UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒	Annual report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended December 31, ~~2022~~2023

☐	Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _____________ to _____________

COMMISSION FILE NO. 1-11602

Nano Magic Inc.

(Exact name of registrant as specified in its charter)

Delaware		47-1598792
(State of Incorporation)		(IRS Employer Identification Number)

31601 Research Park Drive, Madison Heights, MI 48071

(Address of principal executive office, including Zip Code)

Registrant’s telephone number, including area code: (844) 273-6462

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

Title of each class		Trading Symbol		Name of Each Exchange on Which Registered
Common Stock, $0.0001 par value		NMGX		OTC Markets

Securities registered pursuant to Section 12(g) of the Exchange Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

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 past 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 and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Exchange Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received b any of the registrant’s executive officers during the relevant recovery period pursuant to Section 240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The aggregate market value of the Common Stock held by non-affiliates of the Registrant, based upon the closing price of the Common Stock on the OTCQB system on June 30, ~~2022~~2023 of $01.2500, was approximately $1,~~124~~003,~~627~~520.

As of April 113, ~~2023~~2024, the registrant had 1013,~~790~~498,~~980~~ 676 shares of common stock issued and outstanding.

Documents Incorporated by Reference: No documents are incorporated by reference into this annual report on Form 10-K.

NANO MAGIC INC.

FORM 10-K

TABLE OF CONTENTS

		Page
PART I
Item 1.	Business.	4
Item 1A.	Risk Factors.	8
Item 1B.	Unresolved Staff Comments.	13
Item 2.	Properties.	13
Item 1C.	Cybersecurity	13
Item 3.	Legal Proceedings.	13
Item 2.	Properties.	14
Item 4.	Mine Safety Disclosures.	13
Item 3.	Legal Proceedings.	14
Item 4.	Mine Safety Disclosures.	14
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	14
Item 6.	[Reserved]	17
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	17
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk.	1920
Item 8.	Financial Statements and Supplementary Data.	2021
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	4243
Item 9A.	Controls and Procedures.	43
Item 9B.	Other Information.	44
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	44
PART III
Item 10.	Directors, Executive Officers and Corporate Governance.	4544
Item 11.	Executive Compensation.	48
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	50
Item 13.	Certain Relationships and Related Transactions, and Director Independence.	5152
Item 14.	Principal Accounting Fees and Services.	5152
PART IV
Item 15.	Exhibits, Financial Statement Schedules.	52
SIGNATURES		5455

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (this “Report”) contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, which includes information about us and our industry that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this Report regarding our strategy, future operations, future financial position, future net sales, projected expenses, prospects and plans and objectives of management are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievement to be materially different from those expressed or implied by the forward-looking statements.

In some cases, you can identify forward-looking statements by terms such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “will,” “would,” “should,” “could,” “can,” “potential,” “continue,” or the negative of these terms, and similar expressions intended to identify forward-looking statements. However, not all forward-looking statements contain these identifying words. These forward-looking statements reflect our current views about future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Actual events or results could differ materially from those expressed or implied by these forward-looking statements as a result of various factors. There may be other factors that cause our actual results to differ materially from the forward-looking statements.

These forward-looking statements represent our estimates and assumptions only as of the date of this report. Unless required by U.S. federal securities laws, we do not intend to update any of these forward-looking statements to reflect circumstances or events that occur after the statement is made or to conform these statements to actual results.

PART I

Item 1. Business

Nano Magic Inc., a Delaware corporation (“we”, “us”, “our”, “Nano Magic” or the “Company”), formerly Nano Magic Holdings Inc., develops, commercializes and markets nanotechnology powered consumer and industrial cleaners and coatings to clean, protect, and enhance products for peak performance. Consumer products include lens and screen cleaners and coatings, anti-fog solutions, and household and automotive cleaners and protective coatings sold direct-to-consumer and in big box retail. Nano Magic also sells branded and private label cleaners and coatings into the optical, safety, and industrial channels. Our focus is to expand our direct-to-consumer sales through e-commerce and to grow sales to big box retailers. We continue to sell our consumer products directly to opticians and ophthalmologists and small optical retailers.

Effective May 31, 2022, we sold a 70% interest in our subsidiary, Applied Nanotech, Inc. (“ANI”). The contract research services performed by ANI for governmental and private customers was previously reported as our Contract research segment. As a result of this sale, the Company has deconsolidated ANI from its financial reporting, and we will report as only one segment. We retain a 30% interest in ANI that is now recorded as an equity investment. On December 31, 2022, our wholly-owned subsidiary Nano Magic LLC was merged into the parent company and we changed our name to Nano Magic Inc.

Our revenue is based on the retail and institutional sale of specialty products utilizing nanotechnology to deliver unique performance attributes. We work to understand surfaces at the nano scale, and our products for surfaces can be used on a wide variety of substrates. Our consumer products are sold as liquids, ~~gels, foam~~ and as wet and dry towelettes. ~~Institutional~~Industrial coating products are typically sold in liquid form enabling application by a variety of common commercial techniques. We rely on intellectual property including trade secret formulations to protect our proprietary technology.

We have multiple product technology platforms that offer solutions to common surface problems such as ease of cleaning, preventing fogging, preventing accumulation of dirt or grime, improving resistance to scuffing and wear and surface protection. All our products have some “nano” characteristic about them – whether it is being active at the molecular level, incorporation of submicron-particles, or creating very thin, self-assembling coatings that are 20 nanometers or less in thickness.

Our consumer products are primarily customized cleaning and protection solutions. With respect to our consumer products, we strive to create segment leading brands for solutions that are sustainable, of high quality, and that are both easy and safe to apply. We emphasize convenience, such as our product that combines antifog and cleaning into one product for convenience for our users. This, and other products can be used on eyeglasses, safety goggles and glasses, extreme sport glasses, goggles and visors. Our solutions are also packaged for use on electronic screens, windows, mirrors, shower doors, and other similar clear surfaces along with the cleaning of everyday household surfaces. We have also expanded into the auto care sector with Force Field^® windshield protection. This product creates a non-stick, super water repellent protective barrier — like a force field — to protect the windshield against rain, bugs, and salt. The coating solution is easy-to-apply and improves visibility and safety while driving.

Industrial surface treatment products include a family of coating liquids that create nano-thin, strongly-bound, invisible, “forcefield”-like coatings on glass and ceramic surfaces and a series of clear coatings for plastics incorporating submicron sized particles to improve abrasion resistance and wear resistance without sacrificing transparency. We manufacture our formulations internally to protect our technology and strive to maintain the highest quality for the products that we and our commercial partners bring to the marketplace.

Our surface treating products include:

● Liquid and towelette formulations packaged for retail sale to consumers for cleaning and protecting clear surfaces – such as eyeglasses and sunglasses lenses, electronic touchscreens such as mobile phones and infotainment screens, windshields, windows, mirrors, ~~shower doors, eyeglass~~ and ~~sunglass~~shower ~~lenses~~doors. ● Liquid formulation packaged for retail and industrial sale for cleaning surfaces. ● Anti-fogging liquid and towelette formulations packaged for retail sale to consumers for ~~safety~~sport ~~glasses,~~applications ~~protective~~such ~~eye~~as ~~wear~~scuba ~~including~~masks, ~~face~~ski goggles, motorcycle shields, along with football and ~~sporting~~hockey visors and other extreme sport masks and goggles. ● Anti-fogging towelettes for sale to ~~the~~consumers and industrial users, including factory and construction workers and military and first responders for safety, anti-fogging and conditioning of lenses, such as protective eyewear, safety glasses masks, ~~head~~face ~~gear~~shields and other applications such as ~~head’s~~scopes. ~~up displays,~~ ● Mar-resistant and stain-resistant coatings for ~~high~~porcelain ~~end~~and ~~vitreous~~ceramic ~~china~~surfaces ~~tableware~~such ~~used~~as ~~for~~toilets ~~heavy~~used ~~duty,~~in ~~usage situations such as~~ restaurants, cruise ships, casinos, and office buildings. ● Clear protective coatings used on display panels and touch screens to make it easy to remove fingerprints. Applications include automotive and hand-held devices. ● Protective and water-repelling coatings on interior and exterior glass and ceramic surfaces to make it easy to clean and prevent scale and grime encrustation. ~~● Coatings for ceramic insulators used in transit and underground subways systems to prevent caking of metal dust and greases on surfaces to reduce maintenance and current leakage losses.~~

Our vision is to harness the power of nanotechnology to create a safer, more socially conscious, and higher performing world. We have three primary areas of focus:

	1.	Surface cleaning for safety, time and cost savings: Treating surfaces at the nano-scale for easy clean performance – to clean better and to stay cleaner longer;

	2.	Preventing fogging: Surface treatments at the nano-scale to prevent fogging for safety and improved performance, especially on lenses, sportwear and protective eyewear; and

	3.	Sustainability: Creating nano-scale devices and formulas using safe, natural ingredients and manufacturing methods while avoiding the use of harsh chemicals whenever possible.

Marketing and Distribution

We sell our Nano Magic branded consumer products directly to consumers and retailers in the United States and through a distributor in Canada. Direct-to-consumer sales are through our website, nanomagic.com, on Amazon and other online marketplaces. We also have products in pharmacies, and big box retailers. Sales to big box retailers also include private label products under the retailers’ names. Some of our products are incorporated into our customer’s branded products. We continue direct sales to opticians and ophthalmologists.

Our industrial coating products are sold directly to institutional and industrial customers.

Manufacturing Operations

We manufacture, pack and label liquids and towelettes as well as specialty surface coatings at our 29,220-square foot facility in Madison Heights, Michigan.

Intellectual Property and Proprietary Rights

Our nanotechnology expertise and the related intellectual property used in our current products is specialized in the areas of surface science, molecular self-assembly, transparent composites, surfactants, sub-micron metallic inks and pastes and graphene foils. The intellectual property developed from this work is protected with a combination of selective patents and primarily by trade secrets. This intellectual property strategy is like that used by leading companies in the fragrance and flavors industry. No single patent is significant to any of our commercial products. Please refer to the section entitled “Intellectual Property Rights” in this Item 1 for a more detailed discussion of these matters.

Intellectual Property and Proprietary Rights

Our nanotechnology expertise and the related intellectual property used in our current products is specialized in the areas of surface science, molecular self-assembly, transparent composites, and surfactants. The intellectual property developed from this work is protected with a combination of selective patents and primarily by trade secrets. This intellectual property strategy is like that used by leading companies in the fragrance and flavors industry. No single patent is significant to any of our commercial products. Please refer to the section entitled “Intellectual Property Rights” in this Item 1 for a more detailed discussion of these matters.

Competition

Products sold into the optical segment, which has historically been our core sales channel, have a small number of significant competitors. ~~Our~~ Our products are known to be the “benchmark” products in the optical segment and generally outperform those of our competitors. Some of our products in this segment do compete for certain customers or certain applications against lower-priced, traditional materials. Most of the companies selling products into the optical segment are privately-held U.S. packaging or catalog companies. Examples in the U.S. include Hilco Accessories, ~~California~~OptiSource ~~Accessories,~~ and Amcon Laboratories. ~~Internationally, the catalog company, Prosben, Inc., from the Peoples Republic of China is a competitor.~~ These companies sell to opticians and optical stores but are not selling their own branded products direct to consumer or in big box retail and pharmacies. Optical company, Carl Zeiss, sells its branded ~~optical~~ optical products in big box retail ~~in those chains where it has optical stores~~.

In the nano-coating products area or the anti-fog product line we are not aware of any competitive products that we believe match our product performance or processing characteristics. With the COVID-19 pandemic and fogging caused by increased use of masks, other companies have made more of an effort to sell anti-fog products and there were new entrants into this market, but no company has a significant portion of the market.

Backlog

Sales are primarily made under purchase orders for delivery of products. We do not believe that a backlog as of any date is indicative of future results. Some agreements give customers the right to purchase a specific quantity of products during a specified period, but these agreements do not obligate the customers to purchase any minimum quantity. Private label customers are required to commit either to minimums or to repurchase unique inventory items related to their product(s). The quantities purchased by the customer, as well as the shipment schedules, are frequently revised during the agreement term to reflect changes in the customer’s needs. Because of our relatively small size, a customer’s delay of a product shipment can make a difference in the results for an accounting period.

Geographical Information

All long-lived assets are in the United States.

Sources and availability of raw materials and the names of principal suppliers

We use third-party suppliers in the United States to obtain substantially all raw materials, components and packaging products. As is customary in our industry, historically we have not had long-term or exclusive agreements with third-party suppliers and have generally made purchases through purchase orders.

Key Customers

A limited number of key customers historically accounted for a majority of our revenue. In ~~2022~~2023, ~~two~~one ~~accounts~~account represented 4441% of ~~revenues~~revenue. In ~~2021~~2022, ~~four~~two accounts represented 58 44% of ~~revenue~~ revenues.

Intellectual Property Rights

An important part of our overall business and product development strategy is to protect our intellectual property and, when appropriate, we seek patent protection for our products and proprietary technology. Trade secret protection is most important to our products. Our patent portfolio consists of approximately afour ~~dozen~~ issued patents.

The patenting of technology-related products and processes involves uncertain and complex legal and factual questions. The legal standards change from time to time, and administrative and court interpretations are not always consistent in one jurisdiction, or across different jurisdictions. Therefore, there is no assurance what scope of protection any issued patents will provide, or whether any such patents ultimately will be upheld as valid by a court of competent jurisdiction in the event of a legal challenge. The costs of such proceedings would be significant and an unfavorable outcome could result in the loss of rights to the invention at issue in the proceedings.

If we fail to obtain patents or elect not to file for patent protection, there can be no assurance that we can protect our rights in the technology, or that others will not independently develop substantially equivalent proprietary products and techniques, or otherwise gain access to our technology.

Competitors have filed applications for, or have been issued, patents, and may obtain additional patents and proprietary rights relating to products or processes used in, necessary to, competitive with, or otherwise related to, our patents. The scope and validity of these patents, and the extent to which we may be required to obtain licenses under these patents or under other proprietary rights and the cost and availability of licenses is unknown. This may limit our ability to use and to license our technology. Litigation concerning these or other patents could be protracted and expensive. If suit were brought against us for patent infringement, we could potentially challenge the validity of the other patent but would need to overcome a presumption of validity. If we were found to infringe and the patent was held valid (or was unchallenged), there could be no assurance that the prevailing party would grant us a license. Even if a license were available, the payments that would be required would be unknown and could materially reduce the value of our interest in the affected products.

We require our employees, directors, consultants, outside scientific collaborators, sponsored researchers, and other advisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with us. These agreements provide that all confidential information developed or made known to the individual through the relationship is to be kept confidential and not disclosed to third parties except in specific circumstances. In the case of employees and some consultants, the agreements provide that all inventions conceived by the individual while working for us will be our property. There is no assurance, however, that these agreements will provide sufficient protection for our trade secrets in the event of unauthorized use or disclosure of such information.

Research and Development

Research and development drive our new products and improvement of existing products. Research and development costs incurred in the development of the Company’s products was $1647,~~777~~440 for the year ended December 31, ~~2022~~2023, and $3416,~~875~~777 for the year ended December 31, ~~2021~~2022. This represented approximately 01.474% and 0.895% of our total operating costs in each of those years. The ability to engineer product performance using nanotechnology is one of the ways we distinguish our products in marketing and sales of our products. Product research and development work includes branding and packaging, development and refinement of formulas, engineering of liquid formulas that can be applied both by hand and by machine, optimization for a variety of performance characteristics, testing and characterization, and work on manufacturing processes and techniques both for producing the product, and for a customer’s use of the product.

Compliance with Laws and Regulations

Our operations must satisfy governmental safety standards. Applicable safety standards are established by the U.S. Occupational Safety and Health Administration (“OSHA”), pollution control standards by the U.S. Environmental Protection Agency (“EPA”) and other state and local regulations, including foreign regulation for products manufactured or shipped outside the U.S. We take these requirements into account in product development. Cost of compliance with these regulations has not been significant in the past and we do not expect it to be material in the future.

OSHA, the EPA, and other governmental agencies, both in the United States, the specific states in which we or our customers sell products, and foreign countries, may adopt additional rules and regulations that may affect us and products using our technology. The cost of compliance with these regulations has not been significant to us in the past and is not expected to be material in the future. Changing regulations, including those regulating polyfluoroalkyl substances (PFASs), can affect us and our customers, and we have in the past, and may be required in the future, to reformulate or change formulas and packaging to address regulatory issues. This can affect timing of sales which may be significant in an accounting period.

Our commercial products do not require any government approvals.

Employees and Human Capital

As of December 31, ~~2022~~2023, we had 1913 full-time employees. Our employees are valued team members and are important to our growth and success. This is especially true given our relatively small size. By cross-training so that individuals can master a number of different tasks, we try to create a more challenging work environment and minimize disruption in the case of absence or employee departures. We strive to provide a positive work environment emphasizing a positive attitude, team work and ethical behavior. In the first quarter of 2023, some of our key personnel agreed to take half their salary in stock options to help us conserve cash. We are not subject to any collective bargaining agreements, and we consider our relations with our employees to be good.

Available Information

General information about the Company can be found on our website, www.nanomagic.com

Item 1A. Risk Factors

The COVID-19 pandemic ~~has~~ disrupted the global economy and the economic disruption continues to affect Nano Magic’s, ~~supply~~its ~~chain~~customers and ~~the~~suppliers and ~~long-term~~resulting ~~effects~~problems ofin ~~the~~forecasts ~~pandemic~~ and ~~related~~supply ~~economic disruption~~chain ~~cannot~~make beoperations ~~predicted~~challenging.

The COVID-19 pandemic coupled with government orders and regulations designed to address the effects of the pandemic disrupted the U.S. and global economies. Inflation and changes in consumer buying patterns along with various challenges to the supply chain continue to challenge manufacturing and retail operations including Nano Magic and its customers. The duration of the disruption and the short and long-term effects of new and changing ~~requirements~~consumer and ~~new consumer and~~ business behaviors are impossible to predict.

Nano Magic experienced increased demand for its anti-fog product as a result of the pandemic which attracted new entrants to that market segment. That demand has fallen as mask mandates and mask wearing has declined. The staying power of new entrants who took advantage of the demand is unknown.

Labor shortages, inflation, and a variety of government regulations continue to affect Nano Magic customers – both consumer and retail stores – and the continuing impact on customers, the supply chain, raw materials supply and pricing, and the distribution of Nano Magic products, cannot be foreseen.

Supply chain disruption and sales growth can put additional strain on our need for working capital.

Disruption in the supply chain has caused some higher prices and longer lead times. To assure supply, Nano Magic must order materials further in advance, increasing the time between its payments to vendors and the time when Nano Magic can realize a sale. Increased order volume and increased sales will also require that Nano Magic buy larger quantities of raw material inventory and packaging materials. Sales growth will increase our working capital needs, as Nano Magic must pay for the materials before it can see the increased revenue from customers. Similarly, labor must be paid for before the revenue is realized. This can create a greater need for growth capital when funds are already curtailed by Nano Magic’s operating losses.

Nano Magic has limited resources which can hamper its ability to execute its business plan.

Nano Magic is a small company with limited human and financial resources. This limits the resources Nano Magic can devote to the sale and promotion of its products, and may limit its ability to tackle issues that arise in manufacturing and distribution. Nano Magic’s size curtails the resources Nano Magic can devote to promoting its existing products and developing brand recognition. Nano Magic’s limited resources can constrain its ability to take advantage of opportunities, may limit its growth and may give competitors time to challenge its products in the marketplace. These factors will make it harder for Nano Magic to be successful.

Nano Magic is dependent on key executives and the loss of its President and CEO or other key personnel could adversely affect its results of operations and financial condition.

Nano Magic’s President and CEO, Tom Berman, is under contract through the end of ~~2023~~2024. His vision and leadership are very important to the execution of the Nano Magic business plan, and loss of his services would adversely affect Nano Magic’s results of operations and the value of its stock. Other executives and employees are at-will employees, so they may terminate their employment relationship at any time. Loss of experienced personnel and their knowledge of Nano Magic’s business and industry would be extremely difficult to replace. Moreover, because of Nano Magic’s small size, it would be very difficult for remaining personnel to perform the duties fulfilled by the loss of personnel.

Increased sales under the Nano Magic brand name and building a strong brand with consumer brand loyalty will take time.

Nano Magic has placed a number of Nano Magic branded products in ~~pharmacies~~regional and ~~big~~national ~~box~~ retailers. Developing customer loyalty and brand awareness takes time. The time frame could be shortened if Nano Magic had greater resources for marketing and advertising.

Consumer confidence and spending habits have been affected by the COVID-19 pandemic and its after effects, but what that means and how this will affect sales of Nano Magic products remains unknown.

Nano Magic is a small company and the marketplace for consumer cleaning products is competitive.

Nano Magic has a limited line of products; retail chains and big-box stores may only want suppliers that offer a more extensive product line. Nano Magic has fewer resources than many of its competitors to devote to extending product lines, and to new products and packaging. Its inability to devote the required resources to adapt to the demands of consumers or to meet competitive product offerings may limit Nano Magic’s ability to execute on its business plan and hurt its revenue.

If we or our third-party service providers experience a security breach, data loss or other compromise, including if unauthorized access to our data, our business operations may be interrupted, our reputation and business relationships may be harmed, and we may incur other costs.

We use cloud-based computer systems for our communications (e-mail, voice, data exchange, etc.), for other aspects of our operations and for our business and financial records. Any security breach, data loss, or other compromise, including those resulting from a cybersecurity attack, phishing attack, or any unauthorized access, unauthorized usage, virus or similar breach or disruption could result in the loss or destruction of or unauthorized access to, or use, alteration, disclosure, or acquisition of, data, business disruptions and delays as well as damage to our reputation, litigation, regulatory investigations, or other liabilities. Our website and technology infrastructure also may experience performance issues due to a variety of factors, including infrastructure changes, human or software errors, hosting disruptions, capacity constraints, technical failures, natural disasters, or fraud.

We also rely on cloud technologies from third parties in order to operate critical functions of our business, including financial management services, relationship management services, and aspects of our manufacturing and sales functions. If our service agreements are terminated, or there is a lapse of service, elimination of services or features that we utilize, interruption of internet service provider connectivity or damage to our providers’ facilities, we could experience business interruptions as well as significant delays and additional expense in arranging or creating new facilities and services and/or re-architecting our cloud-based offerings for deployment on a different cloud infrastructure service provider, which could adversely affect our business, financial condition and results of operations. Our vendors and service providers may also be the targets of cyberattacks, malicious software, phishing schemes, and fraud. Any of the foregoing could have a material adverse effect on our business, including our financial condition, results of operations and reputation.

Our facilities, as well as the facilities of third-parties that provide or maintain, or have access to our data or network infrastructure, are vulnerable to damage or interruption from earthquakes, hurricanes, floods, fires, cyber security attacks, terrorist attacks, power losses, telecommunications failures and similar events. In the event that our or any third-party provider’s systems or service abilities are hindered by any of the events discussed above, our ability to operate may be impaired. A third party’s decision to close facilities or terminate services without adequate notice, or other unanticipated problems, could adversely impact our operations. If business continuity and disaster recovery plans of ours or of a third-party provider prove to be inadequate in preventing the loss of data or service interruptions, this could cause further disruptions to our operations or damages to important systems or facilities or damage to our computer hardware or systems or those of our employees, or customers. Our systems have been the target of cyber-attacks. Although we have taken and continue to take steps to enhance our cybersecurity posture, we cannot assure that future cyber incidents will not occur or that our systems will not be targeted or breached in the future.

Drug stores and big-box retail chains that Nano Magic has targeted as a distribution channel to increase its sales volume have their own challenges in the marketplace and demand a high level of support from vendors which will be challenging for Nano Magic, due to its size and limited resources.

The after effects of the pandemic continue to pose challenges for retail stores and this can make them cautious about ordering product or trying new products. In addition, to supply a large number of stores and maintain brand quality, drug stores and big-box retail chains often require, among other things, that their vendors comply with scheduling and packaging requirements, maintain back-up inventory in reserves and impose other standards and restrictions on their vendors. Retail customers may delay or defer orders that can slow sales for Nano Magic. And, if Nano Magic, because of its limited resources, cannot meet customer requirements, then it will not be able to service these distribution channels, and Nano Magic’s potential for revenue growth will be harmed. Moreover, losing a customer may leave Nano Magic with significant obsolete inventory.

