Quarterly Report (10-q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarter ended March 31, 2023

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________ to ________

Commission file number: 000-56030

ENERGY and WATER DEVELOPMENT CORP.

(Exact Name of Registrant as Specified in Its Charter)

Florida		30-0781375
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

7901 4th Street N STE #4174, St Petersburg, Florida 33702

(Address of Principal Executive Offices, including Zip Code)

Tel No.: 305-517-7330

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The number of shares outstanding of the registrant’s classes of common stock as June 5, 2023 was 213,181,259 shares.

INDEX

		Page
	PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets as of March 31, 2023 (Unaudited) and December 31, 2022	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2023 and 2022 (Unaudited)	2
	Condensed Consolidated Statements of Changes in Stockholders' Deficit for the three months ended March 31, 2023 and 2022 (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2023 and 2022 (Unaudited)	4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	21
Item 4.	Controls and Procedures	21

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Mine Safety Disclosures	23
Item 5.	Other Information	23
Item 6.	Exhibits	24
SIGNATURES		25

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

The information contained in this Report, including in the documents incorporated by reference into this Report, includes some statements that are not purely historical and that are “forward-looking statements.” Such forward-looking statements include, but are not limited to, statements regarding our Company and management’s expectations, hopes, beliefs, intentions or strategies regarding the future, including our financial condition, results of operations, and the expected impact of the offering on the parties’ individual and combined financial performance. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” and similar expressions, or the negatives of such terms, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements contained in this Report are based on current expectations and beliefs concerning future developments and the potential effects on the parties and the transaction. There can be no assurance that future developments actually affecting us will be those anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the parties’ control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date hereof.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. The following discussion should be read in conjunction with our financial statements and the related notes included in this Report.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Energy and Water Development Corp.

Condensed Consolidated Balance Sheets


	March 31,			December 31,
	2023			2022
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	144,441		$	40,886
Accounts receivable		52,761			52,761
Inventory		467,527			457,646
Prepaid expenses and other current assets		300,737			315,222
TOTAL CURRENT ASSETS		965,466			866,515

Property and equipment, net		265,899			245,667
Operating lease right-of-use asset		39,359			62,113
TOTAL ASSETS	$	1,270,724		$	1,174,295

LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	910,340		$	1,023,563
Accounts payable - related party		24,029			27,029
Convertible loan payables, net of discount		116,821			73,664
Due to officers		251,376			222,492
Derivative liability		153,432			184,025
Current portion of operating lease liability		39,359			62,113
Current portion of financing lease liability		14,930			14,327
TOTAL CURRENT LIABILITIES		1,510,287			1,607,213

Financing lease liability, net of current portion		46,155			48,946
TOTAL LIABILITIES		1,556,442			1,656,159

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT:
Preferred stock, par value $.001 per share; 500,000,000 shares authorized, 9,780,796 shares issued and outstanding as of March 31, 2023 and December 31, 2022		9,781			9,781
Common stock, par value $.001 per share; 1,000,000,000 shares authorized, 195,572,994 and 182,934,483 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively		195,573			182,934
Common stock subscriptions; 13,674,000 and 0 shares as of March 31, 2023 and December 31, 2022, respectively		310,700			—
Additional paid-in capital		24,266,847			23,678,396
Accumulated deficit		(25,047,999	)		(24,337,973	)
Accumulated other comprehensive loss		(20,620	)		(15,002	)
TOTAL STOCKHOLDERS' DEFICIT		(285,718	)		(481,864	)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	1,270,724		$	1,174,295

See accompanying notes to the condensed consolidated financial statements (unaudited).

Energy and Water Development Corp.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)


	For the Three Months Ended
	March 31,
	2023			2022

GENERAL AND ADMINISTRATIVE EXPENSES
Marketing fees	$	14,996		$	93,247
Professional fees		132,576			101,898
Officers’ salaries and payroll taxes		136,633			113,237
Other general and administrative expenses		215,449			122,655
Travel and entertainment		5,527			12,075
TOTAL GENERAL and ADMINISTRATIVE EXPENSES		505,181			443,112

LOSS FROM OPERATIONS		(505,181	)		(443,112	)

OTHER INCOME (EXPENSE)
Change in fair value of derivative liability		30,593			243,653
Other income (expense)		8,392			(34,805	)
Loss on settlement of liabilities		(196,159	)		—
Interest expense		(47,671	)		(124,446	)
TOTAL OTHER INCOME (EXPENSE)		(204,845	)		84,402

LOSS BEFORE TAXES		(710,026	)		(358,710	)

TAXES		—			—

NET LOSS	$	(710,026	)	$	(358,710	)

OTHER COMPREHENSIVE (LOSS) INCOME
Foreign currency translation adjustments		(5,618	)		13,970
TOTAL OTHER COMPREHENSIVE (LOSS) INCOME		(5,618	)		13,970

COMPREHENSIVE LOSS		(715,644	)		(344,740	)

Net loss per common share - Basic and diluted	$	(0.00	)	$	(0.00	)

Weighted average number of common shares outstanding - Basic and diluted		192,887,042			149,481,067

See accompanying notes to the condensed consolidated financial statements (unaudited).

Energy and Water Development Corp.

Condensed Statements of Changes in Stockholders’ Deficit

(Unaudited)


	Preferred Stock				Common Stock				Common Stock Subscriptions						Additional Paid-in			Accumulated			Accumulated Other Comprehensive			Total Stockholders'
	Shares		Amount		Shares		Amount		Shares			Amount			Capital			Deficit			Loss			Deficit


BALANCE AT DECEMBER 31, 2021		9,780,796	$	9,781		143,840,643	$	143,840		15,855,000		$	792,745		$	20,777,401		$	(22,395,393	)	$	(42,444	)	$	(714,070	)
Sale of Common Stock		—		—		17,453,000		17,453		(14,953,000	)		(747,650	)		1,030,197			—			—			300,000
Common stock issued for services		—		—		520,000		520		—			—			88,080			—			—			88,600
Common stock issued to satisfy convertible debt		—		—		540,716		541		—			—			49,459			—			—			50,000
Stock issued for interest and fees		—		—		34,842		35		—			—			3,187			—			—			3,222
Subscriptions liability reclassification to subscriptions		—		—		—		—		7,547,000			377,350			—			—			—			377,350
Derivative settled upon conversion of debt		—		—		—		—		—			—			110,507			—			—			110,507
Subscription deposits received		—		—		—		—		1,875,000			300,000			—			—			—			300,000
Costs associated with equity line of credit		—		—		—		—		—			—			(24,000	)		—			—			(24,000	)
Net loss		—		—		—		—		—			—			—			(358,710	)		—			(358,710	)
Other comprehensive loss		—		—		—		—		—			—			—			—			13,970			13,970
BALANCE AT March 31, 2022		9,780,796	$	9,781		162,389,201	$	162,389		10,324,000		$	722,445		$	22,034,831		$	(22,754,103	)	$	(28,474	)	$	146,869


	Preferred Stock				Common Stock				Common Stock Subscriptions				Additional Paid-in		Accumulated			Accumulated Other Comprehensive			Total Stockholders'
	Shares		Amount		Shares		Amount		Shares		Amount		Capital		Deficit			Loss			Deficit


BALANCE AT DECEMBER 31, 2022		9,780,796	$	9,781		182,934,483	$	182,934		—	$	—	$	23,678,396	$	(24,337,973	)	$	(15,002	)	$	(481,864	)
Sale of Common Stock		—		—		5,685,988		5,686		13,674,000		310,700		227,814		—			—			544,200
Common stock issued to officers for accrued salary		—		—		6,952,523		6,953		—		—		357,332		—			—			364,285
Imputed interest on related party loans		—		—		—		—		—		—		3,305		—			—			3,305
Net loss		—		—		—		—		—		—		—		(710,026	)		—			(710,026	)
Other comprehensive loss		—		—		—		—		—		—		—		—			(5,618	)		(5,618	)
BALANCE AT March 31, 2023		9,780,796	$	9,781		195,572,994	$	195,573		13,674,000	$	310,700	$	24,266,847	$	(25,047,999	)	$	(20,620	)	$	(285,718	)

See accompanying notes to the condensed consolidated financial statements (unaudited).

