What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2026-05-22 compared with 2025-11-19 · 142 added, 178 removed, 168 unchanged (66% of the section changed)

42 unchanged sentences

the name of the Company from Ozop Surgical Corp to “Ozop Energy Solutions, Inc.”

December 11, 2020, the Company formed Ozop Energy Systems, Inc.

(“OES”), a Nevada corporation and a wholly owned subsidiary

of the Company.

OES was formed to be a manufacturer and distributor of renewable energy products.

December 11, 2020, the Company formed

August 19, 2021, the Company formed Ozop Capital Partners, Inc.

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ARC was created to address a significant need in the lighting controls industry.

We believe that easy deployment and

creative applications can transform lighting controls into essential tools for enhancing the utility and ambiance of any space.

ARC’s personnel has extensive

experience in lighting controls since 2012, bringing together IT specialists and lighting control experts.

We believe that easy deployment

and creative applications can transform lighting controls into essential tools for enhancing the utility and ambiance of any space.

Company’s mission is to deliver cutting-edge technology that simplifies complex control needs, ensuring seamless integration and

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for all of the Company’s lease obligations through May 31, 2026, the lease termination date.

The Company and the subleasee have

agreed to work together regarding any existing Company inventory in the facility.

Energy Distribution System:

40 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 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.

consolidated financial statements for the three months ended March 31, 2026, and 2025.

of Operations for the three months ended March 31, 2026, and 2025:

the three months ended March 31, 2026, the Company generated revenue of $56,053 compared to $42,257 for the three months ended March

Revenues from Ozop Energy Systems, Inc.

(“OES”) and Automated Room

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

Revenues from Ozop Engineering and Design (“OED”)

are classified as design and installation.

(“OES”) and Automated Room Controls, Inc.

(“ARC”) are classified

as sourced and distributed products.

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

Sales are summarized as follows:

Three months ended

September 30,

Nine months ended

September 30,

Sourced and distributed products

Design and installation

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.

and installation revenues increased for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, as

OED received more jobs in the current year period compared to the prior year quarter.

Sales of sourced and distributed products (ARC

and OES) were lower for the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

of sales and Gross profit

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

September 30,

Nine months ended

September 30,

the three months ended March 31, 2026, and 2025, the Company recognized $45,659 and $32,768, respectively, of cost of sales.

Sourced and distributed products

Design and installation

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 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:

Three Months Ended

September 30,

Three Months Ended

September 30,

Nine Months Ended

September 30,

Nine Months Ended

September 30,

gross margin on design and installation was 22.4% for the three months ended March 31, 2026, compared to 23.3% for the three months ended

March 31, 2025.

The Company recognized a gross margin on solar products (OES) of 11.9% for the three months ended March 31, 2025, and

there were no sales and gross margin for the three months ended March 31, 2026.

operating expenses for the three months ended March 31, 2026, and 2025, were $671,802 and $940,318 respectively.

The operating expenses

were comprised of:

Management fees, related parties

Salaries, taxes and benefits

Stock compensation consultants

Stock compensation expense

Travel expenses

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Advertising and marketing

Rent and office expenses

Building, rent and office expense

Research and development costs

General and administrative, other

Total operating expenses

General and administrative,

January 1, 2022, the Company entered into an employment agreement with Mr.

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Conway $20,000 per month.

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

taxes, and benefits decreased for the three months ended March 31, 2026, compared to March 31, 2025.

OES currently has 1 employee with

an aggregate annual salary of $72,000, compared to 2 employees with an aggregate annual salary of $204,000 for the three months ended

March 31, 2025.

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

two part-time employees paid on an hourly basis.

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

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

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

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,

the three months ended March 31, 2026, OED was paying employees on a per hour basis for time travel to and from a job and time of service

at a job and is 100% charged to cost of sales (see above).

For the three months ended March 31, 2025, OED had two employees with an aggregate

annual compensation of $244,000 and allocated $30,260 of salaries and payroll taxes to cost of sales for the three months ended March

ARC did not have any employees for the three months ended March 31, 2026, and is being managed by our financial consultant,

our OES employee, and the Company’s CEO.

For the three months ended March 31, 2025, ARC had 3 employees with an annual salary of

Ozop Capital Partners had one employee through January 15, 2026, with annual compensation of $144,000.

The Company allocates

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

The expenses per subsidiary

included in operating expenses for the three months ended March 31, 2026, and 2025, are as follows:

Three months ended

September 30,

Nine Months Ended

September 30,

Nine Months Ended

September 30,

Ozop Energy Systems

Ozop Engineering and Design

Automated Room Controls

Ozop Capital Partners/EV Insurance Company

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.

Automated Room Controls, Inc.

Ozop Capital Partners/EV

Insurance Company

based compensation of $48,000 during the three months ended March 31, 2026, related to the Company issuing 300,000 shares of common stock

pursuant to a Service Agreement with a third party.

The Company valued the shares at $0.16 per share.

expenses decreased for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, as the Company had lower

travel expenses related to Systems and OED.

and consulting fees decreased slightly for the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

and marketing expenses decreased for the three months ended March 31, 2026, compared to March 31, 2025, as result of the Company attending

less trade shows in the current year compared to the prior year.

rent and office expense (including storage, supplies, utilities, and internet costs) increased for the three months ended March 31, 2026,

compared to the three months ended March 31, 2025.

and development costs decreased for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, due to

the development and testing of the ARC products occurred in the 2025 period.

expenses decreased for the three months ended March 31, 2026, compared to the three months ended March 31, 2025.

