What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-04-15 compared with 2024-04-16 · 344 added, 296 removed, 14 unchanged (98% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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.

This report includes forward-looking statements.

Generally, the words “believes,”

“anticipates,” “may,” “will,” “should,” “expect,” “intend,” “estimate,”

“continue,” and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking

Such statements are subject to certain risks and uncertainties, including the matters set forth in this report or other reports

or documents we file with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes to differ

materially from those projected.

Undue reliance should not be placed on these forward-looking statements which speak only as of the date

We undertake no obligation to update these forward-looking statements.

our financial statements are presented on the basis that we are a going concern, which contemplates the realization of assets and the

satisfaction of liabilities in the normal course of business over a reasonable length of time, our auditors have raised a substantial

doubt about our ability to continue as a going concern.

Energy Solutions, Inc.

(the “Company,” “we,” “us” or “our”) was originally incorporated

as Newmarkt Corp.

on July 17, 2015, under the laws of the State of Nevada.

December 11, 2020, the Company formed Ozop Energy Systems, Inc.

(“OES”), a Nevada corporation and a wholly owned subsidiary

of the Company.

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.

MANAGEMENT’S DISCUSSION AND ANALYSIS

OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following is management’s discussion

and analysis of certain significant factors that have affected our financial position and operating results during the periods included

in the accompanying consolidated financial statements, as well as information relating to the plans of our current management.

includes forward-looking statements.

Generally, the words “believes,” “anticipates,” “may,” “will,”

“should,” “expect,” “intend,” “estimate,” “continue,” and similar expressions

or the negative thereof or comparable terminology are intended to identify forward-looking statements.

Such statements are subject to

certain risks and uncertainties, including the matters set forth in this report or other reports or documents we file with the Securities

and Exchange Commission from time to time, which could cause actual results or outcomes to differ materially from those projected.

reliance should not be placed on these forward-looking statements which speak only as of the date hereof.

We undertake no obligation to

update these forward-looking statements.

While our financial statements are presented on the

basis that we are a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course

of business over a reasonable length of time, our auditors have raised a substantial doubt about our ability to continue as a going concern.

Ozop Energy Solutions, Inc.

(the “Company,”

“we,” “us” or “our”) was originally incorporated as Newmarkt Corp.

on July 17, 2015, under the laws

of the State of Nevada.

On 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.

As permitted 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.”

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

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

subsidiary of the Company and was formed as a holding company.

On December 11, 2020, the Company formed Ozop Energy

Systems, Inc.

(“OES”), a Nevada corporation and a wholly owned subsidiary of the Company.

OES was formed to be a manufacturer

and distributor of renewable energy products.

On August 19, 2021, the Company formed Ozop Capital

Partners, Inc.

(“Ozop Capital”), a Delaware corporation and a wholly owned subsidiary of the Company.

Brian Conway was appointed

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

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

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

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

of Ozop Capital.

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

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.

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

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

of mind” to the EV buyer.

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

(“OED”) a Nevada corporation, as a wholly owned subsidiary

of the Company.

OED was formed to become a premier engineering and lighting control design firm.

OED offers product and design support

for lighting and solar projects with a focus on fast lead times and technical support.

OED and our partners can offer the resources needed

for lighting, solar and electrical design projects.

OED will provide its’ customers systems to coordinate the understanding of

electrical usage with the relationship between lighting design and lighting controls, by developing more efficient ecofriendly designs

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

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 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:

the year ended December 31, 2023, the Company generated revenue of $4,760,705 compared to $16,629,450 for the year ended December 31,

was formed as a captive insurance company in the State of Delaware.

EVCO is a wholly owned subsidiary of Ozop Capital.

On January 7, 2022,

EVCO filed with New Castle County, Delaware DBA OZOP Plus.

On February 25, 2022, the Company formed Ozop Engineering

and Design, Inc.

(“OED”) a Nevada corporation, as a wholly owned subsidiary of the Company.

OED was formed to become a premier

engineering and lighting control design firm.

OED offers product and design support for lighting and solar projects with a focus on fast

lead times and technical support.

OED and our partners are able to offer the resources needed for lighting, solar and electrical design

OED will provide customers systems to coordinate the understanding of electrical usage with the relationship between lighting

design and lighting controls, by developing more efficient ecofriendly designs.

We work with architects, engineers, facility managers,

electrical contractors and engineers.

On June 11, 2024, the Company formed Automated Room

Controls, Inc.

(“ARC”) a Nevada corporation, as a wholly owned subsidiary of the Company.