Sales of specialized coatings to industrial customers that incorporate Nano Magic products into their own product offerings make us dependent on Nano Magic’s industrial customers’ commitment to the product and dependent on the success of Nano Magic’s customers.

Some of Nano Magic’s existing products are sold to ~~institutional~~industrial customers that incorporate Nano Magic’s product into their own ~~product~~ product or service offering to their customers. This means the success of Nano Magic’s product is dependent on the level of support, ~~marketing~~ marketing and customer assistance provided by the ~~institutional~~industrial customers. Also, Nano Magic cannot control timing, marketing or introduction of its products or improved products, the timing or methods used to address customer concerns, and Nano Magic cannot affect directly ~~marketing~~ marketing or distribution of the products or services that incorporate its products. If Nano Magic’s industrial customer has other ~~priorities~~ priorities or is unsuccessful in its marketing or provides poor customer service, then the sales of Nano Magic’s products and Nano Magic’s results of operations will be adversely affected. To the extent that Nano Magic’s customers feel the effects of an economic downturn from the COVID-19 pandemic, that may lessen their interest in introducing products or services incorporating Nano Magic products.

Risks Relating to Nano Magic’s Technology and Commercialization

~~Nano~~Third-parties may claim that Nano Magic’s products may infringe ~~the~~their intellectual property rights ~~of others~~, which may subject it to claims, or prevent or delay its product development efforts and stop it from selling or increase the costs of its products.

Nano Magic’s commercial success depends in part on its ability to operate without infringing the patents and other intellectual property rights of third parties. If claims are made that Nano Magic is using third party technology without authorization or that any third-party patents cover Nano Magic’s products or their use, then the holders of any of these patents or other intellectual property may be able to block the sale of Nano Magic’s products unless Nano Magic obtains a license or changes the products so as not to use the third-party’s intellectual property. Nano Magic could incur significant costs defending against any claim; and, if Nano Magic is liable, then Nano Magic may not be able to enter licensing arrangements or to redesign the products at a reasonable cost or on reasonable terms.

Nano Magic may be unable to adequately prevent disclosure of trade secrets and other proprietary information.

Nano Magic relies on trade secrets to protect its proprietary know-how and technology, especially where Nano Magic does not believe patent protection is appropriate or obtainable. Others independently may develop the same or similar technology, or otherwise obtain access to Nano Magic’s proprietary technology. Nano Magic relies in part on confidentiality agreements with its employees and consultants to protect its trade secrets and other proprietary information. These agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure. Costly and time-consuming litigation could be necessary to enforce and determine the scope of Nano Magic’s proprietary rights. Failure to obtain or maintain trade secret protection could enable competitors to use Nano Magic’s proprietary information and to develop products that better compete with its products.

Any lawsuits relating to infringement of intellectual property rights necessary to defend Nano Magic or enforce its rights will be costly and time consuming.

Nano Magic’s ability to defend its intellectual property may require litigation to enforce its rights or to defend litigation brought by a third-party. Any of these lawsuits, regardless of their success, could be time consuming and expensive to defend and resolve and may require delay or suspension of commercial sales while they are pending. The cost could cause Nano Magic to forego litigation or to settle on terms that are disadvantageous. If litigation is undertaken or defended, that attendant cost or delay could have a material, adverse impact on Nano Magic’s results of operations.

Some health effects of nanotechnology are unknown.

There has been scientific debate on the health effects of nanomaterials. The science of nanotechnology is engineering at the molecular level to modify or build materials. Many nano-materials are found in nature; others are not naturally occurring. Some scientists believe that certain nanomaterials may be hazardous to human health or the environment. The health effect of new materials is unknown, and can be affected by how they are incorporated and bonded to other materials. Nano Magic focuses on materials larger than 100 nanometers so that they are not regulated as nanoparticles, and Nano Magic carefully evaluates potential health effects of its products on its customers and the effects of handling materials on Nano Magic’s employees. Changing regulations, including those regulating polyfluoroalkyl substances (PFASs) can affect us and our customers. Nano Magic is very mindful of the risks of materials Nano Magic uses and focuses on health and safety. However, debate about the health effects of PFASs, nanoparticles and nanotechnology may adversely affect market acceptance of Nano Magic’s products and adversely affect its financial performance.

Risks Related to Ownership of Nano Magic’s Common Stock

Nano Magic’s common stock is thinly traded, and the number of free trading shares is small, thereby contributing to price volatility.

There is little trading of Nano Magic common stock. As a result, an investor may not be able to sell Nano Magic common stock at the time that the investor would like to sell. Furthermore, if a stock is thinly traded, then any sale may depress the market price.

The limited number of Nano Magic’s free trading shares may limit its ability to raise capital through private placements forcing Nano Magic to offer its stock using more costly qualification or registration procedures.

To remain eligible for the OTCQB, Nano Magic must have a minimum float of 10% of the outstanding stock. Shares sold in a private placement are restricted, and issuing too many restricted shares will take Nano Magic below the float required to remain on the OTCQB. This may force Nano Magic to use available qualification and registration procedures for any capital raise. This in turn would require additional time and resources before Nano Magic would have additional funds for operations or other purposes.

The market price of Nano Magic’s common stock is subject to potential significant price fluctuation because the common stock is thinly traded, and that could result in substantial losses for investors and subject Nano Magic to securities class action litigation.

Among the factors that may cause the market price of Nano Magic’s common stock to fluctuate are the risks described in this “Risk Factors” section and other factors, including:

	●	The trading volume of Nano Magic’s common stock;
	●	Changes in Nano Magic’s capital structure, such as future issuances of securities or the incurrence of debt;
	●	Actual or expected sales of Nano Magic’s common stock by its stockholders;
	●	Failure of Nano Magic’s products to achieve or maintain market acceptance or commercial success;
	●	Changes in the estimation of the future size and growth rate of Nano Magic’s markets;
	●	Fluctuation in Nano Magic’s quarterly operating results;
	●	Recruitment or departure of key personnel;
	●	The commencement or outcome of litigation involving Nano Magic, its industry segments, or some combination; and
	●	Changes in legislation or regulatory policies, practices, or actions.

In addition, the stock market in general, the OTCQB and the market for nanotechnology companies in particular, may experience a loss of investor confidence. Such loss of investor confidence may result in extreme price and volume fluctuations in Nano Magic common stock that are unrelated or disproportionate to the operating performance of Nano Magic’s business, financial condition or results of operations. These broad market and industry factors may materially harm the market price of Nano Magic’s common stock and expose Nano Magic to securities class action litigation. Such litigation, even if unsuccessful, could be costly to defend and divert management’s attention and resources, which could further materially harm Nano Magic’s financial condition and results of operations.

Concentration of stock ownership with affiliates could make a management change or an acquisition of Nano Magic more difficult.

Approximately 8472% of the common stock on a fully-diluted basis is owned or controlled by Nano Magic’s present officers and directors. ~~Certain~~ Certain provisions of Nano Magic’s organizational documents could discourage potential acquisition proposals, delay or prevent a change in control of us or limit the price that investors may be willing to pay in the future for shares of Nano Magic’s common stock. For example, the amended and restated certificate of incorporation and amended and restated by-laws will:

	●	authorize the issuance of preferred stock that can be created and issued by Nano Magic’s board of directors without prior stockholder approval, commonly referred to as “blank check” preferred stock, with rights senior to those of its common stock;

	●	limit the persons who can call special stockholder meetings;

	●	permit written action by voting stockholders, permitting affiliates acting alone to accomplish most stockholder actions;

	●	establish advance notice requirements to nominate persons for election to Nano Magic’s board of directors or to propose matters that can be acted on by stockholders at stockholder meetings;

	●	not provide for cumulative voting in the election of directors; and

	●	provide for the filling of vacancies on Nano Magic’s Board of Directors by action of a majority of the directors and not by the stockholders.

These provisions could also limit the price that investors would be willing to pay in the future for shares of Nano Magic common stock.

Nano Magic does not intend to pay dividends for the foreseeable future.

Nano Magic intends to retain earnings for the foreseeable future to finance the operation and expansion of its business, and Nano Magic does not anticipate paying cash dividends. Stockholders can expect to receive a return on common stock only if the market price of the stock increases.

Future sales of Nano Magic’s common stock may depress its share price.

Sales of substantial number of shares of Nano Magic’s common stock in the public market following a capital raise,

Nano Magic’s common stock is a “penny stock” under SEC rules, and it may be more difficult to resell securities classified as “penny stock.”

Nano Magic’s common stock is a “penny stock” under applicable SEC rules (generally defined as non-exchange traded stock with a per-share price below $5.00). Unless Nano Magic maintains a per-share price above $5.00, these rules impose additional sales practice and disclosure requirements on broker-dealers that recommend the purchase or sale of penny stocks to persons other than those who qualify as “established customers” or “accredited investors.” The additional burdens imposed upon broker-dealers by such requirements may discourage broker-dealers from effecting transactions in Nano Magic’s securities, which could severely limit the market price and liquidity of Nano Magic’s securities. These requirements may also affect your ability to resell Nano Magic’s common stock.

Nano Magic has reported material weaknesses in its internal controls over financial reporting.

In order to remedy the identified deficiencies in its internal controls over financial reporting, Nano Magic may be required to add additional staff. Nano Magic may not be able to remediate any future material weaknesses, or to complete its evaluation, testing and any required remediation in a timely fashion. During the annual evaluation process, if Nano Magic identifies one or more material weaknesses in its internal controls over financial reporting, then Nano Magic may be unable to assert that its internal controls are effective. If Nano Magic is unable to assert that its internal controls over financial reporting are effective, investors then could lose confidence in the accuracy and completeness of its financial reports, which could harm Nano Magic’s stock price.

Nano Magic’s obligations associated with being a public company require significant resources and management attention, and carry significant cost.

As a public company, Nano Magic has legal, accounting, administrative and other costs and expenses that burden its profit. As a reporting company under the Exchange Act, Nano Magic is required to file annual, quarterly and current reports with respect to its business and financial condition, and proxy and other information statements, and is subject to the rules and regulations implemented by the Commission, the Sarbanes-Oxley Act, and the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, and accounting pronouncements and standards of the Public Company Accounting Oversight Board, each of which imposes additional reporting and other obligations on public companies.

Moreover, Nano Magic must monitor changes and comply with any changes to these rules and regulations, and with any future changes in laws, regulations and standards relating to corporate governance and public disclosure. Nano Magic’s need to comply with existing and evolving regulatory requirements imposes administrative expense and also diverts management’s time and attention from revenue-generating activities to compliance activities, which could have a material adverse effect on its business, financial condition and results of operations.

Item 1. Business

Available Information

General information about the Company can be found on our website, www.nanomagic.com.

Item 1A. Risk Factors

Item 1B. Unresolved Staff Comments

Not applicable.

Item 1C. Cybersecurity

We rely on information technology systems and networks managed and maintained by independent third-parties. Our internal team responsible for cyber security monitors daily and weekly back-ups of our information to protect against data loss and minimize disruption to our operations in the event of a cybersecurity incident. Our systems are accessible by our employees and third parties as necessary and appropriate to perform services or otherwise do business with us, and we have implemented two-factor identification for access to our systems. As part of our risk management, we provide regular training and reminders to our associates and third parties using our systems to avoid cybersecurity incidents. Our Board receives regular updates on cybersecurity systems as part of each management report.

Item 2. Properties.

We lease our headquarters and the office, warehouse, manufacturing and laboratory space in Madison Heights, Michigan. These facilities are adequate for our current needs.

Item 3. Legal Proceedings.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Our common stock, $0.0001 par value, trades on the OTC system under the symbol “NMGX”. The following table sets forth, on a per share basis for the periods indicated, the high and low sale prices for the common stock as reported by that system. These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

			High		~~High~~		Low		~~Low~~
	2021		First Quarter		$	1.00			$	0.0151
2022		First Quarter	$	0.20			$	0.16
		Second Quarter	~~Second Quarter~~$	0.25	$	~~1.00~~	$	0.20	$	~~0.0005~~
		Third Quarter	~~Third Quarter~~$	0.48	$	~~.002~~	$	0.05	$	~~0.0001~~
		Fourth Quarter	~~Fourth Quarter~~$	0.26	$	~~1.50~~	$	0.05	$	~~0.0001~~
	2022		First Quarter		$	0.20			$	0.16
2023		First Quarter	$	0.25			$	0.25
		Second Quarter	~~Second Quarter~~$	1.06	$	~~0.25~~	$	0.25	$	~~0.20~~
		Third Quarter	~~Third Quarter~~$	1.15	$	~~0.48~~	$	0.66	$	~~0.05~~
		Fourth Quarter	~~Fourth Quarter~~$	0.89	$	~~0.26~~	$	0.57	$	~~0.05~~

As of ~~April~~March 1029, ~~2023~~2024, the closing sale price for our common stock as reported on the OTCQB system was $0.2540 per share. As of that date, there were approximately ~~357~~436 shareholders of record for our common stock. This does not include beneficial owners holding common ~~stock~~ stock in street name in brokerage accounts. As of our last record of total shareholders, including those holding stock in street name, there were approximately 3,460 shareholders.

Cash Dividends

We have never paid cash dividends on our common stock, have no plans to pay any dividends, and it is unlikely that we will pay any dividends in the foreseeable future. We currently intend to invest future earnings, if any, to finance expansion of our business. Any payment of cash dividends in the future will be dependent upon our earnings, financial condition, capital requirements, and other factors determined by our board of directors.

Recent Issuance of Unregistered Securities

OnSales ~~February 16, 2021, the Company sold to Magic Growth 2 LLC, 769,231 shares~~ of ~~common stock for proceeds of $961~~Stock,~~538~~ ~~and~~Warrants warrants to purchase up to 769,225 shares of common stock for proceeds of $38,463. The warrants are exercisable at any time during the four years after date of issue at a warrant exercise price of $2.00 per share. PEN Comeback Management, LLC, owned by Tom J. Berman and ~~Ronald~~Convertible ~~J. Berman, is the sole voting member of Magic Growth 2 LLC.~~Notes

On March 2, 2021, we issued an aggregate of 37,890 shares of common stock to our directors as compensation to them for service on our Board. These shares were valued on that date at $0.95 per share based on the quoted price of the stock for a total value of $36,000.

On March 17, 2021, the Company sold to Magic Growth 2 LLC, 385,231 shares of common stock for proceeds of $481,539 and warrants to purchase up to 385,225 shares of common stock for proceeds of $19,260. The warrants are exercisable at any time during the four years after date of issue at a warrant exercise price of $2.00 per share.

On December 15, 2021, we issued an aggregate of 45,333 shares of common stock to our directors as compensation to them for service on our Board. These shares were valued on that date at $0.75 per share for a total value of $34,000.

On January 7, 2022, and again on February 14, 2022, the Company sold to several investors an aggregate of $200,000 convertible promissory notes due March 31, 2026. Issued at face value, the notes bear interest at 8% per annum, payable semi-annually in cash. The notes are convertible at any time at the option of the holder into shares of common stock at a conversion price of $1.75 per share.

On January 11, 2022, the Company sold to Magic Growth 3 LLC 222,223 shares of common stock for proceeds of $388,887 and warrants to purchase up to 222,195 shares of common stock for proceeds of $11,114. The warrants are exercisable at any time during the four years after date of issue at a warrant exercise price of $1.75.

On February 22, 2022, the Company sold to Magic Growth 3 LLC 152,778 shares of common stock for proceeds of $267,362 and warrants to purchase up to 152,770 shares of common stock for proceeds of $7,638. The warrants are exercisable at any time during the four years after date of issue at a warrant exercise price of $1.75.

On April 14, 2022, the Company sold to Magic Growth 3 LLC 69,445 shares of common stock for proceeds of $121,529 and warrants to purchase up to 69,425 shares of common stock for proceeds of $3,471. The warrants are exercisable at any time during the four years after date of issue at a warrant exercise price of $2.25.

On May 27, 2022, the Company sold to Magic Growth 3 LLC 213,889 shares of common stock for proceeds of $374,305 and warrants to purchase up to 213,885 shares of common stock for proceeds of $10,694. The warrants are exercisable at any time during the four years after date of issue at a warrant exercise price of $2.25.

On July 27, 2022, and again on August 22, 2022, the Company sold to several investors an aggregate of $100,000 convertible promissory notes due March 31, 2026. Issued at face value, the notes bear interest at 8% per annum, payable semi-annually in cash. The notes are convertible at any time at the option of the holder into shares of common stock at a conversion price of $1.75 per share.

On August 29, 2022, the Company sold to Magic Growth 3 LLC 69,445 shares of common stock for proceeds of $121,529 and warrants to purchase up to 69,425 shares of common stock for proceeds of $3,471. The warrants are exercisable at any time during the four years after date of issue at a warrant exercise price of $2.25.

On October 26, 2022, the Company sold to an investor a $25,000 convertible promissory note due October 31, 2023. On October 18, 2023, the maturity date of this note was extended to October 31, 2024. Issued at face value, the note bears interest at 8% per annum, payable semi-annually in cash. The notes are convertible at any time at the option of the holder into shares of common stock at a conversion price of $1.75 per share.

On October 31, 2022, the Company sold to Magic Growth 3 LLC 13,889 shares of common stock for proceeds of $24,306 and warrants to purchase up to 13,885 shares of common stock for proceeds of $694. The warrants are exercisable at any time during the four years after date of issue at a warrant exercise price of $2.25.

InBetween December 19, 2022 and December 22, 2022, the Company sold 102,082 shares of common stock to ~~individual,~~ accredited investors for aggregate proceeds of $127,603 and sold to those investors warrants to purchase up to 101,875 shares of common stock for proceeds of $2,037. The warrants are exercisable at any time during the four years after date of issue at a warrant exercise price of $1.75.

On December 6, 2022, we issued an aggregate of 176,000 shares of common stock to our directors as compensation to them for service on our Board. These shares were valued on that date at $0.75 per share for a total value of $132,000.

On December 18, 2022, the Company sold to an investor a $50,000 convertible, secured promissory note due June 17, 2024. Issued at face value, the note bears interest at 8% per annum accrued during the term of the loan, payable on maturity. The note is convertible at any time at the option of the holder into shares of common stock at a conversion price of $1.75 per share.

In January 2023, the Company sold 15,749 shares of common stock to an individual, accredited investor for proceeds of $19,686 and sold to that investor warrants to purchase up to 15,688 shares of common stock for proceeds of $314. The warrants are exercisable at any time during the four years after date of issue at a warrant exercise price of $1.75.

InOn ~~February~~March 27, 2023, wethe ~~reached~~Company ~~agreement~~sold ~~with~~19,686 ~~the~~shares ~~landlord~~of common stock to an accredited investor for proceeds of ~~our~~$24,607 ~~Michigan~~and ~~facility~~sold to ~~accept~~that investor ~~$66~~warrants to purchase up to 19,~~000~~625 ~~worth~~shares of ~~our~~ common stock at afor ~~price~~proceeds of $1393.25 ~~per~~On ~~share~~March as23, ~~partial~~2023, ~~payment~~the Company sold 39,371 shares of ~~rent~~common stock to an individual, accredited investor for proceeds of $49,214 and sold to that investor warrants to purchase up to 39,313 shares of common stock for proceeds of $786. All these warrants are exercisable at any time during the ~~six-month~~four ~~period~~years ~~from~~after date ~~October~~of ~~2022~~issue ~~through~~at ~~March~~a ~~2023~~warrant exercise price of $1.75.

On ~~March~~the ~~23,~~dates ~~2023,~~indicated below the Company sold ~~39,371 shares of~~ common stock to ~~an individual,~~ accredited ~~investor~~investors for ~~proceeds~~the ofcash ~~$49,214~~proceeds ~~and~~indicated ~~sold to~~in ~~that~~the ~~investor warrants to purchase up to 39,313 shares of common stock for proceeds of $786~~chart. The ~~warrants~~sale ~~are exercisable at any time during the four years after date~~ of ~~issue~~these atsecurities adid ~~warrant~~not ~~exercise~~include ~~price of $1~~warrants.~~75.~~

Date of sale	Shares sold		Cash proceeds
April 8, 2023		333,333	$	250,000
April 27, 2023		57,143	$	100,000
July 25, 2023		133,333	$	100,000
August 23, 2023		266,666	$	200,000
August 24, 2023		66,666	$	50,000
August 31, 2023		33,333	$	25,000
September 19, 2023		33,333	$	25,000
October 16, 2023		13,333	$	10,000
October 26, 2023		13,333	$	10,000
November 6, 2023		133,333	$	100,000
November 7, 2023		39,999	$	30,000
November 16, 2023		133,333	$	100,000
November 21, 2023		485,000	$	363,751
November 24, 2023		266,667	$	200,000
March 7, 2024		6,667	$	5,000
March 14, 2024		66,667	$	50,000

On June 16, 2023, the Company issued a note at face value of $50,000 and sold that investor, for a price of $0.02 per warrant, warrants to purchase up to 10,000 shares of common stock at an exercise price of $1.75.

On July 24, 2023 and on November 2, 2023, the Company sold at face amount convertible notes in the amount $50,000 each. The notes bear interest at 8% per year, and are convertible into common stock at a conversion price of $1.25 per share at the option of the holder.

The issuances of all shares described in this section were exempt from registration under the Securities Act of 1933, as amended, in reliance on Section 4(a)(2).

Common Stock Issued for Services

In February 2023, we reached an agreement with the landlord of our Michigan facility to accept 52,800 shares of our common stock at a price of $1.25 per share as partial payment of rent for the six-month period from October 2022 through March 2023. Those shares were issued in March, 2023.

In May 2023, we reached a further agreement with the landlord that calls for us to pay cash each month to cover the cost of the mortgage and the lease for the lighting fixtures, but that will allow us to pay the balance of the rent by issuing shares of our stock valued at $0.75 per share. We have the option to continue to use stock to pay a portion of the rent through 2024. On October 16, 2023, the Company issued 52,800 shares of common stock to its landlord in Michigan in partial payment of rent. In December 2023, the Company issued an additional 81,392 shares in partial payment of rent.

On May 30, 2023, the Company issued 76,922 shares of restricted common stock to a consultant as compensation for services. The shares are subject to forfeiture until vested. So long as the consulting services agreement remains in effect 4,273 shares vested in May for prior service, and another 4,273 shares vest at the end of May and each calendar month thereafter, with 4,277 shares vesting in December 2023. During 2024, 3,205 shares will vest at the end of each month, with 3,206 shares vesting at the end of December 2024.

In August 2023, the Company issued to each of three individuals who are serving on its advisory committee a total of 38,460 shares of restricted stock for their services during 2023, for an aggregate of 115,380 shares of restricted stock. All shares vest ratably by December 31, 2023.

On December 5, 2023, the Board determined to pay accrued fees due to the directors in shares of common stock and we issued an aggregate of 240,006 shares to present and former directors for service during 2023. All these shares were issued based on a value of $0.65 for a total value of $156,000.

The issuances of all shares described in this section were exempt from registration under the Securities Act of 1933, as amended, in reliance on Section 4(a)(2).

Stock Options

In ~~connection~~May ~~with~~2023, the ~~three~~Board granted options with a four-year ~~extension~~term at an exercise price of ~~the~~$0.65, ~~contract~~to ~~with~~purchase up to 100,000 shares to our CFO, ~~President~~Leandro Vera, for prior services rendered, and ~~Chief~~to ~~Executive~~Ronald ~~Officer~~J. Berman options to purchase up to 50,000 heshares. ~~was~~Options with those terms were also granted as compensation for services to be rendered in 2023, vesting in monthly increments, an ~~option~~aggregate onof 60,000 ~~March~~each 3to Mr. Vera and to Jeanne Rickert, ~~2021~~our General Counsel, and 45,000 to Ronald J. Berman. Tom J. Berman, our President and CEO, was also granted an option to purchase up to ~~2,350,000~~an ~~shares~~aggregate of ~~common~~69,228 ~~stock~~shares, atvesting anin ~~exercise~~monthly ~~price~~increments, in lieu of ~~$0.75.~~cash ~~Vesting~~for isa portion asof ~~follows:~~his salary.

