What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-11-14 compared with 2022-08-15 · 221 added, 228 removed, 219 unchanged (67% of the section changed)

45 unchanged sentences

August 19, 2021, the Company formed Ozop Capital Partners, Inc.

(“Ozop Capital”), a Delaware corporation.

The Company is

the majority shareholder of Ozop Capital with PJN Holdings LLC, a New York limited liability company, being the minority shareholder.

(“Ozop Capital”), a Delaware corporation is a wholly owned

subsidiary of the Company.

Ozop Capital was formed as a holding company to seek to develop a captive insurance company.

Brian Conway was appointed as the sole officer

and director of Ozop Capital and has voting control of Ozop Capital.

was appointed as the sole officer and director of Ozop Capital and has voting control of Ozop Capital.

October 29, 2021, EV Insurance Company, Inc.

21 unchanged sentences

utilities or be used for off grid use as part of our developing Neo-Grids solution.

The Neo-Grids proprietary program, patent pending,

was developed for the off-grid distribution of electricity to remove or reduce the dependency on utilities that currently burdens the

EV Charging sectors.

It will also reduce or eliminate the lengthy permitting processes and streamline the installations of those EV chargers.

The Neo-Grid TM System, patent

pending, was developed for the off-grid distribution of electricity to remove or reduce the dependency on utilities that currently burdens

the EV Charging sectors.

It will also reduce or eliminate the lengthy permitting processes and streamline the installations of those

Energy Distribution System:

The Neo-Grids, patent pending, is comprised of the design engineering, installation, and operational

methodologies as well as the financial arbitrage of how we produce, capture and distribute electrical energy for the EV markets.

has acquired the license rights to a proprietary system, the Neo-Grids TM System (patent pending), for the capture and

distribution of electrical energy for the EV market.

The Neo-Grids TM System will serve both the private auto

and the commercial sectors.

The exponential growth of the EV industry has been accelerated by the recent major commitments of most of

the major car manufacturers.

Our Neo-Grids TM System leverages this accelerated

growth by offering (1) charging locations that can be installed with reduced delays, restricted areas or load limits and (2) EV charger

electricity that is produced from renewable sources claiming little to no carbon footprint.

has developed a business plan for the Neo Grids distribution, a solution to the stress forthcoming to the existing grid infrastructure.

The Company has completed its’ Neo Grid research and development as well as the first set of engineered technical drawings.

first stage of engineered technical drawings allows us to move forward with stage two, as well as to begin to construct the first prototype

or proof of concept, (“PoC”).

Our PoC design is partially reliant on auto manufacturers establishing standardizations of

the actual charging/discharging protocols of the batteries such as on-board inverters as well as bi-directional capabilities in electric

vehicles, which have only recently been established.

As the market growth rate of EV’s continues to rise, the stress on the existing

grid-tied infrastructure shows the need for the continued development of our Neo-Grid solution.

The Neo-Grid TM System patent pending, consists of the design, engineering,

installation, and operational methodologies as well as the financial arbitrage of how we produce, capture and distribute electrical

energy for the EV markets.

OES has acquired th rough

a license the rights to a proprietary system, the Neo-Grids TM System

(patent pending), for the capture and distribution of electrical energy for the EV market.

The Neo-Grids TM

System will serve both the private auto and the commercial sectors.

The exponential growth of the EV industry has been

accelerated by the recent major commitments of most of the major car manufacturers.

Our Neo-Grids TM System leverages

this accelerated growth by offering (1) charging locations that can be rapidly installed in restricted

areas or load limits and (2) EV charger electricity that is produced from renewable sources having little to no carbon

has developed a business plan for the Neo Grid TM distribution system, a solution to alleviate the stress on the existing grid-tied

infrastructure.

The Company has completed its’ Neo Grid TM research and development as well as the first stage that includes

the specifications and engineered technical drawings.

This completion of the first stage of allows us to move forward with stage two,

as well as to begin to construct the first prototype or proof of concept, (“PoC”).

Our PoC design is partially reliant on

auto manufacturers establishing standardizations of the actual charging/discharging protocols of the batteries such as on-board inverters

as well as bi-directional capabilities in electric vehicles, which have only recently been established.

