~~[X]~~ ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

~~[ ]~~ ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

(Former name, former address and former fiscal year, if changed since last report)

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 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. ~~[X]~~ ☒ Yes ~~[ ]~~☐ No

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). ~~[X]~~ ☒Yes ~~[ ]~~☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and smaller reporting company” in Rule 12b-2 of the Exchange Act.

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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). ~~[ ]~~☐ Yes ~~[X]~~ ☒ No

As of ~~November 20, 2020,~~August 13, 2021, there were ~~3,263,811,170~~ 4,606,910,897shares outstanding of the registrant’s common stock, $0.001 par value per share.

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

Ozop Energy Solutions, Inc. (the” Company,” “we,” “us” or “our”) was originally incorporated as Newmarkt Corp. on July 17, 2015, under the laws of the State of Nevada.

On October 29, 2020, the Company formed a new wholly owned subsidiary, Ozop Surgical Name Change Subsidiary, Inc., a Nevada corporation (“Merger Sub”). The Merger Sub was formed under the Nevada Revised Statutes for the sole purpose and effect of changing the Company’s name to “Ozop Energy Solutions, Inc.” That same day the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with the Merger Sub and filed Articles of Merger (the “Articles of Merger”) with the Nevada Secretary of State, merging the Merger Sub into the Company, which were stamped effective as of November 3, 2020. As permitted by the Section 92.A.180 of the Nevada Revised Statutes, the sole purpose and effect of the filing of Articles of Merger was to change the name of the Company from Ozop Surgical Corp to “Ozop Energy Solutions, Inc.”

On December 11, 2020, the Company formed Ozop Energy Systems, Inc. (“OES”), a Nevada corporation and a wholly owned subsidiary of the Company. OES was formed to be a manufacturer and distributor of renewable energy products.

On July 10, 2020, the Company entered into a Stock Purchase Agreement (the “SPA”) with Power Conversion Technologies, Inc., a Pennsylvania corporation (“PCTI”), and Catherine Chis (“Chis”), PCTI’s Chief Executive Officer (“CEO”) and its sole shareholder. Under the terms of the SPA, the Company acquired one thousand ~~(1,000)~~(1,000) shares of PCTI, which represents all of the outstanding shares of PCTI, from Chis in exchange for the issuance of 47,500 shares of the Company’s Series C Preferred Stock, 18,667 shares of the Company’s Series D Preferred Stock, and 500 shares of the Company’s Series E Preferred Stock to Chis. The Acquisition ~~is being~~was accounted for as a business combination and was treated as a reverse acquisition for accounting purposes with PCTI as the accounting acquirer in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”). In accordance with the accounting treatment for a reverse acquisition, the Company’s historical financial statements prior to the reverse merger were and will be replaced with the historical financial statements of PCTI prior to the reverse merger, in all future filings with the U.S. Securities and Exchange Commission (the “SEC”). The consolidated financial statements after completion of the reverse merger have and will include the assets, liabilities and results of operations of the combined company from and after the closing date of the reverse merger.

PCTI designs, develops, manufactures and distributes standard and custom power electronic solutions. PCTI serves clients in several industries including energy storage, shore power, DEWs, microgrid, telecommunications, military, transportation, renewable energy, aerospace and mission critical defense systems. Customers include the United States military, other global military organizations and many of the world’s largest industrial manufacturers. All of its products are manufactured in the United States. Because of the Company’s product scope and the high-power niche that their products occupy, the Company is aggressively targeting the rapidly growing renewable and energy storage markets. The Company’s mission is to be a global leader for high power electronics with a standard of continued innovation.

The Company utilized the Option Pricing Method (the “OPM”) to value the transaction. The OPM method treats all equity linked instruments as call options on the enterprise value, with exercise prices and liquidation preferences based on the terms of the various common, preferred, options, warrants, and convertible debt. Under this method, the common stock only has value if the funds available for distribution to the shareholders exceed the liquidation preferences of the preferred stock and face value of the convertible debt. The timing of a liquidity event is required to utilize this method. The OPM considers the various terms of the stockholder agreements—including the level of seniority among the securities, dividend policy, conversion ratios, and cash allocations—upon liquidation of the enterprise. In addition, the method implicitly considers the effect of the liquidation preference as of the future liquidation date, not as of the valuation date. A feature of the OPM is that it explicitly recognizes the option-like payoffs of the various share classes utilizing information in the underlying asset (that is, estimated volatility) and the risk-free rate to adjust for risk by adjusting the probabilities of future payoffs. The following table summarizes the preliminary value of the consideration issued and the preliminary purchase price allocation of the fair value of assets acquired and liabilities assumed in the transaction.

The Company reviews the goodwill allocated to each of our reporting units for possible impairment annually and whenever events or changes in circumstances indicate the carrying amount may not be recoverable. Pursuant to that review, management has determined that the goodwill arising from the above transaction . ~~The company preliminarily~~has been impaired and accordingly $11,201,145 was recorded ~~the excess~~ as ~~goodwill and will analyze within the measurement period if there should be~~ an ~~allocation to identifiable intangible assets~~:

~~Included in the Unaudited Condensed Consolidated Statements of Comprehensive Loss~~impairment expense for the ~~nine months~~year ended September 30, 2020, are the results of Ozop, the accounting acquiree, of revenues of $-0- and a loss before income taxes of $6,228,022.The following table provides unaudited pro forma results of operations for the nine months ended September 30, 2020, and 2019, as if the acquisition had been consummated as of the beginning of that period presented. The pro forma results include the effect of certain purchase accounting adjustments, such as the estimated changes in depreciation and amortization expense on the acquired intangible assets. However, pro forma results do not include any anticipated cost savings (if any) of the combined companies. Accordingly, such amounts are not necessarily indicative of the results if the acquisition has occurred on the date indicated, or which may occur in the future.December 31, 2020.

OZOP was originally incorporated in Switzerland on November 28, 1998 under the name Perma Consultants Holding AG (“Perma”). On July 19, 2016, Mr. Eric Siu (“Siu”), a former director purchased ~~100%~~100% of the outstanding capital stock of Perma and changed the name from Perma to Ozop Surgical AG (“Ozop AG”). On February 1, 2018, Ozop AG was re-domiciled as a Delaware corporation and changed its name to Ozop Surgical, Inc. On July 28, 2016, Ozop formed as the sole member, Ozop Surgical, LLC (“Ozop LLC”), a Wyoming limited liability company. On October 28, 2016, Ozop acquired ~~100%~~100% of Ozop Surgical Limited (“Ozop HK”), from Siu, the sole shareholder of Ozop HK. Ozop HK, is a private limited company incorporated in Hong Kong.

During the preparation of the financial statements as of March 31, 2021, and for the three months ended March 31, 2021, the Company discovered an error was made in the financial statements as of and for the period ended December 31, 2020. The error relates to the recognition of certain warrants as derivative liabilities due to the fact the Company has insufficient authorized shares to cover the exercises. Management believes that the error as of and for December 31, 2020, does not materially impact the balance sheet as December 31, 2020. New warrants issued in the six months ended June 30, 2021, have been properly accounted for as derivatives. The following table reflects the effect of the error on the balance sheet as of December 31, 2020:

The change in the current and total liabilities is as a result of the fair value of $2,061,307 of warrants based on the Black-Scholes option pricing valuation method, and an increase in notes payable of $733,364 as a result of reclassifying amounts previously recorded as discounts on notes payable, related to the warrants.

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As of ~~September~~June 30, ~~2020,~~2021, the Company had an accumulated deficit of ~~$8,173,098~~ $231,982,985and a working capital deficit of ~~$4,635,877. In addition, the Company has generated losses since inception.~~$44,573,732 (including derivative liabilities of $43,953,486). These factors, among others, raise substantial doubt about the ability of the Company to continue as a going ~~concern.~~concern for one year from the date of the issuance of these financial statements.

In December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has now spread to most other countries and infections have been reported globally.emerged. Because COVID-19 infections have been reported throughout the United States, certain federal, state and local governmental authorities have issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19. The ultimate impact of the COVID-19 pandemic on the Company’s operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak,, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in an extended period of continued business disruption, and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time but it may have a material adverse impact on our business, financial condition and results of operations. Management expects that its business will be impacted to some degree, but the significance of the impact of the COVID-19 outbreak on the Company’s business and the duration for which it may have an impact cannot be determined at this time.

As a public company, ~~management~~Management believes it will be able to access the public equities market for fund raising for product development, ~~and regulatory approvals,~~ sales and marketing and inventory requirements as we expand our distribution in the ~~US market, we will need to meet increasing inventory requirements.~~U.S. market.

~~On July 10, 2020,~~During the six months ended June 30, 2021, the Company raised $12,000,000 and has begun to implement the following business operations, plans and strategies:

In April 2021, the Company signed a five- year lease (beginning June 1, 2021) of approximately 8,100 SF in California, for office and warehouse space to support the sales and distribution of our west coast operations. Operations are underway and sales were approximately $1.2 million for the three and six months ended June 30, 2021. The Company expects sales to reach over $14 million for the year ended December 31, 2021.

OES is actively engaged in the renewable, electric vehicle (“EV”), energy storage and energy resiliency sectors. We are engaged in multiple business lines that include Project Development as well as Equipment Distribution. Our solar and energy storage projects involve large-scale battery and solar photovoltaics (PV) installations. The utility-scale storage business is based on an arbitrage business model in which we install multiple 1+ megawatt batteries, charge them with off-peak grid electricity under contract with the utility, then sell the power back during peak load hours at a premium, as dictated by prevailing electricity tariffs.

Solar PV: Our PV business model involves the design and construction of electrical generating PV systems that can sell power to the utilities or be used for off grid use as part of our developing Neo-Grids solution. The Neo-Grids proprietary program, patent/s pending, was developed for the off-grid distribution of electricity to remove or reduce the dependency on utilities that currently burdens the EV Charging sectors. It will also reduce or eliminate the lengthy permitting processes and streamline the installations of those EV chargers.

Electric Vehicle Chargers: The Neo-Grids, patent pending, is comprised of the design engineering, installation, and operational methodologies as well as the financial arbitrage of how we produce, capture and distribute electrical energy for the EV markets. Neo-Grids will serve both the private auto and the commercial sectors. OES has license rights to the proprietary “flow” that was filed with the United States Patent and Trademark Office in March 2021. The exponential growth of the EV industry has been accelerated by the recent major commitments of most of the major car manufacturers. Our Neo-Grids business model leverages this accelerated growth by offering (1) charging locations that can be installed with reduced delays, restricted areas or load limits and (2) EV charger electricity that is produced from renewable sources claiming little to no carbon footprint.

OES has developed a business plan for the Neo Grids distribution solution that is being executed now and will be coming out of Research and Development for proof of concept in Q3 2021. Having identified several manufacturers and established a supply line for EV chargers, we have entered into agreements for EV charger installations as part of this proof of concept and plan to service them under multi-year agreements.

Equipment Distributor: OES has also entered the ~~SPA with PCTI,~~component supply/distribution side of the renewable, resiliency and ~~Chis, PCTI’s CEO and its sole shareholder (see Note 1). This transaction takes PCTI public, and allows us to drive future investments into the~~ energy storage ~~market,~~industries distributing the core components associated with residential and commercial solar PV systems as well as onsite battery storage and power generation. The components we are distributing include PV panels, solar inverters, solar mounting systems, stationary batteries, onsite generators and other associated electrical equipment and components that are all manufactured by multiple companies, both domestic and international. These core products are sourced from management-developed relationships and are distributed through our existing network and our in-house sales team.

OES management has decades of experience in the renewable, storage and resilient energy businesses and associated markets, which ~~Forbes estimates will grow from $59 billion in 2019~~include but are not limited to ~~$546 billion by 2035, PCTI’s products, technologies~~project finance, project development, equipment finance, construction, utility protocol, regulatory policy and ~~expertise are a linchpin of this emerging industry.~~technology assessment.

The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of ~~September~~June 30, ~~2020,~~2021, and the results of operations and cash flows for the periods presented. The results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Current Report on Form ~~8-K/A~~10-K filed on ~~September 25, 2020, which includes the historical financial information of PCTI.~~April 15, 2021.

The unaudited condensed consolidated financial statements include the accounts of the Company and PCTI and the Company’s other wholly owned subsidiaries Ozop Energy Systems, Inc., Ozop LLC, Ozop HK and Spinus, LLC (“Spinus”). All intercompany accounts and transactions have been eliminated in consolidation.

The Company qualifies as an “emerging growth company” under the 2012 JOBS Act. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. As an emerging growth company, the Company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to take advantage of the benefits of this extended transition period.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reported period. Actual results could differ from those estimates.

The Company considers all highly liquid investments with an original term of three months or less to be cash equivalents. These investments are carried at cost, which approximates fair value. Cash and cash equivalent balances may, at certain times, exceed federally insured ~~limits~~limits. The Company has 0cash equivalents at June 30, 2021, and December 31, 2020.

Following is a summary of customers who accounted for more than ten percent (10%) of the Company’s revenues for the three and ~~nine~~ months ended ~~September~~June 30, ~~2020,~~2021, and ~~2019,~~2020, and their accounts receivable balance as of ~~September~~June 30, ~~2020:~~2021:

~~As disclosed in the above table,~~Customers B-E are customers of Ozop Energy Systems Inc. and Customers A, F- I are customers of PCTI. PCTI, historically does not have year to year many recurring clients as the Company produces capital equipment for its’ customers.

The Company records accounts receivable at the time products and services are delivered. An allowance for losses is established through a provision for losses charged to expenses. Receivables are charged against the allowance for losses when management believes collectability is unlikely. The allowance (if any) is an amount that management believes will be adequate to absorb estimated losses on existing receivables, based on evaluation of the collectability of the accounts and prior loss experience.

Inventories are valued at the lower of cost or net realizable value, with cost determined on the first-in, first-out basis. Inventory costs include finished goods, material, labor and manufacturing overhead. In evaluating the net realizable value of inventory, management also considers, if applicable, other factors, including known trends, market conditions, currency exchange rates and other such issues.

The components of inventories at ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019,~~2020 are as follows:

	June 30, 2021		December 31, 2020

Raw materials	$	222,670	$	207,178
Work in process		150,095		142,526
Finished goods		1,234,495		9,643
Inventory net	$	1,607,260	$	359,347

The principal purchases by ~~the Company is~~PCTI are comprised of parts and raw materials that ~~the Company~~PCTI assembles and manufactures and sells to its customers. ~~Following is a summary of~~There were no suppliers who accounted for more than ten percent (10%) of ~~the Company’s~~PCTI’s purchases for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, and ~~2019:~~

2020. Suppliers to ~~the Company~~PCTI vary from period to period dependent upon our customer’s order specifications. In any specific reporting period, we may be relying on certain vendors, however these vendors will vary dependent on the parts and materials needed. ~~The Company~~PCTI believes ~~its relationships with all of the above vendors~~it is ~~good, and we are~~ not reliant on any particular vendor for future needs.

OES purchases finished renewable energy products from its’ suppliers. For the three and six months ended June 30, 2021, there were three suppliers that accounted for 29.6%, 21.8% and 12.7%, respectively. There are only a handful of major suppliers, and we currently have supply arrangements with three of those vendors. One of these vendors requires a 20% down payment with the balance due on delivery, and the two vendors terms are due on delivery. We also buy product from other distributors, if we are not able to purchase direct from the manufacturer. While management believes all of its relationships with its vendors are good, if we are unable to continue to use and/or find alternative suppliers, when we cannot buy direct, it may have a material negative effect on our business.

Property and equipment are stated at cost, and depreciation is provided by use of a straight-line method over the estimated useful lives of the assets.

The Company reviews property and equipment for potential impairment whenever events or changes in circumstances indicate that the carrying amounts of assets may not be recoverable. The estimated useful lives of property and equipment is as follows:

Depreciation expense was $3,562 and $6,784 for the three and nine months ended September 30, 2020, respectively, and $1,815 and $5,445 for the three and nine months ended September 30, 2019, respectively.SCHEDULE OF ESTIMATED USEFUL LIVES OF PROPERTY AND EQUIPMENT

~~Intangible assets primarily represent purchased patent and license rights.~~ The Company amortizes these costs over the shorter of the legal life of the patent or its estimated economic life using the straight-line method. The Company evaluates long-lived assets for impairment whenever events or changesrecognizes revenue in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the assets to future undiscounted cash flows to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. For the three and nine months ended September 30, 2020, the Company recorded amortization expense of $10,417. In accordance with ASC ~~350,~~ ~~“Intangibles—Goodwill and Other,”~~ goodwill and other intangible assets with indefinite lives are no longer subject to amortization but are tested for impairment annually or whenever events or changes in circumstances indicate that the asset might be impaired.

Goodwill is measured as the excess of consideration transferred and the net of the acquisition date fair value of assets acquired, and liabilities assumed in a business acquisition. The Company reviews the goodwill allocated to each of our reporting units for possible impairment annually and whenever events or changes in circumstances indicate carrying amount may not be recoverable. When assessing goodwill for impairment, the Company has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its’ carrying amount.

~~Goodwill is tested annually for impairment on January 1, and at any time upon occurrence of certain events or changes in circumstances.~~ In assessing the qualitative factors, the Company assesses relevant events and circumstances that may impact the fair value and the carrying amount of the reporting unit. The identification of relevant events and circumstances, and how these may impact a reporting unit’s fair value or carrying amount involve significant judgments and assumptions. The judgment and assumptions include the identification of macroeconomic conditions, industry, and market considerations, cost factors, overall financial performance and share price trends, and making the assessment as to whether each relevant factor will impact the impairment test positively or negatively and the magnitude of any such impact.

The carrying amount of each reporting unit is determined based upon the assignment of our assets and liabilities, including existing goodwill and other intangible assets, to the identified reporting units. Where an acquisition benefits only one reporting unit, the Company allocates, as of the acquisition date, all goodwill for that acquisition to the reporting unit that will benefit. Where the Company has had an acquisition that benefited more than one reporting unit, The Company has assigned the goodwill to our reporting units as of the acquisition date such that the goodwill assigned to a reporting unit is the excess of the fair value of the acquired business, or portion thereof, to be included in that reporting unit over the fair value of the individual assets acquired and liabilities assumed that are assigned to the reporting unit.