The right to purchase:	Consisting of:	Vesting:
Tranche 1	150,000 Option Shares	Vested on June 30, 2021
Tranche 2	150,000 Option Shares	Vested on December 31, 2021
Tranche 3	150,000 Option Shares	Vested on June 30, 2022
Tranche 4	150,000 Option Shares	Vested on December 31, 2022
Tranche 5	150,000 Option Shares	Will vest on June 30, 2023
Tranche 6	150,000 Option Shares	Will vest on December 31, 2023
Tranche 7	Up to 150,000 Option Shares	Forfeited because sales bonus for 2021 did not reach cap
Tranche 8	Up to 150,000 Option Shares	Forfeited because sales bonus for 2022 did not reach cap
Tranche 9	Up to 150,000 Option Shares	Will vest if the aggregate sales bonus payable for 2023 exceeds $300,000
Tranche 10	Up to 1 million Option Shares	If a profit bonus is payable under the employment contract and the Board determines to pay some or all of it with options, the number vested as determined by the Board

In addition to the options described above that were not under the 2021 Equity Incentive Plan, additional options were granted to employees and consultants during 2023 that are reflected in the table below.

On March 2, 2021, we granted an option to Ronald J. Berman as part of his consulting contract. Based on sales revenue in 2021, he vested in options to purchase 37,500 shares at an exercise price of $0.75 and the balance of the option was forfeited. Mr. Berman is a director and is the father of our President, Tom J. Berman.

In December 2022, the options held by Tom Berman and Ron Berman were amended so that, in the event of their death or disability, their personal representative has the same rights as the original holder to exercise the vested options during their term.

On March 2, 2021, our Board adopted the Nano Magic 2021 Equity Incentive Plan described below.

On August 10, 2021 we issued the option to purchase up to 100,000 shares that had been approved by the Board in May, 2021 in connection with a consulting agreement. No options have been included in diluted earnings per share as they would be anti-dilutive.

Issuer Purchases of Equity Securities

Neither we nor any of our affiliates have engaged in any purchases of our equity securities during the periods discussed in this Report.

Equity Compensation Plan Information

The table below sets out as of December 31, ~~2022~~2023 the number of securities to be issued upon the exercise of outstanding options, warrants and rights (column (a)), the weighted average exercise price of those options, warrants and rights (column (b)), and the number of securities remaining available for future issuance under the plan (other than the securities to be issued upon the exercise of the outstanding options, warrants and rights) (column (c)). The options to officers and directors were not granted under any equity plan.

Plan (none of which have been approved by security holders)	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights ($)		Number of securities remaining available for future issuance under equity compensation plans
	(a)		(b)		(c)
2012 Equity Incentive Plan (1)		838	$	13.79
2015 Equity Incentive Plan (1)		50,000	$	0.65		-
2015 Equity Incentive Plan (2)		50,000		0.65		-
2021 Equity Incentive Plan		369,185		0.70		226,625
2021 Equity Incentive Plan		172,653		0.78		240,547
Options granted to Tom J. Berman (2)		1,449,228		0.68		-
Option granted to Tom J. Berman (3)		450,000		0.55		-
Options granted to Ronald J. Berman (3)		132,500		0.68		-
Option granted to Tom J. Berman (3)		2,050,000		0.75		-
Options granted to law firm (3)		49,570		0.01
Option granted to Ronald Berman (3)		37,500		0.75		-
Option granted to Leandro Vera (3)		160,000		0.65		-
Total		2,760,991	$	0.72		240,547
Option granted to Jeanne Rickert (3-2)		60,000		0.65
Total		2,270,483	$	0.67		226,625

	(1)	InThe ~~April~~2015 ~~2012,~~Equity ~~the~~Incentive ~~Company’s~~Plan was adopted by the Board ofon ~~Directors~~November ~~established~~30, ~~the~~2015. ~~2012~~During ~~Equity~~2020, ~~Compensation~~50,000 options were granted under the Plan. ~~The~~In ~~Board~~2021, ~~has~~the Board terminated the ~~2012~~2015 Equity ~~Compensation~~ Plan and no new grants can be made under this Plan.
	(2)	~~The~~Of ~~2015~~this ~~Equity~~total, ~~Incentive~~450,000 ~~Plan~~were ~~was~~awarded ~~adopted~~as bypart ~~the~~of ~~Board~~his on2019 ~~November 30~~contract, ~~2015. During 2020~~900, ~~50,~~000 ~~options~~as ~~were~~part ~~granted~~of ~~under~~his ~~the Plan. In~~ 2021 contract, ~~the~~and ~~Board terminated~~ the ~~2015~~balance ~~Equity~~were ~~Plan~~awarded ~~and~~as nopart ~~new~~of ~~grants~~his ~~can~~salary, bein ~~made~~lieu ~~under~~of ~~this Plan~~cash.
	(3)	~~The~~Options ~~options~~were ~~granted~~awarded toin ~~Tom~~lieu J.of ~~Berman~~cash ~~and~~for ~~Ronald~~services ~~Berman are not granted under any equity plan~~rendered.

Item 6. [Reserved]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

The following is management’s discussion and analysis of certain significant factors that have affected our financial position and operating results during the periods included in the accompanying ~~consolidated~~ financial statements.

OVERVIEW

Nano Magic develops, commercializes and markets nanotechnology powered consumer and industrial cleaners and coatings to clean, protect, and enhance products for peak performance. Consumer products include lens and screen cleaners and coatings, anti-fog solutions, and household and automobile cleaners and protective coatings sold direct-to-consumer and in big box retail. Nano Magic also sells branded and private label cleaners and coatings into the optical, safety, and industrial channels. Our focus is to expand our direct-to-consumer sales through e-commerce and to grow sales to big box retailers. We continue to sell our consumer products directly to opticians and ophthalmologists and small optical retailers.

In December 2019, a novel strain of coronavirus disease (“COVID-19”) was first reported in Wuhan, China. Less than four months later, on March 11, 2020, the World Health Organization declared COVID-19 a pandemic. Disruptions to the economy, the supply chain and the labor force caused by the pandemic and government policies adopted to address the pandemic continue to have an effect on our business and the business of our suppliers and customers. For example, despite progress in our efforts to place Nano Magic products in big box retail and secured several national big box retail placements, these customers are also suffering from supply chain disruptions and their focus on their core business is delaying roll-out of some of our solutions. The Company experienced margin erosion as a result of government orders issued in response to the COVID-19 pandemic. Contributing factors included but were not limited to higher raw material prices, longer lead-times, and production delays.17

RESULTS OF OPERATIONS

The following comparative analysis on results of operations was based primarily on the comparative ~~consolidated~~ financial statements, footnotes and related information for the periods identified below and should be read in conjunction with the ~~consolidated~~ financial statements and the notes to those statements that are included elsewhere in this report. The results discussed below are for the years ended December 31, ~~2022~~2023 and ~~2021~~2022.

Comparison of Results of Operations for the Year Ended December 31, ~~2022~~2023 and ~~2021~~2022

Revenues

For the years ended December 31, ~~2022~~2023 and ~~2021~~2022, revenues were $2,~~577~~782,~~332~~390 and $42,~~313~~577,~~443~~332, respectively. For the year ended December 31, ~~2022~~2023, sales ~~decreased~~increased by $1205,~~736~~058,~~111,~~ or 408%, as compared to the year ended December 31, ~~2021~~2022. This ~~decrease~~increase is primarily driven by a ~~reduction~~increases in ~~high~~optical ~~anti-fog~~sales, ~~product shipments during COVID~~e-commerce, inand ~~particular~~sales ~~high~~to ~~demand~~retail ~~in the first half of 2021~~customers. Sales of private label and co-branded products to optical and industrial customers remain significant. We continue to focus to increase sales of our Nano Magic branded solutions by direct sales to consumers using e-commerce, and are expanding by placing products with pharmacies, big box stores and other retailer outlets. Revenue opportunities from those solutions has been delayed by the logistics and other supply chain issues those customers have been facing in their business.

Cost of ~~revenues~~sales

Cost of ~~revenues~~sales includes inventory costs, materials and supplies costs, internal labor and related benefits, subcontractor costs, depreciation, overhead and shipping and handling costs ~~incurred including costs related to government and private contracts in our Contract services segment~~.

For the year ended December 31, ~~2022~~2023, cost of ~~revenues~~ sales was $2,~~481~~418,~~110~~521 as compared to $2,~~651~~481,~~325~~110 for ~~2021~~2022, a decrease of $~~170~~62,~~215~~589 or 63%. Costs ~~remained~~containment ~~relatively~~efforts ~~high~~and ~~compared~~reduced toheadcount ~~the~~resulted in ~~revenue~~improvement ~~decrease~~despite ~~due primarily to~~ fixed costs, increased energy costs and inflation.

Gross profit and gross margin

For the year ended December 31, ~~2022~~2023, gross profit amounted to $96363,~~222~~869 as compared to $196,~~662,118~~222 for the year ended December 31, ~~2021~~2022, ~~a decrease~~an increase of $1267,~~565~~647,~~896,~~ or 94278%. The ~~decrease~~increase was due primarily to ~~the~~cost ~~sales~~containment ~~decrease, a higher proportion of sales through lower-margin channels,~~ and ~~fixed~~reduced ~~production expenses~~headcount. For the years ended December 31, ~~2022~~2023 and ~~2021~~2022, gross margins were 3 13.71% and 383.57%, respectively.

Other operating income

For the year ended December 31, ~~2022~~2023, other operating income totaled $9511,~~701~~ 420 as compared to $~~632~~95,~~069~~701 for the year ended December 31, ~~2021~~2022, a decrease of $~~536~~84,~~368~~281, or 8588%. The decrease was due primarily due to ~~the completion~~settlement ofincome ~~payments~~received ~~under~~in ~~a settlement agreement~~2022.

Operating expenses

For the year ended December 31, ~~2022~~2023, operating expenses decreased by $~~377~~329,~~258~~399, or 109% as compared to the year ended December 31, ~~2021~~2022. For the years ended December 31, ~~2022~~2023 and ~~2021~~2022, respectively, operating expenses consisted of the following:

	Year Ended December 31,
	2022		2021
	2023		2022
Selling and marketing expenses	$	~~389~~319,~~391~~370	$	~~161~~389,~~194~~391
Salaries, wages and related benefits		1864,~~520,970~~719		21,~~244~~314,~~832~~376
Research and development		16,777		34,875
Stock compensation expense		404,726		206,594
Professional fees		788,641		707,938
Research and development		47,440		16,777
General and administrative expenses		829,841		774,039
Professional fees		602,581		788,641
Total	$	3,545,620	$	3,922,878
General and administrative expenses		977,385		829,841
Total	$	3,216,221	$	3,545,620

● For the year ended December 31, 2022, selling and marketing expenses increased by $228,197, or 142%, as compared to the year ended December 31, 2021. The increase was primarily attributable to attendance at trade shows and brand marketing activities designed to increase sales channels and market penetration. ● For the year ended December 31, 2022, salaries, wages and related benefits decreased by $723,862 or 32%, as compared to the year ended December 31, 2021. This was due to the need for fewer personnel due to lower sales and to cost-cutting efforts. ● For the year ended December 31, 2022, research and development costs decreased by $18,098, or 52%, as compared to the year ended December 31, 2021, driven by a reduction in R&D projects. ● For the year ended December 31, 2022, professional fees increased by $80,703, or 11%, as compared to the year ended December 31, 2021, primarily driven by increased third-party legal fees and the assistance of sales consultants. ● For the year ended December 31, 2022, general and administrative expenses increased by $55,802, or 7%, as compared to the year ended December 31, 2021 primarily due to general rate increases and inflation.

	●	For the year ended December 31, 2023, selling and marketing expenses decreased by $70,021, or 18%, as compared to the year ended December 31, 2022. The decrease was primarily attributable to reduced direct to consumer brand marketing and more cost-effective trade show exhibits.

	●	For the year ended December 31, 2023, salaries, wages and related benefits decreased by $449,657 or 34%, as compared to the year ended December 31, 2022. This was due to reduced headcount and use of options in lieu of cash for some employees.

	●	For the year ended December 31, 2023, stock compensation expense increased by $198,132, or 96%, as compared to the year ended December 31, 2022 due primarily to options granted to employees and consultants.
	●	For the year ended December 31, 2023, research and development costs increased by $30,663, or 183%, as compared to the year ended December 31, 2022, due primarily to consultant expense and product development expenses.

	●	For the year ended December 31, 2023, professional fees decreased by $186,060, or 24%, as compared to the year ended December 31, 2022, primarily driven by reduced legal fees.

	●	For the year ended December 31, 2023, general and administrative expenses increased by $147,544, or 18%, as compared to the year ended December 31, 2022 primarily due to increased reserve for credit losses based on aging of receivables.

Loss from operations

As a result of the factors described above, for the year ended December 31, ~~2022~~2023, loss from operations amounted to $32,~~353~~840,~~697~~932 as compared to a loss from operations of $13,~~628~~353,~~691~~697 for the year ended December 31, ~~2021~~2022, ana ~~increase~~decrease of $1512,~~725,006~~765 or ~~106~~15%.

Other expense (income)

For the year ended December 31, ~~2022~~2023, total other ~~income~~expense amounted to $~~102~~14,~~583~~787 as compared to other income of $~~113~~102,~~173~~583 for the year ended December 31, ~~2021~~2022, a decrease of $10117,~~590~~370 or 9114%. The change is primarily due to a government grant for employee-retention tax credits recognized in 2022 as well as reduced income from investment in subsidiary of $57,289, offset by an increase in interest expense for the year ended December 31, 2022 as compared to the same period in 2021, and a loan forgiveness of $130,900 in 2021 that did not reoccur in 2022.

Loss from continuing operations

For the year ended December 31, ~~2022~~2023, loss from continuing operations amounted to $32,~~251~~855,~~114~~719 as compared to a loss from continuing operations of $13,~~515~~251,~~518~~114 for the year ended December 31, ~~2021~~2022, a andecrease ~~increase~~ of $1395,~~735,596~~395 or ~~115~~12%.

Income (loss) from discontinued operations

For the year ended December 31, ~~2022~~2023, income from discontinued operations was $0, as compared to a gain from discontinued operations of $1,149,525 for the year ended December 31, 2022, comprised of $1,300 income plus a gain on sale of discontinued operations of $1,148,225~~, as compared to a loss from discontinued operations of $59,046 for the year ended December 31, 2021~~.

Net loss

As a result of the foregoing, for the year ended December 31, ~~2022~~2023 our net loss amounted to $2,~~101~~855,~~589~~719 as compared to a net loss of $12,~~574~~101,~~564~~ 589 for the year ended December 31, ~~2021~~2022, an increase in losses of $~~527~~754,~~025~~130 or 3336%.

For the years ended December 31, ~~2022~~2023 and ~~2021~~2022, net losses from continuing operations amounted to $0.3225 and $0.1632 per common share (basic and diluted), respectively. For the years ended December 31, ~~2022~~2023 and ~~2021~~2022, net income ~~and~~from ~~(loss) for~~ discontinued operations amounted to $0~~.11~~ and $(0.~~01)~~11 per common share (basic and diluted), respectively.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is the ability of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had a working capital balance of $~~524~~454,~~389~~969 and unrestricted cash of $~~259~~527,~~223~~462 as of December 31, ~~2022~~2023.

The following table sets forth a summary of changes in our working capital from continuing operations for the period from December 31, ~~2022~~ 2023 to December 31, ~~2021~~2022:

December 31, 2022

December 31, 2021

Dollar Change

Percentage Change

December 31, 2023

December 31, 2022

Dollar Change

Percentage Change

Working capital:

Total current assets

1,~~900~~699,~~858~~821

21,~~082~~900,~~293~~858

(~~181~~201,~~435~~037

)

(810.7158

Total current liabilities

1,~~376~~244,~~469~~852

~~577~~1,~~769~~376,469

~~798~~(131,~~700~~617

)

~~138~~(9.2456

Working capital:

~~524~~454,~~389~~969

~~1,504,~~524,389

(~~980~~69,~~135~~420

)

(6513.1524

The decrease in current assets reflects decreases in accounts receivable, prepaids, and inventory balances, offset by an increase in cash. The increase in current liabilities is primarily due to increases in accounts payable and accrued expenses.

Net cash used by operating activities was $1,~~708~~537,~~365~~ 468 for the year ended December 31, ~~2022~~2023 as compared to net cash used by operating activities of $1,~~377~~708,~~056~~365 for the year ended December 31, ~~2021~~ 2022, ana ~~increase~~decrease of $~~331~~170,~~309~~897, or 2410%. Net cash used by operating activities reflects a net loss of $32,~~251~~855,~~114~~719, partially offset by the add-back of non-cash items totaling $~~555~~1,~~827~~286,581 and changes in operating assets and liabilities of $131,~~059,167~~670. Net cash used by continuing operations for the years ended December 31, ~~2022~~2023 and ~~2021~~2022 totaled $1,~~636~~537,~~120~~468 and $1,~~282~~636,~~553~~120, respectively. Net cash used by discontinued operations for the years ended December 31, ~~2022~~2023 and ~~2021~~2022 totaled $~~72,245~~0 and $9472,~~503~~245, respectively.

We have worked over the last several quarters to reduce our costs and conserve cash. Our common stock suffered an extended period with no market makers and the caveat emptor designation on the OTC market, that made it ~~increasingly~~ difficult to raise additional capital. Since early March 2023, we have had market makers for our stock, and ~~are~~later ~~working~~that toyear ~~remove~~the OTC removed the caveat emptor warning on our shares. WeIn ~~expect~~September 2023, towe ~~need~~resumed ~~additional~~quotation ~~capital in~~on the ~~next quarter~~OTCQB.

Net cash provided by investing activities was $2035,~~090~~648 for the year ended December 31, ~~2022~~2023 as compared to net cash used in investing activities of $~~127~~20,~~257~~090 for the year ended December 31, ~~2021~~2022.

Net cash provided by financing activities was $1,~~705~~770,~~024~~059 for the year ended December 31, ~~2022~~2023 as compared to $1,~~458~~705,~~653~~024 for the year ended December 31, ~~2021. The increase was primarily attributed to proceeds from the issuance of convertible debt in~~ 2022.

CRITICAL ACCOUNTING POLICIES

Our critical accounting policies are included in Note 2 - Significant Accounting Policies of our ~~consolidated~~ financial statements included within this Report.

RECENT ACCOUNTING PRONOUNCEMENTS

Recently issued accounting standards are included in Note 2 - Significant Accounting Policies of our ~~consolidated~~ financial statements included within this Report.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Not Applicable.

1920

Item 8. Financial Statements and Supplementary Data.

NANO MAGIC INC. ~~AND SUBSIDIARIES~~

INDEX TO ~~CONSOLIDATED~~ FINANCIAL STATEMENTS

December 31, ~~2022~~2023 and ~~2021~~2022

TABLE OF CONTENTS

Report of Independent Registered Public Accounting Firm PCAOB ID NO: 1195	2122
Consolidated Financial Statements:
Financial Statements:
Consolidated Balance Sheets as of December 31, 2022 and 2021	23
Balance Sheets as of December 31, 2023 and 2022	24
Consolidated Statements of Operations for the Years Ended December 31, 2022 and 2021	24
Statements of Operations for the Years Ended December 31, 2023 and 2022	25
Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Years Ended December 31, 2022 and 2021	25
Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2023 and 2022	26
Consolidated Statements of Cash Flows for the Years Ended December 31, 2022 and 2021	26
Statements of Cash Flows for the Years Ended December 31, 2023 and 2022	27
Notes to Consolidated Financial Statements	27
Notes to Financial Statements	28

2021

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of

Nano Magic Inc.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Nano Magic Inc. (the “Company”) as of December 31, ~~2022~~2023 and ~~2021~~2022, and the related statements of operations, stockholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2022~~2023 and ~~2021~~2022, and the results of its operations and its cash flows for the ~~years~~ years then ended, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has recurring losses from operations, negative cash flow from operations, and an accumulated deficit. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustment that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

2122

To the Shareholders and Board of Directors of

Nano Magic Inc.

Page Two

Critical Audit ~~Matter~~Matters

The critical audit ~~matter~~matters communicated below isare amatters ~~matter~~ arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit ~~matter~~matters below, providing separate opinions on the critical audit ~~matter~~matters or on the accounts or disclosures to which they related.

Critical Audit Matter – Going Concern Assessment

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company suffered recurring losses from operations and negative cash flows from operations and expects to continue to incur losses for at least the next twelve months. This matter is also described in the “Emphasis of Matter – Substantial Doubt about the Company’s Ability to Continue as a Going Concern” section of our report.

We identified management’s judgements and assumptions used to assess the Company’s ability to continue as a going concern as a critical audit matter due to inherent complexities and uncertainties related to the Company’s projections of operations. Auditing these judgements and assumptions involved especially challenging auditor judgement due to the nature and extent of audit evidence and effort required to address these matters.

How the Critical Audit Matter Was Addressed in the Audit

The primary procedures we performed to address this critical audit matter included the following: (1) evaluating management’s assessment and assessing the reasonableness of key assumptions underlying management’s conclusion, (2) evaluating the probability that the Company will be able to reduce operating expenditures or raise additional capital if required, (3) assessing management’s plans in the context of other audit evidence obtained during the audit to determine whether it supported or contradicted the conclusions reached by management.

Critical Audit Matter – Going Concern Assessment - Reserve for Slow Moving, Excess and Obsolete Inventory

As described in Note 2 to the financial statements, management periodically performs obsolescence reviews on slow-moving and excess inventories, and reserves are established based on current assessments about future demands and market conditions. Management determines the reserve percentages based on an analysis of annual inventory movement, historical sales levels and future sales forecasts anticipated for inventory items by product type. The Company’s inventory balance was $1,181,273 as of December 31, 2023, which was reduced by a reserve for slow moving, excess and obsolete inventory of $331,505.

The principal considerations for our determination that performing procedures relating to the reserve for slow moving, excess, and obsolete inventory is a critical audit matter are (i) the significant judgment by management when developing the reserve and (ii) a high degree of auditor judgment, subjectivity and effort in performing procedures and evaluating management’s significant assumptions related to stocking levels, historical sales levels, and future sales forecasts impacting the determination of the reserve percentages.

How the Critical Audit Matter Was Addressed in the Audit

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements. These procedures included, among others (i) testing management’s process for developing the reserve; (ii) evaluating the appropriateness of the analysis performed by management; (iii) testing the completeness and accuracy of the underlying data used in the analysis; and (iv) evaluating the reasonableness of the significant assumptions used by management related to annual inventory movement, historical sales levels, and future sales forecasts. Evaluating management’s assumptions related to annual inventory movement, historical sales levels, and future sales forecasts involved considering (i) the consumption and use of inventory in previous periods; (ii) changes in market conditions; and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit.

/s/ UHY LLP

We have served as the Company’s auditor since 2019.

UHY LLP

Sterling Heights, Michigan

April 112, ~~2023~~2024

NANO MAGIC INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	December 31			December 31
	2022			2021
ASSETS
CURRENT ASSETS:
Cash	$	259,223		$	197,932
Accounts receivable, net		348,565			293,229
Inventory, net		1,120,073			1,379,005
Prepaid expenses		132,997			212,127
Current portion of note receivable		40,000			-
Current assets of discontinued operations		-			74,373
Total Current Assets		1,900,858			2,156,666
Operating lease right-of-use assets		1,037,749			1,219,061
Property, plant and equipment, net		525,809			633,187
Note receivable, non-current		375,983			-
Non-marketable equity investment in subsidiary		250,146			-
Non-current assets of discontinued operations		-			97,687
Total Assets	$	4,090,545		$	4,106,601
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	762,524		$	174,156
Accounts payable - related parties		87,119			21,066
Accrued expenses and other current liabilities		276,132			57,040
Current portion of notes payable		26,629			-
Current portion of finance leases		39,005			87,567
Advances from related parties		42,887			113,952
Current portion of operating lease liabilities		142,173			123,988
Current liabilities of discontinued operations		-			575,770
Total Current Liabilities		1,376,469			1,153,539
Notes payable, net of current portion		350,000			-
Finance leases, net of current portion		24,194			61,045
Operating lease liabilities, net of current portion		722,420			864,593
Non-current liabilities of discontinued operations		-			111,607
Total Liabilities		2,473,083			2,190,784
Commitments and Contingencies (See Note 15)		-			-
STOCKHOLDERS’ EQUITY:
Preferred stock, $0.0001 par value, 100,000 shares authorized; no shares issued and outstanding		-			-
Common stock: $0.0001 par value, 30,000,000 shares authorized; 10,722,431 and 9,702,680 issued and outstanding at December 31, 2022 and 2021, respectively		1,072			970
Additional paid-in capital		13,763,143			11,960,011
Accumulated deficit		(12,146,753	)		(10,045,164	)
Total Stockholders’ Equity		1,617,462			1,915,817
Total Liabilities and Stockholders’ Equity	$	4,090,545		$	4,106,601

See accompanying notes to consolidated financial statements.

