JUPITER WELLNESS : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-K) (2024)

You should read the following discussion and analysis of our financial conditionand results of our operations together with our consolidated financialstatements and the notes thereto appearing elsewhere in this document. Thisdiscussion contains forward-looking statements reflecting our currentexpectations, whose actual outcomes involve risks and uncertainties. Actualresults and the timing of events may differ materially from those stated in orimplied by these forward-looking statements due to a number of factors,including those discussed in the sections entitled "Risk Factors," "CautionaryStatement regarding Forward-Looking Statements" and elsewhere in thisProspectus. Please see the notes to our Financial Statements for informationabout our Significant Accounting Policies and Recent Accounting Pronouncements.

Forward Looking Statements

This annually report contains forward-looking statements. These statementsrelate to future events or our future financial performance. In some cases, youcan identify forward-looking statements by terminology such as "may", "should","expects", "plans", "anticipates", "believes", "estimates", "predicts","potential" or "continue" or the negative of these terms or other comparableterminology. These statements are only predictions and involve known and unknownrisks, uncertainties and other factors that may cause our or our industry'sactual results, levels of activity, performance or achievements to be materiallydifferent from any future results, levels of activity, performance orachievements expressed or implied by these forward-looking statements. Althoughwe believe that the expectations reflected in the forward-looking statements arereasonable, we cannot guarantee future results, levels of activity, performanceor achievements. Except as required by applicable law, including the securitieslaws of the United States, we do not intend to update any of the forward-lookingstatements to conform these statements to actual results.

Our unaudited financial statements are stated in United States Dollars (US$) andare prepared in accordance with United States Generally Accepted AccountingPrinciples. The following discussion should be read in conjunction with ourfinancial statements and the related notes that appear elsewhere in thisannually report. The following discussion contains forward-looking statementsthat reflect our plans, estimates and beliefs. Our actual results could differmaterially from those discussed in the forward-looking statements. Factors thatcould cause or contribute to such differences include, but are not limited to,those discussed below and elsewhere in this annually report.

In this annually report, unless otherwise specified, all dollar amounts areexpressed in United States dollars and all references to "common shares" referto the common shares in our capital stock.

As used in this annually report and unless otherwise indicated, the terms "we","us", "our", "JUPW" and the "Company" mean Jupiter Wellness, Inc.

Company Overview

We were originally incorporated in the State of Delaware on October 24, 2018.Our principal business address is 725 N. Hwy A1A, Suite C-106, Jupiter, FL33477.

Jupiter Wellness, Inc. is a cutting-edge developer of cannabidiol (CBD) basedmedical therapeutics and wellness products. The Company's clinical pipeline ofprescription CBD-enhanced skin care therapeutics address indications includingeczema, burns, herpes cold sores, and skin cancer. We are in the early stage ofmanufacturing, distributing, and marketing a diverse line of consumer productsinfused with CBD. We have a proprietary, line of products: CaniSun, CaniSkin andCaniDermRX. Under the CaniSun brand, we are marketing patent pending CBD-infusedsun care lotion formulas containing various sun protection factors, or SPFs. Inaddition, we are exploring the use of CBD with other prescription and/orover-the-counter, or OTC, consumer products that have potentially therapeuticand medical applications. Specifically, we are exploring the use of such topicalsolutions for the treatment of eczema, dermatitis (JW-100), and actinickeratosis (JW-_100), a non-prescription lotion/lip balm (JW-200) for thetreatment of symptoms of cold sores, and a prescription product for thetreatment of burns (JW-101). The CaniDermRX (JW-100) topical solution for thetreatment of eczema dermatitis is the lead product candidate and will be furthertested in humans as an investigational cosmetic ingredient followed by clinicaltrials subject to the regulations of the United States Food and DrugAdministration ("FDA") under an investigational new drug, or IND, application.In February 2021, we announced the results of our novel Cannabidiol-Aspartamecombination treatment JW-100 clinical trial which has shown it significantlyReduces ISGA Score in Eczema patients. A double blinded placebo controlledinterventional study was conducted. Subjects were assigned to apply, at home,one of three treatments: JW-100 (a CBD and aspartame combination topicalformulation), a CBD only topical formulation, or a placebo topical formulation.After 14 days, the average reduction in the Investigators Static GlobalAssessment (ISGA) score was calculated for each group. Additionally, theproportion of subjects achieving (ISGA) score 0 (clear) or 1 (almost clear) withat least 2 grade improvement from baseline was recorded for each arm of thestudy. 50% of subjects in the JW-100 arm achieved ISGA clear or almost clear (1or 2) with at least a 2-grade improvement from baseline after treatment versus20% and 15% in the CBD-only and placebo arms, respectively. The percentage ofsubjects achieving clear or almost clear with at least a 2-grade improvementfrom baseline was found to be statistically significant (p=0.028). JW-100, anovel topical formulation containing CBD and aspartame, was shown tosignificantly reduce ISGA score in atopic dermatitis patients after two weeks ofuse. The combination of CBD and aspartame was more effective at reducing ISGAscores than CBD alone.

