The following discussion and analysis of our financial condition and operating results should be read together with our financial statements and related notes included elsewhere in this report. This discussion and analysis and other parts of this report contain forward-looking statements based upon current beliefs, plans, and expectations that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" or in other parts of this report. Our fiscal quarters end on March 31, June 30, September 30, and December 31, and our current fiscal year ended on December 31, 2019.

Overview

We develop projects for renewable power generation, desalinated water production, and air conditioning using our proprietary technologies designed to extract energy from the temperature differences between warm surface water and cold deep water. In addition, our projects provide ancillary products such as potable/bottle water and high-profit aquaculture, mariculture, and agriculture opportunities.

We currently have no source of revenue, so as we continue to incur costs we are dependent on external funding for operations. We cannot assure that such funding will be available or, if available, can be obtained on acceptable or favorable terms.

Our operating expenses consist principally of expenses associated with the development of our projects until we determine that a particular project is feasible. Salaries and wages consist primarily of employee salaries and wages, payroll taxes, and health insurance. Our professional fees are related to consulting, engineering, legal, investor relations, outside accounting, and auditing expenses. General and administrative expenses include travel, insurance, rent, marketing, and miscellaneous office expenses. The interest expense includes interest and discounts related to our loans and notes payable.

Results of Operations

Comparison of Years Ended December 31, 2019 and 2018

We had no revenue in the years ended December 31, 2019 and 2018.

During the year ended December 31, 2019, we had salaries and wages of $861,443, compared to salaries and wages of $1,361,706 during the same period for 2018, a decrease of 36.7%, which is attributable to a reduction in staff because of cost-cutting measures due to our lack of revenue and funding.

During the years ended December 31, 2019 and 2018, we recorded professional fees of $505,636 and $1,201,956, respectively, a decrease of 57.9% year over year, which is attributable to a decrease in the use of outside consultants, especially for our due diligence of potential acquisitions.

General and administrative expenses were $271,621 during the year ended December 31, 2019, compared to $595,306 for the same period in 2018, a decrease of 54.4%. This decrease is attributable to a reduction in staff because of cost-cutting measures due to our lack of revenue and funding.

Our interest expense was $2,348,923 for the year ended December 31, 2019, compared to $1,281,134 for the same period of the previous year, an increase of 83.3%. In addition to interest on our notes payable of $1,263,598 for the year ended December 31, 2018, we also incurred default penalties of $1,089,643 on two of our notes during the year ended December 31, 2019.

Our amortization of debt discount and loan fee expenses was $39,851 for the year ended December 31, 2019, compared to $1,160,983 for the same period of the previous year. This decrease was due to our payments of original discount fees and transaction fees for L2 Capital, LLC and Collier Investments, LLC in 2018. The expense also reflects the fair value of warrants issued with notes payable and recorded as discount, which we amortized during the year. In addition, there was a change in the fair value of the derivative liability of $693,380 during the year ended December 31, 2019, and $1,206,857 for the same period in 2018. We did not incur a loss on the extinguishment of any debt in 2019, as compared to a loss on settlement of debt of $279,432 in 2018.

Our operations used net cash of $616,780 in 2019, as compared to $1,638,582 in the prior year. The decrease was primarily due to the $693,380 of change in the derivative liability in 2019 when compared to $1,206,857 in 2018. Also, default penalties of $1,089,643 on two loans impacted our cash flow from operations. The recognition of the impairment of assets under construction of $892,639 impacted the cash flow in 2018.

Investing activities for the years ended December 31, 2019 and 2018, used cash of $0 and $0, respectively.


                                       22

Financing activities provided cash of $631,625 for our operations during the year ended December 31, 2019, as compared to providing cash of $1,221,965 in the prior year, a decrease of 48.3%. Proceeds from new notes payable were $477,950 in 2019, as compared to $1,114,242 in the prior year.

Liquidity and Capital Resources

At December 31, 2019, our principal source of liquidity consisted of $23,243 of cash, as compared to $8,398 of cash at December 31, 2018. At December 31, 2019, we had negative working capital (current assets minus current liabilities) of $21,882,907. In addition, our stockholders' deficiency was $22,066,657 at December 31, 2019, compared to stockholders' deficiency of $17,769,177 at December 31, 2018, an increase in the deficiency of $4,297,480. We are focusing our efforts on promoting and marketing our technology by developing and executing contracts. We are exploring external funding alternatives, as our current cash is insufficient to fund operations for the next 12 months.

Our consolidated financial statements have been prepared assuming we will continue as a going concern. We have experienced recurring losses from operations and have an accumulated deficit. Our ability to continue our operations as a going concern is dependent on management's plans, which include the raising of capital through debt and/or equity markets until such time that revenue provided by operations is sufficient to fund working capital requirements. We will require additional funding to finance the growth of our current and expected future operations as well as to achieve our strategic objectives. The accompanying consolidated financial statements have been preparedon a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These consolidated financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should we be unable to continue as a going concern. In recent weeks, the continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which increases the cost of capital and adversely impacts access to capital. The disruption may have an adverse impact on the Company's ability to raise capital through debt and/or equity markets to fund working capital requirements or to continue as a going concern.

We have no significant contractual obligations or commercial commitments not reflected on our balance sheet as of this date.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as "special purpose entities.

Critical Accounting Policies

We have identified the policies outlined below as critical to our business operations and an understanding of our results of operations. The list is not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for management's judgment in their application. The impact and any associated risks related to these policies on our business operations is discussed throughout Management's Discussion and Analysis of Financial Condition and Results of Operations when such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see the notes to our consolidated financial statements for the year ended December 31, 2019. Note that our preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. We cannot assure that actual results will not differ from those estimates.

Revenue Recognition

In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. We adopted the ASU on January 1, 2018. The adoption of the ASU did not have an impact on our consolidated financial statements during the years ended December 31, 2019 and 2018.

Income Taxes

We use the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities and on the amount of operating loss carry-forwards and are measured using the enacted tax rates and laws that will be in effect when the temporary differences and carry-forwards are expected to reverse. An allowance against deferred tax assets is recorded when it is more likely than not that such tax benefits will not be realized.




                                       23


Capitalization Policy

Furniture, vehicles, equipment, and software are recorded at cost and include major expenditures that increase productivity or substantially increase useful lives. Maintenance, repairs, and minor replacements are charged to expenses when incurred. When furniture, vehicles, and equipment are sold or otherwise disposed of, the asset and related accumulated depreciation are removed from this account, and any gain or loss is included in the statement of operations. The cost of furniture, vehicles, equipment, and software is depreciated over the estimated useful lives of the related assets.

Assets under construction represent costs incurred by us for our renewable energy systems currently in process. We capitalize costs incurred once the project has met the project feasibility stage. Costs include environmental engineering, permits, government approval costs, and site engineering costs. We currently have several projects in the development stage. We capitalize direct interest costs associated with the projects.

Recent Accounting Pronouncements

We have reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on our consolidated results of operations, financial position, and cash flows. Based on that review, we believe that none of these pronouncements will have a significant effect on current or future earnings or operations (see Note 1 of the notes to our consolidated financial statements for the year ended December 31, 2019).

© Edgar Online, source Glimpses