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 quarterly period ended ~~June~~ September 30, 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 No. 000-53029

C-BOND SYSTEMS, INC.

(Exact name of Registrant as Specified in its Charter)

Colorado		26-1315585
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

6035 South Loop East
Houston, Texas		77033
(Address of Principal Executive Offices)		(Zip Code)

832-649-5658

(Registrant’s telephone number, including area code)

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
N/A		N/A		N/A

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 (Section 232.405 of this chapter) during the preceding 12 months (or 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, a 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 Exchange Act) Yes ☐ No ☒

There were ~~523~~532,~~233~~818,~~675~~051 shares of the registrant’s common stock, par value $0.001 per share, issued and outstanding as of ~~August~~November 14, 2023.

C-BOND SYSTEMS, INC.

FORM 10-Q

~~JUNE~~ SEPTEMBER 30, 2023

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements	1
	Consolidated Balance Sheets - As of June 30, 2023 (unaudited) and December 31, 2022	1
	Consolidated Balance Sheets - As of September 30, 2023 (unaudited) and December 31, 2022	1
	Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2023 and 2022 (unaudited)	2
	Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited)	2
	Consolidated Statements of Changes in Shareholders’ Deficit for the Three and Six Months Ended June 30, 2023 and 2022 (unaudited)	3
	Consolidated Statements of Changes in Shareholders’ Deficit for the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited)	3
	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2023 and 2022 (unaudited)	4
	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 (unaudited)	4
	Notes to Unaudited Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	4239
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	5249
Item 4.	Controls and Procedures	5249
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	5350
Item 1A.	Risk Factors	5450
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5450
Item 3.	Defaults Upon Senior Securities	5450
Item 4.	Mine Safety Disclosures	5450
Item 5.	Other Information	5450
Item 6.	Exhibits	5551
Signatures		5652

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

C-BOND SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	September 30,			December 31,
	2023			2022
	(Unaudited)
ASSETS
CURRENT ASSETS:
Cash	$	1,~~511~~133,~~527~~129		$	97,091
Accounts receivable, net		80270,~~508~~803			269,442
Inventory		~~119~~110,~~147~~339			77,446
Prepaid expenses and other current assets		6634,~~946~~863			71,171
Contract assets		~~52,766~~-			279
Total Current Assets		1,~~830~~549,~~894~~134			515,429
OTHER ASSETS:
Property and equipment, net		79183,~~048~~886			96,306
Right of use asset, net		~~186~~172,~~631~~754			375,412
Intangible asset, net		~~254~~242,~~666~~040			279,918
Goodwill		350,491			350,491
Security deposit		-			6,482
Total Other Assets		~~870~~949,~~836~~171			1,108,609
TOTAL ASSETS	$	2,~~701~~498,~~730~~305		$	1,624,038
LIABILITIES AND SHAREHOLDERS’ DEFICIT
CURRENT LIABILITIES:
Convertible note payable, net of discount - current portion	$	1,031,250		$	1,031,250
Notes payable, net of discount - current portion		3380,~~209~~695			1,576,438
Note payable - related party		50,000			-
Accounts payable		724,603			779,765
Accounts payable		729,738			779,765
Accrued expenses		405,995			736,393
Accrued expenses		390,750			736,393
Accrued interest payable - related party		386			10,027
Accrued interest payable - related party		15,690			10,027
Accrued compensation		385,423			590,632
Accrued compensation		418,444			590,632
Contract liabilities		136,427			22,637
Contract liabilities		180,000			22,637
Lease liabilities, current portion		59,548			117,671
Lease liabilities, current portion		57,910			117,671
Total Current Liabilities		2,824,327			4,864,813
Total Current Liabilities		2,906,991			4,864,813
LONG-TERM LIABILITIES:
Convertible notes payable, net of current portion		-			251,263
Notes payable, net of current portion and discount		559,~~547~~869			208,804
Note payable - related party		-			250,000
Lease liabilities, net of current portion		~~128~~113,~~721~~206			258,895
Total Long-term Liabilities		~~134~~173,~~268~~075			968,962
Total Liabilities		32,~~041~~997,~~259~~402			5,833,775
Commitments and Contingencies (See Note 10)
Series B convertible preferred stock: $0.10 par value, 100,000 shares designated; 1,144 and 1,000 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively ($1,192,427 redemption and liquidation value at June 30, 2023)		1,192,427			1,037,201
Series B convertible preferred stock: $0.10 par value, 100,000 shares designated; 1,144 and 1,000 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively ($1,198,197 redemption and liquidation value at September 30, 2023)		1,198,197			1,037,201
Series C convertible preferred stock: $0.10 par value, 100,000 shares designated; 15,450 and 17,290 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively ($2,453,715 redemption and liquidation value at June 30, 2023)		1,635,810			1,803,731
Series C convertible preferred stock: $0.10 par value, 100,000 shares designated; 15,150 and 17,290 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively ($2,420,285 redemption and liquidation value at September 30, 2023)		1,613,523			1,803,731
SHAREHOLDERS’ DEFICIT:
Preferred stock: $0.10 par value, 2,000,000 shares authorized; 100,000 Series B and 100,000 Series C designated, none issued and outstanding		-			-
Common stock: $0.001 par value, 4,998,000,000 shares authorized; 523,233,675 and 350,270,172 issued and outstanding at June 30, 2023 and December 31, 2022, respectively		523,234			350,270
Common stock: $0.001 par value, 4,998,000,000 shares authorized; 532,818,051 and 350,270,172 issued and outstanding at September 30, 2023 and December 31, 2022, respectively		532,818			350,270
Additional paid-in capital		55,~~827~~852,~~561~~477			55,141,503
Accumulated deficit		(59,~~633~~840,~~941~~149	)		(62,693,184	)
Total C-Bond Systems, Inc. shareholders’ deficit		(3,~~283~~454,~~146~~854	)		(7,201,411	)
Noncontrolling Interest		115,380			150,742
Noncontrolling interest		144,037			150,742
Total Shareholders’ Deficit		(3,~~167~~310,~~766~~817	)		(7,050,669	)
Total Liabilities and Shareholders’ Deficit	$	2,~~701~~498,~~730~~305		$	1,624,038

See accompanying unaudited notes to the unaudited consolidated financial statements.

C-BOND SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	For the Three Months Ended						For the ~~Six~~Nine Months Ended
	June 30,						June 30,
	September 30,						September 30,
	2023			2022			2023			2022
SALES:	$	~~414~~813,~~055~~951		$	~~540~~573,~~367~~649		$	~~929~~1,~~275~~743,226		$	1,~~051~~624,~~076~~725
COST OF SALES (excluding depreciation expense)		~~209~~346,~~071~~611			~~209~~246,~~704~~346			~~454~~801,~~431~~042			~~459~~705,~~334~~680
GROSS PROFIT		~~204~~467,~~984~~340			~~330~~327,~~663~~303			~~474~~942,~~844~~184			~~591~~919,~~742~~045
OPERATING EXPENSES:
Compensation and related benefits (including stock-based compensation of $30,046 and $6,618 for the three months ended June 30, 2023, and 2022, and $42,183 and $1,021,126 for the six months ended June 30, 2023 and 2022, respectively)		(441,181	)		(424,714	)		(868,053	)		(1,840,732	)
Compensation and related benefits (including stock-based compensation of $0 and $4,445 for the three months ended September 30, 2023, and 2022, and $42,183 and $1,025,571 for the nine months ended September 30, 2023 and 2022, respectively)		(308,991	)		(412,642	)		(1,177,044	)		(2,253,374	)
Professional fees		(~~193~~111,~~263~~005	)		(~~132~~217,~~052~~123	)		(~~380~~491,~~953~~958	)		(~~446~~663,~~264~~387	)
General and administrative expenses		(~~142~~161,~~404~~975	)		(~~185~~198,~~391~~362	)		(~~321~~483,~~304~~279	)		(~~390~~588,~~004~~366	)
Total Operating Expenses		(~~776~~581,~~848~~971	)		(~~742~~828,~~157~~127	)		(12,~~570~~152,~~310~~281	)		(23,~~677~~505,~~000~~127	)
OTHER OPERATING INCOME:
Gain on sale of product line		~~4,051,709~~-			-			4,051,709			-
INCOME (LOSS) FROM OPERATIONS		3(114,~~479,845~~631	)		(~~411~~500,~~494~~824	)		2,~~956~~841,~~243~~612			(2,~~085~~586,~~258~~082	)
OTHER INCOME (EXPENSES):
Gain (loss) on debt extinguishment, net		~~462~~9,~~581~~250			~~(234,320~~-	)		~~462~~471,~~581~~831			(231,395	)
Interest expense		(~~166~~58,~~189~~301	)		(~~362~~440,~~305~~552	)		(~~361~~420,~~975~~276	)		(~~610~~1,~~885~~051,437	)
Interest expense - related party		(~~1,964~~386	)		(15,~~233~~014	)		(56,~~663~~049	)		(16,~~233~~247	)
Total Other Income (Expenses), net		~~294~~(49,~~428~~437	)		(~~597~~445,~~858~~566	)		9445,~~943~~506			(~~843~~1,~~513~~289,079	)
NET INCOME (LOSS)		3(164,~~774,273~~068	)		(1946,~~009,352~~390	)		32,~~051~~887,~~186~~118			(23,~~928~~875,~~771~~161	)
Net loss of subsidiary attributable to noncontrolling interest		18,640			10,066			35,362			23,086
Net (income) loss of subsidiary attributable to noncontrolling interest		(28,657	)		8,529			6,705			31,615
Preferred stock dividend		(13,~~618~~483	)		(1714,~~622~~619	)		(2740,~~305~~788	)		(3146,~~627~~246	)
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON SHAREHOLDERS	$	3(206,~~779,295~~208	)	$	(1952,~~016,908~~480	)	$	32,~~059~~853,~~243~~035		$	(23,~~937~~889,~~312~~792	)
NET INCOME (LOSS) PER COMMON SHARE:
Basic	$	(0.0100	)	$	(0.00	)	$	0.01		$	(0.01	)
Diluted	$	(0.00	)	$	(0.00	)	$	0.00		$	(0.01	)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:
Basic		~~493~~524,~~056~~747,~~689~~583			~~294~~319,~~776~~825,~~031~~057			~~458~~478,~~283~~703,~~435~~698			~~289~~299,~~334~~609,~~882~~959
Diluted		2524,~~349~~747,~~380,186~~583			~~294~~319,~~776~~825,~~031~~057			2,~~314~~355,~~606~~294,~~932~~011			~~289~~299,~~334~~609,~~882~~959

See accompanying unaudited notes to the unaudited consolidated financial statements.

C-BOND SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ DEFICIT

FOR THE THREE AND ~~SIX~~NINE MONTHS ENDED ~~JUNE~~ SEPTEMBER 30, 2023 AND 2022

(Unaudited)

					Additional								Total
	Common Stock				Paid-in		Accumulated			Noncontrolling			Shareholders’
	# of Shares		Amount		Capital		Deficit			Interest			Deficit
Balance, December 31, 2022		350,270,172	$	350,270	$	55,141,503	$	(62,693,184	)	$	150,742		$	(7,050,669	)
Common stock issued for cash and accrued compensation		54,545,455		54,545		245,455		-			-			300,000
Common stock issued for professional fees		6,666,667		6,667		33,333		-			-			40,000
Common stock issued for accrued compensation		9,636,364		9,636		43,364		-			-			53,000
Common stock issued for conversion of Series C preferred stock		26,585,614		26,586		74,814		-			-			101,400
Preferred stock dividends and deemed dividend		-		-		-		(13,687	)		-			(13,687	)
Accretion of stock-based compensation		-		-		12,137		-			-			12,137
Net loss		-		-		-		(706,365	)		(16,722	)		(723,087	)
Balance, March 31, 2023		447,704,272		447,704		55,550,606		(63,413,236	)		134,020			(7,280,906	)
Common stock issued for professional fees		6,500,000		6,500		32,950		-			-			39,450
Common stock issued for compensation		2,500,000		2,500		23,500		-			-			26,000
Common stock issued for conversion of Series C preferred stock		23,157,922		23,158		59,442		-			-			82,600
Common stock issued for conversion of debt, accrued interest and fees		43,371,481		43,372		157,017		-			-			200,389
Preferred stock dividends and deemed dividend		-		-		-		(13,618	)		-			(13,618	)
Accretion of stock-based compensation		-		-		4,046		-			-			4,046
Net income		-		-		-		3,792,913			(18,640	)		3,774,273
Balance, June 30, 2023		523,233,675	$	523,234	$	55,827,561	$	(59,633,941	)	$	115,380		$	(3,167,766	)
Common stock issued for professional fees		1,000,000		1,000		3,500		-			-			4,500
Common stock issued for conversion of Series C preferred stock		8,584,376		8,584		21,416		-			-			30,000
Preferred stock dividends and deemed dividend		-		-		-		(13,483	)		-			(13,483	)
Net loss		-		-		-		(192,725	)		28,657			(164,068	)
Balance, September 30, 2023		532,818,051	$	532,818	$	55,852,477	$	(59,840,149	)	$	144,037		$	(3,310,817	)

					Additional									Total
	Common Stock				Paid-in			Accumulated			Noncontrolling			Shareholders’
	# of Shares		Amount		Capital			Deficit			Interest			Deficit
Balance, December 31, 2021		282,216,632	$	282,217	$	53,064,616		$	(57,515,129	)	$	189,255		$	(3,979,041	)
Common stock issued for accounts payable		90,859		90		2,084			-			-			2,174
Common stock issued for compensation		500,000		500		13,750			-			-			14,250
Common stock issued for conversion of Series C preferred stock		1,543,151		1,543		10,457			-			-			12,000
Common stock issued in connection with debt		823,529		824		12,139			-			-			12,963
Preferred stock dividends and deemed dividend		-		-		-			(14,005	)		-			(14,005	)
Accretion of stock-based compensation		-		-		42,702			-			-			42,702
Beneficial conversion charge for issuance of Series B preferred shares for accrued compensation recorded as stock-based compensation		-		-		957,556			-			-			957,556
Net loss		-		-		-			(1,906,399	)		(13,020	)		(1,919,419	)
Balance, March 31, 2022		285,174,171		285,174		54,103,304			(59,435,533	)		176,235			(4,870,820	)
		-
Common stock issued for professional fees		7,000,000		7,000		95,000			-			-			102,000
Common stock issued for conversion of Series C preferred stock		13,184,548		13,185		88,815			-			-			102,000
Common stock issued in connection with debt		1,750,000		1,750		30,986			-			-			32,736
Preferred stock dividends and deemed dividend		-		-		3,702			(17,622	)		-			(13,920	)
Accretion of stock-based compensation		-		-		6,618			-			-			6,618
Relative fair value of warrants issued in connection with debt		-		-		325,785			-			-			325,785
Beneficial conversion feature on convertible debt		-		-		469,899			-			-			469,899
Beneficial conversion feature buyback related to debt extinguishment		-		-		(160,993	)		-			-			(160,993	)
Net loss		-		-		-			(999,286	)		(10,066	)		(1,009,352	)
Balance, June 30, 2022		307,108,719	$	307,109	$	54,963,116		$	(60,452,441	)	$	166,169		$	(5,016,047	)
Common stock issued for compensation		3,000,000		3,000		(3,000	)		-			-			-
Common stock issued for professional fees		7,954,545		7,954		83,296			-			-			91,250
Common stock issued in connection with debt		7,671,634		7,672		57,260			-			-			64,932
Preferred stock dividends and deemed dividend		-		-		733			(14,619	)		-			(13,886	)
Accretion of stock-based compensation		-		-		4,445			-			-			4,445
Beneficial conversion feature on convertible debt adjustment		-		-		(115,684	)		-			-			(115,684	)
Net loss		-		-		-			(937,861	)		(8,529	)		(946,390	)
Balance, September 30, 2022		325,734,898	$	325,735	$	54,990,166		$	(61,404,921	)	$	157,640		$	(5,931,380	)

See accompanying unaudited notes to the unaudited consolidated financial statements.

C-BOND SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	For the Six Months Ended
	For the Nine Months Ended
	June 30,
	September 30,
	2023			2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)	$	32,~~051~~887,~~186~~118		$	(23,~~928~~875,~~771~~161	)
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation and amortization expense		4163,~~395~~953			4568,~~665~~230
Amortization of debt discount to interest expense		9596,~~922~~075			~~527~~910,~~219~~907
Interest expense for put premium on convertible notes		29,212			-
Non-cash interest expense from fees on debt conversion		2,250			-
Stock-based compensation		42,183			1,~~021~~025,~~126~~571
Stock-based professional fees		97119,~~817~~700			~~124~~228,~~050~~946
Bad debt expense		-			7,716
Bad debt (recovery) expense		(10,331	)		7,716
Non-cash (gain) loss on debt extinguishment and inducement expense		(~~462~~471,~~581~~831	)		231,395
Gain from sale of Nanoshield product line		(4,051,709	)		-
Lease costs		660			~~749~~586
Change in operating assets and liabilities:
Accounts receivable		~~188~~8,~~934~~970			(8086,~~545~~571	)
Inventory		(5142,~~196~~388	)		20(1,~~285~~287	)
Prepaid expenses and other assets		(~~15,434~~734	)		2023,~~343~~763
Contract assets		~~(52,487~~279	)		82,805
Accounts payable		(5055,~~027~~162	)		~~102~~(8,721	)
Accrued expenses		823,~~040~~285			77122,~~335~~074
Accrued interest - related party		5(9,~~663~~641	)		-6,247
Accrued compensation		4926,~~812~~041			3426,~~276~~927
Contract liabilities		~~157~~113,~~363~~790			1653,~~876~~462
NET CASH USED IN OPERATING ACTIVITIES		(~~912~~1,~~997~~228,280	)		(~~799~~1,~~374~~183,111	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment		(114,770	)		-
Proceeds from the sale of Nanoshield product line		4,042,631			-
NET CASH PROVIDED BY INVESTING ACTIVITIES		43,~~042~~927,~~631~~861			-
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock		275,000			-
Proceeds from note payable - related party		-			250,000
Repayment of note payable - related party		(~~200~~250,000	)		-
Proceeds from notes payable		~~175~~291,~~000~~621			~~175~~641,~~000~~260
Repayment of notes payable		(1,~~792~~807,~~448~~414	)		(4975,~~396~~480	)
Proceeds from convertible notes payable		50,000			~~148,420~~-
Repayment of convertible notes payable		(222,750	)		-
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES		(1,~~715~~663,~~198~~543	)		~~524~~815,~~024~~780
NET INCREASE (DECREASE) IN CASH		1,~~414~~036,~~436~~038			(~~275~~367,~~350~~331	)
CASH, beginning of period		97,091			519,898
CASH, end of period	$	1,~~511~~133,~~527~~129		$	~~244~~152,~~548~~567
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for:
Interest	$	~~199~~225,~~122~~739		$	815,~~354~~287
Income taxes	$	-		$	-
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Common stock issued as prepaid for services	$	7983,~~450~~950		$	~~102~~193,~~000~~250
Common stock issued for accrued compensation	$	78,000		$	-
Series B preferred stock issued for accrued compensation	$	144,000		$	278,654
Preferred stock dividend accrued	$	2740,~~305~~788		$	2741,~~925~~811
Deemed dividend related to ratchet provision	$	-		$	34,~~702~~435
Increase in debt discount and paid-in capital for shares issued with convertible debt	$	-		$	45110,~~699~~631
Increase in debt discount and paid-in capital for warrants issued with convertible debt	$	-		$	325,785
Increase in debt discount and paid-in capital for beneficial conversion feature on convertible debt	$	-		$	469,899
Conversion of series C preferred stock to common stock	$	184,000		$	114,000
Conversion of notes payable to common stock	$	194,000		$	-
Common stock issued for accounts payable	$	-		$	2,174
Conversion of series C preferred stock to common stock	$	214,000		$	114,000
Conversion of notes payable and accrued interest to common stock	$	198,139		$	-
Increase in right of use and lease liability	$	-		$	184,375

See accompanying unaudited notes to the unaudited consolidated financial statements.

C-BOND SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~JUNE~~SEPTEMBER 30, 2023 (UNAUDITED)

NOTE 1 – NATURE OF ORGANIZATION

Nature of Organization

C-Bond Systems, Inc., together with its subsidiaries (the “Company”), is a materials development company and sole owner, developer, and manufacturer of the patented C-Bond technology. The Company is engaged in the implementation of proprietary nanotechnology applications and processes to enhance properties of strength, functionality, and sustainability of brittle material systems. The Company’s primary focus is in the multi-billion-dollar glass and window film industry with target markets in the United States and internationally. ~~The~~During the nine months ended September 30, 2023 and 2022, the Company ~~operates~~operated in two ~~divisions~~segments: C-Bond Transportation Solutions and Patriot Glass Solutions. C-Bond Transportation Solutions ~~sold~~ sold a windshield strengthening, water repellent solution called C-Bond nanoShield™ through May 8, 2023, the date that the nanoShield product line and related technologies were sold (see Note 16). Patriot Glass Solutions sells multi-purpose glass strengthening primer and window film mounting solutions, including C-Bond BRS, a ballistic-resistant film system, and C-Bond Secure, a forced entry system.

On June 30, 2021, the Company entered into a Share Exchange Agreement and Plan of Reorganization (the “Exchange Agreement”) with (i) Mobile Tint LLC, a Texas limited liability company doing business as A1 Glass Coating (“Mobile”), (ii) the sole member of Mobile (the “Mobile Shareholder”), and (iii) Michael Wanke as the Representative of the Mobile Shareholder. Pursuant to the Exchange Agreement, the Company agreed to acquire 80% of Mobile’s units, representing 80% of Mobile’s issued and outstanding capital stock (the “Mobile Shares”). On July 22, 2021, the Company closed the Exchange Agreement and acquired 80% of the Mobile Shares. The Mobile Shares were exchanged for 28,021,016 restricted shares of the Company’s common stock in an amount equal to $800,000, divided by the average of the closing prices of the Company’s common stock during the 30-day period immediately prior to the closing. ~~Two~~Initially, for two years after closing, the Company ~~has~~had the option to acquire the remaining 20% of Mobile’s issued and outstanding membership interests in exchange for a number of shares of the Company’s common stock equal to 300% of Mobile’s average EBIT value, divided by the price of the Company’s common stock as defined in the Exchange Agreement. On September 20, 2023, the Company and the Mobile Shareholder entered into amendment #2 to the Exchange Agreement (the “Amended Exchange Agreement”). Pursuant to the Amended Exchange Agreement, the Company shall have the option (the “Option”), beginning on July 1, 2025 (the “Option Start Date”) and ending on 5:00 P.M. EST on the date that is thirty calendar days after the Option Start Date (the “Option Period”), to acquire the remaining 20% of Mobile Units (the “Additional Units”), representing 20% of Mobile’s issued and outstanding membership interests, collectively (the “Additional Closing”) (See Note 10). Mobile provides quality window tint solutions for auto, home, and business owners across Texas, specializing in automotive window tinting, residential window film, and commercial window film that stop harmful UV rays from passing through its window films for reduced glare, comfortable temperatures, and lower energy bills. Mobile also carries products that offer forced-entry protection and films that protect glass from scratches, graffiti, other types of vandalism, and even bullets, including C-Bond BRS and C-Bond Secure products. As part of the transaction, Mobile’s owner-operator, Mr. Wanke, joined the Company as President of its Patriot Glass Solutions division.

On May 8, 2023, the Company entered into an Asset Purchase Agreement (“APA”) with Apex Protect GPS, LLC (the “Buyer”), whereby the Company sold its C-Bond nanoShield™ business, including intangible assets, intellectual property, work in process, furniture, fixtures, equipment, inventory and other physical assets of the Company’s C-Bond nanoShield division (the “Assets”) to the Buyer. Accordingly, the Company assigned, transferred and delivered to the Buyer, free and clear of all liens, all of the Assets. Following the Closing, the Parties entered into an Assignment and Agreement to Re-Execute (“Assignment”) on June 15, 2023, by and among the Company (“Seller”); Apex Protect GPS, LLC, (“Assignor”) and CB Nanoshield, LLC, (“Assignee”), whereby the Assignor assigned all its right to the (i) APA; (ii) Bill of Sale (iii) IP Agreements; and (iv) and any memorandums, schedules and exhibits related to the foregoing to Assignee. The Seller and Assignee also entered into a Lease and Assignment and Assumption Agreement on June 15, 2023 (the “Assignment Agreement”), wherein the Seller assigned to Assignee, and Assignee took assignment from the Seller, of the lease for the premises located at 6035 South Loop East, Houston, Texas 77033 (the “Lease”) pursuant to the Assignment Agreement (See Note 16).

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The Company’s unaudited consolidated financial statements include the financial statements of its wholly owned subsidiary, C-Bond Systems, LLC, and its 80% owned subsidiary, Mobile since acquiring 80% of Mobile on July 22, 2021. All significant intercompany accounts and transactions have been eliminated in consolidation.

5Management acknowledges its responsibility for the preparation of the accompanying unaudited condensed consolidated financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its financial position and the results of its operations for the periods presented. The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S. GAAP”) for interim financial information and with the instructions Article 8-03 of Regulation S-X. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole.

~~C-BOND~~Certain information and note disclosure normally ~~SYSTEMS,~~included ~~INC~~in consolidated financial statements prepared in accordance with U.S. ~~AND~~GAAP ~~SUBSIDIARIES~~has been condensed or omitted from these statements ~~NOTES~~pursuant TOto ~~CONSOLIDATED~~such ~~FINANCIAL~~accounting ~~STATEMENTS~~principles and, accordingly, they do not include all the information and notes necessary for comprehensive ~~JUNE~~consolidated 30financial statements. These unaudited condensed consolidated financial statements should be read in conjunction with the summary of significant accounting policies and notes to the consolidated financial statements for the year ended December 31, ~~2023~~2022 of the Company which were included in the Company’s Annual Report on Form 10-K as filed with the Securities and Exchange Commission (~~UNAUDITED~~the “SEC”) on March 31, 2023.

Management acknowledges its responsibility for the preparation of the accompanying unaudited condensed consolidated financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its financial position and the results of its operations for the periods presented. The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America (the “U.S. GAAP”) for interim financial information and with the instructions Article 8-03 of Regulation S-X. Operating results for interim periods are not necessarily indicative of results that may be expected for the fiscal year as a whole.5

~~Certain information~~C-BOND and note disclosure normally included in consolidated financial statements prepared in accordance with U.S. GAAP has been condensed or omitted from these statements pursuant to such accounting principles andSYSTEMS, ~~accordingly, they do not include all the information and notes necessary for comprehensive consolidated financial statements~~INC. ~~These~~AND ~~unaudited condensed consolidated financial statements~~SUBSIDIARIES ~~should~~NOTES beTO ~~read~~CONSOLIDATED inFINANCIAL ~~conjunction with the summary of significant accounting policies and notes to the consolidated financial statements~~STATEMENTS ~~for~~SEPTEMBER ~~the year ended December 31~~30, ~~2022 of the Company which were included in the Company’s Annual Report on Form 10-K as filed with~~2023 ~~the Securities and Exchange Commission~~ (~~the “SEC”~~UNAUDITED) ~~on March 31, 2023.~~

Going Concern

These unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying unaudited consolidated financial statements, the Company had net income of $32,~~051~~887,~~186~~118 for the ~~six~~nine months ended ~~June~~September 30, 2023. Net cash used in operations was $~~912~~1,~~997~~228,280 for the ~~six~~nine months ended September ~~June~~ 30, 2023. Additionally, as of ~~June~~September 30, 2023, the Company had an accumulated deficit, shareholders’ deficit, and working capital deficit of $59,~~633~~840,~~941~~149, $3,~~167~~310,~~766~~817 and $1,~~076~~275,~~097~~193, respectively. On May 8, 2023, the Company sold its nanoShield product line and received net proceeds of $4,042,631. The proceeds were used to repay convertible notes payable, notes payable and related ~~accrued~~ accrued interest. On ~~June~~September 30, 2023, the Company had cash of $1,~~511~~133,~~527~~129. These factors raise substantial doubt about the Company’s ~~ability~~ ability to continue as a going concern for a period of twelve months from the issuance date of this report. Management cannot provide ~~assurance~~ assurance that the Company will ultimately achieve profitable operations or become cash flow positive or raise additional debt and/or equity capital. The Company is seeking to raise capital through additional debt and/or equity financings to fund its operations in the future. Although the Company has historically raised capital from sales of common shares and preferred shares, and from the issuance of promissory notes and convertible promissory notes, there is no assurance that it will be able to continue to do so. If the Company is unable to raise additional capital or secure additional lending in the near future, management expects that the Company will need to curtail its operations. These unaudited consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Use of Estimates

The preparation of unaudited consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Estimates during the ~~six~~ nine months ended ~~June~~September 30, 2023 and 2022 include estimates for allowance for doubtful accounts on accounts receivable, the estimates for obsolete or slow moving inventory, estimates used in the calculation of progress towards completion on uncompleted jobs, the useful life of property and equipment, assumptions used in assessing impairment of long-term assets, the estimate of the fair value lease liability and related right of use asset, the valuation of redeemable and mandatorily redeemable preferred stock, the value of beneficial conversion features and deemed dividends, the valuation allowances for deferred tax assets, and the fair value of non-cash equity transactions.

6Fair Value of Financial Instruments and Fair Value Measurements

~~C-BOND~~The carrying amounts reported in the unaudited ~~SYSTEMS~~consolidated balance sheets for cash, ~~INC.~~accounts ~~AND~~receivable, ~~SUBSIDIARIES NOTES~~contract TOassets ~~CONSOLIDATED~~and ~~FINANCIAL~~liabilities, ~~STATEMENTS~~notes payable, convertible note payable, accounts ~~JUNE~~payable, 30accrued expenses, ~~2023~~accrued compensation, and lease liabilities approximate their fair market value based on the short-term maturity ~~(UNAUDITED)~~of these instruments.

~~Fair~~The Company analyzes all financial instruments ~~Value~~with features of both liabilities and equity under the Financial ~~Instruments~~Accounting Standard Board’s (the “FASB”) accounting standard for such instruments. Under this standard, financial assets and ~~Fair~~liabilities ~~Value~~are ~~Measurements~~classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company did not identify any assets or liabilities that are required to be presented on the balance sheet at fair value in accordance with Accounting Standards Codification (“ASC”) Topic 820.

~~The carrying~~ASC ~~amounts~~825-10 ~~reported~~“Financial inInstruments”, allows ~~the~~entities ~~unaudited~~to ~~consolidated~~voluntarily ~~balance~~choose ~~sheets~~to ~~for~~measure ~~cash,~~certain ~~accounts~~financial ~~receivable, contract~~ assets and liabilities, at fair value (fair value option). The fair ~~notes~~value ~~payable,~~option ~~convertible~~may ~~note~~be ~~payable,~~elected ~~accounts~~on ~~payable,~~an ~~accrued~~instrument-by-instrument ~~expenses~~basis and is irrevocable, ~~accrued~~unless ~~compensation~~a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and ~~lease~~losses ~~liabilities~~for ~~approximate~~that instrument should be reported in earnings at each subsequent ~~their~~reporting ~~fair~~date. ~~market~~The ~~value~~Company ~~based~~did onnot elect to apply the ~~short-term~~fair ~~maturity~~value ofoption ~~these~~to any outstanding instruments.

~~The Company~~Risks ~~analyzes all financial instruments with features of both liabilities~~ and equity under the Financial Accounting Standard Board’s (the “FASB”) accounting standard for such instruments. Under this standard, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company did not identify any assets or liabilities that are required to be presented on the balance sheet at fair value in accordance with Accounting Standards Codification (“ASC”) Topic 820.Uncertainties

~~ASC~~The Company maintains its cash in bank and financial ~~825-10~~institution ~~“Financial~~deposits ~~Instruments”,~~that ~~allows~~at ~~entities~~times tomay ~~voluntarily~~exceed ~~choose~~federally toinsured ~~measure~~limits. ~~certain~~On ~~financial~~September ~~assets~~30, ~~and~~2023, ~~liabilities~~the Company had cash in bank in excess atof ~~fair~~FDIC ~~value~~insured ~~(fair~~levels ~~value~~of ~~option)~~$814,353. ~~The~~To ~~fair~~reduce ~~value~~its ~~option~~risk ~~may~~associated bewith ~~elected~~the onfailure anof ~~instrument-by-instrument~~such ~~basis~~financial ~~and~~institution, isthe ~~irrevocable,~~Company ~~unless~~evaluates aat ~~new~~least ~~election~~annually ~~date~~the ~~occurs~~rating of the financial institution in which it holds deposits. IfAny material loss that the ~~fair~~Company ~~value~~may ~~option~~experience in isthe ~~elected~~future ~~for~~could have an ~~instrument,~~adverse ~~unrealized~~effect ~~gains~~on ~~and~~its ~~losses~~ability ~~for~~to ~~that~~pay ~~instrument~~its ~~should~~operational expenses or make other payments and may require the Company beto ~~reported~~move inits ~~earnings~~cash atto ~~each~~other ~~subsequent~~high ~~reporting~~quality ~~date~~financial institutions. Currently, ~~The~~the Company ~~did~~is ~~not~~reviewing ~~elect~~its bank relationships in order to ~~apply~~mitigate ~~the~~its ~~fair~~risk ~~value~~to ~~option~~ensure that its exposure is limited or reduced to ~~any~~the ~~outstanding instruments~~FDIC protection limits.

~~Risks~~ Cash and ~~Uncertainties~~Cash Equivalents

~~The Company~~For ~~maintains~~purposes ~~its~~of ~~cash~~the inconsolidated ~~bank~~statements ~~and~~of cash ~~financial institution deposits that at times may exceed federally insured limits. On June 30~~flows, ~~2023,~~ the Company ~~had~~considers ~~cash~~all inhighly ~~bank~~liquid ininstruments ~~excess of FDIC insured levels of $1,157,360. To reduce its risk associated~~ with ~~the~~a ~~failure~~maturity of ~~such~~ ~~financial~~three ~~institution,~~months ~~the~~or ~~Company~~less ~~evaluates~~ at ~~least annually~~ the ~~rating~~purchase ofdate ~~the~~and ~~financial institution in which it holds deposits.~~money ~~Any~~market ~~material~~accounts ~~loss that the Company may experience in the future could have an adverse effect on its ability~~ to ~~pay~~be ~~its~~cash ~~operational~~equivalents. ~~expenses or~~The ~~make other payments and may require the~~ Company tohad ~~move~~no ~~its~~ cash toequivalents ~~other~~as ~~high~~of ~~quality~~September ~~financial institutions. Currently~~30, ~~the~~ ~~Company~~2023 isand ~~reviewing~~December ~~its~~31, ~~bank relationships in order to mitigate its risk to ensure that its exposure is limited or reduced to the FDIC protection limits~~2022.

~~Cash and Cash Equivalents~~6

~~For purposes~~C-BOND ~~of the consolidated statements of cash flows~~SYSTEMS, ~~the~~INC. ~~Company~~AND ~~considers~~SUBSIDIARIES NOTES ~~all~~TO ~~highly~~CONSOLIDATED ~~liquid~~FINANCIAL ~~instruments with a maturity of three months~~STATEMENTS orSEPTEMBER ~~less at the purchase date and money market accounts to be cash equivalents. The Company had no cash equivalents as of June~~ 30, 2023 ~~and December 31, 2022.~~(UNAUDITED)

Accounts Receivable

The Company recognizes an allowance for losses on accounts receivable in an amount equal to the estimated probable losses net of recoveries. The allowance is based on an analysis of historical bad debt experience, current receivables aging, and expected future write-offs, as well as an assessment of specific identifiable customer accounts considered at risk or uncollectible. The expense associated with the allowance for doubtful accounts is recognized as general and administrative expense.

Inventory

Inventory, consisting of raw materials and finished goods, are stated at the lower of cost and net realizable value utilizing the first-in, first-out (FIFO) method. A reserve is established when management determines that certain inventories may not be saleable. If inventory costs exceed the expected net realizable value due to obsolescence or quantities in excess of expected demand, the Company will record reserves for the difference between the cost and the net realizable value. These reserves are recorded based on estimates and included in cost of sales.

7Property and Equipment

~~C-BOND~~Property and equipment are stated at cost and ~~SYSTEMS~~are depreciated using the straight-line method over their estimated useful lives, ~~INC~~which range from one to seven years. ~~AND~~Leasehold ~~SUBSIDIARIES~~improvements ~~NOTES~~are TOdepreciated ~~CONSOLIDATED~~over ~~FINANCIAL~~the ~~STATEMENTS~~shorter of the useful life or lease term including scheduled renewal terms. Maintenance and repairs are charged ~~JUNE~~to 30expense as incurred. When assets are retired or disposed of, ~~2023~~the cost and accumulated depreciation are removed from the accounts, and ~~(UNAUDITED)~~any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of these assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.

~~Property~~ Goodwill and ~~Equipment~~Intangible Assets

~~Property and~~Goodwill ~~equipment~~represents ~~are~~the ~~stated~~future ateconomic ~~cost~~benefit arising ~~and~~from ~~are~~other ~~depreciated~~assets ~~using~~acquired ~~the~~that ~~straight-line~~could ~~method~~not ~~over~~be ~~their~~individually ~~estimated~~identified ~~useful~~and ~~lives,~~separately ~~which~~recognized. ~~range~~Any ~~from one~~goodwill toarising ~~seven~~from ~~years.~~the Company’s ~~Leasehold~~acquisition ~~improvements~~is ~~are~~attributable ~~depreciated~~to ~~over~~ the ~~shorter~~value of the ~~useful~~potential ~~life~~expanded ormarket ~~lease~~opportunity ~~term~~with ~~including~~new ~~scheduled renewal terms~~customers. ~~Maintenance~~Intangible ~~and~~assets may ~~repairs~~have ~~are~~either ~~charged~~an toidentifiable ~~expense~~or asindefinite ~~incurred~~useful life. ~~When~~Intangible assets ~~are~~with ~~retired~~identifiable oruseful ~~disposed~~lives ~~of,~~are ~~the~~amortized ~~cost~~on ~~and~~a ~~accumulated depreciation~~straight-line ~~are~~basis ~~removed~~over ~~from~~their ~~the~~economic ~~accounts, and any resulting gains~~ or ~~losses~~legal ~~are~~life, ~~included~~whichever inis ~~income in the year of disposition~~shorter. The Company’s ~~examines the~~amortizable ~~possibility~~intangible ~~of decreases in the value of these~~ assets ~~when~~are ~~events~~being oramortized ~~changes in circumstances reflect the fact that their recorded~~over ~~value~~a ~~may~~useful ~~not~~life beof ~~recoverable~~5 years.

~~Goodwill and~~Impairment ~~Intangible~~of Long-Lived Assets

~~Goodwill represents~~In ~~the~~accordance ~~future~~with ~~economic~~ASC ~~benefit~~Topic ~~arising~~360, ~~from~~the ~~other~~Company reviews long-lived assets ~~acquired~~for ~~that~~impairment ~~could~~whenever ~~not~~events beor ~~individually~~changes ~~identified~~in ~~and~~circumstances ~~separately~~indicate ~~recognized. Any~~that ~~goodwill arising from~~ the ~~Company’s~~carrying ~~acquisition~~amount isof ~~attributable to~~ the ~~value~~assets ofmay not ~~the~~be ~~potential~~fully ~~expanded~~recoverable, ~~market~~or ~~opportunity~~at ~~with new~~least ~~customers~~annually. ~~Intangible~~The ~~assets~~Company ~~may~~recognizes ~~have either~~ an ~~identifiable~~impairment orloss ~~indefinite~~when ~~useful~~the ~~life.~~sum ~~Intangible~~of ~~assets~~expected ~~with~~undiscounted ~~identifiable useful~~future ~~lives~~cash ~~are~~flows ~~amortized~~is onless athan ~~straight-line~~the ~~basis~~carrying ~~over~~amount ~~their~~of ~~economic~~the orasset. ~~legal~~The ~~life,~~amount ~~whichever~~of impairment is ~~shorter.~~measured ~~The~~as ~~Company’s~~the ~~amortizable intangible~~difference ~~assets~~between ~~are~~the ~~being~~asset’s estimated ~~amortized~~fair ~~over~~value aand ~~useful~~its ~~life~~book ~~of 5 years~~value.

~~Impairment of~~Derivative ~~Long-Lived~~Financial ~~Assets~~Instruments

InThe Company had certain financial instruments that were embedded derivatives. The Company evaluated all its financial instruments to determine if those contracts or any potential embedded components of those contracts qualify as derivatives to be separately accounted for in accordance with ASC ~~Topic 360~~815-10-05-4, ~~the~~Derivatives and ~~Company~~Hedging ~~reviews~~and ~~long~~815-~~lived~~40, ~~assets~~Contracts ~~for~~in ~~impairment~~Entity’s ~~whenever~~Own ~~events~~Equity. orThis ~~changes~~accounting intreatment ~~circumstances~~requires ~~indicate~~ that the carrying amount of ~~the~~any ~~assets~~embedded ~~may~~derivatives ~~not~~ be ~~fully~~recorded ~~recoverable,~~at orfair value at ~~least~~issuance ~~annually.~~and ~~The~~marked-to-market ~~Company~~at ~~recognizes~~each anbalance ~~impairment~~sheet ~~loss when~~date. In the ~~sum~~event ofthat ~~expected~~the fair ~~undiscounted~~value ~~future~~is ~~cash~~recorded ~~flows~~as a liability, as is ~~less~~the ~~than~~case with the ~~carrying~~Company, ~~amount~~the ofchange in the ~~asset.~~fair ~~The~~value ~~amount~~during ofthe ~~impairment~~period is ~~measured~~ recorded as either ~~the~~other ~~difference~~income ~~between~~or expense. Upon conversion, exercise or repayment, the ~~asset’s~~respective ~~estimated~~derivative liability is marked to fair value at the conversion, repayment or exercise date and ~~its~~then ~~book~~the related fair value amount is reclassified to other income or expense as part of gain or loss on extinguishment.

~~Derivative Financial~~Warranty ~~Instruments~~Liability

The Company ~~had~~provides ~~certain~~limited ~~financial~~warranties ~~instruments~~on ~~that~~its products ~~were~~for ~~embedded~~product ~~derivatives.~~defects ~~The~~for ~~Company~~periods ~~evaluated~~ranging ~~all~~from ~~its~~12 ~~financial~~months ~~instruments~~ to ~~determine if~~the ~~those~~life ~~contracts~~of orthe ~~any~~product. ~~potential~~Warranty ~~embedded~~costs ~~components~~may ofinclude ~~those~~the ~~contracts~~cost ~~qualify~~of asproduct replacement, ~~derivatives~~refunds, tolabor becosts ~~separately~~and ~~accounted~~other ~~for~~costs. inAllowances ~~accordance with~~for ~~ASC~~estimated ~~815-10-05-4,~~warranty ~~Derivatives~~costs ~~and~~are ~~Hedging~~recorded ~~and~~during ~~815-40,~~the ~~Contracts~~period inof ~~Entity’s~~sale. ~~Own~~The determination ~~Equity.~~of ~~This~~such ~~accounting~~allowances ~~treatment~~ requires ~~that~~ the ~~carrying~~Company ~~amount~~to ofmake ~~any~~estimates ~~embedded~~of ~~derivatives~~product bewarranty ~~recorded~~claim atrates ~~fair~~and ~~value~~expected atcosts ~~issuance~~to ~~and~~repair or ~~marked-~~to~~-market~~ atreplace ~~each~~the ~~balance sheet~~products ~~date~~under warranty. InThe ~~the~~Company ~~event~~currently ~~that~~establishes ~~the~~warranty ~~fair~~reserves ~~value~~based ison ~~recorded~~historical aswarranty acosts for each product line combined with liability, asestimates isbased on the ~~case~~prior ~~with~~12 ~~the~~months’ ~~Company,~~sales ~~the~~activities. ~~change~~If inactual ~~the~~return ~~fair~~rates ~~value~~and/or ~~during~~repair and replacement costs differ significantly from the ~~period~~Company’s isestimates, ~~recorded~~adjustments asto ~~either~~recognize ~~other~~additional ~~income~~cost orof ~~expense~~sales may be required in future periods. ~~Upon~~Historically ~~conversion,~~the ~~exercise~~warranty oraccrual ~~repayment,~~and the ~~respective~~expense ~~derivative~~amounts have been immaterial. The warranty liability is ~~marked~~included toin ~~fair~~accrued ~~value~~expenses aton the ~~conversion,~~accompanying ~~repayment~~unaudited orconsolidated ~~exercise~~balance ~~date~~sheets and ~~then~~amounted ~~the~~to ~~related~~$1,000 ~~fair~~and ~~value~~$26,648 ~~amount~~on isSeptember 30, ~~reclassified~~2023 toand ~~other income~~December or31, ~~expense~~2022, asrespectively. ~~part~~During ofthe ~~gain~~nine ormonths ~~loss~~ended onSeptember ~~extinguishment~~30, 2023 and 2022, warranty costs were de minimis.

~~Warranty Liability~~7

~~The Company~~C-BOND ~~provides limited warranties on its products for product defects for periods ranging from 12 months to the life of the product. Warranty costs may include the cost of product replacement~~SYSTEMS, ~~refunds, labor costs and other costs~~INC. ~~Allowances~~AND ~~for estimated warranty costs~~SUBSIDIARIES ~~are~~NOTES ~~recorded~~TO ~~during~~CONSOLIDATED ~~the~~FINANCIAL ~~period of sale. The determination of such allowances requires the Company to make estimates of product warranty~~STATEMENTS ~~claim~~SEPTEMBER rates and expected costs to repair or to replace the products under warranty. The Company currently establishes warranty reserves based on historical warranty costs for each product line combined with liability estimates based on the prior 12 months’ sales activities. If actual return rates and/or repair and replacement costs differ significantly from the Company’s estimates, adjustments to recognize additional cost of sales may be required in future periods. Historically the warranty accrual and the expense amounts have been immaterial. The warranty liability is included in accrued expenses on the accompanying unaudited consolidated balance sheets and amounted to $1,000 and $26,648 on June 30, 2023 ~~and December 31, 2022, respectively. During the six months ended June 30, 2023 and 2022,~~ ~~warranty costs were de minimis.~~(UNAUDITED)

Beneficial Conversion Feature

Convertible debt includes conversion terms that are considered in the money compared to the market price of the stock on the date of the related agreement. The Company calculates the beneficial conversion feature and records a debt discount with the amount being amortized to interest expense over the term of the note.

8Revenue Recognition

~~C-BOND SYSTEMS~~The Company follows ASC Topic 606, ~~INC~~Revenue from Contracts with Customers (“ASC 606”). ~~AND~~This ~~SUBSIDIARIES~~standard establishes a single comprehensive model for entities to use ~~NOTES~~in TOaccounting ~~CONSOLIDATED~~for ~~FINANCIAL~~revenue ~~STATEMENTS~~arising from contracts with customers and supersedes most of the existing revenue recognition guidance. ASC ~~JUNE~~606 ~~30,~~requires ~~2023~~an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects ~~(UNAUDITED)~~the consideration to which the entity expects to be entitled in exchange for those goods or services and requires certain additional disclosures.

~~Revenue~~The Company sells its products, which include ~~Recognition~~standard warranties, primarily to distributors and authorized dealers. Product sales are recognized at a point in time when the product is shipped to the customer and title is transferred and are recorded net of any discounts or allowances. The warranty does not represent a separate performance obligation.

~~The~~Revenues from contracts for the distribution and ~~Company~~installation ~~follows~~of ~~ASC~~window ~~Topic~~film ~~606,~~solutions ~~Revenue~~are ~~from~~recognized ~~Contracts~~over ~~with~~time ~~Customers~~on ~~(“ASC~~the ~~606”).~~basis ~~This~~of ~~standard~~the ~~establishes~~Company’s aestimates ~~single~~of the progress towards completion ~~comprehensive~~of ~~model~~contracts ~~for~~using ~~entities~~various tooutput ~~use~~or ininput ~~accounting~~methods ~~for~~depending ~~revenue~~on ~~arising~~the ~~from~~type ~~contracts~~of ~~with~~contract ~~customers~~terms ~~and~~including ~~supersedes~~(1) ~~most~~the ratio of ~~the~~number ~~existing~~of labor ~~revenue~~hours ~~recognition~~spent ~~guidance.~~compared ~~ASC~~to ~~606~~the ~~requires~~number anof ~~entity~~estimated labor hours to ~~recognize~~complete ~~revenue~~a tojob, ~~depict~~(2) using the ~~transfer~~milestone ofmethod, ~~promised~~or ~~goods~~(3) orusing ~~services~~a tounits completed ~~customers~~method. inThese anmethods ~~amount~~are ~~that~~used ~~reflects~~because ~~the~~management ~~consideration~~considers these to ~~which~~be the ~~entity~~best ~~expects~~available tomeasure beof ~~entitled~~progress inon ~~exchange~~these contracts. We use the same method for ~~those~~similar ~~goods~~types orof ~~services~~contracts. The asset, “contract assets” represents revenues recognized in excess ~~and~~of ~~requires~~amounts ~~certain~~billed. ~~additional~~The ~~disclosures~~liability, “contract liabilities,” represents billings in excess of revenues recognized.

~~The Company~~Cost sells its products, which include standard warranties, primarily to distributors and authorized dealers. Product sales are recognized at a point in time when the product is shipped to the customer and title is transferred and are recorded net of ~~any discounts or allowances. The warranty does not represent a separate performance obligation.~~Sales

~~Revenues from~~Cost ~~contracts for the distribution and installation~~ of ~~window~~sales ~~film~~includes ~~solutions~~inventory are recognized over time on the basis of the Company’s estimates of the progress towards completion of contracts using various output or input methods depending on the type of contract terms including (1) the ratio of number of labor hours spent compared to the number of estimated labor hours to complete a jobcosts, ~~(2) using the~~packaging ~~milestone~~costs ~~method,~~and orwarranty ~~(3) using a units completed method~~expenses. These methods are used because management considers these to be the best available measure of progress on these contracts. We use the same method for similar types of contracts. The asset, “contract assets” represents revenues recognized in excess of amounts billed. The liability, “contract liabilities,” represents billings in excess of revenues recognized.

