UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
| Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For
the quarter ended
| Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the transition period from __________ to __________
Commission
file number
(Exact name of registrant as specified in its charter)
| 3841 | ||||
(State or Other Jurisdiction of Incorporation or Organization) |
(Primary Standard Industrial Classification Number) |
(IRS Employer Identification Number) |
| (Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices) |
Securities registered under Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock, $0.001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicated
by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant
to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such
files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. :
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
reporting company | |
| Emerging
growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use to the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 USC. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
As of May 20, 2025, shares of common stock of the registrant were outstanding.
OZOP ENERGY SOLUTIONS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
| 2 |
OZOP ENERGY SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| March 31, | December 31, | |||||||
| 2025 | 2024 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Total Current Assets | ||||||||
| Operating lease right-of-use asset, net | ||||||||
| Property and equipment, net | ||||||||
| Other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Liabilities | ||||||||
| Current Liabilities | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Related party liabilities | ||||||||
| Convertible notes payable | ||||||||
| Current portion of notes payable, net of discounts | ||||||||
| Derivative liabilities | ||||||||
| Operating lease liability, current portion | ||||||||
| Deferred liability | ||||||||
| Customer deposits | ||||||||
| Liabilities of discontinued operations | ||||||||
| Total Current Liabilities | ||||||||
| Long Term Liabilities | ||||||||
| Operating lease liability, net of current portion | ||||||||
| TOTAL LIABILITIES | ||||||||
| COMMITMENTS AND CONTINGENCIES | ||||||||
| Stockholders’ Deficit | ||||||||
| Preferred stock ( shares authorized, par value $) | ||||||||
| Series C Preferred Stock ( shares authorized and shares issued and outstanding, par value $) | ||||||||
| Series D Preferred Stock ( shares authorized and shares issued and outstanding, par value $) | ||||||||
| Series E Preferred Stock ( shares authorized, -- shares issued and outstanding, par value $) | ||||||||
| Common stock ( (2025) and (2024) shares authorized, par value $; and shares issued and outstanding as of March 31, 2025, and December 31, 2024, respectively) | ||||||||
| Treasury stock, at cost, shares of Series C Preferred Stock and shares of Series D Preferred Stock | ( | ) | ( | ) | ||||
| Common stock to be issued; | ||||||||
| Additional paid in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total Ozop Energy Solutions, Inc. stockholders’ deficit | ( | ) | ( | ) | ||||
| Noncontrolling interest | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ DEFICIT | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-1 |
OZOP ENERGY SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenue | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross profit | ||||||||
| Operating expenses: | ||||||||
| General and administrative, related parties | ||||||||
| General and administrative, other | ||||||||
| Total operating expenses | ||||||||
| Loss from continuing operations | ( | ) | ( | ) | ||||
| Other (income) expenses: | ||||||||
| Interest expense | ||||||||
| Gain on change in fair value of derivatives | ( | ) | ( | ) | ||||
| Total Other (Income) Expenses | ||||||||
| Loss from continuing operations before income taxes | ( | ) | ( | ) | ||||
| Income tax provision | ||||||||
| Net loss from continuing operations | ( | ) | ( | ) | ||||
| Discontinued Operations: | ||||||||
| Income from discontinued operations, net of tax | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Loss from continuing operations per share of common stock basic and fully diluted | $ | ) | $ | ) | ||||
| Income from discontinued operations per share of common stock basic and fully diluted | $ | $ | ||||||
| Loss per share basic and fully diluted | $ | ) | $ | ) | ||||
| Weighted average shares outstanding basic and diluted | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-2 |
OZOP ENERGY SOLUTIONS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2025
(Unaudited)
Common stock to be issued | Series C Preferred Stock | Series D Preferred Stock | Common Stock | Treasury | Additional Paid-in | Accumulated | Noncontrolling | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount |
Stock |
Capital |
Deficit |
Interest |
(Deficit) | ||||||||||||||||||||||||||||||||||||||||
| Balances January 1, 2025 | $ | | $ | | $ | | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||
| Issuance of shares of common stock sold, net of issuance costs of $ | - | - | - | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Balances March 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-3 |
OZOP ENERGY SOLUTIONS, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 2024
(Unaudited)
Common stock to be issued | Series C Preferred Stock | Series D Preferred Stock | Common Stock | Treasury | Additional Paid-in | Accumulated | Noncontrolling | Total Stockholders’ Equity | ||||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | Shares | Amount |
Stock |
Capital |
Deficit |
Interest |
(Deficit) | ||||||||||||||||||||||||||||||||||||||||
| Balances January 1, 2024 | $ | $ | | $ | | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Issuance of shares of common stock sold, net of issuance costs of $ | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Balances March 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
OZOP ENERGY SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Net income from discontinued operations | ||||||||
| Net loss | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Non-cash interest expense | ||||||||
| Amortization and depreciation | ||||||||
| Gain on fair value change of derivatives | ( | ) | ( | ) | ||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Inventory | ( | ) | ||||||
| Prepaid expenses | ( | ) | ||||||
| Accounts payable and accrued expenses | ||||||||
| Related party liabilities | ||||||||
| Deferred revenue | ||||||||
| Operating lease liabilities | ( | ) | ( | ) | ||||
| Customer deposits | ||||||||
| Net cash used in continuing operations | ( | ) | ( | ) | ||||
| Net cash used in discontinued operations | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of office and computer equipment | ( | ) | ||||||
| Net cash used in investing activities | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Proceeds from sale of common stock, net of costs | ||||||||
| Net cash provided by financing activities | ||||||||
| Net decrease in cash | ( | ) | ( | ) | ||||
| Cash, Beginning of period | ||||||||
| Cash, End of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income taxes | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F-5 |
OZOP ENERGY SOLUTIONS, INC.