In parallel, we plan to initiate the development of other products. Weoriginally anticipated developmental studies to be completed in 2020, however,these studies were delayed due to COVID-19. We are also actively seeking toacquire or license products in the OTC skin care market that can be infused withCBD and marketed under our CaniSkin and CaniDermRX brand names. There can be noassurances that we will acquire or enter into such partnership or licensingagreements.

The endocannabinoid system, which is a body system affected by CBD, plays apivotal role in maintaining a healthy skin through modulating pain sensation,cell proliferation and inflammation. Our strategy for treatment of skinindications is, therefore, to focus on the use of CBD containing topicalformulations and to explore potential combinations of CBD and other agents thatmay augment and act synergistically with CBD. We will explore this strategy byconducting controlled clinical trials to try to ultimately gain FDA approval forspecific indications.

 31 Table of ContentsCaniSun Brand

We developed a CBD-infused sunscreen with broad-spectrum SPF protection. We havecompleted lab testing for CBD solubility-infusing clear, colorless, odorless,and 99.5% pure CBD isolated with three different sun care active ingredients,hom*osalate, octisalate and octocrylene, which have already been approved by theFDA. The CBD-infused sun care market is fairly nascent in the United States; webelieve that there are currently no major competitors in the category. We see anopportunity to become the leading manufacturer of CBD-infused sun care products,marketing the CaniSun brand through an extensive digital and social mediaawareness campaign. We announced the launch of our CaniSun sun care line of SPF30, SPF 50 and SPF 55 face lotion on June 6, 2019. We also sell our CBD-infusedlip balm and CBD-infused SPF 30 sunscreen spray on our website Canisun.com.

We currently have additional CaniSun products in various stages of developmentas follows:

 i) CBD-infused SPF 30 Lip Balm; ii) CBD-infused SPF 15 sunscreen lotion; and iii) Mineral-based sunscreen lotions (SPF 30 and 50).

All of the products listed above are in the developmental stage, whereby we arefinalizing the formula to be used in each product, respectively. For CBD-infusedproduct candidates in development, such as our CBD-infused SPF 30 Lip Balm andCBD-infused SPF 15 sunscreen lotion, we have already identified the sun careactive ingredient formula (which has already been FDA approved) to be infusedwith CBD. Once the respective formulas for each of our products are created, theproduct candidates will undergo three months of stability testing. Provided thatthe product candidates pass the stability testing, we intend to sell theproducts on our CaniSun website. The formula for our mineral-based sunscreenlotion (SPF 30 and 50) (product iii) above) includes certain minerals instead ofchemicals typically used in sunscreen lotions.

Overall, we believe that our currently offered sunscreen products comply withthe FDA Final Rule for sunscreen products under 21 CFR 352 Sunscreen productsfor Over-the-Counter Human Use. Therefore, we believe that our sunscreenproducts fall within the FDA monograph and that premarket approval and testingis not required. Our products have been tested for SPF Evaluation (SPF rating),Critical Wave Length (Broad Spectrum claim) and Water Resistance, each of whichis defined within the monograph and labeled accordingly.

All of the test on these products is standard testing for suncare products. Suchtesting protocols are not intended to test for any effects of adding CBD. Inaddition to these tests that were conducted to support the claims on thepackage, each batch is also tested for appearance, color, odor, pH, viscosity,specific gravity, analytical for the sunscreen active ingredients, and microbialcontent testing.

Our products are tested each time they are manufactured. DCR Labs manufacturesour products and has represented to us that it is compliant with the FDA'sCurrent Good Manufacturing Practice, or "CGMP", regulations in accordance with21 CFR 210/211 required for Over-the-Counter drug products. DCR Labs hasself-imposed health and safety standards to ensure compliance with the FDA'sCGMPs.