NANO MAGIC INC. ~~AND SUBSIDIARIES~~

~~CONSOLIDATED STATEMENTS~~BALANCE ~~OF OPERATIONS~~SHEETS

	2022			2021
	December 31			December 31
	For the Years Ended
	2023			2022
	December 31,
ASSETS
	2022			2021
CURRENT ASSETS:
NET REVENUES	$	2,577,332		$	4,313,443
Cash	$	527,462		$	259,223
COST OF SALES		2,481,110			2,651,325
Accounts receivable, net of allowance for credit losses of $150,300 and $29,375 at December 31, 2023 and December 31, 2022, respectively		209,057			348,565
GROSS PROFIT		96,222			1,662,118
Inventory, net		849,764			1,120,073
OTHER OPERATING INCOME		95,701			632,069
Prepaid expenses		63,538			132,997
OPERATING EXPENSES:
Current portion of note receivable		50,000			40,000
Selling and marketing expenses		389,391			161,194
Total Current Assets		1,699,821			1,900,858
Salaries, wages and related benefits		1,520,970			2,244,832
Operating lease right-of-use assets		845,563			1,037,749
Research and development		16,777			34,875
Property, plant and equipment, net		424,103			525,809
Professional fees		788,641			707,938
Note receivable, net of current position		291,782			375,983
General and administrative expenses		829,841			774,039
Non-marketable equity investment in subsidiary		253,835			250,146
Total Operating Expense		3,545,620			3,922,878
Total Assets	$	3,515,104		$	4,090,545
LOSS FROM OPERATIONS		(3,353,697	)		(1,628,691	)
LIABILITIES AND STOCKHOLDERS’ EQUITY
OTHER INCOME
CURRENT LIABILITIES:
Loan forgiveness		-			130,900
Accounts payable	$	593,338		$	762,524
Income from investment in subsidiary		57,289			-
Accounts payable - related parties		55,520			87,119
Government grant		61,448			-
Accounts payable		55,520			87,119
Interest expense		(33,767	)		(17,737	)
Accrued expenses and other current liabilities		245,398			276,132
Other income		17,613			10
Current portion of notes payable		121,610			26,629
Total Other Income		102,583			113,173
Current portion of finance leases		24,194			39,005
LOSS FROM CONTINUING OPERATIONS		(3,251,114	)		(1,515,518	)
Advances from related parties		42,887			42,887
INCOME (LOSS) FROM DISCONTINUED OPERATIONS
Current portion of operating lease liabilities		161,905			142,173
Income (loss) from discontinued operations		1,300			(59,046	)
Total Current Liabilities		1,244,852			1,376,469
Gain on sale of discontinued operations		1,148,225			-
Notes payable, net of current portion		375,000			325,000
NET INCOME (LOSS) FROM DISCONTINUED OPERATIONS		1,149,525			(59,046	)
Notes payable - related parties, net of current portion		25,000			25,000
NET LOSS	$	(2,101,589	)	$	(1,574,564	)
Notes payable, net of current portion		25,000			25,000
NET INCOME (LOSS) PER SHARE - BASIC:
Finance leases, net of current portion		-			24,194
Continuing operations	$	(0.32	)	$	(0.16	)
Operating lease liabilities, net of current portion		560,514			722,420
Discontinued operations	$	0.11		$	(0.01	)
Total Liabilities		2,205,366			2,473,083
NET INCOME (LOSS) PER SHARE - BASIC:	$	(0.21	)	$	(0.17	)
Commitments and Contingencies (See Note 14)		-			-
NET INCOME (LOSS) PER SHARE - DILUTED:
STOCKHOLDERS’ EQUITY:
Continuing operations	$	(0.32	)	$	(0.16	)
Preferred stock, $0.0001 par value, 100,000 shares authorized; no shares issued and outstanding		-			-
Discontinued operations	$	0.11		$	(0.01	)
Common stock: $0.0001 par value, 30,000,000 shares authorized; 13,425,342 and 10,722,431 issued and outstanding at December 31, 2023 and 2022, respectively		1,342			1,072
NET INCOME (LOSS) PER SHARE - DILUTED:	$	(0.21	)	$	(0.17	)
Additional paid-in capital		16,310,868			13,763,143
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Accumulated deficit		(15,002,472	)		(12,146,753	)
Basic		10,264,381			9,475,560
Total Stockholders’ Equity		1,309,738			1,617,462
Diluted		10,264,381			9,475,560
Total Liabilities and Stockholders’ Equity	$	3,515,104		$	4,090,545

See accompanying notes to ~~consolidated~~ financial statements.

NANO MAGIC INC. ~~AND SUBSIDIARIES~~

~~CONSOLIDATED~~ STATEMENTS OF ~~CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)~~OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2022 AND 2021

	2023			2022
	For the Years Ended
	December 31,
	2023			2022

NET REVENUES	$	2,782,390		$	2,577,332

COST OF SALES		2,418,521			2,481,110

GROSS PROFIT		363,869			96,222

OTHER OPERATING INCOME		11,420			95,701

OPERATING EXPENSES:
Selling and marketing expenses		319,370			389,391
Salaries, wages and related benefits		864,719			1,314,376
Stock compensation expense		404,726			206,594
Research and development		47,440			16,777
Professional fees		602,581			788,641
General and administrative expenses		977,385			829,841

Total Operating Expense		3,216,221			3,545,620

LOSS FROM OPERATIONS		(2,840,932	)		(3,353,697	)

OTHER (EXPENSE) INCOME
Income from investment in subsidiary		3,689			57,289
Interest expense		(44,461	)		(33,767	)
Government grant		-			61,448
Other income		25,985			17,613
Total Other (Expense) Income		(14,787	)		102,583

LOSS FROM CONTINUING OPERATIONS		(2,855,719	)		(3,251,114	)

INCOME FROM DISCONTINUED OPERATIONS
Income from discontinued operations		-			1,300
Gain on sale of discontinued operations		-			1,148,225

NET INCOME FROM DISCONTINUED OPERATIONS		-			1,149,525

NET LOSS	$	(2,855,719	)	$	(2,101,589	)

NET (LOSS) INCOME PER SHARE - BASIC:
Continuing operations	$	(0.25	)	$	(0.32	)
Discontinued operations	$	-		$	0.11
NET LOSS PER SHARE - BASIC:	$	(0.25	)	$	(0.21	)

NET (LOSS) INCOME PER SHARE - DILUTED:
Continuing operations	$	(0.25	)	$	(0.32	)
Discontinued operations	$	-		$	0.11
NET LOSS PER SHARE - DILUTED:	$	(0.25	)	$	(0.21	)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		11,481,547			10,264,381
Diluted		11,481,547			10,264,381

	Shares		Amount		Paid-in Capital		Deficit			Equity
	Class A Common Stock				Additional		Accumulated			Total Stockholders’
	Shares		Amount		Paid-in Capital		Deficit			Equity
Balance, December 31, 2020		8,459,995	$	846	$	9,867,174	$	(8,470,600	)	$	1,397,420
Common stock issued for cash, net of issuance costs		1,154,462		115		1,442,962		-			1,443,077
Common stock issued for services		88,223		9		74,991		-			75,000
Stock-based compensation		-		-		517,161		-			517,161
Warrants and options on private placement		-		-		57,723		-			57,723
Net loss		-		-		-		(1,574,564	)		(1,574,564	)
Balance, December 31, 2021		9,702,680	$	970	$	11,960,011	$	(10,045,164	)	$	1,915,817
Balance		9,702,680		970		11,960,011		(10,045,164	)		1,915,817
Common stock issued for cash, net of issuance costs		843,751		85		1,425,436		-			1,425,521
Common stock issued for services		176,000		17		131,983		-			132,000
Stock-based compensation		-		-		206,594		-			206,594
Warrants and options on private placement		-		-		39,119		-			39,119
Net loss		-		-		-		(2,101,589	)		(2,101,589	)
Balance, December 31, 2022		10,722,431	$	1,072	$	13,763,143	$	(12,146,753	)	$	1,617,462
Balance		10,722,431		1,072		13,763,143		(12,146,753	)		1,617,462

See accompanying notes to financial statements.

See accompanying notes to consolidated financial statements.

NANO MAGIC INC. ~~AND SUBSIDIARIES~~

~~CONSOLIDATED~~ STATEMENTS OF ~~CASH~~CHANGES ~~FLOWS~~IN STOCKHOLDERS’ EQUITY

~~The~~FOR ~~following~~THE ~~table~~YEARS ~~provides~~ENDED aDECEMBER ~~reconciliation~~31, of2023 ~~cash~~AND ~~and restricted cash reported within the consolidated balance sheet that sum to the total of the same such amounts shown in the consolidated statement of cash flows:~~2022

	2022			2021
	Shares			Amount			Capital		Deficit			Equity
	For the Years Ended
	Class A Common Stock						Additional Paid-in		Accumulated			Total Stockholders’
	December 31,
	Shares			Amount			Capital		Deficit			Equity
	2022			2021
Balance, December 31, 2021		9,702,680		$	970		$	11,960,011	$	(10,045,164	)		1,915,817
CASH FLOWS FROM OPERATING ACTIVITIES
Common stock issued for cash, net of issuance costs		843,751			85			1,425,436		-			1,425,521
Net loss from continuing operations	$	(3,251,114	)	$	(1,515,518	)
Common stock issued for services		176,000			17			131,983		-			132,000
Net income (loss) from discontinued operations		1,149,525			(59,046	)
Stock-based compensation		-			-			206,594		-			206,594
Adjustments to reconcile net loss to net cash provided by operating activities:
Warrants and options on private placement		-			-			39,119		-			39,119
Change in inventory obsolescence reserve		119,136			(48,924	)
Net loss		-			-			-		(2,101,589	)		(2,101,589	)
Depreciation and amortization expense		112,288			105,005
Balance, December 31, 2022		10,722,431			1,072			13,763,143		(12,146,753	)		1,617,462
Gain on forgiveness of loan		-			(130,900	)
Balance		10,722,431			1,072			13,763,143		(12,146,753	)		1,617,462
Bad debt expense		43,098			(18,251	)
Common stock issued for cash, net of issuance costs		2,083,611			208			1,657,050		-			1,657,258
Stock-based compensation		338,594			592,161
Common stock issued for services		426,998			43			322,605		-			322,648
Income from investment in subsidiary		(57,289	)		-
Restricted stock issued for services		192,302			19			126,589		-			126,608
Change in operating assets and liabilities:
Stock-based compensation		-			-			404,726		-			404,726
Accounts receivable		(46,006	)		923,441
Stock options issued for legal services		-			-			29,930		-			29,930
ERTC Receivable		(43,413	)		-
Warrants and options on private placement		-			-			6,825		-			6,825
Inventory		139,796			(488,388	)
Net loss		-			-			-		(2,855,719	)		(2,855,719	)
Prepaid expenses and contract assets		79,130			(22,363	)
Balance, December 31, 2023		13,425,342			1,342			16,310,868		(15,002,472	)		1,309,738
Accounts payable		588,366			(556,935	)
Balance		13,425,342			1,342			16,310,868		(15,002,472	)		1,309,738
Accounts payable - related party		66,053			(12,000	)
Operating lease liabilities		57,321			64,628
Accrued expenses		217,920			(174,508	)
Total adjustments		1,614,994			232,966
Net cash used by continuing operating activities		(1,636,120	)		(1,282,553	)
Net cash used by discontinued operating activities		(72,245	)		(94,503	)
NET CASH USED BY OPERATING ACTIVITIES		(1,708,365	)		(1,377,056	)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from note receivable		25,000			-
Purchases of property and equipment		(4,910	)		(127,014	)
Net cash provided (used) by continuing investing activities		20,090			(127,014	)
Net cash used by discontinued investing activities		-			(243	)
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES		20,090			(127,257	)
CASH FLOWS FROM CONTINUING FINANCING ACTIVITIES
Proceeds from sale of common stock and warrants		1,464,641			1,500,800
Proceeds from issuance of convertible debt		375,000			-
Repayment of bank loans		(37,452	)		(43,111	)
Repayment of finance leases		(46,100	)		(43,906	)
Repayment of advances from related parties		(71,065	)		(31,435	)
Net cash provided by continuing financing activities		1,685,024			1,382,348
Net cash provided by discontinued financing activities		20,000			76,305
NET CASH PROVIDED BY FINANCING ACTIVITIES		1,705,024			1,458,653
NET INCREASE (DECREASE) IN CASH		16,749			(45,660	)
CASH in continuing operations, beginning of year		197,932			260,145
CASH in discontinued operations, beginning of year		44,542			27,989
CASH, end of period	$	259,223		$	242,474
Less: CASH in discontinued operations, end of period	$	-		$	44,542
CASH in continuing operations, end of period	$	259,223		$	197,932
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest	$	33,767		$	17,737

See accompanying notes to ~~consolidated~~ financial statements.

NANO MAGIC INC. ~~AND SUBSIDIARIES~~

~~NOTES TO~~STATEMENTS ~~CONSOLIDATED~~OF ~~FINANCIAL~~CASH ~~STATEMENTS~~FLOWS

~~DECEMBER~~The ~~31,~~following ~~2022~~table ~~AND~~provides ~~2021~~a reconciliation of cash and restricted cash reported within the balance sheets that sum to the total of the same such amounts shown in the statements of cash flows:

	2023			2022
	For the Years Ended
	December 31,
	2023			2022

CASH FLOWS FROM OPERATING ACTIVITIES
Net loss used in continuing operations	$	(2,855,719	)	$	(3,251,114	)
Net income from discontinued operations		-			1,149,525
Adjustments to reconcile net loss to net cash used by operating activities:
Change in inventory obsolescence reserve		146,627			119,136
Depreciation and amortization expense		111,058			112,288
Bad debt expense		148,672			43,098
Stock-based compensation		404,726			206,594
Stock issued for services		479,186			132,000
Income from investment in subsidiary		(3,689	)		(57,289	)
Change in operating assets and liabilities:
Accounts receivable		(9,164	)		(46,006	)
ERTC Receivable		-			(43,413	)
Inventory		123,678			139,796
Prepaid expenses and contract assets		69,459			79,130
Accounts payable		(138,810	)		588,366
Accounts payable - related party		(31,598	)		66,053
Operating lease liabilities		50,012			57,321
Accrued expenses		(31,906	)		217,920
Total adjustments		1,318,251			1,614,994

Net cash used by continuing operating activities		(1,537,468	)		(1,636,120	)
Net cash used by discontinued operating activities		-			(72,245	)

NET CASH USED BY OPERATING ACTIVITIES		(1,537,468	)		(1,708,365	)

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from note receivable		45,000			25,000
Purchases of property and equipment		(9,352	)		(4,910	)

NET CASH PROVIDED BY INVESTING ACTIVITIES		35,648			20,090

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of common stock and warrants		1,664,083			1,464,641
Proceeds from issuance of convertible debt		147,857			375,000
Repayment of bank loans		(1,629	)		(37,452	)
Repayment of finance leases		(40,252	)		(46,100	)
Repayment of advances from related parties		-			(71,065	)
Net cash provided by continuing financing activities		1,770,059			1,685,024
Net cash provided by discontinued financing activities		-			20,000

NET CASH PROVIDED BY FINANCING ACTIVITIES		1,770,059			1,705,024

NET INCREASE IN CASH		268,239			16,749

CASH in continuing operations, beginning of year		259,223			197,932
CASH in discontinued operations, beginning of year		-			44,542

CASH, end of period	$	527,462		$	259,223

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period for interest	$	44,461		$	33,767

See accompanying notes to financial statements.

NANO MAGIC INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2023 AND 2022

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

Organization

Nano Magic Inc. (“we”, “us”, “our”, “Nano Magic” or the “Company”), a Delaware corporation, develops and sells a portfolio of nano-layer coatings, nano-based cleaners, and nano-composite products based on its proprietary technology. On December 31, 2022, our wholly-owned subsidiary Nano Magic LLC was merged into the parent company and we changed our name to Nano Magic Inc.

We develop, manufacture and sell consumer and institutional products using nanotechnology to deliver unique performance attributes at the surfaces of a wide variety of substrates. These products are marketed internationally primarily to customers in the optical industry.

Going Concern

These ~~consolidated~~ financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the ~~consolidated~~ financial statements, the Company had ~~losses~~net ~~from continuing operations~~ losses and net cash used by ~~continuing~~ operations of $32,~~251~~855,~~114~~719 and $1,~~636~~537,~~120~~468, respectively, for the year ended December 31, ~~2022~~2023. As indicated in the accompanying financial statements, the Company had positive working capital of $~~524~~454,~~389~~969, including $~~259~~527,~~223~~462 of cash at December 31, ~~2022~~2023. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these ~~consolidated~~ financial statements are issued. Management cannot provide assurance that the Company will ultimately achieve profitable operations, become cash flow positive or raise additional capital. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. They do not include any adjustments related to the recoverability and/or classification of the recorded asset amounts and/or the classification of the liabilities that might be necessary should the Company be unable to continue as a going concern.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of ~~consolidated~~ financial statements in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the ~~consolidated~~ financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates for the years ended December 31, ~~2022~~2023 and ~~2021~~2022 include estimates for allowance for doubtful accounts on accounts receivable, the estimates for obsolete inventory, the useful life of property and equipment, assumptions used in assessing impairment of long-term assets, estimates of current and deferred income taxes and deferred tax valuation allowances, the fair value of non-cash equity transactions, and the fair value of equity incentives.

Cash, Cash Equivalents and Restricted Cash

For purposes of the ~~consolidated~~ statements of cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money market accounts to be cash equivalents.

Accounts Receivable

The Company recognizes an allowance for credit losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. The expense associated with the allowance for ~~doubtful~~credit ~~accounts~~losses is recognized as general and administrative expense.

Inventory

Inventory is stated at the lower of cost or net realizable value. Cost is determined using the average cost method based on prices paid for inventory items. This valuation requires us to make judgments, based on currently available information, about the likely method of disposition, such as sales to individual customers and expected recoverable values.

Property and Equipment

Property and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives, which range from three to ten years. Leasehold improvements are depreciated over the shorter of the useful life or lease term including scheduled renewal terms. Maintenance and repairs are charged to expense as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in other income or expense in the year of disposition. The Company examines the possibility of decreases in the value of these assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.

Impairment of Long-Lived Assets

In accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not record any impairment charge for the year ended December 31, ~~2022~~2023 and ~~2021~~2022.

Leases

Operating leases are reflected on our balance sheet within operating lease Right-of-use (ROU) assets and the related current and non-current operating lease liabilities. ROU assets represent the right to use an underlying asset for the lease term, and lease liabilities represent the obligation to make lease payments arising from lease agreement. Operating lease ROU assets and liabilities are recognized at the commencement date, the date on which the lessor began making the underlying asset customizable for our use, based upon the present value of the lease payments over the respective lease term. Lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectation regarding the terms. Variable lease costs such as common area maintenance, property taxes and insurance are expensed as incurred.

Lease Term

The Company calculates the term for each lease agreement to include the noncancelable period specified in the agreement together with (1) the periods covered by options to extend the lease if the Company is reasonably certain to exercise that option, (2) periods covered by an option to terminate if the Company is reasonably certain not to exercise that option and (3) period covered by an option to extend (or not terminate) if controlled by the lessor.

The assessment of whether the Company is reasonably certain to exercise an option to extend a lease requires significant judgement surrounding contract-based factors, asset-based factors, entity-based factors and market-based factors.

Lease Payments

Lease payments consist of fixed payments, less any lease incentives paid or payable to the lessee related to the use of the underlying asset during the lease term.

Incremental Borrowing Rate

The ROU asset and related lease liabilities recorded based on the present value of the lease payments using (1) the rate implicit in the lease or (2) the rate of interest that a lessee would have to pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments in a similar economic environment.

Revenue Recognition

We adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”), effective January 1, 2018 using the modified retrospective method. ASC Topic 606 is a comprehensive revenue recognition model that requires revenue to be recognized when control of the promised goods or services are transferred to our customers at an amount that reflects the consideration that we expect to receive. The application of ASC Topic 606 requires us to use significant judgment and estimates. Application of ASC Topic 606 requires a five-step model applicable to all revenue streams as follows:

Identification of the contract, or contracts, with a customer

A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and identifies the payment terms related to these goods or services, (ii) the contract has commercial substance and, (iii) we determine that collection of substantially all consideration for goods or services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We apply judgment in determining the customer’s ability and intention to pay, which is based on a variety of factors including the customer’s historical payment experience or, in the case of a new customer, published credit and financial information pertaining to the customer.

Identification of the performance obligations in the contract

Performance obligations promised in a contract are identified based on the goods or services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the goods or service either on its own or together with other resources that are readily available from third parties or from us, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract.

When a contract includes multiple promised goods or services, we apply judgment to determine whether the promised goods or services are capable of being distinct and are distinct within the context of the contract. If these criteria are not met, the promised goods or services are accounted for as a combined performance obligation.

Determination of the transaction price

The transaction price is determined based on the consideration to which we will be entitled to receive in exchange for transferring goods or services to our customer. The Company generally ships products to customers and does not have multiple performance obligations in its revenue stream and therefore does not allocate transaction prices to multiple performance obligations. We estimate any variable consideration included in the transaction price using the expected value method that requires the use of significant estimates for discounts, cancellation periods, refunds and returns. Sales discounts applied on orders are treated as a reduction of revenues, as are any rebates provided under customer contracts.

Disaggregation of Revenue

A limited number of key customers historically accounted for a majority of our revenue. In ~~2022~~2023, ~~two~~one ~~customers~~customer accounted for 4441% of revenues. In ~~2021~~2022, ~~four~~two customers represented 5844% of revenue.

Principal versus Agent Considerations

When another party is involved in providing goods or services to our customer, we apply the principal versus agent guidance in ASC Topic 606 to determine if we are the principal or an agent to the transaction. When we control the specified goods or services before they are transferred to our customer, we report revenue gross, as principal. If we do not control the goods or services before they are transferred to our customer, revenue is reported net of the fees paid to the other party, as agent. Our evaluation to determine if we control the goods or services within ASC Topic 606 includes the following indicators:

We are primarily responsible for fulfilling the promise to provide the specified good or service.

When we are primarily responsible for providing the goods and services, such as when the other party is acting on our behalf, we have indication that we are the principal to the transaction. We consider if we may terminate our relationship with the other party at any time without penalty or without permission from our customer.

We have inventory risk before the specified good or service has been transferred to a customer or after transfer of control to the customer.

We may commit to obtaining the services of another party with or without an existing contract with our customer. In these situations, we have risk of loss as principal for any amount due to the other party regardless of the amount(s) we earn as revenue from our customer.

The entity has discretion in establishing the price for the specified good or service.

We have discretion in establishing the price our customer pays for the specified goods or services.

Cost of Sales

Cost of sales includes inventory costs, materials and supplies costs, internal labor and related benefits, subcontractor costs, depreciation, overhead and shipping and handling costs incurred.

Government Loan Forgiveness and Grants

InDuring the year ended December 31, ~~2021 the Company had $130~~2022,~~900~~ ~~in Payroll Protection Program loans that were forgiven and in~~ the ~~year ended December 31, 2022 the~~ Company applied for $61,448 in Employee Retention Tax Credits. ~~The~~(ERTC), which ~~loan~~were ~~forgiveness~~recognized ~~and~~in ~~government~~other ~~grant~~income ~~applied~~on ~~for~~the ~~have~~accompanying ~~been~~statements ~~recognized~~of operations in ~~Other Income~~2022.

Shipping and Handling Costs

Shipping and handling costs incurred relating to the purchase of inventory are included in inventory which is charged to cost of sales as products are sold. Shipping and handling costs incurred for product shipped to customers are included in cost of sales. For the years ended December 31, ~~2022~~2023 and ~~2021~~2022, shipping and handling costs amounted to $~~180~~153,~~369~~919 and $~~187~~180,~~154~~369, respectively.

Research and Development

Research and development costs incurred in the development of the Company’s products and under other Company sponsored research and development projects are expensed as incurred. Costs such as direct labor, direct costs, and other allocated costs incurred to perform research and development service pursuant to government and private research projects are in included in cost of sales. Research and development costs incurred in the development of the Company’s products for the years ended December 31, ~~2022~~2023 and ~~2021~~2022 were $1647,~~777~~440 and $3416,~~875~~777, respectively, and are included in operating expenses on the accompanying ~~consolidated~~ statements of operations.