Notes to Consolidated Financial Statements
March 31, 2025
(Unaudited)
NOTE 1 - ORGANIZATION
Business
Ozop Energy Solutions, Inc. (the” Company,” “we,” “us” or “our”) was originally incorporated as Newmarkt Corp. on July 17, 2015, under the laws of the State of Nevada.
On July 10, 2020, the Company entered into a Stock Purchase Agreement (the “SPA”) with Power Conversion Technologies, Inc., a Pennsylvania corporation (“PCTI”), and Catherine Chis (“Chis”), PCTI’s Chief Executive Officer (“CEO”) and its sole shareholder. Under the terms of the SPA, the Company acquired one thousand () shares of PCTI, which represents all of the outstanding shares of PCTI, from Chis in exchange for the issuance of shares of the Company’s Series C Preferred Stock, shares of the Company’s Series D Preferred Stock, and shares of the Company’s Series E Preferred Stock to Chis.
On 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. As permitted 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.”
On 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.
On 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 Capital.
On 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.
On 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. We work with architects, engineers, facility managers, electrical contractors and engineers.
On 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. The Company’s mission is to deliver cutting-edge technology that simplifies complex control needs, ensuring seamless integration and exceptional performance.
NOTE 2 – GOING CONCERN AND MANAGEMENT’S PLANS
The
accompanying 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, 2025, the Company had an accumulated deficit of
$
| F-6 |
Management’s Plans
As a public company, Management believes it will be able to access the public equities market for fund raising for product development, sales and marketing and inventory requirements as we expand our distribution in the U.S. market.
On
May 2, 2023, the Company entered into an Equity Financing Agreement (the “Financing Agreement”) and Registration Rights Agreement
(the “Registration Rights Agreement”) with GHS. Under the terms of the Financing Agreement, GHS has agreed to provide the
Company with up to $
On
July 30, 2024, the Company receive a Notice of Effectiveness for the sale of up to Two Billion () shares of the Company’s
common stock to GHS, pursuant to the May 2, 2023, Financing Agreement and Registration Rights Agreement. The terms and conditions are
similar to the terms and conditions of the July 19, 2023, registration statement. During the year ended December 31, 2024, the Company
sold to GHS shares of common stock and received $
On
April 11, 2025, the Company entered into an Equity Financing Agreement (the “2025 Financing Agreement”) and Registration
Rights Agreement (the “2025 Registration Rights Agreement”) with GHS. Under the terms of the Financing Agreement, GHS has
agreed to provide the Company with up to $
OES operates in the renewable, electric vehicle (“EV”), energy storage and energy resiliency sectors. We are engaged in multiple business lines that include project development as well as equipment distribution.
Equipment Distributor: In April 2021, the Company signed a five-year lease (beginning June 1, 2021) of approximately 8,100 SF in California, for office and warehouse space to support the sales and distribution of our west coast operations. On February 22, 2023, with an effective date of March 1, 2023, the Company entered into a Sublease for a Single Subleasee Agreement (the “Sublease”) with the landlord and a third party for the office and warehouse in Carlsbad California. Pursuant to the Sublease agreement, the third party will be responsible 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.
| F-7 |
Modular 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 NeoVoltTM 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.
OED 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.
Ozop 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. 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. OZOP Plus will be ceded the battery premium portion of all of the Empire Plus VSC’s contracted.
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.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements and with the instructions to Form 10-Q and Article 8 of Regulation S-X of the SEC. Accordingly, they do not contain all information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements contain all the adjustments necessary (consisting only of normal recurring accruals) to present the financial position of the Company as of March 31, 2025, and the results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2025, are not necessarily indicative of the operating results for the full fiscal year or any future period. These unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto for the year ended December 31, 2024, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on April 15, 2025.
The unaudited consolidated financial statements include the accounts of the Company and the Company’s wholly owned subsidiaries Ozop Energy Systems, Inc. (“OES”), Ozop Capital Partners, Inc. (“Ozop Capital”), Ozop Engineering and Design, Inc. (“OED), Automated Room Controls, Inc. (“ARC”), Power Conversion Technologies, Inc. (“PCTI”), Ozop LLC, Ozop HK and Spinus, LLC (“Spinus”). All intercompany accounts and transactions have been eliminated in consolidation.
| F-8 |
Use of Estimates
The 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.
Cash and Cash Equivalents
The
Company considers all highly liquid investments with an original term of three months or less to be cash equivalents. These investments
are carried at cost, which approximates fair value. Cash is maintained at a major financial institution. Accounts held at U.S. financial
institutions are insured by the FDIC up to $
Sales Concentration and credit risk
Following is a summary of customers who accounted for more than ten percent (10%) of the Company’s revenues for the three months ended March 31, 2025, and 2024, and their accounts receivable balance as of March 31, 2025:
| Sales % Three Months Ended March 31, 2025 | Sales % Three Months Ended March 31, 2024 | Accounts receivable balance March 31, 2025 | ||||||||||
| Customer A | % | $ | ||||||||||
| Customer B | % | $ | ||||||||||
| Customer C | % | % | $ | |||||||||
| Customer D | % | $ | ||||||||||
Accounts Receivable
The
Company records accounts receivable at the time products and services are delivered. An allowance for losses is established through a
provision for losses charged to expenses. Receivables are charged against the allowance for losses when management believes collectability
is unlikely. The allowance (if any) is an amount that management believes will be adequate to absorb estimated losses on existing receivables,
based on evaluation of the collectability of the accounts and prior loss experience. As of March 31, 2025, four customers represented
Inventory
Inventories
are valued at the lower of cost or net realizable value, with cost determined on the first-in, first-out basis. Inventory costs consist
of finished goods. In evaluating the net realizable value of inventory, management also considers, if applicable, other factors, including
known trends, market conditions, currency exchange rates and other such issues. Finished goods inventories as of March 31, 2025, and
December 31, 2024, were $
Purchase concentration
ARC began purchasing inventory during the three months ended March 31, 2025. OES purchases finished renewable energy products from its’ suppliers. For the three months ended March 31, 2025, and 2024, OES made no purchases.
