0001213900-23-025315.txt : 20230331
0001213900-23-025315.hdr.sgml : 20230331
20230331145533
ACCESSION NUMBER: 0001213900-23-025315
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 101
CONFORMED PERIOD OF REPORT: 20221231
FILED AS OF DATE: 20230331
DATE AS OF CHANGE: 20230331
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: C-Bond Systems, Inc
CENTRAL INDEX KEY: 0001421636
STANDARD INDUSTRIAL CLASSIFICATION: INVESTORS, NEC [6799]
IRS NUMBER: 261315585
STATE OF INCORPORATION: CO
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-53029
FILM NUMBER: 23786829
BUSINESS ADDRESS:
STREET 1: 6035 SOUTH LOOP EAST
CITY: HOUSTON
STATE: TX
ZIP: 77033
BUSINESS PHONE: 832-649-5658
MAIL ADDRESS:
STREET 1: 6035 SOUTH LOOP EAST
CITY: HOUSTON
STATE: TX
ZIP: 77033
FORMER COMPANY:
FORMER CONFORMED NAME: WestMountain Alternative Energy Inc
DATE OF NAME CHANGE: 20071218
10-K
1
f10k2022_cbondsystems.htm
ANNUAL REPORT
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2022
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number: 000-53029
C-BOND SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Colorado
26-1315585
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
6035 South Loop East, Houston, TX
77033
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including
area code: (832)649-5658
Securities registered pursuant to Section 12(b)
of the Exchange Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
N/A
N/A
N/A
Securities registered pursuant to Section 12(g)
of the Exchange Act: Common Stock, par value $0.001 per share
Indicate by check mark if the registrant is a
well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes
☒ No ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.
See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and
“emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
Smaller reporting company
☒
Emerging growth company
☐
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. ☐
If securities are registered pursuant to Section
12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s
executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting
common equity held by non-affiliates based upon the closing price of $0.0115 per share of common stock as of June 30, 2022 (the last business
day of the registrant’s most recently completed second fiscal quarter), was $2,695,967.
Indicate the number of shares outstanding of each
of the registrant’s classes of common stock, as of the latest practicable date: 447,704,272 shares of common stock are issued and
outstanding as of March 31, 2023.
This Annual Report on Form
10-K (this “Report”) contains forward-looking statements that involve substantial risks and uncertainties. All statements,
other than statements of historical facts, contained in this Report, including statements regarding our strategy, future operations, future
financial position, future revenue, projected costs, prospects, plans and objectives of management and expected market growth, are forward-looking
statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “could,”
“will,” “would,” “should,” “expect,” “plan,”, “anticipate,” “believe,”
“estimate,” “intend,” “predict,” “seek,” “contemplate,” “project,”
“continue,” “potential,” “ongoing” or the negative of these terms or other comparable terminology.
These forward-looking statements include, but are not limited to, statements about:
●
our ability to obtain additional funds for our operations;
●
our ability to obtain and maintain intellectual property protection for our products and our ability to operate our business without infringing the intellectual property rights of others;
●
our reliance on third party distributors;
●
the initiation, timing, progress and results of our research and development programs;
●
our dependence on current and future collaborators for developing new products;
●
the rate and degree of market acceptance of our commercial products;
●
the implementation of our business model and strategic plans for our business;
●
our estimates of our expenses, losses, future revenue and capital requirements, including our needs for additional financing;
●
our reliance on third party suppliers to supply the materials and components for our products;
●
our ability to attract and retain qualified key management and technical personnel;
●
our financial performance;
●
the impact of government regulation and developments relating to our competitors or our industry; and
●
other risks and uncertainties, including those listed under the caption “Risk Factors.”
These statements relate to
future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors
that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements
expressed or implied by these forward-looking statements. Factors that may cause actual results to differ materially from current expectations
include, among other things, those listed under the section titled “Risk Factors” and elsewhere in this Report.
Any forward-looking statement
in this Report reflects our current view with respect to future events and is subject to these and other risks, uncertainties and assumptions
relating to our business, results of operations, industry, and future growth. Given these uncertainties, you should not place undue reliance
on these forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this Report completely
and with the understanding that our actual future results may be materially different from any future results expressed or implied by
these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements
for any reason, even if new information becomes available in the future.
This Report also contains
estimates, projections and other information concerning our industry, our business and the markets for certain glass strengthening solutions,
hydrophobic products, and window film mounting solutions, including data regarding the estimated size of those markets and their projected
growth rates. Information that is based on estimates, forecasts, projections, or similar methodologies is inherently subject to uncertainties
and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise
expressly stated, we obtained these industry, business, market and other data from reports, research surveys, studies and similar data
prepared by third parties, industry, and general publications, government data and similar sources. In some cases, we do not expressly
refer to the sources from which these data are derived.
You are cautioned not to
place undue reliance on any forward-looking statements, which speak only as of the date of this Report. Except as required by law, we
do not undertake any obligation to update or release any revisions to these forward-looking statements to reflect any events or circumstances,
whether as a result of new information, future events, changes in assumptions or otherwise, after the date hereof.
ii
PART I
ITEM 1. BUSINESS
The following discussion
should be read in conjunction with our consolidated financial statements and the related notes to the consolidated financial statements
that appear elsewhere in this Report.
As used in this Report and
unless otherwise indicated, the terms “C-Bond Systems, Inc.,” “Company,” “we,” “us,” or
“our” refer to C-Bond Systems, Inc. and its wholly owned subsidiary, C-Bond Systems, LLC, and its 80% owned subsidiary, Mobile
Tint, LLC, as the context may require.
Overview
We are a materials development
company and sole owner, developer, and manufacturer of the patented C-Bond technology. We are engaged in the implementation of proprietary
nanotechnology applications and processes to enhance properties of strength, functionality, and sustainability of brittle material systems.
Our primary focus is in the multi-billion-dollar glass and window film industry with target markets in the United States and internationally.
Additionally, we have expanded our product line to include disinfection products. We operate in two divisions: C-Bond Transportation Solutions
and Patriot Glass Solutions. C-Bond Transportation Solutions sells a windshield strengthening, water repellent solution called C-Bond
nanoShield™ as well as disinfection products. Patriot Glass Solutions sells multi-purpose glass strengthening primer and window
film mounting solutions, including C-Bond BRS, a ballistic-resistant film system, and C-Bond Secure, a forced entry system.
On June 30, 2021, we entered
into a Share Exchange Agreement and Plan of Reorganization (the “Exchange Agreement”) with (i) Mobile Tint LLC, a Texas limited
liability company doing business as A1 Glass Coating (“Mobile”), (ii) the sole member of Mobile (the “Mobile Shareholder”),
and (iii) Michael Wanke as the Representative of the Mobile Shareholder. Pursuant to the Exchange Agreement, C-Bond agreed to acquire
80% of Mobile’s units, representing 80% of Mobile’s issued and outstanding capital stock (the “Mobile Shares”).
On July 22, 2021, we closed the Exchange Agreement and acquired 80% of the Mobile Shares. Mobile provides quality window tint solutions
for auto, home, and business owners across Texas, specializing in automotive window tinting, residential window film, and commercial window
film that stop harmful UV rays from passing through its window films for reduced glare, comfortable temperatures, and lower energy bills.
Mobile also carries products that offer forced-entry protection and films that protect glass from scratches, graffiti, other types of
vandalism, and even bullets, including C-Bond BRS and C-Bond Secure products.
We expect that our recent acquisition of
Mobile will be the springboard to provide glass security solutions across the United States. We recently launched Patriot Glass Solutions
to protect personal and business property across the United States using C-Bond’s proprietary glass strengthening technology to
protect property from looting, rioting, break-ins, and gunfire. With our recent acquisition of Mobile, we are re-branding our Safety Solutions
Group as “Patriot Glass Solutions.” Patriot Glass Solutions’ primary products include C-Bond BRS, a ballistic-resistant
film system; and C-Bond Secure, a multi-purpose glass strengthening primer and window film mounting solution that deters forced entry.
Our Business
Product and Service Offerings
C-Bond’s core products
are patented, low-cost technologies that significantly increase the mechanical performance of glass. We have implemented the following
business structure integrating the Transportation Solutions Group and Patriot Glass Solutions.
C-Bond nanoShield™
is a patented, nanotechnology, windshield glass strengthening and hydrophobic (water repellent) all-in-one performance system. It is designed
to improve windshield safety and performance by increasing windshield chip and crack resistance and improving windshield visibility in
wet weather conditions to provide extended driver reaction time. We believe that C-Bond nanoShield is unique in the market and that
the product has no direct competitors. With C-Bond nanoShield, we intend to create new markets and channels in the aftermarket
automotive windshield segment, including fleets, automotive dealers, and service providers.
1
Disinfectant Products
On May 20, 2020, we entered
into a two-year Distributor Agreement with an entity where we were appointed as a distributor to exclusively sell MB-10 Disinfectant Tablets
for use in certain markets. In February 2022, we and the entity amended the Distributor Agreement to include the sale of Vimoba Tablets
in those same markets and extended the term of the Distributor Agreement for another year. MB-10 Disinfectant Tablets are the most convenient
way yet to deliver the benefits of chlorine dioxide to hygiene or biosafety programs. MB-10 disinfectant tablets have one of the broadest,
most complete EPA registration labels on the market. It is a safe, easy, and effective way to disinfect a vehicle’s interior using
an EPA registered disinfectant (Reg No.70060-19-46269) included on List N for use against human coronavirus SARS-CoV-2. It is proven effective
against emerging viral pathogens, including enveloped and large and small non-enveloped viruses. MB-10 Tablets provide fast-acting virus
and bacteria protection that is safe for all vehicle surfaces including LED screens and electronics without leaving a residue or odor.
Vimoba Tablets are 100% non-corrosive, chlorine dioxide producing tablets that maintain the exact same efficacy, EPA Label claims, dilution
rates and contact times as MB-10 Tablets, while including a buffering agent that makes the Vimoba solution completely non-corrosive on
stainless steel – even after prolonged use or exposure – and even when the solution dries on the surface. We were appointed
as a distributor to exclusively sell MB-10 Disinfectant Tablets and Vimoba Tablets for use in the following markets:
●
Automotive, Trucking, RV, rental agencies (auto and truck), service vehicles (taxi, Uber, Lyft), mass transit (train, buses), golf carts, aviation, train, marine (potential future growth)
●
Dealerships
●
Global Distribution
●
Service Providers
●
Transportation Detailing.
Patriot Glass Solutions
C-Bond Secure Strengthening Primer and Window Film Mounting Solution
C-Bond Secure is a patented,
non-toxic, water-based nanotechnology solution designed to significantly increase the strength of architectural glass and improve the
performance properties of window film-to-glass products. C-Bond Secure improves the performance of window film-to-glass products by reducing
glass breakage from impact and stress environments and filling the capillary voids on the glass surface to prevent the trapping of moisture
and impurities that impede cure time and adhesion between the glass and any succeeding window film product. This is important because
when glass does break, this nanotechnology improves the chances that no large shards/pieces will escape the immediate area of the glass
surface and result in serious laceration or personal injury. C-Bond Secure has been tested against untreated glass by third-party
laboratories and shown to outperform untreated glass in this capacity. C-Bond Secure faces market competition from basic soap and
water products (such as baby shampoo and dishwashing soap) as the recognized industry standard window film application solutions, which
we believe provide no structural benefits and are designed to wash hair and dishes, respectively. C-Bond Secure increases overall glass
strength, improves window film product performance, and can be used in conjunction with any manufacturer’s film product.
C-Bond BRS (Ballistic-Resistant Film System)
C-Bond BRS is a patented,
nanotechnology Ballistic-Resistant Film System that increases the structural integrity of glass and provides National Institute of Justice
(NIJ) Level I, Level II, Level IIA, and Underwriter Laboratories (UL) 752 ballistic-resistant protection. C-Bond BRS includes a specified glass thickness
and glass type, the C-Bond window film mounting solution to improve the glass mechanical strength, and the C-Bond window film product.
This product is targeted to police, fire, emergency services, media outlets, schools, airports, and government buildings due to the utility
of ballistic-resistant glass protection in their respective fields. The C-Bond BRS system seeks to combine simplicity and affordability
with a one-way capability (the ability to shoot-out but prevent shooting in) ballistic protection compared to other costlier ballistic
resistant material (polycarbonate and glass laminate) products.
Commercial Market Strategy
We utilize a distributor
model to reach potential customers. This approach takes advantage of existing resources and facilitates relationships between us
and our enterprise partners to leverage their collective strengths. We require industry partners to generate economic growth, support
commercialization activities, provide more developed business networks, knowledge of and access to supply and demand channels, and supplement
limited financial resources. We and our industrial partners work together to determine scalability, adaptability, affordability, usability
and intellectual property. From a business perspective, the long-term scope and strategic benefits of our plug and play business strategy
are to be able to carry out business on a global basis at a lower cost and be better informed and more adaptive to changing market conditions,
which is dependent on securing these relationships.
2
C-Bond Authorized Distributor Network
Our Authorized Distributor
Program focuses on channeling distribution agreements with industry specific business-to-business and original equipment manufacturing
customers to develop a global distribution network. This program aims to partner with high quality distributors that can grow revenues
and margins. For the year ended December 31, 2022, no customer accounted for over 10% of total sales. For the year ended December 31,
2022, all sales were in the United States. Almost all sales generated through Mobile are performed in Texas. No other geographical area
accounted for more than 10% of total sales during the years ended December 31, 2022 and 2021. A reduction in sales from or loss of our
customers could have a material adverse effect on the Company’s consolidated results of operations and financial condition.
Suppliers
Currently, we rely on two
main suppliers, Madico, Inc. and Eastman Performance Films, LLC, for our window film; one main supplier, Gelest, Inc., for our chemicals;
and one main supplier, Quip Laboratories, for disinfectant products. However, we believe that, if necessary, alternate window film
and chemical suppliers could be found without material disruption to our business.
Intellectual Property
To date, we have filed, licensed
and/or acquired a total of 23 individual patents and patent applications spanning core and strategic nano-technology applications and
processes. We intend to continue to expand our patent coverage. Our focus remains on building a patent portfolio that protects our core
intellectual property and delivers shareholder value.
We own four provisional United
States patents and licenses, seven United States patents, and 12 foreign patents on a non-exclusive basis from William Marsh Rice University
(“Rice University”) with claims directed toward various aspects of our current products and products under development including
the use of nanotechnology for glass strengthening and the processes and composition of our products.
Pursuant to an agreement
dated April 8, 2016, between us and Rice University, Rice University has granted a non-exclusive license to us, in nanotube-based surface
treatment for strengthening glass and related materials under Rice’s intellectual property rights, to use, make, distribute, offer
and sell the licensed products specified in the agreement. In consideration, we had to pay a one-time non-refundable license fee of $10,000
and royalty payments of 5% of net sales of the licensed products during the term of the agreement and a sell-off period of 180 days from
termination. In addition, we are required to pay for the maintenance of the patents. This agreement will continue until the expiration
of the last to expire of the licensed property rights, unless terminated earlier in accordance with the terms of the agreement. To date,
no royalties have been due under this agreement.
The “C-Bond™”
and “C-Bond nanoShield™” names and logos are registered trademarks issued by the U.S. Patent and Trademark Office.
Research and Development
We did not incur any research and development expenses during 2022.
Competition
C-Bond nanoshield Windshield Performance System
We believe we have no direct
competition in the windshield glass strengthening space.
C-Bond nanoShield also provides
a complementary hydrophobic or water repellent quality. There are competitors in this space, including Rain-X, AquaPel, and Diamon-Fusion.
We believe these products do not provide chip or crack resistance and have hydrophobic properties that degrade sooner than C-Bond nanoShield.
Accordingly, management believes there is no product that is truly comparable to C-Bond nanoShield currently on the market. We had
the performance of C-Bond nanoShield verified at our request, based on a modified chip test for paint on metal parts, SAEJ 400, to provide
windshield glass chip protection when compared to untreated glass.
3
C-Bond Secure Glass Strengthening Primer and
Window Film Mounting Solution
C-Bond Secure faces competition
from alternative window film mounting products in the market; however, all these products have similar ingredients to a soap and water
mix, which we believe provides no structural benefit. These solutions are used to provide a window film installer the ability to
slip or move the film on the surface to which it is applied. The industry standard solution most commonly used to apply window film
to glass is a mixture containing commonly available baby shampoo or dishwashing soap and water that we believe has the following negative
attributes: provides no structural benefits, often bubbles or yellows and scatters light, can only be applied within a limited temperature
range, and may require 30 to 120 days of “dry” time to set completely depending on the film thickness. C-Bond Secure
provides the same slip properties while also strengthening the glass and improving film adhesion.
C-Bond BRS
C-Bond BRS faces competition
from alternative bulletproof or bullet-resistant glass products in the market. Alternative bulletproof solutions use polycarbonate or
glass laminate materials that are expensive, thick, heavy, often require reframing and retrofit of existing structure and revised building
codes, and yellow and discolor over time. These alternative solutions are often cost prohibitive to cost sensitive customers such
as educational and municipal facilities. C-Bond BRS allows for increased safety and security at an affordable cost. Most importantly,
it provides a deterrent to an intruder and valuable time to secure the facility.
Employees
As of December 31, 2022,
C-Bond had one full-time employee, and multiple part-time employees, including our chief executive officer, who operate as
independent contractors of the Company. Additionally, Mobile had 16 full-time employees and 3 independent contractors. We have established an extensive network
of external partners, contractors, and consultants to minimize administrative overhead and maximize efficiency.
We believe that a diverse
workforce is important to our success. We will continue to focus on the hiring, retention and advancement of women and underrepresented
populations, and to cultivate an inclusive and diverse corporate culture. In the future, we intend to continue to evaluate our use of
human capital measures or objectives in managing our business such as the factors we employ or seek to employ in the development, attraction
and retention of personnel and maintenance of diversity in our workforce.
The success of our business
is fundamentally connected to the well-being of our people. Accordingly, we are committed to the health, safety and wellness of our employees.
We provide our employees and their families with access to a variety of innovative, flexible and convenient health and wellness programs,
including benefits that provide protection and security so they can have peace of mind concerning events that may require time away from
work or that impact their financial well-being; that support their physical and mental health by providing tools and resources to help
them improve or maintain their health status and encourage engagement in healthy behaviors; and that offer choice where possible so they
can customize their benefits to meet their needs and the needs of their families.
We also provide robust compensation
and benefits programs to help meet the needs of our employees. We believe that we maintain a satisfactory working relationship with our
employees and have not experienced any labor disputes.
General Company Information
C-Bond Systems, Inc., formerly
WestMountain Alternative Energy, Inc. (“WestMountain”), was incorporated in the state of Colorado on November 13, 2007. C-Bond
Systems, LLC is a Texas-based limited liability company that was formed in 2013, headquartered in Houston, Texas. On April 25, 2018, WestMountain
Energy, WestMountain’s wholly owned subsidiary, WETM Acquisition Corp., a corporation formed in the State of Colorado on April 18,
2018, (the “Acquisition Sub”), and C-Bond Systems, LLC, entered into an Agreement and Plan of Merger and Reorganization (“Merger
Agreement”). Pursuant to the terms of the Merger Agreement, on April 25, 2018, referred to as the Closing Date, the Acquisition
Sub merged with and into C-Bond Systems, LLC, which was the surviving corporation and became a wholly owned subsidiary of WestMountain
(the “Merger”). The Merger was effective as of April 26, 2018, upon the filing of a Certificate of Merger with the Secretary
of State of the State of Texas. On July 18, 2018, we changed our name to C-Bond Systems, Inc. Our common stock is currently quoted
on the OTC Pink marketplace on a limited basis under the trading symbol “CBNT”. Our principal executive offices are located
at 6035 South Loop East, Houston, Texas, 77033. Our website address is http://cbondsystems.com/, and our telephone number is (832)
649-5658. The content of any website of ours is not a part of, or incorporated by reference in, this Report. The Company’s Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to reports filed pursuant to Sections
13(a) and 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are filed with the Securities and
Exchange Commission (the “SEC”). These reports and any other information filed by the Company with the SEC are available free
of charge on our website. The SEC maintains an internet site that contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the SEC at www.sec.gov.
4
ITEM 1A. RISK FACTORS
Investing in our common
stock involves a high degree of risk. You should not invest in our stock unless you are able to bear the complete loss of your investment.
You should carefully consider the risks described below, as well as other information provided to you in this annual report on Form 10-K,
including information in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and
“Cautionary Note Regarding Forward-Looking Information” before making an investment decision. The risks and uncertainties
described below are not the only ones facing C-Bond Systems. Additional risks and uncertainties not presently known to us or that we currently
believe are immaterial may also impair our business operations. If any of the following risks actually occur, our business, financial
condition or results of operations could be materially adversely affected, the value of our common stock could decline, and you may lose
all or part of your investment.
We have incurred substantial losses to date,
may continue to incur losses in the future, and we may never achieve or sustain profitability.
We have incurred substantial
net losses since our inception, including net losses of $5,156,478 and $7,128,858 (which included stock-based compensation of $1,039,943
and $4,085,868, respectively), for the years ended December 31, 2022 and 2021, respectively, and these losses may continue. The net
cash used in operations was $1,584,918 and $1,807,051 for the years ended December 31, 2022 and 2021, respectively. As of December 31,
2022, we had an accumulated deficit, shareholders’ deficit, and working capital deficit of $62,693,184, $7,050,669 and $4,349,384,
respectively. These factors raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve
months from the issuance date of this report. Management cannot provide assurance that the Company will ultimately achieve profitable
operations or become cash flow positive or raise additional debt and/or equity capital.
Our ability to continue as a going concern
will require us to obtain additional financing to fund our current operations, which may be unavailable on attractive terms, if at all.
As of December 31, 2022,
our recurring operating losses, cash used in operations and our current operating plans raise substantial doubt about our ability to continue
as a going concern for a period of twelve months from the issuance date of this report. Our ability to continue as a going concern will
require us to obtain additional financing to fund our current operating plans. We believe that our existing cash and cash equivalents
will not be sufficient to fund our current operating plans. If we are unable to raise capital when needed or on attractive terms, we would
be forced to delay, reduce or eliminate our commercialization efforts.
Unfavorable global economic, business, or
political conditions could adversely affect our business, financial condition, or results of operations.
Our results of operations
could be adversely affected by general conditions in the global economy and in the global financial markets, including conditions that
are outside of our control, including the impact of health and safety concerns, such as those relating to the current COVID-19 outbreak.
The most recent global financial crisis caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged
economic downturn could result in a variety of risks to our business, including weakened demand for our products and our ability to raise
additional capital when needed on acceptable terms, if at all. A weak or declining economy could strain our domestic and international
customers, possibly resulting in delays in customer payments. Any of the foregoing could harm our business and we cannot anticipate all
the ways in which the current economic climate and financial market conditions could adversely impact our business.
We hold our cash and cash equivalents that
we use to meet our working capital and operating expense needs in deposit accounts that could be adversely affected if the financial institution
holding such funds fails.
We hold our cash and cash
equivalents that we use to meet our working capital and operating expense needs in deposit accounts. At times, the balance held in these
accounts may exceed the Federal Deposit Insurance Corporation, or FDIC, standard deposit insurance limit of $250,000. If the financial
institution in which we hold such funds fails or is subject to significant adverse conditions in the financial or credit markets, we could
be subject to a risk of loss of all or a portion of such uninsured funds or be subject to a delay in accessing all or a portion of such
uninsured funds. Any such loss or lack of access to these funds could adversely impact our short-term liquidity and ability to meet our
operating expense obligations, including payroll obligations.
For example, on March 10,
2023, Silicon Valley Bank, or SVB, and Signature Bank, were closed by state regulators and the FDIC was appointed receiver for each bank.
The FDIC created successor bridge banks and all deposits of SVB and Signature Bank were transferred to the bridge banks under a systemic
risk exception approved by the United States Department of the Treasury, the Federal Reserve and the FDIC. If the financial institution
in which we hold funds for working capital and operating expenses were to fail, we cannot provide any assurances that such governmental
agencies would take action to protect our uninsured deposits or investments in a similar manner.
5
Our future revenues are very difficult to
predict with any accuracy.
Predicting the timing or
the amount of revenues that we will receive from the sale, or license, of our products is very difficult. Any delay in the development
and acceptance of one or more of our products, could result in significant delays in the realization of revenues, the need to raise additional
capital through the issuance of additional equity or debt securities sooner than we intend, and may allow competitors to reach certain
of such markets with products before we do. In view of the emerging nature of the technology involved in certain of these markets, and
the attendant uncertainty as to whether our products will achieve meaningful commercial acceptance, if at all, there can be no assurance
that we will realize revenues sufficient to achieve profitability.
Our intellectual property is subject to
patents and exclusive license agreements that may expire or change.
We rely on U.S. patents to
protect our propriety products that form the core of our revenue potential. These patents are subject to standard patent expiration terms.
Upon expiration of our patents, we will no longer be able to prevent our competitors from developing similar products to ours. Additionally,
we rely on exclusive license agreements to use certain technologies. The terms of the exclusive license agreements may change upon expiration
of their current terms. We may not be able to renew or extend our current licenses, or they may become non-exclusive licensees. The inability
to maintain our exclusive licenses agreements would have a significant impact on our potential future revenues.
If we are unable to adequately protect our
intellectual property, our competitive position and results of operations may be adversely impacted.
Protecting our intellectual
property is critical to our innovation efforts. We own patents, trade secrets, copyrights, trademarks and/or other intellectual property
rights related to many of our products, and also have exclusive and non-exclusive license rights under intellectual property owned by
others. Our intellectual property rights may be challenged or infringed upon by third parties, particularly in countries where property
rights are not highly developed or protected, or we may be unable to maintain, renew or enter into new license agreements with third-party
owners of intellectual property on reasonable terms. Unauthorized use of our intellectual property rights or inability to preserve existing
intellectual property rights could adversely impact our competitive position and results of operations.
We are dependent on key personnel, and our
ability to grow and compete in our industry will be harmed if we do not retain the continued services of our key personnel, or we fail
to identify, hire, and retain additional qualified personnel.
Our success depends on the
efforts of our senior management team and other key personnel. The loss of services of members of our senior management team could have
an adverse effect on our business. In addition, if we expect to grow our operations, it will be necessary for us to attract and retain
additional qualified personnel. If we are unable to attract or retain qualified personnel as needed, the growth of our operations could
be slowed or hampered.
Potential adverse outcomes in legal proceedings
may adversely affect results.
Our business exposes us to
product liability claims that are inherent in the design, manufacture and sale of our products and the products of suppliers. We may not
be able to obtain insurance on acceptable terms or our insurance may not provide adequate protection against actual losses. In addition,
we are subject to the risk that one or more of our insurers may become insolvent and become unable to pay claims that may be made in the
future. Even if we maintain adequate insurance, claims could have a material adverse effect on our financial condition, liquidity and
results of operations and on our ability to obtain suitable, adequate or cost-effective insurance in the future.
6
If we are unable to successfully introduce
new products, our future growth may be adversely affected.
Our ability or failure to
develop new products based on innovation can affect our competitive position and requires the investment of significant time and resources.
Difficulties or delays in research, development, production or commercialization of new products and services may reduce future revenues
and adversely affect our competitive position. If we are unable to create sustainable product differentiation, our organic growth may
be adversely affected.
Research and development for continued growth
of our IP portfolio and product offerings is expensive, and we may not have sufficient funds to continue research and develop activities
and may not be able to acquire additional funding.
Our ability to continue our
research and development activities to improve and expand our products and service offerings requires extensive amounts of funding. We
may not be able to obtain the necessary funding on attractive terms and in a timely basis to continue our research and development activities,
which has caused our research and development activities to be delayed, reduced or terminated. Delaying, reducing or terminating our research
activities would impede our estimated growth and results of operations.
We rely heavily on collaborative partners such as distributors,
manufacturers and vendors and our relationships with such parties may restrict or limit our business operations.
We are currently working
with several third-party entities with respect to the validation, optimization, and distribution of our products. Our current and future
collaborations and joint ventures are important as they allow greater access to funds, to research, development and testing resources,
validation, and to manufacturing, sales and distribution resources that we would otherwise not have. We intend to continue to significantly
rely on such collaborative and joint venture arrangements. Some of the risks and uncertainties related to the reliance on such collaborations
and joint ventures include the fact that such relationships could actually serve to limit or restrict us, while our partners are free
to pursue other products either on their own or with others. Further, our partners may terminate a collaborative technology relationship
and such termination may require us to seek other partners or expend substantial resources to pursue these activities independently.
We rely primarily on a third-party distribution
model for our products and the number and quality of distributors can vary and may impact our revenues.
We rely on numerous third-party
distributors for the distribution of our products. While we believe that alternative distributors could be located if required, our product
sales could be affected if any of these distributors do not continue to distribute our products in required quantities or at all, or with
the required levels of quality. In addition, difficulties encountered by these distributors, such as fire, accident, natural disasters,
or political unrest, could halt or disrupt distributions, resulting in delay or cancellation of orders. Any of these events could result
in delayed deliveries by us of our products, causing reduced sales and harm to our reputation and brand name.
We only have one manufacturing facility for our propriety products.
We manufacture our proprietary
products at our Houston, Texas facility. In the event of a fire, flood, tornado, hurricane or other form of a catastrophic event, we may
be unable to fulfill any then-existing demand for our products, possibly for a prolonged period, depending upon the severity of the event.
As a result, should a catastrophic event occur, our financial condition and results of operation would be materially adversely affected.
Our lease on our Houston,
Texas facility expires on May 31, 2025. If we are not able to renew or extend our lease on the Houston, Texas facility, we may have to
move our corporate headquarters and manufacturing facility. Doing so could cause us to incur significant expenses and could delay or reduce
our ability to manufacture our products for some time. Our financial condition and results of operation could be materially adversely
affected by any such move.
7
The requirements of being a public company
may strain our resources, divert management’s attention, and affect our ability to attract and retain qualified members of the board
of directors.
As a public company, we are
subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”),
the Dodd-Frank Act, the listing requirements of the OTC and other applicable securities rules and regulations. Compliance with these rules
and regulations requires significant legal and financial compliance costs, makes some activities more difficult, time-consuming or costly
and increases demand on our systems and resources. The Exchange Act requires, among other things, that we file annual, quarterly and current
reports with respect to our business and operating results. The Sarbanes-Oxley Act requires, among other things, that we maintain effective
disclosure controls and procedures and internal control over financial reporting. In order to maintain and, if required, improve our disclosure
controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight
may be required. As a result, management’s attention may be diverted from other business concerns, which could harm our business
and operating results. We may need to hire more employees in the future to comply with these regulatory requirements, which will increase
our costs and expenses.
In addition, changing laws,
regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing
legal and financial compliance costs and making some activities more time consuming. These laws, regulations and standards are subject
to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve
over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance
matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply
with evolving laws, regulations and standards, and this investment may result in increased general and administrative expenses and a diversion
of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply with new
laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to ambiguities related to practice,
regulatory authorities may initiate legal proceedings against us and our business may be harmed.
We also expect that being
a public company with these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance,
and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make
it more difficult for us to attract and retain qualified members for our board of directors, particularly to serve any committees, and
qualified executive officers.
As a result of disclosure
of information in filings required of a public company, our business and financial condition will become more visible, which we believe
may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business
and operating results could be harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims,
and the time and resources necessary to resolve them, could divert the resources of our management and harm our business and operating
results.
We may not reach sufficient size to justify our
public reporting status. If we are forced to become a private company, then our stockholders may lose their ability to sell their shares.
We may not be able to fulfill our obligation
to develop and maintain proper and effective internal controls over financial reporting.
We are required, pursuant
to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal
control over financial reporting annually. This assessment needs to include disclosure of any material weaknesses identified by our management
in our internal control over financial reporting. Management concluded that our internal control over financial reporting as of December
31, 2022 was not effective, see “We have identified material weaknesses in our internal control over financial reporting which
could, if not remediated, result in a material misstatement in our financial statement.” below. In the future, we may not be
able to complete our evaluation, testing and any required remediation in a timely fashion. Failure to comply, or any adverse results from
such evaluation, could result in a loss of investor confidence in our financial reports and have an adverse effect on the trading price
of our equity securities. Achieving continued compliance with Section 404 may require us to incur significant costs and expend significant
time and management resources. We cannot assure you that we will be able to fully comply with Section 404 or that we will be able to conclude
that our internal control over financial reporting is effective.
8
Risks Related to the Glass Strengthening and Water Repellent
Industries
We face competition from companies that
have substantially greater capital resources, research and development, manufacturing, and marketing resources.
While we believe that we
have significant competitive benefits offered by our proprietary products, there are competitors with much longer operating histories,
greater name recognition, larger customer bases and significantly greater financial, technical, and marketing resources than we have.
As we grow and become successful with our products, we expect these competitors to increase the resources they dedicate to our market.
Such competition could materially adversely affect our business, operating results, or financial condition.
We may face increased pricing pressures
from current and future competitors and, accordingly, there can be no assurance that competitive pressures will not require us to reduce
our prices.
It is likely that we will
experience significant competitive pressure over time. Accordingly, the use and pricing of our products may decline as the market becomes
more competitive. Any material reduction in the price of our products will negatively affect our gross margin and results of operations.
We may have difficulty developing brand
awareness for our products.
We believe that a developed
market for glass strengthening products currently does not exist. Generation of the brand and market communications are essential to the
Company’s long-term success. Funding constraints will limit the Company’s ability to build product awareness through marketing
and advertising. Without clear market communication the risk of having the product confused with other applications such as a stand-alone
hydrophobic product is possible. If we are unable to develop such a market or create demand for our products, it would adversely impact
our business and operating results.
Risks Related to our Common Stock
Our common stock is quoted on the OTC Pink,
which may limit the liquidity and price of our common stock more than if our common stock were listed on the Nasdaq Stock Market or another
national exchange.
Our securities are currently
quoted on the OTC Markets, specifically the OTC Pink (the “OTC Pink”), an inter-dealer automated quotation system for equity
securities. Quotation of our securities on the OTC Pink may limit the liquidity and price of our securities more than if our securities
were listed on the Nasdaq Stock Market or another national exchange. As an OTC Pink company, we do not attract the extensive analyst coverage
that accompanies companies listed on national securities exchanges. Further, institutional and other investors may have investment guidelines
that restrict or prohibit investing in securities traded on the OTC Pink. These factors may have an adverse impact on the trading and
price of our common stock.
The trading price of our common stock may
decrease due to factors beyond our control.
The stock market from time
to time has experienced extreme price and volume fluctuations, which have particularly affected the market prices for smaller reporting
companies, and which often have been unrelated to the operating performance of the companies. These broad market fluctuations may adversely
affect the market price of our common stock. If our shareholders sell substantial amounts of their common stock in the public market,
the price of our common stock could fall. These sales also might make it more difficult for us to sell equity, or equity-related securities,
in the future at a price we deem appropriate.
9
The market price of our common
stock may also fluctuate significantly in response to the following factors, most of which are beyond our control:
●
variations in our quarterly operating results,
●
changes in general economic conditions and in our industry,
●
changes in market valuations of similar companies,
●
announcements by us or our competitors of significant new contracts, acquisitions, strategic partnerships or joint ventures, or capital commitments,
●
loss of a major customer, partner or joint venture participant and
●
the addition or loss of key managerial and collaborative personnel.
Any such fluctuations may
adversely affect the market price of our common stock, regardless of our actual operating performance. As a result, stockholders may be
unable to sell their shares, or may be forced to sell them at a loss.
The market price for our common shares is
particularly volatile given our status as a relatively unknown company with a small and thinly traded public float, limited operating
history and lack of profits which could lead to wide fluctuations in our share price. You may be unable to sell your common shares at
or above your purchase price, which may result in substantial losses to you.
The market for our common
shares is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue
to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is attributable to a number of
factors. First, as noted above, our common shares are sporadically and thinly traded. As a consequence of this lack of liquidity, the
trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either
direction. The price for our shares could, for example, decline precipitously in the event that a large number of our common shares are
sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse
impact on its share price. Secondly, we are a speculative or “risky” investment due to our limited operating history and lack
of profits to date. As a consequence of this enhanced risk, more risk-adverse investors may, under the fear of losing all or most of their
investment in the event of negative news or lack of progress, be more inclined to sell their shares on the market more quickly and at
greater discounts than would be the case with the stock of a seasoned issuer. Many of these factors are beyond our control and may decrease
the market price of our common shares, regardless of our operating performance. We cannot make any predictions or projections as to what
the prevailing market price for our common shares will be at any time, including as to whether our common shares will sustain their current
market prices, or as to what effect that the sale of shares or the availability of common shares for sale at any time will have on the
prevailing market price.
Penny stock regulations may impose certain
restrictions on marketability of our securities.
Our common stock is subject
to penny stock rules, which may discourage broker-dealers from effecting transactions in our common stock or affect their ability to sell
our securities. As a result, purchasers and current holders of our securities could find it more difficult to sell their securities. Trading
volume of OTC Pink stocks have been historically lower and more volatile than stocks traded on an exchange or the Nasdaq Stock Market.
In addition, we may be subject to rules of the SEC that impose additional requirements on broker-dealers when selling penny stocks to
persons other than established customers and accredited investors. In general, an accredited investor is a person with net worth in excess
of $1,000,000 or annual income exceeding $200,000 individually, or $300,000 together with his or her spouse. The relevant SEC regulations
generally define penny stocks to include any equity security not traded on an exchange or the Nasdaq Stock Market with a market price
(as defined in the regulations) of less than $5 per share. Under the penny stock regulations, a broker-dealer must make a special suitability
determination as to the purchaser and must have the purchaser’s prior written consent to the transaction. Prior to any transaction
in a penny stock covered by these rules, a broker-dealer must deliver a disclosure schedule about the penny stock market prepared by the
SEC. Broker-dealers must also make disclosure concerning commissions payable to both the broker-dealer and any registered representative
and provide current quotations for the securities. Finally, broker-dealers are required to send monthly statements disclosing recent price
information for the penny stock held in an account and information on the limited market in penny stocks.
You may find it difficult to sell our common
stock.
As mentioned above, there
has been a limited trading market in our common stock. We cannot assure you that an active trading market for our common stock will develop
or be sustained. Regardless of whether an active and liquid public market exists, negative fluctuations in our actual or anticipated operating
results will likely cause the market price of our common stock to fall, making it more difficult for you to sell our common stock at a
favorable price, or at all.
10
We intend to issue additional equity and
stock options to employees and consultants as compensation in the future, which will result in dilution to existing and new investors.
We provide and intend to
continue to provide additional equity-based compensation to our employees, officers, directors, consultants, and independent contractors
through an equity incentive plan. Our equity incentive plan permits the award of options to purchase shares of common stock and the issuance
of restricted shares of our common stock. Because stock options granted under the plan will generally only be exercised when the exercise
price for such option is below the then market value of the common stock, the exercise of such options or the issuance of shares will
cause dilution to the book value per share of our common stock and to existing and new investors.
Holders of convertible debt issued by the
Company may convert their promissory notes and exercise warrants into shares of our common stock, which will result in significant dilution
to existing and new investors.
We closed a various financing
transactions in 2021 and 2022 with investors whereby the respective investor purchased convertible promissory notes and warrants from
the Company. If the investors convert their notes and exercise their warrants, the Company will issue shares of the Company’s common
stock to the investor, which may cause substantial dilution to the book value per share of our common stock and to existing and new investors.
Holders of Series B Preferred Shares or
Series C Preferred Shares issued by the Company may, as of December 31, 2022, convert such shares into approximately164,635,079
and 432,250,000 shares of our common stock, respectively, which could result in significant dilution to existing and new investors.
As of December 31, 2022,
we had 1,000 Series B and 17,290 Series C shares of Preferred Stock issued and outstanding. If a holder of Series B Preferred shares or
Series C Preferred shares issued by the Company elects to convert such shares into approximately 164,635,079 and 432,250,000 shares
of our common stock, respectively, it would result in significant dilution to existing and new investors.
Sales of a substantial number of shares
of our common stock in the public market by our existing stockholders could cause our stock price to fall.
We have not entered into
lock-up agreements with any of our existing stockholders. As a result, sales of a substantial number of shares of our common stock in
the public market could depress the market price of our common stock and could impair our ability to raise capital through the sale of
additional equity securities. We are unable to predict the effect that sales may have on the prevailing market price of our common stock.
Our stock price is likely to be volatile.
There is generally significant
volatility in the market prices and limited liquidity of securities of companies at our stage. Contributing to this volatility are various
events that can affect our stock price in a positive or negative manner. These events include, but are not limited to: governmental regulations
or actions; market acceptance and sales growth of our products; litigation involving our industry; developments or disputes concerning
our patents or other proprietary rights; departure of key personnel; future sales of our securities; fluctuations in our financial results
or those of companies that are perceived to be similar to us; investors’ general perception of us; announcements by us of significant
contracts, acquisitions, strategic partnerships, joint ventures or capital commitments, and general economic, industry and market conditions.
If any of these events occur, it could cause our stock price to fall.
The price of our common stock may be adversely
affected by the future issuance and sale of shares of our common stock or other equity securities.
We cannot predict the size
of future issuances or sales of our common stock or other equity securities future acquisitions or capital raising activities, or the
effect, if any, that such issuances or sales may have on the market price of our common stock. The issuance and sale of substantial amounts
of common stock or other equity securities or announcement that such issuances and sales may occur, could adversely affect the market
price of our common stock. Any decline in the price of our common stock may encourage short sales, which could place further downward
pressure on the price of our common stock and may impair our ability to raise additional capital through the sale of equity securities.
11
Our reduced stock price may adversely affect
our liquidity.
Our common stock has limited
trading history. Many market makers are reluctant to make a market in stock with a trading price of less than $5.00 per share, as well
as shares quoted on the OTC Pink. To the extent that we have fewer market makers for our common stock, our volume and liquidity will likely
decline, which could further depress our stock price.
We have never paid dividends on our common
stock and cannot guarantee that we will pay dividends to our stockholders in the future.
We have never paid dividends
on our common stock. For the foreseeable future, we intend to retain our future earnings, if any, to reinvest in the development and growth
of our business and, therefore, do not intend to pay dividends on our common stock. However, in the future, our board of directors may
declare dividends on our common stock. Any future determination to pay dividends will be at the discretion of our board of directors and
will depend on our financial condition, results of operations, capital requirements, and such other factors as our board of directors
deems relevant. Accordingly, investors may need to sell their shares of our common stock to realize a return on their investment, and
they may not be able to sell such shares at or above the price paid for them. We cannot guarantee that we will pay dividends to our stockholders
in the future.
Colorado law and our Articles of Incorporation
protect our directors from certain types of lawsuits, which could make it difficult for us to recover damages from them in the event of
a lawsuit.
Colorado law provides that
our directors will not be liable to our company or to our stockholders for monetary damages for all but certain types of conduct as directors.
Our Articles of Incorporation require us to indemnify our directors and officers against all damages incurred in connection with our business
to the fullest extent provided or allowed by law. The exculpation provisions may have the effect of preventing stockholders from recovering
damages against our directors caused by their negligence, poor judgment, or other circumstances. The indemnification provisions may require
our company to use our assets to defend our directors and officers against claims, including claims arising out of their negligence, poor
judgment, or other circumstances.
Additional risks may exist since we became
public through a “reverse merger.”
Because our business became
public by means of a “reverse merger,” we may not be able to attract the attention of major brokerage firms. Securities analysts
of major brokerage firms may not provide coverage of us since there is little incentive to brokerage firms to recommend the purchase of
our common stock. We cannot assure you that brokerage firms will want to conduct any secondary offerings on our behalf in the future.
We have identified material weaknesses in
our internal control over financial reporting which could, if not remediated, result in a material misstatement in our financial statements.
We are subject to the
reporting and other obligations under the Exchange Act, including the requirements of Section 404 of the Sarbanes-Oxley Act, which
require annual management assessments of the effectiveness of our internal control over financial reporting. Our management is
responsible for establishing and maintaining adequate internal control over financial reporting. As reported in Item 9A hereof, our
management concluded that our internal control over financial reporting was not effective as of December 31, 2022 because of a
material weakness in our internal control over financial reporting. The ineffectiveness of our disclosure controls and procedures
was due to the following material weaknesses in our internal control over financial reporting: (1) the lack of multiple levels of
management review on complex business, accounting, and financial reporting issues and (2) a lack of adequate segregation of duties
as a result of our limited financial resources to support hiring of personnel. Until such time as we expand our staff to include additional accounting and executive personnel, it is
likely we will continue to report material weaknesses in our internal control over financial reporting.
While management has undertaken
and will continue to undertake steps to improve our internal control over financial reporting to address and remediate the material weaknesses,
there can be no assurance that we will be able to successfully remediate the identified material weaknesses, or that we will not identify
additional control deficiencies or material weaknesses in the future. If we are unable to successfully remediate our existing or any future
material weaknesses in our internal control over financial reporting, the accuracy and timing of our financial reporting may be adversely
affected, we may be unable to maintain compliance with securities laws regarding the timely filing of periodic reports, investors may
lose confidence in our financial reporting and the price of our ordinary shares may decline.
12
ITEM 1B. UNRESOLVED STAFF COMMENTS
On January 20, 2022, we received
an Order Directing Examination and Designating Officers to Take Testimony (a “Formal Order”) from the SEC. The Formal Order
authorizes that an examination be made to determine whether a stop order should be issued under Section 8(d) of the Securities Act of
1933, as amended (the “Securities Act”) with respect to the Company’s Registration Statement on Form S-1, and any supplements and amendments thereto. The Formal Order
indicates that the Form S-1 may be deficient in that it may contain untrue statements of material fact or omit to state material facts
necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading concerning, among
other things, the Company’s revenue and financial condition.
ITEM 2. PROPERTIES
Our corporate headquarters
and manufacturing facility is located in an 8,385 square foot facility in Houston, Texas at 6035 South Loop East. The lease on
the Houston facility expires on May 31, 2025.
In connection with the Exchange
Agreement with Mobile, the Company was named as guarantor of a Commercial Lease Agreement dated July 21, 2021, by and between landlord
MDW Management, LLC, a company owned by Michael Wanke and his wife and tenant Mobile. The term of this lease is 60 months, at a minimum
monthly rent of $5,600 (not including tax), with two five-year options for the tenant to renew. The Company’s obligation as guarantor
of the Lease will terminate upon the occurrence of earlier of the following: (i) the date of the Company’s acquisition of 100% of
the ownership interests of Mobile; (ii) the date that the Company beneficially owns less than an 80%)ownership interest in Mobile; or
(iii) two (2) years from and after the effective date of the guaranty. Our Mobile manufacturing and warehouse facility is located in an
approximate 4,000 square foot facility in Universal City, Texas at 2029 Pat Booker Rd.
ITEM 3. LEGAL PROCEEDINGS
From time to time, we may
become involved in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject
to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm business.
Except as set forth below,
the Company is not involved in any pending or threatened legal proceedings that it believes could reasonably be expected to have a material
adverse effect on its financial condition, results of operations, or cash flows.
On January 20, 2022, we received
the “Formal Order” from the SEC. The Formal Order authorizes that an examination be made to determine whether a stop order
should be issued under Section 8(d) of the Securities Act with respect to the Company’s Registration Statement on Form S-1, and
any supplements and amendments thereto. The Formal Order indicates that the Form S-1 may be deficient in that it may contain untrue statements
of material fact or omit to state material facts necessary in order to make the statements made, in light of the circumstances under which
they were made, not misleading concerning, among other things, the Company’s revenue and financial condition.
On March 8, 2021, a former
officer of the Company resigned. The Company and the former officer alleged certain claims against each other, including certain compensation
claims. Neither party has initiated litigation. The Company intends to vigorously defend itself against any possible claims and assert
any relevant claims against the former executive and believes it will prevail.
In July 2021, a former employee of the Company filed a small claims
case for approximately $16,000 in Harris County, TX, and the Company filed its response on August 2021. This case is no longer shown as
pending with the Harris County, Texas Court system. The Company intends to vigorously defend itself against any claim made and believes
it will prevail.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
13
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON
EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Our common stock is quoted
on the OTC Pink operated by the OTC Markets Group, under the symbol “CBNT.” Trading in OTC Pink stocks can be volatile, sporadic
and risky, as thinly traded stocks tend to move more rapidly in price than more liquid securities. Such trading may also depress the market
price of our common stock and make it difficult for our stockholders to resell their common stock. Our common stock does not have an established
public trading market.
The following table reflects
the high and low closing price for our common stock for the period indicated. The bid information was obtained from the OTC Markets Group,
Inc. and reflects inter-dealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions.
Quarter Ended
High
Low
December 31, 2022
$
0.0160
$
0.0050
September 30, 2022
$
0.0170
$
0.0070
June 30, 2022
$
0.0289
$
0.0106
March 31, 2022
$
0.0300
$
0.0130
December 31, 2021
$
0.05
$
0.02
September 30, 2021
$
0.05
$
0.02
June 30, 2021
$
0.06
$
0.02
March 31, 2021
$
0.15
$
0.04
On March 30, 2023, the closing price of the Company’s
common stock on OTC Pink was $0.0048.
Holders of Common Stock
As of March 30, 2023, there
were approximately 213 record holders of our common stock. The number of record holders does not include beneficial owners of common
stock whose shares are held in the names of banks, brokers, nominees, or other fiduciaries.
Dividends
Historically, we have not
paid any cash dividends on our common stock. It is our present intention not to pay any cash dividends in the foreseeable future, but
rather to reinvest earnings, if any, in our business operations. However, in the future, our board of directors may declare dividends
on our common stock. Payment of future dividends on our common stock, if any, will be at the discretion of our board of directors and
will depend on, among other things, our results of operations, cash requirements and surplus, financial condition, contractual restrictions
and other factors that our board of directors may deem relevant. We cannot guarantee that we will pay dividends to our stockholders in
the future.
Securities Authorized for Issuance under Equity Compensation Plans
See “Part III. Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters” for information concerning our
equity compensation plans as of December 31, 2022.
Recent Sales of Unregistered Securities
On October 3, 2022, we issued
3,000,000 shares of our common stock for investor relations services to be rendered.
On December 1, 2022, we issued 6,535,274 shares
our common stock upon the conversion of 250 shares of Series C preferred with a stated redemption value of $25,000. The conversion price
was based on contractual terms of the related Series C preferred shares.
In connection with the Letter
Agreement dated December 15, 2022, in order to induce GS Capital to extend the due dates of the GS Capital Notes, we issued 15,000,000
shares of the Company’s common stock to GS Capital.
The above securities were
issued in reliance upon the exemptions provided by Section 4(a)(2) under the Securities Act.
14
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
None.
ITEM 6. [RESERVED]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion
and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements
and the related notes and other financial information included in this Report. Some of the information contained in this discussion and
analysis or set forth elsewhere in this Report, including information with respect to our plans and strategy for our business, includes
forward-looking statements that involve risks and uncertainties as described under the heading “Cautionary Note Regarding Our Forward-Looking
Statements” elsewhere in this Report. You should review the disclosure under the heading “Risk Factors” in this Report
for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by
the forward-looking statements contained in the following discussion and analysis.
Overview
We are a nanotechnology company
and sole owner, developer, and manufacturer of the patented C-Bond technology. We are engaged in the implementation of proprietary nanotechnology
applications and processes to enhance properties of strength, functionality, and sustainability of brittle material systems. Our present
primary focus is in the multi-billion-dollar glass and window film industry with target markets in the United States and internationally.
We operate in two divisions: C-Bond Transportation Solutions and Patriot Glass Solutions. C-Bond Transportation Solutions sells a windshield
strengthening, water repellent solution called C-Bond nanoShield™ as well as disinfection products. Patriot Glass Solutions sells
multi-purpose glass strengthening primer and window film mounting solutions, including C-Bond BRS, a ballistic-resistant film system,
and C-Bond Secure, a forced entry system.
To date, we have filed, licensed
and/or acquired a total of 23 individual patents and patent applications spanning core and strategic nano-technology applications and
processes. Our intellectual property portfolio was recently valued at $33.7 million by a leading, independent, global intellectual property
valuation firm. The IP valuation firm’s review covered the valuation of our intangible assets including our developed technology,
trade name, customer relationships, and assembled workforce, and the Company’s determination of the fair value or other amounts
of any assets and liabilities including current assets, real property, personal property, and current liabilities. Our developed technology
includes C-Bond nanoShield, C-Bond Secure, and C-Bond BRS. The valuation firm also reviewed historical and projected financial information
for the Company giving consideration to general economic and industry trends.
On May 20, 2020, we entered
into a two-year Distributor Agreement with an entity where we were appointed as a distributor to exclusively sell MB-10 Disinfectant Tablets
for use in certain markets. In February 2022, we and the entity amended the Distributor Agreement to include the sale of Vimoba Tablets
in those same markets and extended the term of the Distributor Agreement for another year. MB-10 Disinfectant Tablets are the most convenient
way yet to deliver the benefits of chlorine dioxide to hygiene or biosafety programs. MB-10 disinfectant tablets have one of the broadest,
most complete EPA registration labels on the market. It is a safe, easy, and effective way to disinfect a vehicle’s interior using
an EPA registered disinfectant (Reg No.70060-19-46269) included on List N for use against human coronavirus SARS-CoV-2. It is proven effective
against emerging viral pathogens, including enveloped and large and small non-enveloped viruses. MB-10 Tablets provide fast-acting virus
and bacteria protection that is safe for all vehicle surfaces including LED screens and electronics without leaving a residue or odor.
Vimoba Tablets are 100% non-corrosive, chlorine dioxide producing tablets that maintain the exact same efficacy, EPA Label claims, dilution
rates and contact times as MB-10 Tablets, while including a buffering agent that makes the Vimoba solution completely non-corrosive on
stainless steel – even after prolonged use or exposure – and even when the solution dries on the surface. We were appointed
as a distributor to exclusively sell MB-10 Disinfectant Tablets and Vimoba Tablets for use in the following markets:
●
Automotive, Trucking, RV, rental agencies (auto and truck), service vehicles (taxi, Uber, Lyft), mass transit (train, buses), golf carts, aviation, train, marine (potential future growth)
●
Dealerships
●
Global Distribution
●
Service Providers
●
Transportation Detailing.
15
On June 30, 2021, we entered
into a Share Exchange Agreement and Plan of Reorganization (the “Exchange Agreement”) with (i) Mobile Tint LLC, a Texas limited
liability company doing business as A1 Glass Coating (“Mobile”), (ii) the sole member of Mobile (the “Mobile Member”),
and (iii) Michael Wanke as the Representative of the Mobile Member. Pursuant to the Exchange Agreement, we agreed to acquire 80% of Mobile’s
member units, representing 80% of Mobile’s issued and outstanding capital stock (the “Mobile Member Units”). On July
22, 2021, we closed the Exchange Agreement and acquired 80% of the Mobile Shares. The Mobile Member Units were exchanged for restricted
shares of the Company’s common stock, in an amount equal to $800,000, divided by the average of the closing prices of the Company’s
common stock during the 30-day period immediately prior to the closing as defined in the Exchange Agreement. In connection with the Exchange
Agreement, we issued 28,021,016 shares of its common stock. Two years after closing, we have the option to acquire the remaining 20% of
Mobile’s issued and outstanding membership interests in exchange for a number of shares of the Company’s common stock equal
to 300% of Mobile’s average EBIT value, divided by the price of the Company’s common stock as defined in the Exchange Agreement
(the “Additional Closing”). Mobile provides quality window tint solutions for auto, home, and business owners across Texas,
specializing in automotive window tinting, residential window film, and commercial window film that stop harmful UV rays from passing
through its window films for reduced glare, comfortable temperatures, and lower energy bills. Mobile also carry products that offer forced-entry
protection and films that protect glass from scratches, graffiti, other types of vandalism, and even bullets, including our C-Bond BRS
and C-Bond Secure products. As part of the transaction, Mobile’s owner-operator, Michael Wanke, joined the Company as President
of its Safety Patriot Glass Solutions Group. Mobile has been in business for more than 30 years and produced annual revenue of approximately
$2 million in both 2019 and 2020. As part of the transaction, Mobile’s owner-operator, Michael Wanke, has agreed to join us as President
of our Patriot Glass Solutions group.
We expect that our recent acquisition
of Mobile will be the springboard to provide glass security solutions across the United States. We recently launched Patriot Glass Solutions
to protect personal and business property across the United States using C-Bond’s proprietary glass strengthening technology to
protects property from looting, rioting, break-ins, and gunfire. With our recent acquisition of Mobile, we are re-branding our Safety
Solutions Group as “Patriot Glass Solutions.” Patriot Glass Solutions’ primary products include C-Bond BRS, a ballistic-resistant
film system; and C-Bond Secure, a multi-purpose glass strengthening primer and window film mounting solution that deters forced entry.
The following discussion
highlights our results of operations and the principal factors that have affected our financial condition as well as our liquidity and
capital resources for the periods described and provides information that management believes is relevant for an assessment and understanding
of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on
our consolidated financial statements contained in this Report, which have been prepared in accordance with United States generally accepted
accounting principles (“GAAP”). You should read the discussion and analysis together with such financial statements and the
related notes thereto.
Operating Overview
We are a nanotechnology company
and sole owner, developer, and manufacturer of the patented C-Bond technology. We are engaged in the implementation of proprietary nanotechnology
applications and processes to enhance properties of strength, functionality, and sustainability of brittle material systems. Our present
primary focus is in the multi-billion-dollar glass and window film industry with target markets in the United States and internationally.
We operate in two divisions: C-Bond Transportation Solutions and Patriot Glass Solutions. C-Bond Transportation Solutions, which sells
a windshield strengthening, water repellent solution called C-Bond nanoShield™ as well as disinfection products, and Patriot Glass
Solutions, which sells multi-purpose glass strengthening primer and window film mounting solutions, including C-Bond BRS, a ballistic-resistant
film systems, and C-Bond Secure, a forced entry system. The C-Bond technology enables ordinary glass to dissipate energy by permeating
the glass surface and detecting microscopic flaws and defects that are randomly distributed all over the glass surface. C-Bond’s
unique qualities then work to locate and repair the identified surface imperfections that weaken the glass composite structure and ultimately
act as failure initiators. The C-Bond formula is engineered to maintain original glass design integrity while increasing the mechanical
performance properties of the glass unit. As a result of the COVID-19 pandemic we created partnerships to distribute disinfection related
products, which we began to sell in the second quarter of 2020. The Company currently sells MB-10 Tablets® and Vimoba® Tablets.
Revenue is generated by the
sale of products through distributors and directly to dealers. C-Bond nanoShield and disinfection sales are generated through distribution
channels. Sales of C-Bond Secure are made primarily to window film dealers who offer the product as an upsell during installation. Revenue
is generated from the sale of C-Bond BRS on a project basis. C-Bond BRS is specified into project plans providing authorized installers
a competitive advantage.
16
Additionally, through the
acquisition of 80% of Mobile Tint, LLC, we now provide quality window tint solutions for auto, home, and business owners across Texas,
specializing in automotive window tinting, residential window film, and commercial window film that stop harmful UV rays from passing
through its window films for reduced glare, comfortable temperatures, and lower energy bills. Mobile also carries products that offer
forced-entry protection and films that protect glass from scratches, graffiti, other types of vandalism, and even bullets, including our
C-Bond BRS and C-Bond Secure products.
Going Concern
The accompanying
consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the
settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial
statements, the Company had a net loss of $5,156,478 and $7,128,858 for the years ended December 31, 2022 and 2021, respectively,
which included stock-based compensation of $1,039,943 and $4,085,868 for the years ended December 31, 2022 and 2021, respectively.
The net cash used in operations was $1,584,918 and $1,807,051 for the years ended December 31, 2022 and 2021, respectively.
Additionally, the Company had an accumulated deficit, shareholders’ deficit, and working capital deficit of $62,693,184,
$7,050,669 and $4,349,384, respectively, on December 31, 2022. These factors raise substantial doubt about the Company’s
ability to continue as a going concern for a period of twelve months from the issuance date of this report. Management cannot
provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive or raise additional
debt and/or equity capital. The Company is seeking to raise capital through additional debt and/or equity financings to fund its
operations in the future. Although the Company has historically raised capital from sales of common shares, preferred shares and
from the issuance of convertible and other promissory notes, there is no assurance that it will be able to continue to do so. If the
Company is unable to raise additional capital or secure additional lending in the near future, management expects that the Company
will need to curtail its operations. These unaudited condensed consolidated financial statements do not include any adjustments
related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary
should the Company be unable to continue as a going concern.
COVID-19
In March 2020, the World Health
Organization declared COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. We were materially affected
by the COVID-19 outbreak to in 2020 and 2021 and the ultimate duration and severity of the outbreak and its impact on the economic environment
and our business is uncertain. The Company saw a material decrease in sales from its international customers as a result of the unprecedented
public health crisis from the COVID-19 pandemic and a decrease in domestic sales due to a decrease in business spending on discretionary
items. As a result, during 2021 and 2020, the Company’s international customers delayed the ordering of products and delayed or
defaulted on payment of balances due to the Company. The lack of collection of accounts receivable balances, which the Company believes
was attributable to COVID-19, had a material impact on the cash flows of the Company. The Company believes that COVID-19 had minimal impact
on its operations in 2022. The Company cannot estimate the future impact of the pandemic on its business. A severe or prolonged economic
downturn could result in a variety of risks to the Company’s business, including weakened demand for its products and a decreased
ability to raise additional capital when needed on acceptable terms, if at all. Currently, the Company is unable to estimate the impact
of this event on its operations.
Critical Accounting Policies
The following discussion
and analysis of our consolidated financial condition and consolidated results of operations are based upon our consolidated financial
statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation
of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Management continually evaluates such
estimates, including those related to estimates for allowance for doubtful accounts on accounts receivable, the estimates for obsolete
or slow moving inventory, estimated used in the calculation of percentage of completion on uncompleted jobs, purchase price allocation
of acquired businesses, the useful life of property and equipment, assumptions used in assessing impairment of long-term assets, the estimate
of the fair value of the right of use asset and lease liability, the valuation of redeemable and mandatorily redeemable preferred stock,
the value of beneficial conversion features and deemed dividends, the valuation of deferred tax assets, and the fair value of non-cash
equity transactions. Management bases its estimates on historical experience and on various other assumptions that it believes to be 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 sources. Any future changes to these estimates and assumptions could cause a material change
to our reported amounts of revenues, expenses, assets and liabilities. Actual results may differ from these estimates under different
assumptions or conditions. Management believes the following critical accounting policies affect our more significant judgments and estimates
used in the preparation of the consolidated financial statements.
17
Segment reporting
During the year ended December
31, 2022 and from July 22, 2021 (date of acquisition of Mobile) to December 31, 2021, we operated in two reportable business segments
- (1) the manufacture and sale of a windshield strengthening water repellent solution as well as a disinfection product, and the sale
of multi-purpose glass strengthening primer and window film mounting solutions, including ballistic-resistant film systems and a forced
entry system (the “C-Bond Segment”), and (2) the distribution and installation of window film solutions (the “Mobile Segment”). Our reportable segments were strategic business units that offered different products. They were managed separately
based on the fundamental differences in their operations and locations.
Accounts receivable
The Company recognizes an
allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based
on an analysis of historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment
of specific identifiable customer accounts considered at risk or uncollectible. The expense associated with the allowance for doubtful
accounts is recognized as general and administrative expense.
Inventory
Inventory, consisting of
raw materials and finished goods, is stated at the lower of cost and net realizable value utilizing the first-in, first-out (FIFO) method.
A reserve is established when management determines that certain inventories may not be saleable. If inventory costs exceed expected net
realizable value due to obsolescence or quantities in excess of expected demand, the Company will record reserves for the difference between
the cost and the net realizable value. These reserves are recorded based on estimates and included in cost of sales.
Revenue recognition
We follow the Financial
Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue
from Contracts with Customers (“ASC 606”). This standard establishes a single comprehensive model for entities to
use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition
guidance. ASC 606 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services and
requires certain additional disclosures.
We sell our products, which
include standard warranties primarily to distributors and authorized dealers. Product sales are recognized at a point in time when the
product is shipped to the customer and title is transferred and are recorded net of any discounts or allowances. The warranty does not
represent a separate performance obligation.
Revenues from contracts for
the distribution and installation of window film solutions are recognized over time on the basis of the Company’s estimates of the
progress towards completion of contracts using various output or input methods depending on the type of contract terms including (1) the
ratio of number of labor hours spent compared to the number of estimated labor hours to complete a job, (2) using the milestone method,
or (3) using a units completed method. These methods are used because management considers these to be the best available measure of progress
on these contracts. We use the same method for similar types of contracts. The asset, “contract assets” represents revenues
recognized in excess of amounts billed. The liability, “contract liabilities,” represents billings in excess of revenues recognized.
Stock-based compensation
Stock-based compensation
is accounted for based on the requirements of ASC 718 – “Compensation –Stock Compensation”, which requires
recognition in the financial statements of the cost of employee, director, and non-employee services received in exchange for an award
of equity instruments over the period the employee, director, or non-employee is required to perform the services in exchange for the
award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services
received in exchange for an award based on the grant-date fair value of the award. The Company has elected to recognize forfeitures as
they occur as permitted under Accounting Standards Update (“ASU”) 2016-09 Improvements to Employee Share-Based Payment.
See Note 2 to our consolidated
financial statements for a summary of significant accounting policies and recent accounting pronouncements.
18
Results of Operations
The following comparative
analysis on results of operations was based primarily on the comparative consolidated financial statements, footnotes and related information
for the periods identified below and should be read in conjunction with the consolidated financial statements and the notes to those statements
for the years ended December 31, 2022 and 2021, which are included elsewhere in this annual report on Form 10-K. The results discussed
below are for the years ended December 31, 2022 and 2021.
Comparison of Results of Operations for the Years ended December
31, 2022 and 2021
Sales
For the year ended December
31, 2022, sales amounted to $2,232,646 as compared to $1,476,828 for the year ended December 31, 2021, an increase of $755,818, or 51.2%.
The increase was primarily attributable to the acquisition of 80% of Mobile on July 22, 2021, which generated sales of $1,853,910 for the
year ended December 31, 2022 as compared to $1,042,017 for the period from acquisition (July 22, 2021) to December 31, 2021, an increase
in C-Bond nanoShield solution sales of $122,471, and an increase in disinfectant product of $3,574, offset by a decrease in sales of C-Bond
ballistic resistant glass protection systems and C-Bond Secure window film application solution of $167,113, a decrease in freight and
delivery revenue of $2,864, and a decrease in sale of installation and other services of $12,143.
Cost of Goods Sold
In connection with our C-Bond
Solutions segment, cost of goods sold is comprised primarily of cost of raw materials and finished inventory sold, packaging costs, and
warranty costs. In connection with our Mobile segment, cost of goods sold is comprised primarily of cost of raw materials such as film,
labor, subcontractor costs, equipment rental, and supplies.
For the year ended December
31, 2022, cost of sales amounted to $954,402 as compared to $657,298 for the year ended December 31, 2021, an increase of $297,104, or
45.2%. This increase in cost of sales is primarily attributable to the acquisition of 80% of Mobile on July 22, 2021, which
generated cost of sales of $889,016 for the year ended December 31, 2022 as compared to cost of sales of $518,700 for the period from
acquisition (July 22, 2021) to December 31, 2021, an increase of $370,316. The increase was offset by a decrease in cost of sales of $70,212
related to an increase in sales of C-Bond nanoShield solution which were offset by a decrease in sales of C-Bond ballistic resistant glass
protection systems and C-Bond Secure window film application solution products. Generally, we recognize a higher gross profit percentage
on the sale of C-bond nanoShield and C-bond ballistic resistant glass protections systems than we do on the Mobile.
Gross Profit
For the year ended December
31, 2022, gross profit amounted to $1,278,244, or 57.3% of sales, as compared to $819,530, or 55.5% of sales, for the year ended December
31, 2021, an increase of $458,714, or 56.0%. This increase in gross profits is primarily attributable to the acquisition of 80% of Mobile on July 22, 2021, which generated gross profit of $863,736, or 46.6% for the year ended December 31, 2022 as compared to gross
profit of $482,092, or 46.3% from acquisition date (July 22, 2021) to December 31, 2021, an increase of $381,644. Additionally, we had
an increase in gross profits of $77,070, related to an increase in sales of C-Bond nanoShield solution offset be a decreased in sales
of C-Bond ballistic resistant glass protection systems, C-Bond Secure window film application solution, and a decrease in sales of disinfectant
products. Generally, we recognize a higher gross profit percentage on the sale of C-bond nanoShield and C-bond ballistic resistant glass
protections systems than we do on the sale of disinfection products and from Mobile Tint installations and services. During the year ended
December 31, 2022 and 2021, gross profits percentages related to the sale of sales of C-Bond nanoShield solution, C-Bond ballistic resistant
glass protection systems, C-Bond Secure window film application solution, and disinfectant products were 86.4% and 70.9%, respectively.
19
Operating Expenses
For the year ended December
31, 2022, operating expenses amounted to $4,470,738 as compared to $7,829,649 for the year ended December 31, 2021, a decrease of $3,358,911,
or 42.9%. For the years ended December 31, 2022 and 2021, operating expenses consisted of the following:
Year Ended December 31,
2022
2021
Compensation and related benefits, including stock-based compensation charges of $1,039,943 and $4,085,868 for the years ended December 31, 2022, and 2021, respectively
$
2,844,783
$
6,165,006
Research and development
-
(3,250
)
Professional fees
815,542
1,031,540
General and administrative expenses
810,413
636,353
Total
$
4,470,738
$
7,829,649
Compensation and related benefits
For the year ended December
31, 2022, compensation and related benefits decreased by $3,320,223, or 53.9%, as compared to the year ended December 31, 2021. This decrease
was primarily due to a decrease in stock-based compensation of $3,045,925 and a decrease in compensation and related benefits of $640,324
to C-Bond employees primarily attributable to a decrease in bonuses, offset by an increase in compensation and related benefits of $366,026
from the acquisition of Mobile Tint.
On January 6, 2022, the Board
of Directors of the Company agreed to satisfy $278,654 of accrued compensation owed to its executive officers (collectively, the “Management”)
as of December 31, 2021 and included in accrued compensation on the accompanying condensed consolidated balance sheet. Management agreed
to accept 278 shares of the Company’s Series B convertible preferred stock in settlement of this accrued compensation. The conversion
feature of the Series B Preferred Stock at the time of issuance was determined to be beneficial on the commitment date. Because the Series
B Preferred Stock was perpetual with no stated maturity date, and the conversions could occur any time from the date of issuance, the
Company immediately recorded non-cash stock-based compensation of $957,556 related to the beneficial conversion feature arising from the
issuance of Series B Preferred Stock. On January 18, 2021, the Board of Directors of the Company agreed to satisfy $295,000 of accrued
compensation owed to its executive officers and former executive officer (collectively, the “Management”) through a Liability
Reduction Plan (the “Plan”). Under this Plan, Management agreed to accept 295 shares of the Company’s Series B convertible
preferred stock in settlement of accrued compensation. The conversion feature of the Series B Preferred Stock at the time of issuance
was determined to be beneficial on the commitment date. Because the Series B Preferred Stock was perpetual with no stated maturity date,
and the conversions could occur any time from the date of issuance, the Company immediately recorded non-cash stock-based compensation
of $3,778,810 related to the beneficial conversion feature arising from the issuance of Series B Preferred Stock.
Research and development
Research and development
expenses (recovery) consisted primarily of contracted development services, third party testing laboratories, materials used and allocated
overhead expenses. For the year ended December 31, 2022, we did not incur any research and development fees due to a lack of working capital.
For the year ended December 31, 2021, we recorded a research and development recovery of $3,250 related to a receipt of a refund of previous
research and development costs of $3,250.
20
Professional fees
For the year ended December
31, 2022, professional fees decreased by $215,998, or 20.9%, as compared to the year ended December 31, 2021. This decrease was primarily
related to a decrease in legal fees of $130,044, a decrease in consulting fee of $148,156, a decrease in investor relations fees of $24,739,
and a decrease in other professional fees of $6,013, offset by an increase in accounting fees of $92,954 attributable to the acquisition
of Mobile.
General and administrative
For the year ended December
31, 2022, general and administrative expenses increased by $174,060, or 27.4%, as compared to the year ended December 31, 2021. This increase
was primarily attributable to an increase in depreciation and amortization expense of $43,252 related to the acquisition of Mobile,
an increase in rent expense of $44,699, an increase in advertising expense of $4,111, and an increase in other selling, general and administrative
expenses of $117,096, offset by a decreased in bad debt expense of $31,639 and a decrease in shipping and handling expense of $3,459.
Loss from Operations
For the year ended December
31, 2022, loss from operations decreased by $3,817,625, or 54.5%, as compared to the year ended December 31, 2021.
Other Income (Expenses), net
For the year ended
December 31, 2022, other expense, net amounted to $1,963,984 as compared to $118,739 for the year ended December 31, 2021, an
increase of $1,845,245, or 1,554.0%. This change was due to an increase in interest expense of $1,337,130 related to an increase in
the amortization of debt discount, an increase in interest-bearing debt of $1,466,000, and the accrual of a default penalty of $206,250 related
to convertible debt that defaulted due to non-payment, and a decrease in other income of $67,778 and an increase in loss on debt
extinguishment and inducement expenses of $440,337.
Net Loss
Due to factors discussed
above, for the years ended December 31, 2022 and 2021, net loss amounted to $5,156,478 and $7,128,858, respectively. For the year ended
December 31, 2022, net loss attributable to common shareholders, which included a deemed dividend related to price protection, beneficial
conversion features on preferred stock, and the dividends accrued on Series B and C preferred stock of $60,090 and the deduction of net
loss attributable to noncontrolling interests of $38,513, amounted to $5,178,055, or $(0.02) per basic and diluted common share. For
the year ended December 31, 2021, net loss attributable to common shareholders, which included a deemed dividend related to price protection,
beneficial conversion features on preferred stock, and the dividends accrued on Series B and C preferred stock of $4,401,907 and the
deduction of net income attributable to noncontrolling interests of $15,525, amounted to $11,546,290, or $(0.05) per basic and diluted
common share.
Liquidity and Capital Resources
Liquidity is the ability
of an enterprise to generate adequate amounts of cash to meet its needs for cash requirements. We had cash of $97,091 and $519,898 as
of December 31, 2022 and 2021, respectively.
Our primary uses of cash
have been for compensation and related benefits, fees paid to third parties for professional services, and general and administrative
expenses. We have received funds from the sales of products and from various financing activities such as from the sale of our common
shares, from the sale of preferred shares and from debt financings. The following trends are reasonably likely to result in changes in
our liquidity over the near to long term:
●
An increase in working capital requirements to finance our current business,
●
Research and development fees;
●
Addition of administrative and sales personnel needed for business growth;
●
The cost of being a public company;
21
●
Marketing expense for building brand;
●
Capital requirements for production capacity.
●
Working capital requirements to support acquired companies.
Since inception, we have
raised proceeds from the sale of common shares and preferred shares, and from debt to fund our operations and research and development
initiatives.
On May 10, 2021, we entered
into a Loan and Security Agreement (the “Loan Agreement”) and a Secured Promissory Note (the “Note”) in the amount
of $500,000 with a lender. The Note shall accrue interest at 8% per annum, compounded annually, and all outstanding principal and accrued
interest is due and payable of May 10, 2023. Our obligations under the Loan Agreement and the Note are secured by a second priority security
interest in substantially all of the Company’s assets (the “Collateral”). The Loan Agreement and Note contain customary
representations, warranties and covenants, including certain restrictions on our ability to incur additional debt or create liens on its
property. The Loan Agreement and the Note also provide for certain events of default, including, among other things, payment defaults,
breaches of representations and warranties and bankruptcy or insolvency proceedings, the occurrence of which, after any applicable cure
period, would permit Lender, among other things, to accelerate payment of all amounts outstanding under the Loan Agreement and the Note,
as applicable, and to exercise its remedies with respect to the Collateral. Upon the occurrence of an Event of Default under the Loan
Agreement and Note, all amounts then outstanding (including principal and interest) shall bear interest at the rate of 18% per annum,
compounded annually until the Event of Default is cured. On December 31, 2022 and 2021, principal amount due under this Note amounted
to $500,000.
On August 25, 2021, we entered
into a subscription agreement with an accredited investor whereby the investor agreed to purchase 3,000 shares of the Company’s
Series C Convertible Preferred Stock for $300,000, or $100.00 per share, the stated value, which was used for working capital purposes.
The conversion feature of the Series C Preferred Stock at the time of issuance was determined to be beneficial on the commitment date.
Because the Series C Preferred Stock was perpetual with no stated maturity date, and the conversions could occur any time from the date
of issuance, the Company immediately recorded a non-cash deemed dividend of $1,509,523 related to the beneficial conversion feature arising
from the issuance of Series C Preferred Stock. This non-cash deemed dividend increased the Company’s net loss attributable to common
stockholders and net loss per share.
On October 15, 2021, we
entered into a Securities Purchase Agreement (the “SPA”) with Mercer Street Global Opportunity Fund, LLC (the “Investor”),
pursuant to which the Company received $750,000 (less $10,000 of Investor’s fees) in exchange for the issuance of a 10% Original
Issue Discount Senior Convertible Promissory Note (the “Initial Note”) in the principal amount of $825,000, and a five-year
warrant (the “Initial Warrant”) to purchase, in the aggregate, shares of the Company’s common stock at an exercise
price of $0.05 per share in an amount equal to 50% of the conversion shares to be issued. The transactions contemplated under the SPA
closed on October 18, 2021. Pursuant to the SPA, the Investor has agreed to purchase an additional $825,000 10% Original Issue Discount
Senior Convertible Promissory Note (the “Second Note,” and together with the Initial Note, the “Notes”), and
a five-year warrant (the “Second Warrant,” and together with the Initial Warrant, the “Warrants”) to purchase,
in the aggregate, shares of the Company’s common stock at an exercise price of $0.05 per share from the Company in an amount equal
to 50% of the conversion shares to be issued upon the same terms as the Initial Note and Initial Warrant (subject to there being no event
of default under the Initial Note or other customary closing conditions), within three trading days of a registration statement registering
the shares of the Company’s common stock issuable under the Notes (the “Conversion Shares”) and upon exercise of the
Warrants (the “Warrant Shares”) being declared effective by the SEC. The Notes mature 12 months after issuance, bear interest
at a rate of 4% per annum, and are initially convertible into the Company’s common stock at a fixed conversion price of $0.025
per share, subject to adjustment for stock splits, stock combinations, dilutive issuances, and similar events, as described in the Notes.
On April 20, 2022, the Company and Mercer Street Global Opportunity Fund, LLC (the “Investor”) entered into an Exchange Agreement
(the “Exchange Agreement”) that amended a 10% Original Issue Discount Senior Convertible Promissory Note (See Note 7). The
original SPA remains in effect. Per the terms of the Exchange Agreement, the Parties agreed to exchange (i) the Initial Note for a new
Convertible Promissory Note (the “New Note”) and (ii) the Initial Warrant for a new five-year warrant to purchase, in the
aggregate, 33,000,000 shares of the Company’s common stock at an exercise price of $0.025 per share (the “New Warrant”
and together with the New Note, the “New Securities”), according to the terms and conditions of the Exchange Agreement. On
April 20, 2022, pursuant to the terms of the Exchange Agreement, the Investor surrendered the Prior Securities in exchange for the New
Securities. Other than the surrender of the Prior Securities, no consideration of any kind whatsoever was given by the Investor to the
Company in connection with the Exchange Agreement. The terms of the New Securities are the same as the Prior Securities except for the
pricing of the shares issuable under the New Note and the shares issuable upon exercise of the New Warrant. The New Securities are composed
of the New Note, which is a 10% Original Issue Discount Senior Convertible Promissory Note in the principal amount of $825,000, and the
New Warrant. The New Note matures on October 15, 2022, bears interest at a rate of 4% per annum, and is initially convertible into the
Company’s common stock at a fixed conversion price of $0.0125 per share, subject to adjustment for stock splits, stock combinations,
dilutive issuances, and similar events, as described in the New Note. The Notes may be prepaid at any time for the first 90 days at face
value plus accrued interest. From day 91 through day 180, the Notes may be prepaid in an amount equal to 110% of the principal amount
plus accrued interest. From day 181 through the day immediately preceding the maturity date, the Notes may be prepaid in an amount equal
to 120% of the principal amount plus accrued interest. The Notes and Warrants contain conversion limitations providing that a holder
thereof may not convert the Notes or exercise the Warrants to the extent (but only to the extent) that, if after giving effect to such
conversion, the holder or any of its affiliates would beneficially own in excess of 4.99% of the outstanding shares of the Company’s
common stock immediately after giving effect to such conversion or exercise. A holder may increase or decrease its beneficial ownership
limitation upon notice to the Company provided that in no event such limitation exceeds 9.99%, and that any increase shall not be effective
until the 61st day after such notice. In connection with the SPA, the Company entered into a Registration Rights Agreement dated October
15, 2021 (the “Registration Rights Agreement”), with the Investor pursuant to which it is obligated to file a registration
statement with the SEC within 45 days after the date of the agreement to register the resale by the Investor of the conversion shares
and warrant shares, and use all commercially reasonable efforts to have the registration statement declared effective by the SEC within
60 days after the registration statement is filed. Upon the occurrence of an event of default under the Notes, the Investor has the right
to be prepaid at 125% of the outstanding principal balance and accrued interest, and interest accrues at 18% per annum. The Company has
also granted the Investor a 12-month (or until the Notes are no longer outstanding) right to participate in specified future financings,
up to a level of 30%. On October 15, 2022, the due date of the New Note, the New Note defaulted due to non-payment. Accordingly, the
Company added a default penalty of $206,250, or 25%, to the principal balance and recorded interest expense of $206,250, and interest
shall accrue at 18% per annum.
22
On March 14, 2022,
the Company entered into an Original Issue Discount Promissory Note and Security Agreement (the “March 2022 Note”) in the
principal amount of $197,500 with Mercer Street Global Opportunity Fund, LLC (the “Investor”). The March 2022 Note was funded
on March 14, 2022 and the Company received net proceeds of $175,000 which is net of an Original Issue Discount and investor legal fees
of $22,500. The March 2022 Note matures 12 months after issuance and bears interest at a rate of 3% per annum. At any time, the Company
may prepay all or any portion of the principal amount of the March 2022 Note and any accrued and unpaid interest without penalty. The
March 2022 Note also creates a lien on and grants a priority security interest in all of the Company’s assets.
On May 2, 2022, the Company
entered into a Promissory Note (the “May 2022 Note”) in the principal amount of $250,000 with the Company’s chief executive
officer. The May 2022 Note was funded in May 2022 and the Company received net proceeds of $250,000. The May 2022 Note bears interest
at a rate of 6% per annum and all outstanding principal and accrued and unpaid interest is due on May 2, 2024. At any time, the Company
may prepay all or any portion of the principal amount of the May 2022 Note and any accrued and unpaid interest without penalty.
On June 23, 2022, the Company
entered into entered into a Securities Purchase Agreement (“Agreement”) with GS Capital Partners, LLC (“GS Capital”),
pursuant to which a Promissory Note (the “GS Capital Note”) was made to GS Capital in the aggregate principal amount of $195,000.
The Note was purchased for $176,000, reflecting an original issuance discount of $19,000, and was funded on June 24, 2022 (less legal
and other administrative fees). The Company received net proceeds of $148,420. The Company further issued GS Capital a total of 1,750,000
commitment shares (“Commitment Shares”) as additional consideration for the purchase of the Note (See Note 9). Principal and
interest payments shall be made in 10 installments of $21,060 each beginning on the 90th-day anniversary following the issue date and
continuing thereafter each 30 days for nine months. The GS Capital Note matures 12 months after issuance and bears interest at a rate
of 8% per annum. GS Capital shall have the right at any time following an Event of Default to convert all or any part of the outstanding
and unpaid principal, interest, penalties, and all other amounts under this Note at a conversion price of $0.011, subject to adjustment
as defined in the GS Capital Note. The Company did not calculate a beneficial conversion feature since the GS Capital Note is contingently
convertible upon default on the GS Capital Note. As of September 30, 2022, the Company is not in default on this note. In the event that
following the Issue Date the closing trading price of the Company’s common stock is then being traded is below $0.011 per share
for more than ten consecutive trading days, then the conversion price shall be equal to $0.004 per share. The GS Capital Note
contains conversion limitations providing that a holder thereof may not convert the Note to the extent (but only to the extent) that,
if after giving effect to such conversion, the holder or any of its affiliates would beneficially own in excess of 4.99% of the outstanding
shares of the Company’s common stock immediately after giving effect to such conversion or exercise. A holder may increase or decrease
its beneficial ownership limitation upon notice to the Company provided that in no event such limitation exceeds 9.99%, and that any increase
shall not be effective until the 61st day after such notice. Events of default include, amongst other items, failure to pay principal
or interest, bankruptcy, delisting of the Company’s stock, financial statement restatements, or if the Company effectuates a reverse
split. Upon the occurrence of any event of default, the GS Capital Note shall become immediately and automatically due and payable and
the Company shall pay to GS Capital, in full satisfaction of its obligations hereunder, an amount equal to: (a) the then outstanding principal
amount of this note plus (b) accrued and unpaid interest on the unpaid principal amount of this note to the date of payment (the
“mandatory prepayment date”) plus (y) default interest, if any, multiplied by 120%. On December 15, 2022, the Company
and GS Capital entered into a letter agreement to extend the due date of the GS Capital June 2022 note by 60 days. Specifically, the maturity
date of the GS Capital June 2022 note was extended to August 23, 2023 and the next payment due date was extended to February 28, 2023.
Through December 31, 2022, the Company paid $53,512 of principal balance. On December 31, 2022, the principal balance due on the GS Capital
Note amounted to $141,488 and accrued interest payable amounted to $7,471.
On July 26, 2022, the Company
closed a Securities Purchase Agreement (“July 2022 Agreement”) with GS Capital, pursuant to which a Promissory Note (“July
2022 Note”) was made to GS Capital in the aggregate principal amount of $195,000. The July 2022 Note was purchased for $176,000,
reflecting an original issuance discount of $19,000, and was funded on July 28, 2022 (less legal and other administrative fees). The Company
received net proceeds of $158,920. The Company further issued GS Capital a total of 2,600,000 commitment shares (“July 2022 Commitment
Shares”) as additional consideration for the purchase of the July 2022 Note. In addition, the Company issued 998,008 of its common
stock to the placement agent as fee for the capital raise, respectively. The July Commitment Shares and the placement agent shares were
recorded as a debt discount of $34,606 based on the relative fair value method to be amortized over the life of the Note. Principal and
interest payments shall be made in 10 installments of $21,060 each beginning on the 90th-day anniversary following the issue date and
continuing thereafter each 30 days for nine months. The July 2022 Note matures 12 months after issuance and bears interest at a rate of
8% per annum. GS Capital shall have the right at any time following an Event of Default to convert all or any part of the outstanding
and unpaid principal, interest, penalties, and all other amounts under the July 2022 Note at a conversion price of $0.011, subject to
adjustment as defined in the Note. The Company did not calculate a beneficial conversion feature since the GS Capital July 2022 Note is
contingently convertible upon a default on the July 2022 Note. As of September 30, 2022, the Company is not in default on this note. In
the event that following the Issue Date the closing trading price of the Company’s common stock is then being traded is below $0.011 per
share for more than ten consecutive trading days, then the conversion price shall be equal to $0.004 per share. The July 2022
Note contains conversion limitations providing that a holder thereof may not convert the Note to the extent (but only to the extent) that,
if after giving effect to such conversion, the holder or any of its affiliates would beneficially own in excess of 4.99% of the outstanding
shares of the Company’s common stock immediately after giving effect to such conversion or exercise. A holder may increase or decrease
its beneficial ownership limitation upon notice to the Company provided that in no event such limitation exceeds 9.99%, and that any increase
shall not be effective until the 61st day after such notice. . On December 15, 2022, the Company and GS Capital entered into a letter
agreement to extend the due date of the GS Capital July 2022 note by 60 days. Specifically, the maturity date of the GS Capital July 2022
note was extended to September 26, 2023 and the next payment due date was extended to February 28, 2023. Through December 31, 2022, the
Company paid $34,120 of principal balance. On December 31, 2022, the principal balance due on the GS Capital July 2022 Note amounted to
$160,880 and accrued interest payable amounted to $6,441.
