Ozop Energy Solutions (OZSC) posts Q1 2026 loss and flags going-concern risk
Ozop Energy Solutions, Inc. reported first-quarter 2026 results showing very small revenue against a heavy debt load and ongoing losses. Revenue was $56,053, up modestly from $42,257 a year earlier, with gross profit of $10,394. Operating expenses of $671,802 and interest expense of $1,792,032 drove a net loss of $2,483,713 for the quarter.
At March 31, 2026, cash was $83,779 and total assets were $727,157, compared with total liabilities of $41,074,025, resulting in a stockholders’ deficit of $40,346,868. The company discloses a working capital deficit of $40,724,721 and states that these conditions raise substantial doubt about its ability to continue as a going concern.
Ozop completed a 1-for-5,000 reverse stock split in January 2026, reducing outstanding common shares to 2,665,555, and later had 3,786,060 shares outstanding at March 31, 2026. During the quarter it raised equity by selling 439,796 shares for net proceeds of $47,069 and issuing additional shares for services and to settle accrued interest. The company continues to rely on high-interest promissory and convertible notes, many of which are in default, and records derivative liabilities of $2,955,700.
Positive
- None.
Negative
- Substantial doubt about going concern: The company discloses an accumulated deficit of $236,064,897, a working capital deficit of $40,724,721, and states these conditions raise substantial doubt about its ability to continue as a going concern.
- Extremely weak balance sheet and heavy leverage: At March 31, 2026, total assets of $727,157 are dwarfed by total liabilities of $41,074,025, resulting in a stockholders’ deficit of $40,346,868 and significant reliance on high-interest notes and convertible debt.
- Multiple debt defaults and high interest burden: The company is in default on $18,714,423 of debt plus accrued interest, and recorded quarterly interest expense of $1,792,032 on revenue of only $56,053, severely constraining financial flexibility.
Insights
Highly leveraged balance sheet, persistent losses, and multiple debt defaults create elevated credit risk.
Ozop Energy Solutions shows a very weak balance sheet. Total assets of $727,157 sit against total liabilities of $41,074,025, producing a stockholders’ deficit of $40,346,868. Current liabilities of $40,993,623 far exceed current assets of $268,902, driving a working capital deficit of $40,724,721.
The company reports being in default on $18,714,423 of debt plus interest due to missed maturities and payment terms. Interest expense of $1,792,032 in just one quarter, on revenue of only $56,053, indicates the capital structure is heavily skewed toward expensive debt. Derivative liabilities of $2,955,700 linked to convertible notes and warrants add further complexity and volatility.
Management explicitly states that recurring losses, significant deficits, and debt defaults raise “substantial doubt” about the company’s ability to continue as a going concern for one year from issuance of these financial statements. While the company has raised funds through new promissory and convertible notes and small equity sales, ongoing viability depends on successfully accessing additional capital and negotiating with creditors; the filing does not specify any completed comprehensive debt restructuring.
Key Figures
Key Terms
going concern financial
reverse stock split financial
derivative liabilities financial
convertible notes payable financial
working capital deficit financial
Equity Financing Agreement financial
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:
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, 2026,
OZOP ENERGY SOLUTIONS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
Table of Contents
| Page | |
| Consolidated Balance Sheets as of March 31, 2026, and December 31, 2025 (Unaudited) | F-1 |
| Consolidated Statements of Operations for the three months ended March 31, 2026, and 2025 (Unaudited) | F-2 |
| Consolidated Statements of Stockholders’ Deficit for the three months ended March 31, 2026, and 2025 (Unaudited) | F-3 |
| Consolidated Statements of Cash Flows for the three months ended March 31, 2026, and 2025 (Unaudited) | F-5 |
| Notes to Consolidated Financial Statements (Unaudited) | F-6 |
| 2 |
OZOP ENERGY SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
| March 31, | December 31, | |||||||
| 2026 | 2025 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Total Current Assets | ||||||||
| Operating lease right-of-use asset, net | ||||||||
| Note receivable, related party | ||||||||
| 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, net of discounts | ||||||||
| Current portion of notes payable, net of discounts | ||||||||
| Derivative liabilities | ||||||||
| Operating lease liability, current portion | ||||||||
| Deferred liability | ||||||||
| 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 ( | ||||||||
| Series C Preferred Stock
( | ||||||||
| Series D Preferred Stock
( | ||||||||
| Series E Preferred Stock
( | - | - | ||||||
| Preferred Stock value | - | |||||||
| Common stock ( | ||||||||
| Treasury stock, at cost,
| ( | ) | ( | ) | ||||
| 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)
| 2026 | 2025 | |||||||
| For the Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| 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 | ||||||||
| Loss (gain) on change in fair value of derivatives | ( | ) | ||||||
| Total Other Expenses | ||||||||
| Loss from continuing operations before income taxes | ( | ) | ( | ) | ||||
| Income tax provision | - | - | ||||||
| Net loss from continuing operations | ( | ) | ( | ) | ||||
| Discontinued Operations: | ||||||||
| Income (loss) 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, 2026
(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, 2026 | $ | - | $ | | $ | | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||
| Common stock shares issued in round up of reverse stock split | - | - | - | - | - | - | - | ( | ) | - | - | - | ||||||||||||||||||||||||||||||||||||||||
| Issuance of shares of common stock sold, net
of issuance costs of $ | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for services | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
| Issuance of common stock for accrued interest and fees | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
| Reclass of derivative liability to equity | - | - | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||||||||||||||
| Balances March 31, 2026 | $ | - | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||
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, 2025
(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, 2025 | $ | - | $ | | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Balances | $ | - | $ | | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||||||
| Issuance of shares of common stock sold, net
of issuance costs of $ | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||
| Net loss | - | - | - | - | - | - | - | - | - | - | ( | ) | - | ( | ) | |||||||||||||||||||||||||||||||||||||
| Balances March 31, 2025 | $ | - | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||
| Balances | $ | - | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||
| * |
The accompanying notes are an integral part of these consolidated financial statements.