Advertising Costs

The Company participates in various advertising programs. All costs related to advertising of the Company’s products are expensed in the period incurred. Advertising costs charged to operations for the years ended December 31, ~~2022~~2023 and ~~2021~~2022 were $~~247~~289,~~073~~981 and $40247,~~459~~073, respectively, and are included in selling and marketing on the ~~consolidated~~ accompanying statements of operations. These advertising expenses do not include cooperative advertising and sales incentives which have been deducted from sales.

Federal and State Income Taxes

The Company accounts for income tax using the liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.

The Company follows the accounting guidance for uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. As of December 31, ~~2022~~2023, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. Tax years that remain subject to examination are the years ending on and after December 31, ~~2018~~2019. The Company does not expect any significant changes in its unrecognized tax benefits within twelve months of the reporting date. The Company recognizes interest and penalties related to uncertain income tax positions in other expense. However, no such interest and penalties were recorded as of December 31, ~~2022~~2023 or ~~2021~~2022.

Stock-Based Compensation

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment Topic of ASC 718 which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award. The Company adopted ASU No. 2017-09 in 2018; its adoption did not have a material impact on its ~~consolidated~~ financial statements.

Pursuant to ASC Topic 505-50, for share-based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the service period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company initially records compensation expense based on the fair value of the award at the reporting date.

Earnings (Loss) Per Share of Common Stock

ASC 260 “Earnings Per Share”, requires dual presentation of basic and diluted earnings per share (“EPS”) with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the entity. Basic net loss per common share is computed by dividing net loss available to common shareholders by the weighted average number of shares of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. Additionally, potentially dilutive common shares consist of common stock options and warrants (using the treasury stock method).

These common stock equivalents may be dilutive in the future. Potentially dilutive common shares were excluded from the computation of diluted shares outstanding as they would have an anti-dilutive impact on the Company’s net ~~income (~~loss) and consisted of the following:

	December 31, 2022		December 31, 2021
	December 31, 2023		December 31, 2022
Stock options		2,~~760~~270,~~991~~483		32,~~123~~760,~~702~~991
Stock warrants		7,~~440~~525,~~639~~265		67,~~597~~440,~~178~~639
Total		109,~~201~~795,~~630~~748		910,~~720~~201,~~880~~630

31Net losses per share of common stock is as follows:

Net income (loss) per share of common stock is as follows:

Net income (loss) per common shares outstanding:	Year Ended December 31, 2022			Year Ended December 31, 2021
	Year Ended December 31, 2023			Year Ended December 31, 2022
Common stock	$	(0.21	)	$	(0.17	)
Net loss per common shares outstanding	$	(0.25	)	$	(0.21	)
Weighted average shares outstanding:
Weighted average common shares outstanding:		11,481,547			10,264,381
Total weighted average common shares outstanding		10,264,381			9,475,560

Recently Adopted Accounting Pronouncements

The Company does not believe there are any other recently issued and effective, or not yet effective pronouncements that would have or are expected to have any significant effect on the Company’s financial position, results of operations or cash flows.

There have been no changes to our significant accounting policies described in Note 2 to our Annual Report on Form 10-K for the year ended December 31, ~~2022~~2023, that have had a material impact on our ~~Consolidated~~financial ~~Financial~~statements ~~Statements~~ and related notes.

Reclassifications

Certain accounts and financial statement captions in the prior periods have been reclassified to conform to the current period financial statements. None of the reclassifications had any impact on the net loss reported in ~~2021~~2022.

NOTE 3 – DISCONTINUED OPERATIONS

Effective May 31, 2022, we sold a 70% interest in our subsidiary ANI to two of its officers and long-term employees in exchange for a promissory note in the face amount of $450,000. The note bears interest at 7% and has semi-annual payments of principal initially in the amount of $20,000, increasing to $25,000 in May 2024 and to $30,000 in May 2026, with a final balloon payment of $80,000 due on December 31, 2029. As of December 31, ~~2022~~2023, $~~415~~341,~~983~~ 782 remained outstanding on the note, with $4050,000 as the current portion of the note receivable and $~~375~~291,~~983~~ 782 as the non-current portion. The note is secured by a stock pledge, described below. InOn ~~conjunction with~~March ~~the~~15, ~~sale~~2024, wean ~~recognized~~investor apaid ~~one-time~~the ~~gain~~Company of $1100,~~148,225.~~000 ~~Financial~~to ~~information~~purchase ~~(related~~$115,000 toin ~~periods~~principal ~~before~~amount ~~May~~of ~~2022) included~~the innote ~~this~~payable to ~~10-K reflect~~us from ANI. asThe aoriginal ~~discontinued operation.~~note ~~For~~from ~~the~~ANI ~~years~~was ~~ended~~cancelled, ~~December~~and ~~31,~~we ~~2022~~now ~~and~~hold ~~December~~a ~~31,~~note ~~2021,~~on ~~income~~the ~~(loss)~~same ~~from~~terms ~~discontinued~~in ~~operations~~the ~~amounted to~~principal amount of $1225,~~300~~777 as ~~and~~of ~~$(59~~March 15,~~046),~~ ~~respectively~~2024.

In conjunction with the sale, we recognized a one-time gain of $1,148,225. Financial information (related to periods before May 2022) included in this 10-K reflect ANI as a discontinued operation. During the year ended December 31, 2022, income from discontinued operations amounted to $1,300.

In connection with the sale, the capital structure of Applied Nanotech was changed to give the Company, as the holder of Class B common stock of Applied Nanotech, a 30% economic interest, certain information rights, special consent rights, and tag-along rights, as well as the obligation to sell our stock under certain circumstances if other stockholders are selling. The Class A stock acquired by the buyers was pledged to secure the promissory note given in payment of the purchase price. The Company plans to hold its remaining shares in ANI for an indefinite period and treats its investment in ANI as an equity investment.

The following includes the detail of major classes of assets and liabilities of discontinued operations summarized on the accompanying unaudited consolidated financial statements:

SCHEDULE OF DISPOSAL GROUPS ASSETS AND LIABILITIES OF DISCONTINUED OPERATIONS SUMMARIZED

	December 31
	2021
ASSETS
CURRENT ASSETS:
Cash and investments	$	55,258
Accounts receivable, net		19,115
Total Current Assets		74,373
Operating lease right-of-use assets		90,852
Property, plant and equipment, net		945
Other assets		5,890
Total Assets	$	172,060
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	475,283
Accrued expenses and other current liabilities		12,434
Current portion of lease liabilities		42,291
Contract liabilities		45,762
Total Current Liabilities		575,770
Notes Payable, net of current portion		54,883
Lease liabilities, net of current portion		56,724
Total Liabilities	$	687,377

The following is the detail of major line items that constitute income from discontinued operations:

SCHEDULE OF INCOME ~~(LOSS)~~ FROM DISCONTINUED OPERATIONS

	2022		~~2021~~
	For the Year Ended
	December 31,
	December 31, 2022
	2022		2021
Net Revenues	$	258,444
Net Revenues	$	258,444	$	726,170
Cost of Sales		211,029
Cost of Sales		211,029		696,597
Gross Profit		47,415
Gross Profit		47,415		29,573
Salaries, wages and related benefits		23,573
Salaries, wages and related benefits		23,573		85,603
General and administrative expenses		21,961
General and administrative expenses		21,961		64,407
Interest and other expense		581
Professional fees		-		16,817
Income from discontinued operations		1,300
Other income		-		(79,305	)
Gain on sale of discontinued operations		1,148,225
Interest and other expense		581		1,097
Net income from discontinued operations	$	1,149,525
Income (loss) from discontinued operations		1,300		(59,046	)
Gain on sale of discontinued operations		1,148,225		-
Net income (loss) from discontinued operations	$	1,149,525	$	(59,046	)

In the second quarter of 2022, the gain on the sale of 70% of the company’s ownership interest in ANI was calculated as follows:

SCHEDULE OF SALE OF STOCK BY SUBSIDIARY

Fair value of consideration received	$	450,000
Fair value of retained interest		192,857
Less carrying value of subsidiary sold		(505,368	)
Plus negative carrying value of subsidiary sold		505,368
Gain on sale of subsidiary	$	1,148,225

NOTE 4 – INVESTMENT IN SUBSIDIARY

The Company is accounting for its 30% ownership interest in ANI by the equity method of accounting under which the Company’s share of the net income (loss) of ANI is recognized as income (loss) in the Company’s statement of operations classified as income from investment in subsidiary. Any dividends received from ANI as well as periodic losses for the Company’s 30% share will be treated as a reduction of the investment account. Any income from ANI for the Company’s 30% share will be treated as an increase in the investment account. For the ~~year~~ years ended December 31, 2023 and 2022, the Company recorded income from the investment in subsidiary of $3,689 and $57,289, respectively.

~~At December 31, 2022, a balance of $250,146 was recognized as a non-marketable equity investment in subsidiary on the balance sheet in non-current assets as follows:~~33

At December 31, 2023 and at December 31, 2022, a balance of $253,835 and $250,146, respectively, was recognized as a non-marketable equity investment in subsidiary on the balance sheet in non-current assets as follows:

Investment in ANI	$	192,857
	December 31, 2023.		December 31, 2022
Income from investment in subsidiary		57,289
Investment in ANI	$	192,857	$	192,857
Non-marketable equity investment in subsidiary	$	250,146
Income from investment in subsidiary		60,978		57,289
Non-marketable equity investment in subsidiary	$	253,835	$	250,146

NOTE 5 – ACCOUNTS RECEIVABLE

At December 31, ~~2022~~2023 and ~~2021~~2022, accounts receivable consisted of the following:

SCHEDULE OF ACCOUNTS RECEIVABLE

	December 31, 2022			December 31, 2021
	December 31, 2023			December 31, 2022
Accounts receivable	$	~~377~~359,~~940~~357		$	~~335~~377,~~555~~940
Less: allowance for doubtful accounts		(29,375	)		(42,326	)
Less: allowance for credit losses		(150,300	)		(29,375	)
Accounts receivable, net	$	~~348~~209,~~565~~057		$	~~293~~348,~~229~~565

~~Bad~~Allowance ~~debt~~for ~~expense~~credit ~~(recoveries)~~losses was $4342,~~098~~326 ~~and~~at (December 31, 2021. Bad debt expense was $1857,~~251)~~064 for the ~~years~~year ended December 31, 2022, ~~and~~with ~~2021~~an increase in the allowance of $44,113, ~~respectively~~leaving an ending balance in the allowance for credit losses of $29,375 at December 31, 2022. Bad debt expense was $27,747 for the year ended December 31, 2023, with an increase in the allowance of $148,672, leaving an ending balance in the allowance for credit losses of $150,300 at December 31, 2023.

NOTE 6 – INVENTORY

At December 31, ~~2022~~2023 and ~~2021~~2022, inventory consisted of the following:

SCHEDULE OF INVENTORY

	December 31, 2022			December 31, 2021
	December 31, 2023			December 31, 2022
Raw materials	$	~~695~~648,~~774~~537		$	~~673~~695,~~518~~774
Work in progress		~~256~~235,~~095~~811			~~314~~256,~~461~~095
Finished goods		~~353~~296,~~082~~921			~~456~~353,~~768~~082
Inventory, gross		1,~~304~~181,~~951~~269			1,~~444~~304,~~747~~951
Less: reserve for obsolescence		(~~184~~331,~~878~~505	)		(65184,~~742~~878	)
Inventory, net	$	1849,~~120,073~~764		$	1,~~379~~120,~~005~~073

NOTE 7 – OPERATING LEASE

Effective May 31, 2020, we entered into a lease with a related party for a 29,220 square foot building in Madison Heights, Michigan. The occupancy and rent commencement date was October 1, 2020. The lease has an initial term of seven years with a renewal option at the end of the initial term for an additional 3-year term, and a second renewal option thereafter for an additional 5-year term. The renewal term is not included in the calculation of the operating lease liability. As the sole tenant, we are responsible for all taxes, ordinary maintenance, snow removal and other ordinary operating expenses. Rent is $6.50 per square foot, increasing by $0.25 per year. During the first three years we ~~also~~had ~~have~~ the right to to buy up to a 49% interest in Magic Research LLC for a price equal to 49% of the contributions received from other members. This right has now expired as we did not exercise the option. See Note ~~13,~~12 Stockholders’ Equity, for a description of warrants issued to the owners of Magic Research LLC in connection with this lease. The fair value of these warrants totaling $311,718 were recorded as initial direct costs of obtaining the lease and are included in ~~other~~right-of-use assets on the accompanying balance sheet. See Note 1211, Related Party Transactions, for information about roles in management and economic participation by our CEO and ~~several~~ several other directors in the landlord. At December 31, 2022, the Company was in default in payment of rent; $57,119 was outstanding for rent that was included in Accounts Payable, Related Parties. See Note 17, Subsequent Events, for the settlement of unpaid rent.

In February 2023, we reached an agreement with the landlord of our Michigan facility to accept $66,000 worth of our common stock at a price of $1.25 per share as partial payment of rent for the six-month period from October 2022 through March 2023. During that period, we will pay cash of $8,056 per month, effectively a cash rent reduction of $10,983 per month. In May 2023, we reached a further agreement with the landlord under which we pay cash each month to cover the cost of the mortgage and the lease for the lighting fixtures, but that will allow us to pay the balance of the rent by issuing shares of our stock valued at $0.75 per share. We have the option to continue to use stock to pay a portion of the rent through 2024. On October 16, 2023, the Company issued 52,800 shares of common stock to its landlord in Michigan in partial payment of rent. In December 2023, the Company issued an additional 81,392 shares in partial payment of rent.

For operating leases, we calculated ROU assets and lease liabilities based on the present value of the remaining lease payments as of the date of adoption using the IBR as of that date.

SCHEDULE OF REMAINING LEASE PAYMENTS

	December 31, 2022		December 31, 2021
	December 31, 2023		December 31, 2022
Operating lease liabilities	$	~~864~~722,~~593~~419	$	~~988~~864,~~581~~593
Right-of-use assets	$	1845,~~037,749~~563	$	1,~~219~~037,~~061~~749

Future payments on the operating lease are:

	Operating Leases
2023	$	206,373
2024	$	213,681
2024		213,681
2025		220,989
2026		228,297
2027		175,334
Less: impact of discounting		(~~180~~115,~~081~~882	)
Present value of lease liabilities		~~864~~722,~~593~~419

34NOTE 8 – PROPERTY AND EQUIPMENT

~~NOTE~~At 8December -31, ~~PROPERTY~~2023 ~~AND~~and ~~EQUIPMENT~~2022, property and equipment consisted of the following:

At December 31, 2022 and 2021, property and equipment consisted of the following:

SCHEDULE OF PROPERTY AND EQUIPMENT

	Useful Life	December 31, ~~2022~~2023			December 31, ~~2021~~2022
Machinery and equipment	5 -– 10 Years	$	2,~~613~~616,~~387~~629		$	2,613,387
Furniture and office equipment	3 -– 7 Years		~~480~~486,~~784~~894			~~475~~480,~~874~~784
Leasehold improvements	2 -– 15 Years		140,678			140,678
Property and equipment, gross
Less: accumulated depreciation			(2,~~709~~820,~~040~~098	)		(2,~~596~~709,~~752~~040	)
Property and equipment, net		$	~~525~~424,~~809~~103		$	~~633~~525,~~187~~809

For the years ended December 31, ~~2022~~2023 and ~~2021~~2022, depreciation and amortization expense amounted to $~~112~~111,~~288~~058 and $~~105~~112,~~005~~288, respectively.

NOTE 9 – NOTES PAYABLE AND FINANCE LEASES

Notes Payable

On January 7, 2022, the Company sold to one investor a $100,000 convertible note due March 31, 2025. On January 26, 2022, January 31, 2022, and again on February 14, 2022, the Company sold three $50,000 convertible notes to three different investors. The three $50,000 notes are due March 31, 2026. All four notes were issued at face value, and bear interest at 8% per annum, payable semi-annually in cash. The notes are convertible at any time at the option of the holder into shares of common stock at a conversion price of $1.75 per share.

On July 27, 2022, the Company sold two convertible notes, one for $50,000 and one for $25,000, both due on March 31, 2025. The $25,000 note is to Mr. Ron Berman, a Related Party. On August 22, 2022, the Company sold a $25,000 convertible promissory note due March 31, 2026. All three notes were issued at face value, and bear interest at 8% per annum, payable semi-annually in cash. The notes are convertible at any time at the option of the holder into shares of common stock at a conversion price of $1.75 ~~per~~ per share.

On October 26, 2022, the Company sold to an investor a $25,000 convertible promissory note due October 31, 2023. Issued at face value, the note bears interest at 8% per annum, payable semi-annually in cash. The notes are convertible at any time at the option of the holder into shares of common stock at a conversion price of $1.75 per share.35

On December 18, 2022, the Company issued a convertible promissory note for $50,000 that is secured by certain payroll tax credits the Company is entitled to receive under the Employee Retention Tax Credit program. The note bears interest at 8% per annum, payable at maturity which is eighteen months from date of issue. The note can be converted to common stock at any time at the option of the holders at a conversion price of $1.75 per share at which point accrued interest will be paid in cash.

On June 14, 2023, the Company issued a convertible, secured note and warrants to purchase 10,000 shares of the Company’s common stock for $50,000 with the same terms as the one issued on December 18, 2022. The warrants were recorded as a debt discount on the date of issuance for a total value of $5,333. The balance at December 31, 2023 of the debt discount was $3,390.

On July 24, 2023, the Company issued at face value a convertible note in the original principal amount of $50,000. The note is due two years from date of issue, bears interest at 8% per annum and is convertible at $1.25 per share.

On November 2, 2023, the Company issued at face value a convertible note in the original principal amount of $50,000. The note is due two years from date of issue, bears interest at 8% per annum and is convertible at $1.25 per share.

The convertible promissory notes have not been included in diluted earnings per share as they would be anti-dilutive.

On February 10, 2015, Nano Magic entered into a $373,000 promissory note (the “Equipment Note”) with KeyBank, N.A. (the “Bank”). The unpaid principal balance of this Equipment Note iswas payable in 60 equal monthly instalments payments of principal and interest through ~~June~~ June 10, 2020. The Equipment Note iswas secured by certain equipment, as defined in the Equipment Note, and ~~bears~~bore interest computed at a rate of interest of 4.35% per annum based on a year of 360 days. On June 18, 2019, Nano Magic entered into an Amendment to the Equipment Note with the Bank. By the amendment, the maturity date of the note was extended until April 10, 2022, the interest rate was raised to 6.29% per year, and the monthly payments were reduced to $4,053 per month, including interest. On May 2, 2022, we amended the Equipment Note with Key Bank to extend the due date on the note until December 10, 2022. The interest rate remained the same at 6.29% per year and the monthly payments remained at $4,053 per month. At December 31, 2022, the balance due on the Equipment Note was $1,629 and isthe balance ~~included~~was paid in ~~current~~full ~~liabilities~~in 2023.

Finance leases

On August 11, 2020, we entered into a finance lease for furniture used in the Michigan facility. We financed $60,684 over a period of 36 months and ~~are~~were required to make monthly payments of $1,972 during that time. AsAt of December 31, 2022, the balance due was $13,335 and iswas included in current liabilities. $2,091 was is also included in Accounts Payable for this lease as of December 31, 2022. As of December 31, 2023 the lease was completely paid off.

On September 24, 2020, we entered into a finance lease with Raymond Leasing Corporation for a forklift. We financed $14,250. The lease term iswas 36 months with monthly payments of $425. As of At December 31, 2022, the balance due was $3,755 and iswas included in current liabilities. As of December 31, 2023, the lease was completely paid off.

In December 2020, we entered into a finance lease for production equipment. We financed $85,000 over a period of 48 months and ~~are~~were required to make monthly payments of $2,135 during that time. AsAt of December 31, 2022, the balance due was $46,109 of which $21,915 ~~and~~ was is included in current liabilities and $24,194 was is included in long term liabilities. As of December 31, 2023, the balance due was $24,194, all of which was included in current liabilities.

For finance leases, we calculate ROU assets and lease liabilities based on the present value of the remaining lease payments as of the date of lease commencement. The ROU assets for finance leases are depreciated in accordance with the Company’s depreciation policies for those asset groupings. Finance lease liabilities were $6324,~~199~~194 at December 31, ~~2022~~2023 and totaled $~~106~~63,~~935~~199 at December 31, ~~2021~~2022. Finance lease interest expense was $124,~~594~~250 and $12,~~346~~594 for the years ended December 31, ~~2022~~2023 and ~~2021~~2022, respectively.

3536

Maturities

Future minimum lease payments under leases that had initial or remaining non-cancelable lease terms in excess of one year as of December 31, ~~2022~~2023, are as follows:

	Finance Leases
2023	$	39,005
2024		25,620
Less: impact of discounting		(1,426	)
Present value of lease liabilities		6324,~~199~~194

NOTE 10 – ~~BANK~~ACCOUNTS ~~LOANS~~RECEIVABLE FACTORING

On ~~May~~ 8September 1, 2020, Nano Magic LLC ~~obtained~~entered aan ~~loan~~agreement ~~from~~with ~~Fifth~~a ~~Third~~company ~~Bank~~to ~~for~~sell ~~$130,900~~its ~~under~~receivables ~~the~~with ~~Small~~a ~~Business~~retailer ~~Administration~~at ~~Paycheck~~a ~~Protection Program~~discount. ~~The~~This ~~loan~~agreement ~~had~~expired ~~interest~~on at September 1~~.00% and was payable in monthly installments of principal and interest in the amount of $7~~,~~330~~ 2022. ~~On August~~Costs 6,associated ~~2021 we completed the loan forgiveness application~~ with ~~Fifth~~this ~~Third~~program ~~Bank~~ were $47 for the ~~Paycheck~~year ~~Protection~~ended Plan loan we received through that bank. On November 9, 2021 we were notified by Fifth Third Bank that the Small Business Administration had reviewed our loan forgiveness application filed earlier and that the entire amount of the loan to Nano Magic LLC was forgiven. The amount forgiven is included in other income on the income statement. As of December 31, 2022 ~~and 2021 no amounts were outstanding on this loans~~.

~~NOTE~~In August 2023, we began shipments under an agreement with a customer for the sale of products that included accounts receivable financing 11with –a ~~ACCOUNTS~~large ~~RECEIVABLE~~international ~~FACTORING~~bank. Subject to certain limits, we receive payments as soon as 15 days from shipment to a discounted value of approximately 7% The discount depends on the payment date selected with the bank. Costs associated with this program for the year ended December 31, 2023 were $12,497.

OnNOTE September 1, 2020, Nano Magic LLC entered an agreement with NOWaccount ® Network Corporation for the sale of accounts receivable due from approved customers. Subject to certain limits, we will receive an immediate payment equal to the discounted value of a receivable from those customers. The discount applied depends on the due date for payment from the customer. This agreement expired on September 1, 2022. Costs associated with this program were $47 and $11~~,337~~ ~~for~~– ~~the~~RELATED ~~years~~PARTY ~~ended December 31 2022 and 2021, respectively.~~TRANSACTIONS

~~NOTE~~Accounts 12Payable –to ~~RELATED~~related ~~PARTY~~parties ~~TRANSACTIONS~~totaled $55,520 and $87,119 on December 31, 2023 and December 31, 2022, respectively. These balances include payroll and reimbursements due to officers and directors plus account payable due to the landlord at December 31, 2023. Advances from related parties aggregating $42,887 on both December 31, 2023 and December 31, 2022 is comprised of amounts due to the Rickerts for working capital advances made in 2018.

~~Advances~~In ~~from related parties aggregating $130~~October,~~006~~ ~~includes $42~~2023,~~887~~ asthe ofRickerts ~~December~~purchased 3113,333 ~~2022,~~shares ~~and $92,887 as~~ of ~~December~~common ~~31,~~stock ~~2021 due to the Rickerts~~ for ~~working capital advances made in 2018 and accrued payroll of~~ $1610,000 ~~due to them due as of December 31, 2022 and December 31, 2021~~. ~~We paid legal and consulting fees to director Mr. Ron Berman of $124,150 in 2022, and $167,350 in 2021.~~

~~Mr. Ron~~We ~~Berman~~paid legal and ~~Mr.~~consulting ~~Tom~~fees ~~Berman~~to ~~are~~director ~~the~~Mr. ~~managers~~Ron ofBerman ~~the limited liability company that is the manager~~ of ~~PEN~~$0 ~~Comeback~~in 2023, ~~LLC~~and $124,150 ~~PEN Comeback~~in 2,2022. ~~LLC,~~In ~~Magic Growth~~July, ~~LLP~~2022, ~~Magic Growth 2 LLC and Magic Growth 3 LLC~~Mr. ~~These~~Ron ~~five~~Berman ~~limited~~bought ~~liability~~a ~~companies~~convertible ~~purchased~~note ~~shares~~for of$25,000 ~~common~~which ~~stock~~matures ~~and~~on ~~derivative~~March ~~securities from us in 2018~~31, ~~2019,~~2025 ~~2020, 2021,~~ and ~~2022.~~bears ~~See~~interest ~~the subsection on Sales~~ of ~~Stock~~8% ~~under~~per ~~Issuances of Common Stock in Note 11 and in Note 16 Subsequent Events~~annum.