Property, plant, and equipment
Property and equipment are stated at cost, and depreciation is provided by use of a straight-line method over the estimated useful lives of the assets.
| F-9 |
The Company reviews property and equipment for potential impairment whenever events or changes in circumstances indicate that the carrying amounts of assets may not be recoverable. The estimated useful lives of property and equipment is as follows:
| Building | ||
| Office furniture and equipment | ||
| Warehouse equipment |
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, from the commercial sales of products or providing services by: (1) identify the contract (if any) with a customer; (2) identify the performance obligations in the contract (if any); (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract (if any); and (5) recognize revenue when each performance obligation is satisfied. The Company has no outstanding contracts with any of its’ customers. The Company recognizes revenue when title, ownership, and risk of loss pass to the customer, all of which occurs upon shipment or delivery of the product and is based on the applicable shipping terms for product sales or upon delivery of service to the customer for installation services. Any advance payments are recorded as current liability until revenue is recognized.
For product sales contracts with customers, ownership of the goods and associated revenue are transferred to customers at a point in time, generally upon shipment of a product to the customer or receipt of the product by the customer and without significant judgments. For the periods covered herein, we did not have post shipment obligations such as training or installation, customer acceptance provisions, credits and discounts, rebates and price protection, or other similar privileges.
For installation services contracts with customers, the Company invoices the customer upon completion of the job and recognizes revenue based on the invoiced amount.
The following table disaggregates our revenue by major source for the three months ended March 31, 2025, and 2024:
| Three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Sourced and distributed products | $ | $ | ||||||
| OED Installations | ||||||||
| Total | $ | $ | ||||||
Advertising and Marketing Expenses
The
Company expenses advertising and marketing costs as incurred. For the three months ended March 31, 2025, and 2024, the Company recorded
advertising and marketing expenses of $
Research and Development
Costs
and expenses that can be clearly identified as research and development are charged to expense as incurred. For the three months ended
March 31, 2025, and 2024, the Company recorded $
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815, Derivatives and Hedging Activities.
Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
| F-10 |
The Company accounts for convertible instruments (when it has been determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of this note transaction and the effective conversion price embedded in this note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption.
The Company accounts for the conversion of convertible debt when a conversion option has been bifurcated using the general extinguishment standards. The debt and equity linked derivatives are removed at their carrying amounts and the shares issued are measured at their then-current fair value, with any difference recorded as a gain or loss on extinguishment of the two separate accounting liabilities.
Discontinued Operations
In accordance with ASC 205-20 Presentation of Financial Statements: Discontinued Operations, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the components of an entity meet the criteria in paragraph 205-20-45-10. In the period in which the component meets held-for-sale or discontinued operations criteria the major current assets, other assets, current liabilities, and noncurrent liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations, less applicable income taxes (benefit), shall be reported as components of net income (loss) separate from the net income (loss) of continuing operations.
On September 1, 2022, the BOD of the Company authorized the filing of a Chapter 7 proceeding which meets the definition of a discontinued operation. Accordingly, the operating results of PCTI are reported as net income (loss) from discontinued operations in the accompanying unaudited consolidated financial statements for the three months ended March 31, 2025, and 2024. For additional information, see Note 14- Discontinued Operations.
Distinguishing Liabilities from Equity
The Company relies on the guidance provided by ASC Topic 480, Distinguishing Liabilities from Equity, to classify certain redeemable and/or convertible instruments. The Company first determines whether a financial instrument should be classified as a liability. The Company will determine the liability classification if the financial instrument is mandatorily redeemable, or if the financial instrument, other than outstanding shares, embodies a conditional obligation that the Company must or may settle by issuing a variable number of its equity shares.
Once the Company determines that a financial instrument should not be classified as a liability, the Company determines whether the financial instrument should be presented between the liability section and the equity section of the balance sheet (“temporary equity”). The Company will determine temporary equity classification if the redemption of the financial instrument is outside the control of the Company (i.e. at the option of the holder). Otherwise, the Company accounts for the financial instrument as permanent equity.
Our CEO and Chairman holds sufficient shares of the Company’s voting preferred stock that give sufficient voting rights under the articles of incorporation and bylaws of the Company such that the CEO and Chairman can at any time unilaterally vote to increase the number of authorized shares of common stock of the Company, without the need to call a general meeting of common shareholders of the Company.
Initial Measurement
The Company records its financial instruments classified as liability, temporary equity or permanent equity at issuance at the fair value, or cash received.
Subsequent Measurement – Financial Instruments Classified as Liabilities
The Company records the fair value of its financial instruments classified as liabilities at each subsequent measurement date. The changes in the fair value of its financial instruments classified as liabilities are recorded as other income (expenses).
| F-11 |
Fair Value of Financial Instruments
The Company measures assets and liabilities at fair value based on an expected exit price as defined by the authoritative guidance on fair value measurements, which represents the amount that would be received on the sale of an asset or paid to transfer a liability, as the case may be, in an orderly transaction between market participants. As such, fair value may be based on assumptions that market participants would use in pricing an asset or liability. The authoritative guidance on fair value measurements establishes a consistent framework for measuring fair value on either a recurring or nonrecurring basis whereby inputs, used in valuation techniques, are assigned a hierarchical level.
The following are the hierarchical levels of inputs to measure fair value:
| ● | Level 1 - Observable inputs that reflect quoted market prices in active markets for identical assets or liabilities. | |
| ● | Level 2 - Inputs reflect quoted prices for identical assets or liabilities in markets that are not active; quoted prices for similar assets or liabilities in active markets; inputs other than quoted prices that are observable for the assets or liabilities; or inputs that are derived principally from or corroborated by observable market data by correlation or other means. | |
| ● | Level 3 - Unobservable inputs reflecting the Company’s assumptions incorporated in valuation techniques used to determine fair value. These assumptions are required to be consistent with market participant assumptions that are reasonably available. |
From time to time, certain of the Company’s embedded conversion features on debt and outstanding warrants have been treated as derivative liabilities for accounting purposes under ASC 815 due to insufficient authorized shares to fully settle conversion features of the instruments if exercised. In this case, the Company utilized the latest inception date sequencing method to reclassify outstanding instruments as derivative instruments. These contracts were recognized at fair value with changes in fair value recognized in earnings until such time as the conditions giving rise to such derivative liability classification were settled.