~~The transaction with PCTI resulted in recognizing goodwill of $11,201,145 (see Note 1).~~

~~Effective January 1, 2018, the Company adopted ASC~~ 606, ~~— Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue~~ from the commercial sales of products by: (1) identify the contract (if any) with a customer; (2) identify the performance obligations in the contract (if any); (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract (if any); and (5) recognize revenue when each performance obligation is satisfied. Under ASC 606, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured. Other than The Company has no outstanding contracts with any of its’ customers. The Company recognizes revenue when title, ownership, and risk of loss pass to the customer, all of which occurs upon shipment or delivery of the product and is based on the applicable shipping terms.

For contracts with customers, ownership of the goods and associated revenue are transferred to customers at a point in time, generally upon shipment of a product to the customer or receipt of the product by the customer and without significant judgments. Advance payments are typically required for commercial customers and are recorded as current liability until revenue is recognized. Advance payments are not required for government customers. The majority of contracts typically require payment within 30 to 60 days after transfer of ownership to the customer.

For the periods covered herein, we did not have post shipment obligations such as training or installation, customer acceptance provisions, credits and discounts, rebates and price protection, or other similar privileges.

~~There was no impact on the Company’s financial statements as a result of adopting Topic 606~~The following table disaggregates our revenue by major source for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021:

Revenues from sourced and ~~2019.~~distributed products are purchased from suppliers as finished goods and the Company brings the finished goods into our California warehouse to fill orders as well as to build inventory for future sales orders. From time to time for some of our larger orders we may have our suppliers ship directly to our customers to avoid extra shipping charges. For manufactured products, there is usually a bidding process by branches of the military or other large firms that need mostly battery charging and storage systems for large industrial projects. We would then purchase the raw materials and parts needed to build out the project in our Pennsylvania warehouse. There was no disaggregation of revenues for the three and six months ended June 30, 2020.

The Company expenses advertising and marketing costs as incurred. For the ~~nine~~three and six months ended ~~September~~June 30, ~~2020, and 2019,~~2021, the Company recorded ~~$47,325~~ $5,954and ~~$232,~~$28,544, respectively, of advertising and marketing ~~expenses.~~expenses, compared to a credit of $2,939 and an expense of $3,168 for the three and six months ended June 30, 2020.

Costs and expenses that can be clearly identified as research and development are charged to expense as incurred. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, and ~~2019,~~2020, the Company did not record any research and development expenses.

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

Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as ~~free standing~~free-standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of this note transaction and the effective conversion price embedded in this note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.

The Company accounts for the conversion of convertible debt when a conversion option has been bifurcated using the general extinguishment standards. The debt and equity linked derivatives are removed at their carrying amounts and the shares issued are measured at their then-current fair value, with any difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities.

The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.

From time to time, certain of the Company’s embedded conversion features on debt and outstanding warrants have been treated as derivative liabilities for accounting purposes under ASC 815 due to insufficient authorized shares to fully settle conversion features of the instruments if exercised. In this case, the Company utilized the latest inception date sequencing method to reclassify outstanding instruments as derivative instruments. These contracts were recognized at fair value with changes in fair value recognized in earnings until such time as the conditions giving rise to such derivative liability classification were settled.

The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable and accrued expenses, certain notes payable and notes payable - related party, approximate their fair values because of the short maturity of these instruments.

The following table represents the Company’s derivative instruments that are measured at fair value on a recurring basis as of ~~September~~June 30, 2021 and December 31, 2020, for each fair value hierarchy level:

~~Effective July 10, 2020, the~~The Company ~~began accounting~~accounts for leases under ASU 2016-02 (see Note 14), applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. For contracts entered into on or after the effective date, at the inception of a contract the Company assess whether the contract is, or contains, a lease. Our assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether we have the right to direct the use of the asset. We allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments.

Operating lease ROU assets represent the right to use the leased asset for the lease term and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an implicit rate, the Company ~~use~~used an incremental borrowing rate of ~~7.5%~~7.5%, for the existing lease, based on the information available at the adoption date in determining the present value of future payments. Operating lease expense is recognized pursuant to on a straight-line basis over the lease term and is included in rent in the condensed consolidated statements of operations.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance on deferred tax assets is established when management considers it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Tax benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihoodof being realized upon ultimate resolution. Interest and penalties related to unrecognized tax benefits are recorded as incurred as a component of income tax expense. The Company has not recognized any tax benefits from uncertain tax positions for any of the reporting periods presented.

The accounts of the Company’s Hong Kong subsidiary are maintained in Hong Kong dollars and the accounts of the U.S. companies are maintained in USD. The accounts of the Hong Kong subsidiary were translated into USD in accordance with Accounting Standards Codification (“ASC”) Topic 830, Foreign Currency Matters. According to Topic 830, all assets and liabilities were translated at the exchange rate on the balance sheet date; stockholders’ equity is translated at historical rates and statement of comprehensive income items are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with ASC Topic 220, Comprehensive Income. Gains and losses resulting from the foreign currency transactions are reflected in the statements of comprehensive income.

~~Relevant exchange rates used in the preparation of the consolidated financial statements are as follows for the period ended September 30, 2020, (Hong Kong dollar per one U.S. dollar):~~

The Company has no reportable segments as it operates in one segment; renewable energy.

The Company reports earnings (loss) per share in accordance with ASC 260, “Earnings per Share.” Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net loss by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period. As of ~~September~~June 30, ~~2020, and 2019,~~2021, the Company’s dilutive securities are convertible into approximately ~~9,744,058,757~~ 14,423,538,825 shares of common stock. There were no0 dilutive securities as of ~~September~~June 30, ~~2019.~~2020. This amount is not included in the computation of dilutive loss per share because their impact is antidilutive. The following table represents the classes of dilutive securities as of ~~September~~June 30, ~~2020:~~2021:

In ~~February 2016,~~August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging --Contracts in Entity’ Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’ Own Equity (“ASU ~~No. 2016-02, Leases. Under the new guidance, lessees will be~~2020-06”), which simplifies accounting for convertible instruments by removing major separation models required ~~to recognize a lease liability and a right-of-use asset for all leases (with the exception of short-term leases) at the commencement date.~~under current GAAP. The ASU ~~is effective~~also removes certain settlement conditions that are required for ~~fiscal years~~equity-linked contracts to qualify for the derivative scope exception, and ~~interim periods within those years beginning after December 15, 2018.~~

~~In January 2017,~~it simplifies the FASB issued ASU No. 217-04, Intangibles - Goodwill and Other: Simplifying the Test for Goodwill Impairment. The amendments simplify the subsequent measurement of goodwill and eliminate the two-step goodwill impairment test.diluted earnings per share calculation in certain areas. The Company does not believe the adoption of the ASU will ~~perform its annual, or interim, goodwill impairment test by comparing the fair value of~~have a reporting unit with its carrying amount. An entity should recognize a goodwill impairment charge for the amount by which the reporting unit’s carrying amount exceeds its fair value. If fair value exceeds the carrying amount, no impairment should be recorded. Any loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. Impairment losses on goodwill cannot be reversed once recognized. The ASU is effective prospectively for fiscal years and interim periods within those years beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We do not anticipate any material impact on the ~~condensed consolidated~~Company’s financial ~~statements.~~position, results of operations or cash flows.

Other than the above, there have no recent accounting pronouncements or changes in accounting pronouncements during the period ended ~~September~~June 30, ~~2020,~~2021, that are of significance or potential significance to the Company.

~~Patents as of September 30, 2020, consist of~~The following table summarizes the ~~following:~~Company’s property and equipment:

Depreciation expense was $18,681and $-0- for the ~~three and nine~~six months ended ~~September~~June 30, 2021, and 2020, ~~was $10,417.~~respectively.

~~Since the~~The transaction with PCTI is being accounted for as a business combination and was treated as a reverse acquisition for accounting purposes with PCTI as the accounting acquirer in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”). In accordance with the accounting treatment for a reverse acquisition, the Company’s historical financial statements prior to the reverse merger were and will be replaced with the historical financial statements of PCTI prior to the reverse merger. The consolidated financial statements after completion of the reverse merger have and will include the assets, liabilities and results of operations of the combined company from and after the closing date of the reverse merger. ~~Accordingly, as of July 10, 2020, PCTI assumed the liabilities of the Company, including the convertible note balances.~~

On July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a past-due 15% convertible note issued by the Company on August 18, 2017, and purchased by an investor (the “Purchaser”) pursuant to a Debt Purchase Agreement, dated February 18, 2020. This note, as amended, is convertible into common stock at a conversion price equal to a 70% discount to the lowest closing prices of the common stock for the thirty prior trading days including the day upon which a notice of conversion is received. As of September 30, 2020, and July 10, 2020, the outstanding principal balance of assigned note was $2,086.

On July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a past-due 15% convertible note issued by the Company on September 13, 2017. As of ~~September~~June 30, ~~2020,~~2021 and ~~July 10,~~December 31, 2020, the outstanding principal balance of this note was ~~$25,000.~~$25,000.

On July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a 12% convertible note issued by the Company on February 26, 2020, pursuant to a Securities Purchase Agreement. The SPA includes customary representations, warranties and covenants by the Company and customary closing conditions. In conjunction with this note, the Company issued a warrant to purchase 2,212,500 shares of common stock at an exercise price of $0.03, subject to adjustments and expiring on the five-year anniversary of the Issuance Date. As of July 10, 2020, the outstanding principal balance of this note was $132,750 with a carrying value of $66,176, net of unamortized discounts of $66,574. For the period from July 11, 2020 to September 30, 2020, amortization of the debt discounts of $66,574 was charged to interest expense. For the period from July 11, 2020 to September 30, 2020, the investor converted a total of $132,750 of the face value and $7,943 of accrued interest into 83,214,457 shares of common stock at an average conversion price of $0.0017. As of September 30, 2020, the outstanding principal balance of this note was $-0-.

On July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a 12% convertible note issued by the Company on February 26, 2020, and purchased by an investor (the “Purchaser”) pursuant to a Debt Purchase Agreement, dated March 3, 2020 with a maturity date of February 26, 2021. This note, as amended, is convertible into common stock at a conversion price equal to a 70% discount to the lowest closing prices of the common stock for thirty prior trading days including the day upon which a notice of conversion is received. As of July 10, 2020, the outstanding principal balance of assigned note was $798,750. For the period from July 11, 2020 to September 30, 2020, the investor converted a total of $798,750 of the face value and $147,549 of accrued interest into 496,756,528 shares of common stock at an average conversion price of $0.0019. As of September 30, 2020, the outstanding principal balance of this note was $-0-.

On July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a 12% convertible note issued by the Company on August 21, 2019, and purchased by an investor (the “Purchaser”) pursuant to a Debt Purchase Agreement, with a maturity date of August 21, 2020. This note, as amended, is convertible into common stock at a conversion price equal to a 70% discount to the lowest closing prices of the common stock for thirty prior trading days including the day upon which a notice of conversion is received. As of July 10, 2020, the outstanding principal balance of assigned note was $155,632. For the period from July 11, 2020 to September 30, 2020, the investor converted a total of $155,632 of the face value and $48,306 of accrued interest into 219,963,737 shares of common stock at an average conversion price of $0.0009. As of September 30, 2020, the outstanding principal balance of this note was $-0-.

On July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a 12% convertible promissory note issued by the Company on March 9, 2020, (the “Issuance Date”) to an investor. This note matures 6 months after the Issuance Date. This note is convertible into shares of the Company’s common stock beginning on the Issuance Date at $.25 for the first three months after the Issuance Date. After the first three months after the Issuance Date, the conversion price shall be equal to the lower of (i) $.25 or 50% of the lowest trading price for the thirty trading days prior to the conversion. As of July 10, 2020, the outstanding principal balance of this note was $80,000 with a carrying value of $53,333, net of unamortized discounts of $26,667. For the period from July 11, 2020 to September 30, 2020, amortization of the debt discounts of $26,667 was charged to interest expense. As of September 30, 2020, the outstanding principal balance and carrying value of this note was $80,000.

On July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a past-due 22% convertible note issued by the Company on December 5, 2018, and purchased by an investor (the “Purchaser”) pursuant to a Debt Purchase Agreement on April 17, 2020. This note, as amended, is convertible into common stock at a conversion price equal to a 70% discount to the lowest closing prices of the common stock for thirty prior trading days including the day upon which a notice of conversion is received. As of July 10, 2020, the outstanding principal balance of assigned note was $352,695. For the period from July 11, 2020 to September 30, 2020, the investor converted a total of $352,695 of the face value and $89,295 of accrued interest into 273,028,909 shares of common stock at an average conversion price of $0.0016. As of September 30, 2020, the outstanding principal balance of this note was $-0-.

On July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a past-due 22% convertible note issued by the Company on October 19, 2018, and purchased by an investor (the “Purchaser”) pursuant to a Debt Purchase Agreement on April 24, 2020. This note, as amended, is convertible into common stock at a conversion price equal to a 70% discount to the lowest closing prices of the common stock for thirty prior trading days including the day upon which a notice of conversion is received. As of September 30, 2020, and July 10, 2020, the outstanding principal balance of assigned note was $67.

On July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a 15% convertible promissory note issued by the Company on April 27, 2020, (the “Issuance Date”) to an investor. This note matures on April 27, 2021 and is convertible into shares of common stock at a conversion price equal to 50% of the lowest traded price for the twenty-five prior trading days including the day upon which a conversion notice is received by the Company. As of July 10, 2020, the outstanding principal balance of this note was $60,000 with a carrying value of $11,500, net of unamortized discounts of $48,500. For the period from July 11, 2020 to September 30, 2020, amortization of the debt discounts of $13,500 was charged to interest expense. As of September 30, 2020, the outstanding principal balance of this note is $60,000 with a carrying value of $25,000, net of unamortized discounts of $35,000.

On July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a convertible note issued by the Company on August 23, 2019, with a maturity date of May 23, 2020, and purchased by an investor (the “Purchaser”) pursuant to a Debt Purchase Agreement on April 28, 2020. This note, as amended, is convertible into common stock at a conversion price equal to a 70% discount to the lowest closing prices of the common stock for thirty prior trading days including the day upon which a notice of conversion is received. As of September 30, 2020, and July 10, 2020, the outstanding principal balance of assigned note was $14,831.

On July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a 12% convertible promissory note issued by the Company on April 28, 2020, (the “Issuance Date”) to an investor. This note matures 12 months after the date of issuance. This note is convertible into shares of the Company’s common stock beginning on the date which is 180 days from the issuance date of this note, at a conversion price equal to 58% multiplied by the lowest closing bid price during the 20- trading day period ending on the last completed trading date in the OTC Markets prior to the date of conversion. As of July 10, 2020, the outstanding principal balance of this note was $53,000 with a carrying value of $10,158, net of unamortized discounts of $42,842. For the period from July 11, 2020 to September 30, 2020, amortization of the debt discounts of $11,925 was charged to interest expense. As of September 30, 2020, the outstanding principal balance of this note is $53,000 with a carrying value of $22,083, net of unamortized discounts of $30,917.

On July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a 12% convertible promissory note issued by the Company on May 4, 2020, (the “Issuance Date”) to an investor, pursuant to a Securities Purchase Agreement. This note matures 12 months after the date of issuance. This note is convertible into shares of the Company’s common stock beginning on the date which is 180 days from the issuance date of this note, at a conversion price equal to the lower of $0.50 or 58% multiplied by the average of the two lowest closing trading price or bid price during the 20- trading day period ending on the last completed trading date in the OTC Markets prior to the date of conversion. In conjunction with this note, the Company issued a warrant to purchase 3,666,666 shares of common stock at an exercise price of $0.015, subject to adjustments and expiring on the five-year anniversary of the Issuance Date. As of July 10, 2020, the outstanding principal balance of this note was $110,000 with a carrying value of $18,860, net of unamortized discounts of $91,140. For the period from July 11, 2020 to September 30, 2020, amortization of the debt discounts of $25,369 was charged to interest expense. As of September 30, 2020, the outstanding principal balance of this note is $110,000 with a carrying value of $44,229, net of unamortized discounts of $65,771.

On July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a 12% convertible promissory note issued by the Company on May 5, 2020, (the “Issuance Date”) to an investor, pursuant to a Securities Purchase Agreement. This note matures 6 months after the Issuance Date. This note is convertible into shares of the Company’s common stock beginning on the Issuance Date at $03 for the first three months after the Issuance Date. After the first three months after the Issuance Date, the conversion price shall be equal to the lower of (i) $.03 or 50% of the lowest trading price for the thirty-five trading days prior to the conversion. As of July 10, 2020, the outstanding principal balance of this note was $162,000 with a carrying value of $62,100, net of unamortized discounts of $99,900. In conjunction with this note, the Company issued a warrant to purchase 4,325,000 shares of common stock at an exercise price of $0.02, subject to adjustments and expiring on the five-year anniversary of the Issuance Date. For the period from July 11, 2020 to September 30, 2020, amortization of the debt discounts of $72,900 was charged to interest expense. As of September 30, 2020, the outstanding principal balance of this note is $162,000 with a carrying value of $135,000, net of unamortized discounts of $27,000.

On July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a 12% convertible promissory note issued by the Company on May 7, 2020, (the “Issuance Date”) to an investor, pursuant to a Securities Purchase Agreement. This note matures on May 7, 2021 and is convertible into shares of common stock at a conversion price equal to 50% of the lowest traded price for the twenty-five prior trading days including the day upon which a conversion notice is received by the Company. As of July 10, 2020, the outstanding principal balance of this note was $30,000 with a carrying value of $5,000, net of unamortized discounts of $25,000. For the period from July 11, 2020 to September 30, 2020, amortization of the debt discounts of $6,875 was charged to interest expense. As of September 30, 2020, the outstanding principal balance of this note is $30,000 with a carrying value of $11,875, net of unamortized discounts of $18,125.

