renewable Energy Laboratory, independent universities including the University of Wisconsin, Texas Tech University, and Texas A&M, as well as air quality science laboratories. Airocide™ technology is listed as a FDA Class II Medical Device, making it a suitable for providing medical grade air purification in critical hospital use cases. Airocide™ Product lines include APS (consumer units), the GCS and 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 extend the life of any perishables like fruit, produce 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”). The Scientific Air 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. Scientific Air’s products are well suited for larger spaces within a facility 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

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 to address a growing air disinfection market trend that aligns with the White House “Clean Air Initiatives” implemented during the height of the COVID 19 Pandemic designed to protect consumers and 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 the only companies in the 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 energy efficiency and 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 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 surface disinfection portfolio (Airocide™ and Lumicide™) as well as 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 healthcare that incorporates UV Lighting and 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:

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our ability to acquire new customers or retain existing customers.

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our ability to offer competitive product pricing.

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our ability to broaden product offerings.

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industry demand and competition; and

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market conditions and our market positions

Results of Operations

	Three Months Ended September 30, 2023											Three Months Ended September 30, 2022
	Hospitality		Disinfection/Healthy Building Technologies			Corporate			Total			Hospitality			Disinfection/Healthy Building Technologies			Corporate			Total
Net Sales	$	5,715,354	$	5,730,694		$	—		$	11,446,048		$	4,282,030		$	1,593,581		$	—		$	5,875,611
Cost of Goods Sold		4,454,534		4,336,230			—			8,790,764			4,117,717			919,280			—			5,036,997
Gross Profit		1,260,820		1,394,464			—			2,655,284			164,313			674,301			—			838,614
Research and development		—		91,085			—			91,085			—			93,522			—			93,522
Stock based compensation		57,821		34,188			139,845			231,854			35,519			39,647			84,364			159,530
Selling, General and Administrative		1,123,073		3,130,810			528,251			4,782,134			929,992			1,893,211			522,364			3,345,567
Total Operating expenses		1,180,894		3,256,083			668,096			5,105,073			965,511			2,026,380			606,728			3,598,619
Operating Income (Loss)		79,926		(1,861,619	)		(668,096	)		(2,449,789	)		(801,198	)		(1,352,079	)		(606,728	)		(2,760,005	)
Other Income
Change in Fair Market Value of Warrant Liability		—		—			1,206			1,206			—			—			34,804			34,804
Interest expense		—		—			(558,268	)		(558,268	)		—			—			(43,037	)		(43,037	)
Loss on change in contingent consideration		—		—			434,000			434,000			—			—			—			—
Other income		—		—			—			—			67,765			—			—			67,765
Total Other Income (Expense)		—		—			(123,062	)		(123,062	)		67,765			—			(8,233	)		59,532
Loss Before Provision for Income Taxes		79,926		(1,861,619	)		(791,158	)		(2,572,851	)		(733,433	)		(1,352,079	)		(614,961	)		(2,700,473	)
Provision for Income Taxes		—		—			—			—			—			—			—			—
Net Income (Loss)	$	79,926	$	(1,861,619	)	$	(791,158	)	$	(2,572,851	)	$	(733,433	)	$	(1,352,079	)	$	(614,961	)	$	(2,700,473	)
Non-GAAP Financial Measures
Adjusted EBITDA
Operating Loss	$	79,926	$	(1,861,619	)	$	(668,096	)	$	(2,449,789	)	$	(801,198	)	$	(1,352,079	)	$	(606,728	)	$	(2,760,005	)
Depreciation and Amortization		78,095		691,099			—			769,194			56,009			452,068			—			508,077
Loss on impairment of goodwill		—		—			—			—			—			—			—			—
Stock based compensation		57,821		34,188			139,845			231,854			35,519			39,647			84,364			159,530
Adjusted EBITDA	$	215,842	$	(1,136,332	)	$	(528,251	)	$	(1,448,741	)	$	(709,670	)	$	(860,364	)	$	(522,364	)	$	(2,092,398	)