As the market growth rate of

EV’s continues to rise, the stress on the existing grid-tied infrastructure shows the need for the continued development of our

Neo-Grid TM System as a viable solution.

management has decades of experience in the renewable, storage and resilient energy businesses and associated markets, which include

1 unchanged sentence

technology assessment.

Plus plans on marketing vehicle service contracts (“VSC’s”) for electric vehicles (EV’s) that will offer to consumers

to be able to purchase additional months and or miles above the manufacturer’s warranty and to also bring added value to EV owners

by utilizing our partnerships and strengths in the energy market to offer unique and innovative services.

Among EV owners’ concerns

are the EV battery repair and replacement costs, range anxiety, environmental responsibilities, roadside assistance, and the accelerated

wear on additional components that EV vehicles experience.

Plus markets vehicle service contracts (“VSC’s”) for electric vehicles (EV’s) that offer consumers to be able

to purchase additional months and miles above the manufacturer’s warranty and to also bring added value to EV owners by utilizing

our partnerships and strengths in the energy market to offer unique and innovative services.

Among EV owners’ concerns are the

EV battery repair and replacement costs, range anxiety, environmental responsibilities, roadside assistance, and the accelerated wear

on additional components that EV vehicles experience.

Management believes that the Ozop Plus marketed VSC’s will give “peace

20 unchanged sentences

These VSC’s have a maximum of 10 years and 150,000 miles and cover new and used cars from model year 2017 and

During August 2022, Royal will begin the filing process in all 50 states, 30 plus of which are effective upon filing, and

the others have various waiting times or approvals needed.

Royal’s VSCs are now effective in 35 states and the others have various waiting times or approvals needed.

October 13, 2022, EVCO entered into a Reinsurance Contract (the “Contract”) with American Bankers Insurance Company of

Florida (“ABIC” or the “Ceding Company”).

Royal is the Administrator of the Contract.

Pursuant to the terms

of the Contract, ABIC will cede 100% of the battery coverage portion of all electric vehicle service contracts to EVCO.

date ABIC and EVCO also entered into a Trust Agreement, whereas EVCO as the reinsurer agrees to deposit an amount equal to unearned

premium reserves, plus losses reported but unpaid, plus the estimated amount of losses incurred but not reported to the trust account.

Permissible investments (with a maturity of no more than five (5) years) of the assets of the Trust account include:

Treasury Securities

or cash instruments

agency issues

investments as Ceding Company approves

February 25, 2022, the Company formed Ozop Engineering and Design, Inc.

9 unchanged sentences

by working with architects, engineers, facility managers, electrical contractors and engineers.

Purchase Agreement

Purchase Agreement and Stock Redemption Agreement

July 10, 2020, the Company entered into a Stock Purchase Agreement (the “SPA”) with Power Conversion Technologies, Inc.,

4 unchanged sentences

Stock, 18,667 shares of the Company’s Series D Preferred Stock, and 500 shares of the Company’s Series E Preferred Stock

The Acquisition is being accounted for as a business combination and was treated as a reverse acquisition for accounting purposes

with PCTI as the accounting acquirer in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic

805, Business Combinations (“ASC 805”).

In accordance with the accounting treatment for a reverse acquisition, the Company’s

historical financial statements prior to the reverse merger were and will be replaced with the historical financial statements of PCTI

prior to the reverse merger, in all future filings with the U.S.

Securities and Exchange Commission (the “SEC”).

The consolidated

financial statements after completion of the reverse merger have and will include the assets, liabilities and results of operations of

the combined company from and after the closing date of the reverse merger.

designs, develops, manufactures and distributes standard and custom power electronic solutions.

All of its products are manufactured

in the United States.

results of operations below include PCTI activity for the three and six months ended June 30, 2022, and 2021.