23
On September 6, 2022, the
Company closed a Securities Purchase Agreement (“September 2022 Agreement”) with GS Capital, pursuant to which a Promissory
Note (“September 2022 Note”) was made to GS Capital in the aggregate principal amount of $195,000. The September 2022 Note
was purchased for $176,000, reflecting an original issuance discount of $19,000, and was funded on September 6, 2022 (less legal and other
administrative fees). The Company received net proceeds of $158,920. The Company further issued GS Capital a total of 3,300,000 commitment
shares (“September 2022 Commitment Shares”) as additional consideration for the purchase of the September 2022 Note. In addition,
the Company issued 773,626 of its common stock to the placement agent as fee for the capital raise, respectively. The September Commitment
Shares and the placement agent shares were recorded as a debt discount of $30,326 based on the relative fair value method to be amortized
over the life of the Note. Principal and interest payments shall be made in 9 installments of $23,400 each beginning on the 120th-day
anniversary following the issue date and continuing thereafter each 30 days for eight months. The September 2022 Note matures 12 months
after issuance and bears interest at a rate of 8% per annum. GS Capital shall have the right at any time following an Event of Default
to convert all or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under the September 2022
Note at a conversion price of $0.009, subject to adjustment as defined in the Note. The Company did not calculate a beneficial conversion
feature since the GS Capital July 2022 Note is contingently convertible upon a default on the September 2022 Note. As of September 30,
2022, the Company is not in default on this note. In the event that following the Issue Date the closing trading price of the Company’s
common stock is then being traded is below $0.009 per share for more than ten consecutive trading days, then the conversion
price shall be equal to $0.0032 per share. The September 2022 Note contains conversion limitations providing that a holder thereof may
not convert the Note to the extent (but only to the extent) that, if after giving effect to such conversion, the holder or any of its
affiliates would beneficially own in excess of 4.99% of the outstanding shares of the Company’s common stock immediately after giving
effect to such conversion or exercise. A holder may increase or decrease its beneficial ownership limitation upon notice to the Company
provided that in no event such limitation exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice.
On December 15, 2022, the Company and GS Capital entered into a letter agreement to extend the due date of the GS Capital September 2022
note by 60 days. Specifically, the maturity date of the GS Capital September 2022 note was extended to November 6, 2023 and the next payment
due date was extended to March 6, 2023. On December 31, 2022, the principal balance due on the GS Capital September 2022 Note amounted
to $195,000 and accrued interest payable amounted to $5,001.
On November 8, 2022, the Company entered into a Promissory Note (the “November 2022 Note”) with a private investor (the “Private
Investor”) in the principal amount of $200,000 and received net proceeds of $200,000. The November 2022 Note bears interest at a
rate of 8% per annum and all outstanding principal and accrued and unpaid interest is due on November 8, 2024. At any time, the Company
may prepay all or any portion of the principal amount of the November 2022 Note and any accrued and unpaid interest without penalty. As
security for payment of the principal and interest on the November 2022 Note, the Company and the Private Investor previously entered
into that certain Loan and Security Agreement dated May 10, 2021, which is incorporated into the November 2022 Note. On December 31, 2022,
the principal balance due on the November 2022 Note amounted to $200,000 and accrued interest payable amounted to $2,367.
On November 9, 2022, the
Company closed a Securities Purchase Agreement dated November 4, 2022, with 1800 DIAGONAL LENDING LLC, a Virginia limited liability company,
(“Diagonal”), pursuant to which a Promissory Note (the “November 2022 Diagonal Note”) dated November 4, 2022,
was made to Diagonal in the aggregate principal amount of $104,250 and the Company received net proceeds of $100,000 which was net of
fees of $4,250. The November 2022 Diagonal Note bears interest at a rate of 12% per annum (22% upon the occurrence of an event of a default)
and all outstanding principal and accrued and unpaid interest are due on May 4, 2024. On December 27, 2022, the Company closed a Securities
Purchase Agreement dated December 27, 2022, with 1800 Diagonal pursuant to which a Promissory Note (“December 2022 Diagonal Note”)
dated December 27, 2022, was made to Diagonal in the aggregate principal amount of $64,250 and the Company received net proceeds of $60,000
which was net of fees of $4,250. The December 2022 Diagonal Note bears interest at a rate of 12% per annum (22% upon the occurrence of
an event of a default) and all outstanding principal and accrued and unpaid interest are due on June 27, 2024. The Company has the right
to prepay the November 2022 and December 2022 Diagonal Notes (principal and accrued interest) at any time during the first six months
the note is outstanding at the rate of 115% during the first 30 days after issuance, 120% during the 31st to 60th
day after issuance, and 125% during the 61st to the 180th day after issuance. The November 2022 and December 2022
Diagonal Notes may not be prepaid after the 180th day following the issuance date, unless Diagonal agrees to such repayment and such terms.
Diagonal may in its option, at any time beginning 180 days after the date of the Diagonal Notes, convert the outstanding principal and
interest on the November 2022 and December 2022 Diagonal Notes into shares of our common stock at a conversion price per share equal to
65% of the average of the three lowest closing bid prices of our common stock during the 10 trading days prior to the date of conversion.
At no time may the November 2022 and December 2022 Diagonal Notes be converted into shares of our common stock if such conversion would
result in Diagonal and its affiliates owning an aggregate of in excess of 4.99% of the then outstanding shares of our common stock.
24
On November 22, 2022, the
Company entered into a Promissory Note and Security Agreement (the “November 2022 Note”) in the principal amount of $65,000
with Mercer Street Global Opportunity Fund, LLC (the “Investor”). The November 2022 Note was funded on November 22, 2022 and
the Company received net proceeds of $62,500 which is net of investor legal fees of $2,500. The legal fees were recorded as a debt discount
to be amortized over the life of the November 2022 note. The November 2022 Note matures on August 22, 2023 and bears interest at a rate
of 8% per annum. At any time, the Company may prepay all or any portion of the principal amount of the November 2022 Note and any accrued
and unpaid interest without penalty.
Additional cash liquidity
is generated from product sales. However, to date, we are not profitable, and we cannot provide any assurances that we will be profitable.
We believe that our existing cash and cash equivalents will not be sufficient to fund our current operating plans.
Cash Flows
For the Years Ended December 31, 2022 and 2021
The following table shows
a summary of our cash flows for the years ended December 31, 2022 and 2021.
Year Ended December 31,
2022
2021
Net cash used in operating activities
$
(1,584,918
)
$
(1,807,051
)
Net cash provided by investing activities
$
5,500
$
301,901
Net cash provided by financing activities
$
1,156,611
$
1,701,641
Net (decrease) increase in cash
$
(422,807
)
$
196,491
Cash - beginning of the year
$
519,898
$
323,407
Cash - end of the year
$
97,091
$
519,898
Net Cash Used in Operating Activities:
Net cash flow used in operating
activities was $1,584,918 for the year ended December 31, 2022 as compared to net cash flow used in operating activities of $1,807,051
for the year ended December 31, 2021, a decrease of $222,133.
Net cash flow used in operating
activities for the year ended December 31, 2022 primarily reflected a net loss of $5,156,478, which was then adjusted for the add-back
(deduction) of non-cash items primarily consisting of depreciation and amortization of $89,219, stock-based compensation expense of $1,039,943,
stock-based professional fees of $298,571, amortization of debt discount of $1,059,752, non-cash interest expense for default penalty
and put premiums of $296,981, bad debt expense of $7,716, gain on sale of property and equipment of $(5,500), and a non-cash loss on debt
extinguishment of $343,895, and changes in operating assets and liabilities consisting primarily of an increase in accounts receivable
of $100,160, a decrease in inventory of $5,485, an increase in prepaid expenses of $746, a decrease in contract assets of $82,526, a decrease
in accounts payable of $49,709, an increase in accrued expenses of $299,660, an increase in contract liabilities of $12,211, an increase
in accrued compensation of $180,609, and an increase in accrued interest – related party of $10,027.
Net cash flow used in operating
activities for the year ended December 31, 2021 primarily reflected a net loss of $7,128,858, which was then adjusted for the add-back
(deduction) of non-cash items primarily consisting of depreciation and amortization of $45,967, stock-based compensation expense of $4,085,868,
stock-based professional fees of $478,129, amortization of debt discount of $171,875, bad debt expense of $39,355, allowance for obsolete
inventory of $45,000, gain on sale of property and equipment of $(13,000), and a non-cash gain on debt extinguishment of $(96,442), and
changes in operating assets and liabilities consisting primarily of an increase in accounts receivable of $73,180, a decrease in inventory
of $17,288, an increase in prepaid expenses of $13,211, an increase in contract assets of $50,106, an increase in accounts payable of
$88,853, an increase in accrued expenses of $92,148, an increase in accrued compensation of $601,431, and a decrease in customer deposits
of $110,000.
Net Cash Provided by Investing Activities:
During the year ended December
31, 2022, we received proceeds of $5,500 from the sale of property and equipment.
During the year ended December
31, 2021, we received proceeds of $288,901 in connection with the acquisition of Mobile and $13,000 from the sale of property
and equipment.
25
Net Cash Provided by Financing Activities:
Net cash provided by financing
activities was $1,156,611 for the year ended December 31, 2022 as compared to $1,701,641 for the year ended December 31, 2021.
During the year ended December
31, 2022, we received net proceeds from notes payable of $903,760, received proceeds from a related party note payable of $250,000, and
received net proceeds from convertible notes payable of $160,000. These proceeds were offset by the repayment of notes payable of $157,149.
During the year ended December
31, 2021, we received net proceeds from the sale of Series C preferred stock of $550,000, net proceeds from a loan of $500,000, and net
proceeds from convertible notes payable of $680,000. These proceeds were offset by the repayment of notes payable of $28,359.
Funding Requirements
We expect the primary use
of capital to continue to be salaries, legal, accounting and regulatory expenses and general overhead costs including sales and marketing.
Additional uses of capital will include additional headcount, tools and equipment, capacity expansion and operational control software.
We believe current cash and cash equivalents will not be sufficient to meet anticipated cash requirements. Additional capital will be
required to further research new product verticals and enhancements to current product offerings based on customer requirements.
As of December 31, 2022,
we determined that there was substantial doubt about our ability to maintain operations as a going concern. Our consolidated financial
statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities
and commitments in the normal course of business. Management cannot provide assurance that we will ultimately achieve profitable operations
or become cash flow positive or raise additional debt and/or equity capital. We will seek to raise capital through additional debt and/or
equity financings to fund operations in the future. Although we have historically raised capital from sales of common and preferred shares,
from the issuance of notes payable, and from the issuance of convertible promissory notes, there is no assurance that it will be able
to continue to do so. If we are unable to raise additional capital or secure additional lending in the near future, management expects
that the Company will need to curtail its operations. Our consolidated financial statements do not include any adjustments related to
the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the company
be unable to continue as a going concern.
Our forecast of the period
of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves
risks and uncertainties, and actual results could vary materially because of a number of factors. We have based this estimate on assumptions
that may prove to be wrong and could utilize our available capital resources sooner than we currently expect. Our capital requirements
are difficult to forecast. Please see the section titled “Risk Factors” in this Annual Report on Form 10-K for additional
risks associated with our capital requirements.
Until such time as we generate
substantial product revenue to offset operational expenses, we expect to finance our cash needs through a combination of public and private
equity offerings and debt financings. We may be unable to raise capital or enter into such other arrangements when needed or on favorable
terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on
our financial condition.
Contractual Obligations and Off-Balance Sheet Arrangements
Contractual Obligations
We have certain fixed contractual
obligations and commitments that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest
rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing
and amounts of payments. We have presented below a summary of the most significant assumptions used in our determination of amounts presented
in the tables, to assist in the review of this information within the context of our consolidated financial position, results of operations,
and cash flows.
26
The following tables summarize
our contractual obligations as of December 31, 2022, and the effect these obligations are expected to have on our liquidity and cash flows
in future periods.
Payments Due by Period
Contractual obligations:
Total
Less than 1 year
1-2 years
3-5 years
5 + years
Notes payable
$
1,918,203
$
1,709,399
$
208,804
$
-
$
-
Convertible note payable
1,199,750
1,031,250
168,500
-
-
Interest on notes payable
477,734
477,734
-
-
-
Operating lease gross base rent
436,259
147,466
249,593
39,200
-
Total
$
4,031,946
$
3,365,849
$
626,897
$
39,200
$
-
We enter into agreements
in the normal course of business with contracted research and testing organization, product distribution and material vendors which are
payable or cancelable at any time with 30-day prior written approval.
Off-balance Sheet Arrangements
We do not have any off-balance
sheet arrangements during the period presented as defined in the rules and regulations of the SEC.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
Our consolidated financial
statements, together with the related notes and report of independent registered public accounting firm, are set forth on the pages indicated
in Item 15, Part IV of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Disclosure controls and procedures
We maintain “disclosure
controls and procedures,” as that term is defined in Rule 13a-15(e) and 15d-15(e), promulgated by the SEC pursuant to the Securities
Exchange Act of 1934, as amended (the “Exchange Act”). Disclosure controls and procedures include controls and procedures
designed to ensure that information required to be disclosed in our company’s reports filed under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is
accumulated and communicated to our management, including our principal executive officer and principal financial officer, to allow timely
decisions regarding required disclosure. Our management, with the participation of our principal executive officer and principal financial
officer, evaluated our company’s disclosure controls and procedures as of the end of the period covered by this annual report on
Form 10-K. Based on this evaluation, our principal executive officer and principal financial officer concluded that as of December 31,
2022, our disclosure controls and procedures were not effective. The ineffectiveness of our disclosure controls and procedures was due
to material weaknesses, which we identified, in our report on internal control over financial reporting.
27
Internal control over financial reporting
Management’s annual report on internal
control over financial reporting
Our management, including
our principal executive officer and principal financial officer, are responsible for establishing and maintaining adequate internal control
over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Our management, with the participation of our principal
executive officer and principal financial officer, evaluated the effectiveness of our internal control over financial reporting as of
December 31, 2022. Our management’s evaluation of our internal control over financial reporting was based on the 2013 framework
in Internal Control-Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this
evaluation, our management concluded that as of December 31, 2022, our internal control over financial reporting was not effective.
The ineffectiveness of our
disclosure controls and procedures was due to the following material weaknesses in our internal control over financial reporting: (1)
the lack of multiples levels of management review on complex business, accounting and financial reporting issues, and (2) a lack of adequate
segregation of duties as a result of our limited financial resources to support hiring of personnel.
Until such time as we expand our staff to include
additional accounting and executive personnel, it is likely we will continue to report material weaknesses in our internal control over
financial reporting.
A material weakness is a
deficiency or a combination of control deficiencies in internal control over financial reporting such that there is a reasonable possibility
that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis.
Limitations on Effectiveness of Controls
Internal control over financial
reporting cannot provide absolute assurance of achieving financial reporting objectives because of its inherent limitations. Internal
control over financial reporting is a process that involves human diligence and compliance and is subject to lapses in judgment and breakdowns
resulting from human failures. Internal control over financial reporting can also be circumvented by collusion or improper management
override. Because of such limitations, there is a risk that material misstatements may not be prevented or detected on a timely basis
by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process.
Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
Changes in internal control over financial
reporting
There were no changes in
our internal control over financial reporting during the fourth quarter of our fiscal year ended December 31, 2022 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B. OTHER INFORMATION
None.
ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS
THAT PREVENT INSPECTIONS
Not applicable.
28
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND
CORPORATE GOVERNANCE
The following table sets
forth certain information regarding our current directors and executive officers:
Name
Age
Position
Scott R. Silverman
58
Chief Executive Officer, Interim Chief Financial Officer, Treasurer, Chairman of the Board and Director
Allison Tomek
47
President, Vice President of Corporate Communication, Secretary and Director
Barry M. Edelstein
58
Director
Scott R. Silverman has
been the Chairman of the Board and a director of the Company since June 1, 2018. Mr. Silverman has served as Chief Executive Officer of
C-Bond Systems, LLC since December 2017 and Interim Chief Financial Officer since March 8, 2021. From 2003 to 2011, Mr. Silverman
served as Executive Chairman of VeriChip Corporation which completed an initial public offering on the NASDAQ in 2007 raising more than
$30 million. VeriChip Corporation subsequently sold to Stanley Works in 2008. From 2011 to 2016, Mr. Silverman founded and served
as Chairman and Chief Executive Officer of Veriteq Corporation, a leader in RFID technology for medical devices which went public in 2013
and was subsequently sold to a leading breast implant manufacturer. Mr. Silverman is a graduate from the University of Pennsylvania and
Villanova University School of Law. We believe that Mr. Silverman’s knowledge of our company, industry and business makes him
well-suited to serve on the board of directors.
Allison Tomek has
served as Vice President of Corporate Communications and Corporate Secretary since April 2018, and as President and Director since March
8, 2021. She was previously Senior Vice President Investor Relations at PositiveID Corporation from 2007 to 2018, as well as Vice President
of Investor Relations at Veriteq Corporation from 2011 to 2015. She served as the director of investor relations and corporate communications
at Andrx Corporation at the time of its acquisition by Watson Pharmaceuticals in 2006 for $1.9 billion. She is a former two-time President
of the National Investor Relations Institute, South Florida chapter. She holds a B.S. in News/Editorial from the School of Journalism
and Mass Communication at the University of Colorado, Boulder. We believe that Ms. Tomek’s knowledge of our company, regulations,
and business makes her well-suited to serve on the board of directors.
Barry M. Edelstein has
been a director on the Board of the Company since June 1, 2018. Since June 2008, Mr. Edelstein has served as a Managing Partner of Structured
Growth Capital, Inc., which provides monetization financing to non-investment grade entities. Since January 2002, Mr. Edelstein
has also served as President and CEO of ScentSational Technologies, LLC, a leader in developing, patenting and licensing Olfaction Packaging
technologies to food, beverage and other consumer products companies. Mr. Edelstein has a JD from the Widener University School of Law
and a Bachelor of Science in Business Administration, Marketing from Drexel University’s LeBow College of Business. Mr. Edelstein
brings a wealth of operational and financial experience to our board as well as a deep knowledge of the packaging industry.
29
Terms of Office
All directors will hold office
until the next annual meeting of stockholders or until their successors have been elected and qualified or appointed, unless sooner displaced.
Family Relationships
There are no family relationships
between or among any of our directors or executive officers.
Director Independence
The Company’s securities
are not listed on a national securities exchange, or an inter-dealer quotation system which has requirements that a majority of the board
of directors be independent No member of the Board of Directors other than Mr. Edelstein is independent, as that term is defined in the
listing standards of The Nasdaq Stock Market.
Board Meetings; Annual Meeting Attendance
During the fiscal year ended
December 31, 2022, the Board held three board meetings in person and via teleconference and acted via unanimous written consent on
9 occasions. The Company did not hold an annual meeting.
Holders of our securities
can send communications to the Board via mail or telephone to the Secretary at the Company’s principal executive offices. The Company
has not yet established a policy with respect to our directors’ attendance at the annual meetings. A stockholder who wishes to
communicate with the Board may do so by directing a written request addressed to our Corporate Secretary at the address appearing on
the first page of this Information Statement.
Committees of the Board of Directors
As our Common Stock is not
presently listed for trading on a national securities exchange, we are not required to have board committees. However, the Company has
an audit committee which is comprised of Mr. Edelstein, an independent director.
Code of Business Conduct and Ethics
On March 12, 2019, we adopted
a Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions in that our officers and directors serve in these capacities. A copy of
the Code of Business Conduct and Ethics is available, without charge, on our website at http://cbondsystems.com/. We intend to satisfy
the disclosure requirements of Form 8-K regarding any amendment to, or a waiver from, any provision of our Code of Business Conduct and
Ethics by posting such amendment or waiver on our website.
Board Leadership Structure and Role in Risk
Oversight
Currently, the Board is comprised
of three directors: Scott Silverman, Allison Tomek and Barry Edelstein, with Scott Silverman serving as our Chairman. Scott Silverman
is also our Chief Executive Officer.
The Board recognizes that
the leadership structure and combination or separation of the Chief Executive Officer and Chairman roles is driven by the needs of the
Company at any point in time. We have no policy requiring combination or separation of these leadership roles and our governing documents
do not mandate a particular structure. This has allowed the Board the flexibility to establish the most appropriate structure for the
Company at any given time.
30
ITEM 11. EXECUTIVE COMPENSATION
The following summarizes
the compensation earned by our executive officers named in the “Summary Compensation Table” below (referred to herein as our
“named executive officers”) in the fiscal years ended December 31, 2022 and 2021.
This section also discusses
the material elements of our executive compensation policies and decisions and important factors relevant to an analysis of these policies
and decisions. It provides qualitative information regarding the manner and context in which compensation is awarded to and earned by
our named executive officers and is intended to place in perspective the information presented in the following tables and the corresponding
narrative.
Overview
Our named executive officers
for the years ended December 31, 2022 and 2021, are as follows:
●
Scott R. Silverman – Chief Executive Officer and Chief Financial Officer;
●
Allison Tomek – President, Vice President of Corporate Communication and Secretary since March 8, 2021;
2022 Summary Compensation Table
The following table sets forth
information regarding compensation awarded to, earned by or paid to each of the named executive officers for the years ended December
31, 2022 and 2021.
Name and Principal Position
Year
Salary
($)
Bonus ($) (1)
Stock
Awards
($) (2)
Option
Awards
($)
All Other
Compensation
($)
Total
($)
Scott R. Silverman
2022
450,211
(3)
155,469
-
-
681,740
(4)(8)
1,287,420
Chief Executive Officer, Interim Chief Financial Officer and Treasurer
2021
409,283
(3)
483,415
-
-
2,309,736
(5)(8)
3,202,434
Allison Tomek
2022
180,000
(3)
70,219
-
-
279,000
(6)
529,219
President, Vice President of Corporate Communications, Secretary
2021
158,090
(3)
137,700
132,000
(7)
-
256,190
(6)
683,980
(1)
Cash bonuses earned by Mr. Silverman and Ms. Tomek
in 2022 were based on a bonus approved by the Board of Directors in December 2022 and also included bonuses accrued or paid based on a
percentage of capital raises, in accordance with Mr. Silverman’s employment agreement. Cash bonuses were earned by Mr. Silverman
and Ms. Tomek in 2021 based on a bonus approved by the Board of Directors during 2021 and also included bonuses accrued or paid based
on a percentage of capital raises, in accordance with Mr. Silverman’s employment agreement. In connection with the December 2022
and 2021 bonus, the bonus recipients and the Company agreed to pay 90% of the 2022 and 2021 year-end bonus in Series B preferred stock
rather than cash.
(2)
As required by SEC rules, the amounts in this
column reflect the grant date or modification date fair value as required by FASB ASC Topic 718. A discussion of the assumptions and methodologies
used to calculate these amounts, are contained in the notes to our financial statements under “Note 10 – Shareholders’
Deficit”.
(3)
Includes accrued and unpaid deferred compensation.
31
(4)
On January 6, 2022, Mr. Silverman’s
Series B preferred share issuance included non-cash compensation of $678,556 related to the conversion of accrued compensation to convertible
Series B preferred shares. The conversion feature of the Series B Preferred Stock at the time of issuance was determined to be beneficial
on the issue date. Because the Series B Preferred Stock was perpetual with no stated maturity date, and the conversions could occur any
time from the date of issuance, during the year ended December 31, 2022, the Company immediately recorded non-cash stock-based compensation
of $678,556 related to the beneficial conversion feature arising from the issuance of Series B Preferred Stock which is included in Stock
Awards.
(5)
In 2021, in lieu of cash compensation, Mr.
Silverman received 180 shares of series B preferred shares for unpaid and deferred compensation and a bonus of $180,000. In 2021, Mr.
Silverman’s series B preferred share issuance included non-cash compensation of $2,305,714 related to the conversion of accrued
compensation to convertible Series B preferred shares. The conversion feature of the Series B Preferred Stock at the time of issuance
was determined to be beneficial on the issue date. Because the Series B Preferred Stock was perpetual with no stated maturity date, and
the conversions could occur any time from the date of issuance, during the year ended December 31, 2021, the Company immediately recorded
non-cash stock-based compensation of $2,305,714 related to the beneficial conversion feature arising from the issuance of Series B Preferred
Stock which is included in Stock Awards.
(6)
In 2022, in lieu of cash compensation, Ms.
Tomek received 81 shares of series B preferred shares for unpaid and deferred compensation. In 2022, Ms. Tomek’s series B preferred
share issuance included non-cash compensation of $279,000 related to the conversion of accrued compensation to convertible Series B preferred
shares. The conversion feature of the Series B Preferred Stock at the time of issuance was determined to be beneficial on the issue date.
Because the Series B Preferred Stock was perpetual with no stated maturity date, and the conversions could occur any time from the date
of issuance, during the year ended December 31, 2022, the Company immediately recorded non-cash stock-based compensation of $279,000
related to the beneficial conversion feature arising from the issuance of Series B Preferred Stock which is included in Stock Awards.
In 2021, in lieu of cash compensation, Ms. Tomek received 20 shares of series B preferred shares for unpaid and deferred compensation
and bonus of $20,000. In 2021, Ms. Tomek’s series B preferred share issuance included non-cash compensation of $256,190 related
to the conversion of accrued compensation to convertible Series B preferred shares. The conversion feature of the Series B Preferred
Stock at the time of issuance was determined to be beneficial on the issue date. Because the Series B Preferred Stock was perpetual with
no stated maturity date, and the conversions could occur any time from the date of issuance, during the year ended December 31, 2021,
the Company immediately recorded non-cash stock-based compensation of $256,190 related to the beneficial conversion feature arising from
the issuance of Series B Preferred Stock which is included in Stock Awards.
(7)
In 2021, stock awards include the issuance
of 2,000,000 shares of restricted common stock to Ms. Tomek with a fair value of $132,000.
(8)
Includes reimbursement of medical expenses of $3,184 and $4,022 in 2022 and 2021, respectively.
Narrative Disclosure to Summary Compensation
Table
Except as otherwise described
below, there are no compensatory plans or arrangements, including payments to be received from the Company with respect to any named
executive officer, that would result in payments to such person because of his or her resignation, retirement or other termination of
employment with the Company, or our subsidiaries, any change in control, or a change in the person’s responsibilities following
a change in control of the Company.
32
Employment Agreement with Executive Officer
Employment Agreement with Scott R. Silverman
We entered into an employment
agreement with Mr. Silverman on October 18, 2017, pursuant to which he serves as our Chief Executive Officer for an initial term of three
years that extends for successive one-year renewal terms unless either party gives 30-days’ advance notice of non-renewal. As consideration
for these services, the employment agreement provides Mr. Silverman with the following compensation and benefits:
●
An annual base salary of $300,000, with a 10% increase on each anniversary date contingent upon achieving certain performance objectives as set by the Board.
●
When the first $500,000 of equity investments was raised by the Company after entering into this employment agreement, Mr. Silverman receives a capital raise success bonus of 5% of all equity capital raised from investors/lenders introduced by him to the Company.
●
Annual cash performance bonus opportunity as determined by the Board.
●
An option to acquire 3,000,000 common shares of the Company, with a strike price of $0.31 per share. These options vested pro rata on a monthly basis for the term of the employment agreement. On each anniversary, Mr. Silverman will be eligible to be granted a minimum of 500,000 stock options of the Company at a strike price of $0.85 per common share contingent upon the achievement of certain performance objectives.
●
Certain other employee benefits and perquisites, including reimbursement of necessary and reasonable travel and participation in retirement and welfare benefits.
Mr. Silverman’s employment agreement provides that, in the event that his employment is terminated by the Company without “cause”
(as defined in his employment agreement), or if Mr. Silverman resigned for “good reasons” (as defined in his employment agreement),
subject to a complete release of claims, he will be entitled to (i) retain all stock options previously granted; and (ii) receive any
benefits then owed or accrued along with one year of base salary and any unreimbursed expenses incurred by him. All amounts shall be paid
on the termination date. In the event that Mr. Silverman’s employment is terminated by the Company for “cause” (as defined
in his employment agreement), or if Mr. Silverman resigned without “good reasons” (as defined in his employment agreement),
subject to a complete release of claims, he will be entitled to receive any unpaid base salary and benefits then owed or accrued and any
unreimbursed expenses incurred by him. Additionally, if a change of control (as defined in his employment agreement) occurs during the
term of this agreement, all unvested stock options will vest in full, and Mr. Silverman shall be paid a bonus equal to three times his current minimum base salary
and minimum target bonus.
Pursuant to the employment
agreement, Mr. Silverman is subject to a confidentiality covenant, a two-year post-termination non-competition covenant and a two-year
post-termination non-solicitation covenant. On June 30, 2020, the Company amended the employment agreement of Mr. Silverman to provide
for successive one-year extensions until either the executive or the Board of Directors of the Company gives notice to terminate the employment
agreement per its terms. This employment agreement amendment also included an allowance of up to $10,000 per year to cover uncovered medical/dental
expenses for Mr. Silverman and his family.
Elements of Executive Compensation
Base Salaries.
Base salaries for the named executive officers during 2022 and 2021 were determined, subject in each case to their employment agreements,
on the scope of each officer’s responsibilities along with his or her respective experience and contributions during the prior year.
When reviewing base salaries, our board of directors took factors into account such as each officer’s experience and individual
performance, company performance as a whole, and general industry conditions, but did not assign any specific weighting to any factor.
33
Equity Awards.
Equity awards granted by the board of directors to the named executive officers during 2022 and 2021 were determined based on their employment
agreements, on the scope of each officer’s responsibilities along with his or her respective experience and contributions during
the prior year. When reviewing equity awards, our board of directors took factors into account such as each officer’s experience
and individual performance, company performance as a whole, and general industry conditions, but did not assign any specific weighting
to any factor.
Capital Raise Success
Bonus. Pursuant to Mr. Silverman’s employment agreement, he receives a capital raise success bonus of 5% of all equity capital
raised from investors/lenders introduced by him to the Company. Mr. Silverman agreed to share this capital raise bonus with other executives.
Bonus. In January
2021, the board of directors approved a bonus to Mr. Silverman and Ms. Tomek of $200,000 and $25,000, respectively. In December 2021,
the board of directors approved a bonus to Mr. Silverman and Ms. Tomek of $219,615 and $90,500, respectively. In December 2022, the board
of directors approved a bonus to Mr. Silverman and Ms. Tomek of $100,000 and $60,000, respectively.
Other Benefits.
On June 30, 2020, we amended the employment agreement of Mr. Silverman to include an allowance of up to $10,000 per year to cover uncovered
medical/dental expenses for Mr. Silverman and his family. Currently, we do not offer any additional benefit packages to other employees.
Outstanding Equity Awards at Fiscal Year-End
The following are the outstanding
equity awards for the named executive officers as of December 31, 2022:
Option Awards
Name
Number of
Securities
Underlying
Unexercised
Options
(Exercisable)
Number of
Securities
Underlying
Unexercised
Options
(Unexercisable)
Equity Incentive
Plan Awards:
Number of
Securities
Underlying
Unexercised Unearned Options
Option
Exercise
Price
($)(1)
Option
Expiration
Date
Scott R. Silverman
3,000,000
(2)
-
0
$
0.31
10/18/2027
(1)
This reflects the exercise price of such options.
(2)
These shares were fully vested prior to 2021.
Stock Awards
Name
Number of Shares or Units of Stock That Have Not Vested (#)
Market Value of Shares or Units of Stock That Have Not Vested
($)(*)
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)
Scott R. Silverman (1)
6,970,120
$
57,155
6,970,120
$
57,155
Allison Tomek (2)
4,750,000
$
38,950
4,750,000
$
38,950
*
The market value of shares of stock is computed by multiplying the closing market price of our stock at the end of the last completed fiscal year of December 31, 2022 of $0.0082 by the number of shares of stock set forth to the left of such figure.
(1)
6,970,120 shares vest on May 1, 2023, as extended by agreement. As of December 31, 2022, Mr. Silverman also owns 655 shares of Series B Preferred stock, which may convert into approximately 107,761,859 common shares.
(2)
4,750,000 shares vest on May 1, 2023, as extended per agreement. As of December 31, 2022, Ms. Tomek also owns 146 shares of Series B Preferred stock, which may convert into approximately 23,842,222 common shares.
34
C-Bond Systems, Inc. 2018 Long-Term Incentive
Plan
On June 7, 2018, our Board
of Directors and our stockholders approved the C-Bond Systems, Inc. 2018 Long-Term Incentive Plan (the “2018 Plan”), which
became effective on August 2, 2018. The purposes of the 2018 Plan is to advance the interests of the Company, its affiliates and its stockholders
and promote the long-term growth of the Company by providing employees, non-employee Directors and third-party service providers with
incentives to maximize stockholder value and to otherwise contribute to the success of the Company and its affiliates, thereby aligning
the interests of such individuals with the interests of the Company’s stockholders and providing them additional incentives to continue
in their employment or affiliation with the Company.
Summary of the Plan
Administration
The 2018 Plan will be administered
by a committee designated by the Board of Directors (the “Committee”) or, in the absence of the Committee or in the case of
awards issued to non-employee Directors, the 2018 Plan will be administered by the Board of Directors (as applicable, the “Administrator”). The
Administrator also has full and exclusive power and authority to administer the 2018 Plan. In administering awards under our 2018
Plan, the Administrator, has the power, subject to the terms of the 2018 Plan, to determine the terms of the awards granted under our
2018 Plan, including any applicable exercise or grant price, the number of shares subject to each award and the exercisability of the
awards. The Administrator also has full power to determine the persons to whom and the time or times at which awards will be made
and to make all other determinations and take all other actions advisable for the administration of the 2018 Plan.
On a calendar year basis,
the Board of Directors may, by resolution, delegate to the Chief Executive Officer of the Company the limited authority to grant awards
under the 2018 Plan during such calendar year to designated classes of employees, who are not officers of the Company or any affiliate
and subject to the provisions of Section 16 of the Exchange Act, and to service providers.
Types of Awards
Under our 2018 Plan, the
Administrator may grant:
●
options to acquire our Common Stock, both incentive stock options that are intended to satisfy the requirements of Section 422 of the Internal Revenue Code and nonqualified stock options which are not intended to satisfy such requirements. The exercise price of options granted under our 2018 Plan must at least be equal to the fair market value of our Common Stock on the date of grant and the term of an option may not exceed ten years, except that with respect to an incentive stock option granted to any employee who owns more than 10% of the voting power of all classes of our outstanding stock as of the grant date the term must not exceed five years and the exercise price must equal at least 110% of the fair market value on the grant date.
●
stock appreciation rights, or SARs, which allow the recipient to receive the appreciation in the fair market value of our Common Stock between the date of grant and the exercise date. The amount payable under the stock appreciation right may be paid in cash or with shares of our Common Stock, or a combination thereof, as determined by the Administrator.
●
restricted stock awards, which are awards of our shares of Common Stock that vest in accordance with terms and conditions established by the Administrator.
●
restricted stock units, which are awards that are based on the value of our Common Stock and may be paid in cash or in shares of our Common Stock.
●
other types of stock-based or stock-related awards not otherwise described by the terms and provision of the 2018 Plan, including the grant or offer for sale of unrestricted shares of the Company’s Common Stock, and which may involve the transfer of actual shares of the Company’s Common Stock or payment in cash or otherwise of amounts based on the value of shares of our Common Stock and may be designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
●
other cash-based awards to eligible persons in such amounts and upon such terms as the Administrator shall determine.
An award granted under the
2018 Plan must include a minimum vesting period of at least one year, provided, however, that an award may provide that the award will
vest before the completion of such one-year period upon the death or qualifying disability of the grantee of the award or a change of
control of the Company and awards covering, in the aggregate, 25,000,000 shares of our Common Stock may be issued without any minimum
vesting period.
35
Shares Authorized for Issuance
The aggregate number of shares
of Common Stock that may be issued under the 2018 Plan and number of shares of our Common Stock that may be subject to incentive stock
options granted under the 2018 Plan is 50,000,000 shares.
Term
The Board may alter, amend,
or terminate our 2018 Plan and the Administrator may alter, amend, or terminate any award agreement in whole or in part; however, no termination,
amendment, or modification shall adversely affect in any material way any award previously granted, without the written consent of the
holder. Our 2018 Plan was adopted on June 7, 2018, became effective on August 2, 2018, and will continue indefinitely until it is terminated
by the Board as provided in the 2018 Plan. However, as required by the Internal Revenue Code, no incentive stock option awards may be
granted under our 2018 Plan on or after the tenth anniversary of the date the plan was adopted by the Board, unless our 2018 Plan is subsequently
amended, with the approval of stockholders, to extend the period for granting such awards.
Disclosure of Equity Awards Based on Material Nonpublic Information:
None
Pay Versus Performance (PVP)
In accordance with the SEC’s
disclosure requirements regarding pay versus performance, or PVP, this section presents the SEC-defined “Compensation Actually Paid,”
or CAP of our PEO and NEOs for each of the fiscal years ended December 31, 2022 and 2021, and our financial performance. Also as required
by the SEC, this section compares CAP to various measures used to gauge performance at the Company for each such fiscal year. Also as
required by the SEC, this section compares CAP to various measures used to gauge performance at the Company.
Pay versus Performance Table - Compensation
Definitions
Salary, Bonus, Stock Awards,
and All Other Compensation are each calculated in the same manner for purposes of both CAP and Summary Compensation Table, or SCT values.
The primary difference between the calculation of CAP and SCT total compensation is the calculation of the value of “Stock Awards,”
with the table below describing the differences in how these awards are valued for purposes of SCT total and CAP:
SCT
Total
CAP
Stock Awards
Grant date fair value of stock awards
granted during the year
Fair value of stock awards that are unvested as of the end of the year, or vested during the year
Pay Versus Performance Table
In accordance with the SEC’s new PVP rules,
the following table sets forth information concerning the compensation of our NEOs for each of the fiscal years ended December 31, 2022
and 2021, and our financial performance for each such fiscal year:
Year (1)
Summary Compensation Table Total for PEO
Compensation Actually Paid to PEO (2)(3)
Average Summary Compensation Table Total for Non-PEO
NEOs
Average Compensation Actually Paid to Non-PEO NEOs
Value of Initial Fixed $100 Investment Based On Total
Shareholder Return
Net Income (Loss)
2022
$
1,287,420
$
1,146,624
$
529,219
$
473,669
$
7.45
$
(5,156,478
)
2021
$
3,202,434
$
2,633,672
$
1,027,876
$
211,683
$
25.82
$
(7,128,858
)
(1)
The PEO (CEO) in the 2022 and 2021 reporting year is Scott Silverman. The non-PEO NEO in the 2022 reporting
year is Allison Tomek. The non-PEO NEO’s in the 2021 reporting year was Vince Pugliese and Allison Tomek.
36
(2)
The CAP was calculated beginning with the PEO’s and NEO’s SCT total. In 2022 and 2021, the
following amounts were deducted from and added to the applicable SCT total compensation:
SCT Total
Stock awards deducted from SCT
Increase for fair value of awards granted during the year that remain unvested as of
year end
Decrease for change in fair value from prior year-end to current year-end for awards
granted in prior years and unvested as of year end
Other
adjustments
Total CAP
(A)
(B)
(C)
(D)
(E)
A - B + C + E
PEO
2022
1,287,420
-
-
(140,796
)
-
1,146,624
2021
3,202,434
-
-
(568,762
)
-
2,633,672
Average Non-PEO NEO
2022
529,219
-
(55,550
)
-
473,669
2021
1,027,876
(132,000
)
16,400
(700,593
)
-
211,683
(3)
The fair value of stock awards reported for CAP purposes in columns (C) and (D) are based on the quoted closing price of the Company’s
common stock on the vesting date or the year end date for unvested stock awards in accordance with the SEC rules. See Note 9, “Stockholder’s
Equity” in the Notes to the Company’s Consolidated Financial Statements for the fiscal year ended 2022 included in the Company’s
Annual Report on Form 10-K for the year ended 2022 for more information regarding the Company’s accounting for share-based compensation.
Director Compensation
Our non-executive board member
receives $5,000 in cash compensation each quarter plus $2,500 per quarter for serving as committee chair.
The following table sets
forth compensation paid, earned or awarded during 2022 to each of our directors, other than Scott Silverman and Allison Tomek, whose compensation
is described in “Summary Compensation Table”.
2022 Director Compensation
Name
Fees Earned or Paid in Cash ($)
Stock Awards ($) (1)
All Other Compensation ($)
Total ($)
Barry M. Edelstein
30,000
24,000
-
54,000
(1)
On August 12, 2022, Mr. Edelstein received 2,000,000 shares of restricted stock valued at $24,000, or $0.012 per share, based on the quoted closing price of the Company’s common stock on the measurement date.
Directors are also entitled
to the protection provided by the indemnification provisions in our articles of incorporation, as amended, and our amended and restated
bylaws.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets
forth certain information relating to the beneficial ownership of our common stock as of March 31, 2023, by:
●
each person, or group of affiliated persons, known by us to beneficially own more than five percent of the outstanding shares of our common stock;
●
each of our directors;
●
each of our named executive officers; and
●
all directors and executive officers as a group.
37
The number of shares beneficially
owned by each entity, person, director or executive officer is determined in accordance with the rules of the SEC, and the information
is not necessarily indicative of beneficial ownership for any other purpose. Under such rules, beneficial ownership includes any shares
over which the individual has sole or shared voting power or dispositive power as well as any shares that the individual has the right
to acquire within 60 days of March 31, 2023 through the exercise of any stock option, warrants or other rights. Except as otherwise indicated,
and subject to applicable community property laws, the persons named in the table have sole voting and dispositive power with respect
to all shares of common stock held by that person.
The percentage of shares beneficially
owned is computed on the basis of 447,704,272 shares of our common stock outstanding as of March 31, 2023, the implied conversion of 1,144
shares of our Series B Preferred Stock and related accrued dividends as of March 31, 2023 into 215,767,091 shares of common stock, and
the implied conversion of 16,270 shares of our Series C Preferred Stock and related accrued dividends as of March 31, 2023 into 406,750,000
shares of common stock for total shares outstanding of 1,070,221,363. Shares of common stock that a person has the right to acquire within
60 days of March 31, 2023, are deemed outstanding for purposes of computing the percentage ownership of the person holding such rights,
but are not deemed outstanding for purposes of computing the percentage ownership of any other person, except with respect to the percentage
ownership of all directors and executive officers as a group. As a result of the Company’s issuance of 1,144 shares of Series B
Preferred Stock, which carries majority voting rights of 50 votes of Common Stock to every 1 share of Series B Preferred Stock, to named
executive officers and directors, they have the rights to 9,355,121,489 votes through their Series B holdings, of a total of 10,781,548,091
votes. The percentage of voting rights in the table below assumes that all Series B shares held by directors and named officers are voted
in any instance requiring shareholder vote. Unless otherwise noted below, the address of the persons listed on the table is c/o C-Bond
Systems, Inc., 6035 South Loop East, Houston, TX 77033.
Name of Beneficial Owner
Common Stock Beneficially Owned
Percent of Outstanding Shares
Percent of Voting
Rights
Named Executive Officers and Directors:
Scott Silverman (2)
207,636,080
35.1
%
63.1
%
Barry M. Edelstein (4)
20,728,097
4.6
%
3.6
%
Allison Tomek (5)
42,345,153
8.7
%
16.6
%
All directors and executive officers as a group (3 persons) (6)
270,709,330
41.6
%
83.3
%
Other Greater Than 5% Stockholders:
Jeff Badders (1)
30,844,916
6.9
%
*
Mike Wanke
28,021,016
6.3
%
*
Vince Pugliese (3)
33,751,992
7.1
%
10.3
%
*
Indicates beneficial ownership of less than 1% of the total outstanding common stock.
(1)
Jeff Badders has sole voting and dispositive power with respect to these shares. Mr. Badders’ address is 4002 North Street, Nacogdoches, TX 75965.
(2)
Includes (i) 64,315,575 shares outstanding pursuant to restricted stock awards and subscription agreement; (ii) 745 shares of Series B Preferred Stock, which may convert into 140,320,505 shares of Common Stock; and (iii) 3,000,000 shares issuable upon the exercise of vested stock options.
(3)
Includes (i) 517,397
shares held by Mr. Pugliese; (ii) 9,058,433 shares outstanding pursuant to restricted stock awards; (iii) 120 shares of Series B
Preferred Stock, which may convert into 22,876,164 shares of Common Stock; and (iv) 1,299,998 shares issuable upon the exercise of
vested stock options. The Company has concluded that Mr. Pugliese’s resignation has resulted in him forfeiting his
compensation and his restricted and unrestricted stock/equity, but this is not been reflected in its consolidated financial statements.
(4)
Includes (i) 12,886,364 shares outstanding pursuant to restricted stock awards; and (ii) 41 shares of Series B Preferred Stock, which may convert into 7,841,733 shares of Common Stock.
(5)
Includes (i) 5,050,000 shares outstanding pursuant to restricted stock awards; and (ii) 200 shares of Series B Preferred Stock, which may convert into 37,295,153 shares of Common Stock.
(6)
Includes (i) 82,251,939 shares held pursuant to restricted stock awards; (iii) 986 shares of Series B Preferred Stock, which may convert into 185,457,391 shares of Common Stock; and (iv) 3,000,000 shares issuable upon exercise of vested stock options.
38
Equity Compensation Plan Information
The following table sets
forth as of December 31, 2022 information regarding our common stock that may be issued under the Company’s equity compensation
plans:
Plan Category
Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights
(a)
Weighted Average Exercise Price of Outstanding Options, Warrants and Rights
(b)
Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (excluding Securities Reflected in Columns (a)) (c) (1)
Equity compensation plans approved by security holders
8,445,698
$
0.40
9,403,232
Equity compensation plans not approved by security holders
-
-
-
Total
8,445,698
$
0.40
9,403,232
*
The table above includes 8,445,698 options that were issued pursuant to the Merger Agreement (adjusted for forfeitures and exercises since the issuance), by converting each option to purchase Common Units issued and outstanding immediately prior to the closing of the Merger into an option to purchase an equivalent number of shares of our common stock.
(1)
Represents shares available under the C-Bond Systems, Inc. 2018 Long-Term Incentive Plan, under which the Company can issue options, stock appreciation rights, restricted stock awards, restricted stock units and other types of stock-based awards.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR
INDEPENDENCE
Bohemian Companies, LLC and
BOCO Investments, LLC are two companies under common control. Mr. Klemsz, our President prior to the Merger, has been the Chief Investment
Officer of BOCO Investments, LLC since March 2007. On November 14, 2018, the Company also entered into a Revolving Credit Facility Loan
and Security Agreement (“Loan Agreement”) and a Secured Promissory Note (the “Note”) with BOCO Investments, LLC.
Subject to and in accordance with the terms and conditions of the Loan Agreement and the Note, BOCO Investments, LLC agreed to lend to
the Company up to $400,000 (the “Maximum Loan Amount”) against the issuance and delivery by the Company of the Note for use
as working capital and to assist in inventory acquisition. As of December 31, 2018, BOCO Investments, LLC loaned us $400,000 and may
loan additional amounts to the Company at any time and from time to time through November 14, 2020, up to an aggregate amount not to
exceed the Maximum Loan Amount. The Company must repay all principal, interest and other amounts outstanding on or before November 14,
2020. The Company’s obligations under the Loan Agreement and the Note are secured by a first-priority security interest in substantially
all of the Company’s assets (the “Collateral”). The outstanding principal advanced to Company pursuant to the Loan
Agreement bears interest at the rate of 12% per annum, compounded annually. The Loan Agreement and Note contain customary representations,
warranties and covenants, including covenants requiring the Company to maintain certain inventory and accounts receivable amounts, certain
restrictions on the Company’s ability to incur additional debt or create liens on its property. The Loan Agreement and the Note
also provide for certain events of default, including, among other things, payment defaults, breaches of representations and warranties
and bankruptcy or insolvency proceedings, the occurrence of which, after any applicable cure period, would permit Lender, among other
things, to accelerate payment of all amounts outstanding under the Loan Agreement and the Note, as applicable, and to exercise its remedies
with respect to the Collateral, including the sale of the Collateral. Commencing March 31, 2019 and at all times thereafter through the
remainder of the commitment period and for so long thereafter as there is any amount still due and owing under the Note, the Company
must maintain an accounts receivable balances plus inventory such that the outstanding principal borrowed by Company under the Loan Agreement
and Note is less than or equal to 85% of accounts receivable plus 50% of inventory, all as measured at the same point in time. Commencing
on January 10, 2019 and on or before the l0th day of each month thereafter, the Company shall pay BOCO Investments, LLC all interest
accrued on outstanding principal under the Loan Agreement and Notes as of the end of the month then concluded. As of December 31, 2022
the Company was in default of certain requirements under the Loan Agreement, including not meeting the requirement regarding minimum
asset amount as defined therein. Upon the occurrence of such event of defaults, the Lender may, at its option and in accordance with
the Loan Agreement, declare all obligations immediately due and payable, however, as of the date of this Report, the Lender has not made
any such declaration.
During the year ended December
31, 2021, Mr. Silverman, the Company’s Chief Executive Officer, Interim Chief Financial Officer, Treasurer, Chairman of the
Board and a greater than 5% stockholder, and Ms. Tomek, the Company’s President, Vice President of Corporate Communications,
Secretary, Director and a greater than 5% stockholder, owned 5% and 2.5%, respectively, of a customer of the Company. During the year
ended December 31, 2021, the Company recognized sales of $1,200 to this company. The terms of this transaction were considered as an
arm’s length transaction.
In December 2021, the Company
advanced $3,750 to a company partially owned by officers of the Company. The advance was non-interest bearing, payable on demand, and
as of December 31, 2021 was reflected as due from related party on the accompanying consolidated balance sheets. In June 2022, this advance
was deemed uncollectible and the balance was written off to bad debt expense.
39
On May 2, 2022, the Company
entered into a Promissory Note (the “May 2022 Note”) in the principal amount of $250,000 with the Company’s chief executive
officer. The May 2022 Note was funded in May 2022 and the Company received net proceeds of $250,000. The May 2022 Note bears interest
at a rate of 6% per annum and all outstanding principal and accrued and unpaid interest is due on May 2, 2024. At any time, the Company
may prepay all or any portion of the principal amount of the May 2022 Note and any accrued and unpaid interest without penalty. For the
year ended December 31, 2022, interest expense – related party amounted to $10,027. On December 31, 2022, principal amount due and
accrued interest payable - related party amounted to $250,000 and $10,027, respectively.
For information regarding
the number of restricted shares of stock, preferred stock, or options held by the Company’s executive officers, and directors, or
an affiliate or immediate family member thereof, see “Security Ownership of Certain Beneficial Owners and Management” and
“Executive Compensation.”
Our board of directors intends
to adopt a written related person transaction policy, to set forth the policies and procedures for the review and approval or ratification
of related person transactions. This policy will cover, with certain exceptions set forth in Item 404 of Regulation S-K promulgated under
the Exchange Act, any transaction, arrangement or relationship, or any series of similar transactions, arrangements or relationships,
in which we were or are to be a participant, where the amount involved exceeds or will exceed the lesser of $120,000 or 1% of the average
of our total assets as of the end of the last two completed fiscal years and a related person had, has or will have a direct or indirect
material interest, including purchases of goods or services by or from the related person or entities in which the related person has
a material interest, indebtedness, guarantees of indebtedness and employment by us of a related person.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following table sets
forth the fees billed by our principal independent accountants, Salberg & Company, P.A., for each of our last two fiscal years for
the categories of services indicated.
Years Ended December 31,
Category
2022
2021
Audit Fees
$
100,100
$
92,700
Audit Related Fees
$
7,500
$
64,000
Tax Fees
$
-
$
-
All Other Fees
$
-
$
-
Audit fees.
Consists of fees billed for the audit of our annual consolidated financial statements included in our Form 10-K, review of our interim
financial statements included in our Form 10-Q and services that are normally provided by the accountant in connection with year-end statutory
and regulatory filings or engagements.
Audit-related fees.
Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review
of our consolidated financial statements and are not reported under “Audit Fees”, review of our Forms 8-K filings and services
that are normally provided by the accountant in connection with non-year-end statutory and regulatory filings or engagements.
Tax fees. Consists
of professional services rendered for tax compliance, tax advice and tax planning.
Other fees. The services
provided by our accountants within this category consisted of advice and other services not related to the above categories.
In June 2018, we established
an audit committee, which consists of Barry Edelstein (audit committee chairman). The audit committee’s charter requires that the
audit committee pre-approve all audit and non-audit services that our independent auditors provide to the Company, provided that pre-approval
of non-audit services is not required if (i) the fees for all such services do not aggregate to more than 5% of total fees paid to the
independent auditors in that fiscal year; (ii) such services were not recognized as non-audit services at that time of engagement; and
(iii) such services are promptly brought to the attention of the audit committee and approved by the audit committee prior to the completion
of the audit. Prior to the formation of the audit committee, our board of directors would evaluate the scope and cost of the engagement
of an auditor before the auditor renders audit and audit-related services. All of the audit and audit related fees described above for
fiscal years ended December 31, 2022 and 2021 were pre-approved by the audit committee.
40
PART IV
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES
A.
The
following documents are filed as part of this Report:
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
+
Indicates a management contract or any compensatory plan, contract or arrangement.
*
Filed herewith
**
Furnished herewith
ITEM 16. 10-K SUMMARY
As permitted, the registrant
has elected not to supply a summary of information required by Form 10-K.
45
SIGNATURES
Pursuant to the requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
C-BOND SYSTEMS, INC.
Date: March 31, 2023
By:
/s/ Scott R. Silverman
Scott R. Silverman
Chief Executive Officer and
Chairman of the Board
POWER OF ATTORNEY
Each person whose signature
appears below hereby appoints Scott R. Silverman as attorney-in-fact with full power of substitution, severally, to execute in the name
and on behalf of the registrant and each such person, individually and in each capacity stated below, one or more amendments to the annual
report on Form 10-K, which amendments may make such changes in the report as the attorney-in-fact acting deems appropriate and to file
any such amendment to the annual report on Form 10-K with the Securities and Exchange Commission. Pursuant to the requirements of the
Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities
and on the dates indicated.
Signature
Title
Date
/s/ Scott R. Silverman
Chief Executive Officer,
Interim Chief Financial Officer and Treasurer, Chairman of the Board and Director
March 31, 2023
Scott R. Silverman
(principal executive officer and principal financial and accounting officer)
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of:
C-Bond Systems, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated
balance sheets of C-Bond Systems, Inc. and Subsidiaries (the “Company”) as of December 31, 2022 and 2021, the related consolidated
statements of operations, changes in shareholders’ deficit, and cash flows, for each of the two years in the period ended December
31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December
31, 2022 and 2021, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December
31, 2022, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements
have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements,
the Company has a net loss and cash used in operations of $5,156,478 and $1,584,918 respectively, in 2022 and a working capital deficit,
shareholders’ deficit and accumulated deficit of $4,349,384, $7,050,669 and $62,693,184 respectively, at December 31, 2022.
These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s Plan in regard
to these matters is also described in Note 2. The consolidated financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
Basis for Opinion
These consolidated financial statements are the
responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with
the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether
the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required
to have, nor were we engaged to perform, an audit of internal control over financial reporting. As part of our audits we are
required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on
the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Member National Association of Certified
Valuation Analysts • Registered with the PCAOB
Member CPAConnect with
Affiliated Offices Worldwide • Member Center for Public Company Audit Firms
F-2
Our audits included performing procedures to assess
the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures
that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide
a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters are matters arising
from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit
committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved
our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ Salberg & Company, P.A.
SALBERG & COMPANY, P.A.
We have served as the Company’s auditor
since 2017.
Boca Raton, Florida
March 31, 2023
F-3
C-BOND
SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
December 31,
December 31,
2022
2021
ASSETS
CURRENT ASSETS:
Cash
$
97,091
$
519,898
Accounts receivable, net
269,442
173,248
Inventory
77,446
82,931
Prepaid expenses and other current assets
71,171
151,746
Contract assets
279
82,805
Due from related party
-
3,750
Total Current Assets
515,429
1,014,378
OTHER ASSETS:
Property and equipment, net
96,306
135,022
Right of use asset, net
375,412
251,172
Intangible asset, net
279,918
330,421
Goodwill
350,491
350,491
Security deposit
6,482
6,482
Total Other Assets
1,108,609
1,073,588
TOTAL ASSETS
$
1,624,038
$
2,087,966
LIABILITIES AND SHAREHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Convertible notes payable, net of discount
$
1,031,250
$
171,875
Notes payable, net of discount
1,576,438
488,414
Accounts payable
779,765
831,648
Accrued expenses
736,393
436,733
Accrued interest payable - related party
10,027
-
Accrued compensation
590,632
691,602
Contract liabilities
22,637
10,426
Lease liability, current portion
117,671
44,927
Total Current Liabilities
4,864,813
2,675,625
LONG-TERM LIABILITIES:
Convertible notes payable, net of current portion and discount
251,263
-
Note payable, net of current portion and discount
208,804
539,440
Note payable - related party
250,000
-
Lease liability, net of current portion
258,895
206,319
Total Long-term Liabilities
968,962
745,759
Total Liabilities
5,833,775
3,421,384
Commitments and Contingencies (See Note 11)
Series B convertible preferred stock: $0.10 par value, 100,000 shares designated; 1,000 and 722 shares issued and outstanding at December 31, 2022 and 2021, respectively ($1,037,201 redemption and liquidation value at December 31, 2022)
1,037,201
738,611
Series C convertible preferred stock: $0.10 par value, 100,000 shares designated; 17,290 and 18,680 shares issued and outstanding at December 31, 2022 and 2021, respectively ($2,860,518 redemption and liquidation value at December 31, 2022)
1,803,731
1,907,012
SHAREHOLDERS’ DEFICIT:
Preferred stock: $0.10 par value, 2,000,000 shares authorized; 100,000 Series B and 100,000 Series C designated
-
-
Common stock: $0.001 par value, 4,998,000,000 shares authorized; 350,270,172 and 282,216,632 issued and outstanding at December 31, 2022 and 2021, respectively
350,270
282,217
Additional paid-in capital
55,141,503
53,064,616
Accumulated deficit
(62,693,184
)
(57,515,129
)
Total C-Bond Systems, Inc. shareholders’ deficit
(7,201,411
)
(4,168,296
)
Noncontrolling Interest
150,742
189,255
Total Shareholders’ Deficit
(7,050,669
)
(3,979,041
)
Total Liabilities and Shareholders’ Deficit
$
1,624,038
$
2,087,966
See
accompanying notes to the consolidated financial statements.
F-4
C-BOND
SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS
For the Year Ended
December 31,
2022
2021
SALES:
Third parties
$
2,232,646
$
1,475,628
Related party
-
1,200
Total Sales
2,232,646
1,476,828
COST OF SALES (excluding depreciation expense)
954,402
657,298
GROSS PROFIT
1,278,244
819,530
OPERATING EXPENSES:
Compensation and related benefits (including stock-based compensation of $1,039,943 and $4,085,868 for the years ended December 31, 2022, and 2021, respectively)
2,844,783
6,165,006
Research and development
-
(3,250
)
Professional fees
815,542
1,031,540
General and administrative expenses
810,413
636,353
Total Operating Expenses
4,470,738
7,829,649
LOSS FROM OPERATIONS
(3,192,494
)
(7,010,119
)
OTHER INCOME (EXPENSES):
(Loss) gain on debt extinguishment and inducement expense, net
(343,895
)
96,442
Other income
-
67,778
Interest expense
(1,610,062
)
(282,959
)
Interest expense - related party
(10,027
)
-
Total Other Expenses, net
(1,963,984
)
(118,739
)
NET LOSS
(5,156,478
)
(7,128,858
)
Net loss (income) of subsidiary attributable to noncontrolling interest
38,513
(15,525
)
Preferred stock dividend and deemed dividend
(60,090
)
(4,401,907
)
NET LOSS ATTRIBUTABLE TO COMMON SHAREHOLDERS
$
(5,178,055
)
$
(11,546,290
)
NET LOSS PER COMMON SHARE:
Basic and diluted
$
(0.02
)
$
(0.05
)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic and diluted
308,121,062
254,299,139
See
accompanying notes to the consolidated financial statements.
F-5
C-BOND
SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT
FOR
THE YEARS ENDED DECEMBER 31, 2022 AND 2021
Additional
Total
Common Stock
Paid-in
Accumulated
Noncontrolling
Shareholders’
# of Shares
Amount
Capital
Deficit
Interest
Deficit
Balance, December 31, 2020
228,346,974
$
228,347
$
42,573,272
$
(45,968,839
)
$
-
$
(3,167,220
)
Common shares issued for accounts payable
3,801,224
3,801
114,037
-
-
117,838
Common shares issued for acquisition
28,021,016
28,021
666,900
-
-
694,921
Common shares issued for professional fees
13,250,000
13,250
540,950
-
-
554,200
Common shares issued for compensation
4,676,500
4,677
19,736
-
-
24,413
Common shares issued for accrued compensation
944,767
945
54,796
-
-
55,741
Common shares issued for cashless warrant exercise
1,008,000
1,008
(1,008
)
-
-
-
Common shares issued for conversion of Series C preferred stock
1,500,000
1,500
10,500
-
-
12,000
Common stock issued in connection with convertible debt
668,151
668
13,396
14,064
Preferred stock dividends and deemed dividend
-
-
4,354,761
(4,401,907
)
-
(47,146
)
Accretion of stock-based compensation
267,530
-
-
267,530
Accretion of stock-based professional fees
-
-
5,000
-
-
5,000
Beneficial conversion charge for issuance of Series B preferred shares for accrued compensation recorded as stock-based compensation
-
-
3,778,810
-
-
3,778,810
Initial noncontrolling in acquired business
-
-
-
-
173,730
173,730
Beneficial conversion feature connection with convertible debt
-
-
318,794
-
-
318,794
Issuance of warrants in connection with convertible debt
-
-
347,142
-
-
347,142
Net loss
-
-
-
(7,144,383
)
15,525
(7,128,858
)
Balance, December 31, 2021
282,216,632
282,217
53,064,616
(57,515,129
)
189,255
(3,979,041
)
Common stock issued for accounts payable
90,859
90
2,084
-
-
2,174
Common stock issued for compensation
3,500,000
3,500
10,750
-
-
14,250
Common stock issued for professional fees
17,954,545
17,954
199,296
-
-
217,250
Common stock issued for conversion of Series C preferred stock
21,262,973
21,263
117,737
-
-
139,000
Common stock issued in connection with debt
10,245,163
10,246
100,385
-
-
110,631
Common stock issued as inducement to extend note payable
15,000,000
15,000
97,500
-
-
112,500
Preferred stock dividends and deemed dividend
-
-
4,435
(60,090
)
-
(55,655
)
Accretion of stock-based compensation
-
-
68,137
-
-
68,137
Relative fair value of warrants issued in connection with debt
-
-
325,785
-
-
325,785
Beneficial conversion charge for issuance of Series B preferred shares for accrued compensation recorded as stock-based compensation
-
-
957,556
-
-
957,556
Beneficial conversion feature on convertible debt
-
-
354,215
-
-
354,215
Beneficial conversion feature buyback related to debt extinguishment
-
-
(160,993
)
-
-
(160,993
)
Net loss
-
-
-
(5,117,965
)
(38,513
)
(5,156,478
)
Balance, December 31, 2022
350,270,172
$
350,270
$
55,141,503
$
(62,693,184
)
$
150,742
$
(7,050,669
)
See
accompanying notes to the consolidated financial statements.
F-6
C-BOND
SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
For the Year Ended
December 31,
2022
2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss
$
(5,156,478
)
$
(7,128,858
)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization expense
89,219
45,967
Amortization of debt discount to interest expense
1,059,752
171,875
Interest expense for put premium on convertible notes
90,731
-
Default penalty included in interest expense
206,250
-
Stock-based compensation
1,039,943
4,085,868
Stock-based professional fees
298,571
478,129
Bad debt expense
7,716
39,355
Allowance for obsolete inventory
-
45,000
Gain on sale of property and equipment
(5,500
)
(13,000
)
Non-cash loss (gain) on debt extinguishment and inducement expense
343,895
(96,442
)
Lease costs
1,080
(370
)
Change in operating assets and liabilities:
Accounts receivable
(100,160
)
(73,180
)
Inventory
5,485
17,288
Prepaid expenses and other assets
(746
)
(13,211
)
Contract assets
82,526
(50,106
)
Due from related party
-
1,776
Accounts payable
(49,709
)
88,853
Accrued expenses
299,660
92,148
Accrued interest - related party
10,027
-
Customer deposit
-
(110,000
)
Accrued compensation
180,609
601,431
Contract liabilities
12,211
10,426
NET CASH USED IN OPERATING ACTIVITIES
(1,584,918
)
(1,807,051
)
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash proceeds from sale of property and equipment
5,500
13,000
Cash received from acquisition
-
288,901
NET CASH PROVIDED BY INVESTING ACTIVITIES
5,500
301,901
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable - related party
250,000
-
Proceeds from sale of series C preferred stock
-
550,000
Proceeds from note payable
903,760
500,000
Repayment of notes payable
(157,149
)
(28,359
)
Proceeds from convertible notes payable
160,000
680,000
NET CASH PROVIDED BY FINANCING ACTIVITIES
1,156,611
1,701,641
NET (DECREASE) INCREASE IN CASH
(422,807
)
196,491
CASH, beginning of year
519,898
323,407
CASH, end of year
$
97,091
$
519,898
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest
$
479,509
$
53,283
Income taxes
$
-
$
-
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued as prepaid for services
$
217,250
$
98,800
Common stock issued for accrued compensation
$
-
$
40,626
Series B preferred stock issued for accrued compensation
$
278,654
$
295,000
Common stock issued for accounts payable
$
2,174
$
117,838
Preferred stock dividend accrued
$
55,655
$
47,146
Deemed dividend related to beneficial conversion feature of Series C preferred shares
$
-
$
4,354,761
Increase in debt discount and paid-in capital for shares issued with convertible debt
$
110,631
$
-
Increase in debt discount and paid-in capital for warrants and beneficial conversion features
$
680,000
$
680,000
Conversion of series C preferred stock to common stock
$
139,000
$
12,000
Increase in right of use and lease liability
$
184,375
$
-
ACQUISITION:
Assets acquired:
Cash
$
-
$
288,901
Accounts receivable, net
-
59,726
Inventory
-
68,019
Prepaid expenses
-
6,091
Contract assets
-
32,699
Property and equipment
-
140,211
Right of use assets
-
253,433
Total assets acquired
-
849,080
Less: liabilities assumed:
Accounts payable
-
65,728
Accrued expenses
-
159,262
Notes payable
-
95,013
Customer deposit
-
110,000
Lease liabilities
-
253,433
Noncontrolling interest
-
173,730
Total liabilities assumed
-
857,166
Net liabilities assumed
-
8,086
Fair value of shares for acquisition
-
694,921
Increase in intangible assets - non-cash
$
-
$
703,007
See
accompanying notes to the consolidated financial statements.
F-7
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
NOTE 1 – NATURE OF ORGANIZATION
Nature of Organization
C-Bond Systems, Inc., together with its subsidiaries
(the “Company”), is a materials development company and sole owner, developer, and manufacturer of the patented C-Bond technology.
The Company is engaged in the implementation of proprietary nanotechnology applications and processes to enhance properties of strength,
functionality, and sustainability of brittle material systems. The Company’s primary focus is in the multi-billion-dollar glass
and window film industry with target markets in the United States and internationally. Additionally, the Company has expanded its product
line to include disinfection products. The Company operates in two divisions: C-Bond Transportation Solutions and Patriot Glass Solutions.
C-Bond Transportation Solutions sells a windshield strengthening, water repellent solution called C-Bond nanoShield™ as well as
disinfection products. Patriot Glass Solutions sells multi-purpose glass strengthening primer and window film mounting solutions, including
C-Bond BRS, a ballistic-resistant film system, and C-Bond Secure, a forced entry system.
On June 30, 2021, the Company entered into a Share
Exchange Agreement and Plan of Reorganization (the “Exchange Agreement”) with (i) Mobile Tint LLC, a Texas limited liability
company doing business as A1 Glass Coating (“Mobile”), (ii) the sole member of Mobile (the “Mobile Shareholder”),
and (iii) Michael Wanke as the Representative of the Mobile Shareholder. Pursuant to the Exchange Agreement, the Company agreed to acquire
80% of Mobile’s units, representing 80% of Mobile’s issued and outstanding capital stock (the “Mobile Shares”).
On July 22, 2021, the Company closed the Exchange Agreement and acquired 80% of the Mobile Shares. The Mobile Shares were exchanged for
28,021,016 restricted shares of the Company’s common stock in an amount equal to $800,000, divided by the average of the closing
prices of the Company’s common stock during the 30-day period immediately prior to the closing. Two years after closing, the Company
has the option to acquire the remaining 20% of Mobile’s issued and outstanding membership interests in exchange for a number of
shares of the Company’s common stock equal to 300% of Mobile’s average EBIT value, divided by the price of the Company’s
common stock as defined in the Exchange Agreement (the “Additional Closing”). Mobile provides quality window tint solutions
for auto, home, and business owners across Texas, specializing in automotive window tinting, residential window film, and commercial window
film that stop harmful UV rays from passing through its window films for reduced glare, comfortable temperatures, and lower energy bills.
Mobile also carries products that offer forced-entry protection and films that protect glass from scratches, graffiti, other types of
vandalism, and even bullets, including C-Bond BRS and C-Bond Secure products. As part of the transaction, Mobile’s owner-operator,
Mr. Wanke, joined the Company as President of its Patriot Glass Solutions division.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation and Principles of Consolidation
The Company’s consolidated financial statements
include the financial statements of its wholly owned subsidiary, C-Bond Systems, LLC, and its 80% owned subsidiary, Mobile since acquiring
80% of Mobile on July 22, 2021. All significant intercompany accounts and transactions have been eliminated in consolidation.
Going Concern
These consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the
normal course of business. As reflected in the accompanying consolidated financial statements, the Company had a net loss of $5,156,478
and $7,128,858 for the years ended December 31, 2022 and 2021, respectively. The net cash used in operations was $1,584,918 and $1,807,051
for the years ended December 31, 2022 and 2021, respectively. Additionally, the Company had an accumulated deficit, shareholders’
deficit, and working capital deficit of $62,693,184, $7,050,669 and $4,349,384, respectively, on December 31, 2022. These factors raise
substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date
of this report. Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow
positive or raise additional debt and/or equity capital. The Company is seeking to raise capital through additional debt and/or equity
financings to fund its operations in the future. Although the Company has historically raised capital from sales of common shares and
preferred shares, and from the issuance of promissory notes and convertible promissory notes, there is no assurance that it will be able
to continue to do so. If the Company is unable to raise additional capital or secure additional lending in the near future, management
expects that the Company will need to curtail its operations. These consolidated financial statements do not include any adjustments related
to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.
F-8
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
Use of Estimates
The preparation of consolidated financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ from those estimates. Estimates during the years ended December
31, 2022 and 2021 include estimates for allowance for doubtful accounts on accounts receivable, the estimates for obsolete or slow moving
inventory, estimates used in the calculation of progress towards completion on uncompleted jobs, purchase price allocation of acquired
businesses, the useful life of property and equipment, assumptions used in assessing impairment of long-term assets, the estimate of the
fair value lease liability and related right of use asset, the valuation of redeemable and mandatorily redeemable preferred stock, the
value of beneficial conversion features and deemed dividends, the valuation allowances for deferred tax assets, and the fair value of
non-cash equity transactions.
Fair Value of Financial Instruments and Fair Value Measurements
The carrying amounts reported in the consolidated
balance sheets for cash, accounts receivable, contract assets and liabilities, notes payable, convertible note payable, accounts payable,
accrued expenses, accrued compensation, and lease liabilities approximate their fair market value based on the short-term maturity of
these instruments.
The Company analyzes all financial instruments
with features of both liabilities and equity under the Financial Accounting Standard Board’s (the “FASB”) accounting
standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest
level of input that is significant to the fair value measurement. The Company did not identify any assets or liabilities that are required
to be presented on the balance sheet at fair value in accordance with Accounting Standards Codification (“ASC”) Topic 820.
ASC 825-10 “Financial Instruments”,
allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair
value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value
option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent
reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.
Cash and Cash Equivalents
For purposes of the consolidated statements of
cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money
market accounts to be cash equivalents. The Company had no cash equivalents as of December 31, 2022 and 2021.
Accounts Receivable
The Company recognizes an allowance for losses
on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of
historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable
customer accounts considered at risk or uncollectible. The expense associated with the allowance for doubtful accounts is recognized as
general and administrative expense.
Inventory
Inventory, consisting of raw materials and finished
goods, are stated at the lower of cost and net realizable value utilizing the first-in, first-out (FIFO) method. A reserve is established
when management determines that certain inventories may not be saleable. If inventory costs exceed expected net realizable value due to
obsolescence or quantities in excess of expected demand, the Company will record reserves for the difference between the cost and the
net realizable value. These reserves are recorded based on estimates and included in cost of sales.
Property and Equipment
Property and equipment are stated at cost and
are depreciated using the straight-line method over their estimated useful lives, which range from one to seven years. Leasehold improvements
are depreciated over the shorter of the useful life or lease term including scheduled renewal terms. Maintenance and repairs are charged
to expense as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and
any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in
the value of these assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.
F-9
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
Goodwill and Intangible Assets
Goodwill represents the future economic benefit
arising from other assets acquired that could not be individually identified and separately recognized. Any goodwill arising from the
Company’s acquisition is attributable to the value of the potential expanded market opportunity with new customers. Intangible assets
may have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line
basis over their economic or legal life, whichever is shorter. The Company’s amortizable intangible assets are being amortized over
a useful life of 5 years.
Impairment of Long-Lived Assets
In accordance with ASC Topic 360, the Company
reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may
not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future
cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s
estimated fair value and its book value.
Derivative Financial Instruments
The Company had certain financial instruments
that were embedded derivatives. The Company evaluated all its financial instruments to determine if those contracts or any potential embedded
components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815-10-05-4, Derivatives
and Hedging and 815-40, Contracts in Entity’s Own Equity. This accounting treatment requires that the carrying amount
of any embedded derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the
fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as
either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at
the conversion, repayment or exercise date and then the related fair value amount is reclassified to other income or expense as part of
gain or loss on extinguishment.
Warranty Liability
The Company provides limited warranties on its
products for product defects for periods ranging from 12 months to the life of the product. Warranty costs may include the cost of product
replacement, refunds, labor costs and other costs. Allowances for estimated warranty costs are recorded during the period of sale. The
determination of such allowances requires the Company to make estimates of product warranty claim rates and expected costs to repair or
to replace the products under warranty. The Company currently establishes warranty reserves based on historical warranty costs for each
product line combined with liability estimates based on the prior 12 months’ sales activities. If actual return rates and/or repair
and replacement costs differ significantly from the Company’s estimates, adjustments to recognize additional cost of sales may be
required in future periods. Historically the warranty accrual and the expense amounts have been immaterial. The warranty liability is
included in accrued expenses on the accompanying consolidated balance sheets and amounted $26,648 and $26,733 on December 31, 2022 and
2021, respectively. For the years ended December 31, 2022 and 2021, warranty costs were de minimis.
Beneficial Conversion Feature
Convertible debt includes conversion terms that
are considered in the money compared to the market price of the stock on the date of the related agreement. The Company calculates the
beneficial conversion feature and records a debt discount with the amount being amortized to interest expense over the term of the note.
Revenue Recognition
The Company follows ASC Topic 606, Revenue
from Contracts with Customers (“ASC 606”). This standard establishes a single comprehensive model for entities to use
in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. ASC
606 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services and requires certain additional disclosures.
The Company sells its products which include standard
warranties primarily to distributors and authorized dealers. Product sales are recognized at a point in time when the product is shipped
to the customer and title is transferred and are recorded net of any discounts or allowances. The warranty does not represent a separate
performance obligation.
Revenues from contracts for the distribution and
installation of window film solutions are recognized over time on the basis of the Company’s estimates of the progress towards completion
of contracts using various output or input methods depending on the type of contract terms including (1) the ratio of number of labor
hours spent compared to the number of estimated labor hours to complete a job, (2) using the milestone method, or (3) using a units completed
method. These methods are used because management considers these to be the best available measure of progress on these contracts. We
use the same method for similar types of contracts. The asset, “contract assets” represents revenues recognized in excess
of amounts billed. The liability, “contract liabilities,” represents billings in excess of revenues recognized.
F-10
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
Cost of Sales
Cost of sales includes inventory costs, packaging
costs and warranty expenses.
Cost of revenues from fixed-price contracts for
the distribution and installation of window film solutions include all direct material, sub-contractor, labor and certain other direct
costs, as well as those indirect costs related to contract performance, such as indirect labor and fringe benefits. Provisions for estimated
losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions
and estimated profitability may result in revisions to cost and income, which are recognized in the period in which the revisions are
determined. Changes in estimated job profitability resulting from job performance, job conditions, claims, change orders, and settlements,
are accounted for as changes in estimates in the current period.
Shipping and Handling Costs
Shipping and handling costs incurred for product
shipped to customers are included in general and administrative expenses and amounted to $45,455 and $15,431 for the years ended December
31, 2022 and 2021, respectively. Shipping and handling costs charged to customers are included in sales.
Research and Development
Research and development costs incurred in the
development of the Company’s products are expensed as incurred and includes costs such as labor, materials, and other allocated
costs incurred. For the years ended December 31, 2022 and 2021, research and development costs (recovery) incurred in the development
of the Company’s products were $0 and $(3,250), respectively, and are included in operating expenses on the accompanying consolidated
statements of operations. In April 2021, the Company received a refund of research and development costs of $3,250.
Advertising Costs
The Company may participate in various advertising
programs. All costs related to advertising of the Company’s products are expensed in the period incurred. For the years ended December
31, 2022 and 2021, advertising costs charged to operations were $69,737 and $65,626, respectively and are included in general and administrative
expenses on the accompanying consolidated statements of operations. These advertising expenses do not include cooperative advertising
and sales incentives which shall been deducted from sales.
Federal and State Income Taxes
The Company accounts for income tax using the
liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined
based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in
effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax
assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets
will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes
the enactment date.
The Company follows the accounting guidance for
uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”. Using that guidance, tax positions initially
need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the
tax authorities. As of December 31, 2022 and 2021, the Company had no uncertain tax positions that qualify for either recognition or disclosure
in the financial statements. Tax years that remain subject to examination are the years ending on and after December 31, 2017. The Company
recognizes interest and penalties related to uncertain income tax positions in other expense. However, no such interest and penalties
were recorded as of December 31, 2022 and 2021.
Stock-Based Compensation
Stock-based compensation is accounted for based
on the requirements of ASC 718 – “Compensation –Stock Compensation”, which requires recognition in the
financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments
over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively,
the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange
for an award based on the grant-date fair value of the award. The Company has elected to recognize forfeitures as they occur as permitted
under the FASB’s Accounting Standards Update (“ASU”) 2016-09 Improvements to Employee Share-Based Payment.
F-11
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
Loss Per Common Share
ASC 260 “Earnings Per Share”, requires
dual presentation of basic and diluted earnings per common share (“EPS”) with a reconciliation of the numerator and denominator
of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilutive securities and
non-vested forfeitable shares. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue
common shares were exercised or converted into common shares or resulted in the issuance of common shares that then shared in the earnings
of the entity. Basic net loss per common share is computed by dividing net loss available to members by the weighted average number of
common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average
number of common shares, common share equivalents and potentially dilutive securities outstanding during each period. Potentially dilutive
common shares consist of stock options and non-vested forfeitable shares (using the treasury stock method) and shares issuable upon conversion
of preferred shares and convertible notes payable (using the as-if converted method). These common share equivalents may be dilutive in
the future.
All potentially dilutive common shares were excluded
from the computation of diluted common shares outstanding as they would have an anti-dilutive impact on the Company’s net losses
and consisted of the following:
December 31,
2022
2021
Stock options
8,445,698
8,445,698
Warrants
34,000,000
17,500,000
Series B preferred stock
164,635,079
114,598,413
Series C preferred stock
432,250,000
296,507,937
Convertible debt
962,679,774
33,000,000
Non-vested, forfeitable common shares
16,970,120
14,270,120
1,618,980,671
484,322,168
Segment Reporting
During the year ended December 31, 2022 and from
July 22, 2021 (date of acquisition of Mobile Tint) to December 31, 2021, the Company operated in two reportable business segments which
consisted of (1) the manufacture and sale of a windshield strengthening water repellent solution as well as disinfection products, and
the sale of multi-purpose glass strengthening primer and window film mounting solutions, including ballistic-resistant film systems and
a forced entry system, and (2) the distribution and installation of window film solutions. The Company’s reportable segments are
strategic business units that offer different products. They are managed separately based on the fundamental differences in their operations
and locations.
Leases
The Company accounts for leases in accordance
with ASC 842. The lease standard requires certain leases to be reported on the consolidated balance sheets as right-of-use assets and
lease liabilities. The Company elected the practical expedients permitted under the transition guidance of this standard that retained
the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. The Company does not
reassess whether any contracts entered into prior to adoption are leases or contain leases.
The Company categorize leases with contractual
terms longer than twelve months as either operating or finance. Finance leases are generally those leases that would allow the Company
to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in property
and equipment, net. All other leases are categorized as operating leases. The Company does not have any finance leases as of December
31, 2022 and 2021. The Company’s leases generally have terms that range from three to four years for property and equipment and
five years for property. The Company elected the accounting policy to include both the lease and non-lease components of our agreements
as a single component and account for them as a lease.
Lease liabilities are recognized at the present
value of the fixed lease payments using a discount rate based on the Company’s current borrowing rate. Lease assets are recognized
based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the
leases. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term.
When the Company has the option to extend the
lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and it is reasonably certain that
the Company will exercise the option, the Company considers these options in determining the classification and measurement of the lease.
Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease.
F-12
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
Noncontrolling Interest
The Company accounts for noncontrolling interest
in accordance with ASC Topic 810-10-45, which requires the Company to present noncontrolling interests as a separate component of total
shareholders’ deficit on the consolidated balance sheets and the consolidated net loss attributable to its noncontrolling interest
be clearly identified and presented on the face of the consolidated statements of operations.
Risk and Uncertainties
In March 2020, the World Health Organization declared
COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. The Company was materially affected by the COVID-19
outbreak in 2020 and 2021 and the ultimate duration and severity of the outbreak and its impact on the economic environment and our business
is uncertain. The Company saw a material decrease in sales from its international customers as a result of the unprecedented public health
crisis from the COVID-19 pandemic and a decrease in domestic sales due to a decrease in business spending on discretionary items. As a
result, during 2021 and 2020, the Company’s international customers delayed the ordering of products and delayed or defaulted on
payment of balances due to the Company. The lack of collection of accounts receivable balances, which the Company believes was attributable
to COVID-19, had a material impact on the cash flows of the Company. The Company believes that COVID-19 had minimal impact on its operations
in 2022. The Company cannot estimate the future impact of the pandemic on its business. A severe or prolonged economic downturn could
result in a variety of risks to the Company’s business, including weakened demand for its products and a decreased ability to raise
additional capital when needed on acceptable terms, if at all. Currently, the Company is unable to estimate the impact of this event on
its operations.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt—Debt
with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies accounting for
convertible instruments by removing major separation models required under current U.S. GAAP. Consequently, more convertible debt instruments
will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain
settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity
contracts to qualify for the exception. The ASU also simplifies the diluted net income per share calculation in certain areas. The new
guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and early
adoption is permitted. The Company is currently evaluating the impact of the adoption of the standard on the consolidated financial statements.
In June
2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments, which significantly changes how entities will measure credit losses for most financial assets, including
accounts receivable. ASU No. 2016-13 will replace today’s “incurred loss” approach with an “expected loss”
model, under which companies will recognize allowances based on expected rather than incurred losses. On November 15, 2019, the FASB delayed
the effective date of Topic 326 for certain small public companies and other private companies until fiscal years beginning after December
15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, as well as private companies
and not-for-profit entities. The Company is currently evaluating the new guidance and has not yet determined whether the adoption of the
new standard will have a material impact on its consolidated financial statements or the method of adoption.
In March
2022, the FASB issued ASU No. 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage
Disclosures. The guidance was issued as improvements to ASU No. 2016-13 described above. The vintage disclosure changes require an
entity to disclose current-period gross write-offs by year of origination for financing receivables. The guidance is effective for financial
statements issued for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The amendments should
be applied prospectively. Early adoption of the amendments is permitted, including adoption in an interim period. The amendments will
impact our disclosures but will not otherwise impact the consolidated financial statements. The Company is currently evaluating the new
guidance.
Other accounting standards that have been issued
or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial
statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated
to its financial condition, results of operations, cash flows or disclosures.
F-13
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
NOTE 3 - ACQUISITION OF MOBILE TINT LLC
On June 30, 2021, the Company entered into a Share
Exchange Agreement and Plan of Reorganization (the “Exchange Agreement”) with (i) Mobile Tint LLC, a Texas limited liability
company doing business as A1 Glass Coating (“Mobile”), (ii) the sole member of Mobile (the “Mobile Member”), and
(iii) Michael Wanke as the Representative of the Mobile Member. Pursuant to the Exchange Agreement, the Company agreed to acquire 80%
of Mobile’s member units, representing 80% of Mobile’s issued and outstanding membership units (the “Mobile Member Units”).
On July 22, 2021, the Company closed the Exchange Agreement and acquired 80% of the Mobile Member Units. The Mobile Member Units were
exchanged for restricted shares of the Company’s common stock, in an amount equal to $800,000, divided by the average of the closing
prices of the Company’s common stock during the 30-day period immediately prior to the closing as defined in the Exchange Agreement.
In connection with the Exchange Agreement, the Company issued 28,021,016 shares of its common stock. These shares were valued at $694,921,
or $0.0248 per common share, based on the quoted closing price of the Company’s common stock on July 22, 2021, the measurement date.
Two years after closing, the Company has the option to acquire the remaining 20% of Mobile’s issued and outstanding membership interests
in exchange for a number of shares of the Company’s common stock equal to 300% of Mobile’s average EBIT value, divided by
the price of the Company’s common stock as defined in the Exchange Agreement (the “Additional Closing”).
The Company also entered into an Amendment to
the Exchange Agreement, dated July 21, 2021, which, among other things, stipulates that for U.S. federal income tax purposes the Exchange
and the Additional Closing (if exercised) are intended to qualify as a “reorganization” within the meaning of Section 368(a)
of the Code and the Treasury Regulations, and the definition of “Total EBIT Value” shall mean Mobile’s net income, before
income tax expense and interest expense have been deducted, for the period beginning on July 1, 2021 and ending on June 30, 2023, plus
fifty percent (50%) of the Mobile Member’s Base Salary, as defined in the Executive Employment Agreement dated July 21, 2021, between
the Mobile Member and the Company (the “Employment Agreement”), as described below.