Energy and Water Development Corp.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	For the Three Months Ended
	March 31,
	2023			2022

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(710,026	)	$	(358,710	)
Reconciliation of net loss to net cash used in operating activities
Amortization of debt discount and deferred financing costs		43,157			63,296
Depreciation expense		19,402			873
Non-cash lease expense		23,357			—
Change in fair value of derivative liability		(30,593	)		(243,653	)
Imputed interest on related party loans		3,305			—
Loss on settlement of liabilities		196,159			—
Stock issued for services		—			88,600

Changes in operating assets and liabilities:
Inventory		(9,881	)		(256,999	)
Prepaid expenses and other current assets		14,485			142,910
Operating lease liabilities, current and non-current		(22,754	)		—
Accounts payable and accrued expenses		19,777			(30,003	)
Due to related party		(3,000	)		—
Due to officers		64,010			(4,558	)
CASH USED IN OPERATING ACTIVITIES		(392,602	)		(598,244	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		—			(34,525	)
CASH USED IN INVESTING ACTIVITIES:		—			(34,525	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of finance leases		(2,791	)		—
Payments of convertible loans payable		—			(150,000	)
Costs associated with equity line of credit		—			(24,000	)
Proceeds from sale of common stock		233,500			300,000
Proceeds from common stock subscriptions		310,700			300,000
CASH PROVIDED BY FINANCING ACTIVITIES		541,409			426,000

Effect of exchange rate changes on cash		(45,252	)		29,152

Net change in cash		103,555			(177,617	)

Cash beginning of period		40,886			589,668

Cash end of period	$	144,441		$	412,051

SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest	$	451		$	67,940
Cash paid for taxes	$	—		$	—

NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued for interest and fees	$	—		$	3,222
Common stock issued to convert loans payable	$	—		$	50,000
Derivative liability settled upon conversion of debt	$	—		$	110,507
Reclassification of common stock subscription liability to common stock subscriptions	$	310,700		$	377,350
Reclassification of common stock subscriptions to common stock	$	—		$	747,650

See accompanying notes to the condensed consolidated financial statements (unaudited).

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Note 1. Incorporation and Nature of Operations

Energy and Water Development Corp. (the “Company” or “EAWD”) was originally incorporated as a Delaware corporation named Wealthhound.com, Inc. in 2000 and was converted to a Florida corporation under the name Eagle International Holdings Group Inc. on December 14, 2007.

On March 10, 2008, the Company changed its name to Eurosport Active World Corporation and on March 17, 2008, the Company entered into an Agreement and Plan of Acquisition (the “Acquisition Agreement”) with Inko Sport America, LLC (“ISA”), a privately-held Florida limited liability company wherein all of the certified owners of ISA exchanged their ownership interests in ISA for shares of the Company. In connection with the closing of the Acquisition Agreement, the Company adopted ISA’s business plan and the Company’s registered directors were elected to their positions. This transaction was accounted for as a recapitalization effected by a share exchange, wherein ISA was considered the acquirer for accounting and financial reporting purposes. ISA was administratively dissolved in September 2010.

In September 2019, the Company changed its name to Energy and Water Development Corp. to more accurately reflect the Company’s purpose and business sector and the Company has registered its logo “EAWD” with the United States Patent and Trademark Office, the European Union Intellectual Property Office and the World Intellectual Property Organization (WIPO) to secure its corporate identity.

To ensure the Company is positioned to service its growing business in one of the EU’s most environmentally progressive countries, the Company has a branch registered to conduct business in Germany and two wholly-owned German subsidiaries: Energy and Water Development Deutschland GmbH (“EAWD Deutschland”) and EAWD Logistik GmbH (“EAWD Logistik”).

Note 2. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The condensed consolidated financial statements include the accounts of EAWD and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

The condensed consolidated financial statements (unaudited) include the accounts of Energy and Water Development Corp. and have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission. These unaudited condensed financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC.

In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements of Energy and Water Development Corp. for the fiscal year ended December 31, 2022, have been omitted.

Foreign currency translation

The United States dollar (“USD”) is the Company’s reporting currency. The Company has two subsidiaries located in Germany. The net sales generated, and the related expenses directly incurred from the operations, if any, are denominated in local currency, Euro (“Euro”). The functional currency of the subsidiaries is generally the same as the local currency.

Assets and liabilities measured in Euros are translated into USD at the prevailing exchange rates in effect as of the financial statement date and the related gains and losses, net of applicable deferred income taxes, are reflected in accumulated other comprehensive loss in its balance sheets. Income and expense accounts are translated at the average exchange rate for the period. The Company has not, to the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations. During the three months ended March 31, 2023 the Company used a spot rate of 1.09 and an average rate of 1.07 when converting EURO to USD.

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Use of Estimates

The preparation of financial statements in accordance 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 the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates. Estimates which are particularly significant to the financial statements include estimates relating to the determination of impairment of assets, assessment of going concern, the determination of the fair value of stock-based compensation, and the recoverability of deferred income tax assets.

Leases

Effective January 1, 2019, the Company adopted ASC 842- Leases (“ASC 842”). The lease standard provided a number of optional practical expedients in transition. The Company elected the package of practical expedients. As such, the Company did not have to reassess whether expired or existing contracts are or contain a lease; did not have to reassess the lease classifications or reassess the initial direct costs associated with expired or existing leases. The lease standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption under which the Company will not recognize right-of-use (“ROU”) assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases. The Company elected the practical expedient to not separate lease and non-lease components for certain classes of assets (facilities).

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and short-term and long-term lease liabilities, as applicable.

Cash

The Company considers short-term interest-bearing investments with initial maturities of three months or less to be cash equivalents. The Company has $144,441 and $40,866 cash as of March 31, 2023 and December 31, 2022, respectively.

Inventory

Inventory is stated at the lower of cost or net realizable value using the first in, first out (FIFO) method. A reserve is established if necessary to reduce excess or obsolete inventories to their net realizable value.

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets include prepaid inventory, purchase deposits, miscellaneous prepaid expenses, value added tax receivable, and a security deposit.