Due to supply chain issues

and other factors, management is currently reviewing the current business model of PCTI, in determining the best course of action going

Redemption Agreement

July 13, 2021, the Company entered into a Definitive Agreement (the “Agreement”) with Chis to purchase the 47,500 shares

1 unchanged sentence

by Chis for the total purchase price of $11,250,000.The Agreement was closed on July 27, 2021.

of Operations for the three and six months ended June 30, 2022 and 2021:

the three and six months ended June 30, 2022, the Company generated revenue of $4,878,636 and $7,960,874, respectively, compared to $1,274,033

and $2,069,587 for the three and six months ended June 30, 2021, respectively.

The increase in revenues is from Ozop Energy Systems,

(“OES”) and are classified as sourced and distributed products.

PCTI sales classified as manufactured products had an

increase for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, and decreased for the six month ended

June 30, 2022, compared to the six months ended June 30, 2021.

Ozop Engineering and design (“OED”) operations began in the

quarter ended June 30, 2022, and are classified as design and installation.

of Operations for the three and nine months ended September 30, 2022 and 2021:

the three and nine months ended September 30, 2022, the Company generated revenue of $3,928,918 and $11,614,117, respectively, compared

to $4,716,607 and $5,971,589 for the three and nine months ended September 30, 2021, respectively.

Revenues from Ozop Energy Systems,

(“OES”) are classified as sourced and distributed products.

Ozop Engineering and design (“OED”) operations

began in the quarter ended June 30, 2022, and are classified as design and installation.

Sales are summarized as follows:

Three months ended

Six months ended

September 30,

Sourced and distributed products

Manufactured products

Design and installation

15 unchanged sentences

manufacturing ramps up.

on the situation prior to the June 6, 2022 announcement, the Company placed approximately $10,932,000 of purchase orders for solar panels

and as of the date of the filing of this report has fully paid and received approximately $1,262,000 of this product.

Additionally, the

Company has made approximately $1.9 million of down payments to vendors on the remaining $9,670,000 of open purchase orders to vendors,

to assure product delivery of approximately $4.7 million with a forecasted delivery in August and September 2022 and $5 million with

a forecasted delivery in November and December 2022.

Based on the above and the Company’s current on-hand inventory, management

anticipates similar sales results for the third quarter as the second quarter, and the potential for a significant increase in fourth

quarter sales.

to supply chain issues and other factors, management is currently reviewing the current business model of PCTI, in determining the best

course of action going forward.

the three and six months ended June 30, 2022, the Company recognized $4,416,400 and $7.292.292, respectively of cost of sales, compared

to $1,214,468 and $1,441,377 for the three and six months ended June 30, 2021, respectively..

Three months ended

Six months ended

on the above situation, the Company placed approximately $14,422,000 of purchase orders for solar panels and as of the date of the

filing of this report has fully paid and received approximately $7,265,000 of this product.

Additionally, the Company has made

approximately $1,499,000 of additional deposits to vendors, resulting in a remaining balance of $5,658,000 of open purchase orders

to vendors, to assure product delivery of approximately $7.2 million with a forecasted delivery of $3.9 million in Q4 2022 and $3.3

million in Q1 2023.

The Company was expecting to receive additional product in Q3 2022, that has been delayed until Q4 2022, which

impacted revenues for the three and nine months ended September 30, 2022.

Based on the above and the Company’s current on-hand

inventory, management anticipates the potential for a significant increase in fourth quarter sales over Q3 2022 sales.

the three and nine months ended September 30, 2022, the Company recognized $3,598,918 and $10,634,170, respectively of cost of sales,

compared to $4,370,680 and $5,575,557 for the three and nine months ended September 30, 2021, respectively.

September 30,

Sourced and distributed products

Manufactured products

on the above cost of sales, gross margin was 9.5% and 8.4% for the three and six months ended June 30, 2022, compared to 4.7% and 30.4%

for the three and six months ended June 30, 2021, respectively.

The decrease of gross margin for the six months is a result of the manufactured

orders shipped in 2021 were at a higher margin than the manufactured orders were in 2022.

While PCTI’s margin and gross profit

decreased in the current year, the Company realized an additional $632,663 of gross profit dollars recognized on OES’s sourced

and distributed products.

Due to product availability, increased buy prices and delivery issues that the solar industry experienced at

the end of the 4 th quarter 2021, and into the first quarter of 2022, the Company experienced lower margins on sourced products

at the beginning of 2022.