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/Intangible Assets. Adjusted EBITDA was a loss of $1.4 million for the three months ended September 30, 2023, which was a decrease of $0.7 million as compared to the three months ended September 30, 2022. By segment, Hospitality improved $0.9 million, and Disinfection/Healthy Building Technologies increased $0.2 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, education and public spaces, cannabis, correctional facilities, and commercial, municipal and residential markets (Disinfection/Healthy Building Technologies segment); the manufacture of fine mirrors and custom furniture specifically for the hospitality 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 $11.4 million represented an increase of $5.5 million, or 94.8% for the three months ended September 30, 2023 as compared to net sales of $5.9 million for the three months ended September 30, 2022. The Disinfection/Healthy Building Technologies segment increased $4.1 million, primarily due the acquisition of PURO Lighting and LED Supply Co. on January 26, 2023. Additionally, the Hospitality segment increased $1.4 million, as that market continues to improve and our operatons have been streamlined to meet the increased demand.

Gross Profit

Gross profit increased $1.9 million from $0.8m, or 14.3% vs. sales, for the three months ended September 30, 2022 to $2.7m, or 23.2% vs. sales for the three months ended September 30, 2023. The improvement from 14.3% to 23.2% was driven primarily by the improved margins in the Hospitality segment as the lower gross profit legacy projects from the VisionMark asset acquisition have been completed and the operations have been streamlined. Gross profit as a percentage of sales also improved 1.0% as compared to Q2 2023, primarily due to the improvements in the operations of the Hospitality segment, whose gross profit improved from 19.7% in Q2 2023 to 22.1% in Q3 2023.

Operating Expenses

Selling, General, and Administrative – S,G&A costs, excluding stock based compensation, for the three months ended September 30, 2023, increased to $4.7 million as compared to $3.3 million for the three months ended September 30, 2022. This increase of $1.4 million was driven primarily by the expansion of the Disinfection/Healthy Building Technologies segment with the acquisitions of PURO Lighting and LED Supply Co. These acquisitions accounted for approximately $1.9 million of the increase, offset by a reduction in other SG&A expenses of $0.5 million. The Company is working to further improve cost synergies as the integration of PURO Lighting and LED Supply Co. progresses.

Other Income/Expense

The Company incurred interest expense of $0.5 million for the three months ended September 30, 2023 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 gain on the change in fair market value of contingent consideration of $0.4 million for the three nonths ended September 30, 2023 because of the make whole provision within the PURO Lighting and LED Supply Co. merger agreement. See Note 2.

Net Loss

The Company recorded a net loss of $2.6 million for the three months ended September 30, 2023, compared to a net loss of $2.7 million for the three months ended September 30, 2022. The decrease of $0.1 million in the net loss was mainly due to the $0.8 million improvement in the Hospitality segment. This improvement was offset by the $0.5 million increase in the net loss of the Disinfection/Healthy Building Technologies segment, primarily as a result of increased S,G&A costs from the acquisitions of PURO Lighting and LED Supply Co., and by the increase in interest expense of $0.5m, offset by the gain on contingent consideration of $0.4m.

