CLNV Clean Vision Corporation (QB)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended SEPTEMBER 30, 2024

 

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______ to _______

 

Commission File Number: 024-11501

 

 

 

CLEAN VISION CORPORATION

(Exact name of registrant as specified in its charter)

 

Nevada		85-1449444
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

 

2711 N. Sepulveda Blvd. #1051 Manhattan Beach, CA		90266
(Address of principal executive offices)		(Zip Code)

 

(424) 835-1845

(Registrant’s telephone number, including area code)

 

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
N/A		N/A		N/A

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

  

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒

 

Emerging growth company

☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

 

As of November 18, 2024, there were 807,923,773 shares of the issuer’s common stock issued and outstanding.

 

 

   

CLEAN VISION CORPORATION

 

FORM 10-Q

 

For the Quarterly Period Ended September 30, 2024

 

INDEX

 

PART I	Financial Information
Item 1.	Financial Statements (unaudited)	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29
Item 4.	Controls and Procedures	29
PART II	Other Information
Item 1.	Legal Proceedings	30
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Mine Safety Disclosures	31
Item 5.	Other Information	31
Item 6.	Exhibits	31
Signatures		32

 

 

 

  

PART I - FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

INDEX TO FINANCIAL STATEMENTS

 

Consolidated Balance Sheets as of September 30, 2024 (unaudited) and December 31, 2023	F-2
Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine Months Ended September 30, 2024 and 2023 (unaudited)	F-3
Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the Three and Nine Months Ended September 30, 2024, and 2023 (unaudited)	F-4
Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2024, and 2023 (unaudited)	F-6
Notes to the Consolidated Financial Statements (unaudited)	F-7

 

CLEAN VISION CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

		September 30, 2024				December 31, 2023
ASSETS			(Unaudited)				(Audited)
Current Assets:
Cash		$	4,180			$	339,921
Prepaids and other assets			418,322				366,812
Accounts receivable			8,152				70,745
Loan receivable			70,000				70,000
Trading securities			5,263				5,069
Total Current Assets			505,917				852,547
Property and equipment			4,928,359				4,883,566
Goodwill			4,854,622				4,854,622
Total Assets		$	10,288,898			$	10,590,735
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Cash overdraft		$	410,489			$	353,159
Accounts payable			1,412,696				758,038
Accrued compensation			746,514				344,015
Accrued expenses			782,924				546,392
Convertible note payable, net of discount of $782,889 and $1,701,403, respectively			4,432,594				2,779,199
Derivative liability			251,721				598,306
Loans payable			822,808				780,656
Related party payables			760,059				549,946
Loans payables – related party			4,500,000				4,500,000
Liabilities of discontinued operations			67,093				67,093
Total current liabilities			14,186,898				11,276,804
Economic incentive (Note 12)			1,750,000				1,750,000
Total Liabilities			15,936,898				13,026,804
Commitments and contingencies			—				—
Mezzanine Equity:
Series B Preferred stock, $0.001 par value, 2,000,000 shares authorized; 0 and 2,000,000 shares issued and outstanding, respectively			—				1,800,000
Total mezzanine equity			—				1,800,000
Stockholders' Deficit:
Preferred stock, $0.001 par value, 4,000,000 shares authorized; no shares issued and outstanding			—				—
Series A Preferred stock, $0.001 par value, 2,000,000 shares authorized; no shares issued and outstanding			—				—
Series C Preferred stock, $0.001 par value, 2,000,000 shares authorized; 2,000,000 shares issued and outstanding			2,000				2,000
Common stock, $0.001 par value, 2,000,000,000 shares authorized, 798,511,454 and 682,463,425 shares issued and outstanding, respectively			798,512				682,464
Common stock to be issued			298,000				217,775
Additional paid-in capital			32,324,443				28,238,505
Accumulated other comprehensive loss			13,306				2,171
Accumulated deficit			(40,370,138	)			(34,831,900	)
Non-controlling interest			1,285,877				1,452,916
Total stockholders' deficit			(5,648,000	)			(4,236,069	)
Total liabilities and stockholders' deficit		$	10,288,898			$	10,590,735

 The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

  

CLEAN VISION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

 