However, margins of sourced products were approximately 9.7% in the three months ended June 30, 2022 and the

Company expects slightly higher margins and the third and fourth quarters of 2022.

While the overall margin will be reduced, the higher

gross profit dollars generated from the higher sourced and distributed products revenues will benefit the Company.

operating expenses for the three months ended March 31, 2022, and 2021, were $1,977,857 and $5,789,470, respectively.

The operating expenses

were comprised of:

Three Months Ended June 30, 2022

Three Months Ended June 30, 2021

Six Months Ended June 30, 2022

June 30, 2021

Wages and management fees, related parties, including stock-based compensation

on the above cost of sales, gross margin was 8.4% for the three and nine months ended September 30, 2022, compared to 7.3% and 6.6% for

the three and nine months ended September 30, 2021, respectively.

The increase of gross margin for the three and nine months is a result

of the mix of customer sales.

operating expenses for the three and nine months ended September 30, 2022, were $1,514,524 and $4,648,920, compared to $1,708,102 and

$11,309,256 for the three and none months ended September 30, 2021, respectively.

The operating expenses were comprised of:

Months Ended September 30, 2022

Months Ended September 30, 2021

Months Ended September 30, 2022

September 30, 2021

Wages and management fees, related

parties, including stock-based compensation

Stock-based compensation, other

5 unchanged sentences

Total operating expenses

and management fees- related parties, include amounts paid to our CEO and to the President (resigned July 2021) of PCTI.

2020, pursuant to the PCTI transaction, the Company assumed an employment contract entered into on February 28, 2020, between the Company

and management fees- related parties, are amounts paid to our CEO.

On July 10, 2020, pursuant to the PCTI transaction, the Company assumed

an employment contract entered into on February 28, 2020, between the Company and Mr.

Conway (the “Employment Agreement”).

Conway’s compensation as adjusted was $20,000 per month, and effective

September 1, 2021, Mr.

Conway began to receive $10,000 per month from Ozop Capital.

Effective January 1, 2022, the Company entered into

a new employment agreement with Mr.

Pursuant to the agreement, Mr.

Conway received a $250,000 contract renewal bonus and will

receive an annual compensation of $240,000 from the Company and will also be eligible to receive bonuses and equity grants at the discretion

The Company also agreed to compensate Mr.

Conway’s compensation as adjusted was $20,000 per month, and effective September 1, 2021, Mr.

Conway began to receive $10,000

per month from Ozop Capital.

Effective January 1, 2022, the Company entered into a new employment agreement with Mr.

to the agreement, Mr.

Conway received a $250,000 contract renewal bonus and will receive an annual compensation of $240,000 from the

Company and will also be eligible to receive bonuses and equity grants at the discretion of the BOD.

The Company also agreed to compensate

Conway for services provided directly to any of the Company’s subsidiaries.

Ozop Capital increased Mr.

Conway’s compensation to $20,000 per month in January 2022 and OES began compensating Mr.

Conway $20,000

in March 2022.

Below is a summary of wages and management fees:

Three months ended

Six months ended

Conway’s compensation

to $20,000 per month in January 2022 and OES began compensating Mr.

Conway $20,000 in March 2022.

Below is a summary of wages and management

September 30,

CEO management fees

Stock-based compensation

President subsidiary (resigned July 2021)

Total other (income) expense

based compensation for the six months ended June 30, 2022, of $136,429 is comprised of the following:

Total other (income)

based compensation for the nine months ended September 30, 2022, of $136,429 is comprised of the following:

shares of common stock issued in the aggregate to two employees pursuant to their offers of employment dated March 31, 2021.

shares were valued at $0.027 per share.

During the six months ended June 30, 2022, the Company included $135,000 in stock compensation

During the nine months ended September 30, 2022, the Company included $135,000 in stock compensation

of amortization of stock compensation for shares issued in April 2021.

based compensation, other for the three and six months ended June 30, 2021, of $2,013,945 and $5,115,945 is comprised of the following

based compensation, other for the three and nine months ended September 30, 2021, of $668,711 and $5,784,656 is comprised of the following

stock issuances:

3 unchanged sentences

over the one-year term of the agreement.

