What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-11-19 compared with 2025-08-19 · 138 added, 119 removed, 208 unchanged (55% of the section changed)

127 unchanged sentences

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

consolidated financial statements for the three and six months ended June 30, 2025, and 2024.

of Operations for the three and six months ended June 30, 2025, and 2024:

the three and six months ended June 30, 2025, the Company generated revenue of $63,731 and $105,988 compared to $941,972 and $1,193,694

for the three and six months ended June 30, 2024.

consolidated financial statements for the three and nine months ended September 30, 2025, and 2024.

of Operations for the three and nine months ended September 30, 2025, and 2024:

the three and nine months ended September 30, 2025, the Company generated revenue of $142,840 and $248,828 compared to $74,286 and $1,267,980

for the three and nine months ended September 30, 2024.

Revenues from Ozop Energy Systems, Inc.

(“OES”) and Automated Room Controls,

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

(“OES”) and Automated Room

Controls, Inc (“ARC”) are classified as sourced and distributed products.

Revenues from Ozop Engineering and Design (“OED”)

2 unchanged sentences

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

Sourced and distributed products

Design and installation

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 were significantly lower for the three and six months ended June 30, 2025, compared to the three and six months

ended June 30, 2024.

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 demand.

These factors also resulted in our customers having excess inventory on hand, and our decision to not currently place additional

orders for solar products.

The three and six months ended June 30, 2025, also includes $10,382 of revenues from ARC.

Design and installation

revenues decreased for the three and six months ended June 30, 2025, compared to the three and six months ended June 30, 2024.

months ended June 30, 2024, included $162,000 for a one-time large installation job.

for OES (included in sourced and distributed products) for the nine months ended September 30, 2024, included $728,640, pursuant to the

YHS Settlement.

Excluding this, sales of sourced and distributed products were significantly lower for the nine months ended September

30, 2025, compared to the nine months ended September 30, 2024.

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 demand.

These factors also resulted in our customers having excess inventory on hand, and

our decision to not currently place additional orders for solar products.

Sales of sourced and distributed products for the three and

nine months ended September 30, 2025, also includes $75,986 and $86,368 of revenues from ARC.

Design and installation revenues increased

for three months ended September 30, 2025, compared to the three months ended September 30, 2024, as a result of new customers, and decreased

for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024, as the nine months ended September

30, 2024, included $162,000 for a one-time large installation job.

of sales and Gross profit

the three and six months ended June 30, 2025, the Company recognized $49,617 and $78,636 respectively, of cost of sales, compared to

$823,647 and $939,092, respectively, for the three and six months ended June 30, 2024.

the three and nine months ended September 30, 2025, the Company recognized $91,575 and $170,211, respectively, of cost of sales, compared

to $50,863 and $989,955, respectively, for the three and nine months ended September 30, 2024.

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

Sourced and distributed products

Design and installation

Company recognized a gross margin on solar products of 11.7% and 11.8% for the three and six months ended June 30, 2025, compared to

7.9% and 8.5% for the three and six months ended June 30, 2024.

The decrease in gross profit dollars was due to lower revenues in the

current period.

The increase in gross margin percentage is primarily a result of the product mix of sales.

Company recognized a gross margin on solar products (OES) of -0- and 11.8% for the three and nine months ended September 30, 2025,

compared to 15% and 8.9% for the three and nine months ended September 30, 2024.

ARC products had a gross margin of 32.6% and 31.1%,

respectively, for the three and nine months ended September 30, 2025.

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

The Company recognized a gross margin on design

and installation of 24.9% and 28.6% for the three and six months ended June 30, 2025, compared to 77.9% and 72.4% for the three and six

months ended June 30, 2024.

The decrease in gross profit dollars was due to lower revenues in the current period.

The decrease in gross

margin percentage is primarily a result of a new customer in the current three and six month periods who compensates the Company based

on hourly rate for actual hours worked as compared to a higher daily rate the Company received from other customers on the prior year

operating expenses for the three and six months ended June 30, 2025, were $839,577 and $1,783,644, respectively, compared to $808,172

and $1,776,935, respectively, for the three and six months ended June 30, 2024.

and installation of 39.6% and 33.5% for the three and nine months ended September 30, 2025, compared to 68% and 72% for the three and

nine months ended September 30, 2024.

