What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-08-14 compared with 2023-05-15 · 188 added, 157 removed, 257 unchanged (57% of the section changed)

51 unchanged sentences

On October 29, 2021, EV Insurance Company, Inc.

was formed as a captive insurer that reinsures in the State of Delaware.

formed as a captive insurer that reinsures in the State of Delaware.

EVCO (DBA “OZOP Plus”) is a wholly owned subsidiary

22 unchanged sentences

EV Charging sectors.

It will also reduce or eliminate the lengthy permitting processes and streamline the installations of those EV chargers.

It will also reduce or eliminate the lengthy permitting processes and streamline the installation of those EV chargers.

Energy Distribution System:

45 unchanged sentences

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 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 newer.

VSCs are now effective in 46 states and the others have various waiting times or approvals needed.

October 13, 2022, EVCO entered a Reinsurance Contract (the “Contract”) with American Bankers Insurance Company of Florida

(“ABIC” or the “Ceding Company”).

On June 22, 2022, the Company

entered into an Agent Agreement with Royal Administration Services, Inc.

Under the agreement, the Company

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

Royal has agreed to allow Ozop Plus

on all VSC’s, marketed by Royal and the Company, to assume all 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 newer.

Royal’s VSCs are now effective

in all 50 states.

On October 13, 2022, EVCO

entered a Reinsurance Contract (the “Contract”) with American Bankers Insurance Company of Florida (“ABIC”

or the “Ceding Company”).

Royal is the Administrator of the Contract.

Pursuant to the terms of the

Contract, ABIC will cede 100% of the battery coverage portion of all electric vehicle service contracts to EVCO.

On the same date

ABIC and EVCO also entered into a Trust Agreement, whereas EVCO as the reinsurer agrees to deposit an amount equal to unearned premium

reserves, plus losses reported but unpaid, plus the estimated amount of losses incurred but not reported to the trust account.

investments (with a maturity of no more than five (5) years) of the assets of the Trust account include:

Pursuant to the terms of the Contract, ABIC will

cede 100% of the battery coverage portion of all electric vehicle service contracts to EVCO.

On the same date ABIC and EVCO also

entered into a Trust Agreement, whereas EVCO as the reinsurer agrees to deposit an amount equal to unearned premium reserves, plus

losses reported but unpaid, plus the estimated amount of losses incurred but not reported to the trust account.

Permissible investments

(with a maturity of no more than five (5) years) of the assets of the Trust account include:

Treasury Securities

15 unchanged sentences

Accordingly, the operating results of PCTI are reported as income (loss) from discontinued operations in the accompanying

consolidated financial statements for the three months ended March 31, 2023, and 2022.

of Operations for the three months ended March 31, 2023, and 2022:

the three months ended March 31, 2023, the Company generated revenue of $2,791,198 compared to $2,919,322 for the three months ended

March 31, 2022.

consolidated financial statements for the three and six months ended June 30, 2023, and 2022.

of Operations for the three and six months ended June 30, 2023, and 2022:

the three and six months ended June 30, 2023, the Company generated revenue of $1,241,326 and 4,032,524, respectively, compared to $4,765,877

and $7,685,199 for the three and six months ended June 30, 2022, respectively.

Revenues from Ozop Energy Systems, Inc.

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

Engineering and Design (“OED”) operations began in the quarter ended June 30, 2022, and are classified as design and installation.

are classified as sourced and distributed products.

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

Sourced and distributed products

Design and installation

it did for most of the solar industry;

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

continued during 2022.

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 goods.

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, 2022, that it would investigate claims by a 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 four Southeast Asian nations for two years and invoked the Defense Production Act to spur domestic solar panel manufacturing

The tariff exemption will serve as a “bridge” while U.S.

manufacturing ramps up.

of March 31, 2023, the Company had inventory of approximately $1,648,000.

Sourced and distributed

and installation

of sourced and distributed products (solar product) were lower for the three and six months ended June 30, 2023, compared to the same

periods in 2022.

The Company believes the lower revenues were due to higher interest rates affecting homeowners’ ability and desire

for residential rooftop solar installations as well as competitors lowering their selling prices to try to capture a part of the lower

This also resulted in our customers having excess inventory on hand.

of June 30, 2023, the Company had inventory of approximately $2,328,000.