On July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a convertible note issued by the Company on January 8, 2020, with a maturity date of January 8, 2021, and purchased by an investor (the “Purchaser”) pursuant to a Debt Purchase Agreement on May 15, 2020. This note, as amended, is convertible into common stock at a conversion price equal to a 70% discount to the lowest closing prices of the common stock for thirty prior trading days including the day upon which a notice of conversion is received. As of July 10, 2020, the outstanding principal balance of assigned note was $115,500, with a carrying value of $56,306, net of unamortized discounts of $59,194. For the period from July 11, 2020 to September 30, 2020, amortization of the debt discounts of $59,194 was charged to interest expense. For the period from July 11, 2020 to September 30, 2020, the investor converted a total of $115,067 of the face value and $2,408 of accrued interest and fees into 88,500,000 shares of common stock at an average conversion price of $0.00133. As of September 30, 2020, the outstanding principal balance of this note is $433.

On July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a convertible note issued by the Company on November 27, 2019, with a maturity date of November 27, 2020, and purchased by an investor (the “Purchaser”) pursuant to a Debt Purchase Agreement on May 15, 2020. This note, as amended, is convertible into common stock at a conversion price equal to a 70% discount to the lowest closing prices of the common stock for thirty prior trading days including the day upon which a notice of conversion is received. As of September 30, 2020, and July 10, 2020, the outstanding principal balance of assigned note was $296.

On July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a 15% convertible promissory note issued by the Company on May 28, 2020, (the “Issuance Date”) to an investor, pursuant to a Securities Purchase Agreement. This note matures on May 28, 2021 and is convertible into shares of common stock at a conversion price equal to 50% of the lowest traded price for the twenty-five prior trading days including the day upon which a conversion notice is received by the Company. As of July 10, 2020, the outstanding principal balance of this note was $30,000 with a carrying value of $3,250, net of unamortized discounts of $26,750. For the period from July 11, 2020 to September 30, 2020, amortization of the debt discounts of $6,750 was charged to interest expense. As of September 30, 2020, the outstanding principal balance of this note is $30,000 with a carrying value of $10,000, net of unamortized discounts of $20,000.

On July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a past-due convertible note issued by the Company on May 29, 2019, with a maturity date of May 29, 2020, and purchased by an investor (the “Purchaser”) pursuant to a Debt Purchase Agreement on May 28, 2020. This note, as amended, is convertible into common stock at a conversion price equal to a 70% discount to the lowest closing prices of the common stock for thirty prior trading days including the day upon which a notice of conversion is received. As of July 10, 2020, the outstanding principal balance of assigned note was $31,043. For the period from July 11, 2020 to September 30, 2020, the investor converted a total of $31,043 of the face value and $53,337 of accrued interest and fees into 86,262,262 shares of common stock at an average conversion price of $0.001. As of September 30, 2020, the note balance is $-0-.

On July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a 12% convertible promissory note issued by the Company on June 1, 2020, (the “Issuance Date”) to an investor, pursuant to a Securities Purchase Agreement. This note matures 6 months after the Issuance ~~Date.~~ Date. This note is convertible into shares of the Company’s common stock beginning on the Issuance Date at ~~$0.025~~$0.025 for the first three months after the Issuance Date.After the first three months after the Issuance Date, the conversion price shall be equal to the lower of (i) $.025 or 50% of the lowest trading price for the thirty-five trading days prior to the conversion. AsAs of July 10, 2020, the outstanding principal balance of this note was ~~$127,500~~ $127,500 with a carrying value of ~~$27,625,~~$27,625, net of unamortized discounts of $99,875. For the period from July 11, 2020 to September 30, 2020, amortization of the debt discounts of $57,375 was charged to interest expense. As of September 30, 2020, the outstanding principal balance of this note is $127,500 with a carrying value of $85,000, net of unamortized discounts of $42,500.$99,875. In conjunction with this note, the Company issued a warrant to purchase 6,375,000 shares of common stock at an exercise price of ~~$0.02,~~$0.02, subject to adjustments and expiring on the ~~five-year~~five-year anniversary of the Issuance Date. For the six months June 30, 2021, the investor converted a total of $127,500 of the face value and $14,433 of accrued interest and fees into 88,708,118 shares of common stock at an average conversion price of $0.0016. On March 10, 2021, the investor received 6,355,008 shares of common stock upon the cashless exercise of the warrants. As of June 30, 2021, and December 31, 2020, the outstanding principal balance of this note was $-0- and $127,500, respectively.

On July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a 12% convertible promissory note issued by the Company on June 11, 2020, (the “Issuance Date”) to an investor, pursuant to a Securities Purchase Agreement. This note matures 12 months after the date of issuance. This note is convertible into shares of the Company’s common stock beginning on the date which is 180 days from the issuance date of this note, at a conversion price equal to 58% multiplied by the lowest closing bid price during the twenty- trading day period ending on the last completed trading date in the OTC Markets prior to the date of conversion. As of July 10, 2020, the outstanding principal balance of this note was $53,000 with a carrying value of $4,417, net of unamortized discounts of $48,583. For the period from July 11, 2020 to September 30, 2020, amortization of the debt discounts of $11,792 was charged to interest expense. As of September 30, 2020, the outstanding principal balance of this note is $53,000 with a carrying value of $16,209, net of unamortized discounts of $36,791.

~~On July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a 15%~~15% convertible promissory note issued by the Company on June 30, 2020, (the “Issuance Date”) to an investor, pursuant to a Securities Purchase Agreement. This note matures 6 months after the Issuance Date.This note is convertible into shares of the Company’s common stock beginning on the Issuance Date at ~~$0.025~~ $0.025 for the first three months after the Issuance Date.After the first three months after the Issuance Date, the conversion price shall be equal to the lower of (i) $.025 or 50% of the lowest trading price for the thirty-five trading days prior to the conversion. As of July 10, 2020, the outstanding principal balance of this note was ~~$129,500~~ $129,500 with a carrying value of ~~$8,375,~~$8,375, net of unamortized discounts of ~~$121,125. For the period from July 11, 2020 to September 30, 2020, amortization of the debt discounts of~~ $ ~~was charged to interest expense. As of September 30, 2020, the outstanding principal balance of this note is $129,500 with a carrying value of $65,750, net of unamortized discounts of $63,750.~~121,125. In conjunction with this note, the Company issued a warrant to purchase 6,375,000 shares of common stock at an exercise price of ~~$0.02,~~$0.02, subject to adjustments and expiring on the ~~five-year~~five-year anniversary of the Issuance Date. For the six months June 30, 2021, the investor converted a total of $129,500 of the face value and $30,264 of accrued interest and fees into 110,946,972 shares of common stock at an average conversion price of $0.00144. On March 10, 2021, the investor received 6,355,008 shares of common stock upon the cashless exercise of the warrants. As of June 30, 2021, and December 31, 2020, the outstanding principal balance of this note was $-0- and $129,500, respectively, with a carrying value of $111,763 as of December 31, 2020, net of unamortized discounts of $10,416.

On July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a ~~15%~~15% convertible promissory note issued by the Company on July 8, 2020, (the “Issuance Date”) to an investor, pursuant to a Securities Purchase Agreement. This note matures 6 months after the Issuance Date.This note is convertible into shares of the Company’s common stock beginning on the Issuance Date at $0.025 for the first three months after the Issuance Date.After the first three months after the Issuance Date, the conversion price shall be equal to the lower of (i) $.025 or 50% of the lowest trading price for the thirty-five trading days prior to the conversion. As of July 10, 2020, the outstanding principal balance of this note was $250,000 with a carrying value of $-0-, net of unamortized discounts of $250,000. For the period from July 11, 2020 to September 30, 2020, amortization of the debt discounts of $114,583 was charged to interest expense. As of September 30, 2020, the outstanding principal balance of this note is $250,000 with a carrying value of $114,583, net of unamortized discounts of $135,417. In conjunction with this note, the Company issued a warrant to purchase 12,500,000 shares of common stock at an exercise price of ~~$0.02,~~$0.02, subject to adjustments and expiring on the ~~five-year~~five-year anniversary of the Issuance Date. For the six months ended June 30, 2021, amortization of the debt discounts of $10,416 was charged to interest expense. For the six months June 30, 2021, the investor converted a total of $250,000 of the face value and $130,044 of accrued interest and fees into 243,012,455 shares of common stock at an average conversion price of $0.00156. On March 10, 2021, the investor received 12,460,800 shares of common stock upon the cashless exercise of the warrants. As of June 30, 2021, and December 31, 2020, the outstanding principal balance of this note was $-0- and $250,000, respectively, with a carrying value of $239,583 as of December 31, 2020, net of unamortized discounts of $10,416.

On February 26, 2020, (the “Issuance Date”) PCTI issued a ~~12%~~12% Convertible Promissory Note (the “Note”), in the principal amount of $106,950, to an investor. This note matures 12 months after the Issuance Date.This note is convertible into shares of the Company’s common stock beginning on the Issuance Date at ~~55%~~55% of the lowest trading price for the twenty-five trading days prior to the conversion.If the trading price cannot be calculated for such security on such date, the trading price shall be the fair market value as mutually determined by the Company and the investor for which the calculation of the trading price is required in order to determine the conversion price. PCTI received proceeds of ~~$85,000~~ $85,000 on February 26, 2020, and the Note included an original issue discount of ~~$13,950~~ $13,950 and lender costs of ~~$8,000.~~$8,000. This note proceeds ~~will be~~were used by the Company for general working capital purposes. The Note also ~~requires~~required a daily payment via ACH of ~~$400.~~$400. On June 25, 2020, the Note was amended to add ~~$111,225~~ $111,225 of additional principal to the outstanding balance. Pursuant to the PCTI transaction with Ozop, on July 10, 2020, the conversion price is equal to ~~45%~~45% multiplied by the lowest closing bid price during the twenty-five-trading day period ending on the last completed trading date in the OTC Markets prior to the date of conversion. Accordingly, the Company determined the conversion feature of the Notes represented an embedded derivative since the note is convertible into a variable number of shares upon conversion, as the note was not considered to be conventional debt under ASC 815 and the embedded conversion feature was bifurcated from the debt host and accounted for as a derivative liability. The embedded feature included in the note resulted in an initial debt discount of ~~$85,000,~~$85,000, interest expense of ~~$135,786~~ $135,786 and initial derivative liability of ~~$220,786.~~$220,786. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, amortization of the debt discounts of ~~$54,793~~ $17,737 was charged to interest expense. For the ~~nine~~six months ~~ended September~~June 30, ~~2020,~~2021, the investor converted a total of $50,550 of the face value and $11,265 of accrued interest and fees into 20,218,562 shares of common stock at an average conversion price of $0.00306. The Investor also amended the note to deduct the previously added principal ~~payments~~amount of ~~$56,400 were paid.~~$111,225. As of ~~September~~June 30, 2021, and December 31, 2020, the outstanding principal balance of this note was ~~$161,775 with a carrying value~~$-0- and $161,775, respectively. The Company accounted for the amendment as an extinguishment of ~~$116,935, net of unamortized discounts of $44,840.~~debt.

On July 15, 2020, (the “Issuance Date”) the Company issued a ~~15%~~15% convertible promissory note, in the principal amount of ~~$127,500,~~$127,500, to an investor. This note matures 6 months after the Issuance Date.This note is convertible into shares of the Company’s common stock beginning on the Issuance Date at $0.011 for the first three months after the Issuance Date.After the first three months after the Issuance Date, the conversion price shall be equal to the lower of (i) $.025 or 50% of the lowest trading price for the thirty-five trading days prior to the conversion. The Company received proceeds of ~~$102,000~~ $102,000 on July 22, 2020, and this note included an original issue discount of ~~$25,500.~~$25,500. This note proceeds will be used by the Company for general working capital purposes. In conjunction with this note, the Company issued a warrant to purchase 6,375,000 shares of common stock at an exercise price of ~~$0.02,~~$0.02, subject to adjustments and expiring on the ~~five-year~~five-year anniversary of the Issuance Date. The Company allocated the proceeds to the debt of ~~$82,068~~ $82,068 and to the warrant ~~$19,932~~ $19,932 based on the relative fair value. The embedded conversion feature included in this note resulted in an initial derivative liability of ~~$207,699,~~$207,699, a debt discount of ~~$82,068~~ $82,068 with the excess of ~~$125,541~~$125,541 charged to interest expense of ~~$125,541.~~$125,541. On March 10, 2021, the investor received 6,355,008 shares of common stock upon the cashless exercise of the warrants. For the ~~nine~~six months ended ~~September~~June 30, 2020, amortization of the debt discounts of ~~$53,125~~ $10,792 was charged to interest expense. On May 6, 2021, the Company and the investor entered into a Settlement and Mutual Release Agreement (the “Settlement Agreement”). Pursuant to the Settlement Agreement, the investor agreed to cancel the July 15, 2020, note. The Company accounted for the cancelled note as a gain on debt extinguishment. As of ~~September~~June 30, 2021, and December 31, 2020, the outstanding principal balance of this note was ~~$127,500~~$-0- and $127,500, respectively, with a carrying value of ~~$53,125,~~$116,708, net of unamortized discounts of ~~$74,375.~~$10,792 as of December 31, 2020.

On July 29, 2020, (the “Issuance Date”) the Company issued a ~~15%~~15% convertible promissory note, in the principal amount of ~~$127,500,~~$127,500, to an investor. This note matures 6 months after the Issuance Date.This note is convertible into shares of the Company’s common stock beginning on the Issuance Date at $0.011 for the first three months after the Issuance Date.After the first three months after the Issuance Date, the conversion price shall be equal to the lower of (i) $.025 or 50% of the lowest trading price for the thirty-five trading days prior to the conversion. The Company received proceeds of ~~$100,000~~ $100,000 on August 3, 2020, and this note included an original issue discount of ~~$25,500.~~$25,500. This note proceeds will be used by the Company for general working capital purposes. In conjunction with this note, the Company issued a warrant to purchase 12,750,000 shares of common stock at an exercise price of ~~$0.01,~~$0.01, subject to adjustments and expiring on the five-year anniversary of the Issuance Date. The Company allocated the proceeds to the debt ~~$61,733~~ $61,733 and warrant ~~$40,267~~ $40,267 based on the relative fair value. The embedded conversion feature included in this note resulted in an initial derivative liability of ~~$198,239,~~$198,239, a debt discount of ~~$61,733~~ $61,733 with the excess of ~~$136,506~~ $136,506 charged to interest expense. On March 10, 2021, the investor received 12,710,016 shares of common stock upon the cashless exercise of the warrants. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, amortization of the debt discounts of ~~$42,500~~ $21,583 was charged to interest expense. On May 6, 2021, the investor, pursuant to the Settlement Agreement, agreed to cancel the July 29, 2020, note. The Company accounted for the cancelled note as a gain on debt extinguishment. As of ~~September~~June 30, 2021, and December 31, 2020, the outstanding principal balance of this note was ~~$127,500~~ $-0- and $127,500 with a carrying value of ~~$42,500,~~$105,917, net of unamortized discounts of ~~$85,000.~~$21,583 as of December 31, 2020.

On November 16, 2020, (the “Issuance Date”) the Company issued a promissory note, in the principal amount of $250,000, to an investor. The note carries a guaranteed interest payment of 15%, which is added to the principal on the Issuance Date. Principal payments shall be made in six instalments of $57,500 commencing May 21, 2021, and continuing each 30 days thereafter for 4 months. The Holder shall have the right from time to time, and at any time following an event of default, as defined on the agreement, to convert all or any part of the outstanding and unpaid principal, interest and any other amounts due into fully paid and non-assessable shares of common stock of the Company. This note is convertible into shares of the Company’s common stock beginning on the Issuance Date at $0.01 for the first three months after the Issuance Date. After the first three months after the Issuance Date, the conversion price shall be equal to the lower of (i) $.01 or the volume weighted average price of the common stock during the five (5) Trading Day period ending on the day prior to conversion.The Company received proceeds of $200,000 on November 19, 2020, and this note included an original issue discount of $50,000. This note proceeds will be used by the Company for general working capital purposes. The embedded conversion feature included in this note resulted in an initial derivative liability of $14,750 and a debt discount of $50,000. In conjunction with this note, the Company issued a warrant to purchase 35,000,000 shares of common stock at an exercise price of $0.25, subject to adjustments and expiring on the five-year anniversary of the Issuance Date. The warrants issued resulted in a debt discount of $3,050, with the offset to additional paid in capital. For the six months ended June 30, 2021, amortization of the debt discounts of $59,264 was charged to interest expense. On May 6, 2021, the investor, pursuant to the Settlement Agreement, agreed to cancel the November 16, 2020, note and the warrant to purchase 35,000,000 shares. The Company accounted for the cancelled note and warrant as a gain on debt extinguishment. As of June 30, 2021, and December 31, 2020, the outstanding principal balance of this note was $-0- and $250,000 with a carrying value of $190,736, as of December 31, 2020, net of unamortized discounts of $59,264.

A summary of the convertible note balance as of ~~September~~June 30, ~~2020,~~2021, is as follows:

The Company determined the conversion feature of the convertible notes, which all contain variable conversion rates, represented an embedded derivative since the notes were convertible into a variable number of shares upon conversion. Accordingly, the notes are not considered to be conventional debt under ASC 815 and the embedded conversion feature was bifurcated from the debt host and accounted for as a derivative liability.

At any given time, certain of the Company’s embedded conversion features on debt and outstanding warrants may be treated as derivative liabilities for accounting purposes under ASC 815-40 due to insufficient authorized shares to settle these outstanding contracts. Pursuant to SEC staff guidance that permits a sequencing approach based on the use of ASC 815-15-25 which provides guidance for contracts that permit partial net share settlement. The sequencing approach may be applied in one of two ways: contracts may be evaluated based on (1) earliest issuance date or (2) latest maturity date. Pursuant to the sequencing approach, the Company evaluates its contracts based upon the latest maturity date.

The Company valued the derivative liabilities at ~~September~~June 30, 2021, and December 31, 2020, at ~~$2,250,953. The~~$43,953,486 and $3,299,684, respectively. For the derivative liability associated with convertible notes, the Company used the Monte Carlo simulation valuation model with the following assumptions as of ~~September~~June 30, 2021, and December 31, 2020, risk free interest rates at ~~0.11%~~0.06% and 0.09%, respectively, and volatility of ~~85%~~202% and 48% to ~~94%~~61%, respectively. During the six months ended, the Company issued 300,000,000 warrants in conjunction with notes payable (see Note 8). ~~The initial~~Due to insufficient authorized shares (see above), the Company recorded a discount to notes payable of $12,000,000 and interest expense of $38,907,939, with the offset to derivative liabilities for ~~convertible notes issued from July 11, 2020~~the initial fair value of the warrants based on the Black-Scholes option pricing method of $50,907,939. The following assumptions were utilized in the Black-Scholes valuation, risk free interest rate of .48% to ~~September 30, 2020, used the following assumptions; risk-free interest rates from 0.12% to 0.17% and~~.80%, volatility of ~~96%~~363% to ~~106%~~366%, and exercise prices of $0.13 to $0.15. The Company revaluated the warrants outstanding at December 31, 2020, and based on the insufficient authorized shares, the Company determined that the warrants should have been classified as a liability, The accompanying financial statements have been adjusted to reflect the change from an equity classification to a liability classification (see Note 2).