~~In addition,~~ Mr. Ron ~~Tom~~ Berman and Mr. ~~Ron~~Tom Berman are ~~two of three individuals who share voting power of~~ the ~~sole~~managers ~~manager~~ of the limited liability company that is ~~our~~the ~~landlord~~manager inof ~~Michigan.~~PEN ~~Together~~Comeback, ~~Tom~~LLC, ~~and~~PEN ~~Ron~~Comeback 2, ~~Berman hold~~LLC, inMagic ~~the~~Growth, ~~aggregate~~LLP, aMagic 5%Growth ~~economic~~2 ~~interest~~LLC inand ~~the~~Magic ~~landlord entity.~~Growth ~~The~~3 ~~lease~~LLC. ~~for~~These ~~the~~five ~~Michigan~~limited ~~facility~~liability ~~gives~~companies uspurchased ~~the~~shares ~~right,~~of ~~during~~common stock ~~the~~and ~~first~~derivative ~~three~~securities ~~years~~from ofus ~~the~~in ~~lease~~2018, to2019, ~~buy~~2020, up2021, toand a2022. ~~49%~~See ~~interest in~~ the ~~landlord~~subsection ~~for~~on aSales ~~price~~of ~~equal~~Stock tounder ~~49%~~Issuances of Common ~~the~~Stock ~~contributions~~in ~~received~~Note ~~from~~12 ~~other~~and ~~members~~in Note 16 Subsequent Events.

36In addition, Mr. Tom Berman and Mr. Ron Berman are two of three individuals who share voting power of the sole manager of the limited liability company that is our landlord in Michigan. Together, Tom and Ron Berman hold, in the aggregate, a 5% economic interest in the landlord entity.

NOTE 1312 -– STOCKHOLDERS’ EQUITY

Description of Preferred and Common Stock

Preferred Stock

The preferred stock may be issued in one or more series. The Company’s board of directors are authorized to issue the shares of preferred stock in such series and to fix from time to time before issuance thereof the number of shares to be included in any such series and the designation, powers, preferences and relative, participating, optional or other rights, and the qualifications, limitations or restrictions thereof, of such series.

Common Stock

The rights of each share of common are the same with respect to dividends, distributions and rights upon liquidation. Holders of common stock each have one vote per share in the election of directors and other matters submitted to a vote of the stockholders.

Issuances of Common Stock

Common Stock Issued for Services ~~and Stock Appreciation Rights~~

Pursuant to the agreement entered into on October 20, 2020, with the holder of substantially all the outstanding stock appreciation rights, on March 2, 2021, we issued 5,000 shares of common stock at value of $1.00 in partial settlement of that holder’s stock appreciation rights.

Sales of Common Stock

On February 16, 2021, the Company sold to Magic Growth 2 LLC, 769,231 shares of common stock for proceeds of $961,538 and warrants to purchase up to 769,225 shares of common stock for proceeds of $38,463. The warrants are exercisable at any time during the four years after date of issue at a warrant exercise price of $2.00 per share. PEN Comeback Management, LLC, owned by Tom J. Berman and Ronald J. Berman, is the sole voting member of Magic Growth 2 LLC.

OnIn ~~April~~February 142023, ~~2022,~~we reached an agreement with the ~~Company~~landlord ~~sold~~of toour ~~Magic~~Michigan ~~Growth~~facility 3to ~~LLC~~accept 6952,~~445~~800 shares of our common stock ~~for~~at ~~proceeds~~a price of $~~121,529~~1.25 ~~and~~per ~~warrants~~share toas ~~purchase up~~partial topayment ~~69,425 shares~~ of ~~common~~rent ~~stock~~ for ~~proceeds~~the ofsix-month ~~$3,471.~~period ~~The~~from ~~warrants~~October ~~are~~2022 ~~exercisable~~through atMarch ~~any~~2023. ~~time~~Those ~~during~~shares ~~the~~were ~~four~~issued in ~~years~~March, ~~after~~2023. ~~date of~~The ~~issue~~landlord atis a ~~warrant~~related ~~exercise price of $2~~party.~~25.~~

OnIn May 272023, ~~2022,~~we reached a further agreement with the ~~Company~~landlord ~~sold~~that calls for us to ~~Magic~~pay ~~Growth~~cash 3each ~~LLC~~month ~~213,889~~to ~~shares~~cover the cost of ~~common~~the mortgage ~~stock~~and the lease for ~~proceeds~~the oflighting ~~$374~~fixtures,~~305~~ ~~and~~but ~~warrants~~that towill ~~purchase up~~allow us to ~~213,885~~pay ~~shares~~the balance of ~~common~~the ~~stock~~rent ~~for~~by ~~proceeds~~issuing shares of our stock valued at $~~10,694~~0.75 per ~~The~~share. ~~warrants~~We ~~are~~have ~~exercisable~~the atoption ~~any~~to ~~time~~continue ~~during~~to use stock to pay a portion of the ~~four~~rent ~~years~~through ~~after~~2024. ~~date~~On October 16, 2023, the Company issued 52,800 shares of ~~issue~~common atstock ato ~~warrant~~its ~~exercise~~landlord ~~price~~in Michigan in partial payment of $2rent.25 In December 2023, the Company issued an additional 81,392 shares in partial payment of rent. The landlord is a related party.

On ~~August~~May 2930, ~~2022~~2023, the Company ~~sold~~issued 76,922 shares of restricted common stock to ~~Magic~~a ~~Growth~~consultant 3as ~~LLC~~compensation ~~69,445~~for services. The shares ofare subject ~~common~~to ~~stock~~forfeiture ~~for~~until ~~proceeds~~vested. ofSo ~~$121~~long as the consulting services agreement remains in effect 4,~~529~~273 ~~and~~shares ~~warrants~~vested toin ~~purchase~~May for prior upservice, toand 69another 4,~~425~~273 shares vest at the end of ~~common~~May ~~stock~~and ~~for~~each ~~proceeds~~calendar ofmonth $3thereafter,~~471.~~ ~~The~~with ~~warrants~~4,277 ~~are~~shares ~~exercisable~~vesting atin ~~any~~December ~~time~~2023. During ~~during~~2024, ~~the~~3,205 ~~four~~shares ~~years~~will ~~after~~vest ~~date~~ at the end of ~~issue~~each atmonth, awith ~~warrant~~3,206 ~~exercise~~shares ~~price~~vesting at the end of $2December 2024.~~25.~~

OnIn ~~October~~August 312023, ~~2022,~~ the Company ~~sold~~issued to ~~Magic~~each ~~Growth 3 LLC 13,889 shares~~ of ~~common~~three ~~stock~~individuals ~~for~~who ~~proceeds~~are ofserving ~~$24,306~~on ~~and~~its ~~warrants~~advisory tocommittee ~~purchase up~~a tototal ~~13,885~~of 38,460 shares of ~~common~~restricted stock for ~~proceeds~~their ofservices ~~$694. The warrants are exercisable at any time~~ during ~~the~~2023. ~~four~~All ~~years~~shares ~~after~~vest ~~date~~ratably ~~of issue~~by atDecember a31, ~~warrant exercise price of $2~~2023.~~25.~~

In On December ~~2022~~5, ~~the Company sold 102~~2023,~~082~~ ~~shares~~the ofBoard ~~common~~determined ~~stock~~ to ~~individual,~~pay ~~accredited investors for aggregate proceeds of $127,603~~accrued ~~and~~fees ~~sold~~due to ~~those~~the ~~investors~~directors ~~warrants~~in ~~to purchase up to 101,875~~ shares of common stock ~~for~~and ~~proceeds~~we ofissued ~~$2,037.~~an ~~The~~aggregate ~~warrants~~of ~~are~~240,006 ~~exercisable at~~shares ~~any~~to ~~time~~present ~~during~~and ~~the~~former ~~four~~directors ~~years~~for ~~after~~service during ~~date of issue at a warrant exercise price of $1~~2023.~~75.~~

Sales of Common Stock

During the quarter ended March 31, 2022, the Company sold 375,001 shares of common stock for proceeds of $656,249 and warrants to purchase up to 374,965 shares of common stock for proceeds of $18,752. The warrants are exercisable at any time during the four years after date of issue at a warrant exercise price of $2.25.

During the quarter ended June 30, 2022, the Company sold 283,334 shares of common stock for proceeds of $495,834 and warrants to purchase up to 283,310 shares of common stock for proceeds of $14,165. The warrants are exercisable at any time during the four years after date of issue at a warrant exercise price of $2.25.

During the quarter ended September 30, 2022, the Company sold 69,445 shares of common stock for proceeds of $121,529 and warrants to purchase up to 69,425 shares of common stock for proceeds of $3,471. The warrants are exercisable at any time during the four years after date of issue at a warrant exercise price of $2.25.

During the quarter ended December 31, 2022, the Company sold 115,971 shares of common stock for proceeds of $151,909 and warrants to purchase up to 115,760 shares of common stock for proceeds of $2,731. The warrants are exercisable at any time during the four years after date of issue at a warrant exercise price of $1.75.

For the three months ended March 31, 2023, the Company sold 74,806 shares of common stock for proceeds of $93,507. Additionally, 74,626 warrants were sold for $1,492. The warrants are exercisable at any time during the four years after date of issue at a warrant exercise price of $2.25.

During the quarter ended June 30, 2023, the Company sold 253,994 shares of common stock for proceeds of $346,064 and warrants to purchase up to 196,813 shares of common stock for proceeds of $4,136. The warrants are exercisable at any time during the four years after date of issue at a warrant exercise price of $1.75. Also, during the quarter ended June 30, 2023, the Company sold 10,000 warrants in connection with the issuance of a convertible note payable of $50,000 as disclosed in Note 9. In accordance with ASC 470, 11% of the value of the total convertible note payable was allocated to the warrants.

During the quarter ended September 30, 2023, the Company sold an additional 533,331 shares of common stock for proceeds of $400,000. In addition, during the three-month period, an investment made in April was cancelled and the $250,000 investment was reissued at $0.75 per share, resulting in a net increase in the outstanding stock of 136,482 shares. In connection with this sale, the company canceled the 196,813 warrants previously issued in April.

During the quarter ended December 31, 2023, the Company sold 1,084,998 shares of common stock for proceeds of $813,750.

All of these sales of stock and warrants were sold in private placements exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.

Stock Options

Stock options outstanding are to purchase common stock. Stock option activities for the years ended December 31, ~~2022~~2023 and ~~2021~~2022 are summarized as follows:

SCHEDULE OF STOCK OPTION PLAN ACTIVITY

	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance Outstanding, December 31, 2020		502,892		$	0.89		3.23	$	-
Exercised		-
Forfeited or expired		(116,690	)		1.83
Granted		2,747,500			0.80
Balance Outstanding, December 31, 2021		3,133,702		$	0.77		4.93	$	-
Exercised		-
Forfeited or expired		(518,411	)	$	1.03		-		-
Granted		145,700		$	0.80
Balance Outstanding, December 31, 2022		2,760,991		$	0.72		4.09	$	-
Exercisable, December 31, 2022		1,269,386		$	0.69		3.08	$	-
Exercised		-
Forfeited or expired		(1,176,987	)	$	0.75		-		-
Granted		686,479		$	0.60
Balance Outstanding, December 31, 2023		2,270,483		$	0.67		2.73	$	76,725
Exercisable, December 31, 2023		2,244,090		$	0.67		2.72	$	76,725

A summary of unvested options and the related average fair-value per share follows:

	Number of Options			Weighted- average Grant Date Fair Value
Nonvested as of December 31, 2022		1,491,605		$	0.83
Granted		686,479			0.50
Vested		(974,704	)		0.62
Cancelled		(1,176,987	)		0.83
Nonvested as of December 31, 2023		26,393		$	0.57

Options Issued Outside of a Plan

OnIn ~~April~~2023 3,our ~~2019,~~President weand ~~issued~~CEO toTom ~~our~~Berman ~~CEO~~was ~~and~~paid ~~President,~~part ~~Tom~~of ~~Berman,~~his salary in options. In April, he was granted an option to purchase up to ~~550~~30,000 shares, offully ~~common~~vested ~~Stock~~for atsalary anot ~~price~~paid offrom ~~$0.55~~January ~~per~~to ~~share.~~March, ~~The~~and, ~~options~~in ~~vested~~May, ~~over~~a ~~time,~~second ~~each~~option ~~tranche~~was ~~exercisable~~granted for 4up ~~years~~to ~~after~~69,228 shares ~~vesting.~~that ~~Two~~vested over the course of the ~~tranches~~calendar year ~~were~~for ~~tied~~salary tonot ~~the bonus~~paid ~~under~~in ~~Mr.~~April ~~Berman’s~~and ~~employment~~subsequent ~~agreement~~months of 2023. ~~The~~Also ~~bonus~~in ~~cap~~May, ~~under~~we ~~Mr.~~granted ~~Berman’s~~our ~~employment~~Chief ~~agreement~~Financial ~~was~~Officer ~~not~~an ~~reached~~option infor ~~2019~~up to 100,000 ~~accordingly~~shares ~~that~~in ~~tranche~~recognition of ~~100,000~~his ~~option~~services ~~shares~~from ~~was~~2019 through ~~forfeited~~2022. ~~Mr.~~Both ~~Berman~~our ~~reached~~CFO ~~the~~and ~~bonus~~our ~~cap~~General ~~for~~Counsel ~~2020~~were ~~and~~granted ~~the~~options ~~option~~in May for up to ~~purchase~~60,000 ~~that~~shares, ~~tranche~~which vested over the course of the calendar year. ~~Consequently~~In May, ~~the~~2023, ~~remaining~~we ~~options~~also granted director Ronald Berman an option to purchase up to ~~450~~50,000 shares ~~were~~for ~~fully~~services previously rendered and granted him an option for 45,000 shares that vested asover the course of ~~December~~the ~~31,~~calendar year. ~~2020~~All options have an exercise price of $0.65 per share and a four-year term.

38In December 2023, the Company awarded 49,570 fully vested options to a law firm for legal services at an exercise price of $0.01. The options expire four years from the award date.

OnThe ~~March~~fair 2,value ~~2021,~~of inthe ~~connection~~options ~~with~~awarded ~~the~~outside ~~three-year~~of ~~extension~~any ofplan ~~the~~was ~~contract~~calculated ~~with~~using ~~our~~the ~~President~~Black-Scholes ~~and~~method. ~~Chief~~The ~~Executive~~assumptions ~~Officer,~~used ~~Mr.~~in ~~Tom~~the ~~Berman~~calculations ~~was~~are ~~granted~~shown anbelow. ~~option~~The toexpected ~~purchase~~term uprepresents tothe ~~1,350,000~~period ~~shares~~ of ~~common~~time ~~stock~~that atthe anoptions ~~exercise~~are ~~price~~expected ofto $0be outstanding.~~75.~~ ~~Vesting~~Below is asa ~~follows:~~summary of terms for options issued during 2023 outside of the plan.

~~SCHEDULE OF STOCK OPTIONS VESTING~~39

The right to purchase:	Consisting of:	Vesting:
Tranche 1	150,000 Option Shares	Vested on June 30, 2021
Tranche 2	150,000 Option Shares	Vested on December 31, 2021
Tranche 3	150,000 Option Shares	Vested on June 30, 2022
Tranche 4	150,000 Option Shares	Vested on December 31, 2022
Tranche 5	150,000 Option Shares	Will vest on June 30, 2023
Tranche 6	150,000 Option Shares	Will vest on December 31, 2023
Tranche 7	Up to 150,000 Option Shares	Forfeited because sales bonus for 2021 did not reach cap
Tranche 8	Up to 150,000 Option Shares	Forfeited because sales bonus for 2021 did not reach cap
Tranche 9	Up to 150,000 Option Shares	Will vest if the aggregate sales bonus payable for 2023 exceeds $300,000
Tranche 10	Up to 1 million Option Shares	If a profit bonus is payable under the employment contract and the Board determines to pay some or all of it with options, the number vested as determined by the Board

The fair value of the options awarded outside of any plan was calculated using the Black-Scholes method. The assumptions used in the calculations are shown below. The expected term represents the period of time that the options are expected to be outstanding. Below is a summary of terms for options issued during 2021 outside of the plan.

Exercise price per option	$	$0.7501 - $0.65
Fair value per option at grant date	$	$0.6025 - $0.8461
Expected term		54 years
Expected volatility		~~130~~215% -~~335~~ 245	%
Expected dividend yield		0	%
Risk-free interest rate		03.1957% -1 3.1896	%
Expense in period	$	147,646
Unearned expense	$	314,980

2015 Equity Incentive Plan

On November 30, 2015, the Board of Directors authorized the 2015 Equity Incentive Plan. On January 31, 2020 we granted an option to purchase 100,000 shares to a senior member of the sales team with vesting tied directly to 2020 sales goals. On April 8, 2021, the Board terminated the 2015 Equity Incentive Plan. One option for 50,000 shares is vested and outstanding under this Plan.

2021 Equity Incentive Plan

OnThe ~~March 2, 2021, our Board adopted the 2021~~ Nano Magic 2021 Equity Incentive Plan (the “Plan”) was adopted to allow equity compensation for those who provide services to the Company and to encourage ownership in the Company by personnel whose service to the Company is important to its continued progress, to encourage recipients to act as owners and thereby in the stockholders’ interest and to enable recipients to share in the Company’s success. Initially, 85,000 shares were available for issuance under the Plan and that number of options were also granted to employees on March 2, 2021. On April 8, 2021 the number of shares under the Plan was increased by 2,500, and an additional 2,500 options were granted. On June 21, 2021 an additional 200,000 shares were made available for issuance under the Plan and options for 100,000 shares were granted, but subsequently forfeited. On August 10, 2021 we issued the option to purchase up to 100,000 shares that had been approved by the Board in May, 2021 in connection with a consulting agreement.

On August 10, 2021, we issued the option to purchase up to 100,000 shares that had been approved by the Board in May, 2021 in connection with a consulting agreement.

On February 16, 2022, the Board increased the number of options available for issuance under the 2021 Equity Plan and issued 110,700 options under that Plan. On August 17, 2022, the Board issued an aggregate of 15,000 options under the 2021 Equity Plan to two employees. On August 17, 2022, the Board also acted to suspend operation of the provision of the 2021 Equity Plan that causes forfeiture of vested options if the service provider leaves the Company.

~~The fair~~On ~~value~~April of12, 2023, the ~~options~~Company ~~awarded~~granted to47,610 ~~employees and service providers~~ options under the 2021 Equity Plan. ~~were~~The ~~calculated~~options ~~using the Black-Scholes method and~~ were ~~tied~~granted to ~~service~~individuals ~~conditions~~in ~~for~~lieu ~~purposes~~ of ~~vesting.~~cash ~~The~~for ~~assumptions~~a ~~used~~portion inof ~~the~~their ~~calculations~~salary ~~are~~for ~~shown below. The expected term represents~~ the period ~~of time that the options are expected to be outstanding. During the year ended~~from December 31, ~~2021,~~2022 ~~43,385~~through ~~options vested~~March ~~and~~31, ~~compensation~~2023. ~~expense~~All ~~related~~options toare ~~them~~at ~~for~~an ~~the~~exercise ~~year-ending~~price ~~2021 was $42,320 with unearned expense~~ of $~~23,301~~0. ~~During~~65 ~~the~~per ~~year~~share ~~ended December 31, 2022, 100,163 options vested and compensation expense related to them~~ for ~~the~~a ~~year~~four-~~ending~~year ~~2022~~term ~~was~~and ~~$54,616~~were fully ~~with~~vested ~~unearned~~on ~~expense~~date of ~~$22,627~~grant. ~~Below is a summary of terms for options issued in 2022 under the plan.~~

On May 30, 2023, the Company granted 175,071 options under the 2021 Equity Plan. The options were granted to employees and consultants at an exercise price of $0.65 per share.

The fair value of the options awarded to employees and service providers under the 2021 Equity Plan were calculated using the Black-Scholes method and were tied to service conditions for purposes of vesting. The assumptions used in the calculations are shown below. The expected term represents the period of time that the options are expected to be outstanding. During the year ended December 31, 2022, 100,163 options vested and compensation expense related to them for the year-ending 2023 was $54,616 with unearned expense of $22,627. During the year ended December 31, 2023, 205,792 options vested and compensation expense related to them for the year-ending 2022 was $110,930 with unearned expense of $12,143. Below is a summary of terms for options issued in 2023 under the plan.

Exercise price per option	$	$0.7565
Fair value per option at grant date	$	$0.6025 -$0.57
Expected term		54 years
Expected volatility		~~243~~215% -~~244~~ 245	%
Expected dividend yield		0	%
Risk-free interest rate		13.4057% - 3.0096	%

Warrants

As of December 31, 2023, there were outstanding and exercisable warrants to purchase 7,525,265 shares of common stock with a weighted average exercise price of $1.72 per share and a weighted average remaining contractual term of 40.72 months. As of December 31, 2022, there were outstanding and exercisable warrants to purchase 7,440,639 shares of common stock with a weighted average exercise price of $1.72 per share and a weighted average remaining contractual term of 61.12 months. The weighted average contractual ~~term~~terms ~~reflects~~ reflect the extension of two years for warrants issued inbetween 2018, ~~2019~~ and ~~the~~2022 ~~first quarter of 2020~~ that ~~was~~ were effected in May 2022 and December 2023.

As of December 31, 2021, there were outstanding and exercisable warrants to 6,597,178 shares of common stock with a weighted average exercise price of $1.66 per share and a weighted average remaining contractual term of 24.9 months.40

NOTE 1413 – INCOME TAXES

The Company maintains deferred tax assets and liabilities that reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The net deferred tax asset has been fully offset by a valuation allowance because of the uncertainty of the attainment of future taxable income.

The items accounting for the difference between income taxes at the effective statutory rate and the provision for income taxes for the years ended December 31, ~~2022~~2023 and ~~2021~~2022 were as follows:

	2022			2021
	2023			2022
	Years Ended December 31,
	2022			2021
	2023			2022
Income tax provision (benefit) at U.S. statutory rate of 21%	$	~~441~~600,000		$	~~331~~441,000
Government grant		~~13,000~~-			-13,000
Payroll Protection Program loan forgiveness		-			44,000
Change in valuation allowance		(768,000	)		(454,000	)
Change in valuation allowance		(454,000	)		(375,000	)
Revaluation of deferred tax asset		168,000			(327,000	)
Revaluation of deferred tax asset		(327,000	)		441,000
Revaluation of valuation allowance due to return to provision		-			85,000
Revaluation of valuation allowance		-			(441,000	)
Revaluation of valuation allowance due to ANI sale		-			242,000
Revaluation of valuation allowance due to return to provision		85,000			-
Revaluation of valuation allowance due to ANI sale		242,000			-
Total provision for income tax	$	-		$	-

40The Company’s approximate net deferred tax assets as of December 31, 2023 and 2022 were as follows:

The Company’s approximate net deferred tax assets as of December 31, 2022 and 2021 were as follows:

	December 31, 2022			December 31, 2021
	December 31, 2023			December 31, 2022
Deferred Tax Assets:
Net operating loss carryforward	$	3,~~392~~869,000		$	3,~~355~~392,000
Stock-based compensation		~~109~~295,000			66109,000
Allowance for inventory obsolescence		3963,000			1439,000
Accrued compensation		6,000			16,000
Other		56137,000			3956,000
Total deferred tax assets		34,~~602~~370,000			3,~~475~~602,000
Valuation allowance		(34,~~602~~370,000	)		(3,~~475~~602,000	)
Net deferred tax assets	$	-			-

The gross estimated net operating loss carryforward was approximately $1618,~~150~~422,000 at December 31, ~~2022~~2023, which is an estimate of the Company’s net operating loss carryforward acquired in the Combination after giving effect to the limitation on the usage of such net operating loss carryforwards due to a change in ownership in accordance with Section 382 of the Internal Revenue Code plus net operating loss carryforwards since the Combination. The Company provided a valuation allowance equal to the net deferred income tax asset for the year ended December 31, ~~2022~~2023 because it was not known whether future taxable income will be sufficient to utilize the loss carryforward. The potential tax benefit arising from tax loss carryforwards prior to 2017 will expire between 2022 and 2038, while the potential tax benefits arising after 2017 currently have no expiration date.