We expect to continually update and expand upon our corporate website andfurther refine our online retail strategies on an ongoing basis.Jupiterwellness.com is our primary corporate website, which will serve as theprimary source of information about us for investors and contain press releases,clinical trial pipeline, lab reports, blog posts, and additional informationabout each of our brands. We anticipate that each brand will have its ownfront-facing website dedicated to retail sales and brand specific information.For example, our line of sun care products, CaniSun, has its own website atCaniSun.com and allows for online retail purchase of the entire product line. Aswe expand our brands (CaniSkin and CaniDermRX), we anticipate utilizing the samestrategy and dedicating a new e-commerce website to each brand moving forward.We are also building a website dedicated to servicing our wholesale and largerdistributor clients. This website will have more information about each productand provide a central location for larger retailers to find more in-depthinformation about all of our brands in one place. We plan to leverage ourwebsites with a social media presence across multiple platforms designed toutilize product reviews to increase brand loyalty, brand recognition and sales.The references to our website in this prospectus are inactive textual referencesonly. The information on our website is neither incorporated by reference intothis prospectus nor intended to be used in connection with this offering. Wealso see growth potential in developing retail locations. We intend to utilizecross-promotion marketing campaigns with our products and product categoryexpansion that leverages our existing distribution channels. We have built ane-commerce platform designed to connect us directly to consumers. We use theplatform to sell products, educate customers and build brand loyalty.

 32 Table of Contents

CaniSkin Brand and CaniDermRX Brand

We are currently developing other products such as CBD-infused skin care lotionunder the CaniSkin brand. Specifically, a CBD-infused moisturizing face serum isunder development. We must first finalize the formula to be used in the faceserum, and, once approved, the product candidate will undergo stability testing.We intend to sell the product, provided it first passes stability testing, onour website for CaniSkin products. Additionally, we are developing innovativedermatological treatments under the CaniDermRX brand that are specialized totreat atopic dermatitis and other dermatological conditions such as burns, skincancer and herpes cold sores, respectively. Subject to obtaining FDA approval,we intend for our experimental-stage product for the treatment of atopicdermatitis to compete with Dupixent, an FDA-approved leading treatment foratopic dermatitis, and for our experimental-stage product for the treatment ofherpes cold sores to compete with Silvadene and Abreva, FDA-approved productsfor treating herpes cold sores. These products require more extensive testing toshow with safety and efficacy.

Our first clinical indication is atopic dermatitis (eczema). We have completedmanufacturing of formulations containing CBD and aspartame in an FDA-approvedCGMP facility and will be initiating clinical trials of an experimental cosmeticingredient in this indication to determine efficacy. We expect these studies tobe completed in 2021 and cost approximately $120,000. We will not make anymedicinal or therapeutic claims based on this trial. In parallel, we haveinitiated development studies to file an investigational new drug ("IND")application for FDA regulated clinical studies in this indication. We expect thedevelopmental studies to be completed in the first quarter of 2021 and the INDfiling to be submitted in the second quarter of 2021. We originally anticipateddevelopmental studies to be completed in the first quarter of 2020, however,these studies were delayed due to COVID-19. The cost of the developmentalstudies are estimated to be approximately $250,000.

Critical Accounting Policies

Our management's discussion and analysis of our financial condition and resultsof operations is based on our unaudited financial statements for the year endedDecember 31, 2020 and audited financial statements for the year ended December31, 2020, which have been prepared in accordance with United States generallyaccepted accounting principles, or U.S. GAAP, and the rules and regulations ofthe Securities and Exchange Commission. The preparation of the financialstatements requires us to make estimates and assumptions that affect thereported amounts of assets and liabilities and the disclosure of contingentassets and liabilities at the date of the financial statements as well as thereported revenue generated, and expenses incurred during the reporting periods.Our estimates are based on our historical experience and on various otherfactors that we believe are reasonable under the circ*mstances, the results ofwhich form the basis for making judgments about the carrying value of assets andliabilities that are not readily apparent from other sources. Actual results maydiffer from these estimates under different assumptions or conditions and anysuch differences may be material. We believe that the accounting policiesdiscussed below are critical to understanding our historical and futureperformance, as these policies relate to the more significant areas involvingmanagement's judgments and estimates.

The financial statements have been prepared in accordance with accountingprinciples generally accepted in the United States of America ("US GAAP") andare expressed in United States Dollars. Significant accounting policies aresummarized below:

Revenue Recognition

The Company generates its revenue from the sale of its products directly to theend user or distributor (collectively the "customer").