ARC was created to address a significant

need in the lighting controls industry.

ARC’s personnel has extensive experience in lighting controls since 2012, bringing together

IT specialists and lighting control experts.

We believe that easy deployment and creative applications can transform lighting controls

into essential tools for enhancing the utility and ambiance of any space.

The Company’s mission

is to deliver cutting-edge technology that simplifies complex control needs, ensuring seamless integration and exceptional performance.

OES 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.

Equipment Distributor:

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.

Modular Energy Distribution System:

The NeoVolt ™ System comprises 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.

Our NeoVolt 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.

The Company has developed

a business plan for NeoVolt™, a scalable battery storage solution that aims to relieve the stress on existing grid infrastructure

by providing distributed energy storage.

With the first stage of engineered technical drawings completed, we are advancing to stage two

and preparing to construct the initial prototype or proof of concept (PoC).

NeoVolt™ is designed with advanced features, including

automatic adoption of connected devices and dynamic load balancing through a master-slave configuration.

These capabilities enable NeoVolt™

to seamlessly integrate with and manage energy flows across multiple devices.

Furthermore, the PoC is contingent upon recent advancements

in EV charging and discharging standardizations, including on-board inverters and bi-directional capabilities, to ensure compatibility

and efficiency in both residential and commercial applications.

OED specializes in lighting commissioning services.

On September 27, 2024, OED signed an agreement with Leviton Manufacturing Co, Inc., to serve as a field service technician for their advanced

lighting control systems.

Ozop 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 of mind” to the EV buyer.

On October 23, 2024, Ozop Capital Partners, Inc.

into an agreement with Empire Auto Protect (“Empire”).

Under the agreement, Empire will white label Royal Administration’s

Fully Charged VSC, to be marketed as Empire Plus.

OZOP Plus will be ceded the battery premium portion of all of the Empire Plus VSC’s

ARC has devloped products to be 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, 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.

Discontinued Operations

On September 1, 2022, the BOD of the Company authorized

the filing of a Chapter 7 proceedings which meets the definition of a discontinued operation.

Accordingly, the operating results of PCTI

are reported as income from discontinued operations in the accompanying consolidated financial statements for the years ended December

31, 2024, and 2023.

Results of Operations for the years ended December

31, 2024, and 2023:

For the year ended December 31, 2024, the Company

generated revenue of $1,342,653 compared to $4,760,705 for the year ended December 31, 2023.

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.

are summarized as follows:

are classified as sourced and distributed products.

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

and installation.

Sales are summarized as follows:

Sourced and distributed products

Design and installation

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.

Sales for the year ended December 31, 2024, included

$728,640, pursuant to the YHS Settlement.

Excluding this, sales of sourced and distributed products (solar product) were significantly

lower for the year ended December 31, 2024, compared to December 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

Design and installation revenues increased for the year ended December 31, 2024, compared to December 31, 2023, as the Company

received additional and larger installation jobs.

Cost of sales

For the years ended December 31, 2024, and 2023, the

Company recognized $1,187,180 and $5,367,636, respectively, of cost of sales.

Sourced and distributed products

Design and installation

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.

During the years ended December 31, 2024, and 2023,

the Company reviewed its inventory valuation to determine if the historical cost of its solar panels was less than their net realizable

Management also considers, if applicable, other factors, including known trends, market conditions, and other such issues.

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 $134,025 and $1,495,978, respectively, (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.

The operating expenses

were comprised of:

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.

For the year ended December 31, 2024, the increase

in gross margin compared to the year ended December 31, 2023, is a result of lower inventory write down.

Operating expenses

Total operating expenses for the years ended December

31, 2024, and 2023, were $3,619,155 and $5,644,981, respectively.

The operating expenses were comprised of:

Management fees, related parties

Travel expenses

Termination costs

Salaries, taxes, and benefits

Professional and consulting fees

Advertising and marketing

Rent and office expenses

Research and development costs

General and administrative, Other

Effective 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 (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.

Conway 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.

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.

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.

shares were valued at $0.027 per share.

During the year ended December 31, 2022, the Company included $135,000 in stock compensation

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

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

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 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, 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 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)

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.

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

Currently, the subsidiaries of Ozop Capital, OES and

OED, each compensates Mr.

Conway $20,000 per month.

Travel expenses decreased for the year ended December

31, 2024, compared to the year ended December 31, 2023, as the Company had lower travel expenses related to Systems.

Termination 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.

Salaries, taxes, and benefits decreased for the year

ended December 31, 2024, compared to December 31, 2023.