For the six months ended June 30, 2021, $331,507 is included in stock-based compensation

For the three and nine months ended September 30, 2021, $250,000 and $583,562, respectively,

is included in stock-based compensation expense.

shares issued in April 2021 pursuant to a one-year consulting agreement.

2 unchanged sentences

be amortized over the one-year term of the agreement.

For the six months ended June 30, 2021, the Company recorded $36,348 as stock-based

compensation expense.

For the three and nine months ended September 30, 2021, the Company recorded

$21,211 and $55,595, respectively, as stock-based compensation expense.

shares issued in April 2021 for services.

The Company valued the shares at $0.1392 per share (the market price of the common stock

on the date of the agreement), and $696,000 is included in stock-based compensation expense for the six months ended June 30, 2021.

on the date of the agreement), and $696,000 is included in stock-based compensation expense for the nine months ended September 30,

shares issued for services.

The shares were valued at $0.0056 per share, the date the Company agreed to issue the shares.

the six months ended June 30, 2021, the Company included $56,000 in stock compensation expense.

nine months ended September 30, 2021, the Company included $56,000 in stock compensation expense.

shares issued pursuant to a consulting agreement dated February 24, 2021 (see Note 12).

The shares were valued at $0.2386 per share.

During the six months ended June 30, 2021, the Company included $2,386,000 in stock compensation expense.

shares of common stock issued in the aggregate to two new employees pursuant to their offers of employment dated March 31, 2021.

For the nine months ended September 30, 2021, the Company included $2,386,000 in stock compensation expense.

shares of common stock to be issued in the aggregate to two new employees pursuant to their offers of employment dated March 31,

The shares were valued at $0.23 per share.

During the six months ended June 30, 2021, the Company included $460,000 in stock compensation

expense for the 5,000,000 shares of common stock.

For the nine months ended September 30, 2021, the Company included $460,000 in stock

compensation expense for the 5,000,000 shares of common stock.

of 200 shares and 950 shares of Series E Preferred Stock, with a redemption value of $1,000 per share, resulting in stock compensation

expense of $950,000 and $1,150,000 for the three and six months ended June 30, 2021, respectively.

taxes and benefits increased for the three and six months ended June 30, 2022, compared to the same periods in 2021.

The increase was

a result of the current periods including $252,913 and $499,348, respectively, compared to $125,575 and $167,515 for the three and six

months ended June 30, 2021, respectively, of expenses related to OES and $55,562 for the three and six months ended June 30, 2022, respectively,

These additional costs were offset by reductions in PCTI’s expenses of $104,164 and $129,999, respectively, for the three

and six months ended June 30, 2022, compared to the three and six months ended June 30, 2021.

OES now has annual gross payroll of approximately

$512,000 and an additional $351,000 on an annual basis of personnel focused on the Company’s battery storage vertical.

OED currently

has five employees with an aggregate annual compensation of $457,000.

and consulting fees increased for the three and six months ended June 30, 2022, compared to June 30, 2021.

The increases are due to increases

in accounting expenses of Ozop and its’ subsidiaries in the current three- and six-month periods and consultants engaged in the

second quarter of 2021 by Ozop Capital Partners that have been engaged for the entire six months ended June 30, 2022, as Ozop Plus initiates

its business plan regarding vehicle service contracts on electric vehicles.

and marketing expenses decreased for the three and six months ended June 30, 2022, compared to

June 30, 2021.

The decreases were related to marketing programs during 2021, including brand awareness programs for both PCTI

and office expense (including supplies, utilities and internet costs) increased for the three and six months ended June 30, 2022, compared

to the three and six months ended June 30, 2021.

The increases are the result of including in the current period, rent and office expense

of approximately $52,412 and $98,146, respectively, for the three and six months ended June 30, 2022, compared to $18,421 for the three

and six months ended June 30, 2021, for OES.

The Company estimates that the monthly OES rent and office expense for the California operation

to be approximately $18,000 per month.

expense increased for the three and six months ended June 30, 2022, compared to the three and six months ended June 30, 2021.

was the result of including in the current three- and six-month periods, insurance expense of approximately $52,114 and $132,948, respectively,

for the three and six months ended June 30, 2022, compared to $26,648 for the three and six months ended June 30, 2021, for OES.