The exchange Agreement transaction documents include
the Operating Agreement of Mobile (the “Operating Agreement”) which, among other things, appoints Mr. Wanke, Scott R. Silverman,
and Allison Tomek as the Managers of Mobile, and governs the operations of Mobile as outlined therein. Under the terms of the Operating
Agreement, the Managers shall not have the authority to perform or approve the following actions, among other things, unless such action
is also approved by a unanimous vote: to terminate the existing lease between Company and MDW Management, LLC, an entity owned by Michael
Wanke and his spouse; to borrow money for the Company from banks, other lending institutions, the Manager, Members, or affiliates of the
Manager or Members; to establish lines of credit in the name of the Company with financial institutions such as banks or other lending
institutions; to determine and declare distributions to Members of Mobile.
In connection with the Exchange Agreement, the
Company entered into a Piggy-Back Registration Rights Agreement dated July 20, 2021 (the “Registration Rights Agreement”)
with Mobile, the Mobile Member, and Mr. Wanke, pursuant to which if at any time on or after the date of the closing, the Company proposes
to file any Registration Statement (a “Registration Statement”) with respect to any offering of equity securities by the Company
for its own account or for shareholders of the Company, other than a Form S-8 Registration Statement, a dividend reinvestment plan, or
in connection with a merger or acquisition, then the Company shall (x) give written notice of such proposed filing to the holders of registrable
securities no less than ten (10) days before the anticipated filing date of the Registration Statement, and (y) offer to the holders of
registrable securities the opportunity to register the sale of either (i) an amount of registrable securities equal to the total number
of shares of the Company’s common stock being registered in such Registration Statement that are being offered solely for the Company’s
account excluding the registrable securities; or (ii) an amount of registrable securities equal to the total number of shares of the Company’s
common stock being registered for resale by shareholders of the Company excluding the registrable securities.
In connection with the Exchange Agreement, the
Company was named as guarantor (“Guarantor”) of a Commercial Lease Agreement dated July 21, 2021, by and between landlord
MDW Management, LLC, a company owned by Michael Wanke and his wife and tenant Mobile Tint, LLC d/b/a A-1 Glass (the “Lease”).
The term of the Lease is 60 months, at a minimum monthly rent of $5,600 (not including tax), with two five-year options for the tenant
to renew. The Company’s obligation as Guarantor of the Lease will terminate upon the occurrence of earlier of the following: (i)
the date of Guarantor’s acquisition of 100% of the ownership interests of Mobile; (ii) the date that Guarantor beneficially owns
less than an eighty percent (80%) ownership interest in Mobile; or (iii) two (2) years from and after the effective date of the guaranty.
F-14
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
In connection with the Exchange Agreement, the
assets acquired and liabilities assumed were recorded at their estimated fair values on the acquisition date, subject to adjustment during
the measurement period with subsequent changes recognized in earnings or loss. These estimates were inherently uncertain and are subject
to refinement. Management develops estimates based on assumptions as a part of the purchase price allocation process to value the assets
acquired and liabilities assumed as of the business acquisition date. As a result, during the purchase price measurement period, which
may be up to one year from the business acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed
based on completion of valuations, with the corresponding offset to goodwill. After the purchase price measurement period, the Company
will record any adjustments to assets acquired or liabilities assumed in operating expenses in the period in which the adjustments may
have been determined. Based upon the purchase price allocation, the following table summarizes the estimated fair value of the assets
acquired and liabilities assumed at the date of the respective acquisition:
Total
Assets acquired:
Cash
$
288,901
Accounts receivable, net
59,726
Inventory
68,019
Prepaid expenses and other
6,091
Contract assets
32,699
Property and equipment
140,211
Right of use asset
253,433
Intangible assets
352,516
Goodwill
350,491
Total assets acquired at fair value
1,552,087
Less: total liabilities assumed:
Notes payable
95,013
Accounts payable
65,728
Accrued expenses
159,262
Customer deposit
110,000
Lease liability
253,433
Noncontrolling interest
173,730
Total liabilities assumed
857,166
Net assets acquired
$
694,921
Purchase consideration paid:
Fair value of common shares issued
$
694,921
Total purchase consideration paid
$
694,921
The following unaudited pro forma consolidated
results of operations have been prepared as if the acquisition of Mobile Tint LLC had occurred as of the beginning of the following year:
For the Year Ended December 31, 2021
Net Revenues
$
2,168,863
Net Loss
$
(7,128,027
)
Net Loss per Share
$
(0.03
)
Pro forma data does not purport to be indicative
of the results that would have been obtained had these events actually occurred at the beginning of the periods presented and is not intended
to be a projection of future results.
NOTE 4 – ACCOUNTS RECEIVABLE
On December 31, 2022 and 2021, accounts receivable
consisted of the following:
December 31, 2022
December 31, 2021
Accounts receivable
$
304,964
$
204,804
Less: allowance for doubtful accounts
(35,522
)
(31,556
)
Accounts receivable, net
$
269,442
$
173,248
For the years ended December 31, 2022 and 2021, bad debt expense amounted
to $7,716 and $39,355, respectively.
F-15
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
NOTE 5 – INVENTORY
On December 31, 2022 and 2021, inventory consisted
of the following:
December 31, 2022
December 31, 2021
Raw materials
$
1,501
$
7,141
Finished goods
75,945
120,790
Inventory
77,446
127,931
Less: allowance for obsolete or slow-moving inventory
-
(45,000
)
Inventory, net
$
77,446
$
82,931
For the years ended December 31, 2022 and 2021,
a loss from allowance for slow moving inventory amounted to $0 and $45,000, respectively, and is included in cost of sales on the accompanying
consolidated statements of operations.
NOTE 6 – PROPERTY AND EQUIPMENT
On December 31, 2022 and 2021, property and equipment
consisted of the following:
Useful Life
December 31, 2022
December 31, 2021
Machinery and equipment
5 – 7 years
$
124,133
$
124,133
Furniture and office equipment
3 – 7 years
32,306
32,306
Vehicles
1 – 5 years
62,195
63,009
Leasehold improvements
3 – 5 years
45,296
45,296
263,930
264,744
Less: accumulated depreciation
(167,624
)
(129,722
)
Property and equipment, net
$
96,306
$
135,022
During the year ended December 31, 2022, the Company
sold a vehicle and other equipment for proceeds of $5,500 and record a gain on sale of property and equipment of $5,500 which is included
in general and administrative expenses on the accompanying consolidated statement of operations. During the year ended December 31, 2021,
the Company sold a vehicle for proceeds of $13,000 and record a gain on sale of property and equipment of $13,000 which is included in
general and administrative expenses on the accompanying consolidated statement of operations. For the years ended December 31, 2022 and
2021, depreciation expense is included in general and administrative expenses and amounted to $38,716 and $23,872, respectively.
NOTE 7 – INTANGIBLE ASSETS AND GOODWILL
On December 31, 2022 and 2021, intangible assets,
which were acquired from Mobile in 2021 (See Note 3), consisted of the following:
Useful life
December 31, 2022
December 31, 2021
Customer relations
5 years
$
212,516
$
212,516
Non-compete
5 years
40,000
40,000
Trade name
-
100,000
100,000
352,516
352,516
Less: accumulated amortization
(72,598
)
(22,095
)
Intangible assets, net
$
279,918
$
330,421
Useful life
December 31, 2022
December 31, 2021
Goodwill
-
$
350,491
$
350,491
F-16
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
For the years ended December 31, 2022 and 2021,
amortization expense of intangible assets amounted to $50,503 and $22,095, respectively. On December 31, 2022, accumulated amortization
amounted to $61,098 and $11,500 for the customer relations and non-compete, respectively. On December 31, 2021, accumulated amortization
amounted to $18,595 and $3,500 for the customer relations and non-compete, respectively.
Amortization of intangible assets with identifiable
useful lives that is attributable to future periods is as follows:
Twelve months ending December 31:
Amount
2023
$
50,503
2024
50,503
2025
50,503
2026
28,409
Total
$
179,918
NOTE 8 – CONVERTIBLE NOTES PAYABLE
Mercer Convertible Debt
On October 15, 2021, the Company entered into
a Securities Purchase Agreement (the “SPA”) with Mercer Street Global Opportunity Fund, LLC (the “Investor”),
pursuant to which the Company issued and sold to Investor a 10% Original Issue Discount Senior Convertible Promissory Note in the principal
amount of $825,000 (the “Initial Note”) and five-year warrants to purchase up to 16,500,000 shares of the Company’s
common stock at an initial exercise price of $0.05 per share, an amount equal to 50% of the conversion shares that were issued (the “Initial
Warrants”). The Company received net proceeds of $680,000, which is net of original issue discounts of $75,000, placement fees of
$60,000, and legal fees of $10,000. The transactions contemplated under the SPA closed on October 18, 2021.
Pursuant to the SPA, the Investor agreed to purchase
an additional $825,00010% Original Issue Discount Senior Convertible Promissory Note (the “Second Note,” and together with
the Initial Note, the “Notes”), and a five-year warrant (the “Second Warrant,” and together with the Initial Warrant,
the “Warrants”) to purchase, in the aggregate, shares of the Company’s common stock at an initial exercise price of
$0.05 per share from the Company in an amount equal to 50% of the conversion shares to be issued upon the same terms as the Initial Note
and Initial Warrant (subject to there being no event of default under the Initial Note or other customary closing conditions), within
three trading days of a registration statement registering the shares of the Company’s common stock issuable under the Notes (the
“Conversion Shares”) and upon exercise of the Warrants (the “Warrant Shares”) being declared effective by the
SEC. To date, the Investor did not purchase the Second Note.
The Initial Note matured 12 months after issuance,
bore interest at a rate of 4% per annum through the date of default, and was initially convertible beginning on the six-month anniversary
of the original issue date into the Company’s common stock at a fixed conversion price of $0.025 per share, subject to adjustment
for stock splits, stock combinations, dilutive issuances, and similar events, as described in the Initial Note.
The Initial Note may be prepaid at any time for
the first 90 days at face value plus accrued interest. From day 91 through day 180, the Note may be prepaid in an amount equal to 110%
of the principal amount plus accrued interest. From day 181 through the day immediately preceding the maturity date, the Initial Note
may be prepaid in an amount equal to 120% of the principal amount plus accrued interest.
The Note and Warrants contain conversion limitations
providing that a holder thereof may not convert the Notes or exercise the Warrants to the extent (but only to the extent) that, if after
giving effect to such conversion, the holder or any of its affiliates would beneficially own in excess of 4.99% of the outstanding shares
of the Company’s common stock immediately after giving effect to such conversion or exercise. A holder may increase or decrease
its beneficial ownership limitation upon notice to the Company provided that in no event such limitation exceeds 9.99%, and that any increase
shall not be effective until the 61st day after such notice.
In connection with the SPA, the Company entered
into a Registration Rights Agreement dated October 15, 2021 (the “Registration Rights Agreement”), with the Investor pursuant
to which it is obligated to file a registration statement with the SEC within 45 days after the date of the agreement to register the
resale by the Investor of the conversion shares and warrant shares, and use all commercially reasonable efforts to have the registration
statement declared effective by the SEC within 60 days after the registration statement is filed.
Upon the occurrence of an event of default under
the Notes, the Investor has the right to be prepaid at 125% of the outstanding principal balance and accrued interest, and interest accrues
at 18% per annum. Events of default included, among other things,
(i)
any
default in the payment of (A) principal and interest payment under this Note or any other Indebtedness, or (B) Late Fees, liquidated
damages and other amounts owing to the Holder of this Note, as and when the same shall become due and payable (whether on a Conversion
Date, or the Maturity Date, or by acceleration or otherwise), which default, solely in the case of a default under clause (B) above,
is not cured within five Trading Days;
(ii)
the Company or any Subsidiary shall be subject to a Bankruptcy Event;
F-17
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
(iii)
the SEC suspends the Common Stock from trading or the Company’s Common Stock is not listed or quoted for trading on a Trading Market which failure is not cured, if possible to cure, within the earlier to occur of 10 Trading Days after notice of such failure is sent by the Holder or by any other Holder to the Company or the transfer of shares of Common Stock through the Depository Trust Company System is no longer available or is subject to a “chill” by the Depository Trust Company or any successor;
(iv)
the Company shall be a party to any Change of Control Transaction or shall agree to sell or dispose of all or in excess of 50% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change of Control Transaction);
(v)
the Company incurs any Indebtedness other than Permitted Indebtedness;
(vi)
the Company restates any financial statements included in its reports or registration statements filed pursuant to the Securities Act or the Exchange Act for any date or period from two years prior to the Original Issue Date of this Note and until this Note is or the Warrants issued to the Holder are no longer outstanding, if following first public announcement or disclosure that a restatement will occur the VWAP on the next Trading Day is 20% less than the VWAP on the prior Trading Day. For the purposes of this clause the next Trading Day if an announcement is made before 4:00 pm New York, NY time is either the day of the announcement or the following Trading Day. The Company filed a Report on Form 8-K announcing the restatement of its financial statements for the year ended December 31, 2020. Following the first public announcement or disclosure that a restatement occurred, the VWAP on the next Trading Day was not 20% less than the VWAP on the prior Trading Day and accordingly, the default provisions were not triggered.
The Company has also granted the investor a 12-month
(or until the Notes are no longer outstanding) right to participate in specified future financings, up to a level of 30%.
In connection with the SPA, on October 18, 2021,
the Company issued 668,151 shares of its common stock to the placement agent as fee for the capital raise. The 668,151 shares of common
stock issued were recorded as a debt discount of $14,064 based on the relative fair value method to be amortized over the life of the
Note. The 16,500,000 Initial Warrants were valued at $347,142 using the relative fair value method and recorded as a debt discount to
be amortized over the life of the note. The original issue discounts of $75,000, placement fees of $60,000, and legal fees of $10,000,
aggregating $145,000, was recorded as a debt discount to be amortized into interest expense over the twelve-month term of the note. Additionally,
the Initial Note was convertible into common shares at an initial conversion price of is $0.025 which was lower than the fair value of
common shares based on the quoted closing price of the Company’s common stock on the measurement date. Since warrants and common
shares were issued with the Initial Note, the proceeds were allocated to the instrument based on relative fair value. The Initial Warrants
did not contain any features requiring liability treatment and therefore were classified as equity. The value allocated to the Initial
Warrants and common shares issued was $347,142 and $14,064, respectively, and $318,794 was allocated to the beneficial conversion feature.
Since the intrinsic value of the beneficial conversion feature, warrants and common shares was greater than the proceeds allocated to
the convertible instrument, the amount of the discount assigned to the beneficial conversion feature, warrants and common shares issued
was limited to the amount of the proceeds allocated to the convertible instrument. Accordingly, the Company recorded an aggregate non-cash
debt discount of $680,000 with the credit to additional paid in capital. This debt discount was amortized to interest expense over the
term of the Convertible Note through the date Exchange Agreement discussed below.
On April 20, 2022, the Company and the Investor
entered into an Exchange Agreement (the “Exchange Agreement”). The original SPA remains in effect. Per the terms of the Exchange
Agreement, the Parties agreed to exchange (i) the Initial Note for a new Convertible Promissory Note (the “New Note”) and
(ii) the Initial Warrant for a new five-year warrant to purchase, in the aggregate, 33,000,000 shares of the Company’s common stock
at an exercise price of $0.025 per share (the “New Warrant” and together with the New Note, the “New Securities”),
according to the terms and conditions of the Exchange Agreement. On April 20, 2022, pursuant to the terms of the Exchange Agreement, the
Investor surrendered the Prior Securities in exchange for the New Securities. Other than the surrender of the Prior Securities, no consideration
of any kind whatsoever was given by the Investor to the Company in connection with the Exchange Agreement. The terms of the New Securities
are the same as the Prior Securities except for the pricing of the shares issuable under the New Note and the shares issuable upon exercise
of the New Warrant. The New Securities are composed of the New Note, which is a 10% Original Issue Discount Senior Convertible Promissory
Note in the principal amount of $825,000, and the New Warrant. The New Note matured on October 15, 2022, bore interest at a rate of 4%
per annum through the date of default, and was initially convertible into the Company’s common stock at a fixed conversion price
of $0.0125 per share, subject to adjustment for stock splits, stock combinations, dilutive issuances, and similar events, as described
in the New Note. If the average Closing Price during any 10 consecutive Trading Day period beginning and ending during the 60 Day Effectiveness
Period (the “Average Closing Price”) is below the Conversion Price than the conversion price will be reduced to such Average
Closing Price but in no event less than $0.00875.
On October 15, 2022, the due date of the New Note,
the New Note defaulted due to non-payment. Accordingly, the Company added a default penalty of $206,250, or 25%, to the principal balance
and recorded interest expense of $206,250, and interest shall accrue at 18% per annum.
In accordance with ASC 470-50, Debt Modifications
and Extinguishments, the Company performed an assessment of whether the Exchange Agreement transaction was deemed to be new debt, a modification
of existing debt, or an extinguishment of existing debt. The Company evaluated the April 20, 2022 Exchange Agreement for debt modification
and concluded that the debt qualified for debt extinguishment. On April 20, 2022, the Company agreed to reduce the conversion price from
$0.025 per share to $0.0125 per share, and to cancel the Initial Warrant to purchase 16,500,000 shares of common exercisable at $0.05
per shares, and to issue a New Warrant to purchase 33,000,000 shares exercisable at $0.025 per share. All other terms of the convertible
note and warrants remain unchanged, and therefore did not change the cash flows of the note. The New Warrants did not contain any features
requiring liability treatment and therefore were classified as equity.
F-18
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
The Company determined the transaction was considered
a debt extinguishment because of the change in conversion price was substantial. Upon extinguishment, the Company had $395,313 of unamortized
initial debt discount recorded which it wrote off, and the Company recorded a buyback of $160,993 which represents the reversal of calculated
beneficial conversion feature on the initial debt upon settlement, for an aggregate net loss on debt extinguishment of $234,320. The Company
recorded a new debt discount in connection with the New Note which was calculated based on the relative fair value of the New Warrants
of $325,785. Additionally, the New Note is convertible into common shares at an initial conversion price of $0.0125 which was lower than
the fair value of common shares based on the quoted closing price of the Company’s common stock on the measurement date. The value
allocated to the New Warrants was $325,785, and $354,215 was allocated to the beneficial conversion feature. Since the intrinsic value
of the beneficial conversion feature and warrants was greater than the proceeds allocated to the convertible instrument, the amount of
the discount assigned to the beneficial conversion feature and warrants issued was limited to the amount of the proceeds allocated to
the convertible instrument. Accordingly, the Company recorded an aggregate non-cash debt discount of $680,000 with the credit to additional
paid in capital. This debt discount was amortized to interest expense over the remaining term of the Convertible Note.
The Company uses the Binomial Valuation Model
to determine the fair value of its stock warrants which requires the Company to make several key judgments including:
●
the value of the Company’s common stock;
●
the expected life of issued stock warrants;
●
the expected volatility of the Company’s stock price;
●
the expected dividend yield to be realized over the life of the stock warrants; and
●
the risk-free interest rate over the expected life of the stock warrants.
The Company’s computation of the expected
life of issued stock warrants was based on the simplified method as the Company does not have adequate exercise experience to determine
the expected term. The interest rate was based on the U.S. Treasury yield curve in effect at the time of grant. The computation of volatility
was based on the historical volatility of the Company’s common stock.
On October 18, 2021 and April 20, 2022 (the Exchange
Agreement date) along with various re-pricings as outlined below, the fair value of the stock warrants were estimated at issuance using
the Binomial Valuation Model with the following assumptions:
2022
2021
Dividend rate
—%
—%
Term (in years)
4 years
5 years
Volatility
246.6% to 329.6%
348.5%
Risk—free interest rate
2.79% to 3.12%
1.16%
At any time this Note or any amounts accrued and
payable thereunder remain outstanding, the Company or any Subsidiary, as applicable, sells or grants any option to purchase or sells or
grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition),
any common stock or common stock equivalents entitling any Person to acquire shares of the Company’s common stock at an effective
price per share that is lower than the conversion price then in effect (such lower price, the “Base Conversion Price” and
each such issuance or announcement a “Dilutive Issuance”), then the conversion price shall be immediately reduced to equal
the Base Conversion Price. Such adjustment shall be made whenever such common stock or common stock equivalents are issued. On June 23,
2022, the Company issued common stock equivalents with an initial conversion price of $0.011 per share and accordingly, the conversion
price and warrant down-round provisions were triggered. As a result, the conversion price of the New April 2022 Note was reduced to $0.011
per share and the exercise price of the New April 2022 Warrant was lowered to $0.011. As a result of the June 23, 2022 down-round provisions,
the Company calculated the difference between the warrants fair value on June 23, 2022, the date the down-round feature was triggered
using the then current exercise price of $0.025 and the new exercise price of $0.011. On June 23, 2022, the Company recorded a deemed
dividend of $3,702 which represents the fair value transferred to the warrant holders from the down round feature being triggered. No
additional beneficial conversion feature amount was recorded based on the June 23, 2022 valuation as the ratcheted beneficial conversion
feature value was lower than the original amount. Additionally, on September 6, 2022, the Company issued common stock equivalents with
an initial conversion price of $0.009 per share and accordingly, the conversion price and warrant down-round provisions were triggered.
As a result, the conversion price of the New April 2022 Note was reduced to $0.009 per share and the exercise price of the New April 2022
Warrant was lowered to $0.009. As a result of the September 6, 2022 down-round provisions, the Company calculated the difference between
the warrants fair value on September 6, 2022, the date the down-round feature was triggered using the then current exercise price of $0.011
and the new exercise price of $0.009. On September 6, 2022, the Company recorded a deemed dividend of $733 which represents the fair value
transferred to the warrant holders from the down round feature being triggered. No additional beneficial conversion feature amount was
recorded based on the September 6, 2022 valuation as the ratcheted beneficial conversion feature value was lower than the original amount.
F-19
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
Pursuant to the provisions of ASC 815-40 –
Derivatives and Hedging – Contracts in an Entity’s Own Stock, the convertible note and related warrants issued in connection
with the Mercer convertible note was analyzed and it was determined that the terms of the convertible note and warrants contained terms
that were not considered derivatives.
1800 Diagonal Lending Convertible Debt
On November 9, 2022, the Company closed a Securities
Purchase Agreement dated November 4, 2022, with 1800 DIAGONAL LENDING LLC, a Virginia limited liability company, (“Diagonal”),
pursuant to which a Promissory Note (the “November 2022 Diagonal Note”) dated November 4, 2022, was made to Diagonal in the
aggregate principal amount of $104,250 and the Company received net proceeds of $100,000 which was net of fees of $4,250. The November
2022 Diagonal Note bears interest at a rate of 12% per annum (22% upon the occurrence of an event of a default) and all outstanding principal
and accrued and unpaid interest are due on May 4, 2024.
On December 27, 2022, the Company closed a Securities
Purchase Agreement dated December 27, 2022, with 1800 Diagonal pursuant to which a Promissory Note (“December 2022 Diagonal Note”)
dated December 27, 2022, was made to Diagonal in the aggregate principal amount of $64,250 and the Company received net proceeds of $60,000
which was net of fees of $4,250. The December 2022 Diagonal Note bears interest at a rate of 12% per annum (22% upon the occurrence of
an event of a default) and all outstanding principal and accrued and unpaid interest are due on June 27, 2024.
The Company has the right to prepay the November
2022 and December 2022 Diagonal Notes (principal and accrued interest) at any time during the first six months the note is outstanding
at the rate of 115% during the first 30 days after issuance, 120% during the 31st to 60th day after issuance, and
125% during the 61st to the 180th day after issuance. The November 2022 and December 2022 Diagonal Notes may not
be prepaid after the 180th day following the issuance date, unless Diagonal agrees to such repayment and such terms. Diagonal may in its
option, at any time beginning 180 days after the date of the Diagonal Notes, convert the outstanding principal and interest on the November
2022 and December 2022 Diagonal Notes into shares of our common stock at a conversion price per share equal to 65% of the average of the
three lowest closing bid prices of our common stock during the 10 trading days prior to the date of conversion. At no time may the November
2022 and December 2022 Diagonal Notes be converted into shares of our common stock if such conversion would result in Diagonal and its
affiliates owning an aggregate of in excess of 4.99% of the then outstanding shares of our common stock.
The Company has accounted for the November 2022
and December 2022 Diagonal Notes as stock settled debt under ASC 480 and recorded an aggregate debt premium of $90,731 with a charge to
interest expense.
For the years ended December 31, 2022 and 2021,
amortization of debt discounts related to the convertible notes payable amounted to $938,344 and $171,875, respectively, which has been
included in interest expense on the accompanying consolidated statements of operations.
On December 31, 2022 and 2021, accrued interest
payable under the convertible notes discussed above amounted to $83,138 and $7,052, respectively, and is included in accrued expenses
on the accompanying consolidated balance sheets.
On December 31, 2022 and 2021, convertible notes
payable consisted of the following:
December 31, 2022
December 31, 2021
Convertible notes payable
$
1,199,750
$
825,000
Add: put premium
90,731
-
Less: unamortized debt discount
(7,968
)
(653,125
)
Convertible note payable, net
1,282,513
171,875
Less: current portion of convertible note payable
(1,031,250
)
(171,875
)
Convertible note payable – long-term
$
251,263
$
-
F-20
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
NOTE 9 – NOTES PAYABLE
On December 31, 2022 and 2021, notes payable consisted
of the following:
December 31, 2022
December 31, 2021
Notes payable
$
1,899,380
$
978,925
Note payable – PPP note
18,823
48,929
Total notes payable
1,918,203
1,027,854
Less: unamortized debt discount
(132,961
)
-
Note payable, net
1,785,242
1,027,854
Less: current portion of notes payable, net of discount
(1,576,438
)
(488,414
)
Notes payable – long-term
$
208,804
$
539,440
Notes Payable
BOCO Investment Note
On November 14, 2018, the Company entered into
a Revolving Credit Facility Loan and Security Agreement (“Loan Agreement”) and a Secured Promissory Note (the “Note”)
with BOCO Investments, LLC (the “Lender”). Subject to and in accordance with the terms and conditions of the Loan Agreement
and the Note, the Lender agreed to lend to the Company up to $400,000 (the “Maximum Loan Amount”) against the issuance and
delivery by the Company of the Note for use as working capital and to assist in inventory acquisition. In 2018, the Lender loaned $400,000
to the Company, the Maximum Loan Amount. The Company should have repaid all principal, interest and other amounts outstanding on or before
November 14, 2020. The Company’s obligations under the Loan Agreement and the Note are secured by a first-priority security interest
in substantially all the Company’s assets (the “Collateral”). The outstanding principal advanced to Company pursuant
to the Loan Agreement initially bore interest at the rate of 12% per annum, compounded annually. Upon the occurrence of an Event of Default
under the Loan Agreement and Note, all amounts then outstanding (including principal and interest) shall bear interest at the rate of
18% per annum, compounded annually until the Event of Default is cured. Additionally, at or prior to December 31, 2018, the Company should
have achieved an accounts receivable balance plus inventory equal to the unpaid principal balance of the Note (the “Minimum Asset
Amount”).
In the event that the Company’s accounts
receivable balance plus inventory balance is less than paid principal balance of the Note as of December 31, 2018, the Company
shall have 45 days (through and until February 15, 2019) to cure such violation and an establish accounts receivable plus inventory equal
to the unpaid principal balance of the Note. Commencing March 31, 2019 and at all times thereafter through the remainder of the commitment
period and for so long thereafter as there is any amount still due and owing under the Note, the Company must maintain an accounts receivable
balances plus inventory such that the outstanding principal borrowed by Company under the Loan Agreement and Note is less than or equal
to eighty five percent (85%) of accounts receivable plus fifty percent (50%) of inventory, all as measured at the same point in time.
Commencing on January 10, 2019 and on or before
the 10th day of each month thereafter, the Company should have paid Lender all interest accrued on outstanding principal under
the Loan Agreement and Notes as of the end of the month then concluded. Upon the occurrence of any Event of Default and at any time thereafter,
Lender may, at its option, declare any and all obligations immediately due and payable without demand or notice. As of December 31, 2022
and 2021, the Company did not meet the Minimum Asset Amount covenant as defined in the Loan Agreement, failed to timely pay interest payments
due, and has violated other default provisions. The note balance due of $400,000 has been reflected as a current liability on the accompanying
consolidated balance sheets and interest shall accrue at 18% per annum. The Loan Agreement and Note contain customary representations,
warranties, and covenants, including certain restrictions on the Company’s ability to incur additional debt or create liens on its
property. The Loan Agreement and the Note also provide for certain events of default, including, among other things, payment defaults,
breaches of representations and warranties, breach of covenants, and bankruptcy or insolvency proceedings, the occurrence of which, after
any applicable cure period, would permit Lender, among other things, to accelerate payment of all amounts outstanding under the Loan Agreement
and the Note, as applicable, and to exercise its remedies with respect to the Collateral, including the sale of the Collateral. On December
31, 2022 and 2021, principal amount due under this Note amounted to $400,000 and is considered to be in default. On December 31, 2022
and 2021, accrued interest payable under this Note amounted to $292,241 and $220,241, respectively, and is included in accrued expenses
on the accompanying consolidated balance sheets.
F-21
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
Mercer Street Global Opportunity Fund Notes
On March 14, 2022, the Company entered into an
Original Issue Discount Promissory Note and Security Agreement (the “March 2022 Note”) in the principal amount of $197,500
with Mercer Street Global Opportunity Fund, LLC (the “Investor”). The March 2022 Note was funded on March 14, 2022 and the
Company received net proceeds of $175,000 which is net of an original issue discount and investor legal fees of $22,500. The original
issue discount was recorded as a debt discount to be amortized over the life of the March 2022 note. The March 2022 Note matures 12 months
after issuance and bears interest at a rate of 3% per annum. At any time, the Company may prepay all or any portion of the principal amount
of the March 2022 Note and any accrued and unpaid interest without penalty. The March 2022 Note also creates a lien on and grants a priority
security interest in all the Company’s assets. In connection with the March 2022 Note, the Company issued 823,529 shares of its
common stock to the placement agent as fee for the capital raise. The 823,529 shares of common stock issued were recorded as a debt discount
of $12,963 based on the relative fair value method to be amortized over the life of the March 2022 Note. For the year ended December 31,
2022, amortization of debt discount related to the March 2022 Note amounted to $28,075 which has been included in interest expense on
the accompanying consolidated statements of operations. On December 31, 2022, the principal balance due on the March 2022 Note amounted
to $197,500 and accrued interest payable amounted to $4,756.
On November 22, 2022, the Company entered into
a Promissory Note and Security Agreement (the “November 2022 Note”) in the principal amount of $65,000 with Mercer Street
Global Opportunity Fund, LLC (the “Investor”). The November 2022 Note was funded on November 22, 2022 and the Company received
net proceeds of $62,500 which is net of investor legal fees of $2,500. The legal fees were recorded as a debt discount to be amortized
over the life of the November 2022 note. The November 2022 Note matures on August 22, 2023 and bears interest at a rate of 8% per annum.
At any time, the Company may prepay all or any portion of the principal amount of the November 2022 Note and any accrued and unpaid interest
without penalty. The November 2022 Note also creates a lien on and grants a priority security interest in all the Company’s assets.
For the year ended December 31, 2022, amortization of debt discount related to the November 2022 Note amounted to $347 which has been
included in interest expense on the accompanying consolidated statements of operations. On December 31, 2022, the principal balance due
on the November 2022 Note amounted to $65,000 and accrued interest payable amounted to $214.
GS Capital Debt
On June 23, 2022, the Company entered into entered
into a Securities Purchase Agreement (“Agreement”) with GS Capital Partners, LLC (“GS Capital”), pursuant to which
a Promissory Note (the “GS Capital June 2022 Note”) was made to GS Capital in the aggregate principal amount of $195,000.
The GS Capital June 2022 Note was purchased for $176,000, reflecting an original issuance discount of $19,000, and was funded on June
24, 2022 (less legal and other administrative fees). The Company received net proceeds of $148,420. The Company further issued GS Capital
a total of 1,750,000 commitment shares (“Commitment Shares”) as additional consideration for the purchase of the Note (See
Note 9). Additionally, the GS Capital Note is convertible upon an event of default into common shares at an initial effective conversion
price which was lower than the fair value of common shares based on the quoted closing price of the Company’s common stock on the
measurement date. Principal and interest payments shall be made in 10 installments of $21,060 each beginning on the 90th-day anniversary
following the issue date and continuing thereafter each 30 days for nine months. The GS Capital Note matures 12 months after issuance
and bears interest at a rate of 8% per annum. GS Capital shall have the right at any time following an Event of Default to convert all
or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under this Note at a conversion price
of $0.011, subject to adjustment as defined in the GS Capital Note. The Company did not calculate a beneficial conversion feature since
the GS Capital Note is contingently convertible upon default on the GS Capital Note. As of December 31, 2022, the Company is not in default
on this note. In the event that following the Issue Date the closing trading price of the Company’s common stock is then being traded
is below $0.011 per share for more than ten consecutive trading days, then the conversion price shall be equal to $0.004
per share. The GS Capital Note contains conversion limitations providing that a holder thereof may not convert the Note to the extent
(but only to the extent) that, if after giving effect to such conversion, the holder or any of its affiliates would beneficially own in
excess of 4.99% of the outstanding shares of the Company’s common stock immediately after giving effect to such conversion or exercise.
A holder may increase or decrease its beneficial ownership limitation upon notice to the Company provided that in no event such limitation
exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice. Events of default include, amongst other
items, failure to pay principal or interest, bankruptcy, delisting of the Company’s stock, financial statement restatements, or
if the Company effectuates a reverse split. Upon the occurrence of any event of default, the GS Capital Note shall become immediately
and automatically due and payable and the Company shall pay to GS Capital, in full satisfaction of its obligations hereunder, an amount
equal to: (a) the then outstanding principal amount of this note plus (b) accrued and unpaid interest on the unpaid principal amount
of this note to the date of payment (the “mandatory prepayment date”) plus (y) default interest, if any, multiplied
by 120%. On December 15, 2022, the Company and GS Capital entered into a letter agreement to extend the due date of the GS Capital June
2022 note by 60 days. Specifically, the maturity date of the GS Capital June 2022 note was extended to August 23, 2023 and the next payment
due date was extended to February 28, 2023. Through December 31, 2022, the Company paid $53,512 of principal balance. On December 31,
2022, the principal balance due on the GS Capital Note amounted to $141,488 and accrued interest payable amounted to $7,471.
F-22
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
On July 26, 2022, the Company closed a Securities
Purchase Agreement (“July 2022 Agreement”) with GS Capital, pursuant to which a Promissory Note (“GS Capital July 2022
Note”) was made to GS Capital in the aggregate principal amount of $195,000. The GS Capital July 2022 Note was purchased for $176,000,
reflecting an original issuance discount of $19,000, and was funded on July 28, 2022 (less legal and other administrative fees). The Company
received net proceeds of $158,920. The Company further issued GS Capital a total of 2,600,000 commitment shares (“July 2022 Commitment
Shares”) as additional consideration for the purchase of the July 2022 Note. In addition, the Company issued 998,008 of its common
stock to the placement agent as fee for the capital raise, respectively. The July Commitment Shares and the placement agent shares were
recorded as a debt discount of $34,606 based on the relative fair value method to be amortized over the life of the Note. Additionally,
the GS Capital July 2022 Note is convertible upon an event of default into common shares at an initial effective conversion price which
was lower than the fair value of common shares based on the quoted closing price of the Company’s common stock on the measurement
date. Principal and interest payments shall be made in 10 installments of $21,060 each beginning on the 90th-day anniversary following
the issue date and continuing thereafter each 30 days for nine months. The GS Capital July 2022 Note matures 12 months after issuance
and bears interest at a rate of 8% per annum. GS Capital shall have the right at any time following an Event of Default to convert all
or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under the GS Capital July 2022 Note at
a conversion price of $0.011, subject to adjustment as defined in the Note. The Company did not calculate a beneficial conversion feature
since the GS Capital July 2022 Note is contingently convertible upon a default on the July 2022 Note. As of December 31, 2022, the Company
is not in default on this note.In the event that following the Issue Date the closing trading price of the Company’s common stock
is then being traded is below $0.011 per share for more than ten consecutive trading days, then the conversion price shall
be equal to $0.004 per share. The July 2022 Note contains conversion limitations providing that a holder thereof may not convert the Note
to the extent (but only to the extent) that, if after giving effect to such conversion, the holder or any of its affiliates would beneficially
own in excess of 4.99% of the outstanding shares of the Company’s common stock immediately after giving effect to such conversion
or exercise. A holder may increase or decrease its beneficial ownership limitation upon notice to the Company provided that in no event
such limitation exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice. On December 15, 2022,
the Company and GS Capital entered into a letter agreement to extend the due date of the GS Capital July 2022 note by 60 days. Specifically,
the maturity date of the GS Capital July 2022 note was extended to September 26, 2023 and the next payment due date was extended to February
28, 2023. Through December 31, 2022, the Company paid $34,120 of principal balance. On December 31, 2022, the principal balance due on
the GS Capital July 2022 Note amounted to $160,880 and accrued interest payable amounted to $6,441.
On September 6, 2022, the Company closed a Securities
Purchase Agreement (“September 2022 Agreement”) with GS Capital, pursuant to which a Promissory Note (“September 2022
Note”) was made to GS Capital in the aggregate principal amount of $195,000. The September 2022 Note was purchased for $176,000,
reflecting an original issuance discount of $19,000, and was funded on September 6, 2022 (less legal and other administrative fees). The
Company received net proceeds of $158,920. The Company further issued GS Capital a total of 3,300,000 commitment shares (“September
2022 Commitment Shares”) as additional consideration for the purchase of the September 2022 Note. In addition, the Company issued
773,626 of its common stock to the placement agent as fee for the capital raise, respectively. The September Commitment Shares and the
placement agent shares were recorded as a debt discount of $30,326 based on the relative fair value method to be amortized over the life
of the Note. Additionally, the September 2022 Note is convertible into common shares upon an event of default at an initial effective
conversion price which was lower than the fair value of common shares based on the quoted closing price of the Company’s common
stock on the measurement date. Principal and interest payments shall be made in 9 installments of $23,400 each beginning on the 120th-day
anniversary following the issue date and continuing thereafter each 30 days for eight months. The September 2022 Note matures 12 months
after issuance and bears interest at a rate of 8% per annum. GS Capital shall have the right at any time following an Event of Default
to convert all or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under the September 2022
Note at a conversion price of $0.009, subject to adjustment as defined in the Note. The Company did not calculate a beneficial conversion
feature since the GS Capital July 2022 Note is contingently convertible upon a default on the September 2022 Note. As of December 31,
2022, the Company is not in default on this note. In the event that following the Issue Date the closing trading price of the Company’s
common stock is then being traded is below $0.009 per share for more than ten consecutive trading days, then the conversion
price shall be equal to $0.0032 per share. The September 2022 Note contains conversion limitations providing that a holder thereof may
not convert the Note to the extent (but only to the extent) that, if after giving effect to such conversion, the holder or any of its
affiliates would beneficially own in excess of 4.99% of the outstanding shares of the Company’s common stock immediately after giving
effect to such conversion or exercise. A holder may increase or decrease its beneficial ownership limitation upon notice to the Company
provided that in no event such limitation exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice.
On December 15, 2022, the Company and GS Capital entered into a letter agreement to extend the due date of the GS Capital September 2022
note by 60 days. Specifically, the maturity date of the GS Capital September 2022 note was extended to November 6, 2023 and the next payment
due date was extended to March 6, 2023. On December 31, 2022, the principal balance due on the GS Capital September 2022 Note amounted
to $195,000 and accrued interest payable amounted to $5,001.
F-23
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
In connection with the Letter Agreement dated
December 15, 2022, in order to induce GS Capital to extend the due dates of the GS Capital Notes, the Company issued 15,000,000 shares
of the Company’s common stock. These shares were valued at $112,500, or $0.0075 per common share, based on the quoted closing price
of the Company’s common stock on the measurement date. In connection with the issuance of these shares, during the year ended December
31, 2022, the Company recorded an inducement expense of $112,500 which was included in loss on debt extinguishment on the accompanying
consolidated statement of operations.
Other Notes Payable
On May 10, 2021, the Company entered into a Loan
and Security Agreement (the “Loan Agreement”) and a Secured Promissory Note (the “Promissory Note”) in the amount
of $500,000 with a lender. The Promissory Note shall accrue interest at 8% per annum, compounded annually, and all outstanding principal
and accrued interest is due and payable of May 10, 2023. The Company’s obligations under the Loan Agreement and the Promissory Note
are secured by a second priority security interest in substantially all of the Company’s assets (the “Collateral”).
The Loan Agreement and Promissory Note contain customary representations, warranties, and covenants, including certain restrictions on
the Company’s ability to incur additional debt or create liens on its property. The Loan Agreement and the Promissory Note also
provide for certain events of default, including, among other things, payment defaults, breaches of representations and warranties and
bankruptcy or insolvency proceedings, the occurrence of which, after any applicable cure period, would permit Lender, among other things,
to accelerate payment of all amounts outstanding under the Loan Agreement and the Promissory Note, as applicable, and to exercise its
remedies with respect to the Collateral. Upon the occurrence of an Event of Default under the Loan Agreement and Promissory Note, all
amounts then outstanding (including principal and interest) shall bear interest at the rate of 18% per annum, compounded annually until
the Event of Default is cured. On December 31, 2022 and 2021, accrued interest payable under this Promissory Note amounted to $65,863
and $25,863, respectively, and is included in accrued expenses on the accompanying consolidated balance sheets. On December 31, 2022 and
2021, principal amount due under this Promissory Note amounted to $500,000.
On July 22, 2021, in connection with the acquisition
of Mobile Tint, the Company assumed vehicle and equipment loans in the amount of $95,013. These loans bear interest at rates ranging from
6.79% to 8.24% and are payable monthly through April 2025. On December 31, 2022 and 2021, notes payable related to these vehicle and equipment
loans amounted to $39,513 and $78,925, respectively.
On November 8, 2022, the Company entered into
a Promissory Note (the “November 2022 Note”) with a lender investor (the “Private Investor”) in the principal
amount of $200,000 and received net proceeds of $200,000. The November 2022 Note bears interest at a rate of 8% per annum and all outstanding
principal and accrued and unpaid interest is due on November 8, 2024. At any time, the Company may prepay all or any portion of the principal
amount of the November 2022 Note and any accrued and unpaid interest without penalty. As security for payment of the principal and interest
on the November 2022 Note, the Company and the lender Investor previously entered into that certain Loan and Security Agreement dated
May 10, 2021, which is incorporated into the November 2022 Note. On December 31, 2022, accrued interest payable under this Promissory
Note amounted to $2,367, and is included in accrued expenses on the accompanying consolidated balance sheets. On December 31, 2022, principal
amount due under this Promissory Note amounted to $200,000.
For the years ended December 31, 2022 and 2021,
amortization of debt discounts related to notes payable amounted to $121,408 and $0, respectively, which has been included in interest
expense on the accompanying consolidated statements of operations.
PPP Loan
On April 28, 2020, the Company entered into a
Paycheck Protection Program Promissory Note (the “PPP Note”) with respect to a loan of $156,200 (the “PPP Loan”)
from Comerica Bank. The PPP Loan was obtained pursuant to the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid,
Relief, and Economic Security Act (the “CARES act”) administered by the U.S. Small Business Administration (“SBA”).
The PPP Loan matures on April 28, 2022 and bears interest at a rate of 1.00% per annum. The PPP Loan is payable in 18 equal monthly payments
of approximately $8,900 commencing November 1, 2020. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties.
The Company may apply to have the loan forgiven pursuant to the terms of the PPP if certain criteria are met. The Company applied for
forgiveness of its PPP Loan, and on November 4, 2021, the Company was notified that the Small Business Administration forgave $95,000
of the principal loan amount and $1,442 of interest. As of November 4, 2021, the remaining principal balance of the loan was $61,200 and
the remaining accrued interest balance was $935. During the year ended December 31, 2022, the Company repaid PPP Loan principal of $30,107.
On December 31, 2022 and 2021, the principal amount due under the PPP Loan amounted to $18,823 and $48,929, respectively. As of December
31, 2022 and 2021, accrued interest payable amounted to $170 and $1,031, respectively.
On December 31, 2022, future annual maturities
of notes payable are as follows:
December 31,
Amount
2023
$
1,709,400
2024
206,457
2025
2,346
Total notes payable on December 31, 2022
$
1,918,203
F-24
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
NOTE 10 – SHAREHOLDERS’ DEFICIT
Preferred Stock
Series B Preferred Stock
On December 12, 2019, the Company filed an Amendment
to its Articles of Incorporation to designate a series of preferred stock, the Series B Convertible Preferred Stock (the “Series
B”), with the Secretary of State of the State of Colorado. The Certificate of Designations established 100,000 shares of the Series
B, par value $0.10, having such designations, preferences, and rights as determined by the Company’s Board of Directors in its sole
discretion, in accordance with the Company’s Articles of Incorporation and Amended and Restated Bylaws. The Certificate of Designations
became effective with the State of Colorado upon filing.
The Series B ranks senior with respect to dividends
and right of liquidation with the Company’s common stock and junior to all existing and future indebtedness of the Company. The
Series B has a stated value per share of $1,000, subject to adjustment as provided in the Certificate of Designations (the “Stated
Value”), and a dividend rate of 2% per annum of the Stated Value.
The Series B is subject to redemption (at Stated
Value, plus any accrued, but unpaid dividends (the “Liquidation Value”) by the Company no later than three years after a Deemed
Liquidation Event and at the Company’s option after one year from the issuance date of the Series B, subject to a ten-day notice
(to allow holder conversion). A “Deemed Liquidation Event” will mean: (a) a merger or consolidation in which the Company is
a constituent party or a subsidiary of the Company is a constituent party and the Company issues shares of its capital stock pursuant
to such merger or consolidation, except any such merger or consolidation involving the Company or a subsidiary in which the shares of
capital stock of the Company outstanding immediately prior to such merger or consolidation continue to represent, or are converted into
or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting
power, of the capital stock of the surviving or resulting corporation or, if the surviving or resulting corporation is a wholly-owned
subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting
corporation; or (b) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions,
by the Company or any subsidiary of the Company of all or substantially all the assets of the Company and its subsidiaries taken as a
whole, or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Company if substantially all of
the assets of the Company and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease,
transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Company.
The Series B is convertible into common stock
at the option of a holder or if the closing price of the common stock exceeds 400% of the Conversion Price for a period of twenty consecutive
trading days, at the option of the Company. Conversion Price means a price per share of the common stock equal to 100% of the lowest daily
volume weighted average price of the common stock during the two years preceding or subsequent two years following the Issuance Date,
subject to adjustment as otherwise provided in the Certificate of Designations (the “Conversion Price”).
In the event of a conversion of any Series B,
the Company shall issue to the holder a number of shares of common stock equal to the sum of the Stated Value plus accrued but unpaid
dividends multiplied by the number of shares of Series B Preferred Stock being converted divided by the Conversion Price.
Upon liquidation of the Company after payment
or provision for payment of liabilities of the Company and after payment or provision for any liquidation preference payable to the holders
of any preferred stock ranking senior to the Series B but prior to any distribution to the holders of Common Stock or preferred stock
ranking junior upon liquidation to the Series B, the holders of Series B will be entitled to be paid out of the assets of the Company
available for distribution to its stockholders an amount with respect to each share of Series B equal to the Liquidation Value.
F-25
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
The Series B has voting rights per Series B Share
equal to the Liquidation Value per share, divided by the Conversion Price, multiplied by fifty (50). Subject to applicable Colorado law,
the holders of Series B will have functional voting control in situations requiring shareholder vote.
These Series B preferred share issuances with
redemption provisions that permit the issuer to settle in either cash or common stock, at the option of the issuer, were evaluated to
determine whether temporary or permanent equity classification on the consolidated balance sheet was appropriate. As per the terms of
the Series B preferred stock agreements, Series B preferred stock is redeemable for cash and other assets on the occurrence of a deemed
liquidation event. A deemed liquidation event includes a change of control which is not in the Company’s control. As such, since
Series B preferred stock is redeemable upon the occurrence of an event that is not within the Company’s control, the Series B preferred
stock is classified as temporary equity.
The Company concluded that the Series B Preferred
Stock represented an equity host and, therefore, the redemption feature of the Series B Preferred Stock was not considered to be clearly
and closely related to the associated equity host instrument. However, the redemption features did not meet the net settlement criteria
of a derivative and, therefore, were not considered embedded derivatives that required bifurcation. The Company also concluded that the
conversion rights under the Series B Preferred Stock were clearly and closely related to the equity host instrument. Accordingly, the
conversion rights feature on the Series B Preferred Stock were not considered an embedded derivative that required bifurcation. The conversion
feature of the Series B Preferred Stock at the time of issuance was determined to be beneficial on the commitment date.
On December 12, 2019, the Board of Directors of
the Company agreed to satisfy $108,000 of accrued compensation owed to its directors and executive officers (collectively, the “Management”)
through a Liability Reduction Plan (the “Plan”). Under this Plan, Management agreed to accept 108 shares of the Company’s
Series B convertible preferred stock in settlement of accrued compensation. On December 21, 2020, the Board of Directors of the
Company agreed to satisfy $318,970 of accrued compensation owed to its directors and executive officers (collectively, the “Management”)
through a Liability Reduction Plan (the “Plan”). Under this Plan, Management agreed to accept 319 shares of the Company’s
Series B convertible preferred stock in settlement of accrued compensation.
On January 18, 2021, the Board of Directors of
the Company agreed to satisfy $295,000 of accrued compensation owed to its executive officers and former executive officer (collectively,
the “Management”) through a Liability Reduction Plan (the “Plan”). Under this Plan, Management agreed to accept
295 shares of the Company’s Series B convertible preferred stock in settlement of accrued compensation. The conversion feature of
the Series B Preferred Stock at the time of issuance was determined to be beneficial on the commitment date. Because the Series B Preferred
Stock was perpetual with no stated maturity date, and the conversions could occur any time from the date of issuance, the Company immediately
recorded non-cash stock-based compensation of $3,778,810 related to the beneficial conversion feature arising from the issuance of Series
B Preferred Stock.
On January 6, 2022, the Board of Directors of
the Company agreed to satisfy $278,654 of accrued compensation owed to its executive officers (collectively, the “Management”)
as of December 31, 2021 and included in accrued compensation on the accompanying consolidated balance sheet. Management agreed to accept
278 shares of the Company’s Series B convertible preferred stock in settlement of this accrued compensation. The conversion feature
of the Series B Preferred Stock at the time of issuance was determined to be beneficial on the commitment date. Because the Series B Preferred
Stock was perpetual with no stated maturity date, and the conversions could occur any time from the date of issuance, the Company immediately
recorded non-cash stock-based compensation of $957,556 related to the beneficial conversion feature arising from the issuance of Series
B Preferred Stock.
158 Series B Preferred Stock vested on May 1,
2021 and 842 shall vest of May 1, 2023. By mutual agreement between the parties, the vesting date of previously granted Series B Preferred
stock was extended through May 2023.
During the years ended December 31, 2022 and 2021,
the Company accrued dividends of $19,936 and $14,165, respectively, which was included in Series B convertible preferred stock on the
accompanying consolidated balance sheets.
As of December 31, 2022, the net Series B Preferred
Stock balance was $1,037,201, which includes stated value of $1,000,624 and accrued dividends payable of $36,577. As of December 31, 2021,
the net Series B Preferred Stock balance was $738,611, which includes stated value of $721,970 and accrued dividends payable of $16,641.
The net Series B Preferred Stock balance is included on the accompanying consolidated balance sheets.
F-26
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
Series C Preferred Stock
On August 20, 2020, the Company filed an Amendment
to its Articles of Incorporation to designate a series of preferred stock, the Series C Convertible Preferred Stock (the “Series
C”), with the Secretary of State of the State of Colorado. The Certificate of Designations established 100,000 shares of the Series
C, par value $0.10, having such designations, preferences, and rights as determined by the Company’s Board of Directors in its sole
discretion, in accordance with the Company’s Articles of Incorporation and Amended and Restated Bylaws. The Certificate of Designations
became effective with the State of Colorado upon filing.
The Series C ranks senior with respect to dividends
and right of liquidation with the Company’s common stock and junior to all existing and future indebtedness of the Company. The
Series C has a stated value per share of $100, subject to adjustment as provided in the Certificate of Designations (the “Stated
Value”), and a dividend rate of 2% per annum of the Stated Value.
The Company has no option to redeem the Series
C Preferred Stock. If the Company determines to liquidate, dissolve or wind-up its business and affairs, or effect any Deemed Liquidation
Event as defined below, each of which has been approved by the holders of a majority of the shares of Series C Preferred Stock then outstanding,
the Company will redeem all of the shares of Series C Preferred Stock outstanding immediately prior to such mandatory redemption event
at a price per share of Series C Preferred Stock equal to the aggregate Series C Liquidation Value, which is 150% of the sum of the Stated
Value plus accrued and unpaid dividends, for the shares of Series C Preferred Stock being redeemed.
The Company will deliver ten-day advance written
notice prior to the consummation of any mandatory redemption event via email or overnight courier (“Notice of Mandatory Redemption”)
to each Holder whose shares are to be redeemed. The Series C is subject to redemption at liquidation Value noted above by the Company.
Upon receipt by any Holder of a Notice of Mandatory Redemption, if Holder does not choose to convert, such Holder will promptly submit
to the Company such Holder’s Series C Preferred Stock certificates on the Redemption Payment Date. Upon receipt of such Holder’s
Series C Preferred Stock certificates, the Company will pay the applicable redemption price to such Holder in cash. A “Deemed Liquidation
Event” will mean: (a) a merger or consolidation in which the Company is a constituent party or a subsidiary of the Company is a
constituent party and the Company issues shares of its capital stock pursuant to such merger or consolidation, except any such merger
or consolidation involving the Company or a subsidiary in which the shares of capital stock of the Company outstanding immediately prior
to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent,
immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of the surviving or resulting
corporation or, if the surviving or resulting corporation is a wholly-owned subsidiary of another corporation immediately following such
merger or consolidation, the parent corporation of such surviving or resulting corporation; or (b) the sale, lease, transfer, exclusive
license or other disposition, in a single transaction or series of related transactions, by the Company or any subsidiary of the Company
of all or substantially all the assets of the Company and its subsidiaries taken as a whole, or the sale or disposition (whether by merger
or otherwise) of one or more subsidiaries of the Company if substantially all of the assets of the Company and its subsidiaries taken
as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition
is to a wholly owned subsidiary of the Company. Since the Company has determined that a deemed liquidation event is not probable, the
Series C is stated at the Stated Value plus accrued and unpaid dividends rather than redemption value, which is liquidation value.
The Series C is convertible at the option of a
holder at any time following the issuance date. In the event of a conversion of any Series C Preferred Stock, the Company shall issue
to such Holder a number of Conversion Shares equal to (x) the sum of (1) the Stated Value per share of Series C Preferred Stock plus (2)
any accrued but unpaid dividends thereon multiplied by (y) the number of shares of Series C Preferred Stock held by such Holder and subject
to the Holder Conversion Notice, divided by (z) the Conversion Price with respect to such Series C Preferred Stock. Conversion Price means
a price per share of the common stock equal to the lowest daily volume weighted average price of the common stock for any trading day
during the two years preceding the date of delivery of the conversion notice, subject to adjustment as otherwise provided in the Series
C Certificate of Designation.
Upon liquidation of the Company after payment
or provision for payment of liabilities of the Company and after payment or provision for any liquidation preference payable to the holders
of any preferred stock ranking senior to the Series C but prior to any distribution to the holders of Common Stock or preferred stock
ranking junior upon liquidation to the Series C, the holders of Series C will be entitled to be paid out of the assets of the Company
available for distribution to its stockholders an amount with respect to each share of Series C equal to the Liquidation Value.
F-27
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
Through April 28, 2021, each share of Series C
Preferred Stock was entitled to vote on all matters requiring shareholder vote. Each share of Series C Preferred Stock was entitled to
the number of votes per share based on the calculation of the number of conversion shares of Series C Preferred Stock is then convertible.
On April 28, 2021, the Company filed an Amended and Restated Certificate of Designations of Preferences, Rights, and Limitations of Series
C Convertible Preferred Stock (the “Amended Certificate”). The Amended Certificate changed the voting rights of the Series
C Preferred Stock on any matters requiring shareholder approval or any matters on which the common shareholders are permitted to vote.
Series C Preferred Stock shall have no right to vote on any matters requiring shareholder approval or any matters on which the common
shareholders (or other preferred stock of the Company which may vote with the common shareholders) are permitted to vote. With respect
to any voting rights of the Series C Preferred Stock set forth herein, the Series C Preferred Stock shall vote as a class, each share
of Series C Preferred Stock shall have one vote on any such matter, and any such approval may be given via a written consent in lieu of
a meeting of the Holders of the Series C Preferred Stock. Any reference herein to a determination, decision or election being made by
the “Majority Holders” shall mean the determination, decision or election as made by Holders holding a majority of the issued
and outstanding shares of Series C Preferred Stock at such time. It also adjusts the conversion feature of the Series C Preferred Stock
so that any Holder of Series C Preferred Stock cannot convert any portion of the Series C in excess of that number of Series C Preferred
Stock that upon conversion would result in beneficial ownership by the Holder of more than 4.99% of the outstanding shares of common stock
of the Company.
These Series C preferred stock issuances with
redemption provisions that permit the issuer to settle in either cash or common stock, at the option of the holder, were evaluated to
determine whether temporary or permanent equity classification on the consolidated balance sheet was appropriate. As per the terms of
the Series C preferred stock agreements, Series C preferred stock is redeemable for cash and other assets on the occurrence of a deemed
liquidation event. A deemed liquidation event includes a change of control which is not in the Company’s control. As such, since
Series C preferred stock is redeemable upon the occurrence of an event that is not within the Company’s control, the Series C preferred
stock is classified as temporary equity.
The Company concluded that the Series C Preferred
Stock represented an equity host and, therefore, the redemption feature of the Series C Preferred Stock was not considered to be clearly
and closely related to the associated equity host instrument. However, the redemption features did not meet the net settlement criteria
of a derivative and, therefore, were not considered embedded derivatives that required bifurcation. The Company also concluded that the
conversion rights under the Series C Preferred Stock were clearly and closely related to the equity host instrument. Accordingly, the
conversion rights feature on the Series C Preferred Stock were not considered an embedded derivative that required bifurcation. The conversion
feature of the Series C Preferred Stock at the time of issuance was determined to be beneficial on the commitment date.
During August and September 2020, the Company
entered into subscription agreements with an accredited investor whereby the investor agreed to purchase an aggregate of purchase 6,300
shares of the Company’s Series C Convertible Preferred Stock for $630,000, or $100.00 per share (the “Stated Value”),
which were used to pay off various discounted convertible instruments and redeem Series A preferred stock. During the three months
ended December 31, 2020, the Company entered into subscription agreements with an accredited investor whereby the investor agreed to purchase
an aggregate of purchase 7,000 shares of the Company’s Series C Convertible Preferred Stock for $700,000, or $100.00 per share (the
“Stated Value”), which were used from working capital purposes.
On February 24, 2021, the Company entered into
a subscription agreement with an accredited investor whereby the investor agreed to purchase 2,500 shares of the Company’s Series
C Convertible Preferred Stock for $250,000, or $100.00 per share, the stated value, which was used for working capital purposes. The conversion
feature of the Series C Preferred Stock at the time of issuance was determined to be beneficial on the commitment date. Because the Series
C Preferred Stock was perpetual with no stated maturity date, and the conversions could occur any time from the date of issuance, the
Company immediately recorded a non-cash deemed dividend of $2,845,238 related to the beneficial conversion feature arising from the issuance
of Series C Preferred Stock. This non-cash deemed dividend increased the Company’s net loss attributable to common stockholders
and net loss per share.
On August 25, 2021, the Company entered into a
subscription agreement with an accredited investor whereby the investor agreed to purchase 3,000 shares of the Company’s Series
C Convertible Preferred Stock for $300,000, or $100.00 per share, the stated value, which was used for working capital purposes. The conversion
feature of the Series C Preferred Stock at the time of issuance was determined to be beneficial on the commitment date. Because the Series
C Preferred Stock was perpetual with no stated maturity date, and the conversions could occur any time from the date of issuance, the
Company immediately recorded a non-cash deemed dividend of $1,509,523 related to the beneficial conversion feature arising from the issuance
of Series C Preferred Stock. This non-cash deemed dividend increased the Company’s net loss attributable to common stockholders
and net loss per share.
F-28
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
On December 7, 2021, the Company issued 1,500,000
shares of its common stock upon conversion of 120 shares of Series C Preferred Stock with a stated value of $12,000.
On January 12, 2022, the Company issued 1,543,151
shares its common stock upon the conversion of 120 shares of Series C preferred with a stated redemption value of $12,000. The conversion
price was based on contractual terms of the related Series C preferred shares.
On April 20, 2022, the Company issued 13,184,548
shares its common stock upon the conversion of 1,020 shares of Series C preferred with a stated redemption value of $102,000. The conversion
price was based on contractual terms of the related Series C preferred shares.
On December 1, 2022, the Company issued 6,535,274
shares its common stock upon the conversion of 250 shares of Series C preferred with a stated redemption value of $25,000. The conversion
price was based on contractual terms of the related Series C preferred shares.
During the years ended December 31, 2022 and 2021,
the Company accrued dividends of $35,719 and $32,981, respectively, which was included in Series C convertible preferred stock on the
accompanying consolidated balance sheets.
As of December 31, 2022, the net Series C Preferred
Stock balance was $1,803,731, which includes stated value of $1,729,000 and accrued dividends payable of $74,731. As of December 31, 2021,
the net Series C Preferred Stock balance was $1,907,012, which includes stated liquidation value of $1,868,000 and accrued dividends payable
of $39,012. The net Series C Preferred Stock balance is included on the accompanying consolidated balance sheets.
Common Stock
Issuance of Common Stock for Services
Issuance of Common Stock for Professional Fees
2021
On January 6, 2021, the Company issued 100,000
shares of its common stock for business development services rendered. These shares were valued at $10,000, or $0.10 per common share,
based on the quoted closing price of the Company’s common stock on the measurement date. In connection with the issuance of these
shares, during the year ended December 31, 2021, the Company recorded stock-based professional fees of $10,000.
On February 1, 2021, the Company issued an aggregate
of 700,000 shares of its common stock for business development, advisory and consulting services rendered and to be rendered. These shares
were valued at $54,600, or $0.078 per common share, based on the quoted closing price of the Company’s common stock on the measurement
date and will be amortized into stock-based consulting fees over the term of the agreement or vesting period ranging from immediately
to one year. In connection with the issuance of these shares, during the years ended December 31, 2022 and 2021, the Company recorded
stock-based professional fees of $3,250 and $51,350, respectively.
On March 8, 2021, the Company issued an aggregate
of 750,000 shares of its common stock for business development and consulting services rendered and to be rendered. These shares were
valued at $49,500, or $0.066 per common share, based on the quoted closing price of the Company’s common stock on the measurement
date, and will be amortized into stock-based consulting fees over the term of the agreement or vesting period. In connection with the
issuance of these shares, during the year ended December 31, 2021, the Company recorded stock-based professional fees of $49,500.
On April 7, 2021, the Company issued 2,500,000
shares of its common stock for investor relations services to be rendered. These shares were valued at $135,000, or $0.054 per common
share, based on the quoted closing price of the Company’s common stock on the measurement date. In connection with these shares,
during the year ended December 31, 2021, the Company recorded stock-based professional fees of $135,000.
F-29
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
On June 3, 2021, the Company issued 200,000 shares
of its common stock for technology services rendered. These shares were valued at $6,000, or $0.03 per common share, based on the quoted
closing price of the Company’s common stock on the measurement date. In connection with the issuance of these shares, during the
year ended December 31, 2021, the Company recorded stock-based professional fees of $6,000.
On July 7, 2021, the Company issued 2,500,000
shares of its common stock for investor relations services to be rendered. These shares were valued at $72,500, or $0.029 per common share,
based on the quoted closing price of the Company’s common stock on the measurement date. In connection with these shares, during
the year ended December 31, 2021, the Company recorded stock-based professional fees of $72,500.
On August 23, 2021, the Company issued 500,000
shares of its common stock for business development and consulting services rendered and to be rendered. These shares were valued at $19,000,
or $0.038 per common share, based on the quoted closing price of the Company’s common stock on the measurement date, and will be
amortized into stock-based consulting fees over the term of the agreement or vesting period. In connection with the issuance of these
shares, during the years ended December 31, 2022 and 2021, the Company recorded stock-based professional fees of $12,271 and $6,729, respectively.
On October 1, 2021, the Company issued 6,000,000
shares of its common stock for investor relations services to be rendered. These shares were valued at $207,600, or $0.0346 per common
share, based on the quoted closing price of the Company’s common stock on the measurement date. In connection with these shares,
during the years ended December 31, 2022 and 2021, the Company recorded stock-based professional fees of $103,800 and $103,800, respectively.
2022
On June 7, 2022, the Company issued an aggregate
of 4,000,000 shares of its common stock for business development and consulting services rendered and to be rendered. These shares were
valued at $48,000, or $0.012 per common share, based on the quoted closing price of the Company’s common stock on the measurement
date, and will be amortized into stock-based consulting fees over the term of the agreement. In connection with the issuance of these
shares, during the year ended December 31, 2022, the Company recorded stock-based professional fees of $27,000 and prepaid expenses of
$21,000 which will be amortized into stock-based professional fees over the remaining term of the agreement.
On June 24, 2022, the Company issued an aggregate
of 3,000,000 shares of its common stock for business development and consulting services rendered and to be rendered. These shares were
valued at $54,000, or $0.018 per common share, based on the quoted closing price of the Company’s common stock on the measurement
date, and will be amortized into stock-based consulting fees over the term of the agreement. In connection with the issuance of these
shares, during the year ended December 31, 2022, the Company recorded stock-based professional fees of $54,000.
On July 1, 2022, the Company granted a restricted
stock award of 2,500,000 common shares of the Company to a consultant of the Company for business development and consulting services
rendered, which shares were valued at $31,250, or $0.0125 per common share, based on the quoted closing price of the Company’s common
stock on the measurement date, and will be amortized into stock-based consulting fees over the term of the agreement. In connection with
the issuance of these shares, during the year ended December 31, 2022, the Company recorded stock-based professional fees of $31,250.
On July 15, 2022, the Company granted a restricted
stock award of 5,454,545 common shares of the Company to a consultant of the Company for government relations services to be rendered,
which shares were valued at $60,000, or $0.011 per common share, based on the quoted closing price of the Company’s common stock
on the measurement date, and will be amortized into stock-based consulting fees over the term of the agreement. In connection with the
issuance of these shares, during the year ended December 31, 2022, the Company recorded stock-based professional fees of $55,000 and prepaid
expenses of $5,000 as of December 31, 2022, which will be amortized into stock-based professional fees over the remaining term of the
agreement.
F-30
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
On October 3, 2022, the Company issued 3,000,000
shares of its common stock for investor relations services to be rendered. These shares were valued at $24,000, or $0.008 per common share,
based on the quoted closing price of the Company’s common stock on the measurement date. In connection with the issuance of these
shares, during the year ended December 31, 2022, the Company recorded stock-based professional fees of $12,000 and prepaid expenses of
$12,000 as of December 31, 2022, which will be amortized into stock-based professional fees over the remaining term of the agreement.
During the year ended December 31, 2022, the Company
recorded stock-based professional fees of $119,321 in connection with the amortization of prepaid expenses of $119,321 related to common
shares previously issued. During the year ended December 31, 2021, the Company recorded stock-based professional fees of $43,250 in connection
with the amortization to prepaid expenses of $38,250 and accretion of stock-based professional fees of $5,000 related to common shares
previously issued.
Issuance of Common Stock for Stock-Based Compensation
2021
On February 1, 2021, the Company issued 200,000
shares of its common stock to an individual who agreed to act as the Company’s national sales manager for services to be rendered.
These shares were valued at $15,600, or $0.078 per common share, based on the quoted closing price of the Company’s common stock
on the measurement date. These shares were to vest on May 1, 2022. On May 17, 2021, this individual resigned, and these shares have been
forfeited.
On March 8, 2021, the Company granted restricted
stock awards for an aggregate of 2,500,000 common shares of the Company to an employee and an officer of the Company for services to be
rendered. which were valued at $165,000, or $0.066 per common share, based on the quoted closing price of the Company’s common stock
on the measurement date. These shares were to vest on May 1, 2022. On May 17, 2021, this individual resigned, and these shares have been
forfeited.
On July 22, 2021, pursuant to the Share Exchange
Agreement and Plan of Reorganization (See Note 3), the Company issued 976,500 shares of its common stock to employees of Mobile Tint LLC
as a bonus. These shares were valued at $24,413, or $0.025 per common share, based on the quoted closing price of the Company’s
common stock on the measurement date. In connection with these shares, during the year ended December 31, 2021, the Company recorded stock-based
compensation of $24,413.
On September 17, 2021, the Company granted a restricted
stock award for 1,000,000 common shares of the Company to an employee for services to be rendered through May 1, 2022 which were valued
at $30,600, or $0.031 per common share, based on the quoted closing price of the Company’s common stock on the measurement date.
These shares will vest on May 1, 2022. In connection with these shares, the Company shall record stock-based compensation over the vesting
period.
2022
On March 24, 2022, the Company granted restricted
stock awards of 500,000 vested common shares of the Company to an employee of the Company for services rendered. The awards were valued
at $14,250, or $0.0285 per common share, based on the quoted closing price of the Company’s common stock on the measurement date.
On July 12, 2022, the Company granted a restricted
stock award of 1,000,000 common shares of the Company to an employee of the Company. The shares will vest on May 1, 2023. These shares
were valued on the date of grant at $11,000, or $0.011 per common share based on the quoted closing price of the Company’s common
stock on the measurement date. In connection with these shares, the Company shall record stock-based compensation over the vesting period.
On August 12, 2022, the Company granted a restricted
stock award of 2,000,000 common shares of the Company to a board member of the Company. The shares will vest on May 1, 2023. These shares
were valued on the date of grant at $24,000 or $0.012 per common share based on the quoted closing price of the Company’s common
stock on the measurement date. In connection with these shares, the Company shall record stock-based compensation over the vesting period.
F-31
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
During the years ended December 31, 2022 and 2021,
aggregate accretion of stock-based compensation expense on granted common shares amounted to $82,387 and $267,530, respectively. Total
unrecognized compensation expense related to these unvested common shares on December 31, 2022 amounted to $16,183. By mutual agreement
between the parties, the vesting date of previously granted shares was extended through May 2023.
The following table summarizes activity related
to non-vested shares:
Number of Non-Vested Shares
Weighted Average Grant Date Fair Value
Non-vested, December 31, 2020
23,826,926
$
0.16
Granted
6,194,767
0.06
Forfeited
(700,000
)
(0.07
)
Shares vested
(15,051,573
)
(0.14
)
Non-vested, December 31, 2021
14,270,120
0.14
Granted
3,500,000
0.014
Shares vested
(800,000
)
(0.037
)
Non-vested, December 31, 2022
16,970,120
$
0.119
Issuance of Common Stock for Accrued Compensation
On March 19, 2021, the Company issued 944,767
shares of its common stock pursuant to the terms of a Notice of Separation and General Release Agreement. These shares were valued at
$55,741, or $0.059 per common share, based on the quoted closing price of the Company’s common stock on the measurement date. In
connection with the issuance of these shares, the Company reduced accrued compensation by $40,625 and recorded stock-based compensation
of $15,116.
Issuance of Common Stock Pursuant to Share Exchange Agreement
On July 22, 2021, the Company closed the Exchange
Agreement and acquired 80% of the Mobile Member Units (see Note 3). The Mobile Member Units were exchanged for restricted shares of the
Company’s common stock, in an amount equal to $800,000, divided by the average of the closing prices of the Company’s common
stock during the 30-day period immediately prior to the closing as defined in the Exchange Agreement. In connection with the Exchange
Agreement, the Company issued 28,021,016 shares of its common stock. These shares were valued at $694,921, or $0.0248 based on the quoted
closing price of the Company’s common stock on the measurement date.
Shares Issued for Accounts Payable
On May 4, 2021, the Company issued 3,801,224 common
shares upon conversion of accounts payable of $117,838, or $0.031 per common share, based on the quoted closing price of the Company’s
common stock on the measurement date.
Common Stock Issued in Connection with Convertible
Debt
In connection with the SPA, on October 18, 2021,
the Company issued 668,151 shares of its common stock to the placement agent as fee for the capital raise. The 668,151 shares of common
stock issued were recorded as a debt discount of $14,064 based on the relative fair value method to be amortized over the life of the
Note (See Note 8).
Common Stock Issued in Connection with Notes
Payable
In connection with the March 2022 Note, the Company
issued 823,529 shares of its common stock to the placement agent as fee for the capital raise. The 823,529 shares of common stock issued
were recorded as a debt discount of $12,963 based on the relative fair value method to be amortized over the life of the Note (See Note
9).
In connection with the June 2022 GS Capital Note,
the Company issued 1,750,000 shares of its common stock as a commitment fee. The 1,750,000 shares of common stock issued were recorded
as a debt discount of $32,736 based on the relative fair value method to be amortized over the life of the Note (See Note 9).
F-32
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
In connection with the July 2022 GS Capital Note,
on July 28, 2022, the Company issued 2,600,000 shares of its common stock as a commitment fee and the Company issued 998,008 shares of
its common stock to the placement agent as fee for the capital raises. The aggregate of 3,598,008 shares of common stock issued were recorded
as a debt discount of $34,606 based on the relative fair value method to be amortized over the life of the July 2022 Note (See Note 9).
In connection with the September 2022 GS Capital
Note, on September 6, 2022, the Company issued 3,300,000 shares of its common stock as a commitment fee and the Company issued 773,626
shares of its common stock to the placement agent as fee for the capital raises. The aggregate of 4,073,626 shares of common stock issued
were recorded as a debt discount of $30,326 based on the relative fair value method to be amortized over the life of the September 2022
Note (See Note 9).
In connection with the Letter Agreement dated
December 15, 2022, to GS Capital to extend the due dates of the GS Capital Notes, the Company issued 15,000,000 shares of the Company’s
common stock. These shares were valued at $112,500, or $0.0075 per common share, based on the quoted closing price of the Company’s
common stock on the measurement date. In connection with the issuance of these shares, during the year ended December 31, 2022, the Company
recorded an expense of $112,500 which was included in loss on debt extinguishment on the accompanying consolidated statement of operations.
Common Stock Issued for Conversion of Series
C Preferred Stock
On December 7, 2021, the Company issued 1,500,000
shares its common stock upon the conversion of 120 shares of Series C preferred with a stated redemption value of $12,000. The conversion
price was based on contractual terms of the related Series C preferred shares.
On January 12, 2022, the Company issued 1,543,151
shares its common stock upon the conversion of 120 shares of Series C preferred with a stated redemption value of $12,000. The conversion
price was based on contractual terms of the related Series C preferred shares.
On April 20, 2022, the Company issued 13,184,548
shares its common stock upon the conversion of 1,020 shares of Series C preferred with a stated redemption value of $102,000. The conversion
price was based on contractual terms of the related Series C preferred shares.
On December 1, 2022, the Company issued 6,535,274
shares its common stock upon the conversion of 250 shares of Series C preferred with a stated redemption value of $25,000. The conversion
price was based on contractual terms of the related Series C preferred shares.
Common stock issued for Accounts Payable
On January 6, 2022, the Company issued 90,859
common shares upon conversion of accounts payable of $2,174, or $0.024 per common share, based on the quoted closing price of the Company’s
common stock on the measurement date.
Common Stock Issued Upon Warrant Exercise
On January 7, 2021, the Company issued 1,008,000
shares of its common stock in connection with the cashless exercise of 1,050,000 warrants. The exercise price was based on contractual
terms of the related warrant.
Stock Options
For the years ended December 31, 2022 and 2021,
the Company recorded no compensation expense related to stock options. Total unrecognized compensation expense related to unvested stock
options on December 31, 2022 and 2021 amounted to $0.
Stock option activities for the years ended December
31, 2022 and 2021 are summarized as follows:
Number of Options
Weighted Average Exercise Price
Weighted Average Remaining Contractual Term (Years)
Aggregate Intrinsic Value
Balance Outstanding, December 31, 2020
8,445,698
$
0.40
-
-
Exercised
-
-
-
-
Balance Outstanding, December 31, 2021
8,445,698
0.40
-
-
Exercised
-
-
-
-
Balance Outstanding, December 31, 2022
8,445,698
$
0.40
3.43
$
-
Exercisable, December 31, 2022
8,445,698
$
0.40
3.43
$
-
F-33
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
Warrants
On January 7, 2021, the Company issued 1,008,000
shares of its common stock in connection with the cashless exercise of 1,050,000 warrants. The exercise price was based on contractual
terms of the related warrant.
On October 15, 2021, in connection with a Securities
Purchase Agreements with an accredited investor (See Note 7), the Company issued warrants to purchase an aggregate amount up to 16,500,000
shares of the Company’s common stock (the “Initial Warrants”). The Initial Warrants were exercisable at any time on
or after the date of the issuance and entitled this investor to purchase shares of the Company’s common stock for a period of five
years from the initial date the Initial Warrants become exercisable. Under the terms of the Initial Warrants, the holder was entitled
to exercise the Initial Warrants to purchase up to 16,500,000 shares of the Company’s common stock at an initial exercise price
of $0.05, subject to adjustment as detailed in the Warrants. In connection with the issuance of these warrants, on the initial measurement
date, the relative fair value of the Initial Warrants of $347,142 was recorded as a debt discount and an increase in paid-in capital (See
Note 7). On April 20, 2022, in connection with an Exchange Agreement, the 16,500,000 Initial Warrants were cancelled and a new warrant
to purchase up to 33,000,000 shares of the Company’s common stock at an initial exercise price of $0.025, subject to adjustment
as detailed in the Warrants was issued (See Note 7).
On April 20, 2022, in connection with an Exchange
Agreement (See Note 8), the Company issued warrants to purchase an aggregate amount up to 33,000,000 shares of the Company’s common
stock (the “New Warrants”). The New Warrants are exercisable at any time on or after the date of the issuance and entitled
this investor to purchase shares of the Company’s common stock for a period of five years from the initial date the warrants become
exercisable. Under the terms of the New Warrants, the holder is entitled to exercise the Warrants to purchase up to 33,000,000 shares
of the Company’s common stock at an initial exercise price of $0.025, subject to adjustment as detailed in the New Warrants. In
connection with the issuance of the New Warrants, on the initial measurement date, the relative fair value of the warrants of $325,785
was recorded as a debt discount and an increase in paid-in capital (See Note 8). On June 23, 2022, the Company issued common stock equivalents
with an initial conversion price of $0.011 per share and accordingly, the conversion price and warrant down-round provisions were triggered.
As a result, the conversion price of the New April 2022 Note was reduced to $0.011 per share and the exercise price of the New April 2022
Warrant was lowered to $0.011. As a result of the June 23, 2022 down-round provisions, the Company calculated the difference between the
warrants fair value on June 23, 2022, the date the down-round feature was triggered using the then current exercise price of $0.025 and
the new exercise price of $0.011. On June 23, 2022, the Company recorded a deemed dividend of $3,702 which represents the fair value transferred
to the warrant holders from the down round feature being triggered. Additionally, on September 6, 2022, the Company issued common stock
equivalents with an initial conversion price of $0.009 per share and accordingly, the conversion price and warrant down-round provisions
were triggered. As a result, the conversion price of the New April 2022 Note was reduced to $0.009 per share and the exercise price of
the New April 2022 Warrant was lowered to $0.009. As a result of the September 6, 2022 down-round provisions, the Company calculated the
difference between the warrants fair value on September 6, 2022, the date the down-round feature was triggered using the then current
exercise price of $0.011 and the new exercise price of $0.009. On September 6, 2022, the Company recorded a deemed dividend of $733 which
represents the fair value transferred to the warrant holders from the down round feature being triggered. No additional beneficial conversion
feature amount was recorded based on the September 6, 2022 valuation as the ratcheted beneficial conversion feature value was lower than
the original amount.
Warrant activities for the years ended December
31, 2022 and 2021 are summarized as follows:
Number of Warrants
Weighted Average Exercise Price
Weighted Average Remaining Contractual Term (Years)
Aggregate Intrinsic Value
Balance Outstanding December 31, 2020
2,050,000
$
0.05
3.66
$
137,000
Granted
16,500,000
0.05
-
-
Cancelled
(1,050,000
)
(0.01
)
-
-
Balance Outstanding December 31, 2021
17,500,000
0.05
4.67
-
Granted
33,000,000
0.025
-
-
Cancelled
(16,500,000
)
0.05
-
-
Balance Outstanding December 31, 2022
34,000,000
$
0.011
3.73
$
-
Exercisable, December 31, 2022
34,000,000
$
0.011
3.73
$
-
F-34
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
2018 Long-Term Incentive Plan
On June 7, 2018, a majority of the Company’s
shareholders and its board approved the adoption of a 2018 Long-Term Incentive Plan (the “2018 Plan”). The purpose of the
2018 Plan is to advance the interests of the Company, its affiliates and its stockholders and promote the long-term growth of the Company
by providing employees, non-employee directors and third-party service providers with incentives to maximize stockholder value and to
otherwise contribute to the success of the Company and its affiliates, thereby aligning the interests of such individuals with the interests
of the Company’s stockholders and providing them additional incentives to continue in their employment or affiliation with the Company.
The Plan was adopted on June 7, 2018 and effective on August 2, 2018. Under the 2018 Plan, the Plan Administrator may grant:
●
options to acquire the Company’s common stock, both incentive stock options that are intended to satisfy the requirements of Section 422 of the Internal Revenue Code and nonqualified stock options which are not intended to satisfy such requirements. The exercise price of options granted under our 2018 Plan must at least be equal to the fair market value of the Company’s common stock on the date of grant and the term of an option may not exceed ten years, except that with respect to an incentive stock option granted to any employee who owns more than 10% of the voting power of all classes of the Company’s outstanding stock as of the grant date the term must not exceed five years and the exercise price must equal at least 110% of the fair market value on the grant date.
●
stock appreciation rights, or SARs, which allow the recipient to receive the appreciation in the fair market value of the Company’s common stock between the date of grant and the exercise date. The amount payable under the stock appreciation right may be paid in cash or with shares of the Company’s common stock, or a combination thereof, as determined by the Administrator.
●
restricted stock awards, which are awards of the Company’s shares of common stock that vest in accordance with terms and conditions established by the Administrator.
●
restricted stock units, which are awards that are based on the value of the Company’s common stock and may be paid in cash or in shares of the Company’s common stock.
●
other types of stock-based or stock-related awards not otherwise described by the terms and provision of the 2018 Plan, including the grant or offer for sale of unrestricted shares of the Company’s common stock, and which may involve the transfer of actual shares of the Company’s common stock or payment in cash or otherwise of amounts based on the value of shares of the Company’s common stock and may be designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
●
other cash-based awards to eligible persons in such amounts and upon such terms as the Administrator shall determine.
An award granted under the 2018 Plan must include
a minimum vesting period of at least one year, provided, however, that an award may provide that the award will vest before the completion
of such one-year period upon the death or qualifying disability of the grantee of the award or a change of control of the Company and
awards covering, in the aggregate, 25,000,000 shares of our Common Stock may be issued without any minimum vesting period.
The aggregate number of shares of common stock
and number of shares of the Company’s common stock that may be subject to incentive stock options granted under the 2018 Plan is
50,000,000 shares, of which 11,445,698 shares have been issued or granted under incentive stock options and 29,451,070 shares of restricted
stock have been issued as of December 31, 2022. All shares underlying grants are expected to be issued from the Company’s unissued
authorized shares available.
NOTE 11 – COMMITMENTS AND CONTINGENCIES
Legal Matters
From time to time, the Company may be involved
in litigation related to claims arising out of its operations in the normal course of business. As of December 31, 2022, other than discussed
below, the Company is not involved in any other pending or threatened legal proceedings that it believes could reasonably be expected
to have a material adverse effect on its financial condition, results of operations, or cash flows.
F-35
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
On January 20, 2022, we received an Order Directing
Examination and Designating Officers to Take Testimony (a “Formal Order”) from the SEC. The Formal Order authorizes that an
examination be made to determine whether a stop order should be issued under Section 8(d) of the Securities Act of 1933 with respect to
the Company’s Registration Statement on Form S-1, and any supplements and amendments thereto. The Formal Order indicates that the
Form S-1 may be deficient in that it may contain untrue statements of material fact or omit to state material facts necessary in order
to make the statements made, in light of the circumstances under which they were made, not misleading concerning, among other things,
the Company’s revenue and financial condition. On April 15, 2022, the Company filed an amendment to its Annual Report on Form 10-K
for the fiscal year ended December 31, 2020. The restatement had the cumulative effect of decreasing the Company’s reported revenue
for Fiscal 2020 by $102,569 and decreasing the Company’s bad debt expense for the same period by $102,569. There was no effect on
Company’s reported net loss for Fiscal 2020 or on the financial condition of the Company on December 31, 2020. The Company received
a subpoena from the SEC on April 25, 2022, requesting all documents and communications concerning the review of C-Bond’s revenue
recognition practices for fiscal year 2020. The Company has provided the requested information and its Chief Executive Officer provided
his testimony regarding this Formal Order in October 2022.
On March 8, 2021, a former officer of the Company
resigned. Both parties alleged certain claims against the other, including certain compensation claims. Neither party has filed litigation. The Company intends to vigorously defend itself against any possible claims and assert
any relevant claims against the former executive and believes it will prevail.
In July 2021, a former employee of the Company
filed a small claims case for approximately $16,000 in Harris County, TX, and the Company filed its response in August 2021. There
has been no further communication from the Court, and the Company believes the case has been dismissed but has not received any formal notice of such. The Company intends to vigorously defend itself against the claim made and believes
it will prevail. As of December 31, 2022 and 2021, the Company has accrued compensation of $18,250 to this former employee, which is included
in accrued compensation on the accompanying consolidated balance sheets.
Employment Agreements
On October 18, 2017, the Company entered into
an employment agreement with Mr. Scott Silverman, pursuant to which he serves as the Chief Executive Officer of the Company for an initial
term of three years that extends for successive one-year renewal terms unless either party gives 30-days’ advance notice of non-renewal.
As consideration for these services, the employment agreement provides Mr. Silverman with the following compensation and benefits:
●
An annual base salary of $300,000, with a 10% increase on each anniversary date contingent upon achieving certain performance objectives as set by the Board. Until the Company raises $1,000,000 in debt or equity financing after entering into this agreement, Mr. Silverman will receive ½ of the base salary on a monthly basis with the other ½ being deferred. Upon the financing being raised, Mr. Silverman will receive the deferred portion of his compensation and his base salary will be paid in full moving forward.
●
After the first $500,000 of equity investments is raised by the Company, after entering into this employment agreement, Mr. Silverman will receive a capital raise success bonus of 5% of all equity capital raised from investors/lenders introduced by him to the Company.
●
Annual cash performance bonus opportunity as determined by the Board.
●
An option to acquire 3,000,000 common shares of the Company, with a strike price of $0.31 per unit. These options vested pro rata on a monthly basis for the term of the employment agreement. On each anniversary, Mr. Silverman will be eligible to be granted a minimum of 500,000 stock options of the Company at a strike price of $0.85 per common unit contingent upon the achievement of certain performance objectives.
●
Certain other employee benefits and perquisites, including reimbursement of necessary and reasonable travel and participation in retirement and welfare benefits.
The receipt of $1,240,000 in connection with
the April 25, 2018 financing triggered the right of the employee to receive the deferred salary and the 5% bonus provision disclosed above.
F-36
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
Mr. Silverman’s employment agreement provides
that, in the event that his employment is terminated by the Company without “cause” (as defined in his employment agreement),
or if Mr. Silverman resigned for “good reasons” (as defined in his new employment agreement), subject to a complete release
of claims, he will be entitled to (i) retain all stock options previously granted; and (ii) receive any benefits then owed or accrued
along with one year of base salary and any unreimbursed expenses incurred by him. All amounts shall be paid on the termination date. In
the event that Mr. Silverman’s employment is terminated by the Company for “cause” (as defined in his employment agreement),
or if Mr. Silverman resigned without “good reasons” (as defined in his employment agreement), subject to a complete release
of claims, he will be entitled to receive any unpaid base salary and benefits then owed or accrued and any unreimbursed expenses incurred
by him. Additionally, if a change of control (as defined in his employment agreement) occurs during the term of this agreement, all unvested
stock options will vest in full and if the valuation of the Company in the change of control transaction is greater than $0.85 per common
share, then Mr. Silverman shall be paid a bonus equal to two times his minimum base salary and minimum target bonus. Pursuant to the employment
agreement, Mr. Silverman will be subject to a confidentiality covenant, a two-year post-termination non-competition covenant and a two-year
post-termination non-solicitation covenant. On June 30, 2020, the Company amended the employment agreement of Mr. Silverman to provide
for successive one-year extensions until either the executive or the Board of Directors of the Company gives notice to terminate the employment
agreement per its terms. This employment agreement amendment also includes an allowance of up to $10,000 per year to cover uncovered medical/dental
expenses for Mr. Silverman and his family.
On January 18, 2021, the Company’s board
of directors approved a bonus to officers and an employee of the Company in the aggregate amount of $330,000 which deferred and recorded
as accrued compensation on the bonus approval date.
On July 21, 2021, the Company entered into the
Employment Agreement with Mr. Wanke, the President of Mobile, to serve as the President of C-Bond’s Safety Solutions Group. Under
the three-year Employment Agreement, Mr. Wanke will receive a base salary of $240,000 per year, which may be increased from time to time
with the approval of the board of directors. In addition, Mr. Wanke may receive an annual bonus as determined by the board of directors.
It is understood that although Mr. Wanke’s base salary will be paid by Mobile, 50% of the base salary will be allocated to the expenses
of Mobile, and the other 50% of the base salary will be allocated to the expenses of the Company. The term of this Agreement (the “Initial
Term”) shall begin as of July 21, 2021 (the “Effective Date”) and shall end on the earlier of (i) the third anniversary
of the Effective Date and (ii) the time of the termination of the Executive’s employment in accordance with the Employment Agreement.
This Initial Term and any Renewal Term (as defined below) shall automatically be extended for one or more additional terms of one (1)
year each (each a “Renewal Term” and together with the Initial Term, the “Term”), unless either the Company or
Executive provide notice to the other Party of their desire to not so renew the Initial Term or Renewal Term (as applicable) at least
thirty (30) days prior to the expiration of the then-current Initial Term or Renewal Term, as applicable. All unvested shares of stock
and stock options shall expire upon such termination, if any. The Executive shall be eligible for an annual bonus payment in an amount
to be determined by the Board of Directors of the Company (the “Bonus”). The Bonus shall be determined and payable based on
the achievement of certain performance objectives of the Company as established by the Board and communicated to and agreed to by the
Executive in writing as soon as practicable after commencement of the year in respect of which the Bonus is paid. The Bonus, if earned,
is payable in cash and/or restricted stock at the discretion of the Board. It is understood between the Parties that the target bonus
for each year shall be up to 50% of the Base Salary.
On December 8, 2021, the Company’s board
of directors approved a bonus to certain officers in the aggregate amount of $309,615 which is equal to 50% of their annual compensation.
This bonus will be paid 10% in cash ($30,962) which was paid in December 2021 and 90% in equity amounting $278,653 which as of December
31, 2021 had been accrued and as of December 31, 2021, was included in accrued compensation on the accompanying consolidated balance sheet.
On January 6, 2022, the Board of Directors of the Company agreed to satisfy $278,653 of the bonus owed to its executive officers (collectively,
the “Management”). Management agreed to accept 278 shares of the Company’s Series B convertible preferred stock in settlement
of this accrued compensation.
On December 7, 2022, the Company’s board
of directors approved a bonus to certain officers in the aggregate amount of $160,000. This bonus will be paid 10% in cash ($16,000) which
was paid in December 2022 and 90% in equity amounting to $144,000 which as of December 31, 2022 had been accrued and as of December 31,
2022, was included in accrued compensation on the accompanying consolidated balance sheet. On January 17, 2023, the Board of Directors
of the Company agreed to satisfy $144,000 of the bonus owed to its executive officers (collectively, the “Management”). Management
agreed to accept 144 shares of the Company’s Series B convertible preferred stock in settlement of this accrued compensation (See
Note 18).
F-37
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
Licensing agreement
Pursuant to an agreement dated April 8, 2016,
between the Company and Rice University, Rice University has granted a non-exclusive license to the Company, in nanotube-based surface
treatment for strengthening glass and related materials under Rice’s intellectual property rights, to use, make, distribute, offer
and sell the licensed products specified in the agreement. In consideration for which, the Company had to pay a one-time non-refundable
license fee of $10,000 and royalty payments of 5% of net sales of the licensed products during the term of the agreement and a sell-off
period of 180 days from termination, In addition, the Company is required to pay for the maintenance of the patents, This agreement will
continue until the expiration of the last to expire of the licensed property rights, unless terminated earlier in accordance with the
terms of the agreement. There have been no royalty payments paid or due through December 31, 2022.
Anti-dilution rights related to C-Bond Systems,
LLC
Prior to the Merger, C-Bond Systems, LLC entered
into certain contracts, described below, which provided certain anti-dilution protection to the counterparties to those contracts.
The Company believes that these contracts do not apply to any future issuances of equity by C-Bond Systems, Inc.
In 2013, pursuant to a subscription agreement,
the Company’s subsidiary. C-Bond Systems, LLC issued 2,425,300 common shares. To the extent that during the term of the agreement
C-Bond Systems, LLC issues any “down-round” or subsequent investments based upon an enterprise value of less than $2,000,000
(“Dilutive Transaction”) (other than an issuance pursuant to an option agreement with an employee or otherwise to compensate
an employee, or incident to an acquisition of assets by C-Bond Systems, LLC in which common units were issued to the seller of such assets)
contemporaneously with the Dilutive Transaction, the contract obligated C-Bond Systems, LLC to issue the investor additional common units
in C-Bond Systems, LLC in an amount which would provide them with the ownership percentage interest which they would have held in C-Bond
Systems, LLC represented by the common units purchased by them on this date.
In 2015, pursuant to a subscription agreement,
C-Bond Systems, LLC issued 3,880,480 common shares to an entity at $0.77 per common share. This agreement entitled the subscriber to anti-dilution
protection to the extent that C-Bond Systems, LLC issued any equity in a “down-round” based upon a value of less than $0.77
per common unit of C-Bond Systems, LLC (other than an issuance pursuant to an option agreement with an employee or consultant or otherwise
to compensate an employee or consultant, or incident to an acquisition of assets by C-Bond Systems, LLC in which common units are issued
to the seller of such assets (“Dilutive Transaction”)). Contemporaneously with the Dilutive Transaction, the contract obligated
C-Bond Systems, LLC to issue the Subscriber additional common units in C-Bond Systems, LLC in an amount which would provide the investor
with the ownership percentage interest in C-Bond Systems, LLC on a fully diluted basis which Subscriber held immediately prior to the
Dilutive Transaction.
In 2016, pursuant to a subscription agreement,
C-Bond Systems, LLC issued 1,175,902 common shares to an entity at $0.85 per common share. This agreement entitled this investor to customary
broad-based weighted average anti-dilution protection to the extent that after the date of this subscription agreement C-Bond Systems,
LLC issued any equity in a “down round” based upon a value of less than $0.85 per common share, including the issuance of
options with an exercise price per share of less than $0.85 to compensate employees or consultants (“Dilutive Transaction”),
subject to exclusions for issuances of common shares or options in connection with strategic partnerships, equity kickers to lenders or
vendors, mergers or acquisitions. The agreement obligated C-Bond Systems, LLC to give to this investor written notice (an “Issuance
Notice”) of any proposed issuance by C-Bond Systems, LLC of any C-Bond Systems, LLC common units, or other form of equity interest
(excluding issuances of C-Bond Systems, LLC options or other equity to compensate employees or consultants and the issuance of shares
in connection with strategic partnerships, equity kickers to lenders or vendors, mergers or acquisitions) at least ten business days prior
to the proposed issuance date. This contract entitled the investor to purchase their pro rata portion of such shares or other equity interest
of C-Bond Systems, LLC at the price and on the other terms and conditions specified in the issuance notice.
NOTE 12 – CONCENTRATIONS
Concentrations Of Credit Risk
Financial instruments that potentially subject
the Company to concentrations of credit risk consist primarily of trade accounts receivable and cash deposits. The Company places its
cash in banks at levels that, at times, may exceed federally insured limits. On December 31, 2022, the Company did not have any cash in
excess of FDIC limits of $250,000. The Company has not experienced any losses in such accounts through December 31, 2022.
Geographic Concentrations of Sales
During the years ended December 31, 2022 and 2021,
all sales were in the United States.
F-38
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
Customer Concentrations
For the year ended December 31, 2022, no customer
accounted for over 10% of total sales. For the year ended December 31, 2021, three customers accounted for approximately 44.2% of total
sales (17.4%, 15.3%, and 11.5%, respectively). On December 31, 2022, three customers accounted for 41.1% (10.3%, 19.3% and 11.5%, respectively)
of the total accounts receivable balance. On December 31, 2021, one customer accounted for 21.4% of the total accounts receivable balance.
Vendor concentrations
Generally, the Company purchases substantially
all of its inventory from five suppliers. The loss of these suppliers may have a material adverse effect on the Company’s consolidated
results of operations and financial condition. However, the Company believes that, if necessary, alternate vendors could supply similar
products in adequate quantities to avoid material disruptions to operations.
NOTE 13 – SEGMENT REPORTING
During the year ended December 31, 2022 and from
July 22, 2021 (date of acquisition of Mobile Tint) to December 31, 2021, the Company operated in two reportable business segments - (1)
the manufacture and sale of a windshield strengthening water repellent solution as well as a disinfection product, and the sale of multi-purpose
glass strengthening primer and window film mounting solutions, including ballistic-resistant film systems and a forced entry system (the
“C-Bond Segment”), and (2) the distribution and installation of window film solutions (the “Mobile Tint Segment”).
The Company’s reportable segments were strategic business units that offered different products. They were managed separately based
on the fundamental differences in their operations and locations.
Information with respect to these reportable business
segments for the years ended December 31, 2022 and 2021 was as follows:
For the Year Ended December 31,
2022
2021
Revenues:
C-Bond
$
378,736
$
434,811
Mobile Tint
1,853,910
1,042,017
2,232,646
1,476,828
Depreciation and amortization:
C-Bond
7,109
9,889
Mobile Tint
82,110
36,078
89,219
45,967
Interest expense:
C-Bond
23
1,372
Mobile Tint
20,212
3,354
Other (a)
1,599,854
278,233
1,620,089
282,959
Net (loss):
C-Bond
(1,097,069
)
(2,001,725
)
Mobile Tint
(192,566
)
77,626
Other (a)
(3,866,843
)
(5,204,759
)
$
(5,156,478
)
$
(7,128,858
)
December 31, 2022
December 31, 2021
Identifiable long-lived tangible assets on December 31, 2022 and 2021 by segment:
C-Bond
$
1,684
$
8,794
Mobile Tint
94,622
126,228
$
96,306
$
135,022
(a)
The Company does not allocate any general and administrative or financing expenses of its holding company activities to its reportable segments, because these activities are managed at the corporate level.
F-39
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
NOTE 14 – REVENUE RECOGNITION
In connection with the Company’s C-Bond
segment, the revenue that the Company recognizes arises from purchase requests the Company receives from its customers. The Company’s
performance obligations under purchase orders or by a verbal order correspond to each shipment of product that the Company makes to its
customer under the purchase order or verbal order. As a result, each purchase order or verbal order generally contains more than one performance
obligation based on the number of products ordered, the quantity of product to be shipped and the mode of shipment requested by the customer.
Control of the Company’s products transfers to its customers when the customer is able to direct the use of, and obtain substantially
all of the benefits from, the Company’s products, which generally occurs at the later of when the customer obtains title to the
product or when the customer assumes risk of loss of the product. The transfer of control generally occurs at a point of shipment from
the Company’s warehouse. Once this occurs, the Company has satisfied its performance obligation and the Company recognizes revenue.
In connection with the Company’s C-Bond segment, when the Company receives a purchase order or verbal order from a customer, the
Company is obligated to provide the product during a mutually agreed upon time period. Depending on the terms of the purchase order or
verbal order, either the Company or the customer arranges delivery of the product to the customer’s intended destination. In situations
where the Company has agreed to arrange delivery of the product to the customer’s intended destination and control of the product
transfers upon loading of the Company’s product onto transportation equipment, the Company has elected to account for any freight
income associated with the delivery of these products as freight revenue, since this activity fulfills the Company’s obligation
to transfer the product to the customer.
In connection with the Company’s Mobile
Tint segment, the revenue that the Company recognizes arises from purchase requests the Company receives from its customers. The Company’s
performance obligations under purchase order or a signed proposal correspond to each job for the distribution and installation of window
film solutions. As a result, each purchase order or signed proposal generally may contain more than one performance obligation based on
the specific job. Control of the Company’s products transfers to its customers when the customer is able to direct the use of, and
obtain substantially all of the benefits from, the Company’s products, which generally occurs when the job or a specific portion
of the job is completed. Once this occurs, the Company has satisfied its performance obligation and the Company recognizes revenue.
Revenues from contracts for the distribution and installation of window film solutions are recognized over time on the basis of the Company’s
estimates of the progress towards completion of contracts using various output of input methods including (1) the ratio of number of labor
hours spent compared to the number of estimated labor hours to complete a job, (2) using the milestone method, or (3) using a units completed
method. These methods are used because management considers these methods to be the best available measure of progress on these contracts.
Transaction Price
The Company agrees with its customers on the selling
price of each transaction. This transaction price is generally based on the product, market conditions, including supply and demand balances,
labor costs, and freight. In the Company’s C-Bond contracts with customers, the Company allocates the entire transaction price to
the sale of product to the customer, which is the basis for the determination of the relative standalone selling price allocated to each
performance obligation. Returns of the Company’s product by its customers are permitted only when the product is not to specification
and were not material for the years ended December 31, 2022 and 2021. Any sales tax, value added tax, and other tax the Company collects
concurrently with its revenue-producing activities are excluded from revenue.
Revenue Disaggregation
The Company tracks its revenue by product. The
following table summarizes our revenue by product for the years ended December 31, 2022 and 2021:
For the Years Ended December 31,
2022
2021
C-Bond Secure multi-purpose and BRS ballistic resistant glass protection systems
$
17,311
$
184,424
C-Bond Nanoshield solution sales
345,470
222,999
Disinfection products
10,880
7,306
C-Bond installation and other services
-
12,143
Window tint installation and sales recognized over time
1,853,910
1,042,017
Freight and delivery
5,075
7,939
Total
$
2,232,646
$
1,476,828
F-40
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In October 2019, the Company entered into an 18-month
lease agreement for the lease of office and warehouse space under a non-cancelable operating lease through May 31, 2021. From the lease
commencement date of December 1, 2019 until November 30, 2020, monthly rent shall be $4,444 and from December 1, 2020 to May 31, 2021,
monthly rent shall be $4,577 per month. On May 12, 2021 and effective June 1, 2021, the Company entered into an amendment to the lease
which extended the lease for one year until May 31, 2022 at a monthly base rent of $5,283. On May 4, 2022 and effective June 1, 2022,
the Company entered into an amendment to the lease which extended the lease for three years until May 31, 2025 at a monthly base rent
as follows:
Rental Period
Amount per Month
June 1, 2022 – May 31, 2023
$
5,441
June 1, 2023 – May 31, 2024
$
5,604
June 1, 2024 – May 31, 2025
$
5,772
In connection with the Exchange Agreement discussed
in Note 3, the Company was named as guarantor (“Guarantor”) of a Commercial Lease Agreement dated July 21, 2021, by and between
landlord MDW Management, LLC, a company owned by Mr. Wanke and his wife and tenant Mobile Tint, LLC d/b/a A-1 Glass (the “Lease”).
The term of the Lease is 60 months, at a minimum monthly rent of $5,600 (not including tax), with two five-year options for the tenant
to renew. The Company’s obligation as Guarantor of the Lease will terminate upon the occurrence of earlier of the following: (i)
the date of Guarantor’s acquisition of 100% of the ownership interests of Mobile; (ii) the date that Guarantor beneficially owns
less than an eighty percent (80%) ownership interest in Mobile; or (iii) two (2) years from and after the effective date of the guaranty.
In September 2021, the Company entered into a
48-month lease agreement for the lease of office equipment under a non-cancelable operating lease through September 2025. The monthly
base rent is $365 per month.
In February 2022, the Company entered into a 36-month
lease agreement for the lease of a vehicle under a non-cancelable operating lease through January 2025. The monthly base rent is $788
per month.
In adopting ASC Topic 842, Leases (Topic 842)
on January 1, 2019, the Company had elected the ‘package of practical expedients’, which permitted it not to reassess under
the new standard its prior conclusions about lease identification, lease classification and initial direct costs (see Note 2). In addition,
the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 month or less. Upon signing of new leases for property
and equipment, the Company analyzed the new leases and determined it is required to record a lease liability and a right of use asset
on its consolidated balance sheets, at fair value.
During the years ended December 31, 2022 and 2021,
in connection with its property operating leases, the Company recorded rent expense of $167,875 and $119,192 respectively, which is expensed
during the year and included in general and administrative expenses on the accompanying consolidated statements of operations.
The significant assumption used to determine the
present value of the lease liabilities in February 2022, September 2021 and July 2021 was discount rates ranging from 4% and 12% which
was based on the Company’s estimated average incremental borrowing rate.
On December 31, 2022 and 2021, right-of-use asset
(“ROU”) is summarized as follows:
December 31, 2022
December 31, 2021
Office leases and office equipment right of use assets
$
480,293
$
269,590
Less: accumulated amortization
(104,881
)
(18,418
)
Balance of ROU assets
$
375,412
$
251,172
On December 31, 2022 and 2021, operating lease
liabilities related to the ROU assets are summarized as follows:
December 31, 2022
December 31, 2021
Lease liabilities related to office leases right of use assets
$
376,566
$
251,246
Less: current portion of lease liabilities
(117,671
)
(44,927
)
Lease liabilities – long-term
$
258,895
$
206,319
F-41
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
On December 31, 2022, future minimum base lease
payments due under non-cancelable operating leases are as follows:
Twelve months ended December 31,
Amount
2023
$
147,466
2024
149,460
2025
100,133
2026
39,200
Total minimum non-cancelable operating lease payments
436,259
Less: discount to fair value
(59,693
)
Total lease liability on December 31, 2022
$
376,566
NOTE 16 – RELATED PARTY TRANSACTIONS
Due From Related Party
In December 2021, the Company advanced $3,750
to a company partially owned by officers of the Company. The advance is non-interest bearing, payable on demand, and as of December 31,
2021 is reflected as due from related party on the accompanying consolidated balance sheets. In June 2022, this advance was deemed uncollectible
and the balance was written off to bad debt expense.
Sales and Accounts Receivable – Related
Party
During the year ended December 31, 2021, the Company
recognized sales of $1,200 to a company partially owned by officers of the Company.
Note Payable - Related Party
On May 2, 2022, the Company entered into a Promissory
Note (the “May 2022 Note”) in the principal amount of $250,000 with the Company’s chief executive officer. The May 2022
Note was funded in May 2022 and the Company received net proceeds of $250,000. The May 2022 Note bears interest at a rate of 6% per annum
and all outstanding principal and accrued and unpaid interest is due on May 2, 2024. At any time, the Company may prepay all or any portion
of the principal amount of the May 2022 Note and any accrued and unpaid interest without penalty. For the year ended December 31, 2022,
interest expense – related party amounted to $10,027. On December 31, 2022, principal amount due and accrued interest payable -
related party amounted to $250,000 and $10,027, respectively.
NOTE 17 - INCOME TAXES
The Company accounts for income tax using the
liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined
based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in
effect in the year in which the differences are expected to reverse. The deferred tax assets on December 31, 2022 and 2021 consist only
of net operating loss carryforwards. The net deferred tax asset has been fully offset by a valuation allowance because of the uncertainty
of the attainment of future taxable income.
The items accounting for the difference between income taxes at the
effective statutory rate and the provision for income taxes for the years ended December 31, 2022 and 2021 were as follows:
2022
2021
Income tax benefit at U.S. statutory rate
$
(1,081,240
)
$
(1,497,060
)
Non-deductible expenses
506,677
894,825
Change in valuation allowance
574,563
602,235
Total provision for income tax
$
-
$
-
F-42
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
The Company’s approximate net deferred tax asset as of December
31, 2022 and 2021 was as follows:
Deferred Tax Asset:
December 31, 2022
December 31, 2021
Net operating loss carryforward
$
2,512,665
$
1,938,102
Total deferred tax asset before valuation allowance
2,512,665
1,938,102
Valuation allowance
(2,512,665
)
(1,938,102
)
Net deferred tax asset
$
-
$
-
The net operating loss carryforward was approximately
$11,965,000 on December 31, 2022. The Company provided a valuation allowance equal to the net deferred income tax asset as of December
31, 2022 and 2021 because it was not known whether future taxable income will be sufficient to utilize the loss carryforward. During the
year ended December 31, 2022, the valuation allowance increased by $574,563. Additionally, the future utilization of the net operating
loss carryforward to offset future taxable income is subject to an annual limitation as a result of ownership changes that may occur in
the future. The potential tax benefit arising from the loss carryforward may be carried forward indefinitely subject to usage limitations.
The Company does not have any uncertain tax positions or events leading
to uncertainty in a tax position. The Company’s 2022, 2021 and 2020 Corporate Income Tax Returns are subject to Internal Revenue
Service examination.
NOTE 18 – SUBSEQUENT EVENTS
Issuance Series B Preferred Stock for Accrued Compensation
On January 17, 2023, the Board of Directors of
the Company agreed to satisfy $144,000 of accrued compensation owed to its executive officers (collectively, the “Management”)
which, as of December 31, 2022 was included in accrued compensation on the accompanying consolidated balance sheet. Management agreed
to accept 144 shares of the Company’s Series B convertible preferred stock in settlement of this accrued compensation. The conversion
feature of the Series B Preferred Stock at the time of issuance was determined not to be beneficial on the commitment date and accordingly,
no stock-based compensation or gain or loss was recorded.
Issuance of Common Shares for Accrued Compensation
and Cash
On January 17, 2023, the Company entered into
a Subscription Agreement with its Chairman and Chief Executive Officer, Scott R. Silverman (the “Subscription Agreement”),
whereby Mr. Silverman purchased 54,545,455 shares (the “Subscription Shares”) of the Company’s common stock for $300,000,
or $0.0055 per share, based on the quoted closing price of the Company’s common stock on the measurement date (the “Consideration”).
The Consideration consisted of a cash payment of $275,000 the conversion of $25,000 of accrued compensation owed to Mr. Silverman.
On January 17, 2023, Barry Edelstein, a member
of the Company’s Board of Directors, elected to convert $53,000 of accrued compensation into 9,636,364 shares of unregistered common
stock of the Company. The shares were valued at $53,000, or $0.0055, based on the quoted closing price of the Company’s common stock
on the measurement date.
Common Shares Issued for Professional Services
On February 6, 2023, the Company issued 6,666,667
shares of its common stock for investor relations services to be rendered. These shares were valued at $40,000, or $0.006 per common share,
based on the quoted closing price of the Company’s common stock on the measurement date. In connection with these shares, the Company
recorded stock-based professional fees of $40,000 over the term of the agreement.
F-43
C-BOND SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2022 and 2021
Common Stock Issued for Conversion of Series
C Preferred Stock
On January 3, 2023, the Company issued 6,546,575
shares its common stock upon the conversion of 250 shares of Series C preferred with a stated redemption value of $25,000. The conversion
price was based on contractual terms of the related Series C preferred shares.
On January 13, 2023, the Company issued 5,004,200
shares its common stock upon the conversion of 191 shares of Series C preferred with a stated redemption value of $19,100. The conversion
price was based on contractual terms of the related Series C preferred shares.
On January 26, 2023, the Company issued 5,007,601
shares its common stock upon the conversion of 191 shares of Series C preferred with a stated redemption value of $19,100. The conversion
price was based on contractual terms of the related Series C preferred shares.
On February 1, 2023, the Company issued 5,009,171
shares its common stock upon the conversion of 191 shares of Series C preferred with a stated redemption value of $19,100. The conversion
price was based on contractual terms of the related Series C preferred shares.
On March 7, 2023, the Company issued 5,018,067
shares its common stock upon the conversion of 191 shares of Series C preferred with a stated redemption value of $19,100. The conversion
price was based on contractual terms of the related Series C preferred shares.
Convertible Debt
On March 17, 2023, the Company closed a Securities
Purchase Agreement dated November 4, 2022, with Diagonal pursuant to which a Promissory Note (the “March 2023 Diagonal Note”)
dated March 17, 2023, was made to Diagonal in the aggregate principal amount of $54,250 and the Company received net proceeds of $50,000
which was net of fees of $4,250. The March 2023 Diagonal Note bears interest at a rate of 12% per annum (22% upon the occurrence of an
event of a default) and all outstanding principal and accrued and unpaid interest are due on March 17, 2024.
The Company has the right to prepay the March
2023 Diagonal Note (principal and accrued interest) at any time during the first six months the note is outstanding at the rate of 115%
during the first 30 days after issuance, 120% during the 31st to 60th day after issuance, and 125% during the 61st
to the 180th day after issuance. The March 2023 Diagonal Note may not be prepaid after the 180th day following the issuance
date, unless Diagonal agrees to such repayment and such terms. Diagonal may in its option, at any time beginning 180 days after the date
of the Diagonal Note, convert the outstanding principal and interest on the March 2023 Diagonal Note into shares of our common stock at
a conversion price per share equal to 65% of the average of the three lowest closing bid prices of our common stock during the 10 trading
days prior to the date of conversion. At no time may the March 2023 Diagonal Note be converted into shares of our common stock if such
conversion would result in Diagonal and its affiliates owning an aggregate of in excess of 4.99% of the then outstanding shares of our
common stock.
The Company has accounted for the March 2023 Diagonal
Note as stock settled debt under ASC 480 and recorded an aggregate debt premium of $29,212 with a charge to interest expense.
EX-21.1
2
f10k2022ex21-1_cbondsystems.htm
LIST OF SUBSIDIARIES
Exhibit 21.1
C-Bond Systems, Inc.
List of Subsidiaries
Company Name
State of Incorporation
C-Bond Systems, LLC
Texas
Mobile Tint, LLC (80% owned)
Texas
EX-23.1
3
f10k2022ex23-1_cbondsystems.htm
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Exhibit 23.1
Consent of Independent Registered Public Accounting
Firm
We hereby consent to the incorporation by reference
in the Registration Statements on Form S-8 filed on January 9, 2020 (File No. 333-235868) and September 25, 2018 (File No. 333-227522),
of our report dated March 31, 2023 on the consolidated financial statements of C-Bond Systems, Inc. as of and for the years ended December
31, 2022 and 2021, which report is included in the Annual Report on Form 10-K of C-Bond Systems, Inc. for the year ended December 31,
2022.
1. I have reviewed this annual
report on Form 10-K for the year ended December 31, 2022 of C-Bond Systems, Inc.;
2. Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge,
the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s
other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
(a) Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal
control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness
of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report
any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s
other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies
and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or
not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
1. I have reviewed this annual
report on Form 10-K for the year ended December 31, 2022 of C-Bond Systems, Inc.;
2. Based on my knowledge,
this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements
made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge,
the financial statements, and other financial information included in this report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s
other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange
Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))
for the registrant and have:
(a) Designed such disclosure
controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this report is being prepared;
(b) Designed such internal
control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness
of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report
any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably
likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s
other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent
functions):
(a) All significant deficiencies
and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or
not material, that involves management or other employees who have a significant role in the registrant’s internal control over
financial reporting.
In connection with the annual
report of C-Bond Systems, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2022, as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), and pursuant to 18 U.S.C. Section 1350, as added by Section 906
of the Sarbanes-Oxley Act of 2002, as amended, I, Scott R. Silverman, Chief Executive Officer and Chairman of the Board of the Company,
certify to the best of my knowledge:
1. The Report fully complies
with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
2. The information contained
in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
In connection with the annual
report of C-Bond Systems, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2022, as filed with the Securities
and Exchange Commission on the date hereof (the “Report”), and pursuant to 18 U.S.C. Section 1350, as added by Section 906
of the Sarbanes-Oxley Act of 2002, as amended, I, Scott R. Silverman, Chief Financial Officer of the Company, certify to the best of my
knowledge:
1. The Report fully complies
with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and
2. The information contained
in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: March 31, 2023
/s/ Scott R. Silverman
Scott R. Silverman
Chief Financial Officer
(Principal financial officer)
EX-101.SCH
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Fiscal period values are FY, Q1, Q2, and Q3. 1st, 2nd and 3rd quarter 10-Q or 10-QT statements have value Q1, Q2, and Q3 respectively, with 10-K, 10-KT or other fiscal year statements having FY.
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Indicate 'Yes' or 'No' whether registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. This information should be based on the registrant's current or most recent filing containing the related disclosure.
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The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter.
Indicate 'Yes' or 'No' if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Is used on Form Type: 10-K, 10-Q, 8-K, 20-F, 6-K, 10-K/A, 10-Q/A, 20-F/A, 6-K/A, N-CSR, N-Q, N-1A.
Carrying amount, attributable to parent, of an entity's issued and outstanding stock which is not included within permanent equity. Temporary equity is a security with redemption features that are outside the control of the issuer, is not classified as an asset or liability in conformity with GAAP, and is not mandatorily redeemable. Includes any type of security that is redeemable at a fixed or determinable price or on a fixed or determinable date or dates, is redeemable at the option of the holder, or has conditions for redemption which are not solely within the control of the issuer. Includes stock with a put option held by an ESOP and stock redeemable by a holder only in the event of a change in control of the issuer.
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Sum of the carrying amounts as of the balance sheet date of all assets that are recognized. Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.
Sum of the carrying amounts as of the balance sheet date of all assets that are expected to be realized in cash, sold, or consumed within one year (or the normal operating cycle, if longer). Assets are probable future economic benefits obtained or controlled by an entity as a result of past transactions or events.
Sum of the carrying amounts as of the balance sheet date of all assets that are expected to be realized in cash, sold or consumed after one year or beyond the normal operating cycle, if longer.
Amount, after accumulated amortization and accumulated impairment loss, of asset recognized from cost incurred to obtain or fulfill contract with customer; classified as current.
Amount of currency on hand as well as demand deposits with banks or financial institutions. Includes other kinds of accounts that have the general characteristics of demand deposits. Also includes short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. Excludes cash and cash equivalents within disposal group and discontinued operation.
Represents the caption on the face of the balance sheet to indicate that the entity has entered into (1) purchase or supply arrangements that will require expending a portion of its resources to meet the terms thereof, and (2) is exposed to potential losses or, less frequently, gains, arising from (a) possible claims against a company's resources due to future performance under contract terms, and (b) possible losses or likely gains from uncertainties that will ultimately be resolved when one or more future events that are deemed likely to occur do occur or fail to occur.
Aggregate par or stated value of issued nonredeemable common stock (or common stock redeemable solely at the option of the issuer). This item includes treasury stock repurchased by the entity. Note: elements for number of nonredeemable common shares, par value and other disclosure concepts are in another section within stockholders' equity.
Amount of liability for consideration received or receivable from customer which is not included in transaction price, when consideration is expected to be refunded to customer, classified as current.
Carrying value as of the balance sheet date of long-term debt (with maturities initially due after one year or beyond the operating cycle if longer) identified as Convertible Notes Payable, excluding current portion. Convertible Notes Payable is a written promise to pay a note which can be exchanged for a specified amount of another, related security, at the option of the issuer and the holder.
Carrying value as of the balance sheet date of the portion of long-term debt due within one year or the operating cycle if longer identified as Convertible Notes Payable. Convertible Notes Payable is a written promise to pay a note which can be exchanged for a specified amount of another, related security, at the option of the issuer and the holder.
Carrying value of amounts transferred to third parties for security purposes that are expected to be returned or applied towards payment after one year or beyond the operating cycle, if longer.
For an unclassified balance sheet, amounts due from related parties including affiliates, employees, joint ventures, officers and stockholders, immediate families thereof, and pension funds.
Total of the carrying values as of the balance sheet date of obligations incurred through that date and payable for obligations related to services received from employees, such as accrued salaries and bonuses, payroll taxes and fringe benefits. Used to reflect the current portion of the liabilities (due within one year or within the normal operating cycle if longer).
Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.
Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges.
Carrying value as of the balance sheet date of [accrued] interest payable on all forms of debt, including trade payables, that has been incurred and is unpaid. Used to reflect the current portion of the liabilities (due within one year or within the normal operating cycle if longer).
Sum of the carrying amounts as of the balance sheet date of all liabilities that are recognized. Liabilities are probable future sacrifices of economic benefits arising from present obligations of an entity to transfer assets or provide services to other entities in the future.
Total obligations incurred as part of normal operations that are expected to be paid during the following twelve months or within one business cycle, if longer.
Carrying value as of the balance sheet date of loans payable (with maturities initially due after one year or beyond the operating cycle if longer), excluding current portion.
Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which is directly or indirectly attributable to that ownership interest in subsidiary equity which is not attributable to the parent (that is, noncontrolling interest, previously referred to as minority interest).
The amount for notes payable (written promise to pay), due to related parties. Used to reflect the current portion of the liabilities (due within one year or within the normal operating cycle if longer).
Aggregate par or stated value of issued nonredeemable preferred stock (or preferred stock redeemable solely at the option of the issuer). This item includes treasury stock repurchased by the entity. Note: elements for number of nonredeemable preferred shares, par value and other disclosure concepts are in another section within stockholders' equity.
Amount of asset related to consideration paid in advance for costs that provide economic benefits in future periods, and amount of other assets that are expected to be realized or consumed within one year or the normal operating cycle, if longer.
Amount after accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business to produce goods and services and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures.
Total of all stockholders' equity (deficit) items, net of receivables from officers, directors, owners, and affiliates of the entity which are attributable to the parent. The amount of the economic entity's stockholders' equity attributable to the parent excludes the amount of stockholders' equity which is allocable to that ownership interest in subsidiary equity which is not attributable to the parent (noncontrolling interest, minority interest). This excludes temporary equity and is sometimes called permanent equity.
Amount of stockholders' equity (deficit), net of receivables from officers, directors, owners, and affiliates of the entity, attributable to both the parent and noncontrolling interests. Amount excludes temporary equity. Alternate caption for the concept is permanent equity.
Carrying amount, attributable to parent, of an entity's issued and outstanding stock which is not included within permanent equity. Temporary equity is a security with redemption features that are outside the control of the issuer, is not classified as an asset or liability in conformity with GAAP, and is not mandatorily redeemable. Includes any type of security that is redeemable at a fixed or determinable price or on a fixed or determinable date or dates, is redeemable at the option of the holder, or has conditions for redemption which are not solely within the control of the issuer. Includes stock with a put option held by an ESOP and stock redeemable by a holder only in the event of a change in control of the issuer.
Total number of common shares of an entity that have been sold or granted to shareholders (includes common shares that were issued, repurchased and remain in the treasury). These shares represent capital invested by the firm's shareholders and owners, and may be all or only a portion of the number of shares authorized. Shares issued include shares outstanding and shares held in the treasury.
The maximum number of nonredeemable preferred shares (or preferred stock redeemable solely at the option of the issuer) permitted to be issued by an entity's charter and bylaws.
The aggregate liquidation preference (or restrictions) of stock classified as temporary equity that has a preference in involuntary liquidation considerably in excess of the par or stated value of the shares. The liquidation preference is the difference between the preference in liquidation and the par or stated values of the share. Temporary equity is a security with redemption features that are outside the control of the issuer, is not classified as an asset or liability in conformity with GAAP, and is not mandatorily redeemable. Includes any type of security that is redeemable at a fixed or determinable price or on a fixed or determinable date or dates, is redeemable at the option of the holder, or has conditions for redemption which are not solely within the control of the issuer. If convertible, the issuer does not control the actions or events necessary to issue the maximum number of shares that could be required to be delivered under the conversion option if the holder exercises the option to convert the stock to another class of equity. If the security is a warrant or a rights issue, the warrant or rights issue is considered to be temporary equity if the issuer cannot demonstrate that it would be able to deliver upon the exercise of the option by the holder in all cases. Includes stock with put option held by ESOP and stock redeemable by holder only in the event of a change in control of the issuer.
Per share amount of par value or stated value of stock classified as temporary equity. Temporary equity is a security with redemption features that are outside the control of the issuer, is not classified as an asset or liability in conformity with GAAP, and is not mandatorily redeemable.
The maximum number of securities classified as temporary equity that are permitted to be issued by an entity's charter and bylaws. Temporary equity is a security with redemption features that are outside the control of the issuer, is not classified as an asset or liability in conformity with GAAP, and is not mandatorily redeemable. Includes any type of security that is redeemable at a fixed or determinable price or on a fixed or determinable date or dates, is redeemable at the option of the holder, or has conditions for redemption which are not solely within the control of the issuer. If convertible, the issuer does not control the actions or events necessary to issue the maximum number of shares that could be required to be delivered under the conversion option if the holder exercises the option to convert the stock to another class of equity. If the security is a warrant or a rights issue, the warrant or rights issue is considered to be temporary equity if the issuer cannot demonstrate that it would be able to deliver upon the exercise of the option by the holder in all cases. Includes stock with put option held by ESOP and stock redeemable by holder only in the event of a change in control of the issuer.
The number of securities classified as temporary equity that have been sold (or granted) to the entity's shareholders. Securities issued include securities outstanding and securities held in treasury. Temporary equity is a security with redemption features that are outside the control of the issuer, is not classified as an asset or liability in conformity with GAAP, and is not mandatorily redeemable. Includes any type of security that is redeemable at a fixed or determinable price or on a fixed or determinable date or dates, is redeemable at the option of the holder, or has conditions for redemption which are not solely within the control of the issuer. If convertible, the issuer does not control the actions or events necessary to issue the maximum number of shares that could be required to be delivered under the conversion option if the holder exercises the option to convert the stock to another class of equity. If the security is a warrant or a rights issue, the warrant or rights issue is considered to be temporary equity if the issuer cannot demonstrate that it would be able to deliver upon the exercise of the option by the holder in all cases. Includes stock with put option held by ESOP and stock redeemable by holder only in the event of a change in control of the issuer.
The aggregate total of expenses of managing and administering the affairs of an entity, including affiliates of the reporting entity, which are not directly or indirectly associated with the manufacture, sale or creation of a product or product line.
Amount, after deduction of tax, noncontrolling interests, dividends on preferred stock and participating securities; of income (loss) available to common shareholders.
Generally recurring costs associated with normal operations except for the portion of these expenses which can be clearly related to production and included in cost of sales or services. Includes selling, general and administrative expense.
The net amount of other operating income and expenses, the components of which are not separately disclosed on the income statement, from items that are associated with the entity's normal revenue producing operations.
A fee charged for services from professionals such as doctors, lawyers and accountants. The term is often expanded to include other professions, for example, pharmacists charging to maintain a medicinal profile of a client or customer.
Amount, including tax collected from customer, of revenue from satisfaction of performance obligation by transferring promised good or service to customer. Tax collected from customer is tax assessed by governmental authority that is both imposed on and concurrent with specific revenue-producing transaction, including, but not limited to, sales, use, value-added and excise.
Amount of revenue, fees and commissions earned from transactions between (a) a parent company and its subsidiaries; (b) subsidiaries of a common parent; (c) an entity and trusts for the benefit of employees, for example, but not limited to, pension and profit-sharing trusts that are managed by or under the trusteeship of the entity's management; (d) an entity and its principal, owners, management, or members of their immediate families; and (e) affiliates.
Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss).
Number of [basic] shares or units, after adjustment for contingently issuable shares or units and other shares or units not deemed outstanding, determined by relating the portion of time within a reporting period that common shares or units have been outstanding to the total time in that period.
The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.
Amount of noncash expense (reversal of expense) for employee benefits and share-based payment arrangement. Includes, but is not limited to, pension, other postretirement, postemployment and termination benefits.
The average number of shares or units issued and outstanding that are used in calculating diluted EPS or earnings per unit (EPU), determined based on the timing of issuance of shares or units in the period.
Amount of increase in additional paid in capital (APIC) resulting from the issuance of warrants. Includes allocation of proceeds of debt securities issued with detachable stock purchase warrants.
Number of shares issued in lieu of cash for services contributed to the entity. Number of shares includes, but is not limited to, shares issued for services contributed by vendors and founders.
Value of stock issued during the period upon the conversion of units. An example of a convertible unit is an umbrella partnership real estate investment trust unit (UPREIT unit).
Amount of stockholders' equity (deficit), net of receivables from officers, directors, owners, and affiliates of the entity, attributable to both the parent and noncontrolling interests. Amount excludes temporary equity. Alternate caption for the concept is permanent equity.
Amount of liabilities incurred for goods and services received that are used in an entity's business and related party payables, assumed at the acquisition date.
Amount of liabilities incurred for goods and services received that are used in an entity's business and related party expense, assumed at the acquisition date.
Amount of liabilities incurred for goods and services received that are used in an entity's business and related party payables, assumed at the acquisition date.
Amount of currency on hand as well as demand deposits with banks or financial institutions, acquired at the acquisition date. Includes other kinds of accounts that have the general characteristics of demand deposits. Also includes short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates.
Amount of asset related to consideration paid in advance for costs that provide economic benefits in future periods, and amount of other asset that are expected to be realized or consumed within one year or the normal operating cycle, if longer, acquired at the acquisition date.
Amount due from customers or clients for goods or services, including trade receivables, that have been delivered or sold in the normal course of business, and amounts due from others, including related parties expected to be converted to cash, sold or exchanged within one year or the normal operating cycle, if longer, acquired at the acquisition date.
Amount of liabilities incurred for goods and services received that are used in an entity's business and related party expenses, assumed at the acquisition date.
An entity's right to consideration in exchange for goods or services that the entity has transferred to a customer when that right is conditioned on something other than the passage of time.
The increase (decrease) during the period in the amount of customer money held in customer accounts, including security deposits, collateral for a current or future transactions, initial payment of the cost of acquisition or for the right to enter into a contract or agreement.
Amount of noncash expense included in interest expense to amortize debt discount and premium associated with the related debt instruments. Excludes amortization of financing costs. Alternate captions include noncash interest expense.
Amount of cash and cash equivalents, and cash and cash equivalents restricted to withdrawal or usage. Excludes amount for disposal group and discontinued operations. Cash includes, but is not limited to, currency on hand, demand deposits with banks or financial institutions, and other accounts with general characteristics of demand deposits. Cash equivalents include, but are not limited to, short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates.
Amount of increase (decrease) in cash, cash equivalents, and cash and cash equivalents restricted to withdrawal or usage; including effect from exchange rate change. Cash includes, but is not limited to, currency on hand, demand deposits with banks or financial institutions, and other accounts with general characteristics of demand deposits. Cash equivalents include, but are not limited to, short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates.
The current period expense charged against earnings on long-lived, physical assets not used in production, and which are not intended for resale, to allocate or recognize the cost of such assets over their useful lives; or to record the reduction in book value of an intangible asset over the benefit period of such asset; or to reflect consumption during the period of an asset that is not used in production.
The increase (decrease) during the reporting period in the aggregate amount of liabilities incurred (and for which invoices have typically been received) and payable to vendors for goods and services received that are used in an entity's business.
The increase (decrease) during the reporting period in amount due within one year (or one business cycle) from customers for the credit sale of goods and services.
The increase (decrease) during the reporting period in receivables to be collected from other entities that could exert significant influence over the reporting entity.
The increase (decrease) during the reporting period in the aggregate amount of obligations related to services received from employees, such as accrued salaries and bonuses, payroll taxes and fringe benefits.
The increase (decrease) during the reporting period in the aggregate value of all inventory held by the reporting entity, associated with underlying transactions that are classified as operating activities.
Amount of cash paid for interest, excluding capitalized interest, classified as operating activity. Includes, but is not limited to, payment to settle zero-coupon bond for accreted interest of debt discount and debt instrument with insignificant coupon interest rate in relation to effective interest rate of borrowing attributable to accreted interest of debt discount.
Amount of loss from reductions in inventory due to subsequent measurement adjustments, including, but not limited to, physical deterioration, obsolescence, or changes in price levels.
Amount of cash inflow (outflow) from financing activities, including discontinued operations. Financing activity cash flows include obtaining resources from owners and providing them with a return on, and a return of, their investment; borrowing money and repaying amounts borrowed, or settling the obligation; and obtaining and paying for other resources obtained from creditors on long-term credit.
Amount of cash inflow (outflow) from investing activities, including discontinued operations. Investing activity cash flows include making and collecting loans and acquiring and disposing of debt or equity instruments and property, plant, and equipment and other productive assets.
Amount of cash inflow (outflow) from operating activities, including discontinued operations. Operating activity cash flows include transactions, adjustments, and changes in value not defined as investing or financing activities.
Interest paid other than in cash for example by issuing additional debt securities. As a noncash item, it is added to net income when calculating cash provided by or used in operations using the indirect method.
The cash inflow from the issuance of a long-term debt instrument which can be exchanged for a specified amount of another security, typically the entity's common stock, at the option of the issuer or the holder.
Amount of cash inflow from a noncontrolling interest. Includes, but is not limited to, purchase of additional shares or other increase in noncontrolling interest ownership.
The cash inflow from a long-term borrowing made from related parties where one party can exercise control or significant influence over another party; including affiliates, owners or officers and their immediate families, pension trusts, and so forth. Alternate caption: Proceeds from Advances from Affiliates.
The cash inflow from the sale of long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale.
C-Bond Systems, Inc., together with its subsidiaries
(the “Company”), is a materials development company and sole owner, developer, and manufacturer of the patented C-Bond technology.
The Company is engaged in the implementation of proprietary nanotechnology applications and processes to enhance properties of strength,
functionality, and sustainability of brittle material systems. The Company’s primary focus is in the multi-billion-dollar glass
and window film industry with target markets in the United States and internationally. Additionally, the Company has expanded its product
line to include disinfection products. The Company operates in two divisions: C-Bond Transportation Solutions and Patriot Glass Solutions.
C-Bond Transportation Solutions sells a windshield strengthening, water repellent solution called C-Bond nanoShield™ as well as
disinfection products. Patriot Glass Solutions sells multi-purpose glass strengthening primer and window film mounting solutions, including
C-Bond BRS, a ballistic-resistant film system, and C-Bond Secure, a forced entry system.
On June 30, 2021, the Company entered into a Share
Exchange Agreement and Plan of Reorganization (the “Exchange Agreement”) with (i) Mobile Tint LLC, a Texas limited liability
company doing business as A1 Glass Coating (“Mobile”), (ii) the sole member of Mobile (the “Mobile Shareholder”),
and (iii) Michael Wanke as the Representative of the Mobile Shareholder. Pursuant to the Exchange Agreement, the Company agreed to acquire
80% of Mobile’s units, representing 80% of Mobile’s issued and outstanding capital stock (the “Mobile Shares”).
On July 22, 2021, the Company closed the Exchange Agreement and acquired 80% of the Mobile Shares. The Mobile Shares were exchanged for
28,021,016 restricted shares of the Company’s common stock in an amount equal to $800,000, divided by the average of the closing
prices of the Company’s common stock during the 30-day period immediately prior to the closing. Two years after closing, the Company
has the option to acquire the remaining 20% of Mobile’s issued and outstanding membership interests in exchange for a number of
shares of the Company’s common stock equal to 300% of Mobile’s average EBIT value, divided by the price of the Company’s
common stock as defined in the Exchange Agreement (the “Additional Closing”). Mobile provides quality window tint solutions
for auto, home, and business owners across Texas, specializing in automotive window tinting, residential window film, and commercial window
film that stop harmful UV rays from passing through its window films for reduced glare, comfortable temperatures, and lower energy bills.
Mobile also carries products that offer forced-entry protection and films that protect glass from scratches, graffiti, other types of
vandalism, and even bullets, including C-Bond BRS and C-Bond Secure products. As part of the transaction, Mobile’s owner-operator,
Mr. Wanke, joined the Company as President of its Patriot Glass Solutions division.
The entire disclosure for the nature of an entity's business, major products or services, principal markets including location, and the relative importance of its operations in each business and the basis for the determination, including but not limited to, assets, revenues, or earnings. For an entity that has not commenced principal operations, disclosures about the risks and uncertainties related to the activities in which the entity is currently engaged and an understanding of what those activities are being directed toward.
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Basis of Presentation and Principles of Consolidation
The Company’s consolidated financial statements
include the financial statements of its wholly owned subsidiary, C-Bond Systems, LLC, and its 80% owned subsidiary, Mobile since acquiring
80% of Mobile on July 22, 2021. All significant intercompany accounts and transactions have been eliminated in consolidation.
Going Concern
These consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the
normal course of business. As reflected in the accompanying consolidated financial statements, the Company had a net loss of $5,156,478
and $7,128,858 for the years ended December 31, 2022 and 2021, respectively. The net cash used in operations was $1,584,918 and $1,807,051
for the years ended December 31, 2022 and 2021, respectively. Additionally, the Company had an accumulated deficit, shareholders’
deficit, and working capital deficit of $62,693,184, $7,050,669 and $4,349,384, respectively, on December 31, 2022. These factors raise
substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date
of this report. Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow
positive or raise additional debt and/or equity capital. The Company is seeking to raise capital through additional debt and/or equity
financings to fund its operations in the future. Although the Company has historically raised capital from sales of common shares and
preferred shares, and from the issuance of promissory notes and convertible promissory notes, there is no assurance that it will be able
to continue to do so. If the Company is unable to raise additional capital or secure additional lending in the near future, management
expects that the Company will need to curtail its operations. These consolidated financial statements do not include any adjustments related
to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.
Use of Estimates
The preparation of consolidated financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ from those estimates. Estimates during the years ended December
31, 2022 and 2021 include estimates for allowance for doubtful accounts on accounts receivable, the estimates for obsolete or slow moving
inventory, estimates used in the calculation of progress towards completion on uncompleted jobs, purchase price allocation of acquired
businesses, the useful life of property and equipment, assumptions used in assessing impairment of long-term assets, the estimate of the
fair value lease liability and related right of use asset, the valuation of redeemable and mandatorily redeemable preferred stock, the
value of beneficial conversion features and deemed dividends, the valuation allowances for deferred tax assets, and the fair value of
non-cash equity transactions.
Fair Value of Financial Instruments and Fair Value Measurements
The carrying amounts reported in the consolidated
balance sheets for cash, accounts receivable, contract assets and liabilities, notes payable, convertible note payable, accounts payable,
accrued expenses, accrued compensation, and lease liabilities approximate their fair market value based on the short-term maturity of
these instruments.
The Company analyzes all financial instruments
with features of both liabilities and equity under the Financial Accounting Standard Board’s (the “FASB”) accounting
standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest
level of input that is significant to the fair value measurement. The Company did not identify any assets or liabilities that are required
to be presented on the balance sheet at fair value in accordance with Accounting Standards Codification (“ASC”) Topic 820.
ASC 825-10 “Financial Instruments”,
allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair
value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value
option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent
reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.
Cash and Cash Equivalents
For purposes of the consolidated statements of
cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money
market accounts to be cash equivalents. The Company had no cash equivalents as of December 31, 2022 and 2021.
Accounts Receivable
The Company recognizes an allowance for losses
on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of
historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable
customer accounts considered at risk or uncollectible. The expense associated with the allowance for doubtful accounts is recognized as
general and administrative expense.
Inventory
Inventory, consisting of raw materials and finished
goods, are stated at the lower of cost and net realizable value utilizing the first-in, first-out (FIFO) method. A reserve is established
when management determines that certain inventories may not be saleable. If inventory costs exceed expected net realizable value due to
obsolescence or quantities in excess of expected demand, the Company will record reserves for the difference between the cost and the
net realizable value. These reserves are recorded based on estimates and included in cost of sales.
Property and Equipment
Property and equipment are stated at cost and
are depreciated using the straight-line method over their estimated useful lives, which range from one to seven years. Leasehold improvements
are depreciated over the shorter of the useful life or lease term including scheduled renewal terms. Maintenance and repairs are charged
to expense as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and
any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in
the value of these assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.
Goodwill and Intangible Assets
Goodwill represents the future economic benefit
arising from other assets acquired that could not be individually identified and separately recognized. Any goodwill arising from the
Company’s acquisition is attributable to the value of the potential expanded market opportunity with new customers. Intangible assets
may have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line
basis over their economic or legal life, whichever is shorter. The Company’s amortizable intangible assets are being amortized over
a useful life of 5 years.
Impairment of Long-Lived Assets
In accordance with ASC Topic 360, the Company
reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may
not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future
cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s
estimated fair value and its book value.
Derivative Financial Instruments
The Company had certain financial instruments
that were embedded derivatives. The Company evaluated all its financial instruments to determine if those contracts or any potential embedded
components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815-10-05-4, Derivatives
and Hedging and 815-40, Contracts in Entity’s Own Equity. This accounting treatment requires that the carrying amount
of any embedded derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the
fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as
either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at
the conversion, repayment or exercise date and then the related fair value amount is reclassified to other income or expense as part of
gain or loss on extinguishment.
Warranty Liability
The Company provides limited warranties on its
products for product defects for periods ranging from 12 months to the life of the product. Warranty costs may include the cost of product
replacement, refunds, labor costs and other costs. Allowances for estimated warranty costs are recorded during the period of sale. The
determination of such allowances requires the Company to make estimates of product warranty claim rates and expected costs to repair or
to replace the products under warranty. The Company currently establishes warranty reserves based on historical warranty costs for each
product line combined with liability estimates based on the prior 12 months’ sales activities. If actual return rates and/or repair
and replacement costs differ significantly from the Company’s estimates, adjustments to recognize additional cost of sales may be
required in future periods. Historically the warranty accrual and the expense amounts have been immaterial. The warranty liability is
included in accrued expenses on the accompanying consolidated balance sheets and amounted $26,648 and $26,733 on December 31, 2022 and
2021, respectively. For the years ended December 31, 2022 and 2021, warranty costs were de minimis.
Beneficial Conversion Feature
Convertible debt includes conversion terms that
are considered in the money compared to the market price of the stock on the date of the related agreement. The Company calculates the
beneficial conversion feature and records a debt discount with the amount being amortized to interest expense over the term of the note.
Revenue Recognition
The Company follows ASC Topic 606, Revenue
from Contracts with Customers (“ASC 606”). This standard establishes a single comprehensive model for entities to use
in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. ASC
606 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services and requires certain additional disclosures.
The Company sells its products which include standard
warranties primarily to distributors and authorized dealers. Product sales are recognized at a point in time when the product is shipped
to the customer and title is transferred and are recorded net of any discounts or allowances. The warranty does not represent a separate
performance obligation.
Revenues from contracts for the distribution and
installation of window film solutions are recognized over time on the basis of the Company’s estimates of the progress towards completion
of contracts using various output or input methods depending on the type of contract terms including (1) the ratio of number of labor
hours spent compared to the number of estimated labor hours to complete a job, (2) using the milestone method, or (3) using a units completed
method. These methods are used because management considers these to be the best available measure of progress on these contracts. We
use the same method for similar types of contracts. The asset, “contract assets” represents revenues recognized in excess
of amounts billed. The liability, “contract liabilities,” represents billings in excess of revenues recognized.
Cost of Sales
Cost of sales includes inventory costs, packaging
costs and warranty expenses.
Cost of revenues from fixed-price contracts for
the distribution and installation of window film solutions include all direct material, sub-contractor, labor and certain other direct
costs, as well as those indirect costs related to contract performance, such as indirect labor and fringe benefits. Provisions for estimated
losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions
and estimated profitability may result in revisions to cost and income, which are recognized in the period in which the revisions are
determined. Changes in estimated job profitability resulting from job performance, job conditions, claims, change orders, and settlements,
are accounted for as changes in estimates in the current period.
Shipping and Handling Costs
Shipping and handling costs incurred for product
shipped to customers are included in general and administrative expenses and amounted to $45,455 and $15,431 for the years ended December
31, 2022 and 2021, respectively. Shipping and handling costs charged to customers are included in sales.
Research and Development
Research and development costs incurred in the
development of the Company’s products are expensed as incurred and includes costs such as labor, materials, and other allocated
costs incurred. For the years ended December 31, 2022 and 2021, research and development costs (recovery) incurred in the development
of the Company’s products were $0 and $(3,250), respectively, and are included in operating expenses on the accompanying consolidated
statements of operations. In April 2021, the Company received a refund of research and development costs of $3,250.
Advertising Costs
The Company may participate in various advertising
programs. All costs related to advertising of the Company’s products are expensed in the period incurred. For the years ended December
31, 2022 and 2021, advertising costs charged to operations were $69,737 and $65,626, respectively and are included in general and administrative
expenses on the accompanying consolidated statements of operations. These advertising expenses do not include cooperative advertising
and sales incentives which shall been deducted from sales.
Federal and State Income Taxes
The Company accounts for income tax using the
liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined
based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in
effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax
assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets
will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes
the enactment date.
The Company follows the accounting guidance for
uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”. Using that guidance, tax positions initially
need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the
tax authorities. As of December 31, 2022 and 2021, the Company had no uncertain tax positions that qualify for either recognition or disclosure
in the financial statements. Tax years that remain subject to examination are the years ending on and after December 31, 2017. The Company
recognizes interest and penalties related to uncertain income tax positions in other expense. However, no such interest and penalties
were recorded as of December 31, 2022 and 2021.
Stock-Based Compensation
Stock-based compensation is accounted for based
on the requirements of ASC 718 – “Compensation –Stock Compensation”, which requires recognition in the
financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments
over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively,
the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange
for an award based on the grant-date fair value of the award. The Company has elected to recognize forfeitures as they occur as permitted
under the FASB’s Accounting Standards Update (“ASU”) 2016-09 Improvements to Employee Share-Based Payment.
Loss Per Common Share
ASC 260 “Earnings Per Share”, requires
dual presentation of basic and diluted earnings per common share (“EPS”) with a reconciliation of the numerator and denominator
of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilutive securities and
non-vested forfeitable shares. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue
common shares were exercised or converted into common shares or resulted in the issuance of common shares that then shared in the earnings
of the entity. Basic net loss per common share is computed by dividing net loss available to members by the weighted average number of
common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average
number of common shares, common share equivalents and potentially dilutive securities outstanding during each period. Potentially dilutive
common shares consist of stock options and non-vested forfeitable shares (using the treasury stock method) and shares issuable upon conversion
of preferred shares and convertible notes payable (using the as-if converted method). These common share equivalents may be dilutive in
the future.
All potentially dilutive common shares were excluded
from the computation of diluted common shares outstanding as they would have an anti-dilutive impact on the Company’s net losses
and consisted of the following:
December 31,
2022
2021
Stock options
8,445,698
8,445,698
Warrants
34,000,000
17,500,000
Series B preferred stock
164,635,079
114,598,413
Series C preferred stock
432,250,000
296,507,937
Convertible debt
962,679,774
33,000,000
Non-vested, forfeitable common shares
16,970,120
14,270,120
1,618,980,671
484,322,168
Segment Reporting
During the year ended December 31, 2022 and from
July 22, 2021 (date of acquisition of Mobile Tint) to December 31, 2021, the Company operated in two reportable business segments which
consisted of (1) the manufacture and sale of a windshield strengthening water repellent solution as well as disinfection products, and
the sale of multi-purpose glass strengthening primer and window film mounting solutions, including ballistic-resistant film systems and
a forced entry system, and (2) the distribution and installation of window film solutions. The Company’s reportable segments are
strategic business units that offer different products. They are managed separately based on the fundamental differences in their operations
and locations.
Leases
The Company accounts for leases in accordance
with ASC 842. The lease standard requires certain leases to be reported on the consolidated balance sheets as right-of-use assets and
lease liabilities. The Company elected the practical expedients permitted under the transition guidance of this standard that retained
the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. The Company does not
reassess whether any contracts entered into prior to adoption are leases or contain leases.
The Company categorize leases with contractual
terms longer than twelve months as either operating or finance. Finance leases are generally those leases that would allow the Company
to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in property
and equipment, net. All other leases are categorized as operating leases. The Company does not have any finance leases as of December
31, 2022 and 2021. The Company’s leases generally have terms that range from three to four years for property and equipment and
five years for property. The Company elected the accounting policy to include both the lease and non-lease components of our agreements
as a single component and account for them as a lease.
Lease liabilities are recognized at the present
value of the fixed lease payments using a discount rate based on the Company’s current borrowing rate. Lease assets are recognized
based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the
leases. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term.
When the Company has the option to extend the
lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and it is reasonably certain that
the Company will exercise the option, the Company considers these options in determining the classification and measurement of the lease.
Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease.
Noncontrolling Interest
The Company accounts for noncontrolling interest
in accordance with ASC Topic 810-10-45, which requires the Company to present noncontrolling interests as a separate component of total
shareholders’ deficit on the consolidated balance sheets and the consolidated net loss attributable to its noncontrolling interest
be clearly identified and presented on the face of the consolidated statements of operations.
Risk and Uncertainties
In March 2020, the World Health Organization declared
COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. The Company was materially affected by the COVID-19
outbreak in 2020 and 2021 and the ultimate duration and severity of the outbreak and its impact on the economic environment and our business
is uncertain. The Company saw a material decrease in sales from its international customers as a result of the unprecedented public health
crisis from the COVID-19 pandemic and a decrease in domestic sales due to a decrease in business spending on discretionary items. As a
result, during 2021 and 2020, the Company’s international customers delayed the ordering of products and delayed or defaulted on
payment of balances due to the Company. The lack of collection of accounts receivable balances, which the Company believes was attributable
to COVID-19, had a material impact on the cash flows of the Company. The Company believes that COVID-19 had minimal impact on its operations
in 2022. The Company cannot estimate the future impact of the pandemic on its business. A severe or prolonged economic downturn could
result in a variety of risks to the Company’s business, including weakened demand for its products and a decreased ability to raise
additional capital when needed on acceptable terms, if at all. Currently, the Company is unable to estimate the impact of this event on
its operations.
Recent Accounting Pronouncements
In August 2020, the FASB issued ASU 2020-06, Debt—Debt
with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies accounting for
convertible instruments by removing major separation models required under current U.S. GAAP. Consequently, more convertible debt instruments
will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain
settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity
contracts to qualify for the exception. The ASU also simplifies the diluted net income per share calculation in certain areas. The new
guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and early
adoption is permitted. The Company is currently evaluating the impact of the adoption of the standard on the consolidated financial statements.
In June
2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments, which significantly changes how entities will measure credit losses for most financial assets, including
accounts receivable. ASU No. 2016-13 will replace today’s “incurred loss” approach with an “expected loss”
model, under which companies will recognize allowances based on expected rather than incurred losses. On November 15, 2019, the FASB delayed
the effective date of Topic 326 for certain small public companies and other private companies until fiscal years beginning after December
15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, as well as private companies
and not-for-profit entities. The Company is currently evaluating the new guidance and has not yet determined whether the adoption of the
new standard will have a material impact on its consolidated financial statements or the method of adoption.
In March
2022, the FASB issued ASU No. 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage
Disclosures. The guidance was issued as improvements to ASU No. 2016-13 described above. The vintage disclosure changes require an
entity to disclose current-period gross write-offs by year of origination for financing receivables. The guidance is effective for financial
statements issued for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The amendments should
be applied prospectively. Early adoption of the amendments is permitted, including adoption in an interim period. The amendments will
impact our disclosures but will not otherwise impact the consolidated financial statements. The Company is currently evaluating the new
guidance.
Other accounting standards that have been issued
or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial
statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated
to its financial condition, results of operations, cash flows or disclosures.
On June 30, 2021, the Company entered into a Share
Exchange Agreement and Plan of Reorganization (the “Exchange Agreement”) with (i) Mobile Tint LLC, a Texas limited liability
company doing business as A1 Glass Coating (“Mobile”), (ii) the sole member of Mobile (the “Mobile Member”), and
(iii) Michael Wanke as the Representative of the Mobile Member. Pursuant to the Exchange Agreement, the Company agreed to acquire 80%
of Mobile’s member units, representing 80% of Mobile’s issued and outstanding membership units (the “Mobile Member Units”).
On July 22, 2021, the Company closed the Exchange Agreement and acquired 80% of the Mobile Member Units. The Mobile Member Units were
exchanged for restricted shares of the Company’s common stock, in an amount equal to $800,000, divided by the average of the closing
prices of the Company’s common stock during the 30-day period immediately prior to the closing as defined in the Exchange Agreement.
In connection with the Exchange Agreement, the Company issued 28,021,016 shares of its common stock. These shares were valued at $694,921,
or $0.0248 per common share, based on the quoted closing price of the Company’s common stock on July 22, 2021, the measurement date.
Two years after closing, the Company has the option to acquire the remaining 20% of Mobile’s issued and outstanding membership interests
in exchange for a number of shares of the Company’s common stock equal to 300% of Mobile’s average EBIT value, divided by
the price of the Company’s common stock as defined in the Exchange Agreement (the “Additional Closing”).
The Company also entered into an Amendment to
the Exchange Agreement, dated July 21, 2021, which, among other things, stipulates that for U.S. federal income tax purposes the Exchange
and the Additional Closing (if exercised) are intended to qualify as a “reorganization” within the meaning of Section 368(a)
of the Code and the Treasury Regulations, and the definition of “Total EBIT Value” shall mean Mobile’s net income, before
income tax expense and interest expense have been deducted, for the period beginning on July 1, 2021 and ending on June 30, 2023, plus
fifty percent (50%) of the Mobile Member’s Base Salary, as defined in the Executive Employment Agreement dated July 21, 2021, between
the Mobile Member and the Company (the “Employment Agreement”), as described below.
The exchange Agreement transaction documents include
the Operating Agreement of Mobile (the “Operating Agreement”) which, among other things, appoints Mr. Wanke, Scott R. Silverman,
and Allison Tomek as the Managers of Mobile, and governs the operations of Mobile as outlined therein. Under the terms of the Operating
Agreement, the Managers shall not have the authority to perform or approve the following actions, among other things, unless such action
is also approved by a unanimous vote: to terminate the existing lease between Company and MDW Management, LLC, an entity owned by Michael
Wanke and his spouse; to borrow money for the Company from banks, other lending institutions, the Manager, Members, or affiliates of the
Manager or Members; to establish lines of credit in the name of the Company with financial institutions such as banks or other lending
institutions; to determine and declare distributions to Members of Mobile.
In connection with the Exchange Agreement, the
Company entered into a Piggy-Back Registration Rights Agreement dated July 20, 2021 (the “Registration Rights Agreement”)
with Mobile, the Mobile Member, and Mr. Wanke, pursuant to which if at any time on or after the date of the closing, the Company proposes
to file any Registration Statement (a “Registration Statement”) with respect to any offering of equity securities by the Company
for its own account or for shareholders of the Company, other than a Form S-8 Registration Statement, a dividend reinvestment plan, or
in connection with a merger or acquisition, then the Company shall (x) give written notice of such proposed filing to the holders of registrable
securities no less than ten (10) days before the anticipated filing date of the Registration Statement, and (y) offer to the holders of
registrable securities the opportunity to register the sale of either (i) an amount of registrable securities equal to the total number
of shares of the Company’s common stock being registered in such Registration Statement that are being offered solely for the Company’s
account excluding the registrable securities; or (ii) an amount of registrable securities equal to the total number of shares of the Company’s
common stock being registered for resale by shareholders of the Company excluding the registrable securities.
In connection with the Exchange Agreement, the
Company was named as guarantor (“Guarantor”) of a Commercial Lease Agreement dated July 21, 2021, by and between landlord
MDW Management, LLC, a company owned by Michael Wanke and his wife and tenant Mobile Tint, LLC d/b/a A-1 Glass (the “Lease”).
The term of the Lease is 60 months, at a minimum monthly rent of $5,600 (not including tax), with two five-year options for the tenant
to renew. The Company’s obligation as Guarantor of the Lease will terminate upon the occurrence of earlier of the following: (i)
the date of Guarantor’s acquisition of 100% of the ownership interests of Mobile; (ii) the date that Guarantor beneficially owns
less than an eighty percent (80%) ownership interest in Mobile; or (iii) two (2) years from and after the effective date of the guaranty.
In connection with the Exchange Agreement, the
assets acquired and liabilities assumed were recorded at their estimated fair values on the acquisition date, subject to adjustment during
the measurement period with subsequent changes recognized in earnings or loss. These estimates were inherently uncertain and are subject
to refinement. Management develops estimates based on assumptions as a part of the purchase price allocation process to value the assets
acquired and liabilities assumed as of the business acquisition date. As a result, during the purchase price measurement period, which
may be up to one year from the business acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed
based on completion of valuations, with the corresponding offset to goodwill. After the purchase price measurement period, the Company
will record any adjustments to assets acquired or liabilities assumed in operating expenses in the period in which the adjustments may
have been determined. Based upon the purchase price allocation, the following table summarizes the estimated fair value of the assets
acquired and liabilities assumed at the date of the respective acquisition:
Total
Assets acquired:
Cash
$
288,901
Accounts receivable, net
59,726
Inventory
68,019
Prepaid expenses and other
6,091
Contract assets
32,699
Property and equipment
140,211
Right of use asset
253,433
Intangible assets
352,516
Goodwill
350,491
Total assets acquired at fair value
1,552,087
Less: total liabilities assumed:
Notes payable
95,013
Accounts payable
65,728
Accrued expenses
159,262
Customer deposit
110,000
Lease liability
253,433
Noncontrolling interest
173,730
Total liabilities assumed
857,166
Net assets acquired
$
694,921
Purchase consideration paid:
Fair value of common shares issued
$
694,921
Total purchase consideration paid
$
694,921
The following unaudited pro forma consolidated
results of operations have been prepared as if the acquisition of Mobile Tint LLC had occurred as of the beginning of the following year:
For the Year Ended December 31, 2021
Net Revenues
$
2,168,863
Net Loss
$
(7,128,027
)
Net Loss per Share
$
(0.03
)
Pro forma data does not purport to be indicative
of the results that would have been obtained had these events actually occurred at the beginning of the periods presented and is not intended
to be a projection of future results.
The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable).
On December 31, 2022 and 2021, inventory consisted
of the following:
December 31, 2022
December 31, 2021
Raw materials
$
1,501
$
7,141
Finished goods
75,945
120,790
Inventory
77,446
127,931
Less: allowance for obsolete or slow-moving inventory
-
(45,000
)
Inventory, net
$
77,446
$
82,931
For the years ended December 31, 2022 and 2021,
a loss from allowance for slow moving inventory amounted to $0 and $45,000, respectively, and is included in cost of sales on the accompanying
consolidated statements of operations.
The entire disclosure for inventory. Includes, but is not limited to, the basis of stating inventory, the method of determining inventory cost, the classes of inventory, and the nature of the cost elements included in inventory.
On December 31, 2022 and 2021, property and equipment
consisted of the following:
Useful Life
December 31, 2022
December 31, 2021
Machinery and equipment
5 – 7 years
$
124,133
$
124,133
Furniture and office equipment
3 – 7 years
32,306
32,306
Vehicles
1 – 5 years
62,195
63,009
Leasehold improvements
3 – 5 years
45,296
45,296
263,930
264,744
Less: accumulated depreciation
(167,624
)
(129,722
)
Property and equipment, net
$
96,306
$
135,022
During the year ended December 31, 2022, the Company
sold a vehicle and other equipment for proceeds of $5,500 and record a gain on sale of property and equipment of $5,500 which is included
in general and administrative expenses on the accompanying consolidated statement of operations. During the year ended December 31, 2021,
the Company sold a vehicle for proceeds of $13,000 and record a gain on sale of property and equipment of $13,000 which is included in
general and administrative expenses on the accompanying consolidated statement of operations. For the years ended December 31, 2022 and
2021, depreciation expense is included in general and administrative expenses and amounted to $38,716 and $23,872, respectively.
The entire disclosure for long-lived, physical asset used in normal conduct of business and not intended for resale. Includes, but is not limited to, work of art, historical treasure, and similar asset classified as collections.
On December 31, 2022 and 2021, intangible assets,
which were acquired from Mobile in 2021 (See Note 3), consisted of the following:
Useful life
December 31, 2022
December 31, 2021
Customer relations
5 years
$
212,516
$
212,516
Non-compete
5 years
40,000
40,000
Trade name
-
100,000
100,000
352,516
352,516
Less: accumulated amortization
(72,598
)
(22,095
)
Intangible assets, net
$
279,918
$
330,421
Useful life
December 31, 2022
December 31, 2021
Goodwill
-
$
350,491
$
350,491
For the years ended December 31, 2022 and 2021,
amortization expense of intangible assets amounted to $50,503 and $22,095, respectively. On December 31, 2022, accumulated amortization
amounted to $61,098 and $11,500 for the customer relations and non-compete, respectively. On December 31, 2021, accumulated amortization
amounted to $18,595 and $3,500 for the customer relations and non-compete, respectively.
Amortization of intangible assets with identifiable
useful lives that is attributable to future periods is as follows:
On October 15, 2021, the Company entered into
a Securities Purchase Agreement (the “SPA”) with Mercer Street Global Opportunity Fund, LLC (the “Investor”),
pursuant to which the Company issued and sold to Investor a 10% Original Issue Discount Senior Convertible Promissory Note in the principal
amount of $825,000 (the “Initial Note”) and five-year warrants to purchase up to 16,500,000 shares of the Company’s
common stock at an initial exercise price of $0.05 per share, an amount equal to 50% of the conversion shares that were issued (the “Initial
Warrants”). The Company received net proceeds of $680,000, which is net of original issue discounts of $75,000, placement fees of
$60,000, and legal fees of $10,000. The transactions contemplated under the SPA closed on October 18, 2021.
Pursuant to the SPA, the Investor agreed to purchase
an additional $825,000 10% Original Issue Discount Senior Convertible Promissory Note (the “Second Note,” and together with
the Initial Note, the “Notes”), and a five-year warrant (the “Second Warrant,” and together with the Initial Warrant,
the “Warrants”) to purchase, in the aggregate, shares of the Company’s common stock at an initial exercise price of
$0.05 per share from the Company in an amount equal to 50% of the conversion shares to be issued upon the same terms as the Initial Note
and Initial Warrant (subject to there being no event of default under the Initial Note or other customary closing conditions), within
three trading days of a registration statement registering the shares of the Company’s common stock issuable under the Notes (the
“Conversion Shares”) and upon exercise of the Warrants (the “Warrant Shares”) being declared effective by the
SEC. To date, the Investor did not purchase the Second Note.
The Initial Note matured 12 months after issuance,
bore interest at a rate of 4% per annum through the date of default, and was initially convertible beginning on the six-month anniversary
of the original issue date into the Company’s common stock at a fixed conversion price of $0.025 per share, subject to adjustment
for stock splits, stock combinations, dilutive issuances, and similar events, as described in the Initial Note.
The Initial Note may be prepaid at any time for
the first 90 days at face value plus accrued interest. From day 91 through day 180, the Note may be prepaid in an amount equal to 110%
of the principal amount plus accrued interest. From day 181 through the day immediately preceding the maturity date, the Initial Note
may be prepaid in an amount equal to 120% of the principal amount plus accrued interest.
The Note and Warrants contain conversion limitations
providing that a holder thereof may not convert the Notes or exercise the Warrants to the extent (but only to the extent) that, if after
giving effect to such conversion, the holder or any of its affiliates would beneficially own in excess of 4.99% of the outstanding shares
of the Company’s common stock immediately after giving effect to such conversion or exercise. A holder may increase or decrease
its beneficial ownership limitation upon notice to the Company provided that in no event such limitation exceeds 9.99%, and that any increase
shall not be effective until the 61st day after such notice.
In connection with the SPA, the Company entered
into a Registration Rights Agreement dated October 15, 2021 (the “Registration Rights Agreement”), with the Investor pursuant
to which it is obligated to file a registration statement with the SEC within 45 days after the date of the agreement to register the
resale by the Investor of the conversion shares and warrant shares, and use all commercially reasonable efforts to have the registration
statement declared effective by the SEC within 60 days after the registration statement is filed.
Upon the occurrence of an event of default under
the Notes, the Investor has the right to be prepaid at 125% of the outstanding principal balance and accrued interest, and interest accrues
at 18% per annum. Events of default included, among other things,
(i)
any
default in the payment of (A) principal and interest payment under this Note or any other Indebtedness, or (B) Late Fees, liquidated
damages and other amounts owing to the Holder of this Note, as and when the same shall become due and payable (whether on a Conversion
Date, or the Maturity Date, or by acceleration or otherwise), which default, solely in the case of a default under clause (B) above,
is not cured within five Trading Days;
(ii)
the Company or any Subsidiary shall be subject to a Bankruptcy Event;
(iii)
the SEC suspends the Common Stock from trading or the Company’s Common Stock is not listed or quoted for trading on a Trading Market which failure is not cured, if possible to cure, within the earlier to occur of 10 Trading Days after notice of such failure is sent by the Holder or by any other Holder to the Company or the transfer of shares of Common Stock through the Depository Trust Company System is no longer available or is subject to a “chill” by the Depository Trust Company or any successor;
(iv)
the Company shall be a party to any Change of Control Transaction or shall agree to sell or dispose of all or in excess of 50% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change of Control Transaction);
(v)
the Company incurs any Indebtedness other than Permitted Indebtedness;
(vi)
the Company restates any financial statements included in its reports or registration statements filed pursuant to the Securities Act or the Exchange Act for any date or period from two years prior to the Original Issue Date of this Note and until this Note is or the Warrants issued to the Holder are no longer outstanding, if following first public announcement or disclosure that a restatement will occur the VWAP on the next Trading Day is 20% less than the VWAP on the prior Trading Day. For the purposes of this clause the next Trading Day if an announcement is made before 4:00 pm New York, NY time is either the day of the announcement or the following Trading Day. The Company filed a Report on Form 8-K announcing the restatement of its financial statements for the year ended December 31, 2020. Following the first public announcement or disclosure that a restatement occurred, the VWAP on the next Trading Day was not 20% less than the VWAP on the prior Trading Day and accordingly, the default provisions were not triggered.
The Company has also granted the investor a 12-month
(or until the Notes are no longer outstanding) right to participate in specified future financings, up to a level of 30%.
In connection with the SPA, on October 18, 2021,
the Company issued 668,151 shares of its common stock to the placement agent as fee for the capital raise. The 668,151 shares of common
stock issued were recorded as a debt discount of $14,064 based on the relative fair value method to be amortized over the life of the
Note. The 16,500,000 Initial Warrants were valued at $347,142 using the relative fair value method and recorded as a debt discount to
be amortized over the life of the note. The original issue discounts of $75,000, placement fees of $60,000, and legal fees of $10,000,
aggregating $145,000, was recorded as a debt discount to be amortized into interest expense over the twelve-month term of the note. Additionally,
the Initial Note was convertible into common shares at an initial conversion price of is $0.025 which was lower than the fair value of
common shares based on the quoted closing price of the Company’s common stock on the measurement date. Since warrants and common
shares were issued with the Initial Note, the proceeds were allocated to the instrument based on relative fair value. The Initial Warrants
did not contain any features requiring liability treatment and therefore were classified as equity. The value allocated to the Initial
Warrants and common shares issued was $347,142 and $14,064, respectively, and $318,794 was allocated to the beneficial conversion feature.
Since the intrinsic value of the beneficial conversion feature, warrants and common shares was greater than the proceeds allocated to
the convertible instrument, the amount of the discount assigned to the beneficial conversion feature, warrants and common shares issued
was limited to the amount of the proceeds allocated to the convertible instrument. Accordingly, the Company recorded an aggregate non-cash
debt discount of $680,000 with the credit to additional paid in capital. This debt discount was amortized to interest expense over the
term of the Convertible Note through the date Exchange Agreement discussed below.
On April 20, 2022, the Company and the Investor
entered into an Exchange Agreement (the “Exchange Agreement”). The original SPA remains in effect. Per the terms of the Exchange
Agreement, the Parties agreed to exchange (i) the Initial Note for a new Convertible Promissory Note (the “New Note”) and
(ii) the Initial Warrant for a new five-year warrant to purchase, in the aggregate, 33,000,000 shares of the Company’s common stock
at an exercise price of $0.025 per share (the “New Warrant” and together with the New Note, the “New Securities”),
according to the terms and conditions of the Exchange Agreement. On April 20, 2022, pursuant to the terms of the Exchange Agreement, the
Investor surrendered the Prior Securities in exchange for the New Securities. Other than the surrender of the Prior Securities, no consideration
of any kind whatsoever was given by the Investor to the Company in connection with the Exchange Agreement. The terms of the New Securities
are the same as the Prior Securities except for the pricing of the shares issuable under the New Note and the shares issuable upon exercise
of the New Warrant. The New Securities are composed of the New Note, which is a 10% Original Issue Discount Senior Convertible Promissory
Note in the principal amount of $825,000, and the New Warrant. The New Note matured on October 15, 2022, bore interest at a rate of 4%
per annum through the date of default, and was initially convertible into the Company’s common stock at a fixed conversion price
of $0.0125 per share, subject to adjustment for stock splits, stock combinations, dilutive issuances, and similar events, as described
in the New Note. If the average Closing Price during any 10 consecutive Trading Day period beginning and ending during the 60 Day Effectiveness
Period (the “Average Closing Price”) is below the Conversion Price than the conversion price will be reduced to such Average
Closing Price but in no event less than $0.00875.
On October 15, 2022, the due date of the New Note,
the New Note defaulted due to non-payment. Accordingly, the Company added a default penalty of $206,250, or 25%, to the principal balance
and recorded interest expense of $206,250, and interest shall accrue at 18% per annum.
In accordance with ASC 470-50, Debt Modifications
and Extinguishments, the Company performed an assessment of whether the Exchange Agreement transaction was deemed to be new debt, a modification
of existing debt, or an extinguishment of existing debt. The Company evaluated the April 20, 2022 Exchange Agreement for debt modification
and concluded that the debt qualified for debt extinguishment. On April 20, 2022, the Company agreed to reduce the conversion price from
$0.025 per share to $0.0125 per share, and to cancel the Initial Warrant to purchase 16,500,000 shares of common exercisable at $0.05
per shares, and to issue a New Warrant to purchase 33,000,000 shares exercisable at $0.025 per share. All other terms of the convertible
note and warrants remain unchanged, and therefore did not change the cash flows of the note. The New Warrants did not contain any features
requiring liability treatment and therefore were classified as equity.
The Company determined the transaction was considered
a debt extinguishment because of the change in conversion price was substantial. Upon extinguishment, the Company had $395,313 of unamortized
initial debt discount recorded which it wrote off, and the Company recorded a buyback of $160,993 which represents the reversal of calculated
beneficial conversion feature on the initial debt upon settlement, for an aggregate net loss on debt extinguishment of $234,320. The Company
recorded a new debt discount in connection with the New Note which was calculated based on the relative fair value of the New Warrants
of $325,785. Additionally, the New Note is convertible into common shares at an initial conversion price of $0.0125 which was lower than
the fair value of common shares based on the quoted closing price of the Company’s common stock on the measurement date. The value
allocated to the New Warrants was $325,785, and $354,215 was allocated to the beneficial conversion feature. Since the intrinsic value
of the beneficial conversion feature and warrants was greater than the proceeds allocated to the convertible instrument, the amount of
the discount assigned to the beneficial conversion feature and warrants issued was limited to the amount of the proceeds allocated to
the convertible instrument. Accordingly, the Company recorded an aggregate non-cash debt discount of $680,000 with the credit to additional
paid in capital. This debt discount was amortized to interest expense over the remaining term of the Convertible Note.
The Company uses the Binomial Valuation Model
to determine the fair value of its stock warrants which requires the Company to make several key judgments including:
●
the value of the Company’s common stock;
●
the expected life of issued stock warrants;
●
the expected volatility of the Company’s stock price;
●
the expected dividend yield to be realized over the life of the stock warrants; and
●
the risk-free interest rate over the expected life of the stock warrants.
The Company’s computation of the expected
life of issued stock warrants was based on the simplified method as the Company does not have adequate exercise experience to determine
the expected term. The interest rate was based on the U.S. Treasury yield curve in effect at the time of grant. The computation of volatility
was based on the historical volatility of the Company’s common stock.
On October 18, 2021 and April 20, 2022 (the Exchange
Agreement date) along with various re-pricings as outlined below, the fair value of the stock warrants were estimated at issuance using
the Binomial Valuation Model with the following assumptions:
2022
2021
Dividend rate
—%
—%
Term (in years)
4 years
5 years
Volatility
246.6% to 329.6%
348.5%
Risk—free interest rate
2.79% to 3.12%
1.16%
At any time this Note or any amounts accrued and
payable thereunder remain outstanding, the Company or any Subsidiary, as applicable, sells or grants any option to purchase or sells or
grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition),
any common stock or common stock equivalents entitling any Person to acquire shares of the Company’s common stock at an effective
price per share that is lower than the conversion price then in effect (such lower price, the “Base Conversion Price” and
each such issuance or announcement a “Dilutive Issuance”), then the conversion price shall be immediately reduced to equal
the Base Conversion Price. Such adjustment shall be made whenever such common stock or common stock equivalents are issued. On June 23,
2022, the Company issued common stock equivalents with an initial conversion price of $0.011 per share and accordingly, the conversion
price and warrant down-round provisions were triggered. As a result, the conversion price of the New April 2022 Note was reduced to $0.011
per share and the exercise price of the New April 2022 Warrant was lowered to $0.011. As a result of the June 23, 2022 down-round provisions,
the Company calculated the difference between the warrants fair value on June 23, 2022, the date the down-round feature was triggered
using the then current exercise price of $0.025 and the new exercise price of $0.011. On June 23, 2022, the Company recorded a deemed
dividend of $3,702 which represents the fair value transferred to the warrant holders from the down round feature being triggered. No
additional beneficial conversion feature amount was recorded based on the June 23, 2022 valuation as the ratcheted beneficial conversion
feature value was lower than the original amount. Additionally, on September 6, 2022, the Company issued common stock equivalents with
an initial conversion price of $0.009 per share and accordingly, the conversion price and warrant down-round provisions were triggered.
As a result, the conversion price of the New April 2022 Note was reduced to $0.009 per share and the exercise price of the New April 2022
Warrant was lowered to $0.009. As a result of the September 6, 2022 down-round provisions, the Company calculated the difference between
the warrants fair value on September 6, 2022, the date the down-round feature was triggered using the then current exercise price of $0.011
and the new exercise price of $0.009. On September 6, 2022, the Company recorded a deemed dividend of $733 which represents the fair value
transferred to the warrant holders from the down round feature being triggered. No additional beneficial conversion feature amount was
recorded based on the September 6, 2022 valuation as the ratcheted beneficial conversion feature value was lower than the original amount.
Pursuant to the provisions of ASC 815-40 –
Derivatives and Hedging – Contracts in an Entity’s Own Stock, the convertible note and related warrants issued in connection
with the Mercer convertible note was analyzed and it was determined that the terms of the convertible note and warrants contained terms
that were not considered derivatives.
1800 Diagonal Lending Convertible Debt
On November 9, 2022, the Company closed a Securities
Purchase Agreement dated November 4, 2022, with 1800 DIAGONAL LENDING LLC, a Virginia limited liability company, (“Diagonal”),
pursuant to which a Promissory Note (the “November 2022 Diagonal Note”) dated November 4, 2022, was made to Diagonal in the
aggregate principal amount of $104,250 and the Company received net proceeds of $100,000 which was net of fees of $4,250. The November
2022 Diagonal Note bears interest at a rate of 12% per annum (22% upon the occurrence of an event of a default) and all outstanding principal
and accrued and unpaid interest are due on May 4, 2024.
On December 27, 2022, the Company closed a Securities
Purchase Agreement dated December 27, 2022, with 1800 Diagonal pursuant to which a Promissory Note (“December 2022 Diagonal Note”)
dated December 27, 2022, was made to Diagonal in the aggregate principal amount of $64,250 and the Company received net proceeds of $60,000
which was net of fees of $4,250. The December 2022 Diagonal Note bears interest at a rate of 12% per annum (22% upon the occurrence of
an event of a default) and all outstanding principal and accrued and unpaid interest are due on June 27, 2024.
The Company has the right to prepay the November
2022 and December 2022 Diagonal Notes (principal and accrued interest) at any time during the first six months the note is outstanding
at the rate of 115% during the first 30 days after issuance, 120% during the 31st to 60th day after issuance, and
125% during the 61st to the 180th day after issuance. The November 2022 and December 2022 Diagonal Notes may not
be prepaid after the 180th day following the issuance date, unless Diagonal agrees to such repayment and such terms. Diagonal may in its
option, at any time beginning 180 days after the date of the Diagonal Notes, convert the outstanding principal and interest on the November
2022 and December 2022 Diagonal Notes into shares of our common stock at a conversion price per share equal to 65% of the average of the
three lowest closing bid prices of our common stock during the 10 trading days prior to the date of conversion. At no time may the November
2022 and December 2022 Diagonal Notes be converted into shares of our common stock if such conversion would result in Diagonal and its
affiliates owning an aggregate of in excess of 4.99% of the then outstanding shares of our common stock.
The Company has accounted for the November 2022
and December 2022 Diagonal Notes as stock settled debt under ASC 480 and recorded an aggregate debt premium of $90,731 with a charge to
interest expense.
For the years ended December 31, 2022 and 2021,
amortization of debt discounts related to the convertible notes payable amounted to $938,344 and $171,875, respectively, which has been
included in interest expense on the accompanying consolidated statements of operations.
On December 31, 2022 and 2021, accrued interest
payable under the convertible notes discussed above amounted to $83,138 and $7,052, respectively, and is included in accrued expenses
on the accompanying consolidated balance sheets.
On December 31, 2022 and 2021, convertible notes
payable consisted of the following:
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
On December 31, 2022 and 2021, notes payable consisted
of the following:
December 31, 2022
December 31, 2021
Notes payable
$
1,899,380
$
978,925
Note payable – PPP note
18,823
48,929
Total notes payable
1,918,203
1,027,854
Less: unamortized debt discount
(132,961
)
-
Note payable, net
1,785,242
1,027,854
Less: current portion of notes payable, net of discount
(1,576,438
)
(488,414
)
Notes payable – long-term
$
208,804
$
539,440
Notes Payable
BOCO Investment Note
On November 14, 2018, the Company entered into
a Revolving Credit Facility Loan and Security Agreement (“Loan Agreement”) and a Secured Promissory Note (the “Note”)
with BOCO Investments, LLC (the “Lender”). Subject to and in accordance with the terms and conditions of the Loan Agreement
and the Note, the Lender agreed to lend to the Company up to $400,000 (the “Maximum Loan Amount”) against the issuance and
delivery by the Company of the Note for use as working capital and to assist in inventory acquisition. In 2018, the Lender loaned $400,000
to the Company, the Maximum Loan Amount. The Company should have repaid all principal, interest and other amounts outstanding on or before
November 14, 2020. The Company’s obligations under the Loan Agreement and the Note are secured by a first-priority security interest
in substantially all the Company’s assets (the “Collateral”). The outstanding principal advanced to Company pursuant
to the Loan Agreement initially bore interest at the rate of 12% per annum, compounded annually. Upon the occurrence of an Event of Default
under the Loan Agreement and Note, all amounts then outstanding (including principal and interest) shall bear interest at the rate of
18% per annum, compounded annually until the Event of Default is cured. Additionally, at or prior to December 31, 2018, the Company should
have achieved an accounts receivable balance plus inventory equal to the unpaid principal balance of the Note (the “Minimum Asset
Amount”).
In the event that the Company’s accounts
receivable balance plus inventory balance is less than paid principal balance of the Note as of December 31, 2018, the Company
shall have 45 days (through and until February 15, 2019) to cure such violation and an establish accounts receivable plus inventory equal
to the unpaid principal balance of the Note. Commencing March 31, 2019 and at all times thereafter through the remainder of the commitment
period and for so long thereafter as there is any amount still due and owing under the Note, the Company must maintain an accounts receivable
balances plus inventory such that the outstanding principal borrowed by Company under the Loan Agreement and Note is less than or equal
to eighty five percent (85%) of accounts receivable plus fifty percent (50%) of inventory, all as measured at the same point in time.
Commencing on January 10, 2019 and on or before
the 10th day of each month thereafter, the Company should have paid Lender all interest accrued on outstanding principal under
the Loan Agreement and Notes as of the end of the month then concluded. Upon the occurrence of any Event of Default and at any time thereafter,
Lender may, at its option, declare any and all obligations immediately due and payable without demand or notice. As of December 31, 2022
and 2021, the Company did not meet the Minimum Asset Amount covenant as defined in the Loan Agreement, failed to timely pay interest payments
due, and has violated other default provisions. The note balance due of $400,000 has been reflected as a current liability on the accompanying
consolidated balance sheets and interest shall accrue at 18% per annum. The Loan Agreement and Note contain customary representations,
warranties, and covenants, including certain restrictions on the Company’s ability to incur additional debt or create liens on its
property. The Loan Agreement and the Note also provide for certain events of default, including, among other things, payment defaults,
breaches of representations and warranties, breach of covenants, and bankruptcy or insolvency proceedings, the occurrence of which, after
any applicable cure period, would permit Lender, among other things, to accelerate payment of all amounts outstanding under the Loan Agreement
and the Note, as applicable, and to exercise its remedies with respect to the Collateral, including the sale of the Collateral. On December
31, 2022 and 2021, principal amount due under this Note amounted to $400,000 and is considered to be in default. On December 31, 2022
and 2021, accrued interest payable under this Note amounted to $292,241 and $220,241, respectively, and is included in accrued expenses
on the accompanying consolidated balance sheets.
Mercer Street Global Opportunity Fund Notes
On March 14, 2022, the Company entered into an
Original Issue Discount Promissory Note and Security Agreement (the “March 2022 Note”) in the principal amount of $197,500
with Mercer Street Global Opportunity Fund, LLC (the “Investor”). The March 2022 Note was funded on March 14, 2022 and the
Company received net proceeds of $175,000 which is net of an original issue discount and investor legal fees of $22,500. The original
issue discount was recorded as a debt discount to be amortized over the life of the March 2022 note. The March 2022 Note matures 12 months
after issuance and bears interest at a rate of 3% per annum. At any time, the Company may prepay all or any portion of the principal amount
of the March 2022 Note and any accrued and unpaid interest without penalty. The March 2022 Note also creates a lien on and grants a priority
security interest in all the Company’s assets. In connection with the March 2022 Note, the Company issued 823,529 shares of its
common stock to the placement agent as fee for the capital raise. The 823,529 shares of common stock issued were recorded as a debt discount
of $12,963 based on the relative fair value method to be amortized over the life of the March 2022 Note. For the year ended December 31,
2022, amortization of debt discount related to the March 2022 Note amounted to $28,075 which has been included in interest expense on
the accompanying consolidated statements of operations. On December 31, 2022, the principal balance due on the March 2022 Note amounted
to $197,500 and accrued interest payable amounted to $4,756.
On November 22, 2022, the Company entered into
a Promissory Note and Security Agreement (the “November 2022 Note”) in the principal amount of $65,000 with Mercer Street
Global Opportunity Fund, LLC (the “Investor”). The November 2022 Note was funded on November 22, 2022 and the Company received
net proceeds of $62,500 which is net of investor legal fees of $2,500. The legal fees were recorded as a debt discount to be amortized
over the life of the November 2022 note. The November 2022 Note matures on August 22, 2023 and bears interest at a rate of 8% per annum.
At any time, the Company may prepay all or any portion of the principal amount of the November 2022 Note and any accrued and unpaid interest
without penalty. The November 2022 Note also creates a lien on and grants a priority security interest in all the Company’s assets.
For the year ended December 31, 2022, amortization of debt discount related to the November 2022 Note amounted to $347 which has been
included in interest expense on the accompanying consolidated statements of operations. On December 31, 2022, the principal balance due
on the November 2022 Note amounted to $65,000 and accrued interest payable amounted to $214.
GS Capital Debt
On June 23, 2022, the Company entered into entered
into a Securities Purchase Agreement (“Agreement”) with GS Capital Partners, LLC (“GS Capital”), pursuant to which
a Promissory Note (the “GS Capital June 2022 Note”) was made to GS Capital in the aggregate principal amount of $195,000.
The GS Capital June 2022 Note was purchased for $176,000, reflecting an original issuance discount of $19,000, and was funded on June
24, 2022 (less legal and other administrative fees). The Company received net proceeds of $148,420. The Company further issued GS Capital
a total of 1,750,000 commitment shares (“Commitment Shares”) as additional consideration for the purchase of the Note (See
Note 9). Additionally, the GS Capital Note is convertible upon an event of default into common shares at an initial effective conversion
price which was lower than the fair value of common shares based on the quoted closing price of the Company’s common stock on the
measurement date. Principal and interest payments shall be made in 10 installments of $21,060 each beginning on the 90th-day anniversary
following the issue date and continuing thereafter each 30 days for nine months. The GS Capital Note matures 12 months after issuance
and bears interest at a rate of 8% per annum. GS Capital shall have the right at any time following an Event of Default to convert all
or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under this Note at a conversion price
of $0.011, subject to adjustment as defined in the GS Capital Note. The Company did not calculate a beneficial conversion feature since
the GS Capital Note is contingently convertible upon default on the GS Capital Note. As of December 31, 2022, the Company is not in default
on this note. In the event that following the Issue Date the closing trading price of the Company’s common stock is then being traded
is below $0.011 per share for more than ten consecutive trading days, then the conversion price shall be equal to $0.004
per share. The GS Capital Note contains conversion limitations providing that a holder thereof may not convert the Note to the extent
(but only to the extent) that, if after giving effect to such conversion, the holder or any of its affiliates would beneficially own in
excess of 4.99% of the outstanding shares of the Company’s common stock immediately after giving effect to such conversion or exercise.
A holder may increase or decrease its beneficial ownership limitation upon notice to the Company provided that in no event such limitation
exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice. Events of default include, amongst other
items, failure to pay principal or interest, bankruptcy, delisting of the Company’s stock, financial statement restatements, or
if the Company effectuates a reverse split. Upon the occurrence of any event of default, the GS Capital Note shall become immediately
and automatically due and payable and the Company shall pay to GS Capital, in full satisfaction of its obligations hereunder, an amount
equal to: (a) the then outstanding principal amount of this note plus (b) accrued and unpaid interest on the unpaid principal amount
of this note to the date of payment (the “mandatory prepayment date”) plus (y) default interest, if any, multiplied
by 120%. On December 15, 2022, the Company and GS Capital entered into a letter agreement to extend the due date of the GS Capital June
2022 note by 60 days. Specifically, the maturity date of the GS Capital June 2022 note was extended to August 23, 2023 and the next payment
due date was extended to February 28, 2023. Through December 31, 2022, the Company paid $53,512 of principal balance. On December 31,
2022, the principal balance due on the GS Capital Note amounted to $141,488 and accrued interest payable amounted to $7,471.
On July 26, 2022, the Company closed a Securities
Purchase Agreement (“July 2022 Agreement”) with GS Capital, pursuant to which a Promissory Note (“GS Capital July 2022
Note”) was made to GS Capital in the aggregate principal amount of $195,000. The GS Capital July 2022 Note was purchased for $176,000,
reflecting an original issuance discount of $19,000, and was funded on July 28, 2022 (less legal and other administrative fees). The Company
received net proceeds of $158,920. The Company further issued GS Capital a total of 2,600,000 commitment shares (“July 2022 Commitment
Shares”) as additional consideration for the purchase of the July 2022 Note. In addition, the Company issued 998,008 of its common
stock to the placement agent as fee for the capital raise, respectively. The July Commitment Shares and the placement agent shares were
recorded as a debt discount of $34,606 based on the relative fair value method to be amortized over the life of the Note. Additionally,
the GS Capital July 2022 Note is convertible upon an event of default into common shares at an initial effective conversion price which
was lower than the fair value of common shares based on the quoted closing price of the Company’s common stock on the measurement
date. Principal and interest payments shall be made in 10 installments of $21,060 each beginning on the 90th-day anniversary following
the issue date and continuing thereafter each 30 days for nine months. The GS Capital July 2022 Note matures 12 months after issuance
and bears interest at a rate of 8% per annum. GS Capital shall have the right at any time following an Event of Default to convert all
or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under the GS Capital July 2022 Note at
a conversion price of $0.011, subject to adjustment as defined in the Note. The Company did not calculate a beneficial conversion feature
since the GS Capital July 2022 Note is contingently convertible upon a default on the July 2022 Note. As of December 31, 2022, the Company
is not in default on this note. In the event that following the Issue Date the closing trading price of the Company’s common stock
is then being traded is below $0.011 per share for more than ten consecutive trading days, then the conversion price shall
be equal to $0.004 per share. The July 2022 Note contains conversion limitations providing that a holder thereof may not convert the Note
to the extent (but only to the extent) that, if after giving effect to such conversion, the holder or any of its affiliates would beneficially
own in excess of 4.99% of the outstanding shares of the Company’s common stock immediately after giving effect to such conversion
or exercise. A holder may increase or decrease its beneficial ownership limitation upon notice to the Company provided that in no event
such limitation exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice. On December 15, 2022,
the Company and GS Capital entered into a letter agreement to extend the due date of the GS Capital July 2022 note by 60 days. Specifically,
the maturity date of the GS Capital July 2022 note was extended to September 26, 2023 and the next payment due date was extended to February
28, 2023. Through December 31, 2022, the Company paid $34,120 of principal balance. On December 31, 2022, the principal balance due on
the GS Capital July 2022 Note amounted to $160,880 and accrued interest payable amounted to $6,441.
On September 6, 2022, the Company closed a Securities
Purchase Agreement (“September 2022 Agreement”) with GS Capital, pursuant to which a Promissory Note (“September 2022
Note”) was made to GS Capital in the aggregate principal amount of $195,000. The September 2022 Note was purchased for $176,000,
reflecting an original issuance discount of $19,000, and was funded on September 6, 2022 (less legal and other administrative fees). The
Company received net proceeds of $158,920. The Company further issued GS Capital a total of 3,300,000 commitment shares (“September
2022 Commitment Shares”) as additional consideration for the purchase of the September 2022 Note. In addition, the Company issued
773,626 of its common stock to the placement agent as fee for the capital raise, respectively. The September Commitment Shares and the
placement agent shares were recorded as a debt discount of $30,326 based on the relative fair value method to be amortized over the life
of the Note. Additionally, the September 2022 Note is convertible into common shares upon an event of default at an initial effective
conversion price which was lower than the fair value of common shares based on the quoted closing price of the Company’s common
stock on the measurement date. Principal and interest payments shall be made in 9 installments of $23,400 each beginning on the 120th-day
anniversary following the issue date and continuing thereafter each 30 days for eight months. The September 2022 Note matures 12 months
after issuance and bears interest at a rate of 8% per annum. GS Capital shall have the right at any time following an Event of Default
to convert all or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under the September 2022
Note at a conversion price of $0.009, subject to adjustment as defined in the Note. The Company did not calculate a beneficial conversion
feature since the GS Capital July 2022 Note is contingently convertible upon a default on the September 2022 Note. As of December 31,
2022, the Company is not in default on this note. In the event that following the Issue Date the closing trading price of the Company’s
common stock is then being traded is below $0.009 per share for more than ten consecutive trading days, then the conversion
price shall be equal to $0.0032 per share. The September 2022 Note contains conversion limitations providing that a holder thereof may
not convert the Note to the extent (but only to the extent) that, if after giving effect to such conversion, the holder or any of its
affiliates would beneficially own in excess of 4.99% of the outstanding shares of the Company’s common stock immediately after giving
effect to such conversion or exercise. A holder may increase or decrease its beneficial ownership limitation upon notice to the Company
provided that in no event such limitation exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice.
On December 15, 2022, the Company and GS Capital entered into a letter agreement to extend the due date of the GS Capital September 2022
note by 60 days. Specifically, the maturity date of the GS Capital September 2022 note was extended to November 6, 2023 and the next payment
due date was extended to March 6, 2023. On December 31, 2022, the principal balance due on the GS Capital September 2022 Note amounted
to $195,000 and accrued interest payable amounted to $5,001.
In connection with the Letter Agreement dated
December 15, 2022, in order to induce GS Capital to extend the due dates of the GS Capital Notes, the Company issued 15,000,000 shares
of the Company’s common stock. These shares were valued at $112,500, or $0.0075 per common share, based on the quoted closing price
of the Company’s common stock on the measurement date. In connection with the issuance of these shares, during the year ended December
31, 2022, the Company recorded an inducement expense of $112,500 which was included in loss on debt extinguishment on the accompanying
consolidated statement of operations.
Other Notes Payable
On May 10, 2021, the Company entered into a Loan
and Security Agreement (the “Loan Agreement”) and a Secured Promissory Note (the “Promissory Note”) in the amount
of $500,000 with a lender. The Promissory Note shall accrue interest at 8% per annum, compounded annually, and all outstanding principal
and accrued interest is due and payable of May 10, 2023. The Company’s obligations under the Loan Agreement and the Promissory Note
are secured by a second priority security interest in substantially all of the Company’s assets (the “Collateral”).
The Loan Agreement and Promissory Note contain customary representations, warranties, and covenants, including certain restrictions on
the Company’s ability to incur additional debt or create liens on its property. The Loan Agreement and the Promissory Note also
provide for certain events of default, including, among other things, payment defaults, breaches of representations and warranties and
bankruptcy or insolvency proceedings, the occurrence of which, after any applicable cure period, would permit Lender, among other things,
to accelerate payment of all amounts outstanding under the Loan Agreement and the Promissory Note, as applicable, and to exercise its
remedies with respect to the Collateral. Upon the occurrence of an Event of Default under the Loan Agreement and Promissory Note, all
amounts then outstanding (including principal and interest) shall bear interest at the rate of 18% per annum, compounded annually until
the Event of Default is cured. On December 31, 2022 and 2021, accrued interest payable under this Promissory Note amounted to $65,863
and $25,863, respectively, and is included in accrued expenses on the accompanying consolidated balance sheets. On December 31, 2022 and
2021, principal amount due under this Promissory Note amounted to $500,000.
On July 22, 2021, in connection with the acquisition
of Mobile Tint, the Company assumed vehicle and equipment loans in the amount of $95,013. These loans bear interest at rates ranging from
6.79% to 8.24% and are payable monthly through April 2025. On December 31, 2022 and 2021, notes payable related to these vehicle and equipment
loans amounted to $39,513 and $78,925, respectively.
On November 8, 2022, the Company entered into
a Promissory Note (the “November 2022 Note”) with a lender investor (the “Private Investor”) in the principal
amount of $200,000 and received net proceeds of $200,000. The November 2022 Note bears interest at a rate of 8% per annum and all outstanding
principal and accrued and unpaid interest is due on November 8, 2024. At any time, the Company may prepay all or any portion of the principal
amount of the November 2022 Note and any accrued and unpaid interest without penalty. As security for payment of the principal and interest
on the November 2022 Note, the Company and the lender Investor previously entered into that certain Loan and Security Agreement dated
May 10, 2021, which is incorporated into the November 2022 Note. On December 31, 2022, accrued interest payable under this Promissory
Note amounted to $2,367, and is included in accrued expenses on the accompanying consolidated balance sheets. On December 31, 2022, principal
amount due under this Promissory Note amounted to $200,000.
For the years ended December 31, 2022 and 2021,
amortization of debt discounts related to notes payable amounted to $121,408 and $0, respectively, which has been included in interest
expense on the accompanying consolidated statements of operations.
PPP Loan
On April 28, 2020, the Company entered into a
Paycheck Protection Program Promissory Note (the “PPP Note”) with respect to a loan of $156,200 (the “PPP Loan”)
from Comerica Bank. The PPP Loan was obtained pursuant to the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid,
Relief, and Economic Security Act (the “CARES act”) administered by the U.S. Small Business Administration (“SBA”).
The PPP Loan matures on April 28, 2022 and bears interest at a rate of 1.00% per annum. The PPP Loan is payable in 18 equal monthly payments
of approximately $8,900 commencing November 1, 2020. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties.
The Company may apply to have the loan forgiven pursuant to the terms of the PPP if certain criteria are met. The Company applied for
forgiveness of its PPP Loan, and on November 4, 2021, the Company was notified that the Small Business Administration forgave $95,000
of the principal loan amount and $1,442 of interest. As of November 4, 2021, the remaining principal balance of the loan was $61,200 and
the remaining accrued interest balance was $935. During the year ended December 31, 2022, the Company repaid PPP Loan principal of $30,107.
On December 31, 2022 and 2021, the principal amount due under the PPP Loan amounted to $18,823 and $48,929, respectively. As of December
31, 2022 and 2021, accrued interest payable amounted to $170 and $1,031, respectively.
On December 31, 2022, future annual maturities
of notes payable are as follows:
On December 12, 2019, the Company filed an Amendment
to its Articles of Incorporation to designate a series of preferred stock, the Series B Convertible Preferred Stock (the “Series
B”), with the Secretary of State of the State of Colorado. The Certificate of Designations established 100,000 shares of the Series
B, par value $0.10, having such designations, preferences, and rights as determined by the Company’s Board of Directors in its sole
discretion, in accordance with the Company’s Articles of Incorporation and Amended and Restated Bylaws. The Certificate of Designations
became effective with the State of Colorado upon filing.
The Series B ranks senior with respect to dividends
and right of liquidation with the Company’s common stock and junior to all existing and future indebtedness of the Company. The
Series B has a stated value per share of $1,000, subject to adjustment as provided in the Certificate of Designations (the “Stated
Value”), and a dividend rate of 2% per annum of the Stated Value.
The Series B is subject to redemption (at Stated
Value, plus any accrued, but unpaid dividends (the “Liquidation Value”) by the Company no later than three years after a Deemed
Liquidation Event and at the Company’s option after one year from the issuance date of the Series B, subject to a ten-day notice
(to allow holder conversion). A “Deemed Liquidation Event” will mean: (a) a merger or consolidation in which the Company is
a constituent party or a subsidiary of the Company is a constituent party and the Company issues shares of its capital stock pursuant
to such merger or consolidation, except any such merger or consolidation involving the Company or a subsidiary in which the shares of
capital stock of the Company outstanding immediately prior to such merger or consolidation continue to represent, or are converted into
or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting
power, of the capital stock of the surviving or resulting corporation or, if the surviving or resulting corporation is a wholly-owned
subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting
corporation; or (b) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions,
by the Company or any subsidiary of the Company of all or substantially all the assets of the Company and its subsidiaries taken as a
whole, or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Company if substantially all of
the assets of the Company and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease,
transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Company.
The Series B is convertible into common stock
at the option of a holder or if the closing price of the common stock exceeds 400% of the Conversion Price for a period of twenty consecutive
trading days, at the option of the Company. Conversion Price means a price per share of the common stock equal to 100% of the lowest daily
volume weighted average price of the common stock during the two years preceding or subsequent two years following the Issuance Date,
subject to adjustment as otherwise provided in the Certificate of Designations (the “Conversion Price”).
In the event of a conversion of any Series B,
the Company shall issue to the holder a number of shares of common stock equal to the sum of the Stated Value plus accrued but unpaid
dividends multiplied by the number of shares of Series B Preferred Stock being converted divided by the Conversion Price.
Upon liquidation of the Company after payment
or provision for payment of liabilities of the Company and after payment or provision for any liquidation preference payable to the holders
of any preferred stock ranking senior to the Series B but prior to any distribution to the holders of Common Stock or preferred stock
ranking junior upon liquidation to the Series B, the holders of Series B will be entitled to be paid out of the assets of the Company
available for distribution to its stockholders an amount with respect to each share of Series B equal to the Liquidation Value.
The Series B has voting rights per Series B Share
equal to the Liquidation Value per share, divided by the Conversion Price, multiplied by fifty (50). Subject to applicable Colorado law,
the holders of Series B will have functional voting control in situations requiring shareholder vote.
These Series B preferred share issuances with
redemption provisions that permit the issuer to settle in either cash or common stock, at the option of the issuer, were evaluated to
determine whether temporary or permanent equity classification on the consolidated balance sheet was appropriate. As per the terms of
the Series B preferred stock agreements, Series B preferred stock is redeemable for cash and other assets on the occurrence of a deemed
liquidation event. A deemed liquidation event includes a change of control which is not in the Company’s control. As such, since
Series B preferred stock is redeemable upon the occurrence of an event that is not within the Company’s control, the Series B preferred
stock is classified as temporary equity.
The Company concluded that the Series B Preferred
Stock represented an equity host and, therefore, the redemption feature of the Series B Preferred Stock was not considered to be clearly
and closely related to the associated equity host instrument. However, the redemption features did not meet the net settlement criteria
of a derivative and, therefore, were not considered embedded derivatives that required bifurcation. The Company also concluded that the
conversion rights under the Series B Preferred Stock were clearly and closely related to the equity host instrument. Accordingly, the
conversion rights feature on the Series B Preferred Stock were not considered an embedded derivative that required bifurcation. The conversion
feature of the Series B Preferred Stock at the time of issuance was determined to be beneficial on the commitment date.
On December 12, 2019, the Board of Directors of
the Company agreed to satisfy $108,000 of accrued compensation owed to its directors and executive officers (collectively, the “Management”)
through a Liability Reduction Plan (the “Plan”). Under this Plan, Management agreed to accept 108 shares of the Company’s
Series B convertible preferred stock in settlement of accrued compensation. On December 21, 2020, the Board of Directors of the
Company agreed to satisfy $318,970 of accrued compensation owed to its directors and executive officers (collectively, the “Management”)
through a Liability Reduction Plan (the “Plan”). Under this Plan, Management agreed to accept 319 shares of the Company’s
Series B convertible preferred stock in settlement of accrued compensation.
On January 18, 2021, the Board of Directors of
the Company agreed to satisfy $295,000 of accrued compensation owed to its executive officers and former executive officer (collectively,
the “Management”) through a Liability Reduction Plan (the “Plan”). Under this Plan, Management agreed to accept
295 shares of the Company’s Series B convertible preferred stock in settlement of accrued compensation. The conversion feature of
the Series B Preferred Stock at the time of issuance was determined to be beneficial on the commitment date. Because the Series B Preferred
Stock was perpetual with no stated maturity date, and the conversions could occur any time from the date of issuance, the Company immediately
recorded non-cash stock-based compensation of $3,778,810 related to the beneficial conversion feature arising from the issuance of Series
B Preferred Stock.
On January 6, 2022, the Board of Directors of
the Company agreed to satisfy $278,654 of accrued compensation owed to its executive officers (collectively, the “Management”)
as of December 31, 2021 and included in accrued compensation on the accompanying consolidated balance sheet. Management agreed to accept
278 shares of the Company’s Series B convertible preferred stock in settlement of this accrued compensation. The conversion feature
of the Series B Preferred Stock at the time of issuance was determined to be beneficial on the commitment date. Because the Series B Preferred
Stock was perpetual with no stated maturity date, and the conversions could occur any time from the date of issuance, the Company immediately
recorded non-cash stock-based compensation of $957,556 related to the beneficial conversion feature arising from the issuance of Series
B Preferred Stock.
158 Series B Preferred Stock vested on May 1,
2021 and 842 shall vest of May 1, 2023. By mutual agreement between the parties, the vesting date of previously granted Series B Preferred
stock was extended through May 2023.
During the years ended December 31, 2022 and 2021,
the Company accrued dividends of $19,936 and $14,165, respectively, which was included in Series B convertible preferred stock on the
accompanying consolidated balance sheets.
As of December 31, 2022, the net Series B Preferred
Stock balance was $1,037,201, which includes stated value of $1,000,624 and accrued dividends payable of $36,577. As of December 31, 2021,
the net Series B Preferred Stock balance was $738,611, which includes stated value of $721,970 and accrued dividends payable of $16,641.
The net Series B Preferred Stock balance is included on the accompanying consolidated balance sheets.
Series C Preferred Stock
On August 20, 2020, the Company filed an Amendment
to its Articles of Incorporation to designate a series of preferred stock, the Series C Convertible Preferred Stock (the “Series
C”), with the Secretary of State of the State of Colorado. The Certificate of Designations established 100,000 shares of the Series
C, par value $0.10, having such designations, preferences, and rights as determined by the Company’s Board of Directors in its sole
discretion, in accordance with the Company’s Articles of Incorporation and Amended and Restated Bylaws. The Certificate of Designations
became effective with the State of Colorado upon filing.
The Series C ranks senior with respect to dividends
and right of liquidation with the Company’s common stock and junior to all existing and future indebtedness of the Company. The
Series C has a stated value per share of $100, subject to adjustment as provided in the Certificate of Designations (the “Stated
Value”), and a dividend rate of 2% per annum of the Stated Value.
The Company has no option to redeem the Series
C Preferred Stock. If the Company determines to liquidate, dissolve or wind-up its business and affairs, or effect any Deemed Liquidation
Event as defined below, each of which has been approved by the holders of a majority of the shares of Series C Preferred Stock then outstanding,
the Company will redeem all of the shares of Series C Preferred Stock outstanding immediately prior to such mandatory redemption event
at a price per share of Series C Preferred Stock equal to the aggregate Series C Liquidation Value, which is 150% of the sum of the Stated
Value plus accrued and unpaid dividends, for the shares of Series C Preferred Stock being redeemed.
The Company will deliver ten-day advance written
notice prior to the consummation of any mandatory redemption event via email or overnight courier (“Notice of Mandatory Redemption”)
to each Holder whose shares are to be redeemed. The Series C is subject to redemption at liquidation Value noted above by the Company.
Upon receipt by any Holder of a Notice of Mandatory Redemption, if Holder does not choose to convert, such Holder will promptly submit
to the Company such Holder’s Series C Preferred Stock certificates on the Redemption Payment Date. Upon receipt of such Holder’s
Series C Preferred Stock certificates, the Company will pay the applicable redemption price to such Holder in cash. A “Deemed Liquidation
Event” will mean: (a) a merger or consolidation in which the Company is a constituent party or a subsidiary of the Company is a
constituent party and the Company issues shares of its capital stock pursuant to such merger or consolidation, except any such merger
or consolidation involving the Company or a subsidiary in which the shares of capital stock of the Company outstanding immediately prior
to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent,
immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of the surviving or resulting
corporation or, if the surviving or resulting corporation is a wholly-owned subsidiary of another corporation immediately following such
merger or consolidation, the parent corporation of such surviving or resulting corporation; or (b) the sale, lease, transfer, exclusive
license or other disposition, in a single transaction or series of related transactions, by the Company or any subsidiary of the Company
of all or substantially all the assets of the Company and its subsidiaries taken as a whole, or the sale or disposition (whether by merger
or otherwise) of one or more subsidiaries of the Company if substantially all of the assets of the Company and its subsidiaries taken
as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition
is to a wholly owned subsidiary of the Company. Since the Company has determined that a deemed liquidation event is not probable, the
Series C is stated at the Stated Value plus accrued and unpaid dividends rather than redemption value, which is liquidation value.
The Series C is convertible at the option of a
holder at any time following the issuance date. In the event of a conversion of any Series C Preferred Stock, the Company shall issue
to such Holder a number of Conversion Shares equal to (x) the sum of (1) the Stated Value per share of Series C Preferred Stock plus (2)
any accrued but unpaid dividends thereon multiplied by (y) the number of shares of Series C Preferred Stock held by such Holder and subject
to the Holder Conversion Notice, divided by (z) the Conversion Price with respect to such Series C Preferred Stock. Conversion Price means
a price per share of the common stock equal to the lowest daily volume weighted average price of the common stock for any trading day
during the two years preceding the date of delivery of the conversion notice, subject to adjustment as otherwise provided in the Series
C Certificate of Designation.
Upon liquidation of the Company after payment
or provision for payment of liabilities of the Company and after payment or provision for any liquidation preference payable to the holders
of any preferred stock ranking senior to the Series C but prior to any distribution to the holders of Common Stock or preferred stock
ranking junior upon liquidation to the Series C, the holders of Series C will be entitled to be paid out of the assets of the Company
available for distribution to its stockholders an amount with respect to each share of Series C equal to the Liquidation Value.
Through April 28, 2021, each share of Series C
Preferred Stock was entitled to vote on all matters requiring shareholder vote. Each share of Series C Preferred Stock was entitled to
the number of votes per share based on the calculation of the number of conversion shares of Series C Preferred Stock is then convertible.
On April 28, 2021, the Company filed an Amended and Restated Certificate of Designations of Preferences, Rights, and Limitations of Series
C Convertible Preferred Stock (the “Amended Certificate”). The Amended Certificate changed the voting rights of the Series
C Preferred Stock on any matters requiring shareholder approval or any matters on which the common shareholders are permitted to vote.
Series C Preferred Stock shall have no right to vote on any matters requiring shareholder approval or any matters on which the common
shareholders (or other preferred stock of the Company which may vote with the common shareholders) are permitted to vote. With respect
to any voting rights of the Series C Preferred Stock set forth herein, the Series C Preferred Stock shall vote as a class, each share
of Series C Preferred Stock shall have one vote on any such matter, and any such approval may be given via a written consent in lieu of
a meeting of the Holders of the Series C Preferred Stock. Any reference herein to a determination, decision or election being made by
the “Majority Holders” shall mean the determination, decision or election as made by Holders holding a majority of the issued
and outstanding shares of Series C Preferred Stock at such time. It also adjusts the conversion feature of the Series C Preferred Stock
so that any Holder of Series C Preferred Stock cannot convert any portion of the Series C in excess of that number of Series C Preferred
Stock that upon conversion would result in beneficial ownership by the Holder of more than 4.99% of the outstanding shares of common stock
of the Company.
These Series C preferred stock issuances with
redemption provisions that permit the issuer to settle in either cash or common stock, at the option of the holder, were evaluated to
determine whether temporary or permanent equity classification on the consolidated balance sheet was appropriate. As per the terms of
the Series C preferred stock agreements, Series C preferred stock is redeemable for cash and other assets on the occurrence of a deemed
liquidation event. A deemed liquidation event includes a change of control which is not in the Company’s control. As such, since
Series C preferred stock is redeemable upon the occurrence of an event that is not within the Company’s control, the Series C preferred
stock is classified as temporary equity.
The Company concluded that the Series C Preferred
Stock represented an equity host and, therefore, the redemption feature of the Series C Preferred Stock was not considered to be clearly
and closely related to the associated equity host instrument. However, the redemption features did not meet the net settlement criteria
of a derivative and, therefore, were not considered embedded derivatives that required bifurcation. The Company also concluded that the
conversion rights under the Series C Preferred Stock were clearly and closely related to the equity host instrument. Accordingly, the
conversion rights feature on the Series C Preferred Stock were not considered an embedded derivative that required bifurcation. The conversion
feature of the Series C Preferred Stock at the time of issuance was determined to be beneficial on the commitment date.
During August and September 2020, the Company
entered into subscription agreements with an accredited investor whereby the investor agreed to purchase an aggregate of purchase 6,300
shares of the Company’s Series C Convertible Preferred Stock for $630,000, or $100.00 per share (the “Stated Value”),
which were used to pay off various discounted convertible instruments and redeem Series A preferred stock. During the three months
ended December 31, 2020, the Company entered into subscription agreements with an accredited investor whereby the investor agreed to purchase
an aggregate of purchase 7,000 shares of the Company’s Series C Convertible Preferred Stock for $700,000, or $100.00 per share (the
“Stated Value”), which were used from working capital purposes.
On February 24, 2021, the Company entered into
a subscription agreement with an accredited investor whereby the investor agreed to purchase 2,500 shares of the Company’s Series
C Convertible Preferred Stock for $250,000, or $100.00 per share, the stated value, which was used for working capital purposes. The conversion
feature of the Series C Preferred Stock at the time of issuance was determined to be beneficial on the commitment date. Because the Series
C Preferred Stock was perpetual with no stated maturity date, and the conversions could occur any time from the date of issuance, the
Company immediately recorded a non-cash deemed dividend of $2,845,238 related to the beneficial conversion feature arising from the issuance
of Series C Preferred Stock. This non-cash deemed dividend increased the Company’s net loss attributable to common stockholders
and net loss per share.
On August 25, 2021, the Company entered into a
subscription agreement with an accredited investor whereby the investor agreed to purchase 3,000 shares of the Company’s Series
C Convertible Preferred Stock for $300,000, or $100.00 per share, the stated value, which was used for working capital purposes. The conversion
feature of the Series C Preferred Stock at the time of issuance was determined to be beneficial on the commitment date. Because the Series
C Preferred Stock was perpetual with no stated maturity date, and the conversions could occur any time from the date of issuance, the
Company immediately recorded a non-cash deemed dividend of $1,509,523 related to the beneficial conversion feature arising from the issuance
of Series C Preferred Stock. This non-cash deemed dividend increased the Company’s net loss attributable to common stockholders
and net loss per share.
On December 7, 2021, the Company issued 1,500,000
shares of its common stock upon conversion of 120 shares of Series C Preferred Stock with a stated value of $12,000.
On January 12, 2022, the Company issued 1,543,151
shares its common stock upon the conversion of 120 shares of Series C preferred with a stated redemption value of $12,000. The conversion
price was based on contractual terms of the related Series C preferred shares.
On April 20, 2022, the Company issued 13,184,548
shares its common stock upon the conversion of 1,020 shares of Series C preferred with a stated redemption value of $102,000. The conversion
price was based on contractual terms of the related Series C preferred shares.
On December 1, 2022, the Company issued 6,535,274
shares its common stock upon the conversion of 250 shares of Series C preferred with a stated redemption value of $25,000. The conversion
price was based on contractual terms of the related Series C preferred shares.
During the years ended December 31, 2022 and 2021,
the Company accrued dividends of $35,719 and $32,981, respectively, which was included in Series C convertible preferred stock on the
accompanying consolidated balance sheets.
As of December 31, 2022, the net Series C Preferred
Stock balance was $1,803,731, which includes stated value of $1,729,000 and accrued dividends payable of $74,731. As of December 31, 2021,
the net Series C Preferred Stock balance was $1,907,012, which includes stated liquidation value of $1,868,000 and accrued dividends payable
of $39,012. The net Series C Preferred Stock balance is included on the accompanying consolidated balance sheets.
Common Stock
Issuance of Common Stock for Services
Issuance of Common Stock for Professional Fees
2021
On January 6, 2021, the Company issued 100,000
shares of its common stock for business development services rendered. These shares were valued at $10,000, or $0.10 per common share,
based on the quoted closing price of the Company’s common stock on the measurement date. In connection with the issuance of these
shares, during the year ended December 31, 2021, the Company recorded stock-based professional fees of $10,000.
On February 1, 2021, the Company issued an aggregate
of 700,000 shares of its common stock for business development, advisory and consulting services rendered and to be rendered. These shares
were valued at $54,600, or $0.078 per common share, based on the quoted closing price of the Company’s common stock on the measurement
date and will be amortized into stock-based consulting fees over the term of the agreement or vesting period ranging from immediately
to one year. In connection with the issuance of these shares, during the years ended December 31, 2022 and 2021, the Company recorded
stock-based professional fees of $3,250 and $51,350, respectively.
On March 8, 2021, the Company issued an aggregate
of 750,000 shares of its common stock for business development and consulting services rendered and to be rendered. These shares were
valued at $49,500, or $0.066 per common share, based on the quoted closing price of the Company’s common stock on the measurement
date, and will be amortized into stock-based consulting fees over the term of the agreement or vesting period. In connection with the
issuance of these shares, during the year ended December 31, 2021, the Company recorded stock-based professional fees of $49,500.
On April 7, 2021, the Company issued 2,500,000
shares of its common stock for investor relations services to be rendered. These shares were valued at $135,000, or $0.054 per common
share, based on the quoted closing price of the Company’s common stock on the measurement date. In connection with these shares,
during the year ended December 31, 2021, the Company recorded stock-based professional fees of $135,000.
On June 3, 2021, the Company issued 200,000 shares
of its common stock for technology services rendered. These shares were valued at $6,000, or $0.03 per common share, based on the quoted
closing price of the Company’s common stock on the measurement date. In connection with the issuance of these shares, during the
year ended December 31, 2021, the Company recorded stock-based professional fees of $6,000.
On July 7, 2021, the Company issued 2,500,000
shares of its common stock for investor relations services to be rendered. These shares were valued at $72,500, or $0.029 per common share,
based on the quoted closing price of the Company’s common stock on the measurement date. In connection with these shares, during
the year ended December 31, 2021, the Company recorded stock-based professional fees of $72,500.
On August 23, 2021, the Company issued 500,000
shares of its common stock for business development and consulting services rendered and to be rendered. These shares were valued at $19,000,
or $0.038 per common share, based on the quoted closing price of the Company’s common stock on the measurement date, and will be
amortized into stock-based consulting fees over the term of the agreement or vesting period. In connection with the issuance of these
shares, during the years ended December 31, 2022 and 2021, the Company recorded stock-based professional fees of $12,271 and $6,729, respectively.
On October 1, 2021, the Company issued 6,000,000
shares of its common stock for investor relations services to be rendered. These shares were valued at $207,600, or $0.0346 per common
share, based on the quoted closing price of the Company’s common stock on the measurement date. In connection with these shares,
during the years ended December 31, 2022 and 2021, the Company recorded stock-based professional fees of $103,800 and $103,800, respectively.
2022
On June 7, 2022, the Company issued an aggregate
of 4,000,000 shares of its common stock for business development and consulting services rendered and to be rendered. These shares were
valued at $48,000, or $0.012 per common share, based on the quoted closing price of the Company’s common stock on the measurement
date, and will be amortized into stock-based consulting fees over the term of the agreement. In connection with the issuance of these
shares, during the year ended December 31, 2022, the Company recorded stock-based professional fees of $27,000 and prepaid expenses of
$21,000 which will be amortized into stock-based professional fees over the remaining term of the agreement.
On June 24, 2022, the Company issued an aggregate
of 3,000,000 shares of its common stock for business development and consulting services rendered and to be rendered. These shares were
valued at $54,000, or $0.018 per common share, based on the quoted closing price of the Company’s common stock on the measurement
date, and will be amortized into stock-based consulting fees over the term of the agreement. In connection with the issuance of these
shares, during the year ended December 31, 2022, the Company recorded stock-based professional fees of $54,000.
On July 1, 2022, the Company granted a restricted
stock award of 2,500,000 common shares of the Company to a consultant of the Company for business development and consulting services
rendered, which shares were valued at $31,250, or $0.0125 per common share, based on the quoted closing price of the Company’s common
stock on the measurement date, and will be amortized into stock-based consulting fees over the term of the agreement. In connection with
the issuance of these shares, during the year ended December 31, 2022, the Company recorded stock-based professional fees of $31,250.
On July 15, 2022, the Company granted a restricted
stock award of 5,454,545 common shares of the Company to a consultant of the Company for government relations services to be rendered,
which shares were valued at $60,000, or $0.011 per common share, based on the quoted closing price of the Company’s common stock
on the measurement date, and will be amortized into stock-based consulting fees over the term of the agreement. In connection with the
issuance of these shares, during the year ended December 31, 2022, the Company recorded stock-based professional fees of $55,000 and prepaid
expenses of $5,000 as of December 31, 2022, which will be amortized into stock-based professional fees over the remaining term of the
agreement.
On October 3, 2022, the Company issued 3,000,000
shares of its common stock for investor relations services to be rendered. These shares were valued at $24,000, or $0.008 per common share,
based on the quoted closing price of the Company’s common stock on the measurement date. In connection with the issuance of these
shares, during the year ended December 31, 2022, the Company recorded stock-based professional fees of $12,000 and prepaid expenses of
$12,000 as of December 31, 2022, which will be amortized into stock-based professional fees over the remaining term of the agreement.
During the year ended December 31, 2022, the Company
recorded stock-based professional fees of $119,321 in connection with the amortization of prepaid expenses of $119,321 related to common
shares previously issued. During the year ended December 31, 2021, the Company recorded stock-based professional fees of $43,250 in connection
with the amortization to prepaid expenses of $38,250 and accretion of stock-based professional fees of $5,000 related to common shares
previously issued.
Issuance of Common Stock for Stock-Based Compensation
2021
On February 1, 2021, the Company issued 200,000
shares of its common stock to an individual who agreed to act as the Company’s national sales manager for services to be rendered.
These shares were valued at $15,600, or $0.078 per common share, based on the quoted closing price of the Company’s common stock
on the measurement date. These shares were to vest on May 1, 2022. On May 17, 2021, this individual resigned, and these shares have been
forfeited.
On March 8, 2021, the Company granted restricted
stock awards for an aggregate of 2,500,000 common shares of the Company to an employee and an officer of the Company for services to be
rendered. which were valued at $165,000, or $0.066 per common share, based on the quoted closing price of the Company’s common stock
on the measurement date. These shares were to vest on May 1, 2022. On May 17, 2021, this individual resigned, and these shares have been
forfeited.
On July 22, 2021, pursuant to the Share Exchange
Agreement and Plan of Reorganization (See Note 3), the Company issued 976,500 shares of its common stock to employees of Mobile Tint LLC
as a bonus. These shares were valued at $24,413, or $0.025 per common share, based on the quoted closing price of the Company’s
common stock on the measurement date. In connection with these shares, during the year ended December 31, 2021, the Company recorded stock-based
compensation of $24,413.
On September 17, 2021, the Company granted a restricted
stock award for 1,000,000 common shares of the Company to an employee for services to be rendered through May 1, 2022 which were valued
at $30,600, or $0.031 per common share, based on the quoted closing price of the Company’s common stock on the measurement date.
These shares will vest on May 1, 2022. In connection with these shares, the Company shall record stock-based compensation over the vesting
period.
2022
On March 24, 2022, the Company granted restricted
stock awards of 500,000 vested common shares of the Company to an employee of the Company for services rendered. The awards were valued
at $14,250, or $0.0285 per common share, based on the quoted closing price of the Company’s common stock on the measurement date.
On July 12, 2022, the Company granted a restricted
stock award of 1,000,000 common shares of the Company to an employee of the Company. The shares will vest on May 1, 2023. These shares
were valued on the date of grant at $11,000, or $0.011 per common share based on the quoted closing price of the Company’s common
stock on the measurement date. In connection with these shares, the Company shall record stock-based compensation over the vesting period.
On August 12, 2022, the Company granted a restricted
stock award of 2,000,000 common shares of the Company to a board member of the Company. The shares will vest on May 1, 2023. These shares
were valued on the date of grant at $24,000 or $0.012 per common share based on the quoted closing price of the Company’s common
stock on the measurement date. In connection with these shares, the Company shall record stock-based compensation over the vesting period.
During the years ended December 31, 2022 and 2021,
aggregate accretion of stock-based compensation expense on granted common shares amounted to $82,387 and $267,530, respectively. Total
unrecognized compensation expense related to these unvested common shares on December 31, 2022 amounted to $16,183. By mutual agreement
between the parties, the vesting date of previously granted shares was extended through May 2023.
The following table summarizes activity related
to non-vested shares:
Number of Non-Vested Shares
Weighted Average Grant Date Fair Value
Non-vested, December 31, 2020
23,826,926
$
0.16
Granted
6,194,767
0.06
Forfeited
(700,000
)
(0.07
)
Shares vested
(15,051,573
)
(0.14
)
Non-vested, December 31, 2021
14,270,120
0.14
Granted
3,500,000
0.014
Shares vested
(800,000
)
(0.037
)
Non-vested, December 31, 2022
16,970,120
$
0.119
Issuance of Common Stock for Accrued Compensation
On March 19, 2021, the Company issued 944,767
shares of its common stock pursuant to the terms of a Notice of Separation and General Release Agreement. These shares were valued at
$55,741, or $0.059 per common share, based on the quoted closing price of the Company’s common stock on the measurement date. In
connection with the issuance of these shares, the Company reduced accrued compensation by $40,625 and recorded stock-based compensation
of $15,116.
Issuance of Common Stock Pursuant to Share Exchange Agreement
On July 22, 2021, the Company closed the Exchange
Agreement and acquired 80% of the Mobile Member Units (see Note 3). The Mobile Member Units were exchanged for restricted shares of the
Company’s common stock, in an amount equal to $800,000, divided by the average of the closing prices of the Company’s common
stock during the 30-day period immediately prior to the closing as defined in the Exchange Agreement. In connection with the Exchange
Agreement, the Company issued 28,021,016 shares of its common stock. These shares were valued at $694,921, or $0.0248 based on the quoted
closing price of the Company’s common stock on the measurement date.
Shares Issued for Accounts Payable
On May 4, 2021, the Company issued 3,801,224 common
shares upon conversion of accounts payable of $117,838, or $0.031 per common share, based on the quoted closing price of the Company’s
common stock on the measurement date.
Common Stock Issued in Connection with Convertible
Debt
In connection with the SPA, on October 18, 2021,
the Company issued 668,151 shares of its common stock to the placement agent as fee for the capital raise. The 668,151 shares of common
stock issued were recorded as a debt discount of $14,064 based on the relative fair value method to be amortized over the life of the
Note (See Note 8).
Common Stock Issued in Connection with Notes
Payable
In connection with the March 2022 Note, the Company
issued 823,529 shares of its common stock to the placement agent as fee for the capital raise. The 823,529 shares of common stock issued
were recorded as a debt discount of $12,963 based on the relative fair value method to be amortized over the life of the Note (See Note
9).
In connection with the June 2022 GS Capital Note,
the Company issued 1,750,000 shares of its common stock as a commitment fee. The 1,750,000 shares of common stock issued were recorded
as a debt discount of $32,736 based on the relative fair value method to be amortized over the life of the Note (See Note 9).
In connection with the July 2022 GS Capital Note,
on July 28, 2022, the Company issued 2,600,000 shares of its common stock as a commitment fee and the Company issued 998,008 shares of
its common stock to the placement agent as fee for the capital raises. The aggregate of 3,598,008 shares of common stock issued were recorded
as a debt discount of $34,606 based on the relative fair value method to be amortized over the life of the July 2022 Note (See Note 9).
In connection with the September 2022 GS Capital
Note, on September 6, 2022, the Company issued 3,300,000 shares of its common stock as a commitment fee and the Company issued 773,626
shares of its common stock to the placement agent as fee for the capital raises. The aggregate of 4,073,626 shares of common stock issued
were recorded as a debt discount of $30,326 based on the relative fair value method to be amortized over the life of the September 2022
Note (See Note 9).
In connection with the Letter Agreement dated
December 15, 2022, to GS Capital to extend the due dates of the GS Capital Notes, the Company issued 15,000,000 shares of the Company’s
common stock. These shares were valued at $112,500, or $0.0075 per common share, based on the quoted closing price of the Company’s
common stock on the measurement date. In connection with the issuance of these shares, during the year ended December 31, 2022, the Company
recorded an expense of $112,500 which was included in loss on debt extinguishment on the accompanying consolidated statement of operations.
Common Stock Issued for Conversion of Series
C Preferred Stock
On December 7, 2021, the Company issued 1,500,000
shares its common stock upon the conversion of 120 shares of Series C preferred with a stated redemption value of $12,000. The conversion
price was based on contractual terms of the related Series C preferred shares.
On January 12, 2022, the Company issued 1,543,151
shares its common stock upon the conversion of 120 shares of Series C preferred with a stated redemption value of $12,000. The conversion
price was based on contractual terms of the related Series C preferred shares.
On April 20, 2022, the Company issued 13,184,548
shares its common stock upon the conversion of 1,020 shares of Series C preferred with a stated redemption value of $102,000. The conversion
price was based on contractual terms of the related Series C preferred shares.
On December 1, 2022, the Company issued 6,535,274
shares its common stock upon the conversion of 250 shares of Series C preferred with a stated redemption value of $25,000. The conversion
price was based on contractual terms of the related Series C preferred shares.
Common stock issued for Accounts Payable
On January 6, 2022, the Company issued 90,859
common shares upon conversion of accounts payable of $2,174, or $0.024 per common share, based on the quoted closing price of the Company’s
common stock on the measurement date.
Common Stock Issued Upon Warrant Exercise
On January 7, 2021, the Company issued 1,008,000
shares of its common stock in connection with the cashless exercise of 1,050,000 warrants. The exercise price was based on contractual
terms of the related warrant.
Stock Options
For the years ended December 31, 2022 and 2021,
the Company recorded no compensation expense related to stock options. Total unrecognized compensation expense related to unvested stock
options on December 31, 2022 and 2021 amounted to $0.
Stock option activities for the years ended December
31, 2022 and 2021 are summarized as follows:
Number of Options
Weighted Average Exercise Price
Weighted Average Remaining Contractual Term (Years)
Aggregate Intrinsic Value
Balance Outstanding, December 31, 2020
8,445,698
$
0.40
-
-
Exercised
-
-
-
-
Balance Outstanding, December 31, 2021
8,445,698
0.40
-
-
Exercised
-
-
-
-
Balance Outstanding, December 31, 2022
8,445,698
$
0.40
3.43
$
-
Exercisable, December 31, 2022
8,445,698
$
0.40
3.43
$
-
Warrants
On January 7, 2021, the Company issued 1,008,000
shares of its common stock in connection with the cashless exercise of 1,050,000 warrants. The exercise price was based on contractual
terms of the related warrant.
On October 15, 2021, in connection with a Securities
Purchase Agreements with an accredited investor (See Note 7), the Company issued warrants to purchase an aggregate amount up to 16,500,000
shares of the Company’s common stock (the “Initial Warrants”). The Initial Warrants were exercisable at any time on
or after the date of the issuance and entitled this investor to purchase shares of the Company’s common stock for a period of five
years from the initial date the Initial Warrants become exercisable. Under the terms of the Initial Warrants, the holder was entitled
to exercise the Initial Warrants to purchase up to 16,500,000 shares of the Company’s common stock at an initial exercise price
of $0.05, subject to adjustment as detailed in the Warrants. In connection with the issuance of these warrants, on the initial measurement
date, the relative fair value of the Initial Warrants of $347,142 was recorded as a debt discount and an increase in paid-in capital (See
Note 7). On April 20, 2022, in connection with an Exchange Agreement, the 16,500,000 Initial Warrants were cancelled and a new warrant
to purchase up to 33,000,000 shares of the Company’s common stock at an initial exercise price of $0.025, subject to adjustment
as detailed in the Warrants was issued (See Note 7).
On April 20, 2022, in connection with an Exchange
Agreement (See Note 8), the Company issued warrants to purchase an aggregate amount up to 33,000,000 shares of the Company’s common
stock (the “New Warrants”). The New Warrants are exercisable at any time on or after the date of the issuance and entitled
this investor to purchase shares of the Company’s common stock for a period of five years from the initial date the warrants become
exercisable. Under the terms of the New Warrants, the holder is entitled to exercise the Warrants to purchase up to 33,000,000 shares
of the Company’s common stock at an initial exercise price of $0.025, subject to adjustment as detailed in the New Warrants. In
connection with the issuance of the New Warrants, on the initial measurement date, the relative fair value of the warrants of $325,785
was recorded as a debt discount and an increase in paid-in capital (See Note 8). On June 23, 2022, the Company issued common stock equivalents
with an initial conversion price of $0.011 per share and accordingly, the conversion price and warrant down-round provisions were triggered.
As a result, the conversion price of the New April 2022 Note was reduced to $0.011 per share and the exercise price of the New April 2022
Warrant was lowered to $0.011. As a result of the June 23, 2022 down-round provisions, the Company calculated the difference between the
warrants fair value on June 23, 2022, the date the down-round feature was triggered using the then current exercise price of $0.025 and
the new exercise price of $0.011. On June 23, 2022, the Company recorded a deemed dividend of $3,702 which represents the fair value transferred
to the warrant holders from the down round feature being triggered. Additionally, on September 6, 2022, the Company issued common stock
equivalents with an initial conversion price of $0.009 per share and accordingly, the conversion price and warrant down-round provisions
were triggered. As a result, the conversion price of the New April 2022 Note was reduced to $0.009 per share and the exercise price of
the New April 2022 Warrant was lowered to $0.009. As a result of the September 6, 2022 down-round provisions, the Company calculated the
difference between the warrants fair value on September 6, 2022, the date the down-round feature was triggered using the then current
exercise price of $0.011 and the new exercise price of $0.009. On September 6, 2022, the Company recorded a deemed dividend of $733 which
represents the fair value transferred to the warrant holders from the down round feature being triggered. No additional beneficial conversion
feature amount was recorded based on the September 6, 2022 valuation as the ratcheted beneficial conversion feature value was lower than
the original amount.
Warrant activities for the years ended December
31, 2022 and 2021 are summarized as follows:
Number of Warrants
Weighted Average Exercise Price
Weighted Average Remaining Contractual Term (Years)
Aggregate Intrinsic Value
Balance Outstanding December 31, 2020
2,050,000
$
0.05
3.66
$
137,000
Granted
16,500,000
0.05
-
-
Cancelled
(1,050,000
)
(0.01
)
-
-
Balance Outstanding December 31, 2021
17,500,000
0.05
4.67
-
Granted
33,000,000
0.025
-
-
Cancelled
(16,500,000
)
0.05
-
-
Balance Outstanding December 31, 2022
34,000,000
$
0.011
3.73
$
-
Exercisable, December 31, 2022
34,000,000
$
0.011
3.73
$
-
2018 Long-Term Incentive Plan
On June 7, 2018, a majority of the Company’s
shareholders and its board approved the adoption of a 2018 Long-Term Incentive Plan (the “2018 Plan”). The purpose of the
2018 Plan is to advance the interests of the Company, its affiliates and its stockholders and promote the long-term growth of the Company
by providing employees, non-employee directors and third-party service providers with incentives to maximize stockholder value and to
otherwise contribute to the success of the Company and its affiliates, thereby aligning the interests of such individuals with the interests
of the Company’s stockholders and providing them additional incentives to continue in their employment or affiliation with the Company.
The Plan was adopted on June 7, 2018 and effective on August 2, 2018. Under the 2018 Plan, the Plan Administrator may grant:
●
options to acquire the Company’s common stock, both incentive stock options that are intended to satisfy the requirements of Section 422 of the Internal Revenue Code and nonqualified stock options which are not intended to satisfy such requirements. The exercise price of options granted under our 2018 Plan must at least be equal to the fair market value of the Company’s common stock on the date of grant and the term of an option may not exceed ten years, except that with respect to an incentive stock option granted to any employee who owns more than 10% of the voting power of all classes of the Company’s outstanding stock as of the grant date the term must not exceed five years and the exercise price must equal at least 110% of the fair market value on the grant date.
●
stock appreciation rights, or SARs, which allow the recipient to receive the appreciation in the fair market value of the Company’s common stock between the date of grant and the exercise date. The amount payable under the stock appreciation right may be paid in cash or with shares of the Company’s common stock, or a combination thereof, as determined by the Administrator.
●
restricted stock awards, which are awards of the Company’s shares of common stock that vest in accordance with terms and conditions established by the Administrator.
●
restricted stock units, which are awards that are based on the value of the Company’s common stock and may be paid in cash or in shares of the Company’s common stock.
●
other types of stock-based or stock-related awards not otherwise described by the terms and provision of the 2018 Plan, including the grant or offer for sale of unrestricted shares of the Company’s common stock, and which may involve the transfer of actual shares of the Company’s common stock or payment in cash or otherwise of amounts based on the value of shares of the Company’s common stock and may be designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.
●
other cash-based awards to eligible persons in such amounts and upon such terms as the Administrator shall determine.
An award granted under the 2018 Plan must include
a minimum vesting period of at least one year, provided, however, that an award may provide that the award will vest before the completion
of such one-year period upon the death or qualifying disability of the grantee of the award or a change of control of the Company and
awards covering, in the aggregate, 25,000,000 shares of our Common Stock may be issued without any minimum vesting period.
The aggregate number of shares of common stock
and number of shares of the Company’s common stock that may be subject to incentive stock options granted under the 2018 Plan is
50,000,000 shares, of which 11,445,698 shares have been issued or granted under incentive stock options and 29,451,070 shares of restricted
stock have been issued as of December 31, 2022. All shares underlying grants are expected to be issued from the Company’s unissued
authorized shares available.
The entire disclosure for shareholders' equity comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income. Includes, but is not limited to, balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings, accumulated balance for each classification of other comprehensive income and amount of comprehensive income.
From time to time, the Company may be involved
in litigation related to claims arising out of its operations in the normal course of business. As of December 31, 2022, other than discussed
below, the Company is not involved in any other pending or threatened legal proceedings that it believes could reasonably be expected
to have a material adverse effect on its financial condition, results of operations, or cash flows.
On January 20, 2022, we received an Order Directing
Examination and Designating Officers to Take Testimony (a “Formal Order”) from the SEC. The Formal Order authorizes that an
examination be made to determine whether a stop order should be issued under Section 8(d) of the Securities Act of 1933 with respect to
the Company’s Registration Statement on Form S-1, and any supplements and amendments thereto. The Formal Order indicates that the
Form S-1 may be deficient in that it may contain untrue statements of material fact or omit to state material facts necessary in order
to make the statements made, in light of the circumstances under which they were made, not misleading concerning, among other things,
the Company’s revenue and financial condition. On April 15, 2022, the Company filed an amendment to its Annual Report on Form 10-K
for the fiscal year ended December 31, 2020. The restatement had the cumulative effect of decreasing the Company’s reported revenue
for Fiscal 2020 by $102,569 and decreasing the Company’s bad debt expense for the same period by $102,569. There was no effect on
Company’s reported net loss for Fiscal 2020 or on the financial condition of the Company on December 31, 2020. The Company received
a subpoena from the SEC on April 25, 2022, requesting all documents and communications concerning the review of C-Bond’s revenue
recognition practices for fiscal year 2020. The Company has provided the requested information and its Chief Executive Officer provided
his testimony regarding this Formal Order in October 2022.
On March 8, 2021, a former officer of the Company
resigned. Both parties alleged certain claims against the other, including certain compensation claims. Neither party has filed litigation. The Company intends to vigorously defend itself against any possible claims and assert
any relevant claims against the former executive and believes it will prevail.
In July 2021, a former employee of the Company
filed a small claims case for approximately $16,000 in Harris County, TX, and the Company filed its response in August 2021. There
has been no further communication from the Court, and the Company believes the case has been dismissed but has not received any formal notice of such. The Company intends to vigorously defend itself against the claim made and believes
it will prevail. As of December 31, 2022 and 2021, the Company has accrued compensation of $18,250 to this former employee, which is included
in accrued compensation on the accompanying consolidated balance sheets.
Employment Agreements
On October 18, 2017, the Company entered into
an employment agreement with Mr. Scott Silverman, pursuant to which he serves as the Chief Executive Officer of the Company for an initial
term of three years that extends for successive one-year renewal terms unless either party gives 30-days’ advance notice of non-renewal.
As consideration for these services, the employment agreement provides Mr. Silverman with the following compensation and benefits:
●
An annual base salary of $300,000, with a 10% increase on each anniversary date contingent upon achieving certain performance objectives as set by the Board. Until the Company raises $1,000,000 in debt or equity financing after entering into this agreement, Mr. Silverman will receive ½ of the base salary on a monthly basis with the other ½ being deferred. Upon the financing being raised, Mr. Silverman will receive the deferred portion of his compensation and his base salary will be paid in full moving forward.
●
After the first $500,000 of equity investments is raised by the Company, after entering into this employment agreement, Mr. Silverman will receive a capital raise success bonus of 5% of all equity capital raised from investors/lenders introduced by him to the Company.
●
Annual cash performance bonus opportunity as determined by the Board.
●
An option to acquire 3,000,000 common shares of the Company, with a strike price of $0.31 per unit. These options vested pro rata on a monthly basis for the term of the employment agreement. On each anniversary, Mr. Silverman will be eligible to be granted a minimum of 500,000 stock options of the Company at a strike price of $0.85 per common unit contingent upon the achievement of certain performance objectives.
●
Certain other employee benefits and perquisites, including reimbursement of necessary and reasonable travel and participation in retirement and welfare benefits.
The receipt of $1,240,000 in connection with
the April 25, 2018 financing triggered the right of the employee to receive the deferred salary and the 5% bonus provision disclosed above.
Mr. Silverman’s employment agreement provides
that, in the event that his employment is terminated by the Company without “cause” (as defined in his employment agreement),
or if Mr. Silverman resigned for “good reasons” (as defined in his new employment agreement), subject to a complete release
of claims, he will be entitled to (i) retain all stock options previously granted; and (ii) receive any benefits then owed or accrued
along with one year of base salary and any unreimbursed expenses incurred by him. All amounts shall be paid on the termination date. In
the event that Mr. Silverman’s employment is terminated by the Company for “cause” (as defined in his employment agreement),
or if Mr. Silverman resigned without “good reasons” (as defined in his employment agreement), subject to a complete release
of claims, he will be entitled to receive any unpaid base salary and benefits then owed or accrued and any unreimbursed expenses incurred
by him. Additionally, if a change of control (as defined in his employment agreement) occurs during the term of this agreement, all unvested
stock options will vest in full and if the valuation of the Company in the change of control transaction is greater than $0.85 per common
share, then Mr. Silverman shall be paid a bonus equal to two times his minimum base salary and minimum target bonus. Pursuant to the employment
agreement, Mr. Silverman will be subject to a confidentiality covenant, a two-year post-termination non-competition covenant and a two-year
post-termination non-solicitation covenant. On June 30, 2020, the Company amended the employment agreement of Mr. Silverman to provide
for successive one-year extensions until either the executive or the Board of Directors of the Company gives notice to terminate the employment
agreement per its terms. This employment agreement amendment also includes an allowance of up to $10,000 per year to cover uncovered medical/dental
expenses for Mr. Silverman and his family.
On January 18, 2021, the Company’s board
of directors approved a bonus to officers and an employee of the Company in the aggregate amount of $330,000 which deferred and recorded
as accrued compensation on the bonus approval date.
On July 21, 2021, the Company entered into the
Employment Agreement with Mr. Wanke, the President of Mobile, to serve as the President of C-Bond’s Safety Solutions Group. Under
the three-year Employment Agreement, Mr. Wanke will receive a base salary of $240,000 per year, which may be increased from time to time
with the approval of the board of directors. In addition, Mr. Wanke may receive an annual bonus as determined by the board of directors.
It is understood that although Mr. Wanke’s base salary will be paid by Mobile, 50% of the base salary will be allocated to the expenses
of Mobile, and the other 50% of the base salary will be allocated to the expenses of the Company. The term of this Agreement (the “Initial
Term”) shall begin as of July 21, 2021 (the “Effective Date”) and shall end on the earlier of (i) the third anniversary
of the Effective Date and (ii) the time of the termination of the Executive’s employment in accordance with the Employment Agreement.
This Initial Term and any Renewal Term (as defined below) shall automatically be extended for one or more additional terms of one (1)
year each (each a “Renewal Term” and together with the Initial Term, the “Term”), unless either the Company or
Executive provide notice to the other Party of their desire to not so renew the Initial Term or Renewal Term (as applicable) at least
thirty (30) days prior to the expiration of the then-current Initial Term or Renewal Term, as applicable. All unvested shares of stock
and stock options shall expire upon such termination, if any. The Executive shall be eligible for an annual bonus payment in an amount
to be determined by the Board of Directors of the Company (the “Bonus”). The Bonus shall be determined and payable based on
the achievement of certain performance objectives of the Company as established by the Board and communicated to and agreed to by the
Executive in writing as soon as practicable after commencement of the year in respect of which the Bonus is paid. The Bonus, if earned,
is payable in cash and/or restricted stock at the discretion of the Board. It is understood between the Parties that the target bonus
for each year shall be up to 50% of the Base Salary.
On December 8, 2021, the Company’s board
of directors approved a bonus to certain officers in the aggregate amount of $309,615 which is equal to 50% of their annual compensation.
This bonus will be paid 10% in cash ($30,962) which was paid in December 2021 and 90% in equity amounting $278,653 which as of December
31, 2021 had been accrued and as of December 31, 2021, was included in accrued compensation on the accompanying consolidated balance sheet.
On January 6, 2022, the Board of Directors of the Company agreed to satisfy $278,653 of the bonus owed to its executive officers (collectively,
the “Management”). Management agreed to accept 278 shares of the Company’s Series B convertible preferred stock in settlement
of this accrued compensation.
On December 7, 2022, the Company’s board
of directors approved a bonus to certain officers in the aggregate amount of $160,000. This bonus will be paid 10% in cash ($16,000) which
was paid in December 2022 and 90% in equity amounting to $144,000 which as of December 31, 2022 had been accrued and as of December 31,
2022, was included in accrued compensation on the accompanying consolidated balance sheet. On January 17, 2023, the Board of Directors
of the Company agreed to satisfy $144,000 of the bonus owed to its executive officers (collectively, the “Management”). Management
agreed to accept 144 shares of the Company’s Series B convertible preferred stock in settlement of this accrued compensation (See
Note 18).
Licensing agreement
Pursuant to an agreement dated April 8, 2016,
between the Company and Rice University, Rice University has granted a non-exclusive license to the Company, in nanotube-based surface
treatment for strengthening glass and related materials under Rice’s intellectual property rights, to use, make, distribute, offer
and sell the licensed products specified in the agreement. In consideration for which, the Company had to pay a one-time non-refundable
license fee of $10,000 and royalty payments of 5% of net sales of the licensed products during the term of the agreement and a sell-off
period of 180 days from termination, In addition, the Company is required to pay for the maintenance of the patents, This agreement will
continue until the expiration of the last to expire of the licensed property rights, unless terminated earlier in accordance with the
terms of the agreement. There have been no royalty payments paid or due through December 31, 2022.
Anti-dilution rights related to C-Bond Systems,
LLC
Prior to the Merger, C-Bond Systems, LLC entered
into certain contracts, described below, which provided certain anti-dilution protection to the counterparties to those contracts.
The Company believes that these contracts do not apply to any future issuances of equity by C-Bond Systems, Inc.
In 2013, pursuant to a subscription agreement,
the Company’s subsidiary. C-Bond Systems, LLC issued 2,425,300 common shares. To the extent that during the term of the agreement
C-Bond Systems, LLC issues any “down-round” or subsequent investments based upon an enterprise value of less than $2,000,000
(“Dilutive Transaction”) (other than an issuance pursuant to an option agreement with an employee or otherwise to compensate
an employee, or incident to an acquisition of assets by C-Bond Systems, LLC in which common units were issued to the seller of such assets)
contemporaneously with the Dilutive Transaction, the contract obligated C-Bond Systems, LLC to issue the investor additional common units
in C-Bond Systems, LLC in an amount which would provide them with the ownership percentage interest which they would have held in C-Bond
Systems, LLC represented by the common units purchased by them on this date.
In 2015, pursuant to a subscription agreement,
C-Bond Systems, LLC issued 3,880,480 common shares to an entity at $0.77 per common share. This agreement entitled the subscriber to anti-dilution
protection to the extent that C-Bond Systems, LLC issued any equity in a “down-round” based upon a value of less than $0.77
per common unit of C-Bond Systems, LLC (other than an issuance pursuant to an option agreement with an employee or consultant or otherwise
to compensate an employee or consultant, or incident to an acquisition of assets by C-Bond Systems, LLC in which common units are issued
to the seller of such assets (“Dilutive Transaction”)). Contemporaneously with the Dilutive Transaction, the contract obligated
C-Bond Systems, LLC to issue the Subscriber additional common units in C-Bond Systems, LLC in an amount which would provide the investor
with the ownership percentage interest in C-Bond Systems, LLC on a fully diluted basis which Subscriber held immediately prior to the
Dilutive Transaction.
In 2016, pursuant to a subscription agreement,
C-Bond Systems, LLC issued 1,175,902 common shares to an entity at $0.85 per common share. This agreement entitled this investor to customary
broad-based weighted average anti-dilution protection to the extent that after the date of this subscription agreement C-Bond Systems,
LLC issued any equity in a “down round” based upon a value of less than $0.85 per common share, including the issuance of
options with an exercise price per share of less than $0.85 to compensate employees or consultants (“Dilutive Transaction”),
subject to exclusions for issuances of common shares or options in connection with strategic partnerships, equity kickers to lenders or
vendors, mergers or acquisitions. The agreement obligated C-Bond Systems, LLC to give to this investor written notice (an “Issuance
Notice”) of any proposed issuance by C-Bond Systems, LLC of any C-Bond Systems, LLC common units, or other form of equity interest
(excluding issuances of C-Bond Systems, LLC options or other equity to compensate employees or consultants and the issuance of shares
in connection with strategic partnerships, equity kickers to lenders or vendors, mergers or acquisitions) at least ten business days prior
to the proposed issuance date. This contract entitled the investor to purchase their pro rata portion of such shares or other equity interest
of C-Bond Systems, LLC at the price and on the other terms and conditions specified in the issuance notice.
Financial instruments that potentially subject
the Company to concentrations of credit risk consist primarily of trade accounts receivable and cash deposits. The Company places its
cash in banks at levels that, at times, may exceed federally insured limits. On December 31, 2022, the Company did not have any cash in
excess of FDIC limits of $250,000. The Company has not experienced any losses in such accounts through December 31, 2022.
Geographic Concentrations of Sales
During the years ended December 31, 2022 and 2021,
all sales were in the United States.
Customer Concentrations
For the year ended December 31, 2022, no customer
accounted for over 10% of total sales. For the year ended December 31, 2021, three customers accounted for approximately 44.2% of total
sales (17.4%, 15.3%, and 11.5%, respectively). On December 31, 2022, three customers accounted for 41.1% (10.3%, 19.3% and 11.5%, respectively)
of the total accounts receivable balance. On December 31, 2021, one customer accounted for 21.4% of the total accounts receivable balance.
Vendor concentrations
Generally, the Company purchases substantially
all of its inventory from five suppliers. The loss of these suppliers may have a material adverse effect on the Company’s consolidated
results of operations and financial condition. However, the Company believes that, if necessary, alternate vendors could supply similar
products in adequate quantities to avoid material disruptions to operations.
The entire disclosure for any concentrations existing at the date of the financial statements that make an entity vulnerable to a reasonably possible, near-term, severe impact. This disclosure informs financial statement users about the general nature of the risk associated with the concentration, and may indicate the percentage of concentration risk as of the balance sheet date.
During the year ended December 31, 2022 and from
July 22, 2021 (date of acquisition of Mobile Tint) to December 31, 2021, the Company operated in two reportable business segments - (1)
the manufacture and sale of a windshield strengthening water repellent solution as well as a disinfection product, and the sale of multi-purpose
glass strengthening primer and window film mounting solutions, including ballistic-resistant film systems and a forced entry system (the
“C-Bond Segment”), and (2) the distribution and installation of window film solutions (the “Mobile Tint Segment”).
The Company’s reportable segments were strategic business units that offered different products. They were managed separately based
on the fundamental differences in their operations and locations.
Information with respect to these reportable business
segments for the years ended December 31, 2022 and 2021 was as follows:
For the Year Ended December 31,
2022
2021
Revenues:
C-Bond
$
378,736
$
434,811
Mobile Tint
1,853,910
1,042,017
2,232,646
1,476,828
Depreciation and amortization:
C-Bond
7,109
9,889
Mobile Tint
82,110
36,078
89,219
45,967
Interest expense:
C-Bond
23
1,372
Mobile Tint
20,212
3,354
Other (a)
1,599,854
278,233
1,620,089
282,959
Net (loss):
C-Bond
(1,097,069
)
(2,001,725
)
Mobile Tint
(192,566
)
77,626
Other (a)
(3,866,843
)
(5,204,759
)
$
(5,156,478
)
$
(7,128,858
)
December 31, 2022
December 31, 2021
Identifiable long-lived tangible assets on December 31, 2022 and 2021 by segment:
C-Bond
$
1,684
$
8,794
Mobile Tint
94,622
126,228
$
96,306
$
135,022
(a)
The Company does not allocate any general and administrative or financing expenses of its holding company activities to its reportable segments, because these activities are managed at the corporate level.
The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.
In connection with the Company’s C-Bond
segment, the revenue that the Company recognizes arises from purchase requests the Company receives from its customers. The Company’s
performance obligations under purchase orders or by a verbal order correspond to each shipment of product that the Company makes to its
customer under the purchase order or verbal order. As a result, each purchase order or verbal order generally contains more than one performance
obligation based on the number of products ordered, the quantity of product to be shipped and the mode of shipment requested by the customer.
Control of the Company’s products transfers to its customers when the customer is able to direct the use of, and obtain substantially
all of the benefits from, the Company’s products, which generally occurs at the later of when the customer obtains title to the
product or when the customer assumes risk of loss of the product. The transfer of control generally occurs at a point of shipment from
the Company’s warehouse. Once this occurs, the Company has satisfied its performance obligation and the Company recognizes revenue.
In connection with the Company’s C-Bond segment, when the Company receives a purchase order or verbal order from a customer, the
Company is obligated to provide the product during a mutually agreed upon time period. Depending on the terms of the purchase order or
verbal order, either the Company or the customer arranges delivery of the product to the customer’s intended destination. In situations
where the Company has agreed to arrange delivery of the product to the customer’s intended destination and control of the product
transfers upon loading of the Company’s product onto transportation equipment, the Company has elected to account for any freight
income associated with the delivery of these products as freight revenue, since this activity fulfills the Company’s obligation
to transfer the product to the customer.
In connection with the Company’s Mobile
Tint segment, the revenue that the Company recognizes arises from purchase requests the Company receives from its customers. The Company’s
performance obligations under purchase order or a signed proposal correspond to each job for the distribution and installation of window
film solutions. As a result, each purchase order or signed proposal generally may contain more than one performance obligation based on
the specific job. Control of the Company’s products transfers to its customers when the customer is able to direct the use of, and
obtain substantially all of the benefits from, the Company’s products, which generally occurs when the job or a specific portion
of the job is completed. Once this occurs, the Company has satisfied its performance obligation and the Company recognizes revenue.
Revenues from contracts for the distribution and installation of window film solutions are recognized over time on the basis of the Company’s
estimates of the progress towards completion of contracts using various output of input methods including (1) the ratio of number of labor
hours spent compared to the number of estimated labor hours to complete a job, (2) using the milestone method, or (3) using a units completed
method. These methods are used because management considers these methods to be the best available measure of progress on these contracts.
Transaction Price
The Company agrees with its customers on the selling
price of each transaction. This transaction price is generally based on the product, market conditions, including supply and demand balances,
labor costs, and freight. In the Company’s C-Bond contracts with customers, the Company allocates the entire transaction price to
the sale of product to the customer, which is the basis for the determination of the relative standalone selling price allocated to each
performance obligation. Returns of the Company’s product by its customers are permitted only when the product is not to specification
and were not material for the years ended December 31, 2022 and 2021. Any sales tax, value added tax, and other tax the Company collects
concurrently with its revenue-producing activities are excluded from revenue.
Revenue Disaggregation
The Company tracks its revenue by product. The
following table summarizes our revenue by product for the years ended December 31, 2022 and 2021:
For the Years Ended December 31,
2022
2021
C-Bond Secure multi-purpose and BRS ballistic resistant glass protection systems
$
17,311
$
184,424
C-Bond Nanoshield solution sales
345,470
222,999
Disinfection products
10,880
7,306
C-Bond installation and other services
-
12,143
Window tint installation and sales recognized over time
In October 2019, the Company entered into an 18-month
lease agreement for the lease of office and warehouse space under a non-cancelable operating lease through May 31, 2021. From the lease
commencement date of December 1, 2019 until November 30, 2020, monthly rent shall be $4,444 and from December 1, 2020 to May 31, 2021,
monthly rent shall be $4,577 per month. On May 12, 2021 and effective June 1, 2021, the Company entered into an amendment to the lease
which extended the lease for one year until May 31, 2022 at a monthly base rent of $5,283. On May 4, 2022 and effective June 1, 2022,
the Company entered into an amendment to the lease which extended the lease for three years until May 31, 2025 at a monthly base rent
as follows:
Rental Period
Amount per Month
June 1, 2022 – May 31, 2023
$
5,441
June 1, 2023 – May 31, 2024
$
5,604
June 1, 2024 – May 31, 2025
$
5,772
In connection with the Exchange Agreement discussed
in Note 3, the Company was named as guarantor (“Guarantor”) of a Commercial Lease Agreement dated July 21, 2021, by and between
landlord MDW Management, LLC, a company owned by Mr. Wanke and his wife and tenant Mobile Tint, LLC d/b/a A-1 Glass (the “Lease”).
The term of the Lease is 60 months, at a minimum monthly rent of $5,600 (not including tax), with two five-year options for the tenant
to renew. The Company’s obligation as Guarantor of the Lease will terminate upon the occurrence of earlier of the following: (i)
the date of Guarantor’s acquisition of 100% of the ownership interests of Mobile; (ii) the date that Guarantor beneficially owns
less than an eighty percent (80%) ownership interest in Mobile; or (iii) two (2) years from and after the effective date of the guaranty.
In September 2021, the Company entered into a
48-month lease agreement for the lease of office equipment under a non-cancelable operating lease through September 2025. The monthly
base rent is $365 per month.
In February 2022, the Company entered into a 36-month
lease agreement for the lease of a vehicle under a non-cancelable operating lease through January 2025. The monthly base rent is $788
per month.
In adopting ASC Topic 842, Leases (Topic 842)
on January 1, 2019, the Company had elected the ‘package of practical expedients’, which permitted it not to reassess under
the new standard its prior conclusions about lease identification, lease classification and initial direct costs (see Note 2). In addition,
the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 month or less. Upon signing of new leases for property
and equipment, the Company analyzed the new leases and determined it is required to record a lease liability and a right of use asset
on its consolidated balance sheets, at fair value.
During the years ended December 31, 2022 and 2021,
in connection with its property operating leases, the Company recorded rent expense of $167,875 and $119,192 respectively, which is expensed
during the year and included in general and administrative expenses on the accompanying consolidated statements of operations.
The significant assumption used to determine the
present value of the lease liabilities in February 2022, September 2021 and July 2021 was discount rates ranging from 4% and 12% which
was based on the Company’s estimated average incremental borrowing rate.
On December 31, 2022 and 2021, right-of-use asset
(“ROU”) is summarized as follows:
December 31, 2022
December 31, 2021
Office leases and office equipment right of use assets
$
480,293
$
269,590
Less: accumulated amortization
(104,881
)
(18,418
)
Balance of ROU assets
$
375,412
$
251,172
On December 31, 2022 and 2021, operating lease
liabilities related to the ROU assets are summarized as follows:
December 31, 2022
December 31, 2021
Lease liabilities related to office leases right of use assets
$
376,566
$
251,246
Less: current portion of lease liabilities
(117,671
)
(44,927
)
Lease liabilities – long-term
$
258,895
$
206,319
On December 31, 2022, future minimum base lease
payments due under non-cancelable operating leases are as follows:
Twelve months ended December 31,
Amount
2023
$
147,466
2024
149,460
2025
100,133
2026
39,200
Total minimum non-cancelable operating lease payments
The entire disclosure for operating leases of lessee. Includes, but is not limited to, description of operating lease and maturity analysis of operating lease liability.
In December 2021, the Company advanced $3,750
to a company partially owned by officers of the Company. The advance is non-interest bearing, payable on demand, and as of December 31,
2021 is reflected as due from related party on the accompanying consolidated balance sheets. In June 2022, this advance was deemed uncollectible
and the balance was written off to bad debt expense.
Sales and Accounts Receivable – Related
Party
During the year ended December 31, 2021, the Company
recognized sales of $1,200 to a company partially owned by officers of the Company.
Note Payable - Related Party
On May 2, 2022, the Company entered into a Promissory
Note (the “May 2022 Note”) in the principal amount of $250,000 with the Company’s chief executive officer. The May 2022
Note was funded in May 2022 and the Company received net proceeds of $250,000. The May 2022 Note bears interest at a rate of 6% per annum
and all outstanding principal and accrued and unpaid interest is due on May 2, 2024. At any time, the Company may prepay all or any portion
of the principal amount of the May 2022 Note and any accrued and unpaid interest without penalty. For the year ended December 31, 2022,
interest expense – related party amounted to $10,027. On December 31, 2022, principal amount due and accrued interest payable -
related party amounted to $250,000 and $10,027, respectively.
The entire disclosure for related party transactions. Examples of related party transactions include transactions between (a) a parent company and its subsidiary; (b) subsidiaries of a common parent; (c) and entity and its principal owners; and (d) affiliates.
The Company accounts for income tax using the
liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined
based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in
effect in the year in which the differences are expected to reverse. The deferred tax assets on December 31, 2022 and 2021 consist only
of net operating loss carryforwards. The net deferred tax asset has been fully offset by a valuation allowance because of the uncertainty
of the attainment of future taxable income.
The items accounting for the difference between income taxes at the
effective statutory rate and the provision for income taxes for the years ended December 31, 2022 and 2021 were as follows:
2022
2021
Income tax benefit at U.S. statutory rate
$
(1,081,240
)
$
(1,497,060
)
Non-deductible expenses
506,677
894,825
Change in valuation allowance
574,563
602,235
Total provision for income tax
$
-
$
-
The Company’s approximate net deferred tax asset as of December
31, 2022 and 2021 was as follows:
Deferred Tax Asset:
December 31, 2022
December 31, 2021
Net operating loss carryforward
$
2,512,665
$
1,938,102
Total deferred tax asset before valuation allowance
2,512,665
1,938,102
Valuation allowance
(2,512,665
)
(1,938,102
)
Net deferred tax asset
$
-
$
-
The net operating loss carryforward was approximately
$11,965,000 on December 31, 2022. The Company provided a valuation allowance equal to the net deferred income tax asset as of December
31, 2022 and 2021 because it was not known whether future taxable income will be sufficient to utilize the loss carryforward. During the
year ended December 31, 2022, the valuation allowance increased by $574,563. Additionally, the future utilization of the net operating
loss carryforward to offset future taxable income is subject to an annual limitation as a result of ownership changes that may occur in
the future. The potential tax benefit arising from the loss carryforward may be carried forward indefinitely subject to usage limitations.
The Company does not have any uncertain tax positions or events leading
to uncertainty in a tax position. The Company’s 2022, 2021 and 2020 Corporate Income Tax Returns are subject to Internal Revenue
Service examination.
The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.
Issuance Series B Preferred Stock for Accrued Compensation
On January 17, 2023, the Board of Directors of
the Company agreed to satisfy $144,000 of accrued compensation owed to its executive officers (collectively, the “Management”)
which, as of December 31, 2022 was included in accrued compensation on the accompanying consolidated balance sheet. Management agreed
to accept 144 shares of the Company’s Series B convertible preferred stock in settlement of this accrued compensation. The conversion
feature of the Series B Preferred Stock at the time of issuance was determined not to be beneficial on the commitment date and accordingly,
no stock-based compensation or gain or loss was recorded.
Issuance of Common Shares for Accrued Compensation
and Cash
On January 17, 2023, the Company entered into
a Subscription Agreement with its Chairman and Chief Executive Officer, Scott R. Silverman (the “Subscription Agreement”),
whereby Mr. Silverman purchased 54,545,455 shares (the “Subscription Shares”) of the Company’s common stock for $300,000,
or $0.0055 per share, based on the quoted closing price of the Company’s common stock on the measurement date (the “Consideration”).
The Consideration consisted of a cash payment of $275,000 the conversion of $25,000 of accrued compensation owed to Mr. Silverman.
On January 17, 2023, Barry Edelstein, a member
of the Company’s Board of Directors, elected to convert $53,000 of accrued compensation into 9,636,364 shares of unregistered common
stock of the Company. The shares were valued at $53,000, or $0.0055, based on the quoted closing price of the Company’s common stock
on the measurement date.
Common Shares Issued for Professional Services
On February 6, 2023, the Company issued 6,666,667
shares of its common stock for investor relations services to be rendered. These shares were valued at $40,000, or $0.006 per common share,
based on the quoted closing price of the Company’s common stock on the measurement date. In connection with these shares, the Company
recorded stock-based professional fees of $40,000 over the term of the agreement.
Common Stock Issued for Conversion of Series
C Preferred Stock
On January 3, 2023, the Company issued 6,546,575
shares its common stock upon the conversion of 250 shares of Series C preferred with a stated redemption value of $25,000. The conversion
price was based on contractual terms of the related Series C preferred shares.
On January 13, 2023, the Company issued 5,004,200
shares its common stock upon the conversion of 191 shares of Series C preferred with a stated redemption value of $19,100. The conversion
price was based on contractual terms of the related Series C preferred shares.
On January 26, 2023, the Company issued 5,007,601
shares its common stock upon the conversion of 191 shares of Series C preferred with a stated redemption value of $19,100. The conversion
price was based on contractual terms of the related Series C preferred shares.
On February 1, 2023, the Company issued 5,009,171
shares its common stock upon the conversion of 191 shares of Series C preferred with a stated redemption value of $19,100. The conversion
price was based on contractual terms of the related Series C preferred shares.
On March 7, 2023, the Company issued 5,018,067
shares its common stock upon the conversion of 191 shares of Series C preferred with a stated redemption value of $19,100. The conversion
price was based on contractual terms of the related Series C preferred shares.
Convertible Debt
On March 17, 2023, the Company closed a Securities
Purchase Agreement dated November 4, 2022, with Diagonal pursuant to which a Promissory Note (the “March 2023 Diagonal Note”)
dated March 17, 2023, was made to Diagonal in the aggregate principal amount of $54,250 and the Company received net proceeds of $50,000
which was net of fees of $4,250. The March 2023 Diagonal Note bears interest at a rate of 12% per annum (22% upon the occurrence of an
event of a default) and all outstanding principal and accrued and unpaid interest are due on March 17, 2024.
The Company has the right to prepay the March
2023 Diagonal Note (principal and accrued interest) at any time during the first six months the note is outstanding at the rate of 115%
during the first 30 days after issuance, 120% during the 31st to 60th day after issuance, and 125% during the 61st
to the 180th day after issuance. The March 2023 Diagonal Note may not be prepaid after the 180th day following the issuance
date, unless Diagonal agrees to such repayment and such terms. Diagonal may in its option, at any time beginning 180 days after the date
of the Diagonal Note, convert the outstanding principal and interest on the March 2023 Diagonal Note into shares of our common stock at
a conversion price per share equal to 65% of the average of the three lowest closing bid prices of our common stock during the 10 trading
days prior to the date of conversion. At no time may the March 2023 Diagonal Note be converted into shares of our common stock if such
conversion would result in Diagonal and its affiliates owning an aggregate of in excess of 4.99% of the then outstanding shares of our
common stock.
The Company has accounted for the March 2023 Diagonal
Note as stock settled debt under ASC 480 and recorded an aggregate debt premium of $29,212 with a charge to interest expense.
The entire disclosure for significant events or transactions that occurred after the balance sheet date through the date the financial statements were issued or the date the financial statements were available to be issued. Examples include: the sale of a capital stock issue, purchase of a business, settlement of litigation, catastrophic loss, significant foreign exchange rate changes, loans to insiders or affiliates, and transactions not in the ordinary course of business.
Basis of Presentation and Principles of Consolidation
The Company’s consolidated financial statements
include the financial statements of its wholly owned subsidiary, C-Bond Systems, LLC, and its 80% owned subsidiary, Mobile since acquiring
80% of Mobile on July 22, 2021. All significant intercompany accounts and transactions have been eliminated in consolidation.
These consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the
normal course of business. As reflected in the accompanying consolidated financial statements, the Company had a net loss of $5,156,478
and $7,128,858 for the years ended December 31, 2022 and 2021, respectively. The net cash used in operations was $1,584,918 and $1,807,051
for the years ended December 31, 2022 and 2021, respectively. Additionally, the Company had an accumulated deficit, shareholders’
deficit, and working capital deficit of $62,693,184, $7,050,669 and $4,349,384, respectively, on December 31, 2022. These factors raise
substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date
of this report. Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow
positive or raise additional debt and/or equity capital. The Company is seeking to raise capital through additional debt and/or equity
financings to fund its operations in the future. Although the Company has historically raised capital from sales of common shares and
preferred shares, and from the issuance of promissory notes and convertible promissory notes, there is no assurance that it will be able
to continue to do so. If the Company is unable to raise additional capital or secure additional lending in the near future, management
expects that the Company will need to curtail its operations. These consolidated financial statements do not include any adjustments related
to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern.
The preparation of consolidated financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ from those estimates. Estimates during the years ended December
31, 2022 and 2021 include estimates for allowance for doubtful accounts on accounts receivable, the estimates for obsolete or slow moving
inventory, estimates used in the calculation of progress towards completion on uncompleted jobs, purchase price allocation of acquired
businesses, the useful life of property and equipment, assumptions used in assessing impairment of long-term assets, the estimate of the
fair value lease liability and related right of use asset, the valuation of redeemable and mandatorily redeemable preferred stock, the
value of beneficial conversion features and deemed dividends, the valuation allowances for deferred tax assets, and the fair value of
non-cash equity transactions.
Fair Value of Financial Instruments and Fair Value Measurements
The carrying amounts reported in the consolidated
balance sheets for cash, accounts receivable, contract assets and liabilities, notes payable, convertible note payable, accounts payable,
accrued expenses, accrued compensation, and lease liabilities approximate their fair market value based on the short-term maturity of
these instruments.
The Company analyzes all financial instruments
with features of both liabilities and equity under the Financial Accounting Standard Board’s (the “FASB”) accounting
standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest
level of input that is significant to the fair value measurement. The Company did not identify any assets or liabilities that are required
to be presented on the balance sheet at fair value in accordance with Accounting Standards Codification (“ASC”) Topic 820.
ASC 825-10 “Financial Instruments”,
allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair
value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value
option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent
reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.
For purposes of the consolidated statements of
cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money
market accounts to be cash equivalents. The Company had no cash equivalents as of December 31, 2022 and 2021.
The Company recognizes an allowance for losses
on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of
historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable
customer accounts considered at risk or uncollectible. The expense associated with the allowance for doubtful accounts is recognized as
general and administrative expense.
Inventory, consisting of raw materials and finished
goods, are stated at the lower of cost and net realizable value utilizing the first-in, first-out (FIFO) method. A reserve is established
when management determines that certain inventories may not be saleable. If inventory costs exceed expected net realizable value due to
obsolescence or quantities in excess of expected demand, the Company will record reserves for the difference between the cost and the
net realizable value. These reserves are recorded based on estimates and included in cost of sales.
Property and equipment are stated at cost and
are depreciated using the straight-line method over their estimated useful lives, which range from one to seven years. Leasehold improvements
are depreciated over the shorter of the useful life or lease term including scheduled renewal terms. Maintenance and repairs are charged
to expense as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and
any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in
the value of these assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.
Goodwill represents the future economic benefit
arising from other assets acquired that could not be individually identified and separately recognized. Any goodwill arising from the
Company’s acquisition is attributable to the value of the potential expanded market opportunity with new customers. Intangible assets
may have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line
basis over their economic or legal life, whichever is shorter. The Company’s amortizable intangible assets are being amortized over
a useful life of 5 years.
In accordance with ASC Topic 360, the Company
reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may
not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future
cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s
estimated fair value and its book value.
The Company had certain financial instruments
that were embedded derivatives. The Company evaluated all its financial instruments to determine if those contracts or any potential embedded
components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815-10-05-4, Derivatives
and Hedging and 815-40, Contracts in Entity’s Own Equity. This accounting treatment requires that the carrying amount
of any embedded derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the
fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as
either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at
the conversion, repayment or exercise date and then the related fair value amount is reclassified to other income or expense as part of
gain or loss on extinguishment.
The Company provides limited warranties on its
products for product defects for periods ranging from 12 months to the life of the product. Warranty costs may include the cost of product
replacement, refunds, labor costs and other costs. Allowances for estimated warranty costs are recorded during the period of sale. The
determination of such allowances requires the Company to make estimates of product warranty claim rates and expected costs to repair or
to replace the products under warranty. The Company currently establishes warranty reserves based on historical warranty costs for each
product line combined with liability estimates based on the prior 12 months’ sales activities. If actual return rates and/or repair
and replacement costs differ significantly from the Company’s estimates, adjustments to recognize additional cost of sales may be
required in future periods. Historically the warranty accrual and the expense amounts have been immaterial. The warranty liability is
included in accrued expenses on the accompanying consolidated balance sheets and amounted $26,648 and $26,733 on December 31, 2022 and
2021, respectively. For the years ended December 31, 2022 and 2021, warranty costs were de minimis.
Convertible debt includes conversion terms that
are considered in the money compared to the market price of the stock on the date of the related agreement. The Company calculates the
beneficial conversion feature and records a debt discount with the amount being amortized to interest expense over the term of the note.
The Company follows ASC Topic 606, Revenue
from Contracts with Customers (“ASC 606”). This standard establishes a single comprehensive model for entities to use
in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. ASC
606 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services and requires certain additional disclosures.
The Company sells its products which include standard
warranties primarily to distributors and authorized dealers. Product sales are recognized at a point in time when the product is shipped
to the customer and title is transferred and are recorded net of any discounts or allowances. The warranty does not represent a separate
performance obligation.
Revenues from contracts for the distribution and
installation of window film solutions are recognized over time on the basis of the Company’s estimates of the progress towards completion
of contracts using various output or input methods depending on the type of contract terms including (1) the ratio of number of labor
hours spent compared to the number of estimated labor hours to complete a job, (2) using the milestone method, or (3) using a units completed
method. These methods are used because management considers these to be the best available measure of progress on these contracts. We
use the same method for similar types of contracts. The asset, “contract assets” represents revenues recognized in excess
of amounts billed. The liability, “contract liabilities,” represents billings in excess of revenues recognized.
Cost of sales includes inventory costs, packaging
costs and warranty expenses.
Cost of revenues from fixed-price contracts for
the distribution and installation of window film solutions include all direct material, sub-contractor, labor and certain other direct
costs, as well as those indirect costs related to contract performance, such as indirect labor and fringe benefits. Provisions for estimated
losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions
and estimated profitability may result in revisions to cost and income, which are recognized in the period in which the revisions are
determined. Changes in estimated job profitability resulting from job performance, job conditions, claims, change orders, and settlements,
are accounted for as changes in estimates in the current period.
Shipping and handling costs incurred for product
shipped to customers are included in general and administrative expenses and amounted to $45,455 and $15,431 for the years ended December
31, 2022 and 2021, respectively. Shipping and handling costs charged to customers are included in sales.
Research and development costs incurred in the
development of the Company’s products are expensed as incurred and includes costs such as labor, materials, and other allocated
costs incurred. For the years ended December 31, 2022 and 2021, research and development costs (recovery) incurred in the development
of the Company’s products were $0 and $(3,250), respectively, and are included in operating expenses on the accompanying consolidated
statements of operations. In April 2021, the Company received a refund of research and development costs of $3,250.
The Company may participate in various advertising
programs. All costs related to advertising of the Company’s products are expensed in the period incurred. For the years ended December
31, 2022 and 2021, advertising costs charged to operations were $69,737 and $65,626, respectively and are included in general and administrative
expenses on the accompanying consolidated statements of operations. These advertising expenses do not include cooperative advertising
and sales incentives which shall been deducted from sales.
The Company accounts for income tax using the
liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined
based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in
effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax
assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets
will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes
the enactment date.
The Company follows the accounting guidance for
uncertainty in income taxes using the provisions of ASC 740 “Income Taxes”. Using that guidance, tax positions initially
need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the
tax authorities. As of December 31, 2022 and 2021, the Company had no uncertain tax positions that qualify for either recognition or disclosure
in the financial statements. Tax years that remain subject to examination are the years ending on and after December 31, 2017. The Company
recognizes interest and penalties related to uncertain income tax positions in other expense. However, no such interest and penalties
were recorded as of December 31, 2022 and 2021.
Stock-based compensation is accounted for based
on the requirements of ASC 718 – “Compensation –Stock Compensation”, which requires recognition in the
financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments
over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively,
the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange
for an award based on the grant-date fair value of the award. The Company has elected to recognize forfeitures as they occur as permitted
under the FASB’s Accounting Standards Update (“ASU”) 2016-09 Improvements to Employee Share-Based Payment.
ASC 260 “Earnings Per Share”, requires
dual presentation of basic and diluted earnings per common share (“EPS”) with a reconciliation of the numerator and denominator
of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilutive securities and
non-vested forfeitable shares. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue
common shares were exercised or converted into common shares or resulted in the issuance of common shares that then shared in the earnings
of the entity. Basic net loss per common share is computed by dividing net loss available to members by the weighted average number of
common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average
number of common shares, common share equivalents and potentially dilutive securities outstanding during each period. Potentially dilutive
common shares consist of stock options and non-vested forfeitable shares (using the treasury stock method) and shares issuable upon conversion
of preferred shares and convertible notes payable (using the as-if converted method). These common share equivalents may be dilutive in
the future.
All potentially dilutive common shares were excluded
from the computation of diluted common shares outstanding as they would have an anti-dilutive impact on the Company’s net losses
and consisted of the following:
During the year ended December 31, 2022 and from
July 22, 2021 (date of acquisition of Mobile Tint) to December 31, 2021, the Company operated in two reportable business segments which
consisted of (1) the manufacture and sale of a windshield strengthening water repellent solution as well as disinfection products, and
the sale of multi-purpose glass strengthening primer and window film mounting solutions, including ballistic-resistant film systems and
a forced entry system, and (2) the distribution and installation of window film solutions. The Company’s reportable segments are
strategic business units that offer different products. They are managed separately based on the fundamental differences in their operations
and locations.
The Company accounts for leases in accordance
with ASC 842. The lease standard requires certain leases to be reported on the consolidated balance sheets as right-of-use assets and
lease liabilities. The Company elected the practical expedients permitted under the transition guidance of this standard that retained
the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. The Company does not
reassess whether any contracts entered into prior to adoption are leases or contain leases.
The Company categorize leases with contractual
terms longer than twelve months as either operating or finance. Finance leases are generally those leases that would allow the Company
to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in property
and equipment, net. All other leases are categorized as operating leases. The Company does not have any finance leases as of December
31, 2022 and 2021. The Company’s leases generally have terms that range from three to four years for property and equipment and
five years for property. The Company elected the accounting policy to include both the lease and non-lease components of our agreements
as a single component and account for them as a lease.
Lease liabilities are recognized at the present
value of the fixed lease payments using a discount rate based on the Company’s current borrowing rate. Lease assets are recognized
based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the
leases. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term.
When the Company has the option to extend the
lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and it is reasonably certain that
the Company will exercise the option, the Company considers these options in determining the classification and measurement of the lease.
Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease.
The Company accounts for noncontrolling interest
in accordance with ASC Topic 810-10-45, which requires the Company to present noncontrolling interests as a separate component of total
shareholders’ deficit on the consolidated balance sheets and the consolidated net loss attributable to its noncontrolling interest
be clearly identified and presented on the face of the consolidated statements of operations.
In March 2020, the World Health Organization declared
COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. The Company was materially affected by the COVID-19
outbreak in 2020 and 2021 and the ultimate duration and severity of the outbreak and its impact on the economic environment and our business
is uncertain. The Company saw a material decrease in sales from its international customers as a result of the unprecedented public health
crisis from the COVID-19 pandemic and a decrease in domestic sales due to a decrease in business spending on discretionary items. As a
result, during 2021 and 2020, the Company’s international customers delayed the ordering of products and delayed or defaulted on
payment of balances due to the Company. The lack of collection of accounts receivable balances, which the Company believes was attributable
to COVID-19, had a material impact on the cash flows of the Company. The Company believes that COVID-19 had minimal impact on its operations
in 2022. The Company cannot estimate the future impact of the pandemic on its business. A severe or prolonged economic downturn could
result in a variety of risks to the Company’s business, including weakened demand for its products and a decreased ability to raise
additional capital when needed on acceptable terms, if at all. Currently, the Company is unable to estimate the impact of this event on
its operations.
In August 2020, the FASB issued ASU 2020-06, Debt—Debt
with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies accounting for
convertible instruments by removing major separation models required under current U.S. GAAP. Consequently, more convertible debt instruments
will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain
settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity
contracts to qualify for the exception. The ASU also simplifies the diluted net income per share calculation in certain areas. The new
guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and early
adoption is permitted. The Company is currently evaluating the impact of the adoption of the standard on the consolidated financial statements.
In June
2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments, which significantly changes how entities will measure credit losses for most financial assets, including
accounts receivable. ASU No. 2016-13 will replace today’s “incurred loss” approach with an “expected loss”
model, under which companies will recognize allowances based on expected rather than incurred losses. On November 15, 2019, the FASB delayed
the effective date of Topic 326 for certain small public companies and other private companies until fiscal years beginning after December
15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, as well as private companies
and not-for-profit entities. The Company is currently evaluating the new guidance and has not yet determined whether the adoption of the
new standard will have a material impact on its consolidated financial statements or the method of adoption.
In March
2022, the FASB issued ASU No. 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage
Disclosures. The guidance was issued as improvements to ASU No. 2016-13 described above. The vintage disclosure changes require an
entity to disclose current-period gross write-offs by year of origination for financing receivables. The guidance is effective for financial
statements issued for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The amendments should
be applied prospectively. Early adoption of the amendments is permitted, including adoption in an interim period. The amendments will
impact our disclosures but will not otherwise impact the consolidated financial statements. The Company is currently evaluating the new
guidance.
Other accounting standards that have been issued
or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial
statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated
to its financial condition, results of operations, cash flows or disclosures.
Disclosure of accounting policy for the classification of shipping and handling costs, including whether the costs are included in cost of sales or included in other income statement accounts. If shipping and handling fees are significant and are not included in cost of sales, disclosure includes both the amounts of such costs and the line item on the income statement which includes such costs.
Disclosure of accounting policy for cash and cash equivalents, including the policy for determining which items are treated as cash equivalents. Other information that may be disclosed includes (1) the nature of any restrictions on the entity's use of its cash and cash equivalents, (2) whether the entity's cash and cash equivalents are insured or expose the entity to credit risk, (3) the classification of any negative balance accounts (overdrafts), and (4) the carrying basis of cash equivalents (for example, at cost) and whether the carrying amount of cash equivalents approximates fair value.
Disclosure of accounting policy regarding (1) the principles it follows in consolidating or combining the separate financial statements, including the principles followed in determining the inclusion or exclusion of subsidiaries or other entities in the consolidated or combined financial statements and (2) its treatment of interests (for example, common stock, a partnership interest or other means of exerting influence) in other entities, for example consolidation or use of the equity or cost methods of accounting. The accounting policy may also address the accounting treatment for intercompany accounts and transactions, noncontrolling interest, and the income statement treatment in consolidation for issuances of stock by a subsidiary.
Disclosure of accounting policy for computing basic and diluted earnings or loss per share for each class of common stock and participating security. Addresses all significant policy factors, including any antidilutive items that have been excluded from the computation and takes into account stock dividends, splits and reverse splits that occur after the balance sheet date of the latest reporting period but before the issuance of the financial statements.
Disclosure of accounting policy for fair value measurements of financial and non-financial assets, liabilities and instruments classified in shareholders' equity. Disclosures include, but are not limited to, how an entity that manages a group of financial assets and liabilities on the basis of its net exposure measures the fair value of those assets and liabilities.
Disclosure of accounting policy for goodwill and intangible assets. This accounting policy also may address how an entity assesses and measures impairment of goodwill and intangible assets.
Disclosure of accounting policy for recognizing and measuring the impairment of long-lived assets. An entity also may disclose its accounting policy for long-lived assets to be sold. This policy excludes goodwill and intangible assets.
Disclosure of accounting policy for income taxes, which may include its accounting policies for recognizing and measuring deferred tax assets and liabilities and related valuation allowances, recognizing investment tax credits, operating loss carryforwards, tax credit carryforwards, and other carryforwards, methodologies for determining its effective income tax rate and the characterization of interest and penalties in the financial statements.
Disclosure of inventory accounting policy for inventory classes, including, but not limited to, basis for determining inventory amounts, methods by which amounts are added and removed from inventory classes, loss recognition on impairment of inventories, and situations in which inventories are stated above cost.
Disclosure of accounting policy pertaining to new accounting pronouncements that may impact the entity's financial reporting. Includes, but is not limited to, quantification of the expected or actual impact.
Disclosure of accounting policy for long-lived, physical asset used in normal conduct of business and not intended for resale. Includes, but is not limited to, work of art, historical treasure, and similar asset classified as collections.
Disclosure of accounting policy for costs it has incurred (1) in a planned search or critical investigation aimed at discovery of new knowledge with the hope that such knowledge will be useful in developing a new product or service, a new process or technique, or in bringing about a significant improvement to an existing product or process; or (2) to translate research findings or other knowledge into a plan or design for a new product or process or for a significant improvement to an existing product or process.
Disclosure of accounting policy for award under share-based payment arrangement. Includes, but is not limited to, methodology and assumption used in measuring cost.
The entire disclosure when substantial doubt is raised about the ability to continue as a going concern. Includes, but is not limited to, principal conditions or events that raised substantial doubt about the ability to continue as a going concern, management's evaluation of the significance of those conditions or events in relation to the ability to meet its obligations, and management's plans that alleviated or are intended to mitigate the conditions or events that raise substantial doubt about the ability to continue as a going concern.
Disclosure of accounting policy for the use of estimates in the preparation of financial statements in conformity with generally accepted accounting principles.
Tabular disclosure of securities (including those issuable pursuant to contingent stock agreements) that could potentially dilute basic earnings per share (EPS) in the future that were not included in the computation of diluted EPS because to do so would increase EPS amounts or decrease loss per share amounts for the period presented, by antidilutive securities.
Tabular disclosure of condensed income statement, including, but not limited to, income statements of consolidated entities and consolidation eliminations.
Tabular disclosure of the amounts recognized as of the acquisition date for each major class of assets acquired and liabilities assumed. May include but not limited to the following: (a) acquired receivables; (b) contingencies recognized at the acquisition date; and (c) the fair value of noncontrolling interests in the acquiree.
Tabular disclosure of the various types of trade accounts and notes receivable and for each the gross carrying value, allowance, and net carrying value as of the balance sheet date. Presentation is categorized by current, noncurrent and unclassified receivables.
Tabular disclosure of the carrying amount as of the balance sheet date of merchandise, goods, commodities, or supplies held for future sale or to be used in manufacturing, servicing or production process.
Tabular disclosure of physical assets used in the normal conduct of business and not intended for resale. Includes, but is not limited to, balances by class of assets, depreciation and depletion expense and method used, including composite depreciation, and accumulated deprecation.
Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.
Tabular disclosure for warrants. Includes, but is not limited to, outstanding awards at beginning and end of year, grants, exercises, forfeitures, and weighted-average grant date fair value.
Tabular disclosure for stock option plans. Includes, but is not limited to, outstanding awards at beginning and end of year, grants, exercises, forfeitures, and weighted-average grant date fair value.
The Company does not allocate any general and administrative or financing expenses of its holding company activities to its reportable segments, because these activities are managed at the corporate level.
Identifiable long-lived tangible assets on December 31, 2022 and 2021 by segment:
C-Bond
$
1,684
$
8,794
Mobile Tint
94,622
126,228
$
96,306
$
135,022
(a)
The Company does not allocate any general and administrative or financing expenses of its holding company activities to its reportable segments, because these activities are managed at the corporate level.
Tabular disclosure of long-lived assets, excluding financial instruments, long-term customer relationships of a financial institution, mortgage rights, deferred policy acquisition costs, and deferred tax assets, by geographic areas located in the entity's country of domicile and foreign countries in which the entity holds assets.
Tabular disclosure of the profit or loss and total assets for each reportable segment. An entity discloses certain information on each reportable segment if the amounts (a) are included in the measure of segment profit or loss reviewed by the chief operating decision maker or (b) are otherwise regularly provided to the chief operating decision maker, even if not included in that measure of segment profit or loss.
Tabular disclosure of entity-wide revenues from external customers for each product or service or each group of similar products or services if the information is not provided as part of the reportable operating segment information.
Tabular disclosure of undiscounted cash flows of lessee's operating lease liability. Includes, but is not limited to, reconciliation of undiscounted cash flows to operating lease liability recognized in statement of financial position.
Tabular disclosure of the components of net deferred tax asset or liability recognized in an entity's statement of financial position, including the following: the total of all deferred tax liabilities, the total of all deferred tax assets, the total valuation allowance recognized for deferred tax assets.
Tabular disclosure of the reconciliation using percentage or dollar amounts of the reported amount of income tax expense attributable to continuing operations for the year to the amount of income tax expense that would result from applying domestic federal statutory tax rates to pretax income from continuing operations.
Disclosure of the weighted average expected dividend for an entity using a valuation technique with different dividend rates during the contractual term.
Amount charged to advertising expense for the period, which are expenses incurred with the objective of increasing revenue for a specified brand, product or product line.
Amount of currency on hand as well as demand deposits with banks or financial institutions. Includes other kinds of accounts that have the general characteristics of demand deposits. Excludes cash and cash equivalents within disposal group and discontinued operation.
Useful life of intermediate-life plants, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days.
Useful life of long lived, physical assets used in the normal conduct of business and not intended for resale, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days. Examples include, but not limited to, land, buildings, machinery and equipment, office equipment, furniture and fixtures, and computer equipment.
The aggregate costs incurred (1) in a planned search or critical investigation aimed at discovery of new knowledge with the hope that such knowledge will be useful in developing a new product or service, a new process or technique, or in bringing about a significant improvement to an existing product or process; or (2) to translate research findings or other knowledge into a plan or design for a new product or process or for a significant improvement to an existing product or process whether intended for sale or the entity's use, during the reporting period charged to research and development projects, including the costs of developing computer software up to the point in time of achieving technological feasibility, and costs allocated in accounting for a business combination to in-process projects deemed to have no alternative future use.
The amount of purchased research and development assets that are acquired in a business combination have no alternative future use and are therefore written off in the period of acquisition.
A segregation of retained earnings which is unavailable for dividend distribution. Includes also retained earnings appropriated for loss contingencies.
Securities (including those issuable pursuant to contingent stock agreements) that could potentially dilute basic earnings per share (EPS) or earnings per unit (EPU) in the future that were not included in the computation of diluted EPS or EPU because to do so would increase EPS or EPU amounts or decrease loss per share or unit amounts for the period presented.
Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.
The Company’s obligation as Guarantor of the Lease will terminate upon the occurrence of earlier of the following: (i)
the date of Guarantor’s acquisition of 100% of the ownership interests of Mobile; (ii) the date that Guarantor beneficially owns
less than an eighty percent (80%) ownership interest in Mobile; or (iii) two (2) years from and after the effective date of the guaranty.
Number of shares of stock issued as of the balance sheet date, including shares that had been issued and were previously outstanding but which are now held in the treasury.
Amount of liabilities incurred for goods and services received that are used in an entity's business and related party expenses, assumed at the acquisition date.
Amount of consideration transferred, consisting of acquisition-date fair value of assets transferred by the acquirer, liabilities incurred by the acquirer, and equity interest issued by the acquirer.
Amount of currency on hand as well as demand deposits with banks or financial institutions, acquired at the acquisition date. Includes other kinds of accounts that have the general characteristics of demand deposits. Also includes short-term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates.
Amount of assets that are expected to be realized or consumed within one year or the normal operating cycle, if longer, acquired at the acquisition date.
Amount of asset related to consideration paid in advance for costs that provide economic benefits in future periods, and amount of other assets that are expected to be realized or consumed within one year or the normal operating cycle, if longer, acquired at the acquisition date.
Amount due from customers or clients for goods or services, including trade receivables, that have been delivered or sold in the normal course of business, and amounts due from others, including related parties expected to be converted to cash, sold or exchanged within one year or the normal operating cycle, if longer, acquired at the acquisition date.
Amount of liabilities incurred for goods and services received that are used in an entity's business and related party payables, assumed at the acquisition date.
Amount of transfers into (out of) an asset representing the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.
Carrying amount of equity interests owned by noncontrolling shareholders, partners, or other equity holders in one or more of the entities consolidated into the reporting entity's financial statements other than joint ventures, limited partnerships, operating partnerships or interests held by preferred unit holders.
Gross amount, as of the balance sheet date, of merchandise, goods, commodities, or supplies held for future sale or to be used in manufacturing, servicing or production process.
Amount of expense charged against earnings to allocate the cost of tangible and intangible assets over their remaining economic lives, classified as other.
The cash inflow from the sale of long-lived, physical assets that are used in the normal conduct of business to produce goods and services and not intended for resale.
Amount of accumulated depreciation, depletion and amortization for physical assets used in the normal conduct of business to produce goods and services.
Amount before accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures.
Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.
Amount after accumulated depreciation, depletion and amortization of physical assets used in the normal conduct of business to produce goods and services and not intended for resale. Examples include, but are not limited to, land, buildings, machinery and equipment, office equipment, and furniture and fixtures.
Useful life of long lived, physical assets used in the normal conduct of business and not intended for resale, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days. Examples include, but not limited to, land, buildings, machinery and equipment, office equipment, furniture and fixtures, and computer equipment.
The aggregate expense charged against earnings to allocate the cost of intangible assets (nonphysical assets not used in production) in a systematic and rational manner to the periods expected to benefit from such assets. As a noncash expense, this element is added back to net income when calculating cash provided by or used in operations using the indirect method.
Accumulated amortization of other deferred costs capitalized at the end of the reporting period. Does not include deferred finance costs, deferred acquisition costs of insurance companies, or deferred leasing costs for real estate operations.
Weighted average amortization period of finite-lived intangible assets acquired either individually or as part of a group of assets, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days.
Amount of write-down of assets recognized in the income statement. Includes, but is not limited to, losses from tangible assets, intangible assets and goodwill.
Gross carrying amount before accumulated amortization as of the balance sheet date to an asset acquired in a business combination representing a favorable existing relationship with customers having a finite beneficial life.
Useful life of finite-lived intangible assets, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days.
Gross carrying amount before accumulated amortization as of the balance sheet date of the rights acquired through registration of a trade name to gain or protect exclusive use thereof for a reasonably expected period of economic benefit.
Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.
Useful life of intermediate-life plants, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days.
Amount of amortization for assets, excluding financial assets and goodwill, lacking physical substance with finite life expected to be recognized in next fiscal year following current fiscal year. Excludes interim and annual periods when interim periods are reported from current statement of financial position date (rolling approach).
Amount of amortization for assets, excluding financial assets and goodwill, lacking physical substance with finite life expected to be recognized in fourth fiscal year following current fiscal year. Excludes interim and annual periods when interim periods are reported from current statement of financial position date (rolling approach).
Amount of amortization for assets, excluding financial assets and goodwill, lacking physical substance with finite life expected to be recognized in third fiscal year following current fiscal year. Excludes interim and annual periods when interim periods are reported from current statement of financial position date (rolling approach).
Amount of amortization for assets, excluding financial assets and goodwill, lacking physical substance with finite life expected to be recognized in second fiscal year following current fiscal year. Excludes interim and annual periods when interim periods are reported from current statement of financial position date (rolling approach).
Upon the occurrence of an event of default under
the Notes, the Investor has the right to be prepaid at 125% of the outstanding principal balance and accrued interest, and interest accrues
at 18% per annum. Events of default included, among other things,
(i)any
default in the payment of (A) principal and interest payment under this Note or any other Indebtedness, or (B) Late Fees, liquidated
damages and other amounts owing to the Holder of this Note, as and when the same shall become due and payable (whether on a Conversion
Date, or the Maturity Date, or by acceleration or otherwise), which default, solely in the case of a default under clause (B) above,
is not cured within five Trading Days;
(ii)
the Company or any Subsidiary shall be subject to a Bankruptcy Event;
(iii)
the SEC suspends the Common Stock from trading or the Company’s Common Stock is not listed or quoted for trading on a Trading Market which failure is not cured, if possible to cure, within the earlier to occur of 10 Trading Days after notice of such failure is sent by the Holder or by any other Holder to the Company or the transfer of shares of Common Stock through the Depository Trust Company System is no longer available or is subject to a “chill” by the Depository Trust Company or any successor;
(iv)
the Company shall be a party to any Change of Control Transaction or shall agree to sell or dispose of all or in excess of 50% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change of Control Transaction);
(v)
the Company incurs any Indebtedness other than Permitted Indebtedness;
(vi)
the Company restates any financial statements included in its reports or registration statements filed pursuant to the Securities Act or the Exchange Act for any date or period from two years prior to the Original Issue Date of this Note and until this Note is or the Warrants issued to the Holder are no longer outstanding, if following first public announcement or disclosure that a restatement will occur the VWAP on the next Trading Day is 20% less than the VWAP on the prior Trading Day. For the purposes of this clause the next Trading Day if an announcement is made before 4:00 pm New York, NY time is either the day of the announcement or the following Trading Day. The Company filed a Report on Form 8-K announcing the restatement of its financial statements for the year ended December 31, 2020. Following the first public announcement or disclosure that a restatement occurred, the VWAP on the next Trading Day was not 20% less than the VWAP on the prior Trading Day and accordingly, the default provisions were not triggered.
Amount of a favorable spread to a debt holder between the amount of debt being converted and the value of the securities received upon conversion. This is an embedded conversion feature of convertible debt issued that is in-the-money at the commitment date.
Amount of liabilities incurred to vendors for goods and services received, and accrued liabilities classified as other, payable within one year or the normal operating cycle, if longer.
Discount on common shares, or any unamortized balance thereof, shown separately as a deduction from the applicable account(s) as circumstances require.
Including the current and noncurrent portions, carrying value as of the balance sheet date of a written promise to pay a note, initially due after one year or beyond the operating cycle if longer, which can be exchanged for a specified amount of one or more securities (typically common stock), at the option of the issuer or the holder.
Amount of a favorable spread to a debt holder between the amount of debt being converted and the value of the securities received upon conversion. This is an embedded conversion feature of convertible debt issued that is in-the-money at the commitment date.
The difference between the reacquisition price and the net carrying amount of the extinguished debt recognized currently as a component of income in the period of extinguishment, net of tax.
Additional shares included in the calculation of diluted EPS as a result of the potentially dilutive effect of contingently issuable shares. Contingently issuable shares are those shares that are issuable for little or no cash contingent on certain conditions being met.
The amount of expense provided in the period for legal costs incurred on or before the balance sheet date pertaining to resolved, pending or threatened litigation, including arbitration and mediation proceedings.
Amount of long-term debt payable, sinking fund requirements, and other securities issued that are redeemable by holder at fixed or determinable prices and dates maturing in the second and third rolling twelve months following the latest balance sheet. For interim and annual periods when interim periods are reported on a rolling approach, from latest balance sheet date.
The interest rate applicable to the portion of the carrying amount of long-term borrowings outstanding as of the balance sheet date, including current maturities, which accrues interest at a rate subject to change from time to time.
Number of shares of stock issued as of the balance sheet date, including shares that had been issued and were previously outstanding but which are now held in the treasury.
Value of outstanding derivative securities that permit the holder the right to purchase securities (usually equity) from the issuer at a specified price.
The estimated dividend rate (a percentage of the share price) to be paid (expected dividends) to holders of the underlying shares over the option's term.
The estimated measure of the percentage by which a share price is expected to fluctuate during a period. Volatility also may be defined as a probability-weighted measure of the dispersion of returns about the mean. The volatility of a share price is the standard deviation of the continuously compounded rates of return on the share over a specified period. That is the same as the standard deviation of the differences in the natural logarithms of the stock prices plus dividends, if any, over the period.
Expected term of award under share-based payment arrangement, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents reported fact of one year, five months, and thirteen days.
Amount, before unamortized (discount) premium and debt issuance costs, of long-term debt. Includes, but is not limited to, notes payable, bonds payable, commercial loans, mortgage loans, convertible debt, subordinated debt and other types of debt.
In the event that the Company’s accounts
receivable balance plus inventory balance is less than paid principal balance of the Note as of December 31, 2018, the Company
shall have 45 days (through and until February 15, 2019) to cure such violation and an establish accounts receivable plus inventory equal
to the unpaid principal balance of the Note. Commencing March 31, 2019 and at all times thereafter through the remainder of the commitment
period and for so long thereafter as there is any amount still due and owing under the Note, the Company must maintain an accounts receivable
balances plus inventory such that the outstanding principal borrowed by Company under the Loan Agreement and Note is less than or equal
to eighty five percent (85%) of accounts receivable plus fifty percent (50%) of inventory, all as measured at the same point in time.
GS Capital shall have the right at any time following an Event of Default to convert all
or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under this Note at a conversion price
of $0.011, subject to adjustment as defined in the GS Capital Note. The Company did not calculate a beneficial conversion feature since
the GS Capital Note is contingently convertible upon default on the GS Capital Note. As of December 31, 2022, the Company is not in default
on this note. In the event that following the Issue Date the closing trading price of the Company’s common stock is then being traded
is below $0.011 per share for more than ten consecutive trading days, then the conversion price shall be equal to $0.004
per share. The GS Capital Note contains conversion limitations providing that a holder thereof may not convert the Note to the extent
(but only to the extent) that, if after giving effect to such conversion, the holder or any of its affiliates would beneficially own in
excess of 4.99% of the outstanding shares of the Company’s common stock immediately after giving effect to such conversion or exercise.
A holder may increase or decrease its beneficial ownership limitation upon notice to the Company provided that in no event such limitation
exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice. Events of default include, amongst other
items, failure to pay principal or interest, bankruptcy, delisting of the Company’s stock, financial statement restatements, or
if the Company effectuates a reverse split. Upon the occurrence of any event of default, the GS Capital Note shall become immediately
and automatically due and payable and the Company shall pay to GS Capital, in full satisfaction of its obligations hereunder, an amount
equal to: (a) the then outstanding principal amount of this note plus (b) accrued and unpaid interest on the unpaid principal amount
of this note to the date of payment (the “mandatory prepayment date”) plus (y) default interest, if any, multiplied
by 120%. On December 15, 2022, the Company and GS Capital entered into a letter agreement to extend the due date of the GS Capital June
2022 note by 60 days. Specifically, the maturity date of the GS Capital June 2022 note was extended to August 23, 2023 and the next payment
due date was extended to February 28, 2023. Through December 31, 2022, the Company paid $53,512 of principal balance. On December 31,
2022, the principal balance due on the GS Capital Note amounted to $141,488 and accrued interest payable amounted to $7,471.On July 26, 2022, the Company closed a Securities
Purchase Agreement (“July 2022 Agreement”) with GS Capital, pursuant to which a Promissory Note (“GS Capital July 2022
Note”) was made to GS Capital in the aggregate principal amount of $195,000. The GS Capital July 2022 Note was purchased for $176,000,
reflecting an original issuance discount of $19,000, and was funded on July 28, 2022 (less legal and other administrative fees). The Company
received net proceeds of $158,920. The Company further issued GS Capital a total of 2,600,000 commitment shares (“July 2022 Commitment
Shares”) as additional consideration for the purchase of the July 2022 Note. In addition, the Company issued 998,008 of its common
stock to the placement agent as fee for the capital raise, respectively. The July Commitment Shares and the placement agent shares were
recorded as a debt discount of $34,606 based on the relative fair value method to be amortized over the life of the Note. Additionally,
the GS Capital July 2022 Note is convertible upon an event of default into common shares at an initial effective conversion price which
was lower than the fair value of common shares based on the quoted closing price of the Company’s common stock on the measurement
date. Principal and interest payments shall be made in 10 installments of $21,060 each beginning on the 90th-day anniversary following
the issue date and continuing thereafter each 30 days for nine months. The GS Capital July 2022 Note matures 12 months after issuance
and bears interest at a rate of 8% per annum. GS Capital shall have the right at any time following an Event of Default to convert all
or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under the GS Capital July 2022 Note at
a conversion price of $0.011, subject to adjustment as defined in the Note. The Company did not calculate a beneficial conversion feature
since the GS Capital July 2022 Note is contingently convertible upon a default on the July 2022 Note. As of December 31, 2022, the Company
is not in default on this note.
In the event that following the Issue Date the closing trading price of the Company’s common stock
is then being traded is below $0.011 per share for more than ten consecutive trading days, then the conversion price shall
be equal to $0.004 per share. The July 2022 Note contains conversion limitations providing that a holder thereof may not convert the Note
to the extent (but only to the extent) that, if after giving effect to such conversion, the holder or any of its affiliates would beneficially
own in excess of 4.99% of the outstanding shares of the Company’s common stock immediately after giving effect to such conversion
or exercise. A holder may increase or decrease its beneficial ownership limitation upon notice to the Company provided that in no event
such limitation exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice.
The September Commitment Shares and the
placement agent shares were recorded as a debt discount of $30,326 based on the relative fair value method to be amortized over the life
of the Note. Additionally, the September 2022 Note is convertible into common shares upon an event of default at an initial effective
conversion price which was lower than the fair value of common shares based on the quoted closing price of the Company’s common
stock on the measurement date. Principal and interest payments shall be made in 9 installments of $23,400 each beginning on the 120th-day
anniversary following the issue date and continuing thereafter each 30 days for eight months. The September 2022 Note matures 12 months
after issuance and bears interest at a rate of 8% per annum. GS Capital shall have the right at any time following an Event of Default
to convert all or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under the September 2022
Note at a conversion price of $0.009, subject to adjustment as defined in the Note. The Company did not calculate a beneficial conversion
feature since the GS Capital July 2022 Note is contingently convertible upon a default on the September 2022 Note. As of December 31,
2022, the Company is not in default on this note. In the event that following the Issue Date the closing trading price of the Company’s
common stock is then being traded is below $0.009 per share for more than ten consecutive trading days, then the conversion
price shall be equal to $0.0032 per share. The September 2022 Note contains conversion limitations providing that a holder thereof may
not convert the Note to the extent (but only to the extent) that, if after giving effect to such conversion, the holder or any of its
affiliates would beneficially own in excess of 4.99% of the outstanding shares of the Company’s common stock immediately after giving
effect to such conversion or exercise. A holder may increase or decrease its beneficial ownership limitation upon notice to the Company
provided that in no event such limitation exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice.
On December 15, 2022, the Company and GS Capital entered into a letter agreement to extend the due date of the GS Capital September 2022
note by 60 days. Specifically, the maturity date of the GS Capital September 2022 note was extended to November 6, 2023 and the next payment
due date was extended to March 6, 2023. On December 31, 2022, the principal balance due on the GS Capital September 2022 Note amounted
to $195,000 and accrued interest payable amounted to $5,001.
The home loan principal amount is the amount of money initially borrowed from the lender, and as the loan is repaid, it can also refer to the amount of money still owed.
Sum of the carrying values as of the balance sheet date of obligations incurred through that date, including liabilities incurred and payable to vendors for goods and services received, taxes, interest, rent and utilities, compensation costs, payroll taxes and fringe benefits (other than pension and postretirement obligations), contractual rights and obligations, and statutory obligations.
Amount of noncash expense included in interest expense to amortize debt discount and premium associated with the related debt instruments. Excludes amortization of financing costs. Alternate captions include noncash interest expense.
Total number of common shares of an entity that have been sold or granted to shareholders (includes common shares that were issued, repurchased and remain in the treasury). These shares represent capital invested by the firm's shareholders and owners, and may be all or only a portion of the number of shares authorized. Shares issued include shares outstanding and shares held in the treasury.
A unique description of a noncash or part noncash stock conversion. The description would be expected to include sufficient information to provide an understanding of the nature and purpose of the conversion. Noncash is defined as transactions during a period that do not result in cash receipts or cash payments in the period. "Part noncash" refers to that portion of the transaction not resulting in cash receipts or cash payments in the period.
Identification of the lender and information about a contractual promise to repay a short-term or long-term obligation, which includes borrowings under lines of credit, notes payable, commercial paper, bonds payable, debentures, and other contractual obligations for payment. This may include rationale for entering into the arrangement, significant terms of the arrangement, which may include amount, repayment terms, priority, collateral required, debt covenants, borrowing capacity, call features, participation rights, conversion provisions, sinking-fund requirements, voting rights, basis for conversion if convertible and remarketing provisions. The description may be provided for individual debt instruments, rational groupings of debt instruments, or by debt in total.
Including the current and noncurrent portions, carrying value as of the balance sheet date of loans from a bank with maturities initially due after one year or beyond the normal operating cycle if longer.
Carrying value as of the balance sheet date of current portion of long-term loans payable to bank due within one year or the operating cycle if longer.
Sum of the carrying values as of the balance sheet date of the portions of all long-term notes and loans payable due within one year or the operating cycle if longer.
Number of shares of stock issued as of the balance sheet date, including shares that had been issued and were previously outstanding but which are now held in the treasury.
Carrying value as of the balance sheet date of notes payable (with maturities initially due after one year or beyond the operating cycle if longer), excluding current portion.
Including the current and noncurrent portions, carrying value as of the balance sheet date of all notes and loans payable (with maturities initially due after one year or beyond the operating cycle if longer).
Including the current and noncurrent portions, aggregate carrying amount of all types of notes payable, as of the balance sheet date, with initial maturities beyond one year or beyond the normal operating cycle, if longer.
The remaining balance of debt issuance expenses that were capitalized and are being amortized against income over the lives of the respective bond issues. This does not include the amounts capitalized as part of the cost of the utility plant or asset.
Amount of required minimum rental payments for operating leases having an initial or remaining non-cancelable lease term in excess of one year due in the fourth and fifth fiscal years following the latest fiscal year. Excludes interim and annual periods when interim periods are reported on a rolling approach, from latest balance sheet date.
Amount of required minimum rental payments for operating leases having an initial or remaining non-cancelable lease term in excess of one year due in the fourth fiscal year following the latest fiscal year. Excludes interim and annual periods when interim periods are reported on a rolling approach, from latest balance sheet date.
Amount of required minimum rental payments for operating leases having an initial or remaining non-cancelable lease term in excess of one year due in the third fiscal year following the latest fiscal year. Excludes interim and annual periods when interim periods are reported on a rolling approach, from latest balance sheet date.
Amount of required minimum rental payments for operating leases having an initial or remaining non-cancelable lease term in excess of one year due after the fifth fiscal year following the latest fiscal year. Excludes interim and annual periods when interim periods are reported on a rolling approach, from latest balance sheet date.
The aggregate number of shares of common stock
and number of shares of the Company’s common stock that may be subject to incentive stock options granted under the 2018 Plan is
50,000,000 shares, of which 11,445,698 shares have been issued or granted under incentive stock options and 29,451,070 shares of restricted
stock have been issued as of December 31, 2022.
The Series B is convertible into common stock
at the option of a holder or if the closing price of the common stock exceeds 400% of the Conversion Price for a period of twenty consecutive
trading days, at the option of the Company. Conversion Price means a price per share of the common stock equal to 100% of the lowest daily
volume weighted average price of the common stock during the two years preceding or subsequent two years following the Issuance Date,
subject to adjustment as otherwise provided in the Certificate of Designations (the “Conversion Price”).
On April 20, 2022, in connection with an Exchange
Agreement (See Note 8), the Company issued warrants to purchase an aggregate amount up to 33,000,000 shares of the Company’s common
stock (the “New Warrants”). The New Warrants are exercisable at any time on or after the date of the issuance and entitled
this investor to purchase shares of the Company’s common stock for a period of five years from the initial date the warrants become
exercisable. Under the terms of the New Warrants, the holder is entitled to exercise the Warrants to purchase up to 33,000,000 shares
of the Company’s common stock at an initial exercise price of $0.025, subject to adjustment as detailed in the New Warrants. In
connection with the issuance of the New Warrants, on the initial measurement date, the relative fair value of the warrants of $325,785
was recorded as a debt discount and an increase in paid-in capital (See Note 8). On June 23, 2022, the Company issued common stock equivalents
with an initial conversion price of $0.011 per share and accordingly, the conversion price and warrant down-round provisions were triggered.
As a result, the conversion price of the New April 2022 Note was reduced to $0.011 per share and the exercise price of the New April 2022
Warrant was lowered to $0.011. As a result of the June 23, 2022 down-round provisions, the Company calculated the difference between the
warrants fair value on June 23, 2022, the date the down-round feature was triggered using the then current exercise price of $0.025 and
the new exercise price of $0.011. On June 23, 2022, the Company recorded a deemed dividend of $3,702 which represents the fair value transferred
to the warrant holders from the down round feature being triggered. Additionally, on September 6, 2022, the Company issued common stock
equivalents with an initial conversion price of $0.009 per share and accordingly, the conversion price and warrant down-round provisions
were triggered. As a result, the conversion price of the New April 2022 Note was reduced to $0.009 per share and the exercise price of
the New April 2022 Warrant was lowered to $0.009. As a result of the September 6, 2022 down-round provisions, the Company calculated the
difference between the warrants fair value on September 6, 2022, the date the down-round feature was triggered using the then current
exercise price of $0.011 and the new exercise price of $0.009. On September 6, 2022, the Company recorded a deemed dividend of $733 which
represents the fair value transferred to the warrant holders from the down round feature being triggered. No additional beneficial conversion
feature amount was recorded based on the September 6, 2022 valuation as the ratcheted beneficial conversion feature value was lower than
the original amount.
Amount of noncash expense included in interest expense to amortize debt discount and premium associated with the related debt instruments. Excludes amortization of financing costs. Alternate captions include noncash interest expense.
Carrying value as of the balance sheet date of liabilities incurred (and for which invoices have typically been received) and payable to vendors for goods and services received that are used in an entity's business.
Carrying value as of the balance sheet date of obligations incurred through that date and payable for professional fees, such as for legal and accounting services received. Used to reflect the current portion of the liabilities (due within one year or within the normal operating cycle if longer).
Carrying value as of the balance sheet date of obligations incurred through that date and payable for professional fees, such as for legal and accounting services received.
Amount of noncash expense included in interest expense to amortize debt discount and premium associated with the related debt instruments. Excludes amortization of financing costs. Alternate captions include noncash interest expense.
Number of securities into which each warrant or right may be converted. For example, but not limited to, each warrant may be converted into two shares.
Total number of common shares of an entity that have been sold or granted to shareholders (includes common shares that were issued, repurchased and remain in the treasury). These shares represent capital invested by the firm's shareholders and owners, and may be all or only a portion of the number of shares authorized. Shares issued include shares outstanding and shares held in the treasury.
The value of the financial instrument issued [noncash or part noncash] in the conversion of stock. Noncash is defined as transactions during a period that do not result in cash receipts or cash payments in the period. "Part noncash" refers to that portion of the transaction not resulting in cash receipts or cash payments in the period.
The number of shares converted in a noncash (or part noncash) transaction. Noncash is defined as transactions during a period that do not result in cash receipts or cash payments in the period. "Part noncash" refers to that portion of the transaction not resulting in cash receipts or cash payments in the period.
The number of new shares issued in the conversion of stock in a noncash (or part noncash) transaction. Noncash is defined as transactions during a period that do not result in cash receipts or cash payments in the period. "Part noncash" refers to that portion of the transaction not resulting in cash receipts or cash payments in the period.
Amount of asset related to consideration paid in advance for other costs that provide economic benefits within a future period of one year or the normal operating cycle, if longer.
A fee charged for services from professionals such as doctors, lawyers and accountants. The term is often expanded to include other professions, for example, pharmacists charging to maintain a medicinal profile of a client or customer.
Number of shares of stock issued as of the balance sheet date, including shares that had been issued and were previously outstanding but which are now held in the treasury.
Amount of consideration paid in advance for supplies that provide economic benefits within a future period of one year or the normal operating cycle, if longer.
The number of shares into which fully or partially vested stock options outstanding as of the balance sheet date can be currently converted under the option plan.
The weighted-average price as of the balance sheet date at which grantees can acquire the shares reserved for issuance on vested portions of options outstanding and currently exercisable under the stock option plan.
Weighted average remaining contractual term for vested portions of options outstanding and currently exercisable or convertible, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days.
The number of shares into which fully or partially vested stock options outstanding as of the balance sheet date can be currently converted under the option plan.
The weighted-average price as of the balance sheet date at which grantees can acquire the shares reserved for issuance on vested portions of options outstanding and currently exercisable under the stock option plan.
The number of shares under options that were cancelled during the reporting period as a result of occurrence of a terminating event specified in contractual agreements pertaining to the stock option plan.
Weighted average remaining contractual term for vested portions of options outstanding and currently exercisable or convertible, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days.
Weighted average remaining contractual term of outstanding stock options, in 'PnYnMnDTnHnMnS' format, for example, 'P1Y5M13D' represents the reported fact of one year, five months, and thirteen days.
This bonus will be paid 10% in cash ($16,000) which
was paid in December 2022 and 90% in equity amounting to $144,000 which as of December 31, 2022 had been accrued and as of December 31,
2022, was included in accrued compensation on the accompanying consolidated balance sheet.
This bonus will be paid 10% in cash ($30,962) which was paid in December 2021 and 90% in equity amounting $278,653 which as of December
31, 2021 had been accrued and as of December 31, 2021, was included in accrued compensation on the accompanying consolidated balance sheet.
As consideration for these services, the employment agreement provides Mr. Silverman with the following compensation and benefits:
●
An annual base salary of $300,000, with a 10% increase on each anniversary date contingent upon achieving certain performance objectives as set by the Board. Until the Company raises $1,000,000 in debt or equity financing after entering into this agreement, Mr. Silverman will receive ½ of the base salary on a monthly basis with the other ½ being deferred. Upon the financing being raised, Mr. Silverman will receive the deferred portion of his compensation and his base salary will be paid in full moving forward.
●
After the first $500,000 of equity investments is raised by the Company, after entering into this employment agreement, Mr. Silverman will receive a capital raise success bonus of 5% of all equity capital raised from investors/lenders introduced by him to the Company.
●
Annual cash performance bonus opportunity as determined by the Board.
●
An option to acquire 3,000,000 common shares of the Company, with a strike price of $0.31 per unit. These options vested pro rata on a monthly basis for the term of the employment agreement. On each anniversary, Mr. Silverman will be eligible to be granted a minimum of 500,000 stock options of the Company at a strike price of $0.85 per common unit contingent upon the achievement of certain performance objectives.
●
Certain other employee benefits and perquisites, including reimbursement of necessary and reasonable travel and participation in retirement and welfare benefits.
Executive compensation, also known as executive pay, refers to remuneration packages specifically designed for business leaders, senior management and executive-level employees of a company.
Amount of liability accrued for the employer's obligation related to an employee's right to receive compensation for future absences that have been earned by employee.
Amount of expense for salary and wage arising from service rendered by nonofficer employee. Excludes allocated cost, labor-related nonsalary expense, and direct and overhead labor cost included in cost of good and service sold.
For an entity that discloses a concentration risk in relation to quantitative amount, which serves as the "benchmark" (or denominator) in the equation, this concept represents the concentration percentage derived from the division.
Number of segments reported by the entity. A reportable segment is a component of an entity for which there is an accounting requirement to report separate financial information on that component in the entity's financial statements.
The Company does not allocate any general and administrative or financing expenses of its holding company activities to its reportable segments, because these activities are managed at the corporate level.
The aggregate expense recognized in the current period that allocates the cost of tangible assets, intangible assets, or depleting assets to periods that benefit from use of the assets.
Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss).
Line items represent financial concepts included in a table. These concepts are used to disclose reportable information associated with domain members defined in one or many axes to the table.
Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income after deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss).
In February 2022, the Company entered into a 36-month
lease agreement for the lease of a vehicle under a non-cancelable operating lease through January 2025.
In September 2021, the Company entered into a
48-month lease agreement for the lease of office equipment under a non-cancelable operating lease through September 2025.
Description of the maturity date of the debt instrument including whether the debt matures serially and, if so, a brief description of the serial maturities.
For an unclassified balance sheet, the accumulated amortization, as of the reporting date, which represents the periodic charge to earnings of initial direct costs which have been deferred and are being allocated over the lease term in proportion to the recognition of rental income.
Operating Lease Right-Of-Use (“Rou”) Assets and Operating Lease Liabilities (Details) - Schedule of operating lease liabilities related to the ROU assets - USD ($)
Operating Lease Right-Of-Use (“Rou”) Assets and Operating Lease Liabilities (Details) - Schedule of future minimum base lease payments due under non-cancelable operating leases
Net proceeds are the amounts received by the seller after deducting all costs and expenses from the gross proceeds in a transaction arising from the sale of an asset (goods, property, or securities).
Amounts due to recorded owners or owners with a beneficial interest of more than 10 percent of the voting interests or officers of the company, which are due after one year (or one business cycle).
Carrying amount as of the balance sheet date of obligations due all related parties. For classified balance sheets, represents the current portion of such liabilities (due within one year or within the normal operating cycle if longer).
The portion of the valuation allowance pertaining to the deferred tax asset representing potential future taxable deductions from net operating loss carryforwards for which it is more likely than not that a tax benefit will not be realized.
Amount of the difference between reported income tax expense (benefit) and expected income tax expense (benefit) computed by applying the domestic federal statutory income tax rates to pretax income (loss) from continuing operations attributable to increase (decrease) in the valuation allowance for deferred tax assets.
Amount of the difference between reported income tax expense (benefit) and expected income tax expense (benefit) computed by applying the domestic federal statutory income tax rates to pretax income (loss) from continuing operations attributable to other nondeductible expenses.
The Company has the right to prepay the March
2023 Diagonal Note (principal and accrued interest) at any time during the first six months the note is outstanding at the rate of 115%
during the first 30 days after issuance, 120% during the 31st to 60th day after issuance, and 125% during the 61st
to the 180th day after issuance.
Total number of common shares of an entity that have been sold or granted to shareholders (includes common shares that were issued, repurchased and remain in the treasury). These shares represent capital invested by the firm's shareholders and owners, and may be all or only a portion of the number of shares authorized. Shares issued include shares outstanding and shares held in the treasury.
Aggregate par or stated value of issued nonredeemable common stock (or common stock redeemable solely at the option of the issuer). This item includes treasury stock repurchased by the entity. Note: elements for number of nonredeemable common shares, par value and other disclosure concepts are in another section within stockholders' equity.
The number of new shares issued in the conversion of stock in a noncash (or part noncash) transaction. Noncash is defined as transactions during a period that do not result in cash receipts or cash payments in the period. "Part noncash" refers to that portion of the transaction not resulting in cash receipts or cash payments in the period.
Amount, after accumulated amortization, of debt issuance costs. Includes, but is not limited to, legal, accounting, underwriting, printing, and registration costs.
The amount of expense provided in the period for legal costs incurred on or before the balance sheet date pertaining to resolved, pending or threatened litigation, including arbitration and mediation proceedings.
The amount for notes payable (written promise to pay), due to related parties. Used to reflect the current portion of the liabilities (due within one year or within the normal operating cycle if longer).
The fair value as of the date of the statement of financial position of shares outstanding in connection with an own-share lending arrangement, in contemplation of a convertible debt offering or other financing.
The redemption (or callable) amount of currently redeemable preferred stock. Includes amounts representing dividends not currently declared or paid but which will be payable under the redemption features or for which ultimate payment is solely within the control of the issuer.
Number of shares of stock issued as of the balance sheet date, including shares that had been issued and were previously outstanding but which are now held in the treasury.
Describes the event or transaction that occurred between the balance sheet date and the date the financial statements are issued or available to be issued.
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style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 1 – <span style="text-decoration:underline">NATURE OF ORGANIZATION</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b> </b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Nature of Organization</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">C-Bond Systems, Inc., together with its subsidiaries
(the “Company”), is a materials development company and sole owner, developer, and manufacturer of the patented C-Bond technology.
The Company is engaged in the implementation of proprietary nanotechnology applications and processes to enhance properties of strength,
functionality, and sustainability of brittle material systems. The Company’s primary focus is in the multi-billion-dollar glass
and window film industry with target markets in the United States and internationally. Additionally, the Company has expanded its product
line to include disinfection products. The Company operates in two divisions: C-Bond Transportation Solutions and Patriot Glass Solutions.
C-Bond Transportation Solutions sells a windshield strengthening, water repellent solution called C-Bond nanoShield™ as well as
disinfection products. Patriot Glass Solutions sells multi-purpose glass strengthening primer and window film mounting solutions, including
C-Bond BRS, a ballistic-resistant film system, and C-Bond Secure, a forced entry system.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On June 30, 2021, the Company entered into a Share
Exchange Agreement and Plan of Reorganization (the “Exchange Agreement”) with (i) Mobile Tint LLC, a Texas limited liability
company doing business as A1 Glass Coating (“Mobile”), (ii) the sole member of Mobile (the “Mobile Shareholder”),
and (iii) Michael Wanke as the Representative of the Mobile Shareholder. Pursuant to the Exchange Agreement, the Company agreed to acquire
80% of Mobile’s units, representing 80% of Mobile’s issued and outstanding capital stock (the “Mobile Shares”).
On July 22, 2021, the Company closed the Exchange Agreement and acquired 80% of the Mobile Shares. The Mobile Shares were exchanged for
28,021,016 restricted shares of the Company’s common stock in an amount equal to $800,000, divided by the average of the closing
prices of the Company’s common stock during the 30-day period immediately prior to the closing. Two years after closing, the Company
has the option to acquire the remaining 20% of Mobile’s issued and outstanding membership interests in exchange for a number of
shares of the Company’s common stock equal to 300% of Mobile’s average EBIT value, divided by the price of the Company’s
common stock as defined in the Exchange Agreement (the “Additional Closing”). Mobile provides quality window tint solutions
for auto, home, and business owners across Texas, specializing in automotive window tinting, residential window film, and commercial window
film that stop harmful UV rays from passing through its window films for reduced glare, comfortable temperatures, and lower energy bills.
Mobile also carries products that offer forced-entry protection and films that protect glass from scratches, graffiti, other types of
vandalism, and even bullets, including C-Bond BRS and C-Bond Secure products. As part of the transaction, Mobile’s owner-operator,
Mr. Wanke, joined the Company as President of its Patriot Glass Solutions division.</p>0.800.800.80280210168000000.203<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTE 2 – <span style="text-decoration:underline">SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Basis of Presentation and Principles of Consolidation</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company’s consolidated financial statements
include the financial statements of its wholly owned subsidiary, C-Bond Systems, LLC, and its 80% owned subsidiary, Mobile since acquiring
80% of Mobile on July 22, 2021. All significant intercompany accounts and transactions have been eliminated in consolidation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Going Concern</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">These consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the
normal course of business. As reflected in the accompanying consolidated financial statements, the Company had a net loss of $5,156,478
and $7,128,858 for the years ended December 31, 2022 and 2021, respectively. The net cash used in operations was $1,584,918 and $1,807,051
for the years ended December 31, 2022 and 2021, respectively. Additionally, the Company had an accumulated deficit, shareholders’
deficit, and working capital deficit of $62,693,184, $7,050,669 and $4,349,384, respectively, on December 31, 2022. These factors raise
substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date
of this report. Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow
positive or raise additional debt and/or equity capital. The Company is seeking to raise capital through additional debt and/or equity
financings to fund its operations in the future. Although the Company has historically raised capital from sales of common shares and
preferred shares, and from the issuance of promissory notes and convertible promissory notes, there is no assurance that it will be able
to continue to do so. If the Company is unable to raise additional capital or secure additional lending in the near future, management
expects that the Company will need to curtail its operations. These consolidated financial statements do not include any adjustments related
to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern. </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Use of Estimates</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The preparation of consolidated financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ from those estimates. Estimates during the years ended December
31, 2022 and 2021 include estimates for allowance for doubtful accounts on accounts receivable, the estimates for obsolete or slow moving
inventory, estimates used in the calculation of progress towards completion on uncompleted jobs, purchase price allocation of acquired
businesses, the useful life of property and equipment, assumptions used in assessing impairment of long-term assets, the estimate of the
fair value lease liability and related right of use asset, the valuation of redeemable and mandatorily redeemable preferred stock, the
value of beneficial conversion features and deemed dividends, the valuation allowances for deferred tax assets, and the fair value of
non-cash equity transactions.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Fair Value of Financial Instruments and Fair Value Measurements</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The carrying amounts reported in the consolidated
balance sheets for cash, accounts receivable, contract assets and liabilities, notes payable, convertible note payable, accounts payable,
accrued expenses, accrued compensation, and lease liabilities approximate their fair market value based on the short-term maturity of
these instruments.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company analyzes all financial instruments
with features of both liabilities and equity under the Financial Accounting Standard Board’s (the “FASB”) accounting
standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest
level of input that is significant to the fair value measurement. The Company did not identify any assets or liabilities that are required
to be presented on the balance sheet at fair value in accordance with Accounting Standards Codification (“ASC”) Topic 820.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">ASC 825-10 “Financial Instruments”,
allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair
value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value
option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent
reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Cash and Cash Equivalents</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For purposes of the consolidated statements of
cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money
market accounts to be cash equivalents. The Company had no cash equivalents as of December 31, 2022 and 2021.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Accounts Receivable</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company recognizes an allowance for losses
on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of
historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable
customer accounts considered at risk or uncollectible. The expense associated with the allowance for doubtful accounts is recognized as
general and administrative expense.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Inventory</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Inventory, consisting of raw materials and finished
goods, are stated at the lower of cost and net realizable value utilizing the first-in, first-out (FIFO) method. A reserve is established
when management determines that certain inventories may not be saleable. If inventory costs exceed expected net realizable value due to
obsolescence or quantities in excess of expected demand, the Company will record reserves for the difference between the cost and the
net realizable value. These reserves are recorded based on estimates and included in cost of sales.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Property and Equipment</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Property and equipment are stated at cost and
are depreciated using the straight-line method over their estimated useful lives, which range from one to seven years. Leasehold improvements
are depreciated over the shorter of the useful life or lease term including scheduled renewal terms. Maintenance and repairs are charged
to expense as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and
any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in
the value of these assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Goodwill and Intangible Assets</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Goodwill represents the future economic benefit
arising from other assets acquired that could not be individually identified and separately recognized. Any goodwill arising from the
Company’s acquisition is attributable to the value of the potential expanded market opportunity with new customers. Intangible assets
may have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line
basis over their economic or legal life, whichever is shorter. The Company’s amortizable intangible assets are being amortized over
a useful life of 5 years.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Impairment of Long-Lived Assets</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In accordance with ASC Topic 360, the Company
reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may
not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future
cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s
estimated fair value and its book value.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Derivative Financial Instruments</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company had certain financial instruments
that were embedded derivatives. The Company evaluated all its financial instruments to determine if those contracts or any potential embedded
components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815-10-05-4, <i>Derivatives
and Hedging</i> and 815-40, <i>Contracts in Entity’s Own Equity</i>. This accounting treatment requires that the carrying amount
of any embedded derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the
fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as
either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at
the conversion, repayment or exercise date and then the related fair value amount is reclassified to other income or expense as part of
gain or loss on extinguishment.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Warranty Liability</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company provides limited warranties on its
products for product defects for periods ranging from 12 months to the life of the product. Warranty costs may include the cost of product
replacement, refunds, labor costs and other costs. Allowances for estimated warranty costs are recorded during the period of sale. The
determination of such allowances requires the Company to make estimates of product warranty claim rates and expected costs to repair or
to replace the products under warranty. The Company currently establishes warranty reserves based on historical warranty costs for each
product line combined with liability estimates based on the prior 12 months’ sales activities. If actual return rates and/or repair
and replacement costs differ significantly from the Company’s estimates, adjustments to recognize additional cost of sales may be
required in future periods. Historically the warranty accrual and the expense amounts have been immaterial. The warranty liability is
included in accrued expenses on the accompanying consolidated balance sheets and amounted $26,648 and $26,733 on December 31, 2022 and
2021, respectively. For the years ended December 31, 2022 and 2021, warranty costs were de minimis.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i> </i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Beneficial Conversion Feature</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Convertible debt includes conversion terms that
are considered in the money compared to the market price of the stock on the date of the related agreement. The Company calculates the
beneficial conversion feature and records a debt discount with the amount being amortized to interest expense over the term of the note.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Revenue Recognition</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company follows ASC Topic 606, <i>Revenue
from Contracts with Customers</i> (“ASC 606”). This standard establishes a single comprehensive model for entities to use
in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. ASC
606 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services and requires certain additional disclosures.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company sells its products which include standard
warranties primarily to distributors and authorized dealers. Product sales are recognized at a point in time when the product is shipped
to the customer and title is transferred and are recorded net of any discounts or allowances. The warranty does not represent a separate
performance obligation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Revenues from contracts for the distribution and
installation of window film solutions are recognized over time on the basis of the Company’s estimates of the progress towards completion
of contracts using various output or input methods depending on the type of contract terms including (1) the ratio of number of labor
hours spent compared to the number of estimated labor hours to complete a job, (2) using the milestone method, or (3) using a units completed
method. These methods are used because management considers these to be the best available measure of progress on these contracts. We
use the same method for similar types of contracts. The asset, “contract assets” represents revenues recognized in excess
of amounts billed. The liability, “contract liabilities,” represents billings in excess of revenues recognized.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Cost of Sales</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Cost of sales includes inventory costs, packaging
costs and warranty expenses.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Cost of revenues from fixed-price contracts for
the distribution and installation of window film solutions include all direct material, sub-contractor, labor and certain other direct
costs, as well as those indirect costs related to contract performance, such as indirect labor and fringe benefits. Provisions for estimated
losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions
and estimated profitability may result in revisions to cost and income, which are recognized in the period in which the revisions are
determined. Changes in estimated job profitability resulting from job performance, job conditions, claims, change orders, and settlements,
are accounted for as changes in estimates in the current period.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Shipping and Handling Costs</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Shipping and handling costs incurred for product
shipped to customers are included in general and administrative expenses and amounted to $45,455 and $15,431 for the years ended December
31, 2022 and 2021, respectively. Shipping and handling costs charged to customers are included in sales.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b> </b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Research and Development</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Research and development costs incurred in the
development of the Company’s products are expensed as incurred and includes costs such as labor, materials, and other allocated
costs incurred. For the years ended December 31, 2022 and 2021, research and development costs (recovery) incurred in the development
of the Company’s products were $0 and $(3,250), respectively, and are included in operating expenses on the accompanying consolidated
statements of operations. In April 2021, the Company received a refund of research and development costs of $3,250.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b> </b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Advertising Costs</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b> </b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company may participate in various advertising
programs. All costs related to advertising of the Company’s products are expensed in the period incurred. For the years ended December
31, 2022 and 2021, advertising costs charged to operations were $69,737 and $65,626, respectively and are included in general and administrative
expenses on the accompanying consolidated statements of operations. These advertising expenses do not include cooperative advertising
and sales incentives which shall been deducted from sales.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Federal and State Income Taxes</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company accounts for income tax using the
liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined
based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in
effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax
assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets
will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes
the enactment date.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company follows the accounting guidance for
uncertainty in income taxes using the provisions of ASC 740 <i>“Income Taxes</i>”. Using that guidance, tax positions initially
need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the
tax authorities. As of December 31, 2022 and 2021, the Company had no uncertain tax positions that qualify for either recognition or disclosure
in the financial statements. Tax years that remain subject to examination are the years ending on and after December 31, 2017. The Company
recognizes interest and penalties related to uncertain income tax positions in other expense. However, no such interest and penalties
were recorded as of December 31, 2022 and 2021.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Stock-Based Compensation</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Stock-based compensation is accounted for based
on the requirements of ASC 718 – <i>“Compensation –Stock Compensation</i>”, which requires recognition in the
financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments
over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively,
the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange
for an award based on the grant-date fair value of the award. The Company has elected to recognize forfeitures as they occur as permitted
under the FASB’s Accounting Standards Update (“ASU”) 2016-09 <i>Improvements to Employee Share-Based Payment</i>.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Loss Per Common Share</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">ASC 260 “Earnings Per Share”, requires
dual presentation of basic and diluted earnings per common share (“EPS”) with a reconciliation of the numerator and denominator
of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilutive securities and
non-vested forfeitable shares. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue
common shares were exercised or converted into common shares or resulted in the issuance of common shares that then shared in the earnings
of the entity. Basic net loss per common share is computed by dividing net loss available to members by the weighted average number of
common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average
number of common shares, common share equivalents and potentially dilutive securities outstanding during each period. Potentially dilutive
common shares consist of stock options and non-vested forfeitable shares (using the treasury stock method) and shares issuable upon conversion
of preferred shares and convertible notes payable (using the as-if converted method). These common share equivalents may be dilutive in
the future.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">All potentially dilutive common shares were excluded
from the computation of diluted common shares outstanding as they would have an anti-dilutive impact on the Company’s net losses
and consisted of the following: </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: justify">Stock options</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">8,445,698</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">8,445,698</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify">Warrants</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">34,000,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">17,500,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">Series B preferred stock</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">164,635,079</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">114,598,413</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify">Series C preferred stock</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">432,250,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">296,507,937</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">Convertible debt</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">962,679,774</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">33,000,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-bottom: 1.5pt">Non-vested, forfeitable common shares</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">16,970,120</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">14,270,120</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 4pt"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">1,618,980,671</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">484,322,168</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Segment Reporting</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the year ended December 31, 2022 and from
July 22, 2021 (date of acquisition of Mobile Tint) to December 31, 2021, the Company operated in two reportable business segments which
consisted of (1) the manufacture and sale of a windshield strengthening water repellent solution as well as disinfection products, and
the sale of multi-purpose glass strengthening primer and window film mounting solutions, including ballistic-resistant film systems and
a forced entry system, and (2) the distribution and installation of window film solutions. The Company’s reportable segments are
strategic business units that offer different products. They are managed separately based on the fundamental differences in their operations
and locations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Leases</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company accounts for leases in accordance
with ASC 842. The lease standard requires certain leases to be reported on the consolidated balance sheets as right-of-use assets and
lease liabilities. The Company elected the practical expedients permitted under the transition guidance of this standard that retained
the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. The Company does not
reassess whether any contracts entered into prior to adoption are leases or contain leases.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company categorize leases with contractual
terms longer than twelve months as either operating or finance. Finance leases are generally those leases that would allow the Company
to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in property
and equipment, net. All other leases are categorized as operating leases. The Company does not have any finance leases as of December
31, 2022 and 2021. The Company’s leases generally have terms that range from three to four years for property and equipment and
five years for property. The Company elected the accounting policy to include both the lease and non-lease components of our agreements
as a single component and account for them as a lease.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Lease liabilities are recognized at the present
value of the fixed lease payments using a discount rate based on the Company’s current borrowing rate. Lease assets are recognized
based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the
leases. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">When the Company has the option to extend the
lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and it is reasonably certain that
the Company will exercise the option, the Company considers these options in determining the classification and measurement of the lease.
Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Noncontrolling Interest</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company accounts for noncontrolling interest
in accordance with ASC Topic 810-10-45, which requires the Company to present noncontrolling interests as a separate component of total
shareholders’ deficit on the consolidated balance sheets and the consolidated net loss attributable to its noncontrolling interest
be clearly identified and presented on the face of the consolidated statements of operations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Risk and Uncertainties</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In March 2020, the World Health Organization declared
COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. The Company was materially affected by the COVID-19
outbreak in 2020 and 2021 and the ultimate duration and severity of the outbreak and its impact on the economic environment and our business
is uncertain. The Company saw a material decrease in sales from its international customers as a result of the unprecedented public health
crisis from the COVID-19 pandemic and a decrease in domestic sales due to a decrease in business spending on discretionary items. As a
result, during 2021 and 2020, the Company’s international customers delayed the ordering of products and delayed or defaulted on
payment of balances due to the Company. The lack of collection of accounts receivable balances, which the Company believes was attributable
to COVID-19, had a material impact on the cash flows of the Company. The Company believes that COVID-19 had minimal impact on its operations
in 2022. The Company cannot estimate the future impact of the pandemic on its business. A severe or prolonged economic downturn could
result in a variety of risks to the Company’s business, including weakened demand for its products and a decreased ability to raise
additional capital when needed on acceptable terms, if at all. Currently, the Company is unable to estimate the impact of this event on
its operations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b> </b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Recent Accounting Pronouncements</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In August 2020, the FASB issued ASU 2020-06, Debt—Debt
with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies accounting for
convertible instruments by removing major separation models required under current U.S. GAAP. Consequently, more convertible debt instruments
will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain
settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity
contracts to qualify for the exception. The ASU also simplifies the diluted net income per share calculation in certain areas. The new
guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and early
adoption is permitted. The Company is currently evaluating the impact of the adoption of the standard on the consolidated financial statements.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span>In June
2016, the FASB issued ASU No. 2016-13, <i>Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments, </i>which significantly changes how entities will measure credit losses for most financial assets, including
accounts receivable. ASU No. 2016-13 will replace today’s “incurred loss” approach with an “expected loss”
model, under which companies will recognize allowances based on expected rather than incurred losses. On November 15, 2019, the FASB delayed
the effective date of Topic 326 for certain small public companies and other private companies until fiscal years beginning after December
15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, as well as private companies
and not-for-profit entities. The Company is currently evaluating the new guidance and has not yet determined whether the adoption of the
new standard will have a material impact on its consolidated financial statements or the method of adoption.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span>In March
2022, the FASB issued ASU No. 2022-02, <i>Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage
Disclosures</i>. The guidance was issued as improvements to ASU No. 2016-13 described above. The vintage disclosure changes require an
entity to disclose current-period gross write-offs by year of origination for financing receivables. The guidance is effective for financial
statements issued for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The amendments should
be applied prospectively. Early adoption of the amendments is permitted, including adoption in an interim period. The amendments will
impact our disclosures but will not otherwise impact the consolidated financial statements. The Company is currently evaluating the new
guidance.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Other accounting standards that have been issued
or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial
statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated
to its financial condition, results of operations, cash flows or disclosures.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Basis of Presentation and Principles of Consolidation</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company’s consolidated financial statements
include the financial statements of its wholly owned subsidiary, C-Bond Systems, LLC, and its 80% owned subsidiary, Mobile since acquiring
80% of Mobile on July 22, 2021. All significant intercompany accounts and transactions have been eliminated in consolidation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>0.800.80<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Going Concern</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">These consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the
normal course of business. As reflected in the accompanying consolidated financial statements, the Company had a net loss of $5,156,478
and $7,128,858 for the years ended December 31, 2022 and 2021, respectively. The net cash used in operations was $1,584,918 and $1,807,051
for the years ended December 31, 2022 and 2021, respectively. Additionally, the Company had an accumulated deficit, shareholders’
deficit, and working capital deficit of $62,693,184, $7,050,669 and $4,349,384, respectively, on December 31, 2022. These factors raise
substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the issuance date
of this report. Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow
positive or raise additional debt and/or equity capital. The Company is seeking to raise capital through additional debt and/or equity
financings to fund its operations in the future. Although the Company has historically raised capital from sales of common shares and
preferred shares, and from the issuance of promissory notes and convertible promissory notes, there is no assurance that it will be able
to continue to do so. If the Company is unable to raise additional capital or secure additional lending in the near future, management
expects that the Company will need to curtail its operations. These consolidated financial statements do not include any adjustments related
to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the
Company be unable to continue as a going concern. </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"> </p>51564787128858158491818070516269318470506694349384<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Use of Estimates</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The preparation of consolidated financial statements
in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue
and expenses during the reporting period. Actual results could differ from those estimates. Estimates during the years ended December
31, 2022 and 2021 include estimates for allowance for doubtful accounts on accounts receivable, the estimates for obsolete or slow moving
inventory, estimates used in the calculation of progress towards completion on uncompleted jobs, purchase price allocation of acquired
businesses, the useful life of property and equipment, assumptions used in assessing impairment of long-term assets, the estimate of the
fair value lease liability and related right of use asset, the valuation of redeemable and mandatorily redeemable preferred stock, the
value of beneficial conversion features and deemed dividends, the valuation allowances for deferred tax assets, and the fair value of
non-cash equity transactions.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Fair Value of Financial Instruments and Fair Value Measurements</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The carrying amounts reported in the consolidated
balance sheets for cash, accounts receivable, contract assets and liabilities, notes payable, convertible note payable, accounts payable,
accrued expenses, accrued compensation, and lease liabilities approximate their fair market value based on the short-term maturity of
these instruments.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company analyzes all financial instruments
with features of both liabilities and equity under the Financial Accounting Standard Board’s (the “FASB”) accounting
standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest
level of input that is significant to the fair value measurement. The Company did not identify any assets or liabilities that are required
to be presented on the balance sheet at fair value in accordance with Accounting Standards Codification (“ASC”) Topic 820.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">ASC 825-10 “Financial Instruments”,
allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair
value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value
option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent
reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Cash and Cash Equivalents</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For purposes of the consolidated statements of
cash flows, the Company considers all highly liquid instruments with a maturity of three months or less at the purchase date and money
market accounts to be cash equivalents. The Company had no cash equivalents as of December 31, 2022 and 2021.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Accounts Receivable</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company recognizes an allowance for losses
on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of
historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable
customer accounts considered at risk or uncollectible. The expense associated with the allowance for doubtful accounts is recognized as
general and administrative expense.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Inventory</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Inventory, consisting of raw materials and finished
goods, are stated at the lower of cost and net realizable value utilizing the first-in, first-out (FIFO) method. A reserve is established
when management determines that certain inventories may not be saleable. If inventory costs exceed expected net realizable value due to
obsolescence or quantities in excess of expected demand, the Company will record reserves for the difference between the cost and the
net realizable value. These reserves are recorded based on estimates and included in cost of sales.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Property and Equipment</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Property and equipment are stated at cost and
are depreciated using the straight-line method over their estimated useful lives, which range from one to seven years. Leasehold improvements
are depreciated over the shorter of the useful life or lease term including scheduled renewal terms. Maintenance and repairs are charged
to expense as incurred. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and
any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in
the value of these assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>P1YP7Y<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Goodwill and Intangible Assets</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Goodwill represents the future economic benefit
arising from other assets acquired that could not be individually identified and separately recognized. Any goodwill arising from the
Company’s acquisition is attributable to the value of the potential expanded market opportunity with new customers. Intangible assets
may have either an identifiable or indefinite useful life. Intangible assets with identifiable useful lives are amortized on a straight-line
basis over their economic or legal life, whichever is shorter. The Company’s amortizable intangible assets are being amortized over
a useful life of 5 years.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>P5Y<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Impairment of Long-Lived Assets</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In accordance with ASC Topic 360, the Company
reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may
not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future
cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s
estimated fair value and its book value.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Derivative Financial Instruments</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company had certain financial instruments
that were embedded derivatives. The Company evaluated all its financial instruments to determine if those contracts or any potential embedded
components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC 815-10-05-4, <i>Derivatives
and Hedging</i> and 815-40, <i>Contracts in Entity’s Own Equity</i>. This accounting treatment requires that the carrying amount
of any embedded derivatives be recorded at fair value at issuance and marked-to-market at each balance sheet date. In the event that the
fair value is recorded as a liability, as is the case with the Company, the change in the fair value during the period is recorded as
either other income or expense. Upon conversion, exercise or repayment, the respective derivative liability is marked to fair value at
the conversion, repayment or exercise date and then the related fair value amount is reclassified to other income or expense as part of
gain or loss on extinguishment.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Warranty Liability</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company provides limited warranties on its
products for product defects for periods ranging from 12 months to the life of the product. Warranty costs may include the cost of product
replacement, refunds, labor costs and other costs. Allowances for estimated warranty costs are recorded during the period of sale. The
determination of such allowances requires the Company to make estimates of product warranty claim rates and expected costs to repair or
to replace the products under warranty. The Company currently establishes warranty reserves based on historical warranty costs for each
product line combined with liability estimates based on the prior 12 months’ sales activities. If actual return rates and/or repair
and replacement costs differ significantly from the Company’s estimates, adjustments to recognize additional cost of sales may be
required in future periods. Historically the warranty accrual and the expense amounts have been immaterial. The warranty liability is
included in accrued expenses on the accompanying consolidated balance sheets and amounted $26,648 and $26,733 on December 31, 2022 and
2021, respectively. For the years ended December 31, 2022 and 2021, warranty costs were de minimis.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i> </i></b></p>2664826733<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Beneficial Conversion Feature</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Convertible debt includes conversion terms that
are considered in the money compared to the market price of the stock on the date of the related agreement. The Company calculates the
beneficial conversion feature and records a debt discount with the amount being amortized to interest expense over the term of the note.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Revenue Recognition</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company follows ASC Topic 606, <i>Revenue
from Contracts with Customers</i> (“ASC 606”). This standard establishes a single comprehensive model for entities to use
in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. ASC
606 requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects
the consideration to which the entity expects to be entitled in exchange for those goods or services and requires certain additional disclosures.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company sells its products which include standard
warranties primarily to distributors and authorized dealers. Product sales are recognized at a point in time when the product is shipped
to the customer and title is transferred and are recorded net of any discounts or allowances. The warranty does not represent a separate
performance obligation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Revenues from contracts for the distribution and
installation of window film solutions are recognized over time on the basis of the Company’s estimates of the progress towards completion
of contracts using various output or input methods depending on the type of contract terms including (1) the ratio of number of labor
hours spent compared to the number of estimated labor hours to complete a job, (2) using the milestone method, or (3) using a units completed
method. These methods are used because management considers these to be the best available measure of progress on these contracts. We
use the same method for similar types of contracts. The asset, “contract assets” represents revenues recognized in excess
of amounts billed. The liability, “contract liabilities,” represents billings in excess of revenues recognized.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Cost of Sales</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Cost of sales includes inventory costs, packaging
costs and warranty expenses.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Cost of revenues from fixed-price contracts for
the distribution and installation of window film solutions include all direct material, sub-contractor, labor and certain other direct
costs, as well as those indirect costs related to contract performance, such as indirect labor and fringe benefits. Provisions for estimated
losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions
and estimated profitability may result in revisions to cost and income, which are recognized in the period in which the revisions are
determined. Changes in estimated job profitability resulting from job performance, job conditions, claims, change orders, and settlements,
are accounted for as changes in estimates in the current period.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Shipping and Handling Costs</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Shipping and handling costs incurred for product
shipped to customers are included in general and administrative expenses and amounted to $45,455 and $15,431 for the years ended December
31, 2022 and 2021, respectively. Shipping and handling costs charged to customers are included in sales.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b> </b></p>4545515431<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Research and Development</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Research and development costs incurred in the
development of the Company’s products are expensed as incurred and includes costs such as labor, materials, and other allocated
costs incurred. For the years ended December 31, 2022 and 2021, research and development costs (recovery) incurred in the development
of the Company’s products were $0 and $(3,250), respectively, and are included in operating expenses on the accompanying consolidated
statements of operations. In April 2021, the Company received a refund of research and development costs of $3,250.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b> </b></p>032503250<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Advertising Costs</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b> </b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company may participate in various advertising
programs. All costs related to advertising of the Company’s products are expensed in the period incurred. For the years ended December
31, 2022 and 2021, advertising costs charged to operations were $69,737 and $65,626, respectively and are included in general and administrative
expenses on the accompanying consolidated statements of operations. These advertising expenses do not include cooperative advertising
and sales incentives which shall been deducted from sales.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>6973765626<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Federal and State Income Taxes</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company accounts for income tax using the
liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined
based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in
effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax
assets if based on the weight of available evidence, it is more-likely-than-not that some portion, or all, of the deferred tax assets
will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes
the enactment date.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company follows the accounting guidance for
uncertainty in income taxes using the provisions of ASC 740 <i>“Income Taxes</i>”. Using that guidance, tax positions initially
need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the
tax authorities. As of December 31, 2022 and 2021, the Company had no uncertain tax positions that qualify for either recognition or disclosure
in the financial statements. Tax years that remain subject to examination are the years ending on and after December 31, 2017. The Company
recognizes interest and penalties related to uncertain income tax positions in other expense. However, no such interest and penalties
were recorded as of December 31, 2022 and 2021.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Stock-Based Compensation</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Stock-based compensation is accounted for based
on the requirements of ASC 718 – <i>“Compensation –Stock Compensation</i>”, which requires recognition in the
financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments
over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively,
the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange
for an award based on the grant-date fair value of the award. The Company has elected to recognize forfeitures as they occur as permitted
under the FASB’s Accounting Standards Update (“ASU”) 2016-09 <i>Improvements to Employee Share-Based Payment</i>.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Loss Per Common Share</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">ASC 260 “Earnings Per Share”, requires
dual presentation of basic and diluted earnings per common share (“EPS”) with a reconciliation of the numerator and denominator
of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilutive securities and
non-vested forfeitable shares. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue
common shares were exercised or converted into common shares or resulted in the issuance of common shares that then shared in the earnings
of the entity. Basic net loss per common share is computed by dividing net loss available to members by the weighted average number of
common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average
number of common shares, common share equivalents and potentially dilutive securities outstanding during each period. Potentially dilutive
common shares consist of stock options and non-vested forfeitable shares (using the treasury stock method) and shares issuable upon conversion
of preferred shares and convertible notes payable (using the as-if converted method). These common share equivalents may be dilutive in
the future.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">All potentially dilutive common shares were excluded
from the computation of diluted common shares outstanding as they would have an anti-dilutive impact on the Company’s net losses
and consisted of the following: </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: justify">Stock options</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">8,445,698</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">8,445,698</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify">Warrants</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">34,000,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">17,500,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">Series B preferred stock</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">164,635,079</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">114,598,413</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify">Series C preferred stock</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">432,250,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">296,507,937</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">Convertible debt</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">962,679,774</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">33,000,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-bottom: 1.5pt">Non-vested, forfeitable common shares</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">16,970,120</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">14,270,120</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 4pt"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">1,618,980,671</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">484,322,168</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: justify">Stock options</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">8,445,698</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">8,445,698</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify">Warrants</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">34,000,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">17,500,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">Series B preferred stock</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">164,635,079</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">114,598,413</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify">Series C preferred stock</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">432,250,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">296,507,937</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">Convertible debt</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">962,679,774</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">33,000,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-bottom: 1.5pt">Non-vested, forfeitable common shares</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">16,970,120</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">14,270,120</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 4pt"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">1,618,980,671</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">484,322,168</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>8445698844569834000000175000001646350791145984134322500002965079379626797743300000016970120142701201618980671484322168<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Segment Reporting</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the year ended December 31, 2022 and from
July 22, 2021 (date of acquisition of Mobile Tint) to December 31, 2021, the Company operated in two reportable business segments which
consisted of (1) the manufacture and sale of a windshield strengthening water repellent solution as well as disinfection products, and
the sale of multi-purpose glass strengthening primer and window film mounting solutions, including ballistic-resistant film systems and
a forced entry system, and (2) the distribution and installation of window film solutions. The Company’s reportable segments are
strategic business units that offer different products. They are managed separately based on the fundamental differences in their operations
and locations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Leases</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company accounts for leases in accordance
with ASC 842. The lease standard requires certain leases to be reported on the consolidated balance sheets as right-of-use assets and
lease liabilities. The Company elected the practical expedients permitted under the transition guidance of this standard that retained
the lease classification and initial direct costs for any leases that existed prior to adoption of the standard. The Company does not
reassess whether any contracts entered into prior to adoption are leases or contain leases.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company categorize leases with contractual
terms longer than twelve months as either operating or finance. Finance leases are generally those leases that would allow the Company
to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in property
and equipment, net. All other leases are categorized as operating leases. The Company does not have any finance leases as of December
31, 2022 and 2021. The Company’s leases generally have terms that range from three to four years for property and equipment and
five years for property. The Company elected the accounting policy to include both the lease and non-lease components of our agreements
as a single component and account for them as a lease.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Lease liabilities are recognized at the present
value of the fixed lease payments using a discount rate based on the Company’s current borrowing rate. Lease assets are recognized
based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the
leases. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">When the Company has the option to extend the
lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and it is reasonably certain that
the Company will exercise the option, the Company considers these options in determining the classification and measurement of the lease.
Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>P3YP4YP5Y<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Noncontrolling Interest</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company accounts for noncontrolling interest
in accordance with ASC Topic 810-10-45, which requires the Company to present noncontrolling interests as a separate component of total
shareholders’ deficit on the consolidated balance sheets and the consolidated net loss attributable to its noncontrolling interest
be clearly identified and presented on the face of the consolidated statements of operations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Risk and Uncertainties</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In March 2020, the World Health Organization declared
COVID-19 a global pandemic and recommended containment and mitigation measures worldwide. The Company was materially affected by the COVID-19
outbreak in 2020 and 2021 and the ultimate duration and severity of the outbreak and its impact on the economic environment and our business
is uncertain. The Company saw a material decrease in sales from its international customers as a result of the unprecedented public health
crisis from the COVID-19 pandemic and a decrease in domestic sales due to a decrease in business spending on discretionary items. As a
result, during 2021 and 2020, the Company’s international customers delayed the ordering of products and delayed or defaulted on
payment of balances due to the Company. The lack of collection of accounts receivable balances, which the Company believes was attributable
to COVID-19, had a material impact on the cash flows of the Company. The Company believes that COVID-19 had minimal impact on its operations
in 2022. The Company cannot estimate the future impact of the pandemic on its business. A severe or prolonged economic downturn could
result in a variety of risks to the Company’s business, including weakened demand for its products and a decreased ability to raise
additional capital when needed on acceptable terms, if at all. Currently, the Company is unable to estimate the impact of this event on
its operations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b> </b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Recent Accounting Pronouncements</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In August 2020, the FASB issued ASU 2020-06, Debt—Debt
with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic
815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies accounting for
convertible instruments by removing major separation models required under current U.S. GAAP. Consequently, more convertible debt instruments
will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain
settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity
contracts to qualify for the exception. The ASU also simplifies the diluted net income per share calculation in certain areas. The new
guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years, and early
adoption is permitted. The Company is currently evaluating the impact of the adoption of the standard on the consolidated financial statements.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span>In June
2016, the FASB issued ASU No. 2016-13, <i>Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments, </i>which significantly changes how entities will measure credit losses for most financial assets, including
accounts receivable. ASU No. 2016-13 will replace today’s “incurred loss” approach with an “expected loss”
model, under which companies will recognize allowances based on expected rather than incurred losses. On November 15, 2019, the FASB delayed
the effective date of Topic 326 for certain small public companies and other private companies until fiscal years beginning after December
15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, as well as private companies
and not-for-profit entities. The Company is currently evaluating the new guidance and has not yet determined whether the adoption of the
new standard will have a material impact on its consolidated financial statements or the method of adoption.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span>In March
2022, the FASB issued ASU No. 2022-02, <i>Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage
Disclosures</i>. The guidance was issued as improvements to ASU No. 2016-13 described above. The vintage disclosure changes require an
entity to disclose current-period gross write-offs by year of origination for financing receivables. The guidance is effective for financial
statements issued for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The amendments should
be applied prospectively. Early adoption of the amendments is permitted, including adoption in an interim period. The amendments will
impact our disclosures but will not otherwise impact the consolidated financial statements. The Company is currently evaluating the new
guidance.</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Other accounting standards that have been issued
or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial
statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated
to its financial condition, results of operations, cash flows or disclosures.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTE 3 - <span style="text-decoration:underline">ACQUISITION OF MOBILE TINT LLC</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b> </b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On June 30, 2021, the Company entered into a Share
Exchange Agreement and Plan of Reorganization (the “Exchange Agreement”) with (i) Mobile Tint LLC, a Texas limited liability
company doing business as A1 Glass Coating (“Mobile”), (ii) the sole member of Mobile (the “Mobile Member”), and
(iii) Michael Wanke as the Representative of the Mobile Member. Pursuant to the Exchange Agreement, the Company agreed to acquire 80%
of Mobile’s member units, representing 80% of Mobile’s issued and outstanding membership units (the “Mobile Member Units”).
On July 22, 2021, the Company closed the Exchange Agreement and acquired 80% of the Mobile Member Units. The Mobile Member Units were
exchanged for restricted shares of the Company’s common stock, in an amount equal to $800,000, divided by the average of the closing
prices of the Company’s common stock during the 30-day period immediately prior to the closing as defined in the Exchange Agreement.
In connection with the Exchange Agreement, the Company issued 28,021,016 shares of its common stock. These shares were valued at $694,921,
or $0.0248 per common share, based on the quoted closing price of the Company’s common stock on July 22, 2021, the measurement date.
Two years after closing, the Company has the option to acquire the remaining 20% of Mobile’s issued and outstanding membership interests
in exchange for a number of shares of the Company’s common stock equal to 300% of Mobile’s average EBIT value, divided by
the price of the Company’s common stock as defined in the Exchange Agreement (the “Additional Closing”).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company also entered into an Amendment to
the Exchange Agreement, dated July 21, 2021, which, among other things, stipulates that for U.S. federal income tax purposes the Exchange
and the Additional Closing (if exercised) are intended to qualify as a “reorganization” within the meaning of Section 368(a)
of the Code and the Treasury Regulations, and the definition of “Total EBIT Value” shall mean Mobile’s net income, before
income tax expense and interest expense have been deducted, for the period beginning on July 1, 2021 and ending on June 30, 2023, plus
fifty percent (50%) of the Mobile Member’s Base Salary, as defined in the Executive Employment Agreement dated July 21, 2021, between
the Mobile Member and the Company (the “Employment Agreement”), as described below.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The exchange Agreement transaction documents include
the Operating Agreement of Mobile (the “Operating Agreement”) which, among other things, appoints Mr. Wanke, Scott R. Silverman,
and Allison Tomek as the Managers of Mobile, and governs the operations of Mobile as outlined therein. Under the terms of the Operating
Agreement, the Managers shall not have the authority to perform or approve the following actions, among other things, unless such action
is also approved by a unanimous vote: to terminate the existing lease between Company and MDW Management, LLC, an entity owned by Michael
Wanke and his spouse; to borrow money for the Company from banks, other lending institutions, the Manager, Members, or affiliates of the
Manager or Members; to establish lines of credit in the name of the Company with financial institutions such as banks or other lending
institutions; to determine and declare distributions to Members of Mobile.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the Exchange Agreement, the
Company entered into a Piggy-Back Registration Rights Agreement dated July 20, 2021 (the “Registration Rights Agreement”)
with Mobile, the Mobile Member, and Mr. Wanke, pursuant to which if at any time on or after the date of the closing, the Company proposes
to file any Registration Statement (a “Registration Statement”) with respect to any offering of equity securities by the Company
for its own account or for shareholders of the Company, other than a Form S-8 Registration Statement, a dividend reinvestment plan, or
in connection with a merger or acquisition, then the Company shall (x) give written notice of such proposed filing to the holders of registrable
securities no less than ten (10) days before the anticipated filing date of the Registration Statement, and (y) offer to the holders of
registrable securities the opportunity to register the sale of either (i) an amount of registrable securities equal to the total number
of shares of the Company’s common stock being registered in such Registration Statement that are being offered solely for the Company’s
account excluding the registrable securities; or (ii) an amount of registrable securities equal to the total number of shares of the Company’s
common stock being registered for resale by shareholders of the Company excluding the registrable securities. </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the Exchange Agreement, the
Company was named as guarantor (“Guarantor”) of a Commercial Lease Agreement dated July 21, 2021, by and between landlord
MDW Management, LLC, a company owned by Michael Wanke and his wife and tenant Mobile Tint, LLC d/b/a A-1 Glass (the “Lease”).
The term of the Lease is 60 months, at a minimum monthly rent of $5,600 (not including tax), with two five-year options for the tenant
to renew. The Company’s obligation as Guarantor of the Lease will terminate upon the occurrence of earlier of the following: (i)
the date of Guarantor’s acquisition of 100% of the ownership interests of Mobile; (ii) the date that Guarantor beneficially owns
less than an eighty percent (80%) ownership interest in Mobile; or (iii) two (2) years from and after the effective date of the guaranty.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the Exchange Agreement, the
assets acquired and liabilities assumed were recorded at their estimated fair values on the acquisition date, subject to adjustment during
the measurement period with subsequent changes recognized in earnings or loss. These estimates were inherently uncertain and are subject
to refinement. Management develops estimates based on assumptions as a part of the purchase price allocation process to value the assets
acquired and liabilities assumed as of the business acquisition date. As a result, during the purchase price measurement period, which
may be up to one year from the business acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed
based on completion of valuations, with the corresponding offset to goodwill. After the purchase price measurement period, the Company
will record any adjustments to assets acquired or liabilities assumed in operating expenses in the period in which the adjustments may
have been determined. Based upon the purchase price allocation, the following table summarizes the estimated fair value of the assets
acquired and liabilities assumed at the date of the respective acquisition:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Total</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify">Assets acquired:</td><td> </td>
<td colspan="2" style="text-align: right"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 88%; text-align: justify; padding-left: 8.1pt">Cash</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">288,901</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-left: 8.1pt">Accounts receivable, net</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">59,726</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-left: 8.1pt">Inventory</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">68,019</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-left: 8.1pt">Prepaid expenses and other</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,091</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-left: 8.1pt">Contract assets</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">32,699</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-left: 8.1pt">Property and equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">140,211</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-left: 8.1pt">Right of use asset</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">253,433</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-left: 8.1pt">Intangible assets</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">352,516</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 1.5pt; padding-left: 8.1pt">Goodwill</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">350,491</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-bottom: 1.5pt">Total assets acquired at fair value</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,552,087</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">Less: total liabilities assumed:</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-left: 8.1pt">Notes payable</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">95,013</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-left: 8.1pt">Accounts payable</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">65,728</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-left: 8.1pt">Accrued expenses</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">159,262</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-left: 8.1pt">Customer deposit</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">110,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-left: 8.1pt">Lease liability</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">253,433</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 1.5pt; padding-left: 8.1pt">Noncontrolling interest</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">173,730</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-bottom: 1.5pt">Total liabilities assumed</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">857,166</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 4pt; padding-left: 8.1pt">Net assets acquired</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">694,921</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="font-weight: bold; text-align: justify">Purchase consideration paid:</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 1.5pt">Fair value of common shares issued</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right">694,921</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-bottom: 4pt; padding-left: 8.1pt">Total purchase consideration paid</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">694,921</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following unaudited pro forma consolidated
results of operations have been prepared as if the acquisition of Mobile Tint LLC had occurred as of the beginning of the following year: </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">For the Year Ended<br/> December 31,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 88%; text-align: left; padding-bottom: 4pt">Net Revenues</td><td style="width: 1%; padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; width: 1%; text-align: left">$</td><td style="border-bottom: Black 4pt double; width: 9%; text-align: right">2,168,863</td><td style="width: 1%; padding-bottom: 4pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 4pt">Net Loss</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(7,128,027</td><td style="padding-bottom: 4pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 4pt">Net Loss per Share</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(0.03</td><td style="padding-bottom: 4pt; text-align: left">)</td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pro forma data does not purport to be indicative
of the results that would have been obtained had these events actually occurred at the beginning of the periods presented and is not intended
to be a projection of future results.</p>0.800.800.80800000280210166949210.02480.2030.505600The Company’s obligation as Guarantor of the Lease will terminate upon the occurrence of earlier of the following: (i)
the date of Guarantor’s acquisition of 100% of the ownership interests of Mobile; (ii) the date that Guarantor beneficially owns
less than an eighty percent (80%) ownership interest in Mobile; or (iii) two (2) years from and after the effective date of the guaranty.<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Total</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td style="text-align: justify">Assets acquired:</td><td> </td>
<td colspan="2" style="text-align: right"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 88%; text-align: justify; padding-left: 8.1pt">Cash</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">288,901</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-left: 8.1pt">Accounts receivable, net</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">59,726</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-left: 8.1pt">Inventory</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">68,019</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-left: 8.1pt">Prepaid expenses and other</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,091</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-left: 8.1pt">Contract assets</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">32,699</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-left: 8.1pt">Property and equipment</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">140,211</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-left: 8.1pt">Right of use asset</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">253,433</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-left: 8.1pt">Intangible assets</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">352,516</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 1.5pt; padding-left: 8.1pt">Goodwill</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">350,491</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-bottom: 1.5pt">Total assets acquired at fair value</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,552,087</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">Less: total liabilities assumed:</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-left: 8.1pt">Notes payable</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">95,013</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-left: 8.1pt">Accounts payable</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">65,728</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-left: 8.1pt">Accrued expenses</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">159,262</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-left: 8.1pt">Customer deposit</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">110,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-left: 8.1pt">Lease liability</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">253,433</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 1.5pt; padding-left: 8.1pt">Noncontrolling interest</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">173,730</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-bottom: 1.5pt">Total liabilities assumed</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">857,166</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 4pt; padding-left: 8.1pt">Net assets acquired</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">694,921</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="font-weight: bold; text-align: justify">Purchase consideration paid:</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 1.5pt">Fair value of common shares issued</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right">694,921</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-bottom: 4pt; padding-left: 8.1pt">Total purchase consideration paid</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">694,921</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>288901597266801960913269914021125343335251635049115520879501365728159262110000253433173730857166694921694921694921<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">For the Year Ended<br/> December 31,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 88%; text-align: left; padding-bottom: 4pt">Net Revenues</td><td style="width: 1%; padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; width: 1%; text-align: left">$</td><td style="border-bottom: Black 4pt double; width: 9%; text-align: right">2,168,863</td><td style="width: 1%; padding-bottom: 4pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 4pt">Net Loss</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(7,128,027</td><td style="padding-bottom: 4pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 4pt">Net Loss per Share</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(0.03</td><td style="padding-bottom: 4pt; text-align: left">)</td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>2168863-7128027-0.03<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTE 4 – <span style="text-decoration:underline">ACCOUNTS RECEIVABLE</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 31, 2022 and 2021, accounts receivable
consisted of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: center"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Accounts receivable</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">304,964</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">204,804</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Less: allowance for doubtful accounts</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(35,522</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(31,556</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Accounts receivable, net</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">269,442</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">173,248</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the years ended December 31, 2022 and 2021, bad debt expense amounted
to $7,716 and $39,355, respectively.</p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: center"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Accounts receivable</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">304,964</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">204,804</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Less: allowance for doubtful accounts</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(35,522</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(31,556</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Accounts receivable, net</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">269,442</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">173,248</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>3049642048043552231556269442173248771639355<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTE 5 – <span style="text-decoration:underline">INVENTORY</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 31, 2022 and 2021, inventory consisted
of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Raw materials</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,501</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">7,141</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Finished goods</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">75,945</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">120,790</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Inventory</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">77,446</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">127,931</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Less: allowance for obsolete or slow-moving inventory</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-121">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(45,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Inventory, net</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">77,446</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">82,931</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the years ended December 31, 2022 and 2021,
a loss from allowance for slow moving inventory amounted to $0 and $45,000, respectively, and is included in cost of sales on the accompanying
consolidated statements of operations.</p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Raw materials</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,501</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">7,141</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Finished goods</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">75,945</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">120,790</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Inventory</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">77,446</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">127,931</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Less: allowance for obsolete or slow-moving inventory</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-121">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(45,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Inventory, net</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">77,446</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">82,931</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>150171417594512079077446127931450007744682931045000<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 6 – <span style="text-decoration:underline">PROPERTY AND EQUIPMENT</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 31, 2022 and 2021, property and equipment
consisted of the following: </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: center"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Useful Life</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 64%; text-align: justify">Machinery and equipment</td><td style="width: 1%"> </td>
<td style="width: 11%; text-align: center">5 – 7 years</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">124,133</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">124,133</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify">Furniture and office equipment</td><td> </td>
<td style="text-align: center">3 – 7 years</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">32,306</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">32,306</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">Vehicles</td><td> </td>
<td style="text-align: center">1 – 5 years</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">62,195</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">63,009</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-bottom: 1.5pt">Leasehold improvements</td><td style="padding-bottom: 1.5pt"> </td>
<td style="text-align: center; padding-bottom: 1.5pt">3 – 5 years</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">45,296</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">45,296</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td> </td><td> </td>
<td style="text-align: center"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">263,930</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">264,744</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-bottom: 1.5pt">Less: accumulated depreciation</td><td style="padding-bottom: 1.5pt"> </td>
<td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(167,624</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(129,722</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 4pt">Property and equipment, net</td><td style="padding-bottom: 4pt"> </td>
<td style="text-align: center; padding-bottom: 4pt"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">96,306</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">135,022</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the year ended December 31, 2022, the Company
sold a vehicle and other equipment for proceeds of $5,500 and record a gain on sale of property and equipment of $5,500 which is included
in general and administrative expenses on the accompanying consolidated statement of operations. During the year ended December 31, 2021,
the Company sold a vehicle for proceeds of $13,000 and record a gain on sale of property and equipment of $13,000 which is included in
general and administrative expenses on the accompanying consolidated statement of operations. For the years ended December 31, 2022 and
2021, depreciation expense is included in general and administrative expenses and amounted to $38,716 and $23,872, respectively. </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: center"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Useful Life</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 64%; text-align: justify">Machinery and equipment</td><td style="width: 1%"> </td>
<td style="width: 11%; text-align: center">5 – 7 years</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">124,133</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">124,133</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify">Furniture and office equipment</td><td> </td>
<td style="text-align: center">3 – 7 years</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">32,306</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">32,306</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify">Vehicles</td><td> </td>
<td style="text-align: center">1 – 5 years</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">62,195</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">63,009</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-bottom: 1.5pt">Leasehold improvements</td><td style="padding-bottom: 1.5pt"> </td>
<td style="text-align: center; padding-bottom: 1.5pt">3 – 5 years</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">45,296</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">45,296</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td> </td><td> </td>
<td style="text-align: center"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">263,930</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">264,744</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-bottom: 1.5pt">Less: accumulated depreciation</td><td style="padding-bottom: 1.5pt"> </td>
<td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(167,624</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(129,722</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 4pt">Property and equipment, net</td><td style="padding-bottom: 4pt"> </td>
<td style="text-align: center; padding-bottom: 4pt"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">96,306</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">135,022</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>P5YP7Y124133124133P3YP7Y3230632306P1YP5Y6219563009P3YP5Y4529645296263930264744167624129722963061350225500550013000130003871623872<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTE 7 – <span style="text-decoration:underline">INTANGIBLE ASSETS AND GOODWILL</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 31, 2022 and 2021, intangible assets,
which were acquired from Mobile in 2021 (See Note 3), consisted of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: center"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Useful life</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 64%; text-align: left">Customer relations</td><td style="width: 1%"> </td>
<td style="width: 11%; text-align: center">5 years</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">212,516</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">212,516</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td>Non-compete</td><td> </td>
<td style="text-align: center">5 years</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">40,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">40,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Trade name</td><td style="padding-bottom: 1.5pt"> </td>
<td style="text-align: center; padding-bottom: 1.5pt"><div style="-sec-ix-hidden: hidden-fact-122">-</div></td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">100,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">100,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td> </td><td> </td>
<td style="text-align: center"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">352,516</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">352,516</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Less: accumulated amortization</td><td style="padding-bottom: 1.5pt"> </td>
<td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(72,598</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(22,095</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 4pt">Intangible assets, net</td><td style="padding-bottom: 4pt"> </td>
<td style="text-align: center; padding-bottom: 4pt"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">279,918</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">330,421</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Useful life</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 64%; padding-bottom: 4pt">Goodwill</td><td style="width: 1%; padding-bottom: 4pt"> </td>
<td style="width: 1%; padding-bottom: 4pt; text-align: left"> </td><td style="width: 9%; padding-bottom: 4pt; text-align: right"><div style="-sec-ix-hidden: hidden-fact-123">-</div></td><td style="width: 1%; padding-bottom: 4pt; text-align: left"> </td><td style="width: 1%; padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; width: 1%; text-align: left">$</td><td style="border-bottom: Black 4pt double; width: 9%; text-align: right">350,491</td><td style="width: 1%; padding-bottom: 4pt; text-align: left"> </td><td style="width: 1%; padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; width: 1%; text-align: left">$</td><td style="border-bottom: Black 4pt double; width: 9%; text-align: right">350,491</td><td style="width: 1%; padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the years ended December 31, 2022 and 2021,
amortization expense of intangible assets amounted to $50,503 and $22,095, respectively. On December 31, 2022, accumulated amortization
amounted to $61,098 and $11,500 for the customer relations and non-compete, respectively. On December 31, 2021, accumulated amortization
amounted to $18,595 and $3,500 for the customer relations and non-compete, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Amortization of intangible assets with identifiable
useful lives that is attributable to future periods is as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">Twelve months ending December 31:</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Amount</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 88%; text-align: left">2023</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">50,503</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">2024</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">50,503</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">2025</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">50,503</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">2026</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">28,409</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">179,918</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: center"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Useful life</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 64%; text-align: left">Customer relations</td><td style="width: 1%"> </td>
<td style="width: 11%; text-align: center">5 years</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">212,516</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">212,516</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td>Non-compete</td><td> </td>
<td style="text-align: center">5 years</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">40,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">40,000</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Trade name</td><td style="padding-bottom: 1.5pt"> </td>
<td style="text-align: center; padding-bottom: 1.5pt"><div style="-sec-ix-hidden: hidden-fact-122">-</div></td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">100,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">100,000</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td> </td><td> </td>
<td style="text-align: center"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">352,516</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">352,516</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Less: accumulated amortization</td><td style="padding-bottom: 1.5pt"> </td>
<td style="text-align: center; padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(72,598</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(22,095</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 4pt">Intangible assets, net</td><td style="padding-bottom: 4pt"> </td>
<td style="text-align: center; padding-bottom: 4pt"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">279,918</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">330,421</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Useful life</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 64%; padding-bottom: 4pt">Goodwill</td><td style="width: 1%; padding-bottom: 4pt"> </td>
<td style="width: 1%; padding-bottom: 4pt; text-align: left"> </td><td style="width: 9%; padding-bottom: 4pt; text-align: right"><div style="-sec-ix-hidden: hidden-fact-123">-</div></td><td style="width: 1%; padding-bottom: 4pt; text-align: left"> </td><td style="width: 1%; padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; width: 1%; text-align: left">$</td><td style="border-bottom: Black 4pt double; width: 9%; text-align: right">350,491</td><td style="width: 1%; padding-bottom: 4pt; text-align: left"> </td><td style="width: 1%; padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; width: 1%; text-align: left">$</td><td style="border-bottom: Black 4pt double; width: 9%; text-align: right">350,491</td><td style="width: 1%; padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>P5Y212516212516P5Y4000040000100000100000352516352516725982209527991833042135049135049150503220956109811500185953500<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">Twelve months ending December 31:</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Amount</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 88%; text-align: left">2023</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">50,503</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">2024</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">50,503</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">2025</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">50,503</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">2026</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">28,409</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">179,918</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>50503505035050328409179918<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTE 8 – <span style="text-decoration:underline">CONVERTIBLE NOTES PAYABLE</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b> </b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Mercer Convertible Debt</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On October 15, 2021, the Company entered into
a Securities Purchase Agreement (the “SPA”) with Mercer Street Global Opportunity Fund, LLC (the “Investor”),
pursuant to which the Company issued and sold to Investor a 10% Original Issue Discount Senior Convertible Promissory Note in the principal
amount of $825,000 (the “Initial Note”) and five-year warrants to purchase up to 16,500,000 shares of the Company’s
common stock at an initial exercise price of $0.05 per share, an amount equal to 50% of the conversion shares that were issued (the “Initial
Warrants”). The Company received net proceeds of $680,000, which is net of original issue discounts of $75,000, placement fees of
$60,000, and legal fees of $10,000. The transactions contemplated under the SPA closed on October 18, 2021.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the SPA, the Investor agreed to purchase
an additional $825,000 10% Original Issue Discount Senior Convertible Promissory Note (the “Second Note,” and together with
the Initial Note, the “Notes”), and a five-year warrant (the “Second Warrant,” and together with the Initial Warrant,
the “Warrants”) to purchase, in the aggregate, shares of the Company’s common stock at an initial exercise price of
$0.05 per share from the Company in an amount equal to 50% of the conversion shares to be issued upon the same terms as the Initial Note
and Initial Warrant (subject to there being no event of default under the Initial Note or other customary closing conditions), within
three trading days of a registration statement registering the shares of the Company’s common stock issuable under the Notes (the
“Conversion Shares”) and upon exercise of the Warrants (the “Warrant Shares”) being declared effective by the
SEC. To date, the Investor did not purchase the Second Note.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Initial Note matured 12 months after issuance,
bore interest at a rate of 4% per annum through the date of default, and was initially convertible beginning on the six-month anniversary
of the original issue date into the Company’s common stock at a fixed conversion price of $0.025 per share, subject to adjustment
for stock splits, stock combinations, dilutive issuances, and similar events, as described in the Initial Note.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Initial Note may be prepaid at any time for
the first 90 days at face value plus accrued interest. From day 91 through day 180, the Note may be prepaid in an amount equal to 110%
of the principal amount plus accrued interest. From day 181 through the day immediately preceding the maturity date, the Initial Note
may be prepaid in an amount equal to 120% of the principal amount plus accrued interest.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Note and Warrants contain conversion limitations
providing that a holder thereof may not convert the Notes or exercise the Warrants to the extent (but only to the extent) that, if after
giving effect to such conversion, the holder or any of its affiliates would beneficially own in excess of 4.99% of the outstanding shares
of the Company’s common stock immediately after giving effect to such conversion or exercise. A holder may increase or decrease
its beneficial ownership limitation upon notice to the Company provided that in no event such limitation exceeds 9.99%, and that any increase
shall not be effective until the 61<sup>st</sup> day after such notice.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the SPA, the Company entered
into a Registration Rights Agreement dated October 15, 2021 (the “Registration Rights Agreement”), with the Investor pursuant
to which it is obligated to file a registration statement with the SEC within 45 days after the date of the agreement to register the
resale by the Investor of the conversion shares and warrant shares, and use all commercially reasonable efforts to have the registration
statement declared effective by the SEC within 60 days after the registration statement is filed.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Upon the occurrence of an event of default under
the Notes, the Investor has the right to be prepaid at 125% of the outstanding principal balance and accrued interest, and interest accrues
at 18% per annum. Events of default included, among other things,</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%"><tr style="vertical-align: top; text-align: justify">
<td style="width: 0.25in"/><td style="width: 0.25in; text-align: left"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(i)</span></td><td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">any
default in the payment of (A) principal and interest payment under this Note or any other Indebtedness, or (B) Late Fees, liquidated
damages and other amounts owing to the Holder of this Note, as and when the same shall become due and payable (whether on a Conversion
Date, or the Maturity Date, or by acceleration or otherwise), which default, solely in the case of a default under clause (B) above,
is not cured within five Trading Days;</span></td>
</tr></table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
<tr style="vertical-align: top">
<td style="width: 0.25in; text-align: justify"> </td>
<td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(ii)</span></td>
<td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the Company or any Subsidiary shall be subject to a Bankruptcy Event;</span></td></tr>
</table><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
<tr style="vertical-align: top">
<td style="width: 0.25in; text-align: justify"> </td>
<td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iii)</span></td>
<td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the SEC suspends the Common Stock from trading or the Company’s Common Stock is not listed or quoted for trading on a Trading Market which failure is not cured, if possible to cure, within the earlier to occur of 10 Trading Days after notice of such failure is sent by the Holder or by any other Holder to the Company or the transfer of shares of Common Stock through the Depository Trust Company System is no longer available or is subject to a “chill” by the Depository Trust Company or any successor;</span></td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
<tr style="vertical-align: top">
<td style="width: 0.25in; text-align: justify"> </td>
<td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(iv)</span></td>
<td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the Company shall be a party to any Change of Control Transaction or shall agree to sell or dispose of all or in excess of 50% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change of Control Transaction);</span></td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
<tr style="vertical-align: top">
<td style="width: 0.25in; text-align: justify"> </td>
<td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(v)</span></td>
<td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the Company incurs any Indebtedness other than Permitted Indebtedness;</span></td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt; width: 100%">
<tr style="vertical-align: top">
<td style="width: 0.25in; text-align: justify"> </td>
<td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(vi)</span></td>
<td style="text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the Company restates any financial statements included in its reports or registration statements filed pursuant to the Securities Act or the Exchange Act for any date or period from two years prior to the Original Issue Date of this Note and until this Note is or the Warrants issued to the Holder are no longer outstanding, if following first public announcement or disclosure that a restatement will occur the VWAP on the next Trading Day is 20% less than the VWAP on the prior Trading Day. For the purposes of this clause the next Trading Day if an announcement is made before 4:00 pm New York, NY time is either the day of the announcement or the following Trading Day. The Company filed a Report on Form 8-K announcing the restatement of its financial statements for the year ended December 31, 2020. Following the first public announcement or disclosure that a restatement occurred, the VWAP on the next Trading Day was not 20% less than the VWAP on the prior Trading Day and accordingly, the default provisions were not triggered.</span></td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has also granted the investor a 12-month
(or until the Notes are no longer outstanding) right to participate in specified future financings, up to a level of 30%.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the SPA, on October 18, 2021,
the Company issued 668,151 shares of its common stock to the placement agent as fee for the capital raise. The 668,151 shares of common
stock issued were recorded as a debt discount of $14,064 based on the relative fair value method to be amortized over the life of the
Note. The 16,500,000 Initial Warrants were valued at $347,142 using the relative fair value method and recorded as a debt discount to
be amortized over the life of the note. The original issue discounts of $75,000, placement fees of $60,000, and legal fees of $10,000,
aggregating $145,000, was recorded as a debt discount to be amortized into interest expense over the twelve-month term of the note. Additionally,
the Initial Note was convertible into common shares at an initial conversion price of is $0.025 which was lower than the fair value of
common shares based on the quoted closing price of the Company’s common stock on the measurement date. Since warrants and common
shares were issued with the Initial Note, the proceeds were allocated to the instrument based on relative fair value. The Initial Warrants
did not contain any features requiring liability treatment and therefore were classified as equity. The value allocated to the Initial
Warrants and common shares issued was $347,142 and $14,064, respectively, and $318,794 was allocated to the beneficial conversion feature.
Since the intrinsic value of the beneficial conversion feature, warrants and common shares was greater than the proceeds allocated to
the convertible instrument, the amount of the discount assigned to the beneficial conversion feature, warrants and common shares issued
was limited to the amount of the proceeds allocated to the convertible instrument. Accordingly, the Company recorded an aggregate non-cash
debt discount of $680,000 with the credit to additional paid in capital. This debt discount was amortized to interest expense over the
term of the Convertible Note through the date Exchange Agreement discussed below.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On April 20, 2022, the Company and the Investor
entered into an Exchange Agreement (the “Exchange Agreement”). The original SPA remains in effect. Per the terms of the Exchange
Agreement, the Parties agreed to exchange (i) the Initial Note for a new Convertible Promissory Note (the “New Note”) and
(ii) the Initial Warrant for a new five-year warrant to purchase, in the aggregate, 33,000,000 shares of the Company’s common stock
at an exercise price of $0.025 per share (the “New Warrant” and together with the New Note, the “New Securities”),
according to the terms and conditions of the Exchange Agreement. On April 20, 2022, pursuant to the terms of the Exchange Agreement, the
Investor surrendered the Prior Securities in exchange for the New Securities. Other than the surrender of the Prior Securities, no consideration
of any kind whatsoever was given by the Investor to the Company in connection with the Exchange Agreement. The terms of the New Securities
are the same as the Prior Securities except for the pricing of the shares issuable under the New Note and the shares issuable upon exercise
of the New Warrant. The New Securities are composed of the New Note, which is a 10% Original Issue Discount Senior Convertible Promissory
Note in the principal amount of $825,000, and the New Warrant. The New Note matured on October 15, 2022, bore interest at a rate of 4%
per annum through the date of default, and was initially convertible into the Company’s common stock at a fixed conversion price
of $0.0125 per share, subject to adjustment for stock splits, stock combinations, dilutive issuances, and similar events, as described
in the New Note. If the average Closing Price during any 10 consecutive Trading Day period beginning and ending during the 60 Day Effectiveness
Period (the “Average Closing Price”) is below the Conversion Price than the conversion price will be reduced to such Average
Closing Price but in no event less than $0.00875.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On October 15, 2022, the due date of the New Note,
the New Note defaulted due to non-payment. Accordingly, the Company added a default penalty of $206,250, or 25%, to the principal balance
and recorded interest expense of $206,250, and interest shall accrue at 18% per annum.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In accordance with ASC 470-50, Debt Modifications
and Extinguishments, the Company performed an assessment of whether the Exchange Agreement transaction was deemed to be new debt, a modification
of existing debt, or an extinguishment of existing debt. The Company evaluated the April 20, 2022 Exchange Agreement for debt modification
and concluded that the debt qualified for debt extinguishment. On April 20, 2022, the Company agreed to reduce the conversion price from
$0.025 per share to $0.0125 per share, and to cancel the Initial Warrant to purchase 16,500,000 shares of common exercisable at $0.05
per shares, and to issue a New Warrant to purchase 33,000,000 shares exercisable at $0.025 per share. All other terms of the convertible
note and warrants remain unchanged, and therefore did not change the cash flows of the note. The New Warrants did not contain any features
requiring liability treatment and therefore were classified as equity.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company determined the transaction was considered
a debt extinguishment because of the change in conversion price was substantial. Upon extinguishment, the Company had $395,313 of unamortized
initial debt discount recorded which it wrote off, and the Company recorded a buyback of $160,993 which represents the reversal of calculated
beneficial conversion feature on the initial debt upon settlement, for an aggregate net loss on debt extinguishment of $234,320. The Company
recorded a new debt discount in connection with the New Note which was calculated based on the relative fair value of the New Warrants
of $325,785. Additionally, the New Note is convertible into common shares at an initial conversion price of $0.0125 which was lower than
the fair value of common shares based on the quoted closing price of the Company’s common stock on the measurement date. The value
allocated to the New Warrants was $325,785, and $354,215 was allocated to the beneficial conversion feature. Since the intrinsic value
of the beneficial conversion feature and warrants was greater than the proceeds allocated to the convertible instrument, the amount of
the discount assigned to the beneficial conversion feature and warrants issued was limited to the amount of the proceeds allocated to
the convertible instrument. Accordingly, the Company recorded an aggregate non-cash debt discount of $680,000 with the credit to additional
paid in capital. This debt discount was amortized to interest expense over the remaining term of the Convertible Note.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company uses the Binomial Valuation Model
to determine the fair value of its stock warrants which requires the Company to make several key judgments including:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 0.25in"> </td>
<td style="width: 0.25in"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">●</span></td>
<td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the value of the Company’s common stock;</span></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">●</span></td>
<td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the expected life of issued stock warrants;</span></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">●</span></td>
<td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the expected volatility of the Company’s stock price;</span></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">●</span></td>
<td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the expected dividend yield to be realized over the life of the stock warrants; and</span></td></tr>
<tr style="vertical-align: top">
<td> </td>
<td> </td>
<td> </td></tr>
<tr style="vertical-align: top">
<td> </td>
<td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">●</span></td>
<td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">the risk-free interest rate over the expected life of the stock warrants.</span></td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company’s computation of the expected
life of issued stock warrants was based on the simplified method as the Company does not have adequate exercise experience to determine
the expected term. The interest rate was based on the U.S. Treasury yield curve in effect at the time of grant. The computation of volatility
was based on the historical volatility of the Company’s common stock.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On October 18, 2021 and April 20, 2022 (the Exchange
Agreement date) along with various re-pricings as outlined below, the fair value of the stock warrants were estimated at issuance using
the Binomial Valuation Model with the following assumptions:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Dividend rate</td><td> </td>
<td style="text-align: center"><span style="-sec-ix-hidden: hidden-fact-124">—</span>%</td><td> </td>
<td style="text-align: center"><div style="-sec-ix-hidden: hidden-fact-125">—%</div></td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">Term (in years)</td><td> </td>
<td style="text-align: center">4 years</td><td> </td>
<td style="text-align: center">5 years</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%">Volatility</td><td style="width: 1%"> </td>
<td style="width: 11%; text-align: center">246.6% to 329.6%</td><td style="width: 1%"> </td>
<td style="width: 11%; text-align: center">348.5%</td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">Risk—free interest rate</td><td> </td>
<td style="text-align: center">2.79% to 3.12%</td><td> </td>
<td style="text-align: center">1.16%</td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">At any time this Note or any amounts accrued and
payable thereunder remain outstanding, the Company or any Subsidiary, as applicable, sells or grants any option to purchase or sells or
grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition),
any common stock or common stock equivalents entitling any Person to acquire shares of the Company’s common stock at an effective
price per share that is lower than the conversion price then in effect (such lower price, the “Base Conversion Price” and
each such issuance or announcement a “Dilutive Issuance”), then the conversion price shall be immediately reduced to equal
the Base Conversion Price. Such adjustment shall be made whenever such common stock or common stock equivalents are issued. On June 23,
2022, the Company issued common stock equivalents with an initial conversion price of $0.011 per share and accordingly, the conversion
price and warrant down-round provisions were triggered. As a result, the conversion price of the New April 2022 Note was reduced to $0.011
per share and the exercise price of the New April 2022 Warrant was lowered to $0.011. As a result of the June 23, 2022 down-round provisions,
the Company calculated the difference between the warrants fair value on June 23, 2022, the date the down-round feature was triggered
using the then current exercise price of $0.025 and the new exercise price of $0.011. On June 23, 2022, the Company recorded a deemed
dividend of $3,702 which represents the fair value transferred to the warrant holders from the down round feature being triggered. No
additional beneficial conversion feature amount was recorded based on the June 23, 2022 valuation as the ratcheted beneficial conversion
feature value was lower than the original amount. Additionally, on September 6, 2022, the Company issued common stock equivalents with
an initial conversion price of $0.009 per share and accordingly, the conversion price and warrant down-round provisions were triggered.
As a result, the conversion price of the New April 2022 Note was reduced to $0.009 per share and the exercise price of the New April 2022
Warrant was lowered to $0.009. As a result of the September 6, 2022 down-round provisions, the Company calculated the difference between
the warrants fair value on September 6, 2022, the date the down-round feature was triggered using the then current exercise price of $0.011
and the new exercise price of $0.009. On September 6, 2022, the Company recorded a deemed dividend of $733 which represents the fair value
transferred to the warrant holders from the down round feature being triggered. No additional beneficial conversion feature amount was
recorded based on the September 6, 2022 valuation as the ratcheted beneficial conversion feature value was lower than the original amount.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to the provisions of ASC 815-40 –
<i>Derivatives and Hedging – Contracts in an Entity’s Own Stock</i>, the convertible note and related warrants issued in connection
with the Mercer convertible note was analyzed and it was determined that the terms of the convertible note and warrants contained terms
that were not considered derivatives.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">1800 Diagonal Lending Convertible Debt</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On November 9, 2022, the Company closed a Securities
Purchase Agreement dated November 4, 2022, with 1800 DIAGONAL LENDING LLC, a Virginia limited liability company, (“Diagonal”),
pursuant to which a Promissory Note (the “November 2022 Diagonal Note”) dated November 4, 2022, was made to Diagonal in the
aggregate principal amount of $104,250 and the Company received net proceeds of $100,000 which was net of fees of $4,250. The November
2022 Diagonal Note bears interest at a rate of 12% per annum (22% upon the occurrence of an event of a default) and all outstanding principal
and accrued and unpaid interest are due on May 4, 2024.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 27, 2022, the Company closed a Securities
Purchase Agreement dated December 27, 2022, with 1800 Diagonal pursuant to which a Promissory Note (“December 2022 Diagonal Note”)
dated December 27, 2022, was made to Diagonal in the aggregate principal amount of $64,250 and the Company received net proceeds of $60,000
which was net of fees of $4,250. The December 2022 Diagonal Note bears interest at a rate of 12% per annum (22% upon the occurrence of
an event of a default) and all outstanding principal and accrued and unpaid interest are due on June 27, 2024.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has the right to prepay the November
2022 and December 2022 Diagonal Notes (principal and accrued interest) at any time during the first six months the note is outstanding
at the rate of 115% during the first 30 days after issuance, 120% during the 31<sup>st</sup> to 60<sup>th</sup> day after issuance, and
125% during the 61<sup>st</sup> to the 180<sup>th</sup> day after issuance. The November 2022 and December 2022 Diagonal Notes may not
be prepaid after the 180th day following the issuance date, unless Diagonal agrees to such repayment and such terms. Diagonal may in its
option, at any time beginning 180 days after the date of the Diagonal Notes, convert the outstanding principal and interest on the November
2022 and December 2022 Diagonal Notes into shares of our common stock at a conversion price per share equal to 65% of the average of the
three lowest closing bid prices of our common stock during the 10 trading days prior to the date of conversion. At no time may the November
2022 and December 2022 Diagonal Notes be converted into shares of our common stock if such conversion would result in Diagonal and its
affiliates owning an aggregate of in excess of 4.99% of the then outstanding shares of our common stock.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has accounted for the November 2022
and December 2022 Diagonal Notes as stock settled debt under ASC 480 and recorded an aggregate debt premium of $90,731 with a charge to
interest expense.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the years ended December 31, 2022 and 2021,
amortization of debt discounts related to the convertible notes payable amounted to $938,344 and $171,875, respectively, which has been
included in interest expense on the accompanying consolidated statements of operations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 31, 2022 and 2021, accrued interest
payable under the convertible notes discussed above amounted to $83,138 and $7,052, respectively, and is included in accrued expenses
on the accompanying consolidated balance sheets.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 31, 2022 and 2021, convertible notes
payable consisted of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Convertible notes payable</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,199,750</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">825,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">Add: put premium</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">90,731</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-126">-</div></td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Less: unamortized debt discount</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(7,968</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(653,125</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">Convertible note payable, net</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,282,513</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">171,875</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Less: current portion of convertible note payable</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(1,031,250</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(171,875</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 4pt">Convertible note payable – long-term</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">251,263</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-127">-</div></td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>0.10825000165000000.050.506800007500060000100008250000.100.050.500.040.0251.101.200.04990.0999Upon the occurrence of an event of default under
the Notes, the Investor has the right to be prepaid at 125% of the outstanding principal balance and accrued interest, and interest accrues
at 18% per annum. Events of default included, among other things,
(i)any
default in the payment of (A) principal and interest payment under this Note or any other Indebtedness, or (B) Late Fees, liquidated
damages and other amounts owing to the Holder of this Note, as and when the same shall become due and payable (whether on a Conversion
Date, or the Maturity Date, or by acceleration or otherwise), which default, solely in the case of a default under clause (B) above,
is not cured within five Trading Days;
(ii)
the Company or any Subsidiary shall be subject to a Bankruptcy Event;
(iii)
the SEC suspends the Common Stock from trading or the Company’s Common Stock is not listed or quoted for trading on a Trading Market which failure is not cured, if possible to cure, within the earlier to occur of 10 Trading Days after notice of such failure is sent by the Holder or by any other Holder to the Company or the transfer of shares of Common Stock through the Depository Trust Company System is no longer available or is subject to a “chill” by the Depository Trust Company or any successor;
(iv)
the Company shall be a party to any Change of Control Transaction or shall agree to sell or dispose of all or in excess of 50% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute a Change of Control Transaction);
(v)
the Company incurs any Indebtedness other than Permitted Indebtedness;
(vi)
the Company restates any financial statements included in its reports or registration statements filed pursuant to the Securities Act or the Exchange Act for any date or period from two years prior to the Original Issue Date of this Note and until this Note is or the Warrants issued to the Holder are no longer outstanding, if following first public announcement or disclosure that a restatement will occur the VWAP on the next Trading Day is 20% less than the VWAP on the prior Trading Day. For the purposes of this clause the next Trading Day if an announcement is made before 4:00 pm New York, NY time is either the day of the announcement or the following Trading Day. The Company filed a Report on Form 8-K announcing the restatement of its financial statements for the year ended December 31, 2020. Following the first public announcement or disclosure that a restatement occurred, the VWAP on the next Trading Day was not 20% less than the VWAP on the prior Trading Day and accordingly, the default provisions were not triggered.
0.3066815166815114064165000003471427500060000100001450000.02534714214064318794680000330000000.0250.108250002022-10-150.040.01250.008752062500.252062500.180.0250.0125165000000.05330000000.0253953131609932343203257850.0125325785354215680000<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Dividend rate</td><td> </td>
<td style="text-align: center"><span style="-sec-ix-hidden: hidden-fact-124">—</span>%</td><td> </td>
<td style="text-align: center"><div style="-sec-ix-hidden: hidden-fact-125">—%</div></td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">Term (in years)</td><td> </td>
<td style="text-align: center">4 years</td><td> </td>
<td style="text-align: center">5 years</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%">Volatility</td><td style="width: 1%"> </td>
<td style="width: 11%; text-align: center">246.6% to 329.6%</td><td style="width: 1%"> </td>
<td style="width: 11%; text-align: center">348.5%</td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">Risk—free interest rate</td><td> </td>
<td style="text-align: center">2.79% to 3.12%</td><td> </td>
<td style="text-align: center">1.16%</td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>P4YP5Y2.4663.2963.4850.02790.03120.01160.0110.0110.0110.01137020.0090.0090.0090.0110.00973310425010000042500.120.22642506000042500.120.221.151.201.250.650.049990731938344171875831387052<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Convertible notes payable</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,199,750</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">825,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">Add: put premium</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">90,731</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-126">-</div></td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Less: unamortized debt discount</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(7,968</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(653,125</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">Convertible note payable, net</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,282,513</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">171,875</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Less: current portion of convertible note payable</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(1,031,250</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(171,875</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 4pt">Convertible note payable – long-term</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">251,263</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-127">-</div></td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>119975082500090731796865312512825131718751031250171875251263<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTE 9 – <span style="text-decoration:underline">NOTES PAYABLE</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 31, 2022 and 2021, notes payable consisted
of the following:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Notes payable</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,899,380</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">978,925</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Note payable – PPP note</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">18,823</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">48,929</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Total notes payable</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,918,203</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,027,854</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Less: unamortized debt discount</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(132,961</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-128">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Note payable, net</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,785,242</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,027,854</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Less: current portion of notes payable, net of discount</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(1,576,438</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(488,414</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Notes payable – long-term</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">208,804</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">539,440</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Notes Payable</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">BOCO Investment Note</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On November 14, 2018, the Company entered into
a Revolving Credit Facility Loan and Security Agreement (“Loan Agreement”) and a Secured Promissory Note (the “Note”)
with BOCO Investments, LLC (the “Lender”). Subject to and in accordance with the terms and conditions of the Loan Agreement
and the Note, the Lender agreed to lend to the Company up to $400,000 (the “Maximum Loan Amount”) against the issuance and
delivery by the Company of the Note for use as working capital and to assist in inventory acquisition. In 2018, the Lender loaned $400,000
to the Company, the Maximum Loan Amount. The Company should have repaid all principal, interest and other amounts outstanding on or before
November 14, 2020. The Company’s obligations under the Loan Agreement and the Note are secured by a first-priority security interest
in substantially all the Company’s assets (the “Collateral”). The outstanding principal advanced to Company pursuant
to the Loan Agreement initially bore interest at the rate of 12% per annum, compounded annually. Upon the occurrence of an Event of Default
under the Loan Agreement and Note, all amounts then outstanding (including principal and interest) shall bear interest at the rate of
18% per annum, compounded annually until the Event of Default is cured. Additionally, at or prior to December 31, 2018, the Company should
have achieved an accounts receivable balance plus inventory equal to the unpaid principal balance of the Note (the “Minimum Asset
Amount”).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In the event that the Company’s accounts
receivable balance plus inventory balance is less than paid principal balance of the Note as of December 31, 2018<b>,</b> the Company
shall have 45 days (through and until February 15, 2019) to cure such violation and an establish accounts receivable plus inventory equal
to the unpaid principal balance of the Note. Commencing March 31, 2019 and at all times thereafter through the remainder of the commitment
period and for so long thereafter as there is any amount still due and owing under the Note, the Company must maintain an accounts receivable
balances plus inventory such that the outstanding principal borrowed by Company under the Loan Agreement and Note is less than or equal
to eighty five percent (85%) of accounts receivable plus fifty percent (50%) of inventory, all as measured at the same point in time.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Commencing on January 10, 2019 and on or before
the 10<sup>th</sup> day of each month thereafter, the Company should have paid Lender all interest accrued on outstanding principal under
the Loan Agreement and Notes as of the end of the month then concluded. Upon the occurrence of any Event of Default and at any time thereafter,
Lender may, at its option, declare any and all obligations immediately due and payable without demand or notice. As of December 31, 2022
and 2021, the Company did not meet the Minimum Asset Amount covenant as defined in the Loan Agreement, failed to timely pay interest payments
due, and has violated other default provisions. The note balance due of $400,000 has been reflected as a current liability on the accompanying
consolidated balance sheets and interest shall accrue at 18% per annum. The Loan Agreement and Note contain customary representations,
warranties, and covenants, including certain restrictions on the Company’s ability to incur additional debt or create liens on its
property. The Loan Agreement and the Note also provide for certain events of default, including, among other things, payment defaults,
breaches of representations and warranties, breach of covenants, and bankruptcy or insolvency proceedings, the occurrence of which, after
any applicable cure period, would permit Lender, among other things, to accelerate payment of all amounts outstanding under the Loan Agreement
and the Note, as applicable, and to exercise its remedies with respect to the Collateral, including the sale of the Collateral. On December
31, 2022 and 2021, principal amount due under this Note amounted to $400,000 and is considered to be in default. On December 31, 2022
and 2021, accrued interest payable under this Note amounted to $292,241 and $220,241, respectively, and is included in accrued expenses
on the accompanying consolidated balance sheets.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Mercer Street Global Opportunity Fund Notes</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 14, 2022, the Company entered into an
Original Issue Discount Promissory Note and Security Agreement (the “March 2022 Note”) in the principal amount of $197,500
with Mercer Street Global Opportunity Fund, LLC (the “Investor”). The March 2022 Note was funded on March 14, 2022 and the
Company received net proceeds of $175,000 which is net of an original issue discount and investor legal fees of $22,500. The original
issue discount was recorded as a debt discount to be amortized over the life of the March 2022 note. The March 2022 Note matures 12 months
after issuance and bears interest at a rate of 3% per annum. At any time, the Company may prepay all or any portion of the principal amount
of the March 2022 Note and any accrued and unpaid interest without penalty. The March 2022 Note also creates a lien on and grants a priority
security interest in all the Company’s assets. In connection with the March 2022 Note, the Company issued 823,529 shares of its
common stock to the placement agent as fee for the capital raise. The 823,529 shares of common stock issued were recorded as a debt discount
of $12,963 based on the relative fair value method to be amortized over the life of the March 2022 Note. For the year ended December 31,
2022, amortization of debt discount related to the March 2022 Note amounted to $28,075 which has been included in interest expense on
the accompanying consolidated statements of operations. On December 31, 2022, the principal balance due on the March 2022 Note amounted
to $197,500 and accrued interest payable amounted to $4,756.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On November 22, 2022, the Company entered into
a Promissory Note and Security Agreement (the “November 2022 Note”) in the principal amount of $65,000 with Mercer Street
Global Opportunity Fund, LLC (the “Investor”). The November 2022 Note was funded on November 22, 2022 and the Company received
net proceeds of $62,500 which is net of investor legal fees of $2,500. The legal fees were recorded as a debt discount to be amortized
over the life of the November 2022 note. The November 2022 Note matures on August 22, 2023 and bears interest at a rate of 8% per annum.
At any time, the Company may prepay all or any portion of the principal amount of the November 2022 Note and any accrued and unpaid interest
without penalty. The November 2022 Note also creates a lien on and grants a priority security interest in all the Company’s assets.
For the year ended December 31, 2022, amortization of debt discount related to the November 2022 Note amounted to $347 which has been
included in interest expense on the accompanying consolidated statements of operations. On December 31, 2022, the principal balance due
on the November 2022 Note amounted to $65,000 and accrued interest payable amounted to $214.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">GS Capital Debt</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On June 23, 2022, the Company entered into entered
into a Securities Purchase Agreement (“Agreement”) with GS Capital Partners, LLC (“GS Capital”), pursuant to which
a Promissory Note (the “GS Capital June 2022 Note”) was made to GS Capital in the aggregate principal amount of $195,000.
The GS Capital June 2022 Note was purchased for $176,000, reflecting an original issuance discount of $19,000, and was funded on June
24, 2022 (less legal and other administrative fees). The Company received net proceeds of $148,420. The Company further issued GS Capital
a total of 1,750,000 commitment shares (“Commitment Shares”) as additional consideration for the purchase of the Note (See
Note 9). Additionally, the GS Capital Note is convertible upon an event of default into common shares at an initial effective conversion
price which was lower than the fair value of common shares based on the quoted closing price of the Company’s common stock on the
measurement date. Principal and interest payments shall be made in 10 installments of $21,060 each beginning on the 90th-day anniversary
following the issue date and continuing thereafter each 30 days for nine months. The GS Capital Note matures 12 months after issuance
and bears interest at a rate of 8% per annum. GS Capital shall have the right at any time following an Event of Default to convert all
or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under this Note at a conversion price
of $0.011, subject to adjustment as defined in the GS Capital Note. The Company did not calculate a beneficial conversion feature since
the GS Capital Note is contingently convertible upon default on the GS Capital Note. As of December 31, 2022, the Company is not in default
on this note. In the event that following the Issue Date the closing trading price of the Company’s common stock is then being traded
is below $0.011 per share for more than ten consecutive trading days, then the conversion price shall be equal to $0.004
per share. The GS Capital Note contains conversion limitations providing that a holder thereof may not convert the Note to the extent
(but only to the extent) that, if after giving effect to such conversion, the holder or any of its affiliates would beneficially own in
excess of 4.99% of the outstanding shares of the Company’s common stock immediately after giving effect to such conversion or exercise.
A holder may increase or decrease its beneficial ownership limitation upon notice to the Company provided that in no event such limitation
exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice. Events of default include, amongst other
items, failure to pay principal or interest, bankruptcy, delisting of the Company’s stock, financial statement restatements, or
if the Company effectuates a reverse split. Upon the occurrence of any event of default, the GS Capital Note shall become immediately
and automatically due and payable and the Company shall pay to GS Capital, in full satisfaction of its obligations hereunder, an amount
equal to: (a) the then outstanding principal amount of this note <span style="text-decoration:underline">plus</span> (b) accrued and unpaid interest on the unpaid principal amount
of this note to the date of payment (the “mandatory prepayment date”) <span style="text-decoration:underline">plus</span> (y) default interest, if any, multiplied
by 120%. On December 15, 2022, the Company and GS Capital entered into a letter agreement to extend the due date of the GS Capital June
2022 note by 60 days. Specifically, the maturity date of the GS Capital June 2022 note was extended to August 23, 2023 and the next payment
due date was extended to February 28, 2023. Through December 31, 2022, the Company paid $53,512 of principal balance. On December 31,
2022, the principal balance due on the GS Capital Note amounted to $141,488 and accrued interest payable amounted to $7,471.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 26, 2022, the Company closed a Securities
Purchase Agreement (“July 2022 Agreement”) with GS Capital, pursuant to which a Promissory Note (“GS Capital July 2022
Note”) was made to GS Capital in the aggregate principal amount of $195,000. The GS Capital July 2022 Note was purchased for $176,000,
reflecting an original issuance discount of $19,000, and was funded on July 28, 2022 (less legal and other administrative fees). The Company
received net proceeds of $158,920. The Company further issued GS Capital a total of 2,600,000 commitment shares (“July 2022 Commitment
Shares”) as additional consideration for the purchase of the July 2022 Note. In addition, the Company issued 998,008 of its common
stock to the placement agent as fee for the capital raise, respectively. The July Commitment Shares and the placement agent shares were
recorded as a debt discount of $34,606 based on the relative fair value method to be amortized over the life of the Note. Additionally,
the GS Capital July 2022 Note is convertible upon an event of default into common shares at an initial effective conversion price which
was lower than the fair value of common shares based on the quoted closing price of the Company’s common stock on the measurement
date. Principal and interest payments shall be made in 10 installments of $21,060 each beginning on the 90th-day anniversary following
the issue date and continuing thereafter each 30 days for nine months. The GS Capital July 2022 Note matures 12 months after issuance
and bears interest at a rate of 8% per annum. GS Capital shall have the right at any time following an Event of Default to convert all
or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under the GS Capital July 2022 Note at
a conversion price of $0.011, subject to adjustment as defined in the Note. The Company did not calculate a beneficial conversion feature
since the GS Capital July 2022 Note is contingently convertible upon a default on the July 2022 Note. As of December 31, 2022, the Company
is not in default on this note. In the event that following the Issue Date the closing trading price of the Company’s common stock
is then being traded is below $0.011 per share for more than ten consecutive trading days, then the conversion price shall
be equal to $0.004 per share. The July 2022 Note contains conversion limitations providing that a holder thereof may not convert the Note
to the extent (but only to the extent) that, if after giving effect to such conversion, the holder or any of its affiliates would beneficially
own in excess of 4.99% of the outstanding shares of the Company’s common stock immediately after giving effect to such conversion
or exercise. A holder may increase or decrease its beneficial ownership limitation upon notice to the Company provided that in no event
such limitation exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice. On December 15, 2022,
the Company and GS Capital entered into a letter agreement to extend the due date of the GS Capital July 2022 note by 60 days. Specifically,
the maturity date of the GS Capital July 2022 note was extended to September 26, 2023 and the next payment due date was extended to February
28, 2023. Through December 31, 2022, the Company paid $34,120 of principal balance. On December 31, 2022, the principal balance due on
the GS Capital July 2022 Note amounted to $160,880 and accrued interest payable amounted to $6,441.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On September 6, 2022, the Company closed a Securities
Purchase Agreement (“September 2022 Agreement”) with GS Capital, pursuant to which a Promissory Note (“September 2022
Note”) was made to GS Capital in the aggregate principal amount of $195,000. The September 2022 Note was purchased for $176,000,
reflecting an original issuance discount of $19,000, and was funded on September 6, 2022 (less legal and other administrative fees). The
Company received net proceeds of $158,920. The Company further issued GS Capital a total of 3,300,000 commitment shares (“September
2022 Commitment Shares”) as additional consideration for the purchase of the September 2022 Note. In addition, the Company issued
773,626 of its common stock to the placement agent as fee for the capital raise, respectively. The September Commitment Shares and the
placement agent shares were recorded as a debt discount of $30,326 based on the relative fair value method to be amortized over the life
of the Note. Additionally, the September 2022 Note is convertible into common shares upon an event of default at an initial effective
conversion price which was lower than the fair value of common shares based on the quoted closing price of the Company’s common
stock on the measurement date. Principal and interest payments shall be made in 9 installments of $23,400 each beginning on the 120th-day
anniversary following the issue date and continuing thereafter each 30 days for eight months. The September 2022 Note matures 12 months
after issuance and bears interest at a rate of 8% per annum. GS Capital shall have the right at any time following an Event of Default
to convert all or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under the September 2022
Note at a conversion price of $0.009, subject to adjustment as defined in the Note. The Company did not calculate a beneficial conversion
feature since the GS Capital July 2022 Note is contingently convertible upon a default on the September 2022 Note. As of December 31,
2022, the Company is not in default on this note. In the event that following the Issue Date the closing trading price of the Company’s
common stock is then being traded is below $0.009 per share for more than ten consecutive trading days, then the conversion
price shall be equal to $0.0032 per share. The September 2022 Note contains conversion limitations providing that a holder thereof may
not convert the Note to the extent (but only to the extent) that, if after giving effect to such conversion, the holder or any of its
affiliates would beneficially own in excess of 4.99% of the outstanding shares of the Company’s common stock immediately after giving
effect to such conversion or exercise. A holder may increase or decrease its beneficial ownership limitation upon notice to the Company
provided that in no event such limitation exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice.
On December 15, 2022, the Company and GS Capital entered into a letter agreement to extend the due date of the GS Capital September 2022
note by 60 days. Specifically, the maturity date of the GS Capital September 2022 note was extended to November 6, 2023 and the next payment
due date was extended to March 6, 2023. On December 31, 2022, the principal balance due on the GS Capital September 2022 Note amounted
to $195,000 and accrued interest payable amounted to $5,001.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the Letter Agreement dated
December 15, 2022, in order to induce GS Capital to extend the due dates of the GS Capital Notes, the Company issued 15,000,000 shares
of the Company’s common stock. These shares were valued at $112,500, or $0.0075 per common share, based on the quoted closing price
of the Company’s common stock on the measurement date. In connection with the issuance of these shares, during the year ended December
31, 2022, the Company recorded an inducement expense of $112,500 which was included in loss on debt extinguishment on the accompanying
consolidated statement of operations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">Other Notes Payable</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On May 10, 2021, the Company entered into a Loan
and Security Agreement (the “Loan Agreement”) and a Secured Promissory Note (the “Promissory Note”) in the amount
of $500,000 with a lender. The Promissory Note shall accrue interest at 8% per annum, compounded annually, and all outstanding principal
and accrued interest is due and payable of May 10, 2023. The Company’s obligations under the Loan Agreement and the Promissory Note
are secured by a second priority security interest in substantially all of the Company’s assets (the “Collateral”).
The Loan Agreement and Promissory Note contain customary representations, warranties, and covenants, including certain restrictions on
the Company’s ability to incur additional debt or create liens on its property. The Loan Agreement and the Promissory Note also
provide for certain events of default, including, among other things, payment defaults, breaches of representations and warranties and
bankruptcy or insolvency proceedings, the occurrence of which, after any applicable cure period, would permit Lender, among other things,
to accelerate payment of all amounts outstanding under the Loan Agreement and the Promissory Note, as applicable, and to exercise its
remedies with respect to the Collateral. Upon the occurrence of an Event of Default under the Loan Agreement and Promissory Note, all
amounts then outstanding (including principal and interest) shall bear interest at the rate of 18% per annum, compounded annually until
the Event of Default is cured. On December 31, 2022 and 2021, accrued interest payable under this Promissory Note amounted to $65,863
and $25,863, respectively, and is included in accrued expenses on the accompanying consolidated balance sheets. On December 31, 2022 and
2021, principal amount due under this Promissory Note amounted to $500,000.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 22, 2021, in connection with the acquisition
of Mobile Tint, the Company assumed vehicle and equipment loans in the amount of $95,013. These loans bear interest at rates ranging from
6.79% to 8.24% and are payable monthly through April 2025. On December 31, 2022 and 2021, notes payable related to these vehicle and equipment
loans amounted to $39,513 and $78,925, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On November 8, 2022, the Company entered into
a Promissory Note (the “November 2022 Note”) with a lender investor (the “Private Investor”) in the principal
amount of $200,000 and received net proceeds of $200,000. The November 2022 Note bears interest at a rate of 8% per annum and all outstanding
principal and accrued and unpaid interest is due on November 8, 2024. At any time, the Company may prepay all or any portion of the principal
amount of the November 2022 Note and any accrued and unpaid interest without penalty. As security for payment of the principal and interest
on the November 2022 Note, the Company and the lender Investor previously entered into that certain Loan and Security Agreement dated
May 10, 2021, which is incorporated into the November 2022 Note. On December 31, 2022, accrued interest payable under this Promissory
Note amounted to $2,367, and is included in accrued expenses on the accompanying consolidated balance sheets. On December 31, 2022, principal
amount due under this Promissory Note amounted to $200,000.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the years ended December 31, 2022 and 2021,
amortization of debt discounts related to notes payable amounted to $121,408 and $0, respectively, which has been included in interest
expense on the accompanying consolidated statements of operations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>PPP Loan</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On April 28, 2020, the Company entered into a
Paycheck Protection Program Promissory Note (the “PPP Note”) with respect to a loan of $156,200 (the “PPP Loan”)
from Comerica Bank. The PPP Loan was obtained pursuant to the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid,
Relief, and Economic Security Act (the “CARES act”) administered by the U.S. Small Business Administration (“SBA”).
The PPP Loan matures on April 28, 2022 and bears interest at a rate of 1.00% per annum. The PPP Loan is payable in 18 equal monthly payments
of approximately $8,900 commencing November 1, 2020. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties.
The Company may apply to have the loan forgiven pursuant to the terms of the PPP if certain criteria are met. The Company applied for
forgiveness of its PPP Loan, and on November 4, 2021, the Company was notified that the Small Business Administration forgave $95,000
of the principal loan amount and $1,442 of interest. As of November 4, 2021, the remaining principal balance of the loan was $61,200 and
the remaining accrued interest balance was $935. During the year ended December 31, 2022, the Company repaid PPP Loan principal of $30,107.
On December 31, 2022 and 2021, the principal amount due under the PPP Loan amounted to $18,823 and $48,929, respectively. As of December
31, 2022 and 2021, accrued interest payable amounted to $170 and $1,031, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 31, 2022, future annual maturities
of notes payable are as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">December 31,</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Amount</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 88%; text-align: left">2023</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,709,400</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">2024</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">206,457</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">2025</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">2,346</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 4pt">Total notes payable on December 31, 2022</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">1,918,203</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Notes payable</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,899,380</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">978,925</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Note payable – PPP note</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">18,823</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">48,929</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Total notes payable</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,918,203</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,027,854</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Less: unamortized debt discount</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(132,961</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-128">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Note payable, net</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,785,242</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,027,854</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Less: current portion of notes payable, net of discount</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(1,576,438</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(488,414</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Notes payable – long-term</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">208,804</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">539,440</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>189938097892518823489291918203102785413296117852421027854-1576438-4884142088045394404000004000000.120.18In the event that the Company’s accounts
receivable balance plus inventory balance is less than paid principal balance of the Note as of December 31, 2018, the Company
shall have 45 days (through and until February 15, 2019) to cure such violation and an establish accounts receivable plus inventory equal
to the unpaid principal balance of the Note. Commencing March 31, 2019 and at all times thereafter through the remainder of the commitment
period and for so long thereafter as there is any amount still due and owing under the Note, the Company must maintain an accounts receivable
balances plus inventory such that the outstanding principal borrowed by Company under the Loan Agreement and Note is less than or equal
to eighty five percent (85%) of accounts receivable plus fifty percent (50%) of inventory, all as measured at the same point in time. 4000000.1840000040000029224122024119750017500022500P12M0.0382352982352912963280751975004756650006250025000.0834765000214195000176000190001484201750000210600.08GS Capital shall have the right at any time following an Event of Default to convert all
or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under this Note at a conversion price
of $0.011, subject to adjustment as defined in the GS Capital Note. The Company did not calculate a beneficial conversion feature since
the GS Capital Note is contingently convertible upon default on the GS Capital Note. As of December 31, 2022, the Company is not in default
on this note. In the event that following the Issue Date the closing trading price of the Company’s common stock is then being traded
is below $0.011 per share for more than ten consecutive trading days, then the conversion price shall be equal to $0.004
per share. The GS Capital Note contains conversion limitations providing that a holder thereof may not convert the Note to the extent
(but only to the extent) that, if after giving effect to such conversion, the holder or any of its affiliates would beneficially own in
excess of 4.99% of the outstanding shares of the Company’s common stock immediately after giving effect to such conversion or exercise.
A holder may increase or decrease its beneficial ownership limitation upon notice to the Company provided that in no event such limitation
exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice. Events of default include, amongst other
items, failure to pay principal or interest, bankruptcy, delisting of the Company’s stock, financial statement restatements, or
if the Company effectuates a reverse split. Upon the occurrence of any event of default, the GS Capital Note shall become immediately
and automatically due and payable and the Company shall pay to GS Capital, in full satisfaction of its obligations hereunder, an amount
equal to: (a) the then outstanding principal amount of this note plus (b) accrued and unpaid interest on the unpaid principal amount
of this note to the date of payment (the “mandatory prepayment date”) plus (y) default interest, if any, multiplied
by 120%. On December 15, 2022, the Company and GS Capital entered into a letter agreement to extend the due date of the GS Capital June
2022 note by 60 days. Specifically, the maturity date of the GS Capital June 2022 note was extended to August 23, 2023 and the next payment
due date was extended to February 28, 2023. Through December 31, 2022, the Company paid $53,512 of principal balance. On December 31,
2022, the principal balance due on the GS Capital Note amounted to $141,488 and accrued interest payable amounted to $7,471.On July 26, 2022, the Company closed a Securities
Purchase Agreement (“July 2022 Agreement”) with GS Capital, pursuant to which a Promissory Note (“GS Capital July 2022
Note”) was made to GS Capital in the aggregate principal amount of $195,000. The GS Capital July 2022 Note was purchased for $176,000,
reflecting an original issuance discount of $19,000, and was funded on July 28, 2022 (less legal and other administrative fees). The Company
received net proceeds of $158,920. The Company further issued GS Capital a total of 2,600,000 commitment shares (“July 2022 Commitment
Shares”) as additional consideration for the purchase of the July 2022 Note. In addition, the Company issued 998,008 of its common
stock to the placement agent as fee for the capital raise, respectively. The July Commitment Shares and the placement agent shares were
recorded as a debt discount of $34,606 based on the relative fair value method to be amortized over the life of the Note. Additionally,
the GS Capital July 2022 Note is convertible upon an event of default into common shares at an initial effective conversion price which
was lower than the fair value of common shares based on the quoted closing price of the Company’s common stock on the measurement
date. Principal and interest payments shall be made in 10 installments of $21,060 each beginning on the 90th-day anniversary following
the issue date and continuing thereafter each 30 days for nine months. The GS Capital July 2022 Note matures 12 months after issuance
and bears interest at a rate of 8% per annum. GS Capital shall have the right at any time following an Event of Default to convert all
or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under the GS Capital July 2022 Note at
a conversion price of $0.011, subject to adjustment as defined in the Note. The Company did not calculate a beneficial conversion feature
since the GS Capital July 2022 Note is contingently convertible upon a default on the July 2022 Note. As of December 31, 2022, the Company
is not in default on this note.19500017600019000158920260000099800834606210600.080.011In the event that following the Issue Date the closing trading price of the Company’s common stock
is then being traded is below $0.011 per share for more than ten consecutive trading days, then the conversion price shall
be equal to $0.004 per share. The July 2022 Note contains conversion limitations providing that a holder thereof may not convert the Note
to the extent (but only to the extent) that, if after giving effect to such conversion, the holder or any of its affiliates would beneficially
own in excess of 4.99% of the outstanding shares of the Company’s common stock immediately after giving effect to such conversion
or exercise. A holder may increase or decrease its beneficial ownership limitation upon notice to the Company provided that in no event
such limitation exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice.341201608806441195000176000190001589203300000773626The September Commitment Shares and the
placement agent shares were recorded as a debt discount of $30,326 based on the relative fair value method to be amortized over the life
of the Note. Additionally, the September 2022 Note is convertible into common shares upon an event of default at an initial effective
conversion price which was lower than the fair value of common shares based on the quoted closing price of the Company’s common
stock on the measurement date. Principal and interest payments shall be made in 9 installments of $23,400 each beginning on the 120th-day
anniversary following the issue date and continuing thereafter each 30 days for eight months. The September 2022 Note matures 12 months
after issuance and bears interest at a rate of 8% per annum. GS Capital shall have the right at any time following an Event of Default
to convert all or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under the September 2022
Note at a conversion price of $0.009, subject to adjustment as defined in the Note. The Company did not calculate a beneficial conversion
feature since the GS Capital July 2022 Note is contingently convertible upon a default on the September 2022 Note. As of December 31,
2022, the Company is not in default on this note. In the event that following the Issue Date the closing trading price of the Company’s
common stock is then being traded is below $0.009 per share for more than ten consecutive trading days, then the conversion
price shall be equal to $0.0032 per share. The September 2022 Note contains conversion limitations providing that a holder thereof may
not convert the Note to the extent (but only to the extent) that, if after giving effect to such conversion, the holder or any of its
affiliates would beneficially own in excess of 4.99% of the outstanding shares of the Company’s common stock immediately after giving
effect to such conversion or exercise. A holder may increase or decrease its beneficial ownership limitation upon notice to the Company
provided that in no event such limitation exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice.
On December 15, 2022, the Company and GS Capital entered into a letter agreement to extend the due date of the GS Capital September 2022
note by 60 days. Specifically, the maturity date of the GS Capital September 2022 note was extended to November 6, 2023 and the next payment
due date was extended to March 6, 2023. On December 31, 2022, the principal balance due on the GS Capital September 2022 Note amounted
to $195,000 and accrued interest payable amounted to $5,001.150000001125000.00751125005000000.080.186586325863500000500000950130.06790.082439513789252000002000000.08236720000012140801562002022-04-280.018900950001442612009353010718823489291701031<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: left">December 31,</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Amount</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 88%; text-align: left">2023</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,709,400</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">2024</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">206,457</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">2025</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">2,346</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 4pt">Total notes payable on December 31, 2022</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">1,918,203</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>170940020645723461918203<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 10 – <span style="text-decoration:underline">SHAREHOLDERS’ DEFICIT</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Preferred Stock</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Series B Preferred Stock</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 12, 2019, the Company filed an Amendment
to its Articles of Incorporation to designate a series of preferred stock, the Series B Convertible Preferred Stock (the “Series
B”), with the Secretary of State of the State of Colorado. The Certificate of Designations established 100,000 shares of the Series
B, par value $0.10, having such designations, preferences, and rights as determined by the Company’s Board of Directors in its sole
discretion, in accordance with the Company’s Articles of Incorporation and Amended and Restated Bylaws. The Certificate of Designations
became effective with the State of Colorado upon filing.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Series B ranks senior with respect to dividends
and right of liquidation with the Company’s common stock and junior to all existing and future indebtedness of the Company. The
Series B has a stated value per share of $1,000, subject to adjustment as provided in the Certificate of Designations (the “Stated
Value”), and a dividend rate of 2% per annum of the Stated Value.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Series B is subject to redemption (at Stated
Value, plus any accrued, but unpaid dividends (the “Liquidation Value”) by the Company no later than three years after a Deemed
Liquidation Event and at the Company’s option after one year from the issuance date of the Series B, subject to a ten-day notice
(to allow holder conversion). A “Deemed Liquidation Event” will mean: (a) a merger or consolidation in which the Company is
a constituent party or a subsidiary of the Company is a constituent party and the Company issues shares of its capital stock pursuant
to such merger or consolidation, except any such merger or consolidation involving the Company or a subsidiary in which the shares of
capital stock of the Company outstanding immediately prior to such merger or consolidation continue to represent, or are converted into
or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, at least a majority, by voting
power, of the capital stock of the surviving or resulting corporation or, if the surviving or resulting corporation is a wholly-owned
subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting
corporation; or (b) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions,
by the Company or any subsidiary of the Company of all or substantially all the assets of the Company and its subsidiaries taken as a
whole, or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Company if substantially all of
the assets of the Company and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease,
transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Company.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Series B is convertible into common stock
at the option of a holder or if the closing price of the common stock exceeds 400% of the Conversion Price for a period of twenty consecutive
trading days, at the option of the Company. Conversion Price means a price per share of the common stock equal to 100% of the lowest daily
volume weighted average price of the common stock during the two years preceding or subsequent two years following the Issuance Date,
subject to adjustment as otherwise provided in the Certificate of Designations (the “Conversion Price”).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In the event of a conversion of any Series B,
the Company shall issue to the holder a number of shares of common stock equal to the sum of the Stated Value plus accrued but unpaid
dividends multiplied by the number of shares of Series B Preferred Stock being converted divided by the Conversion Price.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Upon liquidation of the Company after payment
or provision for payment of liabilities of the Company and after payment or provision for any liquidation preference payable to the holders
of any preferred stock ranking senior to the Series B but prior to any distribution to the holders of Common Stock or preferred stock
ranking junior upon liquidation to the Series B, the holders of Series B will be entitled to be paid out of the assets of the Company
available for distribution to its stockholders an amount with respect to each share of Series B equal to the Liquidation Value.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Series B has voting rights per Series B Share
equal to the Liquidation Value per share, divided by the Conversion Price, multiplied by fifty (50). Subject to applicable Colorado law,
the holders of Series B will have functional voting control in situations requiring shareholder vote.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">These Series B preferred share issuances with
redemption provisions that permit the issuer to settle in either cash or common stock, at the option of the issuer, were evaluated to
determine whether temporary or permanent equity classification on the consolidated balance sheet was appropriate. As per the terms of
the Series B preferred stock agreements, Series B preferred stock is redeemable for cash and other assets on the occurrence of a deemed
liquidation event. A deemed liquidation event includes a change of control which is not in the Company’s control. As such, since
Series B preferred stock is redeemable upon the occurrence of an event that is not within the Company’s control, the Series B preferred
stock is classified as temporary equity.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company concluded that the Series B Preferred
Stock represented an equity host and, therefore, the redemption feature of the Series B Preferred Stock was not considered to be clearly
and closely related to the associated equity host instrument. However, the redemption features did not meet the net settlement criteria
of a derivative and, therefore, were not considered embedded derivatives that required bifurcation. The Company also concluded that the
conversion rights under the Series B Preferred Stock were clearly and closely related to the equity host instrument. Accordingly, the
conversion rights feature on the Series B Preferred Stock were not considered an embedded derivative that required bifurcation. The conversion
feature of the Series B Preferred Stock at the time of issuance was determined to be beneficial on the commitment date.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 12, 2019, the Board of Directors of
the Company agreed to satisfy $108,000 of accrued compensation owed to its directors and executive officers (collectively, the “Management”)
through a Liability Reduction Plan (the “Plan”). Under this Plan, Management agreed to accept 108 shares of the Company’s
Series B convertible preferred stock in settlement of accrued compensation. On December 21, 2020, the Board of Directors of the
Company agreed to satisfy $318,970 of accrued compensation owed to its directors and executive officers (collectively, the “Management”)
through a Liability Reduction Plan (the “Plan”). Under this Plan, Management agreed to accept 319 shares of the Company’s
Series B convertible preferred stock in settlement of accrued compensation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 18, 2021, the Board of Directors of
the Company agreed to satisfy $295,000 of accrued compensation owed to its executive officers and former executive officer (collectively,
the “Management”) through a Liability Reduction Plan (the “Plan”). Under this Plan, Management agreed to accept
295 shares of the Company’s Series B convertible preferred stock in settlement of accrued compensation. The conversion feature of
the Series B Preferred Stock at the time of issuance was determined to be beneficial on the commitment date. Because the Series B Preferred
Stock was perpetual with no stated maturity date, and the conversions could occur any time from the date of issuance, the Company immediately
recorded non-cash stock-based compensation of $3,778,810 related to the beneficial conversion feature arising from the issuance of Series
B Preferred Stock.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 6, 2022, the Board of Directors of
the Company agreed to satisfy $278,654 of accrued compensation owed to its executive officers (collectively, the “Management”)
as of December 31, 2021 and included in accrued compensation on the accompanying consolidated balance sheet. Management agreed to accept
278 shares of the Company’s Series B convertible preferred stock in settlement of this accrued compensation. The conversion feature
of the Series B Preferred Stock at the time of issuance was determined to be beneficial on the commitment date. Because the Series B Preferred
Stock was perpetual with no stated maturity date, and the conversions could occur any time from the date of issuance, the Company immediately
recorded non-cash stock-based compensation of $957,556 related to the beneficial conversion feature arising from the issuance of Series
B Preferred Stock. </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">158 Series B Preferred Stock vested on May 1,
2021 and 842 shall vest of May 1, 2023. By mutual agreement between the parties, the vesting date of previously granted Series B Preferred
stock was extended through May 2023.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the years ended December 31, 2022 and 2021,
the Company accrued dividends of $19,936 and $14,165, respectively, which was included in Series B convertible preferred stock on the
accompanying consolidated balance sheets.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2022, the net Series B Preferred
Stock balance was $1,037,201, which includes stated value of $1,000,624 and accrued dividends payable of $36,577. As of December 31, 2021,
the net Series B Preferred Stock balance was $738,611, which includes stated value of $721,970 and accrued dividends payable of $16,641.
The net Series B Preferred Stock balance is included on the accompanying consolidated balance sheets.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i> </i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Series C Preferred Stock</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On August 20, 2020, the Company filed an Amendment
to its Articles of Incorporation to designate a series of preferred stock, the Series C Convertible Preferred Stock (the “Series
C”), with the Secretary of State of the State of Colorado. The Certificate of Designations established 100,000 shares of the Series
C, par value $0.10, having such designations, preferences, and rights as determined by the Company’s Board of Directors in its sole
discretion, in accordance with the Company’s Articles of Incorporation and Amended and Restated Bylaws. The Certificate of Designations
became effective with the State of Colorado upon filing.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Series C ranks senior with respect to dividends
and right of liquidation with the Company’s common stock and junior to all existing and future indebtedness of the Company. The
Series C has a stated value per share of $100, subject to adjustment as provided in the Certificate of Designations (the “Stated
Value”), and a dividend rate of 2% per annum of the Stated Value.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has no option to redeem the Series
C Preferred Stock. If the Company determines to liquidate, dissolve or wind-up its business and affairs, or effect any Deemed Liquidation
Event as defined below, each of which has been approved by the holders of a majority of the shares of Series C Preferred Stock then outstanding,
the Company will redeem all of the shares of Series C Preferred Stock outstanding immediately prior to such mandatory redemption event
at a price per share of Series C Preferred Stock equal to the aggregate Series C Liquidation Value, which is 150% of the sum of the Stated
Value plus accrued and unpaid dividends, for the shares of Series C Preferred Stock being redeemed.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company will deliver ten-day advance written
notice prior to the consummation of any mandatory redemption event via email or overnight courier (“Notice of Mandatory Redemption”)
to each Holder whose shares are to be redeemed. The Series C is subject to redemption at liquidation Value noted above by the Company.
Upon receipt by any Holder of a Notice of Mandatory Redemption, if Holder does not choose to convert, such Holder will promptly submit
to the Company such Holder’s Series C Preferred Stock certificates on the Redemption Payment Date. Upon receipt of such Holder’s
Series C Preferred Stock certificates, the Company will pay the applicable redemption price to such Holder in cash. A “Deemed Liquidation
Event” will mean: (a) a merger or consolidation in which the Company is a constituent party or a subsidiary of the Company is a
constituent party and the Company issues shares of its capital stock pursuant to such merger or consolidation, except any such merger
or consolidation involving the Company or a subsidiary in which the shares of capital stock of the Company outstanding immediately prior
to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent,
immediately following such merger or consolidation, at least a majority, by voting power, of the capital stock of the surviving or resulting
corporation or, if the surviving or resulting corporation is a wholly-owned subsidiary of another corporation immediately following such
merger or consolidation, the parent corporation of such surviving or resulting corporation; or (b) the sale, lease, transfer, exclusive
license or other disposition, in a single transaction or series of related transactions, by the Company or any subsidiary of the Company
of all or substantially all the assets of the Company and its subsidiaries taken as a whole, or the sale or disposition (whether by merger
or otherwise) of one or more subsidiaries of the Company if substantially all of the assets of the Company and its subsidiaries taken
as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition
is to a wholly owned subsidiary of the Company. Since the Company has determined that a deemed liquidation event is not probable, the
Series C is stated at the Stated Value plus accrued and unpaid dividends rather than redemption value, which is liquidation value.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Series C is convertible at the option of a
holder at any time following the issuance date. In the event of a conversion of any Series C Preferred Stock, the Company shall issue
to such Holder a number of Conversion Shares equal to (x) the sum of (1) the Stated Value per share of Series C Preferred Stock plus (2)
any accrued but unpaid dividends thereon multiplied by (y) the number of shares of Series C Preferred Stock held by such Holder and subject
to the Holder Conversion Notice, divided by (z) the Conversion Price with respect to such Series C Preferred Stock. Conversion Price means
a price per share of the common stock equal to the lowest daily volume weighted average price of the common stock for any trading day
during the two years preceding the date of delivery of the conversion notice, subject to adjustment as otherwise provided in the Series
C Certificate of Designation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Upon liquidation of the Company after payment
or provision for payment of liabilities of the Company and after payment or provision for any liquidation preference payable to the holders
of any preferred stock ranking senior to the Series C but prior to any distribution to the holders of Common Stock or preferred stock
ranking junior upon liquidation to the Series C, the holders of Series C will be entitled to be paid out of the assets of the Company
available for distribution to its stockholders an amount with respect to each share of Series C equal to the Liquidation Value.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Through April 28, 2021, each share of Series C
Preferred Stock was entitled to vote on all matters requiring shareholder vote. Each share of Series C Preferred Stock was entitled to
the number of votes per share based on the calculation of the number of conversion shares of Series C Preferred Stock is then convertible.
On April 28, 2021, the Company filed an Amended and Restated Certificate of Designations of Preferences, Rights, and Limitations of Series
C Convertible Preferred Stock (the “Amended Certificate”). The Amended Certificate changed the voting rights of the Series
C Preferred Stock on any matters requiring shareholder approval or any matters on which the common shareholders are permitted to vote.
Series C Preferred Stock shall have no right to vote on any matters requiring shareholder approval or any matters on which the common
shareholders (or other preferred stock of the Company which may vote with the common shareholders) are permitted to vote. With respect
to any voting rights of the Series C Preferred Stock set forth herein, the Series C Preferred Stock shall vote as a class, each share
of Series C Preferred Stock shall have one vote on any such matter, and any such approval may be given via a written consent in lieu of
a meeting of the Holders of the Series C Preferred Stock. Any reference herein to a determination, decision or election being made by
the “Majority Holders” shall mean the determination, decision or election as made by Holders holding a majority of the issued
and outstanding shares of Series C Preferred Stock at such time. It also adjusts the conversion feature of the Series C Preferred Stock
so that any Holder of Series C Preferred Stock cannot convert any portion of the Series C in excess of that number of Series C Preferred
Stock that upon conversion would result in beneficial ownership by the Holder of more than 4.99% of the outstanding shares of common stock
of the Company.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">These Series C preferred stock issuances with
redemption provisions that permit the issuer to settle in either cash or common stock, at the option of the holder, were evaluated to
determine whether temporary or permanent equity classification on the consolidated balance sheet was appropriate. As per the terms of
the Series C preferred stock agreements, Series C preferred stock is redeemable for cash and other assets on the occurrence of a deemed
liquidation event. A deemed liquidation event includes a change of control which is not in the Company’s control. As such, since
Series C preferred stock is redeemable upon the occurrence of an event that is not within the Company’s control, the Series C preferred
stock is classified as temporary equity.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company concluded that the Series C Preferred
Stock represented an equity host and, therefore, the redemption feature of the Series C Preferred Stock was not considered to be clearly
and closely related to the associated equity host instrument. However, the redemption features did not meet the net settlement criteria
of a derivative and, therefore, were not considered embedded derivatives that required bifurcation. The Company also concluded that the
conversion rights under the Series C Preferred Stock were clearly and closely related to the equity host instrument. Accordingly, the
conversion rights feature on the Series C Preferred Stock were not considered an embedded derivative that required bifurcation. The conversion
feature of the Series C Preferred Stock at the time of issuance was determined to be beneficial on the commitment date.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During August and September 2020, the Company
entered into subscription agreements with an accredited investor whereby the investor agreed to purchase an aggregate of purchase 6,300
shares of the Company’s Series C Convertible Preferred Stock for $630,000, or $100.00 per share (the “Stated Value”),
which were used to pay off various discounted convertible instruments and redeem Series A preferred stock. During the three months
ended December 31, 2020, the Company entered into subscription agreements with an accredited investor whereby the investor agreed to purchase
an aggregate of purchase 7,000 shares of the Company’s Series C Convertible Preferred Stock for $700,000, or $100.00 per share (the
“Stated Value”), which were used from working capital purposes.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 24, 2021, the Company entered into
a subscription agreement with an accredited investor whereby the investor agreed to purchase 2,500 shares of the Company’s Series
C Convertible Preferred Stock for $250,000, or $100.00 per share, the stated value, which was used for working capital purposes. The conversion
feature of the Series C Preferred Stock at the time of issuance was determined to be beneficial on the commitment date. Because the Series
C Preferred Stock was perpetual with no stated maturity date, and the conversions could occur any time from the date of issuance, the
Company immediately recorded a non-cash deemed dividend of $2,845,238 related to the beneficial conversion feature arising from the issuance
of Series C Preferred Stock. This non-cash deemed dividend increased the Company’s net loss attributable to common stockholders
and net loss per share.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On August 25, 2021, the Company entered into a
subscription agreement with an accredited investor whereby the investor agreed to purchase 3,000 shares of the Company’s Series
C Convertible Preferred Stock for $300,000, or $100.00 per share, the stated value, which was used for working capital purposes. The conversion
feature of the Series C Preferred Stock at the time of issuance was determined to be beneficial on the commitment date. Because the Series
C Preferred Stock was perpetual with no stated maturity date, and the conversions could occur any time from the date of issuance, the
Company immediately recorded a non-cash deemed dividend of $1,509,523 related to the beneficial conversion feature arising from the issuance
of Series C Preferred Stock. This non-cash deemed dividend increased the Company’s net loss attributable to common stockholders
and net loss per share.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 7, 2021, the Company issued 1,500,000
shares of its common stock upon conversion of 120 shares of Series C Preferred Stock with a stated value of $12,000.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 12, 2022, the Company issued 1,543,151
shares its common stock upon the conversion of 120 shares of Series C preferred with a stated redemption value of $12,000. The conversion
price was based on contractual terms of the related Series C preferred shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On April 20, 2022, the Company issued 13,184,548
shares its common stock upon the conversion of 1,020 shares of Series C preferred with a stated redemption value of $102,000. The conversion
price was based on contractual terms of the related Series C preferred shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 1, 2022, the Company issued 6,535,274
shares its common stock upon the conversion of 250 shares of Series C preferred with a stated redemption value of $25,000. The conversion
price was based on contractual terms of the related Series C preferred shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the years ended December 31, 2022 and 2021,
the Company accrued dividends of $35,719 and $32,981, respectively, which was included in Series C convertible preferred stock on the
accompanying consolidated balance sheets.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">As of December 31, 2022, the net Series C Preferred
Stock balance was $1,803,731, which includes stated value of $1,729,000 and accrued dividends payable of $74,731. As of December 31, 2021,
the net Series C Preferred Stock balance was $1,907,012, which includes stated liquidation value of $1,868,000 and accrued dividends payable
of $39,012. The net Series C Preferred Stock balance is included on the accompanying consolidated balance sheets.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b> </b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Common Stock</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Issuance of Common Stock for Services</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-decoration:underline">Issuance of Common Stock for Professional Fees</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i> </i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">2021</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><i> </i></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 6, 2021, the Company issued 100,000
shares of its common stock for business development services rendered. These shares were valued at $10,000, or $0.10 per common share,
based on the quoted closing price of the Company’s common stock on the measurement date. In connection with the issuance of these
shares, during the year ended December 31, 2021, the Company recorded stock-based professional fees of $10,000.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 1, 2021, the Company issued an aggregate
of 700,000 shares of its common stock for business development, advisory and consulting services rendered and to be rendered. These shares
were valued at $54,600, or $0.078 per common share, based on the quoted closing price of the Company’s common stock on the measurement
date and will be amortized into stock-based consulting fees over the term of the agreement or vesting period ranging from immediately
to one year. In connection with the issuance of these shares, during the years ended December 31, 2022 and 2021, the Company recorded
stock-based professional fees of $3,250 and $51,350, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 8, 2021, the Company issued an aggregate
of 750,000 shares of its common stock for business development and consulting services rendered and to be rendered. These shares were
valued at $49,500, or $0.066 per common share, based on the quoted closing price of the Company’s common stock on the measurement
date, and will be amortized into stock-based consulting fees over the term of the agreement or vesting period. In connection with the
issuance of these shares, during the year ended December 31, 2021, the Company recorded stock-based professional fees of $49,500.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On April 7, 2021, the Company issued 2,500,000
shares of its common stock for investor relations services to be rendered. These shares were valued at $135,000, or $0.054 per common
share, based on the quoted closing price of the Company’s common stock on the measurement date. In connection with these shares,
during the year ended December 31, 2021, the Company recorded stock-based professional fees of $135,000.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On June 3, 2021, the Company issued 200,000 shares
of its common stock for technology services rendered. These shares were valued at $6,000, or $0.03 per common share, based on the quoted
closing price of the Company’s common stock on the measurement date. In connection with the issuance of these shares, during the
year ended December 31, 2021, the Company recorded stock-based professional fees of $6,000.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 7, 2021, the Company issued 2,500,000
shares of its common stock for investor relations services to be rendered. These shares were valued at $72,500, or $0.029 per common share,
based on the quoted closing price of the Company’s common stock on the measurement date. In connection with these shares, during
the year ended December 31, 2021, the Company recorded stock-based professional fees of $72,500.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On August 23, 2021, the Company issued 500,000
shares of its common stock for business development and consulting services rendered and to be rendered. These shares were valued at $19,000,
or $0.038 per common share, based on the quoted closing price of the Company’s common stock on the measurement date, and will be
amortized into stock-based consulting fees over the term of the agreement or vesting period. In connection with the issuance of these
shares, during the years ended December 31, 2022 and 2021, the Company recorded stock-based professional fees of $12,271 and $6,729, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On October 1, 2021, the Company issued 6,000,000
shares of its common stock for investor relations services to be rendered. These shares were valued at $207,600, or $0.0346 per common
share, based on the quoted closing price of the Company’s common stock on the measurement date. In connection with these shares,
during the years ended December 31, 2022 and 2021, the Company recorded stock-based professional fees of $103,800 and $103,800, respectively.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">2022</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On June 7, 2022, the Company issued an aggregate
of 4,000,000 shares of its common stock for business development and consulting services rendered and to be rendered. These shares were
valued at $48,000, or $0.012 per common share, based on the quoted closing price of the Company’s common stock on the measurement
date, and will be amortized into stock-based consulting fees over the term of the agreement. In connection with the issuance of these
shares, during the year ended December 31, 2022, the Company recorded stock-based professional fees of $27,000 and prepaid expenses of
$21,000 which will be amortized into stock-based professional fees over the remaining term of the agreement.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On June 24, 2022, the Company issued an aggregate
of 3,000,000 shares of its common stock for business development and consulting services rendered and to be rendered. These shares were
valued at $54,000, or $0.018 per common share, based on the quoted closing price of the Company’s common stock on the measurement
date, and will be amortized into stock-based consulting fees over the term of the agreement. In connection with the issuance of these
shares, during the year ended December 31, 2022, the Company recorded stock-based professional fees of $54,000.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 1, 2022, the Company granted a restricted
stock award of 2,500,000 common shares of the Company to a consultant of the Company for business development and consulting services
rendered, which shares were valued at $31,250, or $0.0125 per common share, based on the quoted closing price of the Company’s common
stock on the measurement date, and will be amortized into stock-based consulting fees over the term of the agreement. In connection with
the issuance of these shares, during the year ended December 31, 2022, the Company recorded stock-based professional fees of $31,250.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 15, 2022, the Company granted a restricted
stock award of 5,454,545 common shares of the Company to a consultant of the Company for government relations services to be rendered,
which shares were valued at $60,000, or $0.011 per common share, based on the quoted closing price of the Company’s common stock
on the measurement date, and will be amortized into stock-based consulting fees over the term of the agreement. In connection with the
issuance of these shares, during the year ended December 31, 2022, the Company recorded stock-based professional fees of $55,000 and prepaid
expenses of $5,000 as of December 31, 2022, which will be amortized into stock-based professional fees over the remaining term of the
agreement.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On October 3, 2022, the Company issued 3,000,000
shares of its common stock for investor relations services to be rendered. These shares were valued at $24,000, or $0.008 per common share,
based on the quoted closing price of the Company’s common stock on the measurement date. In connection with the issuance of these
shares, during the year ended December 31, 2022, the Company recorded stock-based professional fees of $12,000 and prepaid expenses of
$12,000 as of December 31, 2022, which will be amortized into stock-based professional fees over the remaining term of the agreement.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the year ended December 31, 2022, the Company
recorded stock-based professional fees of $119,321 in connection with the amortization of prepaid expenses of $119,321 related to common
shares previously issued. During the year ended December 31, 2021, the Company recorded stock-based professional fees of $43,250 in connection
with the amortization to prepaid expenses of $38,250 and accretion of stock-based professional fees of $5,000 related to common shares
previously issued.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><span style="text-decoration:underline">Issuance of Common Stock for Stock-Based Compensation</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">2021</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 1, 2021, the Company issued 200,000
shares of its common stock to an individual who agreed to act as the Company’s national sales manager for services to be rendered.
These shares were valued at $15,600, or $0.078 per common share, based on the quoted closing price of the Company’s common stock
on the measurement date. These shares were to vest on May 1, 2022. On May 17, 2021, this individual resigned, and these shares have been
forfeited.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 8, 2021, the Company granted restricted
stock awards for an aggregate of 2,500,000 common shares of the Company to an employee and an officer of the Company for services to be
rendered. which were valued at $165,000, or $0.066 per common share, based on the quoted closing price of the Company’s common stock
on the measurement date. These shares were to vest on May 1, 2022. On May 17, 2021, this individual resigned, and these shares have been
forfeited.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 22, 2021, pursuant to the Share Exchange
Agreement and Plan of Reorganization (See Note 3), the Company issued 976,500 shares of its common stock to employees of Mobile Tint LLC
as a bonus. These shares were valued at $24,413, or $0.025 per common share, based on the quoted closing price of the Company’s
common stock on the measurement date. In connection with these shares, during the year ended December 31, 2021, the Company recorded stock-based
compensation of $24,413.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On September 17, 2021, the Company granted a restricted
stock award for 1,000,000 common shares of the Company to an employee for services to be rendered through May 1, 2022 which were valued
at $30,600, or $0.031 per common share, based on the quoted closing price of the Company’s common stock on the measurement date.
These shares will vest on May 1, 2022. In connection with these shares, the Company shall record stock-based compensation over the vesting
period.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><span style="text-decoration:underline">2022</span></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 24, 2022, the Company granted restricted
stock awards of 500,000 vested common shares of the Company to an employee of the Company for services rendered. The awards were valued
at $14,250, or $0.0285 per common share, based on the quoted closing price of the Company’s common stock on the measurement date.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 12, 2022, the Company granted a restricted
stock award of 1,000,000 common shares of the Company to an employee of the Company. The shares will vest on May 1, 2023. These shares
were valued on the date of grant at $11,000, or $0.011 per common share based on the quoted closing price of the Company’s common
stock on the measurement date. In connection with these shares, the Company shall record stock-based compensation over the vesting period.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On August 12, 2022, the Company granted a restricted
stock award of 2,000,000 common shares of the Company to a board member of the Company. The shares will vest on May 1, 2023. These shares
were valued on the date of grant at $24,000 or $0.012 per common share based on the quoted closing price of the Company’s common
stock on the measurement date. In connection with these shares, the Company shall record stock-based compensation over the vesting period.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the years ended December 31, 2022 and 2021,
aggregate accretion of stock-based compensation expense on granted common shares amounted to $82,387 and $267,530, respectively. Total
unrecognized compensation expense related to these unvested common shares on December 31, 2022 amounted to $16,183. By mutual agreement
between the parties, the vesting date of previously granted shares was extended through May 2023.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The following table summarizes activity related
to non-vested shares: </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Number of<br/> Non-Vested<br/> Shares</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Weighted<br/> Average<br/> Grant Date<br/> Fair Value</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%">Non-vested, December 31, 2020</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">23,826,926</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">0.16</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td>Granted</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,194,767</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.06</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Forfeited</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(700,000</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(0.07</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; ">
<td style="padding-bottom: 1.5pt">Shares vested</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(15,051,573</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(0.14</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Non-vested, December 31, 2021</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">14,270,120</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.14</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td>Granted</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">3,500,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.014</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1.5pt">Shares vested</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(800,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(0.037</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; ">
<td style="padding-bottom: 4pt">Non-vested, December 31, 2022</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">16,970,120</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">0.119</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Issuance of Common Stock for Accrued Compensation</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 19, 2021, the Company issued 944,767
shares of its common stock pursuant to the terms of a Notice of Separation and General Release Agreement. These shares were valued at
$55,741, or $0.059 per common share, based on the quoted closing price of the Company’s common stock on the measurement date. In
connection with the issuance of these shares, the Company reduced accrued compensation by $40,625 and recorded stock-based compensation
of $15,116.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i> </i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Issuance of Common Stock Pursuant to Share Exchange Agreement</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 22, 2021, the Company closed the Exchange
Agreement and acquired 80% of the Mobile Member Units (see Note 3). The Mobile Member Units were exchanged for restricted shares of the
Company’s common stock, in an amount equal to $800,000, divided by the average of the closing prices of the Company’s common
stock during the 30-day period immediately prior to the closing as defined in the Exchange Agreement. In connection with the Exchange
Agreement, the Company issued 28,021,016 shares of its common stock. These shares were valued at $694,921, or $0.0248 based on the quoted
closing price of the Company’s common stock on the measurement date.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i> </i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Shares Issued for Accounts Payable</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i> </i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On May 4, 2021, the Company issued 3,801,224 common
shares upon conversion of accounts payable of $117,838, or $0.031 per common share, based on the quoted closing price of the Company’s
common stock on the measurement date.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i> </i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Common Stock Issued in Connection with Convertible
Debt</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the SPA, on October 18, 2021,
the Company issued 668,151 shares of its common stock to the placement agent as fee for the capital raise. The 668,151 shares of common
stock issued were recorded as a debt discount of $14,064 based on the relative fair value method to be amortized over the life of the
Note (See Note 8).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Common Stock Issued in Connection with Notes
Payable</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the March 2022 Note, the Company
issued 823,529 shares of its common stock to the placement agent as fee for the capital raise. The 823,529 shares of common stock issued
were recorded as a debt discount of $12,963 based on the relative fair value method to be amortized over the life of the Note (See Note
9).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i> </i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the June 2022 GS Capital Note,
the Company issued 1,750,000 shares of its common stock as a commitment fee. The 1,750,000 shares of common stock issued were recorded
as a debt discount of $32,736 based on the relative fair value method to be amortized over the life of the Note (See Note 9).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the July 2022 GS Capital Note,
on July 28, 2022, the Company issued 2,600,000 shares of its common stock as a commitment fee and the Company issued 998,008 shares of
its common stock to the placement agent as fee for the capital raises. The aggregate of 3,598,008 shares of common stock issued were recorded
as a debt discount of $34,606 based on the relative fair value method to be amortized over the life of the July 2022 Note (See Note 9).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the September 2022 GS Capital
Note, on September 6, 2022, the Company issued 3,300,000 shares of its common stock as a commitment fee and the Company issued 773,626
shares of its common stock to the placement agent as fee for the capital raises. The aggregate of 4,073,626 shares of common stock issued
were recorded as a debt discount of $30,326 based on the relative fair value method to be amortized over the life of the September 2022
Note (See Note 9).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the Letter Agreement dated
December 15, 2022, to GS Capital to extend the due dates of the GS Capital Notes, the Company issued 15,000,000 shares of the Company’s
common stock. These shares were valued at $112,500, or $0.0075 per common share, based on the quoted closing price of the Company’s
common stock on the measurement date. In connection with the issuance of these shares, during the year ended December 31, 2022, the Company
recorded an expense of $112,500 which was included in loss on debt extinguishment on the accompanying consolidated statement of operations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Common Stock Issued for Conversion of Series
C Preferred Stock</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 7, 2021, the Company issued 1,500,000
shares its common stock upon the conversion of 120 shares of Series C preferred with a stated redemption value of $12,000. The conversion
price was based on contractual terms of the related Series C preferred shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 12, 2022, the Company issued 1,543,151
shares its common stock upon the conversion of 120 shares of Series C preferred with a stated redemption value of $12,000. The conversion
price was based on contractual terms of the related Series C preferred shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On April 20, 2022, the Company issued 13,184,548
shares its common stock upon the conversion of 1,020 shares of Series C preferred with a stated redemption value of $102,000. The conversion
price was based on contractual terms of the related Series C preferred shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 1, 2022, the Company issued 6,535,274
shares its common stock upon the conversion of 250 shares of Series C preferred with a stated redemption value of $25,000. The conversion
price was based on contractual terms of the related Series C preferred shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Common stock issued for Accounts Payable</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 6, 2022, the Company issued 90,859
common shares upon conversion of accounts payable of $2,174, or $0.024 per common share, based on the quoted closing price of the Company’s
common stock on the measurement date.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Common Stock Issued Upon Warrant Exercise</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 7, 2021, the Company issued 1,008,000
shares of its common stock in connection with the cashless exercise of 1,050,000 warrants. The exercise price was based on contractual
terms of the related warrant.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Stock Options</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the years ended December 31, 2022 and 2021,
the Company recorded no compensation expense related to stock options. Total unrecognized compensation expense related to unvested stock
options on December 31, 2022 and 2021 amounted to $0.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Stock option activities for the years ended December
31, 2022 and 2021 are summarized as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: center"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Number of<br/> Options</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Weighted<br/> Average<br/> Exercise<br/> Price</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Weighted<br/> Average<br/> Remaining<br/> Contractual<br/> Term (Years)</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Aggregate<br/> Intrinsic<br/> Value</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 52%">Balance Outstanding, December 31, 2020</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">8,445,698</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">0.40</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right"><div style="-sec-ix-hidden: hidden-fact-129">-</div></td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right"><div style="-sec-ix-hidden: hidden-fact-130"> -</div></td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="padding-bottom: 1.5pt">Exercised</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-131">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-132">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-133">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-134">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Balance Outstanding, December 31, 2021</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">8,445,698</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.40</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-135">-</div></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-136">-</div></td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="padding-bottom: 1.5pt">Exercised</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-137">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-138">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-139">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-140">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 4pt">Balance Outstanding, December 31, 2022</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">8,445,698</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">0.40</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">3.43</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-141">-</div></td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="padding-bottom: 4pt">Exercisable, December 31, 2022</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">8,445,698</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">0.40</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">3.43</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-142">-</div></td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Warrants</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 7, 2021, the Company issued 1,008,000
shares of its common stock in connection with the cashless exercise of 1,050,000 warrants. The exercise price was based on contractual
terms of the related warrant.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On October 15, 2021, in connection with a Securities
Purchase Agreements with an accredited investor (See Note 7), the Company issued warrants to purchase an aggregate amount up to 16,500,000
shares of the Company’s common stock (the “Initial Warrants”). The Initial Warrants were exercisable at any time on
or after the date of the issuance and entitled this investor to purchase shares of the Company’s common stock for a period of five
years from the initial date the Initial Warrants become exercisable. Under the terms of the Initial Warrants, the holder was entitled
to exercise the Initial Warrants to purchase up to 16,500,000 shares of the Company’s common stock at an initial exercise price
of $0.05, subject to adjustment as detailed in the Warrants. In connection with the issuance of these warrants, on the initial measurement
date, the relative fair value of the Initial Warrants of $347,142 was recorded as a debt discount and an increase in paid-in capital (See
Note 7). On April 20, 2022, in connection with an Exchange Agreement, the 16,500,000 Initial Warrants were cancelled and a new warrant
to purchase up to 33,000,000 shares of the Company’s common stock at an initial exercise price of $0.025, subject to adjustment
as detailed in the Warrants was issued (See Note 7).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On April 20, 2022, in connection with an Exchange
Agreement (See Note 8), the Company issued warrants to purchase an aggregate amount up to 33,000,000 shares of the Company’s common
stock (the “New Warrants”). The New Warrants are exercisable at any time on or after the date of the issuance and entitled
this investor to purchase shares of the Company’s common stock for a period of five years from the initial date the warrants become
exercisable. Under the terms of the New Warrants, the holder is entitled to exercise the Warrants to purchase up to 33,000,000 shares
of the Company’s common stock at an initial exercise price of $0.025, subject to adjustment as detailed in the New Warrants. In
connection with the issuance of the New Warrants, on the initial measurement date, the relative fair value of the warrants of $325,785
was recorded as a debt discount and an increase in paid-in capital (See Note 8). On June 23, 2022, the Company issued common stock equivalents
with an initial conversion price of $0.011 per share and accordingly, the conversion price and warrant down-round provisions were triggered.
As a result, the conversion price of the New April 2022 Note was reduced to $0.011 per share and the exercise price of the New April 2022
Warrant was lowered to $0.011. As a result of the June 23, 2022 down-round provisions, the Company calculated the difference between the
warrants fair value on June 23, 2022, the date the down-round feature was triggered using the then current exercise price of $0.025 and
the new exercise price of $0.011. On June 23, 2022, the Company recorded a deemed dividend of $3,702 which represents the fair value transferred
to the warrant holders from the down round feature being triggered. Additionally, on September 6, 2022, the Company issued common stock
equivalents with an initial conversion price of $0.009 per share and accordingly, the conversion price and warrant down-round provisions
were triggered. As a result, the conversion price of the New April 2022 Note was reduced to $0.009 per share and the exercise price of
the New April 2022 Warrant was lowered to $0.009. As a result of the September 6, 2022 down-round provisions, the Company calculated the
difference between the warrants fair value on September 6, 2022, the date the down-round feature was triggered using the then current
exercise price of $0.011 and the new exercise price of $0.009. On September 6, 2022, the Company recorded a deemed dividend of $733 which
represents the fair value transferred to the warrant holders from the down round feature being triggered. No additional beneficial conversion
feature amount was recorded based on the September 6, 2022 valuation as the ratcheted beneficial conversion feature value was lower than
the original amount.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Warrant activities for the years ended December
31, 2022 and 2021 are summarized as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: center"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Number of<br/> Warrants</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Weighted<br/> Average<br/> Exercise<br/> Price</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Weighted<br/> Average<br/> Remaining<br/> Contractual<br/> Term (Years)</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Aggregate<br/> Intrinsic<br/> Value</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 52%">Balance Outstanding December 31, 2020</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">2,050,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">0.05</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">3.66</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">137,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td>Granted</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">16,500,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.05</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-143">-</div></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-144">-</div></td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1.5pt">Cancelled</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(1,050,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(0.01</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-145">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-146">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td>Balance Outstanding December 31, 2021</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">17,500,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.05</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">4.67</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-147">-</div></td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Granted</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">33,000,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.025</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-148">-</div></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-149">-</div></td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="padding-bottom: 1.5pt">Cancelled</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(16,500,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">0.05</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-150">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-151">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 4pt">Balance Outstanding December 31, 2022</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">34,000,000</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">0.011</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">3.73</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-152">-</div></td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="padding-bottom: 4pt">Exercisable, December 31, 2022</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">34,000,000</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">0.011</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">3.73</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-153">-</div></td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b> </b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>2018 Long-Term Incentive Plan</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On June 7, 2018, a majority of the Company’s
shareholders and its board approved the adoption of a 2018 Long-Term Incentive Plan (the “2018 Plan”). The purpose of the
2018 Plan is to advance the interests of the Company, its affiliates and its stockholders and promote the long-term growth of the Company
by providing employees, non-employee directors and third-party service providers with incentives to maximize stockholder value and to
otherwise contribute to the success of the Company and its affiliates, thereby aligning the interests of such individuals with the interests
of the Company’s stockholders and providing them additional incentives to continue in their employment or affiliation with the Company.
The Plan was adopted on June 7, 2018 and effective on August 2, 2018. Under the 2018 Plan, the Plan Administrator may grant:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 0.25in; text-align: justify"> </td> <td style="width: 0.25in; padding-right: 0.8pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">●</span></td> <td style="padding-right: 0.8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">options to acquire the Company’s common stock, both incentive stock options that are intended to satisfy the requirements of Section 422 of the Internal Revenue Code and nonqualified stock options which are not intended to satisfy such requirements. The exercise price of options granted under our 2018 Plan must at least be equal to the fair market value of the Company’s common stock on the date of grant and the term of an option may not exceed ten years, except that with respect to an incentive stock option granted to any employee who owns more than 10% of the voting power of all classes of the Company’s outstanding stock as of the grant date the term must not exceed five years and the exercise price must equal at least 110% of the fair market value on the grant date. </span></td></tr> <tr style="vertical-align: top"> <td style="padding-right: 0.8pt; text-align: justify"> </td> <td style="padding-right: 0.8pt"> </td> <td style="padding-right: 0.8pt; text-align: justify"> </td></tr> <tr style="vertical-align: top"> <td style="padding-right: 0.8pt; text-align: justify"> </td> <td style="padding-right: 0.8pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">●</span></td> <td style="padding-right: 0.8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">stock appreciation rights, or SARs, which allow the recipient to receive the appreciation in the fair market value of the Company’s common stock between the date of grant and the exercise date. The amount payable under the stock appreciation right may be paid in cash or with shares of the Company’s common stock, or a combination thereof, as determined by the Administrator.</span></td></tr> </table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 0.25in; padding-right: 0.8pt"> </td>
<td style="width: 0.25in; padding-right: 0.8pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">●</span></td>
<td style="padding-right: 0.8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">restricted stock awards, which are awards of the Company’s shares of common stock that vest in accordance with terms and conditions established by the Administrator.</span></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 0.8pt"> </td>
<td style="padding-right: 0.8pt"> </td>
<td style="padding-right: 0.8pt; text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 0.8pt"> </td>
<td style="padding-right: 0.8pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">●</span></td>
<td style="padding-right: 0.8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">restricted stock units, which are awards that are based on the value of the Company’s common stock and may be paid in cash or in shares of the Company’s common stock.</span></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 0.8pt"> </td>
<td style="padding-right: 0.8pt"> </td>
<td style="padding-right: 0.8pt; text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 0.8pt"> </td>
<td style="padding-right: 0.8pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">●</span></td>
<td style="padding-right: 0.8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">other types of stock-based or stock-related awards not otherwise described by the terms and provision of the 2018 Plan, including the grant or offer for sale of unrestricted shares of the Company’s common stock, and which may involve the transfer of actual shares of the Company’s common stock or payment in cash or otherwise of amounts based on the value of shares of the Company’s common stock and may be designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.</span></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 0.8pt"> </td>
<td style="padding-right: 0.8pt"> </td>
<td style="padding-right: 0.8pt; text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 0.8pt"> </td>
<td style="padding-right: 0.8pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">●</span></td>
<td style="padding-right: 0.8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">other cash-based awards to eligible persons in such amounts and upon such terms as the Administrator shall determine.</span></td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">An award granted under the 2018 Plan must include
a minimum vesting period of at least one year, provided, however, that an award may provide that the award will vest before the completion
of such one-year period upon the death or qualifying disability of the grantee of the award or a change of control of the Company and
awards covering, in the aggregate, 25,000,000 shares of our Common Stock may be issued without any minimum vesting period.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The aggregate number of shares of common stock
and number of shares of the Company’s common stock that may be subject to incentive stock options granted under the 2018 Plan is
50,000,000 shares, of which 11,445,698 shares have been issued or granted under incentive stock options and 29,451,070 shares of restricted
stock have been issued as of December 31, 2022. All shares underlying grants are expected to be issued from the Company’s unissued
authorized shares available.</p>1000000.110000.02The Series B is convertible into common stock
at the option of a holder or if the closing price of the common stock exceeds 400% of the Conversion Price for a period of twenty consecutive
trading days, at the option of the Company. Conversion Price means a price per share of the common stock equal to 100% of the lowest daily
volume weighted average price of the common stock during the two years preceding or subsequent two years following the Issuance Date,
subject to adjustment as otherwise provided in the Certificate of Designations (the “Conversion Price”). 108000108318970319295000295377881027865427895755615884219936141651037201100062436577738611721970166411000000.11000.021.500.04996300630063000010070007000001002500250000100284523830003000001001509523150000012012000154315112012000131845481020102000653527425025000357193298118037311729000747311907012186800039012100000100000.110000700000546000.078325051350750000495000.0664950025000001350000.05413500020000060000.0360002500000725000.02972500500000190000.03812271672960000002076000.03461038001038004000000480000.01227000210003000000540000.018540002500000312500.0125312505454545600000.0115500050003000000240000.008120001200011932111932143250382505000200000156000.0782022-05-0125000001650000.066976500244130.025244131000000306000.031500000142500.02851000000110000.0112000000240000.0128238726753016183<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Number of<br/> Non-Vested<br/> Shares</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Weighted<br/> Average<br/> Grant Date<br/> Fair Value</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%">Non-vested, December 31, 2020</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">23,826,926</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">0.16</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td>Granted</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">6,194,767</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.06</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Forfeited</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(700,000</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(0.07</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; ">
<td style="padding-bottom: 1.5pt">Shares vested</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(15,051,573</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(0.14</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Non-vested, December 31, 2021</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">14,270,120</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.14</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td>Granted</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">3,500,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.014</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1.5pt">Shares vested</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(800,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(0.037</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; ">
<td style="padding-bottom: 4pt">Non-vested, December 31, 2022</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">16,970,120</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">0.119</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>238269260.1661947670.067000000.07-15051573-0.14142701200.1435000000.014-800000-0.037169701200.119944767557410.05940625151160.80800000280210166949210.024838012241178380.0316681516681511406482352982352912963175000017500003273626000009980083598008346063300000773626407362630326150000001125000.00751125001500000120120001543151120120001318454810201020006535274250250009085921740.0241008000105000000<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: center"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Number of<br/> Options</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Weighted<br/> Average<br/> Exercise<br/> Price</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Weighted<br/> Average<br/> Remaining<br/> Contractual<br/> Term (Years)</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Aggregate<br/> Intrinsic<br/> Value</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 52%">Balance Outstanding, December 31, 2020</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">8,445,698</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">0.40</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right"><div style="-sec-ix-hidden: hidden-fact-129">-</div></td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right"><div style="-sec-ix-hidden: hidden-fact-130"> -</div></td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="padding-bottom: 1.5pt">Exercised</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-131">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-132">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-133">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-134">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Balance Outstanding, December 31, 2021</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">8,445,698</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.40</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-135">-</div></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-136">-</div></td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="padding-bottom: 1.5pt">Exercised</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-137">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-138">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-139">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-140">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 4pt">Balance Outstanding, December 31, 2022</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">8,445,698</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">0.40</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">3.43</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-141">-</div></td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="padding-bottom: 4pt">Exercisable, December 31, 2022</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">8,445,698</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">0.40</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">3.43</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-142">-</div></td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>84456980.484456980.484456980.4P3Y5M4D84456980.4P3Y5M4D1008000105000016500000165000000.0534714216500000330000000.025On April 20, 2022, in connection with an Exchange
Agreement (See Note 8), the Company issued warrants to purchase an aggregate amount up to 33,000,000 shares of the Company’s common
stock (the “New Warrants”). The New Warrants are exercisable at any time on or after the date of the issuance and entitled
this investor to purchase shares of the Company’s common stock for a period of five years from the initial date the warrants become
exercisable. Under the terms of the New Warrants, the holder is entitled to exercise the Warrants to purchase up to 33,000,000 shares
of the Company’s common stock at an initial exercise price of $0.025, subject to adjustment as detailed in the New Warrants. In
connection with the issuance of the New Warrants, on the initial measurement date, the relative fair value of the warrants of $325,785
was recorded as a debt discount and an increase in paid-in capital (See Note 8). On June 23, 2022, the Company issued common stock equivalents
with an initial conversion price of $0.011 per share and accordingly, the conversion price and warrant down-round provisions were triggered.
As a result, the conversion price of the New April 2022 Note was reduced to $0.011 per share and the exercise price of the New April 2022
Warrant was lowered to $0.011. As a result of the June 23, 2022 down-round provisions, the Company calculated the difference between the
warrants fair value on June 23, 2022, the date the down-round feature was triggered using the then current exercise price of $0.025 and
the new exercise price of $0.011. On June 23, 2022, the Company recorded a deemed dividend of $3,702 which represents the fair value transferred
to the warrant holders from the down round feature being triggered. Additionally, on September 6, 2022, the Company issued common stock
equivalents with an initial conversion price of $0.009 per share and accordingly, the conversion price and warrant down-round provisions
were triggered. As a result, the conversion price of the New April 2022 Note was reduced to $0.009 per share and the exercise price of
the New April 2022 Warrant was lowered to $0.009. As a result of the September 6, 2022 down-round provisions, the Company calculated the
difference between the warrants fair value on September 6, 2022, the date the down-round feature was triggered using the then current
exercise price of $0.011 and the new exercise price of $0.009. On September 6, 2022, the Company recorded a deemed dividend of $733 which
represents the fair value transferred to the warrant holders from the down round feature being triggered. No additional beneficial conversion
feature amount was recorded based on the September 6, 2022 valuation as the ratcheted beneficial conversion feature value was lower than
the original amount. <table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: center"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Number of<br/> Warrants</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Weighted<br/> Average<br/> Exercise<br/> Price</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Weighted<br/> Average<br/> Remaining<br/> Contractual<br/> Term (Years)</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Aggregate<br/> Intrinsic<br/> Value</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 52%">Balance Outstanding December 31, 2020</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">2,050,000</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">0.05</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left"> </td><td style="width: 9%; text-align: right">3.66</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">137,000</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td>Granted</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">16,500,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.05</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-143">-</div></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-144">-</div></td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1.5pt">Cancelled</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(1,050,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(0.01</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-145">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-146">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td>Balance Outstanding December 31, 2021</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">17,500,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.05</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">4.67</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-147">-</div></td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>Granted</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">33,000,000</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">0.025</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-148">-</div></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-149">-</div></td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="padding-bottom: 1.5pt">Cancelled</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(16,500,000</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">0.05</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-150">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right"><div style="-sec-ix-hidden: hidden-fact-151">-</div></td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 4pt">Balance Outstanding December 31, 2022</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">34,000,000</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">0.011</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">3.73</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-152">-</div></td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="padding-bottom: 4pt">Exercisable, December 31, 2022</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">34,000,000</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">0.011</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left"> </td><td style="border-bottom: Black 4pt double; text-align: right">3.73</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-153">-</div></td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b> </b></p>20500000.05P3Y7M28D137000165000000.05-1050000-0.01175000000.05P4Y8M1D330000000.025-165000000.05340000000.011P3Y8M23D340000000.011P3Y8M23D0.101.1025000000The aggregate number of shares of common stock
and number of shares of the Company’s common stock that may be subject to incentive stock options granted under the 2018 Plan is
50,000,000 shares, of which 11,445,698 shares have been issued or granted under incentive stock options and 29,451,070 shares of restricted
stock have been issued as of December 31, 2022.<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTE 11 – <span style="text-decoration:underline">COMMITMENTS AND CONTINGENCIES</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Legal Matters</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b> </b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">From time to time, the Company may be involved
in litigation related to claims arising out of its operations in the normal course of business. As of December 31, 2022, other than discussed
below, the Company is not involved in any other pending or threatened legal proceedings that it believes could reasonably be expected
to have a material adverse effect on its financial condition, results of operations, or cash flows.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 20, 2022, we received an Order Directing
Examination and Designating Officers to Take Testimony (a “Formal Order”) from the SEC. The Formal Order authorizes that an
examination be made to determine whether a stop order should be issued under Section 8(d) of the Securities Act of 1933 with respect to
the Company’s Registration Statement on Form S-1, and any supplements and amendments thereto. The Formal Order indicates that the
Form S-1 may be deficient in that it may contain untrue statements of material fact or omit to state material facts necessary in order
to make the statements made, in light of the circumstances under which they were made, not misleading concerning, among other things,
the Company’s revenue and financial condition. On April 15, 2022, the Company filed an amendment to its Annual Report on Form 10-K
for the fiscal year ended December 31, 2020. The restatement had the cumulative effect of decreasing the Company’s reported revenue
for Fiscal 2020 by $102,569 and decreasing the Company’s bad debt expense for the same period by $102,569. There was no effect on
Company’s reported net loss for Fiscal 2020 or on the financial condition of the Company on December 31, 2020. The Company received
a subpoena from the SEC on April 25, 2022, requesting all documents and communications concerning the review of C-Bond’s revenue
recognition practices for fiscal year 2020. The Company has provided the requested information and its Chief Executive Officer provided
his testimony regarding this Formal Order in October 2022. </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 8, 2021, a former officer of the Company
resigned. Both parties alleged certain claims against the other, including certain compensation claims. Neither party has filed litigation. The Company intends to vigorously defend itself against any possible claims and assert
any relevant claims against the former executive and believes it will prevail.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In July 2021, a former employee of the Company
filed a small claims case for approximately $16,000 in Harris County, TX, and the Company filed its response in August 2021. There
has been no further communication from the Court, and the Company believes the case has been dismissed but has not received any formal notice of such. The Company intends to vigorously defend itself against the claim made and believes
it will prevail. As of December 31, 2022 and 2021, the Company has accrued compensation of $18,250 to this former employee, which is included
in accrued compensation on the accompanying consolidated balance sheets.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Employment Agreements</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On October 18, 2017, the Company entered into
an employment agreement with Mr. Scott Silverman, pursuant to which he serves as the Chief Executive Officer of the Company for an initial
term of three years that extends for successive one-year renewal terms unless either party gives 30-days’ advance notice of non-renewal.
As consideration for these services, the employment agreement provides Mr. Silverman with the following compensation and benefits: </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: top">
<td style="width: 0.25in; padding-right: 0.8pt"> </td>
<td style="width: 0.25in; padding-right: 0.8pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">●</span></td>
<td style="padding-right: 0.8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">An annual base salary of $300,000, with a 10% increase on each anniversary date contingent upon achieving certain performance objectives as set by the Board. Until the Company raises $1,000,000 in debt or equity financing after entering into this agreement, Mr. Silverman will receive ½ of the base salary on a monthly basis with the other ½ being deferred. Upon the financing being raised, Mr. Silverman will receive the deferred portion of his compensation and his base salary will be paid in full moving forward.</span></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 0.8pt"> </td>
<td style="padding-right: 0.8pt"> </td>
<td style="padding-right: 0.8pt; text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 0.8pt"> </td>
<td style="padding-right: 0.8pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">●</span></td>
<td style="padding-right: 0.8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">After the first $500,000 of equity investments is raised by the Company, after entering into this employment agreement, Mr. Silverman will receive a capital raise success bonus of 5% of all equity capital raised from investors/lenders introduced by him to the Company.</span></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 0.8pt"> </td>
<td style="padding-right: 0.8pt"> </td>
<td style="padding-right: 0.8pt; text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 0.8pt"> </td>
<td style="padding-right: 0.8pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">●</span></td>
<td style="padding-right: 0.8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Annual cash performance bonus opportunity as determined by the Board.</span></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 0.8pt"> </td>
<td style="padding-right: 0.8pt"> </td>
<td style="padding-right: 0.8pt; text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 0.8pt"> </td>
<td style="padding-right: 0.8pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">●</span></td>
<td style="padding-right: 0.8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">An option to acquire 3,000,000 common shares of the Company, with a strike price of $0.31 per unit. These options vested pro rata on a monthly basis for the term of the employment agreement. On each anniversary, Mr. Silverman will be eligible to be granted a minimum of 500,000 stock options of the Company at a strike price of $0.85 per common unit contingent upon the achievement of certain performance objectives.</span></td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 0.8pt"> </td>
<td style="padding-right: 0.8pt"> </td>
<td style="padding-right: 0.8pt; text-align: justify"> </td></tr>
<tr style="vertical-align: top">
<td style="padding-right: 0.8pt"> </td>
<td style="padding-right: 0.8pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">●</span></td>
<td style="padding-right: 0.8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Certain other employee benefits and perquisites, including reimbursement of necessary and reasonable travel and participation in retirement and welfare benefits.</span></td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The receipt of $1,240,000 in connection with
the April 25, 2018 financing triggered the right of the employee to receive the deferred salary and the 5% bonus provision disclosed above.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Mr. Silverman’s employment agreement provides
that, in the event that his employment is terminated by the Company without “cause” (as defined in his employment agreement),
or if Mr. Silverman resigned for “good reasons” (as defined in his new employment agreement), subject to a complete release
of claims, he will be entitled to (i) retain all stock options previously granted; and (ii) receive any benefits then owed or accrued
along with one year of base salary and any unreimbursed expenses incurred by him. All amounts shall be paid on the termination date. In
the event that Mr. Silverman’s employment is terminated by the Company for “cause” (as defined in his employment agreement),
or if Mr. Silverman resigned without “good reasons” (as defined in his employment agreement), subject to a complete release
of claims, he will be entitled to receive any unpaid base salary and benefits then owed or accrued and any unreimbursed expenses incurred
by him. Additionally, if a change of control (as defined in his employment agreement) occurs during the term of this agreement, all unvested
stock options will vest in full and if the valuation of the Company in the change of control transaction is greater than $0.85 per common
share, then Mr. Silverman shall be paid a bonus equal to two times his minimum base salary and minimum target bonus. Pursuant to the employment
agreement, Mr. Silverman will be subject to a confidentiality covenant, a two-year post-termination non-competition covenant and a two-year
post-termination non-solicitation covenant. On June 30, 2020, the Company amended the employment agreement of Mr. Silverman to provide
for successive one-year extensions until either the executive or the Board of Directors of the Company gives notice to terminate the employment
agreement per its terms. This employment agreement amendment also includes an allowance of up to $10,000 per year to cover uncovered medical/dental
expenses for Mr. Silverman and his family.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 18, 2021, the Company’s board
of directors approved a bonus to officers and an employee of the Company in the aggregate amount of $330,000 which deferred and recorded
as accrued compensation on the bonus approval date.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On July 21, 2021, the Company entered into the
Employment Agreement with Mr. Wanke, the President of Mobile, to serve as the President of C-Bond’s Safety Solutions Group. Under
the three-year Employment Agreement, Mr. Wanke will receive a base salary of $240,000 per year, which may be increased from time to time
with the approval of the board of directors. In addition, Mr. Wanke may receive an annual bonus as determined by the board of directors.
It is understood that although Mr. Wanke’s base salary will be paid by Mobile, 50% of the base salary will be allocated to the expenses
of Mobile, and the other 50% of the base salary will be allocated to the expenses of the Company. The term of this Agreement (the “Initial
Term”) shall begin as of July 21, 2021 (the “Effective Date”) and shall end on the earlier of (i) the third anniversary
of the Effective Date and (ii) the time of the termination of the Executive’s employment in accordance with the Employment Agreement.
This Initial Term and any Renewal Term (as defined below) shall automatically be extended for one or more additional terms of one (1)
year each (each a “Renewal Term” and together with the Initial Term, the “Term”), unless either the Company or
Executive provide notice to the other Party of their desire to not so renew the Initial Term or Renewal Term (as applicable) at least
thirty (30) days prior to the expiration of the then-current Initial Term or Renewal Term, as applicable. All unvested shares of stock
and stock options shall expire upon such termination, if any. The Executive shall be eligible for an annual bonus payment in an amount
to be determined by the Board of Directors of the Company (the “Bonus”). The Bonus shall be determined and payable based on
the achievement of certain performance objectives of the Company as established by the Board and communicated to and agreed to by the
Executive in writing as soon as practicable after commencement of the year in respect of which the Bonus is paid. The Bonus, if earned,
is payable in cash and/or restricted stock at the discretion of the Board. It is understood between the Parties that the target bonus
for each year shall be up to 50% of the Base Salary.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 8, 2021, the Company’s board
of directors approved a bonus to certain officers in the aggregate amount of $309,615 which is equal to 50% of their annual compensation.
This bonus will be paid 10% in cash ($30,962) which was paid in December 2021 and 90% in equity amounting $278,653 which as of December
31, 2021 had been accrued and as of December 31, 2021, was included in accrued compensation on the accompanying consolidated balance sheet.
On January 6, 2022, the Board of Directors of the Company agreed to satisfy $278,653 of the bonus owed to its executive officers (collectively,
the “Management”). Management agreed to accept 278 shares of the Company’s Series B convertible preferred stock in settlement
of this accrued compensation.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 7, 2022, the Company’s board
of directors approved a bonus to certain officers in the aggregate amount of $160,000. This bonus will be paid 10% in cash ($16,000) which
was paid in December 2022 and 90% in equity amounting to $144,000 which as of December 31, 2022 had been accrued and as of December 31,
2022, was included in accrued compensation on the accompanying consolidated balance sheet. On January 17, 2023, the Board of Directors
of the Company agreed to satisfy $144,000 of the bonus owed to its executive officers (collectively, the “Management”). Management
agreed to accept 144 shares of the Company’s Series B convertible preferred stock in settlement of this accrued compensation (See
Note 18).</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Licensing agreement</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Pursuant to an agreement dated April 8, 2016,
between the Company and Rice University, Rice University has granted a non-exclusive license to the Company, in nanotube-based surface
treatment for strengthening glass and related materials under Rice’s intellectual property rights, to use, make, distribute, offer
and sell the licensed products specified in the agreement. In consideration for which, the Company had to pay a one-time non-refundable
license fee of $10,000 and royalty payments of 5% of net sales of the licensed products during the term of the agreement and a sell-off
period of 180 days from termination, In addition, the Company is required to pay for the maintenance of the patents, This agreement will
continue until the expiration of the last to expire of the licensed property rights, unless terminated earlier in accordance with the
terms of the agreement. There have been no royalty payments paid or due through December 31, 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Anti-dilution rights related to C-Bond Systems,
LLC</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Prior to the Merger, C-Bond Systems, LLC entered
into certain contracts, described below, which provided certain anti-dilution protection to the counterparties to those contracts.
The Company believes that these contracts do not apply to any future issuances of equity by C-Bond Systems, Inc.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In 2013, pursuant to a subscription agreement,
the Company’s subsidiary. C-Bond Systems, LLC issued 2,425,300 common shares. To the extent that during the term of the agreement
C-Bond Systems, LLC issues any “down-round” or subsequent investments based upon an enterprise value of less than $2,000,000
(“Dilutive Transaction”) (other than an issuance pursuant to an option agreement with an employee or otherwise to compensate
an employee, or incident to an acquisition of assets by C-Bond Systems, LLC in which common units were issued to the seller of such assets)
contemporaneously with the Dilutive Transaction, the contract obligated C-Bond Systems, LLC to issue the investor additional common units
in C-Bond Systems, LLC in an amount which would provide them with the ownership percentage interest which they would have held in C-Bond
Systems, LLC represented by the common units purchased by them on this date.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In 2015, pursuant to a subscription agreement,
C-Bond Systems, LLC issued 3,880,480 common shares to an entity at $0.77 per common share. This agreement entitled the subscriber to anti-dilution
protection to the extent that C-Bond Systems, LLC issued any equity in a “down-round” based upon a value of less than $0.77
per common unit of C-Bond Systems, LLC (other than an issuance pursuant to an option agreement with an employee or consultant or otherwise
to compensate an employee or consultant, or incident to an acquisition of assets by C-Bond Systems, LLC in which common units are issued
to the seller of such assets (“Dilutive Transaction”)). Contemporaneously with the Dilutive Transaction, the contract obligated
C-Bond Systems, LLC to issue the Subscriber additional common units in C-Bond Systems, LLC in an amount which would provide the investor
with the ownership percentage interest in C-Bond Systems, LLC on a fully diluted basis which Subscriber held immediately prior to the
Dilutive Transaction.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In 2016, pursuant to a subscription agreement,
C-Bond Systems, LLC issued 1,175,902 common shares to an entity at $0.85 per common share. This agreement entitled this investor to customary
broad-based weighted average anti-dilution protection to the extent that after the date of this subscription agreement C-Bond Systems,
LLC issued any equity in a “down round” based upon a value of less than $0.85 per common share, including the issuance of
options with an exercise price per share of less than $0.85 to compensate employees or consultants (“Dilutive Transaction”),
subject to exclusions for issuances of common shares or options in connection with strategic partnerships, equity kickers to lenders or
vendors, mergers or acquisitions. The agreement obligated C-Bond Systems, LLC to give to this investor written notice (an “Issuance
Notice”) of any proposed issuance by C-Bond Systems, LLC of any C-Bond Systems, LLC common units, or other form of equity interest
(excluding issuances of C-Bond Systems, LLC options or other equity to compensate employees or consultants and the issuance of shares
in connection with strategic partnerships, equity kickers to lenders or vendors, mergers or acquisitions) at least ten business days prior
to the proposed issuance date. This contract entitled the investor to purchase their pro rata portion of such shares or other equity interest
of C-Bond Systems, LLC at the price and on the other terms and conditions specified in the issuance notice.</p>102569102569160001825018250As consideration for these services, the employment agreement provides Mr. Silverman with the following compensation and benefits:
●
An annual base salary of $300,000, with a 10% increase on each anniversary date contingent upon achieving certain performance objectives as set by the Board. Until the Company raises $1,000,000 in debt or equity financing after entering into this agreement, Mr. Silverman will receive ½ of the base salary on a monthly basis with the other ½ being deferred. Upon the financing being raised, Mr. Silverman will receive the deferred portion of his compensation and his base salary will be paid in full moving forward.
●
After the first $500,000 of equity investments is raised by the Company, after entering into this employment agreement, Mr. Silverman will receive a capital raise success bonus of 5% of all equity capital raised from investors/lenders introduced by him to the Company.
●
Annual cash performance bonus opportunity as determined by the Board.
●
An option to acquire 3,000,000 common shares of the Company, with a strike price of $0.31 per unit. These options vested pro rata on a monthly basis for the term of the employment agreement. On each anniversary, Mr. Silverman will be eligible to be granted a minimum of 500,000 stock options of the Company at a strike price of $0.85 per common unit contingent upon the achievement of certain performance objectives.
●
Certain other employee benefits and perquisites, including reimbursement of necessary and reasonable travel and participation in retirement and welfare benefits.
12400000.05P1Y0.85100003300002400000.500.503096150.50This bonus will be paid 10% in cash ($30,962) which was paid in December 2021 and 90% in equity amounting $278,653 which as of December
31, 2021 had been accrued and as of December 31, 2021, was included in accrued compensation on the accompanying consolidated balance sheet.278653278160000This bonus will be paid 10% in cash ($16,000) which
was paid in December 2022 and 90% in equity amounting to $144,000 which as of December 31, 2022 had been accrued and as of December 31,
2022, was included in accrued compensation on the accompanying consolidated balance sheet.100000.052425300200000038804800.770.7711759020.850.850.85<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTE 12 – <span style="text-decoration:underline">CONCENTRATIONS</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Concentrations Of Credit Risk</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Financial instruments that potentially subject
the Company to concentrations of credit risk consist primarily of trade accounts receivable and cash deposits. The Company places its
cash in banks at levels that, at times, may exceed federally insured limits. On December 31, 2022, the Company did not have any cash in
excess of FDIC limits of $250,000. The Company has not experienced any losses in such accounts through December 31, 2022.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Geographic Concentrations of Sales</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the years ended December 31, 2022 and 2021,
all sales were in the United States.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b> </b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Customer Concentrations</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">For the year ended December 31, 2022, no customer
accounted for over 10% of total sales. For the year ended December 31, 2021, three customers accounted for approximately 44.2% of total
sales (17.4%, 15.3%, and 11.5%, respectively). On December 31, 2022, three customers accounted for 41.1% (10.3%, 19.3% and 11.5%, respectively)
of the total accounts receivable balance. On December 31, 2021, one customer accounted for 21.4% of the total accounts receivable balance.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b> </b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>Vendor concentrations</b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Generally, the Company purchases substantially
all of its inventory from five suppliers. The loss of these suppliers may have a material adverse effect on the Company’s consolidated
results of operations and financial condition. However, the Company believes that, if necessary, alternate vendors could supply similar
products in adequate quantities to avoid material disruptions to operations.</p>2500000.1030.4420.1740.1530.11530.4110.1030.1930.11510.2145<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTE 13 – <span style="text-decoration:underline">SEGMENT REPORTING</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the year ended December 31, 2022 and from
July 22, 2021 (date of acquisition of Mobile Tint) to December 31, 2021, the Company operated in two reportable business segments - (1)
the manufacture and sale of a windshield strengthening water repellent solution as well as a disinfection product, and the sale of multi-purpose
glass strengthening primer and window film mounting solutions, including ballistic-resistant film systems and a forced entry system (the
“C-Bond Segment”), and (2) the distribution and installation of window film solutions (the “Mobile Tint Segment”).
The Company’s reportable segments were strategic business units that offered different products. They were managed separately based
on the fundamental differences in their operations and locations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Information with respect to these reportable business
segments for the years ended December 31, 2022 and 2021 was as follows: </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">For the Year Ended<br/> December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td>Revenues:</td><td> </td>
<td colspan="2" style="text-align: right"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%">C-Bond</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">378,736</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">434,811</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Mobile Tint</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,853,910</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,042,017</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">2,232,646</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,476,828</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">Depreciation and amortization:</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>C-Bond</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">7,109</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">9,889</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Mobile Tint</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">82,110</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">36,078</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">89,219</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">45,967</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">Interest expense:</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>C-Bond</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">23</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,372</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">Mobile Tint</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">20,212</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">3,354</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Other (a)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,599,854</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">278,233</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,620,089</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">282,959</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Net (loss):</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td>C-Bond</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(1,097,069</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(2,001,725</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Mobile Tint</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(192,566</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">77,626</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Other (a)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(3,866,843</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(5,204,759</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 4pt"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(5,156,478</td><td style="padding-bottom: 4pt; text-align: left">)</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(7,128,858</td><td style="padding-bottom: 4pt; text-align: left">)</td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td>Identifiable long-lived tangible assets on December 31, 2022 and 2021 by segment:</td><td> </td>
<td colspan="2" style="text-align: right"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: right"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%">C-Bond</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,684</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">8,794</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Mobile Tint</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">94,622</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">126,228</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right">96,306</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right">135,022</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 0.25in; padding-right: 0.8pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(a)</span></td> <td style="padding-right: 0.8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The Company does not allocate any general and administrative or financing expenses of its holding company activities to its reportable segments, because these activities are managed at the corporate level.</span></td></tr> </table>2<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">For the Year Ended<br/> December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td>Revenues:</td><td> </td>
<td colspan="2" style="text-align: right"> </td><td> </td><td> </td>
<td colspan="2"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%">C-Bond</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">378,736</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">434,811</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Mobile Tint</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,853,910</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,042,017</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">2,232,646</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,476,828</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">Depreciation and amortization:</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>C-Bond</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">7,109</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">9,889</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Mobile Tint</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">82,110</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">36,078</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">89,219</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">45,967</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">Interest expense:</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>C-Bond</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">23</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,372</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">Mobile Tint</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">20,212</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">3,354</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Other (a)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,599,854</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">278,233</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">1,620,089</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">282,959</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Net (loss):</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"> </td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td>C-Bond</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(1,097,069</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(2,001,725</td><td style="text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Mobile Tint</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">(192,566</td><td style="text-align: left">)</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">77,626</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Other (a)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(3,866,843</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(5,204,759</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 4pt"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(5,156,478</td><td style="padding-bottom: 4pt; text-align: left">)</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">(7,128,858</td><td style="padding-bottom: 4pt; text-align: left">)</td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 0.25in; padding-right: 0.8pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(a)</span></td> <td style="padding-right: 0.8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The Company does not allocate any general and administrative or financing expenses of its holding company activities to its reportable segments, because these activities are managed at the corporate level.</span></td></tr> </table>3787364348111853910104201722326461476828710998898211036078892194596723137220212335415998542782331620089282959-1097069-2001725-19256677626-3866843-5204759-5156478-7128858<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td>Identifiable long-lived tangible assets on December 31, 2022 and 2021 by segment:</td><td> </td>
<td colspan="2" style="text-align: right"> </td><td> </td><td> </td>
<td colspan="2" style="text-align: right"> </td><td> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%">C-Bond</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">1,684</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">8,794</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Mobile Tint</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">94,622</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">126,228</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 1.5pt"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right">96,306</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; text-align: right">135,022</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse"> <tr style="vertical-align: top"> <td style="width: 0.25in; padding-right: 0.8pt"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(a)</span></td> <td style="padding-right: 0.8pt; text-align: justify"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">The Company does not allocate any general and administrative or financing expenses of its holding company activities to its reportable segments, because these activities are managed at the corporate level.</span></td></tr> </table>168487949462212622896306135022<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 14 – <span style="text-decoration:underline">REVENUE RECOGNITION</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the Company’s C-Bond
segment, the revenue that the Company recognizes arises from purchase requests the Company receives from its customers. The Company’s
performance obligations under purchase orders or by a verbal order correspond to each shipment of product that the Company makes to its
customer under the purchase order or verbal order. As a result, each purchase order or verbal order generally contains more than one performance
obligation based on the number of products ordered, the quantity of product to be shipped and the mode of shipment requested by the customer.
Control of the Company’s products transfers to its customers when the customer is able to direct the use of, and obtain substantially
all of the benefits from, the Company’s products, which generally occurs at the later of when the customer obtains title to the
product or when the customer assumes risk of loss of the product. The transfer of control generally occurs at a point of shipment from
the Company’s warehouse. Once this occurs, the Company has satisfied its performance obligation and the Company recognizes revenue.
In connection with the Company’s C-Bond segment, when the Company receives a purchase order or verbal order from a customer, the
Company is obligated to provide the product during a mutually agreed upon time period. Depending on the terms of the purchase order or
verbal order, either the Company or the customer arranges delivery of the product to the customer’s intended destination. In situations
where the Company has agreed to arrange delivery of the product to the customer’s intended destination and control of the product
transfers upon loading of the Company’s product onto transportation equipment, the Company has elected to account for any freight
income associated with the delivery of these products as freight revenue, since this activity fulfills the Company’s obligation
to transfer the product to the customer. </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the Company’s Mobile
Tint segment, the revenue that the Company recognizes arises from purchase requests the Company receives from its customers. The Company’s
performance obligations under purchase order or a signed proposal correspond to each job for the distribution and installation of window
film solutions. As a result, each purchase order or signed proposal generally may contain more than one performance obligation based on
the specific job. Control of the Company’s products transfers to its customers when the customer is able to direct the use of, and
obtain substantially all of the benefits from, the Company’s products, which generally occurs when the job or a specific portion
of the job is completed. Once this occurs, the Company has satisfied its performance obligation and the Company recognizes revenue.
Revenues from contracts for the distribution and installation of window film solutions are recognized over time on the basis of the Company’s
estimates of the progress towards completion of contracts using various output of input methods including (1) the ratio of number of labor
hours spent compared to the number of estimated labor hours to complete a job, (2) using the milestone method, or (3) using a units completed
method. These methods are used because management considers these methods to be the best available measure of progress on these contracts.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Transaction Price</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company agrees with its customers on the selling
price of each transaction. This transaction price is generally based on the product, market conditions, including supply and demand balances,
labor costs, and freight. In the Company’s C-Bond contracts with customers, the Company allocates the entire transaction price to
the sale of product to the customer, which is the basis for the determination of the relative standalone selling price allocated to each
performance obligation. Returns of the Company’s product by its customers are permitted only when the product is not to specification
and were not material for the years ended December 31, 2022 and 2021. Any sales tax, value added tax, and other tax the Company collects
concurrently with its revenue-producing activities are excluded from revenue.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Revenue Disaggregation</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company tracks its revenue by product. The
following table summarizes our revenue by product for the years ended December 31, 2022 and 2021: </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">For the Years Ended<br/> December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td><b> </b></td><td style="font-weight: bold; padding-bottom: 1.5pt"><b> </b></td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center"><b>2022</b></td><td style="padding-bottom: 1.5pt; font-weight: bold"><b> </b></td><td style="padding-bottom: 1.5pt"><b> </b></td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; text-align: center"><b>2021</b></td><td style="padding-bottom: 1.5pt"><b> </b></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">C-Bond Secure multi-purpose and BRS ballistic resistant glass protection systems</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">17,311</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">184,424</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">C-Bond Nanoshield solution sales</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">345,470</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">222,999</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Disinfection products</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">10,880</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">7,306</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">C-Bond installation and other services</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-154">-</div></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12,143</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Window tint installation and sales recognized over time</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,853,910</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,042,017</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Freight and delivery</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">5,075</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">7,939</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">2,232,646</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">1,476,828</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="6" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">For the Years Ended<br/> December 31,</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom">
<td><b> </b></td><td style="font-weight: bold; padding-bottom: 1.5pt"><b> </b></td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center"><b>2022</b></td><td style="padding-bottom: 1.5pt; font-weight: bold"><b> </b></td><td style="padding-bottom: 1.5pt"><b> </b></td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; text-align: center"><b>2021</b></td><td style="padding-bottom: 1.5pt"><b> </b></td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">C-Bond Secure multi-purpose and BRS ballistic resistant glass protection systems</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">17,311</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">184,424</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">C-Bond Nanoshield solution sales</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">345,470</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">222,999</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Disinfection products</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">10,880</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">7,306</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">C-Bond installation and other services</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right"><div style="-sec-ix-hidden: hidden-fact-154">-</div></td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">12,143</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Window tint installation and sales recognized over time</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,853,910</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,042,017</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Freight and delivery</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">5,075</td><td style="padding-bottom: 1.5pt; text-align: left"> </td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">7,939</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="padding-bottom: 4pt">Total</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">2,232,646</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">1,476,828</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>1731118442434547022299910880730612143185391010420175075793922326461476828<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTE 15 – <span style="text-decoration:underline">OPERATING LEASE RIGHT-OF-USE
(“ROU”) ASSETS AND OPERATING LEASE LIABILITIES</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In October 2019, the Company entered into an 18-month
lease agreement for the lease of office and warehouse space under a non-cancelable operating lease through May 31, 2021. From the lease
commencement date of December 1, 2019 until November 30, 2020, monthly rent shall be $4,444 and from December 1, 2020 to May 31, 2021,
monthly rent shall be $4,577 per month. On May 12, 2021 and effective June 1, 2021, the Company entered into an amendment to the lease
which extended the lease for one year until May 31, 2022 at a monthly base rent of $5,283. On May 4, 2022 and effective June 1, 2022,
the Company entered into an amendment to the lease which extended the lease for three years until May 31, 2025 at a monthly base rent
as follows: </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid; font-weight: bold">Rental Period</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Amount per Month</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 88%">June 1, 2022 – May 31, 2023</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">5,441</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td>June 1, 2023 – May 31, 2024</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">5,604</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>June 1, 2024 – May 31, 2025</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">5,772</td><td style="text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In connection with the Exchange Agreement discussed
in Note 3, the Company was named as guarantor (“Guarantor”) of a Commercial Lease Agreement dated July 21, 2021, by and between
landlord MDW Management, LLC, a company owned by Mr. Wanke and his wife and tenant Mobile Tint, LLC d/b/a A-1 Glass (the “Lease”).
The term of the Lease is 60 months, at a minimum monthly rent of $5,600 (not including tax), with two five-year options for the tenant
to renew. The Company’s obligation as Guarantor of the Lease will terminate upon the occurrence of earlier of the following: (i)
the date of Guarantor’s acquisition of 100% of the ownership interests of Mobile; (ii) the date that Guarantor beneficially owns
less than an eighty percent (80%) ownership interest in Mobile; or (iii) two (2) years from and after the effective date of the guaranty.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In September 2021, the Company entered into a
48-month lease agreement for the lease of office equipment under a non-cancelable operating lease through September 2025. The monthly
base rent is $365 per month.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In February 2022, the Company entered into a 36-month
lease agreement for the lease of a vehicle under a non-cancelable operating lease through January 2025. The monthly base rent is $788
per month.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In adopting ASC Topic 842, Leases (Topic 842)
on January 1, 2019, the Company had elected the ‘package of practical expedients’, which permitted it not to reassess under
the new standard its prior conclusions about lease identification, lease classification and initial direct costs (see Note 2). In addition,
the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 month or less. Upon signing of new leases for property
and equipment, the Company analyzed the new leases and determined it is required to record a lease liability and a right of use asset
on its consolidated balance sheets, at fair value.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the years ended December 31, 2022 and 2021,
in connection with its property operating leases, the Company recorded rent expense of $167,875 and $119,192 respectively, which is expensed
during the year and included in general and administrative expenses on the accompanying consolidated statements of operations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The significant assumption used to determine the
present value of the lease liabilities in February 2022, September 2021 and July 2021 was discount rates ranging from 4% and 12% which
was based on the Company’s estimated average incremental borrowing rate.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 31, 2022 and 2021, right-of-use asset
(“ROU”) is summarized as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: justify">Office leases and office equipment right of use assets</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">480,293</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">269,590</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-bottom: 1.5pt">Less: accumulated amortization</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(104,881</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(18,418</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 4pt">Balance of ROU assets</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">375,412</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">251,172</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 31, 2022 and 2021, operating lease
liabilities related to the ROU assets are summarized as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Lease liabilities related to office leases right of use assets</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">376,566</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">251,246</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Less: current portion of lease liabilities</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(117,671</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(44,927</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Lease liabilities – long-term</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">258,895</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">206,319</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On December 31, 2022, future minimum base lease
payments due under non-cancelable operating leases are as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid">Twelve months ended December 31,</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Amount</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 88%; text-align: left">2023</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">147,466</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">2024</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">149,460</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">2025</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">100,133</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">2026</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">39,200</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Total minimum non-cancelable operating lease payments</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">436,259</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Less: discount to fair value</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(59,693</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Total lease liability on December 31, 2022</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">376,566</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>44444577On May 12, 2021 and effective June 1, 20215283<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid; font-weight: bold">Rental Period</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Amount per Month</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 88%">June 1, 2022 – May 31, 2023</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">5,441</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td>June 1, 2023 – May 31, 2024</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">5,604</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td>June 1, 2024 – May 31, 2025</td><td> </td>
<td style="text-align: left">$</td><td style="text-align: right">5,772</td><td style="text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>544156045772P60M560010.80In September 2021, the Company entered into a
48-month lease agreement for the lease of office equipment under a non-cancelable operating lease through September 2025.365In February 2022, the Company entered into a 36-month
lease agreement for the lease of a vehicle under a non-cancelable operating lease through January 2025.7881678751191920.040.12<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: justify">Office leases and office equipment right of use assets</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">480,293</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">269,590</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: justify; padding-bottom: 1.5pt">Less: accumulated amortization</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(104,881</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(18,418</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: justify; padding-bottom: 4pt">Balance of ROU assets</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">375,412</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">251,172</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>48029326959010488118418375412251172<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="text-align: justify"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31,<br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left">Lease liabilities related to office leases right of use assets</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">376,566</td><td style="width: 1%; text-align: left"> </td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">251,246</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Less: current portion of lease liabilities</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(117,671</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(44,927</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Lease liabilities – long-term</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">258,895</td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">206,319</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p>376566251246-117671-44927258895206319<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid">Twelve months ended December 31,</td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">Amount</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 88%; text-align: left">2023</td><td style="width: 1%"> </td>
<td style="width: 1%; text-align: left">$</td><td style="width: 9%; text-align: right">147,466</td><td style="width: 1%; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">2024</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">149,460</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">2025</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">100,133</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">2026</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">39,200</td><td style="padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left">Total minimum non-cancelable operating lease payments</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">436,259</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 1.5pt">Less: discount to fair value</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(59,693</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 4pt">Total lease liability on December 31, 2022</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right">376,566</td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table>14746614946010013339200436259-59693376566<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b>NOTE 16 – <span style="text-decoration:underline">RELATED PARTY TRANSACTIONS</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><span style="text-decoration:underline">Due From Related Party</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">In December 2021, the Company advanced $3,750
to a company partially owned by officers of the Company. The advance is non-interest bearing, payable on demand, and as of December 31,
2021 is reflected as due from related party on the accompanying consolidated balance sheets. In June 2022, this advance was deemed uncollectible
and the balance was written off to bad debt expense.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><span style="text-decoration:underline">Sales and Accounts Receivable – Related
Party</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">During the year ended December 31, 2021, the Company
recognized sales of $1,200 to a company partially owned by officers of the Company.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b> </b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><span style="text-decoration:underline">Note Payable - Related Party</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On May 2, 2022, the Company entered into a Promissory
Note (the “May 2022 Note”) in the principal amount of $250,000 with the Company’s chief executive officer. The May 2022
Note was funded in May 2022 and the Company received net proceeds of $250,000. The May 2022 Note bears interest at a rate of 6% per annum
and all outstanding principal and accrued and unpaid interest is due on May 2, 2024. At any time, the Company may prepay all or any portion
of the principal amount of the May 2022 Note and any accrued and unpaid interest without penalty. For the year ended December 31, 2022,
interest expense – related party amounted to $10,027. On December 31, 2022, principal amount due and accrued interest payable -
related party amounted to $250,000 and $10,027, respectively.</p>375012002500002500000.062024-05-021002725000010027<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 17 - <span style="text-decoration:underline">INCOME TAXES</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company accounts for income tax using the
liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined
based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in
effect in the year in which the differences are expected to reverse. The deferred tax assets on December 31, 2022 and 2021 consist only
of net operating loss carryforwards. The net deferred tax asset has been fully offset by a valuation allowance because of the uncertainty
of the attainment of future taxable income.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0">The items accounting for the difference between income taxes at the
effective statutory rate and the provision for income taxes for the years ended December 31, 2022 and 2021 were as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2022</b></span></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2021</b></span></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Income tax benefit at U.S. statutory rate</span></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</span></td>
<td style="width: 8%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1,081,240</span></td>
<td style="width: 1%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</span></td>
<td style="width: 8%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1,497,060</span></td>
<td style="width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td></tr>
<tr style="vertical-align: bottom; ">
<td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Non-deductible expenses</span></td>
<td> </td>
<td> </td>
<td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">506,677</span></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">894,825</span></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Change in valuation allowance</span></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">574,563</span></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">602,235</span></td>
<td> </td></tr>
<tr style="vertical-align: bottom; ">
<td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Total provision for income tax</span></td>
<td> </td>
<td style="border-bottom: black 4.5pt double"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</span></td>
<td style="border-bottom: black 4.5pt double; text-align: right"><span style="-sec-ix-hidden: hidden-fact-155; font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 4.5pt double; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</span></td>
<td style="border-bottom: black 4.5pt double; text-align: right"><span style="-sec-ix-hidden: hidden-fact-156; font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td>
<td> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company’s approximate net deferred tax asset as of December
31, 2022 and 2021 was as follows:</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b> </b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Deferred Tax Asset:</b></p></td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, <br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, <br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left; padding-bottom: 1.5pt">Net operating loss carryforward</td><td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; width: 9%; text-align: right">2,512,665</td><td style="width: 1%; padding-bottom: 1.5pt; text-align: left"> </td><td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; width: 9%; text-align: right">1,938,102</td><td style="width: 1%; padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">Total deferred tax asset before valuation allowance</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2,512,665</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,938,102</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Valuation allowance</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(2,512,665</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(1,938,102</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 4pt">Net deferred tax asset</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-157">-</div></td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-158">-</div></td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The net operating loss carryforward was approximately
$11,965,000 on December 31, 2022. The Company provided a valuation allowance equal to the net deferred income tax asset as of December
31, 2022 and 2021 because it was not known whether future taxable income will be sufficient to utilize the loss carryforward. During the
year ended December 31, 2022, the valuation allowance increased by $574,563. Additionally, the future utilization of the net operating
loss carryforward to offset future taxable income is subject to an annual limitation as a result of ownership changes that may occur in
the future. The potential tax benefit arising from the loss carryforward may be carried forward indefinitely subject to usage limitations.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p><p style="font: 10pt Times New Roman, Times, Serif; text-align: justify; margin: 0pt 0">The Company does not have any uncertain tax positions or events leading
to uncertainty in a tax position. The Company’s 2022, 2021 and 2020 Corporate Income Tax Returns are subject to Internal Revenue
Service examination.</p><table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<tr style="vertical-align: bottom">
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2022</b></span></td>
<td> </td>
<td> </td>
<td colspan="2" style="border-bottom: black 1.5pt solid; text-align: center"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt"><b>2021</b></span></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td style="width: 78%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Income tax benefit at U.S. statutory rate</span></td>
<td style="width: 1%"> </td>
<td style="width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</span></td>
<td style="width: 8%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1,081,240</span></td>
<td style="width: 1%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td>
<td style="width: 1%; text-align: right"> </td>
<td style="width: 1%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</span></td>
<td style="width: 8%; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">(1,497,060</span></td>
<td style="width: 1%"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">)</span></td></tr>
<tr style="vertical-align: bottom; ">
<td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Non-deductible expenses</span></td>
<td> </td>
<td> </td>
<td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">506,677</span></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">894,825</span></td>
<td> </td></tr>
<tr style="vertical-align: bottom; background-color: #CCEEFF">
<td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Change in valuation allowance</span></td>
<td> </td>
<td style="border-bottom: black 1.5pt solid"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">574,563</span></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"> </td>
<td style="border-bottom: black 1.5pt solid; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">602,235</span></td>
<td> </td></tr>
<tr style="vertical-align: bottom; ">
<td><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">Total provision for income tax</span></td>
<td> </td>
<td style="border-bottom: black 4.5pt double"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</span></td>
<td style="border-bottom: black 4.5pt double; text-align: right"><span style="-sec-ix-hidden: hidden-fact-155; font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td>
<td style="text-align: right"> </td>
<td style="text-align: right"> </td>
<td style="border-bottom: black 4.5pt double; text-align: right"><span style="font-family: Times New Roman, Times, Serif; font-size: 10pt">$</span></td>
<td style="border-bottom: black 4.5pt double; text-align: right"><span style="-sec-ix-hidden: hidden-fact-156; font-family: Times New Roman, Times, Serif; font-size: 10pt">-</span></td>
<td> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>-1081240-1497060506677894825574563602235<table cellpadding="0" cellspacing="0" style="font: 10pt Times New Roman, Times, Serif; border-collapse: collapse; width: 100%">
<tr style="vertical-align: bottom">
<td style="border-bottom: Black 1.5pt solid"><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b> </b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>Deferred Tax Asset:</b></p></td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, <br/> 2022</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td><td style="font-weight: bold; padding-bottom: 1.5pt"> </td>
<td colspan="2" style="border-bottom: Black 1.5pt solid; font-weight: bold; text-align: center">December 31, <br/> 2021</td><td style="padding-bottom: 1.5pt; font-weight: bold"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="width: 76%; text-align: left; padding-bottom: 1.5pt">Net operating loss carryforward</td><td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; width: 9%; text-align: right">2,512,665</td><td style="width: 1%; padding-bottom: 1.5pt; text-align: left"> </td><td style="width: 1%; padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; width: 1%; text-align: left">$</td><td style="border-bottom: Black 1.5pt solid; width: 9%; text-align: right">1,938,102</td><td style="width: 1%; padding-bottom: 1.5pt; text-align: left"> </td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left">Total deferred tax asset before valuation allowance</td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">2,512,665</td><td style="text-align: left"> </td><td> </td>
<td style="text-align: left"> </td><td style="text-align: right">1,938,102</td><td style="text-align: left"> </td></tr>
<tr style="vertical-align: bottom; background-color: rgb(204,238,255)">
<td style="text-align: left; padding-bottom: 1.5pt">Valuation allowance</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(2,512,665</td><td style="padding-bottom: 1.5pt; text-align: left">)</td><td style="padding-bottom: 1.5pt"> </td>
<td style="border-bottom: Black 1.5pt solid; text-align: left"> </td><td style="border-bottom: Black 1.5pt solid; text-align: right">(1,938,102</td><td style="padding-bottom: 1.5pt; text-align: left">)</td></tr>
<tr style="vertical-align: bottom; ">
<td style="text-align: left; padding-bottom: 4pt">Net deferred tax asset</td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-157">-</div></td><td style="padding-bottom: 4pt; text-align: left"> </td><td style="padding-bottom: 4pt"> </td>
<td style="border-bottom: Black 4pt double; text-align: left">$</td><td style="border-bottom: Black 4pt double; text-align: right"><div style="-sec-ix-hidden: hidden-fact-158">-</div></td><td style="padding-bottom: 4pt; text-align: left"> </td></tr>
</table><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"> </p>25126651938102251266519381022512665193810211965000574563<p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b>NOTE 18 – <span style="text-decoration:underline">SUBSEQUENT EVENTS</span></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b> </b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><b><i>Issuance Series B Preferred Stock for Accrued Compensation</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 17, 2023, the Board of Directors of
the Company agreed to satisfy $144,000 of accrued compensation owed to its executive officers (collectively, the “Management”)
which, as of December 31, 2022 was included in accrued compensation on the accompanying consolidated balance sheet. Management agreed
to accept 144 shares of the Company’s Series B convertible preferred stock in settlement of this accrued compensation. The conversion
feature of the Series B Preferred Stock at the time of issuance was determined not to be beneficial on the commitment date and accordingly,
no stock-based compensation or gain or loss was recorded. </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Issuance of Common Shares for Accrued Compensation
and Cash</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 17, 2023, the Company entered into
a Subscription Agreement with its Chairman and Chief Executive Officer, Scott R. Silverman (the “Subscription Agreement”),
whereby Mr. Silverman purchased 54,545,455 shares (the “Subscription Shares”) of the Company’s common stock for $300,000,
or $0.0055 per share, based on the quoted closing price of the Company’s common stock on the measurement date (the “Consideration”).
The Consideration consisted of a cash payment of $275,000 the conversion of $25,000 of accrued compensation owed to Mr. Silverman.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 17, 2023, Barry Edelstein, a member
of the Company’s Board of Directors, elected to convert $53,000 of accrued compensation into 9,636,364 shares of unregistered common
stock of the Company. The shares were valued at $53,000, or $0.0055, based on the quoted closing price of the Company’s common stock
on the measurement date.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i> </i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Common Shares Issued for Professional Services</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 6, 2023, the Company issued 6,666,667
shares of its common stock for investor relations services to be rendered. These shares were valued at $40,000, or $0.006 per common share,
based on the quoted closing price of the Company’s common stock on the measurement date. In connection with these shares, the Company
recorded stock-based professional fees of $40,000 over the term of the agreement.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">
</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Common Stock Issued for Conversion of Series
C Preferred Stock</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 3, 2023, the Company issued 6,546,575
shares its common stock upon the conversion of 250 shares of Series C preferred with a stated redemption value of $25,000. The conversion
price was based on contractual terms of the related Series C preferred shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 13, 2023, the Company issued 5,004,200
shares its common stock upon the conversion of 191 shares of Series C preferred with a stated redemption value of $19,100. The conversion
price was based on contractual terms of the related Series C preferred shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On January 26, 2023, the Company issued 5,007,601
shares its common stock upon the conversion of 191 shares of Series C preferred with a stated redemption value of $19,100. The conversion
price was based on contractual terms of the related Series C preferred shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On February 1, 2023, the Company issued 5,009,171
shares its common stock upon the conversion of 191 shares of Series C preferred with a stated redemption value of $19,100. The conversion
price was based on contractual terms of the related Series C preferred shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 7, 2023, the Company issued 5,018,067
shares its common stock upon the conversion of 191 shares of Series C preferred with a stated redemption value of $19,100. The conversion
price was based on contractual terms of the related Series C preferred shares.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i> </i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><b><i>Convertible Debt</i></b></p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">On March 17, 2023, the Company closed a Securities
Purchase Agreement dated November 4, 2022, with Diagonal pursuant to which a Promissory Note (the “March 2023 Diagonal Note”)
dated March 17, 2023, was made to Diagonal in the aggregate principal amount of $54,250 and the Company received net proceeds of $50,000
which was net of fees of $4,250. The March 2023 Diagonal Note bears interest at a rate of 12% per annum (22% upon the occurrence of an
event of a default) and all outstanding principal and accrued and unpaid interest are due on March 17, 2024.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has the right to prepay the March
2023 Diagonal Note (principal and accrued interest) at any time during the first six months the note is outstanding at the rate of 115%
during the first 30 days after issuance, 120% during the 31<sup>st</sup> to 60<sup>th</sup> day after issuance, and 125% during the 61<sup>st</sup>
to the 180<sup>th</sup> day after issuance. The March 2023 Diagonal Note may not be prepaid after the 180th day following the issuance
date, unless Diagonal agrees to such repayment and such terms. Diagonal may in its option, at any time beginning 180 days after the date
of the Diagonal Note, convert the outstanding principal and interest on the March 2023 Diagonal Note into shares of our common stock at
a conversion price per share equal to 65% of the average of the three lowest closing bid prices of our common stock during the 10 trading
days prior to the date of conversion. At no time may the March 2023 Diagonal Note be converted into shares of our common stock if such
conversion would result in Diagonal and its affiliates owning an aggregate of in excess of 4.99% of the then outstanding shares of our
common stock.</p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"> </p><p style="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">The Company has accounted for the March 2023 Diagonal
Note as stock settled debt under ASC 480 and recorded an aggregate debt premium of $29,212 with a charge to interest expense.</p>144000144545454553000000.005527500025000530009636364530000.00556666667400000.00640000654657525025000500420019119100500760119119100500917119119100501806719119100542505000042500.120.22The Company has the right to prepay the March
2023 Diagonal Note (principal and accrued interest) at any time during the first six months the note is outstanding at the rate of 115%
during the first 30 days after issuance, 120% during the 31st to 60th day after issuance, and 125% during the 61st
to the 180th day after issuance.654.9929212NONE-0.02-0.05254299139308121062falseFY0001421636The Company does not allocate any general and administrative or financing expenses of its holding company activities to its reportable segments, because these activities are managed at the corporate level.EXCEL
96
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