What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-08-19 compared with 2025-05-20 · 131 added, 112 removed, 196 unchanged (55% of the section changed)

69 unchanged sentences

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.

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

54 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 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

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.

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”) 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.

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, 2025, compared to the

three months ended March 31, 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 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.

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.

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.

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.

Three months ended

Six months ended

Sourced and distributed products

Design and installation

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.

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.

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 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

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.

The operating expenses were comprised of:

June 30, 2025

June 30, 2024

June 30, 2025

June 30, 2024

Management fees, related parties

Salaries, taxes, and benefits

Stock compensation consultants

Travel expenses

1 unchanged sentence

Advertising and marketing

Rent and office expense

Rent and office expenses

Research and development costs

General and administrative, other

Total operating expenses

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

6 unchanged sentences

Conway $20,000 per month.

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

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

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,

two part-time employees paid on an hourly basis.

OED has allocated $33,252 and $59,607 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.

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.

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

Ozop Energy Systems

Ozop Engineering and Design

Automated Room Controls, Inc.

Automated Room Controls

Ozop Capital Partners/EV Insurance Company

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.

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.

(Income) Expenses

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.

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.

Three months ended

Six months ended

Interest expense

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.

Loss (gain) on change in fair value of derivatives

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.

and Capital Resources

1 unchanged sentence

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

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

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 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

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.

2 unchanged sentences

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

and depreciation of $54,305.

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

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 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 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

1 unchanged sentence

Net changes of $2,386,310 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.

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.

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.

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.

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.

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