What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-05-14 compared with 2023-11-20 · 172 added, 315 removed, 128 unchanged (79% of the section changed)

1 unchanged sentence

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, as well as information relating

to the plans of our current management.

operating results during the periods included in the accompanying unaudited consolidated financial statements, as well as information

relating to the plans of our current management.

This report includes forward-looking statements.

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statements would be affected to the extent there are material differences between these estimates.

following discussion should be read in conjunction with our unaudited financial statements and the related notes that appear elsewhere

in this Quarterly Report on Form 10-Q.

following discussion should be read in conjunction with our unaudited consolidated financial statements and the related notes that appear

elsewhere in this Quarterly Report on Form 10-Q.

Energy Solutions, Inc.

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OES was formed to be a manufacturer and distributor of renewable energy products.

October 29, 2020, the Company formed a new wholly owned subsidiary, Ozop Surgical Name Change Subsidiary, Inc., a Nevada corporation

(“Merger Sub”).

The Merger Sub was formed under the Nevada Revised Statutes for the sole purpose and effect of changing the

Company’s name to “Ozop Energy Solutions, Inc.” That same day the Company entered into an Agreement and Plan of Merger

(the “Merger Agreement”) with the Merger Sub and filed Articles of Merger (the “Articles of Merger”) with the

Nevada Secretary of State, merging the Merger Sub into the Company, which were stamped effective as of November 3, 2020.

by the Section 92.A.180 of the Nevada Revised Statutes, the sole purpose and effect of the filing of Articles of Merger was to change

the name of the Company from Ozop Surgical Corp.

to “Ozop Energy Solutions, Inc.”

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.

In April 2021, the Company signed a five-year lease (beginning June 1, 2021) of approximately 8,100 SF in California,

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

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 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.

Company 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.

Our Neo-Grid TM System offers (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.

Company 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 established.

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

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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

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

In April 2021, the Company signed a five-year lease (beginning June 1, 2021) of approximately 8,100 SF in California, for

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 installation of those EV chargers.

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.

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 all 50 states.

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.

is developing a product branded OZOP ARC.

OZOP ARC is an advanced lighting controls system, intricately engineered to integrate sophisticated

wired and wireless technologies.

At its core, it employs a hybrid network topology that facilitates both resilient wired connections

and flexible wireless communications, making it suitable for complex infrastructural environments.

The system is equipped with an array

of sensors and control nodes, enabling precise light management and energy usage monitoring.

With support for protocols such as DALI

and Zigbee, alongside the capability for seamless integration with IoT platforms, OZOP ARC offers a comprehensive solution for intricate

lighting networks.

This system is designed not just for control and efficiency, but also for adaptability to diverse architectural and

electrical layouts, embodying a technical solution for advanced, energy-conscious lighting management.

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 income (loss) from discontinued operations in the accompanying

consolidated financial statements for the three and nine months ended September 30, 2023, and 2022.

of Operations for the three and nine months ended September 30, 2023, and 2022:

the three and nine months ended September 30, 2023, the Company generated revenue of $172,559 and 4,205,083, respectively, compared to

$3,928,918 and $11,614,117 for the three and nine months ended September 30, 2022, respectively.

Accordingly, the operating results of PCTI are reported as income from discontinued operations in the accompanying unaudited

consolidated financial statements for the three months ended March 31, 2024, and 2023.

of Operations for the three months ended March 31, 2024, and 2023:

the three months ended March 31, 2024, the Company generated revenue of $251,722 compared to $2,791,198 for the three months ended March

Revenues from Ozop Energy Systems, Inc.

(“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.

Revenues from

Ozop Engineering and Design (“OED”) are classified as design and installation.

Sales are summarized as follows:

Three months ended

September 30,

Nine months ended

September 30,

Sourced and distributed products

Design and installation

of sourced and distributed products (solar product) were lower for the three and nine months ended September 30, 2023, compared to the

same periods in 2022.

The 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.

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

the three and nine months ended September 30, 2023, the Company recognized $126,438 and $4,255,030, respectively, of cost of sales, compared

to $3,598,134 and $10,634,170 for the three and nine months ended September 30, 2022, respectively.

of sourced and distributed products (solar product) were significantly lower for the three months ended March 31, 2024, compared to the

three months ended March 31, 2023.

