What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2024-04-16 compared with 2023-04-17 · 156 added, 329 removed, 154 unchanged (76% of the section changed)

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On October 29, 2021, EV Insurance Company, Inc.

was formed as a captive insurer that reinsures in the State of Delaware.

formed as a captive insurer that reinsures in the State of Delaware.

EVCO (DBA “OZOP Plus”) is a wholly owned subsidiary

of Ozop Capital.

is actively engaged in the renewable, electric vehicle (“EV”), energy storage and energy resiliency sectors.

We are engaged

in multiple business lines that include project development as well as equipment distribution.

Our solar and energy storage projects

involve large-scale battery and solar photovoltaics (PV) installations.

Our utility-scale storage business model is based on an arbitrage

business model in which we install multiple 1+ megawatt batteries, charge them with off-peak grid electricity under contract with the

utility, then sell the power back during peak load hours at a premium, as dictated by prevailing electricity tariffs.

OES has entered the component supply/distribution side of the renewable, resiliency and energy storage industries

operates in the renewable, electric vehicle (“EV”), energy storage and energy resiliency sectors.

We are engaged in multiple

business lines that include project development as well as equipment distribution.

Our solar and energy storage projects involve battery

and solar photovoltaics (PV) installations.

OES operates in the component supply/distribution side of the renewable, resiliency and energy storage industries

distributing the core components associated with residential and commercial solar PV systems as well as onsite battery storage and power

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office and warehouse space to support the sales and distribution of our west coast operations.

The components we are distributing include

PV panels, solar inverters, solar mounting systems, stationary batteries, onsite generators and other associated electrical equipment

and components that are all manufactured by multiple companies, both domestic and international.

These core products are sourced from

management-developed relationships and are distributed through our existing network and our in-house sales team.

Our PV business model involves the design and construction of electrical generating PV systems that can sell power to the

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

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 EV chargers.

On February 22, 2023, with an effective

date of March 1, 2023, the Company entered into a Sublease for a Single Subleasee Agreement (the “Sublease”) with the landlord

and a third party for the office and warehouse in Carlsbad California.

Pursuant to the Sublease agreement, the third party will be responsible

for all of the Company’s lease obligations through May 31, 2026, the lease termination date.

The Company and the subleasee have

agreed to work together regarding any existing Company inventory in the facility.

OES currently is focused on solar panel sales to other

distributors and large installation companies.

Energy Distribution System:

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

OES has acquired through 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 footprint.

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

but are not limited to project finance, project development, equipment finance, construction, utility protocol, regulatory policy and

technology assessment.

The Neo-Grid TM System comprises 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 the Neo-Grid TM System, a proprietary system (patent pending), for the capture and

distribution of electrical energy for the EV market.

The Neo-Grid 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-Grid 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-Grid TM System for the distribution of electrical energy providing a solution

to the inevitable stress to the existing grid infrastructure.

The Company has completed its’ research and development of the Neo-Grid TM

System as well as completed the first set of engineered technical drawings.

This first stage of the 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

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 solution.

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

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of mind” to the EV buyer.

May 2022, the Company entered into an agreement with GS Administrators, Inc., a member of Houston-based GSFSGroup.

Under the agreement,

the Company will market GSFSGroup’s EV VSC’s in all states (except, California, Florida, Massachusetts and Washington)

to Ozop’s network of new and used franchised dealerships and other eligible entities.

In addition to acting as an agent for

the marketing, Ozop also has the right to white label the product under its’ Ozop Plus brand.

Ozop’s role won’t

be limited to marketing the product.

GSFSGroup plans to tap into Ozop’s experience relative to battery collection and disposal

and has agreed to insurance risk sharing in connection with the insurance policies that back the VSC’s.

GSFSGroup is working

on getting the approvals needed for the above four (4) states.

June 22, 2022, the Company entered into an Agent Agreement with Royal Administration Services, Inc.

the agreement, the Company will market Royal’s EV VSC’s and has the right to white label it under Ozop Plus.

agreed to allow Ozop Plus on all VSC’s, marketed by Royal and the Company, to assume all the risk related to the electric battery

at an agreed upon premium.

The battery premium is dependent on the consumer’s selection of the duration of the VSC, the miles

selected for coverage and the type of vehicle that the consumer has purchased, with a key component being the kWh size of the battery.