		For the Three Months Ended September 30,								For the Nine Months Ended September 30,
		2024				2023				2024				2023
Revenue		$	34,799			$	26,908			$	107,946			$	188,205
Cost of revenue			2,149				(11,589	)			11,264				22,273
Gross margin			32,650				38,497				96,682				165,932
Operating Expenses:
Consulting			230,819				389,925				837,764				1,084,423
Advertising and promotion			30,109				—				90,825				—
Development expense			172,523				—				221,896				—
Professional fees			36,399				79,527				359,049				621,087
Payroll expense			337,378				217,806				967,816				750,070
Director fees			23,500				13,500				65,492				101,500
General and administration expenses			127,125				401,845				789,589				1,162,648
Total operating expense			957,853				1,102,603				3,332,431				3,719,728
Loss from Operations			(925,203	)			(1,064,106	)			(3,235,749	)			(3,553,796	)
Other income (expense):
Interest expense			(604,056	)			(1,590,647	)			(2,970,618	)			(3,299,800	)
Change in fair value of derivative			114,413				1,038,342				825,903				2,174,421
Loss on debt issuance			—				—				(357,140	)			(2,676,526	)
Gain on conversion of debt			35,698				620,778				35,698				881,660
Gain on extinguishment of debt			—				—				216,430				17,500
Penalty expense on convertible debt			(219,801	)			—				(219,801	)			—
Total other income (expense)			(673,746	)			68,473				(2,469,528	)			(2,902,745	)
Net loss before provision for income tax			(1,598,949	)			(995,633	)			(5,705,277	)			(6,456,541	)
Provision for income tax expense			—				—				—				—
Net loss		$	(1,598,949	)		$	(995,633	)		$	(5,705,277	)		$	(6,456,541	)
Net income (loss) attributed to non-controlling interest			46,240				(51,697	)			167,039				(18,403	)
Net loss attributed to Clean Vision Corporation			(1,552,709	)			(1,047,330	)			(5,538,238	)			(6,474,944	)
Other comprehensive income:
Foreign currency translation adjustment			13,529				(16,404	)			11,135				(33,462	)
Comprehensive loss		$	(1,539,180	)		$	(1,063,734	)		$	(5,527,103	)		$	(6,508,406	)
Loss per share - basic and diluted		$	(0.00	)		$	(0.00	)		$	(0.01	)		$	(0.01	)
Weighted average shares outstanding - basic and diluted			746,302,675				495,274,326				712,831,938				466,596,880

 

 The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

CLEAN VISION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)

For the Three and Nine Months Ended September 30, 2024 and 2023

(Unaudited) 

 

		Series A Preferred Stock								Series C Preferred Stock								Common Stock								Additional paid				Common Stock To be				Accumulated Other Comprehensive				Minority				Accumulated				Total Stockholders'
		Shares				Amount				Shares				Amount				Shares				Amount				In Capital				Issued				Loss				Interest				Deficit				Deficit
Balance, December 31, 2023 (Restated)			—			$	—				2,000,000			$	2,000				682,463,425			$	682,464			$	28,238,505			$	217,775			$	2,171			$	1,452,916			$	(34,831,900	)		$	(4,236,069	)
Stock issued for services			—				—				—				—				455,840				456				15,544				261,772				—				—				—				277,772
Stock issued for debt commitments			—				—				—				—				5,600,000				5,600				196,560				—				—				—				—				202,160
Stock issued for cash			—				—				—				—				5,000,000				5,000				95,000				—				—				—				—				100,000
Stock issued for warrant exercise			—				—				—				—				2,181,818				2,182				(2,182	)			—				—				—				—				—
Debt issuance cost – warrants issued			—				—				—				—				—				—				575,690				—				—				—				—				575,690
Net loss			—				—				—				—				—				—				—				—				(2,168	)			(39,928	)			(2,161,032	)			(2,203,128	)
Balance, March 31, 2024			—				—				2,000,000				2,000				695,701,083				695,702				29,119,117				479,547				3				1,412,988				(36,992,932	)			(5,283,575	)
Stock issued for services			—				—				—				—				10,000,000				10,000				206,000				—				—				—				—				216,000
Stock issued for debt commitments			—				—				—				—				435,012				435				19,340				(11,775	)			—				—				—				8,000
Stock issued for conversion of debt			—				—				—				—				9,520,088				9,520				109,286				—				—				—				—				118,806
Cancellation of mezzanine equity			—				—				—				—				—				—				1,800,000				—				—				—				—				1,800,000
Net loss			—				—				—				—				—				—				—				—				(226	)			(80,871	)			(1,824,497	)			(1,824,497	)
Balance, June 30, 2024			—				—				2,000,000				2,000				715,656,183			$	715,657			$	31,253,743			$	467,772				(223	)		$	1,332,117			$	(38,817,429	)			(5,046,363	)
Stock issued for services			—				—				—				—				9,010,370				9,010				260,762				(269,772	)			—				—				—				—
Stock issued for conversion of debt			—				—				—				—				73,844,901				73,845				809,938				—				—				—				—				883,783
Stock sold from cash																															100,000																100,000
Net loss			—				—				—				—				—				—				—				—				13,529				(46,240	)			(1,552,709	)			(1,585,420	)
Balance, September 30, 2024			—			$	—				2,000,000			$	2,000				798,511,454			$	798,512			$	32,324,443			$	298,000			$	13,306			$	1,285,877			$	(40,370,138	)		$	(5,648,000	)