Company estimates that the monthly OES insurance expense for the California operation to be approximately $24,000 per month.

expense of $1,150,000 for the nine months ended September 30, 2021.

shares of common stock to be issued in the aggregate to two employees pursuant to their offers of employment dated March 31, 2021.

The shares were valued at $0.0745 per share.

For the three and nine months ended September 30, 2021, the Company included $372,500

in stock compensation expense for the 5,000,000 shares of common stock.

shares of common stock issued for services (see Note 12).

The shares were valued at $0.0553 per share (the

market price of the common stock on the date of the agreement), and $25,000 is included in stock-based compensation expense for the

three and nine months ended September 30, 2021.

taxes and benefits increased for the three and nine months ended September 30, 2022, compared to the same periods in 2021.

was a result of the current periods including $268,091 and $767,438, respectively, compared to $275,375 and $397,889 for the three and

nine months ended September 30, 2021, respectively, of expenses related to OES and $143,320 and $198,882 for the three and nine months

ended September 30, 2022, respectively, for OED.

OES now has annual gross payroll of approximately $512,000 and an additional $351,000

on an annual basis of personnel focused on the Company’s battery storage vertical.

OED currently has five employees with an aggregate

annual compensation of $457,000.

and consulting fees increased for the three and nine months ended September 30, 2022, compared to September 30, 2021.

The increases are

due to increases in accounting expenses of Ozop and its’ subsidiaries in the current three- and nine-month periods and consultants

engaged in the second quarter of 2021 by Ozop Capital Partners that have been engaged for the entire nine months ended September 30,

2022, as Ozop Plus initiates its business plan regarding vehicle service contracts on electric vehicles.

and marketing expenses decreased for the three and nine months ended September 30, 2022, compared

to September 30, 2021.

The decreases were related to marketing programs during 2021, including brand awareness programs for Ozop.

and office expense (including supplies, utilities and internet costs) remained the same for the three months ended September 30, 2022,

compared to the three months ended September 30, 2021, and increased for the nine months ended September 30, 2022, compared to the none

months ended September 30, 2021.

The increase is the result of including in the current period, rent and office expense of approximately

$147.916 for the nine months ended September 30, 2022, compared to $69,221 for the nine months ended September 30, 2021, for OES.

Company estimates that the monthly OES rent and office expense for the California operation to be approximately $18,000 per month.

expense increased for the three and nine months ended September 30, 2022, compared to the three and nine months ended September 30, 2021.

The increase was the result of including in the current three- and nine-month periods, insurance expense of approximately $68,465 and

$201,413, respectively, for the three and nine months ended September 30, 2022, compared to $62,961 and $89,609 for the three and nine

months ended September 30, 2021, for OES.

OED’s insurance expense was $19,790 and $21,135 for the three and nine months ended September

The Company estimates that the monthly OES and OED insurance expense to be approximately $30,000 per month.

Income (Expenses)

income, net was $7,584,016 and $7,973,998 for the three an six months ended June 30, 2022, respectively, compared to other income, net

of $4,087,788 for the three months ended June 30, 2021, and other expenses of $200,183,755 for the six months ended June 30, 2021, and

were comprised of as follows:

Three months ended

Six months ended

income, net was $513,156 and $8,501,649 for the three and nine months ended September 30, 2022, respectively, compared to other income,

net of $13,314,765 for the three months ended September 30, 2021, and other expenses of $186,842,894 for the nine months ended September

30, 2021, and were comprised of as follows:

September 30,

Interest expense

1 unchanged sentence

(17,483,300 )

(15,314,483 )

Loss on extinguishment of debt

Debt restructure expense

Total other (income) expense

$ (7,584,016 )

Total other (income)

$ (13,314,765 )

1 unchanged sentence

$ 186,842,894

increase in other income, net, for the three months ended June 30, 2022, compared to the three months ended June 30, 2021, is primarily

a result of reduced interest expense of $2,899,796 related to the amortization of debt discounts associated with the maturity dates of

certain of the company’s promissory notes.