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

VSCs are now effective in 46 states and the others have various waiting times or approvals needed.

October 13, 2022, EVCO entered 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.

On the same 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.

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.

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

Purchase Agreement and Stock Redemption Agreement

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

a Pennsylvania corporation (“PCTI”), and Catherine Chis (“Chis”), PCTI’s Chief Executive Officer (“CEO”)

and its sole shareholder.

Under the terms of the SPA, the Company acquired one thousand (1,000) shares of PCTI, which represents all

of the outstanding shares of PCTI, from Chis in exchange for the issuance of 47,500 shares of the Company’s Series C Preferred

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

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

of the Company’s Series C Preferred Stock held by Chis and the 18,667 shares of the Company’s Series D Preferred Stock held

by Chis for the total purchase price of $11,250,000.

The Agreement was closed on July 27, 2021.

September 1, 2022, the BOD of the Company authorized the filing of a Chapter 7 proceeding which meets the definition of a discontinued

Accordingly, the operating results of PCTI are reported as a loss from discontinued operations in the accompanying consolidated

financial statements for the years ended December 31, 2022, and 2021.

Accordingly, the operating results of PCTI are reported as a gain or loss from discontinued operations in the accompanying

consolidated financial statements for the years ended December 31, 2023, and 2022.

of Operations for the years ended December 31, 2023, and 2022:

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Revenues from Ozop Energy Systems, Inc.

(“OES”) began in May 2021 and 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:

(“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.

are summarized as follows:

Sourced and distributed products

Design and installation

it did for most of the solar industry;

OES’s importing of solar panels issues that began in the 4 th quarter of 2021,

continued during 2022.

Covid issues continued to be disruptive to a continual source of product from foreign manufacturers as well as

ocean freight backlogs and covid issues that plagued the port of arrivals related to the unloading of containers and the eventual customs

clearance of the imported goods.

An announcement by the U.S.

Department in March 2022 stated it would investigate allegations that solar

panel manufacturers in Southeast Asia are using Chinese-made parts and evading U.S.

tariffs has raised alarms concerning both trade and

environmental policy The department announced March 28 that it would investigate claims by California-based solar panel manufacturer

that solar energy equipment manufacturers in Cambodia, Malaysia, Thailand and Vietnam have close business ties to companies in China

that produce the raw materials and some components of solar panel assemblies.

On June 6, 2022, President Biden waived tariffs on solar

panels from four Southeast Asian nations for two years and invoked the Defense Production Act to spur domestic solar panel manufacturing

The tariff exemption will serve as a “bridge” while U.S.

manufacturing ramps up.

of December 31, 2022, the Company had inventory of approximately $3,601,000 of which approximately $3,092,000 are solar panels.

the date of this report the Company also has outstanding purchase orders with its panel supplier of $14,393,000 and has paid deposits

of approximately $3,908,000 towards these open purchase orders.

In order to meet our current customers anticipated needs for 2023, the

Company would need to purchase approximately an additional $5,000,000 to be received in Q4/2023.

Based on the above, management anticipates

revenues may approach $20 million for 2023 for solar products.

of sourced and distributed products (solar product) were lower for the year ended December 31, 2023, compared to December 31, 2022.

Company believes the lower revenues were due to higher interest rates affecting homeowners’ ability and desire for residential

rooftop solar installations as well as competitors lowering their selling prices to try to capture a part of the lower demand.

factors also resulted in our customers having excess inventory on hand and the cancellation of orders.

the years ended December 31, 2023, and 2022, the Company recognized $5,367,636 and $15,281,791, respectively, of cost of sales.

Sourced and distributed products

on the above cost of sales, gross margin was 8.1% and 7.85% for the years ended December 31, 2022, and 2021, respectively.

for OES was consistent on a year-to-year comparison.

While the Company expects margins to remain similar for 2023, the expected increase

in revenues should create additional gross profit dollars in 2023 compared to 2022.

Inventory write down

the year ended December 31, 2023, the Company reviewed its inventory valuation to determine if the historical cost of its solar panels

was less than their net realizable value.

Management also considers, if applicable, other factors, including known trends, market conditions,

and other such issues.

