What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2022-08-15 compared with 2022-05-16 · 227 added, 197 removed, 220 unchanged (66% of the section changed)

48 unchanged sentences

the majority shareholder of Ozop Capital with PJN Holdings LLC, a New York limited liability company, being the minority shareholder.

Ozop Capital was formed as a holding company and seeks to develop a captive insurance company.

Brian Conway was appointed as the sole

officer and director of Ozop Capital and has voting control of Ozop Capital.

Ozop Capital was formed as a holding company to seek to develop a captive insurance company.

Brian Conway was appointed as the sole officer

and director of Ozop Capital and has voting control of Ozop Capital.

October 29, 2021, EV Insurance Company, Inc.

28 unchanged sentences

methodologies as well as the financial arbitrage of how we produce, capture and distribute electrical energy for the EV markets.

OES has acquired the license rights to a proprietary system, the Neo-Grids TM System (patent pending), for the capture

and distribution of electrical energy for the EV market.

The Neo-Grids TM System will serve both the private

auto and the commercial sectors.

The exponential growth of the EV industry has been accelerated by the recent major commitments of most

of the major car manufacturers.

Our Neo-Grids TM System leverages this

accelerated growth by offering (1) charging locations that can be installed with reduced delays, restricted areas or load limits and

(2) EV charger electricity that is produced from renewable sources claiming little to no carbon footprint.

has acquired the license rights to a proprietary system, the Neo-Grids TM System (patent pending), for the capture and

distribution of electrical energy for the EV market.

The Neo-Grids TM System will serve both the private auto

and the commercial sectors.

The exponential growth of the EV industry has been accelerated by the recent major commitments of most of

the major car manufacturers.

Our Neo-Grids TM System leverages this accelerated

growth by offering (1) charging locations that can be installed with reduced delays, restricted areas or load limits and (2) EV charger

electricity that is produced from renewable sources claiming little to no carbon footprint.

has developed a business plan for the Neo Grids distribution, a solution to the stress forthcoming to the existing grid infrastructure.

10 unchanged sentences

technology assessment.

Plus plans on producing vehicle service contracts (“VSC’s”) for electric vehicles (EV’s) that will offer to consumers

Plus plans on marketing vehicle service contracts (“VSC’s”) for electric vehicles (EV’s) that will offer to consumers

to be able to purchase additional months and or miles above the manufacturer’s warranty and to also bring added value to EV owners

3 unchanged sentences

wear on additional components that EV vehicles experience.

Management believes that the Ozop Plus VSC will give “peace of mind”

to the EV buyer.

The Company is currently in negotiations to complete the necessary agreements to launch the product in Q2 2022.

Additionally,

the Company is also in discussions with entities whereby Ozop Plus can reinsure the battery portion of another entity’s VSC.

Management believes that the Ozop Plus marketed VSC’s will give “peace

of mind” to the EV buyer.

May 2022, the Company entered into an agreement with GS Administrators, Inc., a member of Houston-based GSFSGroup.

Under the agreement,

the Company will market GSFSGroup’s EV VSC’s in all states (except, California, Florida, Massachusetts and Washington)

to Ozop’s network of new and used franchised dealerships and other eligible entities.

In addition to acting as an agent for

the marketing, Ozop also has the right to white label the product under its’ Ozop Plus brand.

Ozop’s role won’t

be limited to marketing the product.

GSFSGroup plans to tap into Ozop’s experience relative to battery collection and disposal

and has agreed to insurance risk sharing in connection with the insurance policies that back the VSC’s.

GSFSGroup is working

on getting the approvals needed for the above four (4) states.

June 22, 2022, the Company entered into an Agent Agreement with Royal Administration Services, Inc.

the agreement, the Company will market Royal’s EV VSC’s and has the right to white label it under Ozop Plus.

agreed to allow Ozop Plus on all VSC’s, marketed by Royal and the Company, to assume all of the risk related to the electric

battery at an agreed upon premium.

The battery premium is dependent on the consumer’s selection of the duration of the VSC,

the miles selected for coverage and the type of vehicle that the consumer has purchased, with a key component being the kWh size

of the battery.

These VSC’s have a maximum of 10 years and 150,000 miles and cover new and used cars from model year 2017 and

During August 2022, Royal will begin the filing process in all 50 states, 30 plus of which are effective upon filing, and

the others have various waiting times or approvals needed.

