OZSC.OIDOzop Energy Solutions, INC
10-Q: Ozop Energy Solutions Reports Worsening Financials, Going Concern Doubts
Sentiment:
Quarterly Report
Ozop Energy Solutions, Inc. reported a significant increase in net loss and working capital deficit for the nine months ended September 30, 2025, raising substantial doubt about its ability to continue as a going concern.
Capital raiseThe company has an Equity Financing Agreement with GHS Investments LLC, allowing for up to $10,000,000 in funding upon effectiveness of a registration statement on Form S-1.Under the May 2, 2023, agreement, GHS is obligated to purchase shares based on put notices, with a maximum of 250% of the average daily trading dollar volume, not exceeding 4.99% of outstanding shares, and individual puts between $10,000 and $750,000.A Notice of Effectiveness was received on July 30, 2024, for the sale of up to 2,000,000,000 shares to GHS under similar terms.A new Equity Financing Agreement with GHS was entered into on April 11, 2025, for up to an additional $10,000,000, with a maximum put amount of 300% of the average daily trading dollar volume, not exceeding 4.99% of outstanding shares, and individual puts between $10,000 and $1,000,000.A Notice of Effectiveness was received on May 7, 2025, for the sale of up to 4,000,000,000 shares to GHS under the April 11, 2025, agreement.The company also agreed to issue Commitment Shares equal to 0.25% of the $10,000,000 commitment amount ($25,000) to GHS, priced at 95% of the VWAP preceding the agreement execution, which have not yet been issued.
Worse than expectedNet loss increased significantly for the nine months ended September 30, 2025, compared to the prior year.Revenue experienced a drastic decline, falling over 80% for the nine-month period.The working capital deficit worsened substantially, indicating deteriorating liquidity.The company is in default on a significant amount of debt, highlighting severe financial distress.Cash on hand decreased by more than half, reflecting increased cash burn from operations.Derivative liabilities increased significantly, adding to financial complexity and risk.
Summary
- Net loss for the nine months ended September 30, 2025, increased to $5,559,344, up from $4,808,669 in the prior year period.
- Revenue for the nine months ended September 30, 2025, significantly decreased to $248,828 from $1,267,980 in the prior year, largely due to lower solar product sales and a one-time litigation settlement gain in 2024.
- The company's accumulated deficit grew to $230,427,985 as of September 30, 2025, from $224,868,641 at December 31, 2024.
- A working capital deficit of $36,273,834 was reported as of September 30, 2025, worsening from $32,232,815 at December 31, 2024.
- The company is in default on $17,725,000 plus accrued interest on debt instruments due to non-payment upon maturity dates.
- Cash on hand decreased to $341,164 as of September 30, 2025, from $797,139 at December 31, 2024.
- Significant common stock dilution occurred, with 2,328,957,493 shares issued for net proceeds of $381,762 and 1,831,366,500 shares issued for convertible notes and accrued interest during the nine months ended September 30, 2025.
- The Board of Directors approved multiple increases in authorized common stock, reaching 25,990,000,000 shares as of September 30, 2025.
- Material weaknesses in internal control over financial reporting were identified, including the lack of an independent Audit Committee and insufficient cash controls.
- The NeoVolt System is advancing to stage two for prototype construction, contingent on EV charging and discharging standardizations.
- Ozop Plus is marketing vehicle service contracts (VSCs) for electric vehicles, including a white-label agreement with Empire Auto Protect for 'Empire Plus' VSCs.
- Automated Room Controls, Inc. (ARC) has developed an advanced lighting controls system and began purchasing inventory during the period.
Sentiment
Score: 2
Explanation: The company faces severe financial distress, evidenced by increasing net losses, a worsening working capital deficit, substantial debt defaults, and a going concern warning. Revenue has plummeted, and while some operating expenses decreased, the overall financial health is deteriorating. Heavy reliance on dilutive equity financing and identified material weaknesses in internal controls further contribute to a highly negative outlook.
Positives
- Design and installation revenues increased for the three months ended September 30, 2025, compared to the prior year period, driven by new customers.
- Operating expenses for the nine months ended September 30, 2025, decreased to $2,419,484 from $2,740,395 in the prior year period.
- Interest expense for the nine months ended September 30, 2025, decreased to $2,627,912 from $3,170,633 in the prior year period.
- The company generated $96,510 in net cash from investing activities for the nine months ended September 30, 2025, primarily from the sale of a building to a related party.
Negatives
- Net loss significantly increased to $5,559,344 for the nine months ended September 30, 2025, compared to $4,808,669 for the same period in 2024.
- Total revenue for the nine months ended September 30, 2025, plummeted to $248,828 from $1,267,980 in the prior year, a decrease of over 80%.
- The company reported a substantial working capital deficit of $36,273,834 as of September 30, 2025, indicating severe liquidity issues.
- Auditors raised substantial doubt about the company's ability to continue as a going concern.
- The company is in default on $17,725,000 in debt instruments, plus accrued interest, due to non-payment.
- Cash on hand decreased by over 57% from December 31, 2024, to September 30, 2025.
- Derivative liabilities increased significantly to $1,753,651 as of September 30, 2025, from $210,493 at December 31, 2024, indicating increased financial complexity and potential future volatility.
- The company continues to rely heavily on highly dilutive equity financing agreements with GHS, issuing billions of shares for relatively small net proceeds.
- Gross margin on design and installation services decreased to 33.5% for the nine months ended September 30, 2025, from 72% in the prior year period, attributed to a new customer compensating based on hourly rates.
- Research and development costs decreased significantly, potentially impacting future innovation, from $115,262 in 2024 to $44,872 in 2025 for the nine-month period.
Risks
- Substantial doubt exists about the company's ability to continue as a going concern due to accumulated deficit, working capital deficit, and debt defaults.
- Inability to access public equities market for fundraising or generate additional capital when required could negatively impact business development and financial results.
- Default on $17,725,000 plus accrued interest on debt instruments exposes the company to potential legal actions and further financial distress.
- High interest rates are affecting homeowners' ability and desire for residential rooftop solar installations, impacting OES's sourced and distributed products segment.
- Competitors lowering selling prices in the solar market are pressuring the company's margins and demand.
- Material weaknesses in internal control over financial reporting, including the lack of an independent Audit Committee and insufficient cash controls, increase the risk of financial misstatement and fraud.
- The NeoVolt PoC is contingent upon recent advancements in EV charging and discharging standardizations, introducing development risk.
- Significant dilution of common stock due to ongoing equity financing and debt conversions could negatively impact existing shareholders.
Future Outlook
Management believes it will be able to access the public equities market for fundraising to support product development, sales and marketing, and inventory requirements as it expands its distribution in the U.S. market. The NeoVolt System is advancing to stage two for prototype construction, contingent on EV charging and discharging standardizations. The company continues to pursue equity financing agreements with GHS to secure funding.
Management Comments
- 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.
- Management believes that the Ozop Plus marketed VSCs will give peace of mind to the EV buyer.
- The Company believes the lower revenues were due to higher interest rates affecting homeowners ability and desire for residential rooftop solar installations as well as competitors lowering their selling prices to try to capture a part of the lower demand.
Industry Context
The company operates in the renewable energy, electric vehicle (EV), energy storage, and lighting controls sectors. Its solar distribution business is facing headwinds from higher interest rates impacting residential rooftop solar installations and increased competition leading to lower selling prices. The EV sector, particularly vehicle service contracts, is a focus for Ozop Plus, addressing concerns like battery repair costs and range anxiety. The NeoVolt system aims to address grid infrastructure stress with scalable battery storage, aligning with distributed energy trends. ARC's advanced lighting controls system targets the need for sophisticated, energy-conscious lighting management.
Comparison to Industry Standards
- The company's solar product sales are significantly impacted by higher interest rates, a trend observed across the residential rooftop solar installation industry, affecting homeowner demand and leading to competitors lowering prices.
- The decrease in gross margin percentage for design and installation services is attributed to a new customer compensating based on hourly rates, which may indicate a shift in market pricing or customer negotiation power compared to previous, higher daily rate contracts.
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Authorized Capital Stock Increase | Board of Directors approved multiple amendments to the Articles of Incorporation to increase authorized common stock. On June 4, 2024, to 8,990,000,000 common shares; on March 4, 2025, to 15,990,000,000 common shares; and on May 21, 2025, to 25,990,000,000 common shares. | 2024-07-22 | Enables significant future equity issuances, facilitating capital raises but also leading to substantial shareholder dilution. |
| Reverse Stock Split Approval | Board of Directors approved a 1-for-5,000 reverse stock split of outstanding common shares, filed with FINRA. | NA | Aims to increase per-share price, potentially to meet exchange listing requirements or improve market perception, but has not yet been effective as of the filing date. |
| Internal Control Weakness Audit Committee | The company does not have an independent Audit Committee; the Board of Directors acts in this capacity without an independent financial expert member. | NA | Increases risk of insufficient oversight over management's financial reporting activities and potential for material misstatements or fraud. |
| Internal Control Weakness Cash Controls | Insufficient internal controls over financial reporting for cash, including failure to segregate cash handling and accounting functions, and lack of dual signatures on bank accounts. | NA | Creates a reasonable possibility that material misstatements of financial statements will not be prevented or detected on a timely basis, increasing risk of fraud or error. |
Related Party Transactions
- During the three and nine months ended September 30, 2025, the company sold its building to an entity controlled by Mr. Conway (CEO). The sale price was $600,000, with $100,000 received in cash and $500,000 from the forgiveness of related party accrued and unpaid management fees owed to the CEO. A gain of $86,250 was recorded on this sale.
- After the building sale, the company leased back the building from the same related party in September 2025 for a three-year lease with a monthly lease payment of $5,000, beginning September 1, 2026.
- Mr. Conway's annual compensation from the company is $240,000, and he also receives $20,000 per month from each of Ozop Capital, OES, and OED for services provided to subsidiaries.
- As of September 30, 2025, the company owes Mr. Conway $40,000 for unpaid management fees, included in related party liabilities.
Stakeholder Impact
- Shareholders face significant dilution due to ongoing common stock issuances for capital raises and debt conversions.
- Creditors are impacted by the company's default on $17,725,000 in debt instruments, raising concerns about repayment.
- Employees may face uncertainty given the company's 'going concern' warning and financial instability.
- Customers in the solar segment may experience reduced product availability or competitive pricing due to market conditions and the company's decision to not place additional solar product orders.
- Investors face high risk due to the company's substantial accumulated deficit, worsening working capital, and material weaknesses in internal controls.
Next Steps
- Access the public equities market for fundraising for product development, sales and marketing, and inventory requirements.
- Advance the NeoVolt System to stage two and construct the initial prototype or proof of concept (PoC).
- Continue discussions with lenders regarding extensions of maturity dates for defaulted promissory notes.
- Issue Commitment Shares to GHS Investments LLC as per the April 11, 2025, financing agreement.
- Implement measures to address identified material weaknesses in internal control over financial reporting, particularly regarding the Audit Committee and cash controls.
Key Dates
| Date | Description |
|---|---|
| 2015-07-17 | Company originally incorporated as Newmarkt Corp. under Nevada laws. |
| 2017-09-13 | Company issued a 15% convertible note, assumed by PCTI on July 10, 2020. |
| 2019-03-04 | Company entered into a Separation Agreement with Salman J. Chaudhry for $227,200 in outstanding fees. |
| 2020-07-07 | Company filed Amended and Restated Certificate of Designation for Series C Preferred Stock and Certificate of Designation for Series D and Series E Preferred Stock. |
| 2020-07-10 | Company acquired Power Conversion Technologies, Inc. (PCTI) from Catherine Chis. |
| 2020-08-24 | Company entered into a 12%, $750,000 face value promissory note with a third-party, due August 24, 2021. |
| 2020-08-28 | Company issued 1,333 shares of Series D Preferred Stock to Mr. Conway. |
| 2020-09-02 | PCTI entered into an agreement with a third-party for a perpetual 3% payment of revenues in exchange for $750,000. |
| 2020-10-29 | Company formed Ozop Surgical Name Change Subsidiary, Inc. and entered into a Merger Agreement to change its name. |
| 2020-11-03 | Merger effective, changing company name to Ozop Energy Solutions, Inc. |
| 2020-11-06 | Company entered into a Settlement Agreement with a note holder, issuing a new 12% Promissory Note for $389,423 due November 6, 2023. |
| 2020-11-13 | Company entered into a 12%, $1,000,000 face value promissory note with a third-party, due November 13, 2021. |
| 2020-12-11 | Company formed Ozop Energy Systems, Inc. (OES). |
| 2021-02-09 | Company entered into a 12%, $2,200,000 face value promissory note with a third-party, due February 9, 2022. |
| 2021-02-26 | Agreement with third-party (originally PCTI) assigned to Ozop. |
| 2021-03-04 | Agreement with third-party amended, royalty percentage changed to 1.8% in exchange for 175,000,000 shares of common stock. |
| 2021-03-17 | Company entered into a 12%, $11,110,000 face value promissory note with a third-party, due March 17, 2022. |
| 2021-04-14 | Company entered into a five-year lease for office and warehouse space in Carlsbad, California, beginning June 1, 2021. |
| 2021-07-13 | Company purchased 18,667 shares of Series D Preferred Stock held by Chis. |
| 2021-07-27 | Company filed Amended and Restated Certificate of Designation of Series D Preferred Stock. |
| 2021-07-28 | Company closed on a Stock and Warrant Purchase Agreement (Series D SPA) with an investor. |
| 2021-08-19 | Company formed Ozop Capital Partners, Inc. (Ozop Capital). |
| 2021-09-01 | Ozop Capital entered into an advisory agreement (RMA Agreement) with Risk Management Advisors, Inc. (RMA). |
| 2021-10-29 | EV Insurance Company, Inc. (EVCO) formed as a captive insurance company. |
| 2021-12-07 | Company entered into a 12%, $3,300,000 face value promissory note with a third-party, due December 7, 2022. |
| 2022-01-01 | New employment agreement with Mr. Conway became effective, with annual compensation of $240,000. |
| 2022-01-07 | EVCO filed DBA OZOP Plus. |
| 2022-02-25 | Company formed Ozop Engineering and Design, Inc. (OED). |
| 2022-05-16 | Huntington National Bank filed a Complaint for Confession of Judgment (COJ) against Catherine Chis. |
| 2022-06-24 | Huntington National Bank filed a COJ against Power Conversion Technologies, Inc (PCTI). |
| 2022-07-20 | Huntington assigned the PCTI judgment against PCTI to Meraki Advisors, LLC. |
| 2022-09-01 | BOD authorized filing of Chapter 7 proceeding for PCTI, leading to discontinued operations reporting. |
| 2022-09-13 | Change in ownership percentages of Ozop Capital, making it a wholly owned subsidiary. |
| 2022-10-03 | PCTI filed a Voluntary Petition for Non-Individuals Filing for Bankruptcy. |
| 2022-10-31 | Maturity dates of $3,300,000 and $11,110,000 notes extended to October 31, 2024, and interest rates increased to 15%. |
| 2022-11-11 | Company entered into a non-interest bearing, $3,020,000 face value promissory note with a third-party lender, due March 31, 2023. |
| 2022-11-14 | Company filed a Complaint in the SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR THE COUNTY OF SAN DIEGO NORTH COUNTY against former employees and YHS. |
| 2022-11-30 | PCTI Trustee filed a Notice of Abandonment of Estate Property. |
| 2023-02-22 | Company entered into a Sublease for its Carlsbad, California office and warehouse space, effective March 1, 2023. |
| 2023-03-01 | Sublease for Carlsbad office and warehouse became effective. |
| 2023-03-31 | PCTI bankruptcy case closed as a no-asset case. |
| 2023-05-02 | Company entered into an Equity Financing Agreement and Registration Rights Agreement with GHS for up to $10,000,000 funding. |
| 2023-07-19 | Registration statement on Form S-1 for GHS financing became effective. |
| 2023-11-06 | Maturity date of $389,423 note extended to November 6, 2025, and interest rate increased to 15%. |
| 2024-04-04 | Company executed a Settlement Agreement with former employees and YHS, receiving $1,125,000. |
| 2024-06-04 | BOD approved amendment to Articles of Incorporation to increase authorized capital stock to 9,000,000,000 shares. |
| 2024-06-11 | Company formed Automated Room Controls, Inc. (ARC). |
| 2024-07-22 | 2024 Amendment to Articles of Incorporation filed with the State of Nevada. |
| 2024-07-30 | Company received Notice of Effectiveness for sale of up to 2,000,000,000 shares to GHS. |
| 2024-09-03 | New employee hired at Ozop Capital Partners with an annual salary of $144,000. |
| 2024-09-27 | OED signed an agreement with Leviton Manufacturing Co, Inc. to serve as a field service technician. |
| 2024-10-23 | Ozop Capital Partners, Inc. entered into an agreement with Empire Auto Protect to white label VSCs. |
| 2025-03-04 | BOD approved amendment to Articles of Incorporation to increase authorized capital stock to 16,000,000,000 shares. |
| 2025-04-10 | 2025 Amendment to Articles of Incorporation filed with the State of Nevada. |
| 2025-04-11 | Company entered into a new Equity Financing Agreement and Registration Rights Agreement with GHS for up to $10,000,000 funding. |
| 2025-05-07 | Company received Notice of Effectiveness for sale of up to 4,000,000,000 shares to GHS under the April 11, 2025 agreement. |
| 2025-05-21 | BOD approved amendment to Articles of Incorporation to increase authorized capital stock to 26,000,000,000 shares. |
| 2025-05-28 | Company entered into a 12%, $200,000 face value promissory note (May 2025 Note) with a third-party, due June 2, 2026. |
| 2025-06-03 | Company received proceeds of $191,000 from the May 2025 Note. |
| 2025-07-01 | May 2025 Amendment to Articles of Incorporation filed with the State of Nevada. |
| 2025-07-15 | Company entered into a 12%, $200,000 face value promissory note (July 2025 Note) with a third-party, due July 14, 2026, and received proceeds of $191,000. |
| 2025-07-31 | Company entered into an Exchange Agreement for the February 9, 2021, promissory note, converting it into two convertible notes and extending maturity to March 31, 2026. |
| 2025-08-07 | Company issued 355,675,100 shares of common stock in payment of accrued interest and fees. |
| 2025-08-13 | Company entered into a 15% Secured Promissory Note for $165,000 with a third-party lender, due August 13, 2026. |
| 2025-08-14 | Company received proceeds of $150,000 from the Secured Promissory Note. |
| 2025-08-20 | Holder converted $50,000 of a convertible note into 500,000,000 shares of common stock. |
| 2025-09-01 | Company leased back its previously sold building from a related party for a three-year term, with monthly payments of $5,000 beginning September 1, 2026. |
| 2025-09-09 | Company issued 544,025,700 shares of common stock in payment of accrued interest and fees. |
| 2025-09-24 | Company entered into a 12%, $200,000 face value promissory note (September 2025 Note) with a third-party, due September 23, 2026, and received proceeds of $191,000. |
| 2025-09-30 | End of the reporting period for this Form 10-Q. |
| 2025-10-02 | Holder of the February 9, 2021 note converted $50,000 into 500,000,000 shares of common stock. |
| 2025-10-14 | Holder of the August 24, 2020 promissory note converted $23,095 of accrued interest into 596,122,600 shares of common stock. |
| 2025-10-27 | Company sold GHS 151,857,500 shares of common stock for proceeds of $10,406 net of offering costs. |
| 2025-11-19 | Filing date of the Form 10-Q and date of outstanding common stock count. |
Recommendation
strong sellThe company's financial position is highly precarious, marked by a significant increase in net loss, a drastic decline in revenue, a worsening working capital deficit, and substantial debt defaults. The 'going concern' warning from auditors, coupled with heavy reliance on highly dilutive equity financing, indicates severe financial distress and an unsustainable business model. Material weaknesses in internal controls further compound the risk. While the company is pursuing new ventures, their revenue contribution is minimal, and the overall financial trajectory is negative. These factors present an exceptionally high risk for investors, making a 'strong sell' recommendation appropriate.
Keywords
renewable energy, electric vehicles, EV charging, lighting controls, battery storage, SEC filing, 10-Q, financial results, going concern, debt default, equity financing, dilution, corporate governance, internal controls
Disclaimer:The information provided here is for general informational purposes only and does not constitute financial advice, recommendation, or endorsement of any kind. It may contain errors or omissions. You should not rely on this information to make financial decisions. Always seek the advice of a qualified financial professional before making any investment or financial decisions. Use of this information is at your own risk.