As of the date of this report the Company also has outstanding

purchase orders with its panel supplier of $12,626,000 and has paid deposits of approximately $3,172,000 towards these open purchase

In order to meet our current customers anticipated needs for 2023, the Company would need to purchase approximately an additional

$3,000,000 to be received in Q4/2023.

Based on the above, management anticipates revenues may approach $20 million for 2023 for solar

the three months ended March 31, 2023, and 2022, the Company recognized $2,394,700 and $2,749,349, respectively, of cost of sales.

purchase orders with its panel supplier of approximately $10,345,000 and has paid deposits of approximately $2,525,000 towards these

open purchase orders.

If the Company sells their current inventory and open purchase orders, sales of solar products can approach $15

million for 2023.

the three and six months ended June 30, 2023, the Company recognized $1,733,892 and $4,128,592, respectively, of cost of sales, compared

to $4,286,687 and $7,036,036 for the three and six months ended June 30, 2022, respectively.

Sourced and distributed

the quarter ended June 30, 2023, the Company reviewed its inventory valuation to determine if the historical cost of its solar panels

was less than their net realizable value.

Management also considers, if applicable, other factors, including known trends, market conditions,

and other such issues.

Based on current market conditions related to solar panels including but not limited to reduced selling prices

in the industry and the abundance of inventory supply in the market, management determined that the net realizable value of certain of

the Company’s inventory required a lower of cost or market adjustment of $625,000 (the “Inventory Adjustment”) to the

historical cost of inventory purchased.

Prior to the Inventory Adjustment, gross margin was 10.7% and 13.1% for the three and six months

ended June 30, 2023, respectively, compared to 10.1% and 8.4% for the three and six months ended June 30, 2022, respectively.

margin prior to Inventory Adjustment

margin after Inventory Adjustment

the three months ended June 30, 2023, the increase in gross margin prior to the Inventory Adjustment compared to the three months ended

June 30, 2022, is a result of the higher gross margins on design and installation sales related to OED, offset by lower gross margin

on solar panel sales related to the product mix sold of solar panels.

For the six months ended June 30, 2023, the increase in gross margin

prior to the Inventory Adjustment compared to the six months ended June 30, 2022, is a result of the higher gross margins on design and

installation sales related to OED, and by higher gross margin on solar panel sales related to the product mix sold of solar panels.

operating expenses for the three and six months ended June 30, 2023, were $963,070 and $2,032,832, respectively, compared to $1,368,829

and $3,134,396 for the three and six months ended June 30, 2022, respectively.

The operating expenses were comprised of:

Three Months Ended

Sourced and distributed products

on the above cost of sales, gross margin was 13.2% and 5.8% for the three months ended March 31, 2023, and 2022, respectively.

margin for OES was higher in the current due to the mix of product sales.

The Company anticipates lower margins for the remainder of

2023 compared to the quarter ending March 31, 2023.

operating expenses for the three months ended March 31, 2023, and 2022, were $1,069,762 and $1,765,567, respectively.

The operating expenses

were comprised of:

Three months ended March 31,

Management fees, related parties

Stock-based compensation, other

Salaries, taxes, and benefits

Professional and consulting fees

Advertising and marketing

Rent and office expenses

General and administrative.

Management fees- related parties, are amounts

paid to our CEO.

On July 10, 2020, pursuant to the PCTI transaction, the Company assumed an employment contract entered into on February

28, 2020, between the Company and Mr.

June 30, 2023

Three Months Ended

June 30, 2022

Six Months Ended

June 30, 2023

Six Months Ended

June 30, 2022

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

compensation, other

taxes, and benefits

and consulting fees

and marketing

and office expenses

and administrative

operating expenses

fees- related parties, are amounts paid to our CEO.

On July 10, 2020, pursuant to the PCTI transaction, the Company assumed an employment

contract entered into on February 28, 2020, between the Company and Mr.

Conway (the “Employment Agreement”).

Conway’s compensation as adjusted was

$20,000 per month.

compensation as adjusted was $20,000 per month.

Effective January 1, 2022, the Company entered into a new employment agreement with Mr.