		Series A Preferred Stock								Series C Preferred Stock								Common Stock								Additional paid				Common Stock to be				Accumulated Other Comprehensive				Accumulated				Minority				Total Stockholders'
		Shares				Amount				Shares				Amount				Shares				Amount				In Capital				Issued				Loss				Deficit				Interest				Deficit
Balance, December 31, 2022			—			$	—				2,000,000			$	2,000				402,196,273			$	402,197			$	15,203,394			$	76,911			$	16,670			$	(19,078,809	)		$	—			$	(3,377,637	)
Stock dividend			—				—				—				—				21,816,590				21,817				1,461,711				—				—				(1,483,528	)			—				—
Stock issued for services – related party			—				—				—				—				500,000				500				60,500				—				—				—				—				61,000
Stock issued for services			—				—				—				—				4,950,000				4,950				350,425				39,334				—				—				—				394,709
Stock issued for cash			—				—				—				—				16,750,000				16,750				318,250				—				—				—				—				335,000
Stock issued for debt conversion			—				—				—				—				19,286,137				19,286				366,437				—				—				—				—				385,723
Debt issuance cost – warrants issued			—				—				—				—				—				—				1,321,698				—				—				—				—				1,321,698
Shares cancelled			—				—				—				—				(3,000,000	)			(3,000	)			3,000				—				—				—				—				—
Net loss			—				—				—				—				—				—				—				—				(1,541	)			(2,701,002	)			—				(2,702,543	)
Balance, March 31, 2023			—				—				2,000,000				2,000				462,499,000				462,500				19,085,415				116,245				15,129				(23,263,339	)			—				(3,582,050	)
Adjust stock dividend shares			—				—				—				—				(16	)			—				—				—				—				—				—				—
Stock issued for services			—				—				—				—				500,000				500				31,900				(27,474	)			—				—				—				4,926
Stock issued for debt conversion			—				—				—				—				25,450,000				25,450				949,650				—				—				—				—				975,100
Debt issuance cost – warrants issued			—				—				—				—				—				—				1,348,364				—				—				—				—				1,348,364
Settlement of debt-related party			—				—				—				—				—				—				96,250				—				—				—				—				96,250
Net loss			—				—				—				—				—				—				—				—				(15,517	)			(2,759,906	)			(33,294	)			(2,808,717	)
Balance, June 30, 2023			—				—				2,000,000				2,000				488,448,984				488,450				21,571,369				88,771				(388	)			(26,023,245	)			(33,294	)			(3,906,337	)
Stock sold for cash			—				—				—				—				—				—				—				198,000				—				—				—				198,000
Stock issued for services			—				—				—				—				32,930,000				32,930				561,134				15,781				—				—				—				609,845
Stock issued for debt conversion			—				—				—				—				77,725,000				77,725				1,362,775				—				—				—				—				1,440,500
Shares issued for settlement			—				—				—				—				4,500,000				4,500				(4,500	)			—				—				—				—				—
Net loss			—				—				—				—				—				—				—				—				(16,404	)			(995,633	)			51,697				(960,340	)
Balance, September 30, 2023			—			$	—				2,000,000			$	2,000				603,603,984			$	603,605			$	23,490,778			$	302,552			$	(16,792	)		$	(27,018,878	)		$	18,403			$	(2,618,332	)

 

  The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

CLEAN VISION CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited) 