A summary of the activity related to derivative liabilities for the ~~period from July 10, 2020 to September~~six months ended June 30, ~~2020,~~2021, is as follows:

On March 17, 2021, the Company entered into a 12%, $11,110,000 face value promissory note with a third- party lender with a maturity date of March 17, 2022. In exchange for the issuance of the $11,110,000 note, inclusive of an original issue discount of $1,000,000 and lender costs of $110,000 the Company received proceeds of $10,000,000 on March 23, 2021, from the lender. In conjunction with the note, the Company issued a warrant to purchase 250,000,000 shares of common stock at $0.13 per share (subject to adjustments) with an expiry date on the three- year anniversary of the note. For the six months ended June 30, 2021, amortization of the costs of $323,750 was charged to interest expense. The fair value of the warrant calculated by the Black- Scholes option pricing method of $33,248,433 has been recorded as an initial debt discount of $10,000,000, interest expense of $23,248,433 and initial derivative liability of $32,248,433. For the six months ended June 30, 2021, amortization of the warrant discount of $2,916,667 was charged to interest expense. As of June 30, 2021, the outstanding principal balance of this note was $11,110,000 with a carrying value of $3,240,417, net of unamortized discounts of $7,869,583.

On February 9, 2021, the Company entered into a 12%, $2,200,000 face value promissory note with a third- party lender with a maturity date of February 9, 2022. In exchange for the issuance of the $2,200,000 note, inclusive of an original issue discount of $200,000 the Company received proceeds of $2,000,000 on February 16, 2021, from the lender. In conjunction with the note, the Company issued a warrant to purchase 50,000,000 shares of common stock at $0.15 per share (subject to adjustments) with an expiry date on the three- year anniversary of the note. For the six months ended June 30, 2021, amortization of the costs of $77,833 was charged to interest expense. The fair value of the warrant calculated by the Black- Scholes option pricing method of $17,659,506 has been recorded as an initial debt discount of $2,000,000, interest expense of $15,659,506 and initial derivative liability of $17,659,506. For the six months ended June 30, 2021, amortization of the warrant discount of $778,333 was charged to interest expense. As of June 30, 2021, the outstanding principal balance of this note was $2,200,000 with a carrying value of $856,167, net of unamortized discounts of $1,343,833.

On November 13, 2020, the Company entered into a 12%, $1,000,000 face value promissory note with a third-party due November 13, 2021. Principal payments shall be made in six instalments of $166,667 commencing 180 days from the issue date and continuing each 30 days thereafter for 5 months and the final payment of principal and interest due on the maturity date.The Company received proceeds of $890,000 on November 20, 2020, and the Company reimbursed the investor for expenses for legal fees and due diligence of $110,000. For the six months ended June 30, 2021, amortization of the costs of $55,000 was charged to interest expense. In conjunction with this note, the Company issued 2 common stock purchase warrants; each warrant entitles the Holder to purchase 125,000,000 shares of common stock at an exercise price of $0.008, subject to adjustments and expires on the five-year anniversary of the issue date. The warrants issued resulted in a debt discount of $1,000,000. For the six months ended June 30, 2021, amortization of the warrant discount of $500,000 was charged to interest expense. As of June 30, 2021, and December 31, 2020, the outstanding principal balance of this note was $1,000,000 with a carrying value of $583,750 and $28,750, respectively, net of unamortized discounts of $416,250 and $971,250, respectively.

On November 6, 2020, the Company entered into a Settlement Agreement with the holder of $120,000 of convertible notes with accrued and unpaid interest of $8,716 and a $210,000 Promissory Noted dated June 23, 2020 with accrued and unpaid interest of $15,707. The Company issued a new 12% Promissory Note with a face value of $389,423 and a maturity date of November 6, 2023. In conjunction with this settlement, the Company issued a warrant to purchase 60,000,000 shares of common stock at an exercise price of $0.0075, subject to adjustments and expires on the five-year anniversary of the issue date. The Company analyzed the transaction and concluded that this was a modification to the existing debt. The investor exercised the warrant on January 14, 2021.

On October 26, 2016, PCTI entered into a ~~$210,000~~ $210,000note payable with a bank. On ~~July 24, 2020,~~March 15, 2021, due to defaults with the terms of the note, the note was amended with the outstanding balance due December ~~26, 2020~~5, 2021, and the interest rate changed to ~~7.75%~~7.75%. Borrowings are collateralized by substantially all of the assets of PCTI and the personal guarantee of PCTI’s former President. At ~~September~~June 30, ~~2020~~2021, and December 31, ~~2019, $150,646~~ 2020, $143,793 and ~~$174,444,~~$151,469, respectively, was outstanding on the note payable.

On ~~September 25, 2019,~~March 15, 2021, PCTI renewed their ~~$350,000~~ $350,000promissory note with a bank that provides for borrowings of up to ~~$350,000.~~$350,000. Interest is due monthly and the principal ~~was~~is due on ~~April 12, 2020, however, on July 24, 2020, due to PCTI being in default with agreement was amended with a change in the maturity date to~~ December 26, ~~2020, and the~~2021, interest rate changed to the prime rate plus ~~3.25% (6.5%~~3.25% (6.5% at ~~September 30, 2020)~~March 15, 2021). Borrowings are collateralized by substantially all of the assets of PCTI and the personal guarantee of PCTI’s former President. At ~~September~~June 30, ~~2020~~2021, and December 31, ~~2019, $347,588~~ 2020, $344,166 and ~~$349,962,~~$345,211, respectively, was outstanding on the promissory note.

On August 24, 2020 (the “Issue Date”), the Company entered into a ~~12%~~12%, ~~$750,000~~ $750,000 face value promissory note with a third-party (the “Holder”) due August 24, 2021 (the “Maturity Date”). Principal payments shall be made in six instalments of $125,000 commencing 180 days from the Issue Date and continuing each 30 days thereafter for 5 months and the final payment of principal and interest due on the Maturity Date. The Holder shall have the right from time to time, and at any time following an event of default, as defined on the agreement, to convert all or any part of the outstanding and unpaid principal, interest and any other amounts due into fully paid and non-assessable shares of common stock of the Company, at the lower of i) the Trading Price (as defined in the agreement) during the previous five trading days prior to the Issuance Date or ii) the volume weighted average price during the five trading days ending on the day preceding the conversion date.The Company received proceeds of ~~$663,000~~ $663,000 on August 25, 2020, and the Company reimbursed the investor for expenses for legal fees and due diligence of ~~$87,000.~~$87,000. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, amortization of the costs of ~~$9,063~~ $43,500 was charged to interest expense. In conjunction with this Note, the Company issued 2 common stock purchase warrants; each warrant entitles the Holder to purchase 122,950,819 shares of common stock at an exercise price of ~~$0.0061,~~$0.0061, subject to adjustments and expires on the five-year anniversary of the Issue Date. The warrants issued resulted in a debt discount of ~~$471,307, with the offset to additional paid in capital.~~$750,000. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, amortization of the debt discount of ~~$49,094~~ $429,688 was charged to interest expense. For the six months ended June 30, 2021, the Company paid $375,000 to the Holder. On May 3, 2021, the Company issued 75,000,000 shares of common stock to the Holder, upon the cashless exercise of a portion of the warrants. As of ~~September~~June 30, 2021, and December 31, 2020, the outstanding principal balance of this note was ~~$750,000~~$375,000 and $750,000, respectively, with a carrying value of ~~$249,839,~~$307,625 and $209,438, net of unamortized discounts of ~~$500,151.~~$67,365 and $540,562, respectively.

On April 20, 2020, PCTI was granted a loan from ~~a bank~~Huntington Bank in the amount of ~~$100,400,~~$100,400, pursuant to the Paycheck Protection Program (“PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The loan matures on April 20, 2022and bears interest at a rate of ~~1.0%~~1.0% per annum, payable monthly beginning on November 20, 2020. The loan may be prepaid at any time prior to maturity with no prepayment penalties. Under the terms of the loan, a portion or all of the loan is forgivable to the extent the loan proceeds are used to fund qualifying payroll, rent and utilities during a designated twenty-four-week period. Payments are deferred until the SBA determines the amount to be forgiven. The Company ~~intends to utilize~~utilized the proceeds of the PPP loan in a manner which will enable qualification as a forgivable loan. However, no assurance can be provided that all or any portion of the PPP loan will be forgiven. The balance on this PPP loan was ~~$10,400~~ $100,400 as of ~~September~~June 30, 2021, and December 31, 2020 and has been classified ~~as a long-term liability~~ in notes payable. On March 26, 2021, the Company received notice from Huntington Bank the they have determined that PCTI’s loan forgiveness application has been approved and has been submitted to the SBA. The SBA has ninety days to submit the loan proceeds to Huntington Bank.

On July 14, 2020, PCTI received ~~$10,000~~ $10,000 grant under the Economic Injury Disaster Loan (“EIDL”) program. Up to ~~$10,000~~ $10,000 of the EIDL can be forgiven as long as such funds were utilized to provide working capital. The first payment due is deferred one year.The entirety of the loan as of ~~September~~June 30, 2021, and December 31, 2020 and has been classified ~~as a long-term liability~~ in notes payable.

The following ~~notes were~~note was assumed on July 10, 2020, pursuant to the PCTI transaction:

On June ~~23,~~25, 2020, ~~(the “Execution Date”),~~ the Company entered into a Loan and Securities Purchase Agreement with a third- party (the “Lender”). Pursuant to the agreement in exchange for a $210,000 Promissory Note, inclusive of an original issue discount of $35,000 the Company received proceeds of $175,000 from the Lender. The note carries an interest rate of 18% and matures and is due in one lump sum on the 24- month anniversary (the “Maturity Date”) of the Execution Date. For the first nine months interest may accrue on a monthly basis, and the Company has the option to pay the monthly interest or add such interest to the principal balance of the note. Commencing on the tenth month of the note, all accrued interest, if any, shall be added to the principal amount of the note, and interest on the new principal amount shall become due and payable on a monthly basis. Should the Company default on making any interest payments following the initial nine-months, or paying the note by the Maturity Date, the note shall automatically be converted into an 18% convertible debenture.

~~On June 25, 2020 (the “Issue Date”)~~12%, ~~the Company entered into a 12%, $203,000~~ $203,000 face value promissory note with a third-party ~~(the “Holder”) due~~lender with a maturity date of June 25, ~~2021 (the “Maturity Date”).~~ 2021. Principal payments shall be made in six instalments of $33,333 commencing 180 days from the ~~Issue Date~~issue date and continuing each 30 days thereafter for 5 months and the final payment of principal and interest due on the ~~Maturity Date.~~maturity date. The Holder shall have the right from time to time, and at any time following an event of default, as defined on the agreement, to convert all or any part of the outstanding and unpaid principal, interest and any other amounts due into fully paid and non-assessable shares of common stock of the Company, at the lower of i) the Trading Price (as defined in the agreement) during the previous five trading days prior to the ~~Issuance Date~~issuance date or ii) the volume weighted average price during the five trading days ending on the day preceding the conversion date. The Company received proceeds of ~~$176,000~~ $176,000 on June 26, 2020, and the Company reimbursed the investor for expenses for legal fees and due diligence of ~~$27,000.~~$27,000. For the six months ended June 30, 2021, amortization of the costs of $13,185 was charged to interest expense. In conjunction with this Note, the Company issued 2 common stock purchase warrants; each warrant entitles the Holder to purchase 10,000,000 shares of common stock at an exercise price of ~~$0.02,~~$0.02, subject to adjustments and expires on the five-year anniversary of the Issue Date. During the six months ended June 30, 2021, the investor converted a total of $203,000 of the face value and $15,899 of accrued interest and fees into 20,268,511 shares of common stock at an average conversion price of $0.0108. On January 8, 2021, and January 15, 2021, the investor received 100,668,692 and 9,121,265 shares of common stock, respectively, upon the cashless exercise of the warrants. As of June 30, 2021, and December 31, 2020, the outstanding principal balance of this note was $-0- and $203,000, respectively.

On September 2, 2020, PCTI entered into an ~~Agreement (the “Agreement”)~~agreement with a third- party. Pursuant to the terms of the ~~Agreement,~~agreement, in exchange for ~~$750,000,~~$750,000, PCTI agreed to pay the third-party a perpetual three percent ~~(3%~~(3%) payment of revenues, as defined in the ~~Agreement.~~agreement. Payments are due ninety (90) days after each calendar quarter, with the first payment due on or before March 31, 2021, for revenues for the quarter ending December 31, 2020. The Company has recorded the ~~$750,000~~ $750,000 as deferred liability on the ~~September~~June 30, 2021, and December 31, 2020, condensed consolidated ~~condensed~~ balance sheet. No payments have been made and the Company is in default of the agreement. On February 26, 2021, the agreement was assigned to Ozop and on March 4, 2021, the note was amended, whereby in exchange for 175,000,000 shares of common stock, the royalty percentage was amended to 1.8%. The Company valued the shares at $0.094 per share (the market value of the common stock on the date of the agreement) and recorded $16,450,000 as debt restructure expense on the condensed consolidated statement of operations for the six months ended June 30, 2021.

During the year ended December 31, 2020, the Company received $64,353 form a customer for a payment of a three- year extended warranty.The extended warranty period is from, March 2021 through February 2024, and accordingly the Company will recognize the revenue over such period. For the three and six months ended June 30, 2021, the Company recognized $5,362 and $7,150, respectively, of revenue. Of the remaining deferred revenue of $57,203, $21,451is recognized as the current portion of deferred revenue and $35,752 is classified as a long- term liability on the condensed consolidated financial statements. As of December 31, 2020, $17,876is classified as the current portion and $46,477 is classified as a long- term liability on the consolidated financial statements.

On July 10, 2020, pursuant to the PCTI transaction, the Company assumed an employment contract entered into on February 28, 2020, between the Company and Mr. Conway (the “Employment Agreement”). Pursuant to the terms of the Employment Agreement, Mr. Conway is to receive an initial annual salary of ~~$120,000,~~$120,000, for his position of CEO of the Company, payable monthly. Mr. Conway was issued 2,500 shares of Series C Preferred Stock. The Company valued the shares at ~~$5,000.~~$5,000. On August 28, 2020, Mr. Conway was issued 1,333 shares of Series D Preferred stock and 500 shares of series E Preferred Stock. The Series D Preferred Stock is convertible in the aggregate into three times (adjusted to one and one-half times on July 27, 2021) the number of shares of common stock outstanding at the time of conversion. On August 28, 2020, Mr. Conway ~~owns 6.67%~~owned 6.67% of the issued and outstanding Series D Preferred Stock, and based on the 3,107,037,634 shares outstanding on August 28, 2020, Mr. Conway’s Preferred Stock iswas convertible into 621,253,401 shares of common stock. Based on the share price of the common stock on that date of ~~$0.0065,~~$0.0065, the shares were valued at ~~$4,286,648~~ $4,286,648 and recognized as compensation onduring the ~~accompanying unaudited condensed consolidated Statement~~year ended December 31, 2020. Effective January 1, 2021, Mr. Conway’s compensation is $20,000 per month.

On March 21, 2021, the Company issued 2,000 shares of ~~Comprehensive Loss.~~Series E Preferred Stock (see Note 12), 1,800 of the shares were issued to Mr. Conway. Pursuant to the terms and conditions of the Certificate of Designation of the Series E Preferred Stock, including the redemption value of $1,000 per share, the Company recorded $1,800,000 as stock compensation expense for the Series E shares issued to Mr. Conway. On April 16, 2021, the Board of Directors of the Company authorized the issuance 2,000 shares of Series E Preferred stock, of which 1,050 were issued to Mr. Conway. The Company recorded $1,050,000 of expense related to the shares issued to Mr. Conway. During the six months ended June 30, 2021, the Company redeemed the 2,850 shares issued to Mr. Conway.

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, and ~~2019,~~2020, the Company recorded expenses to its officers in the following amounts:

As of ~~September~~June 30, ~~2020,~~2021, and December 31, ~~2019,~~2020, included in related party payable is ~~$10,308~~ $42,716 and ~~$27,909,~~$9,120, respectively, for the amounts owed the CEO of ~~PCTI.~~PCTI (resigned in July 2021).

On ~~October 25, 2019 PCTI executed~~January 2, 2021, the Company entered into a ~~non-cancellable~~ten (10) year lease for a 6-bay garage storage facility of ~~office~~approximately 2,500 square feet. Pursuant to the lease the Company agreed to issue 100,000,000 shares of restricted common stock. The shares were certificated on March 8, 2021, with an effective date of January 2, 2021. The Company valued the shares $0.0063, (the market value of the common stock on the date of the agreement) and ~~industrial~~has recorded $630,000 as a prepaid expense. The space ~~totaling 11,800 square feet~~should be ready for occupancy during the calendar quarter ending September 30, 2021.

On April 13, 2021, the Company agreed to engage PJN Strategies, LLC (“PJN”) as a consultant. Pursuant to the agreement, the Company agreed to compensate PJN $20,000 per month. For the three and six months ended June 30, 2021, the Company recorded $60,000 of consulting expenses.

On April 16, 2021, the Company signed a letter of agreement with Rubenstein Public Relations, Inc. (“RPR”). Pursuant to the letter of agreement, the Company agreed to engage RPR, effective May 1, 2021, on a month-to-month basis for $17,000 per month. For the three and six months ended June 30, 2021, the Company recorded $34,000 of consulting expenses.