Cost of revenues from fixed-price contracts for the distribution and installation of ~~Sales~~window film solutions include all direct material, sub-contractor, labor and certain other direct costs, as well as those indirect costs related to contract performance, such as indirect labor and fringe benefits. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined. Changes in job performance, job conditions and estimated profitability may result in revisions to cost and income, which are recognized in the period in which the revisions are determined. Changes in estimated job profitability resulting from job performance, job conditions, claims, change orders, and settlements, are accounted for as changes in estimates in the current period.

~~Cost of~~Shipping ~~sales includes inventory costs, packaging costs~~ and ~~warranty~~Handling ~~expenses.~~Costs

~~Cost of~~Shipping ~~revenues~~and ~~from~~handling ~~fixed-price~~costs ~~contracts~~incurred for ~~the~~product shipped ~~distribution~~to ~~and~~customers ~~installation~~are ofincluded ~~window~~in ~~film~~general ~~solutions~~and ~~include~~administrative ~~all~~expenses ~~direct material, sub-contractor, labor~~ and ~~certain~~amounted ~~other direct costs, as well as those indirect costs related~~ to ~~contract performance~~$10,203 ~~such as indirect labor~~ and ~~fringe benefits.~~$8,784 ~~Provisions~~ for ~~estimated losses on uncompleted contracts are made in~~ the ~~period~~nine inmonths ~~which such losses are determined. Changes~~ended inSeptember ~~job performance~~30, ~~job~~2023 ~~conditions~~ and ~~estimated profitability may result in revisions to cost and income~~2022, ~~which are recognized in the period in which the revisions are determined~~respectively. ~~Changes~~Shipping inand ~~estimated~~handling ~~job~~costs ~~profitability~~charged ~~resulting~~to ~~from~~customers ~~job performance, job conditions, claims, change orders, and settlements,~~ are ~~accounted~~included ~~for as changes~~ in ~~estimates in the current period~~sales.

~~Shipping and Handling Costs~~8

~~Shipping and~~C-BOND ~~handling~~SYSTEMS, ~~costs~~INC. ~~incurred~~AND ~~for~~SUBSIDIARIES NOTES ~~product~~TO ~~shipped~~CONSOLIDATED toFINANCIAL ~~customers are included in general and administrative expenses and amounted to $5,577~~STATEMENTS ~~and~~SEPTEMBER ~~$6,860 for the six months ended June~~ 30, 2023 ~~and 2022, respectively. Shipping and handling costs charged to customers are included~~ ~~in sales.~~(UNAUDITED)

Research and Development

Research and development costs incurred in the development of the Company’s products are expensed as incurred and includes costs such as labor, materials, and other allocated costs incurred. During the ~~six~~nine months ended ~~June~~September 30, 2023 and 2022, research and development costs incurred in the development of the Company’s products were $0.

Advertising Costs

The Company may participate in various advertising programs. All costs related to advertising of the Company’s products are expensed in the period incurred. For the ~~six~~nine months ended September ~~June~~ 30, 2023 and 2022, advertising costs charged to operations were $1027,~~986~~242 and $5566,~~829~~124, respectively, and are included in general and administrative expenses on the accompanying unaudited consolidated statements of operations. These advertising expenses do not include cooperative advertising and sales incentives which shall been deducted from sales.

9Federal and State Income Taxes

~~C-BOND~~The Company accounts for income tax using the ~~SYSTEMS~~liability method prescribed by ASC 740, ~~INC~~“Income Taxes”. ~~AND~~Under ~~SUBSIDIARIES~~this method, deferred tax assets and liabilities are determined ~~NOTES~~based TOon ~~CONSOLIDATED~~the ~~FINANCIAL~~difference ~~STATEMENTS~~between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in ~~JUNE~~effect 30in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, ~~2023~~it is more-likely-than-not that some portion, or all, of the deferred tax assets ~~(UNAUDITED)~~will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.

~~Federal~~The Company follows the accounting guidance for ~~and~~uncertainty ~~State~~in income taxes using the provisions of ASC 740 “Income Taxes”. Using that guidance, tax positions initially need to be recognized in the financial statements when it is more likely than not the position will be sustained upon examination by the tax authorities. As of September 30, 2023 and December 31, 2022, the Company had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. Tax years that remain subject to examination are the years ending on and after December 31, 2017. The Company recognizes interest and penalties related to uncertain income tax positions in other expenses. However, no such interest and penalties were recorded as of September 30, 2023 and December 31, 2022.

The Company accounts for income tax using the liability method prescribed by ASC 740, “Income Taxes”. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities using enacted tax rates that will be in effect in the year in which the differences are expected to reverse. The Company records a valuation allowance to offset deferred tax assets if based on the weight of available evidence, it is moreStock-~~likely-than-not~~Based that some portion, or all, of the deferred tax assets will not be realized. The effect on deferred taxes of a change in tax rates is recognized as income or loss in the period that includes the enactment date.Compensation

~~The Company~~Stock-based ~~follows~~compensation ~~the~~is ~~accounting~~accounted ~~guidance~~ for ~~uncertainty~~based on ~~in income taxes using~~ the ~~provisions~~requirements of ASC ~~740~~718 – “~~Income~~Compensation ~~Taxes”. Using~~–Stock ~~that guidance~~Compensation”, ~~tax~~which ~~positions~~requires ~~initially~~recognition ~~need to be recognized~~ in the financial statements ~~when~~of itthe iscost ~~more~~of ~~likely~~employee, ~~than~~director, ~~not~~and ~~the~~non-employee ~~position will~~services bereceived ~~sustained~~in ~~upon~~exchange ~~examination~~for byan ~~the~~award ~~tax authorities. As~~ of ~~June~~equity ~~30,~~instruments over ~~2023~~the ~~and~~period ~~December~~the 31employee, ~~2022~~director, ~~the~~or ~~Company~~non-employee ~~had~~is norequired ~~uncertain~~to ~~tax positions~~perform ~~that~~the ~~qualify~~services ~~for~~in ~~either~~exchange ~~recognition~~for orthe ~~disclosure~~award in (presumptively, the ~~financial~~vesting ~~statements~~period). ~~Tax~~The ~~years~~ASC ~~that~~also ~~remain~~requires ~~subject~~measurement toof ~~examination are~~ the ~~years~~cost ~~ending~~of onemployee, director, and ~~after~~non-employee ~~December~~services ~~31,~~received ~~2017.~~in ~~The~~exchange for ~~Company~~an ~~recognizes~~award ~~interest~~based ~~and~~on ~~penalties~~the ~~related~~grant-date tofair ~~uncertain~~value ~~income~~of ~~tax~~the ~~positions in~~award. ~~other~~The ~~expenses.~~Company ~~However,~~has noelected ~~such~~to ~~interest~~recognize ~~and~~forfeitures ~~penalties~~as ~~were~~they ~~recorded~~occur as ofpermitted under ~~June~~the ~~30,~~FASB’s ~~2023~~Accounting ~~and~~Standards ~~December~~Update ~~31,~~(“ASU”) ~~2022~~2016-09 Improvements to Employee Share-Based Payment.

~~Stock-Based Compensation~~Loss Per Common Share

~~Stock-based compensation~~ASC is260 ~~accounted~~“Earnings ~~for~~Per ~~based~~Share”, onrequires dual ~~the~~presentation ~~requirements~~ of ~~ASC~~basic ~~718~~and –diluted ~~“Compensation~~earnings ~~–Stock~~per ~~Compensation~~common share (“EPS”~~, which~~) ~~requires~~with ~~recognition~~a inreconciliation of the ~~financial~~numerator ~~statements~~and denominator of the ~~cost~~basic ofEPS ~~employee,~~computation ~~director,~~to the numerator and ~~non-employee~~denominator ~~services~~of ~~received~~the indiluted ~~exchange~~EPS computation. Basic EPS excludes dilutive securities. ~~for~~Diluted anEPS ~~award~~reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares or resulted in the issuance of ~~equity~~common ~~instruments~~shares ~~over~~that then shared in the ~~period~~earnings of the ~~employee,~~entity. ~~director,~~Basic ornet ~~non-employee~~loss per common share is ~~required~~computed by dividing net loss available to ~~perform~~members by the ~~services~~weighted inaverage ~~exchange for~~number ~~the~~of ~~award~~common ~~(presumptively,~~shares outstanding during the ~~vesting~~ period). ~~The~~Diluted ~~ASC~~net ~~also~~loss ~~requires~~per ~~measurement~~common ofshare is computed by dividing net loss by the ~~cost~~weighted average number of ~~employee,~~common ~~director~~shares, ~~and non-employee~~common ~~services~~share ~~received~~equivalents inand ~~exchange~~potentially ~~for~~dilutive ansecurities ~~award~~outstanding ~~based~~during oneach ~~the~~period. ~~grant-date~~Potentially ~~fair~~dilutive ~~value~~common shares consist of stock options and warrants (using the ~~award.~~treasury ~~The~~stock ~~Company~~method) ~~has~~and ~~elected~~shares toissuable ~~recognize~~upon ~~forfeitures~~conversion of preferred shares and convertible notes payable (using the as-if ~~they~~converted ~~occur~~method). asStock ~~permitted~~options ~~under~~and warrants were excluded from the ~~FASB’s~~calculation ~~Accounting~~of ~~Standards~~diluted ~~Update~~shares ~~(“ASU”)~~as ~~2016~~they were anti-09dilutive. These ~~Improvements~~common toshare ~~Employee Share-Based~~equivalents ~~Payment~~may be dilutive in the future.

~~Loss Per Common Share~~9

~~ASC~~C-BOND ~~260 “Earnings Per Share”~~SYSTEMS, requires dual presentation of basic and diluted earnings per common share (“EPS”) with a reconciliation of the numerator and denominator of the basic EPS computation to the numerator and denominator of the diluted EPS computationINC. ~~Basic~~AND ~~EPS excludes dilutive securities.~~SUBSIDIARIES ~~Diluted~~NOTES ~~EPS~~TO ~~reflects~~CONSOLIDATED ~~the~~FINANCIAL ~~potential dilution that could occur if securities or other contracts to issue common shares were exercised or~~STATEMENTS ~~converted~~SEPTEMBER into common shares or resulted in the issuance of common shares that then shared in the earnings of the entity. Basic net loss per common share is computed by dividing net loss available to members by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common shares30, ~~common~~2023 ~~share equivalents and potentially dilutive securities outstanding during each period. Potentially dilutive common shares consist of stock options and warrants~~ (~~using the treasury stock method~~UNAUDITED) and shares issuable upon conversion of preferred shares and convertible notes payable (using the as-if converted method). Stock options and warrants were excluded from the calculation of diluted shares as they were anti-dilutive. These common share equivalents may be dilutive in the future.

10The following table presents a reconciliation of basic and diluted net income (loss) per common share:

C-BOND SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2023 (UNAUDITED)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023		2022
Net income (loss) per common share - basic:
Net income (loss) attributable to common shareholders	$	(206,208	)	$	(952,480	)	$	2,853,035	$	(3,889,792	)
Weighted average common shares outstanding – basic		524,747,583			319,825,057			478,703,698		299,609,959
Net income (loss) per common share – basic	$	(0.00	)	$	(0.00	)	$	0.01	$	(0.01	)

Net income (loss) per common share - diluted:
Net income (loss) attributable to common shareholders - basic	$	(206,208	)	$	(952,480	)	$	2,853,035	$	(3,889,792	)
Add: preferred stock dividends		-			-			40,788		-
Add: interest of convertible debt		-			-			138,837		-
Numerator for income (loss) per common share – diluted	$	(206,208	)	$	(952,480	)	$	3,032,660	$	(3,889,792	)

Weighted average common shares outstanding – basic		524,747,583			319,825,057			478,703,698		299,609,959
Add: dilutive shares related to:
Convertible debt		-			-			1,145,833,333		-
Series B preferred		-			-			327,376,230		-
Series C preferred		-			-			403,380,750		-
Weighted average common shares outstanding – diluted		524,747,583			319,825,057			2,355,294,011		299,609,959
Net income (loss) per common share – diluted	$	(0.00	)	$	(0.00	)	$	0.00	$	(0.01	)

~~The~~For the three months ended September 30, 2023 ~~following~~and ~~table~~for ~~presents~~the athree ~~reconciliation~~and nine months ended September 30, 2022, all potentially dilutive common shares were excluded from the computation of ~~basic~~diluted common shares outstanding as they would have an anti-dilutive impact on the Company’s net losses. For the nine months ended September 30, 2023, stock options and warrants were excluded from the computation of diluted common shares outstanding as they would have an anti-dilutive impact on the Company’s net income. ~~(loss)~~As ~~per~~of September 30, 2023 and 2022, common share equivalents and potentially dilutive securities consisted of the following:

	Three Months Ended June 30,					Six Months Ended June 30,
	September 30,
	2023		2022			~~2023~~		~~2022~~
Net income (loss) per common share - basic:
Stock options		8,445,698		8,445,698
Net income (loss) attributable to common shareholders	$	3,779,295	$	(1,016,908	)	$	3,059,243	$	(2,937,312	)
Warrants		34,000,000		34,000,000
Weighted average common shares outstanding – basic		493,056,689		294,776,031			458,283,435		289,334,882
Series B preferred stock		327,376,230		163,834,286
Net income (loss) per common share – basic	$	0.01	$	(0.00	)	$	0.01	$	(0.01	)
Series C preferred stock		403,380,750		278,412,698
Net income (loss) per common share - diluted:
Convertible debt		1,145,833,333		916,666,667
Net income (loss) attributable to common shareholders - basic	$	3,779,295	$	(1,016,908	)	$	3,059,243	$	(2,937,312	)
		1,919,036,011		1,401,359,349
Add: preferred stock dividends		13,618		-			27,305		-
Add: interest of convertible debt		52,618		-			102,639		-
Numerator for income (loss) per common share – diluted	$	3,845,531	$	(1,016,908	)	$	3,189,187	$	(2,937,312	)
Weighted average common shares outstanding – basic		493,056,689		294,776,031			458,283,435		289,334,882
Add: dilutive shares related to:
Convertible debt		1,145,833,333		-			1,145,833,333		-
Series B preferred		324,240,164		-			324,240,164		-
Series C preferred		386,250,000		-			386,250,000		-
Weighted average common shares outstanding – diluted		2,349,380,186		294,776,031			2,314,606,932		289,334,882
Net income (loss) per common share – diluted	$	0.00	$	(0.00	)	$	0.00	$	(0.01	)

~~For~~Segment the three and six months ended June 30, 2022, all potentially dilutive common shares were excluded from the computation of diluted common shares outstanding as they would have an anti-dilutive impact on the Company’s net losses. For the three and six months ended June 30, 2023, stock options and warrants were excluded from the computation of diluted common shares outstanding as they would have an anti-dilutive impact on the Company’s net income. As of June 30, 2023 and 2022, common share equivalents and potentially dilutive securities consisted of the following: Reporting

	June 30,
	2023		2022
Stock options		8,445,698		8,445,698
Warrants		34,000,000		34,000,000
Series B preferred stock		324,240,164		158,829,048
Series C preferred stock		386,250,000		278,412,698
Convertible debt		1,145,833,333		92,727,273
		1,898,769,195		572,414,717

During the nine months ended September 30, 2023 and 2022, the Company operated in two reportable business segments which consisted of (1) the manufacture and sale of a windshield strengthening water repellent solution as well as disinfection products, and the sale of multi-purpose glass strengthening primer and window film mounting solutions, including ballistic-resistant film systems and a forced entry system, and (2) the distribution and installation of window film solutions. The Company’s reportable segments are strategic business units that offer different products. They are managed separately based on the fundamental differences in their operations and locations.

~~Segment Reporting~~10

~~During the~~C-BOND ~~six months ended June 30~~SYSTEMS, ~~2023~~INC. ~~and~~AND ~~2022, the Company operated in two reportable business segments which consisted of (1) the manufacture~~SUBSIDIARIES ~~and~~NOTES ~~sale~~TO ofCONSOLIDATED aFINANCIAL ~~windshield strengthening water repellent solution as well as disinfection products, and the sale of multi-purpose glass~~STATEMENTS ~~strengthening~~SEPTEMBER ~~primer and window film mounting solutions~~30, ~~including ballistic-resistant film systems and a forced entry system, and~~ 2023 (2UNAUDITED) the distribution and installation of window film solutions. The Company’s reportable segments are strategic business units that offer different products. They are managed separately based on the fundamental differences in their operations and locations.

11Leases

~~C-BOND~~The Company accounts for leases in accordance ~~SYSTEMS,~~with ~~INC~~ASC 842. ~~AND~~The ~~SUBSIDIARIES~~lease standard requires certain leases to be reported on the consolidated balance sheets as right-of-use assets and ~~NOTES~~lease TOliabilities. ~~CONSOLIDATED~~The ~~FINANCIAL~~Company ~~STATEMENTS~~elected the practical expedients permitted under the transition guidance of this standard that retained ~~JUNE~~the ~~30,~~lease ~~2023~~classification and initial direct costs for any leases that existed prior to adoption of the standard. The Company does not ~~(UNAUDITED)~~reassess whether any contracts entered into prior to adoption are leases or contain leases.

~~Leases~~The Company categorizes leases with contractual terms longer than twelve months as either operating or finance. Finance leases are generally those leases that would allow the Company to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in property and equipment, net. All other leases are categorized as operating leases. The Company’s leases generally have terms that range from three to four years for property and equipment and five years for property. The Company elected the accounting policy to include both the lease and non-lease components of our agreements as a single component and account for them as a lease.

~~The Company~~Lease ~~accounts~~liabilities ~~for~~are ~~leases~~recognized inat ~~accordance~~the ~~with~~present value ~~ASC~~of ~~842.~~the ~~The~~fixed lease ~~standard~~payments ~~requires~~using ~~certain~~a ~~leases~~discount torate bebased ~~reported~~ on the ~~consolidated balance~~Company’s ~~sheets~~current asborrowing ~~right-of-use~~rate. Lease assets ~~and~~are ~~lease~~recognized based ~~liabilities.~~on ~~The Company elected~~ the ~~practical~~initial ~~expedients~~present ~~permitted~~value ~~under~~of the ~~transition guidance~~fixed oflease ~~this~~payments, ~~standard~~reduced ~~that~~by ~~retained~~landlord ~~the~~incentives, ~~lease~~plus ~~classification~~any ~~and initial~~ direct costs ~~for~~from ~~any~~executing ~~leases that existed prior to adoption of~~ the ~~standard~~ leases. ~~The~~Leasehold ~~Company~~improvements ~~does~~are ~~not~~capitalized ~~reassess~~at ~~whether~~cost ~~any~~and ~~contracts~~amortized ~~entered~~over ~~into~~the ~~prior~~lesser toof ~~adoption~~their ~~are~~expected ~~leases~~useful life or ~~contain~~the ~~leases~~lease term.

~~The Company~~When ~~categorizes~~the ~~leases~~Company ~~with~~has ~~contractual~~the ~~terms~~option ~~longer~~to ~~than~~extend ~~twelve months as either operating or finance. Finance leases are generally~~the ~~those~~lease ~~leases~~term, ~~that~~terminate ~~would~~the ~~allow~~lease before the ~~Company~~contractual toexpiration ~~substantially~~date, ~~utilize~~ or ~~pay~~purchase ~~for~~ the ~~entire~~leased asset, ~~over~~and ~~its~~it ~~estimated~~is ~~life.~~reasonably ~~Assets~~certain ~~acquired~~that ~~under~~the ~~finance~~Company ~~leases~~will ~~are~~exercise ~~recorded~~the ~~in property and equipment~~option, ~~net.~~the ~~All other leases are categorized as operating leases. The~~ Company~~’s leases~~ ~~generally~~considers ~~have~~these ~~terms~~options ~~that~~in ~~range~~determining ~~from~~the ~~three~~classification ~~to four years for property~~ and ~~equipment~~measurement ~~and~~of ~~five~~the ~~years for property~~lease. ~~The Company elected~~ ~~the~~Costs ~~accounting~~associated ~~policy~~with tooperating ~~include both the~~ lease ~~and~~assets ~~non-lease~~are ~~components~~recognized ofon ~~our~~a ~~agreements~~straight-line asbasis awithin ~~single~~operating ~~component~~expenses ~~and~~over ~~account~~the ~~for~~term ~~them as~~of athe lease.

~~Lease liabilities~~Noncontrolling are recognized at the present value of the fixed lease payments using a discount rate based on the Company’s current borrowing rate. Lease assets are recognized based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the leases. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term.Interest

~~When the~~The Company ~~has~~accounts ~~the~~for ~~option~~noncontrolling tointerest in ~~extend~~accordance ~~the~~with ~~lease~~ASC ~~term,~~Topic ~~terminate the lease before the contractual expiration date~~810-10-45, orwhich ~~purchase~~requires the ~~leased asset,~~Company ~~and~~to itpresent isnoncontrolling ~~reasonably~~interests ~~certain~~as ~~that~~a ~~the~~separate ~~Company~~component ~~will~~of ~~exercise~~total shareholders’ ~~the~~deficit ~~option,~~on the ~~Company~~consolidated ~~considers~~balance ~~these~~sheets ~~options~~and ~~in determining~~ the ~~classification~~ ~~and~~consolidated ~~measurement~~net ofloss ~~the~~attributable ~~lease.~~to ~~Costs~~its ~~associated~~noncontrolling ~~with~~interest be ~~operating~~clearly ~~lease~~identified ~~assets~~and ~~are~~presented ~~recognized~~ on athe ~~straight-line~~face ~~basis~~of ~~within operating expenses over~~ the ~~term~~consolidated statements of ~~the lease~~operations.

~~Noncontrolling Interest~~Recent Accounting Pronouncements

~~The Company~~In ~~accounts~~August ~~for~~2020, ~~noncontrolling~~the ~~interest~~FASB inissued ~~accordance~~ASU 2020-06, Debt—Debt with ~~ASC~~Conversion ~~Topic~~and ~~810~~Other Options (Subtopic 470-1020) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-~~45,~~40)—Accounting ~~which~~for ~~requires~~Convertible ~~the~~Instruments ~~Company~~and toContracts ~~present~~in ~~noncontrolling~~an Entity’s Own Equity. The ASU simplifies accounting for ~~interests~~convertible instruments by removing major separation models required under current U.S. GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate ~~component~~accounting offor ~~total~~embedded ~~shareholders’~~conversion ~~deficit~~features. onThe ASU removes certain settlement conditions that are required for equity contracts to qualify for the ~~consolidated~~derivative ~~balance~~scope ~~sheets~~exception, ~~and~~which will permit more equity contracts to qualify for the ~~consolidated~~exception. The ASU also simplifies the diluted net ~~loss~~income per share calculation in certain areas. The new ~~attributable~~guidance tois ~~its~~effective ~~noncontrolling~~for ~~interest~~fiscal beyears ~~clearly~~beginning ~~identified~~after December 15, 2023, including interim periods within those fiscal years, and ~~presented~~early adoption onis permitted. The Company is currently evaluating the ~~face~~impact of the ~~consolidated~~adoption ~~statements~~ of ~~operations~~the standard on the consolidated financial statements.

~~Recent Accounting Pronouncements~~11

~~In August 2020, the FASB issued ASU 2020~~C-~~06,~~BOND Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)—Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. ConsequentlySYSTEMS, ~~more~~ ~~convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features~~INC. ~~The~~AND ~~ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception,~~SUBSIDIARIES ~~which~~NOTES ~~will~~TO ~~permit~~CONSOLIDATED ~~more~~FINANCIAL ~~equity contracts to qualify for the exception. The ASU also simplifies the diluted net income per share calculation~~STATEMENTS inSEPTEMBER ~~certain areas. The new guidance is effective for fiscal years beginning after December 15~~30, 2023~~, including interim periods within~~ ~~those fiscal years, and early adoption is permitted. The Company is currently evaluating the impact of the adoption of the standard on the consolidated financial statements.~~(UNAUDITED)

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which significantly changes how entities will measure credit losses for most financial assets, including accounts receivable. ASU No. 2016-13 will replace today’s “incurred loss” approach with an “expected loss” model, under which companies will recognize allowances based on expected rather than incurred losses. On November 15, 2019, the FASB delayed the effective date of Topic 326 for certain small public companies and other private companies until fiscal years beginning after December 15, 2022 for SEC filers that are eligible to be smaller reporting companies under the SEC’s definition, as well as private companies and not-for-profit entities. The adoption of Topic 326 on January 1, 2023 did not have a material impact on the Company’s unaudited consolidated financial statements.

12In March 2022, the FASB issued ASU No. 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The guidance was issued as improvements to ASU No. 2016-13 described above. The vintage disclosure changes require an entity to disclose current-period gross write-offs by year of origination for financing receivables. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The amendments should be applied prospectively. Early adoption of the amendments is permitted, including adoption in an interim period. The adoption of ASU No. 2022-02 on January 1, 2023 did not have a material impact on the Company’s unaudited consolidated financial statements.

~~C-BOND~~Other accounting standards that have been issued ~~SYSTEMS,~~or ~~INC.~~proposed ~~AND~~by ~~SUBSIDIARIES~~FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial ~~NOTES~~statements TOupon ~~CONSOLIDATED~~adoption. ~~FINANCIAL~~The ~~STATEMENTS~~Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated ~~JUNE~~to 30its financial condition, ~~2023~~results ~~(UNAUDITED)~~of operations, cash flows or disclosures.

~~In March~~NOTE ~~2022,~~3 ~~the~~– ~~FASB~~ACCOUNTS issued ASU No. 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures. The guidance was issued as improvements to ASU No. 2016-13 described above. The vintage disclosure changes require an entity to disclose current-period gross write-offs by year of origination for financing receivables. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. The amendments should be applied prospectively. Early adoption of the amendments is permitted, including adoption in an interim period. The adoption of ASU No. 2022-02 on January 1, 2023 did not have a material impact on the Company’s unaudited consolidated financial statements. RECEIVABLE

~~Other accounting~~On ~~standards~~September ~~that~~30, ~~have~~2023 ~~been~~and ~~issued~~December or31, ~~proposed~~2022, ~~by FASB that do not require adoption until a future date are not expected to have~~accounts areceivable ~~material~~consisted ~~impact~~of on the consolidated financial statements upon adoption. The Company does not discuss recent pronouncements that are not anticipated to have an impact on or are unrelated to its financial condition, results of operations, cash flows or disclosures.following:

NOTE 3 – ACCOUNTS RECEIVABLE

	September 30, 2023			December 31, 2022
Accounts receivable	$	286,744		$	304,964
Less: allowance for doubtful accounts		(15,941	)		(35,522	)
Accounts receivable, net	$	270,803		$	269,442

~~On June~~For the nine months ended September 30, 2023 and ~~December 31,~~ 2022, ~~accounts~~bad ~~receivable~~debt (recovery) ~~consisted~~expense ofamounted ~~the~~to ~~following:~~$(10,331) and $7,716, respectively.

	June 30, 2023			December 31, 2022
Accounts receivable	$	106,780		$	304,964
Less: allowance for doubtful accounts		(26,272	)		(35,522	)
Accounts receivable, net	$	80,508		$	269,442

NOTE 4 – INVENTORY

~~For the~~On ~~six~~September ~~months ended June~~ 30, 2023 and December 31, 2022, ~~bad~~inventory consisted ~~debt~~of ~~expense~~the ~~amounted to $0 and $7,716, respectively.~~following:

NOTE 4 – INVENTORY

	September 30, 2023		December 31, 2022
Raw materials	$	-	$	1,501
Finished goods		110,339		75,945
Inventory		110,339		77,446
Less: allowance for obsolete or slow-moving inventory		-		-
Inventory, net	$	110,339	$	77,446

~~On June~~During ~~30,~~the ~~2023~~nine ~~and~~months ~~December~~ended 31September 30, 2023 and 2022, ~~inventory~~the ~~consisted~~Company ofdid ~~the~~not ~~following:~~record any allowance for slow moving inventory.

	June 30, 2023		December 31, 2022
Raw materials	$	-	$	1,501
Finished goods		119,147		75,945
Inventory		119,147		77,446
Less: allowance for obsolete or slow-moving inventory		-		-
Inventory, net	$	119,147	$	77,446

~~During the~~C-BOND ~~six months ended June 30~~SYSTEMS, ~~2023~~INC. ~~and~~AND ~~2022,~~SUBSIDIARIES NOTES ~~the~~TO ~~Company~~CONSOLIDATED ~~did~~FINANCIAL ~~not~~STATEMENTS SEPTEMBER ~~record~~30, ~~any allowance for slow moving inventory.~~2023 (UNAUDITED)

NOTE 5 – PROPERTY AND EQUIPMENT

On ~~June~~ September 30, 2023 and December 31, 2022, property and equipment consisted of the following:

	Useful Life	~~June~~September 30, 2023			December 31, 2022
Machinery and equipment	5 – 7 years	$	73,411		$	124,133
Furniture and office equipment	3 – 7 years		2,061			32,306
Vehicles	1 – 5 years		3568,~~330~~050			62,195
Leasehold improvements	3 – 5 years		28110,~~595~~645			45,296
			139,397			263,930
			254,167			263,930
Less: accumulated depreciation			(6070,~~349~~281	)		(167,624	)
Property and equipment, net		$	79183,~~048~~886		$	96,306

13For the nine months ended September 30, 2023 and 2022, depreciation expense is included in general and administrative expenses and amounted to $26,075 and $30,352, respectively.

~~C-BOND SYSTEMS,~~NOTE ~~INC.~~6 ~~AND~~– ~~SUBSIDIARIES NOTES~~INTANGIBLE TOASSETS ~~CONSOLIDATED~~AND ~~FINANCIAL STATEMENTS JUNE 30, 2023 (UNAUDITED)~~GOODWILL

~~For the~~On ~~six~~September ~~months ended June~~ 30, 2023 and December 31, 2022, ~~depreciation~~intangible assets, ~~expense~~which iswere ~~included~~acquired infrom ~~general~~Mobile ~~and~~in ~~administrative expenses and amounted to $16~~2021,~~143~~ ~~and~~consisted ~~$20,413,~~of ~~respectively.~~ the following:

NOTE 6 – INTANGIBLE ASSETS AND GOODWILL

	Useful life	September 30, 2023			December 31, 2022
Customer relations	5 years	$	212,516		$	212,516
Non-compete	5 years		40,000			40,000
Trade name	-		100,000			100,000
			352,516			352,516
Less: accumulated amortization			(110,476	)		(72,598	)
Intangible assets, net		$	242,040		$	279,918

On June 30, 2023 and December 31, 2022, intangible assets, which were acquired from Mobile in 2021, consisted of the following:

		Useful life		September 30, 2023				December 31, 2022
Goodwill		-		$	350,491			$	350,491

	Useful life	June 30, 2023			December 31, 2022
Customer relations	5 years	$	212,516		$	212,516
Non-compete	5 years		40,000			40,000
Trade name	-		100,000			100,000
			352,516			352,516
Less: accumulated amortization			(97,850	)		(72,598	)
Intangible assets, net		$	254,666		$	279,918

For the nine months ended September 30, 2023 and 2022, amortization expense of intangible assets amounted to $37,878 and $37,878, respectively. On September 30, 2023, accumulated amortization amounted to $92,976 and $17,500 for the customer relations and non-compete, respectively. On December 31, 2022, accumulated amortization amounted to $61,098 and $11,500 for the customer relations and non-compete, respectively.

		Useful life				June 30, 2023				December 31, 2022
Goodwill			-			$	350,491			$	350,491

Amortization of intangible assets with identifiable useful lives that is attributable to future periods is as follows:

For the six months ended June 30, 2023 and 2022, amortization expense of intangible assets amounted to $25,252 and $25,252, respectively. On June 30, 2023, accumulated amortization amounted to $82,350 and $15,500 for the customer relations and non-compete, respectively. On December 31, 2022, accumulated amortization amounted to $61,098 and $11,500 for the customer relations and non-compete, respectively.

Twelve months ending September 30:	Amount
2024	$	50,503
2025		50,503
2026		41,034
Total	$	142,040

~~Amortization of~~NOTE ~~intangible~~7 ~~assets~~– ~~with~~CONVERTIBLE ~~identifiable~~NOTES ~~useful lives that is attributable to future periods is as follows:~~PAYABLE

Twelve months ending June 30:	Amount
2024	$	50,503
2025		50,503
2026		50,503
2027		3,157
Total	$	154,666

Mercer Convertible Debt

~~NOTE~~On October 15, 2021, the Company entered into 7a –Securities ~~CONVERTIBLE~~Purchase ~~NOTES~~Agreement ~~PAYABLE~~(the “SPA”) with Mercer Street Global Opportunity Fund, LLC (the “Investor”), pursuant to which the Company issued and sold to Investor a 10% Original Issue Discount Senior Convertible Promissory Note in the principal amount of $825,000 (the “Initial Note”) and five-year warrants to purchase up to 16,500,000 shares of the Company’s common stock at an initial exercise price of $0.05 per share, an amount equal to 50% of the conversion shares that were issued (the “Initial Warrants”). The Company received net proceeds of $680,000, which is net of original issue discounts of $75,000, placement fees of $60,000, and legal fees of $10,000. The transactions contemplated under the SPA closed on October 18, 2021.

~~Mercer Convertible Debt~~13

On October 15, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with Mercer Street Global Opportunity Fund, LLC (the “Investor”), pursuant to which the Company issued and sold to Investor a 10% Original Issue Discount Senior Convertible Promissory Note in the principal amount of $825,000 (the “Initial Note”) and fiveC-~~year~~BOND ~~warrants to purchase up to 16~~SYSTEMS,~~500,000~~ ~~shares of the Company’s common stock at an initial exercise price of $0~~INC.05 ~~per~~AND ~~share, an amount equal to 50% of the~~SUBSIDIARIES ~~conversion~~NOTES ~~shares~~TO ~~that~~CONSOLIDATED ~~were~~FINANCIAL ~~issued (the “Initial Warrants”). The Company received net proceeds of $680,000, which is net~~STATEMENTS ofSEPTEMBER ~~original issue discounts of $75~~30,~~000,~~ ~~placement fees of $60,000, and legal fees of $10,000. The transactions contemplated under the~~2023 ~~SPA closed on October 18, 2021.~~(UNAUDITED)

14Pursuant to the SPA, the Investor agreed to purchase an additional $825,000 10% Original Issue Discount Senior Convertible Promissory Note (the “Second Note,” and together with the Initial Note, the “Notes”), and a five-year warrant (the “Second Warrant,” and together with the Initial Warrant, the “Warrants”) to purchase, in the aggregate, shares of the Company’s common stock at an initial exercise price of $0.05 per share from the Company in an amount equal to 50% of the conversion shares to be issued upon the same terms as the Initial Note and Initial Warrant (subject to there being no event of default under the Initial Note or other customary closing conditions), within three trading days of a registration statement registering the shares of the Company’s common stock issuable under the Notes (the “Conversion Shares”) and upon exercise of the Warrants (the “Warrant Shares”) being declared effective by the SEC. To date, the Investor did not purchase the Second Note.

~~C-BOND~~The Initial Note matured 12 months after issuance, ~~SYSTEMS~~bore interest at a rate of 4% per annum through the date of default, ~~INC.~~and ~~AND~~was ~~SUBSIDIARIES NOTES~~initially TOconvertible ~~CONSOLIDATED~~beginning ~~FINANCIAL~~on ~~STATEMENTS~~the six-month anniversary ~~JUNE~~of 30the original issue date into the Company’s common stock at a fixed conversion price of $0.025 per share, ~~2023~~subject to adjustment ~~(UNAUDITED)~~for stock splits, stock combinations, dilutive issuances, and similar events, as described in the Initial Note.

~~Pursuant to~~The ~~the~~Initial ~~SPA,~~Note ~~the~~may ~~Investor~~be ~~agreed~~prepaid toat ~~purchase~~any antime ~~additional $825,000 10% Original Issue Discount Senior Convertible Promissory Note (the~~for ~~“Second Note,” and together with~~ the ~~Initial~~first ~~Note,~~90 ~~the~~days ~~“Notes”),~~at ~~and~~face avalue ~~five-year~~plus ~~warrant~~accrued ~~(the~~interest. ~~“Second~~From ~~Warrant,” and~~day ~~together~~91 ~~with~~through ~~the~~day ~~Initial Warrant~~180, the ~~“Warrants”)~~Note tomay ~~purchase,~~be inprepaid ~~the aggregate, shares of the Company’s common stock at an initial exercise price of $0.05 per share from the Company~~ in an amount equal to 50110% of the ~~conversion~~principal ~~shares~~amount toplus beaccrued ~~issued upon~~interest. ~~the~~From ~~same~~day ~~terms~~181 asthrough the ~~Initial~~day ~~Note~~immediately ~~and~~preceding ~~Initial~~the ~~Warrant~~maturity ~~(subject~~date, ~~to there being no event of default under~~ the Initial Note ~~or other~~ ~~customary~~may ~~closing~~be ~~conditions),~~prepaid ~~within~~in ~~three~~an ~~trading~~amount ~~days~~equal ofto a120% ~~registration statement registering the shares~~ of the ~~Company’s~~principal ~~common stock~~amount ~~issuable~~plus ~~under~~accrued ~~the Notes (the “Conversion Shares”) and upon exercise of the Warrants (the “Warrant Shares”) being declared effective by the SEC~~interest. ~~To date, the Investor did not purchase the Second Note.~~

The ~~Initial~~ Note ~~matured~~and 12Warrants ~~months~~contain ~~after~~conversion ~~issuance,~~limitations providing ~~bore~~that ~~interest~~a atholder athereof ~~rate~~may ofnot 4%convert ~~per~~the ~~annum~~Notes ~~through~~or exercise the ~~date~~Warrants ofto ~~default,~~the ~~and~~extent ~~was~~(but ~~initially~~only to the extent) that, if after ~~convertible~~giving ~~beginning~~effect onto such conversion, the ~~six-month~~holder ~~anniversary~~or any of ~~the~~its ~~original~~affiliates ~~issue~~would ~~date~~beneficially ~~into~~own in excess of 4.99% of the outstanding shares of the Company’s common stock atimmediately aafter ~~fixed~~giving effect to such conversion ~~price~~ ofor $0exercise.~~025~~ ~~per~~A ~~share,~~holder ~~subject~~may increase or decrease its beneficial ownership limitation upon notice to ~~adjustment~~the ~~for~~Company ~~stock~~provided ~~splits,~~that ~~stock~~in ~~combinations,~~no ~~dilutive~~event ~~issuances,~~such ~~and~~limitation ~~similar~~exceeds ~~events~~9.99%, asand ~~described~~that any increase inshall not be effective until the ~~Initial~~61st ~~Note~~day after such notice.

~~The~~In connection with the SPA, the Company entered ~~Initial~~into ~~Note~~a ~~may~~Registration beRights ~~prepaid~~Agreement atdated ~~any~~October ~~time~~15, ~~for~~2021 (the ~~first~~“Registration 90Rights ~~days~~Agreement”), atwith ~~face~~the ~~value~~Investor ~~plus~~pursuant to ~~accrued~~which ~~interest.~~it ~~From~~is ~~day~~obligated 91to ~~through~~file ~~day~~a ~~180,~~registration ~~the~~statement ~~Note may~~with bethe ~~prepaid~~SEC inwithin an45 ~~amount~~days ~~equal~~after tothe ~~110%~~date of the ~~principal~~agreement ~~amount~~to ~~plus~~register ~~accrued~~the resale ~~interest.~~by ~~From~~the ~~day~~Investor ~~181~~of ~~through~~ the ~~day~~conversion ~~immediately~~shares ~~preceding the~~and ~~maturity~~warrant ~~date~~shares, ~~the~~and ~~Initial~~use ~~Note~~all ~~may~~commercially bereasonable ~~prepaid~~efforts into anhave ~~amount~~the ~~equal~~registration statement todeclared ~~120%~~effective ofby the ~~principal~~SEC ~~amount~~within ~~plus~~60 ~~accrued~~days ~~interest~~after the registration statement is filed.

~~The Note~~Upon ~~and~~the ~~Warrants~~occurrence ~~contain~~of ~~conversion~~an ~~limitations~~event ~~providing~~of ~~that~~default ~~a holder thereof may not convert~~ under the Notes, ~~or exercise~~ the ~~Warrants~~Investor ~~to the~~has ~~extent (but only to~~ the ~~extent)~~right ~~that, if after giving effect~~ to ~~such~~be ~~conversion,~~prepaid ~~the~~at ~~holder or any of its affiliates would beneficially own in excess of 4.99~~125% of the outstanding ~~shares~~principal ofbalance ~~the~~and ~~Company’s~~accrued ~~common~~interest, ~~stock~~and ~~immediately~~interest ~~after~~accrues at ~~giving~~18% ~~effect~~per ~~to such conversion or exercise~~annum. AEvents ~~holder~~of ~~may~~default ~~increase or decrease its beneficial ownership limitation upon notice to the Company provided that in no event such limitation exceeds 9.99%~~included, ~~and~~among ~~that~~other ~~any increase shall not be effective until the 61st day after such notice.~~things,

~~In connection~~(i) ~~with~~any ~~the~~default ~~SPA,~~in the ~~Company~~payment ~~entered~~of ~~into~~(A) aprincipal ~~Registration~~and ~~Rights~~interest ~~Agreement~~payment ~~dated~~under ~~October~~this ~~15,~~Note ~~2021~~or ~~(the~~any ~~“Registration~~other ~~Rights Agreement”)~~Indebtedness, ~~with~~or ~~the~~(B) ~~Investor~~Late ~~pursuant~~Fees, toliquidated ~~which~~damages itand isother ~~obligated~~amounts owing to ~~file~~the aHolder ~~registration~~of ~~statement~~this ~~with~~Note, ~~the~~as ~~SEC~~and ~~within~~when ~~45 days after~~ the ~~date~~same ofshall ~~the~~become ~~agreement~~due toand ~~register~~payable ~~the~~(whether ~~resale~~on bya ~~the~~Conversion ~~Investor~~Date, ofor the ~~conversion~~Maturity ~~shares~~Date, ~~and~~or ~~warrant~~by ~~shares,~~acceleration ~~and~~or ~~use~~otherwise), ~~all~~which ~~commercially reasonable~~default, ~~efforts~~solely toin ~~have~~ the ~~registration~~case ~~statement~~of ~~declared~~a ~~effective~~default byunder ~~the~~clause ~~SEC~~(B) ~~within~~above, 60is ~~days~~not ~~after~~cured ~~the~~within ~~registration~~five ~~statement~~Trading ~~is filed.~~Days;

~~Upon the~~(ii) ~~occurrence of an event of default under~~ the ~~Notes,~~Company ~~the~~or ~~Investor~~any ~~has~~Subsidiary ~~the~~shall ~~right to~~ be ~~prepaid~~subject atto ~~125%~~a ofBankruptcy ~~the outstanding principal balance and accrued interest, and interest accrues at 18% per annum. Events of default included, among other things,~~Event;

(iiii) ~~any~~the ~~default~~SEC insuspends the ~~payment~~Common ofStock ~~(A)~~from ~~principal~~trading ~~and~~or ~~interest~~the ~~payment~~Company’s ~~under~~Common ~~this~~Stock ~~Note~~is not listed or ~~any~~quoted ~~other~~for ~~Indebtedness,~~trading oron ~~(B)~~a ~~Late~~Trading ~~Fees,~~Market ~~liquidated~~which ~~damages~~failure ~~and~~is ~~other~~not ~~amounts~~cured, ~~owing~~if possible to cure, within the ~~Holder~~earlier to occur of ~~this~~10 ~~Note,~~Trading asDays ~~and~~after ~~when~~notice ~~the~~of ~~same~~such ~~shall~~failure ~~become~~is ~~due~~sent ~~and~~by ~~payable~~the ~~(whether~~Holder onor aby ~~Conversion~~any ~~Date,~~other orHolder to the ~~Maturity~~Company ~~Date,~~ or bythe ~~acceleration~~transfer orof ~~otherwise),~~shares ~~which~~of ~~default,~~Common ~~solely~~Stock inthrough the ~~case~~Depository ofTrust aCompany ~~default~~System ~~under~~is ~~clause~~no ~~(B)~~longer ~~above,~~available or is ~~not~~subject ~~cured~~to ~~within~~a ~~five~~“chill” ~~Trading~~by ~~Days~~the Depository Trust Company or any successor;

(iiiv) the Company orshall be a party to any ~~Subsidiary~~Change ~~shall~~of beControl ~~subject~~Transaction or shall agree to sell or dispose of all or in excess of 50% of its assets in one transaction or a ~~Bankruptcy~~series ~~Event~~of related transactions (whether or not such sale would constitute a Change of Control Transaction);

(~~iii~~v) the ~~SEC suspends the Common Stock from trading or the~~ Company’s ~~Common~~incurs Stock is not listed or quoted for trading on a Trading Market which failure is not cured, if possible to cure, within the earlier to occur of 10 Trading Days after notice of such failure is sent by the Holder or by any Indebtedness other ~~Holder~~than toPermitted ~~the Company or the transfer of shares of Common Stock through the Depository Trust Company System is no longer available or is subject to a “chill” by the Depository Trust Company or any successor~~Indebtedness;

(ivvi) the Company ~~shall~~restates beany afinancial ~~party~~statements included in its reports or registration statements filed pursuant to the Securities Act or the Exchange Act for any ~~Change~~date or period from two years prior to the Original Issue Date of ~~Control~~this ~~Transaction~~Note and until this Note is or ~~shall~~the ~~agree~~Warrants issued to ~~sell~~the orHolder ~~dispose~~are ofno ~~all~~longer outstanding, if following first public announcement or indisclosure ~~excess~~that ofa 50restatement will occur the VWAP on the next Trading Day is 20% less than the VWAP on the prior Trading Day. For the purposes of ~~its~~this ~~assets~~clause inthe ~~one~~next ~~transaction~~Trading Day if an announcement is made before 4:00 pm New York, NY time is either the day of the announcement or the following Trading Day. The Company filed a ~~series~~Report on Form 8-K announcing the restatement of ~~related~~its ~~transactions~~financial ~~(whether~~statements for the year ended December 31, 2020. Following the first public announcement or disclosure that a restatement occurred, the VWAP on the next Trading Day was not ~~such~~20% ~~sale~~less ~~would~~than ~~constitute~~the aVWAP ~~Change~~on ofthe ~~Control~~prior ~~Transaction);~~Trading Day and accordingly, the default provisions were not triggered.

1514

C-BOND SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~JUNE~~SEPTEMBER 30, 2023 (UNAUDITED)

The Company has also granted the investor a 12-month (v)or until the ~~Company~~Notes ~~incurs~~are ~~any~~no ~~Indebtedness~~longer ~~other~~outstanding) ~~than~~right ~~Permitted~~to ~~Indebtedness;~~participate in specified future financings, up to a level of 30%.

~~(vi)~~On April 20, 2022, the Company ~~restates~~and ~~any~~the ~~financial~~Investor entered ~~statements~~into ~~included~~an Exchange Agreement (the “Exchange Agreement”). The original SPA remains in ~~its~~effect. ~~reports~~Per orthe ~~registration~~terms ~~statements~~of ~~filed~~the ~~pursuant~~Exchange Agreement, the Parties agreed to exchange (i) the ~~Securities~~Initial ~~Act~~Note orfor a new Convertible Promissory Note (the ~~Exchange~~“New ~~Act~~Note”) ~~for~~and (ii) ~~any~~the ~~date~~Initial orWarrant ~~period~~for ~~from~~a ~~two~~new ~~years~~five-year ~~prior~~warrant to purchase, in the ~~Original~~aggregate, ~~Issue~~33,000,000 ~~Date~~shares of ~~this~~the ~~Note~~Company’s common stock at an exercise price of $0.025 per share (the “New Warrant” and ~~until~~together ~~this~~with the New Note, isthe or“New Securities”), according to the ~~Warrants~~terms ~~issued~~and conditions of the Exchange Agreement. On April 20, 2022, pursuant to the ~~Holder~~terms ~~are~~of nothe ~~longer~~Exchange ~~outstanding~~Agreement, ifthe Investor ~~following~~surrendered ~~first~~the ~~public~~Prior ~~announcement~~Securities orin ~~disclosure~~exchange ~~that~~for athe ~~restatement~~New ~~will~~Securities. ~~occur~~Other than the ~~VWAP~~surrender onof the ~~next~~Prior ~~Trading~~Securities, ~~Day~~no isconsideration of ~~20%~~any ~~less~~kind ~~than~~whatsoever was given by the ~~VWAP~~Investor onto the ~~prior~~Company ~~Trading~~in ~~Day.~~connection ~~For~~with the ~~purposes~~Exchange Agreement. The terms of ~~this~~the ~~clause~~New Securities are the ~~next~~same ~~Trading~~as ~~Day~~the ifPrior anSecurities ~~announcement~~except isfor ~~made~~the ~~before~~pricing ~~4:00~~of pmthe shares issuable under the New ~~York,~~Note NYand ~~time~~the isshares ~~either~~issuable upon exercise of the ~~day~~New Warrant. The New Securities are composed of the ~~announcement~~New orNote, which is a 10% Original Issue Discount Senior Convertible Promissory Note in the ~~following~~principal ~~Trading~~amount ~~Day~~of $825,000, and the New Warrant. The ~~Company~~New ~~filed~~Note matured on October 15, 2022, bore interest at a ~~Report~~rate onof ~~Form~~4% per ~~8-K~~annum ~~announcing~~through the ~~restatement~~date of ~~its~~default, ~~financial~~and ~~statements~~was ~~for~~initially convertible into the ~~year~~Company’s ~~ended~~common ~~December~~stock ~~31,~~at ~~2020~~a fixed conversion price of $0.0125 ~~Following~~per ~~the~~share, ~~first~~subject ~~public~~to ~~announcement~~adjustment orfor ~~disclosure~~stock ~~that~~splits, astock ~~restatement~~combinations, ~~occurred~~dilutive issuances, and similar events, as described in the ~~VWAP~~New onNote. If the ~~next~~average Closing Price during any 10 consecutive Trading Day ~~was~~period ~~not~~beginning ~~20%~~and ~~less~~ending ~~than~~during the ~~VWAP~~60 onDay Effectiveness Period (the ~~prior~~“Average ~~Trading~~Closing ~~Day~~Price”) ~~and~~is ~~accordingly,~~below the ~~default~~Conversion ~~provisions~~Price ~~were~~than ~~not~~the ~~triggered~~conversion price will be reduced to such Average Closing Price but in no event less than $0.00875.