Pursuant to the agreement,

Conway received a $250,000 contract renewal bonus and receives an annual compensation of $240,000 from the Company and will also

be eligible to receive bonuses and equity grants at the discretion of the BOD.

Pursuant to the agreement, Mr.

Conway received a $250,000 contract renewal bonus (included in the six months ended June 30, 2022)

and receives 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.

Conway for services

provided directly to any of the Company’s subsidiaries.

Conway for services provided directly to any of the Company’s subsidiaries.

Ozop Capital increased Mr.

Conway’s compensation to $20,000 per month

in January 2022, OES began compensating Mr.

Conway $20,000 in March 2022, and OED began compensating Mr.

Conway $20,000 per month beginning

in April 2022.

was no stock-based compensation for the three months ended March 31, 2023.

Stock based compensation for the three months ended March 31,

Conway’s compensation to $20,000 per month in January 2022, OES began compensating Mr.

Conway $20,000

in March 2022, and OED began compensating Mr.

Conway $20,000 per month beginning in April 2022.

was no stock-based compensation for the three and six months ended June 30, 2023.

Stock based compensation for the six months ended June

30, 2022, of $136,249 is comprised of the following:

1 unchanged sentence

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.

taxes, and benefits increased for the three months ended March 31, 2023, compared to the three months ended March 31, 2022.

was a result of in the quarter ending March 31, 2023 for Ozop Engineering and Design (“OED”) and EV Insurance Company (“Ozop

Plus”) having employees for the entire period, compared to OED beginning in April 2022, and Ozop Plus beginning in October 2022,

respectively.

These increases were significantly reduced by the termination for cause of all of the employees in the west coast location.

Three months ended March 31,

taxes, and benefits decreased for the three and six months ended June 30, 2023, compared to the three and six months ended June 30, 2022.

The decrease was a result of the termination for cause of all of the employees in the west coast location related to Ozop Energy Systems.

This decrease was reduced by the increases in Ozop Engineering and Design (“OED”) and EV Insurance Company (“Ozop Plus”)

having employees for the entire three and six months ended June 30, 2023, compared to OED beginning in April 2022, and Ozop Plus not

having any employees in the three and six months ended June 30, 2022.

For the three and six months ended June 30, 2023, and 2022, salaries,

taxes and benefits were comprised of the following:

Three Months Ended

June 30, 2023

Three Months Ended

June 30, 2022

Six Months Ended

June 30, 2023

Six Months Ended

June 30, 2022

Ozop Energy Systems

Ozop Engineering and Design

EV Insurance Company

Insurance Company

Energy Systems currently has 3 employees with an aggregate annual salary of $276,000 and focused on the battery storage system, information

2 unchanged sentences

and the Company’s CEO.

OED currently has six employees with an aggregate annual compensation of $588,000.

OED currently has four employees with an aggregate annual compensation of $381,000.

EV Insurance Company

has one employee with annual compensation of $125,000.

and consulting fees decreased for the three months ended March 31, 2023, compared to the three months ended March 31, 2022.

is due to the expiration of certain consulting contracts and accounting fees.

These decreases were partially offset increases in legal

expenses and auditing fees.

and marketing expenses increased for the three months ended March 31, 2023, compared to the three months ended March 31, 2022.

The increases

were related to website development, and lead generation costs.

and office expense (including supplies, utilities, and internet costs) decreased for the three months ended March 31, 2023, compared

to the three months ended March 31, 2022.

The decrease is the result that on March 1, 2023, OES has subleased the Carlsbad office and

warehouse to a third party.

expense decreased for the three months ended March 31, 2023, compared to the three months ended March 31, 2022.

The decrease was the

result of the termination of the west coast employees in November 2022, resulting in no health insurance and workers compensation expenses

and consulting fees decreased for the three and six months ended June 30, 2023, compared to the three and six months ended June 30, 2022.

The decrease is due to the expiration of certain consulting contracts and accounting fees.

These decreases were partially offset by increases

in legal expenses and auditing fees.

and marketing expenses increased for the three and six months ended June 30, 2023, compared to the three and six months ended June 30,

The increases were related to website development, lead generation costs, and trade show participation.

and office expenses (including supplies, utilities, and internet costs) decreased for the three and six months ended June 30, 2023, compared

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

The decrease is the result that on March 1, 2023, OES subleased the Carlsbad office

and warehouse to a third party.

expenses increased for the three months ended June 30, 2023, compared to the three months ended June 30, 2022, and decreased for the

six months ended June 30, 2023, compared to the six months ended June 30, 2022.

The increase for the three-month period was a result

of health insurance for OED for the full three months ended June 30, 2023, compared to the three months ended June 30, 2022.

was reduced by termination of the west coast employees in November 2022, resulting in no health insurance and workers compensation expenses

related thereto.

The Company estimates that the monthly insurance expense to be approximately $20,000 per month.

The decrease for the six-month period was the result of the termination of the west coast employees in November 2022,

resulting in no health insurance and workers compensation expenses related thereto.

The decrease was reduced by the health insurance

costs for OED for the full six months ended June 30, 2023, compared to the six months ended June 30, 2022.

The Company estimates that

the monthly insurance expense to be approximately $20,000 per month.

(Income) Expenses

expense, net, for the three months ended March 31, 2023, was $1,859,651 compared to other income, net, for the three months ended March

31, 2022, of $398,305 and were as follows.

Three months ended

expense, net, for the three and six months ended June 30, 2023, was $1,982,463 and $3,842,114, respectively, compared to other income,

net, for the three and six months ended June 30, 2022, of $7,590,187 and $7,988,492, respectively, and were as follows:

Interest expense

(Gain) loss on change in fair value of derivatives

Total other (income) expense, net

decrease in interest expense for the three months ended March 31, 2023, is primarily a result of the amortization period of certain note

discounts were completed in 2022, resulting in $500,568 of interest related to the amortization of note discounts in the current period,

compared to $3,379,121 for the three months ended March 31, 2022.

Interest expense on the face value of the principal balances of the

notes payable increased due to the increased rate due to mote defaults and extended maturity dates.

For the three months ended March

31, 2023, the Company recognized a loss of $638,118 on the change in the fair value of derivatives compared to a gain of $4,365,203 for

the three months ended March 31, 2022.

loss attributable to the Company for the three months ended March 31, 2023, was $2,527,552 compared to a net loss of $1,193,761 for

the three months ended March 31, 2022.

The change was primarily a result of the loss on the change in fair value of derivatives of

$638,118 for the three months ended March 31, 2023, compared to the gain of $4,365,203 for the three months ended March 31, 2022.

This increase in the loss from the changes in the fair value of derivatives was partially offset by the increase in gross profit,

the decrease in operating expenses and interest expense for the three months ended March 31, 2023, compared to the three months

ended March 31, 2022.

loss on change in fair value of derivatives

(13,376,773 )

other (income) expense

$ (7,590,187 )

$ (7,988,492 )

decrease in interest expense for the three and six months ended June 30, 2023, is primarily a result of the amortization period of certain

note discounts were completed in 2022, resulting in $318,750 and $819,318 of interest related to the amortization of note discounts for

the three and six months ended June 30, 2023, compared to $820,704 and $4,199,825 for the three and six months ended June 30, 2022.

the three and six months ended June 30, 2023, the Company recognized losses on the change in the fair value of derivatives compared to

gains for the three and six months ended June 30, 2022.

losses attributable to the Company for the three and six months ended June 30, 2023, were $3,432,736 and $5,960,288, respectively, compared

to net income of $6,704,305 and $5,510,544 for the three and six months ended June 30, 2022.

The change was primarily a result of the

loss on the change in fair value of derivatives for the three and six months ended June 30, 2023, compared to the gains for the three

and six months ended June 30, 2022.

The increase in the loss was also a result of lower gross profits for the three and six months ended

June 30, 2023, compared to the three and six months ended June 30, 2022, as a result of the Inventory Adjustment increasing the cost

of goods sold by $625,000 for the three and six months ended June 30, 2023.

These increases on losses were partially offset by the decreases

in operating expenses and interest expense for the three and six months ended June 30, 2023, compared to the three and six months ended

June 30, 2022.

and Capital Resources

1 unchanged sentence

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

As of March 31, 2023, the Company had an accumulated deficit of

As of June 30, 2023, the Company had an accumulated deficit of

$217,261,087 and a working capital deficit of $12,238,723 (including derivative liabilities of $5,895,175).

As of March 31, 2023, the

As of June 30, 2023, the

Company was in default of $3,715,000 plus accrued interest on debt instruments due to non-payment upon maturity dates.

15 unchanged sentences

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

the year ended December 31, 2023, we primarily funded our business operations with the existing cash on hand as of January 1, 2023, cash

received from sales of inventory, and $526,393 received from sales of common stock.

As of March 31, 2023, we had cash of $1,954,814 as

compared to $1,369,210 as of December 31, 2022.

As of March 31, 2023, we had current liabilities of $16,785,663 (including $4,952,388

of non-cash derivative liabilities), compared to current assets of $7,569,002, which resulted in a working capital deficit of $9,216,661.

The current liabilities are comprised of accounts payable, accrued expenses, convertible debt, derivative liabilities, customer deposits,

deferred liability, lease obligations, notes payable and liabilities of discontinued operations.

the six months ended June 30, 2023, we primarily funded our business operations with the existing cash on hand as of January 1, 2023,

cash received from sales of inventory, and $598,220 received from sales of common stock.

of June 30, 2023, we had cash of $1,294,898 as compared to $1,369,210 as of December 31, 2022.

As of June 30, 2023, we had current liabilities

of $18,551,196 (including $5,895,175 of non-cash derivative liabilities), compared to current assets of $6,312,473, which resulted in

a working capital deficit of $12,238,723.

The current liabilities are comprised of accounts payable, accrued expenses, convertible debt,

derivative liabilities, customer deposits, deferred liability, lease obligations, notes payable and liabilities of discontinued operations.

December 2019, a novel strain of coronavirus (COVID-19) emerged.

12 unchanged sentences

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

the three months ended March 31, 2023, net cash provided by operating activities was $611,373 compared to net cash used in operating

activities of $3,060,456 for the three months ended March 31, 2022.

For the three months ended March 31, 2023, our net cash provided

by operating activities was primarily attributable to the net loss of $2,527,552, adjusted by non- cash items of the loss on the fair

value change of derivatives of $638,118, interest expense of $500,568, and amortization and depreciation of $55,912.

Net changes of $1,949,690

in operating assets and liabilities added to the cash provided by operating activities.

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 amortization and depreciation of $41,421.

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

convertible notes of $4,365,203.

the six months ended June 30, 2023, net cash used in operating activities was $120,370 compared to $4,676,160 for the six months ended

June 30, 2022.

For the six months ended June 30, 2023, our net cash used in operating activities was primarily attributable to the net

loss of $5,960,288, adjusted by non- cash items of the loss on the fair value change of derivatives of $1,580,905, interest expense of

$819,318, the inventory write-down of $625,000 and amortization and depreciation of $112,397.

Net changes of $2,713,024 in operating

assets and liabilities reduced the cash used in operating activities.

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 amortization

and depreciation of $86,984.

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 $985,645 in operating assets and liabilities increased the cash used in operating activities.

the three months ended March 31, 2023, the net cash used in investing activities was $2,162, compared to $40,000 for the three months

ended March 31, 2022.

the three months ended March 31, 2023, the net cash used in financing activities was $23,607.

During the three months ended March 31,

the six months ended June 30, 2023, the net cash used in investing activities was $2,162, compared to $43,226 for the six months ended

June 30, 2022.

the six months ended June 30, 2023, the net cash provided by financing activities was $48,220.

During the six months ended June 30, 2023,

we received $598,220, net of issuance costs, from the sales of common stock to GHS.

During the three months ended March 31, 2023,

we made payments of $550,000 for notes payable.

There was no financing activity for the three months ended March 31, 2022.

During the six months ended June 30, 2023, we made

payments of $550,000 for notes payable.

There was no financing activity for the six months ended June 30, 2022.

Accounting Policies

significant accounting policies are described in more details in the notes to our financial statements appearing elsewhere in this Quarterly

significant accounting policies are described in more detail in the notes to our financial statements appearing elsewhere in this Quarterly

Report on Form 10-Q.

54 unchanged sentences

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