In accordance with Section 382 of the Internal Revenue Code, the usage of the Company’s net operating loss carry forwards are subject to annual limitations due to greater than 50% ownership changes. Additionally, the future utilization of the net operating loss carryforwards to offset future taxable income may be subject to special tax rules which may limit their usage under the Separate Return Limitation Year (“SRLY”) rules. If necessary, the deferred tax assets will be reduced by any carryforward that expires prior to utilization as a result of such limitations, with a corresponding reduction of the valuation allowance.

The Company’s ~~2019,~~ 2020, 2021, 2022 and ~~2022~~2023 Corporate Income Tax Returns are subject to Internal Revenue Service examination.

~~NOTE 15 - COMMITMENTS AND CONTINGENCIES~~41

NOTE 14 - COMMITMENTS AND CONTINGENCIES

Litigation

The Company may be, from time to time, subject to various administrative, regulatory, and other legal proceedings arising in the ordinary course of business. We are not currently a defendant in any proceedings. Our policy is to accrue costs for contingent liabilities, including legal proceedings or unasserted claims that may result in legal proceedings, when a liability is probable and the amount can be reasonably estimated. As of December 31, ~~2022~~2023, the Company has not accrued any amount for litigation contingencies.

NOTE 1615 – CONCENTRATIONS

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of trade accounts receivable and cash deposits and investments in cash equivalent instruments.

Customer Concentrations

Customer concentrations for the years ended December 31, ~~2022~~2023 and ~~2021~~2022 are as follows:

	For the Years Ended December 31,
	2022			2021
	2023			2022
Customer A		3341	%		1333	%
Customer B		11-*	%		-11	%
Customer C		-*	%		13	%
Total		41	%		44	%
Customer D		-	%		18	%
Customer E		-	%		14	%
Total		44	%		58	%

*	Less than 10%

Accounts receivable balances for these customers at December 31, ~~2022~~2023 and ~~2021~~2022 were $~~104~~4,~~315~~942 and $13104,~~326~~315 respectively. A reduction in sales from or loss of such customers would have a material adverse effect on our results of operations and financial condition.

Geographic Concentrations of Sales

For the years ended December 31, ~~2022~~2023 and ~~2021~~2022, total sales in the United States represent approximately 9594% and 7695% of total ~~consolidated~~ revenues, respectively. ~~Germany accounted for 0% and 14% of total sales during the years ended December 31, 2022 and 2021, respectively.~~

Vendor Concentrations

Vendor concentrations for inventory purchases for the years ended December 31, ~~2022~~2023 and ~~2021~~2022 are:

	For the Years Ended December 31,
	2022			2021
	2023			2022
Vendor A		1314	%		-*	%
Vendor B		1113			-*11
Vendor C		-*12			41-*
Total		24	%		41	%
Vendor D		-*			13
Total		39	%		24	%

*	Less than 10%

The vendors above are used for raw material purchases used primarily in the production of lens care and anti-fog products.

NOTE 1716 - SUBSEQUENT EVENTS

InOn ~~January~~March ~~2023~~7, 2024, the Company sold 156,~~749~~ 667 shares of common stock to an individual, accredited ~~investor for proceeds of $19,686 and sold to~~ ~~that~~ investor ~~warrants to purchase up to 15,688 shares of common stock~~ for proceeds of $~~314~~5,000. ~~The warrants are exercisable at any time during the four years after date of issue at a warrant exercise price of $1.75.~~

InOn ~~February~~March ~~2023~~14, we2024, ~~reached an agreement with~~ the ~~landlord~~Company ofsold ~~our Michigan facility to accept $~~66,~~000~~667 ~~worth~~shares of ~~our~~ common stock atto aan ~~price~~individual, ~~of $1.25~~accredited ~~per~~investor ~~share as partial payment of rent~~ for ~~the~~proceeds ~~six-month period from October 2022 through March 2023. During that period, we will pay cash~~ of $850,~~056 per month, effectively a cash rent reduction of $10,983 per month~~000.

On March 2315, ~~2023~~2024, an investor paid the Company ~~sold 39~~$100,~~371~~000 ~~shares of common stock~~ to anpurchase ~~individual~~$115,000 in ~~accredited~~principal ~~investor~~amount ~~for proceeds~~ of ~~$49,214~~the ~~and~~note ~~sold~~payable to ~~that~~us ~~investor~~from ~~warrants~~ANI. toThe ~~purchase~~original upnote tofrom ~~39,313 shares~~ANI ofwas ~~common~~cancelled, ~~stock~~and ~~for~~we ~~proceeds~~now ofhold ~~$786.~~a ~~The~~note ~~warrants~~on ~~are~~the same ~~exercisable~~terms atin ~~any time during~~ the ~~four~~principal ~~years~~amount ~~after date~~ of ~~issue~~$225,777 atas aof ~~warrant exercise~~March ~~price~~15, ~~of $1~~2024.~~75.~~

Item 9. Changes and Disagreements with Accountants on Accounting and Financial Disclosures.

Not applicable.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports, filed under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Our Chief Executive Officer and Chief Financial Officer evaluated the effectiveness of disclosure controls and procedures as of the end of the period covered by this report under Rule 13a-15(b) under the Exchange Act. The review for the period ended December 31, ~~2022~~2023 and for the year ended December 31, ~~2021~~2022, concluded that there were material weaknesses in our disclosure procedures and controls. In ~~2021~~2022 ~~one weakness related to our ability to accomplish our financial reporting within the time periods specified in the SEC rules~~ and ~~forms,~~2023 ~~for both 2021 and 2022~~ our small staff size restricts our ability to adequately segregate duties. The sale of our subsidiary ANI in May 2022 and the merger of our subsidiary limited liability company into the parent at the end of 2022 has simplified our corporate structure so that will, after a transition period, simplify our financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting.

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. These internal controls are designed to provide reasonable assurance that the reported financial information is presented fairly, that disclosures are adequate and that the judgments inherent in the preparation of financial statements are reasonable. There are inherent limitations in the effectiveness of any system of internal controls, including the possibility of human error; consequently, internal control over financial reporting may not prevent or detect misstatements. Also, effectiveness as it relates to future periods is 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.

The Company’s internal control over financial reporting includes policies and procedures that: (i) pertain to maintaining records that, in reasonable detail, accurately and fairly reflect our transactions; (ii) provide reasonable assurance that transactions are recorded as necessary for preparation of our financial statements in accordance with generally accepted accounting principles and that the receipts and expenditures of company assets are made in accordance with our management and directors authorization; and (iii) provide reasonable assurance regarding the prevention of or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements.

Under the supervision of management, including the Company’s 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 issued by the Committee of Sponsoring Organizations of the Treadway Commission published in 2013 and subsequent guidance prepared by the Commission specifically for smaller public companies. Management has identified the following material weaknesses which have caused management to conclude that as of December 31, ~~2022~~2023 the Company’s internal controls over financial reporting were not effective at the reasonable assurance level: We have not had sufficient resources in our accounting function to have segregation of duties so that the initiation of transactions, the custody of assets and the recording of transactions are performed by separate individuals. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions are performed by ~~separate~~ separate individuals. Management evaluated our limited resources and our failure to have segregation of duties on our assessment of our ~~disclosure~~ disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.

Notwithstanding the assessment that our internal controls over financial reporting was not effective, we believe that our ~~consolidated~~ financial statements contained in this Annual Report fairly present our financial position, results of operations and cash flows for the years covered thereby in all material respects.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.

This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

Changes in Internal Control Over Financial Reporting

Our internal control over financial reporting has not changed during the fourth quarter covered by this Annual Report on Form 10-K, except as discussed above.

Item 9B. Other Information.

Not Applicable.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not Applicable.

PART III

Item 10. Directors, Executive Officers and Corporate Governance

The following sets forth the names of our directors and executive officers, their ages, positions they hold and the time they have served us and our predecessors. The narrative below sets out their principal occupations at present and for at least the past five years.

Name	Age	Position(s)	Serving Since
Ronald J. Berman	6566	Director	May 1996
Tom J. Berman	4344	Director, President & CEO	October 2018
Miles Gatland	5354	Director	February 2022
Raymond Gunn	6465	Director	December 2022
Jeanne M. Rickert	6869	Director and Chief Legal Officer	August 2014
Scott E. Rickert	6869	Chairman of the Board	August 2014
David Sherbin	62	Director	May 2022
Leandro Vera	51	Chief Financial Officer	February 2020
Leandro Vera	50	Chief Financial Officer	February 2020

Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. All directors listed above will remain in office until the next annual meeting of our stockholders, and until their successors have been duly elected and qualified. There are no agreements with respect to the election of Directors. Our Board of Directors appoints officers annually and each Executive Officer serves at the discretion of our Board of Directors.

Ronald J. Berman was in the private practice of law from 1980-1987. Mr. Berman co-founded Rock Financial (now ~~Quicken~~Rocket ~~Loans~~Mortgage) in 1985 and was a member of its Board of Directors. Mr. Berman co-founded BEG Enterprises and served as its President from 1989 to 1998. Mr. Berman is currently practicing law as a sole practitioner. Mr. Berman is a licensed attorney in both Michigan and Florida. He is the father of director and officer Tom Berman.

With his experience in legal matters and founding businesses, Mr. Berman provides our board with professional and strategic expertise as well as the benefit of his significant knowledge of business operations.

Tom J. Berman joined us on October 15, 2018, as our President and as a director and he serves as President and CEO of ~~our subsidiary,~~ Nano Magic, ~~LLC~~Inc. Prior to joining us, Mr. Berman was most recently Chief Administrative Officer and General Counsel for Ascion, LLC d/b/a Reverie, a Michigan based Sleep Technology company. At Ascion he was responsible to help to develop that company’s overall business strategy along with leading its business development, HR and IT and Legal departments as well as its real estate management. He was with Ascion from 2012 until 2018. Prior to joining Ascion Mr. Berman founded Berman Law, PLLC. He is a graduate of Michigan State University and of the University of Detroit Mercy School of law. Tom Berman is the son of director Ronald J. Berman.

With his operations experience and experience guiding the growth at Ascion, Mr. Berman will provide operational and strategic guidance ~~especially to our Product segment~~ as well as bringing his viewpoint as a legal professional.

Miles Gatland is a real estate entrepreneur. He founded Miles Gatland and Associates, Inc. in 1994 and continues to be active in commercial brokerage and redevelopment. He is also an active private investor and served on the board of Surgical Safety Scanner, Inc. from November 2019 to December 2020. He attended Oakland University in Rochester, Michigan for several years.

His experience as an entrepreneur and investor in real estate and other opportunities will provide value to the Company and the Board.

Raymond Gunn is an experienced chief executive officer, chief financial officer and board member. In 2006, Ray co-founded Wingspan Capital Partners, a private equity and consulting firm. That became Wingspan Group in 2017, and Ray became, and continues as, its CEO. Since January 2018 he has also been the CEO and CFO of Blakes Family of Companies and in 2022 he became the Chairman and CEO of FSB Holdings, In., a bank holding company. ~~Additionlly~~Additionally, he currently serves on the boards of TrillaMed, LLC., Cadillac Products Packaging Company, Blake’s Family of Companies, Central Michigan University Research Corp., the Eastern Division of The Salvation Army and he is vice chairman of the Board of Visitors for the School of Business at Oakland University. He is a graduate of Oakland University and pursued a Masters in Taxation from Walsh College. He is a CPA.

Mr. Gunn’s accounting expertise and his experience as a senior executive and CEO of operating companies is valuable to management and the Board.

Jeanne M. Rickert has served as our General Counsel and a Director since August 2014 and as the General Counsel of Nanofilm (now our subsidiary, Nano Magic LLC) since January, 2014. Before that she was a lawyer with the Cleveland office of the international law firm of Jones Day, as a partner of the firm for 25 years and as Of Counsel in 2013. Her practice focused on mergers and acquisitions, joint ventures and general corporate and commercial matters. Her undergraduate degree is from Cornell University and her law degree from Case Western Reserve University. She is married to Scott Rickert.

With her prior experience in the practice of law and as our General Counsel, Ms. Rickert provides our board with legal expertise as well as the benefit of her significant knowledge of business law and transactions.

Scott E. Rickert has served as Chairman of our Board of Directors since August 2014. He served as our President and Chief Executive Officer from August, 2014 until Mr. Tom Berman was elected President in April, 2019. Mr. Rickert had been the Chief Executive Officer of Nanofilm since 2002, after serving Nanofilm as President from its founding in 1985. Prior to starting Nanofilm, Mr. Rickert was a tenured professor of Macromolecular Science at Case Western Reserve University. He has a B.S. in Chemical Engineering from Cornell University and an M.S. and Ph.D. from Case Western Reserve University. He did post-doctoral work at the University of Pennsylvania. He is married to Jeanne Rickert.

Combining his technical background and expertise with his prior experience in developing, commercializing and marketing enhanced-performance products powered by nanotechnology, Mr. Rickert provides our board with technical and operational expertise as well providing guidance to the companies based on his significant knowledge of all aspects of the production and sale of nanotechnology enhanced-performance products.

David Sherbin is the Senior Vice President, General Counsel and Chief Compliance Officer of Superior Industries, Inc, a position he has held since June 1, 2022. Previously, Mr. Sherbin provided legal and consulting services. He retired in April 2021 from his position as the senior vice president, general counsel, chief compliance officer and secretary at Aptiv PLC (formerly Delphi Automotive). He joined that company in 2005 and served as General counsel & Chief Compliance Officer. Prior to that, Mr. Sherbin served Pulte Group, Federal Mogul Corporation and Heller Financial Inc. in legal and compliance roles. He is a graduate of Oberlin College and Cornell Law School.

Mr. Sherbin’s experience in legal matters and his background in compliance strengthen the resources of the Company in those areas.

Leandro Vera was appointed as our Chief Financial Officer on February 12, 2020. Leo has worked with us in a consulting role since December 1, 2018, as the acting CFO for our operations. Leo is a co-founder of Swiftmile, Inc. and has served as its Chief Financial Officer since January of 2015. Between January 2015 and December 2017, Leo also served as Chief Operating Officer of Reverie, one of the leading manufacturers of innovative mattresses, adjustable beds, and pillows. Leo also previously worked at Ergomotion, a $100 million annual revenue supplier of power beds, with roles ranging from COO/CFO to COO, to President and CEO from October 2011 to September 2014, leading it to a successful acquisition by a strategic investor. Prior to Ergomotion, he was Managing Director of Pyrotek, a leading international supplier to aluminum, foundry, glass, zinc, and steel customers with performance improving technical products, integrated processing systems and consulting services worldwide. Leo began his career in public accounting with Coopers & Lybrand LLP in its Audit Assurance division between 1995 and 1997.

With his broad business experience and financial training, Leo brings important expertise to our financial function.

Delinquent Section 16(a) Reports

Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to us under Rule 16a-3(d) of the Securities Exchange Act of 1934 during the fiscal year ended December 31, ~~2021~~2022 and Forms 5 and amendments thereto furnished to us with respect to the fiscal year ended December 31, ~~2021~~2022, as well as any written representation from a reporting person that no Form 5 is required, we are not aware that any officer, director or 10% or greater shareholder failed to file on a timely basis, as disclosed in the aforementioned Forms, reports required by Section 16(a) of the Securities Exchange Act of 1934 during the fiscal year ended December 31, ~~2022~~2023.

Code of Ethics

We have adopted a code of ethics (as such term is defined in Item 406 of Regulation S-K) (the “Code of Ethics”) that applies to our executive officers and other employees. A copy of the Code of Ethics will be sent, free of charge, to any person who sends a written request for a copy to Jeanne Rickert, Secretary, Nano Magic Inc., 31601 Research Park Drive, Madison Heights, MI 48071

Board Leadership Structure and Board’s Role in Risk Oversight

The Chairman of our Board is now a separate position from that of our Chief Executive Officer. The two roles were separated after our present Chief Executive Officer was elected to that position in February 2020 and the then-existing Chief Executive Officer was named Chairman. We believe having a separate Chairman who has previously been in the Chief Executive Officer role provides greater assurance of a continuity in the vision for our business.

Risk is inherent within every business, and how well a business manages risk can ultimately determine its success. We face a variety of risks. As a manufacturing company with nanotechnology products, operational risks relating to production, sources of supply and quality control are significant. Given our history of operating losses and our small size, liquidity risk is also significant. Management is responsible for the day-to-day management of the risks we face, while the Board has responsibility for the oversight of risk management. Taking its risk oversight role, the Board of Directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed. To do this, our directors discuss with management our strategy and risks we face.

Board Committees and Director Independence

Our securities are not quoted on an exchange that requires a majority of the members of our Board of Directors (“the Board” or the “Board of Directors”) to be independent and we are not currently otherwise subject to any law, rule or regulation requiring that all or any portion of our Board of Directors include “independent” directors. Similarly, we are not required to establish or maintain an Audit Committee or other committee of our Board of Directors. Nonetheless, as a matter of corporate governance best practice, we have established an Audit Committee (as described below) and our board has determined that Messrs. Gatland, ~~Gunn~~ and ~~Sherbin~~Gunn are “independent” as defined by the NASDAQ Marketplace rules.

The Board does not have standing compensation or nominating committees. The Board does not believe these committees are necessary based on the size of our company and the current levels of compensation to corporate officers. The entire Board participates in the consideration of compensation issues relating to the Chief Executive Officer. We plan to consider establishing compensation and nominating committees at the appropriate time.

Candidates for director nominees are reviewed in the context of the current composition of the Board and the operating and strategic challenges that we face in the next few years. In conducting this assessment, we consider skills, diversity, age, and such other factors as it deems appropriate given the current needs of the Board and our company, to maintain a balance of knowledge, experience and capability. We will seek out individuals with relevant experience to provide strategic guidance and to advise management as we operate our business and introduce new products.

Audit Committee

In February 2016, the Board created an audit committee. It is charged with overseeing (1) the integrity of our financial statements and accounting and financial reporting processes; (2) our compliance with legal and regulatory requirements; (3) the performance of our independent auditor and the qualifications and independence of that firm; (4) our system of disclosure, internal controls and compliance with our Code of Ethics. ~~In December 2022,~~ Messrs. Gatland, ~~Gunn~~ and ~~Sherbin~~Gunn ~~were elected to~~ serve on ~~that~~the committee, Mr. Gunn as Chair of the committee. Mr. Gunn is an audit committee financial expert.

Report of the Audit Committee

The audit committee (the “Committee”) oversees the Company’s financial reporting process on behalf of the Board of Directors. Management has the primary responsibility for the financial statements and the reporting process, including internal control systems. The Company’s independent registered public accounting firm is responsible for expressing an opinion on the conformity of the company’s audited financial statements with U.S. generally accepted accounting principles.

The Committee has received the written disclosures and the letter from the independent registered public accounting firm required by the applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered accounting firm’s communications with the Committee concerning independence and has discussed with the independent registered accounting firm the independence of that firm.

In reliance on the reviews conducted, the Committee recommends to the Board of the Directors (and the Board has approved) the inclusion of the audited financial statements in the Annual Report on Form 10-K for the fiscal year ended December 31, ~~2022~~2023 filed with the SEC.

Stockholder Nominations

To nominate candidates for service as a director on our board a stockholder must hold at least $2,000 in value of shares entitled to vote in the election of directors. Notice must be given not less than 60 or more than 90 days before the meeting. If less than 75-days’ notice is given of the date of the meeting, the stockholder’s notice is due not more than 10 days after notice of the meeting is given or after public disclosure of the date of the meeting, whichever is first. The notice must include information about a proposed candidate: the class and number of shares of stock held of record, owned beneficially and represented by proxy by the nominating shareholder or any person directly or indirectly controlling, controlled by, under common control with or acting in concert with the nominating shareholder (which we refer to as a “shareholder associated person”), and by each person to be nominated such information to be as of the record date for the meeting and as of the date of such notice; a description of all contracts, arrangements, understandings or relationships between (a) the shareholder making the nomination and any shareholder associated person that relate to the nomination, (b) the shareholder making the nomination and the proposed nominee and (c) the shareholder making the nomination, the proposed nominee or any shareholder associated person and any other person or persons that relate to the nomination.

Item 11. Executive Compensation

SUMMARY COMPENSATION TABLE

The table below sets forth certain compensation information for: (i) our principal executive officer or other individual serving in a similar capacity during our fiscal year ended December 31, ~~2022~~2023; (ii) our two most highly compensated executive officers other than our principal executive officers who were serving as executive officers at December 31, ~~2022~~2023 whose compensation exceed $100,000; and (iii) up to two additional individuals for whom disclosure would have been required but for the fact that the individual was not serving as an executive officer at December 31, ~~2022~~2023. Compensation information is shown for the fiscal years ended December 31, ~~2022~~2023 and December 31, ~~2021~~2022.

We sometimes refer to these individuals to as the “named executive officers” as that term is defined under Rule 3b-7 of the Securities Exchange Act of 1934. The value attributable to any stock or option awards is computed in accordance with ASC Topic 718. None of our named executive officers received compensation in the form of Non-Equity Incentive Plan Compensation or Nonqualified Deferred Compensation Earnings in fiscal ~~2022~~2023 and fiscal ~~2021~~2022. The value of stock awards represents the grant date fair value of awards granted with respect to fiscal ~~2022~~2023 and fiscal ~~2021~~2022 in accordance with ASC Topic 718. Pursuant to Securities and Exchange Commission rules, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting conditions. Our methodology, including its underlying estimates and assumptions used in calculating these values, is set forth in Note 2 to our audited financial statements for the fiscal year ended December 31, ~~2022~~2023.

For stock awards, these shares were valued on the grant date based on the quoted trading price of the stock on such date.

Name & Principal position	Year		Salary ($)			Bonus ($)		Stock Awards ($)(1)		Option Awards ($)		All Other Compensation ($)		Total ($)
(a)	(b)		(c)			(d)		(e)		(f)		(i)		(j)
Tom J. Berman President & CEO		2023		158,000			-		24,000		122,457		-		304,457
Tom J. Berman President & CEO		2022		195,000	(2)		-		24,000		146,889		1,000		366,889
Tom J. Berman President & CEO		2021		210,500			159,145		8,000		457,223		-		834,870

	(1)	All directors are compensated for service on our Board. The compensation in this column for Mr. Berman, reflects awards for service as a director.
	(2)	$40,000 of this amount was earned, ~~but~~and ~~was~~ accrued ~~and~~in 2022, but not paid until 2023.

Mr. Berman’s contract expired at the end of 2023, but was renewed for an additional year in January, 2024. Under the terms of the extension, effective January 1, 2024, Mr. Berman will earn an annual salary of $225,000 and will be entitled to a profit bonus tied to 2024 revenue as well as a bonus if the EBITDA of the corporation is 20% or more.

Mr. Berman’s contract was originally from April 1, 2019 through December 31, 2020. In November 2020, the Board acted to extend his contract through 2023. His salary was $15,000 per month for 2020 and $17,500 per month for 2021. In 2020, Mr. Berman also earned a cash bonus of 10% of the amount by which revenue at our subsidiary Nano Magic LLC for any calendar quarter of 2020 exceeded $450,000, subject to an annual cap on the cash bonus payment of $200,000. In 2020, Mr. Berman reached the cap on the cash payment for the bonus; accordingly, options to purchase an additional 100,000 shares of stock at a price of $0.55 per share became vested. Because revenue for Nano Magic LLC was up more than 20% in 2021 over 2020, Mr. Berman’s salary increased in March 2022 to $20,000 per month. Mr. Berman also earned a sales bonus in 2021 and will earn a bonus on 2022 equal to 10% of the amount by which gross sales by Nano Magic LLC exceed the sales target for the quarter, subject to an annual cap.

Outstanding Equity Awards at Fiscal Year End Table

The following table provides information concerning unexercised options, stock that has not vested and equity incentive plan awards outstanding at December 31, ~~2022~~2023.