~~The~~On October 15, 2022, the due date of the New Note, ~~Company~~the ~~has~~New ~~also~~Note ~~granted~~defaulted due to non-payment. Accordingly, the ~~investor~~Company added a ~~12-month~~default (penalty of $206,250, or ~~until~~25%, to the ~~Notes~~principal ~~are~~balance and norecorded ~~longer~~interest ~~outstanding)~~expense ~~right~~of to$206,250, ~~participate~~and ininterest ~~specified~~shall ~~future~~accrue at 18% per annum. Accordingly, as of September 30, 2023 and December ~~financings~~31, up2022, tothe aprincipal ~~level~~balance of ~~30%~~the Initial note was $1,031,250.

~~On April~~In ~~20,~~accordance ~~2022,~~with ~~the~~ASC ~~Company~~470-50, Debt Modifications and Extinguishments, the ~~Investor~~Company ~~entered~~performed ~~into~~ an ~~Exchange~~assessment ~~Agreement~~of ~~(the~~whether ~~“Exchange Agreement”). The original SPA remains in effect. Per~~ the ~~terms of the~~ Exchange Agreement, ~~the~~transaction ~~Parties~~was ~~agreed~~deemed to ~~exchange~~be ~~(i) the Initial Note for a~~ new ~~Convertible Promissory~~debt, ~~Note (the “New Note”) and (ii) the Initial Warrant for~~ a ~~new five-year warrant to purchase, in the aggregate,~~modification ~~33,000,000 shares~~ of ~~the~~existing ~~Company’s~~debt, ~~common~~or ~~stock at~~ an ~~exercise~~extinguishment ~~price~~ of $0existing debt.~~025~~ ~~per~~The ~~share~~Company ~~(the~~evaluated ~~“New Warrant” and together with~~ the ~~New Note, the “New Securities”), according to the terms and conditions of the Exchange Agreement. On~~ April 20, 2022~~, pursuant~~ ~~to the terms of the~~ Exchange Agreement, ~~the~~for ~~Investor~~debt ~~surrendered~~modification and ~~the~~concluded ~~Prior~~that ~~Securities~~the indebt ~~exchange~~qualified for ~~the~~debt ~~New Securities~~extinguishment. ~~Other than~~On ~~the~~April ~~surrender~~20, ~~of the Prior Securities~~2022, ~~no consideration of any kind whatsoever was given by~~ the ~~Investor to the~~ Company inagreed ~~connection with~~to ~~the~~reduce ~~Exchange Agreement. The terms of~~ the ~~New~~conversion ~~Securities~~price ~~are the same as the Prior Securities except for the pricing of the shares~~from ~~issuable~~$0.025 ~~under~~per ~~the~~share ~~New~~to ~~Note and the shares issuable upon exercise of the New Warrant~~$0.0125 ~~The~~per ~~New Securities are composed of the New Note~~share, ~~which~~ isand ato ~~10%~~cancel ~~Original Issue Discount Senior Convertible Promissory Note in~~ the ~~principal~~Initial ~~amount of $825,000, and the New~~ Warrant. ~~The New~~to ~~Note~~purchase ~~matured on October 15~~16, ~~2022~~500,000 ~~bore~~shares ~~interest at a rate~~ of ~~4% per annum through the date of default, and was initially convertible into the Company’s~~ common ~~stock~~exercisable at ~~a fixed conversion price of~~ $0.~~0125~~ 05 per ~~share~~shares, ~~subject~~and to ~~adjustment~~issue ~~for~~a ~~stock~~New ~~splits,~~Warrant ~~stock combinations,~~to ~~dilutive~~purchase ~~issuances~~33, ~~and similar events~~000,000 asshares ~~described~~exercisable inat ~~the~~$0.025 ~~New~~per ~~Note~~share. IfAll ~~the~~other ~~average~~terms ~~Closing~~of ~~Price~~the ~~during any 10 consecutive~~convertible ~~Trading~~note ~~Day period beginning~~ and ~~ending~~warrants ~~during~~remain ~~the~~unchanged, 60and ~~Day~~therefore ~~Effectiveness~~did ~~Period~~not (change the ~~“Average~~cash ~~Closing~~flows ~~Price”)~~of ~~is below~~ the ~~Conversion~~ ~~Price~~note. ~~than~~The ~~the~~New ~~conversion~~Warrants ~~price~~did ~~will~~not becontain ~~reduced~~any tofeatures requiring ~~such~~liability ~~Average~~treatment ~~Closing~~and ~~Price~~therefore ~~but~~were inclassified noas ~~event less than $0~~equity.~~00875.~~

OnThe Company determined the transaction was considered ~~October~~a 15debt extinguishment because the change in conversion price was substantial. Upon extinguishment, ~~2022~~the Company had $395,313 of unamortized initial debt discount recorded which it wrote off, and the ~~due~~Company ~~date~~recorded a buyback of $160,993 which represents the ~~New~~reversal ~~Note~~of calculated beneficial conversion feature on the initial debt upon settlement, for an aggregate net loss on debt extinguishment of $234,320. The Company recorded a new debt discount in connection with the New Note ~~defaulted~~which ~~due~~was tocalculated ~~non-payment.~~based ~~Accordingly,~~on the ~~Company~~relative ~~added~~fair avalue ~~default~~of ~~penalty~~the New Warrants of $~~206~~325,~~250~~785. Additionally, orthe ~~25%,~~New toNote is convertible into common shares at an initial conversion price of $0.0125 which was lower than the ~~principal~~fair ~~balance~~value ~~and~~of ~~recorded~~common ~~interest~~shares ~~expense~~based on the quoted closing price of the Company’s common stock on the measurement date. The value allocated to the New Warrants was $~~206~~325,~~250~~785, and ~~interest~~$354,215 ~~shall~~was ~~accrue~~allocated atto ~~18%~~the ~~per~~beneficial ~~annum~~conversion feature. Since the intrinsic ~~Accordingly~~value of the beneficial conversion feature and warrants was greater than the proceeds allocated to the convertible instrument, asthe amount of ~~June~~the ~~30,~~discount ~~2023~~assigned to the beneficial conversion feature and ~~December~~warrants ~~31,~~issued ~~2022~~was limited to the amount of the proceeds allocated to the convertible instrument. Accordingly, the ~~principal~~Company ~~balance~~recorded an aggregate non-cash debt discount of $680,000 with the ~~Initial~~credit ~~note~~to additional paid in capital. This debt discount was ~~$1,031,250~~amortized to interest expense over the remaining term of the Convertible Note.

In accordance with ASC 470-50, Debt Modifications and Extinguishments, the Company performed an assessment of whether the Exchange Agreement transaction was deemed to be new debt, a modification of existing debt, or an extinguishment of existing debt. The Company ~~evaluated the~~uses ~~April 20, 2022 Exchange Agreement for debt modification and concluded that~~ the ~~debt~~Binomial ~~qualified~~Valuation ~~for debt extinguishment. On April 20,~~Model ~~2022, the Company agreed~~ to ~~reduce~~determine the ~~conversion~~fair ~~price~~value ~~from $0.025 per share to $0.0125 per share, and to cancel the Initial Warrant to purchase 16,500,000 shares~~ of ~~common~~its ~~exercisable~~stock ~~at $0.05 per shares, and to issue a New Warrant to purchase 33,000,000 shares exercisable at $0.025 per share. All other terms of the convertible note and~~ warrants ~~remain~~which ~~unchanged,~~requires ~~and therefore did not change~~ the ~~cash~~Company ~~flows of~~to ~~the~~make ~~note.~~several ~~The~~key ~~New~~judgments ~~Warrants did not contain any features requiring liability treatment and therefore were classified as equity.~~including:

16● the value of the Company’s common stock; ● the expected life of issued stock warrants; ● the expected volatility of the Company’s stock price; ● the expected dividend yield to be realized over the life of the stock warrants; and ● the risk-free interest rate over the expected life of the stock warrants.

~~C-BOND SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2023 (UNAUDITED)~~15

~~The Company~~C-BOND ~~determined the transaction was considered a debt extinguishment because of the change in conversion price was substantial. Upon extinguishment~~SYSTEMS, the Company had $395,313 of unamortized initial debt discount recorded which it wrote off, and the Company recorded a buyback of $160,993 which represents the reversal of calculated beneficial conversion feature on the initial debt upon settlement, for an aggregate net loss on debt extinguishment of $234,320INC. ~~The~~AND ~~Company recorded a new debt discount in connection with the New Note which~~SUBSIDIARIES ~~was~~NOTES ~~calculated~~TO ~~based~~CONSOLIDATED onFINANCIAL ~~the relative fair value of the New Warrants of $325,785. Additionally, the New Note is convertible into common~~STATEMENTS ~~shares~~SEPTEMBER at an initial conversion price of $0.0125 which was lower than the fair value of common shares based on the quoted closing price of the Company’s common stock on the measurement date. The value allocated to the New Warrants was $32530,~~785,~~ ~~and $354,215 was allocated~~2023 to the beneficial conversion feature. Since the intrinsic value of the beneficial conversion feature and warrants was greater than the proceeds allocated to the convertible instrument, the amount of the discount assigned to the beneficial conversion feature and warrants issued was limited to the amount of the proceeds allocated to the convertible instrument. Accordingly, the Company recorded an aggregate non-cash debt discount of $680,000 with the credit to additional paid in capital. This debt discount was amortized to interest expense over the remaining term of the Convertible Note.(UNAUDITED)

The Company’s ~~uses~~computation of the ~~Binomial~~expected life ~~Valuation~~of ~~Model~~issued stock warrants was based on the simplified method as the Company does not have adequate exercise experience to determine the expected term. The interest rate was based on the ~~fair~~U.S. ~~value~~Treasury yield curve in effect at the time of ~~its~~grant. ~~stock~~The ~~warrants~~computation ~~which~~of ~~requires~~volatility was based on the ~~Company~~historical tovolatility ~~make~~of ~~several key~~the ~~judgments~~Company’s ~~including:~~common stock.

●On ~~the~~April ~~value~~20, of2022 (the ~~Company’s~~Exchange ~~common~~Agreement ~~stock;~~date) along ●with ~~the~~various ~~expected~~re-pricings ~~life~~as ofoutlined ~~issued~~below, ~~stock warrants; ●~~ the ~~expected~~fair ~~volatility~~value of the ~~Company’s~~ stock ~~price; ● the expected dividend yield to be realized over the life of the stock~~ warrants; ~~and~~were ●estimated ~~the~~at ~~risk-free~~issuance ~~interest~~using ~~rate over~~ the ~~expected~~Binomial ~~life~~Valuation Model ofwith the ~~stock~~following ~~warrants.~~assumptions:

The Company’s computation of the expected life of issued stock warrants was based on the simplified method as the Company does not have adequate exercise experience to determine the expected term. The interest rate was based on the U.S. Treasury yield curve in effect at the time of grant. The computation of volatility was based on the historical volatility of the Company’s common stock.

		2022
Dividend rate		—%
Term (in years)		4 years
Volatility		246.6% to 329.6%
Risk—free interest rate		2.79% to 3.12%

OnAt any time this Note or any amounts accrued and ~~April~~payable 20thereunder remain outstanding, ~~2022~~the Company or any Subsidiary, as applicable, sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any common stock or common stock equivalents entitling any Person to acquire shares of the ~~Exchange~~Company’s ~~Agreement~~common ~~date~~stock at an effective price per share that is lower than the conversion price then in effect (such lower price, the “Base Conversion Price” and each such issuance or announcement a “Dilutive Issuance”), ~~along~~then the conversion price shall be immediately reduced to equal the Base Conversion Price. Such adjustment shall be made whenever such common stock or common stock equivalents are issued. On June 23, 2022, the Company issued common stock equivalents with ~~various~~an reinitial conversion price of $0.011 per share and accordingly, the conversion price and warrant down-~~pricings~~round asprovisions ~~outlined~~were ~~below~~triggered. As a result, the conversion price of the New April 2022 Note was reduced to $0.011 per share and the exercise price of the New April 2022 Warrant was lowered to $0.011. As a result of the June 23, 2022 down-round provisions, the Company calculated the difference between the warrants fair value on June 23, 2022, the date the down-round feature was triggered using the then current exercise price of $0.025 and the new exercise price of $0.011. On June 23, 2022, the Company recorded a deemed dividend of $3,702 which represents the fair value transferred to the warrant holders from the down round feature being triggered. No additional beneficial conversion feature amount was recorded based on the June 23, 2022 valuation as the ratcheted beneficial conversion feature value was lower than the original amount. Additionally, on September 6, 2022, the Company issued common stock ~~warrants~~equivalents with an initial conversion price of $0.009 per share and accordingly, the conversion price and warrant down-round provisions were triggered. ~~estimated~~As ata ~~issuance~~result, the conversion price of the New April 2022 Note was reduced to $0.009 per share and the exercise price of the New April 2022 Warrant was lowered to $0.009. As a result of the September 6, 2022 down-round provisions, the Company calculated the difference between the warrants fair value on September 6, 2022, the date the down-round feature was triggered using the ~~Binomial~~then ~~Valuation~~current ~~Model~~exercise ~~with~~price of $0.011 and the ~~following~~new ~~assumptions:~~exercise price of $0.009. On September 6, 2022, the Company recorded a deemed dividend of $733 which represents the fair value transferred to the warrant holders from the down round feature being triggered. No additional beneficial conversion feature amount was recorded based on the September 6, 2022 valuation as the ratcheted beneficial conversion feature value was lower than the original amount.

		2022
Dividend rate		—%
Term (in years)		4 years
Volatility		246.6% to 329.6%
Risk—free interest rate		2.79% to 3.12%

Pursuant to the provisions of ASC 815-40 – Derivatives and Hedging – Contracts in an Entity’s Own Stock, the convertible note and related warrants issued in connection with the Mercer convertible note was analyzed and it was determined that the terms of the convertible note and warrants contained terms that were not considered derivatives.

At any time this Note or any amounts accrued and payable thereunder remain outstanding, the Company or any Subsidiary, as applicable, sells or grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant or any option to purchase or other disposition), any common stock or common stock equivalents entitling any Person to acquire shares of the Company’s common stock at an effective price per share that is lower than the conversion price then in effect (such lower price, the “Base Conversion Price” and each such issuance or announcement a “Dilutive Issuance”), then the conversion price shall be immediately reduced to equal the Base Conversion Price. Such adjustment shall be made whenever such common stock or common stock equivalents are issued. On June 23, 2022, the Company issued common stock equivalents with an initial conversion price of $0.011 per share and accordingly, the conversion price and warrant down-round provisions were triggered. As a result, the conversion price of the New April 2022 Note was reduced to $0.011 per share and the exercise price of the New April 2022 Warrant was lowered to $0.011. As a result of the June 23, 2022 down-round provisions, the Company calculated the difference between the warrants fair value on June 23, 2022, the date the down-round feature was triggered using the then current exercise price of $0.025 and the new exercise price of $0.011. On June 23, 2022, the Company recorded a deemed dividend of $3,702 which represents the fair value transferred to the warrant holders from the down round feature being triggered. No additional beneficial conversion feature amount was recorded based on the June 23, 2022 valuation as the ratcheted beneficial conversion feature value was lower than the original amount. Additionally, on September 6, 2022, the Company issued common stock equivalents with an initial conversion price of $0.009 per share and accordingly, the conversion price and warrant down-round provisions were triggered. As a result, the conversion price of the New April 2022 Note was reduced to $0.009 per share and the exercise price of the New April 2022 Warrant was lowered to $0.009. As a result of the September 6, 2022 down-round provisions, the Company calculated the difference between the warrants fair value on September 6, 2022, the date the down-round feature was triggered using the then current exercise price of $0.011 and the new exercise price of $0.009. On September 6, 2022, the Company recorded a deemed dividend of $733 which represents the fair value transferred to the warrant holders from the down round feature being triggered. No additional beneficial conversion feature amount was recorded based on the September 6, 2022 valuation as the ratcheted beneficial conversion feature value was lower than the original amount.16

17C-BOND SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2023 (UNAUDITED)

~~C-BOND SYSTEMS,~~1800 ~~INC.~~Diagonal ~~AND~~Lending ~~SUBSIDIARIES NOTES~~Convertible ~~TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2023 (UNAUDITED)~~Debt

~~Pursuant to~~On November 9, 2022, the ~~provisions~~Company ofclosed ~~ASC~~a ~~815-40~~Securities Purchase –Agreement ~~Derivatives~~dated ~~and~~November ~~Hedging~~4, –2022, ~~Contracts~~with in1800 anDIAGONAL ~~Entity’s~~LENDING ~~Own~~LLC, ~~Stock~~a Virginia limited liability company, (“Diagonal”), pursuant to which a Promissory Note (the ~~convertible note~~“November ~~and~~2022 ~~related~~Diagonal ~~warrants~~Note”) ~~issued~~dated November 4, 2022, was made to Diagonal in ~~connection~~the aggregate ~~with~~principal amount of $104,250 and the ~~Mercer~~Company ~~convertible~~received ~~note~~net ~~was~~proceeds ~~analyzed~~of ~~and~~$100,000 itwhich was ~~determined~~net ~~that~~of fees of $4,250. The November 2022 Diagonal Note bears interest at a rate of 12% per annum (22% upon the ~~terms~~occurrence of an event of a default) and all outstanding principal and accrued and unpaid interest are due on May 4, 2024. In May 2023, the ~~convertible~~November ~~note~~2022 Diagonal Note and ~~warrants~~any ~~contained~~interest ~~terms~~due ~~that~~was ~~were~~repaid ~~not~~in full ~~considered~~(See ~~derivatives~~Note 16).

On December 27, 2022, the Company closed a Securities Purchase Agreement dated December 27, 2022, with 1800 Diagonal pursuant to which a Promissory Note (“December 2022 Diagonal Note”) dated December 27, 2022, was made to Diagonal ~~Lending~~in ~~Convertible~~the ~~Debt~~aggregate principal amount of $64,250 and the Company received net proceeds of $60,000 which was net of fees of $4,250. The December 2022 Diagonal Note bears interest at a rate of 12% per annum (22% upon the occurrence of an event of a default) and all outstanding principal and accrued and unpaid interest are due on June 27, 2024. In May 2023, the December 2022 Diagonal Note and any interest due was repaid in full (See Note 16).

On ~~November~~ 9March 17, ~~2022~~2023, the Company closed a Securities Purchase Agreement dated November 4, 2022, with ~~1800 DIAGONAL LENDING LLC, a Virginia limited liability company, (“~~Diagonal~~”),~~ pursuant to which a Promissory Note (the “~~November~~March ~~2022~~2023 Diagonal Note”) dated ~~November~~March 417, ~~2022~~2023, was made to Diagonal in the aggregate principal amount of $~~104~~54,250 and the Company received net proceeds of $~~100~~50,000 which was net of fees of $4,250. The ~~November~~March ~~2022~~2023 Diagonal Note bears interest at a rate of 12% per annum (22% upon the occurrence of an an event of a default) and all outstanding principal and accrued and unpaid interest are due on ~~May~~March 417, 2024. In May 2023, the ~~November 2022~~March 2023 Diagonal Note and any interest due was repaid in full (See Note 16).

~~On December~~The ~~27,~~Company had the right to prepay the November 2022, December 2022 and March 2023 Diagonal Notes (principal and accrued interest) at any time during the ~~Company~~first ~~closed~~six amonths ~~Securities~~the ~~Purchase~~note ~~Agreement~~is outstanding ~~dated~~at ~~December~~the ~~27,~~rate ~~2022~~of 115% during the first 30 days after issuance, ~~with~~120% ~~1800~~during ~~Diagonal~~the ~~pursuant~~31st to ~~which~~60th aday after ~~Promissory~~issuance, ~~Note~~and ~~(“December~~125% ~~2022~~during ~~Diagonal~~the ~~Note”)~~61st ~~dated~~to ~~December~~the ~~27,~~180th day after issuance. The November 2022, ~~was~~December ~~made~~2022 toand March 2023 Diagonal inNotes may not be prepaid after the ~~aggregate~~180th ~~principal amount~~day offollowing ~~$64~~the issuance date,~~250~~ ~~and~~unless ~~the~~Diagonal ~~Company~~agrees ~~received~~to ~~net~~such ~~proceeds~~repayment ofand such ~~$60~~terms,~~000~~ which was ~~net~~agreed ofto ~~fees~~in ofconnection ~~$4,250.~~with ~~The~~the ~~December~~May ~~2022~~8, ~~Diagonal~~2023 ~~Note~~repayment. ~~bears interest~~Diagonal athad ain ~~rate~~its ofoption, ~~12%~~at ~~per~~any ~~annum~~time ~~(22%~~beginning ~~upon~~180 days after the ~~occurrence~~date of anthe ~~event~~Diagonal ofNote, ato ~~default)~~convert ~~and~~the ~~all~~ outstanding principal and ~~accrued~~interest on the November 2022, December 2022 and March ~~unpaid~~2023 ~~interest~~Diagonal ~~are~~Notes ~~due~~into onshares ~~June~~of ~~27,~~our ~~2024.~~common Instock ~~May~~at ~~2023,~~a ~~the~~conversion ~~December~~price ~~2022~~per ~~Diagonal~~share ~~Note~~equal ~~and~~to ~~any~~65% ~~interest~~of ~~due~~the ~~was~~average ~~repaid~~of inthe ~~full~~three ~~(See~~lowest ~~Note~~closing ~~16)~~bid prices of our common stock during the 10 trading days prior to the date of conversion.

~~On March~~The ~~17, 2023, the~~ Company ~~closed~~accounted afor ~~Securities~~the ~~Purchase Agreement dated~~ November 4, 2022, ~~with Diagonal pursuant to which a Promissory~~and ~~Note~~December ~~(the~~2022 ~~“March 2023~~ Diagonal ~~Note”)~~Notes ~~dated~~as ~~March~~stock ~~17,~~settled ~~2023,~~debt ~~was~~under ~~made~~ASC to480 ~~Diagonal~~and inrecorded ~~the~~an aggregate ~~principal~~debt ~~amount~~premium of $5490,~~250 and~~731 ~~the~~with ~~Company~~a ~~received~~charge ~~net~~to ~~proceeds~~interest expense. ofThe ~~$50,000~~Company ~~which~~has ~~was~~accounted ~~net~~for ofthe ~~fees of $4,250. The~~ March 2023 Diagonal Note ~~bears~~as ~~interest~~stock atsettled adebt ~~rate of~~under ~~12%~~ASC ~~per~~480 ~~annum~~and ~~(22%~~recorded ~~upon~~an ~~the~~aggregate ~~occurrence~~debt premium of an$29,212 ~~event~~with of a ~~default)~~charge ~~and~~to ~~all~~interest ~~outstanding~~expense. ~~principal~~On ~~and~~May ~~accrued~~11, ~~and~~2023, ~~unpaid~~upon ~~interest~~repayment ~~are due~~of onthe ~~March~~November 172022, ~~2024.~~December In2022 ~~May~~and March 2023 Diagonal Notes, the ~~March~~Company ~~2023~~reversed ~~Diagonal~~the ~~Note~~debt premium of $119,943 and ~~any~~recorded ~~interest~~a ~~due~~gain ~~was~~on ~~repaid~~debt inextinguishment ~~full~~of ~~(See~~$119,943 ~~Note~~on ~~16)~~the accompanying unaudited consolidated statement of operations.

~~The Company~~For ~~had~~ the ~~right~~nine tomonths ~~prepay~~ended ~~the~~September ~~November 2022~~30, ~~December 2022 and March~~ 2023 ~~Diagonal Notes (principal~~ and ~~accrued interest) at any~~ ~~time~~2022, ~~during~~amortization ~~the first six months the note is outstanding at the rate~~ of ~~115%~~debt ~~during~~discounts ~~the~~related ~~first~~to ~~30 days after issuance, 120% during~~ the ~~31st~~ toconvertible ~~60th~~notes ~~day~~payable ~~after~~amounted ~~issuance, and 125% during the 61st~~ to ~~the 180th day after issuance. The November 2022~~$2,627 ~~December 2022~~ and ~~March 2023 Diagonal Notes may not be prepaid after the 180th day following the issuance date~~$852,812, ~~unless Diagonal agrees to such repayment and such terms~~respectively, which ~~was~~has been ~~agreed~~included to in ~~connection with the May 8, 2023 repayment. Diagonal had in its option, at any time beginning 180 days after the date of the Diagonal Note, to convert the outstanding principal and~~ interest expense on the ~~November~~ ~~2022,~~accompanying ~~December~~unaudited ~~2022~~consolidated ~~and~~statements ~~March 2023 Diagonal Notes into shares~~ of ~~our common stock at a conversion price per share equal to 65% of the average of the three lowest closing bid prices of our common stock during the 10 trading days prior to the date of conversion~~operations.

~~The Company~~On ~~accounted~~September ~~for~~30, ~~the~~2023 ~~November 2022~~ and December 31, 2022, ~~Diagonal~~accrued interest ~~Notes~~payable ~~as stock settled debt~~ under ~~ASC~~the ~~480~~convertible ~~and~~notes ~~recorded~~discussed anabove ~~aggregate debt~~amounted ~~premium~~to of $90219,~~731~~882 ~~with a charge to interest expense. The Company has accounted for the March 2023 Diagonal Note as stock settled debt under ASC 480~~ and ~~recorded an aggregate debt premium of~~ $2983,~~212 with a charge to interest expense. On May 11~~138, ~~2023~~respectively, ~~upon repayment of the November 2022, December 2022~~ and ~~March~~is ~~2023~~included ~~Diagonal~~in ~~Notes, the Company reversed the debt premium of $119,943 and recorded a gain~~accrued onexpenses ~~debt extinguishment of $119,943~~ on the accompanying unaudited consolidated ~~statement~~balance ~~of operations~~sheets.

18On September 30, 2023 and December 31, 2022, convertible notes payable consisted of the following:

C-BOND SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2023 (UNAUDITED)

	September 30, 2023			December 31, 2022
Convertible notes payable	$	1,031,250		$	1,199,750
Add: put premium		-			90,731
Less: unamortized debt discount		-			(7,968	)
Convertible notes payable, net		1,031,250			1,282,513
Less: current portion of convertible notes payable		(1,031,250	)		(1,031,250	)
Convertible notes payable – long-term	$	-		$	251,263

For the six months ended June 30, 2023 and 2022, amortization of debt discounts related to the convertible notes payable amounted to $2,627 and $516,875, respectively, which has been included in interest expense on the accompanying unaudited consolidated statements of operations.17

~~On June~~C-BOND 30SYSTEMS, ~~2023~~INC. AND ~~and~~SUBSIDIARIES NOTES ~~December~~TO ~~31,~~CONSOLIDATED ~~2022,~~FINANCIAL ~~accrued~~STATEMENTS SEPTEMBER ~~interest payable under the convertible notes discussed above amounted to $173~~30,~~095~~ ~~and $83,138,~~2023 ~~respectively, and is included in accrued expenses on the accompanying unaudited consolidated balance sheets.~~(UNAUDITED)

~~On June~~NOTE ~~30,~~8 ~~2023~~– ~~and~~NOTES ~~December 31, 2022, convertible notes payable consisted of the following:~~PAYABLE

	June 30, 2023			December 31, 2022
Convertible notes payable	$	1,031,250		$	1,199,750
Add: put premium		-			90,731
Less: unamortized debt discount		-			(7,968	)
Convertible notes payable, net		1,031,250			1,282,513
Less: current portion of convertible notes payable		(1,031,250	)		(1,031,250	)
Convertible notes payable – long-term	$	-		$	251,263

On September 30, 2023 and December 31, 2022, notes payable consisted of the following:

NOTE 8 – NOTES PAYABLE

	September 30, 2023			December 31, 2022
Notes payable	$	122,688		$	1,899,380
Note payable – PPP note		18,823			18,823
Total notes payable		141,511			1,918,203
Less: unamortized debt discount		(947	)		(132,961	)
Notes payable, net		140,564			1,785,242
Less: current portion of notes payable, net of discount		(80,695	)		(1,576,438	)
Notes payable – long-term	$	59,869		$	208,804

~~On June~~Notes ~~30, 2023 and December 31, 2022, notes payable consisted of the following:~~Payable

	June 30, 2023			December 31, 2022
Notes payable	$	19,933		$	1,899,380
Note payable – PPP note		18,823			18,823
Total notes payable		38,756			1,918,203
Less: unamortized debt discount		-			(132,961	)
Notes payable, net		38,756			1,785,242
Less: current portion of notes payable, net of discount		(33,209	)		(1,576,438	)
Notes payable – long-term	$	5,547		$	208,804

BOCO Investment Note

~~Notes~~On November 14, 2018, the Company entered into ~~Payable~~a Revolving Credit Facility Loan and Security Agreement (“Loan Agreement”) and a Secured Promissory Note (the “Note”) with BOCO Investments, LLC (the “Lender”). Subject to and in accordance with the terms and conditions of the Loan Agreement and the Note, the Lender agreed to lend to the Company up to $400,000 (the “Maximum Loan Amount”) against the issuance and delivery by the Company of the Note for use as working capital and to assist in inventory acquisition. In 2018, the Lender loaned $400,000 to the Company, the Maximum Loan Amount. The Company should have repaid all principal, interest and other amounts outstanding on or before November 14, 2020. The Company’s obligations under the Loan Agreement and the Note are secured by a first-priority security interest in substantially all the Company’s assets (the “Collateral”). The outstanding principal advanced to Company pursuant to the Loan Agreement initially bore interest at the rate of 12% per annum, compounded annually. Upon the occurrence of an Event of Default under the Loan Agreement and Note, all amounts then outstanding (including principal and interest) shall bear interest at the rate of 18% per annum, compounded annually until the Event of Default is cured. Additionally, at or prior to December 31, 2018, the Company should have achieved an accounts receivable balance plus inventory equal to the unpaid principal balance of the Note (the “Minimum Asset Amount”).

~~BOCO~~In the event that the Company’s accounts ~~Investment~~receivable balance plus inventory balance is less than paid principal balance of the Note as of December 31, 2018, the Company shall have 45 days (through and until February 15, 2019) to cure such violation and an establish accounts receivable plus inventory equal to the unpaid principal balance of the Note. Commencing March 31, 2019 and at all times thereafter through the remainder of the commitment period and for so long thereafter as there is any amount still due and owing under the Note, the Company must maintain an accounts receivable balances plus inventory such that the outstanding principal borrowed by Company under the Loan Agreement and Note is less than or equal to eighty five percent (85%) of accounts receivable plus fifty percent (50%) of inventory, all as measured at the same point in time.

~~On November~~Commencing ~~14,~~on ~~2018~~January 10, ~~the~~2019 ~~Company entered into a Revolving Credit Facility Loan~~ and ~~Security~~on ~~Agreement~~or ~~(“Loan Agreement”) and~~before athe ~~Secured~~10th ~~Promissory~~day ~~Note~~of ~~(the~~each ~~“Note”)~~month ~~with BOCO Investments~~thereafter, ~~LLC (~~the ~~“Lender”).~~Company ~~Subject~~should tohave ~~and~~paid inLender ~~accordance with~~all ~~the~~interest ~~terms~~accrued ~~and~~on ~~conditions~~outstanding ofprincipal under the Loan Agreement and ~~the~~Notes ~~Note,~~as ~~the~~of ~~Lender agreed to lend to~~ the ~~Company~~end upof ~~to $400,000 (~~the ~~“Maximum Loan~~month ~~Amount”)~~then ~~against~~concluded. ~~the~~Upon ~~issuance and delivery by~~ the ~~Company~~occurrence of ~~the~~any ~~Note~~Event ~~for~~of ~~use~~Default ~~as working capital~~ and toat ~~assist~~any intime ~~inventory acquisition. In 2018~~thereafter, ~~the~~ Lender ~~loaned $400~~may,~~000~~ toat ~~the~~its ~~Company~~option, ~~the~~declare ~~Maximum~~any ~~Loan~~and ~~Amount.~~all ~~The~~obligations ~~Company~~immediately ~~should~~due ~~have repaid all principal, interest~~ and ~~other~~payable ~~amounts~~without ~~outstanding~~demand on or ~~before November 14, 2020~~notice. The Company’s ~~obligations~~did ~~under~~not meet the ~~Loan~~Minimum ~~Agreement~~Asset ~~and~~Amount ~~the Note~~covenant ~~are~~as ~~secured~~defined ~~by a first-priority security interest~~ in ~~substantially all~~ the ~~Company’s~~Loan ~~assets~~Agreement, ~~(the~~failed ~~“Collateral”). The outstanding principal advanced~~ to ~~Company~~timely ~~pursuant~~pay ~~to the Loan Agreement initially bore~~ interest atpayments ~~the~~due, ~~rate~~and ofhas ~~12%~~violated other ~~per~~default ~~annum, compounded annually~~provisions. ~~Upon~~Through the ~~occurrence~~date of anrepayment ~~Event of Default under the Loan Agreement~~ and ~~Note~~settlement, ~~all~~the ~~amounts~~note ~~then~~balance ~~outstanding~~due ~~(including principal and interest) shall bear interest at the rate~~ of ~~18% per annum~~$400,000 ~~compounded~~was ~~annually~~reflected ~~until~~as ~~the~~a ~~Event~~current ~~of Default is cured. Additionally,~~liability aton ~~or prior to December 31, 2018,~~ the ~~Company~~accompanying ~~should~~unaudited ~~have~~consolidated ~~achieved an accounts receivable~~ balance ~~plus~~sheets ~~inventory~~and ~~equal~~interest toaccrued ~~the~~at ~~unpaid principal~~18% ~~balance~~per ~~of the Note (the “Minimum Asset Amount”)~~annum.

1918

C-BOND SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ~~JUNE~~SEPTEMBER 30, 2023 (UNAUDITED)

In ~~the~~ ~~event~~May ~~that~~2023, the Company’s ~~accounts~~and ~~receivable~~the ~~balance~~Lender ~~plus~~entered into ~~inventory~~a ~~balance~~Debt isExchange ~~less~~and ~~than~~Release ~~paid~~Agreement ~~principal~~in ~~balance~~regard ofto the $400,000 Note as ofdiscussed ~~December 31~~above, ~~2018,~~whereby the Company ~~shall~~paid ~~have~~the 45Lender ~~days~~cash ~~(through~~of $200,000 and ~~until~~issued ~~February~~the 15Lender 22,000,000 ~~2019)~~shares toof ~~cure~~Common ~~such~~Stock ~~violation~~of ~~and~~the anCompany ~~establish~~in exchange for settlement of the remaining $200,000 of ~~accounts~~the ~~receivable~~loan ~~plus~~and ~~inventory~~all ~~equal~~accrued interest amounting to ~~the~~$317,293, ~~unpaid~~which ~~principal~~were ~~balance~~deemed ofpaid ~~the~~in full (see Note 16). ~~Commencing~~The ~~March 31~~22,000,000 ~~2019~~shares ~~and~~issued were valued at ~~all~~$132,000, ~~times~~or ~~thereafter through~~$0.006 ~~the~~per ~~remainder~~share, ofbased on the ~~commitment~~quoted ~~period~~closing ~~and~~price ~~for~~of sothe ~~long~~Company’s ~~thereafter~~common asstock ~~there~~on isthe ~~any~~measurement ~~amount~~date. In ~~still~~connection ~~due~~with the repayment and ~~owing~~settlement ~~under~~of ~~the~~this ~~Note~~debt, the Company ~~must~~recorded ~~maintain~~a angain ~~accounts~~from ~~receivable~~debt ~~balances~~extinguishment ~~plus~~of ~~inventory~~$385,293 ~~such~~consisting of ~~that~~a) ~~the~~$68,000 ~~outstanding~~calculated ~~principal~~as ~~borrowed~~the bydifference ~~Company~~in ~~under~~ the ~~Loan~~principal ~~Agreement~~amount ~~and~~settled ~~Note~~for isshares ~~less~~of ~~than~~$200,000 orand ~~equal~~the tofair ~~eighty~~value ~~five percent (85%)~~ of ~~accounts~~the ~~receivable~~shares ~~plus~~on ~~fifty~~the measurement ~~percent~~date ~~(50%)~~ of ~~inventory~~$132, ~~all~~000, asand ~~measured~~b) at the ~~same~~forgiveness ~~point~~of ininterest ~~time~~due of $317,293.

~~Commencing on~~On ~~January~~September 1030, ~~2019~~2023 and onDecember or31, ~~before the 10th day of each month thereafter~~2022, the ~~Company should have paid Lender all interest~~ ~~accrued~~principal onamount ~~outstanding~~due ~~principal~~ under ~~the~~this ~~Loan~~Note ~~Agreement~~amounted ~~and~~to ~~Notes~~$0 asand of$400,000, ~~the end of the month then concluded~~respectively. ~~Upon~~On ~~the~~September ~~occurrence~~30, ~~of any~~2023 ~~Event of Default~~ and atDecember ~~any time thereafter~~31, ~~Lender may~~2022, ataccrued ~~its option, declare any and all obligations immediately due and payable~~interest ~~without~~payable ~~demand~~under orthis ~~notice.~~Note ~~The~~amounted ~~Company did not meet the Minimum Asset Amount covenant as defined in the Loan Agreement, failed~~ to ~~timely pay~~$0 ~~interest payments due,~~ and ~~has violated other default provisions. Through the date of repayment and settlement~~$292,241, ~~the note balance due of $400~~respectively,~~000~~ ~~was~~and ~~reflected~~is asincluded ain ~~current~~accrued ~~liability~~expenses on the accompanying unaudited consolidated balance sheets ~~and interest accrued at 18% per annum~~.

~~In May~~Mercer ~~2023,~~Street ~~the~~Global ~~Company~~Opportunity ~~and~~Fund the Lender entered into a Debt Exchange and Release Agreement whereby the Company paid the Lender cash of $200,000 and issued the Lender 22,000,000 shares of Common Stock of the Company in exchange for settlement of the remaining $200,000 of the loan and all accrued interest amounting to $317,293, which were deemed paid in full (see Note 16). The 22,000,000 shares issued were valued at $132,000, or $0.006 per share, based on the quoted closing price of the Company’s common stock on the measurement date. In connection with the repayment and settlement of this debt, the Company recorded a gain from debt extinguishment of $385,293 consisting of a) $68,000 calculated as the different in the principal amount settled for shares of $200,000 and the fair value of the shares on the measurement date of $132,000, and b) the forgiveness of interest due of $317,293.Notes

On ~~June~~ 30March 14, ~~2023~~2022, the Company entered into an Original Issue Discount Promissory Note and ~~December~~Security ~~31,~~Agreement (the “March 2022, Note”) in the principal amount ~~due~~of ~~under~~$197,500 with ~~this~~Mercer Street Global Opportunity Fund, LLC (the “Investor”). The March 2022 Note ~~amounted~~was tofunded $0on March 14, 2022 and the Company received net proceeds of $~~400~~175,000 which is net of an original issue discount and investor legal fees of $22,500. ~~respectively~~The original issue discount was recorded as a debt discount to be amortized over the life of the March 2022 note. OnThe ~~June~~March ~~30,~~2022 Note matures 12 months ~~2023~~after issuance and ~~December~~bears 31interest at a rate of 3% per annum. At any time, the Company may prepay all or any portion of the principal amount of the March 2022, Note and any accrued and unpaid interest ~~payable~~without ~~under~~penalty. ~~this~~The March 2022 Note also creates a lien on and grants a priority security interest in all the Company’s assets. In connection with the March 2022 Note, the Company issued 823,529 shares of its common stock to the placement agent as a fee for the capital raise. The 823,529 shares of common stock issued were recorded as a debt discount of $12,963 based on the relative fair value method to be amortized over the life of the March 2022 Note. On September 30, 2023, the principal balance due on the March 2022 Note amounted to $0 and accrued interest payable amounted to $~~292~~0. On December 31,~~241~~ 2022, ~~respectively~~the principal balance due on the March 2022 Note amounted to $197,500 and isaccrued ~~included~~interest inpayable ~~accrued expenses~~amounted onto $4,756. In May 2023, the ~~accompanying~~March ~~unaudited~~2022 ~~consolidated~~Note ~~balance~~and ~~sheets~~all accrued interest due was paid in full (See Note 16).

~~Mercer~~On November 22, 2022, the Company entered into ~~Street~~a Promissory Note and Security Agreement (the “November 2022 Note”) in the principal amount of $65,000 with Mercer Street Global Opportunity Fund, ~~Notes~~LLC (the “Investor”). The November 2022 Note was funded on November 22, 2022 and the Company received net proceeds of $62,500 which is net of investor legal fees of $2,500. The legal fees were recorded as a debt discount to be amortized over the life of the November 2022 note. The November 2022 Note matures on August 22, 2023 and bears interest at a rate of 8% per annum. At any time, the Company may prepay all or any portion of the principal amount of the November 2022 Note and any accrued and unpaid interest without penalty. The November 2022 Note also creates a lien on and grants a priority security interest in all the Company’s assets. On September 30, 2023, the principal balance due on the November 2022 Note amounted to $0 and accrued interest payable amounted to $0. On December 31, 2022, the principal balance due on the November 2022 Note amounted to $65,000 and accrued interest payable amounted to $214. In May 2023, the November 2022 Note and all accrued interest due was paid in full (See Note 16).

On March 14, 2022, the Company entered into an Original Issue Discount Promissory Note and Security Agreement (the “March 2022 Note”) in the principal amount of $197,500 with Mercer Street Global Opportunity Fund, LLC (the “Investor”). The March 2022 Note was funded on March 14, 2022 and the Company received net proceeds of $175,000 which is net of an original issue discount and investor legal fees of $22,500. The original issue discount was recorded as a debt discount to be amortized over the life of the March 2022 note. The March 2022 Note matures 12 months after issuance and bears interest at a rate of 3% per annum. At any time, the Company may prepay all or any portion of the principal amount of the March 2022 Note and any accrued and unpaid interest without penalty. The March 2022 Note also creates a lien on and grants a priority security interest in all the Company’s assets. In connection with the March 2022 Note, the Company issued 823,529 shares of its common stock to the placement agent as a fee for the capital raise. The 823,529 shares of common stock issued were recorded as a debt discount of $12,963 based on the relative fair value method to be amortized over the life of the March 2022 Note. On June 30, 2023, the principal balance due on the March 2022 Note amounted to $197,500 and accrued interest payable amounted to $6,217. On December 31, 2022, the principal balance due on the March 2022 Note amounted to $197,500 and accrued interest payable amounted to $4,756. In May 2023, the March 2022 Note and all accrued interest due was paid in full (See Note 16).19

20C-BOND SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2023 (UNAUDITED)

~~C-BOND SYSTEMS,~~GS ~~INC.~~Capital ~~AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2023 (UNAUDITED)~~Debt

On ~~November~~ 22June 23, 2022, the Company entered into entered into a ~~Promissory~~Securities ~~Note~~Purchase ~~and~~Agreement ~~Security~~ (“Agreement”) with GS Capital Partners, LLC (“GS Capital”), pursuant to which a Promissory Note (the “~~November~~GS Capital June 2022 Note”) was made to GS Capital in the aggregate principal amount of $65195,000. The ~~with~~GS ~~Mercer~~Capital ~~Street~~June ~~Global~~2022 ~~Opportunity~~Note ~~Fund~~was purchased for $176,000, ~~LLC~~reflecting ~~(the~~an ~~“Investor”).~~original ~~The~~issuance ~~November~~discount ~~2022~~of ~~Note~~$19,000, and was funded on ~~November~~ 22June 24, 2022 (less legal and ~~the~~other administrative fees). The Company received net proceeds of $62148,~~500~~420. ~~which~~The isCompany ~~net~~further ofissued ~~investor~~GS ~~legal~~Capital a ~~fees~~total of $21,~~500~~750,000 commitment shares (“Commitment Shares”) as additional consideration for the purchase of the Note (See Note 9). ~~The~~Additionally, ~~legal~~the ~~fees~~GS ~~were~~Capital Note is convertible upon an event of default into common shares at an initial effective conversion ~~recorded~~price aswhich awas ~~debt~~lower ~~discount~~than tothe befair ~~amortized~~value ~~over~~of common shares based on the ~~life~~quoted closing price of the ~~November~~Company’s ~~2022~~common ~~note~~stock on the measurement date. Principal and interest payments shall be made in 10 installments of $21,060 each beginning on the 90th-day anniversary following the issue date and continuing thereafter each 30 days for nine months. The ~~November~~GS ~~2022~~Capital Note matures on12 ~~August~~months ~~22,~~after ~~2023~~issuance and bears interest at a rate of 8% per annum. AtGS Capital shall have the right at any time, ~~the~~following ~~Company~~an ~~may~~Event ~~prepay~~of ~~all~~Default to convert all or any ~~portion~~part of the outstanding and unpaid principal, ~~amount~~interest, penalties, and all other amounts under this Note at a conversion price of $0.011, subject to adjustment as defined in the ~~November~~GS Capital Note. The Company did not calculate a beneficial conversion feature since ~~2022~~the GS Capital Note ~~and~~is ~~any~~contingently ~~accrued~~convertible ~~and~~upon ~~unpaid~~default ~~interest~~on ~~without~~the ~~penalty~~GS Capital Note. ~~The~~As ~~November~~of December 31, 2022, ~~Note~~the ~~also~~Company ~~creates~~is anot ~~lien~~in default on ~~and~~this ~~grants~~note. In the event that following the Issue Date the closing trading price of the Company’s common stock is then being traded is below $0.011 per share for more than ten consecutive trading days, then the conversion price shall be equal to $0.004 per share. The GS Capital Note contains conversion limitations providing that a ~~priority~~holder ~~security~~thereof may not convert the Note to the extent ~~interest~~(but only to the extent) that, if after giving effect to such conversion, the holder or any of its affiliates would beneficially own in excess ~~all~~of 4.99% of the outstanding shares of the Company’s ~~assets~~common stock immediately after giving effect to such conversion or exercise. A Onholder ~~June~~may ~~30,~~increase ~~2023~~or decrease its beneficial ownership limitation upon notice to the Company provided that in no event such limitation exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice. Events of default include, amongst other items, failure to pay principal ~~balance~~or ~~due~~interest, onbankruptcy, delisting of the ~~November~~Company’s ~~2022~~stock, financial statement restatements, or if the Company effectuates a reverse split. Upon the occurrence of any event of default, the GS Capital Note ~~amounted~~shall become immediately and automatically due and payable and the Company shall pay to ~~$65~~GS Capital,~~000~~ in full satisfaction of its obligations hereunder, an amount ~~and~~equal to: (a) the then outstanding principal amount of this note plus (b) accrued and unpaid interest ~~payable~~on ~~amounted~~the unpaid principal amount of this note to $1the date of payment (the “mandatory prepayment date”) plus (y) default interest,~~495~~ if any, multiplied by 120%. On December 3115, 2022, the ~~principal~~Company ~~balance~~and GS Capital entered into a letter agreement to extend the due ondate of the ~~November~~GS Capital June 2022 ~~Note~~note ~~amounted~~by 60 days. Specifically, the maturity date of the GS Capital June 2022 note was extended to August 23, 2023 and the next payment due date was extended to February 28, 2023. Through December 31, 2022, the Company paid $6553,~~000~~512 of principal balance and ~~accrued~~during ~~interest~~the ~~payable~~nine months ~~amounted~~ended toSeptember 30, 2023, paid principal balance of $~~214~~79,488. InDuring April and May 2023, the ~~November~~Company ~~2022~~issued ~~Note~~21,371,481 ~~and~~shares ~~all~~of its common stock upon the conversion of principal of $62,000, accrued interest ~~due~~of ~~was~~$4,139, ~~paid~~and infees ~~full (See~~of ~~Note 16)~~$2,250.

On September 30, 2023, the principal balance due on the GS Capital Note and accrued interest payable amounted to $0 (See Note 16). On December 31, 2022, the principal balance due on the GS Capital ~~Debt~~Note amounted to $141,488 and accrued interest payable amounted to $7,471.