On March 30, 2021, OES hired 2 individuals as Co-Directors of Sales. Pursuant to their respective offers of employment, the Company agreed to an annual salary of $130,000 with a signing bonus of $20,000 for each and to issue each 2,500,000 shares of restricted common stock upon the execution of the agreements and every 90 days thereafter for the first year as long as the employee is still employed. The Company valued the shares at $0.092 per share (the market price of the common stock on the date of the agreement), and $460,000 is included in ~~Zelienople, PA., which began December 1, 2019~~stock-based compensation expense for the six months ended June 30, 2021.The shares were issued in April 2021.

On March 15, 2021, the Company entered into a consulting agreement with Aurora Enterprises (“Aurora”). Mr. Steven Martello is a principal of Aurora. Pursuant to the agreement Mr. Martello will provide strategic analysis regarding existing markets and ~~expires on November 30, 2022.~~revenue streams as well as the development of new lines of revenue. The ~~lease terms include~~Company agreed to a monthly ~~rent~~retainer fee of ~~$7,000 (see Note 12)~~$10,000 and to issue to Aurora or their designee 5,000,000 shares of restricted common stock. The shares were issued in April 2021. Aurora designated the shares to be issued to Pegasus Partners, Inc. The Company valued the shares at $0.1392 per share (the market price of the common stock on the date of the agreement), and $696,000 is included in stock-based compensation expense for the six months ended June 30, 2021.

On February 24, 2021, the Company entered into a consulting agreement with Christopher Ruppel. Pursuant to the agreement Mr. Ruppel will join the Ozop Advisory Board. During the three months ended June 30, 2021, the Company issued 10,000,000 shares of restricted common stock to Mr. Ruppel and agreed to a monthly fee of $2,500. The Company ~~also pays $3,400~~valued the shares at $0.2386 per share (the market price of the common stock on ~~a month~~the date of the agreement), and $2,386,000 is included in stock-based compensation expense for the six months ended June 30, 2021. Effective April 1, 2021, the agreement was amended to ~~month basis for its corporate office in Warwick, New York.~~$10,000 per month. For the three and six months ended June 30, 2021, the Company recorded $10,000 and $12,500 of consulting expenses.

On February ~~1, 2018, Spinus~~19, 2021, the Company entered into a Joint Business Alliance agreement with Grid and Energy Master Planning, LLC (“GEMM”). GEMM will provide advisory, financing and implementation solutions for behind-the-meter customers in the areas of energy efficiency, solar, EV charging, and battery storage for OES. The GEMM services allows OES to provide one-stop-shopping in these emerging and maturing sectors. As of June 30, 2021, there has not been any transactions related to this agreement and the Company is continuing to evaluate the accounting treatment of any future transactions.

On February 4, 2021, the Company entered into a Consulting Services Agreement with Energy Elements Works, LLC and Mr. Ian Graham. Pursuant to the agreement, Mr. Graham will provide services as a Consulting Engineer for the Company’s wholly owned subsidiary OES. The Company has agreed to compensate Mr. Graham $100 per hour for his services.

On January 22, 2021, the Company issued 10,000,000 shares of restricted common stock for legal services performed in 2020 and approved by the BOD of the Company on December 1, 2020. The Company valued the shares at $0.0056 per share (the market price of the common stock on the date of the agreement), and $56,000 is included in stock-based compensation expense for the six months ended June 30, 2021.

On January 14, 2021, the Company entered into a Consulting Agreement with Mr. Allen Sosis. Pursuant to the agreement, Mr. Sosis will provide services as the Director of Business Development for the Company’s wholly owned subsidiary. Pursuant to the agreement, as amended, the Company will pay Mr. Sosis a monthly fee of $15,000 and an ~~Intellectual Property Licensing Agreement~~additional $1,000 in benefits. The Company also agreed to issue Mr. Sosis 5,000,000 shares of restricted common stock. The shares were issued in April 2021. The Company valued the shares at $0.20 per share (the ~~“Licensing Agreement”)~~market price of the common stock on the date of the agreement), and $1,000,00 was recorded as deferred stock compensation, to be amortized over the one-year term of the agreement. For the six months ended June 30, 2021, $331,507 is included in stock-based compensation expense. For the three and six months ended June 30, 2021, the Company recorded $30,000 and $75,500 of consulting expenses. Effective June 1, 2021. Mr. Sosis became an employee of the Company with a $15,000 per month salary.

On January 6, 2021, the Company entered into a consulting agreement with Ezra Green to begin on February 8, 2021. The Company agreed to issue 10,000,000 shares of restricted common stock to Mr. Green and to a monthly fee of $2,500. The Company ~~assumed~~valued the ~~obligations under~~shares at $0.0076 per share (the market price of the ~~Licensing Agreement~~common stock on the date of the agreement), and ~~pledged~~$76,000 was recorded as deferred stock-based compensation, to be amortized over the ~~assets~~one-year term of ~~Spinus~~ the agreement. For the six months ended June 30, 2021, the Company recorded $36,348 as ~~security. Pursuant~~stock-based compensation expense. Effective April 1, 2021, the agreement was amended to $10,000 per month. On March 9, 2021, Mr. Green filed a provisional patent with the USPTO. The provisional patent covers proprietary methods and procedures that, will allow the expansion of OES into the EV charging and support industry. The provisional patent relates to the ~~terms~~more efficient production, distribution, and delivery of energy, particularly renewable energy, to the ~~Licensing Agreement, in consideration~~ EV end consumer and enables OES to build the support systems for such. For the three and six months ended June 30, 2021, the Company recorded $30,000 and $34,500 of $250,000 Spinus has the exclusive rights to certain patents and the non-exclusive rights to other patents. The patents surround mechanical or inflatable expandable interbody implant products. The Company paid the $250,000 on November 20, 2018. The Company also will pay a royalty of 7% of net sales on any product sold utilizing any of the patents. There have not been any sales of the licensed products and accordingly, no royalties have been incurred.consulting expenses.

On March 4, 2019, the Company entered into a Separation Agreement (the “Separation Agreement”) with Salman J. Chaudhry, pursuant to which the Company agreed to pay Mr. Chaudry ~~$227,200 (the~~$227,200 (the “Outstanding Fees”) in certain increments as set forth in the Separation Agreement. As of ~~September~~June 30, ~~2020,~~2021 and December 31, ~~2019,~~2020, the balance owed Mr. Chaudhry is ~~$162,085.~~$162,085.

On July 10, 2020, PCTI assumed a contract entered into by the Company on June 5, 2020, for media relations services with a third-party. Pursuant to the Agreement, the Company will pay the consultants $10,000 per month for the development and execution of a comprehensive media relations plan.

On July 24, 2020, PCTI, the Company’s wholly owned subsidiary, entered into a three- month consulting agreement with a third-party. Pursuant to the agreement, the Company will pay the consultant $10,000 per month and the consultant will provide services, including, but not limited to, identifying PCTI’s best path forward into the renewable energy and energy storage industries as well as advance their presence in the maritime/transportation industry.

On July 29, 2020, PCTI entered into a three-month Performance Solutions Agreement (the “PSA”), with automatic monthly renewals, until terminated either arty on a thirty (30) day written notice to the other party. Pursuant to the PSA, the Company will pay a monthly fee of $5,000 for services including social media and search engine optimization.

On September 2, 2020, PCTI entered into an Agreement ~~(the “Agreement”)~~ with a third- party. Pursuant to the terms of the ~~Agreement,~~agreement, in exchange for ~~$750,000,~~ $750,000, PCTI agreed to pay the third-party a perpetual three percent (3%) payment of revenues, as defined in the ~~Agreement~~agreement. On February 26, 2021, the agreement was assigned to Ozop and on March 4, 2021, the agreement was amended, whereby in exchange for 175,000,000 shares of common stock, the royalty percentage was amended to 1.8% (see Note 7)9). The Company valued the shares at $0.094 per share (the market value of the common stock on the date of the agreement) and recorded $16,450,000 as debt restructure expense on the condensed consolidated statement of operations for the six months ended June 30, 2021.

On March 4, 2021 a Complaint and Demand for Jury Trial (the “Complaint”) was filed by a plaintiff (the “Plaintiff”) in the United States District Court for the Southern District of New York. The Complaint named Ozop Energy Solutions, Inc. (“OZOP”) and Brian Conway, Ozop’s Chief Executive Officer, (the “CEO”). OZOP and the CEO are collectively referred to herein as “Defendants”. The Complaint alleges that the Plaintiff’s purchase and sale of OZOP’s securities, and damages caused by OZOP and its CEO, were violations of federal and state securities law and common laws. This securities fraud complaint is based on two (2) press releases issued by OZOP: the first dated January 12, 2021, which the complainant alleges contained materially false and misleading information about the execution of a Master Supply Agreement, and the second dated February 5, 2021, that retracted the press release it issued on January 12, 2021. In reliance on OZOP’s January 12, 2021 press release (which was retracted and corrected by OZOP’s February 5, 2021 press release), on the same date, Plaintiff sold all of his 4,370,180 OZOP shares on the public market. The Plaintiff alleges that the February 5, 2021 corrective press release (which retracted the January 12, 2021 press release and corrected the material misrepresentations provided therein) caused a dramatic increase in the price of OZOP’s shares, significantly in excess of the price at which Plaintiff sold his OZOP shares on January 12, 2021 (in reliance on the January 12, 2021 press release), causing Plaintiff to suffer significant losses, in excess of two Million Dollars, as a direct and proximate result of Defendants’ material misrepresentations. The Company disputes the allegations in the Complaint has engaged counsel to vigorously defend the Company and the CEO. On May 3, 2021, the Company notified the court, that the Defendants intend to file a motion to dismiss for the foregoing reasons, and respectfully request that the Court enter a briefing schedule. Defendants propose that their opening papers be filed on or before May 14, 2021; that Plaintiff’s opposition papers by filed on or before June 4, 2021, and that Defendants’ reply papers be filed on or before June 18, 2021. On May 12, 2021, the plaintiff and or their counsel, gave notice that the above action is voluntarily dismissed, pursuant to Rule 41(a)(1)(A)(i) of the Federal Rules of Civil Procedure, without prejudice against the defendants Brian Conway and OZOP Energy Solutions, Inc.

On November 12, 2020, a former employee of PCTI filed a Charge of Discrimination against PCTI, for wrongful discharge based on sex and retaliation with the Equal Employment Opportunity Commission (“EEOC”) and the Pennsylvania Human Relations Commission for events occurring on or before June 3, 2020. The EEOC has advised PCTI that have closed their investigation and there are no current charges or claims against PCTI.

During the period from ~~July 11, 2020~~January 1, 2021, to ~~September~~June 30, ~~2020,~~2021, holders of an aggregate of ~~$1,585,937~~ $760,550 in principal and ~~$259,418~~ $201,905 of accrued interest and fees of convertible ~~notes issued by the Company~~ and ~~assumed by PCTI on July 10, 2020,~~promissory notes, converted their debt into ~~1,181,993,984~~ 483,154,618 shares of our common stock at an average conversion price of ~~$0.0016~~ $0.002 per share. ~~The~~

During the six months ended June 30 2021, the Company also issued ~~106,528,473~~ the following shares of restricted common stock:

During the six months ended June 30, 2021, the Company also issued 405,797,987 shares of common stock upon the cashless exercise of common stock purchase warrants.

As of ~~September~~June 30, ~~2020,~~2021, the Company has 4,990,000,000 shares of ~~$0.001~~ $0.001 par value common stock authorized and there are ~~3,140,453,186~~ 4,606,910,897 shares of common stock issued and outstanding.

As of ~~September~~June 30, ~~2020,~~ 2021, 10,000,000shares have been authorized as preferred stock, par value ~~$0.001 (the~~$0.001 (the “Preferred Stock”), which such Preferred Stock shall be issuable in such series, and with such designations, rights and preferences as the Board of Directors may determine from time to time.

On July 7, 2020, the Company filed an Amended and Restated Certificate of Designation with the State of Nevada of the Company’s Series C Preferred Stock. Under the terms of the Amendment to Certificate of Designation of Series C Preferred Stock, 50,000 shares of the Company’s preferred remain designated as Series C Preferred Stock. The holders of Series C Preferred Stock have no conversion rights and no dividend rights. For so long as any shares of the Series C Preferred Stock remain issued and outstanding, the Holder thereof, voting separately as a class, shall have the right to vote on all shareholder matters equal to sixty-seven (67%) percent of the total vote.On July 10, 2020, pursuant to the SPA with PCTI, the Company issued 47,500 shares of Series C preferred Stock to Chis. As of ~~September~~June 30, 2021, and December 31, 2020, there were 50,000 shares of Series DC Preferred Stock issued and outstanding, of which 2,500 are ~~issued to~~held by Mr. Conway.

On July 7, 2020, the Company filed a Certificate of Designation with the State of Nevada of the Company’s Series D Preferred Stock. Under the terms of the Certificate of Designation of Series D Preferred Stock, 20,000 shares of the Company’s preferred stock have been designated as Series D Convertible Preferred Stock. The holders of the Series D Convertible Preferred Stock shall not be entitled to receive dividends. The holders as a group may, at any time convert all of the shares of Series D Convertible Preferred Stock into a number of fully paid and nonassessable shares of common stock determined by multiplying the number of issued and outstanding shares of common stock of the Company on the date of conversion, by 3. Except as provided in the Certificate of Designation or as otherwise required by law, no holder of the Series D Convertible Preferred Stock shall be entitled to vote on any matter submitted to the shareholders of the Company for their vote, waiver, release or other action. The Series D Convertible Preferred Stock shall not bear any liquidation rights.On July 10, 2020, pursuant to the SPA with PCTI, the Company issued 18,667 shares of Series D preferred Stock to Chis, and on August 28, ~~2020. Pursuant~~2020, pursuant to Mr. Conway’s employment agreement, the Company issued 1,333 shares of Series D Preferred Stock to Mr. Conway. Accordingly, on August 28, 2020, Mr. Conway owned 6.67% of the issued and outstanding Series D Preferred Stock, and based on the 3,107,037,634 shares outstanding on August 28, 2020, Mr. Conway’s Preferred Stock was convertible into 621,253,401 shares of common stock. Based on the share price of the common stock on that date of $0.0065, the shares were valued at $4,286,648. As of ~~September~~June 30, 2021, and December 31, 2020, there were 20,000 shares of Series D Preferred Stock issued and outstanding.

On July 7, 2020, the Company filed a Certificate of Designation with the State of Nevada of the Company’s Series E Preferred Stock. Under the terms of the Certificate of Designation of Series E Preferred Stock, 3,000 shares of the Company’s preferred stock have been designated as Series E Preferred Stock. The holders of the Series E Convertible Preferred Stock shall not be entitled to receive dividends. No holder of the Series E Preferred Stock shall be entitled to vote on any matter submitted to the shareholders of the Corporation for their vote, waiver, release or other action, except as may be otherwise expressly required by law. At any time, the Corporation may redeem for cash out of funds legally available therefor, any or all of the outstanding Preferred Stock (“Optional Redemption”) at ~~$1,000 (one~~$1,000 (one thousand dollars) per share. The shares of Series E Preferred Stock have not been registered under the Securities Act of 1933 or the laws of any state of the United States and may not be transferred without such registration or an exemption from registration. On July 10, 2020, pursuant to the SPA with PCTI, the Company issued 500 shares of Series E preferred Stock to Chis, and on August 28, 2020. Pursuant to Mr. Conway’s employment agreement, the Company issued 500 shares of Series E Preferred Stock to Mr. Conway. On March 2, 2021, the BOD authorized the issuance of 1,800 shares of Series E Preferred Stock to Mr. Conway and 200 shares of Series E Preferred Stock to a third-party service provider. The issuances were for services performed. Pursuant to the terms and conditions of the Certificate of Designation of the Series E Preferred Stock, including the redemption value of $1,000 per share, the Company recorded $2,000,000 as stock-based compensation expense for the six months ended June 30, 2021. On March 24, 2021, the Company redeemed the 3,000 shares of Series E Preferred Stock outstanding on that date. On April 16, 2021, the BOD authorized the issuance of 2,000 shares of Series E Preferred stock, of which 1,050 were granted to Mr. Conway. The issuances were for services performed. Pursuant to the terms and conditions of the Certificate of Designation of the Series E Preferred Stock, including the redemption value of $1,000 per share, the Company recorded $2,000,000 as stock-based compensation expense for the three and six months ended June 30, 2021. As of ~~September~~June 30, 2021, and December 31, 2020, there were -0- and 1,000 shares of Series E Preferred Stock issued and ~~outstanding.~~outstanding, respectively.

NOTE 1214 - OPERATING LEASE RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES

On October 25, 2019, PCTI executed a non-cancellable lease for office and industrial space which began December 1, 2019 and expires on November 30, ~~2022.~~2022. Operating lease right-of-use assets and liabilities are recognized at the present value of the future lease payments at the lease commencement date. The interest rate used to determine the present value is our incremental borrowing rate, estimated to be ~~7.5%~~7.5%, as the interest rate implicit in most of our leases is not readily determinable. Prior to July 10, 2020, PCTI recorded monthly lease expense pursuant to the lease agreement and effective July 10, 2020, pursuant to the PCTI transaction, operating lease expense is recognized pursuant to ASC Topic 842. Leases (Topic 842) over the lease term. During the ~~three~~years ended December 31, 2020, and ~~nine months ended September 30, 2020,~~2019, the Company recorded ~~$21,278~~ $84,278and ~~$63,278,~~ $100,946respectively, for rent expense. During the year ended December 31, 2020, upon adoption of ASC Topic 842, the Company recorded right-of-use assets and ~~$21,125~~lease liabilities of $185,139 for this lease.

On April 14, 2021, the Company entered into a five-year lease which began on June 1, 2021, for approximately 8,100 square feet of office and ~~$63,375 for~~warehouse space in Carlsbad, California, expiring May 31, 2026. Initial lease payments of $13,148 begin on June 1, 2021, and increase by approximately 2.4% annually thereafter. The interest rate used to determine the ~~three and nine~~present value is our incremental borrowing rate, estimated to be 7.5%, as the interest rate implicit in most of our leases is not readily determinable. During the six months ended ~~September 30, 2019, respectively,~~ June 1, 2021, upon adoption of ASC Topic 842, the Company recorded right-of-use assets and lease liabilities of $702,888 for this lease.