February 25, 2022, the Company formed Ozop Engineering and Design, Inc.

29 unchanged sentences

in the United States.

results of operations below include PCTI activity for the three months ended March 31, 2022, and 2021.

Due to supply chain issues and

other factors, management is currently reviewing the current business model of PCTI, in determining the best course of action going forward.

results of operations below include PCTI activity for the three and six months ended June 30, 2022, and 2021.

Due to supply chain issues

and other factors, management is currently reviewing the current business model of PCTI, in determining the best course of action going

Redemption Agreement

1 unchanged sentence

of the Company’s Series C Preferred Stock held by Chis and the 18,667 shares of the Company’s Series D Preferred Stock held

by Chis for the total purchase price of $11,250,000.The Agreement was closed on July XX, 2022.

of Operations for the three months ended March 31, 2022 and 2021:

the three months ended March 31, 2022, the Company generated revenue of $3,082,238 compared to $795,554 for the three months ended March

The increase in revenues is a result of revenues of $2,912,322 from Ozop Energy Systems, Inc.

(“OES”) and are classified

as sourced and distributed products.

PCTI sales decreased to $162,916 for the three months ended March 31, 2022 compared to $795,554

for the three months ended March 31, 2021.

by Chis for the total purchase price of $11,250,000.The Agreement was closed on July 27, 2021.

of Operations for the three and six months ended June 30, 2022 and 2021:

the three and six months ended June 30, 2022, the Company generated revenue of $4,878,636 and $7,960,874, respectively, compared to $1,274,033

and $2,069,587 for the three and six months ended June 30, 2021, respectively.

The increase in revenues is from Ozop Energy Systems,

(“OES”) and are classified as sourced and distributed products.

PCTI sales classified as manufactured products had an

increase for the three months ended June 30, 2022 compared to the three months ended June 30, 2021, and decreased for the six month ended

June 30, 2022, compared to the six months ended June 30, 2021.

Ozop Engineering and design (“OED”) operations began in the

quarter ended June 30, 2022, and are classified as design and installation.

Sales are summarized as follows:

Three months ended

Six months ended

Sourced and distributed products

Manufactured products

Design and installation

it did for most of the industry;

OES’s importing of solar panels issues that began in the 4 th quarter of 2021, continued

into the first quarter of 2022.

Covid issues continued to be distributive to a continual source of product from foreign manufacturers

as well as ocean freight backlogs and covid issues that plagued the port of arrivals related to the unloading of containers and the eventual

customs clearance of the imported goods.

Covid issues continued to be disruptive to a continual source of product from foreign manufacturers as well as ocean freight backlogs

and covid issues that plagued the port of arrivals related to the unloading of containers and the eventual customs clearance of the imported

An announcement by the U.S.

Department in March 2022 stated it would investigate allegations

that solar panel manufacturers in Southeast Asia are using Chinese-made parts and evading U.S.

tariffs has raised alarms concerning both

trade and environmental policy The department announced March 28 that it would investigate claims by California-based solar panel manufacturer

that solar energy equipment manufacturers in Cambodia, Malaysia, Thailand and Vietnam have close business ties to companies in China

that produce the raw materials and some components of solar panel assemblies.

Based on the current situation, management has placed approximately

$10,900,000 of purchase orders and as of the date of the filing of this report has made approximately $1.7 million of down payments to

vendors to assure product delivery of approximately $5.9 million with a forecasted delivery by August 2022 and $5 million with a forecasted

delivery in November 2022.

Based on the above and the Company’s current on-hand inventory, management anticipates similar to slightly

higher quarterly sales results for the second and third quarter of 2022 as experienced in the first quarter, and a significant increase

in the fourth quarter of 2022.

Department in March 2022 stated it would investigate allegations that solar panel manufacturers in

Southeast Asia are using Chinese-made parts and evading U.S.

tariffs has raised alarms concerning both trade and environmental policy

The department announced March 28 that it would investigate claims by California-based solar panel manufacturer that solar energy equipment

manufacturers in Cambodia, Malaysia, Thailand and Vietnam have close business ties to companies in China that produce the raw materials

and some components of solar panel assemblies.

On June 6, 2022, President Biden waived tariffs on solar panels from there four Southeast

Asian nations for two years and invoked the Defense Production Act to spur domestic solar panel manufacturing at home.