On ~~June~~ 23July 26, 2022, the Company ~~entered~~closed ~~into entered into~~ a Securities Purchase Agreement (“July 2022 Agreement”) with GS Capital ~~Partners~~, ~~LLC~~ ~~(“GS Capital”),~~ pursuant to which a Promissory Note (~~the~~ “GS Capital ~~June~~July 2022 Note”) was made to GS Capital in the aggregate principal amount of $195,000. The GS Capital ~~June~~July 2022 Note was purchased for $176,000, reflecting an original issuance discount of $19,000, and was funded on ~~June~~July 2428, 2022 (less legal and other administrative fees). The Company received net proceeds of $~~148~~158,~~420~~920. The Company further issued GS Capital a total of 12,~~750~~600,000 commitment shares (“~~Commitment~~July 2022 Commitment Shares”) as additional consideration for the purchase of the ~~Note~~July ~~(See~~2022 Note. 9)In addition, the Company issued 998,008 of its common stock to the placement agent as a fee for the capital raise, respectively. ~~Additionally~~The July Commitment Shares and the placement agent shares were recorded as a debt discount of $34,606 based on the relative fair value method to be amortized over the life of the Note. Additionally, the GS Capital July 2022 Note is convertible upon an event of default into common shares at an initial effective conversion price which was lower than the fair value of common shares based on the quoted closing price of the Company’s common stock on the measurement date. Principal and interest payments shall be made in 10 installments of $21,060 each beginning on the 90th-day anniversary following the issue date and continuing thereafter each 30 days for nine months. The GS Capital July 2022 Note matures 12 months after issuance and bears interest at a rate of 8% per annum. GS Capital shall have the right at any time following an Event of Default to convert all or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under ~~this~~the GS Capital July 2022 Note at a conversion price of $0.011, subject to adjustment as defined in the ~~GS Capital~~ Note. The Company did not calculate a beneficial conversion feature since the GS Capital July 2022 Note is contingently convertible upon a default on the GSJuly ~~Capital~~2022 Note. As of December 31, 2022, the Company is not in default on this note. In the event that following the Issue Date the closing trading price of the Company’s common stock is then being traded is below $0.011 per share for more than ten consecutive trading days, then the conversion price shall be equal to $0.004 per share. The GSJuly ~~Capital~~2022 Note contains conversion limitations providing that a holder thereof may not convert the Note to the extent (but only to the extent) that, if after giving effect to such conversion, the holder or any of its affiliates would beneficially own in excess of 4.99% of the outstanding shares of the Company’s common stock immediately after giving effect to such conversion or exercise. A holder may increase or decrease its beneficial ownership limitation upon notice to the Company provided that in no event such limitation exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice. Events of default include, amongst other items, failure to pay principal or interest, bankruptcy, delisting of the Company’s stock, financial statement restatements, or if the Company effectuates a reverse split. Upon the occurrence of any event of default, the GS Capital Note shall become immediately and automatically due and payable and the Company shall pay to GS Capital, in full satisfaction of its obligations hereunder, an amount equal to: (a) the then outstanding principal amount of this note plus (b) accrued and unpaid interest on the unpaid principal amount of this note to the date of payment (the “mandatory prepayment date”) plus (y) default interest, if any, multiplied by 120%. On December 15, 2022, the Company and GS Capital entered into a letter agreement to extend the due date of the GS Capital ~~June~~July 2022 note by 60 days. Specifically, the maturity date of the GS Capital ~~June~~July 2022 note was extended to ~~August~~September 2326, 2023 and the next payment due date was extended to February 28, 2023. Through December 31, 2022, the Company paid $5334,~~512~~120 of principal balance and during the ~~six~~nine months ended ~~June~~September 30, 2023, paid principal balance of $79160,~~488~~880. ~~During~~On ~~April~~September ~~and~~30, ~~May~~ 2023, the ~~Company~~principal ~~issued~~balance 21due on the GS Capital July 2022 Note and accrued interest payable amounted to $0. On December 31,~~371~~ 2022,~~481~~ ~~shares~~the ofprincipal ~~its~~balance ~~common~~due ~~stock~~on ~~upon~~ the ~~conversion~~GS ofCapital ~~principal~~July of2022 Note amounted to $62160,~~000, accrued~~880 and accrued interest ofpayable amounted to $46,~~139~~441. In May 2023, the GS Capital July 2022 Note and ~~fees~~all ofaccrued ~~$2,250~~interest due was paid in full (See Note 16).

On June 30, 2023, the principal balance due on the GS Capital Note and accrued interest payable amounted to $0 (See Note 16). On December 31, 2022, the principal balance due on the GS Capital Note amounted to $141,488 and accrued interest payable amounted to $7,471.20

21C-BOND SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2023 (UNAUDITED)

~~C-BOND~~On September 6, 2022, the Company closed a Securities ~~SYSTEMS~~Purchase Agreement (“September 2022 Agreement”) with GS Capital, ~~INC~~pursuant to which a Promissory Note (“September 2022 Note”) was made to GS Capital in the aggregate principal amount of $195,000. ~~AND~~The ~~SUBSIDIARIES~~September 2022 Note was purchased for $176,000, ~~NOTES~~reflecting TOan ~~CONSOLIDATED~~original ~~FINANCIAL~~issuance ~~STATEMENTS~~discount of $19,000, and was funded on September 6, 2022 (less legal and other administrative fees). ~~JUNE~~The Company received net proceeds of $158,920. The Company further issued GS Capital a total of 3,300,000 commitment shares (“September 2022 Commitment Shares”) as additional consideration for the purchase of the September 2022 Note. In addition, the Company issued 773,626 of its common stock to the placement agent as fee for the capital raise, respectively. The September Commitment Shares and the placement agent shares were recorded as a debt discount of $30,326 based on the relative fair value method to be amortized over the life of the Note. Additionally, the September 2022 Note is convertible into common shares upon an event of default at an initial effective conversion price which was lower than the fair value of common shares based on the quoted closing price of the Company’s common stock on the measurement date. Principal and interest payments shall be made in 9 installments of $23,400 each beginning on the 120th-day anniversary following the issue date and continuing thereafter each 30 days for eight months. The September 2022 Note matures 12 months after issuance and bears interest at a rate of 8% per annum. GS Capital shall have the right at any time following an Event of Default to convert all or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under the September 2022 Note at a conversion price of $0.009, subject to adjustment as defined in the Note. The Company did not calculate a beneficial conversion feature since the GS Capital July 2022 Note is contingently convertible upon a default on the September 2022 Note. As of December 31, 2022, the Company is not in default on this note. In the event that following the Issue Date the closing trading price of the Company’s common stock is then being traded below $0.009 per share for more than ten consecutive trading days, then the conversion price shall be equal to $0.0032 per share. The September 2022 Note contains conversion limitations providing that a holder thereof may not convert the Note to the extent (but only to the extent) that, if after giving effect to such conversion, the holder or any of its affiliates would beneficially own in excess of 4.99% of the outstanding shares of the Company’s common stock immediately after giving effect to such conversion or exercise. A holder may increase or decrease its beneficial ownership limitation upon notice to the Company provided that in no event such limitation exceeds 9.99%, and that any increase shall not be effective until the 61st day after such notice. On December 15, 2022, the Company and GS Capital entered into a letter agreement to extend the due date of the GS Capital September 2022 note by 60 days. Specifically, the maturity date of the GS Capital September 2022 note was extended to November 6, 2023 and the next payment due date was extended to March 6, 2023. In May 2023, the GS Capital September Note and all accrued interest due was paid in full (~~UNAUDITED~~See Note 16). On September 30, 2023, the principal balance due on the GS Capital September 2022 Note and accrued interest payable amounted to $0. On December 31, 2022, the principal balance due on the GS Capital September 2022 Note amounted to $195,000 and accrued interest payable amounted to $5,001.

~~On July~~In ~~26,~~connection ~~2022,~~with the ~~Company~~Letter ~~closed a Securities Purchase~~ Agreement ~~(“July~~dated December ~~2022~~15, ~~Agreement”) with GS Capital~~2022, ~~pursuant~~in order to ~~which a~~induce ~~Promissory Note (“~~GS Capital ~~July 2022 Note”) was made~~ to GSextend ~~Capital in~~ the ~~aggregate~~due ~~principal~~dates ~~amount~~ of ~~$195,000.~~the ~~The~~ GS Capital ~~July 2022 Note was purchased for $176~~Notes,~~000,~~ ~~reflecting~~the ~~an original issuance discount of $19,000, and was funded on July 28, 2022 (less legal and other administrative fees). The~~ Company ~~received net proceeds of $158,920. The Company further~~ issued ~~GS Capital a total of 2~~15,~~600~~000,000 ~~commitment~~ shares ~~(“July 2022 Commitment Shares”) as additional consideration for the purchase~~ of the ~~July~~ ~~2022 Note. In addition, the~~ Company’s ~~issued 998,008 of its~~ common stock ~~to the placement agent as fee for the capital raise, respectively~~. ~~The~~ ~~July~~These ~~Commitment Shares and the placement agent~~ shares were ~~recorded~~valued asat ~~a debt discount of~~ $34112,~~606~~500, ~~based~~or ~~on the relative fair value method to be amortized over the life of the Note~~$0.0075 ~~Additionally,~~per ~~the GS Capital July 2022 Note is convertible upon an event of default into~~ common ~~shares~~share, ~~at an initial effective conversion price which was lower than the fair value of common shares~~ based on the quoted closing price of the Company’s common stock on the measurement date. ~~Principal~~In ~~and~~connection ~~interest~~with ~~payments shall be made in 10 installments of $21,060 each beginning on~~ the ~~90th-day anniversary following the issue date and continuing thereafter each 30 days for nine months. The GS Capital July 2022 Note matures 12 months after~~ issuance ~~and bears interest at a rate~~ of 8%these per annum. GS Capital shall have the right at any time following an Event of Default to convert all or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under the GS Capital July 2022 Note at a conversion price of $0.011, subject to adjustment as defined in the Note. The Company did not calculate a beneficial conversion feature since the GS Capital July 2022 Note is contingently convertible upon a default on the July 2022 Note. As of December 31, 2022, the Company is not in default on this note. In the event that following the Issue Date the closing trading price of the Company’s common stock is then being traded is below $0.011 per share for more than ten consecutive trading days, then the conversion price shall be equal to $0.004 per share. The July 2022 Note contains conversion limitations providing that a holder thereof may not convert the Note to the extent (but only to the extent) that, if after giving effect to such conversion, the holder or any of its affiliates would beneficially own in excess of 4.99% of the outstanding shares of the Company’s common stock immediately after giving effect to such conversion or exercise. A holder may increase or decrease its beneficial ownership limitation upon notice to the Company provided that in no event such limitation exceeds 9.99%, ~~and~~during ~~that any increase shall not be effective until~~ the ~~61st~~year ~~day~~ended ~~after such notice. On~~ December ~~15, 2022, the Company and GS Capital entered into a letter agreement to extend the due date~~ of the GS Capital July 2022 note by 60 days. Specifically, the maturity date of the GS Capital July 2022 note was extended to September 26, 2023 and the next payment due date was extended to February 28, 2023. Through December 31, 2022, the Company ~~paid~~recorded ~~$34,120~~an ofinducement ~~principal balance~~expense ~~and during the six months ended June 30, 2023, paid principal balance~~ of $~~160~~112,~~880.~~500 Onwhich June 30, 2023, the principal balance due on the GS Capital July 2022 Note and accrued interest payable amounted to $0. On December 31, 2022, the principal balance due on the GS Capital July 2022 Note amounted to $160,880 and accrued interest payable amounted to $6,441. In May 2023, the GS Capital July 2022 Note and all accrued interest due was ~~paid~~included in ~~full~~loss ~~(See~~on ~~Note~~debt ~~16)~~extinguishment.

On September 6, 2022, the Company closed a Securities Purchase Agreement (“September 2022 Agreement”) with GS Capital, pursuant to which a Promissory Note (“September 2022 Note”) was made to GS Capital in the aggregate principal amount of $195,000. The September 2022 Note was purchased for $176,000, reflecting an original issuance discount of $19,000, and was funded on September 6, 2022 (less legal and other administrative fees). The Company received net proceeds of $158,920. The Company further issued GS Capital a total of 3,300,000 commitment shares (“September 2022 Commitment Shares”) as additional consideration for the purchase of the September 2022 Note. In ~~addition,~~May ~~the Company issued 773~~2023,~~626~~ ~~of its common stock to~~ the placement agent as fee for the capital raise, respectively. The September Commitment Shares and the placement agent shares were recorded as a debt discount of $30,326 based on the relative fair value method to be amortized over the life of the Note. Additionally, the September 2022 Note is convertible into common shares upon an event of default at an initial effective conversion price which was lower than the fair value of common shares based on the quoted closing price of the Company’s common stock on the measurement date. Principal and interest payments shall be made in 9 installments of $23,400 each beginning on the 120th-day anniversary following the issue date and continuing thereafter each 30 days for eight months. The September 2022 Note matures 12 months after issuance and bears interest at a rate of 8% per annum. GS Capital ~~shall~~ ~~have~~June ~~the right at any time following an Event of Default to convert all or any part of the outstanding and unpaid principal, interest, penalties, and all other amounts under the September~~ 2022 Note ~~at a conversion price of $0.009~~, ~~subject to adjustment as defined in~~ the ~~Note. The Company did not calculate a beneficial conversion feature since the~~ GS Capital July 2022 Note ~~is contingently convertible upon a default on the September 2022 Note. As of December 31~~, ~~2022,~~and the Company is not in default on this note. In the event that following the Issue Date the closing trading price of the Company’s common stock is then being traded is below $0.009 per share for more than ten consecutive trading days, then the conversion price shall be equal to $0.0032 per share. The September 2022 Note ~~contains~~ ~~conversion~~were ~~limitations~~paid providing that a holder thereof may not convert the Note to the extent (but only to the extent) that, if after giving effect to such conversion, the holder or any of its affiliates would beneficially own in ~~excess~~full ofwithout 4.99% of the outstanding shares of the Company’s common stock immediately after giving effect to such conversion or exercise. A holder may increase or decrease its beneficial ownership limitation upon notice to the Company provided that in no event such limitation exceeds 9.99%, and that any ~~increase~~ ~~shall~~default ~~not~~penalty be effective until the 61st day after such notice. On December 15, 2022, the Company and GS Capital entered into a letter agreement to extend the due date of the GS Capital September 2022 note by 60 days. Specifically, the maturity date of the GS Capital September 2022 note was extended to November 6, 2023 and the next payment due date was extended to March 6, 2023. In May 2023, the GS Capital September Note and all accrued interest due was paid in full (~~See~~see Note 16). On June 30, 2023, the principal balance due on the GS Capital September 2022 Note and accrued interest payable amounted to $0. On December 31, 2022, the principal balance due on the GS Capital September 2022 Note amounted to $195,000 and accrued interest payable amounted to $5,001.

22Other Notes Payable

~~C-BOND~~On May 10, 2021, the Company entered into a Loan ~~SYSTEMS~~and Security Agreement (the “Loan Agreement”) and a Secured Promissory Note (the “Promissory Note”) in the amount of $500,000 ~~INC~~with a lender. ~~AND~~The ~~SUBSIDIARIES NOTES~~Promissory TONote ~~CONSOLIDATED~~accrued ~~FINANCIAL~~interest ~~STATEMENTS~~at 8% per annum, compounded annually, and all outstanding principal and ~~JUNE~~accrued 30interest was due and payable of May 10, 2023. The Company’s obligations under the Loan Agreement and the Promissory Note were secured by a second priority security interest in substantially all of the Company’s assets (~~UNAUDITED~~the “Collateral”). The Loan Agreement and Promissory Note contained customary representations, warranties, and covenants, including certain restrictions on the Company’s ability to incur additional debt or create liens on its property. The Loan Agreement and the Promissory Note also provided for certain events of default, including, among other things, payment defaults, breaches of representations and warranties and bankruptcy or insolvency proceedings, the occurrence of which, after any applicable cure period, would permit Lender, among other things, to accelerate payment of all amounts outstanding under the Loan Agreement and the Promissory Note, as applicable, and to exercise its remedies with respect to the Collateral. On December 31, 2022, accrued interest payable under this Promissory Note amounted to $65,863 and is included in accrued expenses on the accompanying unaudited consolidated balance sheet. On December 31, 2022, the principal amount due under this Promissory Note amounted to $500,000. In May 2023, this Promissory Note and all accrued interest was paid in full (See Note 16).

~~In connection~~On ~~with~~July ~~the Letter Agreement dated December 15~~22, ~~2022~~2021, in ~~order~~connection towith ~~induce GS Capital to extend~~ the ~~due dates~~ acquisition of ~~the~~Mobile ~~GS Capital Notes~~Tint, the Company ~~issued~~assumed ~~15,000,000~~vehicle ~~shares~~and ofequipment loans in the ~~Company’s~~amount ~~common~~of ~~stock~~$95,013. These ~~shares~~loans ~~were~~bear ~~valued~~interest at ~~$112,500,~~rates orranging $0from 6.~~0075~~79% ~~per common~~to ~~share,~~8.24% ~~based~~and onare ~~the~~payable ~~quoted~~monthly ~~closing~~through ~~price~~April ~~of the Company’s common stock on the measurement date~~2025. InOn ~~connection~~September ~~with the issuance of these shares~~30, ~~during~~2023 ~~the~~and ~~year ended~~ December 31, 2022, ~~the~~notes ~~Company~~payable ~~recorded~~related anto ~~inducement~~these vehicle ~~expense~~and ofequipment ~~$112,500~~loans ~~which~~amounted ~~was~~to ~~included~~$12,452 ~~in loss~~and on$39,513, ~~debt extinguishment~~respectively.

~~In May 2023, the GS Capital June 2022 Note, the GS Capital July 2022 Note, and the September 2022 Note were paid in full without any default penalty (see Note 16).~~21

~~Other~~C-BOND SYSTEMS, INC. AND SUBSIDIARIES ~~Notes~~NOTES ~~Payable~~TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2023 (UNAUDITED)

On ~~May~~ 10November 8, ~~2021~~2022, the Company entered into a ~~Loan~~Promissory ~~and~~Note ~~Security Agreement~~ (the “~~Loan~~November ~~Agreement~~2022 Note”) ~~and~~with a ~~Secured~~lender ~~Promissory~~investor ~~Note~~ (the “~~Promissory~~Private ~~Note~~Investor”) in the principal amount of $~~500~~200,000 ~~with~~and areceived ~~lender~~net proceeds of $200,000. The ~~Promissory~~November 2022 Note ~~accrued~~bears interest at a rate of 8% per annum, ~~compounded annually,~~ and all outstanding principal and accrued and unpaid interest ~~was~~is due ~~and~~on ~~payable~~November ~~of May 10~~8, ~~2023~~2024. ~~The~~At ~~Company’s~~any ~~obligations~~time, ~~under~~ the ~~Loan~~Company ~~Agreement~~may ~~and~~prepay ~~the~~all ~~Promissory~~or ~~Note~~any ~~were~~portion ~~secured by a second priority security interest in substantially all~~ of the ~~Company’s~~principal ~~assets~~amount (of the ~~“Collateral”).~~November ~~The~~2022 ~~Loan~~Note ~~Agreement~~ and ~~Promissory~~any ~~Note~~accrued ~~contained customary representations, warranties,~~ and ~~covenants, including~~unpaid ~~certain~~interest ~~restrictions~~without ~~on the Company’s ability to incur additional debt or create liens on its property~~penalty. ~~The~~As ~~Loan~~security ~~Agreement and the Promissory Note also provided~~ for ~~certain events of default, including, among other things,~~ payment ~~defaults, breaches~~ of ~~representations and~~the ~~warranties~~principal and ~~bankruptcy~~interest on ~~or insolvency proceedings,~~ the ~~occurrence~~November of2022 ~~which~~Note, ~~after~~the ~~any~~Company ~~applicable~~and ~~cure~~the ~~period,~~lender ~~would~~Investor ~~permit~~previously ~~Lender, among~~entered ~~other~~into ~~things,~~that tocertain ~~accelerate payment of all amounts outstanding under the~~ Loan ~~Agreement~~ and ~~the~~Security ~~Promissory~~Agreement ~~Note~~dated May 10, ~~as applicable~~2021, ~~and~~ towhich ~~exercise~~is ~~its~~incorporated ~~remedies~~into ~~with~~the ~~respect~~November to2022 ~~the Collateral~~Note. On December 31, 2022, accrued interest payable under this Promissory ~~Note~~ Note amounted to $652,~~863~~367 and is included in accrued expenses on the accompanying unaudited consolidated balance ~~sheet~~sheets. On December 31, 2022, the principal amount due under this Promissory Note amounted to $~~500~~200,000. In May 2023, ~~this~~the ~~Promissory~~November 2022 Note and all ~~accrued~~unpaid interest was paid in full (See Note 16).

On ~~July~~ 22April 4, ~~2021~~2023, inthe ~~connection~~Company ~~with~~entered into a Secured Promissory Note (the ~~acquisition~~“April of2023 ~~Mobile~~Note”) ~~Tint,~~in the ~~Company~~amount ~~assumed~~of ~~vehicle~~$175,000 ~~and~~with ~~equipment~~the ~~loans~~Private inInvestor ~~the~~and ~~amount~~received net proceeds of $95175,~~013.~~000 ~~These~~on ~~loans~~April ~~bear~~6, 2023. The Note accrued interest at ~~rates~~8% ~~ranging~~per ~~from~~annum, ~~6.79%~~compounded toannually, ~~8.24%~~and all outstanding principal and ~~are~~accrued ~~payable~~interest ~~monthly~~is due ~~through~~and payable of April 4, 2025. OnAt ~~June~~any 30time, ~~2023~~the ~~and~~Company ~~December 31,~~may ~~2022,~~prepay ~~notes~~all ~~payable~~or ~~related~~any toportion ~~these~~of ~~vehicle~~the ~~and~~principal ~~equipment~~amount ~~loans~~of ~~amounted~~the toNote ~~$19,933~~and any accrued and ~~$39~~unpaid interest without penalty. In May 2023,~~513,~~ ~~respectively~~the April 2023 Note was paid in full (See Note 16).

~~On November~~During ~~8, 2022,~~ the ~~Company~~three ~~entered~~months ~~into~~ended aSeptember ~~Promissory~~30, ~~Note~~2023, in ~~(the~~connection ~~“November 2022 Note”)~~ with ~~a lender investor (~~the ~~“Private Investor”)~~acquisition ~~in the principal amount~~ of ~~$200,000 and received net proceeds of $200,000. The November 2022 Note bears interest at~~ a ~~rate~~vehicle ~~of 8% per annum~~ and ~~all~~an ~~outstanding~~air ~~principal~~conditioner ~~and accrued and unpaid interest is due on November 8~~unit, ~~2024. At any time,~~ the Company ~~may~~ ~~prepay~~entered ~~all~~into orthree ~~any~~vehicle ~~portion~~and ofequipment loans in the ~~principal~~ amount of ~~the November 2022 Note and any accrued and unpaid interest without penalty~~$117,721. As ~~security~~These ~~for~~loans ~~payment~~bear ~~of the principal and~~ interest onat ~~the~~rates ~~November~~ranging ~~2022~~from ~~Note, the Company and the lender Investor previously entered into that certain Loan and Security Agreement dated May~~ 10~~, 2021, which is incorporated into the November 2022 Note~~.0% ~~On December 31, 2022, accrued interest payable under this Promissory Note amounted~~ to ~~$2,367,~~35.1% and isare ~~included~~payable inmonthly ~~accrued~~through ~~expenses~~September ~~on the accompanying unaudited consolidated balance sheets~~2028. On ~~December~~September 3130, ~~2022~~2023, ~~the~~notes ~~principal~~payable ~~amount~~related ~~due~~to ~~under~~the ~~this~~vehicle ~~Promissory~~and ~~Note~~equipment loans amounted to $~~200~~110,~~000~~236. ~~In May 2023, the November 2022 Note and all unpaid interest was paid in full (See Note 16).~~

23For the nine months ended September 30, 2023 and 2022, amortization of debt discounts related to notes payable amounted to $93,448 and $58,095, respectively, which has been included in interest expense on the accompanying unaudited consolidated statements of operations.

~~C-BOND SYSTEMS,~~PPP ~~INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2023 (UNAUDITED)~~Loan

On April 428, ~~2023~~2020, the Company entered into a Paycheck ~~Secured~~Protection Program Promissory Note (the “~~April~~PPP ~~2023~~ Note”) inwith ~~the~~respect ~~amount~~to a loan of $~~175~~156,~~000~~200 ~~with~~ (the ~~Private~~“PPP ~~Investor~~Loan”) from ~~and~~Comerica ~~received~~Bank. ~~net~~The ~~proceeds~~PPP Loan was obtained pursuant to the Paycheck Protection Program (the “PPP”) of ~~$175~~the Coronavirus Aid,~~000~~ Relief, onand ~~April~~Economic 6,Security ~~2023~~Act (the “CARES act”) administered by the U.S. Small Business Administration (“SBA”). The ~~Note~~PPP ~~accrued~~Loan matures on April 28, 2022 and bears interest at 8a rate of 1.00% per annum. The PPP Loan is payable in 18 equal monthly payments of approximately $8,900 ~~compounded~~commencing ~~annually~~November 1, 2020. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. ~~and~~The ~~all~~Company ~~outstanding~~may ~~principal~~apply ~~and~~to ~~accrued~~have ~~interest~~the isloan ~~due~~forgiven ~~and~~pursuant ~~payable~~to the terms of ~~April~~the 4,PPP ~~2025~~if certain criteria are met. AtThe ~~any~~Company ~~time~~applied for forgiveness of its PPP Loan, and on November 4, 2021, the Company ~~may~~was ~~prepay~~notified ~~all~~that orthe ~~any portion~~Small Business Administration forgave $95,000 of the principal loan amount and $1,442 of interest. As of November 4, 2021, the ~~Note~~remaining ~~and~~principal ~~any~~balance ~~accrued~~of the loan was $61,200 and the ~~unpaid~~remaining accrued interest ~~without~~balance ~~penalty~~was $935. InDuring ~~May~~the ~~2023~~year ended December 31, 2022, the ~~April~~Company repaid the PPP Loan principal of $30,107. On September 30, 2023 ~~Note~~and ~~was~~December 31, 2022, the principal amount due under the PPP Loan amounted to $18,823. As of September ~~paid~~30, in2023 ~~full~~and ~~(See~~December ~~Note~~31, ~~16)~~2022, accrued interest payable amounted to $311 and $170, respectively.

~~For the~~On ~~six~~September ~~months ended June~~ 30, 2023 ~~and 2022~~, ~~amortization~~future annual maturities of ~~debt discounts related to~~ notes payable ~~amounted~~are toas ~~$93,295 and $110,344, respectively, which has been included in interest expense on the accompanying unaudited consolidated statements of operations.~~follows:

PPP Loan

September 30,	Amount
2024	$	81,642
2025		38,228
2026		6,506
2027		7,191
2028		7,944
Total notes payable on September 30, 2023	$	141,511

On April 28, 2020, the Company entered into a Paycheck Protection Program Promissory Note (the “PPP Note”) with respect to a loan of $156,200 (the “PPP Loan”) from Comerica Bank. The PPP Loan was obtained pursuant to the Paycheck Protection Program (the “PPP”) of the Coronavirus Aid, Relief, and Economic Security Act (the “CARES act”) administered by the U.S. Small Business Administration (“SBA”). The PPP Loan matures on April 28, 2022 and bears interest at a rate of 1.00% per annum. The PPP Loan is payable in 18 equal monthly payments of approximately $8,900 commencing November 1, 2020. The PPP Loan may be prepaid at any time prior to maturity with no prepayment penalties. The Company may apply to have the loan forgiven pursuant to the terms of the PPP if certain criteria are met. The Company applied for forgiveness of its PPP Loan, and on November 4, 2021, the Company was notified that the Small Business Administration forgave $95,000 of the principal loan amount and $1,442 of interest. As of November 4, 2021, the remaining principal balance of the loan was $61,200 and the remaining accrued interest balance was $935. During the year ended December 31, 2022, the Company repaid PPP Loan principal of $30,107. On June 30, 2023 and December 31, 2022, the principal amount due under the PPP Loan amounted to $18,823. As of June 30, 2023 and December 31, 2022, accrued interest payable amounted to $264 and $170, respectively.22

~~On June~~C-BOND 30SYSTEMS, ~~2023,~~INC. AND ~~future~~SUBSIDIARIES NOTES ~~annual~~TO ~~maturities~~CONSOLIDATED ofFINANCIAL ~~notes~~STATEMENTS SEPTEMBER ~~payable~~30, ~~are as follows:~~2023 (UNAUDITED)

June 30,	Amount
2024	$	33,209
2025		5,547
Total notes payable on June 30, 2023	$	38,756

NOTE 9 – SHAREHOLDERS’ DEFICIT

~~NOTE 9~~Preferred ~~– SHAREHOLDERS’ DEFICIT~~Stock

Series B Preferred Stock

~~Series~~On December 12, 2019, the Company filed an Amendment to its Articles of Incorporation to designate a series of preferred stock, the Series B Convertible Preferred Stock (the “Series B”), with the Secretary of State of the State of Colorado. The Certificate of Designations established 100,000 shares of the Series B, par value $0.10, having such designations, preferences, and rights as determined by the Company’s Board of Directors in its sole discretion, in accordance with the Company’s Articles of Incorporation and Amended and Restated Bylaws. The Certificate of Designations became effective with the State of Colorado upon filing.

~~On December~~The ~~12,~~Series ~~2019,~~B ~~the~~ranks ~~Company~~senior ~~filed~~with anrespect ~~Amendment~~ to ~~its~~dividends and ~~Articles~~right of ~~Incorporation~~liquidation towith ~~designate~~the aCompany’s ~~series~~common ~~of preferred~~ stock, ~~the~~and ~~Series B~~junior ~~Convertible~~to ~~Preferred~~all ~~Stock~~existing ~~(the~~and ~~“Series~~future ~~B”),~~indebtedness ~~with the Secretary~~ of ~~State of~~ the ~~State of Colorado~~Company. The ~~Certificate of~~ ~~Designations~~Series ~~established~~B ~~100,000~~has ~~shares~~a ofstated ~~the~~value ~~Series~~per B,share ~~par~~of ~~value~~ $~~0.10~~1, ~~having such designations~~000, ~~preferences,~~subject ~~and~~to ~~rights~~adjustment as ~~determined by~~provided ~~the Company’s Board of Directors~~ in ~~its sole discretion, in accordance with~~ the ~~Company’s~~Certificate ~~Articles~~ of ~~Incorporation~~Designations ~~and~~(the “Stated ~~Amended~~Value”), and ~~Restated~~a ~~Bylaws.~~dividend ~~The~~rate ~~Certificate~~ of ~~Designations~~2% ~~became~~per ~~effective~~annum ~~with~~of the ~~State~~Stated ~~of Colorado upon filing~~Value.

The Series B ~~ranks~~is ~~senior~~subject ~~with~~to ~~respect~~redemption to(at Stated Value, plus any accrued, but unpaid dividends ~~and~~(the ~~right~~“Liquidation ofValue”) ~~liquidation~~by ~~with~~the Company no later than three years after a Deemed Liquidation Event and at the Company’s ~~common~~option ~~stock~~after ~~and~~one ~~junior~~year from the issuance date of the Series B, subject to ~~all~~a ~~existing~~ten-day notice ~~and~~(to ~~future~~allow ~~indebtedness~~holder conversion). A “Deemed Liquidation Event” will mean: (a) a merger or consolidation in which the Company is a constituent party or a subsidiary of the Company. ~~The~~is ~~Series~~a Bconstituent ~~has~~party and the Company issues shares of its capital stock pursuant to such merger or consolidation, except any such merger or consolidation involving the Company or a ~~stated~~subsidiary ~~value~~in ~~per~~which ~~share~~the shares of capital $1stock of the Company outstanding immediately prior to such merger or consolidation continue to represent,~~000~~ or are converted into or exchanged for shares of capital stock that represent, ~~subject~~immediately tofollowing ~~adjustment~~such asmerger ~~provided~~or inconsolidation, at least a majority, by voting power, of the capital stock of the surviving or resulting corporation or, if the surviving or resulting corporation is a wholly-owned ~~Certificate~~subsidiary of ~~Designations~~another (corporation immediately following such merger or consolidation, the ~~“Stated~~parent ~~Value”~~corporation of such surviving or resulting corporation; or (b) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Company or any subsidiary of the Company of all or substantially all the assets of the Company and its subsidiaries taken as a whole, ~~dividend~~or ~~rate~~the sale or disposition (whether by merger or otherwise) of 2%one ~~per~~or ~~annum~~more subsidiaries of the ~~Stated~~Company ~~Value~~if substantially all of the assets of the Company and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Company.

24The Series B is convertible into common stock at the option of a holder or if the closing price of the common stock exceeds 400% of the Conversion Price for a period of twenty consecutive trading days, at the option of the Company. Conversion Price means a price per share of the common stock equal to 100% of the lowest daily volume weighted average price of the common stock during the two years preceding or subsequent two years following the Issuance Date, subject to adjustment as otherwise provided in the Certificate of Designations (the “Conversion Price”).

~~C-BOND SYSTEMS,~~In ~~INC.~~the ~~AND~~event ~~SUBSIDIARIES NOTES~~of TOa ~~CONSOLIDATED~~conversion ~~FINANCIAL~~of ~~STATEMENTS JUNE~~any 30Series B, the ~~2023~~Company shall issue to the holder a number of shares of common stock equal to the sum of the Stated Value plus accrued but unpaid ~~(UNAUDITED)~~dividends multiplied by the number of shares of Series B Preferred Stock being converted divided by the Conversion Price.

~~The Series~~Upon Bliquidation isof ~~subject to redemption (at Stated Value, plus any accrued, but unpaid dividends (~~the ~~“Liquidation Value”) by the~~ Company ~~no later than three years~~ after ~~a Deemed Liquidation Event and at the Company’s option after one year from the issuance~~payment ~~date of the Series B, subject to a ten-day notice (to allow holder conversion). A “Deemed Liquidation Event” will mean: (a) a merger~~ or ~~consolidation~~provision infor ~~which~~payment ~~the~~of ~~Company~~liabilities ~~is a constituent party or a subsidiary~~ of the Company ~~is a constituent party~~ and ~~the~~after ~~Company issues~~payment ~~shares of its capital stock pursuant to such merger~~ or ~~consolidation,~~provision ~~except~~for any ~~such~~liquidation ~~merger~~preference orpayable ~~consolidation~~to ~~involving~~ the ~~Company~~holders orof aany ~~subsidiary~~preferred instock ~~which~~ranking ~~the~~senior ~~shares~~to ~~of capital stock of~~ the ~~Company~~Series ~~outstanding~~B ~~immediately~~but prior to ~~such~~any ~~merger~~distribution ~~or consolidation continue~~ to ~~represent,~~the orholders ~~are~~of ~~converted~~Common ~~into~~Stock or ~~exchanged~~preferred ~~for shares of capital~~ stock ~~that represent, immediately following such merger or consolidation,~~ atranking ~~least~~junior aupon ~~majority,~~liquidation byto ~~voting power, of~~ the ~~capital~~Series ~~stock of the surviving or resulting corporation or~~B, if the ~~surviving~~holders ~~or resulting corporation is a wholly-owned subsidiary~~ of ~~another~~Series ~~corporation~~B ~~immediately~~will ~~following~~be ~~such~~entitled ~~merger~~to orbe ~~consolidation,~~paid ~~the~~out ~~parent corporation~~ of ~~such surviving or resulting corporation; or (b)~~ the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Company or any subsidiary of the Company of all or substantially all the assets of the Company ~~and~~available ~~its~~for ~~subsidiaries~~distribution ~~taken~~to asits astockholders ~~whole,~~an oramount ~~the~~with ~~sale~~respect orto ~~disposition~~each ~~(whether~~share ~~by merger or otherwise)~~ of ~~one~~Series orB ~~more~~equal subsidiaries of the Company if substantially all of the assets of the Company and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to ~~a wholly owned subsidiary of~~ the ~~Company~~Liquidation Value.

The Series B ishas ~~convertible~~voting ~~into~~rights ~~common~~per ~~stock~~Series atB ~~the~~Share equal ~~option~~to ~~of a holder or if~~ the ~~closing~~Liquidation ~~price~~Value ofper ~~the~~share, ~~common~~divided ~~stock~~by ~~exceeds 400% of~~ the Conversion ~~Price~~ ~~for a period of twenty consecutive trading days~~Price, atmultiplied ~~the~~by ~~option~~fifty ~~of the Company~~(50). ~~Conversion~~Subject ~~Price means a price per share of the common stock equal~~ to ~~100%~~applicable ofColorado law, the ~~lowest~~holders ~~daily volume weighted average price~~ of ~~the~~Series ~~common~~B ~~stock~~will ~~during~~have ~~the~~functional ~~two~~voting ~~years~~control ~~preceding or subsequent two years following the Issuance Date, subject to adjustment as otherwise provided~~ in ~~the~~situations ~~Certificate~~requiring ofshareholder ~~Designations (the “Conversion Price”)~~vote.

InThese Series B preferred share issuances with redemption provisions that permit the ~~event~~issuer ofto asettle ~~conversion~~in ofeither ~~any~~cash ~~Series~~or Bcommon stock, at the ~~Company~~option ~~shall~~of ~~issue~~the issuer, were evaluated to determine whether temporary or permanent equity classification on the ~~holder~~consolidated abalance ~~number~~sheet ofwas ~~shares~~appropriate. As per the terms of the ~~common~~Series B preferred stock ~~equal~~agreements, toSeries B preferred stock is redeemable for cash and other assets on the ~~sum~~occurrence of a deemed liquidation event. A deemed liquidation event includes a change of control which is not in the ~~Stated~~Company’s ~~Value~~control. ~~plus~~As ~~accrued~~such, ~~but~~since Series ~~unpaid~~B ~~dividends~~preferred ~~multiplied~~stock byis redeemable upon the ~~number~~occurrence of ~~shares~~an ofevent ~~Series~~that Bis ~~Preferred~~not ~~Stock~~within ~~being~~the ~~converted divided~~Company’s bycontrol, the ~~Conversion~~Series ~~Price~~B preferred stock is classified as temporary equity.

Upon liquidation of the Company after payment or provision for payment of liabilities of the Company and after payment or provision for any liquidation preference payable to the holders of any preferred stock ranking senior to the Series B but prior to any distribution to the holders of Common Stock or preferred stock ranking junior upon liquidation to the Series B, the holders of Series B will be entitled to be paid out of the assets of the Company available for distribution to its stockholders an amount with respect to each share of Series B equal to the Liquidation Value.23

~~The Series~~C-BOND ~~B has voting rights per Series B Share equal to the Liquidation Value per share~~SYSTEMS, ~~divided~~INC. AND bySUBSIDIARIES NOTES ~~the~~TO ~~Conversion~~CONSOLIDATED ~~Price,~~FINANCIAL ~~multiplied by~~STATEMENTS ~~fifty~~SEPTEMBER ~~(50). Subject to applicable Colorado law~~30, ~~the holders of Series B will have functional voting control in situations requiring shareholder~~2023 ~~vote.~~(UNAUDITED)

~~These Series~~The BCompany ~~preferred~~concluded ~~share issuances with redemption provisions~~ that ~~permit~~ the ~~issuer~~Series toB ~~settle~~Preferred Stock inrepresented ~~either~~an ~~cash~~equity orhost ~~common~~and, ~~stock~~therefore, at the ~~option~~ redemption feature of the ~~issuer,~~Series ~~were~~B ~~evaluated~~Preferred toStock ~~determine~~was ~~whether~~not ~~temporary~~considered orto ~~permanent~~be ~~equity~~clearly and ~~classification~~closely onrelated to the ~~consolidated~~associated ~~balance~~equity ~~sheet was~~host ~~appropriate~~instrument. AsHowever, ~~per~~ the ~~terms~~redemption offeatures ~~the~~did ~~Series~~not Bmeet ~~preferred~~the ~~stock~~net ~~agreements,~~settlement ~~Series~~criteria of Ba ~~preferred~~derivative ~~stock~~and, istherefore, ~~redeemable~~were ~~for~~not ~~cash~~considered ~~and~~embedded ~~other assets~~derivatives onthat ~~the~~required ~~occurrence~~bifurcation. ofThe aCompany ~~deemed~~also ~~liquidation~~concluded ~~event.~~that Athe conversion ~~deemed~~rights ~~liquidation~~under ~~event~~the ~~includes~~Series aB ~~change~~Preferred ofStock ~~control~~were ~~which~~clearly isand ~~not~~closely inrelated to the ~~Company’s control.~~equity Ashost ~~such~~instrument. Accordingly, ~~since~~the conversion ~~Series~~rights Bfeature ~~preferred~~on ~~stock~~the isSeries ~~redeemable~~B ~~upon~~Preferred ~~the~~Stock ~~occurrence~~were ofnot considered an ~~event~~embedded derivative that isrequired ~~not~~bifurcation. ~~within~~The ~~the Company’s~~conversion ~~control,~~feature of the Series B ~~preferred~~Preferred ~~stock~~Stock isat ~~classified~~the astime ~~temporary~~of ~~equity~~issuance was determined to be beneficial on the commitment date.

~~The Company~~On ~~concluded~~January ~~that~~6, 2022, the ~~Series~~Board Bof ~~Preferred~~Directors ~~Stock~~of the ~~represented~~Company anagreed ~~equity~~to ~~host~~satisfy ~~and~~$278,654 ~~therefore,~~of ~~the~~accrued ~~redemption~~compensation ~~feature~~owed ofto ~~the~~its ~~Series~~executive ~~B Preferred~~officers ~~Stock~~(collectively, ~~was~~the ~~not~~“Management”) as ~~considered~~of toDecember be31, ~~clearly~~2021 and ~~closely~~included ~~related~~in toaccrued compensation on the ~~associated~~accompanying ~~equity~~unaudited ~~host~~consolidated ~~instrument~~balance sheet. ~~However,~~Management ~~the redemption~~agreed ~~features~~to ~~did~~accept ~~not~~278 ~~meet~~shares of the ~~net~~Company’s ~~settlement~~Series ~~criteria~~B ofconvertible apreferred ~~derivative~~stock ~~and,~~in ~~therefore,~~settlement ~~were~~of ~~not~~this ~~considered~~accrued ~~embedded derivatives that required bifurcation~~compensation. The ~~Company also concluded that the~~ conversion feature ~~rights~~of ~~under~~ the Series B Preferred Stock ~~were~~at ~~clearly~~the ~~and~~time ~~closely~~of ~~related to~~issuance ~~the~~was ~~equity~~determined ~~host~~to ~~instrument.~~be ~~Accordingly,~~beneficial on the ~~conversion~~commitment ~~rights~~date. ~~feature~~Because on the Series B Preferred Stock ~~were~~was ~~not~~perpetual ~~considered~~with anno ~~embedded derivative~~stated ~~that~~maturity ~~required~~date, ~~bifurcation.~~and ~~The~~the ~~conversion~~conversions ~~feature~~could ofoccur ~~the~~any ~~Series~~time Bfrom ~~Preferred~~the ~~Stock~~date atof issuance, the Company ~~time~~immediately ofrecorded ~~issuance~~non-cash ~~was~~stock-based ~~determined~~compensation of $957,556 related to be the beneficial onconversion feature arising from the issuance ~~commitment~~of ~~date~~Series B Preferred Stock.

25158 Series B Preferred Stock vested on May 1, 2021 and 842 shall vest on May 1, 2024. By mutual agreement between the parties, the vesting date of previously granted Series B Preferred stock was extended through May 2024.

~~C-BOND SYSTEMS~~On January 17, ~~INC.~~2023, ~~AND~~the ~~SUBSIDIARIES~~Board of Directors of ~~NOTES~~the TOCompany ~~CONSOLIDATED~~agreed ~~FINANCIAL~~to ~~STATEMENTS JUNE~~satisfy 30$144,000 ~~2023~~ of accrued compensation owed to its executive officers (~~UNAUDITED~~collectively, the “Management”) which, as of December 31, 2022 was included in accrued compensation on the accompanying unaudited consolidated balance sheet. Management agreed to accept 144 shares of the Company’s Series B convertible preferred stock in settlement of this accrued compensation. The beneficial conversion feature of the Series B Preferred Stock at the time of issuance was determined to be deminimis on the commitment date.

~~On January~~During 6,the ~~2022,~~nine ~~the~~months ~~Board~~ended ofSeptember ~~Directors~~30, of2023 and 2022, the Company ~~agreed~~accrued todividends ~~satisfy~~of $~~278~~16,~~654~~996 ofand ~~accrued compensation owed to its executive officers (collectively~~$14,892, ~~the “Management”) as of December 31~~respectively, ~~2021~~which ~~and~~was included in ~~accrued compensation on the accompanying unaudited consolidated balance sheet. Management agreed to accept 278 shares of the Company’s~~ Series B convertible preferred stock ~~in settlement~~ ~~of this accrued compensation. The conversion feature of the Series B Preferred Stock at the time of issuance was determined to be beneficial~~ on the ~~commitment~~accompanying ~~date.~~unaudited ~~Because~~consolidated ~~the~~balance Series B Preferred Stock was perpetual with no stated maturity date, and the conversions could occur any time from the date of issuance, the Company immediately recorded non-cash stock-based compensation of $957,556 related to the beneficial conversion feature arising from the issuance of Series B Preferred Stocksheets.

~~158~~ As of September 30, 2023, the net Series B Preferred Stock ~~vested~~balance onwas ~~May~~ $1,198,197, ~~2021~~which ~~and~~includes ~~842~~stated ~~shall~~value ~~vest~~of ~~on May~~ $1,144,624 ~~2024~~and accrued dividends payable of $53,573. ByAs ~~mutual~~of ~~agreement~~December ~~between~~31, 2022, the ~~parties~~net Series B Preferred Stock balance was $1,037,201, ~~the~~which ~~vesting date~~includes stated value of ~~previously~~$1,000,624 ~~granted~~and accrued dividends payable of $36,577. The net Series B Preferred ~~stock~~Stock ~~was~~balance ~~extended~~is ~~through~~included ~~May~~on ~~2024~~the accompanying unaudited consolidated balance sheets.

On January 17, 2023, the Board of Directors of the Company agreed to satisfy $144,000 of accrued compensation owed to its executive officers (collectively, the “Management”) which, as of December 31, 2022 was included in accrued compensation on the accompanying unaudited consolidated balance sheet. Management agreed to accept 144 shares of the Company’s Series BC ~~convertible preferred stock in settlement of this accrued compensation. The beneficial conversion feature of the Series B~~ Preferred Stock ~~at the time of issuance was determined to be deminimis on the commitment date.~~

~~During~~ On August 20, 2020, the ~~six~~Company ~~months~~filed ~~ended~~an ~~June~~Amendment to 30its Articles of Incorporation to designate a series of preferred stock, ~~2023~~the ~~and~~Series ~~2022~~C Convertible Preferred Stock (the “Series C”), with the ~~Company~~Secretary ~~accrued~~of ~~dividends~~State of ~~$11~~the State of Colorado. The Certificate of Designations established 100,~~226~~000 ~~and~~shares of the Series C, par value $90.10,~~847~~ having such designations, ~~respectively~~preferences, ~~which~~and ~~was~~rights ~~included~~as determined by the Company’s Board of Directors in its sole ~~Series~~discretion, Bin ~~convertible~~accordance ~~preferred~~with ~~stock~~the onCompany’s Articles of Incorporation and Amended and Restated Bylaws. The Certificate of Designations became effective with the ~~accompanying~~State ~~unaudited~~of ~~consolidated~~Colorado ~~balance~~upon ~~sheets~~filing.

~~As of~~The ~~June~~Series ~~30,~~C ~~2023,~~ranks ~~the~~senior ~~net~~with ~~Series~~respect Bto ~~Preferred~~dividends and ~~Stock~~right ~~balance~~of ~~was~~liquidation ~~$1,192,427,~~with ~~which~~the ~~includes~~Company’s ~~stated~~common ~~value~~stock ofand ~~$1,144,624~~junior ~~and~~to ~~accrued~~all ~~dividends payable~~existing ofand ~~$47,803.~~future Asindebtedness of ~~December~~the ~~31,~~Company. ~~2022,~~The Series ~~the~~C ~~net~~has ~~Series~~a Bstated ~~Preferred~~value ~~Stock~~per ~~balance~~share ~~was~~of $1100,~~037,201,~~ ~~which~~subject ~~includes~~to ~~stated~~adjustment ~~value~~as ~~of $1,000,624~~provided ~~and~~in ~~accrued~~the ~~dividends~~Certificate ~~payable~~ of ~~$36,577.~~Designations ~~The~~(the ~~net~~“Stated Value”), ~~Series~~and Ba ~~Preferred~~dividend ~~Stock~~rate ~~balance~~of is2% ~~included~~per onannum of the ~~accompanying~~Stated ~~unaudited consolidated balance sheets~~Value.

The Company has no option to redeem the Series C Preferred Stock. If the Company determines to liquidate, dissolve or wind-up its business and affairs, or effect any Deemed Liquidation Event as defined below, each of which has been approved by the holders of a majority of the shares of Series C Preferred Stock then outstanding, the Company will redeem all of the shares of Series C Preferred Stock outstanding immediately prior to such mandatory redemption event at a price per share of Series C Preferred Stock equal to the aggregate Series C Liquidation Value, which is 150% of the sum of the Stated Value plus accrued and unpaid dividends, for the shares of Series C Preferred Stock being redeemed.

On August 20, 2020, the Company filed an Amendment to its Articles of Incorporation to designate a series of preferred stock, the Series C Convertible Preferred Stock (the “Series C”), with the Secretary of State of the State of Colorado. The Certificate of Designations established 100,000 shares of the Series C, par value $0.10, having such designations, preferences, and rights as determined by the Company’s Board of Directors in its sole discretion, in accordance with the Company’s Articles of Incorporation and Amended and Restated Bylaws. The Certificate of Designations became effective with the State of Colorado upon filing.24

~~The Series~~ C-BOND ~~ranks~~SYSTEMS, ~~senior~~INC. AND ~~with~~SUBSIDIARIES NOTES ~~respect~~TO toCONSOLIDATED ~~dividends~~FINANCIAL ~~and right of liquidation with the Company’s common stock and junior to all existing~~STATEMENTS ~~and~~SEPTEMBER ~~future indebtedness of the Company. The Series C has a stated value per share of $100~~30, ~~subject to adjustment as provided in the Certificate~~2023 ~~of Designations~~ (~~the “Stated Value”~~UNAUDITED)~~, and a dividend rate of 2% per annum of the Stated Value.~~

The Company will deliver ten-day advance written notice prior to the consummation of any mandatory redemption event via email or overnight courier (“Notice of Mandatory Redemption”) to each Holder whose shares are to be redeemed. The Series C is subject to redemption at liquidation Value noted above by the Company. Upon ~~has~~receipt noby ~~option~~any Holder of a Notice of Mandatory Redemption, if Holder does not choose to ~~redeem~~convert, such Holder will promptly submit to the Company such Holder’s Series C Preferred Stock certificates on the Redemption Payment Date. IfUpon receipt of such Holder’s Series C Preferred Stock certificates, the Company ~~determines~~will topay ~~liquidate,~~the ~~dissolve~~applicable orredemption ~~wind-up~~price ~~its~~to ~~business and~~such ~~affairs,~~Holder orin ~~effect~~cash. ~~any~~A “Deemed Liquidation Event” aswill ~~defined~~mean: ~~below,~~(a) ~~each~~a ofmerger or consolidation in which ~~has~~the ~~been~~Company ~~approved~~is bya ~~the~~constituent ~~holders~~party ofor a ~~majority~~subsidiary of the Company is a constituent party and the Company issues shares of ~~Series~~its Ccapital ~~Preferred~~stock ~~Stock~~pursuant ~~then~~to ~~outstanding~~such merger or consolidation, except any such merger or consolidation involving the Company ~~will~~or ~~redeem~~a ~~all~~subsidiary ofin which the shares of ~~Series~~capital Cstock ~~Preferred~~of ~~Stock~~the Company outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such ~~mandatory~~merger ~~redemption~~or ~~event~~consolidation, at least a ~~price~~majority, ~~per~~by ~~share~~voting power, of ~~Series~~the Ccapital ~~Preferred~~stock ~~Stock~~of ~~equal~~the tosurviving or resulting corporation or, if the ~~aggregate~~surviving ~~Series~~or Cresulting corporation is a wholly-owned subsidiary of another corporation immediately following such ~~Liquidation~~merger ~~Value~~or consolidation, ~~which~~the isparent ~~150%~~corporation of such surviving or resulting corporation; or (b) the ~~sum~~sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the ~~Stated~~Company ~~Value~~or ~~plus~~any ~~accrued~~subsidiary of the Company of all or substantially all the assets of the Company and ~~unpaid~~its ~~dividends~~subsidiaries taken as a whole, ~~for~~or the ~~shares~~sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Company if substantially all of the assets of the Company and its subsidiaries taken as a whole are held by such subsidiary or subsidiaries, except where such sale, lease, transfer, exclusive license or other disposition is to a wholly owned subsidiary of the Company. Since the Company has determined that a deemed liquidation event is not probable, the Series C ~~Preferred Stock~~is ~~being~~stated ~~redeemed~~at the Stated Value plus accrued and unpaid dividends rather than redemption value, which is liquidation value.