In adopting Topic 842, the Company has elected the ‘package of practical expedients’, which permit it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter is not applicable to the Company. In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 ~~month~~months or less. ~~During the nine months ended September 30, 2019, upon adoption of ASC Topic 842, the Company recorded right-of-use assets and lease liabilities of $185,139.~~

~~From October 1, 2020, through November 20, 2020,~~On July 13, 2021, the Company ~~has issued 123,357,984 shares of common stock upon the conversion of $293,449 of principal, accrued interest and fees of convertible notes.~~

~~On October 8, 2020, the Company, through its wholly owned subsidiary, PCTI~~ entered into a ~~Consortium~~Definitive Agreement (the ~~“Consortium Agreement”~~“Agreement”) with ~~Sterling PBES Energy Solution Ltd.~~Cathy Chis (“~~SPBES”~~Chis”) to purchase the 47,500 shares of the Company’s Series C Preferred Stock held by Chis and the 18,667 shares of the Company’s Series D Preferred Stock held by Chis for the total purchase price of $11,250,000. In conjunction with the Agreement, Chis shall resign from any and all positions held in PCTI, the Company’s wholly owned subsidiary. On July 16, 2021, the Company closed the Agreement described above and purchased the 47,500 shares of the Company’s Series C Preferred Stock held by Chis and the 18,667 shares of the Company’s Series D Preferred Stock held by Chis and returned them to the Company’s treasury for cancellation and accordingly, Chis resigned from all positions held in PCTI. Chis no longer has voting control of the Company and voting control is now held by Brian Conway, the Company Chief Executive Officer, through his ownership of his 2,500 shares of the Company’s Series C Preferred Stock (100% of the outstanding shares).

On June 29, 2021, the Company entered into a Stock and Warrant Purchase Agreement (the “SWPA”) with a third- party investor. Pursuant to the SWPA, in exchange for $13,200,000 the Company will sell to the investor 1 share of Series D Preferred Stock and a warrant to purchase 3,236 shares of Series D Preferred Stock. The investor placed the $13,200,000 into an escrow account. Under the satisfaction of the terms and conditions of the escrow agreement, the Company would receive the $13,200,000 from the investor’s escrow account. On July 9, 2021, the Company received the $13,200,000. On July 13, 2021, the Company sent $11,250,000 to its’ counsel’s trust account and on July, 16, 2021, $11,250,000 was sent from the Company’s counsel’s trust account to Chis to close the Chis Agreement described above.

On July 27, 2021, the Company filed with the Secretary of State of the State of Nevada an Amended and Restated Certificate of Designation of Series D Preferred Stock (the “Series D Amendment”). Under the terms of the Consortium Agreement, PCTI shall offer proposal, execution and service of contracts to supply agreed upon product solutions on behalf of SPBES in the following markets: Marine Industrial Charging Sub-Stations, North America, Europe, the Middle East and North Africa, Southeast Asia, South East Asia, South America and Australasia. SPBES shall be responsible for the project managementSeries D Amendment, 4,570 shares of the ~~product solutions.~~

~~On October 29, 2020, the Company formed a new wholly owned subsidiary, Ozop Surgical Name Change Subsidiary, Inc., a Nevada corporation (“Merger Sub”).~~Company’s preferred stock will be designated as Series D Convertible Preferred Stock. The Merger Sub was formed under the Nevada Revised Statutes for the sole purpose and effect of changing the Company’s name to “Ozop Energy Solutions, Inc.” That same day the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with the Merger Sub and filed Articles of Merger (the “Articles of Merger”) with the Nevada Secretary of State, merging the Merger Sub into the Company, which were stamped effective as of November 3, 2020. As permitted by the Section 92.A.180holders of the ~~Nevada Revised Statutes, the sole purpose and effect~~Series D Convertible Preferred Stock shall not be entitled to receive dividends. Any holder may, at any time convert any number of ~~the filing~~shares of ~~Articles of Merger was to change the name of the Company to “Ozop Energy Solutions, Inc.”~~

~~On November 13, 2020 (the “Issue Date”), the Company entered~~Series D Convertible Preferred Stock held by such holder into a ~~12%, $1,000,000 face value promissory note with a third-party (the “Holder”) due November 13, 2021 (the “Maturity Date”). Principal payments shall be made in six instalments~~number of ~~$166,667 commencing 180 days from the Issue Date~~fully paid and continuing each 30 days thereafter for 5 months and the final payment of principal and interest due on the Maturity Date. The Company received proceeds of $890,000 on November 20, 2020, and the Company reimbursed the investor for expenses for legal fees and due diligence of $110,000. In conjunction with this Note, the Company issued 2 common stock purchase warrants; each warrant entitles the Holder to purchase 125,000,000nonassessable shares of common stock ~~at an exercise price~~determined by multiplying the number of ~~$0.008, subject to adjustments~~issued and ~~expires on the five-year anniversary of the Issue Date.~~

On November 16, 2020, (the “Issuance Date”) the Company issued a promissory note, in the principal amount of $250,000, to an investor. The note carries a guaranteed interest payment of 15%, which is added to the principal on the Issuance Date. Principal payments shall be made in six instalments of $57,500 commencing May 21, 2021, and continuing each 30 days thereafter for 4 months. The Holder shall have the right from time to time, and at any time following an event of default, as defined on the agreement, to convert all or any part of the outstanding ~~and unpaid principal, interest and any other amounts due into fully paid and non-assessable~~ shares of common stock of the Company ~~This note is convertible into~~on the date of conversion, by 1.5 and dividing that number by the number of shares of Series D Convertible Preferred Stock being converted. Except as provided in the ~~Company’s common stock beginning on~~Series D Amendment or as otherwise required by law, no holder of the ~~Issuance Date at $0.01 for the first three months after the Issuance Date. After the first three months after the Issuance Date, the conversion price~~Series D Convertible Preferred Stock shall be ~~equal~~entitled to vote on any matter submitted to the ~~lower~~shareholders of (i) $.01 or the volume weighted average price of the common stock during the five (5) Trading Day period ending on the day prior to conversion. The Company received proceeds of $200,000 on November 19, 2020, and this note included an original issue discount of $50,000. This note proceeds will be used by the Company for ~~general working capital purposes. In conjunction with this note,~~their vote, waiver, release or other action. The Series D Convertible Preferred Stock shall not bear any liquidation rights. Subsequent to the filing of the Series D Amendment, the Company ~~issued a~~delivered the 1 share of Series D Preferred Stock and the warrant to purchase ~~35,000,000~~ 3,236 shares of ~~common stock at an exercise price of $0.25, subject to adjustments and expiring on the five-year anniversary of the Issuance Date.~~Series D Preferred Stock.

The Company has evaluated subsequent events through the date the financial statements were issued. The Company has determined that there are no other such events that warrant disclosure or recognition in the financial statements, except as stated herein.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following is management’s discussion and analysis of certain significant factors that have affected our financial position and operating results during the periods included in the accompanying condensed consolidated financial statements, as well as information relating to the plans of our current management. This ~~quarterly~~ report includes forward-looking statements. Generally, the words “believes,” “anticipates,” “may,” “will,” “should,” “expect,” “intend,” “estimate,” “continue,” and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this report or other reports ~~filed by Ozop Surgical Corp. (“we,” “us,” “our,”~~ or documents we file with the ~~“Company”),~~Securities and Exchange Commission from time to time, ~~contain~~which could cause actual results or ~~may contain forward-looking statements and information that are based upon beliefs of, and information currently available~~outcomes to ~~the Company’s management as well as estimates and assumptions made by Company’s management. Readers are cautioned~~differ materially from those projected. Undue reliance should not ~~to place undue reliance~~be placed on these forward-looking statements which ~~are only predictions and~~ speak only as of the date hereof. ~~When used in the filings, the words “anticipate,” “believe,” “estimate,” “expect,” “future,” “intend,” “plan” or the negative of~~We undertake no obligation to update these ~~terms and similar expressions as they relate to the Company or the Company’s management identify~~ forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.

Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates.

The following discussion should be read in conjunction with our unaudited financial statements and the related notes that appear elsewhere in this Quarterly Report on Form 10-Q.

Ozop Energy Solutions, Inc. (the “Company,” “we,” “us” or “our”) was originally incorporated as Newmarkt Corp. on July 17, 2015, under the laws of the State of Nevada.

On May 8, 2018, following the acquisition of Ozop Surgical, Inc., we amended our Articles of Incorporation (the “Amendment”) to change our name from Newmarkt Corp. to Ozop Surgical Corp. in order to reflect more accurately, at that time, the name of our core service offering and operations.

~~On July 10,~~December 11, 2020, the Company ~~entered into a Stock Purchase Agreement (the “SPA”~~formed Ozop Energy Systems, Inc. (“OES”) ~~with Power Conversion Technologies, Inc.~~, a ~~Pennsylvania~~Nevada corporation ~~(“PCTI”),~~ and ~~Catherine Chis (“Chis”), PCTI’s Chief Executive Officer (“CEO”) and its sole shareholder. Under the terms~~a wholly owned subsidiary of the SPA, the Company acquired one thousand (1,000) shares of PCTI, which represents all of the outstanding shares of PCTI, from Chis in exchange for the issuance of 47,500 shares of the Company’s Series C Preferred Stock, 18,667 shares of the Company’s Series D Preferred Stock, and 500 shares of the Company’s Series E Preferred Stock to Chis. ~~The Acquisition is being accounted for as a business combination and~~Company. OES was treated as a reverse acquisition for accounting purposes with PCTI as the accounting acquirer in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”). In accordance with the accounting treatment for a reverse acquisition, the Company’s historical financial statements prior to the reverse merger were and will be replaced with the historical financial statements of PCTI prior to the reverse merger, in all future filings with the U.S. Securities and Exchange Commission (the “SEC”). The consolidated financial statements after completion of the reverse merger have and will include the assets, liabilities and results of operations of the combined company from and after the closing date of the reverse merger.

~~PCTI~~ designs, develops, manufactures and distributes standard and custom power electronic solutions. PCTI serves clients in several industries including energy storage, shore power, DEWs, microgrid, telecommunications, military, transportation, renewable energy, aerospace and mission critical defense systems. Customers include the United States military, other global military organizations and many of the world’s largest industrial manufacturers. All of its products are manufactured in the United States. Because of the Company’s product scope and the high-power niche that their products occupy, the Company is aggressively targeting the rapidly growing renewable and energy storage markets.~~The Company’s mission is~~formed to be a ~~global leader for high power electronics with a standard~~manufacturer and distributor of ~~continued innovation.~~renewable energy products.

On July 10, 2020, the Company entered into a Stock Purchase Agreement (the “SPA”) with Power Conversion Technologies, Inc., a Pennsylvania corporation (“PCTI”), and Catherine Chis (“Chis”), PCTI’s Chief Executive Officer (“CEO”) and its sole shareholder. Under the terms of the SPA, the Company acquired one thousand (1,000) shares of PCTI, which represents all of the outstanding shares of PCTI, from Chis in exchange for the issuance of 47,500 shares of the Company’s Series C Preferred Stock, 18,667 shares of the Company’s Series D Preferred Stock, and 500 shares of the Company’s Series E Preferred Stock to Chis. The Acquisition is being accounted for as a business combination and was treated as a reverse acquisition for accounting purposes with PCTI as the accounting acquirer in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 805, Business Combinations (“ASC 805”). In accordance with the accounting treatment for a reverse acquisition, the Company’s historical financial statements prior to the reverse merger were and will be replaced with the historical financial statements of PCTI prior to the reverse merger, in all future filings with the U.S. Securities and Exchange Commission (the “SEC”). The consolidated financial statements after completion of the reverse merger have and will include the assets, liabilities and results of operations of the combined company from and after the closing date of the reverse merger.

Results of Operations for the three and ~~nine~~six months ended ~~September~~June 30, 2021 and 2020:

The following discussion relates to the historical financial statements of PCTI for the 2020 period, and ~~2019:~~for the period ended June 30, 2021, the consolidated financial statements include the assets, liabilities and results of operations of PCTI and Ozop.

For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the ~~Company’s revenues were $246,951~~Company generated revenue of $1,274,033 and ~~$1,493,592, respectively,~~$2,069,587, compared to ~~$176,582~~$354,051 and ~~$416,778~~$1,246,641 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019.The~~2020. Sales are summarized as follows:

Based on the above cost of sales, gross margin (loss) was 4.7% and 30.4%% for the three and six months ended June30, 2021, respectively, compared to (22%) and 12.5% for the three and six months ended June 30, 2020, respectively. The significant increase ~~in revenues~~of gross margin from approximately for the current periods is a result of ~~a delay in 2019, by a customer in making a substantial change to~~ the ~~specification and issuing a modification after the purchase order was released for production. The project subsequently~~manufactured orders shipped in ~~2020~~.the 2021 period was at a higher margin. The improved margin was partially offset by the lower margins we recognized on the sourced and distributed products. While managements expects the sourced and distributed margins to rise during the remainder of 2021 and beyond, the overall margin of the Company will decrease due to significantly higher revenues that will be coming from the sourced and distributed products. While the overall margin will be reduced the higher gross profit dollars generated from the higher sourced and distributed products revenues will benefit the Company.

Total operating expenses for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, were ~~$4,830,641~~$4,359,305 and ~~$5,151,483,~~$10,148,775, respectively, compared to ~~$101,820~~$168,342 and ~~$314,433~~$320,842 for the three and ~~nine~~six months ended ~~September~~June 30, ~~2019,~~2020, respectively. For the three and six months ended June 30, 2020, operating expenses were those of PCTI. For the three and six months ended June 30, 2021, operating expenses were comprised of PCTI, Ozop and OES. The operating expenses were comprised of:

All of the above amounts include expenses incurred by PCTI for the entire three- and nine-month periods ended September 30, 2020, and 2019, respectively, and expenses incurred by Ozop for the period July 11, 2020 through September 30, 2020.

Wages and management fees- related parties, ~~includes compensation~~include amounts paid to our CEO and to the President (resigned July 2021) of ~~PCTI, our wholly-owned subsidiary. Currently, the President~~PCTI. The CEO is ~~compensated $13,000 per month and the Company’s CEO monthly base compensation is $10,000. Both the CEO and President are~~ eligible for additional bonuses as approved by the Board of Directors of the Company. Beginning January 1, 2021, the CEO is compensated $20,000 per month. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, the Company’s CEO’s total compensation was ~~$96,771~~$1,410,000 and ~~PCTI’s President~~$3,409,999. Included in the compensation was ~~compensated $32,500.~~

stock-based compensation of $1,050,000 and $2,850,000 related to the issuance of Series E Preferred Stock, ~~based compensation~~ for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, respectively. The Company recorded expenses for PCTI’s President (resigned July 2021) of ~~$4,286,648,~~$51,074 and $86,083 for the three and six months ended June 30, 2021, respectively.

Stock based compensation, other for the three and six months ended June 30, 2021, of $2,013,945 and $5,115,945 is ~~related to 1,333 shares of Series D Preferred Stock issued to Mr. Conwy~~ on August 28, 2020, pursuant to his employment agreement. The Series D Preferred Stock is convertible in the aggregate into three times the number of shares of common stock outstanding at the time of conversion. Mr. Conway’s owns 6.67%comprised of the issued and outstanding Series D Preferred Stock, and based on the 3,107,037,634 shares outstanding on August 28, 2020, Mr. Conway’s Preferred Stock is convertible into 621,253,401 shares of common stock. Based on the share price of the commonfollowing stock ~~on that date of $0.0065, the shares were valued at $4,286,648.~~issuances:

~~Wages,~~Salaries, taxes and benefits increased for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, compared to the same ~~periods~~period in ~~2019.~~2020. The increase was a result of ~~increased~~$40,000 paid for signing bonuses to the two new OES employees. The California operation of OES as of June 30, 2021, has annual payroll of gross payroll of $540,000 with additional sales and ~~administrative~~warehouse personnel ~~at PCTI, in support~~to be hired by the end of the ~~increased revenues as well as personnel hired for additional customer recruitment.~~quarter ending September 30, 2021. In addition to the California employees, OES has a monthly payroll of $37,500 covering business development, sales, administration and IT.

Professional and consulting fees increased infor the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, compared to the ~~same periods in 2019.~~three and six months ended June 30, 2020. The increase was due to accounting and auditing expenses of ~~PCTI, necessary~~Ozop included in ~~preparation~~the current period, the engagement of various consultants by OES as we initiate the ~~transaction with Ozop,~~Company’s business plan regarding distribution of renewable energy products, as well as ~~expenses incurred by Ozop for their public company filing requirements~~an increase in legal fees in the current period. OES current monthly consulting fees are $72,500.

Advertising and marketing expenses increased infor the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, compared to the ~~same periods in 2019.~~ three and six months ended June 30, 2020. The increase was related to marketing programs during ~~the three months ended September 30, 2020,~~2021, including brand awareness programs for both PCTI and Ozop.

Rent and office expense (including supplies, utilities and ~~supplies include utilities as well. The expenses~~internet costs) increased for the three and ~~nine~~six months ended ~~September~~June 30, ~~2010 increased~~2021 compared to the ~~same periods in 2019.~~three and six months ended June 30, 2020. The increase was the result of including in the current ~~three-and nine-month~~three- and six-month periods, rent and office expense of ~~$9,200~~approximately $81,41 and $23,127, respectively for Ozop, ~~beginning in July 2020.~~and $18,441 for OES for June 2021 (the first month of occupancy of the California office and warehouse). The Company estimates that the monthly OES rent and office expense for the California operation to be approximately $20,000 per month.

Other (income) expenses, ~~net,~~ for the three and ~~nine~~six months ended ~~September~~June 30, 2021, and 2020, ~~was $1,708,061 and $1,838,113, respectively, compared to other expenses, net of $12,203 and $41,656 for~~were as follows:

For the three ~~and nine~~ months ended ~~September~~June 30, ~~2019, respectively,~~2021, the Company recognized a gain on the change in fair value of derivatives. The gain was partially offset by interest expense related to the amortization of debt discounts and ~~were as follows.~~

the loss on extinguishment of debt. The increase in other expense for the six months ended June 30, 2021, is primarily a result of loss on extinguishment of debt related to the market value of shares of common stock issued in excess of the debt and accrued interest extinguished. The Company also issued 175,000,000 shares of restricted common stock related to the restructure of the deferred liability (see Note 9). The shares were valued at $0.094 per share and the Company recognized $16,450,000 of restructuring costs. Included in interest expense for the six months ended June 30, 2021, is the initial $38,907,939 of fair value related to the issuance of 300,000,000 warrants. In addition, the increases were the result of the amortization of debt discounts and losses on changes in fair values of derivatives, ~~and interest expense on the~~related to convertible notes ~~assumed by PCTI on July 10, 2020.~~and warrants.