The 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.

These factors also resulted in our customers having excess inventory on hand.

Design and installation revenues

increased for the three months ended March 31, 2024, as the Company received additional and larger installation jobs.

the three months ended March 31, 2024, and 2023, the Company recognized $115,445 and $2,394,700, respectively, of cost of sales.

Three months ended

September 30,

Nine months ended

September 30,

Sourced and distributed products

Inventory write down

the nine months ended September 30, 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 $625,000 (the “Inventory Adjustment”) to

Design and installation

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.

Three months ended

September 30,

Nine months ended

September 30,

the three months ended September 30, 2023, the increase in gross margin compared to the three months ended September 30, 2022, is a result

of sales in current quarter of products that were part of the inventory write down of $625,000 as of June 30, 2023.

For the nine months

ended September 30, 2023, the decrease in gross margin compared to the nine months ended September 30, 2022, is a result of the $625,000

inventory write down..

operating expenses for the three and nine months ended September 30, 2023, were $2,637,795 and $4,670,627, respectively, compared to

$1,514,524 and $4,648,920 for the three and nine months ended September 30, 2022, respectively.

The operating expenses were comprised

September 30,

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

Stock-based compensation, other

to the Inventory Adjustment, the Company recognized a gross margin on solar products of 15.8% for the three months ended March 31, 2024,

compared to 13.2% for the three months ended March 31, 2023.

and installation cost of sales is comprised of OED’s labor costs for each job.

operating expenses for the three months ended March 31, 2024, and 2023, were $968,763 and $1,069,762 respectively.

The operating expenses

were comprised of:

Three months ended March 31,

Management fees, related parties

Salaries, taxes, and benefits

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Rent and office expenses

Termination costs

General and administrative

Total operating expenses

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

General and administrative, other

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.

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 (included in the nine months ended September 30, 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.

will receive 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 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, OES began compensating Mr.

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

$20,000 per month beginning in April 2022.

was no stock-based compensation for the three and nine months ended September 30, 2023.

Stock based compensation for the nine months

ended September 30, 2022, of $136,249 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 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.

taxes, and benefits decreased for the three and nine months ended September 30, 2023, compared to the three and nine months ended September

The decrease was a result of the termination for cause of all of the employees in the west coast location related to Ozop Energy

This decrease was reduced by the increases in Ozop Engineering and Design (“OED”) and EV Insurance Company (“Ozop

Plus”) having employees for the entire three and nine months ended September 30, 2023, compared to OED beginning in April 2022,

and Ozop Plus not having any employees in the three and nine months ended September 30, 2022.

For the three and nine months ended September

30, 2023, and 2022, salaries, taxes and benefits were comprised of the following:

September 30,

Currently, the subsidiaries of Ozop Capital, OES and OED, each compensates Mr.

Conway $20,000 per month.

For the three months ended March

31, 2024, and 2023, the Company recorded expenses to Mr.

Conway of $240,000 or each period.

taxes, and benefits decreased for the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

Systems currently has 2 employees with an aggregate annual salary of $204,000 and focused on information technology and general and administrative

The solar distribution of this vertical is being managed by our financial consultant and the Company’s CEO.

OED currently

has five employees with an aggregate annual compensation of $478,000 and a daily consultant when needed.

OED has allocated $52,114 of

salaries to cost of sales for the three months ended March 31, 2024.

EV Insurance Company has one employee with annual compensation of

The expenses per subsidiary included in operating expenses for the three months ended March 31, 2024, and 2023, are as follows:

Three months ended March 31,

Ozop Energy Systems

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EV Insurance Company

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

technology and general and administrative functions.

The solar distribution of this vertical is being managed by our financial consultant

and the Company’s CEO.

OED currently has four employees with an aggregate annual compensation of $414,000.

EV Insurance Company

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

and consulting fees decreased for the three and nine months ended September 30, 2023, compared to the three and nine months ended September

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 three and nine months ended September 30, 2023, compared to the three and nine months ended

September 30, 2022.

The increases were related to website development, lead generation costs, and trade show participation.

and office expenses (including supplies, utilities, and internet costs) decreased for the three and nine months ended September 30, 2023,

compared to the three and nine months ended September 30, 2022.