The Company recognizes revenues by applying the following steps in accordancewith FASB Accounting Standards Codification 606 "Revenue from Contracts withCustomers" ("ASC 606"). Under ASC 606, revenues are recognized when control ofthe promised goods or services are transferred to a customer, in an amount thatreflects the consideration that the Company expects to receive in exchange forthose goods or services. The Company applies the following five steps in orderto determine the appropriate amount of revenue to be recognized as it fulfillsits obligations under each of its agreements:

 • identify the contract with a customer; • identify the performance obligations in the contract; • determine the transaction price; • allocate the transaction price to performance obligations in the contract; and • recognize revenue as the performance obligation is satisfied.

The Company's performance obligations are satisfied when goods or products areshipped on an FOB shipping point basis as title passes when shipped. Our productis generally paid in advance of shipment or standard net 30 days and we offer nospecific right of return, refund or warranty related to our products except forcases of defective products of which there have been none to date.

 33 Table of ContentsInventory

Inventories are stated at the lower of cost or market. The Company periodicallyreviews the value of items in inventory and provides write-downs or write-offsof inventory based on its assessment of market conditions. Write-downs andwrite-offs are charged to cost of goods sold. Inventory is based upon theaverage cost method of accounting.

Use of Estimates

The preparation of financial statements in conformity with US GAAP requiresmanagement to make estimates and assumptions that affect the reported amounts ofassets and liabilities and disclosure of contingent assets and liabilities atthe date of the financial statements and the reported amounts of expenses duringthe reporting period. Actual results could differ from those estimates.

Earnings (Loss) Per Share

Net income (loss) per common share is computed pursuant to section 260-10-45 ofthe FASB Accounting Standards Codification. Basic net income (loss) per share iscomputed by dividing net income (loss) by the weighted average number of sharesof common stock outstanding during the period. If applicable, diluted earningsper share assume the conversion, exercise or issuance of all common stockinstruments such as options, warrants, convertible securities and preferredstock, unless the effect is to reduce a loss or increase earnings per share.Warrants are not considered in the calculations for the year ended December 31,2020 and the year ended December 31, 2019, as the impact of the potential commonshares would be to decrease the loss per share.

 2020 2019Numerator:Net (loss) $ (6,289,205 ) (925,462 )Denominator:Denominator for basic earnings per share -Weighted-average common shares issued andoutstanding during the period 7,325,708 6,301,219Denominator for diluted earnings per share 7,325,708 6,301,219Basic (loss) per share $ (0.86 ) (0.15 )Diluted (loss) per share $ (0.86 ) (0.15 )Cash

We consider all short-term investments with a maturity of three months or lesswhen purchased to be cash and equivalents for purposes of the statement of cashflows. There were no cash equivalents as December 31, 2020 and 2019.

Foreign Currency Translation

Assets and liabilities in foreign currencies are translated using theexchange rate at the balance sheet date, while revenue and expense accounts aretranslated at the average exchange rates prevailing during the period. Equityaccounts are translated at historical exchange rates. Gains and losses fromforeign currency transactions and translation for the years ended December 31,2020 and 2019 and the cumulative translation gains and losses as of December 31,2020 and 2019 were not material.

Accounts Receivable

Accounts receivable are generated from sales of the Company's products. TheCompany provides an allowance for doubtful collections, which is based upon areview of outstanding receivables, historical collection information, andexisting economic conditions. As of December 31, 2020 the Company recorded anallowance of $118,761 against accounts receivable acquired in connection withthe acquisition of SRM Entertainment and as of December 31, 2020, the Companyhad recognized no allowance for doubtful collections.

Fair Value of Financial Instruments

The fair value of our assets and liabilities, which qualify as financialinstruments under ASC Topic 820, "Fair Value Measurements and Disclosures,"approximates the carrying amounts represented in the accompanying balance sheet,primarily due to their short-term nature.

 34 Table of Contents Income Taxes

We account for income taxes under ASC 740 Income Taxes ("ASC 740"). ASC 740requires the recognition of deferred tax assets and liabilities for both theexpected impact of differences between the financial statement and tax basis ofassets and liabilities and for the expected future tax benefit to be derivedfrom tax loss and tax credit carry forwards. ASC 740 additionally requires avaluation allowance to be established when it is more likely than not that allor a portion of deferred tax assets will not be realized.

