What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-09 compared with 2024-05-14 · 129 added, 109 removed, 191 unchanged (55% of the section changed)

59 unchanged sentences

and the commercial sectors.

Our Neo-Grid TM System offers (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.

Our Neo-Grid TM System offers (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.

Company has developed a business plan for the Neo-Grid TM System for the distribution of electrical energy providing

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by working with architects, engineers, facility managers, electrical contractors and engineers.

is developing a product branded OZOP ARC.

OZOP ARC is an advanced lighting controls system, intricately engineered to integrate sophisticated

wired and wireless technologies.

At its core, it employs a hybrid network topology that facilitates both resilient wired connections

and flexible wireless communications, making it suitable for complex infrastructural environments.

The system is equipped with an array

of sensors and control nodes, enabling precise light management and energy usage monitoring.

With support for protocols such as DALI

and Zigbee, alongside the capability for seamless integration with IoT platforms, OZOP ARC offers a comprehensive solution for intricate

lighting networks.

This system is designed not just for control and efficiency, but also for adaptability to diverse architectural and

electrical layouts, embodying a technical solution for advanced, energy-conscious lighting management.

June 11, 2024, the Company formed Automated Room Controls, Inc.

ARC is developing products to be an advanced lighting

controls system, intricately engineered to integrate sophisticated wired and wireless technologies.

At its core, it employs a hybrid

network topology that facilitates both resilient wired connections and flexible wireless communications, making it suitable for complex

infrastructural environments.

The system is equipped with an array of sensors and control nodes, enabling precise light management and

energy usage monitoring.

With support for protocols such as DALI and Zigbee, alongside the capability for seamless integration with IoT

platforms, ARC offers a comprehensive solution for intricate lighting networks.

This system is designed not just for control and efficiency,

but also for adaptability to diverse architectural and electrical layouts, embodying a technical solution for advanced, energy-conscious

lighting management.

September 1, 2022, the BOD of the Company authorized the filing of a Chapter 7 proceeding which meets the definition of a discontinued

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

consolidated financial statements for the three months ended March 31, 2024, and 2023.

of Operations for the three months ended March 31, 2024, and 2023:

the three months ended March 31, 2024, the Company generated revenue of $251,722 compared to $2,791,198 for the three months ended March

consolidated financial statements for the three and six months ended June 30, 2024, and 2023.

of Operations for the three and six months ended June 30, 2024, and 2023:

the three and six months ended June 30, 2024, the Company generated revenue of $941,972 and $1,193,694, respectively, compared to $1,241,326

and $4,032,524 for the three and six months ended June 30, 2023.

Revenues from Ozop Energy Systems, Inc.

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

Revenues from

Ozop Engineering and Design (“OED”) are classified as design and installation.

(“OES”) are classified

as sourced and distributed products.

Revenues from Ozop Engineering and Design (“OED”) are classified as design and installation.

Sales are summarized as follows:

Three months ended

Six months ended

Sourced and distributed products

Design and installation

of sourced and distributed products (solar product) were significantly lower for the three months ended March 31, 2024, compared to the

three months ended March 31, 2023.

for the three and six months ended June 30, 2024, included $728,640, pursuant to the YHS Settlement.

Excluding this, sales of sourced

and distributed products (solar products) were significantly lower for the three and six months ended June 30, 2024, compared to the

three and six months ended June 30, 2023.

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

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Design and installation revenues

increased for the three months ended March 31, 2024, as the Company received additional and larger installation jobs.

the three months ended March 31, 2024, and 2023, the Company recognized $115,445 and $2,394,700, respectively, of cost of sales.

increased for the three and six months ended June 30, 2024, as the Company received additional and larger installation jobs.

the three and six months ended June 30, 2024, the Company recognized $823,647 and $939,092, respectively, of cost of sales, compared

to $1,733,892 and $4,128,592, respectively, for the three and six months ended June 30, 2023.

Three months ended

Six months ended

Sourced and distributed products

Design and installation

the year ended December 31, 2023, the Company reviewed its inventory valuation to determine if the historical cost of its solar panels

Inventory write down

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.

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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 $1,495,978 (the “Inventory Adjustment”) to

the historical cost of inventory purchased.

to the Inventory Adjustment, the Company recognized a gross margin on solar products of 15.8% for the three months ended March 31, 2024,

compared to 13.2% for the three months ended March 31, 2023.

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.

margin of sourced and distributed products was 7.9% and 8.5% for the three and six months ended June 30, 2024, respectively, compared

to 8.6% and 11.8% (prior to the Inventory Adjustment) for the three and six months ended June 30, 2023, respectively.