Ozop Energy Systems currently has 2 employees with an aggregate annual salary

of $204,000 and focused on 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

OED has allocated $85,878 of salaries to cost of sales for the year ended December 31, 2024, and employees with an annual

salary of $210,000 are being expensed effective July 1, 2024, to Automated Room Controls, Inc.

Ozop Capital Partners

had one employee with annual compensation of $125,000 (terminated in July 2024), and hired a new employee on September 3, 2024, with an

annual salary of $144,000.

The Company allocates salaries and related expenses to the appropriate subsidiary for where their services

are being performed.

The expenses per subsidiary included in operating expenses for the years ended December 31, 2024, and 2023, are as

Ozop Energy Systems

Ozop Engineering and Design

Ozop Capital Partners/EV Insurance Company

Automated Room Controls

Professional and consulting fees decreased for the

year ended December 31, 2024, compared to the year ended December 31, 2023.

The decrease 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.

Advertising and marketing expenses decreased for the

year ended December 31, 2024, compared to December 31, 2023 .

During the year ended December 31, 2024,

the Company reduced the amount of lead lists it was acquiring as well as reduced the amount spent on promotional items.

Research and development costs increased for the year

ended December 3, 2024, compared to the year ended December 31, 2023, due to the development and testing of the ARC products.

Insurance expenses decreased for the year ended December

31, 2024, compared to the year ended December 31, 2023.

The decrease was the result of the Company not renewing the credit insurance policy

for OES, which terminated April 30, 2024.

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

General and administrative expense other, increased

for the year ended December 31, 2024, compared to the year ended December 31, 2023.

There were increases in Dues and Subscriptions ($10,996),

filing fees ($10,730), trade shows and entertainment ($74,371), and website development ($15,800), and other net increase ($2,720), which

were substantially offset by decreases in bad debt expense ($34,277), depreciation ($26,265), repairs and maintenance ($12,467), and building

expenses ($36,426).

Other Income (Expenses)

Other expense, net for the year ended December 31,

2024, was $2,738,052 compared to $1,139,220 for the year ended December 31, 2023, and were as follows.

Interest expense

(Gain) loss on change in fair value of derivatives

(19,202,431 )

Total other expense (income), net

$ (10,763,570 )

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

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 December 31, 2023, the Company had an accumulated deficit

of $218,670,480 and a working capital deficit of $27,002,353 (including derivative liabilities of $1,216,078).

As of December 31, 2023,

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.

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

however, additional capital will be required to meet our debt obligations, and to further expand our business.

We may be unable to obtain

the additional capital required.

If we are unable to generate capital or raise additional funds when required, it will have a negative

impact on our business development and financial results.

These conditions raise substantial doubt about our ability to continue as a

going concern as well as our recurring losses from operations, deficit in equity, and the need to raise additional capital to fund operations.

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 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

$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, 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.

Gain on change in fair value of derivatives

Gain on litigation settlement

Total other expense, net

The decrease in interest expense for the year ended

December 31, 2024, is primarily a result of the amortization period of certain note discounts that were completed during the year ended

December 31, 2024.

For the year ended December 31, 2024, the Company recognized gains on the change in the fair value of derivatives less

than the gains for the year ended December 31, 2023.

Additionally for the year ended December 31, 2024, the Company recognized a gain

of $271,360 on the settlement with YHS.

Net income (loss), attributable to the Company

Net loss attributable to the Company for the year

ended December 31, 2024, was $6,198,161 compared to $7,369,681 for the year ended December 31, 2023.

The loss for the year ended December

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

The change was also impacted by the

gain on the change in fair value of derivatives of $1,005,585 for the year ended December 31, 2024, compared to $3,212,113 for the year

ended December 31, 2023.

Liquidity and Capital Resources

The 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 December 31, 2024, the Company had an accumulated deficit of $224,868,641 and a working capital deficit of $32,232,815.

As of December 31, 2024, the Company was in default of $19,925,000 plus accrued interest on debt instruments due to non-payment upon maturity

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.

Currently, our current capital and our other existing

resources will not be sufficient to provide the working capital needed for our current business, and, additional capital will be required

to meet our debt obligations, and to further expand our business.

We may be unable to obtain the additional capital required.

unable to generate capital or raise additional funds when required, it will have a negative impact on our business development and financial

These conditions raise substantial doubt about our ability to continue as a going concern as well as our recurring losses from

operations, deficit in equity, and the need to raise additional capital to fund operations.