		For the Nine Months Ended September 30,
		2024				2023
Cash Flows from Operating Activities:
Net loss		$	(5,705,277	)		$	(6,456,541	)
Adjustments to reconcile net loss to net cash used by operating activities:
Stock issued for services			285,772				1,009,480
Stock issued for services – related party			—				61,000
Debt discount amortization			2,637,053				2,953,540
Loss on issuance of debt			357,140				2,676,526
Change in fair value of derivative			(825,903	)			(2,174,421	)
Gain on conversion of debt			(35,698	)			(881,660	)
Gain on extinguishment of debt			(216,430	)			(17,500	)
Penalty expense on convertible debt			219,801
Depreciation expense			133,685				—
Changes in operating assets and liabilities:
Prepaids and other assets			(51,704	)			(230,754	)
Accounts receivable			62,593				(160,736	)
Accounts payable			654,658				(152,808	)
Accruals			339,603				164,385
Related-party payables - short-term			210,113				—
Accrued compensation			422,499				(202,619	)
Net cash used by operating activities			(1,512,095	)			(3,412,108	)
Cash Flows from Investing Activities:
Prepaid for acquisition			—				(2,000,000	)
Purchase of property and equipment			(178,478	)			—
Net cash used by investing activities			(178,478	)			(2,000,000	)
Cash Flows from Financing Activities:
Cash overdraft acquired in acquisition			—				(11,093	)
Cash Overdraft			57,330				—
Proceeds from convertible notes payable			1,358,500				4,809,500
Payments - convertible notes payable			(314,285	)			(270,000	)
Proceeds from the sale of common stock			200,000				533,000
Proceeds from notes payable - related party			—				5,000
Repayment of related party loans			—				(32,910	)
Proceeds from notes payable			42,152				42,500
Proceeds from long term note payable			—				1,750,000
Payments - notes payable			—				(72,780	)
Net cash provided by financing activities			1,343,697				6,753,217
Net change in cash			(346,876	)			1,341,109
Effects of currency translation			11,135				(33,462	)
Cash at beginning of period			339,921				10,777
Cash at end of period		$	4,180				1,318,424
Supplemental schedule of cash flow information:
Interest paid		$	—			$	—
Income taxes		$	—			$	—
Supplemental non-cash disclosure:
Common stock issued for conversion of debt		$	709,133			$	2,538,174
Warrants issued with notes payable		$	575,690			$	—
Cancellation of Series B preferred stock		$	1,800,000			$	—
Stock issued for debt commitments		$	418,160			$	—
Note payable issued for acquisition		$	—			$	4,500,000

 

 The accompanying notes are an integral part of these unaudited consolidated financial statements.  

              

CLEAN VISION CORPORATION AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

September 30, 2024

 

NOTE 1 — ORGANIZATION AND NATURE OF BUSINESS

 

Clean Vision Corporation (“Clean Vision,” “we,” “us,” or the “Company”) is a new entrant in the clean energy and waste-to-energy industries focused on clean technology and sustainability opportunities.  Currently, we are focused on providing a solution to the plastic and tire waste problem by recycling the waste and converting it into saleable byproducts, such as hydrogen and other clean-burning fuels that can be used to generate clean energy. Using a technology known as pyrolysis, which heats the feedstock (i.e., plastic) at high temperatures in the absence of oxygen so that the material does not burn, we are able to turn the feedstock into (i) low sulfur fuel, (ii) clean hydrogen and (iii) carbon black or char (char is created when plastic is used as feedstock). Our goal is to generate revenue from three sources: (i) service revenue from the recycling services we provide (ii) revenue generated from the sale of the byproducts; and (iii) revenue generated from the sale of fuel cell equipment.  Our mission is to aid in solving the problem of cost-effectively upcycling the vast amount of waste plastic generated on land before it flows into the world’s oceans.

 

All operations are currently being conducted through Clean-Seas, a wholly-owned subsidiary. Clean-Seas acquired its first pyrolysis unit in November 2021 for use in a pilot project in India, which began operations in early May 2022. On April 23, 2023, Clean-Seas completed its acquisition of a fifty-one percent (51%) interest in Ecosynergie, which changed its name to Clean-Seas Morocco, LLC. Clean-Seas Morocco began operations at its pyrolysis facility in Agadir, Morocco, in April 2023, which currently has capacity to convert 20 TPD of waste plastic through pyrolysis.

 

We believe that our current projects will showcase our ability to pyrolyze waste plastic (using pyrolysis), which will generate three byproducts: (i) low sulfur fuel, (ii) clean hydrogen, AquaH^tm, and (iii) char. We intend to sell the majority of the byproducts, while retaining a small amount of the low sulfur fuels and/or hydrogen to power our facilities and equipment. To date, our operations in India have not generated any revenue.

 

Clean-Seas India Private Limited was incorporated on November 17, 2021, as a wholly owned subsidiary of Clean-Seas.

 

Clean-Seas, Abu Dhabi PVT. LTD was incorporated in Abu Dhabi on December 9, 2021, as a wholly owned subsidiary of the Company. On January 19, 2022, the Company changed the name of its wholly owned subsidiary, Clean-Seas, Abu Dhabi PVT. LTD, to Clean-Seas Group. As of July 4, 2022, the Clean-Seas Group had ceased operations.

 

Endless Energy, Inc. (“Endless Energy”) was incorporated in Nevada on December 10, 2021, as a wholly owned subsidiary of the Company. EndlessEnergy was incorporated for the purpose of investing in wind and solar energy projects but does not currently have any operations.

 

EcoCell, Inc. ("EcoCell”) was incorporated on March 4, 2022, as a wholly owned subsidiary of the Company. EcoCell does not currently have any operations, but we intend to use EcoCell for the purpose of licensing fuel cell patented technology.

 

Clean-Seas Arizona, Inc. (“Clean-Seas Arizona”) was incorporated in Arizona on September 19, 2022, as a wholly owned subsidiary of Clean-Seas. Pursuant to that certain Memorandum of Understanding signed on November 4, 2022, Arizona State University (ASU) and the Rob and Melani Walton Sustainability Solution Services (WS3), the parties intend for Clean-Seas Arizona to establish a plastic feedstock to clean hydrogen conversion facility to be located in Phoenix, Arizona. In furtherance of these goals, and pursuant to a Services Agreement (the “Arizona Services Agreement”) signed on June 12, 2023, with ASU and WS3, this facility is currently intended to source and convert plastic feedstock from the Phoenix area and import plastic from California. Pursuant to the Arizona Services Agreement, the Arizona facility is expected to begin processing plastic feedstock in Q4 2024, now expected in Q4 2025, at 100 TPD and scale up to a maximum of 500 TPD at full capacity. Additionally, we are exploring plans for this facility to be powered by renewable energy, which, if successful, would become the first completely off grid pyrolysis conversion facility in the world.

  

Clean-Seas West Virginia, formed on April 1, 2023, is our first PCN facility slated for the United States and is currently expected to be operational in the third quarter of 2025. This facility will be located in the city of Belle, outside of Charleston, the capital of West Virginia, and is expected to begin operations converting 50 TPD of plastic feedstock. The Company expects to expand to greater than 500 TPD within three years of beginning operations. Clean-Seas has engaged MacVallee, LLC (“MacVallee”) to secure mixed plastic feedstock from material recovery facilities and industrial suppliers.

 F-5

 

  

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation

 

The Company’s unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and reflect all adjustments, consisting of normal recurring adjustments, which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company as of and for the nine month period ending September 30, 2024 and not necessarily indicative of the results to be expected for the full year ending December 31, 2024. These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes included in the Company’s financial statements for the year ended December 31, 2023.

 

Use of Estimates

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

 

Concentrations of Credit Risk

 

We maintain our cash in bank deposit accounts, the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships and consequently have not experienced any losses in our accounts. At times, such deposits may be in excess of the Federal Deposit Insurance Corporation insurable amount (“FDIC”).  As of September 30, 2024, the Company had no cash in excess of the FDIC’s $250,000 coverage limit.

 

Cash Equivalents

 

The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. There were no cash equivalents for the periods ended September 30, 2024 and December 31, 2023.

 

Principles of Consolidation

 

The accompanying unaudited consolidated financial statements for the period ended September 30, 2024, include the accounts of the Company and its wholly owned subsidiaries, Clean-Seas, Inc., Clean-Seas India Private Limited, Clean-Seas Group, Endless Energy, Inc., EcoCell, Inc., Clean-Seas Arizona, Inc., Clean-Seas West Virginia, and our 51% owned subsidiary, Clean-Seas Morocco, LLC. As of September 30, 2024, there was no activity in Clean-Seas Group, Endless Energy or Clean-Seas Arizona. All intercompany transactions are eliminated in consolidation.

 

Translation Adjustment

 

The accounts of the Company’s subsidiary Clean-Seas India are maintained in Rupees and the accounts of Clean-Seas Morocco in Moroccan dirham. In accordance with the Codification, all assets and liabilities were translated at the current exchange rate at respective balance sheets dates, members’ capital are translated at the historical rates and income statement items are translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with the Comprehensive Income Topic of the Codification (ASC 220), as a component of members’ capital. Transaction gains and losses are reflected in the income statement.

 

 F-6

 

Comprehensive Income

The Company uses SFAS 130 “Reporting Comprehensive Income” (ASC Topic 220).  Comprehensive income is comprised of net income and all changes to the statements of members’ capital, except those due to investments by members, changes in paid-in capital and distributions to members.

 

Basic and Diluted Earnings Per Share

 

Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification.  Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.  Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period. The weighted average number of common shares outstanding and potentially outstanding common shares assumes that the Company incorporated as of the beginning of the first period presented. As of September 30, 2024, there are warrants to purchase up to 296,138,059 shares of common stock and approximately 186,597,000 dilutive shares of common stock from convertible notes payable. As of September 30, 2023, there are warrants to purchase up to 116,944,802 shares of common stock and approximately 158,000,000 dilutive shares of common stock from a convertible note payable. As of September 30, 2024 and 2023, there are 20,000,000 and 20,000,000 potentially dilutive shares of common stock, respectively, if the Series C preferred stock were to be converted. As of September 30, 2024 and 2023, the Company’s diluted loss per share is the same as the basic loss per share, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.