	Nine Months Ended September 30, 2023												Nine Months Ended September 30, 2022
	Hospitality			Disinfection/Healthy Building Technologies			Corporate			Total			Hospitality			Disinfection/Healthy Building Technologies			Corporate			Total
Net Sales	$	16,944,409		$	15,999,808		$	—		$	32,944,217		$	9,860,392		$	5,278,955		$	—		$	15,139,347
Cost of Goods Sold		13,895,604			12,061,249			—			25,956,853			8,971,628			2,876,214			—			11,847,842
Gross Profit		3,048,805			3,938,559			—			6,987,364			888,764			2,402,741			—			3,291,505
Research and development		—			460,588			—			460,588			—			234,885			—			234,885
Stock based compensation		172,495			104,552			339,613			616,660			151,679			99,733			308,568			559,980
Loss on impairment of goodwill		—			—			—			—			—			1,138,203			—			1,138,203
Selling, General and Administrative		3,362,775			9,002,786			2,218,265			14,583,826			2,784,540			5,711,495			1,581,523			10,077,558
Total Operating expenses		3,535,270			9,567,926			2,557,878			15,661,074			2,936,219			7,184,316			1,890,091			12,010,626
Operating Loss		(486,465	)		(5,629,367	)		(2,557,878	)		(8,673,710	)		(2,047,455	)		(4,781,575	)		(1,890,091	)		(8,719,121	)
Other Income
Change in Fair Market Value of Warrant Liability		—			—			2,124			2,124			—			—			46,521			46,521
Interest expense		—			—			(1,434,329	)		(1,434,329	)		—			—			(96,113	)		(96,113	)
Gain on settlement of contingent consideration		—			—			—			—			—			1,700,000			—			1,700,000
Loss on change in contingent consideration		—			—			—			—			—			(240,000	)		—			(240,000	)
Other income		—			—			1			1			—			—			69,713			69,713
Total Other Income (Expense)		—			—			(1,432,204	)		(1,432,204	)		—			1,460,000			20,121			1,480,121
Loss Before Provision for Income Taxes		(486,465	)		(5,629,367	)		(3,990,082	)		(10,105,914	)		(2,047,455	)		(3,321,575	)		(1,869,970	)		(7,239,000	)
Provision for Income Taxes		—			—			—			—			—			—			—			—
Net Loss	$	(486,465	)	$	(5,629,367	)	$	(3,990,082	)	$	(10,105,914	)	$	(2,047,455	)	$	(3,321,575	)	$	(1,869,970	)	$	(7,239,000	)
Non-GAAP Financial Measures
Adjusted EBITDA
Operating Loss	$	(486,465	)	$	(5,629,367	)	$	(2,557,878	)	$	(8,673,710	)	$	(2,047,455	)	$	(4,781,575	)	$	(1,890,091	)	$	(8,719,121	)
Depreciation and Amortization		197,174			1,990,147			—			2,187,321			119,157			1,367,415			—			1,486,572
Loss on impairment of goodwill		—			—			—			—			—			1,138,203			—			1,138,203
Stock based compensation		172,495			104,552			339,613			616,660			151,679			99,733			308,568			559,980
Adjusted EBITDA	$	(116,796	)	$	(3,534,668	)	$	(2,218,265	)	$	(5,869,729	)	$	(1,776,619	)	$	(2,176,224	)	$	(1,581,523	)	$	(5,534,366	)

Adjusted EBITDA is defined as Operating Profit (Loss), excluding Depreciation and Amortization, and excluding Stock Based Compensation and Loss on Impairment of Goodwill/Intangible Assets. Adjusted EBITDA was a loss of $5.9 million for the nine months ended September 30, 2023, which was an increase of $0.4 million as compared to the nine months ended September 30, 2022. By segment, Hospitality improved $1.7 million, Disinfection/Healthy Building Technologies increased $1.4 million, and Corporate increased $0.7 million.

Segments

Net Sales

Net sales of $32.9 million represented an increase of $17.8 million, or 117.6% for the nine months ended September 30, 2023, as compared to net sales of $15.1 million for the nine months ended September 30, 2022. This increase was primarily attributable to the Disinfection/Healthy Building Technologies segment, which increased $10.7 million, primarily due to the acquisition of PURO Lighting and LED Supply Co. on January 26, 2023. The Hospitality segment increased $7.1 million, largely as a result of the strategic acquisition on March 25, 2022 of the operations of VisionMark in Brooklyn, NY, which increased $4.6 million, combined with the organic growth of our legacy MunnWorks business of $2.5 million.

Gross Profit

Gross profit increased $3.7 million from $3.3 million, or 21.7% vs. sales, for the nine months ended September 30, 2022 to $7.0 million, or 21.2% vs. sales for the nine months ended September 30, 2023. The decrease from 21.7% to 21.2% was driven primarily by the lower margins in our Disinfection/Healthy Building Technologies segment due to special “one-time” discounting of our Consumer Airocide™ product in Q1 2023 and the increase in sales of the Healthy Building Technologies product line from the PURO Lighting and LED Supply Co. acquisitions.

Operating Expenses

Selling, General, and Administrative – S,G&A costs, excluding stock based compensation, for the nine months ended September 30, 2023, increased to $14.6 million as compared to $10.1 million for the nine months ended September 30, 2022. This increase of $4.5 million was driven primarily by the expansion of the Disinfection/Healthy Building Technologies segment with the acquisitions of PURO Lighting and LED Supply Co. These acquisitions accounted for $5.0 million of the increase, but were offset by synergies achieved through operational optimization of $1.7 million. The Hospitality segment increased $0.6 million, and legal expenses increased $0.6 million in the Corporate segment..

Other Income/Expense

The Company incurred interest expense of $1.4 million during the nine months ended September 30, 2023 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.

For the nine months ended September 30, 2022, the Company recorded a net gain of $1.5 million as a result of the settlement with Scientific Air (“Old SAM Partners”) arising from a dispute regarding certain representations and warranties in the purchase agreement with Old SAM Partners.

Net Loss

The Company recorded a net loss of $10.1 million for the nine months ended September 30, 2023, compared to a net loss of $7.2 million for the nine months ended September 30, 2022. The increase of $2.9 million in the net loss was largely due to the $4.5 million increase in S,G&A costs, primarily as a result of the acquisitions of PURO Lighting and LED Supply Co. (see S,G&A explanation above), an increase in interest expense of $1.3 million, offset by a net gain in 2022 due to the settlement of the Old SAM Partners transaction of $1.5 million (see Other Income/Expense explanation above), offset by improvements in the operations of the Hospitality segment of $1.5m.

Liquidity and Capital Resources

Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022

Net Cash Used in Operating Activities	$	(7,843,235	)	$	(7,473.600	)
Net Cash Used in Investing Activities		(4,596,313	)		(88,618	)
Net Cash Provided by Financing Activities		11,251,974			(149,705	)
Net Decrease in cash and cash equivalents		(1,187,574	)		(7,711,923	)
Cash and equivalents at beginning of year		2,734,485			8,768,156
Cash and equivalents at end of the period		1,546,911			1,056,233

In the nine months ended September 30, 2023, net cash used in operating activities was $7.8 million, as compared to $7.5 million in the nine months ended September 30, 2022.

In the nine months ended September 30, 2023, net cash used in investing activities totaled $4.5 million primarily due to net cash paid of $4.1 million for the acquisitions of PURO Lighting and LED Supply Co. on January 26, 2023.

In the nine months ended September 30, 2023, cash provided by financing activities was $11.3 million, as compared to cash provided by financing activities of ($0.1) million in the nine months ended September 30, 2022. The increase of $11.4 million is primarily due to 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 363,642 shares sold, and an additional $4.4 million from their public offering on June 21, 2023.

On July 1, 2022, the Company filed a $50 million 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 million, as a readily available source of funding if needed. During the year ended December 31, 2022, the Company sold 160,962 ATM shares through the sales agent with net proceeds of $1.0 million. As of September 30, 2023, an additional 363,642 shares have been sold for net proceeds of $2.3 million, leaving a balance of $5.7 million on the ATM facility. The ATM facility with Maxim expired July 1, 2023. The shelf registration statement will expire on July 12, 2025.

The Company believes our sources of liquidity and capital will be sufficient to finance our continued operations and growth strategy.