The downward trend

in gross profit margin is due to the continued decline in selling price because of market competition.

and installation cost of sales is comprised of OED’s labor costs for each job.

operating expenses for the three months ended March 31, 2024, and 2023, were $968,763 and $1,069,762 respectively.

The operating expenses

were comprised of:

Three months ended March 31,

Management fees, related parties

operating expenses for the three and six months ended June 30, 2024, were $808,172 and $1,776,935, respectively, compared to $963,070

and $2,032,832, respectively, for the three and six months ended June 30, 2023.

The operating expenses were comprised of:

Three Months Ended

Six Months Ended

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

Salaries, taxes, and benefits

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General and administrative, other

Total operating expenses

July 10, 2020, pursuant to the PCTI transaction, the Company assumed an employment contract entered into on February 28, 2020, between

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Conway $20,000 per month.

For the three months ended March

31, 2024, and 2023, the Company recorded expenses to Mr.

Conway of $240,000 or each period.

taxes, and benefits decreased for the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

Systems currently has 2 employees with an aggregate annual salary of $204,000 and focused on information technology and general and administrative

The solar distribution of this vertical is being managed by our financial consultant and the Company’s CEO.

OED currently

has five employees with an aggregate annual compensation of $478,000 and a daily consultant when needed.

OED has allocated $52,114 of

salaries to cost of sales for the three months ended March 31, 2024.

EV Insurance Company has one employee with annual compensation of

The expenses per subsidiary included in operating expenses for the three months ended March 31, 2024, and 2023, are as follows:

Three months ended March 31,

For the three and six months

ended June 30, 2024, and 2023, the Company recorded expenses to Mr.

Conway of $240,000 and $480,000, respectively.

taxes, and benefits decreased for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023.

Ozop Energy Systems currently has 2 employees with an aggregate annual salary of $204,000 and focused on information technology and general

and administrative functions.

The solar distribution of this vertical is being managed by our financial consultant and the Company’s

OED currently has five employees with an aggregate annual compensation of $498,000, a daily consultant when needed and 2 summer

OED has allocated $13,791 and $65,905, respectively, of salaries to cost of sales for the three and six months ended June 30,

Ozop Capital Partners has one employee with annual compensation of $125,000 (terminated in July 2024).

The expenses per subsidiary

included in operating expenses for the three and six months ended June 30, 2024, and 2023, are as follows:

Three Months Ended

Six Months Ended

Ozop Energy Systems

Ozop Engineering and Design

EV Insurance Company

and consulting fees decreased for the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

is due to the expiration of certain consulting contracts and legal fees related to the YHS litigation.

These decreases were partially

offset by increases in general legal expenses and auditing fees.

and marketing expenses decreased for the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

and office expense (including storage, supplies, utilities, and internet costs) increased for the three months ended March 31, 2024,

compared to the three months ended March 31, 2023.

The increase is the result of $55,890 expenses incurred by OES for storage fees, partially

offset by decreased rent expense that on March 1, 2023, OES has subleased the Carlsbad office and warehouse to a third party.

expense increased for the three months ended March 31, 2024, compared to the three months ended March 31, 2023.

The increase was the

result of increases in the Company’s general liability insurance.

The Company estimates that the monthly insurance expense to be

approximately $20,000 per month.

Ozop Capital Partners/EV Insurance Company

and consulting fees decreased for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023.

The decrease is due to the expiration of certain consulting contracts and legal fees related to the YHS litigation.

These decreases were

partially offset by increases in general legal expenses and auditing fees.

and marketing expenses decreased slightly for the three and six months ended June 30, 2024, compared to the three and six months ended

June 30, 2023.

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

2024, compared to the three and six months ended June 30, 2023.

The increase is the result of $15,318 and $71,208, for the three and

six months ended June 30, 2024, respectively, of expenses incurred by OES for storage fees, partially offset by decreased rent expense

that on March 1, 2023, OES has subleased the Carlsbad office and warehouse to a third party.

Effective May 7, 2024, there is not any

additional storage charges.

expense decreased for the three and six months ended June 30, 2024, compared to the three and six months ended June 30, 2023.

was the result of the Company not renewing the credit insurance policy for OES, which terminated April 30, 2024.

(Income) Expenses

expense, net, for the three months ended March 31, 2024, was $594,882 compared to $1,859,651 for the three months ended March 31, 2023,

and were as follows.

expense, net, for the three and six months ended June 30, 2024, was $601,944 and $1,196,826, respectively, compared to $1,982,463 and

$3,842,114, respectively, for the three and six months ended June 30, 2023, and were as follows.

Three months ended

Six months ended

Interest expense

(Gain) loss on change in fair value of derivatives

Gain on litigation settlement

Total other (income) expense, net

decrease in interest expense for the three months ended March 31, 2024, is primarily a result of the amortization period of certain note

discounts that were completed in 2023.