| F-4 |
OZOP ENERGY SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| 2026 | 2025 | |||||||
| For the Three Months Ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Net income (loss) from discontinued operations | - | - | ||||||
| Net loss | ( | ) | ( | ) | ||||
| Adjustments to reconcile net loss to net cash used in operating activities | ||||||||
| Non-cash interest expense | ||||||||
| Amortization and depreciation | ||||||||
| Loss (gain) on fair value change of derivatives | ( | ) | ||||||
| Stock compensation expense | - | |||||||
| 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 | - | ( | ) | |||||
| Loans to a related party in exchange for promissory notes | ( | ) | - | |||||
| Net cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from sale of common stock, net of costs | ||||||||
| Proceeds from issuances of convertible notes payable, net | - | |||||||
| Proceeds from issuances of notes payable, net | - | |||||||
| 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 | $ | - | $ | - | ||||
| Schedule of non-cash Investing or Financing Activity: | ||||||||
| Common stock issued for accrued interest | $ | $ | - | |||||
| Debt discount related to derivative liability | $ | $ | - | |||||
| Reclass of derivative liability to equity | $ | $ | - | |||||
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, 2026
(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.
Ozop Energy Systems, Inc. a Nevada corporation and a wholly owned subsidiary of the Company, operates in the renewable, electric vehicle (“EV”), energy storage and energy resiliency sectors. Ozop Engineering and Design Inc. a Nevada corporation and a wholly owned subsidiary of the Company, specializes in lighting commissioning services. EV Insurance Company a Delaware corporation and a wholly owned subsidiary of the Company, DBA as Ozop Plus markets vehicle service contracts (VSC’s”) for EV’s that offer consumers to be able to purchase additional months and miles above the manufacturer’s warranty. Automated Room Controls, Inc, a Nevada corporation and a wholly owned subsidiary of the Company have developed products to be an advanced lighting controls system, intricately engineered to integrate sophisticated wired and wireless technologies.
Reverse Stock Split
On
January 16, 2026, the Company filed a Certificate of Amendment to the Certificate of Incorporation of the Company with the Nevada
Secretary of State to effect a reverse stock split at a
Unless
otherwise indicated, all issued and outstanding stock and per share amounts contained in the accompanying consolidated financial statements
have been adjusted to reflect the
The impacts of the Reverse Stock Split were applied retroactively for all periods presented in accordance with applicable guidance, less the number of rounded whole shares issued for fractional shares. Therefore, prior period amounts are different than those previously reported. Certain amounts within the following tables may not foot due to rounding.
The following table illustrates changes in equity, as previously reported prior to, and as adjusted subsequent to, the impact of the Reverse Stock Split retroactively adjusted for the periods presented:
SCHEDULE OF CHANGES OF EQUITY TO THE IMPACT OF REVERSE STOCK SPLIT
As Previously Reported | Impact of Reverse Stock Split | As Revised | ||||||||||
| March 31, 2025 | ||||||||||||
As Previously Reported | Impact of Reverse Stock Split | As Revised | ||||||||||
| Common stock - shares | ( | ) | ||||||||||
| Common stock - amount | $ | $ | ( | ) | $ | |||||||
| Common stock to be issued- shares | ( | ) | ||||||||||
| Common stock to be issued- amount | $ | $ | ( | ) | $ | - | ||||||
| Additional paid-in capital | $ | $ | $ | |||||||||
As Previously Reported | Impact of Reverse Stock Split | As Revised | ||||||||||
| December 31, 2024 | ||||||||||||
| As Previously Reported | Impact of Reverse Stock Split | As Revised | ||||||||||
| Common stock - shares | ( | ) | ||||||||||
| Common stock - amount | $ | $ | ( | ) | $ | |||||||
| Common stock to be issued - shares | ( | ) | ||||||||||
| Common stock to be issued - amount | $ | $ | ( | ) | $ | - | ||||||
| Additional paid-in capital | $ | $ | $ | |||||||||
| F-6 |
The following table illustrates changes in loss per share and weighted average shares outstanding, as previously reported prior to, and as adjusted subsequent to, the impact of the Reverse Stock Split retroactively adjusted for periods presented:
SCHEDULE OF CHANGE IN LOSS PER SHARE AND WEIGHTED AVERAGE SHARES
As Previously Reported | Impact of Reverse Stock Split | As Revised | ||||||||||
| Three Months ended March 31, 2025 | ||||||||||||
As Previously Reported | Impact of Reverse Stock Split | As Revised | ||||||||||
| Loss attributable to common shareholders | $ | ( | ) | $ | — | $ | ( | ) | ||||
| Weighted average shares used to compute basic and diluted EPS | ( | ) | ||||||||||
Loss from continuing operations per share - basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Income from discontinued operations per share - basic and diluted | $ | $ | - | $ | ||||||||
| Loss per share - basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
The following shares of common stock exercisable or issuable from outstanding stock warrants and convertible instruments were not included in the computation of diluted shares outstanding because the effect would be anti-dilutive:
SCHEDULE OF COMMON STOCK EXERCISABLE OR ISSUABLE FROM OUTSTANDING STOCK WARRANTS
As Previously Reported | Impact of Reverse Stock Split | As Revised | ||||||||||
| March 31, 2025 | ||||||||||||
As Previously Reported | Impact of Reverse Stock Split | As Revised | ||||||||||
| Unexercised common stock purchase warrants | ( | ) | ||||||||||
| Convertible preferred stock | ( | ) | ||||||||||
| Convertible notes payable | ( | ) | ||||||||||
| Promissory notes payable | ( | ) | ||||||||||
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, 2026, the Company had an accumulated
deficit of $
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. During the three months ended March
31, 2026, the Company received $
| F-7 |
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 $
Ozop Energy Systems
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.
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.
OZOP Plus
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. EVCO has agreements with others whereby the battery premium associated with any EV VSC will be ceded to EVCO. 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.
| F-8 |
Ozop Engineering and Design
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 provides its’ customers systems to coordinate the understanding of electrical usage with the relationship between lighting design and lighting controls, by developing more efficient ecofriendly designs by working with architects, engineers, facility managers, electrical contractors and engineers. OED specializes in lighting commissioning 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.
Automated Room Controls (ARC)
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, 2026, and the results of operations and cash flows for the periods presented. The results of operations for the three months ended March 31, 2026, 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, 2025, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on May 14, 2026. Certain reclassifications have been made to previously reported amounts to be consistent with the current year period.
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-9 |
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, 2026, and 2025, and their accounts receivable balance as of March 31, 2026:
SCHEDULES OF CONCENTRATION OF RISK, BY RISK FACTOR
Sales % Three Months Ended March 31, 2026 | Sales % Three Months Ended March 31, 2025 | Accounts receivable balance March 31, 2026 | ||||||||||
| Customer A | % | % | $ | |||||||||
| Customer B | % | % | $ | - | ||||||||
| Customer C | - | % | % | $ | - | |||||||
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, 2026, two 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, 2026, and
December 31, 2025, were $
Purchase concentration
ARC
began purchasing inventory during the three months ended March 31, 2025. For the three months ended March 31, 2026, ARC made no
purchases. OES purchases finished renewable energy products from its’ suppliers. For the three months ended March 31, 2026,
and 2025, OES made
| F-10 |
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, 2026, and 2025:
SCHEDULE OF DISAGGREGATION OF REVENUE
| 2026 | 2025 | |||||||
| Three months ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Sourced and distributed products | $ | $ | ||||||
| OED Installations | ||||||||
| Total | $ | $ | ||||||
Advertising and Marketing Expenses
The
Company expenses advertising and marketing costs (including trade shows) as incurred. For the three months ended March 31, 2026, and
2025, 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, 2026, and 2025, 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-11 |
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 using the effective interest method.
The Company accounts for the conversion of convertible debt when a conversion option has been bifurcated using the conversion method with immediate expense of unamortized discount. Upon conversion, the remaining unamortized discount on the debt host (the conversion portion) is immediately recognized in earnings, and the carrying amounts of the debt host and the bifurcated conversion option liability (measured at fair value on the conversion date) is derecognized, and equity is recognized for the same amount, with no additional gain or loss recognized in earnings upon conversion.
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.
| F-12 |
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.
The following table represents the Company’s derivative instruments that are measured at fair value on a recurring basis as of March 31, 2026, and December 31, 2025, for each fair value hierarchy level:
SCHEDULE OF DERIVATIVE INSTRUMENTS
| March 31, 2026 | Derivative
Liabilities | Total | ||||||
| Level I | $ | - | $ | - | ||||
| Level II | $ | - | $ | - | ||||
| Level III | $ | $ | ||||||
| December 31, 2025 | Derivative
Liabilities | Total | ||||||
| Level I | $ | - | $ | - | ||||
| Level II | $ | - | $ | - | ||||
| Level III | $ | $ | ||||||
| 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 March 31, 2026, and
2025, the Company’s dilutive securities are convertible into approximately
SCHEDULE OF ANTIDILUTIVE SECURITIES EXCLUDED FROM COMPUTATION OF EARNINGS PER SHARE
| March
31, 2026 | March
31, 2025 | |||||||
| Convertible preferred stock (1) | ||||||||
| Unexercised common stock purchase warrants (1) | ||||||||
| Convertible notes payable (1) | ||||||||
| Promissory notes payable (1) | ||||||||
| Total | ||||||||
| (1) |
| F-14 |
Recently adopted accounting pronouncements
Financial Instruments – Measurement of Credit Losses for Accounts Receivable and Contract Assets
In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments in this update provide a practical expedient permitting an entity to assume that conditions at the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current classified accounts receivable and contract assets. This update is effective for annual periods beginning after December 15, 2025, including interim periods within those fiscal years. Adoption of this ASU can be applied prospectively for reporting periods after its effective date. Early adoption is permitted. We adopted this ASU on a prospective basis effective January 1, 2026 and the adoption did not have a material impact on our consolidated financial statements.
Recently issued accounting pronouncements not yet adopted
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.
Interim Reporting: Narrow-Scope Improvements.
In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The ASU clarifies interim disclosure requirements and the applicability of Topic 270. The objective of the amendments is to provide further clarity about the current interim disclosure requirements. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Adoption of this ASU can be applied either a prospective or a retrospective approach. Early adoption is permitted. We are currently evaluating the provisions of this ASU and do not expect this ASU to have a material impact on our consolidated financial statements.
