The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes to our financial statements included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors discussed elsewhere in this report.

Certain information included herein contains statements that may be considered forward-looking statements such as statements relating to our anticipated revenues, gross margins and operating results, estimates used in the preparation of our financial statements, future performance and operations, plans for future expansion, capital spending, sources of liquidity, and financing sources. Forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future, and accordingly, such results may differ from those expressed in any forward-looking statements made herein. These risks and uncertainties include those relating to our liquidity requirements; the continued growth of our industry; the success of marketing and sales activity; the dependence on existing management; the availability and cost of substantial amounts of project capital; leverage and debt service (including sensitivity to fluctuations in interest rates); domestic and global economic conditions; the inherent uncertainty and costs of prolonged arbitration or litigation; and changes in federal or state tax laws or the administration of such laws.

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 can 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 in order to continue. 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 Three Months Ended March 31, 2021 and 2020

We had no revenue in the three months ended March 31, 2021 and 2020.

During the three months ended March 31, 2021, we had salaries and wages of $194,343, compared to salaries and wages of $217,028 during the same three-month period for 2020, a decrease of 10.5%, which attributed to management's focus on reducing expenses.




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During the three months ended March 31, 2021 and 2020, we recorded professional fees of $357,057 and $119,237, respectively, an increase of 199.4%. During the first quarter of 2021, our legal fees were higher due to the continuing Memphis litigation issues.

We incurred general and administrative expenses of $52,567 during the three months ended March 31, 2021, compared to $79,208 for the same three-month period for 2020, a decrease of 33.6%. We had less travel and related expenses, and management made a concerted effort to reduce general and administrative expenses due to lack of cash flow.

Our interest expense was $470,766 for the three months ended March 31, 2021, compared to $320,818 for the same period of the previous year, an increase of 46.7%. This change was due to increased debt and higher interest rates on defaulted notes and the fair value of common stock issued for second commitment fees.

Our debt discount amortization was $70,250 for the three months ended March 31, 2021, compared to $42,852 for the same period of the previous year. The increase of 63.9% is due to debt discount recorded on additional loans that were obtained during the first quarter of 2021. There was a decrease in the fair value of the derivative liability of $295,642 during the three months ended March 31, 2021, compared to a $1,730,623 a 82.9% decrease in the fair value of derivative liability for the same period in 2020.

Liquidity and Capital Resources

At March 31, 2021, our principal source of liquidity consisted of $77,223 of cash, as compared to $7,442 of cash at December 31, 2020. In addition, our stockholders' deficiency was $29,414,386 at March 31, 2021, compared to stockholders' deficiency of $28,413,169 at December 31, 2020, an increase in the deficiency of $1,001,217, which is attributable to the net loss during the period.

Our operations used net cash of $116,364 during the three months ended March 31, 2021, as compared to using net cash of $227,133 during the three months ended March 31, 2020, a decrease of 48.8%. The decrease in net cash used in operations is due to the overall decrease in net loss of approximately $1.1 million and offset by the decrease in the change in the fair value of derivative liability of $1.4 million and the increase in accounts payable and accrued expenses of $0.37 million during the same period 2020.

Financing activities provided cash of $186,145 for our operations during the three months ended March 31, 2021, as compared to $244,837 for the three months ended March 31, 2020, a decrease of 24.0%. During three months ended March 31, 2021, we received $190,000 from convertible notes and notes payable as compared to $260,000 in the same period of 2020.

Our Capital Resources and Anticipated Requirements

As noted above, at March 31, 2021, we had negative working capital (current assets minus current liabilities) of $29,236,540. We are now 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.


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Our condensed 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 the success of 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 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. These 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. The Biden administration has announced a range of financial support for renewable and sustainable companies. Details from the administration are not available yet, but we are already in the process of filing for financial support. Additional applications for financial support will be made as appropriate.

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

Recent Accounting Pronouncements

Information concerning recently issued accounting pronouncements is set forth in Note 2 of our notes to unaudited condensed consolidated financial statements appearing elsewhere in this report.

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