The carrying amounts of the Company’s financial assets and liabilities, such as cash, prepaid expenses, other current assets, accounts payable and accrued expenses and certain notes payable approximate their fair values because of the short maturity of these instruments.
The following table represents the Company’s derivative instruments that are measured at fair value on a recurring basis as of March 31, 2025, and December 31, 2024, for each fair value hierarchy level:
| March 31, 2025 | Derivative Liabilities | Total | ||||||
| Level I | $ | $ | ||||||
| Level II | $ | $ | ||||||
| Level III | $ | $ | ||||||
| December 31, 2024 | Derivative Liabilities | Total | ||||||
| Level I | $ | $ | ||||||
| Level II | $ | $ | ||||||
| Level III | $ | $ | ||||||
Leases
The Company accounts for leases under ASU 2016-02 (see Note 13), applying the package of practical expedients to leases that commenced before the effective date whereby the Company elected to not reassess the following: (i) whether any expired or existing contracts contain leases; (ii) the lease classification for any expired or existing leases; and (iii) initial direct costs for any existing leases. For contracts entered into on or after the effective date, at the inception of a contract the Company assess whether the contract is, or contains, a lease. Our assessment is based on: (1) whether the contract involves the use of a distinct identified asset, (2) whether we obtain the right to substantially all the economic benefit from the use of the asset throughout the period, and (3) whether we have the right to direct the use of the asset. We allocate the consideration in the contract to each lease component based on its relative stand-alone price to determine the lease payments.
Operating
lease ROU assets represent the right to use the leased asset for the lease term and operating lease liabilities are recognized based
on the present value of the future minimum lease payments over the lease term at commencement date. As most leases do not provide an
implicit rate, the Company used an incremental borrowing rate of
| F-12 |
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance on deferred tax assets is established when management considers it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Tax benefits from an uncertain tax position are only recognized if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate resolution. Interest and penalties related to unrecognized tax benefits are recorded as incurred as a component of income tax expense. The Company has not recognized any tax benefits from uncertain tax positions for any of the reporting periods presented.
Segment Policy
The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker (“CODM”), who is our chief executive officer, for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Management, including the chief operating decision maker, reviews operating results solely by monthly revenue and operating results of the Company and, as such, the Company has determined that the Company has one operating segment (renewable energy) as defined by ASC Topic 280 “Segment Reporting”.
The Company reports earnings (loss) per share in accordance with ASC 260, “Earnings per Share.” Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock, common stock equivalents and other potentially dilutive securities outstanding during the period. As of March 31, 2025, and 2024, the Company’s dilutive securities are convertible into approximately and , respectively, shares of common stock. The following table represents the classes of dilutive securities as of March 31, 2025, and 2024:
| March 31, 2025 | March 31, 2024 | |||||||
| Convertible preferred stock (1) | ||||||||
| Unexercised common stock purchase warrants (1) | ||||||||
| Convertible notes payable (1) | ||||||||
| Promissory notes payable (1) | ||||||||
| (1) |
Recent Accounting Pronouncements
From time-to-time new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that may have an impact on the Company’s accounting and reporting. Unless otherwise discussed, the Company believes that other recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations and cash flows when implemented.
| F-13 |
Recently adopted accounting pronouncements
Segment Reporting
In November 2023, the FASB issued Accounting Standards Update (ASU) No. 2023-07, Improvements to Reportable Segment Disclosures (Topic 280). This ASU updates reportable segment disclosure requirements by requiring disclosures of significant reportable segment expenses that are regularly provided to the CODM and included within each reported measure of a segment’s profit or loss. This ASU also requires disclosure of the title and position of the individual identified as the CODM and an explanation of how the CODM uses the reported measures of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The ASU is effective for annual periods beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. We adopted this ASU retrospectively on December 31, 2024. The adoption of ASU 2023-07 did not have a significant impact on the Company’s consolidated financial statements and related disclosures.
Recently issued accounting pronouncements not yet adopted
Income Taxes
In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 is intended to improve income tax disclosures primarily through enhanced disclosure of income tax rate reconciliation items, and disaggregation of income (loss) from continuing operations, income tax expense (benefit) and income taxes paid, net disclosures by federal, state and foreign jurisdictions, among others. ASU 2023-09 is effective for annual reporting periods beginning after December 15, 2024, and early adoption is permitted. The Company is evaluating the impact that ASU 2023-09 will have on the consolidated financial statements and its plan for adoption, including the adoption date and transition method.
Disaggregation of Income Statement Expenses
In November 2024, the FASB issued ASU No. 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses”, which requires disaggregated disclosure of income statement expenses for public business entities. ASU 2024-03 requires new financial statement disclosures in tabular format, disaggregating information about prescribed categories underlying any relevant income statement expense caption. The prescribed categories include, among other things, purchases of inventory, employee compensation, depreciation, and intangible asset amortization. Additionally, entities must disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and for interim reporting periods within fiscal years beginning after December 15, 2027. The guidance can be applied prospectively with an option for retrospective application. Early adoption is also permitted. We are currently evaluating the provisions of this ASU.
NOTE 4 – PROPERTY AND EQUIPMENT
The following table summarizes the Company’s property and equipment:
| March 31, 2025 | December 31, 2024 | |||||||
| Office equipment | $ | $ | ||||||
| Building and building improvements | ||||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and Equipment, Net | $ | $ | ||||||
Depreciation
expense was $
NOTE 5 - CONVERTIBLE NOTES PAYABLE
On
July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a past-due
NOTE 6 – DERIVATIVE LIABILITIES
The Company determined the conversion feature of the convertible notes, which all contain variable conversion rates, represented an embedded derivative since the notes were convertible into a variable number of shares upon conversion. Accordingly, the notes are not considered to be conventional debt under ASC 815 and the embedded conversion feature was bifurcated from the debt host and accounted for as a derivative liability.
| F-14 |
At any given time, certain of the Company’s embedded conversion features on debt and outstanding warrants may be treated as derivative liabilities for accounting purposes under ASC 815-40 due to insufficient authorized shares to settle these outstanding contracts. Pursuant to SEC staff guidance that permits a sequencing approach based on the use of ASC 815-15-25 which provides guidance for contracts that permit partial net share settlement. The sequencing approach may be applied in one of two ways: contracts may be evaluated based on (1) earliest issuance date or (2) latest maturity date. Pursuant to the sequencing approach, the Company evaluates its contracts based upon the latest maturity date.
The
Company valued the derivative liabilities at March 31, 2025, and December 31, 2024, at $
The
following assumptions were utilized in the Black-Scholes valuation of outstanding warrants as of March 31, 2025, and December 31, 2024,
risk free interest rate of
A summary of the activity related to derivative liabilities for the three months ended March 31, 2025, and 2024, is as follows:
Derivative liabilities associated with warrants | Derivative liabilities associated with convertible notes | Total derivative liabilities | ||||||||||
| Balance January 1, 2025 | $ | $ | | $ | ||||||||
| Fair value of issuances during the period | ||||||||||||
| Change in fair value | ( | ) | ( | ) | ||||||||
| Balance March 31, 2025 | $ | $ | $ | |||||||||
Derivative liabilities associated with warrants | Derivative liabilities associated with convertible notes | Total derivative liabilities | ||||||||||
| Balance January 1, 2024 | $ | $ | | $ | ||||||||
| Fair value of issuances during the period | ||||||||||||
| Change in fair value | ( | ) | ( | ) | ||||||||
| Balance March 31, 2024 | $ | $ | $ | |||||||||
| F-15 |
NOTE 7 – NOTES PAYABLE
The Company has the following notes payable outstanding:
| March 31, 2025 | December 31, 2024 | |||||||
| Note payable, interest at | $ | $ | ||||||
| Other, due on demand, interest at | ||||||||
| Note payable $ | ||||||||
| Note payable $ | ||||||||
| Note payable $ | ||||||||
| Note payable $ | ||||||||
| Note payable $ | ||||||||
| Note payable $ | ||||||||
| Note payable $ | ||||||||
| Sub-total notes payable, net of discount | ||||||||
| Less long-term portion, net of discount | ||||||||
| Current portion of notes payable, net of discount | $ | $ | ||||||
On
November 11, 2022, the Company entered into a non-interest bearing, $
On
December 7, 2021, the Company entered into a
On
March 17, 2021, the Company entered into a
On
February 9, 2021, the Company entered into a
| F-16 |
On
November 13, 2020, the Company entered into a
On
November 6, 2020, the Company entered into a Settlement Agreement with the holder of $
On
August 24, 2020 (the “Issue Date”), the Company entered into a
NOTE 8 – DEFERRED LIABILITY
On
September 2, 2020, PCTI entered into an agreement with a third- party. Pursuant to the terms of the agreement, in exchange for $
EV
Insurance Company records premiums received from the issuance of Vehicle Service Contracts (“VSC’s”) as a deferred
liability. The Company will analyze the deferred liability to determine if any amounts can be recorded as income with the balance remaining
in deferred liabilities for potential future claims. As of March 31, 2025, and December 31, 2024, the Company has recorded $
| F-17 |
The
deferred liability as of March 31, 2025, and December 31, 2024, on the consolidated balance sheets is $
NOTE 9 – RELATED PARTY TRANSACTIONS AND BALANCES
Employment Agreement
On
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”). Mr. Conway’s compensation as adjusted was $
Management Fees and Related Party Payables
For
the three months ended March 31, 2025, and 2024, the Company recorded expenses to Mr. Conway of $
NOTE 10 – COMMITMENTS AND CONTINGENCIES
Agreements
On
September 1, 2021, Ozop Capital entered into an advisory agreement (the “RMA Agreement”) with Risk Management Advisors, Inc.
(“RMA”). Pursuant to the terms of the RMA Agreement, RMA will assist Ozop Capital in analyzing, structuring, and coordinating
Ozop Capital’s participation in a captive insurance company. RMA will coordinate legal, accounting, tax, actuarial and other services
necessary to implement the Company’s participation in a captive insurance company, including, but not limited to, the preparation
of an actuarial feasibility study, filing of all required regulatory applications, domicile selection, structural selection, and coordination
of the preparation of legal documentation. The fee for these services was $
On
March 4, 2019, the Company entered into a Separation Agreement (the “Separation Agreement”) with Salman J. Chaudhry, pursuant
to which the Company agreed to pay Mr. Chaudry $
On
September 2, 2020, PCTI entered into an Agreement with a third-party. Pursuant to the terms of the agreement, in exchange for $
Legal matters
We know of no material, existing or pending legal proceedings against our Company.
We were involved as a plaintiff in a Complaint filed in the SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SAN DIEGO NORTH COUNTY (the “Complaint”) on November 14, 2022. The Complaint alleges that former employees would place an order from a customer for purchase of product from OZOP with funds the exact source of which is presently unknown. OZOP alleges that next, the customer would sell that product to OZOP’s customers at a price marked up from the price for which the customer purchased from OZOP – to the benefit of Defendants and to the detriment of OZOP, their employer at the time. The Complaint further alleges that the former employees falsely represented that the price the customer was obtaining from other suppliers and therefore was willing to pay for OZOP product decreased, which allowed them to use the customer to then sell additional product to OZOP’s customers at increasingly larger margins, thus further wrongfully enriching themselves to the detriment of their employer, OZOP. The lawsuit also alleges that the employees were also making false statements to Ozop’s customers regarding the financial condition of Ozop and the lack of module inventory.
| F-18 |
On
April 4, 2024, the Company executed a Settlement Agreement (the “Settlement”) with its former employees and Your Home Solutions
Corp (“YHS”). YHS and the former employees were all defendants (the “Defendants”) in the Complaint. Pursuant
to the terms of the Settlement, the Defendants paid the Company $
There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
NOTE 11– STOCKHOLDERS’ EQUITY
Common stock
During
the three months ended March 31, 2025, the Company issued an aggregate of shares of common stock and received net proceeds
of $
During
the three months ended March 31, 2024, the Company issued an aggregate of shares of common stock and received net proceeds
of $
Increase in Authorized Shares
On June 4, 2024, the Board of Directors of the Company approved to amend the Company’s Articles of Incorporation (the “2024 Amendment”) to increase the authorized capital stock of the Company to shares, of which shall be authorized as common shares and shall be authorized as preferred shares. The Company filed the 2024 Amendment with the State of Nevada on July 22, 2024.
On March 4, 2025, the Board of Directors of the Company approved to amend the Company’s Articles of Incorporation (the “2025 Amendment”) to increase the authorized capital stock of the Company to shares, of which shall be authorized as common shares and shall be authorized as preferred shares. The Company filed the 2025 Amendment with the State of Nevada on April 10, 2025.
As of March 31, 2025, and December 31, 2024, the Company has and shares respectively of $ par value common stock authorized and there are and shares respectively of common stock issued and outstanding.
Preferred stock
As of March 31, 2025, and December 31, 2024, shares have been authorized as preferred stock, par value $ (the “Preferred Stock”), which such Preferred Stock shall be issuable in such series, and with such designations, rights and preferences as the Board of Directors may determine from time to time.
Series C Preferred Stock
On
July 7, 2020, the Company filed an Amended and Restated Certificate of Designation with the State of Nevada of the Company’s Series
C Preferred Stock. Under the terms of the Amendment to Certificate of Designation of Series C Preferred Stock, shares of the Company’s
preferred remain designated as Series C Preferred Stock.
Series D Preferred Stock
On July 7, 2020, the Company filed a Certificate of Designation with the State of Nevada of the Company’s Series D Preferred Stock. On July 10, 2020, pursuant to the SPA with PCTI, the Company issued shares of Series D preferred Stock to Chis, and on August 28, 2020, pursuant to Mr. Conway’s employment agreement, the Company issued shares of Series D Preferred Stock to Mr. Conway. On July 13, 2021, the Company purchased shares of the Company’s Series D Preferred Stock held by Chis.
| F-19 |
On
July 27, 2021, the Company filed with the Secretary of State of the State of Nevada an Amended and Restated Certificate of Designation
of Series D Preferred Stock (the “Series D Amendment”). Under the terms of the Series D Amendment, shares of the Company’s
preferred stock will be designated as Series D Convertible Preferred Stock. The holders of the Series D Convertible Preferred Stock shall
not be entitled to receive dividends. Any holder may, at any time convert any number of shares of Series D Convertible Preferred Stock
held by such holder into a number of fully paid and nonassessable shares of common stock determined by multiplying the number of issued
and outstanding shares of common stock of the Company on the date of conversion, by
The
warrant has a
| i. | Up to (one hundred and sixty-two) Warrant Shares, at any time or times on or after five (5) business days from the closing of the Series D SPA (“the Initial Exercise Date”) subject to up to a maximum number of Warrant Shares that, if converted, would be equal to no more than a maximum of 4.99% of the total number of outstanding shares of Common Stock of the Company and no later than on or before the 15th year anniversary of the Initial Exercise Date (“the Termination Date”); and | |
| ii. | The Remainder of the Warrant representing up to (three thousand and seventy-four) Warrant Shares (“Remaining Warrant Shares”) shall be locked up for a period of (thirty-six) months from the Initial Exercise Date (“Lock Up Period”) and shall become exercisable at any time or times from the date that is the 36 (thirty-six) month anniversary of the Initial Exercise Date (“Lock Up Period Termination Date”) and no later than on or before the Termination Date, as follows: |
| a. |
Series E Preferred Stock
On
July 7, 2020, the Company filed a Certificate of Designation with the State of Nevada of the Company’s Series E Preferred Stock.
Under the terms of the Certificate of Designation of Series E Preferred Stock, shares of the Company’s preferred stock have
been designated as Series E Preferred Stock. The holders of the Series E Convertible Preferred Stock shall not be entitled to receive
dividends. No holder of the Series E Preferred Stock shall be entitled to vote on any matter submitted to the shareholders of the Corporation
for their vote, waiver, release or other action, except as may be otherwise expressly required by law. At any time, the Corporation may
redeem for cash out of funds legally available therefor, any or all of the outstanding Preferred Stock (“Optional Redemption”)
at $
| F-20 |
NOTE 12 – NONCONTROLLING INTEREST
On
August 19, 2021, the Company formed Ozop Capital. The Company initially owned
NOTE 13 - OPERATING LEASE RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES
On
April 14, 2021, the Company entered into a five-year lease which began on June 1, 2021, for approximately
In adopting Topic 842, the Company has elected the ‘package of practical expedients’, which permit it not to reassess under the new standard its prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect the use-of-hindsight or the practical expedient pertaining to land easements; the latter is not applicable to the Company. In addition, the Company elected not to apply ASC Topic 842 to arrangements with lease terms of 12 months or less.
Right-of-use assets are summarized below:
| March 31, 2025 | December 31, 2024 | |||||||
| Office and warehouse lease | $ | $ | ||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||
| Right-of-use assets, net | $ | $ | ||||||
Operating lease liabilities are summarized as follows:
| March 31, 2025 | December 31, 2024 | |||||||
| Lease liability | $ | $ | ||||||
| Less current portion | ( | ) | ( | ) | ||||
| Long term portion | $ | $ | ||||||
Maturity of lease liabilities are as follows:
| Amount | ||||
| For the year ending December 31, 2025 (remaining period) | $ | |||
| For the year ending December 31, 2026 | ||||
| Total | $ | |||
| Less: present value discount | ( | ) | ||
| Lease liability | $ | |||
For
the three months ended March 31, 2025, the Company recorded a credit of $
| F-21 |
NOTE 14 – DISCONTINUED OPERATIONS
On September 1, 2022, the BOD of the Company authorized the filing of a Chapter 7 proceeding which meets the definition of a discontinued operation. Accordingly, the operating results of PCTI are reported as income from discontinued operations in the unaudited accompanying consolidated financial statements for the three months ended March 31, 2025, and 2024. On October 3, 2022, PCTI filed a Voluntary Petition for Non- Individuals Filing for Bankruptcy. On November 30, 2022, the Trustee filed a Notice of Abandonment of Estate Property, as it is over encumbered by the secured creditors. No objections were filed, and as such the inventory and equipment is now considered abandoned to the secured creditors to do with what they wish. In March 2023, the Trustee declared this a no-asset case and closed the bankruptcy.
The results of operations of this component, for all periods, are separately reported as “discontinued operations”. A reconciliation of the major classes of line items constituting the income (loss) from discontinued operations, net of income taxes as is presented in the Consolidated Statements of Operations for the three months ended March 31, 2025, and 2024 are summarized below:
| Three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Revenues | $ | $ | ||||||
| Cost of goods sold | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Income from discontinued operations | $ | $ | ||||||
There
are
Current liabilities
| March 31, 2025 | December 31, 2024 | |||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Current portion of notes payable | ||||||||
| Total current liabilities of discontinued operations | $ | $ | ||||||
On
May 16, 2022, Huntington National Bank (“Huntington”) filed a Complaint for Confession of Judgment (“COJ”) against
Catherine Chis (“Chis”). Chis was the former CEO of PCTI and a Guarantor on Huntington’s Letter of Credit financing
(“LOC”) and a Term Loan (“Term Loan”). The Chis COJ for the LOC was for $
Included
in the Current portion of notes payable are the principal balances of Huntington’s LOC of $
| F-22 |
NOTE 15 - INCOME TAXES
The Company provides for income taxes under ASC 740, Accounting for Income Taxes. ASC 740 requires the use of an asset and liability approach in accounting for income taxes. Deferred tax assets and liabilities are recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect when these differences are expected to reverse. ASC 740 requires the reduction of deferred tax assets by a valuation allowance if, based on the weight of available evidence, it is more likely- than not that some or all of the deferred tax assets will not be realized.
In assessing the need for a valuation allowance, management must determine that there will be sufficient taxable income to allow for the realization of deferred tax assets. Based upon the historical and anticipated future income, management has determined that the deferred tax assets do not meet the more-likely-than-not threshold for realizability. Accordingly, there is a full valuation allowance provided against the Company’s deferred tax assets as of March 31, 2025, and December 31, 2024.
As
of March 31, 2025, the Company has approximately $
NOTE 16 – SUBSEQUENT EVENTS
On
April 1, 2025, the Company sold GHS an aggregate of shares of common stock for proceeds of $
On
April 11, 2025, the Company entered into an Equity Financing Agreement (the “2025 Financing Agreement”) and Registration
Rights Agreement (the “2025 Registration Rights Agreement”) with GHS. Under the terms of the Financing Agreement, GHS has
agreed to provide the Company with up to $
On May 15, 2025, the Company issued shares of common stock pursuant to a Service Agreement with a third party.
The Company has evaluated subsequent events through the date the financial statements were issued. The Company has determined that there are no other such events that warrant disclosure or recognition in the financial statements, except as stated herein.
| F-23 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following is management’s discussion and analysis of certain significant factors that have affected our financial position and operating results during the periods included in the accompanying unaudited consolidated financial statements, as well as information relating to the plans of our current management. This report includes forward-looking statements. Generally, the words “believes,” “anticipates,” “may,” “will,” “should,” “expect,” “intend,” “estimate,” “continue,” and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this report or other reports or documents we file with the Securities and Exchange Commission from time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements.
While our financial statements are presented on the basis that we are a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable length of time, our auditors have raised a substantial doubt about our ability to continue as a going concern.
Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results.
Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments, and assumptions. We believe that the estimates, judgments, and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments, and assumptions are made. These estimates, judgments, and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates.
The following discussion should be read in conjunction with our unaudited consolidated financial statements and the related notes that appear elsewhere in this Quarterly Report on Form 10-Q.
THE COMPANY
Ozop Energy Solutions, Inc. (the “Company,” “we,” “us” or “our”) was originally incorporated as Newmarkt Corp. on July 17, 2015, under the laws of the State of Nevada.
On 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. As permitted 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.”
On 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.
On 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 Capital.
On 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.
On 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. We work with architects, engineers, facility managers, electrical contractors and engineers.
| 3 |
On 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. The Company’s mission is to deliver cutting-edge technology that simplifies complex control needs, ensuring seamless integration and exceptional performance.
OES operates in the renewable, electric vehicle (“EV”), energy storage and energy resiliency sectors. We are engaged in multiple business lines that include project development as well as equipment distribution.
Equipment Distributor: In April 2021, the Company signed a five-year lease (beginning June 1, 2021) of approximately 8,100 SF in California, for office and warehouse space to support the sales and distribution of our west coast operations. On February 22, 2023, with an effective date of March 1, 2023, the Company entered into a Sublease for a Single Subleasee Agreement (the “Sublease”) with the landlord and a third party for the office and warehouse in Carlsbad California. Pursuant to the Sublease agreement, the third party will be responsible 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.
Modular 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 NeoVoltTM 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.
OED 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.
Ozop 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. 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. OZOP Plus will be ceded the battery premium portion of all of the Empire Plus VSC’s contracted.
ARC 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. 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.
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Discontinued Operations
On September 1, 2022, the BOD of the Company authorized the filing of a Chapter 7 proceedings which meets the definition of a discontinued operation. 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.
Results of Operations for the three months ended March 31, 2025, and 2024:
Revenue
For the three months ended March 31, 2025, the Company generated revenue of $42,257 compared to $251,722 for the three months ended March 31, 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. Sales are summarized as follows:
| Three months ended March 31, | ||||||||
| 2025 | 2024 | |||||||
| Sourced and distributed products | $ | 3,024 | $ | 75,222 | ||||
| Design and installation | 39,233 | 176,500 | ||||||
| Total | $ | 42,257 | $ | 251,722 | ||||
Sales 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.
Cost of sales and Gross profit
For 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 March 31, | ||||||||
| 2025 | 2024 | |||||||
| Sourced and distributed products | $ | 2,664 | $ | 63,331 | ||||
| Design and installation | 26,355 | 52,114 | ||||||
| Total | $ | 29,019 | $ | 115,445 | ||||
The 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.
Design 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. 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 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.
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Operating expenses
Total 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 March 31, | ||||||||
| 2025 | 2024 | |||||||
| Management fees, related parties | $ | 240,000 | $ | 240,000 | ||||
| Salaries, taxes and benefits | 231,839 | 193,494 | ||||||
| Travel expenses | 23,399 | 35,142 | ||||||
| Professional and consulting fees | 229,175 | 254,827 | ||||||
| Advertising and marketing | 15,824 | 15,671 | ||||||
| Rent and office expense | 12,971 | 83,604 | ||||||
| Research and development costs | 24,668 | 2,094 | ||||||
| Insurance | 62,882 | 60,976 | ||||||
| General and administrative, Other | 103,309 | 82,955 | ||||||
| Total | $ | 944,067 | $ | 968,763 | ||||
Effective January 1, 2022, the Company entered into an employment agreement with Mr. Conway. Pursuant to the agreement, Mr. 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. Conway $20,000 per month.
Salaries, 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 functions. The solar distribution of this vertical is being managed by our financial consultant and the Company’s CEO. OED has 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. (“ARC”). 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, | ||||||||
| 2025 | 2024 | |||||||
| Ozop Energy Systems | $ | 55,649 | $ | 55,637 | ||||
| Ozop Engineering and Design | 60,136 | 103,716 | ||||||
| Automated Room Controls, Inc. | 84,465 | - | ||||||
| Ozop Capital Partners/EV Insurance Company | 31,589 | 34,141 | ||||||
| Total | $ | 231,839 | $ | 193,494 | ||||
Travel 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.
Professional and consulting fees decreased for the three months ended March 31, 2025, compared to the three months ended March 31, 2024. The decrease 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.
Rent 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.
Research 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.
Other (Income) Expenses
Other 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 March 31, | ||||||||
| 2025 | 2024 | |||||||
| Interest expense | $ | 738,101 | $ | 1,056,887 | ||||
| Gain on change in fair value of derivatives | (111,759 | ) | (462,005 | ) | ||||
| Total other expense, net | $ | 626,342 | $ | 594,882 | ||||
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The 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.
Net loss
Net 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.
Liquidity and Capital Resources
The 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, 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.
Currently, 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. Management’s plans in regard to these factors are discussed in Note 2 to the unaudited consolidated financial statements filed herein.
For 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.
As 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.
Operating Activities
For 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.
For 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.
For 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.
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Investing Activities
For 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.
Financing Activities
For 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.
Critical Accounting Policies and Estimates
The 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.
Our 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.
OFF BALANCE SHEET ARRANGEMENTS
We have no off-balance sheet arrangements, including arrangements that would affect our liquidity, capital resources, market risk support and credit risk support or other benefits.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not Applicable.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as defined in Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”), that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures as of March 31, 2025. Based on the evaluation of these disclosure controls and procedures, and in light of the material weaknesses found in our internal controls over financial reporting, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective for the reasons discussed below.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of March 31, 2025, the Company determined that there were control deficiencies that constituted material weaknesses, as described below.
| 1. | We do not have an Audit Committee – While not being legally obligated to have an audit committee, it is the management’s view that such a committee, including a financial expert member, is an utmost important entity level control over the Company’s financial statement. Currently the Board of Directors acts in the capacity of the Audit Committee, and does not include a member that is considered to be independent of management to provide the necessary oversight over management’s activities. |
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| 2. | We did not maintain appropriate cash controls – As of March 31, 2025, the Company has not maintained sufficient internal controls over financial reporting for cash, including failure to segregate cash handling and accounting functions, and did not require dual signatures on the Company’s bank accounts. |
Accordingly, the Company concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the company’s internal controls.
Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.
Changes in Internal Controls over Financial Reporting
There has been no change in our internal control over financial reporting during the three months ended March 31, 2025, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest.
Item 1A. RISK FACTORS
Not applicable for smaller reporting companies.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. MINE SAFETY DISCLOSURE
Not applicable.
Item 5. OTHER INFORMATION
| (a) | None. | |
| (b) | During the quarter ended March 31, 2025, there have not been any material changes to the procedures by which security holders may recommend nominees to the Board of Directors. |
| 9 |
Item 6. EXHIBITS
The following documents are filed as part of this report:
| 10 |
| 101.INS* | Inline XBRL Instance Document | |
| 101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB* | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
+ Management contract or compensatory plan or arrangement.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Dated: May 20, 2025
| /s/ Brian P Conway | |
| Brian P. Conway | |
| Chief Executive Officer | |
| (principal executive officer) | |
| (principal financial and accounting officer) |
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