The decrease in gross margin percentage is primarily a result of a new customer in the current

three and nine month periods who compensates the Company based on hourly rate for actual hours worked as compared to a higher daily rate

the Company received from other customers on the prior year periods.

operating expenses for the three and nine months ended September 30, 2025, were $635,840 and $2,419,484, respectively, compared to $963,460

and $2,740,395, respectively, for the three and nine months ended September 30, 2024.

The operating expenses were comprised of:

June 30, 2025

June 30, 2024

June 30, 2025

June 30, 2024

Three Months Ended

September 30,

Three Months Ended

September 30,

Nine Months Ended

September 30,

Nine Months Ended

September 30,

Management fees, related parties

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Conway $20,000 per month.

taxes, and benefits decreased for the three and six months ended June 30, 2025, compared to the three and six months ended June 30,

As of June 30, 2025, Ozop Energy Systems had 1 employee with an aggregate annual salary of $78,000 and focused on general and administrative

taxes, and benefits decreased for the three and nine months ended September 30, 2025, compared to the three and nine months ended September

As of September 30, 2025, Ozop Energy Systems had 1 employee with an annual salary of $78,000 and focused on general and administrative

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

1 unchanged sentence

OED has allocated $40,381 and $99,988 of salaries to cost of sales for the three and

six months ended June 30, 2025, and $13,791 and $65,905 of salaries to cost of sales for the three and six months ended June 30, 2024.

nine months ended September 30, 2025, and $7,423 and $73,328 of salaries to cost of sales for the three and nine months ended September

ARC is currently being managed by the Company’s CEO and financial consultant.

Ozop Capital Partners had one employee with annual

compensation of $125,000 (terminated in July 2024), and hired a new employee on September 3, 2024, with an annual salary of $144,000.

Ozop Capital Partners had one employee

with annual compensation of $125,000 (terminated in July 2024), and hired a new employee on September 3, 2024, with an annual salary

The Company allocates salaries and related expenses to the appropriate subsidiary for where their services are being performed.

per subsidiary included in operating expenses for the three and six months ended June 30, 2025, and 2024, are as follows:

June 30, 2025

June 30, 2024

June 30, 2025

June 30, 2024

The expenses per subsidiary included in operating expenses for the three and nine months ended September 30, 2025, and 2024, are as follows:

Three Months Ended

September 30,

Three Months Ended

September 30,

Nine Months Ended

September 30,

Nine Months Ended

September 30,

Ozop Energy Systems

2 unchanged sentences

Ozop Capital Partners/EV Insurance Company

expenses decreased for the three and six months ended June 30, 2025, compared to the three and six months ended June 30, 2024, as the

Company had lower travel expenses related to Systems and OED.

and consulting fees increased for the three and six months ended June 30, 2025, compared to the three and six months ended June 30, 2024.

During the six months ended June 30, 2024, the Company received $125,000 pursuant to the YHS settlement, that was credited to legal fees

for the six months ended June 30, 2024.

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

2025, compared to the three and six months ended June 30, 2024.

The decrease is the result of $15,318 and $71,208 expenses incurred by

OES for storage fees in the three and six months ended June 30, 2024, respectively, (no such storage fees in the three and six months

ended June 30, 2025), coupled with a decrease in office supplies as a result of expenditure control.

and development costs increased for the three and six months ended June 30, 2025, compared to the three and six months ended June 30,

2024, due to the development and testing of the ARC products.

expenses decreased for the three and nine months ended September 30, 2025, compared to the three and nine months ended September 30,

2024, as the Company had lower travel expenses related to Systems and OED.

and consulting fees decreased for the three months ended September 30, 2025, compared to the three months ended September 30, 2024, and

increased for the nine months ended September 30, 2025, compared to the nine months ended September 30, 2024.

During the nine months

ended September 30, 2024, the Company received $125,000 pursuant to the YHS settlement, that was credited to legal fees for the nine

months ended September 30, 2024.

and office expense (including storage, supplies, utilities, and internet costs) increased for the three months ended September 30, 2025,

compared to the three months ended September 30, 2024, because of the Company selling their building and entering into a new lease agreement

effective September 1, 2025.

