The accompanying notes are an integral part of these financial statements.
Notes to Financial Statements
NOTE 1: NATURE OF BUSINESS
Clean Coal Technologies, Inc. (“CCTI”, the “Company”, “Clean Coal”, “we”, “our”), a Nevada corporation, is developing a patented multi-stage process that transforms coal with high levels of impurities, contaminants and other polluting elements into an exceptionally efficient, clean and inexpensive source of high energy, low polluting fuel.
During July 2022, the Company effectuated a 1-for-100 share reverse split of its common stock. All references to the Company’s common stock throughout the financial statements and notes thereto have been adjusted to retroactively reflect the effect of the reverse split.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Methods
The Company’s financial statements are prepared using the accrual method in accordance with Generally Accepted Accounting Principles in the United State of America (“GAAP”). Certain amounts have been reclassified to conform to the current period’s presentation including Notes payable; Notes payable – related parties; short-and long-term Convertible debt, net of unamortized discounts; short and long term Convertible debt, net of unamortized discounts – related party.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure on contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue Recognition
On January 1, 2018, the Company adopted Financial Accounting Standards Board (FASB) Accounting Series Update (ASU) 2014-09 Revenue from Contracts with Customers (“ASU 2014-09”) and all subsequent amendments to the ASU, which (i) creates a single framework for recognizing revenue from contracts with customers that fall within its scope and (ii) revises when it is appropriate to recognize a gain (loss) from the transfer of nonfinancial assets. The core principle of ASU 2014-09 is that revenue is recognized when the transfer of goods or services to customers occurs in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. ASU 2014-09 requires the disclosure of sufficient information to enable readers of the Company’s financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. ASU 2014-09 also requires disclosure of information regarding significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 provides two methods of retrospective application, full and modified retrospective. Full retrospective requires companies to apply ASU 2014-09 to each prior reporting period presented while modified retrospective requires companies to retrospectively apply ASU 2014-09 with the cumulative effect recognized at the date of initial application. The Company elected to adopt ASU 2014-09 using the modified retrospective application effective for the quarter ending March 31, 2018, with no impact the Company’s financial statements as it has no current contracts for revenue generating activities and a limited history of generating revenue from operations as discussed below.
The Company generated revenue in 2012 related to license fees received for the use of its technology. The license fee revenue requires no continuing performance on the Company’s part and is recognized upon receipt of the licensing fee and grant of the license.
During 2012, the Company granted a 25-year technology license agreement for a one-time license fee of $750,000. The first installment of the license fee of $375,000 has been collected pursuant to the signing of a coal testing plant construction contract and the balance of $375,000 will be due upon the successful testing of the coal testing plant, estimated sometime in fiscal 2020. In addition, under the technology license agreement, the Company will receive an on-going royalty fee of $1 per metric ton on all coal processed using the technology, up to $4,000,000 per annum. No revenue has been earned in 2022 or 2021.
Net Loss per Common Share
Basic net loss per share is computed on the basis of the weighted average number of common shares outstanding during each year. Diluted net loss per share is computed similar to basic net loss per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The Company uses the “if-converted” method for calculating the earnings per share impact of outstanding convertible debentures, whereby the securities are assumed converted and an earnings per incremental share is computed. Options, warrants and their equivalents are included in EPS calculations through the treasury stock method. In periods where losses are reported, the weighted-average number of common stock outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.
The Company preformed a 1:100 stock split in July 2022.
The calculation of basic and diluted net loss per share for the years ended December 31, 2022 and 2021 are as follows:
|
|
2022
|
|
|
2021
|
|
Basic Net Loss Per Share:
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(3,262,353 |
)
|
|
$ |
(5,485,329 |
)
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding
|
|
|
4,732,247 |
|
|
|
3,823,640 |
|
|
|
|
|
|
|
|
|
|
Basic net loss per share
|
|
$ |
(0.69 |
)
|
|
$ |
(1.43 |
)
|
|
|
|
|
|
|
|
|
|
Diluted Net Loss Per Share:
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(3,262,353 |
)
|
|
$ |
(5,485,329 |
)
|
Diluted net loss
|
|
$ |
(3,262,353 |
)
|
|
$ |
(5,485,329 |
)
|
Denominator:
|
|
|
|
|
|
|
|
|
Weighted-average common shares outstanding
|
|
|
4,732,247 |
|
|
|
3,823,640 |
|
Common stock warrants
|
|
|
- |
|
|
|
- |
|
Convertible debt
|
|
|
- |
|
|
|
- |
|
Weighted average shares used in computing diluted net loss per share
|
|
|
4,732,247 |
|
|
|
3,823,640 |
|
|
|
|
|
|
|
|
|
|
Diluted net loss per share
|
|
$ |
(0.69 |
)
|
|
$ |
(1.43 |
)
|
The following table summarizes the potential shares of common stock that were excluded from the computation of diluted net loss per share for the years ended December 31, 2022 and 2021 as such shares would have had an anti-dilutive effect:
|
|
2022
|
|
|
2021
|
|
Common stock warrants
|
|
|
- |
|
|
|
673 |
|
Convertible notes payable
|
|
|
4,435,153 |
|
|
|
5,125,259 |
|
Total
|
|
|
4,435,153 |
|
|
|
5,125,932 |
|
Cash and Cash Equivalents
Clean Coal considers all highly liquid investments with an original maturity of three months or less to be cash equivalents for purposes of preparing its Statements of Cash Flows. There are no cash equivalents at December 31 2022 and 2021.
Federal Income Tax
Clean Coal files income tax returns in the U.S. federal jurisdiction, and the state of Nevada. Clean Coal’s policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.
Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Net deferred tax assets consist of the following components as of December 31, 2022 and 2021:
|
|
2022
|
|
|
2021
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
Net operating loss carryforward
|
|
$ |
10,569,983 |
|
|
$ |
10,005,075 |
|
Valuation allowance
|
|
|
(10,569,983 |
)
|
|
|
(10,005,075 |
)
|
|
|
$ |
- |
|
|
$ |
- |
|
The federal income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate of 21% to pretax income from continuing operations for the years ended December 31, 2022 and 2021 due to the following:
|
|
2022
|
|
|
2021
|
|
Pre-tax book loss
|
|
$ |
(685,094 |
)
|
|
$ |
(1,151,919 |
)
|
Meals
|
|
|
59 |
|
|
|
95 |
|
Change in fair value of shares settled debt
|
|
|
111,337 |
|
|
|
(31,740 |
)
|
Debt discount amortization
|
|
|
8,789 |
|
|
|
137,508 |
|
Accrued wages
|
|
|
186,835 |
|
|
|
- |
|
Valuation allowance
|
|
|
378,074 |
|
|
|
1,046,056 |
|
|
|
$ |
- |
|
|
$ |
- |
|
The Company had net operating losses of approximately $49,443,565 that begin to expire in 2030. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years. In accordance with the statute of limitations for federal tax returns, the Company’s federal tax returns for the years 2018 through 2021 are subject to examination.
Property and Equipment
Property and equipment consists of furniture and fixtures and computer equipment, recorded at cost, depreciated upon placement in service over estimated useful lives ranging from three to five years on a straight-line basis. As of December 31, 2022 and 2021, Clean Coal had property and equipment with no net book value. Expenditures for normal repairs and maintenance are charged to expense as incurred.
Impairment of Long Lived Assets
In the event facts and circumstances indicate the carrying value of a long-lived asset, including associated intangibles, may be impaired, an evaluation of recoverability is performed by comparing the estimated future undiscounted cash flows associated with the asset to the asset’s carrying amount to determine if a write-down to market value or discounted cash flow is required.
Research and Development Costs
Research and development expenses include salaries, related employee expenses, research expenses and consulting fees. All costs for research and development activities are expensed as incurred. Clean Coal expenses the costs of licenses of patents and the prosecution of patents until the issuance of such patents and the commercialization of related products is reasonably assured. During the years ended December 31, 2022 and 2021, the Company recognized $12,585 and $13,171 of research and development costs, respectively.
Stock-based Compensation
FASB ASC 718, Compensation—Stock Compensation, (ASC 718) established financial accounting and reporting standards for stock-based employee compensation plans. It defines a fair value based method of accounting for an employee stock option or similar equity instrument. Clean Coal accounts for stock-based compensation to employees in accordance with FASB ASC 718.
Derivative Financial Instruments
Clean Coal evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for in accordance with ASC 815 Derivatives and Hedging (“ASC 815”). The accounting treatment of derivative financial instruments requires that the Company record embedded conversion options and any related freestanding instruments at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. Conversion options are recorded as a discount to the host instrument and are amortized as amortization of debt discount on the statements of operations over the life of the underlying instrument. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification.
Sequencing Policy
Under ASC 815-40-35, Clean Coal follows a sequencing policy, whereby, in the event that reclassification of contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares as a result of certain securities with a potentially indeterminable number of shares, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares. Pursuant to ASC 815, issuance of securities to the Company’s employees or directors are not subject to the sequencing policy.
Fair Value of Financial Instruments
ASC 820, Fair Value Measurements (“ASC 820”) and ASC 825, Financial Instruments (“ASC 825”), requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:
Level 1 - Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
Level 2 - Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
Level 3 - Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
The carrying value of accounts payable and accrued expenses, notes payable and notes and convertible notes payable related parties approximate their fair value due to the short-term maturity of those items.
Certain convertible notes of the Company are required to be recorded at fair value on a recurring basis. Fair value is determined based on the price that would be received for an asset or paid to transfer a liability in an orderly transaction based on market participants. Factors that the Company considered when estimating the fair value of its convertible notes payable included quoted market prices of the Company’s common stock. The level of the convertible notes payable is considered as Level 1.
The following table presents the Company’s liabilities that are measured at fair value on a recurring basis, consistent with the fair value hierarchy provisions.
December 31, 2022
|
|
|
|
Quoted Prices in Active Markets for Identical Liabilities
|
|
|
Significant Other Observable Inputs
|
|
|
Significant Unobservable Inputs
|
|
|
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Total
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes
|
|
$ |
1,549,707 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,549,707 |
|
Total
|
|
$ |
1,549,707 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,549,707 |
|
December 31, 2021
|
|
|
|
Quoted Prices in Active Markets for Identical Liabilities
|
|
|
Significant Other Observable Inputs
|
|
|
Significant Unobservable Inputs
|
|
|
|
|
|
|
|
(Level 1)
|
|
|
(Level 2)
|
|
|
(Level 3)
|
|
|
Total
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible notes
|
|
$ |
1,019,529 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,019,529 |
|
Total
|
|
$ |
1,019,529 |
|
|
$ |
- |
|
|
$ |
- |
|
|
$ |
1,019,529 |
|
Convertible Debt Instruments
The Company follows ASC 480-10, Distinguishing Liabilities from Equity in its evaluation of the accounting for a hybrid instrument. A financial instrument that embodies an unconditional obligation, or a financial instrument other than an outstanding share that embodies a conditional obligation, that the issuer must or may settle by issuing a variable number of its equity shares shall be classified as a liability (or an asset in some circumstances) if, at inception, the monetary value of the obligation is based solely or predominantly on any one of the following: (a) a fixed monetary amount known at inception; (b) variations in something other than the fair value of the issuer’s equity shares; or (c) variations inversely related to changes in the fair value of the issuer’s equity shares. Hybrid instruments meeting these criteria are not further evaluated for any embedded derivatives and are carried as a liability at fair value at each balance sheet date with remeasurements reported in change on fair value expense in the accompanying Statements of Operations.
Recently Issued Accounting Pronouncements
The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements. The Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
Other accounting standards that have been issued by the FASB or other standards-setting bodies are not currently expected to have a material effect on the Company’s consolidated financial position, results of operations or cash flows.
NOTE 3: GOING CONCERN
The accompanying financial statements have been prepared on a going concern basis of accounting which contemplates continuity of operations, realization of assets, liabilities, and commitments in the normal course of business. The accompanying financial statements do not reflect any adjustments that might result if Clean Coal is unable to continue as a going concern. Clean Coal has a working capital deficit as of December 31, 2022 and has generated recurring net losses since inception. Management believes Clean Coal will need to raise capital in order to operate over the next 12 months.
As shown in the accompanying financial statements, Clean Coal has also incurred significant losses from operations since inception. Clean Coal’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability. Clean Coal has limited capital with which to pursue its business plan. There can be no assurance that Clean Coal’s future operations will be significant and profitable, or that Clean Coal will have sufficient resources to meet its objectives. These conditions raise substantial doubt as to Clean Coal’s ability to continue as a going concern. Management may pursue either debt or equity financing or a combination of both, in order to raise sufficient capital to meet Clean Coal’s financial requirements over the next twelve months and to fund its business plan. There is no assurance that management will be successful in raising additional funds.
NOTE 4: RELATED PARTY TRANSACTIONS
Wages and bonus payable to related parties
Accruals for salary and bonuses to officers and directors are included in accrued liabilities in the balance sheets and totaled $7,543,255 and $6,653,566 as of December 31, 2022 and 2021, respectively. As part of the separation agreement with Mr. Ponce de Leon, the Company agreed to pay him all his accrued salary within two years but agreed to pay him $200,000 by November 2015 out of revenues earned. As the Company did not earn revenue in 2015 and as of December 31, 2022 has still not earned revenue, the obligation to Mr. Ponce de Leon of $1,889,133 is currently in default and the amount includes $662,419 in accrued interest. It is the Company’s intention to pay Mr. Ponce de Leon immediately upon receiving revenue.
Nonconvertible Debt
During the years ended December 31, 2022 and 2021, the Company borrowed a total of $430,736 and $625,050 and repaid $10,000 and $10,000 in cash to an entity controlled and owned by a significant shareholder of the Company (“Related Party Note Holder”), respectively. During April 2022, the Related Party Note Holder elected to convert $302,580 in principal and $40,301 in accrued interest, or a total of $342,881 into 857,204 shares of the Company’s common stock at $0.40 per share, the market price on the date of conversion. During September 2021, the Related Party Note Holder purchased a third-party convertible note and accrued interest for $115,000, replacing it with a new, non-convertible note. The notes are unsecured, due on demand and accrued interest at 12% per annum. As of December 31, 2022 and 2021, the balance on the borrowings was $847,786 and $730,050, respectively.
As of December 31, 2022 and 2021, the Company had outstanding notes payable to affiliates of the Company of $705,000 and $705,000, respectively. These notes payable of the Company are unsecured, bear no interest and are due on demand.
During the years ended December 31, 2022 and 2021, the Company received $420 and $30 from related party advances, respectively. The Company repaid $400 and $0 on these advances during the years ended December 31, 2022 and 2021, respectively. The advances are unsecured, bear no interest and are due on demand. As of December 31, 2022 and 2021, the Company had outstanding advances payable to an officer of the Company of $83,200 and $83,180, respectively.
Convertible Debt
During the years ended December 31, 2022 and 2021, the Company borrowed an aggregate of $0 and $18,600, respectively, under convertible notes payable. The convertible notes are secured by assets and the common stock of the Company, bear interest at 12% per annum, are convertible into shares of the Company’s common stock at $6.00 per share and are due three years from the dates of issuance.
As of December 31, 2022 and 2021, the Company had outstanding short-term convertible notes payable of $9,856,124 and $9,779,145, net of unamortized discounts of $0 and $40,200, respectively. As of December 31, 2022 and 2021, there were outstanding long-term convertible notes payable totaling $18,600 and $95,590, net of unamortized discounts of $0 and $1,663, respectively. The convertible notes payable mature(d) between November 2018 and February 2024 and are convertible at $6.00 per share, which, occasionally has been a discount to the market price on the dates of issuance. Amortization expense related to debt discounts on convertible debt for the years ended December 31, 2022 and 2021 was $41,852 and $530,348, respectively. As of December 31, 2022 and 2021, $9,778,799 and $9,436,845 in convertible notes are past due, respectively.
Outstanding notes payable and convertible notes payable to related parties consisted of the following as of December 31, 2022 and 2021:
|
|
December 31,
|
|
Name
|
|
2022
|
|
|
2021
|
|
Convertible Debt:
|
|
|
|
|
|
|
|
|
Convertible notes payable, interest at 12%, convertible at $8.00 per share, unsecured, due May 25, 2019 |
|
$ |
1,202,566 |
|
|
$ |
1,202,566 |
|
Convertible note payable, interest at 12%, convertible at $12.00 per share, unsecured, due between May 25, 2019 and August 1, 2019 |
|
|
1,630,073 |
|
|
|
1,630,073 |
|
Convertible notes payable, interest at 12%, convertible at $15.00 per share, unsecured, due between May 25, 2019 and March 31, 2020 |
|
|
1,799,742 |
|
|
|
1,799,742 |
|
Convertible notes payable, interest at 12%, convertible at $6.00 per share, unsecured, due between April 20, 2020 and February 2, 2024 |
|
|
5,242,343 |
|
|
|
5,242,354 |
|
Total
|
|
|
9,874,724 |
|
|
|
9,874,735 |
|
Less: short-term debt
|
|
|
(9,856,124 |
)
|
|
|
(9,779,145 |
)
|
Total long-term debt
|
|
|
18,600 |
|
|
|
95,590 |
|
Less: unamortized discounts
|
|
|
- |
|
|
|
(1,663 |
)
|
Net long-term debt
|
|
$ |
18,600 |
|
|
$ |
93,927 |
|
|
|
|
|
|
|
|
|
|
Nonconvertible Debt:
|
|
|
|
|
|
|
|
|
Notes payable, no interest, unsecured, due upon demand
|
|
$ |
1,635,986 |
|
|
$ |
1,518,230 |
|
Total
|
|
$ |
1,635,986 |
|
|
$ |
1,518,230 |
|
Principal payments on convertible debt to related parties for each of the following five years is as follows:
2023
|
|
$ |
9,856,124 |
|
2024
|
|
|
18,600 |
|
2025
|
|
|
- |
|
2026
|
|
|
- |
|
2027
|
|
|
- |
|
Thereafter
|
|
|
- |
|
Total
|
|
$ |
9,874,724 |
|
Common Stock Issued to Related Parties
During April 2022, the Related Party Note Holder elected to convert $302,580 in principal and $40,301 in accrued interest, or a total of $342,881 into 857,204 shares of the Company’s common stock at $0.40 per share, the market price on the date of conversion.
During March 2021, an officer and director of the Company agreed to return and retire 45,170 shares of common stock previously issued for common stock compensation.
Non-Binding License Agreement – Related Party
During July 2017, the Company entered into a non-binding agreement to explore the opportunity of engaging in a license of Clean Coal Pristine M technology. As part of the non-binding agreement, in September 2017, the Company received a non-refundable deposit of $100,000, subject to application to any future license agreement, from Wyoming New Power. The license agreement is for two million tons per annum. The remainder of the license fee will be due upon the signing of a definitive license agreement expected in 2023. Wyoming New Power is a related party because it is controlled by an entity that has a significant interest in Clean Coal Technologies, Inc.
NOTE 5: DEBT
Notes Payable
As of December 31, 2022 and 2021, the Company had outstanding notes payable to former affiliates of the Company of $413,185 and $413,185, respectively. The notes payable are unsecured, bear no interest and are due on demand.
Convertible Debt
In accordance with ASC 480, Distinguishing Liabilities from Equity, the Company evaluates its hybrid convertible debt instruments with unconditional obligations allowing settlement by issuing a variable number of its equity shares to determine proper classification and accounting. The Company classifies the following hybrid convertible debt instruments as a liability upon being convertible at the option of the holders due to the conversion terms being based on fixed monetary amounts known at inception, in this case, settlement with a variable number of the Company’s equity shares. As such, conversion option and are carried as a liability at fair value at each balance sheet date with a re-measurement reported as a change in fair value of share-settled debt in other (income) expense in the accompanying condensed statements of operations.
In accordance with ASC 480, Distinguishing Liabilities from Equity, the Company evaluates its hybrid convertible debt instruments with unconditional obligations allowing settlement by issuing a variable number of its equity shares to determine proper classification and accounting. The Company classifies the following hybrid convertible debt instruments as a liability upon being convertible at the option of the holders due to the conversion terms being based on fixed monetary amounts known at inception, in this case, settlement with a variable number of the Company’s equity shares. As such, conversion option and are carried as a liability at fair value at each balance sheet date with a re-measurement reported as a change in fair value of share-settled debt in other (income) expense in the accompanying condensed statements of operations.
During May 2019, the Company issued a convertible note payable in the amount of $262,500, due in one-year, original issuance discount of $12,500, accrues interest at the default rate of 16% per annum, unsecured and convertible into shares of the Company’s common stock at a discount of 65% of the lowest trading price for the Company’s common stock during the ten trading days immediately preceding the conversion. As of December 31, 2022 and 2021, the balance on the convertible note payable was $85,302 and $53,514, respectively. The fair value of the discount conversion feature on the remaining principal balance was $53,243 as of December 31, 2022 and is included in the note principal balance.
During August 2019, the Company issued a convertible note payable in the amount of $157,500, due in one-year, original issuance discount of $7,500, accrues interest at the default rate of 16% per annum, unsecured and convertible into shares of the Company’s common stock at a discount of 65% of the lowest trading price for the Company’s common stock during the ten trading days immediately preceding the conversion. As of December 31, 2022 and 2021, the balance on the convertible note payable was $305,844 and $190,361 respectively. The fair value of the discount conversion feature on the remaining principal balance was $194,507 as of December 31, 2022 and is included in the note principal balance.
During January 2020, the Company issued a convertible note payable in the amount of $138,000, due in one-year, original issuance discount of $3,000, accrues interest at 8% per annum with a default rate of 22% per annum, unsecured and convertible into shares of the Company’s common stock at a discount of 65% of the lowest trading price for the Company’s common stock during the ten trading days immediately preceding the conversion. As of December 31, 2022 and 2021, the balance on the convertible note payable was $326,945 and $220,369, respectively. The fair value of the discount conversion feature on the remaining principal balance was $188,945 as of December 31, 2022. During the years ended December 31, 2022 and December 31, 2021, the Company recognized $0 and $222 in debt discount amortization expense, respectively.
During February 2020, the Company issued a convertible note payable in the amount of $440,000, due in one-year, original issuance discount of $40,000, accrues interest at 5% per annum and a default interest rate of 24%, unsecured and convertible into shares of the Company’s common stock at a discount of 65% of the lowest trading price for the Company’s common stock during the ten trading days immediately preceding the conversion. As of December 31, 2022 and 2021, the balance on the convertible note payable was $248,403 and $161,497, respectively. The fair value of the discount conversion feature on the remaining principal balance was $155,045 as of December 31, 2022. During the years ended December 31, 2022 and December 31, 2021, the Company recognized $0 and $5,918 in debt discount amortization expense, respectively.
During April 2020, the Company issued a convertible note payable in the amount of $247,500, due in one-year, original issuance discount of $22,500, accrues interest at the rate of 5% per annum and a default interest rate of 24% per annum, unsecured and convertible into shares of the Company’s common stock at a discount of 65% of the lowest trading price for the Company’s common stock during the ten trading days immediately preceding the conversion. As of December 31, 2022 and 2021, the balance on the convertible note payable was $583,213 and $393,788, respectively. The fair value of the discount conversion feature on the remaining principal balance was $335,713 as of December 31, 2022. During the years ended December 31, 2022 and December 31, 2021, the Company recognized $0 and $6,411 in debt discount amortization expense, respectively.
During the years ended December 31, 2022, the Company recognized a $530,178 loss in fair value, while during the year ended December 31, 2021 the Company recognized in fair value $151,144 in fair value gains as a result of the conversion options on the above-mentioned convertible debt.
Nonconvertible Debt
Outstanding notes payable and convertible notes payable to third parties consisted of the following as of December 31, 2022 and 2021:
|
|
December 31,
|
|
Name
|
|
2022
|
|
|
2021
|
|
Convertible Debt:
|
|
|
|
|
|
|
|
|
Convertible note payable, interest at 16%, unsecured, due May 22, 2020 |
|
|
85,302 |
|
|
|
53,514 |
|
Convertible note payable, interest at 16%, unsecured, due August 5, 2020 |
|
|
305,844 |
|
|
|
190,361 |
|
Convertible note payable, interest at 10%, unsecured, due January 28, 2021 |
|
|
326,945 |
|
|
|
220,369 |
|
Convertible note payable, interest at 10%, unsecured, due February 6, 2021 |
|
|
248,403 |
|
|
|
161,497 |
|
Convertible note payable, interest at 10%, unsecured, due April 14, 2021 |
|
|
583,213 |
|
|
|
393,788 |
|
Total current debt
|
|
|
1,549,707 |
|
|
|
1,019,529 |
|
Less: Unamortized discount
|
|
|
- |
|
|
|
- |
|
Net, current debt
|
|
$ |
1,549,707 |
|
|
$ |
1,019,529 |
|
Nonconvertible Debt:
|
|
|
|
|
|
|
|
|
Notes payable, no interest, unsecured, past due
|
|
$ |
35,000 |
|
|
$ |
35,000 |
|
Notes payable, no interest, unsecured, past due
|
|
|
378,185 |
|
|
|
378,185 |
|
Total notes payable
|
|
|
413,185 |
|
|
|
413,185 |
|
NOTE 6: EQUITY TRANSACTIONS
Common Stock
2022
During April 2022, the Related Party Note Holder elected to convert $302,580 in principal and $40,301 in accrued interest, or a total of $342,881 into 857,204 shares of the Company’s common stock at $0.40 per share, the market price on the date of conversion.
2021
Between February and August 2021, the Company issued a total of 817,109 shares of common stock to holders of convertible notes payable for principal totaling $441,642, accrued interest totaling $11,734 and conversion fees of $600.
During March 2021, an officer and director of the Company agreed to return and retire 45,170 shares of common stock previously issued for common stock compensation.
Warrants
There were no warrants issued during the years ended December 31, 2022 or 2021 The following table presents the stock warrant activity during the years ended December 31, 2022 and 2021:
|
|
Warrants
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Remaining Term
|
|
Outstanding - December 31, 2021
|
|
|
673 |
|
|
$ |
15.00 |
|
|
|
0.21 |
|
Granted
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Forfeited/expired
|
|
|
(673 |
)
|
|
|
15.00 |
|
|
|
- |
|
Exercised
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
Outstanding December 31, 2022
|
|
|
- |
|
|
$ |
0.00 |
|
|
|
0.00 |
|
Exercisable – December 31, 2022
|
|
|
- |
|
|
$ |
0.00 |
|
|
|
0.00 |
|
The intrinsic value of the exercisable warrants as of December 31, 2022 and 2021 was $0.
NOTE 7: COMMITMENTS AND CONTINGENCIES
Separation Agreement
As part of the separation agreement with Mr. Ponce de Leon, the ex–Chief Operating Officer of the Company, the Company agreed to pay him his accrued salary of $1,226,711 within two years but agreed to pay him $200,000 by November 2015 out of revenues earned.
As the Company did not earn revenue in 2015 and as at December, 2022 has still not earned revenue, the obligation to Mr. Ponce de Leon of $1,889,133 is currently in default and the amount includes $662,419 in accrued interest. It is the Company’s intention to pay Mr. Ponce de Leon upon the company receiving revenue.
Operating Leases
Clean Coal has an operating lease for its executive offices in Manhattan, New York. Effective February 1, 2014, the lease is month to month, at a monthly rate of $200 per month.
In April 2018, the company secured a permanent location in Wyoming for its test facility at the Fort Union Industrial Park. The term of the lease was three years. The Company elected to renew the lease for another three years in May 2021. The renewal calls for rent of $36,000, prepaid. The $36,000 covering three years rent was paid in May 2021 and is being amortized to lease expense using the straight-line method over the three-year term of the lease. During the years ended December 31, 2022 and 2021, the Company recognized $12,000 and $12,000 in amortization of right of use assets, respectively.
NOTE 8: SUBSEQUENT EVENTS
Settlement Agreements, Related Party
On January 2023, the Company entered into three separate settlement agreements (the “Settlement Agreements”) with three related parties, CCTC Acquisition Partners LLC (“CCTC”), Black Diamond Financial Group LLC (“Black Diamond”) and Wyoming New Power, Inc. (“WNP”) (“the Parties” which are all affiliated entities of the Black Diamond Group) to settle outstanding notes and convertible notes payable with an aggregate principal amount of $10,722,510 and accrued interest of $7,068,598 at December 31, 2022 (see also Note 4 above). At the settlement date, 73,000,000 shares of the Company’s common stock were issued with a fair value of $24,770,500 based on the market price of the Company’s common stock on the date of issuance. The approximate $6,979,392 loss on settlement will be recognized in the first quarter of 2023.
Convertible Notes Settlement Agreements
On January 2023, the Company entered into settlement agreements with holders of five convertible notes payable with aggregate outstanding principal amounts of $1,549,707 and accrued interest of $155,609 as of December 31, 2022 (see also Note 5 above). At the settlement date, 3,935,000 shares of the Company’s common stock were issued with an approximate fair value of $1,081,465 based on the market price of the Company’s common stock on the date of issuance. The approximate $623,851 gain on settlement will be recognized in the first quarter of 2023.
Convertible Notes Payable
In March 2023 the company entered into two Convertible Note agreements, each with repayment amounts of $93,500. The face amount of each convertible note is $75,000 and each note has an original issuance discount of $18,500. The convertible notes are unsecured, accrue interest at 10% per annum and are due in one year from the dates of issuance.