The tariff exemption

will serve as a “bridge” while U.S.

manufacturing ramps up.

on the situation prior to the June 6, 2022 announcement, the Company placed approximately $10,932,000 of purchase orders for solar panels

and as of the date of the filing of this report has fully paid and received approximately $1,262,000 of this product.

Additionally, the

Company has made approximately $1.9 million of down payments to vendors on the remaining $9,670,000 of open purchase orders to vendors,

to assure product delivery of approximately $4.7 million with a forecasted delivery in August and September 2022 and $5 million with

a forecasted delivery in November and December 2022.

Based on the above and the Company’s current on-hand inventory, management

anticipates similar sales results for the third quarter as the second quarter, and the potential for a significant increase in fourth

quarter sales.

to supply chain issues and other factors, management is currently reviewing the current business model of PCTI, in determining the best

course of action going forward.

the three months ended March 31, 2022, and 2021, the Company recognized $2,875,832 and $226,909, respectively, of cost of sales.

the three and six months ended June 30, 2022, the Company recognized $4,416,400 and $7.292.292, respectively of cost of sales, compared

to $1,214,468 and $1,441,377 for the three and six months ended June 30, 2021, respectively..

Three months ended

Six months ended

Sourced and distributed products

Manufactured products

on the above cost of sales, gross margin was 6.7% and 71.5% for the three months ended March 31, 2022, and 2021, respectively.

of gross margin for the current year is a result of the manufactured orders shipped in 2021 were at a higher margin than the manufactured

orders were in 2022.

While PCTS’s margin and gross profit decreased in the current year, the Company realized an additional $169,972

of gross profit dollars recognized on OES’s sourced and distributed products.

Due to product availability, increased buy prices

and delivery issues that the solar industry experienced at the end of the 4 th quarter 2021, and into the first quarter of

2022, the Company expects that margins on sourced products may be temporarily reduced at the beginning of 2022.

However, the Company

anticipates that margins of sourced products will rise during the remainder of 2022.

on the above cost of sales, gross margin was 9.5% and 8.4% for the three and six months ended June 30, 2022, compared to 4.7% and 30.4%

for the three and six months ended June 30, 2021, respectively.

The decrease of gross margin for the six months is a result of the manufactured

orders shipped in 2021 were at a higher margin than the manufactured orders were in 2022.

While PCTI’s margin and gross profit

decreased in the current year, the Company realized an additional $632,663 of gross profit dollars recognized on OES’s sourced

and distributed products.

Due to product availability, increased buy prices and delivery issues that the solar industry experienced at

the end of the 4 th quarter 2021, and into the first quarter of 2022, the Company experienced lower margins on sourced products

at the beginning of 2022.

However, margins of sourced products were approximately 9.7% in the three months ended June 30, 2022 and the

Company expects slightly higher margins and the third and fourth quarters of 2022.

While the overall margin will be reduced, the higher

3 unchanged sentences

were comprised of:

Three Months Ended March 31,

Wages and management fees, related parties

Stock-based compensation

Three Months Ended June 30, 2022

Three Months Ended June 30, 2021

Six Months Ended June 30, 2022

June 30, 2021

Wages and management fees, related parties, including stock-based compensation

Stock-based compensation, other

Salaries, taxes and benefits

1 unchanged sentence

Advertising and marketing

Rent and office expenses

General and administrative, other

Rent and office expense

General and administrative

Total operating expenses

and management fees- related parties, include amounts paid to our CEO and to the President (resigned July 2021) of PCTI.

3 unchanged sentences

September 1, 2021, Mr.

Conway receives $10,000 per month from Ozop Capital.

Effective January 1, 2022, the Company entered into a new

employment agreement with Mr.

Conway began to receive $10,000 per month from Ozop Capital.

Effective January 1, 2022, the Company entered into

a new employment agreement with Mr.

Pursuant to the agreement, Mr.

Conway received a $250,000 contract renewal bonus and will receive

an annual compensation of $240,000 from the Company and will also be eligible to receive bonuses and equity grants at the discretion

Conway received a $250,000 contract renewal bonus and will

receive an annual compensation of $240,000 from the Company and will also be eligible to receive bonuses and equity grants at the discretion

The Company also agreed to compensate Mr.

