What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-05-20 compared with 2024-11-12 · 208 added, 230 removed, 100 unchanged (81% of the section changed)

34 unchanged sentences

on July 17, 2015, under the laws of the State of Nevada.

October 29, 2020, the Company formed a new wholly owned subsidiary, Ozop Surgical Name Change Subsidiary, Inc., a Nevada corporation

(“Merger Sub”).

The Merger Sub was formed under the Nevada Revised Statutes for the sole purpose and effect of changing the

Company’s name to “Ozop Energy Solutions, Inc.” That same day the Company entered into an Agreement and Plan of Merger

(the “Merger Agreement”) with the Merger Sub and filed Articles of Merger (the “Articles of Merger”) with the

Nevada Secretary of State, merging the Merger Sub into the Company, which were stamped effective as of November 3, 2020.

by the Section 92.A.180 of the Nevada Revised Statutes, the sole purpose and effect of the filing of Articles of Merger was to change

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

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

2 unchanged sentences

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

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

(“Ozop Capital”), a Delaware corporation and a wholly owned

subsidiary of the Company.

Brian Conway was appointed as the sole officer and director of Ozop Capital and has voting control of Ozop

October 29, 2021, EV Insurance Company, Inc.

(“EVCO”) was formed as a captive insurance company in the State of Delaware.

EVCO is a wholly owned subsidiary of Ozop Capital.

On January 7, 2022, EVCO filed with New Castle County, Delaware DBA OZOP Plus.

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

(“OED”) a Nevada corporation, as a wholly owned subsidiary

of the Company.

OED was formed to become a premier engineering and lighting control design firm.

OED offers product and design support

for lighting and solar projects with a focus on fast lead times and technical support.

OED and our partners are able to offer the resources

needed for lighting, solar and electrical design projects.

OED will provide customers systems to coordinate the understanding of electrical

usage with the relationship between lighting design and lighting controls, by developing more efficient ecofriendly designs.

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

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

(“ARC”) a Nevada corporation, as a wholly owned subsidiary

of the Company.

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

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

exceptional performance.

operates in the renewable, electric vehicle (“EV”), energy storage and energy resiliency sectors.

11 unchanged sentences

Energy Distribution System:

The NeoVolt ™ System comprises the design engineering,

installation, and operational methodologies as well as the financial arbitrage of how we produce, capture and distribute electrical

energy for the EV markets.

Our NeoVolt 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.

The Company has developed

a business plan for NeoVolt™, a scalable battery storage solution that aims to relieve the stress on existing grid infrastructure

by providing distributed energy storage.

With the first stage of engineered technical drawings completed, we are advancing to stage two

and preparing to construct the initial prototype or proof of concept (PoC).

NeoVolt™ is designed with advanced features, including

automatic adoption of connected devices and dynamic load balancing through a master-slave configuration.

These capabilities enable NeoVolt™

to seamlessly integrate with and manage energy flows across multiple devices.

Furthermore, the PoC is contingent upon recent advancements

in EV charging and discharging standardizations, including on-board inverters and bi-directional capabilities, to ensure compatibility

and efficiency in both residential and commercial applications.

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

(“Ozop Capital”), a Delaware corporation and a wholly owned

subsidiary of the Company and was formed as a holding company.

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

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

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

of Ozop Capital.

Plus markets vehicle service contracts (“VSC’s”) for electric vehicles (EV’s) that offer consumers to be able

to purchase additional months and miles above the manufacturer’s warranty and to also bring added value to EV owners by utilizing

our partnerships and strengths in the energy market to offer unique and innovative services.

Among EV owners’ concerns are the

EV battery repair and replacement costs, range anxiety, environmental responsibilities, roadside assistance, and the accelerated wear

on additional components that EV vehicles experience.

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

of mind” to the EV buyer.

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

(“OED”) a Nevada corporation, as a wholly owned subsidiary

of the Company.

OED was formed to become a premier engineering and lighting control design firm.

OED offers product and design support

for lighting and solar projects with a focus on fast lead times and technical support.

OED and our partners can offer the resources needed

for lighting, solar and electrical design projects.

OED will provide its’ customers systems to coordinate the understanding of

electrical usage with the relationship between lighting design and lighting controls, by developing more efficient ecofriendly designs

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

OED specializes in lighting commissioning

On September 27, 2024, OED signed an agreement with Leviton Manufacturing Co, Inc., to serve as a field service technician

for their advanced lighting control systems.

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

The NeoVolt ™ System comprises the design engineering, installation, and operational

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

NeoVolt 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 NeoVolt™, a scalable battery storage solution that aims to relieve the stress on existing

grid infrastructure by providing distributed energy storage.

With the first stage of engineered technical drawings completed, we are

advancing to stage two and preparing to construct the initial prototype or proof of concept (PoC).