Rent and office expense decreased for the nine months ended September 30, 2025, compared to the nine months

ended September 30, 2024, because of $71,208 expenses incurred by OES for storage fees in the nine months ended September 30, 2024 (no such storage fees in the nine months ended September 30, 2025).

and development costs decreased for the three and nine months ended September 30, 2025, compared to the three and nine months ended September

30, 2024, due to the development and testing of the ARC products in 2024.

(Income) Expenses

expense, net, for the three and six months ended June 30, 2025, was $1,380,535 and $2,006,877, respectively compared to $601,944 and

$1,196,826, respectively, for the three and six months ended June 30, 2024, and were as follows.

expense, net, for the three and nine months ended September 30, 2025, was $1,211,600 and $3,218,477, respectively, compared to $1,153,046

and $2,349,872, respectively, for the three and nine months ended September 30, 2024, and were as follows.

Three months ended

Six months ended

September 30,

Nine months ended

September 30,

Interest expense

Loss (gain) on change in fair value of derivatives

Gain on sale of building to a related party

Gain on litigation settlement

Total other (income) expense, net

decrease in interest expense for the three and six months ended June 30, 2025, is primarily a result of the amortization period of certain

note discounts that were completed in 2024.

For the three and six months ended June 30, 2025, the Company recognized a loss of $629,262

and $517,503, respectively, on the change in the fair value of derivatives compared to gains of $183,576 and $645,581, respectively,

for the three and six months ended June 30, 2024.

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, 2025, was $2,205,998 and $3,763,169, respectively, compared

to $1,291,791 and $2,715,586, respectively, for the three and six months ended June 30, 2024.

The change was primarily a result of the

decrease in gross profit and the increase in other expenses and operating expenses.

increase in interest expense for the three months ended September 30, 2025, was as a result of new amortization related to the debt

discount for the convertible notes issued in the Exchange Agreement, partially offset by certain note discounts that were completed

The decrease in interest expense for the nine months ended September 30, 2025, is primarily a result of the amortization

period of certain note discounts that were completed in 2024.

For the three and nine months ended September 30, 2025, the Company

recognized a loss of $159,312 and $676,815, respectively, on the change in the fair value of derivatives compared to a loss of

$96,180 and a gain of $549,401, respectively, for the three and nine months ended September 30, 2024.

Additionally for the three and

nine months ended September 30, 2025, the Company recognized a gain of $86,250 for the sale of a building to a related party and a

gain of $271,360 for the nine months ended September 30, 2024, on the settlement with YHS.

loss attributable to the Company for the three and nine months ended September 30, 2025, was $1,796,175 and $5,559,344, respectively,

compared to $2,093,083 and $4,808,669, respectively, for the three and nine months ended September 30, 2024.

and Capital Resources

1 unchanged sentence

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

As of June 30, 2025, the Company had an accumulated deficit

of $228,631,810 and a working capital deficit of $35,469,211.

As of June 30, 2025, the Company was in default of $19,925,000 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

As of September 30, 2025, the Company had an accumulated

deficit of $230,427,985 and a working capital deficit of $36,273,834.

As of September 30, 2025, the Company was in default of $17,725,000

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 not be sufficient to provide the working capital needed for our current business,

8 unchanged sentences

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

the six months ended June 30, 2025, we primarily funded our business operations with the existing cash on hand as of January 1,

2025, cash received from collection of accounts receivable, $191,000 from the issuance of a convertible note payable and $295,965

received from sales of common stock.

of June 30, 2025, we had cash of $94,077 as compared to $797,139 as of December 31, 2024.

As of June 30, 2025, we had current liabilities

of $35,790,769, compared to current assets of $321,558, which resulted in a working capital deficit of $35,469,211.

The current liabilities

are comprised of accounts payable and accrued expenses, related party liabilities, convertible debt, derivative liabilities, lease obligations,

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

the six months ended June 30, 2025, net cash used in operating activities was $1,186,537 compared to $204,284 for the six months

ended June 30, 2024.

the six months ended June 30, 2025, our net cash used in operating activities was primarily attributable to the net loss of $3,763,169,

adjusted by the loss on the change in fair value of derivatives of $517,503, interest expense of $39,841, stock based compensation of

$40,000, and amortization and depreciation of $105,843.