26The Series C is convertible at the option of a holder at any time following the issuance date. In the event of a conversion of any Series C Preferred Stock, the Company shall issue to such Holder a number of Conversion Shares equal to (x) the sum of (1) the Stated Value per share of Series C Preferred Stock plus (2) any accrued but unpaid dividends thereon multiplied by (y) the number of shares of Series C Preferred Stock held by such Holder and subject to the Holder Conversion Notice, divided by (z) the Conversion Price with respect to such Series C Preferred Stock. Conversion Price means a price per share of the common stock equal to the lowest daily volume weighted average price of the common stock for any trading day during the two years preceding the date of delivery of the conversion notice, subject to adjustment as otherwise provided in the Series C Certificate of Designation.

~~C-BOND~~Upon liquidation of the Company after payment ~~SYSTEMS,~~or ~~INC.~~provision ~~AND~~for ~~SUBSIDIARIES~~payment of liabilities of the Company and after payment or provision for any liquidation preference payable to the holders ~~NOTES~~of TOany ~~CONSOLIDATED~~preferred ~~FINANCIAL~~stock ~~STATEMENTS~~ranking senior to the Series C but prior to any distribution to the holders of Common Stock or preferred stock ~~JUNE~~ranking 30junior upon liquidation to the Series C, ~~2023~~the holders of Series C will be entitled to be paid out of the assets of the Company ~~(UNAUDITED)~~available for distribution to its stockholders an amount with respect to each share of Series C equal to the Liquidation Value.

~~The Company~~Through ~~will~~April ~~deliver~~28, ~~ten-day~~2021, ~~advance~~each ~~written~~share ~~notice prior to the consummation~~ of ~~any~~Series ~~mandatory redemption event via email or overnight~~C ~~courier~~Preferred ~~(“Notice~~Stock ofwas ~~Mandatory~~entitled ~~Redemption”)~~ to ~~each~~vote ~~Holder~~on ~~whose~~all ~~shares~~matters ~~are~~requiring toshareholder ~~be redeemed~~vote. ~~The~~Each share of Series C isPreferred ~~subject~~Stock towas ~~redemption~~entitled to atthe ~~liquidation~~number ~~Value~~of ~~noted~~votes ~~above~~per byshare ~~the~~based ~~Company.~~on ~~Upon~~the ~~receipt~~calculation byof ~~any~~the ~~Holder~~number of aconversion ~~Notice~~shares of ~~Mandatory~~Series ~~Redemption,~~C ifPreferred ~~Holder~~Stock ~~does~~is ~~not~~then ~~choose~~convertible. toOn ~~convert~~April 28, ~~such~~2021, ~~Holder will promptly submit to~~ the Company ~~such~~filed ~~Holder’s~~an ~~Series~~Amended Cand ~~Preferred~~Restated ~~Stock~~Certificate ~~certificates~~of onDesignations ~~the~~of ~~Redemption Payment~~Preferences, ~~Date.~~Rights, ~~Upon~~and ~~receipt~~Limitations of ~~such Holder’s~~ Series C Convertible Preferred Stock ~~certificates,~~ (the ~~Company will pay the applicable redemption price to such Holder in cash. A~~ “~~Deemed~~Amended ~~Liquidation Event~~Certificate”). ~~will~~The ~~mean:~~Amended ~~(a)~~Certificate achanged ~~merger~~the orvoting ~~consolidation~~rights inof ~~which~~ the ~~Company~~Series isC aPreferred ~~constituent~~Stock ~~party~~on orany amatters ~~subsidiary~~requiring ofshareholder ~~the~~approval ~~Company~~or isany amatters ~~constituent~~on ~~party~~which ~~and~~ the ~~Company~~common ~~issues~~shareholders ~~shares~~are ofpermitted ~~its~~to ~~capital~~vote. Series ~~stock~~C ~~pursuant to~~Preferred ~~such~~Stock ~~merger~~shall orhave ~~consolidation,~~no ~~except~~right ~~any~~to ~~such~~vote ~~merger~~on orany ~~consolidation~~matters ~~involving~~requiring ~~the~~shareholder ~~Company~~approval or aany ~~subsidiary~~matters inon which the ~~shares of~~common ~~capital~~shareholders (or other preferred stock of the Company ~~outstanding~~which ~~immediately~~may ~~prior~~vote towith ~~such~~the ~~merger~~common orshareholders) ~~consolidation~~are ~~continue~~permitted to ~~represent,~~vote. orWith ~~are converted into~~respect orto ~~exchanged~~any ~~for~~voting ~~shares~~rights of ~~capital~~the ~~stock~~Series ~~that~~C ~~represent,~~Preferred ~~immediately~~Stock ~~following~~set ~~such~~forth ~~merger or consolidation~~herein, ~~at least a majority, by voting power, of~~ the ~~capital~~Series ~~stock~~C ofPreferred ~~the~~Stock ~~surviving~~shall orvote ~~resulting~~as ~~corporation~~a orclass, ifeach ~~the surviving or resulting corporation is a wholly-owned~~share ~~subsidiary~~ of ~~another~~Series ~~corporation~~C ~~immediately~~Preferred ~~following~~Stock ~~such~~shall ~~merger~~have orone ~~consolidation,~~vote ~~the~~on ~~parent~~any ~~corporation of~~ such ~~surviving or resulting corporation; or (b) the sale~~matter, ~~lease,~~and ~~transfer,~~any ~~exclusive~~such ~~license~~approval ormay ~~other~~be ~~disposition,~~given invia a ~~single~~written ~~transaction~~consent orin ~~series~~lieu of ~~related transactions,~~ bya ~~the~~meeting ~~Company or any subsidiary~~ of the ~~Company~~Holders of ~~all or substantially all~~ the ~~assets~~Series ofC ~~the~~Preferred ~~Company~~Stock. ~~and~~Any ~~its~~reference ~~subsidiaries~~herein ~~taken~~to as a ~~whole~~ determination, decision or ~~the~~election ~~sale~~being ormade ~~disposition~~by the ~~(whether~~“Majority byHolders” ~~merger~~shall ormean ~~otherwise)~~the ofdetermination, ~~one~~decision or ~~more~~election ~~subsidiaries~~as ofmade ~~the~~by ~~Company~~Holders ifholding ~~substantially~~a ~~all~~majority of the ~~assets~~issued and ofoutstanding ~~the~~shares ~~Company~~of ~~and~~Series ~~its~~C ~~subsidiaries~~Preferred ~~taken~~Stock asat asuch ~~whole~~time. ~~are~~It ~~held~~also byadjusts ~~such~~the ~~subsidiary~~conversion orfeature ~~subsidiaries,~~of ~~except~~the ~~where~~Series ~~such~~C ~~sale,~~Preferred Stock ~~lease,~~so ~~transfer,~~that ~~exclusive~~any ~~license~~Holder orof ~~other~~Series ~~disposition~~C isPreferred toStock acannot ~~wholly~~convert ~~owned~~any ~~subsidiary~~portion of the ~~Company.~~Series ~~Since~~C ~~the~~in ~~Company~~excess ~~has~~of ~~determined~~ that anumber ~~deemed~~of ~~liquidation~~Series ~~event~~C isPreferred Stock ~~not~~that ~~probable,~~upon ~~the~~conversion ~~Series~~would Cresult isin ~~stated~~beneficial atownership by the ~~Stated~~Holder ~~Value~~of ~~plus~~more ~~accrued~~than ~~and~~4.99% ~~unpaid~~of ~~dividends~~the ~~rather than~~outstanding ~~redemption~~shares ~~value,~~of ~~which~~common isstock of ~~liquidation~~the ~~value~~Company.

~~The~~ These Series C ispreferred ~~convertible~~stock atissuances ~~the~~with redemption ~~option~~provisions ofthat apermit ~~holder~~the atissuer ~~any~~to ~~time~~settle ~~following~~in ~~the~~either ~~issuance~~cash ~~date.~~or Incommon stock, at the ~~event~~option of athe ~~conversion~~holder, ofwere ~~any~~evaluated ~~Series~~to Cdetermine ~~Preferred~~whether ~~Stock,~~temporary ~~the~~or ~~Company~~permanent ~~shall~~equity ~~issue~~classification toon ~~such~~the ~~Holder~~consolidated abalance ~~number~~sheet ofwas ~~Conversion~~appropriate. ~~Shares~~As ~~equal~~per ~~to (x)~~ the ~~sum~~terms of ~~(1)~~ the ~~Stated Value per share of~~ Series C ~~Preferred~~preferred ~~Stock~~stock ~~plus~~agreements, ~~(2) any accrued but unpaid dividends thereon multiplied by (y) the number of shares of~~ Series C ~~Preferred~~preferred ~~Stock~~stock ~~held~~is byredeemable ~~such~~for ~~Holder~~cash and ~~subject~~other toassets ~~the~~on ~~Holder Conversion Notice, divided by (z)~~ the ~~Conversion~~occurrence ~~Price~~of ~~with~~a ~~respect to~~deemed ~~such~~liquidation ~~Series~~event. CA ~~Preferred~~deemed ~~Stock.~~liquidation ~~Conversion~~event ~~Price~~includes ~~means~~ a ~~price~~change ~~per share~~ of ~~the~~control ~~common~~which ~~stock~~is ~~equal~~not toin the ~~lowest~~Company’s ~~daily~~control. ~~volume~~As ~~weighted~~such, since ~~average~~Series ~~price~~C ofpreferred ~~the common~~ stock ~~for~~is ~~any~~redeemable ~~trading~~upon ~~day during~~ the ~~two~~occurrence ~~years~~of ~~preceding~~an ~~the~~event ~~date~~that ofis ~~delivery~~not ofwithin the ~~conversion~~Company’s ~~notice~~control, ~~subject to adjustment as otherwise provided in~~ the Series C ~~Certificate~~preferred stock ofis ~~Designation~~classified as temporary equity.

~~Upon liquidation~~The ofCompany concluded that the ~~Company~~Series ~~after~~C ~~payment~~Preferred Stock orrepresented ~~provision~~an ~~for~~equity ~~payment~~host ofand, ~~liabilities~~therefore, the redemption feature of the ~~Company~~Series ~~and~~C ~~after~~Preferred ~~payment~~Stock orwas ~~provision~~not ~~for~~considered ~~any~~to be clearly ~~liquidation~~and ~~preference~~closely ~~payable~~related to the ~~holders~~associated ofequity ~~any~~host ~~preferred~~instrument. ~~stock~~However, ~~ranking~~the ~~senior~~redemption tofeatures did not meet the ~~Series~~net Csettlement ~~but~~criteria of ~~prior~~a toderivative ~~any~~and, ~~distribution~~therefore, ~~to the~~were ~~holders~~not ofconsidered ~~Common~~embedded ~~Stock~~derivatives orthat ~~preferred~~required ~~stock~~bifurcation. ~~ranking~~The ~~junior~~Company ~~upon~~also ~~liquidation~~concluded tothat the conversion rights under the Series C, ~~the~~Preferred ~~holders~~Stock ofwere ~~Series~~clearly Cand ~~will~~closely berelated ~~entitled~~ to bethe ~~paid~~equity ~~out~~host ofinstrument. Accordingly, the conversion ~~assets~~rights offeature on the ~~Company~~Series ~~available~~C ~~for~~Preferred ~~distribution~~Stock towere ~~its~~not ~~stockholders~~considered an ~~amount~~embedded ~~with~~derivative ~~respect~~that torequired ~~each~~bifurcation. ~~share~~The conversion feature of the Series C ~~equal~~Preferred Stock at the time of issuance was determined to be beneficial on the ~~Liquidation~~commitment ~~Value~~date.

Through April 28, 2021, each share of Series C Preferred Stock was entitled to vote on all matters requiring shareholder vote. Each share of Series C Preferred Stock was entitled to the number of votes per share based on the calculation of the number of conversion shares of Series C Preferred Stock is then convertible. On ~~April~~January 2812, ~~2021~~2022, the Company ~~filed~~issued ~~an Amended and Restated Certificate of Designations of Preferences~~1, ~~Rights~~543, ~~and Limitations of Series C Convertible Preferred Stock (the “Amended Certificate”). The Amended~~151 ~~Certificate~~shares ~~changed the voting rights~~ of ~~the~~its ~~Series C Preferred Stock on any matters requiring shareholder approval or any matters on which the~~ common shareholders are permitted to vote. Series C Preferred Stock shall have no right to vote on any matters requiring shareholder approval or any matters on which the common shareholders (or other preferred stock ofupon the ~~Company~~conversion ~~which may vote with the common shareholders) are permitted to vote. With respect to any voting rights~~ of ~~the~~120 ~~Series~~shares ~~C Preferred Stock set forth herein, the Series C Preferred Stock shall vote as a class, each share~~ of Series C ~~Preferred~~preferred ~~Stock~~with ~~shall have one vote on any such matter, and any such approval may be given via~~ a ~~written~~stated ~~consent~~redemption invalue ~~lieu~~ of ~~a meeting of the Holders of the Series C Preferred Stock. Any reference herein to a determination~~$12, decision or election being made by the “Majority Holders” shall mean the determination, decision or election as made by Holders holding a majority of the issued and outstanding shares of Series C Preferred Stock at such time000. ItThe ~~also adjusts the~~ conversion ~~feature of the~~ ~~Series~~price Cwas ~~Preferred~~based ~~Stock~~on socontractual ~~that~~terms ~~any Holder~~ of ~~Series C Preferred Stock cannot convert any portion of~~ the ~~Series~~related ~~C in excess of that number of~~ Series C ~~Preferred~~preferred ~~Stock that upon conversion would result in beneficial ownership by the Holder of more than 4.99% of the outstanding~~ shares ~~of common stock of the Company~~.

27On April 20, 2022, the Company issued 13,184,548 shares its common stock upon the conversion of 1,020 shares of Series C preferred with a stated redemption value of $102,000. The conversion price was based on contractual terms of the related Series C preferred shares.

~~C-BOND SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2023 (UNAUDITED)~~25

~~These Series~~ C-BOND ~~preferred stock issuances with redemption provisions that permit the issuer to settle in either cash or common stock~~SYSTEMS, ~~at the~~INC. ~~option~~AND ~~of the holder, were evaluated to determine whether temporary or permanent equity classification on the consolidated balance sheet~~SUBSIDIARIES ~~was~~NOTES ~~appropriate.~~TO AsCONSOLIDATED ~~per~~FINANCIAL ~~the terms of the Series C preferred stock agreements, Series C preferred stock is redeemable for cash and other~~STATEMENTS ~~assets~~SEPTEMBER ~~on the occurrence of a deemed liquidation event. A deemed liquidation event includes a change of control which is not in the Company’s control. As such~~30, ~~since Series C preferred stock is redeemable upon the occurrence of an event that is not within the Company’s~~2023 ~~control, the Series C preferred stock is classified as temporary equity.~~(UNAUDITED)

~~The Company~~During ~~concluded that~~ the ~~Series~~three Cmonths ~~Preferred~~ended ~~Stock~~March ~~represented an equity host and~~31, ~~therefore~~2023, ~~the redemption feature of the Series C~~ ~~Preferred Stock was not considered to be clearly and closely related to~~ the ~~associated~~Company ~~equity~~issued ~~host instrument. However~~26,585,614 ~~the~~shares ~~redemption features did not meet the net settlement criteria~~ of aits ~~derivative~~common ~~and,~~stock ~~therefore,~~upon ~~were not considered embedded derivatives that required bifurcation. The Company also concluded that~~ the conversion ~~rights~~of ~~under the Series C Preferred Stock were clearly and closely related to the equity host instrument. Accordingly~~1,014 ~~the~~shares ~~conversion~~of ~~rights feature on the~~ Series C ~~Preferred~~preferred ~~Stock~~with ~~were~~a ~~not~~stated ~~considered an embedded~~redemption ~~derivative~~value ~~that~~of ~~required bifurcation~~$101,400. The conversion ~~feature~~price ofwas ~~the~~based ~~Series~~on Ccontractual ~~Preferred~~terms ~~Stock~~of at the ~~time~~related ofSeries ~~issuance~~C ~~was~~preferred ~~determined to be beneficial on the commitment date~~shares.

~~On January~~During 12the three months ended June 30, ~~2022~~2023, the Company issued 123,~~543~~157,~~151~~922 shares of its common stock upon the conversion of ~~120~~826 shares of Series C preferred with a stated redemption value of $1282,~~000~~600. The conversion price was based on contractual terms of the related Series C preferred shares.

~~On April~~During ~~20,~~the ~~2022~~three months ended September 30, 2023, the Company issued 138,~~184~~584,~~548~~376 shares of its common stock upon the conversion of ~~1,020~~300 shares of Series C preferred with a stated redemption value of $~~102~~30,000. The conversion price was based on contractual terms of the related Series C preferred shares.

During the ~~three~~nine months ended ~~March~~September 3130, 2023 and 2022, the Company ~~issued~~accrued ~~26,585,614~~dividends ~~shares~~ of ~~its~~$23,792 ~~common~~and ~~stock~~$26,920, ~~upon~~respectively, ~~the~~which ~~conversion~~was ofincluded ~~1,014~~in ~~shares of~~ Series C convertible preferred ~~with a stated redemption value of $101,400. The conversion price was based~~ stock on ~~contractual terms of~~ the ~~related~~accompanying ~~Series C~~unaudited ~~preferred~~consolidated ~~shares~~balance sheets.

~~During the~~As ~~three~~of ~~months~~September ~~ended June~~ 30, 2023, the ~~Company~~net ~~issued~~Series 23C Preferred Stock balance was $1,~~157~~613,~~922~~523, ~~shares~~which ofincludes ~~its~~stated ~~common~~liquidation ~~stock~~value ~~upon~~of ~~the~~$1,515,000 ~~conversion~~and accrued dividends payable of ~~826~~$98,523. ~~shares~~As of ~~Series~~December 31, 2022, the net Series C ~~preferred~~Preferred ~~with~~Stock abalance ~~stated~~was ~~redemption~~$1,803,731, which includes stated value of $821,~~600~~729,000 and accrued dividends payable of $74,731. The ~~conversion~~net ~~price~~Series ~~was~~C ~~based~~Preferred onStock ~~contractual~~balance ~~terms~~is ofincluded on the ~~related~~accompanying ~~Series~~unaudited Cconsolidated ~~preferred shares~~balance sheets.

~~During the~~Common six months ended June 30, 2023 and 2022, the Company accrued dividends of $16,079 and $18,078, respectively, which was included in Series C convertible preferred stock on the accompanying unaudited consolidated balance sheets.Stock

~~As of~~Common ~~June 30, 2023, the net Series C Preferred~~ Stock ~~balance~~Issued ~~was~~for ~~$1,635,810,~~Cash ~~which includes stated liquidation value of $1,545,000~~ and ~~accrued~~ ~~dividends payable of $90,810. As of December 31, 2022, the net Series C Preferred Stock balance was $1,803,731, which includes~~Accrued ~~stated value of $1,729,000 and accrued dividends payable of $74,731. The net Series C Preferred Stock balance is included on the accompanying unaudited consolidated balance sheets.~~Compensation

~~Common~~On January 17, 2023, the Company entered into ~~Stock~~a Subscription Agreement with its Chairman and Chief Executive Officer, Scott R. Silverman (the “Subscription Agreement”), whereby Mr. Silverman purchased 54,545,455 shares (the “Subscription Shares”) of the Company’s common stock for $300,000, or $0.0055 per share, based on the quoted closing price of the Company’s common stock on the measurement date (the “Consideration”). The Consideration consisted of a cash payment of $275,000 the conversion of $25,000 of accrued compensation owed to Mr. Silverman.

~~Common~~On January 17, 2023, Barry Edelstein, a member ~~Stock~~of ~~Issued~~the ~~for~~Company’s ~~Cash~~Board ~~and~~of ~~Accrued~~Directors, ~~Compensation~~elected to convert $53,000 of accrued compensation into 9,636,364 shares of unregistered common stock of the Company. The shares were valued at $53,000, or $0.0055, based on the quoted closing price of the Company’s common stock on the measurement date.

~~On January~~Issuance 17, 2023, the Company entered into a Subscription Agreement with its Chairman and Chief Executive Officer, Scott R. Silverman (the “Subscription Agreement”), whereby Mr. Silverman purchased 54,545,455 shares (the “Subscription Shares”) of ~~the~~Common ~~Company’s~~Stock ~~common stock~~ for $300,000, or $0.0055 per share, based on the quoted closing price of the Company’s common stock on the measurement date (the “Consideration”). The Consideration consisted of a cash payment of $275,000 the conversion of $25,000 of accrued compensation owed to Mr. Silverman.Services

28Issuance of Common Stock for Professional Fees

~~C-BOND SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2023 (UNAUDITED)~~2022

On ~~January~~ ~~17,~~June ~~2023~~7, ~~Barry Edelstein~~2022, ~~a member of~~ the Company’s ~~Board~~issued an aggregate of ~~Directors~~4,000,000 ~~elected~~shares toof ~~convert~~its ~~$53,000~~common ofstock ~~accrued~~for ~~compensation into~~business ~~9,636,364~~development ~~shares~~and ofconsulting ~~unregistered~~services ~~common~~rendered ~~stock~~and ofto ~~the~~be ~~Company~~rendered. ~~The~~These shares were valued at $5348,000, or $0.~~0055~~012 per common share, based on the quoted closing price of the Company’s common stock on the measurement date, and will be amortized into stock-based consulting fees over the term of the agreement. In connection with the issuance of these shares, during the nine months ended September 30, 2022, the Company recorded stock-based professional fees of $15,000 and prepaid expenses of $33,000 which will be amortized into stock-based professional fees over the remaining term of the agreement.

~~Issuance~~On June 24, 2022, the Company issued an aggregate of ~~Common~~3,000,000 ~~Stock~~shares of its common stock for ~~Services~~business development and consulting services rendered and to be rendered. These shares were valued at $54,000, or $0.018 per common share, based on the quoted closing price of the Company’s common stock on the measurement date, and will be amortized into stock-based consulting fees over the term of the agreement. In connection with the issuance of these shares, during the nine months ended September 30, 2022, the Company recorded stock-based professional fees of $54,000.

~~Issuance of Common Stock for Professional Fees~~26

~~On June~~C-BOND 7SYSTEMS, ~~2022, the Company issued an aggregate of 4,000,000 shares of its common stock for business development and consulting services~~INC. ~~rendered~~AND ~~and to be rendered. These shares were valued at $48,000, or $0.012 per common share, based on the quoted closing price of the~~SUBSIDIARIES ~~Company’s~~NOTES ~~common~~TO ~~stock~~CONSOLIDATED onFINANCIAL ~~the measurement date, and will be amortized into stock-based consulting fees over the term of the agreement.~~STATEMENTS InSEPTEMBER ~~connection with the issuance of these shares, during the six months ended June~~ 30, ~~2022, the Company recorded stock-based professional~~2023 ~~fees of $3,000 and prepaid expenses of $45,000 which will be amortized into stock-based professional fees over the remaining term of the agreement.~~(UNAUDITED)

On ~~June~~ 24July 1, 2022, the Company ~~issued~~granted ana ~~aggregate~~restricted stock award of 32,~~000~~500,000 common shares of ~~its~~the ~~common~~Company ~~stock~~to a consultant of the Company for business development and consulting services rendered, ~~and~~which ~~to be rendered. These~~ shares were valued at $5431,~~000~~250, or $0.~~018~~0125 per common share, based on the quoted closing price of the Company’s common stock on the measurement date, and will be amortized into stock-based consulting fees over the term of the agreement. In connection with the issuance of these shares, during the ~~six~~nine months ended ~~June~~September 30, 2022, the Company recorded stock-based professional fees of $415,~~500~~ 625 and prepaid expenses of $4915,~~500~~625 as of September 30, 2022, which will be amortized into stock-based professional fees over the remaining term of the agreement.

On ~~February~~ 6July 15, ~~2023~~2022, the Company ~~issued~~granted 6a restricted stock award of 5,~~666~~454,~~667~~545 common shares of ~~its~~the ~~common~~Company ~~stock~~to a consultant of the Company for ~~public~~government relations services to be rendered., which ~~These~~ shares were valued at $4060,000, or $0.~~006~~011 per common share, based on the quoted closing price of the Company’s common stock on the measurement date, and will be amortized into stock-based consulting fees over the term of the agreement. In connection with the issuance of these shares, during the nine months ended September 30, 2022, the Company recorded stock-based professional fees of $3125,~~667~~ 000 and prepaid ~~expense~~expenses of $835,~~333~~000 as of September 30, 2022, which will be amortized into stock-based professional fees over the remaining term of the agreement.

~~On April 3,~~ 2023, the Company issued 5,000,000 shares of its common stock for investor relations services to be rendered. These shares were valued at $22,500, or $0.0045 per common share, based on the quoted closing price of the Company’s common stock on the measurement date. In connection with these shares, the Company recorded stock-based professional fees of $22,500, which was amortized into professional fees over the term of the agreement.

On ~~June~~ 3February 6, 2023, the Company issued 16,~~500~~666,~~000~~ 667 shares of its common stock for ~~investor~~public relations services to be rendered. These shares were valued at $1640,~~950~~000, or $0.~~0011~~006 per common share, based on the quoted closing price of the Company’s common stock on the measurement date. In connection with these shares, the Company recorded stock-based professional fees of $540,~~650 and prepaid expenses of $11~~000,~~300,~~ which ~~will~~was be amortized into professional fees over the ~~remaining~~ term of the agreement.

~~During~~ On April 3, 2023, the ~~six~~Company ~~months~~issued ~~ended~~5,000,000 shares ~~June~~of 30its common stock for investor relations services to be rendered. These shares were valued at $22,500, ~~2023~~or ~~and~~$0.0045 ~~2022~~per common share, based on the quoted closing price of the Company’s common stock on the measurement date. In connection with these shares, the Company recorded stock-based professional fees of $3822,~~000 and $116~~500,~~550~~ inwhich ~~connection with~~was ~~the~~amortized ~~amortization~~into toprofessional ~~prepaid~~fees ~~expenses~~over ~~related~~the toterm ~~common~~of ~~shares~~the ~~previously issued, respectively~~agreement.

~~Issuance~~On June 3, 2023, the Company issued 1,500,000 shares of ~~Common~~its ~~Stock~~common stock for ~~Stock~~investor relations services to be rendered. These shares were valued at $16,950, or $0.0011 per common share, based on the quoted closing price of the Company’s common stock on the measurement date. In connection with these shares, the Company recorded stock-~~Based~~based ~~Compensation~~professional fees of $16,950, which was amortized into professional fees over the remaining term of the agreement.

On ~~March~~ 24September 3, ~~2022~~2023, the Company ~~granted~~issued ~~restricted stock awards of 500~~1,000 ~~vested common~~ ,000 shares of ~~the~~its ~~Company~~common tostock anfor ~~employee~~investor ofrelations ~~the~~services ~~Company for~~to ~~services~~be rendered. ~~The~~These ~~awards~~shares were valued at $144,~~250~~500, or $0.~~0285~~0045 per common share, based on the quoted closing price of the Company’s common stock on the measurement date. In connection with these shares, the Company recorded stock-based professional fees of $2,250 and prepaid expenses of $2,250, which will be amortized into professional fees over the remaining term of the agreement.

29During the nine months ended September 30, 2023 and 2022, the Company recorded stock-based professional fees of $38,000 and $119,321 in connection with the amortization to prepaid expenses related to common shares previously issued, respectively.

~~C-BOND SYSTEMS,~~Issuance ~~INC.~~of ~~AND~~Common ~~SUBSIDIARIES NOTES~~Stock TOfor ~~CONSOLIDATED~~Stock-Based ~~FINANCIAL STATEMENTS JUNE 30, 2023 (UNAUDITED)~~Compensation

On June 7, 2023, the Company issued 2,500,000 shares of its common stock to employees for services for services rendered. These shares were valued at $26,000, or $0.0104 per common share, based on the quoted closing price of the Company’s common stock on the measurement date.2022

~~During the~~On ~~six~~March ~~months ended June 30~~24, ~~2023 and~~ 2022, ~~aggregate~~the ~~accretion~~Company ofgranted restricted stock~~-based~~ ~~compensation~~awards ~~expense~~of on500,000 ~~granted~~vested common shares ~~amounted to~~of ~~$42,183~~the ~~and~~Company ~~$63,570,~~to ~~respectively.~~an ~~Total~~employee ~~unrecognized~~of ~~compensation~~the ~~expense~~Company ~~related~~for toservices ~~these~~rendered. ~~unvested~~The ~~common~~awards ~~shares~~were onvalued at ~~June 30~~$14,250, ~~2023 amounted~~or to $0.0285 Byper ~~mutual~~common ~~agreement~~share, ~~between~~based ~~the~~on ~~parties,~~ the ~~vesting~~quoted ~~date~~closing price of ~~previously~~the ~~granted~~Company’s ~~shares~~common ~~was~~stock ~~extended~~on ~~through~~the ~~May~~measurement ~~2024~~date.

~~The~~On July 12, 2022, the Company granted a restricted stock award of 1,000,000 ~~following~~common ~~table~~shares ~~summarizes~~of ~~activity~~the ~~related~~Company to ~~non-vested~~an employee of the Company. The shares: will vest on May 1, 2023. These shares were valued on the date of grant at $11,000, or $0.011 per common share based on the quoted closing price of the Company’s common stock on the measurement date. In connection with these shares, the Company shall record stock-based compensation over the vesting period.

	Number of Non-Vested Shares			Weighted Average Grant Date Fair Value
Non-vested, December 31, 2022		16,970,120		$	0.119
Granted		-			-
Shares vested		(2,000,000	)		0.021
Non-vested, June 30, 2023		14,970,120		$	0.132

On August 12, 2022, the Company granted a restricted stock award of 2,000,000 common shares of the Company to a board member of the Company. The shares will vest on May 1, 2023. These shares were valued on the date of grant at $24,000 or $0.012 per common share based on the quoted closing price of the Company’s common stock on the measurement date. In connection with these shares, the Company shall record stock-based compensation over the vesting period.

~~Common stock issued for Accounts Payable~~27

~~On January~~C-BOND 6SYSTEMS, ~~2022, the Company issued 90,859 common shares upon conversion of accounts payable of $2,174, or $0~~INC.~~024~~ AND ~~per common share, based~~SUBSIDIARIES onNOTES ~~the~~TO ~~quoted~~CONSOLIDATED ~~closing~~FINANCIAL ~~price~~STATEMENTS SEPTEMBER of30, ~~the Company’s common stock on the measurement date.~~2023 (UNAUDITED)

~~Common Stock Issued in Connection with Notes Payable~~2023

~~In connection~~On ~~with~~June ~~the~~7, ~~March 2022 Note~~2023, the Company issued ~~823~~2,~~529~~ 500,000 shares of its common stock to ~~the~~employees ~~placement~~for ~~agent~~services ~~as fee~~ for ~~the~~services ~~capital raise~~rendered. ~~The~~These ~~823,529~~ shares ~~of common stock issued~~ were ~~recorded~~valued asat a$26,000, ~~debt~~or ~~discount~~$0.0104 ofper ~~$12~~common share,~~963~~ based on the ~~relative~~quoted ~~fair~~closing ~~value~~price ~~method to~~of bethe ~~amortized~~Company’s ~~over~~common ~~the~~stock ~~life~~on of the ~~Note~~measurement date.

~~In connection~~During ~~with~~ the ~~June~~nine ~~2022~~months GSended ~~Capital~~September ~~Note~~30, ~~the~~2023 and ~~Company issued 1~~2022,~~750,000~~ ~~shares~~aggregate accretion of ~~its~~stock-based ~~common~~compensation ~~stock~~expense ason agranted ~~commitment~~common ~~fee.~~shares ~~The~~amounted 1to $42,~~750~~183 and $53,~~000~~764, respectively. ~~shares~~Total ofunrecognized ~~common~~compensation ~~stock~~expense ~~issued~~related ~~were~~to ~~recorded~~these asunvested acommon ~~debt~~shares ~~discount~~on ofSeptember ~~$32~~30,~~736~~ ~~based~~2023 onamounted ~~the~~to ~~relative~~$0. ~~fair~~By ~~value~~mutual ~~method~~agreement between tothe beparties, ~~amortized over~~ the ~~life~~vesting date of ~~the~~previously ~~Note~~granted ~~(See~~shares ~~Note~~was 8)extended through May 2024.

~~During April~~The ~~and~~following ~~May~~table ~~2023,~~summarizes ~~the~~activity ~~Company issued 21,371,481 shares of its common stock upon the conversion of principal of $62,000, accrued interest~~related ofto ~~$4,139,~~non-vested ~~and fees of $2,250.~~shares:

In May 2023, the Company issued the Lender 22,000,000 shares of common stock of the Company in exchange for settlement of the remaining $200,000 of the loan and all accrued interest amounting to $317,293, which were deemed paid in full (see Note 8 - BOCO Investment Note). The 22,000,000 shares issued were valued at $132,000, or $0.006 per share, based on the quoted closing price of the Company’s common stock on the measurement date. In connection with the issuamce of these shares, the Company recorded a gain from debt extinguishment of $68,000 calculated as the different in the principal amount settled for shares of $200,000 and the fair value of the shares on the measurement date of $132,000.

	Number of Non-Vested Shares			Weighted Average Grant Date Fair Value
Non-vested, December 31, 2022		16,970,120		$	0.119
Granted		-			-
Shares vested		(2,000,000	)		0.021
Non-vested, September 30, 2023		14,970,120		$	0.132

Common ~~Stock~~ ~~Issued~~stock issued for ~~Conversion~~Accounts ~~of Series C Preferred Stock~~Payable

On January 126, 2022, the Company issued 190,~~543,151~~859 common shares ~~of its common stock~~ upon ~~the~~ conversion of ~~120~~accounts ~~shares~~payable of ~~Series~~$2,174, Cor ~~preferred with a stated redemption value of~~ $~~12,000~~0.024 ~~The~~per ~~conversion~~common ~~price~~share, ~~was~~ based on ~~contractual~~the ~~terms~~quoted closing price of the ~~related~~Company’s common ~~Series~~stock Con ~~preferred~~the ~~shares~~measurement date.

~~On April~~Common ~~20,~~Stock ~~2022,~~Issued ~~the~~in ~~Company~~Connection ~~issued 13,184,548 shares its common stock upon the conversion of 1,020 shares of Series C preferred~~ with a ~~stated redemption value of $102,000. The conversion price was based on contractual terms of the related Series C preferred shares.~~Notes Payable

During the three months ended March 31, 2023, the Company issued 26,585,614 shares of its common stock upon the conversion of 1,014 shares of Series C preferred with a stated redemption value of $101,400. The conversion price was based on contractual terms of the related Series C preferred shares.2022

~~During the~~In ~~three~~connection ~~months~~with ~~ended~~the ~~June~~March ~~30,~~2022 ~~2023~~Note, the Company issued 23823,~~157,922~~529 shares of its common stock ~~upon~~to the ~~conversion~~placement ofagent ~~826~~as a fee for the capital raise. The 823,529 shares of ~~Series~~common stock issued Cwere ~~preferred~~recorded ~~with~~as a ~~stated~~debt ~~redemption~~discount ~~value~~ of $8212,~~600.~~963 ~~The~~based ~~conversion~~on ~~price~~the ~~was~~relative ~~based~~fair onvalue ~~contractual~~method ~~terms~~to ofbe amortized over the ~~related~~life ~~Series~~of Cthe ~~preferred shares~~Note.

30In connection with the June 2022 GS Capital Note, the Company issued 1,750,000 shares of its common stock as a commitment fee. The 1,750,000 shares of common stock issued were recorded as a debt discount of $32,736 based on the relative fair value method to be amortized over the life of the Note (See Note 8).

~~C-BOND~~In connection with the July 2022 GS Capital Note, ~~SYSTEMS~~on July 28, ~~INC.~~2022, ~~AND~~the ~~SUBSIDIARIES NOTES~~Company TOissued ~~CONSOLIDATED~~2,600,000 ~~FINANCIAL~~shares ~~STATEMENTS~~of its common stock as a commitment fee and the Company issued 998,008 shares of ~~JUNE~~its 30common stock to the placement agent as a fee for the capital raises. The aggregate of 3,598,008 ~~2023~~shares of common stock issued were recorded as a debt discount of $34,606 based on the relative fair value method to be amortized over the life of the July 2022 Note (~~UNAUDITED~~See Note 8).

~~Stock~~In connection with the September 2022 GS Capital ~~Options~~Note, on September 6, 2022, the Company issued 3,300,000 shares of its common stock as a commitment fee and the Company issued 773,626 shares of its common stock to the placement agent as fee for the capital raises. The aggregate of 4,073,626 shares of common stock issued were recorded as a debt discount of $30,326 based on the relative fair value method to be amortized over the life of the September 2022 Note (See Note 8).

~~For the six months ended June 30,~~ 2023 ~~and 2022, the Company recorded no compensation expense related to stock options. Total unrecognized compensation expense related to unvested stock options on June 30, 2023 amounted to $0.~~

~~Stock~~During April and May 2023, the Company issued ~~option~~21,371,481 ~~activities~~shares ~~for~~of its common stock upon the ~~six~~conversion ~~months~~of ~~ended~~principal ~~June~~of 30$62,000, ~~2023~~accrued ~~are~~interest ~~summarized~~of as$4,139, ~~follows:~~and fees of $2,250.

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance Outstanding, December 31, 2022		8,445,698	$	0.40		3.43		-
Exercised		-		-		-		-
Balance Outstanding, June 30, 2023		8,445,698	$	0.40		2.90	$	-
Exercisable, June 30, 2023		8,445,698	$	0.40		2.90	$	-

In May 2023, the Company issued the Lender 22,000,000 shares of common stock of the Company in exchange for settlement of the remaining $200,000 of the loan and all accrued interest amounting to $317,293, which were deemed paid in full (see Note 8 - BOCO Investment Note). The 22,000,000 shares issued were valued at $132,000, or $0.006 per share, based on the quoted closing price of the Company’s common stock on the measurement date. In connection with the issuance of these shares, the Company recorded a gain from debt extinguishment of $68,000 calculated as the different in the principal amount settled for shares of $200,000 and the fair value of the shares on the measurement date of $132,000.

~~Warrants~~28

~~Warrant activities~~C-BOND ~~for~~SYSTEMS, ~~the~~INC. AND ~~six~~SUBSIDIARIES NOTES ~~months~~TO ~~ended~~CONSOLIDATED ~~June~~FINANCIAL STATEMENTS SEPTEMBER 30, 2023 ~~are summarized as follows:~~ (UNAUDITED)

	Number of Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance Outstanding December 31, 2022		34,000,000	$	0.011		3.73	$	-
Granted		-		-		-		-
Balance Outstanding June 30, 2023		34,000,000	$	0.011		3.24	$	-
Exercisable, June 30, 2023		34,000,000	$	0.011		3.24	$	-

Common Stock Issued for Conversion of Series C Preferred Stock

~~2018 Long-Term Incentive Plan~~2022

On ~~June~~ 7January 12, ~~2018~~2022, ~~a majority of~~ the Company’s ~~shareholders~~issued ~~and its board approved the adoption of a 2018 Long-Term Incentive Plan (the~~1,543,151 ~~“2018~~shares ~~Plan”). The purpose~~ of ~~the~~its ~~2018~~common ~~Plan~~stock isupon ~~to advance~~ the ~~interests~~conversion of ~~the~~120 ~~Company,~~shares ~~its affiliates and its stockholders and promote the long-term growth~~ of ~~the~~Series ~~Company~~C bypreferred ~~providing employees, non-employee directors and third-party service providers~~ with ~~incentives~~ toa ~~maximize~~stated ~~stockholder~~redemption value ~~and to otherwise contribute to the success~~ of ~~the Company and its affiliates~~$12, thereby aligning the interests of such individuals with the interests of the Company’s stockholders and providing them additional incentives to continue in their employment or affiliation with the Company000. The ~~Plan~~conversion price was ~~adopted~~based on ~~June~~contractual 7,terms ~~2018~~of ~~and effective on August 2, 2018. Under~~ the ~~2018~~related ~~Plan,~~Series ~~the~~C ~~Plan~~preferred ~~Administrator may grant:~~shares.

●On ~~options~~April to20, ~~acquire~~2022, the Company’s ~~common~~issued ~~stock~~13,184,548 shares ~~both incentive stock options that are intended to satisfy the requirements~~ of ~~Section~~its 422 of the Internal Revenue Code and nonqualified stock options which are not intended to satisfy such requirements. The exercise price of options granted under our 2018 Plan must at least be equal to the fair market value of the Company’s common stock onupon the ~~date~~conversion of ~~grant~~1,020 ~~and~~shares ~~the term~~ of anSeries ~~option~~C ~~may~~preferred ~~not exceed ten years, except that~~ with ~~respect~~a tostated anredemption ~~incentive~~value ~~stock option granted to any employee who owns more than 10%~~ of ~~the~~$102,000. ~~voting~~The ~~power of all classes of the Company’s outstanding stock as of the grant date the term must not exceed five years and the exercise~~ conversion price ~~must~~was ~~equal~~based aton ~~least~~contractual ~~110%~~terms of the ~~fair~~related ~~market~~Series ~~value~~C onpreferred ~~the grant date~~shares.

312023

~~C-BOND~~During the three months ended March 31, 2023, ~~SYSTEMS~~the Company issued 26,585,614 ~~INC.~~shares ~~AND~~of ~~SUBSIDIARIES NOTES~~its TOcommon ~~CONSOLIDATED~~stock ~~FINANCIAL~~upon ~~STATEMENTS JUNE~~the 30conversion of 1,014 ~~2023~~shares of Series C preferred with a stated redemption ~~(UNAUDITED)~~value of $101,400. The conversion price was based on contractual terms of the related Series C preferred shares.

●During ~~stock appreciation rights, or SARs, which allow~~ the ~~recipient~~three tomonths ~~receive~~ended ~~the~~June ~~appreciation~~30, in2023, the Company ~~fair~~issued ~~market~~23,157,922 ~~value~~shares of ~~the~~its ~~Company’s~~ common stock ~~between~~upon the ~~date~~conversion of ~~grant~~826 ~~and~~shares ~~the~~of ~~exercise~~Series ~~date.~~C ~~The~~preferred ~~amount~~with ~~payable~~a ~~under~~stated ~~the~~redemption value ~~stock~~of ~~appreciation~~$82,600. ~~right~~The ~~may~~conversion beprice ~~paid~~was inbased ~~cash~~on orcontractual ~~with~~terms ~~shares~~ of the ~~Company’s~~related ~~common~~Series ~~stock,~~C orpreferred ~~a combination thereof, as determined by the Administrator~~shares.

●During ~~restricted stock awards, which are awards of~~ the ~~Company’s~~three ~~shares~~months ofended ~~common~~September ~~stock that vest in accordance with terms and conditions established by the Administrator. ● restricted stock units~~30, ~~which are awards that are based on~~ 2023, the ~~value of the~~ Company’s ~~common~~issued ~~stock~~8,584,376 ~~and may be paid in cash or in~~ shares of ~~the~~its ~~Company’s~~ common stock. ●upon ~~other types of stock-based or stock-related awards not otherwise described by~~ the ~~terms~~conversion ~~and provision~~ of ~~the~~300 ~~2018 Plan, including the grant or offer for sale of unrestricted~~ shares of ~~the~~Series ~~Company’s~~C ~~common~~preferred ~~stock,~~with ~~and~~a ~~which~~stated ~~may~~redemption value ~~involve the transfer~~ of ~~actual~~$30,000. ~~shares~~The ofconversion ~~the~~price ~~Company’s~~was ~~common stock or payment in cash or otherwise of amounts~~ based on ~~the~~contractual ~~value~~terms of ~~shares of~~ the ~~Company’s~~related ~~common~~Series ~~stock~~C ~~and~~preferred ~~may be designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States~~shares. ~~● other cash-based awards to eligible persons in such amounts and upon such terms as the Administrator shall determine.~~

An award granted under the 2018 Plan must include a minimum vesting period of at least one year, provided, however, that an award may provide that the award will vest before the completion of such one-year period upon the death or qualifying disability of the grantee of the award or a change of control of the Company and awards covering, in the aggregate, 25,000,000 shares of our Common Stock ~~may be issued without any minimum vesting period.~~Options

~~The aggregate~~For ~~number~~the ofnine ~~shares~~months ofended ~~common~~September ~~stock~~30, 2023 and 2022, ~~number of shares of~~ the Company’s ~~common~~recorded ~~stock~~no ~~that~~compensation ~~may~~expense berelated ~~subject~~ to ~~incentive~~ stock options. ~~granted~~Total ~~under~~unrecognized ~~the~~compensation ~~2018~~expense ~~Plan~~related isto ~~50,000,000 shares, of which 11,445,698 shares have been issued or granted under incentive~~unvested stock options ~~and~~on ~~29,451,070~~September ~~shares of restricted stock have been issued as of June~~ 30, 2023. ~~All~~amounted ~~shares underlying grants are expected~~ to ~~be issued from the Company’s unissued authorized shares available~~$0.

~~NOTE~~Stock option activities for the nine months ended 10September –30, ~~COMMITMENTS~~2023 ~~AND~~are ~~CONTINGENCIES~~summarized as follows:

Legal Matters

	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance Outstanding, December 31, 2022		8,445,698	$	0.40		3.43		-
Exercised		-		-		-		-
Balance Outstanding, September 30, 2023		8,445,698	$	0.40		2.60	$	-
Exercisable, September 30, 2023		8,445,698	$	0.40		2.60	$	-

From time to time, the Company may be involved in litigation related to claims arising out of its operations in the normal course of business. As of June 30, 2023, other than discussed below, the Company is not involved in any other pending or threatened legal proceedings that it believes could reasonably be expected to have a material adverse effect on its financial condition, results of operations, or cash flows.Warrants

~~On January~~Warrant ~~20,~~activities 2022, we received an Order Directing Examination and Designating Officers to Take Testimony (a “Formal Order”) from the SEC. The Formal Order authorizes that an examination be made to determine whether a stop order should be issued under Section 8(d) of the Securities Act of 1933 with respect to the Company’s Registration Statement on Form S-1, and any supplements and amendments thereto. The Formal Order indicates that the Form S-1 may be deficient in that it may contain untrue statements of material fact or omit to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading concerning, among other things, the Company’s revenue and financial condition. On April 15, 2022, the Company filed an amendment to its Annual Report on Form 10-K for the ~~fiscal~~nine ~~year~~months ended ~~December 31, 2020. The restatement had the cumulative effect~~September ~~of decreasing the Company’s reported revenue for Fiscal 2020 by $102~~30,~~569~~ ~~and~~2023 ~~decreasing~~are ~~the~~summarized ~~Company’s~~as bad debt expense for the same period by $102,569. There was no effect on Company’s reported net loss for Fiscal 2020 or on the financial condition of the Company on December 31, 2020. The Company received a subpoena from the SEC on April 25, 2022, requesting all documents and communications concerning the review of C-Bond’s revenue recognition practices for fiscal year 2020. The Company has provided the requested information and its Chief Executive Officer provided his testimony regarding this Formal Order in October 2022. The Company also filed a request to withdraw its Registration Statement on Form S-1 (“S-1”) (File No. 333-261472) (the “Registration Statement”), filed by the Company with the Securities and Exchange Commission on December 3, 2021. The S-1 related to shares of common stock underlying certain convertible promissory notes held by selling securityholders. The S-1 was not declared effective and no securities were sold in reliance thereon.follows:

	Number of Warrants		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Balance Outstanding December 31, 2022		34,000,000	$	0.011		3.73	$	-
Granted		-		-		-		-
Balance Outstanding September 30, 2023		34,000,000	$	0.011		2.99	$	-
Exercisable, September 30, 2023		34,000,000	$	0.011		2.99	$	-

~~C-BOND SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2023 (UNAUDITED)~~29

~~On March~~C-BOND 8SYSTEMS, ~~2021, a former officer of the Company resigned~~INC. AND ~~Both parties alleged certain claims against the other, including certain compensation~~SUBSIDIARIES ~~claims.~~NOTES ~~Neither~~TO ~~party~~CONSOLIDATED ~~has~~FINANCIAL ~~filed litigation. The Company intends to vigorously defend itself against any possible claims and assert any~~STATEMENTS ~~relevant~~SEPTEMBER ~~claims~~30, ~~against the former executive and believes it will prevail.~~2023 (UNAUDITED)

~~In July~~2018 ~~2021,~~Long-Term aIncentive former consultant of the Company filed a small claims case for approximately $16,000 in Harris County, TX, and the Company filed its response in August 2021. The Company has received a civil notice of trial setting for September 7, 2023. The individual served as a consultant and never an employee and the Company believes the claim is without merit. The Company intends to vigorously defend itself against the claim made and believes it will prevail. As of June 30, 2023 and December 31, 2022, the Company has accrued compensation of $18,250 to this former employee, which is included in accrued compensation on the accompanying unaudited consolidated balance sheets.Plan

~~Employment~~On June 7, 2018, a majority of the Company’s ~~Agreements~~shareholders and its board approved the adoption of a 2018 Long-Term Incentive Plan (the “2018 Plan”). The purpose of the 2018 Plan is to advance the interests of the Company, its affiliates and its stockholders and promote the long-term growth of the Company by providing employees, non-employee directors and third-party service providers with incentives to maximize stockholder value and to otherwise contribute to the success of the Company and its affiliates, thereby aligning the interests of such individuals with the interests of the Company’s stockholders and providing them additional incentives to continue in their employment or affiliation with the Company. The Plan was adopted on June 7, 2018 and effective on August 2, 2018. Under the 2018 Plan, the Plan Administrator may grant:

~~On October~~● ~~18,~~options ~~2017,~~to acquire the Company’s ~~entered~~common ~~into~~stock, anboth ~~employment~~incentive ~~agreement~~stock ~~with~~options ~~Mr.~~that ~~Scott~~are ~~Silverman,~~intended ~~pursuant~~ to satisfy the requirements of Section 422 of the Internal Revenue Code and nonqualified stock options which heare ~~serves~~not asintended to satisfy such requirements. The exercise price of options granted under our 2018 Plan must at least be equal to the ~~Chief Executive~~fair ~~Officer~~market value of the Company’s ~~for~~common anstock ~~initial~~on the date of grant and the term of ~~three~~an option may not exceed ten years, except that ~~extends~~with ~~for~~respect ~~successive~~to ~~one-year~~an ~~renewal~~incentive ~~terms~~stock ~~unless~~option ~~either party~~granted ~~gives~~to ~~30-days’~~any ~~advance~~employee ~~notice~~who owns more than 10% of ~~non-renewal.~~the Asvoting ~~consideration~~power ~~for~~of ~~these~~all ~~services,~~classes of the ~~employment~~Company’s ~~agreement~~outstanding ~~provides~~stock ~~Mr. Silverman~~as ~~with~~of the ~~following~~grant ~~compensation~~date the term must not exceed five years and ~~benefits:~~ the exercise price must equal at least 110% of the fair market value on the grant date.