Codification Improvements
In December 2025, the FASB issued ASU No. 2025-12, Codification Improvements. The ASU addresses thirty-three items, representing the changes to the Codification that (1) clarify, (2) correct errors, or (3) make minor improvements. Generally, the amendments in this Update are not intended to result in significant changes for most entities. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2026. The adoption method of this ASU may vary, on an issue-by-issue basis. Early adoption is permitted. We are currently evaluating the provisions of this ASU and do not expect this ASU to have a material impact on our consolidated financial statements.
| F-15 |
NOTE 4 – PROPERTY AND EQUIPMENT
The following table summarizes the Company’s property and equipment:
SCHEDULE OF PROPERTY AND EQUIPMENT
| March
31, 2026 | December
31, 2025 | |||||||
| Office equipment | $ | $ | ||||||
| Less: Accumulated depreciation | ( | ) | ( | ) | ||||
| Property and Equipment, Net | $ | $ | ||||||
Depreciation
expense was $
NOTE 5 - CONVERTIBLE NOTES PAYABLE AND DERIVATIVE LIABILITIES
Convertible Promissory Notes are categorized as equity or debt based on the terms of the notes and the guidance in ASC 480, Distinguishing Liabilities from Equity, and ASC 815, Derivatives and Hedging.
Convertible notes that meet the criteria for equity classification (e.g., conversion into a fixed number of shares with no obligation to deliver cash) are recorded in equity at issuance. Instruments classified as equity are not subsequently remeasured, and no interest expense is recognized.
Convertible notes that include a contractual obligation to deliver cash or other financial assets, or that do not meet the criteria for equity classification, are recorded as debt. These notes are initially recognized at the proceeds received, net of discounts and issuance costs in accordance with ASC 480-10-55-44 on the consolidated balance sheets, and subsequently measured at amortized cost using the effective interest method. Interest expense is recognized in the statement of operations.
If the instrument contains embedded conversion features or other terms that require bifurcation under ASC 815, these features are separated from the host contract and recorded as derivative liabilities at fair value. Derivative liabilities are remeasured at fair value at each reporting date, with changes in fair value recognized in the consolidated statements of operations.
The Company accounts for derivative financial instruments in accordance with Accounting Standards Codification (ASC) 815, Derivatives and Hedging. Under this guidance, the Company evaluates whether an embedded feature within a financial instrument is required to be accounted for separately as a derivative.
Embedded derivatives that are not clearly and closely related to the host contract, that meet the definition of a derivative, and that are not eligible for the scope exceptions under ASC 815, are bifurcated from the host instrument and accounted for as separate derivative financial instruments. These derivatives are recognized as either assets or liabilities on the balance sheet and are measured at fair value, with changes in fair value recognized in the consolidated statements of operations in the period in which they occur.
When the Company issues convertible debt instruments that contain embedded conversion features with variable settlement terms or other features that result in a potential issuance of a variable number of shares, the embedded conversion feature is assessed under ASC 815 -15-25 and ASC 815-10-15-83. If the conversion feature requires bifurcation, it is separated from the debt host and accounted for as a derivative liability.
On
July 10, 2020, PCTI (the accounting acquirer) assumed the balance of a past-due
| F-16 |
On
May 28, 2025 (the “Issue Date”), the Company entered into a
On
July 15, 2025 (the “Issue Date”), the Company entered into a
On
September 24, 2025 (the “Issue Date”), the Company entered into a
| F-17 |
On
July 31, 2025, the Company entered into an Exchange Agreement, whereby, the Company agreed that the holder may exchange any part or
all of the outstanding principal and interest (the Exchange Amount) of the promissory note entered into on February 9, 2021 at any
time and from time to time into the number of common shares equal to the Exchange Amount divided by the lowest trading price from
the previous ten (10) trading days, and to extend the maturity date of the note to March 31, 2026. The Company determined the
Exchange Agreement represented a substantial modification to the existing debt. Accordingly, the Company extinguished the promissory
note dated February 9, 2021, as well as the accrued interest as of July 31, 2025, and recorded two convertible notes, one for the
principal amount of $
On
January 22, 2026 (the “Issue Date”), the Company entered into a
On
January 22, 2026 (the “Issue Date”), the Company entered into a
| F-18 |
The following table summarizes the Company’s convertible notes payable:
SCHEDULE OF CONVERTIBLE NOTES PAYABLE
Three Months ended March 31, | Year
ended December 31, 2025 | |||||||
| Beginning convertible notes principal balance | $ | $ | ||||||
| New convertible note issuances | ||||||||
| Convertible notes issued in exchange for promissory note and accrued interest as a result of loan modification | - | |||||||
| Less: conversion | - | ( | ) | |||||
| Less: unamortized discounts | ( | ) | ( | ) | ||||
| Ending balance, net of discounts | $ | $ | ||||||
The
Company valued the derivative liabilities at March 31, 2026, and December 31, 2025, at $
| (1) | As
of January 21, 2026, the date of the reverse stock split (the reverse stock split), the Company has sufficient authorized shares
available to settle certain outstanding warrants. As a result, these warrants met the criteria for equity classification and the
corresponding embedded derivative no longer required separate liability classification. The carrying amount of the derivative
liability of $ |
| (2) | For
the derivative liabilities associated with the embedded conversion feature of convertible
notes, the Company used the Monte Carlo simulation valuation method with the following assumptions
as of March 31, 2026, and December 31, 2025, risk free rate at |
| (3) | For
the derivative liabilities associated with the remaining outstanding warrants which were
primarily issued in prior years, the following assumptions were utilized in the Black-Scholes
valuation method as of March 31, 2026, and December 31, 2025, risk free interest rate of
|
A summary of the activity related to derivative liabilities for the three months ended March 31, 2026, and 2025, is as follows:
SCHEDULE OF DERIVATIVE LIABILITIES AT FAIR VALUE
Derivative liabilities associated with warrants | Derivative liabilities associated with convertible notes | Total derivative liabilities | ||||||||||
| Balance January 1, 2026 | $ | $ | $ | |||||||||
| Fair value of issuances | - | |||||||||||
| Change in fair value | ( | ) | ||||||||||
| Reclassified to equity | ( | ) | - | ( | ) | |||||||
| Balance March 31, 2026 | $ | $ | $ | |||||||||
Derivative liabilities associated with warrants | Derivative liabilities associated with convertible notes | Total derivative liabilities | ||||||||||
| Balance January 1, 2025 | $ | $ | $ | |||||||||
| Fair value of issuances | - | - | - | |||||||||
| Change in fair value | ( | ) | ( | ) | ||||||||
| Balance March 31, 2025 | $ | $ | $ | |||||||||
| F-19 |
NOTE 6 – NOTES PAYABLE
The Company has the following notes payable outstanding:
SCHEDULE OF NOTES PAYABLE
March 31, 2026 | December 31, 2025 | |||||||
| Note payable, interest at | $ | $ | ||||||
| Other, due on demand, interest at | ||||||||
| Note payable $ | ||||||||
| Note payable $ | ||||||||
| Note payable $ | ||||||||
| 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
January 5, 2026, the Company entered into a
On
February 3, 2026, the Company entered into a
On
November 21, 2025, the Company entered into a
| F-20 |
On
August 13, 2025, the Company entered into a
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
November 13, 2020, the Company entered into a
On
November 6, 2020, the Company entered into a Settlement Agreement with the holder of $
| F-21 |
On
August 24, 2020 (the “Issue Date”), the Company entered into a
NOTE 7 – 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. During the three months ended March 31, 2026, the Company paid a claim of $
The
deferred liability as of March 31, 2026, and December 31, 2025, on the consolidated balance sheets is $
| F-22 |
NOTE 8 – 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, Sale of Building and Related Party Payables
For
the three months ended March 31, 2026, and 2025, the Company recorded expenses to Mr. Conway of $
Note receivable, related party
During
the year ended December 31, 2025, the Company loaned 14464664 Canada Inc. (“Bluezone Beverages”) $
NOTE 9 – 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 $
| F-23 |
Legal matters
We know of no material, existing or pending legal proceedings against our 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 10– STOCKHOLDERS’ EQUITY
Reverse Stock Split
On
January 16, 2026, the Company filed a Certificate of Amendment to the Certificate of Incorporation of the Company with the Nevada Secretary
of State to effect a reverse stock split at a
Common stock
On
January 22, 2026, DTC requested
During
the three months ended March 31, 2026, the Company issued an aggregate of
During
the three months ended March 31, 2026, the Company issued
During
the three months ended March 31, 2026, the Company issued
During
the three months ended March 31, 2025, the Company issued an aggregate of recorded
Increase in Authorized Shares
On
March 4, 2025, the Board of Directors of the Company approved to amend the Company’s Articles of Incorporation (the
“March 2025 Amendment”) to increase the authorized capital stock of the Company to
On
May 21, 2025, the Board of Directors of the Company approved to amend the Company’s Articles of Incorporation (the “May 2025 Amendment”)
to increase the authorized capital stock of the Company to
Preferred stock
As
of March 31, 2026, and December 31, 2025,
| F-24 |
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,
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
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,
The
warrant has a
| i. | Up
to | |
| ii. | The
Remainder of the Warrant representing up to |
| a. |
| F-25 |
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,
NOTE 11 – NONCONTROLLING INTEREST
On
August 19, 2021, the Company formed Ozop Capital. The Company initially owned
NOTE 12 - OPERATING LEASE RIGHT-OF-USE ASSETS AND OPERATING LEASE LIABILITIES
On
April 14, 2021, the Company entered into a
Sale-Leaseback Transaction
In
August 2025, the Company sold its building in Warwick, New York to a related party (see Note 4 and Note 8) with the related party obtained
full control of the real property and no “continuing involvement” of the Company after the sale. On September 1, 2025, the
Company entered into a three-year lease with the same related party to lease back the previously sold building for office space, expiring
August 31, 2028. Lease payments of $
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.
| F-26 |
Right-of-use assets are summarized below:
SCHEDULE OF RIGHT-OF-USE ASSETS
| March
31, 2026 | December
31, 2025 | |||||||
| Office and warehouse lease | $ | $ | ||||||
| Less: Accumulated amortization | ( | ) | ( | ) | ||||
| Right-of-use assets, net | $ | $ | ||||||
Operating lease liabilities are summarized as follows:
SCHEDULE OF OPERATING LEASE LIABILITIES
| March
31, 2026 | December
31, 2025 | |||||||
| Lease liability | $ | $ | ||||||
| Less current portion | ( | ) | ( | ) | ||||
| Long term portion | $ | $ | ||||||
Maturity of lease liabilities are as follows:
SCHEDULE OF MATURITY OF LEASE LIABILITIES
| For the year ending December 31, 2026 (remaining period) | $ | |||
| For the year ending December 31, 2027 | ||||
| For the year ending December 31, 2028 | ||||
| Total | $ | |||
| Less: present value discount | ( | ) | ||
| Lease liability | $ |
For
the three months ended March 31, 2026, and 2025, the Company recorded a debit of $
NOTE 13 – 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.
There were no operating results from the discontinued operations for the three months ended March 31, 2026, and 2025.There are no assets as of March 31, 2026, and December 31, 2025, as the secured lender has taken possession. Liabilities of discontinued operations are separately reported as of March 31, 2026, and December 31, 2025. All liabilities are classified as current. The following tables present the reconciliation of carrying amounts of the major classes of liabilities of the Company classified as discontinued operations in the consolidated balance sheets at March 31, 2026, and December 31, 2025:
Current liabilities
SCHEDULE OF LOSS FROM DISCONTINUED OPERATIONS
March 31, 2026 | December 31, 2025 | |||||||
| Accounts payable and accrued liabilities | $ | $ | ||||||
| Current portion of notes payable | ||||||||
| Total current liabilities of discontinued operations | $ | $ | ||||||
| F-27 |
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 $
NOTE 14 - INCOME TAXES
At
the end of each interim reporting period, the Company estimates its effective tax rate expected to be applied for the full year. This
estimate is used to determine the income tax provision or benefit on a year-to-date basis and may change in subsequent interim periods.
Accordingly, the Company’s effective tax rate for the three months ended March 31, 2026, and 2025, was
As
of March 31, 2026, and December 31, 2025, the liability for uncertain tax positions is
NOTE 15 – SUBSEQUENT EVENTS
Common Stock Issued for Conversions
On
April 14, 2026, the Holder of a convertible promissory note converted $
On
May 8, 2026, the Holder of the promissory note dated August 24, 2020, converted $
Common Stock Issued for Services
On
April 20, 2026, the Company issued
Secured Promissory Note Issuance
On
May 13, 2026, the Company entered into a
Convertible Promissory Note Issuance
On
May 14, 2026, the Company entered into a
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-28 |
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
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.
| 3 |
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.
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.
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.
| 4 |
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.
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, 2026, and 2025.
Results of Operations for the three months ended March 31, 2026, and 2025:
Revenue
For the three months ended March 31, 2026, the Company generated revenue of $56,053 compared to $42,257 for the three months ended March 31, 2025. Revenues from Ozop Energy Systems, Inc. (“OES”) and Automated Room Controls, Inc. (“ARC”) are classified as sourced and distributed products. Ozop Engineering and Design (“OED”) revenues are classified as design and installation. Sales are summarized as follows:
| Three
months ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Sourced and distributed products | $ | 315 | $ | 3,024 | ||||
| Design and installation | 55,738 | 39,233 | ||||||
| Total | $ | 56,053 | $ | 42,257 | ||||
Design and installation revenues increased for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, as OED received more jobs in the current year period compared to the prior year quarter. Sales of sourced and distributed products (ARC and OES) were lower for the three months ended March 31, 2026, compared to the three months ended March 31, 2025.
Cost of sales and Gross profit
For the three months ended March 31, 2026, and 2025, the Company recognized $45,659 and $32,768, respectively, of cost of sales.
| Three
months ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Sourced and distributed products | $ | 2,385 | $ | 2,664 | ||||
| Design and installation | 43,274 | 30,104 | ||||||
| Total | $ | 45,659 | $ | 32,768 | ||||
Three Months ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Gross margin | 18.5 | % | 22.4 | % | ||||
The gross margin on design and installation was 22.4% for the three months ended March 31, 2026, compared to 23.3% for the three months ended March 31, 2025. The Company recognized a gross margin on solar products (OES) of 11.9% for the three months ended March 31, 2025, and there were no sales and gross margin for the three months ended March 31, 2026.
| 5 |
Operating expenses
Total operating expenses for the three months ended March 31, 2026, and 2025, were $671,802 and $940,318 respectively. The operating expenses were comprised of:
| Three
months ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Management fees, related parties | $ | 240,000 | $ | 240,000 | ||||
| Salaries, taxes and benefits | 29,441 | 228,090 | ||||||
| Stock compensation expense | 48,000 | - | ||||||
| Travel expenses | 1,683 | 23,399 | ||||||
| Professional and consulting fees | 223,815 | 229,175 | ||||||
| Advertising and marketing | 2,487 | 27,740 | ||||||
| Building, rent and office expense | 39,621 | 34,426 | ||||||
| Research and development costs | 142 | 24,668 | ||||||
| Insurance | 30,598 | 62,882 | ||||||
| General and administrative, Other | 56,015 | 69,938 | ||||||
| Total | $ | 671,802 | $ | 940,318 | ||||
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 decreased for the three months ended March 31, 2026, compared to March 31, 2025. OES currently has 1 employee with an aggregate annual salary of $72,000, compared to 2 employees with an aggregate annual salary of $204,000 for the three months ended March 31, 2025. The solar distribution of this vertical is being managed by our financial consultant and the Company’s CEO. For the three months ended March 31, 2026, OED was paying employees on a per hour basis for time travel to and from a job and time of service at a job and is 100% charged to cost of sales (see above). For the three months ended March 31, 2025, OED had two employees with an aggregate annual compensation of $244,000 and allocated $30,260 of salaries and payroll taxes to cost of sales for the three months ended March 31, 2025. ARC did not have any employees for the three months ended March 31, 2026, and is being managed by our financial consultant, our OES employee, and the Company’s CEO. For the three months ended March 31, 2025, ARC had 3 employees with an annual salary of $310,000. Ozop Capital Partners had one employee through January 15, 2026, with annual compensation of $144,000. The Company allocates salaries and related expenses to the appropriate subsidiary for where their services are being performed. The expenses per subsidiary included in operating expenses for the three months ended March 31, 2026, and 2025, are as follows:
Three months ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Ozop Energy Systems | $ | 23,018 | $ | 55,649 | ||||
| Ozop Engineering and Design | - | 56,385 | ||||||
| Automated Room Controls, Inc. | - | 84,465 | ||||||
| Ozop Capital Partners/EV Insurance Company | 6,423 | 31,591 | ||||||
| Total | $ | 29,441 | $ | 228,090 | ||||
Stock based compensation of $48,000 during the three months ended March 31, 2026, related to the Company issuing 300,000 shares of common stock pursuant to a Service Agreement with a third party. The Company valued the shares at $0.16 per share.
Travel expenses decreased for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, as the Company had lower travel expenses related to Systems and OED.
Professional and consulting fees decreased slightly for the three months ended March 31, 2026, compared to the three months ended March 31, 2025.
| 6 |
Advertising and marketing expenses decreased for the three months ended March 31, 2026, compared to March 31, 2025, as result of the Company attending less trade shows in the current year compared to the prior year.
Building, rent and office expense (including storage, supplies, utilities, and internet costs) increased for the three months ended March 31, 2026, compared to the three months ended March 31, 2025.
Research and development costs decreased for the three months ended March 31, 2026, compared to the three months ended March 31, 2025, due to the development and testing of the ARC products occurred in the 2025 period.
Insurance expenses decreased for the three months ended March 31, 2026, compared to the three months ended March 31, 2025. The decrease was the result a decrease in health insurance related to the decrease in employees and the Company not renewing certain insurance policies for OES. The Company estimates that the monthly insurance expense to be approximately $12,000 per month.
Other (Income) Expenses
Other expense, net, for the three months ended March 31, 2026, was $1,822,305 compared to $626,342 for the three months ended March 31, 2025, and were as follows:
Three months ended March 31, | ||||||||
| 2026 | 2025 | |||||||
| Interest expense | $ | 1,792,032 | $ | 738,101 | ||||
| Gain (loss) on change in fair value of derivatives | 30,273 | (111,759 | ) | |||||
| Total other expense, net | $ | 1,822,305 | $ | 626,342 | ||||
The increase in interest expense for the three months ended March 31, 2026, is primarily a result of the amortization expense of $974,503 related to debt discounts on convertible notes payable and promissory notes payable compared to $14,240 for the three months ended March 31, 2025. For the three months ended March 31, 2026, the Company recognized a loss of $30,273, compared to the Company recognizing a gain of $111,759 for the three months ended March 31, 2025, on the change in the fair value of derivatives.
Net loss
Net loss attributable to the Company for the three months ended March 31, 2026, was $2,483,713, compared to $1,557,171 for the three months ended March 31, 2025. The change was primarily a result of the increase in other expenses, partially offset by the decrease in operating 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, 2026, the Company had an accumulated deficit of $236,064,897 and a working capital deficit of $40,724,721. As of March 31, 2026, the Company was in default of $18,714,423 plus accrued interest on debt instruments due to non-payment upon maturity dates or failure to comply with the loan’s contractual payment terms. Current cash balances are not sufficient to satisfy obligations currently due. Management is exploring capital raising options which may or may not become available on a timely basis to meet the obligations that are past due. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for one year from the date of the issuance of these financial statements. The accompanying consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the possible inability of the Company to continue as a going concern.
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 on terms favorable to the Company or at all. If we are unable to generate capital or raise additional funds when required, it will have a negative impact on our business development and financial results. These conditions raise substantial doubt about our ability to continue as a going concern as well as our recurring losses from operations, deficit in equity, and the need to raise additional capital to fund 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.
| 7 |
For the three months ended March 31, 2026, we primarily funded our business operations with the existing cash on hand as of January 1, 2026, cash received from collection of accounts receivable, $47,069 received from sales of common stock, $215,000 received from the issuance of convertible promissory notes of $222,000, and $190,000 received from the issuance of $210,000 promissory notes.
As of March 31, 2026, we had cash of $83,779 as compared to $266,431 as of December 31, 2025. As of March 31, 2026, we had current liabilities of $40,993,623, compared to current assets of $268,902, which resulted in a working capital deficit of $40,724,721. The current liabilities are comprised of accounts payable and accrued expenses, related party liabilities, convertible debt, derivative liabilities, lease obligations, deferred liability, notes payable, and liabilities of discontinued operations.
Operating Activities
For the three months ended March 31, 2026, net cash used in operating activities was $459,721 compared to $724,822 for the three months ended March 31, 2025.
For the three months ended March 31, 2026, our net cash used in operating activities was primarily attributable to the net loss of $2,483,713, adjusted the loss on the change in fair value of derivatives of $30,273, the non-cash items of interest expense of $1,006,782, amortization and depreciation of $52,539, and stock based compensation expense of $48,000. Net changes of $886,398 in operating assets and liabilities reduced the cash used in operating activities.
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.
Investing Activities
For the three months ended March 31, 2026, the net cash used in investing activities was $175,000, resulting from loans to related party in exchange for promissory notes.
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.
Financing Activities
For the three months ended March 31, 2026, the net cash provided by financing activities was $452,069 of which $215,000 was net proceeds received from issuance of convertible notes, $47,069 from the sales of common stock to GHS, net of issuance costs, and $190,000 from the issuances of promissory notes payable.
For the three months ended March 31, 2025, the net cash provided by financing activities was $260,805, from the sales of common stock to GHS, net of issuance costs.
| 8 |
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 significant accounting policies are described in more details in Note 3 to our financial statements appearing in “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our most recent Annual Report on Form 10-K for the year ended December 31, 2025, which was filed with the SEC on May14, 2026. While all these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. The SEC requested that all registrants list their most “critical accounting polices” in the Management Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our management believes that given current facts and circumstances, there are no material estimates or assumptions with levels of subjectivity and judgement necessary to be considered critical accounting policies and estimates. There were no significant changes to our critical accounting policies and estimates during the three months ended March 31, 2026.
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, 2026. 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, 2026, 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. |
| 2. | We did not maintain appropriate cash controls – As of March 31, 2026, 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.
| 9 |
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, 2026, 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
On January 22, 2026, DTC requested 58,309 shares of common stock as the result of rounding up shares for the reverse stock split.
On February 5, 2026, the Company issued 142,500 shares of common stock in payment of accrued interest of $12,674 and fees of $750.
On March 2, 2026, the Company issued 300,000 shares of common stock pursuant to a Service Agreement with a third party and recorded stock based compensation of $48,000.
On March 25, 2026, the Company issued 179,900 shares of common stock in payment of accrued interest of $7,569 and fees of $750.
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, 2026, there have not been any material changes to the procedures by which security holders may recommend nominees to the Board of Directors. |
| 10 |
Item 6. EXHIBITS
The following documents are filed as part of this report:
| Exhibit No. | Description | |
| 2.1 | Share Exchange Agreement dated April 5, 2018 by and among Newmarkt Corp., the shareholders of Ozop Surgical, Inc., Ozop Surgical, Inc. and Denis Razvodovskij (Incorporated by reference to Exhibit 2.1 of the Current Report on Form 8-K filed on April 19, 2018). | |
| 2.2 | Stock Purchase Agreement dated June 26, 2020, by and among Ozop Surgical Corp., Power Conversion Technologies, Inc. and Catherine Chis (Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed on June 29, 2020). | |
| 2.3 | Merger Agreement and Plan of Merger between Ozop Surgical Corp. and Ozop Surgical Name Change Subsidiary, Inc. (Incorporated by reference to Exhibit 2.1 of the Current Report on Form 8-K filed on November 13, 2020). | |
| 3.1 | Articles of Incorporation (Incorporated by reference to our General Form for Registration of Securities on Form S-1 filed on August 1, 2016) | |
| 3.2 | Bylaws (Incorporated by reference to our General Form for Registration of Securities on Form S-1 filed on August 1, 2016) | |
| 3.3 | Certificate of Amendment of Amended and Restated Articles of Incorporation as filed with the Nevada Secretary of State on May 8, 2018 (Incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed on May 14, 2018). | |
| 3.4 | Certificate of Designations for Series B Preferred Stock. (Incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed on April 2, 2019). | |
| 3.5 | Amended and Restated Bylaws of Ozop Surgical Corp. adopted on May 22, 2019. (Incorporated by reference to Exhibit 3.2 of the Current Report on Form 8-K filed on May 22, 2019). | |
| 3.6 | Amended and Restated Articles of Incorporation as filed with the Nevada Secretary of State on July 25, 2019. (Incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed on July 30, 2019). | |
| 3.7 | Certificate of Designation of Series C Preferred Stock. (Incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed on September 24, 2019). | |
| 3.8 | Certificate of Withdrawal of Series B Preferred Stock. (Incorporated by reference to Exhibit 3.2 of the Current Report on Form 8-K filed on September 24, 2019). | |
| 3.9 | Amended and Restated Articles of Incorporation as filed with the Nevada Secretary of State on October 29, 2019. (Incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed on October 31, 2019). | |
| 3.10 | Amended and Restated Articles of Incorporation as filed with the Nevada Secretary of State on December 30, 2020, (Incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed on December 31, 2019). | |
| 3.11 | Amended and Restated Articles of Incorporation as filed with the Nevada Secretary of State on January 21, 2020. (Incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed on February 7, 2020). | |
| 3.12 | Amended and Restated Certificate of Designation of Series C Preferred Stock. (Incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed on February 5, 2020). |
| 3.13 | Amendment to Certificate of Designation of Series C Preferred Stock dated July 7, 2020 (Incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed on July 10, 2020). |
| 11 |
| 3.14 | Certificate of Designation of Series D Preferred Stock dated July 7, 2020 (Incorporated by reference to Exhibit 3.2 of the Current Report on Form 8-K filed on July 10, 2020). | |
| 3.15 | Certificate of Designation of Series E Preferred Stock dated July 7, 2020 (Incorporated by reference to Exhibit 3.3 of the Current Report on Form 8-K filed on July 10, 2020). |
| 3.16 | Articles of Incorporation of Ozop Surgical Name Change Subsidiary, Inc. (Incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed on November 13, 2020). | |
| 3.17 | Articles of Merger between Ozop Surgical Corp. and Ozop Surgical Name Change Subsidiary, Inc. (Incorporated by reference to Exhibit 3.2 of the Current Report on Form 8-K filed on November 13, 2020). | |
| 3.18 | Amended and Restated Certificate of Designation Series D Preferred Stock dated July 27, 2021 (Incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed on August 2, 2021). | |
| 3.19 | Advisory agreement between Ozop Capital and RMA dated September 1, 2021 (Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed on September 2, 2021) | |
| 10.1 | Binding Letter of Intent dated February 28, 2020, by and between Ozop Surgical Corp. and Power Conversion Technologies, Inc, and Catherine Chis, (Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed on February 28, 2020). | |
| 10.2+ | Employment Agreement dated February 28, 2020, by and between Ozop Surgical Corp. and Brian Conway, (Incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K filed on February 28, 2020). | |
| 31.1* | Certification of Chief Executive Officer required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2* | Certification of Chief Financial Officer required by Rule 13a-14(1) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1* | Certification of Chief Executive Officer and the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63 |
| 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 22, 2026
| /s/ Brian P Conway | |
| Brian P. Conway | |
| Chief Executive Officer | |
| (principal executive officer) | |
| (principal financial and accounting officer) |
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