5 unchanged sentences

Below is a summary of wages and management fees:

Three months ended March 31,

Three months ended

Six months ended

Stock-based compensation

President subsidiary (resigned July 2021)

based compensation for the three months ended March 31, 2022, of $136,429 is comprised of the following:

Total other (income) expense

based compensation for the six months ended June 30, 2022, of $136,429 is comprised of the following:

shares of common stock issued in the aggregate to two employees pursuant to their offers of employment dated March 31, 2021.

shares were valued at $0.027 per share.

During the three months ended March 31, 2022, the Company included $135,000 in stock compensation

During the six months ended June 30, 2022, the Company included $135,000 in stock compensation

of amortization of stock compensation for shares issued in April 2021.

based compensation for the three months ended March 31, 2021, of $4,902,000 is comprised of the following stock issuances:

based compensation, other for the three and six months ended June 30, 2021, of $2,013,945 and $5,115,945 is comprised of the following

stock issuances:

shares issued in April 2021 pursuant to a one-year consulting agreement.

The Company valued the shares at $0.20 per share (the market

price of the common stock on the date of the agreement), and $1,000,000 was recorded as deferred stock compensation, to be amortized

over the one-year term of the agreement.

For the six months ended June 30, 2021, $331,507 is included in stock-based compensation

shares issued in April 2021 pursuant to a one-year consulting agreement.

The Company valued the shares at $0.0076 per share (the

market price of the common stock on the date of the agreement), and $76,000 was recorded as deferred stock-based compensation, to

be amortized over the one-year term of the agreement.

For the six months ended June 30, 2021, the Company recorded $36,348 as stock-based

compensation expense.

shares issued in April 2021 for services.

The Company valued the shares at $0.1392 per share (the market price of the common stock

on the date of the agreement), and $696,000 is included in stock-based compensation expense for the six months ended June 30, 2021.

shares issued for services.

The shares were valued at $0.0056 per share, the date the Company agreed to issue the shares.

the three months ended March 31, 2021, the Company included $56,000 in stock compensation expense.

the six months ended June 30, 2021, the Company included $56,000 in stock compensation expense.

shares issued pursuant to a consulting agreement dated February 24, 2021 (see Note 11).

The shares were valued at $0.2386 per share.

During the three months ended March 31, 2021, the Company included $2,386,000 in stock compensation expense.

shares of common stock to be issued in the aggregate to two new employees pursuant to their offers of employment dated March 31,

During the six months ended June 30, 2021, the Company included $2,386,000 in stock compensation expense.

shares of common stock issued in the aggregate to two new employees pursuant to their offers of employment dated March 31, 2021.

The shares were valued at $0.23 per share.

During the three months ended March 31, 2021, the Company included $460,000 in stock

compensation expense for the 5,000,000 shares of common stock to be issued.

The shares were issued in April 2021.

of 2,000 shares (1,800 were issued to the Company’s CEO) of Series E Preferred Stock, with a redemption value of $1,000 per

share, resulting in stock compensation expense of $2,000,000 ($1,800,000 related party) for the three months ended March 31, 2021.

taxes and benefits increased for the three months ended March 31, 2022, compared to the same period in 2021.

The increase was a result

of the current period including $246,435 of expenses related to OES.

These additional costs were offset by a reduction in PCTI’’s

expenses of $73,734.

OES now has annual gross payroll of approximately $512,000 and an additional $351,000 on an annual basis of personnel

focused on the Company’s battery storage vertical.

Ozop Engineering and Design (“OED”) has hired three employees effective

April 1, 2022, with an aggregate annual compensation of $302,000.

and consulting fees increased for the three months ended March 31, 2022, compared to March 31, 2021.

The increase was due to increases

in accounting and auditing expenses of Ozop in the current period, consultants engaged on the second quarter of 2021 by both Ozop Capital

Partners and OES as we initiate each of their business plans regarding electric vehicles and distribution

of renewable energy products , respectively.

and marketing expenses decreased for the three months ended March 31, 2022, compared to March 31,

The decrease was related to marketing programs during 2021, including brand awareness programs for both PCTI and Ozop.

and office expense (including supplies, utilities and internet costs) increased for the three months ended March 31, 2022, compared to

the three months ended March 31, 2021.

The increase was the result of including in the current period, rent and office expense of approximately

$45,734 for OES.

The Company estimates that the monthly OES rent and office expense for the California operation to be approximately

$18,000 per month.

expense increased for the three months ended March 31, 2022, compared to the three months ended March 31, 2021.

The increase was the

result of including in the current period, insurance expense of approximately $80,834 for OES.