The decrease was a result that effective March 1, 2023, OES subleased

the Carlsbad office and warehouse to a third party.

costs of $1,755,082 for the three and nine months ended September 30, 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.

expenses decreased for the three and nine months ended September 30, 2023, compared to the three and nine months ended September 30,

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 thereto.

The decrease was reduced by the health insurance costs for OED for the full three and

nine months ended September 30, 2023, compared to the three and nine months ended September 30, 2022.

The Company estimates that the

monthly insurance expense to be approximately $20,000 per month.

and consulting fees decreased for the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

is due to the expiration of certain consulting contracts and legal fees related to the YHS litigation.

These decreases were partially

offset by increases in general legal expenses and auditing fees.

and marketing expenses decreased for the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

and office expense (including storage, supplies, utilities, and internet costs) increased for the three months ended March 31, 2024,

compared to the three months ended March 31, 2023.

The increase is the result of $55,890 expenses incurred by OES for storage fees, partially

offset by decreased rent expense that on March 1, 2023, OES has subleased the Carlsbad office and warehouse to a third party.

expense increased for the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

The increase was the

result of increases in the Company’s general liability insurance.

The Company estimates that the monthly insurance expense to be

approximately $20,000 per month.

(Income) Expenses

(income) expense, net, for the three and nine months ended September 30, 2023, was ($2,265,254) and $1,576,860, respectively, compared

to other income, net, for the three and nine months ended September 30, 2022, of ($513,157) and ($8,501,649), respectively, and were

expense, net, for the three months ended March 31, 2024, was $594,882 compared to $1,859,651 for the three months ended March 31, 2023,

and were as follows.

Three months ended

September 30,

Nine months ended

September 30,

Interest expense

Gain on change in fair value of derivatives

(15,314,483 )

Total other (income) expense

$ (2,265,254 )

$ (8,501,649 )

decrease in interest expense for the three and nine months ended September 30, 2023, is primarily a result of the amortization period

of certain note discounts that were completed in 2022.

For the three months ended September 30, 2023, the Company recognized increased

gains on the change in the fair value of derivatives compared to the gains for the three months ended September 30, 2022.

months ended September 30, 2023, the Company recognized gains on the change in the fair value of derivatives less than the gains for

the nine months ended September 30, 2022.

income (loss) attributable to the Company

loss attributable to the Company for the three months ended September 30, 2023, was $321,058 compared to net loss of $534,988 for the

three months ended September 30, 2022.

The change was primarily a result of the termination expense described above, which were offset

by the gain on the change in fair value of derivatives for the three months ended September 30, 2023, compared to the gain for the three

months ended September 30, 2022.

The decrease in net loss attributable to the Company was also a result of lower interest expense, partially

offset by the lower gross profit recognized in the current quarter compared to the quarter ending September 30, 2022.

The net loss attributable

to the Company for the nine months ended September 30, 2023, was $6,281,346 compared to net income of $4,975,556 for the nine months

ended September 30, 2022.

The change was a result of the termination expense and less gain on change in fair value of derivatives for

the nine months ended September 30, 2023, compared to the gain for the nine months ended September 30, 2022, also a result of lower gross

profits for the nine months ended September 30, 2023, compared to the nine months ended September 30, 2022, as a result of lower sales

and the Inventory Adjustment increasing the cost of goods sold by $625,000 for the nine months ended September 30, 2023.

These increases

on losses were partially offset by the decrease in interest expense for the nine months ended September 30, 2023, compared to the nine

months ended September 30, 2022.

(Gain) loss on change in fair value of derivatives

Total other (income) expense, net

decrease in interest expense for the three months ended March 31, 2024, is primarily a result of the amortization period of certain note

discounts that were completed in 2023.

Interest expense on the face value of the principal balances of the notes payable increased due

to the increased rate as a result of note defaults and extended maturity dates.

For the three months ended March 31, 2024, the Company

recognized a gain of $462,005 on the change in the fair value of derivatives compared to a loss of $638,118 for the three months ended

March 31, 2023.

loss attributable to the Company for the three months ended March 31, 2024, was $1,423,795 compared to $2,527,552 for the three months

ended March 31, 2023.

The change was primarily a result of the gain of $462,005 on the change in fair value of derivatives for the three

months ended March 31, 2024, compared to a loss of $638,115 for the three months ended March 31, 2023.