Other expenses for the six months ended June 30, 2021 ,

includes the loss on extinguishment of debt related to the market value of shares of common stock issued in excess of the debt and accrued

interest extinguished.

The Company also issued 175,000,000 shares of restricted common stock related to the restructure of the deferred

The shares were valued at $0.094 per share and the Company recognized $16,450,000 of restructuring costs.

Also included in

interest expense for the six months ended June 30, 2021, is the initial $38,907,939 of fair value related to the issuance of 300,000,000

In addition, the amortization of debt discounts of $5,137,956 and losses on changes in fair values of derivatives, related

to convertible notes and warrants.

decrease in other income, net, for the three months ended September 30, 2022, compared to the three months ended September 30, 2021,

is primarily a result of the reduced gain on the change in fair value of the derivatives and the reduced interest expense related to

the amortization of debt discounts associated with the maturity dates of certain of the company’s promissory notes.

Other expenses

for the nine months ended September 30, 2021 , includes the loss on extinguishment of debt related

to the market value of shares of common stock issued in excess of the debt and accrued interest extinguished.

The Company also issued

175,000,000 shares of restricted common stock related to the restructure of the deferred liability.

The shares were valued at $0.094

per share and the Company recognized $16,450,000 of restructuring costs.

Also included in interest expense for the nine months ended

September 30, 2021, is the initial $38,907,939 of fair value related to the issuance of 300,000,000 warrants.

In addition, the amortization

of debt discounts of $8,810,332 and losses on changes in fair values of derivatives, related to convertible notes and warrants.

income (loss)

income for the three months ended June 30, 2022, was $6,704,305 compared to a net loss of $211.952 for the three months ended June 30,

The change was primarily a result of an increase in gross profit, a decrease in operating expenses and the increase in other income

as discussed above.

For the six months ended June 30, 2022, the Company has net income $5,510,544 compares to a net loss of $209,704,320

for the six months ended June 30, 2021.

The loss for the six months ended June 30, 2021, was primarily a result of the other expenses

descried above as well as $7,965,945 of stock- based compensation expenses included in the operating expenses for the six months ended

June 30, 2021.

loss for the three months ended September 30, 2022, was $534,988 compared to net income of $11,714,722 for the three months ended September

The change was primarily a result of the reduced gain on the change in fair value of derivatives in the current period compared

to the three months ended September 30, 2021.

For the nine months ended September 30, 2022, the Company had net income $4,975,556 compares

to a net loss of $197,989,599 for the nine months ended September 30, 2021.

The loss for the nine months ended September 30, 2021, was

primarily a result of the other expenses descried above as well as $7,965,945 of stock- based compensation expenses included in the operating

expenses for the nine months ended September 30, 2021.

and Capital Resources

1 unchanged sentence

of assets and the satisfaction of liabilities in the normal course of business.

As of June 30, 2022, the Company had an accumulated deficit

of $211,816,067 and a working capital deficit of $22,909,763 (including derivative liabilities of $7,589,928).

As of June 30, 2022, the

Company was in default of $15,369,247 plus accrued interest on debt instruments due to non-payment upon maturity dates.

These factors,

among others, raise substantial doubt about the ability of the Company to continue as a going concern for one year from the date of the

issuance of these financial statements.

The accompanying financial statements do not include any adjustments to reflect the possible

future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from

the possible inability of the Company to continue as a going concern.

As of September 30, 2022, the Company had an accumulated

deficit of $212,351,054 and a working capital deficit of $23,000,162 (including derivative liabilities of $5,652,218).

As of September

30, 2022, the Company was in default of $14,142,588 plus accrued interest on debt instruments due to non-payment upon maturity dates.

These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for one year from

the date of the issuance of these financial statements.

The accompanying financial statements do not include any adjustments to reflect

the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that

may result from the possible inability of the Company to continue as a going concern.

our current capital and our other existing resources will be sufficient to provide the working capital needed for our current business,

8 unchanged sentences

plans in regard to these factors are discussed below and also in Note 2 to the condensed consolidated financial statements filed herein.

of June 30, 2022, we had cash of $1,949,528 as compared to $6,767,167 at December 31, 2021.