Based on current market conditions related to solar panels including but not limited to reduced selling prices

in the industry and the abundance of inventory supply in the market, management determined that the net realizable value of certain of

the Company’s inventory required a lower of cost or market adjustment of $1,495,978 (the “Inventory Adjustment”) to

the historical cost of inventory purchased.

Gross margin (loss)

the year ended December 31, 2023, the decrease in gross margin compared to the year ended December 31, 2022, is a result of the $1,495,978

inventory write down.

operating expenses for the years ended December 31, 2023, and 2022, were $5,644,981 and $5,959,344, respectively.

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were comprised of:

Year ended December 31,

Management fees, related parties including stock-based compensation of $-0- and $2,850,000, respectively

Stock-based compensation, other

Salaries, taxes, and benefits

Professional and consulting fees

Advertising and marketing

Rent and office expenses

General and administrative.

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”).

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

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

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

fees, related parties

compensation, other

taxes, and benefits

and consulting fees

and marketing

and office expenses

and administrative, Other

January 1, 2022, the Company entered into an employment agreement with Mr.

Pursuant to the agreement, Mr.

Conway received a $250,000 contract renewal bonus and receives 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.

Conway received a $250,000

contract renewal bonus (included in the year ended December 31, 2022) and receives 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 Mr.

Conway for services provided

directly to any of the Company’s subsidiaries.

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 and OED began compensating Mr.

Conway $20,000 in April 2022.

Below is a summary of wages and management fees:

CEO, parent- Series E Preferred Stock

Series E Preferred Stock based compensation for the year ended December 31, 2021, is a result of on March 2, 2021, the BOD authorized

the issuance of 1,800 shares of Series E Preferred Stock to Mr.

Conway and on April 16, 2021, the BOD authorized the issuance of 1,050

The issuances were for services performed.

Pursuant to the terms and conditions of the Certificate of Designation of the

Series E Preferred Stock, including the redemption value of $1,000 per share, the Company recorded $2,850,000 as stock-based compensation

expense for year ended December 31, 2021.

based compensation, other, for the year ended December 31, 2022, of $136,429 is comprised of the following:

Conway’s compensation to

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

Conway $20,000 in March 2022, and OED began compensating Mr.

Conway $20,000

per month beginning in April 2022.

was no stock-based compensation for the year ended December 31, 2023.

Stock based compensation, other, for the year ended December

31, 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.

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

based compensation, other, for the year ended December 31, 2021, of $6,472,751 is comprised of the following stock issuances:

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

The Company valued the shares at $0.20 per share (the market

price of the common stock on the date of the agreement), and $1,000,000 was recorded as deferred stock compensation, to be amortized

over the one-year term of the agreement.

The consultant was terminated in October 2021, and accordingly, for the year ended December

31, 2021, $1,000,000 is included in stock-based compensation expense.

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

The Company valued the shares at $0.0076 per share (the

market price of the common stock on the date of the agreement), and $76,000 was recorded as deferred stock-based compensation, to

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

For the year ended December 31, 2021, the Company recorded $74,751 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 year ended December 31, 2021.

shares issued for services.

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

year ended December 31, 2021, the Company included $56,000 in stock compensation expense.

shares issued pursuant to a consulting agreement dated February 24, 2021.

The shares were valued at $0.2386 per share.

ended December 31, 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.

The shares were valued at $0.23 per share (the market price of the common stock on the date of the issuance).

For the year ended

December 31, 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 $1,150,000 for the year ended December 31, 2021.

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 $0.0745 per share (the market price of the common stock on the date of the issuance).

For the year ended December

31, 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.

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 year ended December 31, 2021.

shares of common stock to be issued for services.

The shares were valued at $0.0392 per share (the market price of the common stock

on the date of the issuance), and $25,000 is included in stock-based compensation expense for the year ended December 31, 2021.

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 $0.0455 per share (the market price of the common stock on the date of the issuance).

For the year ended December

31, 2021, the Company included $227,500 in stock compensation expense for the 5,000,000 shares of common stock.

taxes, and benefits increased for the year ended December 31, 2022, compared to December 31, 2021.

The increase was a result of 2022

having a full year for Ozop Energy Systems and Ozop Engineering and Design and EV Insurance company having employees beginning in April

2022, and October 2022, respectively.