The decrease was the

result a decrease in health insurance related to the decrease in employees and the Company not renewing certain insurance policies for

The Company estimates that the monthly insurance expense to be approximately $12,000 per month.

(Income) Expenses

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

September 30,

Nine months ended

September 30,

expense, net, for the three months ended March 31, 2026, was $1,822,305 compared to $626,342 for the three months ended March 31, 2025,

and were as follows:

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

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.

Gain (loss) on change

in fair value of derivatives

Total other expense,

increase in interest expense for the three months ended March 31, 2026, is primarily a result of the amortization expense of

$974,503 related to debt discounts on convertible notes payable and promissory notes payable compared to $14,240 for the three months

ended March 31, 2025.

For the three months ended March 31, 2026, the Company recognized a loss of $30,273, compared to the Company

recognizing a gain of $111,759 for the three months ended March 31, 2025, on the change in the fair value of derivatives.

loss attributable to the Company for the three months ended March 31, 2026, was $2,483,713, compared to $1,557,171 for the three months

ended March 31, 2025.

The change was primarily a result of the increase in other expenses, partially offset by the decrease in operating

and Capital Resources

accompanying unaudited 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 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,

and, additional capital will be required to meet our debt obligations, and to further expand our business.

We may be unable to obtain

the additional capital required.

If we are unable to generate capital or raise additional funds when required, it will have a negative

impact on our business development and financial results.

These conditions raise substantial doubt about our ability to continue as a

going concern as well as our recurring losses from operations, deficit in equity, and the need to raise additional capital to fund operations.

This “going concern” could impair our ability to finance our operations through the sale of debt or equity securities.

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

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,

accompanying unaudited 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 March 31, 2026, the Company had an

accumulated deficit of $236,064,897 and a working capital deficit of $40,724,721.

As of March 31, 2026, the Company was in default

of $18,714,423 plus accrued interest on debt instruments due to non-payment upon maturity dates or failure to comply with the

loan’s contractual payment terms.

Current cash balances are not sufficient to satisfy obligations currently due.

Management is

exploring capital raising options which may or may not become available on a timely basis to meet the obligations that are past due.

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 consolidated 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, and additional capital will be required to meet our debt obligations, and to further expand our business.

We may be unable

to obtain the additional capital required on terms favorable to the Company or at all.

If we are unable to generate capital or raise additional funds when required, it will have a negative impact on

our business development and financial results.

These conditions raise substantial doubt about our ability to continue as a going

concern as well as our recurring losses from operations, deficit in equity, and the need to raise additional capital to fund

This “going concern” could impair our ability to finance our operations through the sale of debt or equity

Management’s 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, 2026, we primarily funded our business operations with the existing cash on hand as of January 1, 2026,

cash received from collection of accounts receivable, $47,069 received from sales of common stock, $215,000 received from the issuance

of convertible promissory notes of $222,000, and $190,000 received from the issuance of $210,000 promissory notes.

of March 31, 2026, we had cash of $83,779 as compared to $266,431 as of December 31, 2025.

As of March 31, 2026, we had current liabilities

of $40,993,623, compared to current assets of $268,902, which resulted in a working capital deficit of $40,724,721.

The current 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 three months ended March 31, 2026, net cash used in operating activities was $459,721 compared to $724,822 for the three months ended

March 31, 2025.

the three months ended March 31, 2026, our net cash used in operating activities was primarily attributable to the net loss of $2,483,713,

adjusted the loss on the change in fair value of derivatives of $30,273, the non-cash items of interest expense of $1,006,782, amortization

and depreciation of $52,539, and stock based compensation expense of $48,000.

Net changes of $886,398 in operating assets and liabilities

reduced the cash used in operating activities.

the three months ended March 31, 2025, our net cash used in operating activities was primarily attributable to the net loss of $1,557,171,

the gain on the change in fair value of derivatives of $111,759, adjusted by non-cash items of interest expense of $14,241, and amortization

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Net changes of $875,562 in operating assets and liabilities reduced the cash used in operating activities.

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

the three months ended March 31, 2026, the net cash used in investing activities was $175,000, resulting from loans to related party

in exchange for promissory notes.

the three months ended March 31, 2025, the net cash used in investing activities was $3,490, primarily due to purchase of office and

computer equipment.

the three months ended March 31, 2026, the net cash provided by financing activities was $452,069 of which $215,000 was net proceeds

received from issuance of convertible notes, $47,069 from the sales of common stock to GHS, net of issuance costs, and $190,000 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.

the issuances of promissory notes payable.

the three months ended March 31, 2025, the net cash provided by financing activities was $260,805, from the sales of common stock to

GHS, net of issuance costs.

Accounting Policies and Estimates

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Actual results may differ from these estimates under different assumptions or conditions.

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.

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

significant accounting policies are described in more details in Note 3 to our financial statements appearing in “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, 2025, which was filed with the SEC

on May14, 2026.

While all these significant accounting policies impact our financial condition and results of operations, we view certain

of these policies as critical.

The SEC requested that all registrants list their most “critical accounting polices” in the

Management Discussion and Analysis.

The SEC indicated that a “critical accounting policy” is one which is both important

to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or

complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Our management

believes that given current facts and circumstances, there are no material estimates or assumptions with levels of subjectivity and judgement

necessary to be considered critical accounting policies and estimates.

There were no significant changes to our critical accounting policies

and estimates during the three months ended March 31, 2026.

BALANCE SHEET ARRANGEMENTS

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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