The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission and, therefore, do not include all information and footnotes necessary for a complete presentation of our financial position, results of operations, cash flows, and stockholders’ deficit in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.
The accompanying notes are an integral part of these unaudited financial statements.
The accompanying notes are an integral part of these unaudited financial statements.
The accompanying notes are an integral part of these unaudited financial statements.
The accompanying notes are an integral part of these unaudited financial statements.
Notes to Financial Statements
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Clean Coal Technologies, Inc. (“Clean Coal”, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in Clean Coal’s Annual Report on Form 10-K filed with the SEC. In the opinion of management, the accompanying unaudited interim financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial position and the results of operations for the interim period presented herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year or for any future period. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for fiscal 2022 as reported in the Form 10K have been omitted.
Net Income (Loss) per Common Share
Basic net income (loss) per share is computed on the basis of the weighted average number of common shares outstanding during each year. Diluted net income (loss) per share is computed similar to basic net income (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. 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.
For the three months ended March 31, 2023 and 2022, the Company realized net losses, resulting in outstanding warrants and convertible debt having an antidilutive effect. All potentially dilutive instruments were excluded from the calculation of diluted net loss per share as their inclusion would have been anti-dilutive.
The following table summarizes the potential shares of common stock that were excluded from the computation of diluted net loss per share for the three months ended March 31, 2023 and 2022 as such shares would have had an anti-dilutive effect:
|
|
March 31,
|
|
|
|
2023
|
|
|
2022
|
|
Convertible notes payable
|
|
|
1,728,040 |
|
|
|
3,773,682 |
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Total
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|
|
1,728,040 |
|
|
|
3,773,682 |
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Recent 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.
NOTE 2: 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 March 31, 2023 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 3: RESEARCH AND DEVELOPMENT
Research and development expenses include salaries, related employee expenses, facility lease expense, research expenses and consulting fees. All costs for research and development activities are expensed as incurred. In addition, the Company 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 three months ended March 31, 2023 and 2022, the Company recognized $3,000 and $3,293 of research and development costs, respectively.
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 $7,801,639 and $7,543,255 as of March 31, 2023 and December 31, 2022, 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 at March 31, 2023 has still not earned revenue, the obligation to Mr. Ponce de Leon of $1,913,667 is currently in default and the amount includes $686,953 in accrued interest. It is the Company’s intention to pay Mr. Ponce de Leon immediately upon receiving revenue.
Convertible Debt
As of December 31, 2022, the Company had outstanding convertible notes payable and accrued interest to a related party totaling $9,874,724 and $7,586,634, respectively. The convertible notes were secured by assets and the common stock of the Company, incurred interest at 12% per annum, were convertible into shares of the Company’s common stock at $0.06 per share and were past due. During February 2023, the Company entered into a settlement agreement, whereby, with the holder of the convertible notes agreed to convert all of the outstanding debt and accrued interest into 69,300,000 shares of the Company’s common stock valued at $23,562,000, or the market price of the common stock on the date of issuance of $0.34 per share. As a result, the Company recognized a loss on debt conversion of $6,100,642 during the three months ended March 31, 2023.
Amortization expense related to debt discounts on convertible debt for the three months ended March 31, 2023 and 2022 was $0 and $25,033, respectively.
Nonconvertible Debt
As of December 31, 2022, the Company had outstanding nonconvertible notes payable and accrued interest to a related party totaling $847,786 and $145,135, respectively. The borrowings are unsecured, bear no interest and are due on demand. During February 2023, the Company entered into a settlement agreement, whereby, the holder of the nonconvertible notes agreed to convert all of the outstanding debt and accrued interest into 3,700,000 shares of the Company’s common stock. However, only 2,800,000 shares were issued during the three months ended March 31, 2023, the remaining 900,000 shares were issued subsequently, leaving an unsettled balance of $256,500 at March 31, 2023. As such, the 2,800,000 shares were valued at $952,000, or the market price of the common stock on the date of issuance of $0.34 per share. As a result, the Company recognized a loss on debt conversion of $215,579 during the three months ended March 31, 2023.
During the three months ended March 31, 2023, the Company borrowed a total of $15,390 in cash and repaid $84,000 from an entity controlled and owned by a significant shareholder of the Company. As of March 31, 2023 and December 31, 2022, the balance on the borrowings was $187,890 and $847,786, respectively.
As of March 31, 2023 and December 31, 2022, the Company had outstanding advances payable to an officer of the Company of $83,200 and $83,200, respectively. The advances payable are unsecured, bear no interest and are due on demand.
As of March 31, 2023 and December 31, 2022, the Company had outstanding notes payable of $705,000 and $705,000, respectively, to an individual that is a significant shareholder.
NOTE 5: DEBT
Notes Payable
During March 2023, the Company entered into two notes payable, both with principal balances of $93,500 and original issuance discounts of $18,500. The notes payable are unsecured, due in one year, accrue interest at the rate of 10% per annum and if there is an event of default, such as not repaying the note when due, the notes become convertible into shares of the Company’s common stock at a the lesser of $0.10 per share, or 90% of the average of the two lowest volume weighted average market prices for the five consecutive trading days prior to the conversion date. As of March 31, 2023, the outstanding principal balance and debt discount of the notes payable was $187,000 and $37,000, respectively.
As of March 31, 2023 and December 31, 2022, 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.
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 March 31, 2023 and December 31, 2022, the balance on the convertible note payable was $98,024 and $85,302, respectively. The fair value of the discount conversion feature on the remaining principal balance was $65,965 as of March 31, 2023 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 March 31, 2023 and December 31, 2022, the balance on the convertible note payable was $351,987 and $305,844, respectively. The fair value of the discount conversion feature on the remaining principal balance was $240,650 as of March 31, 2023 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, accrued interest at 8% 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. During January 2023, the Company entered into a settlement agreement with the note holder, whereby the Company agreed to issue 685,000 shares of common stock valued at the market price on the date of issuance of $266,466, or $0.39 per share, in exchange for the outstanding convertible note balance with a fair market value of $338,857 and accrued interest of $22,770, recognizing a gain on debt conversion of $95,161 during the three months ended March 31, 2023.
During February 2020 and April 2020, the Company issued two convertible notes payable in the amounts of $440,000 and $247,500, respectively. The convertible notes were due in one-year, had original issuance discounts of $40,000 and $22,500, respectively, accrued interest at 5% per annum, were 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. During January 2023, the Company entered into a settlement agreement with the holder of the convertible notes, whereby the Company agreed to issue 2,500,000 shares of common stock valued at the market price on the date of issuance of $605,000, or $0.24 per share, in exchange for the outstanding convertible note balances with a combined fair market value of $508,700 and accrued interest of $76,522, recognizing a loss on debt conversion of $19,778 during the three months ended March 31, 2023.
During the three months ended March 31, 2023 and 2022, the Company recognized $252,138 in fair value gains and $103,892 in fair value losses as a result of the conversion options on the above-mentioned convertible debt, respectively.
NOTE 6: STOCKHOLDERS’ EQUITY
Common Stock
During February 2023, as a result of convertible debt settlement agreements with two related party companies, who were under common control, the Company issued 72,100,000 shares of common stock valued at $24,514,000, or the market price on the date of issuance or $0.34 per share (see Note 4). This transaction results in a change of control.
During March 2023, as a result of a convertible debt settlement agreement, the Company issued 685,000 shares of common stock valued at $266,466, or the market price on the date of issuance or $0.39 per share (see Note 5).
During March 2023, as a result of a convertible debt settlement agreement, the Company issued 2,500,000 shares of common stock valued at $605,000, or the market price on the date of issuance or $0.24 per share (see Note 5).
NOTE 7: SUBSEQUENT EVENTS
Related Party Transactions
During April 2023, the Company completed a settlement agreement with the related party holder of nonconvertible notes payable, whereby, the Company owed the holder the remaining 900,000 shares of the Company’s common stock valued at $256,500, or the market price of the common stock on the date of issuance of $0.29 per share.
Convertible Notes Payable
During April 2023, the Company completed a settlement agreement with the holder of two convertible notes, whereby the Company agreed to issue 750,000 shares of common stock valued at the market price on the date of issuance of $210,000, or $0.28 per share, in exchange for the outstanding convertible note balances with a combined fair market value of $450,011 and accrued interest of $70,129, recognizing a gain on debt conversion of $310,140 during April 2023.
During April 2023, the Company entered into a note payable with a principal balances of $176,470 and an original issuance discount of 15%, or $26,470. The note payable is unsecured, due in one year, accrues interest at the rate of 10% per annum and if there is an event of default, such as not repaying the note when due, the notes become convertible into shares of the Company’s common stock at $0.20 per share. The Company has the right to purchase the note back without penalty or premium upon at least five days notice.
During April 2023, the Company entered into a note payable with a principal balances of $397,727 and an original issuance discount of 15%, or $47,727. The note payable is unsecured, due in one year, accrues interest at the rate of 10% per annum and if there is an event of default, such as not repaying the note when due, the notes become convertible into shares of the Company’s common stock at a the lesser of $0.40 per share, or 90% of the average of the two lowest volume weighted average market prices for the five consecutive trading days prior to the conversion date. The Company has the right to purchase the note back without penalty or premium upon at least five days notice.