● Anstock ~~annual~~appreciation ~~base~~rights, ~~salary~~or ~~of $300~~SARs,~~000,~~ ~~with~~which aallow ~~10%~~the ~~increase~~recipient onto ~~each~~receive ~~anniversary date contingent upon achieving certain performance objectives as set by~~ the ~~Board.~~appreciation ~~Until~~in the ~~Company~~fair ~~raises~~market ~~$1,000,000~~value ~~in debt or equity financing after entering into this agreement, Mr. Silverman will receive ½~~ of the ~~base~~Company’s ~~salary~~common onstock abetween ~~monthly basis with~~ the ~~other~~date ½of ~~being~~grant ~~deferred.~~and ~~Upon~~ the ~~financing~~exercise ~~being raised, Mr~~date. ~~Silverman~~The ~~will~~amount ~~receive~~payable under the ~~deferred~~stock ~~portion~~appreciation ofright ~~his~~may ~~compensation and his base salary will~~ be paid in ~~full~~cash ~~moving~~or ~~forward.~~with ●shares ~~After the first $500,000~~ of ~~equity investments is raised by~~ the Company,’s ~~after~~common ~~entering into this employment agreement~~stock, ~~Mr.~~or ~~Silverman will receive~~ a ~~capital~~combination ~~raise~~thereof, ~~success bonus of 5% of all equity capital raised from investors/lenders introduced by him to the Company. ● Annual cash performance bonus opportunity~~ as determined by the ~~Board~~Administrator.

	●	An option to acquire 3,000,000 common shares of the Company, with a strike price of $0.31 per unit. These options vested pro rata on a monthly basis for the term of the employment agreement. On each anniversary, Mr. Silverman will be eligible to be granted a minimum of 500,000 stock options of the Company at a strike price of $0.85 per common unit contingent upon the achievement of certain performance objectives.
	●	Certain other employee benefits and perquisites, including reimbursement of necessary and reasonable travel and participation in retirement and welfare benefits.

	●	restricted stock awards, which are awards of the Company’s shares of common stock that vest in accordance with terms and conditions established by the Administrator.

	●	restricted stock units, which are awards that are based on the value of the Company’s common stock and may be paid in cash or in shares of the Company’s common stock.

	●	other types of stock-based or stock-related awards not otherwise described by the terms and provision of the 2018 Plan, including the grant or offer for sale of unrestricted shares of the Company’s common stock, and which may involve the transfer of actual shares of the Company’s common stock or payment in cash or otherwise of amounts based on the value of shares of the Company’s common stock and may be designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.

	●	other cash-based awards to eligible persons in such amounts and upon such terms as the Administrator shall determine.

~~The~~An award granted under the 2018 Plan must include ~~receipt~~a minimum vesting period of $1 at least one year,~~240~~ provided,~~000~~ inhowever, ~~connection~~that ~~with~~an award may provide that the ~~April~~award ~~25,~~will ~~2018~~vest ~~financing~~before ~~triggered~~the completion of such one-year period upon the ~~right~~death or qualifying disability of the ~~employee~~grantee toof ~~receive~~the award or a change of control of the ~~deferred salary~~Company and awards covering, in the 5%aggregate, ~~bonus~~25,000,000 ~~provision~~shares ~~disclosed~~of ~~above~~our Common Stock may be issued without any minimum vesting period.

33The aggregate number of shares of common stock and number of shares of the Company’s common stock that may be subject to incentive stock options granted under the 2018 Plan is 50,000,000 shares, of which 11,445,698 shares have been issued or granted under incentive stock options and 29,451,070 shares of restricted stock have been issued as of September 30, 2023. All shares underlying grants are expected to be issued from the Company’s unissued authorized shares available.

~~C-BOND SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE~~ 30~~, 2023 (UNAUDITED)~~

~~Mr. Silverman’s~~C-BOND ~~employment agreement provides that~~SYSTEMS, ~~in the event that his employment is terminated by the Company without “cause” (as defined in his employment agreement), or if Mr~~INC. ~~Silverman resigned for “good reasons” (as defined in his new employment~~ ~~agreement),~~AND ~~subject to a complete release of claims, he will be entitled to (i) retain all stock options previously granted; and (ii)~~SUBSIDIARIES ~~receive~~NOTES ~~any~~TO ~~benefits~~CONSOLIDATED ~~then~~FINANCIAL ~~owed or accrued along with one year of base salary and any unreimbursed expenses incurred by him. All amounts~~STATEMENTS ~~shall~~SEPTEMBER ~~be paid on the termination date. In the event that Mr. Silverman’s employment is terminated by the Company for “cause” (as defined in his employment agreement)~~30, ~~or if Mr. Silverman resigned without “good reasons” (as defined in his employment~~2023 agreement), subject to a complete release of claims, he will be entitled to receive any unpaid base salary and benefits then owed or accrued and any unreimbursed expenses incurred by him. Additionally, if a change of control (~~as defined in his employment agreement~~UNAUDITED) occurs during the term of this agreement, all unvested stock options will vest in full and if the valuation of the Company in the change of control transaction is greater than $0.85 per common share, then Mr. Silverman shall be paid a bonus equal to two times his minimum base salary and minimum target bonus. Pursuant to the employment agreement, Mr. Silverman will be subject to a confidentiality covenant, a two-year post-termination non-competition covenant and a two-year post-termination non-solicitation covenant. On June 30, 2020, the Company amended the employment agreement of Mr. Silverman to provide for successive one-year extensions until either the executive or the Board of Directors of the Company gives notice to terminate the employment agreement per its terms. This employment agreement amendment also includes an allowance of up to $10,000 per year to cover uncovered medical/dental expenses for Mr. Silverman and his family.

~~On January~~NOTE ~~18,~~10 ~~2021,~~– ~~the~~COMMITMENTS ~~Company’s~~AND ~~board of directors approved a bonus to officers and an employee of the Company in the aggregate amount of $330,000 which deferred and recorded as accrued compensation on the bonus approval date.~~CONTINGENCIES

~~On July~~Legal 21, 2021, the Company entered into the Employment Agreement with Mr. Wanke, the President of Mobile, to serve as the President of C-Bond’s Safety Solutions Group. Under the three-year Employment Agreement, Mr. Wanke will receive a base salary of $240,000 per year, which may be increased from time to time with the approval of the board of directors. In addition, Mr. Wanke may receive an annual bonus as determined by the board of directors. It is understood that although Mr. Wanke’s base salary will be paid by Mobile, 50% of the base salary will be allocated to the expenses of Mobile, and the other 50% of the base salary will be allocated to the expenses of the Company. The term of this Agreement (the “Initial Term”) shall begin as of July 21, 2021 (the “Effective Date”) and shall end on the earlier of (i) the third anniversary of the Effective Date and (ii) the time of the termination of the Executive’s employment in accordance with the Employment Agreement. This Initial Term and any Renewal Term (as defined below) shall automatically be extended for one or more additional terms of one (1) year each (each a “Renewal Term” and together with the Initial Term, the “Term”), unless either the Company or Executive provide notice to the other Party of their desire to not so renew the Initial Term or Renewal Term (as applicable) at least thirty (30) days prior to the expiration of the then-current Initial Term or Renewal Term, as applicable. All unvested shares of stock and stock options shall expire upon such termination, if any. The Executive shall be eligible for an annual bonus payment in an amount to be determined by the Board of Directors of the Company (the “Bonus”). The Bonus shall be determined and payable based on the achievement of certain performance objectives of the Company as established by the Board and communicated to and agreed to by the Executive in writing as soon as practicable after commencement of the year in respect of which the Bonus is paid. The Bonus, if earned, is payable in cash and/or restricted stock at the discretion of the Board. It is understood between the Parties that the target bonus for each year shall be up to 50% of the Base Salary.Matters

~~On December~~From 7,time ~~2022~~to time, the Company’s ~~board~~may ofbe ~~directors~~involved in ~~approved~~litigation arelated ~~bonus~~ to ~~certain~~claims ~~officers~~arising inout ~~the aggregate amount~~ of ~~$160,000.~~its ~~This bonus~~operations ~~will be paid 10%~~ in ~~cash~~the ~~($16,000)~~normal ~~which~~course ~~was paid in December 2022 and 90% in equity amounting to $144,000 which as~~ of ~~December 31,~~business. ~~2022~~As ~~had been accrued and as~~ of ~~December~~September 3130, ~~2022~~2023, ~~was~~other ~~included~~than ~~in accrued compensation on the accompanying consolidated balance~~discussed ~~sheet. On January 17~~below, ~~2023,~~ the ~~Board of Directors of the~~ Company ~~agreed~~is tonot ~~satisfy~~involved ~~$144,000~~in ofany ~~the~~other ~~bonus~~pending ~~owed~~or tothreatened ~~its~~legal ~~executive~~proceedings ~~officers (collectively,~~that ~~the~~it ~~“Management”).~~believes ~~Management~~could ~~agreed~~reasonably be expected to ~~accept~~have ~~144~~a ~~shares~~material ofadverse ~~the~~effect ~~Company’s~~on ~~Series~~its Bfinancial ~~convertible~~condition, ~~preferred stock~~results ~~in settlement~~ of ~~this~~operations, ~~accrued~~or ~~compensation~~cash flows.

~~Licensing~~On January 20, 2022, we received an Order Directing ~~agreement~~Examination and Designating Officers to Take Testimony (a “Formal Order”) from the SEC. The Formal Order authorizes that an examination be made to determine whether a stop order should be issued under Section 8(d) of the Securities Act of 1933 with respect to the Company’s Registration Statement on Form S-1, and any supplements and amendments thereto. The Formal Order indicates that the Form S-1 may be deficient in that it may contain untrue statements of material fact or omit to state material facts necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading concerning, among other things, the Company’s revenue and financial condition. On April 15, 2022, the Company filed an amendment to its Annual Report on Form 10-K for the fiscal year ended December 31, 2020. The restatement had the cumulative effect of decreasing the Company’s reported revenue for Fiscal 2020 by $102,569 and decreasing the Company’s bad debt expense for the same period by $102,569. There was no effect on the Company’s reported net loss for Fiscal 2020 or on the financial condition of the Company on December 31, 2020. The Company received a subpoena from the SEC on April 25, 2022, requesting all documents and communications concerning the review of C-Bond’s revenue recognition practices for fiscal year 2020. The Company has provided the requested information and its Chief Executive Officer provided his testimony regarding this Formal Order in October 2022. The Company also filed a request to withdraw its Registration Statement on Form S-1 (“S-1”) (File No. 333-261472) (the “Registration Statement”), filed by the Company with the Securities and Exchange Commission on December 3, 2021. The S-1 related to shares of common stock underlying certain convertible promissory notes held by selling securityholders. The S-1 was not declared effective and no securities were sold in reliance thereon.

~~Pursuant to~~On anMarch ~~agreement dated April~~ 8, ~~2016~~2021, ~~between the Company and Rice University, Rice University has granted~~ a ~~non-exclusive~~former ~~license~~officer to of the Company~~, in nanotube-based surface treatment for strengthening glass and related materials under Rice’s intellectual property~~ ~~rights,~~resigned. toBoth ~~use,~~parties ~~make,~~alleged ~~distribute,~~certain ~~offer~~claims ~~and~~against ~~sell~~ the ~~licensed~~other, ~~products~~including ~~specified~~certain incompensation ~~the agreement~~claims. InNeither ~~consideration~~party ~~for~~has ~~which,~~filed ~~the~~litigation. The Company ~~had~~ intends to ~~pay~~vigorously adefend ~~one-time~~itself ~~non-refundable~~against ~~license~~any ~~fee~~possible ofclaims ~~$10,000~~ and ~~royalty~~assert ~~payments~~any ofrelevant 5%claims ofagainst ~~net sales of~~ the ~~licensed~~former ~~products during the~~executive ~~term of the agreement~~ and abelieves ~~sell-off~~it ~~period of 180 days from termination, In addition, the Company is required to pay for the maintenance of the patents, This agreement~~ will ~~continue until the expiration of the last to expire of the licensed property rights, unless terminated earlier in accordance with the terms of the agreement~~prevail. ~~There have been no royalty payments paid or due through June 30, 2023.~~

34In July 2021, a former consultant of the Company filed a small claims case for approximately $16,000 in Harris County, TX, and the Company filed its response in August 2021. The Company received a civil notice of trial setting for September 7, 2023. On September 7, 2023, the Company and the former consultant entered into a settlement agreement, whereby the Company paid $9,000 as full settlement of this claim. Accordingly, the Company recorded a gain on debt extinguishment of $9,250. As of September 30, 2023 and December 31, 2022, the Company has accrued compensation of $0 and $18,250 to this former employee, which is included in accrued compensation on the accompanying unaudited consolidated balance sheets.

~~C-BOND SYSTEMS,~~Employment ~~INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2023 (UNAUDITED)~~Agreements

~~Anti-dilution~~On October 18, 2017, the Company entered into ~~rights~~an ~~related~~employment agreement with Mr. Scott Silverman, pursuant to Cwhich he serves as the Chief Executive Officer of the Company for an initial term of three years that extends for successive one-~~Bond~~year ~~Systems~~renewal terms unless either party gives 30-days’ advance notice of non-renewal. As consideration for these services, ~~LLC~~the employment agreement provides Mr. Silverman with the following compensation and benefits:

~~Prior to~~● ~~the~~An ~~Merger,~~annual ~~C-Bond~~base ~~Systems~~salary of $300,000, ~~LLC~~with ~~entered~~a ~~into~~10% increase on each anniversary date contingent upon achieving certain ~~contracts~~performance objectives as set by the Board. Until the Company raises $1,000,000 ~~described~~in ~~below~~debt or equity financing after entering into this agreement, ~~which~~Mr. ~~provided~~Silverman ~~certain~~will ~~anti-dilution~~receive ~~protection~~½ to of the ~~counterparties~~base tosalary ~~those~~on ~~contracts~~a monthly basis with the other ½ being deferred. ~~The~~ ~~Company~~Upon ~~believes~~the ~~that~~financing ~~these~~being ~~contracts~~raised, doMr. ~~not~~Silverman ~~apply~~will toreceive ~~any~~the ~~future~~deferred ~~issuances~~portion of his compensation and his base salary will be paid in full moving forward. ● After the first $500,000 of equity investments is raised by ~~C-Bond~~the ~~Systems~~Company, ~~Inc~~after entering into this employment agreement, Mr. Silverman will receive a capital raise success bonus of 5% of all equity capital raised from investors/lenders introduced by him to the Company. ● Annual cash performance bonus opportunity as determined by the Board.

~~In 2013,~~● ~~pursuant~~An option to aacquire ~~subscription agreement~~3, ~~the Company’s subsidiary. C-Bond Systems~~000,000 ~~LLC issued 2,425,300~~ common shares. ~~To the extent that during the term~~ of the ~~agreement C-Bond Systems~~Company, ~~LLC~~with ~~issues~~a ~~any~~strike ~~“down-round”~~price ~~or subsequent investments based upon an enterprise value~~ of ~~less than~~ $~~2,000,000~~0.31 ~~(“Dilutive~~per ~~Transaction”)~~unit. ~~(other~~These ~~than~~options anvested ~~issuance~~pro ~~pursuant~~rata toon ana ~~option~~monthly ~~agreement with~~basis anfor ~~employee~~the orterm ~~otherwise to compensate an employee, or incident to an acquisition~~ of ~~assets by C-Bond Systems, LLC in which common units were issued to~~ the ~~seller~~employment ofagreement. ~~such~~On ~~assets)~~each ~~contemporaneously with the Dilutive Transaction~~anniversary, ~~the~~Mr. ~~contract~~Silverman ~~obligated~~will ~~C-Bond~~be ~~Systems, LLC~~eligible to ~~issue~~be ~~the~~granted ~~investor~~a ~~additional~~minimum ~~common~~of ~~units in C-Bond Systems~~500,000 ~~LLC~~stock inoptions anof ~~amount which would provide them with~~ the ~~ownership~~Company ~~percentage interest~~at ~~which~~a ~~they~~strike ~~would~~price ~~have~~of ~~held~~$0.85 inper ~~C-Bond~~common ~~Systems,~~unit ~~LLC~~contingent ~~represented~~upon by the ~~common~~achievement ~~units~~of ~~purchased~~certain byperformance ~~them on this date~~objectives.

~~In 2015,~~● ~~pursuant~~Certain to a subscription agreement, C-Bond Systems, LLC issued 3,880,480 common shares to an entity at $0.77 per common share. This agreement entitled the subscriber to anti-dilution protection to the extent that C-Bond Systems, LLC issued any equity in a “down-round” based upon a value of less than $0.77 per common unit of C-Bond Systems, LLC (other ~~than an issuance pursuant to an option agreement with an~~ employee orbenefits ~~consultant~~and ~~or otherwise to compensate an employee or consultant~~perquisites, orincluding ~~incident~~reimbursement ~~to an acquisition~~ of ~~assets~~necessary byand ~~C-Bond Systems,~~reasonable ~~LLC~~travel inand ~~which~~participation common units are issued to the seller of such assets (“Dilutive Transaction”)). Contemporaneously with the Dilutive Transaction, the contract obligated C-Bond Systems, LLC to issue the Subscriber additional common units in ~~C-Bond~~retirement ~~Systems, LLC~~and inwelfare ~~an amount which would provide the investor with the ownership percentage interest in C-Bond Systems, LLC on a fully diluted basis which Subscriber held immediately prior to the Dilutive Transaction~~benefits.

~~In 2016,~~The ~~pursuant~~receipt to a subscription agreement, C-Bond Systems, LLC issued 1,175,902 common shares to an entity at $0.85 per common share. This agreement entitled this investor to customary broad-based weighted average anti-dilution protection to the extent that after the date of ~~this subscription agreement C-Bond Systems, LLC issued any equity in a “down round” based upon a value of less than~~ $~~0.85 per common share~~1, ~~including the issuance of options with an exercise price per share of less than $0.85 to compensate employees or consultants (“Dilutive Transaction”)~~240,000 ~~subject to exclusions for issuances of common shares or options~~ in connection ~~with~~ ~~strategic~~with ~~partnerships,~~the ~~equity~~April ~~kickers to lenders or vendors~~25, ~~mergers~~2018 orfinancing ~~acquisitions.~~triggered The agreement obligated C-Bond Systems, LLC to give to this investor written notice (an “Issuance Notice”) of any proposed issuance by C-Bond Systems, LLC of any C-Bond Systems, LLC common units, or other form of equity interest (excluding issuances of C-Bond Systems, LLC options or other equity to compensate employees or consultants and the ~~issuance~~right of ~~shares in connection with strategic partnerships, equity kickers to lenders or vendors, mergers or acquisitions) at least ten business days prior to~~ the ~~proposed~~employee ~~issuance date. This contract entitled the investor~~ to ~~purchase their~~receive ~~pro rata portion of such shares or other equity interest of C-Bond Systems, LLC at~~ the ~~price~~deferred salary and on the ~~other~~5% ~~terms~~bonus ~~and~~provision ~~conditions~~disclosed ~~specified in the issuance notice~~above.

~~NOTE 11 – CONCENTRATIONS~~31

~~Concentrations~~C-BOND SYSTEMS, INC. OfAND ~~Credit~~SUBSIDIARIES NOTES ~~Risk~~TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2023 (UNAUDITED)

~~Financial~~Mr. Silverman’s employment agreement provides ~~instruments~~that, in the event that ~~potentially~~his ~~subject~~employment is terminated by the Company without “cause” (as defined in his employment agreement), or if Mr. Silverman resigned for “good reasons” (as defined in his new employment agreement), subject to ~~concentrations~~a complete release of ~~credit~~claims, ~~risk~~he ~~consist~~will ~~primarily~~be ofentitled ~~trade~~to ~~accounts~~(i) ~~receivable~~retain all stock options previously granted; and ~~cash~~ ~~deposits.~~(ii) ~~The~~receive ~~Company~~any ~~places~~benefits ~~its~~then ~~cash~~owed inor ~~banks~~accrued along atwith ~~levels~~one ~~that,~~year atof ~~times,~~base ~~may~~salary ~~exceed~~and ~~federally~~any ~~insured~~unreimbursed ~~limits~~expenses incurred by him. OnAll ~~June~~amounts ~~30,~~shall ~~2023,~~be paid on the termination date. In the event that Mr. Silverman’s employment is terminated by the Company ~~had~~for ~~cash~~“cause” (as defined in ~~bank~~his employment agreement), or if Mr. Silverman resigned without “good reasons” (as defined in ~~excess~~his ofemployment ~~FDIC~~agreement), ~~insured~~subject ~~levels~~to a complete release of $1claims,~~157,360.~~ Tohe ~~reduce~~will ~~its~~be ~~risk~~entitled ~~associated~~to ~~with~~receive ~~the~~any ~~failure~~unpaid ofbase ~~such~~salary ~~financial~~and benefits then owed or accrued and any unreimbursed expenses incurred ~~institution~~by him. Additionally, ~~the~~if ~~Company~~a ~~evaluates~~change atof ~~least~~control ~~annually~~(as defined in his employment agreement) occurs during the ~~rating~~term of ~~the~~this ~~financial~~agreement, ~~institution~~all inunvested stock ~~which~~options itwill ~~holds~~vest ~~deposits.~~in ~~Any~~full ~~material loss~~and ~~that~~if the ~~Company~~valuation ~~may~~of ~~experience~~the Company in the ~~future~~change ~~could~~of ~~have~~control antransaction ~~adverse~~is ~~effect~~greater onthan ~~its~~$0.85 ~~ability~~per tocommon share, ~~pay~~then ~~its~~Mr. ~~operational~~Silverman ~~expenses~~shall orbe ~~make other~~paid ~~payments~~a bonus equal to two times his minimum base salary and ~~may~~minimum ~~require~~target ~~the~~bonus. ~~Company~~Pursuant to ~~move~~the ~~its~~employment agreement, ~~cash~~Mr. Silverman will be subject to ~~other~~a ~~high~~confidentiality ~~quality~~covenant, ~~financial~~a ~~institutions. The~~two-year ~~Company~~post-termination ~~reviews~~non-competition covenant and a two-year ~~its~~post-termination ~~bank~~non-solicitation ~~relationships~~covenant. inOn ~~order~~June to30, ~~mitigate~~2020, ~~its~~the ~~risk~~Company amended the employment agreement of Mr. Silverman to ~~ensure~~provide for ~~that~~successive ~~its~~one-year ~~exposure~~extensions isuntil ~~limited~~either the executive or ~~reduced~~the Board of Directors of the Company gives notice to terminate the ~~FDIC~~employment agreement ~~protection~~per ~~limits~~its terms. ~~The~~ ~~Company~~This ~~has~~employment ~~not~~agreement ~~experienced~~amendment ~~any~~also ~~losses~~includes inan ~~such~~allowance ~~accounts~~of ~~through~~up ~~June~~to 30$10,000 ~~2023~~per year to cover uncovered medical/dental expenses for Mr. Silverman and his family.

35On January 18, 2021, the Company’s board of directors approved a bonus to officers and an employee of the Company in the aggregate amount of $330,000 which deferred and recorded as accrued compensation on the bonus approval date.

On July 21, 2021, the Company entered into the Employment Agreement with Mr. Wanke, the President of Mobile, to serve as the President of C-~~BOND~~Bond’s Safety Solutions Group. Under ~~SYSTEMS~~the three-year Employment Agreement, ~~INC~~Mr. ~~AND~~Wanke ~~SUBSIDIARIES~~will receive a base salary of $240,000 per year, which may be increased from time to time ~~NOTES~~with TOthe ~~CONSOLIDATED~~approval ~~FINANCIAL~~of ~~STATEMENTS~~the board of directors. In addition, Mr. Wanke may receive an annual bonus as determined by the board of directors. ~~JUNE~~It is understood that although Mr. Wanke’s base salary will be paid by Mobile, 50% of the base salary will be allocated to the expenses of Mobile, and the other 50% of the base salary will be allocated to the expenses of the Company. The term of this Agreement (the “Initial Term”) shall begin as of July 21, 2021 (the “Effective Date”) and shall end on the earlier of (i) the third anniversary of the Effective Date and (ii) the time of the termination of the Executive’s employment in accordance with the Employment Agreement. This Initial Term and any Renewal Term (as defined below) shall automatically be extended for one or more additional terms of one (1) year each (each a “Renewal Term” and together with the Initial Term, the “Term”), unless either the Company or Executive provide notice to the other Party of their desire to not so renew the Initial Term or Renewal Term (as applicable) at least thirty (30) days prior to the expiration of the then-current Initial Term or Renewal Term, ~~2023~~as applicable. All unvested shares of stock and stock options shall expire upon such termination, if any. The Executive shall be eligible for an annual bonus payment in an amount to be determined by the Board of Directors of the Company (~~UNAUDITED~~the “Bonus”). The Bonus shall be determined and payable based on the achievement of certain performance objectives of the Company as established by the Board and communicated to and agreed to by the Executive in writing as soon as practicable after commencement of the year in respect of which the Bonus is paid. The Bonus, if earned, is payable in cash and/or restricted stock at the discretion of the Board. It is understood between the Parties that the target bonus for each year shall be up to 50% of the Base Salary.

~~Geographic~~On December 7, 2022, the Company’s board ~~Concentrations~~of directors approved a bonus to certain officers in the aggregate amount of ~~Sales~~$160,000. This bonus will be paid 10% in cash ($16,000) which was paid in December 2022 and 90% in equity amounting to $144,000 which as of December 31, 2022 had been accrued and as of December 31, 2022, was included in accrued compensation on the accompanying consolidated balance sheet. On January 17, 2023, the Board of Directors of the Company agreed to satisfy $144,000 of the bonus owed to its executive officers (collectively, the “Management”). Management agreed to accept 144 shares of the Company’s Series B convertible preferred stock in settlement of this accrued compensation.

~~During the~~Licensing ~~six months ended June 30, 2023 and 2022, all sales were in the United States.~~agreement

~~Customer~~Pursuant to an agreement dated April 8, 2016, ~~Concentrations~~between the Company and Rice University, Rice University has granted a non-exclusive license to the Company, in nanotube-based surface treatment for strengthening glass and related materials under Rice’s intellectual property rights, to use, make, distribute, offer and sell the licensed products specified in the agreement. In consideration for which, the Company had to pay a one-time non-refundable license fee of $10,000 and royalty payments of 5% of net sales of the licensed products during the term of the agreement and a sell-off period of 180 days from termination, In addition, the Company is required to pay for the maintenance of the patents, This agreement will continue until the expiration of the last to expire of the licensed property rights, unless terminated earlier in accordance with the terms of the agreement. There have been no royalty payments paid or due through September 30, 2023.

~~For the~~Anti-dilution ~~six~~rights ~~months~~related ~~ended~~to ~~June~~C-Bond 30Systems, ~~2023, one customer accounted for approximately 14.8% of total sales. For the six months ended June 30,~~ 2022, no customer accounted for over 10% of total sales. On June 30, 2023, two customers accounted for 27.8% (10.9% and 16.9%, respectively) of the total accounts receivable balance. On December 31, 2022, three customers accounted for 41.1% (10.3%, 19.3% and 11.5%, respectively) of the total accounts receivable balance.LLC

~~Vendor~~Prior to the Merger, C-Bond Systems, LLC entered ~~concentrations~~into certain contracts, described below, which provided certain anti-dilution protection to the counterparties to those contracts. The Company believes that these contracts do not apply to any future issuances of equity by C-Bond Systems, Inc.

~~Generally~~In 2013, pursuant to a subscription agreement, the Company’s ~~purchases~~subsidiary. ~~substantially~~C-Bond ~~all~~Systems, LLC issued 2,425,300 common shares. To the extent that during the term of ~~its~~the ~~inventory~~agreement C-Bond ~~from~~Systems, ~~five~~LLC ~~suppliers.~~issues ~~The~~any ~~loss~~“down-round” or subsequent investments based upon an enterprise value of ~~these~~less ~~suppliers~~than ~~may~~$2,000,000 (“Dilutive ~~have~~Transaction”) a(other ~~material~~than ~~adverse~~an issuance pursuant to an option agreement with an employee or otherwise to compensate ~~effect~~an onemployee, ~~the~~or ~~Company’s~~incident ~~consolidated~~to ~~results~~an acquisition of ~~operations~~assets ~~and~~by ~~financial~~C-Bond ~~condition. However~~Systems, LLC in which common units were issued to the ~~Company~~seller ~~believes~~of ~~that~~such assets) contemporaneously with the Dilutive Transaction, ifthe ~~necessary~~contract obligated C-Bond Systems, LLC to issue the investor additional common units ~~alternate~~in ~~vendors~~C-Bond ~~could~~Systems, ~~supply~~LLC ~~similar~~in ~~products~~an amount which would provide them with the ownership percentage interest which they would have held in ~~adequate~~C-Bond Systems, ~~quantities~~LLC torepresented ~~avoid~~by ~~material~~the ~~disruptions~~common tounits ~~operations~~purchased by them on this date.

~~NOTE 12 – SEGMENT REPORTING~~32

~~During the~~C-BOND ~~six months ended June 30~~SYSTEMS, ~~2023~~INC. AND ~~and 2022, the Company operated in two reportable business segments - (1) the manufacture and sale~~SUBSIDIARIES ofNOTES aTO ~~windshield~~CONSOLIDATED ~~strengthening~~FINANCIAL ~~water repellent solution as well as a disinfection product, and the sale of multi-purpose glass strengthening~~STATEMENTS ~~primer~~SEPTEMBER ~~and window film mounting solutions~~30, ~~including ballistic-resistant film systems and a forced entry system (the “C-Bond Segment”),~~2023 ~~and~~ (2UNAUDITED) the distribution and installation of window film solutions (the “Mobile Tint Segment”). The Company’s reportable segments were strategic business units that offered different products. They were managed separately based on the fundamental differences in their operations and locations.

~~Information~~In 2015, pursuant to a subscription agreement, C-Bond Systems, LLC issued 3,880,480 common shares to an entity at $0.77 per common share. This agreement entitled the subscriber to anti-dilution protection to the extent that C-Bond Systems, LLC issued any equity in a “down-round” based upon a value of less than $0.77 per common unit of C-Bond Systems, LLC (other than an issuance pursuant to an option agreement with ~~respect~~an employee or consultant or otherwise to ~~these~~compensate ~~reportable~~an ~~business~~employee ~~segments~~or ~~for~~consultant, or incident to an acquisition of assets by C-Bond Systems, LLC in which common units are issued to the ~~three~~seller ~~and~~of ~~six~~such ~~months~~assets ~~ended~~(“Dilutive ~~June~~Transaction”)). 30Contemporaneously with the Dilutive Transaction, ~~2023~~the ~~and~~contract ~~2022~~obligated C-Bond ~~was~~Systems, asLLC ~~follows:~~ to issue the Subscriber additional common units in C-Bond Systems, LLC in an amount which would provide the investor with the ownership percentage interest in C-Bond Systems, LLC on a fully diluted basis which Subscriber held immediately prior to the Dilutive Transaction.

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2023			2022			2023			2022
Revenues:
C-Bond	$	31,166		$	78,805		$	124,372		$	177,974
Mobile Tint		382,889			461,562			804,903			873,102
		414,055			540,367			929,275			1,051,076
Depreciation and amortization:
C-Bond		132			2,138			569			4,432
Mobile Tint		20,413			20,617			40,826			41,233
		20,545			22,755			41,395			45,665
Interest expense:
C-Bond		357			-			357			-
Mobile Tint		6,655			4,942			11,798			8,656
Other (a)		161,141			358,596			355,483			603,462
		168,153			363,538			367,638			612,118
Net income (loss):
C-Bond		3,759,343			(242,893	)		3,483,967			(528,615	)
Mobile Tint		(93,201	)		(50,326	)		(176,813	)		(115,428	)
Other (a)		108,131			(716,133	)		(255,968	)		(2,284,728	)
	$	3,774,273		$	(1,009,352	)	$	3,051,186		$	(2,928,771	)

In 2016, pursuant to a subscription agreement, C-Bond Systems, LLC issued 1,175,902 common shares to an entity at $0.85 per common share. This agreement entitled this investor to customary broad-based weighted average anti-dilution protection to the extent that after the date of this subscription agreement C-Bond Systems, LLC issued any equity in a “down round” based upon a value of less than $0.85 per common share, including the issuance of options with an exercise price per share of less than $0.85 to compensate employees or consultants (“Dilutive Transaction”), subject to exclusions for issuances of common shares or options in connection with strategic partnerships, equity kickers to lenders or vendors, mergers or acquisitions. The agreement obligated C-Bond Systems, LLC to give to this investor written notice (an “Issuance Notice”) of any proposed issuance by C-Bond Systems, LLC of any C-Bond Systems, LLC common units, or other form of equity interest (excluding issuances of C-Bond Systems, LLC options or other equity to compensate employees or consultants and the issuance of shares in connection with strategic partnerships, equity kickers to lenders or vendors, mergers or acquisitions) at least ten business days prior to the proposed issuance date. This contract entitled the investor to purchase their pro rata portion of such shares or other equity interest of C-Bond Systems, LLC at the price and on the other terms and conditions specified in the issuance notice.

36Option to purchase 20% of Mobile Tint

~~C-BOND~~In connection with the Exchange Agreement with ~~SYSTEMS~~Mobile and the Mobile Shareholder (See Note 1), ~~INC.~~the ~~AND~~Company ~~SUBSIDIARIES~~had the option to acquire the remaining 20% of Mobile’s issued and outstanding ~~NOTES~~membership TOinterests ~~CONSOLIDATED~~in ~~FINANCIAL~~exchange ~~STATEMENTS~~for a number of shares of the Company’s common stock equal to 300% of Mobile’s average EBIT ~~JUNE~~value, 30divided by the price of the Company’s common stock as defined in the Exchange Agreement. On September 20, 2023, the Company and the Mobile Shareholder entered into an amendment to the Exchange Agreement (~~UNAUDITED~~the “Amended Exchange Agreement”). Pursuant to the Amended Exchange Agreement, the Company shall have the option (the “Option”), beginning on July 1, 2025 (the “Option Start Date”) and ending on 5:00 P.M. EST on the date that is thirty calendar days after the Option Start Date (the “Option Period”), to acquire the remaining 20% of Mobile Units (the “Additional Units”), representing 20% of Mobile’s issued and outstanding membership interests, collectively (the “Additional Closing”).

	June 30, 2023		December 31, 2022
Identifiable long-lived tangible assets on June 30, 2023 and December 31, 2022 by segment:
C-Bond	$	-	$	1,684
Mobile Tint		79,048		94,622
	$	79,048	$	96,306

If the Company exercises the Option, the Company shall acquire the Additional Units in exchange for (i) a number of shares of Company Common Stock equal to (a) the Share Value (as defined below) divided by (b) the Additional Closing Share Price (as defined below) (the “Additional Closing Exchange Shares”), and (ii) a cash payment equal to the Net Income (as below). “Total EBIT Value” shall mean the sum of (i) Mobile’s net income, before income tax expense and interest expense have been deducted, for the period beginning on July 1, 2023 and ending on June 30, 2025 plus (ii) $240,000. “EBIT Value” shall mean the Total EBIT Value divided by two (2). “Share Value” shall mean (i) 300% of the EBIT Value (the “Triple EBIT Value”), minus (ii) the Net Income. “Net Income” shall mean Mobile’s net income, after income tax expense and interest expense have been deducted, for the period beginning on July 1, 2023 and ending on June 30, 2025. Any salary paid by Mobile, including but not limited to any salary paid to the Mobile Shareholder, shall not be included in Net Income. If the Company Common Stock is quoted or listed for trading on a Trading Market on July 1, 2025, then “Additional Closing Share Price” shall mean the average of all of the closing prices of Company Common Stock on such Trading Market during the calendar month of June 2024.

~~(a)~~NOTE ~~The~~11 ~~Company~~– ~~does not allocate any general and administrative or financing expenses of its holding company activities to its reportable segments, because these activities are managed at the corporate level.~~CONCENTRATIONS

~~NOTE 13~~Concentrations –of ~~REVENUE~~Credit ~~RECOGNITION~~Risk

~~In connection~~Financial ~~with~~instruments ~~the Company’s C-Bond segment, the revenue~~ that ~~the~~potentially ~~Company recognizes arises from purchase requests the Company~~subject ~~receives from its customers. The Company’s performance obligations under purchase orders or by a verbal order correspond to each shipment of product that~~ the Company ~~makes~~ to ~~its~~concentrations ~~customer under the purchase order or verbal order. As a result, each purchase order or verbal order generally contains more than one performance obligation based on the number~~ of ~~products~~credit ~~ordered,~~risk ~~the~~consist ~~quantity~~primarily of ~~product to~~trade beaccounts ~~shipped~~receivable and ~~the~~cash ~~mode of shipment requested by the customer~~deposits. ~~Control~~The ~~of the~~ Company’s ~~products~~places ~~transfers to~~ its ~~customers~~ ~~when~~cash ~~the~~in ~~customer~~banks isat ~~able~~levels tothat, ~~direct~~at ~~the use of~~times, ~~and~~may ~~obtain~~exceed ~~substantially~~federally ~~all~~insured oflimits. ~~the~~On ~~benefits~~September ~~from~~30, 2023, the Company’s ~~products,~~had ~~which generally~~cash ~~occurs~~in atbank ~~the~~in ~~later~~ excess of ~~when~~FDIC ~~the~~insured ~~customer~~levels ~~obtains~~of ~~title~~$814,353. toTo ~~the~~reduce ~~product~~its ~~or when the customer assumes~~ risk ofassociated ~~loss~~with of the ~~product. The~~failure ~~transfer~~ of ~~control~~such ~~generally~~financial ~~occurs at a point of shipment from the Company’s warehouse. Once this occurs~~institution, the Company ~~has~~evaluates ~~satisfied~~at ~~its~~least ~~performance~~annually ~~obligation and~~ the ~~Company~~rating ~~recognizes~~of ~~revenue. In connection with~~ the ~~Company’s~~financial ~~C-Bond~~institution ~~segment, when~~in ~~the~~which ~~Company~~it ~~receives~~holds adeposits. ~~purchase~~Any ~~order~~material orloss ~~verbal~~that ~~order from a customer,~~ the Company ismay ~~obligated~~experience in ~~to provide~~ the ~~product~~future ~~during~~could ~~a mutually~~have ~~agreed~~an ~~upon~~adverse ~~time~~effect ~~period. Depending~~ on ~~the~~its ~~terms~~ability ofto ~~the~~pay ~~purchase~~its ~~order~~operational expenses or ~~verbal~~make ~~order,~~other ~~either~~payments ~~the~~and ~~Company~~may orrequire the ~~customer arranges~~Company ~~delivery~~to ofmove ~~the~~its ~~product~~cash to ~~the~~other ~~customer’s~~high ~~intended~~quality ~~destination~~financial institutions. The InCompany ~~situations~~reviews ~~where~~its ~~the~~bank ~~Company~~relationships ~~has~~in ~~agreed~~order to ~~arrange delivery~~mitigate ofits ~~the~~risk ~~product~~ to ~~the~~ensure ~~customer’s~~that ~~intended~~its ~~destination~~exposure ~~and~~is ~~control~~limited ofor ~~the~~reduced ~~product~~to ~~transfers upon loading of~~ the ~~Company’s product~~FDIC ~~onto~~protection ~~transportation~~limits. ~~equipment,~~The ~~the~~ Company has ~~elected~~not toexperienced ~~account for~~ any ~~freight~~losses ~~income associated with the delivery of these~~in ~~products~~such asaccounts ~~freight~~through ~~revenue~~September 30, ~~since this activity fulfills the Company’s obligation to transfer the product to the customer~~2023.

~~In connection~~Geographic ~~with~~Concentrations the Company’s Mobile Tint segment, the revenue that the Company recognizes arises from purchase requests the Company receives from its customers. The Company’s performance obligations under purchase order or a signed proposal correspond to each job for the distribution and installation of window film solutions. As a result, each purchase order or signed proposal generally may contain more than one performance obligation based on the specific job. Control of the Company’s products transfers to its customers when the customer is able to direct the use of, and obtain substantially all of the benefits from, the Company’s products, which generally occurs when the job or a specific portion of the job is completed. Once this occurs, the Company has satisfied its performance obligation and the Company recognizes revenue. Revenues from contracts for the distribution and installation of window film solutions are recognized over time on the basis of the Company’s estimates of the progress towards completion of contracts using various output of input methods including (1) the ratio of number of labor hours spent compared to the number of estimated labor hours to complete a job, (2) using the milestone method, or (3) using a units completed method. These methods are used because management considers these methods to be the best available measure of progress on these contracts.Sales

37During the nine months ended September 30, 2023 and 2022, all sales were in the United States.

~~C-BOND SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2023 (UNAUDITED)~~33

~~Transaction~~C-BOND SYSTEMS, INC. ~~Price~~AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2023 (UNAUDITED)

~~The Company~~Customer agrees with its customers on the selling price of each transaction. This transaction price is generally based on the product, market conditions, including supply and demand balances, labor costs, and freight. In the Company’s C-Bond contracts with customers, the Company allocates the entire transaction price to the sale of product to the customer, which is the basis for the determination of the relative standalone selling price allocated to each performance obligation. Returns of the Company’s product by its customers are permitted only when the product is not to specification and were not material for the six months ended June 30, 2023 and 2022. Any sales tax, value added tax, and other tax the Company collects concurrently with its revenue-producing activities are excluded from revenue.Concentrations

~~Revenue~~For the nine months ended September 30, 2023, ~~Disaggregation~~one customer accounted for approximately 12.9% of total sales. For the nine months ended September 30, 2022, one customer accounted for 10% of total sales. On September 30, 2023, three customers accounted for 63.9% (25.5%, 10.3% and 28.1%, respectively) of the total accounts receivable balance. On December 31, 2022, three customers accounted for 41.1% (10.3%, 19.3% and 11.5%, respectively) of the total accounts receivable balance.

~~The Company~~Vendor ~~tracks its revenue by product. The following table summarizes our revenue by product for the six months ended June 30, 2023 and 2022:~~ concentrations

	For the Six Months Ended June 30,
	2023		2022
C-Bond Secure multi-purpose and BRS ballistic resistant glass protection systems	$	9,709	$	57,670
C-Bond nanoShield solution sales (See Note 16)		112,413		145,236
Disinfection products		-		10,880
C-Bond installation and other services		-		40
Window tint installation and sales recognized over time		804,903		835,139
Freight and delivery		2,250		2,111
Total	$	929,275	$	1,051,076

Generally, the Company purchases substantially all of its inventory from five suppliers. The loss of these suppliers may have a material adverse effect on the Company’s consolidated results of operations and financial condition. However, the Company believes that, if necessary, alternate vendors could supply similar products in adequate quantities to avoid material disruptions to operations.

NOTE 14 12 – ~~OPERATING~~SEGMENT ~~LEASE RIGHT-OF-USE (“ROU”) ASSETS AND OPERATING LEASE LIABILITIES~~REPORTING

~~In October~~Through ~~2019~~May 8, 2023, the ~~Company~~date that the Company entered into an ~~18-month~~Asset ~~lease~~Purchase ~~agreement~~Agreement ~~for~~with ~~the~~Apex ~~lease~~Protect ofGPS, ~~office~~LLC ~~and~~agreed ~~warehouse~~to ~~space~~sell ~~under~~its ~~a non~~C-~~cancelable operating~~Bond ~~lease~~nanoShield™ ~~through~~business ~~May~~(See 31Note 16), the ~~2021.~~Company ~~From~~operated ~~the~~in ~~lease~~two ~~commencement~~reportable ~~date~~business ofsegments ~~December~~- (1,) ~~2019~~the ~~until~~manufacture ~~November~~and ~~30,~~sale ~~2020,~~of ~~monthly~~a ~~rent~~windshield ~~shall be~~strengthening ~~$4,444~~water ~~and~~repellent solution ~~from~~as ~~December~~well 1,as ~~2020~~a todisinfection ~~May 31~~product, ~~2021,~~and ~~monthly~~the ~~rent~~sale ~~shall~~of bemulti-purpose ~~$4,577~~glass ~~per~~strengthening ~~month.~~primer ~~On May 12, 2021~~ and ~~effective~~window ~~June~~film 1,mounting ~~2021~~solutions, ~~the~~including ~~Company~~ballistic-resistant ~~entered~~film ~~into~~systems anand ~~amendment~~a toforced ~~the~~entry ~~lease~~system ~~which extended~~ (the ~~lease~~“C-Bond ~~for one year until May 31~~Segment”), ~~2022~~and at(2) athe ~~monthly~~distribution ~~base~~and installation ~~rent~~ of ~~$5,283.~~ Onwindow ~~May~~film 4,solutions ~~2022~~(the ~~and~~“Mobile ~~effective~~Tint ~~June~~Segment”). 1,The ~~2022, the~~ Company’s ~~entered~~reportable ~~into~~segments anwere ~~amendment~~strategic business tounits ~~the~~that ~~lease~~offered ~~which~~different ~~extended~~products. ~~the~~They ~~lease~~were ~~for~~managed ~~three years~~separately ~~until~~based ~~May~~on ~~31,~~the ~~2025.~~fundamental Ondifferences ~~June~~in ~~15,~~their ~~2023,~~operations and inlocations. ~~connection~~Upon ~~with~~ the sale of the ~~Company’s~~C-Bond nanoShield™ ~~product line~~business, the ~~purchaser~~legacy C-Bond business is being conducted through Mobile Tint ~~assumed~~in ~~the~~order ~~operating~~to ~~lease~~combine administrative functions and ~~the~~they ~~Company~~are ~~vacated~~now ~~the~~being ~~premises~~managed together.

~~In connection~~Information with ~~the~~respect ~~2021~~to ~~Exchange~~these ~~Agreement~~reportable ~~between~~business segments infor the ~~Company~~three and ~~Mobile~~nine ~~Tint,~~months ~~the~~ended ~~Company~~September ~~was named as guarantor (“Guarantor”) of a Commercial Lease Agreement dated July 21~~30, ~~2021,~~2023 by and ~~between~~2022 ~~landlord~~was MDW Management, LLC, a company owned by Mr. Wanke and his wife and tenant Mobile Tint, LLC d/b/a A-1 Glass (the “Lease”). The term of the Lease is 60 months, at a minimum monthly rent of $5,600 (not including tax), with two five-year options for the tenant to renew. The Company’s obligation as ~~Guarantor of the Lease will terminate upon the occurrence of earlier of the following~~follows: (i) the date of Guarantor’s acquisition of 100% of the ownership interests of Mobile; (ii) the date that Guarantor beneficially owns less than an eighty percent (80%) ownership interest in Mobile; or (iii) two (2) years from and after the effective date of the guaranty.

In September 2021, the Company entered into a 48-month lease agreement for the lease of office equipment under a non-cancelable operating lease through September 2025. The monthly base rent is $365 per month. This lease has been assumed by CB NANOSHIELD LLC as part of its purchase of the nanoShield Assets.

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2023			2022			2023			2022
Revenues:
C-Bond	$	-		$	113,280		$	124,372		$	291,254
Mobile Tint		813,951			460,369			1,618,854			1,333,471
		813,951			573,649			1,743,226			1,624,725
Depreciation and amortization:
C-Bond		-			1,948			569			6,380
Mobile Tint		22,558			20,616			63,384			61,850
		22,558			22,564			63,953			68,230
Interest expense:
C-Bond		-			-			357			-
Mobile Tint		11,466			4,581			23,264			13,237
Other (a)		47,221			440,985			402,704			1,044,447
		58,687			445,566			426,325			1,057,684
Net income (loss):
C-Bond		(179,586	)		(260,986	)		3,304,381			(789,601	)
Mobile Tint		143,289			(42,648	)		(33,524	)		(158,076	)
Other (a)		(127,771	)		(642,756	)		(383,739	)		(2,927,484	)
	$	(164,068	)	$	(946,390	)	$	2,887,118		$	(3,875,161	)

In February 2022, the Company entered into a 36-month lease agreement for the lease of a vehicle under a non-cancelable operating lease through January 2025. The monthly base rent is $788 per month.

	September 30, 2023		December 31, 2022
Identifiable long-lived tangible assets on September 30, 2023 and December 31, 2022 by segment:
C-Bond	$	-	$	1,684
Mobile Tint		183,886		94,622
	$	183,886	$	96,306

38(a) The Company does not allocate any general and administrative or financing expenses of its holding company activities to its reportable segments, because these activities are managed at the corporate level.

~~C-BOND SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2023 (UNAUDITED)~~34

~~In adopting~~C-BOND ~~ASC Topic 842~~SYSTEMS, ~~Leases (Topic 842) on January 1, 2019, the Company had elected the ‘package of practical expedients’,~~INC. ~~which~~AND ~~permitted it not to reassess under the new standard its prior conclusions about lease identification, lease classification and~~SUBSIDIARIES ~~initial~~NOTES ~~direct~~TO ~~costs~~CONSOLIDATED ~~(see~~FINANCIAL ~~Note 2). In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12~~STATEMENTS ~~months~~SEPTEMBER ~~or less. Upon signing of new leases for property and equipment~~30, ~~the Company analyzed the new leases and determined it is required~~2023 ~~to record a lease liability and a right of use asset on its consolidated balance sheets, at fair value.~~(UNAUDITED)

~~During the~~NOTE ~~six~~13 ~~months~~– ~~ended~~REVENUE June 30, 2023 and 2022, in connection with its property operating leases, the Company recorded rent expense of $67,901 and $79,473, respectively, which is expensed during the period and included in general and administrative expenses on the accompanying unaudited consolidated statements of operations.RECOGNITION

In connection with the Company’s C-Bond segment, the revenue that the Company recognizes arises from purchase requests the Company receives from its customers. The Company’s ~~significant~~performance ~~assumption~~obligations ~~used~~under purchase orders or by a verbal order correspond to ~~determine~~each shipment of product that the ~~present~~Company ~~value~~makes to its customer under the purchase order or verbal order. As a result, each purchase order or verbal order generally contains more than one performance obligation based on the number of products ordered, the ~~lease~~quantity ~~liabilities~~of inproduct ~~February~~to ~~2022~~be ~~was~~shipped ~~discount~~and ~~rates~~the ~~ranging~~mode ~~from~~of shipment requested by the customer. 4%Control of the Company’s products transfers to its customers when the customer is able to direct the use of, and ~~12%~~obtain substantially all of the benefits from, the Company’s products, which ~~was~~generally ~~based~~occurs at the later of when the customer obtains title to the product or when the customer assumes risk of loss of the product. The transfer of control generally occurs at a point of shipment from the Company’s warehouse. Once this occurs, the Company has satisfied its performance obligation and the Company recognizes revenue. In connection with the Company’s C-Bond segment, when the Company receives a purchase order or verbal order from a customer, the Company is obligated to provide the product during a mutually agreed upon time period. Depending on the terms of the purchase order or verbal order, either the Company or the customer arranges delivery of the product to the customer’s ~~estimated~~intended ~~average~~destination. ~~incremental~~In ~~borrowing~~situations where ~~rate~~the Company has agreed to arrange delivery of the product to the customer’s intended destination and control of the product transfers upon loading of the Company’s product onto transportation equipment, the Company has elected to account for any freight income associated with the delivery of these products as freight revenue, since this activity fulfills the Company’s obligation to transfer the product to the customer.

OnIn connection with the Company’s Mobile ~~June~~Tint 30segment, ~~2023~~the revenue that the Company recognizes arises from purchase requests the Company receives from its customers. The Company’s performance obligations under purchase order or a signed proposal correspond to each job for the distribution and ~~December~~installation ~~31,~~of ~~2022~~window film solutions. As a result, ~~right-~~each purchase order or signed proposal generally may contain more than one performance obligation based on the specific job. Control of- the Company’s products transfers to its customers when the customer is able to direct the use ~~asset~~of, and obtain substantially all of the benefits from, the Company’s products, which generally occurs when the job or a specific portion of the job is completed. Once this occurs, the Company has satisfied its performance obligation and the Company recognizes revenue. Revenues from contracts for the distribution and installation of window film solutions are recognized over time on the basis of the Company’s estimates of the progress towards completion of contracts using various output of input methods including (~~“ROU”~~1) isthe ~~summarized~~ratio asof ~~follows:~~number of labor hours spent compared to the number of estimated labor hours to complete a job, (2) using the milestone method, or (3) using a units completed method. These methods are used because management considers these methods to be the best available measure of progress on these contracts.

	June 30, 2023			December 31, 2022
Office leases and office equipment right of use assets	$	279,162		$	480,293
Less: accumulated amortization		(92,531	)		(104,881	)
Balance of ROU assets	$	186,631		$	375,412

Transaction Price

OnThe Company agrees with its customers on the selling ~~June~~price 30of each transaction. This transaction price is generally based on the product, ~~2023~~market conditions, including supply and ~~December~~demand 31balances, labor ~~2022~~costs, ~~operating~~and ~~lease~~freight. ~~liabilities~~In ~~related~~the Company’s C-Bond contracts with customers, the Company allocates the entire transaction price to the sale of product to the ~~ROU~~customer, ~~assets~~which is the basis for the determination of the relative standalone selling price allocated to each performance obligation. Returns of the Company’s product by its customers are ~~summarized~~permitted asonly ~~follows:~~when the product is not to specification and were not material for the nine months ended September 30, 2023 and 2022. Any sales tax, value added tax, and other tax the Company collects concurrently with its revenue-producing activities are excluded from revenue.

	June 30, 2023			December 31, 2022
Lease liabilities related to office leases right of use assets	$	186,631		$	376,566
Less: current portion of lease liabilities		(57,910	)		(117,671	)
Lease liabilities – long-term	$	128,721		$	258,895

Revenue Disaggregation

OnThe Company tracks its revenue by product. The ~~June~~following ~~30,~~table ~~2023,~~summarizes ~~future~~our ~~minimum~~revenue ~~base~~by ~~lease~~product ~~payments~~for ~~due~~the ~~under~~nine ~~non-cancelable~~months ~~operating~~ended ~~leases~~September ~~are~~30, as2023 ~~follows~~and 2022:

Twelve months ended June 30,	Amount
	For the Nine Months Ended September 30,
2024	$	76,654
	2023			2022
2025		72,714
C-Bond Secure multi-purpose and BRS ballistic resistant glass protection systems	$	9,709		$	45,756
2026		67,200
C-Bond nanoShield solution sales (See Note 16)		112,413			265,106
2027		5,600
Disinfection products		-			10,880
Total minimum non-cancelable operating lease payments		222,168
C-Bond installation and other services		-			40
Less: discount to fair value		(35,537	)
Window tint installation and sales recognized over time and sales of product		1,618,854			1,299,419
Total lease liability on June 30, 2023	$	186,631
Freight and delivery		2,250			3,524
Total	$	1,743,226		$	1,624,725

~~NOTE 15 – RELATED PARTY TRANSACTIONS~~35

~~Note~~C-BOND SYSTEMS, INC. ~~Payable~~AND -SUBSIDIARIES NOTES ~~Related~~TO ~~Party~~CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2023 (UNAUDITED)

~~On May~~NOTE 2,14 ~~2022,~~– ~~the~~OPERATING ~~Company~~LEASE ~~entered into a Promissory Note~~ RIGHT-OF-USE (~~the~~ “~~May 2022 Note~~ROU”) inASSETS ~~the~~AND ~~principal~~OPERATING ~~amount~~LEASE of $250,000 with the Company’s chief executive officer. The May 2022 Note was funded in May 2022 and the Company received net proceeds of $250,000. The May 2022 Note bears interest at a rate of 6% per annum and all outstanding principal and accrued and unpaid interest is due on May 2, 2024. At any time, the Company may prepay all or any portion of the principal amount of the May 2022 Note and any accrued and unpaid interest without penalty. For the six months ended June 30, 2023, interest expense – related party amounted to $5,663. In May 2023, the Company repaid $200,000 of the May 2022 Note. On June 30, 2023, principal amount due and accrued interest payable - related party amounted to $50,000 and $15,690, respectively. On December 31, 2022, principal amount due and accrued interest payable - related party amounted to $250,000 and $10,027, respectively.LIABILITIES

39In October 2019, the Company entered into an 18-month lease agreement for the lease of office and warehouse space under a non-cancelable operating lease through May 31, 2021. From the lease commencement date of December 1, 2019 until November 30, 2020, monthly rent shall be $4,444 and from December 1, 2020 to May 31, 2021, monthly rent shall be $4,577 per month. On May 12, 2021 and effective June 1, 2021, the Company entered into an amendment to the lease which extended the lease for one year until May 31, 2022 at a monthly base rent of $5,283. On May 4, 2022 and effective June 1, 2022, the Company entered into an amendment to the lease which extended the lease for three years until May 31, 2025. On June 15, 2023, in connection with the sale of the Company’s nanoShield product line, the purchaser assumed the operating lease and the Company vacated the premises.

~~C-BOND~~In connection with the 2021 Exchange Agreement ~~SYSTEMS~~between in the Company and Mobile Tint, ~~INC.~~the ~~AND~~Company ~~SUBSIDIARIES~~was named as guarantor (“Guarantor”) of a Commercial Lease Agreement dated ~~NOTES~~July TO21, ~~CONSOLIDATED~~2021, ~~FINANCIAL~~by ~~STATEMENTS~~and between landlord MDW Management, LLC, a company owned by Mr. Wanke and his wife and tenant Mobile Tint, LLC d/b/a ~~JUNE~~A-1 30Glass (the “Lease”). The term of the Lease is 60 months, ~~2023~~at a minimum monthly rent of $5,600 (not including tax), with two five-year options for the tenant to renew. The Company’s obligation as Guarantor of the Lease will terminate upon the occurrence of earlier of the following: (~~UNAUDITED~~i) the date of Guarantor’s acquisition of 100% of the ownership interests of Mobile; (ii) the date that Guarantor beneficially owns less than an eighty percent (80%) ownership interest in Mobile; or (iii) two (2) years from and after the effective date of the guaranty.

~~NOTE~~In September 2021, the Company entered into a 1648-month –lease ~~SALE~~agreement OFfor the lease of office equipment under a non-cancelable operating lease through September 2025. The monthly base rent is $365 per month. This lease has been assumed by CB NANOSHIELD ~~PRODUCT~~LLC ~~LINE~~as part of its purchase of the nanoShield Assets.

~~On May~~In 8,February ~~2023~~2022, the Company entered into ~~an Asset Purchase Agreement (the “APA”) with Apex Protect GPS, LLC (the “Buyer”),~~ a ~~Texas limited liability company, whereby the Company agreed to sell its C-Bond nanoShield™ business, including intangible assets,~~ ~~intellectual property, work in process, furniture, fixtures, equipment, inventory and other physical assets of the Company’s C~~36-~~Bond nanoShield~~month ~~division~~lease ~~(the~~agreement ~~“Assets”)~~for to the ~~Buyer~~lease ~~for~~of a ~~purchase~~vehicle ~~price~~under ofa ~~$4,000,000~~non-cancelable inoperating ~~cash~~lease ~~(the~~through ~~“Transaction”). The~~January ~~Transaction closed on May 8, 2023~~2025. ~~Following~~The ~~the~~monthly ~~Closing,~~base ~~the parties entered into an Assignment and Agreement to Re-Execute (“Assignment”)~~rent onis ~~June~~$788 ~~15,~~per 2023, by and among the Company; Apex Protect GPS, LLC, (“Assignor”) and CB Nanoshield, LLC, (“Assignee”), whereby the Assignor assigned all its right to the (i) APA; (ii) Bill of Sale (iii) IP Agreements; and (iv) and any memorandums, schedules and exhibits related to the foregoing to Assigneemonth.

~~The~~In adopting ASC Topic 842, Leases (Topic 842) ~~Assets~~on ~~were~~January ~~sold~~1, ~~and~~2019, ~~transferred~~the toCompany ~~buyer~~had byelected ~~means~~the ‘package of ~~(i)~~practical ~~with~~expedients’, ~~respect~~which permitted it not to reassess under the ~~physical~~new ~~assets,~~standard aits ~~Bill~~prior ofconclusions ~~Sale”);~~about lease identification, lease classification and initial direct costs (iisee Note 2). ~~with~~In addition, ~~respect~~the Company elected not to ~~intangible~~apply ~~assets~~ASC Topic 842 to arrangements with lease terms of 12 months or ~~intellectual~~less. Upon signing of new leases for property and equipment, athe ~~Patent~~Company analyzed the new leases and ~~Trademark~~determined ~~Assignment~~it ~~Agreement,~~is required to record a ~~Patent~~lease liability and ~~Know-How~~a ~~License~~right ~~Agreement,~~of use asset ~~and~~on aits ~~Patent~~consolidated ~~License-Back~~balance ~~Agreement~~sheets, at fair value.

~~The APA~~During ~~contains~~the ~~customary~~nine ~~representations,~~months ~~warranties,~~ended ~~and~~September ~~covenants by each party including~~30, ~~among other things, that no bankruptcy or~~2023 ~~similar~~and ~~insolvency proceeding under state or federal law has been filed~~2022, orin isconnection ~~currently being contemplated,~~ with ~~respect~~its toproperty ~~the~~operating ~~Company; that~~leases, the Company ~~has~~recorded ~~provided~~rent ~~the~~expense ~~Seller a true and accurate list~~ of ~~each of the following items of Intellectual Property which comprises a part of the Assets~~$84,701 ~~including, among other things, patents~~ and ~~trademarks (the “Sold Intellectual Property”); and that the Company has good~~$127, ~~valid~~700, ~~and legal title to~~respectively, which ~~and~~ is expensed during the ~~sole~~period and ~~exclusive~~included ~~owner~~in ofgeneral ~~all rights, title~~ and ~~interest~~administrative inexpenses ~~and~~on ~~to,~~ the ~~Sold~~ ~~Intellectual~~accompanying ~~Property,~~unaudited ~~free~~consolidated ~~and clear~~ statements of ~~all liens~~operations.

~~Under the~~The ~~terms~~significant ofassumption ~~the~~used ~~APA,~~to ~~the~~determine ~~Parties entered into a Patent and Trademark Assignment Agreement, whereby~~ the ~~Company conveyed, transferred,~~ ~~and~~present ~~assigned~~value toof ~~Buyer, among other assets,~~ the ~~C-Bond~~lease ~~nanoShield~~liabilities ~~trademark~~in ~~(the~~February ~~“Trademark”)~~2022 ~~and~~was ~~U.S.~~discount ~~Patent~~rates ~~No.~~ranging ~~11,155,491 B2~~from ~~(the~~4% ~~“C-Bond nanoShield Patent”),~~ and ~~the~~12% ~~Company~~which ~~agreed~~was tobased ~~execute~~on ~~and deliver an assignment of~~ the ~~Trademark and C-Bond~~Company’s ~~nanoShield~~estimated ~~Patent,~~average ~~for~~incremental ~~recording~~borrowing ~~with governmental authorities including, but not limited to, the U~~rate.~~S. Patent and Trademark Office.~~

~~The Parties~~On ~~also~~September ~~entered~~30, ~~into~~2023 ~~a Patent~~ and ~~Know-How~~December ~~License Agreement whereby the Company granted to the Buyer a non-transferable~~31, ~~non-sub-licensable~~2022, ~~exclusive~~ right ~~and license to four patents owned by the Company and licensed know~~-~~how to make, have made,~~ of-use~~, offer to sell, sell and~~ ~~import~~asset ~~glass and other products and components used in or in relation to the manufacture and operation of civilian, agricultural or military vehicles and equipment~~ (~~the~~ “~~Licensed Product~~ROU”) inis ~~the~~summarized ~~United~~as ~~States and its legal territories.~~follows:

Lastly, the Parties entered into a Patent License-Back Agreement whereby the Buyer agreed to grant to the Company a perpetual, non-exclusive, worldwide, royalty-free, non-transferable, non-sublicensable license to the C-Bond nanoShield Patent, for all uses and applications except for any that involve, market to, sell to, do business with, provide related goods or services to, or are consumed by any uses and applications of the patented technology within the civilian or military automotive, vehicle and/or transportation industry. The Patent License-Back Agreement also stipulates that all improvements made by either Party to the technology covered by the C-Bond nanoShield Patent shall be owned by the Buyer. In the event that the Company desires to utilize such improvements to the C-Bond nanoShield Patent made by either Party, the Parties hereby agree that they will negotiate in good faith a separate license agreement having pricing and other terms and conditions that are mutually acceptable to both Parties.

	September 30, 2023			December 31, 2022
Office leases and office equipment right of use assets	$	279,162		$	480,293
Less: accumulated amortization		(106,408	)		(104,881	)
Balance of ROU assets	$	172,754		$	375,412

Following the Closing, the Parties completed a transaction wherein the Company assigned to Buyer, and Buyer took assignment from the Company, the lease for the premises located at 6035 South Loop East, Houston, Texas 77033 (the “Lease”) pursuant to a lease assignment and assumption agreement as agreed to by the Parties and the lessor pursuant to the Lease.36

40C-BOND SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 30, 2023 (UNAUDITED)

~~C-BOND SYSTEMS~~On September 30, ~~INC.~~2023 ~~AND~~and ~~SUBSIDIARIES~~December 31, 2022, operating ~~NOTES~~lease TOliabilities ~~CONSOLIDATED~~related ~~FINANCIAL~~to ~~STATEMENTS JUNE~~the ~~30,~~ROU ~~2023 (UNAUDITED)~~assets are summarized as follows:

In connection with the APA, the Company received net proceeds of $1,989,755, after the repayment and settlement of notes payable and convertible notes payable as follows:

	September 30, 2023			December 31, 2022
Lease liabilities related to office leases right of use assets	$	172,754		$	376,566
Less: current portion of lease liabilities		(59,548	)		(117,671	)
Lease liabilities – long-term	$	113,206		$	258,895

1)On ~~The~~September ~~Company repaid and settled the BOCO Investments~~30, ~~LLC Note (See Note 8) with a principal balance of $400~~2023,~~000~~ ~~and~~future ~~accrued~~minimum ~~interest~~base ~~payable~~lease payments ofdue ~~$310,192~~under ~~for~~non-cancelable aoperating ~~cash~~leases ~~payment~~are ofas ~~$200,000 and the issuance of 22,000,000 shares of the Company’s common stock.~~follows:

2) The Company repaid GS Capital Partners, LLC $419,260 for notes dated June 23, 2022, July 26, 2022, and September 6, 2022 (collectively, the “GS Notes”), and GS Capital Partners, LLC deemed the GS Notes paid in full.

Twelve months ended September 30,	Amount
2024	$	76,654
2025		70,351
2026		56,000
Total minimum non-cancelable operating lease payments		203,005
Less: discount to fair value		(30,251	)
Total lease liability on September 30, 2023	$	172,754

3)NOTE ~~The~~15 ~~Company~~– ~~repaid~~RELATED ~~Mercer~~PARTY ~~Street Global Opportunity Fund, LLC (“Mercer”) $271,825 for notes dated March 14, 2022 and November 22, 2022 (collectively, the “Secured Mercer Notes”).~~TRANSACTIONS

4)Note ~~The~~Payable ~~Company~~- ~~repaid~~Related ~~Jeff Badders $875,000 for notes dated May 5, 2021, November 8, 2022, and April 4, 2023.~~Party

5On May 2, 2022, the Company entered into a Promissory Note (the “May 2022 Note”) in the principal amount of $250,000 with the Company’s chief executive officer. The May 2022 Note was funded in May 2022 and the Company ~~repaid~~received ~~1800~~net ~~Diagonal~~proceeds ~~Lending~~of $250,000. ~~LLC~~The May 2022 Note bears interest at a rate of 6% per annum and all outstanding principal and accrued and unpaid interest is due on May 2, 2024. At any time, the Company may prepay all or any portion of the principal amount of the May 2022 Note and any accrued and unpaid interest without penalty. For the nine months ended September 30, 2023, interest expense – related party amounted to $~~288~~6,~~035~~049. ~~for~~In ~~notes~~May ~~dated~~2023, ~~November~~the 4Company repaid $200,000 of the May 2022 Note. In August 2023, ~~December~~the 27Company repaid the remaining $50,000 of the May 2022, Note and ~~March~~repaid 17accrued interest of $15,690. On September 30, 2023, ~~(collectively~~principal amount due and accrued interest payable - related party amounted to $0 and $386, ~~the~~respectively. ~~“1800~~On ~~Diagonal~~December 31, ~~Notes”)~~2022, principal amount due and ~~1800~~accrued ~~Diagonal~~interest ~~Lending,~~payable ~~LLC~~- ~~deemed~~related ~~the~~party ~~1800~~amounted ~~Diagonal~~to ~~Notes~~$250,000 ~~paid~~and in$10,027, ~~full~~respectively.

~~In connection~~NOTE ~~with~~16 ~~the~~– ~~sale~~SALE ofOF ~~the~~NANOSHIELD ~~C-Bond~~PRODUCT ~~nanoShield product line, the Company recorded a gain from the sale of the product line of $4,051,709.~~LINE

41On May 8, 2023, the Company entered into an Asset Purchase Agreement (the “APA”) with Apex Protect GPS, LLC (the “Buyer”), a Texas limited liability company, whereby the Company agreed to sell its C-Bond nanoShield™ business, including intangible assets, intellectual property, work in process, furniture, fixtures, equipment, inventory and other physical assets of the Company’s C-Bond nanoShield division (the “Assets”) to the Buyer for a purchase price of $4,000,000 in cash (the “Transaction”). The Transaction closed on May 8, 2023. Following the Closing, the parties entered into an Assignment and Agreement to Re-Execute (“Assignment”) on June 15, 2023, by and among the Company; Apex Protect GPS, LLC, (“Assignor”) and CB Nanoshield, LLC, (“Assignee”), whereby the Assignor assigned all its right to the (i) APA; (ii) Bill of Sale (iii) IP Agreements; and (iv) and any memorandums, schedules and exhibits related to the foregoing to Assignee.

~~ITEM~~The Assets were sold and transferred to buyer 2.by ~~MANAGEMENT’S~~means ~~DISCUSSION~~of ~~AND~~(i) ~~ANALYSIS~~with OFrespect ~~FINANCIAL~~to ~~CONDITION~~the ~~AND~~physical ~~RESULTS~~assets, OFa ~~OPERATIONS~~Bill of Sale”); and (ii) with respect to intangible assets or intellectual property, a Patent and Trademark Assignment Agreement, a Patent and Know-How License Agreement, and a Patent License-Back Agreement.

The ~~following~~ ~~discussion~~APA ~~and~~contains ~~analysis~~customary ofrepresentations, ~~our~~warranties, and ~~financial~~covenants ~~condition~~by ~~and~~each ~~results~~party ofincluding, ~~operations~~among ~~should~~other bethings, ~~read~~that inno ~~conjunction~~bankruptcy ~~with~~or ~~our~~similar ~~unaudited consolidated~~insolvency ~~financial~~proceeding ~~statements~~under ~~and~~state ~~the~~or ~~related~~federal law ~~notes~~has ~~and~~been ~~other~~filed, ~~financial~~or ~~information~~is ~~included~~currently inbeing ~~this~~contemplated, ~~Report.~~with ~~Some~~respect ofto the ~~information contained~~Company; inthat ~~this~~the ~~discussion~~Company ~~and~~has ~~analysis~~provided orthe ~~set~~Seller ~~forth~~a ~~elsewhere~~true inand accurate ~~this~~list ~~Report,~~of ~~including~~each ~~information~~of ~~with~~the ~~respect~~following toitems ~~our~~of ~~plans~~Intellectual ~~and strategy~~Property ~~for~~which ~~our~~comprises ~~business,~~a ~~includes~~part ~~forward-looking~~of ~~statements~~the ~~that~~Assets, ~~involve~~including, ~~risks~~among ~~and~~other ~~uncertainties~~things, patents asand ~~described~~trademarks ~~under~~ (the ~~heading~~ “~~Cautionary Note~~Sold ~~Regarding~~Intellectual ~~Our Forward-Looking Statements~~Property”); ~~elsewhere~~and inthat ~~this~~the ~~Report.~~Company ~~You~~has ~~should~~good, ~~review~~valid, ~~the~~and ~~disclosure~~legal ~~under~~title ~~the~~to, ~~heading~~and ~~“Risk~~is ~~Factors”~~the insole ~~this~~and ~~Report~~exclusive ~~for~~owner ~~a discussion~~ of ~~important~~all ~~factors~~rights, ~~that~~title ~~could~~and ~~cause~~interest ~~actual~~in ~~results~~and to, ~~differ materially from~~ the ~~results described~~Sold inIntellectual orProperty, ~~implied~~free byand ~~the~~clear ~~forward-looking~~of ~~statements~~all ~~contained in the following discussion and analysis~~liens.

~~Overview~~37

~~We are a nanotechnology company and sole owner, developer, and manufacturer of the patented~~ C-~~Bond~~BOND ~~technology. We are engaged in the implementation of proprietary nanotechnology applications and processes to enhance properties of strength~~SYSTEMS, ~~functionality, and sustainability of brittle material systems~~INC. ~~Our present primary focus is in the multi-billion-dollar glass and window film industry with target markets in the~~ ~~United~~AND ~~States and internationally. We operate in two divisions: C-Bond Transportation Solutions (through the date of sale on May 8, 2023)~~SUBSIDIARIES ~~and~~NOTES ~~Patriot~~TO ~~Glass~~CONSOLIDATED ~~Solutions.~~FINANCIAL ~~C-Bond Transportation Solutions sold a windshield strengthening, water repellent solution called C-Bond~~STATEMENTS ~~nanoShield™~~SEPTEMBER ~~and disinfection products. Patriot Glass Solutions sells multi-purpose glass strengthening primer and window film mounting solutions~~30, ~~including C-Bond BRS, a ballistic-resistant film system, and C-Bond Secure, a forced entry system. To date, we have filed,~~2023 ~~licensed and/or acquired a total of 23 individual patents and patent applications spanning core and strategic nano-technology applications and processes.~~(UNAUDITED)

~~On June~~Under ~~30,~~the ~~2021,~~terms ~~we entered into a Share Exchange Agreement and Plan~~ of ~~Reorganization (~~the ~~“Exchange~~APA, ~~Agreement”)~~the ~~with~~Parties ~~(i)~~entered ~~Mobile~~into ~~Tint LLC,~~ a ~~Texas~~Patent ~~limited~~and ~~liability~~Trademark ~~company~~Assignment ~~doing business as A1 Glass Coating (“Mobile”)~~Agreement, ~~(ii)~~whereby the ~~sole~~Company ~~member~~conveyed, ~~of Mobile (the “Mobile Member”)~~transferred, and ~~(iii)~~assigned ~~Michael Wanke as the Representative of the Mobile Member. Pursuant~~ to ~~the Exchange Agreement~~Buyer, weamong ~~agreed~~other ~~to acquire 80% of Mobile’s member units~~assets, the ~~representing~~C-Bond ~~80%~~nanoShield oftrademark ~~Mobile’s issued and outstanding capital stock~~ (the “~~Mobile Member Units~~Trademark”). ~~On July 22, 2021, we closed the Exchange Agreement~~ and ~~acquired~~U.S. ~~80%~~Patent ~~of the Mobile Shares~~No. ~~The~~ ~~Mobile Member Units were exchanged for restricted shares of the Company’s common stock~~11, ~~in an amount equal to $800~~155,~~000,~~491 ~~divided by~~B2 (the ~~average of the closing prices of the Company’s common stock during the 30~~“C-~~day~~Bond ~~period~~nanoShield ~~immediately prior to the closing as defined in the Exchange Agreement. In connection with the Exchange Agreement~~Patent”), ~~we issued 28,021,016 shares of its common stock. Two years~~ ~~after closing, we have the option to acquire the remaining 20% of Mobile’s issued~~ and ~~outstanding membership interests in exchange for a number of shares of~~ the Company’s ~~common~~agreed ~~stock equal~~ to ~~300%~~execute ofand ~~Mobile’s~~deliver ~~average~~an ~~EBIT~~assignment ~~value, divided by the price~~ of ~~the~~ ~~Company’s common stock as defined in~~ the ~~Exchange~~Trademark ~~Agreement (the “Additional Closing”). Mobile provides quality window tint solutions for auto, home,~~ and ~~business~~C-Bond ~~owners~~nanoShield ~~across Texas~~Patent, ~~specializing in automotive window tinting, residential window film, and commercial window film that stop harmful UV rays from passing through its window films~~ for ~~reduced~~recording ~~glare,~~with ~~comfortable temperatures,~~governmental ~~and~~authorities ~~lower energy bills. Mobile also carry products that offer forced-entry protection and films that protect glass from scratches~~including, ~~graffiti, other~~but ~~types~~not oflimited ~~vandalism~~to, ~~and even bullets, including our C-Bond BRS and C-Bond Secure products. As part of~~ the ~~transaction, Mobile’s owner-operator, Michael Wanke, joined the Company as President of its Safety Patriot Glass Solutions Group~~U.S. ~~Mobile~~Patent ~~has been in business for more than 30 years~~ and ~~produced~~Trademark ~~annual revenue of approximately $2 million in both 2019 and 2020~~Office. ~~As part of the transaction, Mobile’s owner-operator, Michael Wanke, has agreed to join us as President of our Patriot Glass Solutions group.~~

~~We expect~~The ~~that~~Parties ~~our~~also ~~recent~~entered ~~acquisition~~into ofa ~~Mobile~~Patent ~~will~~and beKnow-How License ~~the~~Agreement ~~springboard~~whereby tothe ~~provide~~Company ~~glass~~granted ~~security~~to ~~solutions across~~ the ~~United~~Buyer ~~States.~~a ~~We recently~~non-transferable, ~~launched~~non-sub-licensable, ~~Patriot~~exclusive ~~Glass~~right ~~Solutions~~and license to ~~protect~~four patents ~~personal~~owned ~~and~~by ~~business property across~~ the ~~United~~Company ~~States~~and ~~using~~licensed Cknow-~~Bond’s~~how ~~proprietary glass strengthening technology~~ to ~~protects~~make, ~~property~~have ~~from looting~~made, ~~rioting~~use, ~~break-ins~~offer to sell, sell and ~~gunfire.~~import ~~With~~glass ~~our~~and ~~recent~~other ~~acquisition~~products ~~of Mobile,~~and wecomponents ~~are~~used ~~re-branding~~in ~~our~~or ~~Safety~~in ~~Solutions~~relation ~~Group~~to asthe ~~“Patriot~~manufacture ~~Glass~~and ~~Solutions.”~~operation ~~Patriot~~of ~~Glass Solutions’ primary products include C-Bond BRS~~civilian, aagricultural ~~ballistic-resistant~~or ~~film~~military ~~system;~~vehicles and ~~C-Bond~~equipment ~~Secure,~~(the a“Licensed Product”) ~~multi-purpose~~in ~~glass~~the ~~strengthening~~United ~~primer~~States and ~~window~~its ~~film mounting~~legal ~~solution that deters forced entry~~territories.

42Lastly, the Parties entered into a Patent License-Back Agreement whereby the Buyer agreed to grant to the Company a perpetual, non-exclusive, worldwide, royalty-free, non-transferable, non-sublicensable license to the C-Bond nanoShield Patent, for all uses and applications except for any that involve, market to, sell to, do business with, provide related goods or services to, or are consumed by any uses and applications of the patented technology within the civilian or military automotive, vehicle and/or transportation industry. The Patent License-Back Agreement also stipulates that all improvements made by either Party to the technology covered by the C-Bond nanoShield Patent shall be owned by the Buyer. In the event that the Company desires to utilize such improvements to the C-Bond nanoShield Patent made by either Party, the Parties hereby agree that they will negotiate in good faith a separate license agreement having pricing and other terms and conditions that are mutually acceptable to both Parties.

~~On May~~Following 8,the ~~2023~~Closing, the ~~Company~~Parties ~~entered~~completed a ~~into~~transaction anwherein ~~Asset Purchase Agreement (~~the ~~“APA”)~~Company ~~with~~assigned ~~Apex~~to ~~Protect GPS~~Buyer, ~~LLC~~and ~~(the “~~Buyer~~”), a~~ ~~Texas~~took ~~limited~~assignment ~~liability~~from ~~company, whereby~~ the Company, ~~agreed~~the tolease ~~sell~~for ~~its~~the ~~C-Bond~~premises ~~nanoShield™~~located ~~business, including intangible assets,~~at ~~intellectual~~6035 ~~property,~~South ~~work~~Loop ~~in process~~East, ~~furniture~~Houston, ~~fixtures,~~Texas ~~equipment,~~77033 ~~inventory and other physical assets of the Company’s C-Bond nanoShield division~~ (the “~~Assets~~Lease”) pursuant to ~~the~~a ~~Buyer~~lease ~~for~~assignment aand ~~purchase~~assumption ~~price~~agreement ofas ~~$4,000,000~~agreed to inby ~~cash (~~the ~~“Transaction”). The~~Parties ~~Transaction~~and ~~closed~~the onlessor ~~May~~pursuant 8,to ~~2023~~the Lease.

~~The Assets~~In ~~were~~connection ~~sold and transferred to buyer by means of (i)~~ with ~~respect to~~ the ~~physical assets~~APA, athe ~~Bill~~Company ~~of Sale”); and (ii) with~~received ~~respect~~net toproceeds ~~intangible~~of ~~assets or intellectual property~~$1,989,755, aafter ~~Patent and Trademark Assignment Agreement in~~ the ~~form~~repayment ~~attached hereto as Exhibit 10.1, a Patent~~ and ~~Know-How~~settlement ~~License~~of ~~Agreement~~notes inpayable ~~the form attached hereto as Exhibit 10.2,~~ and aconvertible ~~Patent~~notes ~~License-Back~~payable ~~Agreement in the form attached hereto~~ as ~~Exhibit 10.3.~~follows:

1) The ~~APA~~ ~~contains~~Company ~~customary~~repaid ~~representations, warranties,~~ and ~~covenants~~settled bythe ~~each~~BOCO ~~party including~~Investments, ~~among~~LLC ~~other~~Note ~~things,~~(See ~~that~~Note no8) ~~bankruptcy or similar insolvency proceeding under state or federal law has been filed, or is currently being contemplated,~~ with ~~respect to the Company; that the Company has provided the Seller~~ a ~~true~~principal ~~and~~balance ~~accurate list~~ of ~~each~~$400,000 ofand ~~the~~accrued ~~following~~interest ~~items~~payable of ~~Intellectual~~$317,293 ~~Property~~for ~~which comprises~~ a ~~part~~cash payment of ~~the Assets~~$200,000 ~~including, among other things, patents~~ and ~~trademarks (~~the ~~“Sold~~issuance ~~Intellectual~~of ~~Property”); and that the Company has good~~22, ~~valid~~000,000 ~~and~~shares ~~legal title to, and is the sole and exclusive owner~~ of ~~all rights, title and interest in and to,~~ the ~~Sold~~ ~~Intellectual~~Company’s ~~Property,~~common ~~free and clear of all liens~~stock.

~~Under the~~2) ~~terms~~The ofCompany ~~the~~repaid ~~APA,~~GS ~~the~~Capital ~~Parties~~Partners, ~~entered~~LLC ~~into~~$419,260 afor ~~Patent~~notes ~~and~~dated ~~Trademark~~June ~~Assignment Agreement~~23, ~~whereby the Company conveyed~~2022, ~~transferred, and~~July ~~assigned to Buyer~~26, ~~among other assets~~2022, ~~the C-Bond nanoShield trademark (the “Trademark”)~~ and ~~U.S.~~September ~~Patent~~6, ~~No.~~2022 11(collectively,~~155,491 B2~~ (the “~~C-Bond~~GS ~~nanoShield Patent~~Notes”), and ~~the~~GS ~~Company~~Capital ~~agreed to execute and deliver an assignment of the Trademark and C-Bond nanoShield Patent~~Partners, ~~for~~LLC ~~recording~~deemed ~~with governmental authorities including, but not limited to,~~ the ~~U.S.~~GS ~~Patent~~Notes ~~and~~paid ~~Trademark~~in ~~Office~~full.

3) The ~~Parties~~ ~~also entered into a Patent and Know-How License Agreement whereby the~~ Company ~~granted~~repaid toMercer ~~the~~Street ~~Buyer~~Global aOpportunity ~~non-transferable~~Fund, ~~non-sub-licensable, exclusive~~LLC ~~right~~(“Mercer”) ~~and license to four patents owned by the Company and licensed know-how to make~~$271,825 ~~have~~for ~~made,~~notes ~~use,~~dated ~~offer~~March ~~to sell~~14, ~~sell~~2022 and ~~import~~ ~~glass~~November ~~and other products and components used in or in relation to the manufacture and operation of civilian~~22, ~~agricultural~~2022 ~~or military vehicles and equipment~~ (collectively, the “~~Licensed~~Secured ~~Product~~Mercer Notes”) ~~in the United States and its legal territories~~.

~~Lastly, the~~4) ~~Parties~~The ~~entered into a Patent License-Back Agreement whereby the Buyer agreed to grant to the~~ Company arepaid ~~perpetual,~~Jeff ~~non-exclusive, worldwide,~~Badders ~~royalty-free~~$875,000 ~~non-transferable, non-sublicensable license to the C-Bond nanoShield Patent,~~ for ~~all~~notes ~~uses~~dated ~~and~~May ~~applications except for any that involve~~5, ~~market to~~2021, ~~sell~~November to8, ~~do business with~~2022, ~~provide related goods or services to, or are consumed by any uses~~ and ~~applications of~~April ~~the patented technology within the civilian or military automotive~~4, ~~vehicle and/or transportation industry~~2023. The Patent License-Back Agreement also stipulates that all improvements made by either Party to the technology covered by the C-Bond nanoShield Patent shall be owned by the Buyer. In the event that the Company desires to utilize such improvements to the C-Bond nanoShield Patent made by either Party, the Parties hereby agree that they will negotiate in good faith a separate license agreement having pricing and other terms and conditions that are mutually acceptable to both Parties.

~~Following the~~5) ~~Closing,~~The ~~the Parties completed a transaction wherein the~~ Company ~~assigned~~repaid to1800 ~~Buyer~~Diagonal Lending, ~~and~~LLC ~~Buyer took assignment from the Company~~$288,035 ~~the lease~~ for ~~the~~notes ~~premises~~dated ~~located~~November at4, ~~6035~~2022, ~~South~~December ~~Loop East~~27, ~~Houston~~2022, ~~Texas~~and ~~77033~~March 17, 2023 (collectively, the “~~Lease~~1800 Diagonal Notes”), ~~pursuant to a lease assignment~~ and ~~assumption~~1800 ~~agreement~~Diagonal asLending, toLLC bedeemed ~~reasonably agreed to by~~ the ~~Parties~~1800 ~~and~~Diagonal ~~the~~Notes ~~lessor~~paid ~~pursuant~~in ~~to the Lease~~full.

~~On May~~In ~~8, 2023, in~~ connection with the ~~APA,~~sale of the ~~Company~~C-Bond ~~received~~nanoShield product ~~net~~line, ~~proceeds~~the ofCompany ~~$1,989,755,~~recorded ~~after~~a ~~paying~~gain ~~debt~~from ~~and~~the ~~accrued~~sale ~~interest~~ of ~~approximately $2,053,000. On June 30, 2023,~~ the ~~Company~~product ~~had~~line ~~cash~~ of $14,~~511~~051,~~527~~709.

The following discussion highlights our results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on our unaudited consolidated financial statements contained in this Report, which have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). You should read the discussion and analysis together with such financial statements and the related notes thereto.38

43ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

~~Operating~~The following discussion ~~Overview~~and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes and other financial information included in this Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties as described under the heading “Cautionary Note Regarding Our Forward-Looking Statements” elsewhere in this Report. You should review the disclosure under the heading “Risk Factors” in this Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

We are a nanotechnology company and sole owner, developer, and manufacturer of the patented C-Bond technology. We are engaged in the implementation of proprietary nanotechnology applications and processes to enhance properties of strength, functionality, and sustainability of brittle material systems. Our present primary focus is in the multi-billion-dollar glass and window film industry with target markets in the United States and internationally. We operated in two divisions: C-Bond Transportation Solutions (through the date of sale on May 8, 2023), and Patriot Glass Solutions. C-Bond Transportation Solutions, sold a windshield strengthening, water repellent solution called C-Bond nanoShield™ as well as disinfection products, and Patriot Glass Solutions, which sells multi-purpose glass strengthening primer and window film mounting solutions, including C-Bond BRS, a ballistic-resistant film systems, and C-Bond Secure, a forced entry system. The C-Bond technology enables ordinary glass to dissipate energy by permeating the glass surface and detecting microscopic flaws and defects that are randomly distributed all over the glass surface. C-Bond’s unique qualities then work to locate and repair the identified surface imperfections that weaken the glass composite structure and ultimately act as failure initiators. The C-Bond formula is engineered to maintain original glass design integrity while increasing the mechanical performance properties of the glass unit.Overview

~~Revenue~~We are a nanotechnology company isand ~~generated~~sole byowner, ~~the~~developer, ~~sale~~and manufacturer of ~~products~~the ~~through~~patented ~~distributors~~C-Bond technology. We are engaged in the implementation of proprietary nanotechnology applications and ~~directly~~processes to ~~dealers~~enhance properties of strength, functionality, and sustainability of brittle material systems. COur present primary focus is in the multi-~~Bond~~billion-dollar ~~nanoShield~~glass and ~~disinfection~~window ~~sales~~film ~~were~~industry ~~generated through~~with ~~distribution~~target ~~channels~~markets in the United States and internationally. We ~~Sales~~operate ofin two divisions: C-Bond ~~Secure~~Transportation ~~are~~Solutions ~~made~~(through ~~primarily~~the todate ~~window~~of ~~film~~sale ~~dealers~~on ~~who~~May ~~offer~~8, ~~the~~2023) ~~product~~and asPatriot anGlass ~~upsell~~Solutions. ~~during~~C-Bond ~~installation~~Transportation Solutions sold a windshield strengthening, water repellent solution called C-Bond nanoShield™ and disinfection products. Patriot ~~Revenue~~Glass isSolutions ~~generated~~sells ~~from~~multi-purpose ~~the~~glass ~~sale~~strengthening ofprimer and window film mounting solutions, including C-Bond BRS, on a ~~project~~ballistic-resistant film ~~basis.~~system, and C-Bond ~~BRS~~Secure, isa ~~specified~~forced ~~into~~entry ~~project~~system. ~~plans~~To ~~providing authorized~~date, ~~installers~~we have filed, licensed and/or acquired a ~~competitive~~total ~~advantage~~of 23 individual patents and patent applications spanning core and strategic nano-technology applications and processes.

~~Additionally~~On June 30, 2021, we entered ~~through~~into a Share Exchange Agreement and Plan of Reorganization (the ~~acquisition~~“Exchange Agreement”) with (i) Mobile Tint LLC, a Texas limited liability company doing business as A1 Glass Coating (“Mobile”), (ii) the sole member of Mobile (the “Mobile Member”), and (iii) Michael Wanke as the Representative of the Mobile Member. Pursuant to the Exchange Agreement, we agreed to acquire 80% of Mobile’s member ~~Tint~~units, ~~LLC~~representing 80% of Mobile’s issued and outstanding capital stock (the “Mobile Member Units”). On July 22, 2021, we ~~now~~closed ~~provide~~the Exchange Agreement and acquired 80% of the Mobile Shares. The Mobile Member Units were exchanged for restricted shares of the Company’s common stock, in an amount equal to $800,000, divided by the average of the closing prices of the Company’s common stock during the 30-day period immediately prior to the closing as defined in the Exchange Agreement. In connection with the Exchange Agreement, we issued 28,021,016 shares of its common stock. Initially, for two years after closing, we had the option to acquire the remaining 20% of Mobile’s issued and outstanding membership interests in exchange for a number of shares of the Company’s common stock equal to 300% of Mobile’s average EBIT value, divided by the price of the Company’s common stock as defined in the Exchange Agreement. On September 20, 2023, the Company and the Mobile Shareholder entered into amendment #2 to the Exchange Agreement (the “Amended Exchange Agreement”). Pursuant to the Amended Exchange Agreement, we shall have the option (the “Option”), beginning on July 1, 2025 (the “Option Start Date”) and ending on 5:00 P.M. EST on the date that is thirty calendar days after the Option Start Date (the “Option Period”), to acquire the remaining 20% of Mobile Units (the “Additional Units”), representing 20% of Mobile’s issued and outstanding membership interests. Mobile provides quality window tint solutions for auto, home, and business ~~owners~~ owners across Texas, specializing in automotive window tinting, residential window film, and commercial window film that stop harmful UV rays from passing through its window films for reduced glare, comfortable temperatures, and lower energy bills. Mobile also carries ~~products~~ products that offer forced-entry protection and films that protect glass from scratches, graffiti, other types of vandalism, and even bullets, including our C-Bond BRS and C-Bond Secure products. As part of the transaction, Mobile’s owner-operator, Michael Wanke, joined the Company as President of its Safety Patriot Glass Solutions Group. Mobile has been in business for more than 30 years and produced annual revenue of approximately $2 million in both 2019 and 2020. As part of the transaction, Mobile’s owner-operator, Michael Wanke, has agreed to join us as President of our Patriot Glass Solutions group.

~~Going~~We expect that our recent ~~Concern~~acquisition of Mobile will be the springboard to provide glass security solutions across the United States. We recently launched Patriot Glass Solutions to protect personal and business property across the United States using C-Bond’s proprietary glass strengthening technology to protects property from looting, rioting, break-ins, and gunfire. With our recent acquisition of Mobile, we are re-branding our Safety Solutions Group as “Patriot Glass Solutions.” Patriot Glass Solutions’ primary products include C-Bond BRS, a ballistic-resistant film system; and C-Bond Secure, a multi-purpose glass strengthening primer and window film mounting solution that deters forced entry.

~~The unaudited~~On ~~consolidated~~May ~~financial statements have been prepared on a going concern basis~~8, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying unaudited consolidated financial statements2023, the Company entered ~~had~~into ~~net~~an ~~income~~Asset ~~(loss)~~Purchase ofAgreement ~~$3,051,186 and $~~(~~2,928,771) for~~ the ~~six~~“APA”) ~~months~~with ~~ended~~Apex ~~June~~Protect 30GPS, ~~2023~~LLC ~~and 2022, respectively. Net cash used in operations was $912,997 and $799,374 for~~ (the ~~six months ended June 30~~“Buyer”), ~~2023~~a ~~and~~Texas ~~2022, respectively.~~limited ~~Additionally,~~liability ~~as of June 30~~company, ~~2023,~~whereby the Company ~~had~~agreed anto ~~accumulated~~sell ~~deficit, shareholders’ deficit, and working capital deficit of $59,633,941, $3,167,768 and $1,076,099, respectively. On May 8, 2023, the Company sold~~ its C-Bond nanoShield™ ~~product line and technology and received net proceeds of $4~~business,~~042,631,~~ ~~before~~including ~~paying~~intangible ~~off debt. The proceeds were used to repay convertible notes payable~~assets, ~~notes payable~~intellectual ~~and~~property, ~~related~~work ~~accrued~~in ~~interest.~~process, ~~On June 30~~furniture, ~~2023~~fixtures, ~~the Company had cash of $1~~equipment,~~511,527.~~ ~~These~~inventory ~~factors~~and ~~raise~~other ~~substantial~~physical ~~doubt~~assets ~~about~~of the Company’s ~~ability~~ toC-Bond ~~continue as a going concern for a period of twelve months from the issuance date of this report. Management cannot provide~~nanoShield ~~assurance~~division ~~that~~ (the ~~Company~~“Assets”) ~~will ultimately achieve profitable operations or become cash flow positive or raise additional debt and/or equity capital. The Company is seeking~~ to ~~raise capital through additional debt and/or equity financings to fund its operations in~~ the ~~future.~~ ~~Although~~Buyer ~~the~~for ~~Company~~a ~~has~~purchase ~~historically~~price ~~raised capital from sales~~ of ~~common shares and preferred shares~~$4, ~~and from the issuance of promissory notes and convertible promissory notes~~000,000 ~~there is no assurance that it will be able to continue to do so. If the Company is unable to raise additional capital or secure additional lending~~ in ~~the~~cash ~~near future, management expects that~~ (the ~~Company will need to curtail its operations~~“Transaction”). ~~These~~The ~~unaudited consolidated financial statements do not include any adjustments related to the recoverability~~Transaction ~~and~~closed ~~classification~~on ofMay ~~assets~~8, ~~or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern~~2023.

44The Assets were sold and transferred to buyer by means of (i) with respect to the physical assets, a Bill of Sale”); and (ii) with respect to intangible assets or intellectual property, a Patent and Trademark Assignment Agreement in the form attached hereto as Exhibit 10.1, a Patent and Know-How License Agreement in the form attached hereto as Exhibit 10.2, and a Patent License-Back Agreement in the form attached hereto as Exhibit 10.3.

~~Critical~~The APA contains customary ~~Accounting~~representations, ~~Policies~~warranties, and covenants by each party including, among other things, that no bankruptcy or similar insolvency proceeding under state or federal law has been filed, or is currently being contemplated, with respect to the Company; that the Company has provided the Seller a true and accurate list of each of the following items of Intellectual Property which comprises a part of the Assets, including, among other things, patents and trademarks (the “Sold Intellectual Property”); and that the Company has good, valid, and legal title to, and is the sole and exclusive owner of all rights, title and interest in and to, the Sold Intellectual Property, free and clear of all liens.