Option Awards

~~Stock Awards~~

Stock Awards

Name

~~Number of Securities Underlying Unexercised options - exercisable~~

No.of Securities Underlying Unexercised options - exercisable

~~Number of Securities Underlying Unexercised Options - unexercisable~~

No.of Securities Underlying Unexercised Options - unexercisable

~~Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options~~

Plan Awards: No.of Securities Underlying Unexercised Unearned Options

~~Option Exercise Price ($)~~

Option Exercise Price ($)

~~Option Expiration Date~~

Option Expiration Date

~~Number of Shares or Units of Stock that have not Vested~~

~~Market Value of Shares or Units of Stock that have not Vested ($)~~

No. of Unvested Shares

~~Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that have not Vested~~

Market Value of Unvested Shares ($)

~~Equity Incentive Plan Awards: Market Value of Unearned Shares, Units or other Rights that have not Vested ($)~~

Plan Awards: No.of Unearned Shares or Other Unvested Rights

Plan Awards: Market Value of Unearned Shares or other Unvested Rights ($)

(a)

~~(b)~~

(b)

~~(c)~~

(c)

~~(d)~~

(d)

~~(e)~~

(e)

~~(f)~~

(f)

~~(g)~~

~~(h)~~

(g)

~~(i)~~

(h)

~~(j)~~

(i)

(j)

Tom J. Berman

450,000

~~0.55~~

0.55

)

Tom J. Berman

~~600~~900,000

~~1,450,000~~

~~0.75~~

0.75

)

(1)	The option to purchase:	Expires on:
	50,000 Option Shares	April 3, 2024
	75,000 Option Shares	December 31, 2024
	100,000 Option Shares	June 30, 2025
	125,000 Option Shares	December 31, 2025
	100,000 Option Shares	December 31,2025
(2)	The option to purchase	Expires on:
	150,000 Option Shares	June 30, 2025
	150,000 Option Shares	December 31, 2025
	150,000 Option Shares	June 30, 2026
	150,000 Option Shares	December 31, 2026
	150,000 Option Shares	June 30, 2027
	150,000 Option Shares	December 31, 2027

Director Compensation

We paid our directors the amounts shown below during the fiscal year ended December 31, ~~2022~~2023. Amounts paid to Mr. Tom Berman are shown in the summary Compensation Table for named executive officers. All directors were compensated for ~~2022~~2023 with a fee of $2,000 per meeting paid in shares of commons stock. ~~Miles Gatland joined the Board in February, 2022,~~ David Sherbin ~~joined the board~~ resigned in May, ~~2022~~2023. ~~Raymond Gunn joined the Board in December 2022 and was not compensated in 2022.~~

Name	Fees earned or paid in cash		Stock Awards		Option Awards(1)		All Other Compensation			Total
Ronald J. Berman	$	-	$	24,000	$	-54,495	$	~~124,150~~-	~~(2)~~	$	~~148~~78,~~150~~495
Miles Gatland	$	-	$	24,000	$	-	$	-		$	24,000
Scott E. Rickert	$	-	$	24,000		-	$	50,000	(3)	$	74,000
Raymond Gunn	$	-	$	24,000	$	-	$	-		$	24,000
Jeanne M. Rickert	$	-	$	24,000		-	$	-		$	24,000
Scott E. Rickert	$	-	$	24,000	$	-	$	-		$	24,000
David Sherbin	$	-	$	12,000		-		-		$	12,000
Jeanne M. Rickert	$	-	$	24,000	$	34,418	$	-		$	58,418
David Sherbin	$	-	$	12,000	$	-	$	-		$	12,000

	(1)	No option awards were made to Directors in 2022 or 2021. In 2021, in connection with consulting services, Mr. Ronald Berman was awarded an option described above.
	(2)	Bonus, consulting and legal fees paid to Mr. Berman in 2021.
	(3)	Repayment of cash advances made to the Company in prior years.

(1)

In connection with consulting services, Mr. Ronald Berman was awarded options totaling 95,000 in 2023 valued at $54,495,. Ms. Rickert was also awarded 60,000 options for legal services in 2023 valued at $34,418.

We have entered into agreements to provide contractual indemnification and advancement of expenses to the directors.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Equity Compensation Plans

See table and related explanations under item 5 above regarding Equity Compensation Plans.

Security Ownership of Certain Beneficial Owners and Management

Set forth in the following table is the indicated information as of March 1129, ~~2023~~2024 with respect to each person who is known to us to be ~~the~~ the beneficial owner of more than five percent of our common stock.

Name and address of beneficial owner	Amount and nature of beneficial ownership(1)			Percent of Class(2)
PEN Comeback, LLC 31601 Research Park Drive Madison Heights, MI 48071		3,349,467			1714	%
PEN Comeback 2, LLC 31601 Research Park Drive Madison Heights, MI 48071		2,842,670			1412	%
Magic Growth LLC 31601 Research Park Drive Madison Heights, MI 48071		1,961,496			108	%
Magic Growth 2 LLC 31601 Research Park Drive Madison Heights, MI 48071		2,308,912			1210	%
Magic Growth 3 LLC 31601 Research Park Drive Madison Heights, MI 48071		1,484,254			86	%
Rickert Family, Limited Partnership 9 Diamond Drive Key West, FL 33040		1,~~564~~577,~~512~~832			87	%
Ronald J. Berman 31601 Research Park Drive Madison Heights, MI 48071		2,~~064~~222,~~868~~361	(3)		1110	%(4)
Tom J. Berman 31601 Research Park Drive Madison Heights, MI 48071		12,~~864~~200,~~457~~609	(5)		9	%(4)

	(1)	Includes warrants and options that are presently exercisable.
	(2)	Percentages assume that all options and warrants presently exercisable or exercisable in the next 60 days have been exercised.
	(3)	Mr. Ron Berman owns directly 521,374 shares and options and warrants presently exercisable for 45,000 shares. The balance of his economic interest is held indirectly through investment in PEN Comeback, LLC and PEN Comeback 2, LLC.
	(4)	Mr. Ron Berman and Mr. Tom Berman share equally the voting and dispositive power over the holdings of PEN Comeback, LLC; PEN Comeback 2, LLC; Magic Growth, LLC; Magic Growth 2 LLC and Magic Growth 3 LLC (these five entities, the “Investors”). As a result, their voting control on a fully diluted basis is 61% for Mr. Ron Berman and 64% for Mr. Tom Berman.
	(5)	Mr. Tom Berman owns directly 116,411 shares and options and warrants for 857,500 shares exercisable now or in the next 60 days. The balance of his economic interest is held indirectly through investment in PEN Comeback, LLC and PEN Comeback 2, LLC.

Set forth in the table below is information as of March 11, 2023 with respect to the beneficial ownership of common stock by our directors and Executive Officers.

Name of Beneficial Owner	Amount and Nature of Beneficial Ownership		Economic Percentage Ownership			Voting and Dispositive Power
Ronald J Berman (1) (2)		2,064,868		11	%		64	%
Tom J. Berman (1) (2)		2,064,457		11	%		67	%
Miles Gatland (3)		1,274,578		6	%			(5)
Raymond Gunn		0		-			-
Jeanne M. Rickert (4)		615,080		3	%			(5)
Scott E. Rickert (4)		623,334		3	%		6	%(4)
David Sherbin		16,000		-	(5)		-	(5)
Leandro Vera		0		-			-
All directors and officers as a group				35	%		84	%

(1) Includes options and warrants held directly by the following individuals that are presently exercisable or exercisable in the next 60 days:

Mr. Ron Berman			45,000
Mr. Tom Berman			1,057,500
Mr. Miles Gatland			70,000

	(2)	Includes economic interest in stock and warrants that are presently exercisable held indirectly in PEN Comeback LLC, PEN Comeback 2 LLC or both. Ronald Berman and Tom Berman share voting and dispositive power over all securities held by PEN Comeback LLC, PEN Comeback 2 LLC, Magic Growth LLC, Magic Growth 2 LLC and Magic Growth 3 LLC.
	(3)	Includes economic interest in stock and warrants that are presently exercisable held indirectly in Magic Growth LLC, Magic Growth 2 LLC and Magic Growth 3 LLC. Last column only includes securities held directly, as Messrs. Ron and Tom Berman hold voting and dispositive power of securities held indirectly.

	(4)	Includes economic interest in stock and warrants that are presently exercisable held indirectly in Rickert Family, Limited Partnership. Mr. Rickert has sole voting and dispositive power over all securities held by Rickert Family, Limited Partnership.
	(5)	Less than 1%.

	(3)	Mr. Ron Berman owns directly 583,867 shares and options and warrants presently exercisable for 140,000 shares. The balance of his economic interest is held indirectly through investment in PEN Comeback, LLC and PEN Comeback 2, LLC.

	(4)	Mr. Ron Berman and Mr. Tom Berman share equally the voting and dispositive power over the holdings of PEN Comeback, LLC; PEN Comeback 2, LLC; Magic Growth, LLC; Magic Growth 2 LLC and Magic Growth 3 LLC (these five entities, the “Investors”). As a result, their voting control on a fully diluted basis is 55% for Mr. Ron Berman and 58% for Mr. Tom Berman.

	(5)	Mr. Tom Berman owns directly 153,335 shares and options and warrants for 1,472,112 shares exercisable now or in the next 60 days. The balance of his economic interest is held indirectly through investment in PEN Comeback, LLC and PEN Comeback 2, LLC.

Set forth in the table below is information as of March 29, 2024 with respect to the beneficial ownership of common stock by our directors and Executive Officers.

Name of Beneficial Owner	Amount and Nature of Beneficial Ownership		Economic Percentage Ownership			Voting and Dispositive Power (6)
Ronald J. Berman (1) (2)		2,222,361		10	%		64	%
Tom J. Berman (1) (2)		2,500,609		11	%		67	%
Miles Gatland (1) (3)		1,311,502		6	%		-	(5)
Raymond Gunn (5)		36,924		-			-
Jeanne M. Rickert (1) (4)		722,098		3	%		-	(5)
Scott E. Rickert (4)		670,438		3	%		7	%
Leandro Vera (1) (5)		160,000		-			-
All directors and officers as a group				14	%		72	%

(1)

Includes options and warrants held directly by the following individuals that are presently exercisable or exercisable in the next 60 days:

Ron Berman			140,000
Tom Berman			1,449,228
Miles Gatland			70,000
Jeanne Rickert			60,000
Leandro Vera			160,000

	(2)	Includes economic interest in stock and warrants that are presently exercisable held indirectly in PEN Comeback LLC, PEN Comeback 2 LLC or both.

	(3)	Includes economic interest in stock and warrants that are presently exercisable held indirectly in Magic Growth LLC, Magic Growth 2 LLC and Magic Growth 3 LLC. Last column only includes securities held directly, as Messrs. Ron and Tom Berman hold voting and dispositive power of securities held indirectly.

	(4)	Includes economic interest in stock and warrants that are presently exercisable held indirectly in Rickert Family, Limited Partnership. Mr. Rickert has sole voting and dispositive power over all securities held by Rickert Family, Limited Partnership.

	(5)	Less than 1%.

	(6)	Ronald Berman and Tom Berman share voting and dispositive power over all securities held by PEN Comeback LLC, PEN Comeback 2 LLC, Magic Growth LLC, Magic Growth 2 LLC and Magic Growth 3 LLC.

Item 13. Certain Relationships and Related Transaction, and Director Independence.

Our board has determined that Messrs. Gatland, ~~Gunn~~ and ~~Sherbin~~ Gunn are “independent” as defined by the NASDAQ Marketplace rules.

Please refer to Note 1011 – “Related Party Transactions” to our ~~Consolidated~~ Financial Statements included in this Report. The information described therein is hereby incorporated by reference under this Item 13.

Item 14. Principal Accountant Fees and Services

The following table sets forth the fees billed by our principal independent accountants, UHY for categories of services indicated.

	Years Ended December 31,
Category	~~2022~~2023		~~2021~~2022
Audit Fees	$	~~127~~145,~~500~~000	$	127,500
Audit Related Fees	$		$	-
Tax Fees	$	-	$	9,000
Tax Fees	$	9,000	$	9,000
All Other Fees	$	-	$	-

Audit fees. Consists of fees billed for the audit of our annual financial statements, review of our Form 10-K, review of our interim financial statements included in our Form 10-Q and services that are normally provided by the accountant in connection with year-end statutory and regulatory filings or engagements.

Audit-related fees. Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees”, review of our Forms 8-K filings and services that are normally provided by the accountant in connection with non-year-end statutory and regulatory filings or engagements.

Tax fees. Consists of professional services rendered by a company aligned with our principal accountant for tax compliance, tax advice and tax planning.

Other fees. The services provided by our accountants within this category consisted of advice and other services relating to SEC matters, registration statement review, accounting issues and client conferences.

PART IV

Item 15. Exhibits and Financial Statement Schedules

Exhibit No.		Description
3.1		Amended and Restated Certificate of Incorporation of Nano Magic Inc., dated July 2, 2020. (i incorporated herein by reference to Exhibit 3.1 of the Company’s Form 8-K filed with the SEC on July 2, 2020.
3.2		Certificate of Amendment to the Amended and Restated Certificate of Incorporation dated March 2, 2021 (incorporated herein by reference to Exhibit 3.2 of the Company’s Form 10K filed with the SEC on May 28,2021).
3.3*		Certificate of Merger of Domestic Corporation and Foreign Limited Liability Company effective December 31, 2022 (incorporated herein by reference to Exhibit 3.3 of the Company’s Form 10K filed with the SEC on April 11, 2023).
3.4		Bylaws of PEN Inc. (incorporated herein by reference to Annex C, Exhibit B-2 of the Company’s Proxy Statement filed with the SEC on July 3, 2014).
4.1		Piggyback Registration Rights Agreement, dated March 10, 2014, between Douglas P. Baker and the Company (incorporated herein by reference to the Company’s Form 8-K filed with the Commission on March 11, 2014).
4.2		Registration Rights Agreement, dated October 16, 2018, by and between PEN Inc., and PEN Comeback, LLC (incorporated herein by reference to Exhibit 4.1 of the Company’s Form 10Q filed with the SEC on May 29, 2019).
4.3		Form of Warrant issued to PEN Comeback, LLC (incorporated herein by reference to Exhibit 4.2 of the Company’s Form 10Q filed with the SEC on May 29, 2019).
4.4+		Option dated April 4, 2019 issued to Tom J. Berman (incorporated herein by reference to Exhibit 4.8 of the Company’s Form 10K filed with the SEC on November 13, 2019).
4.5		Registration Rights Agreement, dated September 6, 2019, by and between PEN Inc., and PEN Comeback 2, LLC (incorporated herein by reference to Exhibit 4.9 of the Company’s Form 10K filed with the SEC on November 13, 2019).
4.6		Form of Warrant issued to PEN Comeback 2, LLC (incorporated herein by reference to Exhibit 4.10 of the Company’s Form 10K filed with the SEC on November 13, 2019).
4.7		Form of Warrant issued to Magic Growth LLC and Magic Growth 2 LLC (incorporated herein by reference to Exhibit 4.7 of the Company’s Form 10K filed with the SEC on May 28,2021).
4.8+		Option dated March 2, 2020 issued to Tom J. Berman (incorporated herein by reference to Exhibit 4.8 of the Company’s Form 10K filed with the SEC on May 28,2021).
4.9		Option dated March 2, 2020 issued to Ronald J. Berman (incorporated herein by reference to Exhibit 4.9 of the Company’s Form 10K filed with the SEC on May 28,2021).
4.10		Form of Warrant issued to Magic Growth 3 LLC (incorporated herein by reference to Exhibit 4.10 of the Company’s Form 10K filed with the SEC on March 30, 2022).
4.11		Form of Convertible Promissory Note (incorporated herein by reference to Exhibit 4.11 of the Company’s Form 10K filed with the SEC on March 30, 2022)
4.12*		Form of amendment to extend term of Warrant(s)
4.13*		Form of Amendment to Option(s) to permit personal representative to exercise vested options
4.14*		Form of Secured, Convertible Promissory Note

10.1		Commercial Security Agreement, dated February 10, 2015, between Nanofilm, Ltd. and KeyBank National Association (incorporated herein by reference to Exhibit 10.13 of the Company’s form 10-K filed with the Commission on April 10, 2015).
3.4		Bylaws of PEN Inc. (incorporated herein by reference to Annex C, Exhibit B-2 of the Company’s Proxy Statement filed with the SEC on July 3, 2014).
10.2		Amendment to Commercial Promissory Note dated June 18, 2019, between PEN Brands LLC and KeyBank National Association (incorporated herein by reference to Exhibit 10.9 of the Company’s Form 10K filed with the SEC on November 13, 2019).
4.1		Piggyback Registration Rights Agreement, dated March 10, 2014, between Douglas P. Baker and the Company (incorporated herein by reference to the Company’s Form 8-K filed with the Commission on March 11, 2014).
10.3		PEN Inc. 2015 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.17 of the Company’s form 10-K filed with the Commission on March 30, 2016).
4.2		Registration Rights Agreement, dated October 16, 2018, by and between PEN Inc., and PEN Comeback, LLC (incorporated herein by reference to Exhibit 4.1 of the Company’s Form 10Q filed with the SEC on May 29, 2019).
10.4+		Nano Magic Holdings Inc. 2021 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.7 of the Company’s Form 10K filed with the SEC on May 28,2021).
4.3		Form of Warrant issued to PEN Comeback, LLC (incorporated herein by reference to Exhibit 4.2 of the Company’s Form 10Q filed with the SEC on May 29, 2019).
10.5+		Employment Agreement, dated April 3, 2019, between PEN Inc. and Tom Berman (incorporated herein by reference to Exhibit 10.14 of the Company’s form 10-K filed with the Commission on, 2020).
4.4+		Option dated April 4, 2019 issued to Tom J. Berman (incorporated herein by reference to Exhibit 4.8 of the Company’s Form 10K filed with the SEC on November 13, 2019).
10.6		U.S Small Business Administration Note, dated May 8, 2020, from Nano Magic LLC to Fifth Third Bank (incorporated herein by reference to Exhibit 10.9 of the Company’s Form 10K filed with the SEC on May 28,2021).
4.5		Registration Rights Agreement, dated September 6, 2019, by and between PEN Inc., and PEN Comeback 2, LLC (incorporated herein by reference to Exhibit 4.9 of the Company’s Form 10K filed with the SEC on November 13, 2019).
10.7+		Exhibit B executed March 2, 2020 to Employment Agreement dated April 3, 2019, between Nano Magic Inc. and Tom Berman (incorporated herein by reference to Exhibit 10.10 of the Company’s Form 10K filed with the SEC on May 28,2021).
4.6		Form of Warrant issued to PEN Comeback 2, LLC (incorporated herein by reference to Exhibit 4.10 of the Company’s Form 10K filed with the SEC on November 13, 2019).
10.8		Form of Indemnification and Advancement Agreement between individual directors and Nano Magic Holdings Inc. (incorporated herein by reference to Exhibit 10.1 of the Company’s Form 10Q filed with the SEC on October 28,2021).
4.7		Form of Warrant issued to Magic Growth LLC and Magic Growth 2 LLC (incorporated herein by reference to Exhibit 4.7 of the Company’s Form 10K filed with the SEC on May 28,2021).
21.1*		Subsidiaries of the Registrant
4.8+		Option dated March 2, 2020 issued to Tom J. Berman (incorporated herein by reference to Exhibit 4.8 of the Company’s Form 10K filed with the SEC on May 28,2021).
31.1*		Rule 13a-14(a)/15d-14(a) Certificate of Principal Executive Officer
4.9		Option dated March 2, 2020 issued to Ronald J. Berman (incorporated herein by reference to Exhibit 4.9 of the Company’s Form 10K filed with the SEC on May 28,2021).
31.2*		Rule 13a-14(a)/15d-14(a) Certificate of Chief Financial Officer
4.10		Form of Warrant issued to Magic Growth 3 LLC (incorporated herein by reference to Exhibit 4.10 of the Company’s Form 10K filed with the SEC on March 30, 2022).
32.1*		Section 1350 Certificate of Principal Executive Officer and Chief Financial Officer
4.11		Form of Convertible Promissory Note (incorporated herein by reference to Exhibit 4.11 of the Company’s Form 10K filed with the SEC on March 30, 2022).
101.INS*		Inline XBRL Instance Document
4.12		Form of amendment to extend term of Warrant(s) (incorporated herein by reference to Exhibit 4.12 of the Company’s Form 10K filed with the SEC on April 11, 2023).
101.SCH*		Inline XBRL Taxonomy Extension Schema
4.13		Form of Amendment to Option(s) to permit personal representative to exercise vested options (incorporated herein by reference to Exhibit 4.13 of the Company’s Form 10K filed with the SEC on April 11, 2023).
101.CAL*		Inline XBRL Taxonomy Extension Calculation
4.14		Form of Secured, Convertible Promissory Note (incorporated herein by reference to Exhibit 4.14 of the Company’s Form 10K filed with the SEC on April 11, 2023).
101.DEF*		Inline XBRL Taxonomy Extension Definition
101.LAB*		Inline XBRL Taxonomy Extension Labels
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)
+		Management contract or compensatory plan or arrangement.
*		Filed herewith.

10.1+		PEN Inc. 2015 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.14 of the Company’s form 10-K filed with the Commission on March 30, 2016).

10.2+		Nano Magic Holdings Inc. 2021 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.7 of the Company’s Form 10K filed with the SEC on May 28, 2021).

10.3+		Employment Agreement, dated April 3, 2019, between PEN Inc. and Tom Berman (incorporated herein by reference to Exhibit 10.14 of the Company’s form 10-K filed with the Commission on, 2020).

10.4		U.S Small Business Administration Note, dated May 8, 2020, from Nano Magic LLC to Fifth Third Bank (incorporated herein by reference to Exhibit 10.9 of the Company’s Form 10K filed with the SEC on May 28,2021).

10.5		Exhibit B executed March 2, 2020 to Employment Agreement dated April 3, 2019, between Nano Magic Inc. and Tom Berman (incorporated herein by reference to Exhibit 10.10 of the Company’s Form 10K filed with the SEC on May 28,2021).

10.6+		Exhibit B effective January 1, 2024 to Employment Agreement dated April 3, 2019, between Nano Magic Inc. and Tom Berman (incorporated herein by reference to Exhibit 10.1 of the Company’s Form 8K filed with the SEC on February 7, 2024)

10.7		Form of Indemnification and Advancement Agreement between individual directors and Nano Magic Holdings Inc. (incorporated herein by reference to Exhibit 10.1 of the Company’s Form 10Q filed with the SEC on October 28,2021).

21.1*		Subsidiaries of the Registrant

31.1*		Rule 13a-14(a)/15d-14(a) Certificate of Principal Executive Officer

31.2*		Rule 13a-14(a)/15d-14(a) Certificate of Chief Financial Officer

32.1*		Section 1350 Certificate of Principal Executive Officer and Chief Financial Officer

101.INS*		Inline XBRL Instance Document

101.SCH*		Inline XBRL Taxonomy Extension Schema

101.CAL*		Inline XBRL Taxonomy Extension Calculation

101.DEF*		Inline XBRL Taxonomy Extension Definition

101.LAB*		Inline XBRL Taxonomy Extension Labels

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase

104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

+		Management contract or compensatory plan or arrangement.

*		Filed herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

	Nano Magic Inc.
	(Registrant)
	By:	/s/ Tom J. Berman
		Tom J. Berman, President & CEO
	Date:	April 113, ~~2023~~2024

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Jeanne M. Rickert as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments to the annual report, which amendments may make such changes in the annual report as the attorney-in-fact deems appropriate and to file the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that such attorney-in-fact and agent or his substitutes or substitute, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Tom J. Berman	Director, President & CEO	April 113, ~~2023~~2024
Tom J. Berman	(principal executive officer)
/s/ Leandro Vera	Chief Financial Officer	April 113, ~~2023~~2024
Leandro Vera	(principal financial and accounting officer)
/s/ Ronald J. Berman	Director	April 113, ~~2023~~2024
Ronald J. Berman
/s/ Miles Gatland	Director	April 113, ~~2023~~2024
Miles Gatland
/s/ Raymond Gunn	Director	April 113, ~~2023~~2024
Raymond Gunn
/s/ Jeanne Rickert	Director	April 113, ~~2023~~2024
Jeanne M. Rickert
/s/ Scott E. Rickert	Director	April 113, ~~2023~~2024
Scott E. Rickert
/s/ David Sherbin	Director	April 11, 2023
David Sherbin

5455

Filing Compare · Nano Magic Inc.