Property and Equipment

Property and equipment is stated at cost, less accumulated depreciation. Depreciation is recognized over an asset’s estimated useful life using the straight-line method beginning on the date an asset is placed in service. The Company regularly evaluates the estimated remaining useful lives of the Company’s property and equipment to determine whether events or changes in circumstances warrant a revision to the remaining period of depreciation. Maintenance and repairs are charged to expense as incurred. Estimated useful lives of the Company’s Property and Equipment are as follows:

Schedule of estimated useful lives
	Useful Life (in years)
Office equipment	5
Furniture and fixtures	7
Automobile	5
Machinery and equipment	5

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Revenue Recognition

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services.

To achieve this core principle, five basic criteria must be met before revenue can be recognized: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance obligations in the contract; and (5) recognize revenue when or as the Company satisfies a performance obligation. During the three months ended March 31, 2023 and 2022, the Company did not recognize any revenue.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at a measurement date. A fair value hierarchy requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value.

Described below are the three levels of inputs that may be used to measure fair value:

Level 1 – Quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities,

Level 2 – Observable prices that are based on inputs not quoted on active markets, but corroborated by market data,

Level 3 – Unobservable inputs are used when little or no market data is available.

The application of the three levels of the fair value hierarchy under ASC Topic 820-10-35, our derivative liabilities as of March 31, 2023 and December 31, 2022 were $153,432 and $184,025, respectively and measured on Level 3 inputs.

Certain assets and liabilities are required to be recorded at fair value on a recurring basis. The Company adjusts derivative financial instruments to fair value on a recurring basis. The fair value for other assets and liabilities such as cash, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses, deferred cost and deferred revenue have been determined to approximate carrying amounts due to the short maturities of these instruments. The Company believes that its indebtedness approximates fair value based on current yields for debt instruments with similar terms.

Loss Per Common Share

The Corporation accounts for earnings (loss) per share in accordance with FASB ASC Topic No. 260 - 10, “Earnings Per Share”, which establishes the requirements for presenting earnings per share (“EPS”). FASB ASC Topic No. 260 - 10 requires the presentation of “basic” and “diluted” EPS on the face of the statement of operations. Basic EPS amounts are calculated using the weighted-average number of common shares outstanding during each period. Diluted EPS assumes the exercise of all stock options, warrants and convertible securities having exercise prices less than the average market price of the common stock during the periods, using the treasury stock method. When a loss from operations exists, potential common shares are excluded from the computation of diluted EPS because their inclusion would result in an anti-dilutive effect on per share amounts.

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

As discussed more fully in Note 10, convertible note holders have the option of converting their loans into common shares subject to the terms and features offered by the specific convertible notes. Some note holders were also granted purchase options to purchase additional shares subject to the features of each purchase option. If the convertible note holders of unexercised convertible notes exercised their conversion feature and the additional purchase options, they would represent 0 and 0 in additional common shares as of March 31, 2023 and 2022, respectively. The potential shares from both the conversion feature and the rights to purchase additional shares were excluded from the computation of diluted net loss per share, as the inclusion of such shares would be anti-dilutive.

Related Party Transactions

A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. A related party is generally defined as:

	(i)	any person that holds 10% or more of the Company’s securities including such person’s immediate families,
	(ii)	the Company’s management,
	(iii)	someone that directly or indirectly controls, is controlled by or is under common control with the Company, or
	(iv)	anyone who can significantly influence the financial and operating decisions of the Company.

Note 3. Recently Issued Accounting Standards

Accounting standards promulgated by the FASB are subject to change. Changes in such standards may have an impact on the Corporation’s future financial statements. The following are a summary of recent accounting developments.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses to improve information on credit losses for financial assets and net investment in leases that are not accounted for at fair value through net income. ASU 2016-13 replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses. In April 2019 and May 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” and ASU No. 2019-05, “Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief” which provided additional implementation guidance on the previously issued ASU. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Loss (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842),” which defers the effective date for public filers that are considered small reporting companies (“SRC”) as defined by the Securities and Exchange Commission to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Since the Company is an SRC, implementation is not needed until January 1, 2023. The Company adopted ASU 2016-13 on January 1, 2023. The adoption did not have a material impact on the Company’s consolidated financial statements.

On January 1, 2022, the Company adopted ASU No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40). This standard eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. The adoption of ASU 2020-06 did not have a material impact on the Company’s condensed consolidated financial statements.

On January 1, 2022, the Company adopted ASU No. 2021-04, Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modification or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”), which will clarify and reduce diversity in practice. Specifically, the new standard includes a recognition model comprising four categories of transactions and corresponding accounting treatment for each category. The category that would apply to a modification or an exchange of an equity-classified warrant would depend on the substance of the modification transaction (e.g., a financing transaction to raise equity versus one to raise debt). This recognition model is premised on the idea that the accounting for the transaction should not differ from what it would have been had the issuer of the warrants paid cash instead of modifying the warrants. The adoption of ASU 2021-04 did not have a material impact on the Company’s condensed consolidated financial statements.

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Note 4. Going Concern

The Company has incurred operating losses since it began operations (December 2012) totaling $25,047,999 as of March 31, 2023. During the three months ended March 31, 2023, the Corporation incurred net losses of $710,026. The Company had a working capital deficit of $544,821 as of March 31, 2023.

The Company’s ability to transition to profitable operations is dependent upon achieving a level of revenues adequate to support its cost structure. The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations and the anticipated growth of our business and availability to sufficient resources.

Management expects sales operations to continue to expand. If necessary, the Company will need to raise additional funds during 2023. Management of the Company intends to raise additional funds through the issuance of equity securities or debt, credit lines or advances from suppliers. The ability of the Company to continue as a going concern depends upon its ability to generate sales or obtain additional funding to finance operating losses until the Corporation is profitable.

These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Note 5. Accounts Receivable

As of March 31, 2023 and December 31, 2022, accounts receivable was $52,761 and determined to be fully collectible.

Note 6. Inventory

The components of inventory as of March 31, 2023 and December 31, 2022, consisted of the following:

Schedule of inventories
	March 31,		December 31,
	2023		2022
	(Unaudited)
Work in progress	$	467,527	$	457,646
Inventory, net	$	467,527	$	457,646

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Note 7. Prepaid Expenses and Other Current Assets

The components of prepaid expenses and other current assets as of March 31, 2023 and December 31, 2022, consisted of the following:


	March 31, 2023		December 31, 2022
	(Unaudited)
Prepaid expenses	$	110,108	$	140,676
Value added tax receivable		173,932		158,200
Security deposit		16,697		16,346
Prepaid expenses and other current assets	$	300,737	$	315,222

Note 8. Property and Equipment, net

The components of property and equipment as of March 31, 2023 and December 31, 2022 consisted of the following:

Schedule of property and equipment
	March 31,			December 31,
	2023			2022
	(Unaudited)
Office equipment	$	6,071		$	5,911
Furniture and fixtures		2,500			2,447
Financing lease equipment		65,803			64,417
Machinery and equipment		77,156			41,656
Automobile		152,322			149,787
Property and equipment, gross		303,852			264,218
Less: Accumulated depreciation		(37,953	)		(18,551	)
Property and equipment, net	$	265,899		$	245,667

Depreciation expense for the three months ended March 31, 2023 and 2022 was $19,402 and $873, respectively, and is included in other general and administrative expenses on the condensed consolidated statements of operations and comprehensive loss.