NeoVolt™ is designed with advanced

features, including automatic adoption of connected devices and dynamic load balancing through a master-slave configuration.

These capabilities

enable NeoVolt™ to seamlessly integrate with and manage energy flows across multiple devices.

Furthermore, the PoC is contingent

upon recent advancements in EV charging and discharging standardizations, including on-board inverters and bi-directional capabilities,

to ensure compatibility and efficiency in both residential and commercial applications.

specializes in lighting commissioning services.

On September 27, 2024, OED signed an agreement with Leviton Manufacturing Co, Inc., to

serve as a field service technician for their advanced lighting control systems.

Plus markets vehicle service contracts (VSC’s”) for electric vehicles (EV’s) that offer consumers to be able to purchase

additional months and miles above the manufacturer’s warranty and to also bring added value to EV owners by utilizing our partnerships

and strengths in the energy market to offer unique and innovative services.

Among EV owners’ concerns are the EV battery repair

and replacement costs, range anxiety, environmental responsibilities, roadside assistance, and the accelerated wear on additional components

that EV vehicles experience.

Management believes that the Ozop Plus marketed VSC’s will give “peace of mind” to the

On October 23, 2024, Ozop Capital Partners, Inc.

entered into an agreement with Empire Auto Protect (“Empire”).

Under the agreement, Empire will white label Royal Administration’s Fully Charged VSC, to be marketed as Empire Plus.

will be ceded the battery premium portion of all of the Empire Plus VSC’s contracted.

has developed 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.

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 proceedings 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 and nine months ended September 30, 2024, and 2023.

of Operations for the three and nine months ended September 30, 2024, and 2023:

the three and nine months ended September 30, 2024, the Company generated revenue of $74,286 and $1,267,980, respectively, compared to

$172,559 and $4,205,083 for the three and nine months ended September 30, 2023.

consolidated financial statements for the three months ended March 31, 2025, and 2024.

of Operations for the three months ended March 31, 2025, and 2024:

the three months ended March 31, 2025, the Company generated revenue of $42,257 compared to $251,722 for the three months ended March

Revenues from Ozop Energy Systems, Inc.

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

September 30,

Nine months ended

September 30,

Sourced and distributed products

Design and installation

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

three and nine months ended September 30, 2023.

of sourced and distributed products (solar product) were significantly lower for the three months ended March 31, 2025, compared to the

three months ended March 31, 2024.

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

1 unchanged sentence

a part of the lower demand.

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

Design and installation revenues

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

the three and nine months ended September 30, 2024, the Company recognized $50,863 and $989,955, respectively, of cost of sales, compared

to $126,438 and $4,255,030, respectively, for the three and nine months ended September 30, 2023.

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

place additional order for solar products.

Design and installation revenues decreased for the three months ended March 31, 2025, compared

to the three months ended March 31, 2024.

The prior year included $162,000 for a one-time large installation job.

of sales and Gross profit

the three months ended March 31, 2025, and 2024, the Company recognized $29,019 and $115,445, respectively, of cost of sales.

Three months ended

September 30,

Nine months ended

September 30,

Sourced and distributed products

Design and installation

Inventory write down

the nine months ended September 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.

margin of sourced and distributed products was 15% and 8.9% for the three and nine months ended September 30, 2024, respectively, compared

to 18.4% and 12.1% (prior to the Inventory Adjustment) for the three and nine months ended September 30, 2023, respectively.

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

Company recognized a gross margin on solar products of 11.9% for the three months ended March 31, 2025, compared to 15.8% for the three

months ended March 31, 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 the product mix of sales.

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

operating expenses for the three and nine months ended September 30, 2024, were $963,460 and $2,740,395, respectively, compared to $2,637,795

and $4,670,627, respectively, for the three and nine months ended September 30, 2023.

The operating expenses were comprised of:

Three Months Ended

September 30,

The Company recognized a gross margin on design

and installation of 32.8% for the three months ended March 31, 2025, compared to 70.5% for the three months ended March 31, 2024.

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 quarter who compensates the Company based on hourly rate for actual worked hours as compared

to a higher daily rate the Company received from other customers.

operating expenses for the three months ended March 31, 2025, and 2024, were $944,067 and $968,763 respectively.

The operating expenses

were comprised of:

Three months ended

September 30,

Nine Months Ended

September 30,

Nine Months Ended

September 30,

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

Management fees, related parties

Salaries, taxes and benefits

Travel expenses

Professional and consulting fees

Advertising and marketing

Rent and office expenses

Termination costs

Rent and office expense

Research and development costs

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

the Company and Mr.

Conway (the “Employment Agreement”).

Conway’s compensation as adjusted was $20,000 per month.

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

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

Pursuant to the agreement, Mr.

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

Conway receives 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.

The Company also agreed to compensate Mr.

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

Currently, the subsidiaries of Ozop Capital, OES and OED, each compensates Mr.

the subsidiaries of Ozop Capital, OES and OED, each compensates Mr.

Conway $20,000 per month.

For the three and nine months

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

Conway of $240,000 and $720,000, respectively.

taxes, and benefits increased for the three months and decreased for the nine months ended September 30, 2024, compared to the three

and nine months ended September 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 CEO.

OED currently has five employees with an aggregate annual compensation of $498,000.

OED has allocated $7,423 and $73,328, respectively, of salaries to cost of sales for the three and nine months ended September 30, 2024,

and employees with an annual salary of $210,000 are being expensed effective July 1, 2024, to Automated Room Controls, Inc, (“ARC”).

Ozop Capital Partners has 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.

The expenses per subsidiary included in operating expenses for the three and nine months

ended September 30, 2024, and 2023, are as follows:

Three Months Ended

September 30,

Three Months Ended

September 30,

Nine Months Ended

September 30,

Nine Months Ended

September 30,

taxes, and benefits increased for the three months ended March 31, 2025, compared to March 31, 2024.

As of March 31, 2025, Ozop Energy

Systems had 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.

two employees with an aggregate annual compensation of $244,000.

OED has allocated $26,355 and $52,114 of salaries to cost of sales for

the three months ended March 31, 2025, and 2024.

Employees with an annual salary of $310,000 are being expensed effective July 1, 2024,

to Automated Room Controls, Inc.

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.

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, 2025, and 2024, are as follows:

Three months ended March 31,

Ozop Energy Systems

2 unchanged sentences

Ozop Capital Partners/EV Insurance Company

and consulting fees increased slightly for the three months ended September 30, 2024, compared to the three months ended September 30,

2023, and decreased for the nine months ended September 30, 2024, compared to the nine months ended September 30, 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 and nine months ended September 30, 2024, compared to the three and nine months ended

September 30, 2023.

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

30, 2024, compared to the three and nine months ended September 30, 2023.

The increase for the nine months ended September 30, 2024,

compared to the nine months ended September 30, 2023, is the result of $71,208, for the current nine months 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 nine months ended September 30, 2024, compared to the three and nine months ended September 30, 2023.

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

costs of $1,755,082 for the three and nine months ended September 30, 2023, was a result of storage fees for goods that remained at a

third-party warehouse and purchase order termination fees charged by the Company’s solar panel supplier, all of which was in connection

with an early termination of vendor agreement.

expenses decreased for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, as the Company had lower

travel expenses related to Systems and OED.

and consulting fees decreased for the three months ended March 31, 2025, compared to the three months ended March 31, 2024.

is due to general legal fees and legal fees for the quarter ended March 31, 2024, related to the YHS litigation.

These decreases were

partially offset by increases in auditing fees.

and office expense (including storage, supplies, utilities, and internet costs) decreased for the three months ended March 31, 2025,

compared to the three months ended March 31, 2024.

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

the three months ended March 31, 2024 (no such storage fees in the three months ended March 31, 2025), coupled with a decrease in office

supplies as a result of expenditure control.

and development costs increased for the three months ended March 31, 2025, compared to the three months ended March 31, 2024, due to

the development and testing of the ARC products.

(Income) Expenses

(income) expense, net, for the three and nine months ended September 30, 2024, was $1,153,046 and $2,349,872, respectively, compared

to ($2,265,254) and $1,576,860, respectively, for the three and nine months ended September 30, 2023, and were as follows.

expense, net, for the three months ended March 31, 2025, was $626,342 compared to $594,882 for the three months ended March 31, 2024,

and were as follows.

Three months ended

September 30,

Nine months ended

September 30,

Interest expense

(Gain) loss on change in fair value of derivatives

Gain on litigation settlement

Total other (income) expense, net

$ (2,265,254 )

increase in other expense, net for the three months ended September 30, 2024, compared to the three months ended September 30, 2023,

is primarily a result of the Company recognizing a gain of $3,304,989 in the three months ended September 30, 2023, on the change in

the fair value of derivatives compared to a loss of $96,180 in the three months ended September 30, 2024.

For the nine months ended September

30, 2024, the Company recognized a gain of $549,401 compared to a gain of $1,724,084 for the nine months ended September 30, 2023, respectively,

on the change in the fair value of derivatives.

Additionally for the nine months ended September 30, 2024, the Company recognized a gain

of $271,360 on the settlement with YHS.

loss attributable to the Company for the three and nine months ended September 30, 2024, was $2,093,083 and $4,808,669, respectively,

compared to $321,058 and $6,281,346, respectively, for the three and nine months ended September 30, 2023.

The change for the three months

ended September 30, 2024, compared to the three months ended September 30, 2023, was a combination of a decrease in gross profit of $22,698,

reduced operating expenses of $1,674,335 (mostly related to the loss associated with early termination of vendor agreement of $1,755,082

for the three months ended September 30, 2023), and increased other expenses, net, of $3,418,300, as described above.

The change for

the nine months ended September 30, 2024, compared to the nine months ended September 30, 2023, was a combination of an increase in gross

profit of $327,972, reduced operating expenses of $1,930,232 (mostly related to the loss associated with early termination of vendor

agreement of $1,755,082 for the nine months ended September 30, 2023), and increased other expenses, net, of $773,012, as described above.

Gain on change in fair value of derivatives

Total other expense, net

decrease in interest expense for the three months ended March 31, 2025, is primarily a result of the amortization period of certain note

discounts that were completed in 2024.

For the three months ended March 31, 2025, the Company recognized a gain of $111,759 on the change

in the fair value of derivatives compared to a gain of $462,005 for the three months ended March 31, 2024.

loss attributable to the Company for the three months ended March 31, 2025, was $1,557,171 compared to $1,423,795 for the three months

ended March 31, 2024.

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

offset by the decrease in operating expenses.

and Capital Resources

1 unchanged sentence

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

As of September 30, 2024, the Company had an accumulated

deficit of $223,479,149 and a working capital deficit of $30,760,584 (including derivative liabilities of $666,677).

As of September

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,

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

As of March 31, 2025, the Company had an accumulated

deficit of $226,425,812 and a working capital deficit of $33,521,692.

As of March 31, 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 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

6 unchanged sentences

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, 2024, we primarily funded our business operations with the existing cash on hand as of January 1,

2024, cash received from accounts receivable, and $979,048 received from sales of common stock.

of September 30, 2024, we had cash of $1,354,636 as compared to $1,446,029 as of December 31, 2023.

As of September 30, 2024, we had

current liabilities of $32,398,711 (including $666,677 of derivative liabilities), compared to current assets of $1,638,127, which resulted

in a working capital deficit of $30,760,584.

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 nine months ended September 30, 2024, net cash used in operating activities was $1,059,327 compared to $901,293 for the nine months

ended September 30, 2023.

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 three months ended March 31, 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, and $260,805 received from sales of common stock.

of March 31, 2025, we had cash of $329,632 as compared to $797,139 as of December 31, 2024.

As of March 31, 2025, we had current liabilities

of $33,968,229, compared to current assets of $446,537, which resulted in a working capital deficit of $33,521,692.

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 three months ended March 31, 2025, net cash used in operating activities was $724,822 compared to $641,620 for the three months ended

March 31, 2024.

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

1 unchanged sentence

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

the nine months ended September 30, 2023, our net cash used in operating activities was primarily attributable to the net loss of $6,281,346,

and the gain on the change in fair value of derivatives of $1,724,084, adjusted by non-cash items of the termination expense of $1,755,082,

interest expense of $1,138,067, the inventory write-down of $625,000 and amortization and depreciation of $172,470.

Net changes of $3,429,606

in operating assets and liabilities reduced the cash used in operating activities.

the nine months ended September 30, 2024, and 2023 the net cash used in investing activities was $11,114 and $2,162, respectively, primarily

due to purchase of office and computer equipment.

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 nine months ended September 30, 2023, the net cash provided by financing activities was $500,537.

During the nine months ended September

30, 2023, we received $1,200,537, net of issuance costs, from the sales of common stock to GHS.

During the nine months ended September

30, 2023, we made payments of $700,000 for notes payable.

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,

the gain on the change in fair value of derivatives of $462,005, adjusted by non-cash items of interest expense of $332,990, and amortization

and depreciation of $52,870.

Net changes of $861,893 in operating assets and liabilities reduced the cash used in operating activities.

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.

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

the three months ended March 31, 2025, and 2024, the net cash provided by financing activities was $260,805 and $350,555, respectively,

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

Accounting Policies and Estimates

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

Report on Form 10-Q.

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

of our financial statements:

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

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

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

Actual results could differ from those estimates.

Company’s unaudited consolidated financial statements are prepared in accordance with GAAP in the United States.

The preparation

of its consolidated financial statements and related disclosures requires it to make estimates and judgments that affect the reported

amounts of assets, liabilities, revenue, costs and expenses, and the disclosure of contingent assets and liabilities in the Company’s

unaudited consolidated financial statements.

The Company bases its estimates on historical experience, known trends and events and various

other factors that it believes are reasonable under the circumstances, the results of which form the basis for making judgments about

the carrying values of assets and liabilities that are not readily apparent from other sources.

The Company evaluates its estimates and

assumptions on an ongoing basis.

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 months ended March 31, 2025.

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