The Company estimates that the monthly

OES insurance expense for the California operation to be approximately $24,000 per month.

During the six months ended June 30, 2021, the Company included $460,000 in stock compensation

expense for the 5,000,000 shares of common stock.

of 200 shares and 950 shares of Series E Preferred Stock, with a redemption value of $1,000 per share, resulting in stock compensation

expense of $950,000 and $1,150,000 for the three and six months ended June 30, 2021, respectively.

taxes and benefits increased for the three and six months ended June 30, 2022, compared to the same periods in 2021.

The increase was

a result of the current periods including $252,913 and $499,348, respectively, compared to $125,575 and $167,515 for the three and six

months ended June 30, 2021, respectively, of expenses related to OES and $55,562 for the three and six months ended June 30, 2022, respectively,

These additional costs were offset by reductions in PCTI’s expenses of $104,164 and $129,999, respectively, for the three

and six months ended June 30, 2022, compared to the three and six months ended June 30, 2021.

OES now has annual gross payroll of approximately

$512,000 and an additional $351,000 on an annual basis of personnel focused on the Company’s battery storage vertical.

OED currently

has five employees with an aggregate annual compensation of $457,000.

and consulting fees increased for the three and six months ended June 30, 2022, compared to June 30, 2021.

The increases are due to increases

in accounting expenses of Ozop and its’ subsidiaries in the current three- and six-month periods and consultants engaged in the

second quarter of 2021 by Ozop Capital Partners that have been engaged for the entire six months ended June 30, 2022, as Ozop Plus initiates

its business plan regarding vehicle service contracts on electric vehicles.

and marketing expenses decreased for the three and six months ended June 30, 2022, compared to

June 30, 2021.

The decreases were related to marketing programs during 2021, including brand awareness programs for both PCTI

and office expense (including supplies, utilities and internet costs) increased for the three and six months ended June 30, 2022, compared

to the three and six months ended June 30, 2021.

The increases are the result of including in the current period, rent and office expense

of approximately $52,412 and $98,146, respectively, for the three and six months ended June 30, 2022, compared to $18,421 for the three

and six months ended June 30, 2021, for OES.

The Company estimates that the monthly OES rent and office expense for the California operation

to be approximately $18,000 per month.

expense increased for the three and six months ended June 30, 2022, compared to the three and six months ended June 30, 2021.

was the result of including in the current three- and six-month periods, insurance expense of approximately $52,114 and $132,948, respectively,

for the three and six months ended June 30, 2022, compared to $26,648 for the three and six months ended June 30, 2021, for OES.

Company estimates that the monthly OES insurance expense for the California operation to be approximately $24,000 per month.

Income (Expenses)

income, net was $389,982 for the three months ended March 31, 2022, compared to other expenses, net, for the three months ended March

31, 2021, of $204,271,543, respectively, and were as follows:

Three months ended March 31,

income, net was $7,584,016 and $7,973,998 for the three an six months ended June 30, 2022, respectively, compared to other income, net

of $4,087,788 for the three months ended June 30, 2021, and other expenses of $200,183,755 for the six months ended June 30, 2021, and

were comprised of as follows:

Three months ended

Six months ended

Interest expense

(Gain) loss on change in fair value of derivatives

Debt restructure expense

(13,376,773 )

Loss on extinguishment of debt

Total other (income) expense, net

Debt restructure expense

Total other (income) expense

$ (7,584,016 )

decrease in other expense for the three months ended March 31, 2022, is primarily a result expenses for the three months ended March

31, 2021, including the loss on extinguishment of debt related to the market value of shares of common stock issued in excess of the

debt and accrued interest extinguished and 175,000,000 shares of restricted common stock issued related to the restructure of the deferred

liability (see Note 9).

$ (4,087,788 )

$ (7,973,998 )

$ 200,183,755

increase in other income, net, for the three months ended June 30, 2022, compared to the three months ended June 30, 2021, is primarily

a result of reduced interest expense of $2,899,796 related to the amortization of debt discounts associated with the maturity dates of

certain of the company’s promissory notes.

Other expenses for the six months ended June 30, 2021 ,

includes the loss on extinguishment of debt related to the market value of shares of common stock issued in excess of the debt and accrued

interest extinguished.

The Company also issued 175,000,000 shares of restricted common stock related to the restructure of the deferred

The shares were valued at $0.094 per share and the Company recognized $16,450,000 of restructuring costs.

in interest expense for the three months ended March 31, 2021, is the initial expense of $38,907,939 of fair value related to the issuance

of 300,000,000 warrants.