The decrease in gross profit for

the three months ended March 31, 2024, compared to the three months ended March 31, 2023, partially offset the gain on the change in

the fair value of derivatives.

and Capital Resources

accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets

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

As of September 30, 2023, the Company had an accumulated deficit

of $217,582,145 and a working capital deficit of $11,616,395 (including derivative liabilities of $2,590,186).

As of September 30, 2023,

accompanying unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization

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

As of March 31, 2024, the Company had an accumulated

deficit of $220,094,725 and a working capital deficit of $28,047,674 (including derivative liabilities of $754,073).

As of March 31,

2024, the Company was in default of $3,315,000 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.

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,

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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.

the nine months ended September 30, 2023, we primarily funded our business operations with the existing cash on hand as of January 1,

2023, cash received from sales of inventory, and $1,200,537 received from sales of common stock.

of September 30, 2023, we had cash of $966,292 as compared to $1,369,210 as of December 31, 2022.

As of September 30, 2023, we had current

liabilities of $15,714,672 (including $2,590,186 of non-cash derivative liabilities), compared to current assets of $4,098,277, which

resulted in a working capital deficit of $11,616,395.

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

debt, derivative liabilities, customer deposits, deferred liability, lease obligations, notes payable and liabilities of discontinued

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.

the nine months ended September 30, 2023, net cash used in operating activities was $901,293 compared to $5,185,222 for the nine months

ended September 30, 2022.

For the nine months ended September 30, 2023, our net cash used in operating activities was primarily attributable

to the net loss of $6,281,346, and the gain on the change in fair value of derivatives of $1,724,084, adjusted by non-cash items of the

termination expense of $1,755,082, interest expense of $1,138,067, the inventory write-down of $625,000 and amortization and depreciation

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

the three months ended March 31, 2024, we primarily funded our business operations with the existing cash on hand as of January 1, 2024,

cash received from accounts receivable, and $350,555 received from sales of common stock.

of March 31, 2024, we had cash of $1,154,964 as compared to $1,446,029 as of December 31, 2023.

As of March 31, 2024, we had current

liabilities of $30,435,548 (including $754,073 of derivative liabilities), compared to current assets of $2,387,874, which resulted in

a working capital deficit of $28,047,674.

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 three months ended March 31, 2024, net cash used in operating activities was $641,620 compared to net cash provided by operating

activities of $611,373 for the three months ended March 31, 2023.

the three months ended March 31, 2024, our net cash used in operating activities was primarily attributable to the net loss of $1,423,795,

the gain on the change in fair value of derivatives of $462,005, adjusted by non-cash items of interest expense of $332,990, and amortization

and depreciation of $52,870.

Net changes of $861,893 in operating assets and liabilities reduced the cash used in operating activities.

the nine months ended September 30, 2022, net cash used in operating activities was $5,185,222, which 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, 2023, the net cash used in investing activities was $2,162, compared to $198,362 for the nine months

ended September 30, 2022.

the nine months ended September 30, 2023, the net cash provided by financing activities was $500,537.

During the nine months ended September

the three months ended March 31, 2023, our net cash provided by operating activities was primarily attributable to the net loss of $2,527,552,

adjusted by non-cash items of the loss on the fair value change of derivatives of $638,118, interest expense of $500,568, and amortization

and depreciation of $55,912.

Net changes of $1,949,690 in operating assets and liabilities added to the cash provided by operating activities.

were no investing activities for the three months ended March 31, 2024.

For the three months ended March 31, 2023, the net cash used

in investing activities was $2,162.

the three months ended March 31, 2024, the net cash provided by financing activities was $350,555, net of issuance costs, from the sales

of common stock to GHS.

the three months ended March 31, 2023, the net cash used in financing activities was $23,607.

During the three months ended March 31,

2023, we received $526,393, net of issuance costs, from the sales of common stock to GHS.

During the nine months ended September

During the three months ended March 31, 2023,

we made payments of $550,000 for notes payable.

For the nine months ended September 30, 2022, the Company received shares proceeds

of $814,625, net of issuance costs.

Accounting Policies

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

Accounting Policies and Estimates

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

Report on Form 10-Q.

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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.

(Loss) Per Share

Company computes net income (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

3 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