ASC 740 also clarifies the accounting for uncertainty in income taxes recognizedin an enterprise's financial statements and prescribes a recognition thresholdand measurement process for financial statement recognition and measurement of atax position taken or expected to be taken in a tax return. For those benefitsto be recognized, a tax position must be more-likely-than-not to be sustainedupon examination by taxing authorities. ASC 740 also provides guidance onderecognition, classification, interest and penalties, accounting in interimperiod, disclosure and transition. Based on our evaluation, it has beenconcluded that there are no significant uncertain tax positions requiringrecognition in our financial statements. Since we were incorporated on October24, 2018, the evaluation was performed for 2018 tax year, which would be theonly period subject to examination. We believe that our income tax positions anddeductions would be sustained on audit and does not anticipate any adjustmentsthat would result in a material changes to our financial position. Our policyfor recording interest and penalties associated with audits is to record suchitems as a component of income tax expense.

The Company's deferred tax asset at December 31, 2020 consists of net operatingloss carry forwards calculated using federal and state effective tax ratesequating to approximately $936,311 less a valuation allowance in the amount ofapproximately $936,311. Because of the Company's lack of earnings history, thedeferred tax asset has been fully offset by a valuation allowance in the yearsended December 31, 2020 and 2019.

Research and Development

The Company accounts for research and development costs in accordance withthe Accounting Standards Codification subtopic 730-10, Research and Development("ASC 730-10"). Under ASC 730-10, all research and development costs must becharged to expense as incurred. Accordingly, internal research and developmentcosts are expensed as incurred. Third-party research and developments costs areexpensed when the contracted work has been performed or as milestone resultshave been achieved. Company-sponsored research and development costs related toboth present and future products are expensed in the period incurred. TheCompany incurred research and development expenses of $308,367 and $108,957 forthe year ended December 31, 2020 and 2019, respectively.

Stock Based Compensation

We recognize compensation costs to employees under FASB Accounting StandardsCodification 718 "Compensation - Stock Compensation" ("ASC 718"). Under ASC 718,companies are required to measure the compensation costs of share-basedcompensation arrangements based on the grant-date fair value and recognize thecosts in the financial statements over the period during which employees arerequired to provide services. Share based compensation arrangements includestock options and warrants. As such, compensation cost is measured on the dateof grant at their fair value. Such compensation amounts, if any, are amortizedover the respective vesting periods of the option grant.

On October 24, 2018, the inception date ("Inception"), we adopted ASU No.2018-07 "Compensation - Stock Compensation (Topic 718): Improvements toNonemployee Share-Based Payment Accounting." These amendments expand the scopeof Topic 718, Compensation - Stock Compensation (which currently only includesshare-based payments to employees) to include share-based payments issued tononemployees for goods or services. Consequently, the accounting for share-basedpayments to nonemployees and employees will be substantially aligned.

The value of common stock issued or payable from Inception through December 31,2020 were based upon the last sales price of our common stock to a third party.From January through September 2019, we had multiple sales of common stock at$0.25 per share. From September through the end of 2019, we sold our stock at$1.00 per share. Issuances and grants throughout 2019 were all based upon thelast sales price for sales of our stock for cash to third parties. If and whenour shares of common stock are publicly listed, we will use the closing shareprice on a exchange as a basis for valuing our stock grants.

Recently Issued Accounting Pronouncements

In June 2018, the FASB issued ASU 2018-07, which simplifies the accounting fornonemployee share-based payment transactions. The amendments specify that Topic718 applies to all share-based payment transactions in which a grantor acquiresgoods or services to be used or consumed in a grantor's own operations byissuing share-based payment awards. The Company has adopted this standardbeginning January 1, 2019. The adoption of this standard did not have asignificant impact on our results of operations, financial condition, cashflows, and financial statement disclosures.

In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts withCustomers". The new standard provides a five-step approach to be applied to allcontracts with customers and also requires expanded disclosures about revenuerecognition. The ASU is effective for annual reporting periods beginning afterDecember 15, 2017, including interim periods and is to be retrospectivelyapplied. The adoption of this standard did not have a significant impact on ourresults of operations, financial condition, and cash flows. The adoption of thisstandard is expected to result in additional financial statement disclosures.