As of June 30, 2022, we had current liabilities

of $30,840,870 (including $7,589,928 of non-cash derivative liabilities), compared to current assets of $7,031,107, which resulted in

a working capital deficit of $22,909,763.

The current liabilities are comprised of accounts payable, accrued expenses, convertible debt,

derivative liabilities, customer deposits, lease obligations and notes payable.

of September 30, 2022, we had cash of $2,063,235 as compared to $6,767,167 at December 31, 2021.

As of September 30, 2022, we had current

liabilities of $29,794,842 (including $5,652,218 of non-cash derivative liabilities), compared to current assets of $6,794,680, which

resulted in a working capital deficit of $23,000,162.

The current liabilities are comprised of accounts payable, accrued expenses, convertible

debt, derivative liabilities, customer deposits, lease obligations, notes payable and liabilities of discontinued operations.

December 2019, a novel strain of coronavirus (COVID-19) emerged.

12 unchanged sentences

for which it may have an impact cannot be determined at this time.

the six months ended June 30, 2022, net cash used in operating activities was $4,777,639 compared to $4,841,428 for the six months ended

June 30, 2021.

For the six months ended June 30, 2022, our net cash used in operating activities was primarily attributable to the net

income of $5,150,437, adjusted by non- cash interest expense of $4,199,825, stock-based compensation of $136,249 and the non-cash expenses

of interest and amortization and depreciation of $126,784.

This was offset by the gain on the fair value changes in derivatives related

to warrants and convertible notes of $13,376,773.

Net changes of $1,014,161 in operating assets and liabilities increased the cash used

in operating activities.

the six months ended June 30, 2021, our net cash used in operating activities was primarily attributable to the net loss of $209,704,320,

the nine months ended September 30, 2022, net cash used in operating activities was $5,185,222 compared to $6,350,242 for the nine months

ended September 30, 2021.

For the nine months ended September 30, 2022, our net cash used in operating activities was primarily attributable

to the net income of $4,445,884, adjusted by non- cash interest expense of $5,020,528, stock-based compensation of $136,249 and the non-cash

expenses of amortization and depreciation of $132,924.

This was offset by the gain on the fair value changes in derivatives related to

warrants and convertible notes of $15,314,483.

Net changes of $246,943 in operating assets and liabilities decreased the cash used in

operating activities.

the nine months ended September 30, 2021, our net cash used in operating activities was primarily attributable to the net loss of $197,989,599,

adjusted by loss on debt extinguishment of $95,437,589, non- cash interest expense of $47,838,062 (including $38,907,939 for the initial

5 unchanged sentences

and accounts receivable.

the six months ended June 30, 2022, the net cash used in investing activities was $40,000, compared to $94,679 for the six months ended

June 30, 2021.

the nine months ended September 30, 2022, the net cash used in investing activities was $198,632, compared to $109,769 for the nine months

ended September 30, 2021.

The amounts for both periods were a result of the Company purchasing office furniture and equipment.

the six months ended June 30, 2022, there were no financing activities.

During the six months ended June 30, 2021, net cash provided

by financing activities was $6,589,911.

We received $12,000,000 of proceeds from the issuances of $13,30,000 face value of promissory

During the six months ended June 30, 2021, the Company redeemed 5,000 shares of the Series E Preferred Stock for $5,000,000 and

repaid $383,772 of notes payable and $26,367 to shareholders.

the nine months ended September 30, 2022, the Company received shares proceeds of $814,625, net of issuance costs.

During the nine months

ended September 30, 2021, net cash provided by financing activities was $8,475,000.

We received $12,000,000 of proceeds from the issuances

of $13,310,000 face value of promissory notes, $13,100,000 (net of costs) from the Series D SPA.

During the nine months ended September

30, 2021, the Company acquired 47,500 shares of Series C Preferred Stock and 18,667 shares of Series D Preferred Stock from Chis for

$11,250,000, redeemed 5,000 shares of the Series E Preferred Stock for $5,000,000 and repaid $375,000 of notes payable.

BALANCE SHEET ARRANGEMENTS

6 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis