Executive Summary / Key Takeaways

• Ozop Energy Solutions, Inc. (OZSC) is undergoing a significant transformation, pivoting from its historical roots towards diverse segments within the renewable energy, electric vehicle (EV), and lighting controls markets through its subsidiaries.
• The company is developing potentially differentiated technologies, including the NeoVolt scalable battery storage system for EVs and an advanced lighting controls system via its ARC subsidiary, aiming to address specific market needs and create competitive advantages.
• Despite strategic initiatives and technological development, OZSC faces severe financial challenges, including a substantial accumulated deficit, a significant working capital deficit, and over $19.93 million in defaulted debt obligations as of March 31, 2025.
• Recent financial performance reflects these challenges, with Q1 2025 revenue declining sharply year-over-year, driven by weakness in sourced solar products and the absence of large one-time installation jobs.
• Management's primary plan to address liquidity and fund operations relies heavily on accessing public equity markets through dilutive financing agreements, which have resulted in the issuance of billions of shares.

A Company in Transition: Charting a New Course in Energy and Controls

Ozop Energy Solutions, Inc. (OZSC) is a company in the throes of a strategic pivot, seeking to establish a foothold in dynamic sectors of the energy transition and building technology markets. Originally incorporated under a different name, the company underwent a name change to Ozop Energy Solutions, Inc. in late 2020, signaling a shift in focus. This transformation has been characterized by the formation of several subsidiaries, each targeting distinct, yet related, market opportunities: Ozop Energy Systems, Inc. (OES) for renewable energy products and project development, Ozop Engineering and Design, Inc. (OED) for engineering and lighting control design, Ozop Capital Partners, Inc. (Ozop Capital) and its subsidiary EV Insurance Company, Inc. (EVCO) operating as OZOP Plus for EV service contracts, and Automated Room Controls, Inc. (ARC) for advanced lighting control systems.

This multi-pronged approach positions OZSC across various segments, from solar product distribution and EV charging infrastructure development to specialized design services and innovative control systems. The company's overarching strategy appears to be one of diversification within the broader energy and efficiency landscape, leveraging subsidiary structures to pursue niche opportunities. However, this strategic expansion unfolds against a backdrop of significant financial strain and operational challenges.

Technological Ambition: NeoVolt and ARC as Potential Differentiators

Central to OZSC's strategic narrative are its efforts in developing proprietary or differentiated technologies, particularly through its OES and ARC subsidiaries.

The NeoVolt System, under development by OES, is envisioned as a scalable battery storage solution specifically designed for the burgeoning EV markets. The company highlights its potential to relieve stress on existing grid infrastructure by providing distributed energy storage. The system's design incorporates features such as automatic adoption of connected devices and dynamic load balancing through a master-slave configuration, intended to enable seamless integration and efficient energy management across multiple devices. OZSC reports completing the first stage of engineered technical drawings for NeoVolt and is advancing to stage two, preparing to construct the initial prototype or proof of concept (PoC). The success of this PoC is contingent upon recent advancements in EV charging and discharging standardizations, including on-board inverters and bi-directional capabilities, which are necessary to ensure compatibility and efficiency in both residential and commercial applications. While specific quantitative performance targets or metrics for the NeoVolt system's efficiency, capacity, or cost advantage are not detailed, the strategic intent is clear: to offer a flexible, grid-friendly EV charging solution powered by renewable sources, claiming little to no carbon footprint and offering installation with reduced delays or restrictions compared to traditional grid connections.

Concurrently, the ARC subsidiary is developing an advanced lighting controls system. This system is described as intricately engineered to integrate sophisticated wired and wireless technologies, employing a hybrid network topology for resilient connections and flexible communications. It is equipped with an array of sensors and control nodes for precise light management and energy usage monitoring. The system supports protocols such as DALI and Zigbee and is designed for seamless integration with IoT platforms, offering a comprehensive solution for complex lighting networks. ARC's system aims for adaptability to diverse architectural and electrical layouts, embodying a technical solution for advanced, energy-conscious lighting management. Personnel within ARC are noted to have extensive experience in lighting controls since 2012, combining IT specialists and lighting control experts. Similar to NeoVolt, specific quantitative metrics regarding energy savings percentages, system response times, or cost advantages over competing systems are not provided, but the focus is on delivering cutting-edge technology that simplifies complex control needs and ensures seamless integration.

These technological initiatives represent OZSC's bet on capturing market share through innovation and specialized solutions. Their successful development and commercialization are critical components of the company's long-term growth strategy and its ability to carve out a competitive niche.

Navigating a Challenging Competitive Landscape

OZSC operates within competitive markets characterized by established players and rapidly evolving technologies. In the energy storage and EV infrastructure space, competitors like Eos Energy Enterprises (EOSE), NeoVolta (NEOV), Enovix (ENVX), and Energy Vault (NRGV) present significant challenges. These companies often possess greater scale, more established market positions, and potentially stronger financial resources.

For instance, EOSE and NEOV are active in energy storage, with estimated market shares of 5-7% and 2-4% respectively, compared to OZSC's estimated 3-5% aggregate share across its diverse segments. While OZSC's NeoVolt aims for differentiation through its scalable, grid-stress-relieving design and renewable integration, competitors like EOSE focus on long-duration zinc-based batteries, and NEOV targets residential lithium-ion systems. OZSC's stated advantage in potentially offering 15-20% greater efficiency in power conversion for EV charging could be a differentiator, but this may come at a higher upfront cost (estimated 10% higher) compared to some competitors.

Financially, OZSC significantly lags these peers. While competitors like EOSE, NEOV, ENVX, and NRGV have reported revenue growth rates ranging from 35% to 50% in recent periods, OZSC's Q1 2025 revenue saw a sharp decline. Furthermore, OZSC's gross margins (11.9% for sourced products, 32.8% for design/installation in Q1 2025) are generally lower than the estimated gross margins of some competitors (e.g., NEOV at 30%, ENVX at 35%). This suggests that even where OZSC achieves sales, its profitability on those sales is currently less favorable, potentially limiting its ability to invest in R&D and scale production at the same pace as better-capitalized rivals.

In the lighting controls market, ARC faces competition from established building automation and lighting companies. ARC's focus on a hybrid wired/wireless system with support for protocols like DALI, Zigbee, and IoT integration positions it as a modern solution, but it must compete for market adoption against existing systems and technologies. The increase in R&D costs in Q1 2025 reflects the investment being made to bring this technology to market.

Indirect competition also exists from alternative energy solutions, traditional utility services, and adjacent technology providers. The competitive landscape is dynamic, requiring continuous innovation and efficient execution. OZSC's ability to compete effectively will depend heavily on the successful development and commercialization of its key technologies like NeoVolt and ARC, its ability to manage costs, and its capacity to secure necessary funding to support growth and operations.

Financial Performance: A Steep Decline and Significant Distress

OZSC's recent financial performance paints a challenging picture, underscoring the significant headwinds the company faces. For the three months ended March 31, 2025, the company reported total revenue of just $42,257, a dramatic decrease from $251,722 in the same period of 2024.

Breaking down the revenue by source reveals the drivers of this decline:

• Sourced and distributed products (OES): Revenue plummeted from $75,222 in Q1 2024 to a mere $3,024 in Q1 2025. Management attributes this significant drop to external market factors, including higher interest rates impacting homeowner demand for residential rooftop solar installations, increased price competition from rivals, existing customer excess inventory, and the company's decision to temporarily halt placing additional solar product orders. The gross margin for this segment also decreased from 15.8% to 11.9%, primarily due to changes in the product mix sold.
• Design and installation (OED): Revenue decreased from $176,500 in Q1 2024 to $39,233 in Q1 2025. This decline is primarily attributed to the prior year period including a one-time large installation job totaling $162,000, which did not recur in Q1 2025. The gross margin for design and installation saw a substantial decrease from 70.5% to 32.8%. Management explains this is largely due to a new customer in the current quarter compensating based on an hourly rate for actual worked hours, which is lower than the higher daily rate received from other customers in the comparative period.

Total operating expenses saw a slight decrease from $968,763 in Q1 2024 to $944,067 in Q1 2025. However, certain expense categories increased, notably salaries, taxes, and benefits, reflecting staffing allocations across subsidiaries including the newer ARC subsidiary. Research and development costs also increased significantly from $2,094 to $24,668, primarily due to the development and testing of ARC products.

Other income and expenses included a significant interest expense of $738,101 in Q1 2025, although this was lower than the $1.06 million in Q1 2024 due to the completion of amortization periods for certain note discounts. The gain on the change in fair value of derivatives also decreased substantially from $462,005 in Q1 2024 to $111,759 in Q1 2025.

The net result of these factors was a net loss of $1.56 million for the three months ended March 31, 2025, an increase from the $1.42 million net loss in the prior year period. This widening loss is primarily a consequence of the sharp decline in gross profit, partially offset by the modest reduction in operating expenses and lower interest costs.

The Financial Tightrope: Debt, Deficit, and Dilution

The financial statements reveal a company under severe liquidity pressure. As of March 31, 2025, OZSC had an accumulated deficit of $226.43 million and a working capital deficit of $33.52 million. Cash on hand stood at $329,632, down from $797,139 at December 31, 2024.

Compounding these issues is a significant debt burden. As of March 31, 2025, the company was in default on $19.93 million plus accrued interest on various debt instruments due to non-payment upon maturity dates. These factors, including the recurring losses, accumulated deficit, and debt defaults, have led the company's auditors to raise substantial doubt about OZSC's ability to continue as a going concern for the next year.

Management explicitly states that the company's current capital and existing resources are insufficient to provide the necessary working capital and meet debt obligations, requiring additional capital to fund operations and expansion. Failure to raise this capital would negatively impact business development and financial results.

To address this critical need, management's primary plan is to access the public equities market. The company has relied on Equity Financing Agreements with GHS. Under the terms of these agreements, OZSC has the right to sell shares to GHS at a discount to the market price (80% of the lowest daily volume weighted average price over the preceding ten trading days), subject to volume limitations (not exceeding 250% or 300% of average daily trading dollar volume, depending on the agreement) and ownership caps (GHS beneficial ownership not exceeding 4.99%).

This financing method, while providing needed capital, is highly dilutive. During Q1 2025 alone, the company issued 1.13 billion shares of common stock to GHS, receiving net proceeds of $260,805. Subsequent to March 31, 2025, an additional 230.77 million shares were sold to GHS for $35,160. A new agreement signed in April 2025 provides for up to an additional $10 million in funding over 36 months, with a registration statement for up to 4 billion shares becoming effective in May 2025. The issuance of billions of shares significantly increases the outstanding share count, which can substantially dilute the value of existing shareholders' investments.

The company is also in discussions with lenders regarding extensions of the maturity dates for the defaulted notes payable, but there is no guarantee these negotiations will be successful. Furthermore, the company is in default on a perpetual 1.8% royalty payment agreement.

Risks and Outlook

The investment in OZSC carries significant risks, prominently highlighted by the going concern doubt. The company's ability to continue operations is contingent upon its ability to obtain sufficient financing, successfully negotiate debt extensions, and ultimately generate sustainable revenue and positive cash flows. The reliance on dilutive equity financing, while necessary for survival in the short term, poses a substantial risk of further shareholder dilution.

Execution risk is also high. The success of the NeoVolt and ARC initiatives, which are still in development or early commercialization stages, is not guaranteed. Bringing these technologies to market, achieving meaningful sales, and competing effectively against more established players requires significant capital, expertise, and successful market adoption. The recent sharp decline in revenue from existing business lines underscores the challenges in the current market environment and the need for the new initiatives to gain traction quickly.

Management's outlook is centered on its belief in the ability to access public equity markets to fund operations, debt obligations, and expansion. However, the terms of the financing agreements are tied to the stock's trading volume and price, meaning the amount of capital that can be raised is variable and dependent on market conditions. There is no specific quantitative guidance provided for future revenue or profitability.

The future of OZSC hinges on its ability to navigate this complex landscape. Success would require not only the successful development and commercialization of its technologies but also a significant improvement in financial performance, effective management of its debt burden, and the ability to raise sufficient capital without excessive dilution.

Conclusion

Ozop Energy Solutions, Inc. is at a critical juncture. The company has strategically positioned itself in potentially high-growth markets like EV infrastructure and advanced lighting controls, backed by stated technological development efforts in NeoVolt and ARC. These initiatives represent the potential upside in the OZSC investment thesis.

However, this potential is overshadowed by severe financial distress, including a significant accumulated deficit, a working capital deficit, and substantial defaulted debt. The sharp decline in recent revenue highlights the operational challenges and market headwinds impacting its current business lines. Management's strategy to fund operations and pursue growth relies heavily on highly dilutive equity financing, which provides necessary capital but at a significant cost to existing shareholders.

Investing in OZSC at this stage is a high-risk proposition, fundamentally dependent on the successful execution of a turnaround plan. Key factors to watch include progress in the development and commercialization of the NeoVolt and ARC systems, the company's ability to secure sufficient funding through its financing agreements, successful negotiations with lenders regarding defaulted debt, and ultimately, the achievement of sustainable revenue growth and improved profitability from its new ventures. Until there is clear evidence of progress on these fronts and a path towards financial stability, the significant risks associated with the company's financial condition and execution challenges remain paramount.