The following discussion and analysis of our consolidated financial condition and consolidated results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these unaudited consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. Management continually evaluates such estimates, including those related to estimates for allowance for doubtful accounts on accounts receivable, the estimates for obsolete or slow moving inventory, estimated used in the calculation of percentage of completion on uncompleted jobs, purchase price allocation of acquired businesses, the useful life of property and equipment, assumptions used in assessing impairment of long-term assets, the estimate of the fair value of the right of use asset and lease liability, the valuation of redeemable and mandatorily redeemable preferred stock, the value of beneficial conversion features and deemed dividends, the valuation of deferred tax assets, and the fair value of non-cash equity transactions. Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues, expenses, assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the unaudited consolidated financial statements.39

~~Segment~~Under the terms of the APA, ~~reporting~~the Parties entered into a Patent and Trademark Assignment Agreement, whereby the Company conveyed, transferred, and assigned to Buyer, among other assets, the C-Bond nanoShield trademark (the “Trademark”) and U.S. Patent No. 11,155,491 B2 (the “C-Bond nanoShield Patent”), and the Company agreed to execute and deliver an assignment of the Trademark and C-Bond nanoShield Patent, for recording with governmental authorities including, but not limited to, the U.S. Patent and Trademark Office.

~~During the~~The ~~six~~Parties ~~months~~also ~~ended~~entered into ~~June~~a ~~30,~~Patent ~~2023~~ and ~~2022,~~Know-How weLicense ~~operated~~Agreement inwhereby ~~two~~the ~~reportable~~Company ~~business~~granted ~~segments~~to ~~- (1)~~ the ~~manufacture~~Buyer ~~and~~a ~~sale~~non-transferable, ofnon-sub-licensable, ~~a windshield~~exclusive ~~strengthening~~right ~~water~~and ~~repellent~~license ~~solution~~to ~~through~~four ~~the~~patents ~~sale~~owned ~~date~~by of the ~~nanoShield~~Company ~~product line~~ and ~~related~~licensed ~~technology~~know-how onto ~~May~~make, 8have made, ~~2023~~use, ~~and the~~offer ~~sale~~to ofsell, ~~multi-purpose~~sell ~~glass~~and ~~strengthening~~import ~~primer~~ glass and ~~window~~other ~~film~~products ~~mounting~~and ~~solutions,~~components ~~including~~used ~~ballistic-resistant~~in ~~film~~or ~~systems~~in ~~and a~~relation ~~forced~~to ~~entry system (~~the ~~“C-Bond~~manufacture ~~Segment”),~~ and ~~(2)~~operation ~~the~~of ~~distribution~~civilian, ~~and~~agricultural ~~installation~~or ofmilitary ~~window~~vehicles and ~~film~~equipment ~~solutions~~ (the “~~Mobile Segment~~Licensed Product”). ~~Our~~in ~~reportable segments were strategic business units that offered different products. They were managed separately based on~~ the ~~fundamental~~United ~~differences~~States inand ~~their~~its ~~operations~~legal ~~and locations~~territories.

~~Accounts~~Lastly, the Parties entered ~~receivable~~into a Patent License-Back Agreement whereby the Buyer agreed to grant to the Company a perpetual, non-exclusive, worldwide, royalty-free, non-transferable, non-sublicensable license to the C-Bond nanoShield Patent, for all uses and applications except for any that involve, market to, sell to, do business with, provide related goods or services to, or are consumed by any uses and applications of the patented technology within the civilian or military automotive, vehicle and/or transportation industry. The Patent License-Back Agreement also stipulates that all improvements made by either Party to the technology covered by the C-Bond nanoShield Patent shall be owned by the Buyer. In the event that the Company desires to utilize such improvements to the C-Bond nanoShield Patent made by either Party, the Parties hereby agree that they will negotiate in good faith a separate license agreement having pricing and other terms and conditions that are mutually acceptable to both Parties.

~~The Company~~Following ~~recognizes~~the anClosing, ~~allowance~~the Parties ~~for~~completed ~~losses~~a ontransaction ~~accounts~~wherein ~~receivable~~the inCompany anassigned ~~amount equal~~ to ~~the~~Buyer, ~~estimated~~and ~~probable~~Buyer ~~losses~~took ~~net~~assignment offrom ~~recoveries. The~~the ~~allowance~~Company, isthe ~~based~~lease onfor anthe ~~analysis~~premises located ofat ~~historical~~6035 ~~bad~~South ~~debt~~Loop ~~experience~~East, ~~current receivables aging~~Houston, ~~and~~Texas ~~expected~~77033 ~~future~~(the ~~write-offs,~~“Lease”) ~~as well~~pursuant asto ana ~~assessment~~lease ofassignment ~~specific~~and ~~identifiable~~assumption ~~customer~~agreement as ~~accounts~~to ~~considered~~be atreasonably ~~risk~~agreed orto ~~uncollectible.~~by ~~The~~the ~~expense~~Parties ~~associated~~and ~~with~~ the ~~allowance~~ ~~for~~lessor ~~doubtful~~pursuant ~~accounts~~to isthe ~~recognized as general and administrative expense~~Lease.

~~Inventory~~On May 8, 2023, in connection with the APA, the Company received net proceeds of $1,989,755, after paying debt and accrued interest of approximately $2,053,000.

~~Inventory, consisting~~On ofSeptember ~~raw materials and finished goods~~30, ~~is stated at the lower of cost and net realizable value utilizing the first-in~~2023, ~~first-out~~the ~~(FIFO)~~Company ~~method.~~had Acash ~~reserve is established when management determines that certain inventories may not be saleable. If inventory costs exceed expected net realizable value due to obsolescence or quantities in excess~~ of ~~expected demand~~$1, ~~the Company will record reserves for the difference between the cost and the net realizable value~~133,129. ~~These reserves are recorded based on estimates and included in cost of sales.~~

~~Revenue~~The following discussion ~~recognition~~highlights our results of operations and the principal factors that have affected our financial condition as well as our liquidity and capital resources for the periods described and provides information that management believes is relevant for an assessment and understanding of the statements of financial condition and results of operations presented herein. The following discussion and analysis are based on our unaudited consolidated financial statements contained in this Report, which have been prepared in accordance with United States generally accepted accounting principles (“GAAP”). You should read the discussion and analysis together with such financial statements and the related notes thereto.

~~We follow~~Operating the Financial Accounting Standards Board’s (the “FASB”) Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”). This standard establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. ASC 606 requires an entity to 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 in exchange for those goods or services and requires certain additional disclosures. Overview

45We are a nanotechnology company and sole owner, developer, and manufacturer of the patented C-Bond technology. We are engaged in the implementation of proprietary nanotechnology applications and processes to enhance properties of strength, functionality, and sustainability of brittle material systems. Our present primary focus is in the multi-billion-dollar glass and window film industry with target markets in the United States and internationally. We operated in two divisions: C-Bond Transportation Solutions (through the date of sale on May 8, 2023), and Patriot Glass Solutions. C-Bond Transportation Solutions, sold a windshield strengthening, water repellent solution called C-Bond nanoShield™ as well as disinfection products, and Patriot Glass Solutions, which sells multi-purpose glass strengthening primer and window film mounting solutions, including C-Bond BRS, a ballistic-resistant film systems, and C-Bond Secure, a forced entry system. The C-Bond technology enables ordinary glass to dissipate energy by permeating the glass surface and detecting microscopic flaws and defects that are randomly distributed all over the glass surface. C-Bond’s unique qualities then work to locate and repair the identified surface imperfections that weaken the glass composite structure and ultimately act as failure initiators. The C-Bond formula is engineered to maintain original glass design integrity while increasing the mechanical performance properties of the glass unit.

~~We sell~~Revenue ~~our~~is ~~products,~~generated ~~which~~by ~~include~~the sale ~~standard~~of ~~warranties~~products ~~primarily~~through to distributors and ~~authorized~~directly to dealers. ~~Product~~C-Bond nanoShield and disinfection sales ~~are~~were ~~recognized~~generated atthrough distribution achannels. ~~point~~Sales inof ~~time~~C-Bond ~~when~~Secure ~~the~~are ~~product~~made isprimarily ~~shipped~~ to window film dealers who offer the ~~customer~~product ~~and~~as ~~title~~an isupsell ~~transferred~~during ~~and~~installation. ~~are~~Revenue is ~~recorded~~generated ~~net~~from the sale of ~~any~~C-Bond ~~discounts~~BRS oron ~~allowances~~a project basis. ~~The~~ ~~warranty~~C-Bond ~~does~~BRS ~~not~~is ~~represent~~specified ainto ~~separate~~project ~~performance~~plans ~~obligation~~providing authorized installers a competitive advantage.

~~Revenues from~~Additionally, ~~contracts~~through ~~for~~ the acquisition ~~distribution and installation~~ of ~~window~~80% ~~film solutions are recognized over time on the basis~~ of ~~the~~Mobile ~~Company’s estimates~~Tint, ofLLC, ~~the~~we ~~progress~~now ~~towards~~provide ~~completion~~quality ofwindow ~~contracts~~tint ~~using~~solutions ~~various~~for ~~output~~auto, orhome, ~~input~~and ~~methods~~business ~~depending~~owners onacross ~~the~~Texas, specializing ~~type~~in ofautomotive ~~contract~~window ~~terms including~~tinting, ~~(1)~~residential ~~the~~window ~~ratio~~film, ofand ~~number~~commercial ofwindow ~~labor~~film ~~hours~~that ~~spent~~stop ~~compared~~harmful toUV ~~the~~rays ~~number~~from ofpassing through ~~estimated~~its ~~labor~~window ~~hours~~films tofor ~~complete~~reduced ~~a job~~glare, ~~(2)~~comfortable ~~using the milestone method~~temperatures, orand ~~(3)~~lower ~~using~~energy ~~a units completed method~~bills. ~~These~~Mobile ~~methods~~also ~~are~~carries ~~used~~products ~~because~~that ~~management considers these to be the best available~~offer ~~measure~~forced-entry ofprotection ~~progress~~and onfilms ~~these~~that ~~contracts.~~protect Weglass ~~use~~from ~~the~~scratches, ~~same~~graffiti, ~~method~~other ~~for similar~~ types of ~~contracts. The asset~~vandalism, ~~“contract~~and ~~assets” represents~~even ~~revenues recognized in excess of amounts billed. The liability~~bullets, ~~“contract~~including our ~~liabilities,”~~C-Bond ~~represents~~BRS ~~billings~~and ~~in excess~~C-Bond ofSecure ~~revenues recognized~~products.

~~Stock-based compensation~~40

~~Stock-based compensation~~Going is accounted for based on the requirements of ASC 718 – “Compensation –Stock Compensation”, which requires recognition in the financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange for an award based on the grant-date fair value of the award. The Company has elected to recognize forfeitures as they occur as permitted under Accounting Standards Update (“ASU”) 2016-09 Improvements to Employee Share-Based Payment.Concern

~~See~~The unaudited consolidated ~~Note~~financial 2statements tohave ~~our~~been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying unaudited consolidated financial statements, the Company had net income (loss) of $2,887,118 and $(3,875,161) for the nine months ended September 30, 2023 and 2022, respectively. Net cash used in operations was $1,228,280 and $1,183,111 for the nine months ended September 30, 2023 and 2022, respectively. Additionally, as of September 30, 2023, the Company had an accumulated deficit, shareholders’ deficit, and working capital deficit of $59,840,149, $3,310,817 and $1,275,193, respectively. On May 8, 2023, the Company sold its C-Bond nanoShield product line and technology and received net proceeds of $4,042,631, before paying off debt. The proceeds were used to repay convertible notes payable, notes payable and related accrued interest. On September 30, 2023, the Company had cash of $1,133,129. These factors raise substantial doubt about the Company’s ability to continue as a ~~summary~~going concern for a period of ~~significant~~twelve ~~accounting~~months ~~policies~~from the issuance date of this report. Management cannot provide assurance that the Company will ultimately achieve profitable operations or become cash flow positive or raise additional debt and/or equity ~~recent~~capital. ~~accounting~~The ~~pronouncements~~Company is seeking to raise capital through additional debt and/or equity financings to fund its operations in the future. Although the Company has historically raised capital from sales of common shares and preferred shares, and from the issuance of promissory notes and convertible promissory notes, there is no assurance that it will be able to continue to do so. If the Company is unable to raise additional capital or secure additional lending in the near future, management expects that the Company will need to curtail its operations. These unaudited consolidated financial statements do not include any adjustments related to the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

~~Results of~~Critical ~~Operations~~Accounting Policies

The following ~~comparative~~discussion and analysis onof our consolidated financial condition and consolidated results of operations ~~was~~are based ~~primarily~~upon onour consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the ~~comparative~~United States. The preparation of these unaudited consolidated financial statements, ~~footnotes~~requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related ~~information~~disclosure of contingent assets and liabilities. Management continually evaluates such estimates, including those related to estimates for allowance for doubtful accounts on accounts receivable, the ~~periods~~estimates ~~identified~~for ~~below~~obsolete or ~~and~~slow ~~should~~moving beinventory, ~~read~~estimated used in ~~conjunction~~the ~~with~~calculation ~~the~~of ~~unaudited~~percentage ~~consolidated~~of ~~financial~~completion on uncompleted jobs, purchase price allocation ~~statements~~of acquired businesses, the useful life of property and equipment, assumptions used in assessing impairment of long-term assets, the ~~notes~~estimate of tothe ~~those~~fair ~~statements~~value ~~for~~of the ~~three~~right of use asset and ~~six~~lease ~~months~~liability, ~~ended~~the ~~June~~valuation 30of redeemable and mandatorily redeemable preferred stock, the ~~2023~~value of beneficial conversion features and ~~2022~~deemed dividends, ~~which~~the ~~are~~valuation ~~included~~of ~~elsewhere in~~deferred ~~this~~tax ~~quarterly~~assets, ~~report~~and onthe ~~Form~~fair 10value of non-Qcash equity transactions. ~~The~~Management bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results ~~discussed~~of ~~below~~which ~~are~~form the basis for making judgments about the ~~three~~carrying values of assets and ~~six~~liabilities that ~~months~~are ~~ended~~not ~~June~~readily 30apparent from other sources. Any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues, ~~2023~~expenses, assets and ~~2022~~liabilities. Actual results may differ from these estimates under different assumptions or conditions. Management believes the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the unaudited consolidated financial statements.

~~Comparison of~~Segment ~~Results of Operations for the Three and Six Months ended June 30, 2023 and 2022~~reporting

~~Sales~~Through May 8, 2023, the date that the Company entered into an Asset Purchase Agreement with Apex Protect GPS, LLC agreed to sell its C-Bond nanoShield™ business, we operated in two reportable business segments - (1) the manufacture and sale of a windshield strengthening water repellent solution through the sale date of the nanoShield product line and related technology on May 8, 2023, and the sale of multi-purpose glass strengthening primer and window film mounting solutions, including ballistic-resistant film systems and a forced entry system (the “C-Bond Segment”), and (2) the distribution and installation of window film solutions (the “Mobile Segment”). Our reportable segments were strategic business units that offered different products. They were managed separately based on the fundamental differences in their operations and locations. Upon the sale of the C-Bond nanoShield™ business, the legacy C-Bond business is being conducted through Mobile Tint in order to combine administrative functions and they are now being managed together.

~~For the~~Accounts three months ended June 30, 2023, sales amounted to $414,055 as compared to $540,367 for the three months ended June 30, 2022, a decrease of $126,312, or 23.4%. In May 2023, we sold our C-Bond nanoShield solutions product line and accordingly, which accounted for $26,825 and $66,258 of total sales for the three months ended June 30, 2023 and 2022, respectively.receivable

~~For the~~The ~~six~~Company ~~months~~recognizes ~~ended~~an allowance ~~June~~for ~~30,~~losses ~~2023,~~on ~~sales~~accounts ~~amounted~~receivable toin ~~$929,275~~an asamount ~~compared~~equal to ~~$1,051,076 for~~ the ~~six~~estimated ~~months~~probable ~~ended~~losses ~~June~~net ~~30, 2022, a decrease~~ of ~~$121,801, or 11~~recoveries.~~6%.~~ InThe ~~May~~allowance ~~2023,~~is ~~we sold our C-Bond nanoShield solutions product line and accordingly, which accounted for $112,413~~based ~~and~~on ~~$145,236~~an analysis of ~~total~~historical ~~sales~~bad ~~for~~debt ~~the six months ended June 30~~experience, ~~2023~~current ~~and~~receivables ~~2022~~aging, ~~respectively, a decrease of $32,823. Additionally, for the six months ended June 30, 2023~~ and ~~compared~~expected tofuture ~~the six months ended June 30~~write-offs, ~~2022,~~as ~~sale~~well ofas ~~window~~an ~~tint installation and sales recognized~~assessment ~~over~~of ~~time~~specific ~~decreased~~identifiable bycustomer ~~$30,236,~~accounts ~~sales~~considered ~~from~~at ~~C-Bond~~risk ~~Secure~~or ~~multi-purpose~~uncollectible. ~~and~~The ~~BRS~~expense ~~ballistic~~associated ~~resistant~~with ~~glass~~the ~~protection~~allowance ~~systems~~for ~~decreased~~doubtful byaccounts ~~$47,961,~~is ~~and~~recognized ~~sale~~as ofgeneral ~~disinfection~~and ~~products~~administrative ~~decreased by $10,880~~expense.

~~Cost of Goods Sold~~Inventory

~~In connection~~Inventory, ~~with~~consisting ~~our~~of raw ~~C-Bond~~materials ~~Solutions~~and ~~segment~~finished goods, ~~cost~~is stated at the lower of ~~goods~~cost ~~sold~~and net realizable value utilizing the first-in, first-out (FIFO) method. A reserve is ~~comprised~~established ~~primarily~~when ofmanagement ~~cost~~determines ofthat ~~raw~~certain ~~materials~~inventories ~~and~~may ~~finished~~not be saleable. If inventory costs exceed expected net ~~sold,~~realizable ~~packaging~~value ~~costs,~~due ~~and~~to ~~warranty~~obsolescence ~~costs.~~or Inquantities ~~connection~~in ~~with~~excess ~~our~~of ~~Mobile~~expected ~~segment~~demand, ~~cost~~the ofCompany ~~goods~~will ~~sold~~record isreserves ~~comprised~~for ~~primarily~~the ofdifference between the cost ~~of raw~~and ~~materials~~the ~~such~~net asrealizable ~~film,~~value. ~~labor,~~These ~~subcontractor~~reserves ~~costs,~~are ~~equipment~~recorded ~~rental,~~based on estimates and ~~supplies~~included in cost of sales.

4641

~~For the~~Revenue ~~three months ended June 30, 2023, cost of sales amounted to $209,071 as compared to $209,704 for the three months ended June 30, 2022, a decrease of $633, or 0.3%.~~recognition

~~For~~We follow the Financial Accounting Standards Board’s (the ~~six~~“FASB”) ~~months~~Accounting ~~ended~~Standards ~~June~~Codification ~~30,~~(“ASC”) ~~2023~~Topic 606, ~~cost~~Revenue from ofContracts ~~sales~~with ~~amounted~~Customers to(“ASC ~~$454,431~~606”). asThis ~~compared~~standard establishes a single comprehensive model for entities to ~~$459,334~~use in accounting for ~~the~~revenue ~~six~~arising ~~months~~from ~~ended~~contracts ~~June~~with ~~30,~~customers ~~2022, a~~and ~~decrease~~supersedes most of ~~$4,903,~~the orexisting 1revenue recognition guidance.~~1%.~~ ~~Generally,~~ASC 606 werequires ~~recognize~~an aentity ~~higher~~to ~~gross~~recognize ~~profit~~revenue ~~percentage~~to ondepict the ~~sale~~transfer of ~~C-bond~~promised ~~nanoShield~~goods ~~and~~or ~~C-bond~~services ~~ballistic resistant~~to ~~glass~~customers ~~protections~~in ~~systems~~an ~~than~~amount wethat doreflects the onconsideration to which the ~~Mobile~~entity expects to be entitled in exchange for those goods or services and requires certain additional disclosures.

~~Gross~~We sell our products, which ~~Profit~~include standard warranties primarily to distributors and authorized dealers. Product sales are recognized at a point in time when the product is shipped to the customer and title is transferred and are recorded net of any discounts or allowances. The warranty does not represent a separate performance obligation.

~~For~~Revenues from contracts for the ~~three~~distribution ~~months~~and ~~ended~~installation ~~June~~of ~~30,~~window ~~2023,~~film ~~gross~~solutions ~~profit~~are ~~amounted~~recognized toover ~~$204,984,~~time on the basis of the Company’s estimates of the progress towards completion of contracts using various output or ~~49.5%~~input methods depending on the type of ~~sales,~~contract asterms including (1) the ratio of number of labor hours spent compared to ~~$330~~the number of estimated labor hours to complete a job,~~663,~~ (2) using the milestone method, or 61(3) using a units completed method.2% These methods are used because management considers these to be the best available measure of ~~sales,~~progress ~~for~~on these contracts. We use the ~~three~~same ~~months~~method ~~ended~~for ~~June~~similar ~~30,~~types ~~2022~~of contracts. The asset, a“contract ~~decrease~~assets” represents revenues recognized in excess of ~~$125~~amounts billed. The liability,~~679~~ “contract liabilities,” orrepresents 38billings in excess of revenues recognized.~~0%.~~

For the six months ended June 30, 2023, gross profit amounted to $474,844, or 51.1% of sales, as compared to $591,742, or 56.3% of sales, for the six months ended June 30, 2022, a decrease of $116,898, or 19.7%. Generally, we recognize a higher gross profit percentage on the sale of CStock-~~bond~~based ~~nanoShield and C-bond ballistic resistant glass protections systems than we do on the sale of disinfection products and from Mobile Tint installations and services.~~compensation

~~Operating~~Stock-based compensation ~~Expenses~~is accounted for based on the requirements of ASC 718 – “Compensation –Stock Compensation”, which requires recognition in the financial statements of the cost of employee, director, and non-employee services received in exchange for an award of equity instruments over the period the employee, director, or non-employee is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee, director, and non-employee services received in exchange for an award based on the grant-date fair value of the award. The Company has elected to recognize forfeitures as they occur as permitted under Accounting Standards Update (“ASU”) 2016-09 Improvements to Employee Share-Based Payment.

~~For the~~See ~~three~~Note ~~months~~2 ~~ended June 30, 2023, operating expenses amounted~~ to ~~$776,848~~our ~~as compared to $742,157 for the three months ended June~~unaudited ~~30,~~consolidated ~~2022,~~financial anstatements ~~increase of $34,691, or 4.7%. For the six months ended June 30, 2023, operating expenses amounted to $1,570,310 as compared to $2,677,000~~ for ~~the six months ended June 30, 2022,~~ a ~~decrease~~summary of ~~$1,106,690,~~significant oraccounting ~~41.3%.~~policies ~~For the three~~ and ~~six~~recent ~~months~~accounting ~~ended June 30, 2023 and 2022, operating expenses consisted of the following:~~pronouncements.

	Three Months ended June 30,				Six Months ended June 30,
	2023		2022		2023		2022
Compensation and related benefits, including stock-based compensation charges	$	441,181	$	424,714	$	868,053	$	1,840,732
Professional fees		193,263		132,052		380,953		446,264
General and administrative expenses		142,404		185,391		321,304		390,004
Total	$	776,848	$	742,157	$	1,570,310	$	2,677,000

Results of Operations

~~Compensation~~The following comparative analysis on results of operations was based primarily on the comparative consolidated financial statements, footnotes and related ~~benefits~~information for the periods identified below and should be read in conjunction with the unaudited consolidated financial statements and the notes to those statements for the three and nine months ended September 30, 2023 and 2022, which are included elsewhere in this quarterly report on Form 10-Q. The results discussed below are for the three and nine months ended September 30, 2023 and 2022.

For the three months ended June 30, 2023, compensation and related benefits increased by $16,467, or 3.9%, as compared to the three months ended June 30, 2022. This increase was primarily due to an increase in stock-based compensation of $23,428, offset by a decrease in compensation and related benefits of $6,961.42

~~For the~~Comparison ~~six~~of ~~months~~Results ~~ended~~of ~~June~~Operations ~~30,~~for ~~2023,~~the ~~compensation~~Three and ~~related~~Nine ~~benefits decreased by $972,679, or 52.8%, as compared to the six months~~Months ended ~~June~~September 30, ~~2022.~~2023 ~~This decrease was primarily due to a decrease in stock-based compensation of $978,943, offset by an increase in compensation~~ and ~~related benefits of $6,264.~~2022

On January 6, 2022, the Board of Directors of the Company agreed to satisfy $278,654 of accrued compensation owed to its executive officers (collectively, the “Management”) as of December 31, 2021 and included in accrued compensation on the accompanying condensed consolidated balance sheet. Management agreed to accept 278 shares of the Company’s Series B convertible preferred stock in settlement of this accrued compensation. The conversion feature of the Series B Preferred Stock at the time of issuance was determined to be beneficial on the commitment date. Because the Series B Preferred Stock was perpetual with no stated maturity date, and the conversions could occur any time from the date of issuance, the Company immediately recorded non-cash stock-based compensation of $957,556 related to the beneficial conversion feature arising from the issuance of Series B Preferred Stock.Sales

47For the three months ended September 30, 2023, sales amounted to $813,951 as compared to $573,649 for the three months ended September 30, 2022, an increase of $240,302, or 41.9%. This increase was attributable to an increase in sales of window tint installation and sales of C-Bond Secure multi-purpose and BRS ballistic resistant glass protection systems of $353,582 to school districts in Texas. The Texas Education Agency (TEA) is now mandating that each school district and open-enrollment charter school install either entry-resistant film od fencing on ground-floor windows that would allow access, glass doors, and windows adjacent to glass doors. This increase was offset by a decrease in sales of our recently sold C-Bond nanoShield solutions product line of approximately $119,900.

~~Professional~~For the nine months ended September 30, 2023, ~~fees~~sales amounted to $1,743,226 as compared to $1,624,725 for the nine months ended September 30, 2022, an increase of $118,501, or 7.3%. This increase was attributable to an increase in sales of window tint installation and sales of -Bond Secure multi-purpose and BRS ballistic resistant glass protection systems of $285,383 to school districts in Texas. The Texas Education Agency (TEA) is now mandating that each school district and open-enrollment charter school install either entry-resistant film or fencing on ground-floor windows that would allow access, glass doors, and windows adjacent to glass doors. This increase was offset by a decrease in sales of our recently sold C-Bond nanoShield solutions product line of approximately $167,000.

~~For the~~Cost three months ended June 30, 2023, professional fees increased by $61,211, or 46.3%, as compared to the three months ended June 30, 2022. This increase was primarily related to an increase in legal fees of ~~$20,805,~~Goods ~~an increase in consulting fee of $62,620, and an increase in other professional fees of $3,225, offset by a decrease in accounting fees of $25,439.~~Sold

~~For the~~In ~~six~~connection ~~months~~with ~~ended~~our ~~June~~C-Bond Solutions 30segment, ~~2023,~~cost ~~professional~~of ~~fees~~goods ~~decreased~~sold byis ~~$65,311,~~comprised orprimarily ~~14.6%,~~of asthe ~~compared~~cost toof ~~the~~raw ~~six~~materials ~~months~~and ~~ended~~finished ~~June~~inventory 30sold, ~~2022.~~packaging costs, ~~This~~and ~~decrease~~warranty ~~was~~costs. ~~primarily~~In ~~related~~connection towith aour ~~decrease~~Mobile insegment, ~~legal~~cost ~~fees~~ of ~~$1,398,~~goods asold ~~decrease~~is incomprised ~~investor~~primarily ~~relations~~of ~~fees~~cost of ~~$3,834,~~raw ~~and~~materials asuch ~~decrease~~as infilm, ~~accounting~~labor, ~~fees~~subcontractor ~~of $71~~costs,~~676,~~ ~~offset~~equipment byrental, anand ~~increase in other professional fees of $11,597~~supplies.

~~General~~For the three months ended ~~and~~September ~~administrative~~30, 2023, cost of sales amounted to $346,611 as compared to $246,346 for the three months ended September 30, 2022, an increase of $100,265, or 40.7%.

For the ~~three~~nine months ended September ~~June~~ 30, 2023, ~~general~~cost ~~and~~of ~~administrative~~sales ~~expenses~~amounted ~~decreased~~to by $42801,~~987,~~042 ~~or 23.2%,~~ as compared to ~~the three months ended June 30~~$705,680 ~~2022.~~for ~~For~~ the ~~six~~nine months ended ~~June~~September 30, ~~2023~~2022, ~~general~~an ~~and~~increase of ~~administrative expenses decreased by~~ $6895,~~700~~362, or 1713.65%~~, as compared to the six months ended June 30, 2022~~. ~~These decreases are primarily attributable to a decrease in sales and marketing expenses, and other cost cutting measures.~~

~~Other Operating~~Gross ~~Income~~Profit

~~During~~ For the three ~~and six~~ months ended September ~~June~~ 30, 2023, wegross ~~reported~~profit aamounted ~~gain~~to on$467,340, ~~sale~~or 57.4% of ~~our~~sales, ~~nanoShield~~as ~~product~~compared ~~line~~to of $4327,~~051~~303,~~709~~ or 57.1% Weof ~~did~~sales, ~~not~~for ~~record other~~the ~~operating~~three ~~income~~months ended ~~during~~September ~~the~~30, 2022, ~~periods~~an increase of $140,037, or 42.8%.

~~Income~~For the nine months ended ~~(Loss)~~September 30, 2023, gross profit amounted to $942,184, or 54.1% of sales, as compared to $919,045, or 56.6% of sales, for the nine months ended September 30, 2022, an increase of $23,139, or 2.5%. Generally, we recognize a higher gross profit percentage on the sale of C-Bond nanoShield and C-Bond ballistic resistant glass protections systems than we do on the sale of disinfection products and from ~~Operations~~Mobile Tint installations and services.

~~For the~~Operating ~~three months ended June 30, 2023, income (loss) from operations amounted to $3,479,845 and $(411,494), respectively, a positive change of $3,891,339, or 945.7%.~~Expenses

For the three months ended September 30, 2023, operating expenses amounted to $581,971 as compared to $828,127 for the ~~six~~three months ended ~~June~~September 30, ~~2023~~2022, ~~income~~a ~~(loss)~~decrease of ~~from~~$246,156, ~~operations~~or 29.7%. For the nine months ended September 30, 2023, operating expenses amounted to $2,~~956~~152,~~243~~281 ~~and~~as compared to $(23,~~085~~505,~~258)~~127 for the nine months ended September 30, ~~respectively~~2022, a ~~positive~~decrease ~~change~~ of $51,~~041~~352,~~501~~846, or ~~241~~38.86%. For the three and nine months ended September 30, 2023 and 2022, operating expenses consisted of the following:

Other Income (Expenses), net

	Three Months ended September 30,				Nine Months ended September 30,
	2023		2022		2023		2022
Compensation and related benefits, including stock-based compensation charges	$	308,991	$	412,642	$	1,177,044	$	2,253,374
Professional fees		111,005		217,123		491,958		663,387
General and administrative expenses		161,975		198,362		483,279		588,366
Total	$	581,971	$	828,127	$	2,152,281	$	3,505,127

For the three months ended June 30, 2023, other income (expenses), net amounted to $294,428 as compared to $(597,858) for the three months ended June 30, 2022, a positive change of $892,286, or 149.2%. This change was primarily due to a decrease in interest expense of $195,385 related to a decrease in the amortization of debt discount and a decrease in interest-bearing debt, $143,811, and an increase in gain on debt extinguishment of $696,901 related to the payoff and settlement of debt using proceeds from the sale of nanoShield product line and related technologies.43

~~For the~~Compensation six months ended June 30, 2023, other income (expenses), net amounted to $94,943 as compared to $(843,513) for the six months ended June 30, 2022, a positive change of $938,456, or 111.3%. This change was primarily due to a decrease in interest expense of $244,480 related to a decrease in the amortization of debt discount and ~~a decrease in interest-bearing debt, and an increase in gain on debt extinguishment of $693,976~~ related ~~to the payoff and settlement of debt using proceeds from the sale of nanoShield product line and related technologies.~~benefits

~~Net~~For the three months ended ~~Income~~September ~~(Loss)~~30, 2023, compensation and related benefits decreased by $103,651, or 25.1%, as compared to the three months ended September 30, 2022. This decrease was primarily due to a decrease in compensation and related benefits due to a reduction in the number of employees.

~~Due to~~For ~~factors discussed above, for~~ the ~~three~~nine months ended ~~June 30, 2023 and 2022, net income (loss) amounted to $3,774,273 and $(1,009,352),~~ ~~respectively.~~September ~~For the three months ended June~~ 30, 2023, ~~net~~compensation ~~income attributable to common shareholders, which included dividends accrued on Series B~~ and Crelated ~~preferred~~benefits ~~stock~~decreased ofby $131,~~618 and the deduction of net loss attributable to noncontrolling interests of $18~~076,~~640~~330, ~~amounted to $3,779,295,~~ or $047.018%, ~~per~~as ~~common~~compared ~~share~~to ~~(basic) and $0.00 per common share (diluted). For~~ the ~~three~~nine months ended ~~June~~ September 30, 2022,. ~~net loss~~This ~~attributable~~decrease towas ~~common~~primarily ~~shareholders,~~due ~~which~~to ~~included~~a ~~dividends~~decrease ~~accrued~~in ~~on Series B and C preferred~~ stock-based compensation of $17983,~~622~~388 and ~~the~~a ~~deduction of~~decrease ~~net~~in ~~loss~~compensation ~~attributable~~and torelated benefits ~~noncontrolling interests~~ of $1092,~~066,~~942 ~~amounted~~primarily attributable to ~~$1,016,908,~~a ordecrease ~~$(0.00)~~in ~~per~~the ~~basic~~number ~~and~~of ~~diluted common share~~employees.

48On January 6, 2022, the Board of Directors of the Company agreed to satisfy $278,654 of accrued compensation owed to its executive officers (collectively, the “Management”) as of December 31, 2021 and included in accrued compensation on the accompanying condensed consolidated balance sheet. Management agreed to accept 278 shares of the Company’s Series B convertible preferred stock in settlement of this accrued compensation. The conversion feature of the Series B Preferred Stock at the time of issuance was determined to be beneficial on the commitment date. Because the Series B Preferred Stock was perpetual with no stated maturity date, and the conversions could occur any time from the date of issuance, the Company immediately recorded non-cash stock-based compensation of $957,556 related to the beneficial conversion feature arising from the issuance of Series B Preferred Stock.

~~For the~~Professional six months ended June 30, 2023, net income attributable to common shareholders, which included dividends accrued on Series B and C preferred stock of $27,305 and the deduction of net loss attributable to noncontrolling interests of $27,305, amounted to $3,059,243, or $0.01 per common share (basic) and $0.00 per common share (diluted). For the six months ended June 30, 2022, net loss attributable to common shareholders, which included dividends accrued on Series B and C preferred stock of $31,627 and the deduction of net loss attributable to noncontrolling interests of $31,627, amounted to $2,937,312, or $(0.01) per basic and diluted common share.fees

~~Liquidity~~For the three months ended September 30, 2023, professional fees decreased by $106,118, or 48.9%, as compared to the three months ended September 30, 2022. This decrease was primarily related to a decrease in legal fees of $17,706 and ~~Capital~~a ~~Resources~~decrease in consulting fees of $93,759, offset by an increase in other professional fees of $5,347.

~~Liquidity is~~For the ~~ability~~nine ofmonths anended September ~~enterprise~~30, to2023, ~~generate~~professional ~~adequate~~fees ~~amounts~~decreased ofby ~~cash~~$171,429, or 25.8%, as compared to ~~meet~~the ~~its~~nine ~~needs~~months ~~for~~ended ~~cash~~September ~~requirements~~30, 2022. WeThis ~~had~~decrease was ~~cash~~primarily related to a decrease in legal fees of $119,~~511~~104,~~527 and~~ a decrease in consulting fees of $9786,~~091~~438, asand ofa ~~June~~decrease 30in accounting fees of $71,676, ~~2023~~offset ~~and~~by ~~December~~an ~~31,~~increase ~~2022,~~in ~~respectively~~other professional fees of $5,789.

~~Our primary~~General ~~uses of cash have been for compensation~~ and ~~related benefits, fees paid to third parties for professional services, and general and~~ administrative expenses. We have received funds from the sales of products, from various financing activities such as from the sale of our common shares, from the sale of preferred shares and from debt financings. Additionally, we received net proceeds from the sale of our nanoShield product line and related technologies of $1,989,755, after the repayment and settlement of notes payable and convertible notes payable. The following trends are reasonably likely to result in changes in our liquidity over the near to long term:

●For Anthe ~~increase~~three inmonths ~~working~~ended September ~~capital~~30, ~~requirements~~2023, general and administrative expenses decreased by $36,387, or 18.3%, as compared to ~~finance~~the ~~our~~three ~~current~~months ~~business~~ended September 30, 2022. For the nine months ended September 30, 2023, general and administrative expenses decreased by $105,087, or 17.9%, as compared to the nine months ended September 30, 2022. These decreases are primarily attributable to a decrease in sales and marketing expenses, and other cost cutting measures, including the reduction of rent and other costs associated with our recently sold C-Bond Nanoshield product line.

●Other ~~Research~~Operating ~~and development fees;~~Income

●During ~~Addition~~the nine months ended September 30, 2023, we reported a gain on sale of ~~administrative~~our ~~and~~nanoShield ~~sales~~product ~~personnel~~line ~~needed~~of ~~for~~$4,051,709. ~~business~~We ~~growth;~~did not record other operating income during the 2022 periods.

●Income ~~The~~(Loss) ~~cost~~from ~~of being a public company;~~Operations

●For ~~Marketing~~the ~~expense~~three ~~for~~months ~~building~~ended September ~~brand;~~30, 2023, loss from operations amounted to $(114,631) and $(500,824), respectively, a decrease of $386,193, or 77.1%.

●For ~~Capital~~the ~~requirements~~nine ~~for~~months ~~production~~ended September ~~capacity.~~30, ●2023, ~~Working~~income ~~capital~~(loss) ~~requirements~~from operations amounted to ~~support~~$2,841,612 ~~acquired~~and ~~companies~~$(2,586,082), respectively, a positive change of $5,427,694, or 209.9%.

~~Since inception, we have raised proceeds from the sale of common shares and preferred shares, and from debt to fund our operations and research and development initiatives.~~44

~~As discussed~~Other ~~elsewhere,~~Income ~~on May 8, 2023, the Company entered into an Asset Purchase Agreement~~ (~~the “APA”~~Expenses) ~~with Apex Protect GPS~~, ~~LLC~~ (the “Buyer”), a Texas limited liability company, whereby the Company agreed to sell its C-Bond nanoShield™ business, including intangible assets, intellectual property, work in process, furniture, fixtures, equipment, inventory and other physical assets of the Company’s C-Bond nanoShield division (the “Assets”) to the Buyer for a purchase price of $4,000,000 in cash (the “Transaction”). The Transaction closed on May 8, 2023.net

~~In connection~~For ~~with~~ the ~~APA~~three months ended September 30, we2023, ~~received~~other (expenses), net ~~proceeds~~amounted to $(49,437) as compared to $(445,566) for the three months ended September 30, 2022, a decrease of $1396,~~989~~129,~~755~~ or 88.9%. This decrease was primarily due to a decrease in interest expense of $386,879 ~~after~~related to a decrease in the ~~repayment~~amortization of debt discount and ~~settlement~~a ofdecrease ~~notes~~in ~~payable~~interest-bearing debt, and ~~convertible~~an increase in gain on debt extinguishment of $9,250 ~~notes~~related ~~payable~~to asthe ~~follows:~~payoff and settlement of accrued compensation.

1)For ~~The~~the ~~Company~~nine ~~repaid~~months ~~and~~ended September ~~settled~~30, ~~the~~2023, ~~BOCO~~other ~~Investments~~income (expenses), ~~LLC~~net ~~Note~~amounted ~~(See~~to ~~Note~~$45,506 8as compared to $(1,289,079) ~~with~~for the nine months ended September 30, 2022, a ~~principal~~positive ~~balance~~change of $~~400~~1,~~000~~334,585, ~~and~~or ~~accrued~~103.5%. This change was primarily due to a decrease in interest ~~payable~~expense of $ ~~$310~~631,~~192~~359 ~~for~~related to a ~~cash~~decrease ~~payment~~in the amortization of ~~$200~~debt discount and a decrease in interest-bearing debt,~~000~~ and ~~the~~an ~~issuance~~increase in gain on debt extinguishment of 22$703,~~000,000~~226 ~~shares~~related to the payoff and settlement of debt using proceeds from the ~~Company’s~~sale ~~common~~of ~~stock~~nanoShield product line and related technologies the payoff and settlement of accrued compensation.

49Net Income (Loss)

2)Due ~~The~~to ~~Company~~factors ~~repaid~~discussed above, GSfor ~~Capital~~the ~~Partners~~three months ended September 30, ~~LLC~~2023 ~~$419~~and 2022,~~260~~ ~~for~~net ~~notes~~(loss) ~~dated~~amounted ~~June~~to 23$(164,068) ~~2022~~and $(946,390), ~~July~~respectively. 26For the three months ended September 30, ~~2022~~2023, net loss attributable to common shareholders, which included dividends accrued on Series B and C ~~September~~preferred 6stock of $13,483 ~~2022~~and the deduction of net (~~collectively~~income) attributable to noncontrolling interests of $(28,657), ~~the~~amounted ~~“GS~~to ~~Notes”~~$(206,208), or $(0.00) per common share (basic and GSdiluted). ~~Capital~~For ~~Partners~~the three months ended September 30, ~~LLC~~2022, net loss attributable to common shareholders, which included dividends accrued on Series B and C preferred stock and a deemed ~~the~~dividend GSrelated ~~Notes~~to ~~paid~~price protection provisions in ~~full~~our convertible debt instruments of $14,619, and the deduction of net loss attributable to noncontrolling interests of $8,529, amounted to $952,480, or $(0.00) per basic and diluted common share.

3)Due ~~The~~to ~~Company~~factors ~~repaid~~discussed above, ~~Mercer~~for ~~Street~~the ~~Global~~nine ~~Opportunity~~months ~~Fund~~ended September 30, ~~LLC~~2023 and 2022, net income (~~“Mercer”~~loss) amounted to $~~271~~2,~~825~~887,118 ~~for~~and ~~notes~~$(3,875,161), ~~dated~~respectively. For ~~March~~the 14nine months ended September 30, ~~2022~~2023, net income attributable to common shareholders, which included dividends accrued on Series B and ~~November~~C 22preferred stock of $40,788 ~~2022~~and the deduction of net loss attributable to noncontrolling interests of $6,705, amounted to $2,853,035, or $0.01 per common share (~~collectively~~basic) and $0.00 per common share (diluted). For the nine months ended September 30, 2022, net loss attributable to common shareholders, which included dividends accrued on Series B and C preferred stock of $46,246 and the ~~“Secured~~deduction ~~Mercer~~of ~~Notes”~~net loss attributable to noncontrolling interests of $31,615, amounted to $(3,889,792), or $(0.01) per basic and diluted common share.

4)Liquidity ~~The Company repaid Jeff Badders $875,000 for notes dated May 5, 2021, November 8, 2022,~~ and ~~April~~Capital ~~4, 2023.~~Resources

5)Liquidity ~~The~~is ~~Company~~the ~~repaid~~ability of ~~1800~~an ~~Diagonal~~enterprise ~~Lending,~~to ~~LLC~~generate ~~$288,035~~adequate ~~for~~amounts ~~notes~~of ~~dated~~cash ~~November~~to 4,meet ~~2022,~~its ~~December~~needs ~~27,~~for ~~2022,~~cash ~~and~~requirements. ~~March~~We ~~17,~~had ~~2023~~cash ~~(collectively,~~of ~~the “1800 Diagonal Notes”)~~$1,133,129 and ~~1800 Diagonal Lending~~$97,091 ~~LLC~~as of ~~deemed~~September ~~the~~30, ~~1800~~2023 ~~Diagonal~~and ~~Notes~~December ~~paid~~31, in2022, ~~full~~respectively.

~~Additional~~ Our primary uses of cash have ~~liquidity~~been isfor ~~generated~~compensation and related benefits, fees paid to third parties for professional services, and general and administrative expenses. We have received funds from ~~product~~the sales. ~~However~~of products, tofrom ~~date,~~various wefinancing ~~are~~activities ~~not~~such ~~profitable~~as from the sale of our common shares, from the sale of preferred shares and from debt financings. Additionally, we ~~cannot~~received ~~provide~~net ~~any~~proceeds ~~assurances~~from ~~that~~the wesale of our nanoShield product ~~will~~line beand ~~profitable.~~related Wetechnologies ~~believe~~of ~~that~~$1,989,755, ~~our~~after ~~existing~~the ~~cash~~repayment and ~~cash~~settlement ~~equivalents~~of ~~will~~notes ~~not~~payable beand ~~sufficient~~convertible notes payable. The following trends are reasonably likely to ~~fund~~result in changes in our ~~current~~liquidity ~~operating~~over ~~plans.~~the near to long term:

~~Cash Flows~~● An increase in working capital requirements to finance our current business,

~~For the~~● ~~Six~~Research ~~months ended June 30, 2023~~ and ~~2022~~development fees;

~~The following~~● ~~table~~Addition ~~shows~~of aadministrative ~~summary~~and ofsales ~~our~~personnel ~~cash~~needed ~~flows~~ for ~~the~~business ~~six months ended June 30, 2023 and 2022.~~growth;

	Six Months Ended June 30,
	2023			2022
Net cash used in operating activities	$	(912,997	)	$	(799,374	)
Net cash provided by investing activities		4,042,631			-
Net cash (used in) provided by financing activities		(1,715,198	)		524,024
Net increase (decrease) in cash		1,414,436			(275,350	)
Cash - beginning of the period		97,091			519,898
Cash - end of the period	$	1,511,527		$	244,548

●

The cost of being a public company;

~~Net Cash~~● ~~Used~~Marketing inexpense ~~Operating~~for ~~Activities:~~building brand;

~~Net cash~~● ~~flow~~Capital ~~used~~requirements ~~in operating activities was $912,997~~ for ~~the~~production ~~six~~capacity. ~~months~~● ~~ended~~Working ~~June~~capital ~~30,~~requirements ~~2023 as compared~~ to ~~net~~support ~~cash~~acquired ~~flow used in operating activities of $799,374 for the six months ended June 30, 2022, an increase of $113,623~~companies.

Net cash flow used in operating activities for the six months ended June 30, 2023 primarily reflected net income of $3,051,186, which was then adjusted for the add-back (deduction) of non-cash items primarily consisting of depreciation and amortization of $41,395, stock-based compensation expense of $42,183, stock-based professional fees of $97,817, amortization of debt discount of $95,922, non-cash interest expense for put premiums of $29,212, non-cash gain on debt extinguishment and inducement expense of $462,581, and gain from sale of nanoShield product line of $4,051,709, and changes in operating assets and liabilities consisting primarily of a decrease in accounts receivable of $188,934, an increase in inventory of $51,196, an increase in prepaid expenses of $15,434, an increase in contract assets of $52,487, a decrease in accounts payable of $50,027, an increase in accrued expenses of $8,040, an increase in contract liabilities of $157,363, an increase in accrued compensation of $49,812, and an increase in accrued interest – related party of $5,663.45

~~Net cash~~Since ~~flow used in operating activities for the six months ended June 30~~inception, ~~2022~~we ~~primarily reflected a net loss of $2,928,771, which was~~have ~~then~~raised ~~adjusted~~proceeds ~~for~~from the ~~add-back~~sale ~~(deduction)~~ of ~~non-cash~~common ~~items~~shares ~~primarily consisting of depreciation~~ and ~~amortization~~preferred ~~of $45~~shares,~~665,~~ ~~stock-based compensation expense of $1,021,126, stock-based professional fees of $124,050, amortization of debt discount of $527,219,~~ and afrom ~~non-cash loss on~~ debt ~~extinguishment~~to offund ~~$231,395,~~our ~~and~~operations ~~changes in operating assets~~ and ~~liabilities~~research consisting primarily of an increase in accounts receivable of $80,545, a decrease in inventory of $20,285, a decrease in prepaid expenses of $20,343, a decrease in contract assets of $82,805, an increase in accrued expenses of $77,336, an increase in accrued compensation of $34,276, an increase in contract liabilities of $16,876, and ~~a decrease in accounts payable of $102~~development initiatives.

50As discussed elsewhere, on May 8, 2023, the Company entered into an Asset Purchase Agreement (the “APA”) with Apex Protect GPS, LLC (the “Buyer”), a Texas limited liability company, whereby the Company agreed to sell its C-Bond nanoShield™ business, including intangible assets, intellectual property, work in process, furniture, fixtures, equipment, inventory and other physical assets of the Company’s C-Bond nanoShield division (the “Assets”) to the Buyer for a purchase price of $4,000,000 in cash (the “Transaction”). The Transaction closed on May 8, 2023.

~~Net~~In connection with the APA, ~~Cash~~we ~~Provided~~received bynet ~~Investing~~proceeds ~~Activities~~of $1,989,755, after the repayment and settlement of notes payable and convertible notes payable as follows:

~~Net cash~~1) ~~provided~~The byCompany ~~investing~~repaid ~~activities~~and ~~was~~settled $4the BOCO Investments,~~042,631~~ ~~for~~LLC ~~the~~Note ~~six~~(See ~~months~~Note ~~ended~~8) ~~June~~with 30a principal balance of $400,000 ~~2023~~and asaccrued ~~compared~~interest topayable of $0317,293 for ~~the~~a ~~six~~cash ~~months~~payment ~~ended June~~of 30$200,000 ~~2022~~and the issuance of 22,000,000 shares of the Company’s common stock.

~~During the~~2) ~~six~~The ~~months~~Company ~~ended~~

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