Interest expense on the face value of the principal balances of the notes payable increased due

to the increased rate as a result of note defaults and extended maturity dates.

For the three months ended March 31, 2024, the Company

recognized a gain of $462,005 on the change in the fair value of derivatives compared to a loss of $638,118 for the three months ended

March 31, 2023.

loss attributable to the Company for the three months ended March 31, 2024, was $1,423,795 compared to $2,527,552 for the three months

ended March 31, 2023.

The change was primarily a result of the gain of $462,005 on the change in fair value of derivatives for the three

months ended March 31, 2024, compared to a loss of $638,115 for the three months ended March 31, 2023.

The decrease in gross profit for

the three months ended March 31, 2024, compared to the three months ended March 31, 2023, partially offset the gain on the change in

the fair value of derivatives.

decrease in other expense, net for the three and six months ended June 30, 2024, is primarily a result of the Company recognized gains

of $183,576 and $645,581, respectively, on the change in the fair value of derivatives compared to losses of $942,787 and $1,580,905,

respectively, for the three and six months ended June 30, 2023.

Additionally for the three and six months ended June 30, 2024, the Company

recognized a gain of $271,360 on the settlement with YHS.

loss attributable to the Company for the three and six months ended June 30, 2024, was $1,291,791 and $2,715,586, respectively, compared

to $3,432,736 and $5,960,288, respectively, for the three and six months ended June 30, 2023.

The change for the three months ended June

30, 2024, compared to the three months ended June 30, 2023, was a combination of an increase in gross profit of $610,891, reduced operating

expenses of $154,898 and reduced other expenses, net, of $1,380,519, as described above.

The change for the six months ended June 30,

2024, compared to the six months ended June 30, 2023, was a combination of an increase in gross profit of $350,670, reduced operating

expenses of $255,897 and reduced other expenses, net, of $2,645,288, as described above.

and Capital Resources

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

As of March 31, 2024, the Company had an accumulated

deficit of $220,094,725 and a working capital deficit of $28,047,674 (including derivative liabilities of $754,073).

As of March 31,

2024, the Company was in default of $3,315,000 plus accrued interest on debt instruments due to non-payment upon maturity dates.

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.

As of June 30, 2024, the Company had an accumulated deficit

of $221,386,066 and a working capital deficit of $28,736,003 (including derivative liabilities of $570,497).

As of June 30, 2024, the

Company was in default of $3,315,000 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,

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

the three months ended March 31, 2024, we primarily funded our business operations with the existing cash on hand as of January 1, 2024,

the six months ended June 30, 2024, we primarily funded our business operations with the existing cash on hand as of January 1, 2024,

cash received from accounts receivable, and $932,277 received from sales of common stock.

of March 31, 2024, we had cash of $1,154,964 as compared to $1,446,029 as of December 31, 2023.

As of March 31, 2024, we had current

liabilities of $30,435,548 (including $754,073 of derivative liabilities), compared to current assets of $2,387,874, which resulted in

a working capital deficit of $28,047,674.

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

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

the three months ended March 31, 2024, net cash used in operating activities was $641,620 compared to net cash provided by operating

activities of $611,373 for the three months ended March 31, 2023.

the three months ended March 31, 2024, our net cash used in operating activities was primarily attributable to the net loss of $1,423,795,

of June 30, 2024, we had cash of $2,166,504 as compared to $1,446,029 as of December 31, 2023.

As of June 30, 2024, we had current liabilities

of $31,245,124 (including $570,497 of derivative liabilities), compared to current assets of $2,509,121, which resulted in a working

capital deficit of $28,736,003.

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

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

the six months ended June 30, 2024, net cash used in operating activities was $204,284 compared to $120,370 for the six months ended

June 30, 2023.

the six months ended June 30, 2024, our net cash used in operating activities was primarily attributable to the net loss of $2,715,586,

the gain on the change in fair value of derivatives of $645,581, adjusted by non-cash items of interest expense of $665,980, and amortization

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Net changes of $2,386,310 in operating assets and liabilities reduced the cash used in operating activities.

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.

were no investing activities for the three months ended March 31, 2024.

For the three months ended March 31, 2023, the net cash used

in investing activities was $2,162.

the three months ended March 31, 2024, the net cash provided by financing activities was $350,555, net of issuance costs, from the sales

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, 2024, and 2023 the net cash used in investing activities was $7,518 and $2,162, respectively.

the six months ended June 30, 2024, the net cash provided by financing activities was $932,277, net of issuance costs, from the sales

of common stock to GHS.

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 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.

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

payments of $550,000 for notes payable.

Accounting Policies and Estimates

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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