Year ended December 31,

Ozop Energy Systems

Ozop Engineering and Design

EV Insurance Company

costs of $1,755,082 for the year ended December 31, 2023, was a result of storage fees for goods that remained at a third-party warehouse

and purchase order termination fees charged by the Company’s solar panel supplier, all of which was in connection with an early

termination of vendor agreement.

taxes, and benefits decreased for the year ended December 31, 2023, compared to December 31, 2022.

The decrease was a result of the termination

on November 1, 2022, of all Ozop Energy Systems California employees.

The decrease was partially offset by Ozop Engineering and Design

(“OED”) and EV Insurance (“EV”) company having employees for the full year in 2023 and OED beginning in April

2022, and EV in October 2022, respectively.

Energy Systems

Engineering and Design

Insurance Company

Energy Systems currently has 2 employees with an aggregate annual salary of $204,000 and focused on the battery storage system, information

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and the Company’s CEO.

OED currently has six employees with an aggregate annual compensation of $588,000.

EV Insurance Company

has one employee with annual compensation of $125,000.

and consulting fees increased for the year ended December 31, 2022, compared to December 31, 2021.

The increase is due to increases in

accounting expenses of Ozop and its’ subsidiaries in 2022 and consultants engaged in the second quarter of 2021 by Ozop Capital

Partners that have been engaged for nine months during the year ended December 31, 2022.

OED currently has five employees with an aggregate annual compensation of $478,000 and a daily consultant

EV Insurance Company has one employee with annual compensation of $125,000.

and consulting fees decreased for the year ended December 31, 2023, compared to the year ended December 31, 2022.

The decrease is due

to the expiration of certain consulting contracts and accounting fees.

These decreases were partially offset by increases in legal expenses

and auditing fees.

and marketing expenses increased for the year ended December 31, 2023, compared to December 31, 2022.

The increases were related to website

development, and lead generation costs.

and office expense (including supplies, utilities, and internet costs) increased for the year ended December 31, 2022, compared to the

development, lead generation costs, and trade show participation.

and office expenses (including supplies, utilities, and internet costs) decreased for the year ended December 31, 2023, compared to the

year ended December 31, 2022.

The increase is the result of including in the current period, rent and office expense for the full year

of approximately $222,334 for the year ended December 31, 2022, compared to from June 1, 2021, of $121,343 for the year ended December

31, 2021, for OES.

Effective March 1, 2023, OES has subleased the Carlsbad office and warehouse to a third party.

expense increased for the year ended December 31, 2022, compared to the year ended December 31, 2021.

The increase was the result of

including in the current period insurance expense of approximately $232,664 for the year ended December 31, 2022, compared to $205,970

for the year ended December 31, 2021, for OES.

OED’s insurance expense was $44,471 for the year ended December 31, 2022.

estimates that the monthly OES and OED insurance expense to be approximately $20,000 per month.

The decrease was a result that effective March 1, 2023, OES subleased the Carlsbad office and warehouse

to a third party.

expenses decreased for the year ended December 31, 2023, compared to the year ended December 31, 2022.

The decrease was the result of

the termination of the west coast employees in November 2022, resulting in no health insurance and workers compensation expenses related

The decrease was reduced by the health insurance costs for OED for the full year ended December 31, 2023, compared to less than

a full year for the year ended December 31, 2022.

The Company estimates that the monthly insurance expense to be approximately $20,000

General and administrative expenses decreased from $928,728 for the year ended December 31, 2022, to $515,338 for

the year ended December 31, 2023.

There were decreases in credit card fees of $130,384, building expenses of $144,998, investor relations

of $92,702, freight out of $79,251, and travel and meals and entertainment of $31,064.

These decreases of $478,399 were partially offset

by increases in depreciation expense of $28,851 and other increases of $36,158.

Income (Expenses)

income, net, for the year ended December 31, 2022, was $10,763,570 compared to other expenses, net, for the year ended December 31, 2021,

expense, net for the year ended December 31, 2023, was $1,139,220 compared to Other income, net, for the year ended December 31, 2022,

of $10,763,570 and were as follows.

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(19,202,431 )

Debt restructure expense

Loss on extinguishment of debt

Total other expense, net

$ (10,763,570 )

Total other expense (income), net

$ (10,763,570 )

decrease in interest expense for the year ended December 31, 2022, is primarily a result of the initial $38,907,939 of interest expense

related to the fair value of the issuance of 375,000,000 warrants during the year ended December 31, 2021.

Included in other expenses

for the year ended December 31, 2021, is 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, and $16,450,000 for the issuance of 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.

income (loss)

income attributable to the Company for the year ended December 31, 2022, was $6,025,812 compared to a net loss of $195,047,946 for the

year ended December 31, 2021.

The change was primarily a result of the gain on the change in fair value of derivatives of $19,202,431

for the year ended December 31, 2022, compared to the expense of $17,349,075 year ended December 31, 2021.

The loss for the year ended

December 31, 2021, also included loss on debt settlements of $95,449,996 and $16,450,000 of debt restructure expenses, as well as $9,322,751

of stock- based compensation expenses included in the operating expenses for the year ended December 31, 2021.

decrease in interest expense for the year ended December 31, 2023, is primarily a result of the amortization period of certain note discounts

that were completed in 2022.

For the year ended December 31, 2023, the Company recognized gains on the change in the fair value of derivatives

less than the gains for the year ended December 31, 2022.

income (loss), attributable to the Company

loss attributable to the Company for the year ended December 31, 2023, was $7,369,681 compared to net income attributable to the Company

for the year ended December 31, 2022, of $6,025,812.

The change was primarily a result of the gain on the change in fair value of derivatives

of $3,212,113 for the year ended December 31, 2023, compared to $19,202,431 for the year ended December 31, 2022.

The loss for the year

ended December 31, 2023, also included the termination costs of $1,755,082 and inventory write down costs of $1,495,978.

and Capital Resources

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This “going concern” could impair our ability to finance our operations through the sale of debt or equity securities.

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

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

the year ended December 31, 2023, we primarily funded our business operations with the existing cash on hand as of January 1, 2023, and

$2,510,000 of proceeds received pursuant to the issuance of a promissory note and $1,141,514 received from sales of common stock.

$1,828,263 received from sales of common stock.

of December 31, 2023, we had cash of $1,446,029 as compared to $1,369,210 as of December 31, 2022.

As of December 31, 2022, we had current

liabilities of $15,809,229 (including $4,314,270 of non-cash derivative liabilities), compared to current assets of $8,256,613, which

resulted in a working capital deficit of $7,552,616.

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.

Because COVID-19 infections have been reported throughout the

United States, certain federal, state and local governmental authorities have issued stay-at-home orders, proclamations and/or directives

aimed at minimizing the spread of COVID-19.

The ultimate impact of the COVID-19 pandemic on the Company’s operations is

unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration

of the COVID-19 outbreak , new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional

preventative and protective actions that governments, or the Company, may direct, which may result in an extended period of continued

business disruption, and reduced operations.

Any resulting financial impact cannot be reasonably estimated at this time but it may have

a material adverse impact on our business, financial condition and results of operations.

Management expects that its business will be

impacted to some degree, but the significance of the impact of the COVID-19 outbreak on the Company’s business and the duration

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

As of December 31, 2023, we had

current liabilities of $29,782,234 (including $1,216,078 of non-cash derivative liabilities), compared to current assets of

$2,779,881, which resulted in a working capital deficit of $27,002,353.

The current liabilities are comprised of accounts payable,

accrued expenses, convertible debt, derivative liabilities, lease obligations, deferred liability, notes payable and liabilities of

discontinued operations.

the year ended December 31, 2023, net cash used in operating activities was $799,282 compared to $8,599,296 for the year ended December

For the year ended December 31, 2022, our net cash used in operating activities was primarily attributable to the net income

of $6,151,885, adjusted by non- cash interest expense of $5,938,622, stock-based compensation of $136,249 and the non-cash expenses of

amortization and depreciation of $191,818.

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

convertible notes of $19,202,431.

Net changes of $1,551,000 in operating assets and liabilities increased the cash used in operating

the year ended December 31, 2021, our net cash used in operating activities was primarily attributable to the net loss of $195,069,214,

adjusted by loss on debt extinguishment of $95,449,996, non- cash interest expense of $51,487,601 (including $38,907,939 for the initial

fair value of the 375,000,000 warrants issued), losses on the fair value changes in derivatives related to warrants and convertible notes

of $17,349,075, debt restructuring costs of $16,450,000, stock-based compensation of $9,322,751 and the non-cash expenses of interest

For the year ended December 31, 2023, our net cash used in operating activities was primarily attributable to the net loss

of $7,369,681, the gain on the change in fair value of derivatives of $3,212,113, and $250,000 of income on forfeited customer deposit,

adjusted by non-cash items of the termination expense of $1,755,082, interest expense of $1,465,518, the inventory write-down of $1,495,978

and amortization and depreciation of $230,134.

Net changes of $779,989 in operating assets and liabilities increased the cash used in

operating activities, primarily because of the start-up of the Company’s California operations in the support of inventory and

accounts receivable.

the year ended December 31, 2022, the net cash used in investing activities was $65,202, compared to net cash provided by investing activities

of $116,836 for the year ended December 31, 2021.

the year ended December 31, 2022, the net cash provided by financing activities was $3,401,514, compared to $11,475,000 for the year

ended December 31, 2021.

During the year ended December 31, 2022, we received $2,510,000 of proceeds from the issuance of $3,020,000

promissory note and $1,141,514, net of issuance costs, from the sales of common stock to GHS.

During the year ended December 31, 2022,

we made payments of $250,000 for notes payable.

the year ended December 31, 2021, we received $15,000,000 of proceeds from the issuances of $16,610,000 face value of promissory notes

and $13,100,000 (net of costs) from the Series D SPA.

During the year ended December 31, 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.

Accounting Policies

Net changes of $5,107,251 in operating assets and liabilities reduced the cash used in

operating activities.

the year ended December 31, 2022, our net cash used in operating activities was primarily attributable to the net income of $5,496,140,

adjusted by non- cash interest expense of $5,938,622, stock-based compensation of $136,249 and the non-cash expenses of amortization

and depreciation of $191,818.

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

notes of $19,202,431.

Net changes of $1,551,000 in operating assets and liabilities increased the cash used in operating activities.

the year ended December 31, 2023, the net cash used in investing activities was $2,162, compared to $65,202 for the year ended December

the year ended December 31, 2023, the net cash provided by financing activities was $878,263, compared to $3,401,514 for the year ended

December 31, 2022.

During the year ended December 31, 2023, we received $1,828,263, net of issuance costs, from the sales of common stock

to GHS, and we made payments of $950,000 for notes payable.

the year ended December 31, 2022, we received $2,510,000 of proceeds from the issuance of $3,020,000 promissory note and $1,141,514,

net of issuance costs, from the sales of common stock to GHS.

During the year ended December 31, 2022, we made payments of $250,000 for

notes payable.

Accounting Estimates

significant accounting policies are described in more details in the notes to our financial statements appearing elsewhere in this Annual

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Actual results could differ from those estimates.

are valued at the lower of cost or net realizable value, with cost determined on the first-in, first-out basis.

Inventory costs consist of

finished goods.

In evaluating the net realizable value of inventory, management also considers,

if applicable, other factors, including known trends, market conditions, currency exchange rates and other such issues.

Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815, Derivatives and

17 unchanged sentences

fair value, with any difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities.

January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers.

Under ASC 606, the Company recognizes revenue

from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps:

identify the contract with a customer;

(2) identify the performance obligations in the contract;

(3) determine the transaction price;

(4) allocate the transaction price to each performance obligation in the contract;

and (5) recognize revenue when each performance obligation

is satisfied.

For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition.

Under ASC 605, revenue is recognized when the following criteria are met:

(1) persuasive evidence of an arrangement exists;

(2) the performance

of service has been rendered to a customer or delivery has occurred;

(3) the amount of fee to be paid by a customer is fixed and determinable;

and (4) the collectability of the fee is reasonably assured.

There was no impact on the Company’s financial statements as a result

of adopting Topic 606 for the years ended December 31, 2022, and 2021.

(Loss) Per Share

Company computes net loss per share in accordance with FASB ASC 260, “Earnings per Share.” ASC 260 requires presentation

of both basic and diluted earnings per share (EPS) on the face of the statement of operations.

Basic EPS is computed by dividing net

income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period.

EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock

method, and convertible notes and stock warrants, using the if-converted method.

In computing diluted EPS, the average stock price for

the period is used in determining the number of shares assumed to be purchased from the exercise of stock options, warrants and conversion

of convertible notes.

Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.

BALANCE SHEET ARRANGEMENTS

7 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-K

Item 7. Management’s Discussion and Analysis