This “going concern” could impair

our ability to finance our operations through the sale of debt or equity securities.

Management’s plans in regard to these factors

are discussed in Note 2 to the consolidated financial statements filed herein.

For the year ended December 31, 2024, we primarily

funded our business with the existing cash on hand as of January 1, 2024, cash received from the sale of inventory and collection of accounts

receivable, and $1,212,370 received from sales of common stock.

As of December 31, 2024, we had cash of $797,139 as

compared to $1,446,029 as of December 31, 2023.

As of December 31, 2024, we had current liabilities of $33,185,481, compared to current

assets of $952,666, which resulted in a working capital deficit of $32,232,815.

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

and accrued expenses, related party liabilities, convertible debt, derivative liabilities, lease obligations, deferred liability, notes

payable and liabilities of discontinued operations.

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

For the year ended December 31, 2024, net cash used

in operating activities was $1,850,146 compared to $799,282 for the year ended December 31, 2023.

For the year ended December 31, 2024,

our net cash used in operating activities was primarily attributable to the net loss of $6,198,161, the gain on the change in fair value

of derivatives of $1,005,585, adjusted by non-cash interest expense of $1,119,461, the inventory write-down of $134,025 and amortization

and depreciation of $214,372.

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

Report on Form 10-K.

We believe the following accounting policies to be most critical to the judgement and estimates used in the preparation

of our financial statements:

preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires

management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent

assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reported period.

Actual results could differ from those estimates.

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

Hedging Activities.

GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative

financial instruments according to certain criteria.

The criteria include circumstances in which (a) the economic characteristics and

risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host

contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at

fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same

terms as the embedded derivative instrument would be considered a derivative instrument.

Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated

from their host instruments) as follows:

The Company records, when necessary, discounts to convertible notes for the intrinsic value

of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at

the commitment date of this note transaction and the effective conversion price embedded in this note.

Debt discounts under these arrangements

are amortized over the term of the related debt to their stated date of redemption.

Company accounts for the conversion of convertible debt when a conversion option has been bifurcated using the general extinguishment

The debt and equity linked derivatives are removed at their carrying amounts and the shares issued are measured at their then-current

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

BALANCE SHEET ARRANGEMENTS

have no off-balance sheet arrangements including arrangements that would affect our liquidity, capital resources, market risk support

and credit risk support or other benefits.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

required for smaller reporting companies.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Financial Statements and Financial Statement Schedules appearing on pages F1-F27 of this annual report on Form 10-K.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Net changes of $3,889,315 in operating assets and liabilities reduced the cash used in operating activities.

For the year ended December 31, 2023, net cash used

in operating activities was $799,282.

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 $5,107,251 in operating assets and liabilities reduced the

cash used in operating activities.

Investing Activities

For the year ended December 31, 2024, the net cash

used in investing activities was $11,114, compared to $2,162 for the year ended December 31, 2023, primarily due to purchase of office

and computer equipment for both years.

Financing Activities

For the year ended December 31, 2024, the net cash

provided by financing activities was $1,212,370, from the sales of common stock to GHS, net of issuance costs.

For the year ended December 31, 2023, the net cash

provided by financing activities was $878,263.

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.

Critical Accounting Policies and Estimates

The Company’s consolidated financial statements

are prepared in accordance with GAAP in the United States.

The preparation of its consolidated financial statements and related disclosures

requires it to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and

the disclosure of contingent assets and liabilities in the Company’s financial statements.

The Company bases its estimates on historical

experience, known trends and events and various other factors that it believes are reasonable under the circumstances, the results of

which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other

The Company evaluates its estimates and assumptions on an ongoing basis.

Actual results may differ from these estimates under

different assumptions or conditions.

Our significant accounting policies are described

in more details in Note 3 to our financial statements appearing elsewhere in this Annual Report on Form 10-K.

While all these significant

accounting policies impact our financial condition and results of operations, we view certain of these policies as critical.

The SEC requested

that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis.

The SEC indicated

that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition

and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates

about the effect of matters that are inherently uncertain.

Our management believes that given current facts and circumstances, there are

no material estimates or assumptions with levels of subjectivity and judgement necessary to be considered critical accounting policies.

OFF BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements including

arrangements that would affect our liquidity, capital resources, market risk support and credit risk support or other benefits.

QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

Not required for smaller reporting companies.

FINANCIAL STATEMENTS AND SUPPLEMENTARY

See Index to Financial Statements and Financial Statement

Schedules appearing on pages F1-F27 of this annual report on Form 10-K.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE.

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