For the three months ended March 31, 2022, the Company recognized a gain on the change in the fair value of

derivatives compared to a loss of $52,197,902 for the three months ended March 31, 2021.

net loss for the three months ended March 31, 2022, was $1,381,469 compared to $209,492,368 for the three months ended March 31, 2021.

The decrease in the loss was primarily a result of a decrease in other expenses of $204,661,525, a decrease of $4,765,751 in stock-based

compensation expenses as well as the operating results discussed above.

Also included in

interest expense for the six months ended June 30, 2021, is the initial $38,907,939 of fair value related to the issuance of 300,000,000

In addition, the amortization of debt discounts of $5,137,956 and losses on changes in fair values of derivatives, related

to convertible notes and warrants.

income (loss)

income for the three months ended June 30, 2022, was $6,704,305 compared to a net loss of $211.952 for the three months ended June 30,

The change was primarily a result of an increase in gross profit, a decrease in operating expenses and the increase in other income

as discussed above.

For the six months ended June 30, 2022, the Company has net income $5,510,544 compares to a net loss of $209,704,320

for the six months ended June 30, 2021.

The loss for the six months ended June 30, 2021, was primarily a result of the other expenses

descried above as well as $7,965,945 of stock- based compensation expenses included in the operating expenses for the six months ended

June 30, 2021.

and Capital Resources

accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization

of assets and the satisfaction of liabilities in the normal course of business.

As of June 30, 2022, the Company had an accumulated deficit

of $211,816,067 and a working capital deficit of $22,909,763 (including derivative liabilities of $7,589,928).

As of June 30, 2022, the

Company was in default of $15,369,247 plus accrued interest on debt instruments due to non-payment upon maturity dates.

These factors,

among others, raise substantial doubt about the ability of the Company to continue as a going concern for one year from the date of the

issuance of these financial statements.

The accompanying financial statements do not include any adjustments to reflect the possible

future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from

the possible inability of the Company to continue as a going concern.

our current capital and our other existing resources will be sufficient to provide the working capital needed for our current business,

8 unchanged sentences

plans in regard to these factors are discussed below and also in Note 2 to the condensed consolidated financial statements filed herein.

of March 31, 2022, we had cash of $3,636,662 as compared to $6,767,167 at December 31, 2021.

As of March 31, 2022, we had current liabilities

of June 30, 2022, we had cash of $1,949,528 as compared to $6,767,167 at December 31, 2021.

As of June 30, 2022, we had current liabilities

of $30,840,870 (including $7,589,928 of non-cash derivative liabilities), compared to current assets of $7,031,107, which resulted in

16 unchanged sentences

for which it may have an impact cannot be determined at this time.

the three months ended March 31, 2022, net cash used in operating activities was $3,090,505 compared to $966,126 for the three months

ended March 31, 2021.

For the three months ended March 31, 2022, our net cash used in operating activities was primarily attributable

to the net loss of $1,381.469, adjusted by non- cash interest expense of $3,379,121, stock-based compensation of $136,249 and the non-cash

expenses of interest and amortization and depreciation of $62,532.

This was offset by the gain on the fair value changes in derivatives

related to warrants and convertible notes of $4,365,203.

Net changes of $921,735 in operating assets and liabilities increased the cash

used in operating activities.

the three months ended March 31, 2021, our net cash used in operating activities was primarily attributable to the net loss of $209,492,368,

the six months ended June 30, 2022, net cash used in operating activities was $4,777,639 compared to $4,841,428 for the six months ended

June 30, 2021.

For the six months ended June 30, 2022, our net cash used in operating activities was primarily attributable to the net

income of $5,150,437, adjusted by non- cash interest expense of $4,199,825, stock-based compensation of $136,249 and the non-cash expenses

of interest and amortization and depreciation of $126,784.

This was offset by the gain on the fair value changes in derivatives related

to warrants and convertible notes of $13,376,773.

Net changes of $1,014,161 in operating assets and liabilities increased the cash used

in operating activities.

the six months ended June 30, 2021, our net cash used in operating activities was primarily attributable to the net loss of $209,704,320,

adjusted by loss on debt extinguishment of $95,437,589, non- cash interest expense of $44,170,200 (including $38,907,939 for the initial

2 unchanged sentences

and amortization and depreciation of $65,388.