Note 9. Accounts Payable and Accrued Expenses and Accounts payable – Related Party

Significant components of accounts payable and accrued expenses as of March 31, 2023 and December 31, 2022 are as follows:


	March 31, 2023		December 31, 2022
	(Unaudited)
Accrued expenses	$	260,752	$	241,960
Accounts payable		298,685		324,754
Accrued legal costs		349,726		349,726
Accrued salary and payroll taxes		1,177		134,152
Total	$	910,340	$	1,050,592

As of March 31, 2023 and December 31, 2022, the Company owed Virhtech GmbH, a related party of the Company, $24,029 and $27,029, respectively, for services performed for the Company and is classified as accounts payable – related party on the condensed consolidated balance sheets.

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Note 10. Convertible Loans Payable

As of March 31, 2023 and December 31, 2022, the balance of convertible loans payable net of discount was $116,821 and $73,664, respectively.

During the year ended December 31, 2022, the Company issued one convertible loan in the aggregate amount of $178,000. The note bears interest at 8% per annum and all matured within one year. The conversion features in the note met the definition of a derivative and required bifurcation and liability classification, at fair value. The fair value of the derivative liability as of the date of issuance was $175,025 and was recorded as a discount of the notes.

During the year ended December 31, 2021, the Company issued two convertible loans in the aggregate amount of $404,000. The notes bear interest at 8% per annum and all mature within one year. On October 21, 2021, the Maturity Date of the $304,000 loan was extended from March 25, 2022 to April 21, 2022. The embedded beneficial conversion features in the notes meet the definition of a derivative and requires bifurcation and liability classification, at fair value. The fair value of the derivative liability as of the date of issuance was $746,672 and was recorded as a discount of the notes. During the year ended December 31, 2022, the remaining balance of these loans was fully repaid or converted.

Schedule of notes payable
	Amount
Balance of notes payable, net on December 31, 2021	$	176,703
Issuances of debt		178,000
Cash settlement of debt		(150,000	)
Debt discount		(175,025	)
Conversions		(50,000	)
Amortization of debt discount		93,986
Balance of notes payable, net on December 31, 2022	$	73,664
Amortization of debt discount		43,157
Balance of convertible loan payables, net of discounts on March 31, 2023 (Unaudited)	$	116,821

Derivative Liability

The Company issued debts that consist of the issuance of convertible notes with variable conversion provisions. The conversion terms of the convertible notes are variable based on certain factors, such as the future price of the Company’s common stock. The number of shares of common stock to be issued is based on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Due to the fact that the number of shares of common stock issuable could exceed the Company’s authorized share limit, the equity environment is tainted, and all additional convertible debentures and warrants are included in the value of the derivative liabilities. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion options and warrants and shares to be issued were recorded as derivative liabilities on the issuance date and revalued at each reporting period.

Based on the various convertible notes described above, the fair value of applicable derivative liabilities on notes and change in fair value of derivative liability are as follows as of March 31, 2023 and December 31, 2022:


	Total
Balance as of December 31, 2021	$	354,160
Change Due to Issuances		175,026
Change due to exercise / redemptions		(110,507	)
Change in fair value		(234,654	)
Balance as of December 31, 2022	$	184,025
Change in fair value		(30,593	)
Balance of derivative liability as of March 31, 2023 (Unaudited)	$	153,432

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

A summary of quantitative information with respect to valuation methodology and significant unobservable inputs used for the Company’s derivative liabilities that are categorized within Level 3 of the fair value hierarchy for the periods ended March 31, 2023 and December 31, 2022 is as follows:

Schedule of quantitative information
	March 31, 2023			December 31, 2022
		(Unaudited)
Stock price	$	0.04		$	0.04 – 0.19
Exercise price	$	0.03		$	0.02 - 0.10
Contractual term (in years)		0.58			0.68 – 1.00
Volatility (annual)		182	%		140% – 1,313%
Risk-free rate		4.64	%		0.51% - 4.73%

The foregoing assumptions are reviewed quarterly and are subject to change based primarily on management’s assessment of the probability of the events described occurring. Accordingly, changes to these assessments could materially affect the valuations.

Financial Liabilities Measured at Fair Value on a Recurring Basis

Financial liabilities measured at fair value on a recurring basis are summarized below and disclosed on the balance sheet under Derivative liability – warrants and derivative liabilities:


		Fair Value measured at March 31, 2023 (Unaudited)
		Quoted prices in		Significant other		Significant		Fair value at
		active markets		observable inputs		unobservable inputs		March 31,
		(Level 1)		(Level 2)		(Level 3)		2023
Derivative liability	$	—	$	—	$	153,432	$	153,432
Total	$	—	$	—	$	153,432	$	153,432

	Fair value measured at December 31, 2022
	Quoted prices in		Significant other		Significant		Fair value at
	active markets		observable inputs		unobservable inputs		December 31
	(Level 1)		(Level 2)		(Level 3)		2022
Derivative liability	$	—	$	—	$	184,025	$	184,025
Total	$	—	$	—	$	184,025	$	184,025

There were no transfers between Level 1, 2 or 3 during the three months ended March 31, 2023 and 2022.

During the three months ended March 31, 2023 and 2022, the Company recorded gains of $30,593 and $243,653, respectively, from the change in fair value of derivative liability.

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Note 11. Leases

Finance leases

The Company’s financing lease does not provide an implicit rate that can be readily determined. Therefore, the Company uses discount rates based on the incremental borrowing rate of its most recent external debt of 8%.

The Company’s weighted-average remaining lease term relating to its finance leases is 3.67 years, with a weighted-average discount rate of 8.00%.

The Company incurred amortization expense for its financing lease of $3,255 and $0 during the three months ended March 31, 2023 and 2022, respectively, which was included in general and administrative expenses in the consolidated statements of operations and comprehensive loss. During the three months ended March 31, 2023 and 2022, the Company made cash lease payments of $4,768 and $0, respectively. As of March 31, 2023 and December 31, 2022, the financing lease right-of-use asset was $61,380 and $64,416, respectively, and is included in property and equipment, net on the condensed consolidated balance sheets, the current portion of financing lease liability was $14,930 and $14,327, respectively, and the operating lease liability, net of current portion was $46,155 and $48,946, respectively.

Operating leases

The Company’s operating leases do not provide an implicit rate that can be readily determined. Therefore, the Company uses discount rates based on the incremental borrowing rate of its most recent external debt of 8%.

The Company’s weighted-average remaining lease term relating to its operating leases is 0.81 years, with a weighted-average discount rate of 8.00%.

The Company incurred lease expense for its operating leases of $24,932 and $10,173 during the three months ended March 31, 2023 and 2022, respectively, which was included in general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss. During the three months ended March 31, 2023 and 2022, the Company made cash lease payments of $24,932 and $10,173, respectively. At March 31, 2023 and December 31, 2022, the operating lease right-of-use asset was $39,359 and $62,113, respectively, the current portion of operating lease liability was $39,359 and $62,113, respectively, and the operating lease liability, net of current portion was $0 and $0, respectively.

The following table presents information about the future maturity of the lease liabilities under the Company’s operating and financing leases as of March 31, 2023.


Maturity of Lease Liabilities	Operating lease liabilities			Finance lease liability			Total Amount
2023 (remainder of year)	$	40,549		$	14,458		$	55,007
2024		—			19,277			19,277
2025		—			19,277			19,277
2026		—			17,671			17,671
Total future minimum lease payments		40,549			70,683			111,232
Less: Imputed interest		(1,190	)		(9,598	)		(10,788	)
Present value of lease liabilities	$	39,359		$	61,085		$	100,444
Remaining lease term (in years)		0.67			3.67

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Note 12. Related Party Transactions

Due to officers

Amounts due to officers as of March 31, 2023 and December 31, 2022 are comprised of the following:

Schedule of due to officers
	March 31,		December 31,
	2023		2022
	(Unaudited)
Ralph Hofmeier:
Unsecured advances due to officer	$	9,840	$	56,400
Accrued salaries		121,811		86,265
Total due to Ralph Hofmeier		131,651		142,665

Irma Velazquez:
Unsecured advances due to officer		12,154		10,393
Accrued salaries		107,571		69,434
Total due to Irma Velazquez		119,725		79,827
Total amounts due to officers	$	251,376	$	222,492

Unsecured advances due to officers represent unreimbursed Corporation expenses paid by the officers on behalf of the Corporation. These advances are non-interest bearing and are due on demand.

Officer Compensation

Accrued salaries represent amounts accrued in accordance with the employment agreements for Mr. Hofmeier, the Company’s Chief Technology Officer and Chairman of the Board, and Ms. Velazquez, the Company’s Chief Executive Officer and Vice-Chairman of the Board. Mr. Hofmeier and Ms. Velazquez are also significant stockholders.

Customer deposit

EAWC-TV functions as a distributor of EAWD product. In 2019, EAWC-TV, having secured EAWD’s first customer, has placed a $550,000 order for a solar powered atmospheric water generator (“AWG”) for one of its customers. EAWC-TV and the Company on December 13, 2019 agreed to accept a $303,742 reduction in the balance owed by EAWD to EAWC-TV as a deposit with EAWD related to this order. The deposit was satisfied through delivery of the equipment. The equipment was built in Germany.

In 2020, manufacture of the unit was delayed due to Covid-19 related issues. The Company and EAWC-TV agreed as it had done in 2019, to clear the outstanding balances in the D/T/F EAWC-TV and the outstanding balance it carried in its accounts payable account for administrative services, which it did on December 26, 2020 which resulted in an additional down payment of $193,497. EAWC-TV has an unpaid balance on the equipment of $52,761 as of March 31, 2023 and December 31, 2022, respectively, which represents the balance of the Company’s outstanding accounts receivable as of March 31, 2023 and December 31, 2022.

Virhtech GmbH

Investor deposit and officer compensation

On January 18, 2023, the Company issued 6,952,523 shares of the Company’s common stock to officers for accrued salaries payable valued at $168,126.

For the three months ended March 31, 2023, the Company received deposits in the amount of $310,700 for 13,674,000 common shares related to common stock subscriptions that were issued in May 2023.

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Note 13. Stockholders’ Equity (Deficit)

Preferred Stock

Authorized: 500,000,000 shares of voting preferred stock with a par value of $0.001. As of both March 31, 2023 and December 31, 2022, the Company had 9,780,796 shares of preferred stock issued and outstanding.

Common Stock

Authorized: 1,000,000,000 shares common stock with a par value of $0.001. As of March 31, 2023 and December 31, 2022, the Company had 195,572,994 and 182,934,483 shares of common stock outstanding, respectively.

During the three months ended March 31, 2023 the Company engaged in the following equity events:

On January 18, 2023, the Company issued an aggregate 6,250,000 shares of common stock to Gary Rodney at a per share price of $0.02 in full satisfaction of all accrued but unpaid amounts payable for services as interim chief financial officer pursuant to his consulting agreement by and between InfoQuest Technology, Inc. and the Company dated June 2, 2021. The Company recognized a loss of $194,050 related to the settlement that is included in other income (expense) on the accompanying consolidated condensed statement of operations and comprehensive loss.

On January 18, 2023, the Company issued an aggregate 702,523 shares of common stock to Ralph Hofmeier the Company’s Chief Technology Officer and Chairman of the Board at a per share price of $0.05 in full satisfaction of all accrued but unpaid amounts payable pursuant to his employment agreement by and between Ralph Hofmeier and the Company dated August 4, 2022. The Company recognized a loss of $2,109 related to the settlement that is included in other income (expense) on the accompanying consolidated condensed statement of operations and comprehensive loss.

The Company issued an additional 5,310,988 shares of the Company's common stock pursuant to the ELOC for an aggregate purchase price of $196,000.

From January 1, 2023 through March 31, 2023, the Company issued 375,000 shares of the Company’s common stock to investors for an aggregate purchase price of $37,500.

During the three months ended March 31, 2022 the Company engaged in the following equity events:

	·	On January 26, 2022 the Company entered into a two year equity Line of credit (“ELOC”) with an investor to provide up to $5 million. As of March 31, 2022, 2,500,000 common shares were issued pursuant to this agreement, including 500,000 common shares as the agreed upon commitment fee. The initial purchase in this agreement was for $300,000. See Note 16 for more information.
	·	On January 14, 2022, the Company completed a conversion of our outstanding convertible debt by exchanging $53,222 cash for retiring $50,000 in convertible debt along with $3,222 in interest for a total of 575,558 common shares.
	·	On February 2, 2022, the Company issued 20,000 shares of the Company’s common stock to a vendor for services valued at $3,600.
	·	On February 3, 2022, the Company issued 500,000 shares of the Company’s common stock to a vendor for services valued at $85,000.
	·	On February 18, 2022, the Company received a deposit in the amount of $300,000 for 1,875,000 common shares to be issued pursuant to a securities purchase agreement. As of April 14, 2022, these shares have been issued.
	·	From January 1, 2022 through March 31, 2022, the Company has issued 14,953,000 common shares related to subscriptions outstanding at December 31, 2021.

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Note 14. Commitments and Contingencies

Commitments

Equity Line of Credit

The Company entered into a two-year Equity Line of Credit pursuant to an Equity Purchase Agreement with Tysadco Partners, LLC, dated January 26, 2022. Pursuant to the agreement, Tysadco Partners agreed to invest up to $5,000,000 to purchase the Company’s Common Stock, par value $0.001 per share, and upon execution of the ELOC the Company issued an additional 500,000 shares of common stock to Tysadco Partners as commitment shares in accordance with the closing conditions within the ELOC. Requests are limited to the lesser of $1,000,000 or 500% of the average shares traded for the 10 days prior the Closing Request Date. The purchase price shall be 85% of the two lowest individual daily VWAP during the five (5) trading days immediately prior to the date the Request Notice is delivered (in each case, to be appropriately adjusted for any reorganization, recapitalization, non-cash dividend, stock split or other similar transaction that occurs on or after the date of this Agreement). In addition, the Company and Tysadco Partners entered into a Registration Rights Agreement, whereby the Company shall register the securities on a registration statement covering the Offering Amount with the Securities and Exchange Commission (“SEC”) within forty-five days of filing its 10-K for the year ended December 31, 2021. The Company’s Registration Statement on Form S-1 registering 25,000,000 shares in connection with the ELOC was declared effective on July 5, 2022.

Employment Agreements

The Company entered into employment agreements with its Chief Executive Officer, Mr. Ralph Hofmeier, and its Chief Operating Officer, Ms. Irma Velazquez (collectively the “Employment Agreements”), effective January 1, 2012. Under the Employment Agreements, the Corporation will pay each of Mr. Hofmeier and Ms. Velazquez an annual base salary of $125,000 during the first year and $150,000 during the second year and forward. Any increase to the annual base salary after the second year is subject to approval by the Corporation’s Board of Directors. The Employment Agreements each had initial terms of ten (10) years and is automatically renewed for successive one-year terms unless either party delivers timely notice of its intention not to renew. These contracts expired on August 4, 2022.

Effective as of August 4, 2022, Mr. Ralph M. Hofmeier has resigned as Chief Executive Officer and President of Energy and Water Development Corp. (the "Company"), and has been appointed as Chief Technology Officer of the Company. Mr. Hofmeier’s resignation is not a result of any disagreement with the Company or its independent auditors on any matter relating to the Company’s accounting, strategy, management, operations, policies, regulatory matters, or practices (financial or otherwise).

Effective as of August 4, 2022, Ms. Irma Velazquez has resigned as Chief Operating Officer of the Company, and has been appointed as Chief Executive Officer of the Company. Ms. Velazquez’s resignation is not a result of any disagreement with the Company or its independent auditors on any matter relating to the Company’s accounting, strategy, management, operations, policies, regulatory matters, or practices (financial or otherwise).

On August 4, 2022, per a board of directors resolution, the Company entered into employment agreements with its Chief Technology Officer, Mr. Ralph Hofmeier, and its Chief Executive Officer, Ms. Irma Velazquez (collectively the “2022 Employment Agreements”). Effective for the fiscal year ended December 31, 2022, under the 2022 Employment Agreements, the base salary will be $210,305 prorated for any partial period of employment and payable in arrears in accordance with the Company’s ordinary payroll policies and procedures. Additionally, in recognition of the employees’ past services, the Company shall pay each employee a lump sum cash signing bonus of $29,164, less payroll deductions and withholdings, and each individual will be eligible to receive a yearly bonus based on yearly profitability. Additionally, if certain performance milestones are met, each employee will be granted options to purchase shares of the Company’s common stock. No options had been granted as of March 31, 2023. Any increase to the annual base is subject to approval by the Company’s Board of Directors. The 2022 Employment Agreements each have an indefinite term.

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

Lease

Our registered office is located at 7901 4th Street N STE #4174, St. Petersburg, Florida 33702. Our telephone number is +1 (727) 677-9408. Office services are contracted for on a month-to-month basis in this address. In October 2020, the Company established its official registered branch in Hamburg Germany; the office address until March 31, 2021 was Offakamp 9f- 2.17. On April 1, 2021, the Company entered into two lease agreements for a workshop located at Industriestraße 17, 25462 Relligen and an office located at Ballindam 3 20095 Hamburg, Germany. Our telephone number is +49 40 809081354. Rent expense for the three months ended March 31, 2023 and 2022 amounted to $23,626 and $19,521, respectively.

The Company notified the landlord for one of its operating leases in May 2023 to effectively terminate the lease on June 30, 2023 as a precaution to the vague language used in the lease agreement. In response to the notification, the landlord has sought September 30, 2023 as the final date of the lease and demanded additional compensation for the early termination of the lease and for damages to the rental space. The Company may seek potential litigation against the landlord for demanding additional compensation that the Company does not believe the landlord is entitled to.

Contingencies

From time to time, the Corporation may be a defendant in pending or threatened legal proceedings arising in the normal course of its business. While the outcome and impact of currently pending legal proceedings cannot be predicted with certainty, the Corporation’s management and legal counsel believe that the resolution of these proceedings through settlement or adverse judgment will not have a material adverse effect on its operating results, financial position or cash flows.

Litigation

EAWD vs Packard and Co-Defendant Nick Norwood – Case number 18-031011 CA-01 Miami-Dade County Circuit Court. The Company is demanding the proof of payment for shares issued in 2008. The parties are currently scheduled to participate in non-binding arbitration.

EAWD vs Nerve Smart Systems ApS (“Nerve”) - Case number BS-15264/2022– The Court of Roskilde, Denmark. On April 2022, the Company filed a claim against Nerve demanding the return of the amounts paid by the Company for a Battery Energy Storage System that was never delivered by Nerve to the Company, and therefore Nerve did not meet the requirements and specifications of the contract with the Company. The Company is confident there will be a positive outcome in this case. This matter is not expected to be resolved prior to 2024 due to the long waiting times of the Danish court System.

Note 15. Subsequent Events

In May 2023, the Company issued 2,914,265 shares of the common stock to GS Capital Partners, LLC for conversion of $58,000 of principal and $1,699 of accrued interest on the convertible loan payable.

In May 2023, the Company established an official subsidiary of EAWD called EAWD Mexico SAPI de CV, in Mexico to ensure the company is positioned to service its growing business in the American Continent where the water scarcity is growing as well as the demand for sustainable solutions for the supply of water and off-grid EV charging stations.

For the three months ended March 31, 2023, the Company received deposits in the amount of $310,700 for 13,674,000 common shares related to common stock subscriptions that were issued in May 2023.

In May 2023, the Company issued 1,020,000 shares of common stock for $26,000.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

INTRODUCTORY STATEMENT

The following discussion should be read in conjunction with our condensed financial statements and the notes to those condensed financial statements that are included elsewhere in this Report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. See “Forward-Looking Statements.”

RESULTS of OPERATIONS

Results of Operations for the Three Months ended March 31, 2023 Compared to the three Months ended March 31, 2022


	For the Three Months Ended
	March 31,
	2023			2022
	(Unaudited)
GENERAL AND ADMINISTRATIVE EXPENSES
Marketing fees	$	14,996		$	93,247
Professional fees		132,576			101,898
Officers’ salaries and payroll taxes		136,633			113,237
Other general and administrative expenses		215,449			122,655
Travel and entertainment		5,527			12,075
TOTAL GENERAL and ADMINISTRATIVE EXPENSES		505,181			443,112

LOSS FROM OPERATIONS		(505,181	)		(443,112	)

OTHER INCOME (EXPENSE)
Change in fair value of derivative liability		30,593			243,653
Other income (expense)		8,392			(34,805	)
Loss on settlement		(196,159	)		—
Interest expense		(47,671	)		(124,446	)
TOTAL OTHER INCOME (EXPENSE)		(204,845	)		84,402

LOSS BEFORE TAXES		(710,026	)		(358,710	)

TAXES		—			—

NET LOSS	$	(710,026	)	$	(358,710	)

General and Administrative Expense

General and administrative expense increased by $62,069 to $505,181 for the three months ended March 31, 2023 from $443,112 for the three months ended March 31, 2022.

The increase in general and administrative expenses was primarily due to an increase in professional fees of $30,678, officer’s salaries of $23,396, and other general and administrative expenses of $92,794, offset by a decrease in marketing fees of $78,251, and travel and entertainment expenses by $6,548.

Other Income (Expense)

Other income decreased by $289,247 to $204,845 of other expense for the three months ended March 31, 2023 compared to other income of $84,402 for the three months ended March 31, 2022. The decrease in other income is the result of a decrease in the gain on derivative liability of $213,060 and an increase in loss on settlement of $196,159, offset by an increase in interest income of $76,775 and increase in other income of $43,197.

Net Loss

Net loss increased by $351,316 to $710,026 for the three months ended March 31, 2023 from $358,710 for the three months ended March 31, 2022. This increase was attributable to the net increases and decreases as discussed above.

LIQUIDITY and CAPITAL RESOURCES

We had $144,441 cash and negative working capital of $544,821 as of March 31, 2023. Our operating and capital requirements in connection with supporting our operations will continue to be significant. Since inception, our losses from operations and working capital requirements have been satisfied through the deferral of payment for services performed by our founders and related parties discussed more fully below.

We have sustained operating losses since our operations began. As of March 31, 2023, we had an accumulated deficit of $25,047,999. The Company cannot predict how long it will continue to incur further losses or whether it will ever become profitable as this is dependent upon the reduction of certain expenses and success in obtaining more project contracts, among other things. These conditions raise substantial doubt about the entity’s ability to continue as a going concern.

We have satisfied our cash and working capital requirements in the three months ended March 31, 2023, through the sale of common stock.

Comparison of Cash Flows for the Three Months Ended March 31, 2023 (2023) and March 31, 2022 (2022)

Net cash used in operating activities

We used $392,602 of cash in our operating activities in 2023 compared to $598,244 used in 2022. The decrease in cash used of $205,642 includes a net loss of $710,026, offset by non-cash lease expenses of $23,357, amortization of debt discount and deferred financing costs of $43,157, depreciation expense of $19,402, imputed interest on related party loan of $3,305, loss on settlement of liabilities of $196,159, offset by a change in fair value of derivative liability of $30,593, as well as cash provided by working capital items in the amount of $62,637 principally related to a decrease in prepaid expenses and other current assets of $14,485, an increase in accounts payable and accrued expenses of $19,777, and an increase in due to officers of $64,010, offset by an increase in inventory of $9,881, a decrease in operating lease liabilities, current and non-current of $22,754 and a decrease in due to related party of $3,000.

Cash Flows from Investing Activities

The Company used no cash from investing activities in 2023 as compared to $34,525 in 2022.

Cash Flows from Financing Activities

We received $541,409 (2023) and $426,000 (2022) in cash provided from financing activities. The net increase of $115,409 is due to $233,500 of proceeds from sale of stock and $310,700 of proceeds from common stock subscriptions, offset by $2,791 for payments of finance leases.

Financial Position

Total Assets – As of March 31, 2023 the Company had $1,270,724 of total assets representing $144,441 in cash, $52,761 in accounts receivable, $467,527 in inventory, $300,737 in prepaid expenses and other current assets, $265,899 in property and equipment, and $39,359 in operating lease right-of-use asset.

PLAN OF OPERATION AND FUNDING

We expect to generate more revenues which should, grow in time and lead to a positive cash flow. In the near future, we expect that working capital requirements will continue to be funded through sales contracts, lines of credit, convertible loans and/or further issuances of other securities in sufficient quantities that we will be able to meet our working capital requirement from these possible sources. Additional issuances of equity or convertible debt will result in dilution to our current shareholders.

We seek to focus on three main aspects of the water and energy business: (1) generation, (2) supply, and (3) maintenance. We seek to assist private companies, government entities and NGO’s to build profitable and sustainable supplies/generation capabilities of water and energy as required, by selling them the required technology or technical service to enhance their productivity/operability. With its outsourced technical arm and its commission-based global network of vendors, the Company expects to create sustainable added value to each project it takes on while generating revenue from the sale of EAWD Off-Grid AWG Systems, EAWD Off-Grid EV Charging Stations, EAWD Off-Grid Power Systems, and EAWD Off-Grid Water Purification Systems, royalties from the commercialization of energy and water in certain cases, and the licensing of our innovated technologies; as well as from its engineering, technical consulting, and project management services.

Through our BlueTech Alliance for Water Generation, established in December 2020, we have state-of-the-art technology partners, technology transfer agreements, and technology representation agreements in place relating to aspects of renewable energy and water supply. These unique key relationships offer important selling features and capabilities that differentiated EAWD from its competitors.

The Company plans to generate revenue from the sale of EAWD Off-Grid AWG Systems, EAWD Off-Grid EV Charging Stations, EAWD Off-Grid Power Systems, and EAWD Off-Grid Water Purification Systems, royalties from the commercialization of energy and water in certain cases, and the licensing of our innovated technologies, as well as from its engineering, technical consulting, and project management services.

MATERIAL COMMITMENTS

Employment Agreements

The Company entered into employment agreements with each of Irma Velazquez, its Chief Executive Officer and Vice Chairman of the Board, and Ralph Hofmeier, its Chairman of the Board and Chief Technology Officer, effective August 4, 2022 (together, the “Executive Employment Agreements”). Under the Executive Employment Agreements, the Company agreed to pay each of Ms. Velazquez and Mr. Hofmeier an annual base salary of €200,000, which is approximately $210,000 per year with discretionary cash and equity bonuses available based on the Board’s assessment of the executive’s performance against applicable performance objectives as well as Company performance. Any increase to the annual base salary is subject to approval by the Company’s Board of Directors. The foregoing descriptions of the Executive Employment Agreements does not purport to be complete and is qualified in its entirety by reference to the copy of each agreement filed as Exhibits 10.1 and 10.2 the Company’s Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC.

The Company also entered into employment agreements with 4 other employees, effective during the 3rd quarter of 2021. In 2022, The Company dismissed two employees to upgrade these positions as technical assistants.

OFF-BALANCE SHEET ARRANGEMENTS

We have no off-balance sheet arrangements.

GOING CONCERN

The next operational step to accomplish is to achieve sufficient sales volume to yield positive net income. Due to the timing of the project build out, the Company has currently recorded limited revenue and consequently has incurred operating losses since it began operations (December 2012) totaling $25,047,999 as of March 31, 2023. During the three months ended March 31, 2023, the Corporation incurred net losses of $710,026. The Company also had a working capital deficit of $544,821 as of March 31, 2023.

The Company’s ability to transition to profitable operations is dependent upon achieving a level of revenue adequate to support its cost structure. The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations and the anticipated growth of our business and availability to sufficient resources.

At the filling date of this report, management is working to conclude the sales in Germany and in other regions of the world relating to the previously approved proposals, which would bring a growing revenue. Managements plans to expand the sales operations by greater market penetration of the agricultural, industrial and community development markets with its innovative water and energy generation solution. Management also plans to raise additional funds during 2022 through the issuance of equity securities, from deposits related to customer purchase orders, and, if necessary, loans from management and third-party lenders. Management also plans to reduce expenses by centralizing the assembly, logistics and administrative operations of the Company into a larger, self-sufficient, off-grid location that will be able to house the storage of supplies and inventory, as well as provide space for assembly and administrative operations. The Company is also planning to acquire its own electric vehicles to reduce its supply transportation costs.

The ability of the Company to continue as a going concern depends upon its ability to generate sales or obtain additional funding to finance operating losses until the Corporation is profitable.

ADDRESSING CHALLENGES POST-COVID-19

COVID-19 is an incomparable global public health emergency that has affected almost every industry and has caused the worst global economic contraction of the past 80 years (IMF) and the current war in Ukraine has also caused significant changes in consumer behavior and purchasing patterns, supply chain routing, the dynamics of current market forces, and government oversight and intervention. Disruptive activities could include the temporary closure of our manufacturing facilities and those used in our supply chain processes, restrictions on the export or shipment of our products, significant cutback of ocean container delivery from Germany, business closures in impacted areas, and restrictions on our employees’ and consultants’ ability to travel and to meet with customers. The extent to which COVID-19 or the war in Ukraine impacts our results will depend on future developments, which still uncertain and cannot be predicted, including new information which may emerge concerning the severity of the current conflict as well as virus variants and the actions to contain it or treat its impact, among others. COVID-19 and the war in Ukraine could also continue to result in social, economic and labor instability in the countries in which we or our customers and suppliers operate.

If workers at one or more of our offices or the offices of our suppliers or manufacturers become ill or are quarantined and in either or both events are therefore unable to work, our operations could be subject to disruption. Further, if our manufacturers become unable to obtain necessary raw materials or components, we may incur higher supply costs or our manufacturers may be required to reduce production levels, either of which may negatively affect our financial condition or results of operations.

In light of these challenges, the Company is focusing its efforts on supporting key areas of our business that will help us to stabilize in the new environment and strategize for what comes next. Those key areas are: crisis management and response, workforce, operation and supply chain, finance and liquidity, tax, trade and regulatory, as well as strategy and brand.

CRITICAL ACCOUNTING POLICIES

Our critical accounting policies are set forth in Note 2 to the condensed financial statements.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

We do not expect the adoption of recently issued accounting pronouncements as discussed in Note 3 to have a significant impact on our results of operations, financial position or cash flow.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company and are not required to provide the information under this item.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13(a)-15(e) and 15(d)-15(e)) as of December 31, 2022. This evaluation was carried out by our Principal Executive Officer and our Principal Finance Officer. Based on that evaluation, our Principal Executive Officer and our Principal Finance Officer concluded that, as of March 31, 2023, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.

A material weakness is a deficiency, or a 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. Management has identified the following material weaknesses, which have caused management to conclude that, as of March 31, 2023, our disclosure controls and procedures were not effective:

	·	Inadequate segregation of duties, due to lack of human resources
	·	Limited level of multiple reviews among those tasked with preparing the financial statements,
	·	Lack of a more formal internal control environment.

Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting

We intend to implement changes to strengthen our internal controls in addition to the enhanced controls discussed above. We are in the process of implementing a remediation plan for the identified material weaknesses and we expect that work on the plan will continue throughout 2023, as financial resources permit. Specifically, to address the material weaknesses arising from insufficient accounting personnel, the Company hired a part-time Chief Financial Officer and has secured the services of additional accounting personnel on a consulting basis which begins to address segregation of duties. The Company is currently formalizing its policies and procedures in writing and improving the integration of its financial and reporting system into non accounting departments. Where appropriate, the Company receives advice and assistance from third-party experts as it implements and refines its remediation plan.

Additional measures may be necessary, and the measures we expect to take to improve our internal controls may not be sufficient to address the issues identified, to ensure that our internal controls are effective or to ensure that such material weakness or other material weaknesses would not result in a material misstatement of our annual or interim financial statements. In addition, other material weaknesses or significant deficiencies may be identified in the future. If we are unable to correct deficiencies in internal controls in a timely manner, our ability to record, process, summarize and report financial information accurately and within the time periods specified in the rules and forms of the SEC will be adversely affected. This failure could negatively affect the market price and trading liquidity of our common stock, cause investors to lose confidence in our reported financial information, subject us to civil and criminal investigations and penalties, and generally materially and adversely impact our business and financial condition.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the fiscal quarter ended March 31, 2023 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Internal Controls

Management’s conclusion that our disclosure controls and procedures were not effective means that if a fraud or material misstatement of the company’s annual or interim financial statements were to occur; there is a reasonable possibility that they will not be prevented or detected on a timely basis. 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. Because of 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 the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

EAWD vs Packard and Co-Defendant Nick Norwood - Case number 18-031011 CA-01 Miami-Dade County Circuit Court. The Company is demanding the proof of payment for shares issued in 2008. The parties are currently scheduled to participate in non-binding arbitration.

EAWD vs Nerve Smart Systems ApS (“Nerve”) Case number BS-15264/2022– The Court of Roskilde, Denmark. On April 2022, the Company filed a claim against Nerve demanding the return of amounts paid by the Company for a Battery Energy Storage System that was never delivered by Nerve to the Company, and therefore Nerve did not meet the requirements and specifications of the contract with the Company. The Company is confident there will be a positive outcome. This matter is not expected to be resolved prior to 2024 due to the long waiting times of the Danish court System.

ITEM 1A. RISK FACTORS

We are a smaller reporting company and are not required to provide the information under this item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The Company issued 12,638,511 common shares during the three months ended March 31, 2023.

The sale and the issuance of the foregoing securities were offered and sold in reliance upon exemptions from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”) and Rule 506 of Regulation D promulgated under the Securities Act (“Regulation D”). We made this determination based on the representations of each recipient, as applicable, which included, in pertinent part, that each such investor was either (a) an “accredited investor” within the meaning of Rule 501 of Regulation D or (b) a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act and upon such further representations from each investor that (i) such investor acquired the securities for his, her or its own account for investment and not for the account of any other person and not with a view to or for distribution, assignment or resale in connection with any distribution within the meaning of the Securities Act, (ii) such investor agreed not to sell or otherwise transfer the purchased securities unless they are registered under the Securities Act and any applicable state securities laws, or an exemption or exemptions from such registration are available, (iii) such investor had knowledge and experience in financial and business matters such that he, she or it was capable of evaluating the merits and risks of an investment in us, (iv) such investor had access to all of our documents, records, and books pertaining to the investment and was provided the opportunity to ask questions and receive answers regarding the terms and conditions of the offering and to obtain any additional information which we possessed or were able to acquire without unreasonable effort and expense, and (v) such investor had no need for the liquidity in its investment in us and could afford the complete loss of such investment. In addition, there was no general solicitation or advertising for such securities issued in reliance upon these exemptions.

The proceeds were used to cover expenses of Company operations.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. MINE SAFETY DISCLOSURES

N/A

ITEM 5. OTHER INFORMATION

N/A

ITEM 6. EXHIBITS

EXHIBIT INDEX

Incorporated by Reference

Filed or Furnished

Exhibit #

Exhibit Description

Form

Date Filed

Exhibit #

Herewith

31.1

Certification of Principal Executive Officer (Section 302)

31.2

Certification of Principal Financial Officer (Section 302)

32.1

Certification of Principal Executive Officer and Principal Financial Officer (Section 906)

101.INS

Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Energy and Water Development Corp.

Date: June 6, 2023	By:	/s/ Irma Velazquez
		Irma Velazquez
		Chief Executive Officer (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Irma Velazquez	Chief Executive Officer, Director, and	June 6, 2023
Irma Velazquez	Vice-Chairperson of the Board (Principal Executive Officer)

/s/ Amedeo Montonati	Chief Financial Officer (Principal Financial Officer and	June 6, 2023
Amedeo Montonati	Principal Accounting Officer)

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