 

Stock-Based Compensation

 

In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 allows companies to account for nonemployee awards in the same manner as employee awards. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those annual periods. We adopted this ASU on January 1, 2019.

 

Goodwill

 

The Company accounts for business combinations under the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations, where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.

 

In accordance with ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, the Company will test for indefinite-lived intangibles and goodwill impairment in the fourth quarter of each year and whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable.

 

Derivative Financial Instruments

 

The Company evaluates its convertible notes to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a weighted-average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.

 

Fair Value of Financial Instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification(“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP) and expands disclosures about fair value measurements.  To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels.  The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 F-7

 

 

Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.

 

Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.

 

Level 3: Pricing inputs that are generally unobservable inputs and not corroborated by market data.

 

The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity of those instruments.  The Company’s notes payable represents the fair value of such instruments as the notes bear interest rates that are consistent with current market rates.

 

The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of:

September 30, 2024

Schedule of liabilities measured fair value on recurring basis
Description				Level 1				Level 2				Level 3
	Derivative			$	—			$	—			$	251,721
	Total			$	—			$	—			$	251,721

 

December 31, 2023

Description				Level 1				Level 2				Level 3
	Derivative			$	—			$	—			$	598,306
	Total			$	—			$	—			$	598,306

 

Revenue Recognition

 

The Company recognizes revenue under ASC 606, “Revenue from Contracts with Customers” (“ASC 606”). The Company determines revenue recognition through the following steps:

 

	●	Identification of a contract with a customer;
	●	Identification of the performance obligations in the contract;

 

	●	Determination of the transaction price;
	●	Allocation of the transaction price to the performance obligations in the contract; and
	●	Recognition of revenue when or as the performance obligations are satisfied.

 

Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Shipping and handling activities associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment activity and recognized as revenue at the point in time at which control of the goods transfers to the customer. As a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of goods or services is expected to be one year or less.

 F-8

 

 

Our business model is focused on generating revenue from the following sources:

 

(i) Service revenue from the recycling services we provide. We plan to establish plastic feedstock agreements with a number of feedstock suppliers for the delivery of plastic to our facilities. Much of this plastic is currently a cost center for such feedstock suppliers, who pay "tipping fees" to landfills or incinerators. We will accept this plastic feedstock at reduced price or for no tipping fees. In some cases, feedstock suppliers will also share in revenue on products produced from their feedstock.  This revenue will be realized and recognized upon receipt of feedstock at one of our facilities.

 

(ii) Revenue generated from the sale of commodities. We will produce commodities including, but not limited to, pyrolysis oil, fuel oil, lubricants, synthetic gas, hydrogen, and carbon char. We are in negotiation with chemical and oil companies for purchasing, or off-taking, fuels and oils we produce, and exploring applications for carbon char. This revenue will be recognized upon shipment of products from one of our facilities and in some cases off-takers may pre-pay for a contractual obligation to buy our commodities.

 

(iii) Revenue generated from the sale of environmental credits. Our products are eligible for numerous environmental credits, including but not limited to carbon credits, plastic credits, and biodiversity credits. These credits may be monetized directly on the relevant markets or may be realized as value-add to off-takers, who will pay a premium for eligible products. Revenue from these credits will be recognized upon sale of applicable environmental credits on recognized markets, and/or upon sale of commodities to off-takers when that off-take includes an environmental credit premium.

 

(iv) Revenue generated from royalties and/or the sale of equipment. We expect to develop or acquire intellectual property which could generate revenue through royalties and/or sales of manufactured equipment.  Revenue may be recognized upon the terms of a contracted sale agreement. 

 

For the period ended September 30, 2024, our operations in Morocco had generated approximately $108,000 in revenue. During the period, 93% of revenue was from one party. As of September 30, 2024, we did not generate revenue from any other sources.

Trade Accounts Receivable

 

Trade accounts receivable are amounts due from customers under normal trade terms. After assessing the creditworthiness of our customers and considering our historical experience, anticipated future operations, and prevailing economic conditions, we have determined that the application of the current expected credit loss (CECL) methodology would be immaterial to our financial statements. Consequently, no allowance for credit losses has been recorded as of the year-end. The absence of a recorded allowance for credit losses reflects our judgment that potential credit losses on outstanding receivables are negligible. As of September 30, 2024, approximately 72% of accounts receivable are due from one customer.

 

Inventory

 

Inventory consists of plastic bottles that are acquired at no cost and are held for use in our pyrolysis process, which converts these materials into pyrolysis oil, carbon char, and other commodities. In accordance with U.S. Generally Accepted Accounting Principles (GAAP), these bottles are recorded at the lower of cost or market. Since the acquisition cost of the bottles is zero, and there is no significant alternative market value attributable to these materials before conversion, the carrying value of this inventory is recorded at $0 on our consolidated balance sheets. 