Net changes of $1,873,445 in operating assets and liabilities reduced the cash

used in operating activities.

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 nine months ended September 30, 2025, we primarily funded our business operations with the existing cash on hand as of January

1, 2025, cash received from collection of accounts receivable, $573,000 from the issuances of convertible notes payable, $381,762

received from sales of common stock, $100,000 received in the sale of building to a related party, and $150,000 from the issuance of a note

of September 30, 2025, we had cash of $341,164 as compared to $797,139 as of December 31, 2024.

As of September 30, 2025, we had current

liabilities of $36,844,296, compared to current assets of $570,462, which resulted in a working capital deficit of $36,273,834.

liabilities are comprised of accounts payable and accrued expenses, related party liabilities, convertible debt, derivative liabilities,

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

the nine months ended September 30, 2025, net cash used in operating activities was $1,657,247 compared to $1,059,327 for the nine months

ended September 30, 2024.

the nine months ended September 30, 2025, our net cash used in operating activities was primarily attributable to the net loss of

$5,559,344 , the gain on the sale of building to a related

party of $86,250 , adjusted by the loss on the change in fair value of derivatives of $676,815, interest expense of $340,522,

stock based compensation of $40,000, and amortization and depreciation of $156,685.

Net changes of $2,774,325 in operating assets and liabilities reduced the cash used in operating activities.

the nine months ended September 30, 2024, our net cash used in operating activities was primarily attributable to the net loss of $4,808,669,

the gain on the change in fair value of derivatives of $549,401, adjusted by non-cash items of interest expense of $998,970, and amortization

1 unchanged sentence

Net changes of $3,142,358 in operating assets and liabilities reduced the cash used in operating activities.

the six months ended June 30, 2025, the net cash used in investing activities was $3,490, primarily due to purchase of office and computer

equipment, compared to $7,518 for the six months ended June 30, 2024.

the six months ended June 30, 2025, the net cash provided by financing activities was $486,965 of which $191,000 was net proceeds

received from issuance of convertible note and $295,965 from the sales of common stock to GHS, net of issuance costs.

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 nine months ended September 30, 2025, the net cash provided by investing activities was $96,510, resulting from the sale of the

building to a related party, less the purchase of office and computer equipment.

For the nine months ended September 30, 2024, the net cash used in

investing activities was $11,114 primarily due to purchase of office and computer equipment.

the nine months ended September 30, 2025, the net cash provided by financing activities was $1,104,762 of which $573,000 was net proceeds

received from issuance of convertible notes, $381,762 from the sales of common stock to GHS, net of issuance costs, and $150,000 from

the issuance of a note payable.

For the nine months ended September 30, 2024, the net cash provided by financing activities was $979,048,

net of issuance costs, from the sales of common stock to GHS.

Accounting Policies and Estimates

11 unchanged sentences

senior management has reviewed the critical accounting policies and estimates with our Board of Directors.

For a description of the

Company’s critical accounting policies and estimates, refer to “Part II—Item 7—Management’s Discussion

and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our most

recent Annual Report on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on April 15, 2025.

accounting policies are those that are most important to the portrayal of our financial condition, results of operations and cash

flows and require management’s most difficult, subjective and complex judgments, often as a result of the need to make

estimates about the effect of matters that are inherently uncertain.

If actual results were to differ significantly from estimates

made, the reported results could be materially affected.

There were no significant changes to our critical accounting policies and

estimates during the three and six months ended June 30, 2025.

For a description of the Company’s

critical accounting policies and estimates, refer to “Part II—Item 7—Management’s Discussion and Analysis of

Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our most recent Annual Report

on Form 10-K for the year ended December 31, 2024, which was filed with the SEC on April 15, 2025.

Critical accounting policies are those

that are most important to the portrayal of our financial condition, results of operations and cash flows and require management’s

most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are

inherently uncertain.

If actual results were to differ significantly from estimates made, the reported results could be materially affected.

There were no significant changes to our critical accounting policies and estimates during the three and nine months ended September

BALANCE SHEET ARRANGEMENTS

3 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