Contractual Obligations and Other Commitments

Payment due by period
	Total		2023		2024-2026		2027-2028		Thereafter
Financing lease obligations		213,560		18,391		159,062		36,107		—
Operating lease obligations (1)		3,760,522		481,236		3,279,286		—		—
Notes payable (2)		157,500		157,500				—		—
Streeterville notes (3)		4,980,754		1,743,776		3,236,978		—		—
Pinnacle loan (4)		4,810,922				4,810,922		—		—
Assumed lease liability (5)		559,032		93,174		465,858		—		—
D&O Insurance Liability (6)		206,239		73,233		133,006
Total		14,688,532		2,567,310		12,085,113		36,109		—

(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)		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.
(4)		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 facility was later amended and increased to $6,000,000 on May 23, 2023. 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 $6 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.
(5)		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.
(6)		In September of 2023, the Company financed its D&O insurance in the amount of $244,114 at an interest rate of 6.28%. The Company is obligated to pay $24,411 per month for the next 10 months.

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.

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 June 30, 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, 2023, 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, 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 nine months ended September 30, 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 Financial Reporting

There have been no changes in our internal control procedures over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during our fiscal quarter ended June 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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

No.		Exhibit No.
3.1		Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the 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 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 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 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 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 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 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 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 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 Company’s Registration Statement on Form S-1 (File No. 333-239892) filed with the SEC as of July 16, 2020).
10.2		The Company’s 2020 Omnibus Incentive Plan (incorporated by reference to Exhibit 10.5 of the 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 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 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 Company’s Registration Statement on Form S-1 (File No. 333-239892) filed with the SEC as of July 16, 2020).
10.8		Employment Agreement, dated June 30, 2020 between the Company and Max Munn (incorporated by reference to Exhibit 10.9 of the Company’s Registration Statement on Form S-1 (File No. 333-239892) filed with the SEC as of July 16, 2020).
10.9		Employment Agreement, dated January 1, 2022 between the Company and Michael Ricco (incorporated by reference to Exhibit 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on January 3, 2022)
10.10		Agreement and Plan of Merger dated as of December 19, 2022, 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 10.1 of the Company’s Current Report on Form 8-K filed with the SEC on February 1, 2023)
10.11		Agreement and Plan of Merger dated as of December 19, 2022, 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 Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on February 1, 2023)
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 Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification by the Chief Executive Officer pursuant to 18 U.S.C. 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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 17, 2023	By:	/s/ Max Munn
		Max Munn
		Chief Executive Officer

Date: November 17, 2023	By:	/s/ Michael Riccio
		Michael Riccio
		Chief Financial Officer

EX-31.1 7 ex31_1.htm EXHIBIT 31.1

Exhibit 31.1

CERTIFICATION OF THE CHIEF EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

AND RULE 13A-14 OF THE EXCHANGE ACT OF 1934

I, Max Munn, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2023 of Applied UV, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 17, 2023	By:	/s/ Max Munn
		Max Munn
		Chief Executive Officer

EX-31.2 8 ex31_2.htm EXHIBIT 31.2

Exhibit 31.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES OXLEY ACT OF 2002

AND RULE 13A-14 OF THE EXCHANGE ACT OF 1934

I, Michael Riccio, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the period ended September 30, 2023 of Applied UV, Inc.;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 17, 2023	By:	/s/ Michael Riccio
		Michael Riccio
		Chief Financial Officer

EX-32.1 9 ex32_1.htm EXHIBIT 32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Applied UV, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), I, John Andrews, Chief Executive Officer of Applied UV, Inc. (the "Company"), hereby certify, pursuant to 18 U.S.C. Section 1350 as adopted by pursuant to the Sarbanes-Oxley Act, that, to the best of my knowledge:

The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 17, 2023	By:	/s/ Max Munn
		Max Munn
		Chief Executive Officer

EX-32.2 10 ex32_2.htm EXHIBIT 32.2

Exhibit 32.2

CERTIFICATION OF THE CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S. C. SECTION 1350

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Applied UV, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2023, as filed with the Securities and Exchange Commission on the date hereof (the “Form 10-Q”), I, Michael Riccio, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

	(1)	The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

	(2)	The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 17, 2023	By:	/s/ Michael Riccio
		Michael Riccio
		Chief Financial Officer