~~The~~For the three months ended June 30, 2021, the Company recorded net loss of $211,952 compared to net loss of $368,833 for the three ~~and nine~~ months ended ~~September~~June 30, ~~2020,~~2020. The change was ~~$6,563,262 and $6,862,676 respectively, compared to $70,708 and $371,975 for the three and nine months ended September 30, 2019, respectively. The increases are~~ a result of the ~~changes~~other income recognized in the current quarter as described above, partially offset by stock-based compensation expense of $3,063,945 as well as the operating results described above. For the six months ended June 30, 2021, the increase in the loss compared to the six months ended June 30, 2020, was primarily a result of an increase in other expenses of $200,053,703 as described above, and $7,965,945 in stock-based compensation expenses as well as the operating results discussed above.

Currently, ~~we have limited operating capital. Our~~our current capital and our other existing resources will be sufficient to provide the working capital needed for our current business, however, additional capital will be required to meet our debt obligations, and to further expand our business. We may be unable to obtain the additional capital required. ~~Our inability~~If we are unable to generate capital or raise additional funds when required it will have a negative impact on our business development and financial results. These conditions raise substantial doubt about our ability to continue as a going concern as well as our recurring losses from operations, deficit in equity, and the need to raise additional capital to fund operations. This “going concern” could impair our ability to finance our operations through the sale of debt or equity securities. Management’s plans in regard to these factors are discussed below and also in Note 2 to the condensed consolidated financial statements filed herein.

For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, we primarily funded our business operations with ~~$750,000~~$12,000,000 of proceeds received pursuant to ~~an agreement to provide future perpetual payments of 3% of revenues, $673,000 from~~ the issuances of promissory ~~notes, $289,000 of proceeds from the issuances of convertible note financings as well as $400,000 advance from affiliate and $42,420 received from shareholders.~~notes. Of the proceeds, ~~$82,757~~$5,000,000 was used for ~~repayment~~the redemption of ~~convertible notes and notes payable and $69,470 was paid back to shareholders.~~5,000 shares of Series E Preferred Stock.

As of ~~September~~June 30, ~~2020,~~2021, we had cash of ~~$1,706,257~~$3,462,280 as compared to ~~$27,382~~$1,808,476 at December 31, ~~2019.~~2020. As of ~~September~~June 30, ~~2020,~~2021, we had current liabilities of ~~$6,590,839~~$53,027,894 (including ~~$2,250,953~~$43,953,486 of non-cash derivative liabilities), compared to current assets of ~~$1,954,962,~~$8,454,162, which resulted in a working capital deficit of ~~$4,635,877.~~$44,573,732. The current liabilities are comprised of accounts payable, accrued expenses, convertible debt, derivative liabilities and notes payable.

In December 2019, a novel strain of coronavirus (COVID-19) emerged in Wuhan, Hubei Province, China. While initially the outbreak was largely concentrated in China and caused significant disruptions to its economy, it has now spread to most other countries and infections have been reported globally.emerged. Because COVID-19 infections have been reported throughout the United States, certain federal, state and local governmental authorities have issued stay-at-home orders, proclamations and/or directives aimed at minimizing the spread of COVID-19. The ultimate impact of the COVID-19 pandemic on the Company’s operations is unknown and will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the duration of the COVID-19 outbreak, new information which may emerge concerning the severity of the COVID-19 pandemic, and any additional preventative and protective actions that governments, or the Company, may direct, which may result in an extended period of continued business disruption, and reduced operations. Any resulting financial impact cannot be reasonably estimated at this time but it may have a material adverse impact on our business, financial condition and results of operations. Management expects that its business will be impacted to some degree, but the significance of the impact of the COVID-19 outbreak on the Company’s business and the duration for which it may have an impact cannot be determined at this time.

For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, net cash used in operating activities ~~from continuing operations~~ was ~~$878,327~~$4,841,428 compared to ~~$36,262~~$255,311 for the ~~nine~~six months ended ~~September~~June 30, ~~2019.~~2020. For the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, our net cash used in operating activities was primarily attributable to the net loss of ~~$6,862,676,~~$209,704,320, adjusted by loss on debt extinguishment of $95,437,589, non- cash interest expense of $44,170,200 (including $38,907,939 for the initial fair value of the 300,000,000 warrants issued), losses on the fair value changes in derivatives related to warrants and convertible notes of $43,331,083, debt restructuring costs of $16,450,000, stock-based compensation of ~~$4,286,648,~~$7,965,945 and the non-cash expenses of interest and amortization and depreciation of ~~$1,447,935 and losses on the fair value changes in derivatives of $189,612.~~$65,388. Net changes of ~~$72,960~~$2,557,313 in operating assets and liabilities ~~reduced~~increased the cash used in operating ~~activities.~~activities, primarily as a result of the start-up of the Company’s California operations in the support of inventory and accounts receivable.

For the ~~nine~~three months ended ~~September~~June 30, ~~2019,~~2020, net cash used in operating activities of ~~$36,262~~$255,311 was primarily attributable to the net loss of ~~$371,975, adjusted~~$299,415 reduced by non-cash ~~expenses~~interest expense of $111,250 and amortization and depreciation expense of ~~$5,445,~~$14,658, and the net changes of ~~$330,268~~$81,804 in operating assets and ~~liabilities reduced~~liabilities.

For the six months ended June 30, 2021, the net cash used in ~~operating activities.~~

~~For the nine months ended September 30, 2020, the net cash provided by~~ investing activities was ~~$1,577,566,~~$94,679, compared to ~~$6,967~~$9,648 for the ~~nine~~six months ended ~~September~~June 30, ~~2019. For the nine months ended September 30, 2020,~~2020. The amounts for both periods were a result of the Company received proceeds of $750,000 pursuant to an obligation to pay a perpetual 3% fee of revenues, acquired $470,849 cash, $400,0 advance from affiliate and $42,240 from shareholders. During the nine months ended September 30, 2020, the Company purchased $16,233 ofpurchasing office furniture and ~~equipment and repaid $69,470 to shareholders.~~equipment.

For the ~~nine~~six months ended ~~September~~June 30, ~~2019, the principal investing activity included receiving $110,000 from shareholders and the repayment of $99,891 to shareholders and the purchase of $3,142 of fixed assets.~~

~~For the nine months ended September 30, 2020,~~2021, the net cash provided by financing activities was ~~$979,643,~~$6,589,911, compared to ~~cash used in financing activities of $10,193~~$524,411 for the ~~nine~~three months ended ~~September 30, 2019.~~March 31, 2020. During the ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, we received ~~$289,000~~$12,000,000 of proceeds from the issuances of ~~convertible note financings, $673,000~~$13,30,000 face value of promissory notes. During the six months ended June 30, 2021, the Company redeemed 5,000 shares of the Series E Preferred Stock for $5,000,000 and repaid $383,772 of notes payable and $26,367 to shareholders.

For the six months ended June 30, 2020, the Company received $400,000 in advances from Affiliate, $85,000 from the ~~issuances~~issuance of ~~promissory notes and~~a note payable, $100,400 from the Payroll Protection ~~Program. During the nine months ended September 30, 2020, the Company repaid $82,757 of principal of convertible notes~~Program, $42,000 from shareholders and ~~notes payable.~~

~~For the nine months ended September 30, 2019, the Company~~ made payments on notes payable of ~~$10,193.~~$46,224 and paid $56,765 to shareholders.

We have no off-balance sheet arrangements including arrangements that would affect our liquidity, capital resources, market risk support and credit risk support or other benefits.

Our significant accounting policies are described in more details in the notes to our financial statements appearing elsewhere in this Quarterly Report on Form 10-Q. We believe the following accounting policies to be most critical to the judgement and estimates used in the preparation of our unaudited condensed consolidated financial statements:

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of ~~September~~June 30, ~~2020,~~2021, and the results of operations and cash flows for the periods presented. The results of operations for the three and ~~nine~~six months ended ~~September~~June 30, ~~2020,~~2021, are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form ~~8-K/A~~10-K filed on ~~September 25, 2020.~~May 15, 2021. The unaudited condensed consolidated financial statements include the accounts of the Company and PCTI and the Company’s other wholly owned subsidiaries Ozop Energy Systems, Inc., Ozop LLC, Ozop HK and Spinus, LLC (“Spinus”). All intercompany accounts and transactions have been eliminated in consolidation.

Effective January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products, ~~by:~~licensing agreements and contracts to perform pilot studies by applying the following steps: (1) identify the contract ~~(if any)~~ with a customer; (2) identify the performance obligations in the ~~contract (if any);~~contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the ~~contract (if any);~~contract; and (5) recognize revenue when each performance obligation is satisfied. For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition. Under ASC 605, revenue is recognized when the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) the performance of service has been rendered to a customer or delivery has occurred; (3) the amount of fee to be paid by a customer is fixed and determinable; and (4) the collectability of the fee is reasonably assured. ~~The Company has~~There was no ~~outstanding contracts with any~~impact on the Company’s financial statements as a result of ~~is’ customers.~~adopting Topic 606 for the three and six months ended June 30, 2021, and 2020.

The Company computes net loss per share in accordance with FASB ASC 260, “Earnings per Share.” ASC 260 requires presentation of both basic and diluted earnings per share (EPS) on the face of the statement of operations. Basic EPS is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period. Diluted EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock method, and convertible notes and stock warrants, using the if-converted method. In computing diluted EPS, the average stock price for the period is used in determining the number of shares assumed to be purchased from the exercise of stock options, warrants and conversion of convertible notes. Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.

We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of ~~September~~June 30, ~~2020.~~2021. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective for the reasons discussed below.

A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of ~~September~~June 30, ~~2020,~~2021, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.

Accordingly, the Company concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.

Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.

There has been no change in our internal control over financial reporting occurred during the ~~three~~six months ended ~~September~~June 30, ~~2020,~~2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

We know of no material, existing or pending legal proceedings against our Company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.

~~During~~The following represents all shares issued during the ~~three months~~quarter ended ~~September~~June 30, ~~2020, holders~~2021:

On April 15, 2021, the Company issued 2,500,000 shares pursuant to an employment agreement.

On April 15, 2021, the Company issued 10,000,000 shares of common stock pursuant to a consulting agreement.

On April 15, 2021, the Company issued 5,000,000 shares of common stock pursuant to a consulting agreement.

On May 3, 2021, the Company issued 75,000,000 shares of common stock to an ~~aggregate~~accredited investor upon the cashless exercise of ~~$1,443,821 in principal and $239,428~~a warrant.

On May 6, 2021, the Company issued 54,406,964 shares of common stock to an accredited investor upon the conversion of $85,310 of accrued interest and fees ofrelated to their convertible ~~notes issued by the Company, converted their debt into 1,181,993,894 shares of our common stock at an average conversion price of $0.0014 per share.~~ promissory note dated June 8, 2020.

The Company ~~also~~ issued ~~106,528,473 shares of common stock upon~~ the ~~cashless exercises of warrants.~~

~~The shares described above were issued pursuant to the~~foregoing securities in reliance on an exemption from registration ~~requirements relying on~~provided by Section 4(a)(2) of the Securities ~~Act.~~Act of 1933, as amended, and/or Rule 506(b) promulgated thereunder, as there was no general solicitation to the investors and the transactions did not involve a public offering.

Pursuant to the requirements 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.

Large accelerated filer	~~[ ]~~☐	Accelerated filer	~~[ ]~~☐
Non-accelerated filer	~~[ ]~~☐	Smaller reporting company	~~[X]~~☒
(Do not check if a smaller reporting company)		Emerging growth company	~~[X]~~☒

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
None		N/A		N/A

INDEX

PART I. FINANCIAL INFORMATION

	ITEM 1	Financial Statements (Unaudited)
		Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2020~~2021 and December 31, ~~2019~~2020 (Unaudited)	13
		Condensed Consolidated Statement of ~~Comprehensive Loss~~Operations for the three and ~~nine~~six months ended ~~September~~June 30, 2021 and 2020 ~~and 2019~~ (Unaudited)	24
		Condensed Consolidated Statement of Changes in Stockholders’ ~~Equity (Deficit)~~Deficit for the three and ~~nine~~six months ended ~~September~~June 30, 2021 and 2020 ~~and 2019~~ (Unaudited)	35
		Condensed Consolidated Statement of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, 2021 and 2020 ~~and 2019~~ (Unaudited)	47
		Notes to Interim Unaudited Condensed Consolidated Financial Statements	58
	ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2629
	ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk	3135
	ITEM 4.	Controls and Procedures	3235

PART II. OTHER INFORMATION

	ITEM 1.	Legal Proceedings	3336
	ITEM 1A.	Risk Factors	3336
	ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3336
	ITEM 3.	Defaults Upon Senior Securities	3337
	ITEM 4.	Mine Safety Disclosures	3337
	ITEM 5.	Other Information	3337
	ITEM 6.	Exhibits	33

	~~SIGNATURES~~		3638

	June 30,			December 31,
	2021			2020
ASSETS
Current Assets
Cash	$	3,462,280		$	1,808,476
Prepaid assets		1,392,329			9,569
Accounts receivable		701,945			400
Inventory		1,607,260			359,347
Vendor deposits		1,290,348			-
Total Current Assets		8,454,162			2,177,792

Operating lease right-of-use asset, net		805,710			149,529
Property and equipment, net		136,669			60,671
Other Assets		20,083			-
TOTAL ASSETS	$	9,416,624		$	2,387,992

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Liabilities
Current Liabilities
Accounts payable and accrued expenses	$	2,055,648		$	1,678,006
Related party liabilities		42,716			9,120
Convertible notes payable, net of discounts		25,000			1,078,985
Current portion of notes payable, net of discounts		5,681,318			1,130,083
Customer deposits		306,159			188,518
Deferred liability		750,000			750,000
Derivative liabilities		43,953,486			3,299,684
Current portion of deferred revenues		21,451			17,876
Operating lease liability, current portion		192,116			75,340
Total Current Liabilities		53,027,894			8,227,613

Long Term Liabilities
Note payable, net of discount		389,423			389,423
Operating lease liability, net of current portion		614,247			74,189
Deferred revenue, net of current portion		35,752			46,477
TOTAL LIABILITIES		54,067,316			8,737,702

Stockholders’ Equity (Deficit)
Preferred stock (10,000,000 shares authorized, par value $0.001)
Series C Preferred Stock (50,000 shares authorized and 50,000 shares issued and outstanding, par value $0.001)		50			50
Series D Preferred Stock (20,000 shares authorized and 20,000 shares issued and outstanding, par value $0.001)		20			20
Series E Preferred Stock (3,000 shares authorized, -0- (2021) and 1,000 (2020) issued and outstanding, par value $0.001)		-			1
Preferred stock, value
Common stock (4,990,000,000 shares authorized par value $0.001; 4,606,910,897 (2021) and 3,397,958,292 (2020) shares issued and outstanding)		4,606,911			3,397,958
Additional paid in capital		182,725,312			12,530,933
Accumulated Deficit		(231,982,985	)		(22,278,665	)
Accumulated comprehensive loss		-			(7	)
Total Stockholders’ Equity (Deficit)		(44,650,692	)		(6,349,710	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	9,416,624		$	2,387,992

	September 30,			December 31,
	2020			2019
ASSETS
Current Assets
Cash	$	1,706,257		$	27,382
Prepaid assets		15,826			12,715
Accounts receivable		60,699			19,774
Inventory		172,180			971,813
Total Current Assets		1,954,962			1,031,684

Operating lease right-of-use asset, net		167,500			-
Property and equipment, net		35,560			15,199
Goodwill		11,396,096			-
License Rights, net of accumulated amortization		140,624			-
TOTAL ASSETS	$	13,694,742		$	1,046,883

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Liabilities
Current Liabilities
Accounts payable and accrued expenses	$	1,513,704		$	1,043,179
Related party liabilities		10,308			27,909
Convertible notes payable, net of discounts		861,507			-
Current portion of notes payable, net of discounts		1,025,962			524,406
Customer deposits		104,460			684,822
Deferred liability		750,000			-
Derivative liabilities		2,250,953			-
Operating lease liability, current portion		73,945			-
Total Current Liabilities		6,590,839			2,280,316

Long Term Liabilities
Note payable, net of discount, net of current portion		290,140			-
Operating lease liability, net of current portion		93,555			-
TOTAL LIABILITIES		6,974,534			2,280,316

Stockholders’ Equity (Deficit)
Preferred stock (10,000,000 shares authorized, par value $0.001)
Series C Preferred Stock (50,000 shares authorized and 50,000 (2020) and 47,500 (2019) issued and outstanding, par value $0.001)		50			48
Series D Preferred Stock (20,000 shares authorized and 20,000 (2020) and 18,667 (2019) issued and outstanding, par value $0.001)		20			19
Series E Preferred Stock (2,500 shares authorized and 1,000 (2020) and 500 (2019) issued and outstanding, par value $0.001)		1			1
Common stock (4,990,000,000 shares authorized par value $0.001; 3,140,453,186 (2020) and -0- (2019) shares issued and outstanding)		3,140,453			-
Additional paid in capital		11,752,789			76,922
Accumulated Deficit		(8,173,908	)		(1,310,422	)
Accumulated comprehensive gain		(7	)		-
Total Stockholders’ Equity (Deficit)		6,720,208			(1,233,433	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	13,694,742		$	1,046,883

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2020			2019			2020			2019
Revenue	$	246,951		$	176,582		$	1,493,592		$	416,778
Cost of goods sold		271,510			133,267			1,366,672			432,664
Gross profit (loss)		(24,559	)		43,315			126,920			(15,886	)
Operating expenses:
General and administrative, related parties		4,415,919			-			4,415,919			-
General and administrative, other		414,722			101,820			735,564			314,433
Total operating expenses		4,830,641			101,820			5,151,483			314,433

Loss from operations		(4,855,200	)		(58,505	)		(5,024,563	)		(330,319	)