Net changes of $415,506 in operating assets and liabilities reduced the cash used in operating

the three months ended March 31, 2022, the net cash used in investing activities was $40,000, compared to $35,306 for the three months

ended March 31, 2021.

Net changes of $2,557,313 in operating assets and liabilities increased the cash used in

operating activities, primarily as a result of the start-up of the Company’s California operations in the support of inventory

and accounts receivable.

the six months ended June 30, 2022, the net cash used in investing activities was $40,000, compared to $94,679 for the six months ended

June 30, 2021.

The amounts for both periods were a result of the Company purchasing office furniture and equipment.

the three months ended March 31, 2022, there were no financing activities.

For the three months ended March 31, 2021, the net cash provided

the six months ended June 30, 2022, there were no financing activities.

During the six months ended June 30, 2021, net cash provided

by financing activities was $6,589,911.

During the three months ended March 31, 2021, we received $12,000,000 of proceeds from the issuances

of $13,30,000 face value of promissory notes.

During the three months ended March 31, 2021, the Company redeemed 3,000 shares of the

Series E Preferred Stock for $3,000,000, repaid $3,089 of notes payable and $11,591 to shareholders.

We received $12,000,000 of proceeds from the issuances of $13,30,000 face value of promissory

During the six months ended June 30, 2021, the Company redeemed 5,000 shares of the Series E Preferred Stock for $5,000,000 and

repaid $383,772 of notes payable and $26,367 to shareholders.

BALANCE SHEET ARRANGEMENTS

4 unchanged sentences

Report on Form 10-Q.

We believe the following accounting policies to be most critical to the judgement and estimates used in the preparation

of our unaudited condensed consolidated financial statements:

of Presentation

accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally

accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation

S-X of the SEC.

Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in

the United States of America for annual financial statements.

In the opinion of the Company’s management, the accompanying unaudited

condensed consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present

the financial position of the Company as of March 31, 2022, and the results of operations and cash flows for the periods presented.

results of operations for the three months ended March 31, 2022, are not necessarily indicative of the operating results for the full

fiscal year or any future period.

These unaudited condensed consolidated financial statements should be read in conjunction with the

financial statements and related notes thereto included in the Company’s

Annual Report on Form 10-K/A filed on April 26, 2022.

The unaudited condensed consolidated financial statements of the Company include

the consolidated accounts of the Company and its’ wholly owned subsidiaries;

PCTI, Ozop LLC, Ozop HK and Spinus.

All intercompany

accounts and transactions have been eliminated in consolidation.

preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires

management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent

assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reported period.

Actual results could differ from those estimates.

January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers.

Under ASC 606, the Company recognizes revenue

from the commercial sales of products, licensing agreements and contracts to perform pilot studies by applying the following steps:

identify the contract with a customer;

(2) identify the performance obligations in the contract;

(3) determine the transaction price;

(4) allocate the transaction price to each performance obligation in the contract;

and (5) recognize revenue when each performance obligation

is satisfied.

For the comparative periods, revenue has not been adjusted and continues to be reported under ASC 605 — Revenue Recognition.

Under ASC 605, revenue is recognized when the following criteria are met:

(1) persuasive evidence of an arrangement exists;

(2) the performance

of service has been rendered to a customer or delivery has occurred;

(3) the amount of fee to be paid by a customer is fixed and determinable;

and (4) the collectability of the fee is reasonably assured.

There was no impact on the Company’s financial statements as a result

of adopting Topic 606 for the three months ended March 31, 2022, and 2021.

(Loss) Per Share

Company computes net loss per share in accordance with FASB ASC 260, “Earnings per Share.” ASC 260 requires presentation

of both basic and diluted earnings per share (EPS) on the face of the statement of operations.

Basic EPS is computed by dividing net

income (loss) available to common shareholders by the weighted average number of common shares outstanding during the period.

EPS gives effect to all dilutive potential common shares outstanding during the period including stock options, using the treasury stock

method, and convertible notes and stock warrants, using the if-converted method.

In computing diluted EPS, the average stock price for

the period is used in determining the number of shares assumed to be purchased from the exercise of stock options, warrants and conversion

of convertible notes.

Diluted EPS excludes all dilutive potential common shares if their effect is anti-dilutive.

Quantitative and Qualitative Disclosures about Market Risk.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis