OZOP ENERGY SOLUTIONS, INC. [OZSC] Filings

10-Q 1 form10-q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

☒	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarter ended June 30, 2024

☐	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 000-55976

OZOP ENERGY SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

Nevada

3841

35-2540672

(State or Other Jurisdiction of

Incorporation or Organization)

(Primary Standard Industrial

Classification Number)

(IRS Employer

Identification Number)

55 Ronald Reagan Blvd.

Warwick, NY 10990

(877) 785-6967

(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. Yes ☒ No ☐

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). Yes ☒ No ☐

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 ☐
Non-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 August 9, 2024, 6,628,031,093 shares of common stock of the registrant were outstanding.

OZOP ENERGY SOLUTIONS, INC.

CONSOLIDATED FINANCIAL STATEMENTS

Table of Contents

	Page

Consolidated Balance Sheets as of June 30, 2024, and December 31, 2023 (Unaudited)	F-1

Consolidated Statements of Operations for the three and six months ended June 30, 2024, and 2023 (Unaudited)	F-2

Consolidated Statements of Stockholders’ Deficit for the three and six months ended June 30, 2024, and 2023 (Unaudited)	F-3

Consolidated Statements of Cash Flows for the six months ended June 30, 2024, and 2023 (Unaudited)	F-5

Notes to Consolidated Financial Statements (unaudited)	F-6

OZOP ENERGY SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

	June 30, 2024			December 31, 2023
ASSETS
Current Assets
Cash	$	2,166,504		$	1,446,029
Prepaid expenses		95,931			75,103
Accounts receivable		29,244			168,770
Inventory		217,442			1,089,979
Total Current Assets		2,509,121			2,779,881

Operating lease right-of-use asset, net		300,954			372,451
Property and equipment, net		589,748			618,899
Other assets		13,408			13,408
TOTAL ASSETS	$	3,413,231		$	3,784,639

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Liabilities
Current Liabilities
Accounts payable and accrued expenses	$	9,488,053		$	8,026,784
Convertible notes payable		25,000			25,000
Current portion of notes payable, net of discounts		19,475,000			18,837,500
Derivative liabilities		570,497			1,216,078
Operating lease liability, current portion		155,688			147,993
Deferred liability		496,075			490,495
Liabilities of discontinued operations		1,034,811			1,038,384
Total Current Liabilities		31,245,124			29,782,234

Long Term Liabilities
Notes payable, net of discount		312,683			284,203
Operating lease liability, net of current portion		156,920			236,389
TOTAL LIABILITIES		31,714,727			30,302,826

COMMITMENTS AND CONTINGENCIES		-			-

Stockholders’ Deficit
Preferred stock (10,000,000 shares authorized, par value $0.001) Series C Preferred Stock (50,000 shares authorized and 2,500 shares issued and outstanding, par value $0.001)		3			3
Series D Preferred Stock (4,570 shares authorized and 1,334 shares issued and outstanding, par value $0.001)		1			1
Series E Preferred Stock (3,000 shares authorized, -0- issued and outstanding, par value $0.001)		-			-
Preferred stock		3			3
Common stock (8,990,000,000 shares authorized, par value $0.001; 6,628,031,093 and 5,481,513,400 shares issued and outstanding as of June 30, 2024, and December 31, 2023, respectively)		6,628,031			5,481,513
Treasury stock, at cost, 47,500 shares of Series C Preferred Stock and 18,667 shares of Series D Preferred Stock		(11,249,934	)		(11,249,934	)
Common stock to be issued; 637,755 shares		638			638
Additional paid in capital		198,490,608			198,704,849
Accumulated deficit		(221,386,066	)		(218,670,480	)
Total Ozop Energy Solutions, Inc. stockholders’ deficit		(27,516,719	)		(25,733,410	)
Noncontrolling interest		(784,777	)		(784,777	)
TOTAL STOCKHOLDERS’ DEFICIT		(28,301,496	)		(26,518,187	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	3,413,231		$	3,784,639

The accompanying notes are an integral part of these consolidated financial statements.

F-1

OZOP ENERGY SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	2024			2023			2024			2023
	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2024			2023			2024			2023
Revenue	$	941,972		$	1,241,326		$	1,193,694		$	4,032,524
Cost of revenue		823,647			1,733,892			939,092			4,128,592
Gross profit (loss)		118,325			(492,566	)		254,602			(96,068	)

Operating expenses:
General and administrative, related parties		240,000			240,000			480,000			480,000
General and administrative, other		568,172			723,070			1,296,935			1,552,832
Total operating expenses		808,172			963,070			1,776,935			2,032,832

Loss from continuing operations		(689,847	)		(1,455,636	)		(1,522,333	)		(2,128,900	)

Other (income) expenses:
Interest expense		1,056,880			1,039,676			2,113,767			2,261,209
Loss (gain) on change in fair value of derivatives		(183,576	)		942,787			(645,581	)		1,580,905
Gain on litigation settlement		(271,360	)		-			(271,360	)		-
Total Other (Income) Expenses		601,944			1,982,463			1,196,826			3,842,114

Loss from continuing operations before income taxes		(1,291,791	)		(3,438,099	)		(2,719,159	)		(5,971,014	)
Income tax provision		-			-			-			-
Net loss from continuing operations		(1,291,791	)		(3,438,099	)		(2,719,159	)		(5,971,014	)
Discontinued Operations:
Income from discontinued operations		-			5,363			3,573			10,726
Net loss	$	(1,291,791	)	$	(3,432,736	)	$	(2,715,586	)	$	(5,960,288	)

Loss from contuining operations per share of common stock basic and fully diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)
Income from discontinued operations per share of common stock basic and fully diluted	$	0.00		$	0.00		$	0.00		$	0.00
Loss per share basic and fully diluted	$	(0.00	)	$	(0.00	)	$	(0.00	)	$	(0.00	)

Weighted average shares outstanding Basic and diluted		6,224,136,201			4,892,162,699			5,947,132,280			4,863,711,391

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 AND SIX MONTHS ENDED JUNE 30, 2024

(Unaudited)

	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Stock			Capital			Deficit			Interest			(Deficit)
	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		637,755	$	638		2,500	$	3		1,334	$	1		5,481,513,400	$	5,481,513	$	(11,249,934	)	$	198,704,849		$	(218,670,480	)	$	(784,777	)	$	(26,518,187	)

Issuance of shares of common stock sold, net of issuance costs of $12,384		-		-		-		-		-		-		340,303,728		340,304		-			10,251			-			-			350,555

Net loss		-		-		-		-		-		-		-		-		-			-			(1,423,795	)		-			(1,423,795	)
Balances March 31, 2024		637,755		638		2,500		3		1,334		1		5,821,817,128		5,821,817		(11,249,934	)		198,715,100			(220,094,275	)		(784,777	)		(27,591,427	)

Issuance of shares of common stock sold, net of issuance costs of $19,193		-		-		-		-		-		-		806,213,965		806,214		-			(224,492	)		-			-			581,722

Net loss		-		-		-		-		-		-		-		-		-			-			(1,291,791	)		-			(1,291,791	)
Balances June 30, 2024		637,755	$	638		2,500	$	3		1,334	$	1		6,628,031,093	$	6,628,031	$	(11,249,934	)	$	198,490,608		$	(221,386,066	)	$	(784,777	)	$	(28,301,496	)

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 AND SIX MONTHS ENDED JUNE 30, 2023

(Unaudited)

	Shares		Amount		Shares		Amount		Shares		Amount		Shares		Amount		Stock			Capital		Deficit			Interest			(Deficit)
	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, 2023		637,755	$	638		2,500	$	3		1,334	$	1		4,771,275,349	$	4,771,275	$	(11,249,934	)	$	197,586,824	$	(211,300,799	)	$	(784,777	)	$	(20,976,769	)

Issuance of shares of common stock sold, net of issuance costs of $19,110		-		-		-		-		-		-		107,756,783		107,757		-			418,636		-			-			526,393

Net loss		-		-		-		-		-		-		-		-		-			-		(2,527,552	)		-			(2,527,552	)
Balances March 31, 2023		637,755		638		2,500		3		1,334		1		4,879,032,132		4,879,032		(11,249,934	)		198,005,460		(213,828,351	)		(784,777	)		(22,977,928	)
Balances		637,755		638		2,500		3		1,334		1		4,879,032,132		4,879,032		(11,249,934	)		198,005,460		(213,828,351	)		(784,777	)		(22,977,928	)

Issuance of shares of common stock sold, net of issuance costs of $3,558		-		-		-		-		-		-		15,048,619		15,049		-			56,778		-			-			71,827
Issuance of shares of common stock sold, net of issuance costs		-		-		-		-		-		-		15,048,619		15,049		-			56,778		-			-			71,827

Net loss		-		-		-		-		-		-		-		-		-			-		(3,432,736	)		-			(3,432,736	)
Balances June 30, 2023		637,755	$	638		2,500	$	3		1,334	$	1		4,894,080,751	$	4,894,081	$	(11,249,934	)	$	198,062,238	$	(217,261,087	)	$	(784,777	)	$	(26,338,837	)
Balances		637,755	$	638		2,500	$	3		1,334	$	1		4,894,080,751	$	4,894,081	$	(11,249,934	)	$	198,062,238	$	(217,261,087	)	$	(784,777	)	$	(26,338,837	)

The accompanying notes are an integral part of these consolidated financial statements.

F-4

OZOP ENERGY SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	2024			2023
	For the Six Months Ended June 30,
	2024			2023
Cash flows from operating activities:
Net loss from continuing operations	$	(2,719,159	)	$	(5,971,014	)
Net income from discontinued operations		3,573			10,726
Net loss		(2,715,586	)		(5,960,288	)
Adjustments to reconcile net loss to net cash used in operating activities
Non-cash interest expense		665,980			819,318
Amortization and depreciation		108,166			112,397
(Gain) loss on fair value change of derivatives		(645,581	)		1,580,905
Inventory write-down		-			625,000
Changes in operating assets and liabilities:
Accounts receivable		139,526			157,381
Inventory		872,537			647,653
Prepaid expenses		(20,829	)		(88,926	)
Vendor deposits		-			528,719
Accounts payable and accrued expenses		1,461,270			1,532,615
Deferred revenue		5,580			275
Operating lease liabilities		(71,774	)		(64,693	)
Net cash used in continuing operations		(200,711	)		(109,644	)
Net cash used in discontinued operations		(3,573	)		(10,726	)
Net cash used in operating activities		(204,284	)		(120,370	)

Cash flows from investing activities:
Purchase of office and computer equipment		(7,518	)		(2,162	)
Net cash used in investing activities		(7,518	)		(2,162	)

Cash flows from financing activities:
Proceeds from sale of common stock, net of costs		932,277			598,220
Payments of principal of notes payable		-			(550,000	)
Net cash provided by financing activities		932,277			48,220

Net increase (decrease) in cash		720,475			(74,312	)

Cash, Beginning of period		1,446,029			1,369,210

Cash, End of period	$	2,166,504		$	1,294,898

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

June 30, 2024

(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 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.

On May 5, 2023, the Board of Directors of the Company approved to amend the Company’s Articles of Incorporation (the “2023 Amendment”) to increase the authorized capital stock of the Company to 7,000,000,000 shares, of which 6,990,000,000 shall be authorized as common shares and 10,000,000 shall be authorized as preferred shares. The Company filed the 2023 Amendment with the State of Nevada on June 23, 2023.

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 9,000,000,000 shares, of which 8,990,000,000 shall be authorized as common shares and 10,000,000 shall be authorized as preferred shares. The Company filed the 2024 Amendment with the State of Nevada on July 22, 2024.

F-6

NOTE 2 – GOING CONCERN AND MANAGEMENT’S PLANS

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 June 30, 2024, the Company had an accumulated deficit of $221,386,066 and a working capital deficit of $28,736,003 (including derivative liabilities of $570,497). As of June 30, 2024, the Company was in default of $3,315,000 plus accrued interest on debt instruments due to non-payment upon maturity dates. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for one year from the date of the issuance of these financial statements. The accompanying financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.

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 $10,000,000 of funding upon effectiveness of a registration statement on Form S-1. Pursuant to the effectiveness of the registration statement on July 19, 2023, the Company has the right to deliver puts to GHS and GHS will be obligated to purchase shares of our common stock based on the investment amount specified in each put notice. The maximum amount that the Company shall be entitled to put to GHS in each put notice will not exceed two hundred fifty percent (250%) of the average of the daily trading dollar volume of the Company’s common stock during the ten (10) trading days preceding the put, so long as such amount does not exceed 4.99% of the outstanding shares of the Company. Pursuant to the Financing Agreement, GHS and its affiliates will not be permitted to purchase, and the Company may not put shares of the Company’s common stock to GHS that would result in GHS’s beneficial ownership equaling more than 4.99% of the Company’s outstanding common stock. The price of each put share shall be equal to eighty percent (80%) of the lowest daily volume weighted average price of the Company’s common stock for the ten (10) consecutive trading days preceding the date on which the applicable put is delivered to GHS. No put will be made in an amount equaling less than $10,000 or greater than $750,000. Puts may be delivered by the Company to GHS until the earlier of twenty-four (24) months after the effectiveness of the registration statement on Form S-1 or the date on which GHS has purchased an aggregate of $10,000,000 worth of put shares. During the year ended December 31, 2023, the Company sold to GHS 587,432,649 shares of common stock and received $1,230,043 net of offering costs. During the six months ended June 30, 2024, the Company sold to GHS 146,517,693 shares of common stock for proceeds of $172,117 net of offering costs.

On January 26, 2024, the Company receive a Notice of Effectiveness for the sale of up to One Billion (1,000,000,000) 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 six months ended June 30, 2024, the Company sold to GHS 1,000,000,000 shares of common stock and received $760,160, net of offering costs.

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. OES currently is focused on solar panel sales to other distributors and large installation companies.

F-7

Modular Energy Distribution System: The Neo-Grid^TM System comprises of 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. The Company has acquired the license rights to the Neo-Grid^TM System, a proprietary system (patent pending), for the capture and distribution of electrical energy for the EV market. The Neo-Grid^TM System will serve both the private auto and the commercial sectors. Our Neo-Grid^TM System offers (1) charging locations that can be installed with reduced delays, restricted areas or load limits and (2) EV charger electricity that is produced from renewable sources claiming little to no carbon footprint.

The Company has developed a business plan for the Neo-Grid^TM System for the distribution of electrical energy providing a solution to the inevitable stress to the existing grid infrastructure. The Company has completed its’ research and development of the Neo-Grid^TMSystem as well as completed the first set of engineered technical drawings. This first stage of the engineered technical drawings allows us to move forward with stage two, as well as to begin to construct the first prototype or proof of concept, (“PoC”). Our PoC design is partially reliant on auto manufacturers establishing standardizations of the actual charging/discharging protocols of the batteries such as on-board inverters as well as bi-directional capabilities in electric vehicles, which have only recently been established.

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.

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 June 30, 2024, and the results of operations and cash flows for the periods presented. The results of operations for the three and six months ended June 30, 2024, 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 financial statements and related notes thereto included in the Company’s Current Report on Form 10-K filed on April 16, 2024.

The unaudited consolidated financial statements include the accounts of the Company and Ozop Energy Systems, Inc. and the Company’s other wholly owned subsidiaries Ozop Capital Partners, Inc., Ozop Engineering and Design, Inc., Automated Room Controls, Inc., Power Conversion Technologies, Inc. (“PCTI”), Ozop LLC, Ozop HK and Spinus, LLC (“Spinus”). All intercompany accounts and transactions have been eliminated in consolidation. The accompanying unaudited consolidated financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“US GAAP”).

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 and cash equivalent balances may, at certain times, exceed federally insured limits. The Company has no cash equivalents at June 30, 2024, and December 31, 2023.

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 and six months ended June 30, 2024, and 2023, and their accounts receivable balance as of June 30, 2024:

	Sales % Three Months Ended June 30, 2024			Sales % Six Months Ended June 30, 2024			Sales % Three Months Ended June 30, 2023			Sales % Six Months Ended June 30, 2023			Accounts receivable balance June 30, 2024
Customer A		91.4	%		72.1	%		N/A			N/A		$	-
Customer B		N/A			18.9	%		N/A			N/A		$	9,000
Customer C		N/A			N/A			84.4	%		93.1	%	$	-
Customer D		N/A			N/A			13.1	%		N/A		$	-

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.

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 June 30, 2024, and December 31, 2023, were $217,442 and $1,089,979, respectively. Based on current market conditions related to solar panels including but not limited to reduced selling prices in the industry and the abundance of inventory supply in the market, management determined that the net realizable value of certain of the Company’s inventory required a lower of cost or market adjustment of $1,495,978 to the historical cost of inventory purchases for the year ended December 31, 2023 (of which $625,000 was recorded as of June 30, 2023). There are no inventory markdowns for the three and six months ended June 30, 2024.

F-9

Purchase concentration

OES purchases finished renewable energy products from its suppliers. For the three and six months ended June 30, 2023, there was one supplier that accounted for 100%. For the three and six months ended June 30, 2024, the Company 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.

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	10-25 years
	Office furniture and equipment	3-5 years
	Warehouse equipment	7 years

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 and six months ended June 30, 2024, and 2023:

SCHEDULE OF DISAGGREGATION OF REVENUE

	2024		2023		2024		2023
	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Sourced and distributed products	$	879,552	$	1,213,826	$	954,774	$	3,972,624
OED Installations		62,420		27,500		238,920		59,900
Total	$	941,972	$	1,241,326	$	1,193,694	$	4,032,524

Revenues from sourced and distributed products were previously purchased from suppliers as finished goods and were either in the Carlsbad warehouse or in a third-party warehouse.

F-10

Advertising and Marketing Expenses

The Company expenses advertising and marketing costs as incurred. For the three and six months ended June 30, 2024, the Company recorded advertising and marketing expenses of $12,878 and $28,549, respectively. For the three and six months ended June 30, 2023, the Company recorded advertising and marketing expenses of $13,398 and $31,170, respectively.

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.

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.

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.

F-11

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).

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.

F-12

The following table represents the Company’s derivative instruments that are measured at fair value on a recurring basis as of June 30, 2024, and December 31, 2023, for each fair value hierarchy level:

SCHEDULE OF DERIVATIVE INSTRUMENTS

June 30, 2024	Derivative Liabilities		Total
Level I	$	-	$	-
Level II	$	-	$	-
Level III	$	570,497	$	570,497

December 31, 2023	Derivative Liabilities		Total
Level I	$	-	$	-
Level II	$	-	$	-
Level III	$	1,216,078	$	1,216,078

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 7.5% for the existing lease, based on the information available at the adoption date in determining the present value of future payments. Operating lease expense is recognized pursuant to on a straight-line basis over the lease term and is included in rent in the unaudited consolidated statements of operations.

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 has no reportable segments as it operates in one segment: renewable energy.

F-13

Earnings (Loss) Per Share

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 June 30, 2024, and 2023, the Company’s dilutive securities are convertible into approximately 11,700,915,235 and 8,508,178,172 shares of common stock respectively. The following table represents the classes of dilutive securities as of June 30, 2024, and 2023:

	June 30, 2024		June 30, 2023
Convertible preferred stock (1)		9,942,046,640		7,341,121,127
Unexercised common stock purchase warrants (1)		807,024,518		1,047,024,518
Convertible notes payable (1)		89,035,858		11,023,739
Promissory notes payable (1)		862,808,219		109,008,788
Total		11,700,915,235		8,508,178,172

(1)

The potentially dilutive shares included in the above table are limited whereby the conversion or exercise cannot result in the beneficial owner holding more than 4.99% of the then outstanding shares of common stock subsequent to any conversion or exercise. These shares were excluded from the diluted per share calculation because the effect of including these potential shares was anti-dilutive due to the Company’s net loss position.

Recent Accounting Pronouncements

In August 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging —Contracts in Entity’ Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’ Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP. The ASU also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas. The Company does not believe the adoption of the ASU will have a material impact on the Company’s financial position, results of operations or cash flows.

Other than the above, there have been no recent accounting pronouncements or changes in accounting pronouncements during the period ended June 30, 2024, that are of significance or potential significance to the Company.

NOTE 4 – PROPERTY AND EQUIPMENT

The following table summarizes the Company’s property and equipment:

SCHEDULE OF PROPERTY AND EQUIPMENT

	June 30, 2024			December 31, 2023
Office equipment	$	232,251		$	224,733
Building and building improvements		600,000			600,000
Property plant and equipment, gross		600,000			600,000

Less: Accumulated Depreciation		(242,503	)		(205,834	)
Property and Equipment, Net	$	589,748		$	618,899

Depreciation expenses were $19,213 and $36,669 for the three and six months ended June 30, 2024, and $22,994 and $46,016 for the three and six months ended June 30, 2023, respectively.

NOTE 5 - CONVERTIBLE NOTES PAYABLE

On July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a past-due 15% convertible note issued by the Company on September 13, 2017. As of June 30, 2024, and December 31, 2023, the outstanding principal balance of this note was $25,000.

F-14

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.

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 as of June 30, 2024, and December 31, 2023, at $570,497 and $1,216,078 respectively. For the derivative liability associated with convertible notes, the Company used the Monte Carlo simulation valuation model with the following assumptions as of June 30, 2024, and December 31, 2023, risk free interest rates at 5.33% and 5.26%, respectively, and volatility of 113% and 48%, respectively.

The following assumptions were utilized in the Black-Scholes valuation of outstanding warrants as of June 30, 2024, and December 31, 2023, risk free interest rates of 4.63% to 5.33%, and 4.3% to 5.26%, respectively, volatility of 113% to 134%, and 48% to 99%, respectively, and exercise prices of $0.0019 to $0.039, and $0.0019 to $0.15, respectively.

A summary of the activity related to derivative liabilities for the six months ended June 30, 2024, is as follows:

	Derivative liabilities associated with warrants			Derivative liabilities associated with convertible notes		Total derivative liabilities

Balance January 1, 2024	$	1,187,076		$	29,002	$	1,216,078
Change in fair value		(651,334	)		5,753		(645,581	)
Balance June 30, 2024	$	535,742		$	34,755	$	570,497

NOTE 7 – NOTES PAYABLE

The Company has the following notes payable outstanding:

SCHEDULE OF NOTES PAYABLE

	June 30, 2024		December 31, 2023

Note payable, interest at 8% or 20% (if default), matured January 5, 2020, currently in default	$	45,000	$	45,000
Other, due on demand, interest at 6%, currently in default		50,000		50,000
Note payable $750,000 face value, interest at 12% or 24% (if default), matured August 24, 2021, currently in default		375,000		375,000
Note payable $389,423 face value, interest at 15%, matures November 6, 2025, net of discount of $76,740 (2024) and $105,220 (2023)		312,683		284,203
Note payable $1,000,000 face value, interest at 12% or 24% (if default), matured November 13, 2021, currently in default		1,000,000		1,000,000
Note payable $2,200,000 face value, interest at 15%, matures October 31, 2024, net of discount of $56,667 (2024) and $141,667 (2023)		2,143,333		2,058,333
Note payable $11,110,000 face value, interest at 15%, matures October 31, 2024, net of discount of $283,333 (2024) and $708,333 (2023)		10,826,667		10,401,667
Note payable $3,300,000 face value, interest at 15%, matures October 31, 2024, net of discount of $85,000 (2024) and $212,500 (2023)		3,215,000		3,087,500
Note payable $3,020,000 face value, matured March 31, 2023, currently in default		1,820,000		1,820,000
Sub-total notes payable, net of discount		19,787,683		19,121,703
Less long-term portion, net of discount		312,683		284,203
Current portion of notes payable, net of discount	$	19,475,000	$	18,837,500

On November 11, 2022, the Company entered into a non-interest bearing, $3,020,000 face value promissory note with a third-party lender with scheduled weekly payments and a maturity date of March 31, 2023. In exchange for the issuance of the $3,020,000 note, inclusive of an original issue discount of $250,000, and the reclass of $260,000 from accounts payable and accrued expenses the Company received proceeds of $2,510,000 on November 11, 2022, from the lender. For the six months ended June 30, 2023, amortization of the original issue discount of $181,818 was charged to interest expense. The original issue discount of $250,000 has been fully amortized as of March 31, 2023. The Company has repaid total $1,200,000 of the principal of the note through June 30, 2024, including $250,000 during the year ended December 31, 2022, and $950,000 during the year ended December 31, 2023 (among which, $550,000 was repaid during the six months ended June 30, 2023). As of June 30, 2024, and December 31, 2023, the outstanding principal balance of this note was $1,820,000 and $1,820,000, respectively. The Company is in default on the weekly payments. The Company is currently in discussions with the lender regarding an extension of the maturity date.

F-15

On December 7, 2021, the Company entered into a 12%, $3,300,000 face value promissory note with a third-party lender with a maturity date of December 7, 2022. In exchange for the issuance of the $3,300,000 note, inclusive of an original issue discount of $300,000, the Company received proceeds of $3,000,000 on December 13, 2021, from the lender. On October 31, 2022, the maturity date of the note was extended to October 31, 2024, and the interest rate was increased to 15% per annum. The Company issued 75,000,000 warrants at an exercise price of $0.0067 and with an expiration of October 31, 2025, in exchange for the extension. The warrants were valued at $510,000 by the Black-Scholes option pricing method and will be amortized through the new maturity date of the note. The Company determined that this transaction was a modification of the existing note. For the three and six months ended June 30, 2024, and 2023, $63,750 and $127,500 was charged to interest expense. As of June 30, 2024, and December 31, 2023, the outstanding principal balance of this note was $3,300,000 with carrying values of $3,215,000 and $3,087,500, respectively, net of unamortized discounts of $85,000 and $212,500 as of June 30, 2024, and December 31, 2023, respectively.

On March 17, 2021, the Company entered into a 12%, $11,110,000 face value promissory note with a third-party lender with a maturity date of March 17, 2022. In exchange for the issuance of the $11,110,000 note, inclusive of an original issue discount of $1,000,000 and lender costs of $110,000 the Company received proceeds of $10,000,000 on March 23, 2021, from the lender. On October 31, 2022, the maturity date of the note was extended to October 31, 2024, and the interest rate was increased to 15% per annum. The Company issued 250,000,000 warrants at an exercise price of $0.0067 and with an expiration of October 31, 2025, in exchange for the extension. The warrants were valued at $1,700,000 by the Black-Scholes option pricing method and will be amortized through the new maturity date of the note. The Company determined that this transaction was a modification of the existing note. For the three and six months ended June 30, 2024, and 2023, $212,500 and $425,000 was charged to interest expense. As of June 30, 2024, and December 31, 2023, the outstanding principal balance of this note was $11,110,000 with a carrying value of $10,826,667 and $10,401,667, respectively, net of unamortized discounts of $283,333 and $708,333, respectively.

On February 9, 2021, the Company entered into a 12%, $2,200,000 face value promissory note with a third-party lender with a maturity date of February 9, 2022. In exchange for the issuance of the $2,200,000 note, inclusive of an original issue discount of $200,000 the Company received proceeds of $2,000,000 on February 16, 2021, from the lender. On October 31, 2022, the maturity date of the note was extended to October 31, 2024, and the interest rate was increased to 15% per annum. The Company issued 50,000,000 warrants at an exercise price of $0.0067 and with an expiration of October 31, 2025, in exchange for the extension. The warrants were valued at $340,000 by the Black-Scholes option pricing method and will be amortized through the new maturity date of the note. The Company determined that this transaction was a modification of the existing note. For the three and six months ended June 30, 2024, and 2023, $42,500 and $85,000 was charged to interest expense. As of June 30, 2024, and December 31, 2023, the outstanding principal balance of this note was $2,200,000 with a carrying value of $2,143,333 and $2,058,333, respectively, net of unamortized discounts of $56,667 and $141,667, respectively.

On November 13, 2020, the Company entered into a 12%, $1,000,000 face value promissory note with a third-party due November 13, 2021. Principal payments shall be made in six instalments of $166,667 commencing 180 days from the issue date and continuing each 30 days thereafter for 5 months and the final payment of principal and interest due on the maturity date. The Company received proceeds of $890,000 on November 20, 2020, and the Company reimbursed the investor for expenses for legal fees and due diligence of $110,000. In conjunction with this note, the Company issued 2 common stock purchase warrants; each warrant entitles the Holder to purchase 125,000,000 shares of common stock at an exercise price of $0.008, subject to adjustments and expires on the five-year anniversary of the issue date. As of June 30, 2024, and December 31, 2023, the outstanding principal balance of this note was $1,000,000. This note is in default and the interest rate from the date of default is the lesser of 24% or the highest amount permitted by law. As of June 30, 2024, and December 31, 2023, the accrued interest is $735,452 and $615,452, respectively. The Company is in discussions with the lender regarding the extension of the maturity date of this note.

On November 6, 2020, the Company entered into a Settlement Agreement with the holder of $120,000 of convertible notes with accrued and unpaid interest of $8,716 and a $210,000 Promissory Note dated June 23, 2020, with accrued and unpaid interest of $15,707. The Company issued a new 12% Promissory Note with a face value of $389,423 and a maturity date of November 6, 2023. In conjunction with this settlement, the Company issued a warrant to purchase 60,000,000 shares of common stock at an exercise price of $0.0075, subject to adjustments and expires on the five-year anniversary of the issue date. The Company analyzed the transaction and concluded that this was a modification to the existing debt. The investor exercised the warrant on January 14, 2021. On November 6, 2023, the maturity date of the note was extended to November 6, 2025, and the interest rate was increased to 15% per annum. The Company issued 60,000,000 warrants at an exercise price of $0.0019 and with an expiration of November 6, 2026, in exchange for the extension. The warrants were valued at $113,921 by the Black-Scholes option pricing method and will be amortized through the new maturity date of the note. The Company determined that this transaction was a modification of the existing note. For the three and six months ended June 30, 2024, $14,240 and $28,480 was charged to interest expense. As of June 30, 2024, and December 31, 2023, the outstanding principal balance of this note was $389,423 with a carrying value of $312,683 and $284,203, respectively, net of unamortized discounts of $76,740 and $105,220, respectively.

On August 24, 2020 (the “Issue Date”), the Company entered into a 12%, $750,000 face value promissory note with a third-party (the “Holder”) due August 24, 2021 (the “Maturity Date”). Principal payments shall be made in six instalments of $125,000 commencing 180 days from the Issue Date and continuing each 30 days thereafter for 5 months and the final payment of principal and interest due on the Maturity Date. The Holder shall have the right from time to time, and at any time following an event of default, as defined on the agreement, to convert all or any part of the outstanding and unpaid principal, interest and any other amounts due into fully paid and non-assessable shares of common stock of the Company, at the lower of i) the Trading Price (as defined in the agreement) during the previous five trading days prior to the Issuance Date or ii) the volume weighted average price during the five trading days ending on the day preceding the conversion date. The Company received proceeds of $663,000 on August 25, 2020, and the Company reimbursed the investor for expenses for legal fees and due diligence of $87,000. In conjunction with this Note, the Company issued 2 common stock purchase warrants; each warrant entitles the Holder to purchase 122,950,819 shares of common stock at an exercise price of $0.0061, subject to adjustments and expires on the five-year anniversary of the Issue Date. As of June 30, 2024, and December 31, 2023, the outstanding principal balance of this note was $375,000. This note is in default and the interest rate from the date of default is the lesser of 24% or the highest amount permitted by law. As of June 30, 2024, and December 31, 2023, the accrued interest is $315,247 and $270,247, respectively. The Company is in discussions with the lender regarding the extension of the maturity date of this note.

F-16

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 $750,000, PCTI agreed to pay the third-party a perpetual three percent (3%) payment of revenues, as defined in the agreement. Payments are due ninety (90) days after each calendar quarter, with the first payment due on or before March 31, 2021, for revenues for the quarter ending December 31, 2020. On February 26, 2021, the agreement was assigned to Ozop and on March 4, 2021, the note was amended, whereby in exchange for 175,000,000 shares of common stock, the royalty percentage was amended to 1.8%.

No payments have been made and the Company is in default of the agreement. On November 11, 2022, the third-party and the Company agreed to reduce the liability by $260,000 and add $260,000 to the promissory note issued on November 11, 2022.

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 June 30, 2024, and December 31, 2023, the Company has recorded $6,075 and $495 as deferred liabilities related to VSC’s.

The deferred liability as of June 30, 2024, and December 31, 2023, on the consolidated balance sheets is $496,075 and $490,495, respectively.

NOTE 9 – RELATED PARTY TRANSACTIONS

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 $20,000 per month. Effective January 1, 2022, the Company entered into a new employment agreement with Mr. Conway. Pursuant to the agreement, Mr. Conway will receive 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. For the three and six months ended June 30, 2024, the Company recorded expenses to Mr. Conway of $240,000 and $480,000, respectively. For the three and six months ended June 30, 2023, the Company recorded expenses of $240,000 and $480,000, respectively.

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 $100,000. Ozop Capital agreed to pay $50,000 and to issue $50,000 of shares of restricted common stock. The parties agreed to a reduced fee of $48,000 for the years ended December 31, 2023, and 2024, which has been accrued as of June 30, 2024 ($96,000), and December 31, 2023 ($48,000), and is included in accounts payable and accrued expenses on the consolidated balance sheets presented herein. As of June 30, 2024, and December 31, 2023, the Company has recorded 637,755 shares of common stock to be issued for the balance owed, in addition to the $48,000.

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 $227,200 (the “Outstanding Fees”) in certain increments as set forth in the Separation Agreement. As of June 30, 2024, and December 31, 2023, the balance owed Mr. Chaudhry is $162,085.

On September 2, 2020, PCTI entered into an Agreement with a third-party. Pursuant to the terms of the agreement, in exchange for $750,000, PCTI agreed to pay the third-party a perpetual three percent (3%) payment of revenues, as defined in the agreement. On February 26, 2021, the agreement was assigned to Ozop and on March 4, 2021, the agreement was amended, whereby in exchange for 175,000,000 shares of common stock, the royalty percentage was amended to 1.8% (see Note 8). As of June 30, 2024, and December 31, 2023, the Company has recorded $243,272, respectively, and is included in accounts payable and accrued expenses on the consolidated balance sheets presented herein.

F-17

Legal matters

We know of no material, existing or pending legal proceedings against our Company.

We are 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.

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 $1,125,000 during the six months ended June 30, 2024. In exchange, the Company agreed to release all Defendants from the lawsuit and to deliver 11 containers of solar panels. Upon the receipt of the $1,125,000 and the delivery of the 11 containers, and pursuant to the Settlement, the Company recorded sales of $728,640, a credit of $125,000 to legal expense and for the three and six months ended June 30, 2024, recorded a gain on litigation settlement of $271,360.

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 six months ended June 30, 2024, the Company issued 1,146,517,693 shares of common stock and received net proceeds of $932,277 after issuance costs of $31,577, as follows:

On January 8, 2024, the Company sold 85,134,032 shares to GHS at $0.00128 and received net proceeds of $105,767, after deducting transaction and broker fees of $3,204.

On January 25, 2024, the Company sold 61,383,661 shares to GHS at $0.00112 and received net proceeds of $66,350, after deducting transaction and broker fees of $2,400.

On February 12, 2024, the Company sold 60,722,962 shares to GHS at $0.00104 and received net proceeds of $60,864, after deducting transaction and broker fees of $2,288.

On February 28, 2024, the Company sold 62,124,323 shares to GHS at $0.00096 and received net proceeds of $57,422, after deducting transaction and broker fees of $2,218.

On March 14, 2024, the Company sold 70,938,750 shares to GHS at $0.00088 and received net proceeds of $60,152, after deducting transaction and broker fees of $2,274.

F-18

On April 2, 2024, the Company sold 85,671,625 shares to GHS at $0.0008 and received net proceeds of $66,142, after deducting transaction and broker fees of $2,396.

On April 17, 2024, the Company sold 92,097,313 shares to GHS at $0.00064 and received net proceeds of $56,738, after deducting transaction and broker fees of $2,204.

On May 3, 2024, the Company sold 120,517,054 shares to GHS at $0.00056 and received net proceeds of $65,114, after deducting transaction and broker fees of $2,374.

On May 20, 2024, the Company sold 271,390,910 shares to GHS at $0.00088 and received net proceeds of $233,023, after deducting transaction and broker fees of $5,801.

On June 10, 2024, the Company sold 196,731,306 shares to GHS at $0.00072 and received net proceeds of $136,764, after deducting transaction and broker fees of $4,883.

On June 27, 2024, the Company sold 39,805,757 shares to GHS at $0.00064 and received net proceeds of $23,941, after deducting transaction and broker fees of $1,535.

During the three months ended June 30, 2023, the Company issued 15,048,619 shares of common stock and received net proceeds of $71,827 after issuance costs of $3,558. During the six months ended June 30, 2023, the Company issued 122,805,402 shares of common stock and received net proceeds of $598,220 after issuance costs of $22,668.

The Company has 8,990,000,000 shares of $0.001 par value common stock authorized (effective July 22, 2024, see Note 1 and Note 16) and as of June 30, 2024, there are 6,628,031,093 shares of common stock issued and outstanding.

Preferred stock

As of June 30, 2024, 10,000,000 shares have been authorized as preferred stock, par value $0.001 (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, 50,000 shares of the Company’s preferred remain designated as Series C Preferred Stock. The holders of Series C Preferred Stock have no conversion rights and no dividend rights. For so long as any shares of the Series C Preferred Stock remain issued and outstanding, the Holder thereof, voting separately as a class, shall have the right to vote on all shareholder matters equal to sixty-seven (67%) percent of the total vote. As of June 30, 2024, and December 31, 2023, there were 2,500 shares of Series C Preferred Stock issued and outstanding and the shares are held by Mr. Conway.

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 18,667 shares of Series D preferred Stock to Chis, and on August 28, 2020, pursuant to Mr. Conway’s employment agreement, the Company issued 1,333 shares of Series D Preferred Stock to Mr. Conway. On July 13, 2021, the Company purchased 18,667 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, 4,570 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 1.5 and dividing that number by the number of authorized shares of Series D Convertible Preferred Stock and multiply that result by the number of shares of Series D Convertible Preferred Stock being converted. Except as provided in the Series D Amendment or as otherwise required by law, no holder of the Series D Convertible Preferred Stock shall be entitled to vote on any matter submitted to the shareholders of the Company for their vote, waiver, release or other action. The Series D Convertible Preferred Stock shall not bear any liquidation rights. On July 28, 2021, the Company closed on a Stock and Warrant Purchase Agreement (the “Series D SPA”). Pursuant to the terms of Series D SPA, an investor in exchange for $13,200,000 purchased one share of Series D Preferred Stock, and a warrant to acquire 3,236 shares of Series D Preferred Stock. As of June 30, 2024, and December 31, 2023, there were 1,334 shares, respectively, of Series D Preferred Stock issued and outstanding and a warrant to purchase 3,236 shares of Series D Preferred Stock are outstanding as of June 30, 2024, and December 31, 2023.

The warrant has a 15- year term and Partial Warrant Lock Up and Leak-Out Period. The Holder may only exercise the Warrant and purchase Warrant Shares as follows:

	i.	Up to 162 (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 15^thyear anniversary of the Initial Exercise Date (“the Termination Date”); and

	ii.	The Remainder of the Warrant representing up to 3,074 (three thousand and seventy-four) Warrant Shares (“Remaining Warrant Shares”) shall be locked up for a period of 36 (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:

During every 1 (one) year period, starting on the day that is the Lock Up Period Termination Date, the Holder shall have the right to exercise the Remainder of the Warrant up to a maximum number of Remaining 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 during such given year (“Leak-Out Period”). The Leak-Out Period shall come into effect on the day that is the Lock Up Period Termination Date and remain effective on a yearly basis, for a period of 10 (ten) years thereafter, after which the Leak-Out Period will automatically terminate and become null and void. For clarity purposes the Remainder of the Warrant shall become freely exercisable at any time or times beginning on June 29, 2034, and until the Termination Date.

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, 3,000 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 $1,000 (one thousand dollars) per share. The shares of Series E Preferred Stock have not been registered under the Securities Act of 1933 or the laws of any state of the United States and may not be transferred without such registration or an exemption from registration. As of June 30, 2024, and December 31, 2023, there were -0- shares of Series E Preferred Stock issued and outstanding, respectively.

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NOTE 12 – NONCONTROLLING INTEREST

On August 19, 2021, the Company formed Ozop Capital. The Company initially owned 51% with PJN Holdings, LLC (“PJN”) owning 49%. Brian Conway was appointed as the sole officer and director of Ozop Capital and has voting control of Ozop Capital. The Company presents interest held by noncontrolling interest holders within noncontrolling interest in the unaudited consolidated financial statements. On September 13, 2022, there was a change in the ownership percentages, as PJN returned 490,000 shares, representing their 49% ownership. As of that date, Ozop Capital is a wholly owned subsidiary of the Company. As of June 30, 2024, and December 31, 2023, the accumulative noncontrolling interest is $784,777.

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 8,100 square feet of office and warehouse space in Carlsbad, California, expiring May 31, 2026. Initial lease payments of $13,148 begin on June 1, 2021, and increase by approximately 2.4% annually thereafter. The interest rate used to determine the present value is our incremental borrowing rate, estimated to be 7.5%, as the interest rate implicit in most of our leases is not readily determinable. During the year ended December 31, 2021, upon adoption of ASC Topic 842, the Company recorded right-of-use assets and lease liabilities of $702,888 for this lease. 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.

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:

SCHEDULE OF RIGHT-OF-USE ASSETS

	June 30, 2024			December 31, 2023
Office and warehouse lease	$	702,888		$	702,888
Less: Accumulated amortization		(401,934	)		(330,437	)
Right-of-use assets, net	$	300,954		$	372,451

Operating lease liabilities are summarized as follows:

SCHEDULE OF OPERATING LEASE LIABILITIES

	June 30, 2024			December 31, 2023
Lease liability	$	312,608		$	384,382
Less current portion		(155,688	)		(147,993	)
Long term portion	$	156,920		$	236,389

Maturity of lease liabilities are as follows:

	Amount
For the year ending December 31, 2024 (remaining period)	$	86,760
For the year ending December 31, 2025		175,942
For the year ending December 31, 2026		74,030
Total	$	336,732
Less: present value discount		(24,124	)
Lease liability	$	312,608

The Company recorded a credit of $306 and $277 to operating lease expense (after netting off the sublease income) for the three and six months ended June 30, 2024, and $681, and $29,382 for the three and six months ended June 30, 2023, respectively.

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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 accompanying unaudited consolidated financial statements for the three and six months ended June 30, 2024, and 2023. 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 unaudited Consolidated Statements of Operations for the three and six months ended June 30, 2024, and 2023, are summarized below:

	2024		2023		2024		2023
	Three months ended June 30,				Six months ended June 30,
	2024		2023		2024		2023
Revenues	$	-	$	5,363	$	3,573	$	10,726
Cost of goods sold		-		-		-		-
Gross profit		-		5,363		3,573		10,726
Operating expenses		-		-		-