Other (income) expenses:
Interest expense		1,531,256			12,203			1,661,308			41,656
Loss on change in fair value of derivatives		189,612			-			189,612			-
Gain on extinguishment of debt		(12,807	)		-			(12,807	)		-
Total Other Expenses		1,708,061			12,203			1,838,113			41,656

Loss before income taxes		(6,563,262	)		(70,708	)		(6,862,676	)		(371,975	)
Income tax provision		-			-			-			-
Net loss	$	(6,563,262	)	$	(70,708	)	$	(6,862,676	)	$	(371,975	)
Other comprehensive loss:
Foreign currency translation adjustment		(7	)		-			(7	)		-
Comprehensive loss	$	(6,563,269	)	$	(70,708	)	$	(6,862,683	)	$	(371,975	)

Loss per share basic and fully diluted	$	(0.00	)	$	N/A		$	(0.01	)		N/A

Weighted average shares outstanding
Basic and diluted		2,667,510,771			N/A			1,045,384,629			N/A

	Shares			Amount			Shares		Amount		Shares		Amount		Shares			Amount			Shares		Amount		Loss			Capital			Deficit			Equity(Deficit)
	Common stock to be issued						Series C Preferred Stock				Series D Preferred Stock				Series E Preferred Stock						Common Stock				Accumulated Comprehensive			Additional Paid-in			Accumulated			Total Stockholders’ Equity
	Shares			Amount			Shares		Amount		Shares		Amount		Shares			Amount			Shares		Amount		Loss			Capital			Deficit			(Deficit)
Balances January 1, 2021		-		$	-			50,000	$	50		20,000	$	20		1,000		$	1			3,397,958,292	$	3,397,958		(7	)	$	12,530,933		$	(22,278,665	)	$	(6,349,710	)

Shares issued for conversions of notes and interest payable		-			-			-		-		-		-		-			-			428,747,654		428,748		-			97,110,282			-			97,539,030

Shares issued upon cashless exercise of warrants		-			-			-		-		-		-		-			-			330,797,987		330,798		-			38,714,266			-			39,045,064

Issuance of Series E Preferred Stock		-			-			-		-		-		-		2,000			2			-		-		-			1,999,998			-			2,000,000

Redemption of Series E Preferred Stock		-			-			-		-		-		-		(3,000	)		(3	)		-		-		-			(2,999,997	)		-			(3,000,000	)

Shares issued and to be issued for fees and services		5,000,000			5,000			-		-		-		-		-			-			20,000,000		20,000		-			2,877,000			-			2,897,000

Shares issued for lease agreement		-			-			-		-		-		-		-			-			100,000,000		100,000		-			530,000			-			630,000

Shares issued for debt restructure		-			-			-		-		-		-		-			-			175,000,000		175,000		-			16,275,000			-			16,450,000

Net loss		-			-			-		-		-		-		-			-			-		-		7			-			(209,492,368	)		(209,492,361	)
Balances March 31, 2021		5,000,000			5,000			50,000		50		20,000		20		-			-			4,452,503,933		4,452,504		-			167,037,482			(231,771,033	)		(60,280,977	)

Shares issued and to be issued for fees and services		(5,000,000	)		(5,000	)		-		-		-		-		-			-			25,000,000		25,000		-			1,752,000			-			1,777,000

Shares issued upon cashless exercise of warrants		-			-			-		-		-		-		-			-			75,000,000		75,000		-			8,990,237			-			9,065,237

Shares issued for conversions of notes and interest payable		-			-			-		-		-		-		-			-			54,406,964		54,407		-			4,945,593			-			5,000,000

Issuance of Series E Preferred Stock		-			-			-		-		-		-		2,000			2			-		-		-			1,999,998			-			2,000,000

Redemption of Series E Preferred Stock		-			-			-		-		-		-		(2,000	)		(2	)		-		-		-			(1,999,998	)		-			(2,000,000	)

Net loss		-			-			-		-		-		-		-			-			-		-								(211,952	)		(211,952	)
Balances June 30, 2021		-		$	-			50,000	$	50		20,000	$	20		-		$	-			4,606,910,897	$	4,606,911	$	-		$	182,725,312		$	(231,982,985	)	$	(44,650,692	)

	Common stock				Series C Preferred Stock				Series D Preferred Stock				Series E Preferred Stock				Accumulated comprehensive			Additional Paid-in			Accumulated			Total Stockholders’ Equity
	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		income			Capital			Deficit			(Deficit)
Balances January 1, 2020		-	$	-		47,500	$	48		18,667	$	19		500	$	1	$	-		$	76,922		$	(1,310,422	)		(1,233,434	)

Net income		-		-		-		-										-			-			87,549			87,549
Balances March 31, 2020		-		-		47,500		48		18,667		19		500		1		0			76,922			(1,222,873	)		(1,145,886	)

Net loss		-		-		-		-										-			-			(1,014	)		(1,014	)
Balances June 30, 2020		-		-		47,500		48		18,667		19		500		1		0			76,922			(1,223,887	)		(1,146,898	)

Reverse merger transaction		1,851,930,729		1,851,931		-		-		-		-		-		-		-			(1,033,489	)		-			818,442

Shares issued for conversions of note and interest payable		1,181,993,984		1,181,994		-		-		-		-		-		-		-			7,997,730			-			9,179,724

Shares issued upon cashless exercise of warrants		106,528,473		106,528		-		-		-		-		-		-		-			(106,528	)		-			-

Warrants issued in connection with issuance of debt		-		-		-		-		-		-		-		-		-			531,507			-			531,507

Shares issued pursuant to CEO contract		-		-		2,500		3		1,333		1		500		1		-			4,286,648			-			4,286,652

Foreign currency translation adjustment		-		-		-		-		-		-		-		-		(7	)		-			-			(7	)

Net loss		-		-		-		-		-		-		-		-		-			-			(6,949,211	)		(6,949,211	)
Balances September 30, 2020		3,140,453,186	$	3,140,453		50,000	$	50		20,000	$	20		1,000	$	1	$	(7	)	$	11,752,789		$	(8,173,098	)	$	6,720,208

	2021			2020
	For the Six Months Ended June 30,
	2021			2020
Cash flows from operating activities:
Net loss from continuing operations	$	(209,704,320	)	$	(299,415	)
Adjustments to reconcile net loss to net cash used in operations
Non-cash interest expense		44,170,200			111,250
Amortization and depreciation		65,388			14,658
Debt restructure expense		16,450,000			-
Loss on fair value change of derivatives		43,331,083			-
Loss on extinguishment of debt		95,437,589			-
Stock compensation expense		7,965,945			-
Changes in operating assets and liabilities:
Accounts receivable		(701,545	)		(57,952	)
Inventory		(1,247,913	)		648,039
Prepaid expenses		(1,290,348	)		(1,549	)
Vendor deposits		(64,789	)		-
Accounts payable and accrued expenses		682,845			(177,687	)
Deferred revenue		(7,150	)		-
Operating lease liabilities		(46,054	)		-
Customer deposits		117,641			(492,655	)
Net cash used in operating activities		(4,841,428	)		(255,311	)

Cash flows from investing activities:
Purchase of office and computer equipment		(94,679	)		(9,648	)
Net cash used in investing activities		(94,679	)		(9,648	)

Cash flows from financing activities:
Proceeds from issuances of notes payable		12,000,000			85,000
Proceeds from Payroll Protection Program		-			100,400
Proceeds from shareholders		-			42,000
Payments to shareholders		(26,367	)		(56,765	)
Payments of principal of convertible note payable and notes payable		(383,722	)		(46,224	)
Redemption of Series E Preferred Stock		(5,000,000	)		-
Advance from affiliate		-			400,000
Net cash provided by financing activities		6,589,911			524,411

Net increase in cash		1,653,804			259,452

Cash, Beginning of period		1,808,476			27,382

Cash, End of period	$	3,462,280		$	286,834

Supplemental disclosure of cash flow information:
Cash paid for interest	$	545,138		$	7,349
Cash paid for income taxes	$	-		$	-

Schedule of non-cash Investing or Financing Activity:
Original issue discount included in notes payable	$	1,310,000		$	-
Issuance of common stock upon convertible note and accrued interest conversion	$	743,555		$	-
Operating lease right-of-use assets and liabilities	$	702,888		$	-
Issuance of common stock and preferred stock for consulting fees and compensation	$	7,965,945		$	-
Issuance of common stock for lease agreement	$	630,000		$	-
Issuance of common stock for debt restructuring	$	16,450,000		$	-

	Purchase Price Allocation
Fair value of OZOP equity consideration issued	$	818,444
Assets acquired	$	1,229,917
Goodwill		11,201,145
Liabilities assumed		(11,612,618	)
Total purchase price allocation	$	818,444

	Purchase Price Allocation
Fair value of OZOP equity consideration issued	$	818,444
Assets acquired	$	1,229,917
Goodwill		11,201,145
Liabilities assumed		(11,612,618	)
	$	818,444

	Unaudited pro forma results nine months ended September 30, 2020			Unaudited pro forma results nine months ended September 30, 2019
Revenues	$	1,493,592		$	501,931
Loss before income taxes		(40,027,669	)		(4,809,301	)
Basic and fully diluted loss per share	$	(0.02	)	$	(0.14	)

	Adjusted December 31, 2020			December 31, 2020

Total assets	$	2,387,933		$	2,387,933
Current liabilities		8,227,613			6,885,845
Total liabilities		8,737,702			7,395,934
Total stockholders’ deficit		(6,349,710	)		(5,007,942	)

	Sales % Three Months Ended September 30, 2020			Sales % Three Months Ended September 30, 2019			Sales % Nine Months Ended September 30, 2020			Sales % Nine Months Ended September 30, 2019			Accounts receivable balance September 30, 2020		Sales % Three Months Ended June 30, 2021			Sales % Six Months Ended June 30, 2021			Sales % Three Months Ended June 30, 2020			Sales % Six Months Ended June 30, 2020			Accounts receivable balance June 30, 2021
Customer A		29	%		-	%		60	%		-	%	$	-		N/A			37.0	%		N/A			N/A		$	-
Customer B		19	%		-	%		14	%		-	%		-		18.3	%		11.3	%		N/A			N/A			250,392
Customer C		23	%		-	%		-	%		-	%		34,011		13.5	%		N/A			N/A			N/A			-
Customer D		12	%		-	%		-	%		-	%		-		14.9	%		N/A			N/A			N/A			-
Customer E		-	%		29	%		-	%		12	%		-		10.5	%		N/A			N/A			N/A			112,998
Customer F		-	%		16	%		-	%		-	%		-		N/A			N/A			18.2	%		65.6	%		-
Customer G		-	%		12	%		-	%		-	%		-		N/A			N/A			47.1	%		13.4	%		-
Customer H		-	%		-	%		-	%		31	%		-		N/A			N/A			13.6	%		N/A			-
Customer I		-	%		14	%		-	%		-	%		-		N/A			N/A			13.3	%		N/A			-

	Purchase % Three Months Ended September 30, 2020			Purchase % Three Months Ended September 30, 2019			Purchase % Nine Months Ended September 30, 2020			Purchase % Nine Months Ended September 30, 2019
Supplier A		11	%		-	%		-	%		-	%
Supplier B		15	%		-	%		10	%		-	%
Supplier C		18	%		-	%		-	%		-	%
Supplier D		-	%		17	%		-	%		-	%
Supplier E		-	%		14	%		-	%		-	%
Supplier F		-	%		-	%		15	%		-	%
Supplier G		-	%		-	%		26	%		-	%

	September 30, 2020			December 31, 2019
Office equipment	$	113,025		$	78,851
Less: Accumulated Depreciation		(77,465	)		(63,642	)
Property and Equipment, Net	$	35,560		$	15,199

Office furniture and equipment	3-5 years
Warehouse equipment	7 years

	Three months ended June 30, 2021		Six months ended June 30, 2021
Sourced and distributed products	$	1,254,982	$	1,254,982
Manufactured products		19,051		814,605
Total	$	1,274,033	$	2,069,587

	●	Level 1 - Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities.
	●	Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means.
	●	Level 3 - Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available.

September 30, 2020	Derivative Liabilities		Total
Level I	$	-	$	-
Level II	$	-	$	-
Level III	$	2,250,953	$	2,250,953

June 30, 2021	Derivative Liabilities		Total
Level I	$	-	$	-
Level II	$	-	$	-
Level III	$	43,953,486	$	43,953,486

December 31, 2020	Derivative Liabilities		Total
Level I	$	-	$	-
Level II	$	-	$	-
Level III	$	3,299,684	$	3,299,684

	~~September~~June 30, ~~2020~~ 2021
~~Common stock to be issued~~		~~1,350~~
Convertible preferred stock		~~9,421,359,558~~13,820,732,691
Unexercised common stock purchase warrants		597,024,518
Convertible notes payable		~~322,697,849~~781,616
		~~9,744,058,75~~14,418,538,825

	September 30, 2020
Patents and license rights	$	151,041
Accumulated amortization		(10,417	)
Net carrying amount	$	140,624

	September 30, 2020			June 30, 2021

Principal balance	$	1,544,489		$	25,000
Unamortized discount		(682,982	)		-
Ending balance, net	$	861,507		$	25,000

Balance- July 10, 2020, assumed pursuant to PCTI transaction	$	8,743,231
Issued during period		626,534
Converted or paid		(7,308,426	)
Change in fair value recognized in operations		189,614
Balance- September 30, 2020	$	2,250,953

	Derivative liabilities associated with warrants			Derivative liabilities associated with convertible notes			Total derivative liabilities
Balance December 31, 2020	$	2,061,307		$	1,238,377		$	3,299,684
Fair value of issuances during period		50,907,939			-			50,907,939
Notes converted or paid		-			(2,258,522	)		(2,258,522	)
Exercise of warrants		(48,110,301	)		-			(48,110,301	)
Warrants cancelled		(3,216,397	)		-			(3,216,397	)
Change in fair value		42,275,737			1,055,346			43,331,083
Balance June 30, 2021	$	43,918,285		$	35,201		$	43,953,486

	Three months ended September 30,				Nine months ended September 30,
	2020		2019		2020		2019
CEO, parent	$	96,771	$	-	$	96,771	$	-
President, subsidiary		32,500		-		32,500		-
Total	$	129,271	$	-	$	129,271	$	-

	●	100,000,000 shares of restricted common stock pursuant to a lease agreement (see Note 10).
	●	175,000000 shares of restricted common stock pursuant to restructuring agreement related to a deferred liability (see Note 9).
	●	45,000,000 shares of restricted common stock in the aggregate for services and consulting agreements.

	September 30, 2020			June 30, 2021
Office and warehouse lease	$	185,139		$	888,026
Less accumulated amortization		(17,639	)		(82,316	)
Right-of-us assets, net	$	167,500		$	805,710

	September 30, 2020			June 30, 2021
Lease liability	$	167,500		$	806,363
Less current portion		(73,945	)		(192,116	)
Long term portion	$	93,555		$	614,247

	Amount			Amount
For the three months ending December 31, 2020	$	21,000
For the year ending December 31, 2021		84,000		$	122,886
For the eleven months ending November 30, 2022		77,000
For the year ending December 31, 2022					240,991
For the year ended December 31, 2023					167,858
For the year ended December 31, 2024					171,840
For the year ended December 31, 2025					175,942
Thereafter					74,030
Total	$	182,000		$	953,547
Less: present value discount		(14,500	)		(147,184	)
Lease liability	$	167,500		$	806,363

	Three months ended June 30,				Six months ended June 30,
	2021		2020		2021		2020
Sourced and distributed products	$	1,254,982	$	-	$	1,254,982	$	-
Manufactured products		19,051		354,051		814,605		1,246,641
Total	$	1,274,033	$	354,051	$	2,069.587	$	1,246,641

	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021		Three Months Ended June 30, 2020			Six Months Ended June 30, 2020
Wages and management fees, related parties, including stock-based compensation	$	1,461,074	$	3,576,082	$	-		$	-
Stock-based compensation, other		2,013,945		5,115,945		-			-
Salaries, taxes and benefits		241,918		428,493		93,002			191,632
Professional and consulting fees		362,782		566,207		13,437			18,787
Advertising and marketing		5,954		28,544		(2,939	)		3,168
Rent and office expense		48,837		90,231		8,951			25,446
Insurance		45,439		57,514		3,946			9,924
General and administrative		179,356		285,759		51,945			71,885
Total operating expenses	$	4,359,305	$	10,148,775	$	168,342		$	320,842

	●	5,000,000 shares issued in April 2021 pursuant to a one-year consulting agreement. The Company valued the shares at $0.20 per share (the market price of the common stock on the date of the agreement), and $1,000,00 was recorded as deferred stock compensation, to be amortized over the one-year term of the agreement. For the six months ended June 30, 2021, $331,507 is included in stock-based compensation expense.

	●	10,000,000 shares issued in April 2021 pursuant to a one-year consulting agreement. The Company valued the shares at $0.0076 per share (the market price of the common stock on the date of the agreement), and $76,000 was recorded as deferred stock-based compensation, to be amortized over the one-year term of the agreement. For the six months ended June 30, 2021, the Company recorded $36,348 as stock-based compensation expense.

	●	5,000,000 shares issued in April 2021 for services. The Company valued the shares at $0.1392 per share (the market price of the common stock on the date of the agreement), and $696,000 is included in stock-based compensation expense for the six months ended June 30, 2021.

	●	10,000,000 shares issued for services. The shares were valued at $0.0056 per share, the date the Company agreed to issue the shares. During the six months ended June 30, 2021, the Company included $56,000 in stock compensation expense.

	●	10,000,000 shares issued pursuant to a consulting agreement dated February 24, 2021 (see Note 11). The shares were valued at $0.2386 per share. During the six months ended June 3, 2021, the Company included $2,386,000 in stock compensation expense.

	●	5,000,000 shares of common stock to be issued in the aggregate to two new employees pursuant to their offers of employment dated March 31, 2021. The shares were valued at $0.23 per share. During the six months ended June 30, 2021, the Company included $460,000 in stock compensation expense for the 5,000,000 shares of common stock.

	●	Issuance of 200 shares and 950 shares of Series E Preferred Stock, with a redemption value of $1,000 per share, resulting in stock compensation expense of $950,000 and 1,150,000 for the three and six months ended June 30, 2021, respectively.