In February 2016, Topic 842, "Leases" was issued to replace the leasesrequirements in Topic 840, "Leases". The main difference between previous GAAPand Topic 842 is the recognition of lease assets and lease liabilities bylessees for those leases classified as operating leases under previous GAAP. Alessee should recognize in the balance sheet a liability to make lease payments(the lease liability) and a right-of-use asset representing its right to use theunderlying asset for the lease term. For leases with a term of 12 months orless, a lessee is permitted to make an accounting policy election by class ofunderlying asset not to recognize lease assets and lease liabilities. If alessee makes this election, it should recognize lease expense for such leasesgenerally on a straight-line basis over the lease term. The accounting appliedby a lessor is largely unchanged from that applied under previous GAAP. Topic842 will be effective for annual reporting periods beginning after December 15,2018, including interim periods within those annual periods and is to beretrospectively applied. The Company has adopted this standard beginning January1, 2019. The adoption of this standard did not have a significant impact on ourresults of operations, financial condition, cash flows, and financial statementdisclosures.

Management does not believe that any recently issued, but not effective,accounting standards, if currently adopted, would have a material effect on ourfinancial statements.

 35 Table of ContentsResults of Operations

For the year ended December 31, 2020

The following table provides selected financial data about us for the year endedDecember 31, 2020 and 2019, respectively.

 December 31, 2020 December 31, 2019Sales $ 1,065,665 $ 6,455Cost of Sales 624,570 18,024 Gross Profit (Loss) 441,095 (11,569 )Total expenses 6,730,300 913,893Net Loss $ (6,289,205 ) $ (925,462 )Revenues

We generated $1,065,665 in revenues for the year ended December 31, 2020compared to $6,455 revenues for the year ended December 31, 2019. The largeincrease is due to the Company having only nominal operations during 2019. In2019, the Company focused its efforts on formulating, testing and manufacturingits sunscreen and skin care products. In 2020, the Company (i) began marketingits skin care and sunscreen products line, (2) acquired Magical Beasts, LLC,which expanded its product offerings, sales and marketing capabilities (3) addedadditional product lines to its skin care product line, (4) added a line of handsanitizer, for a combined sales total of $834,812 and acquired SRM EntertainmentLtd which contributed sales of $230,853.

Operating Expenses

We had total operating expenses of $6,730,300 for the year ended December 31,2020 compared to $913,893 for the year ended December 31, 2019.

Operating expenses for the year ended December 31, 2020 were in connection withour daily operations as follows: (i) marketing expenses of $82,367; (ii)research and development of $308,367; (iii) legal and professional expenses of$837,698, consisting of corporate advisory services, registration statementpreparation fees, general corporate governance fees; (iv) rent of $61,797; (v)depreciation and amortization of $103,392; (vi) general and administrativeexpenses of $1,784,456, consisting of payroll and related taxes, travel, mealsand entertainment, office supplies and expense and other normal office andadministration expenses; (vii) stock based compensation of $2,398,140; (viii) animpairment to Goodwill of $308,690; (ix) an impairment to Intangible Assets of$731,628 and (x) net interest expense of $113,765.

We had total operating expenses of $913,893 for the year ended December 31,2019. Operating expenses were in connection with our daily operations asfollows: (i) marketing expenses of $74,145 consisting of internet awarenesscosts, website development, trade shows and promotional displays; (ii) researchand development of $108,957 consisting of product development and formulationand clinical research; (iii) legal and professional expenses of $132,318,consisting of corporate advisory services, registration statement preparationfees, intellectual property fees and general corporate governance fees andtrademark fees; (iv) rent of $17,783; (v) stock based compensation of $357,904;(vi) general and administrative expenses of $217,610, consisting of accountingfees, consulting fees, payroll and related taxes, Board of Director fees, patentfiling expenses, travel, charitable contributions, meals and entertainment,office supplies and expense and other normal office and administration expensesand (vii) net interest expense of $5,176.

Income/Losses

Net losses were $6,289,205 and $925,462 for the years ended December 31, 2020and 2019, respectively.

 36 Table of ContentsImpact of Inflation

We believe that inflation has had a negligible effect on operations sinceinception. We believe that we can offset inflationary increases in the cost ofoperations by increasing sales and improving operating efficiencies.

Off Balance Sheet Arrangements

We do not have off-balance sheet arrangements, financings, or otherrelationships with unconsolidated entities or other persons, also known as"variable interest entities."

Liquidity and Capital Resources

The Company is in commercialization mode, while continuing to pursue thedevelopment of its next generation product as well as new products that arebeing developed.

We generally require cash to: • launch sales initiatives, • fund our operations and working capital requirements, • develop and execute our product development and market introduction plans, • fund research and development efforts, and • pay any expense obligations as they come due. 37 Table of Contents

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