 

The absence of a recorded cost for the plastic bottles does not reflect their importance to our production process or potential value of the end products. This accounting treatment is specific to the characteristics of the materials used and does not imply any underlying concerns about the viability or value of the final products produced through our pyrolysis process. 

 

Recently Issued Accounting Pronouncements

 

The Company has implemented all new applicable accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and 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.

 

 F-9

 

 

NOTE 3 — GOING CONCERN

 

The accompanying unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has not yet established a source of revenue sufficient to cover its operating costs, had an accumulated deficit of $40,370,138 at September 30, 2024, and had a net loss of $5,705,277 for the nine months ended September 30, 2024. The Company’s ability to raise additional capital through the future issuances of common stock and/or debt financing is unknown. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. These conditions and the ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements of the Company do not include any adjustments that may result from the outcome of these aforementioned uncertainties.

 

Management plans to continue to implement its business plan and to fund operations by raising additional capital through the issuance of debt and equity securities. The Company’s existence is dependent upon management's ability to implement its business plan and/or obtain additional funding. There can be no assurance that the Company’s financing efforts will result in profitable operations or the resolution of the Company's liquidity problems. Even if the Company is able to obtain additional financing, it may include undue restrictions on our operations in the case of debt or cause substantial dilution for our stockholders in the case of equity financing.

 

NOTE 4 — BUSINESS COMBINATIONS

 

On April 23, 2023 (the “Morocco Closing Date”), Clean-Seas, a wholly owned subsidiary of the Company, completed its acquisition of a fifty-one percent (51%) interest (the “Morocco Acquisition”) in EcoSynergie S.A.R.L., a limited liability company organized under the laws of Morocco (“Ecosynergie”), pursuant to that certain Notarial Deed (the “Morocco Purchase Agreement”) dated as of January 23, 2023 (the “Signing Date”) setting forth the terms and provisions applicable to the Morocco Acquisition (the “Purchase Agreement”). On the Morocco Closing Date, (i) EcoSynergie’s name was changed to Clean-Seas Morocco, LLC, (ii) Mrs. Halima Aboudeine and Mr. Daniel C. Harris, the Company’s CRO, were appointed as managers of Clean-Seas Morocco and (iii) Mr. Harris was appointed to serve as the Chief Executive Officer of Clean-Seas Morocco. EcoSynergie was not acquired from a related party and the Company did not have common control with EcoSynergie at the time of the Morocco Acquisition.

  

Pursuant to the Morocco Purchase Agreement, Clean-Seas paid an aggregate purchase price of $6,500,000 for the Morocco Acquisition, of which (i) $2,000,000 was paid on the Morocco Closing Date and (ii) the remaining $4,500,000 is to be paid to Ecosynergie Group over a period of ten (10) months from the Morocco Closing Date. Additionally, Clean-Seas committed to invest up to $50,000,000 in Clean-Seas Morocco over a period of ten (10) months from the Morocco Closing Date (the “Clean-Seas Morocco Investment”). The Clean-Seas Morocco Investment is currently contemplated to be funded in tranches based on a to be agreed to schedule tied to milestones related to the technology being deployed by Clean-Seas Morocco. The parties intend to complete the funding schedule applicable to the Clean-Seas Morocco investment in the first quarter 2025. To date, none of the Clean-Seas Morocco Investment has been funded. 

The excess of the purchase price over the estimated fair values of the underlying identifiable assets acquired, liabilities assumed, and non-controlling interest was allocated to goodwill. The provisional estimated fair value of the noncontrolling interest was based the minority interest (49%) in net assets as of the acquisition date. The goodwill of $4,854,622 represents expected synergies from the combined operations. 

The excess of the purchase price over the estimated fair values of the underlying identifiable assets acquired, liabilities assumed, and non-controlling interest was allocated to goodwill. The provisional estimated fair value of the noncontrolling interest was based the minority interest (49%) in net assets as of the acquisition date. The goodwill of $4,584,622 represents expected synergies from the combined operations.

 

 F-10

 

NOTE 5 — PROPERTY & EQUIPMENT

 

Property and equipment are recorded at cost. The Company capitalizes purchases of property and equipment over $5,000. Depreciation is computed using the straight-line method over the estimated useful lives of the various classes of assets as follows between three and ten years.

 

Long lived assets, including property and equipment, to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Impairment losses are recognized if expected future cash flows of the related assets are less than their carrying values. Measurement of an impairment loss is based on the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.

 

Maintenance and repair expenses, as incurred, are charged to expense. Betterments and renewals are capitalized in plant and equipment accounts. Cost and accumulated depreciation applicable to items replaced or retired are eliminated from the related accounts with any gain or loss on the disposition included as income.

 

Clean-Seas, Inc. has purchased a pyrolysis unit for piloting and demonstration purposes which has been commissioned in Hyderabad, India as of May 2022. The unit will be used to showcase the Company’s technology and services, turning waste plastic into environmentally friendly commodities, to potential customers. 

 

Property, plant, and equipment at our Clean-Seas Morocco facility comprise equipment, buildings and fixtures, automobiles, furniture, and land. Upon acquisition, buildings and land were recorded at their estimated fair value, determined through a valuation conducted in 2018. Subsequently, these assets have been adjusted annually to reflect an approximate 5% increase in fair value, consistent with local real estate market trends. Depreciation for equipment, buildings, automobiles, and furniture is computed using the straight-line method over estimated useful lives of 5 to 10 years. 

 

Property and equipment stated at cost, less accumulated depreciation consisted of the following:

 

Schedule of property and equipment stated at cost
		September 30, 2024				December 31, 2023
Pyrolysis unit		$	185,700			$	185,691
Equipment			566,579				436,532
Buildings and fixtures			549,303				493,411
Land			3,883,607				3,867,095
Office furniture			2,301				998
Less: accumulated depreciation			(259,131	)			(100,161	)
Property and equipment, net		$	4,928,359			$	4,883,566

 

Depreciation expense

 

For the nine months ended September 30, 2024 and 2023, depreciation expense was $133,685 and $0, respectively.

  

NOTE 6 — LOANS PAYABLE

 

Effective January 1, 2024, the Company acquired a financing loan for its Director and Officer Insurance for $40,800. The loan bears interest at 8.75%, requires monthly payments of $4,245.41 and is due within one year. As of September 30, 2024, the balance due is $16,509.

 

West Virginia State Incentive Package

 

On June 12, 2023, Clean-Seas announced that it secured $12 million in state incentives, which includes $1.75 million in cash to establish a PCN facility outside of Charleston, West Virginia. Clean-Seas West Virginia, Inc., a West Virginia corporation (“Clean-Seas West Virginia”), has an existing feedstock supply agreement for 100 TPD of post-industrial plastic waste and is planned to be a PCN hub servicing the Mid-Atlantic states. The project will commence in phases, Phase 1 being 50 TPD, scaling up to 500 TPD. Additional project finance capital is in the process of being secured and the Company received the $1.75 million cash disbursement on September 25, 2023.   

 

 F-11

 

NOTE 7 — CONVERTIBLE NOTES PAYABLE

 

February Convertible Notes - Walleye Opportunities Master Fund Ltd

 

On February 21, 2023, the Company entered into a securities purchase agreement (the “February Purchase Agreement”) with certain institutional buyers. Pursuant to the February Purchase Agreement, the Company issued senior convertible notes in the aggregate principal amount of $4,000,000, which notes shall be convertible into shares of common stock at the lower of (a) 120% of the closing price of the common stock on the day prior to closing, or (b) a 10% discount to the lowest daily volume weighted average price (“VWAP”) reported by Bloomberg of the common stock during the 10 trading days prior to the conversion date  .

 

On February 21, 2023, the initial investor under the February Purchase Agreement purchased a senior convertible promissory note (the “February Note”) in the original principal amount of $2,500,000 and a warrant to purchase 29,434,850 shares of the Company’s common stock. The maturity date of the February Note is February 21, 2024 (the “Maturity Date”). The February Note bears interest at a rate of 5% per annum. The February Note carries an original issue discount of 2%. The Company may not prepay any portion of the outstanding principal amount, accrued and unpaid interest or accrued and unpaid late charges on principal and interest, if any, except as specifically permitted by the terms of the February Note. The Company also issued a warrant to the initial investor that is exercisable for shares of the Company’s common stock at a price of $0.0389 per share and expires five years from the date of issuance.

 

The terms of the February convertible note were amended pursuant to the March 2024 note (discussed below). The amendment changes the conversion price to $0.03 and extends the maturity date to December 1, 2024.

 

April Convertible Note - Walleye Opportunities Master Fund Ltd

 

Pursuant to the February Purchase Agreement, on April 10, 2023, an investor purchased a senior convertible promissory note (the “April Note”) in the original principal amount of $1,500,000 and the Company issued warrants for the purchase of up to 17,660,911 shares of the Company’s common stock to the investor. The April Note bears interest at a rate of 5% per annum. The April Note carries an original issue discount of 2%. The Company may not prepay any portion of the outstanding principal amount, accrued and unpaid interest or accrued and unpaid late charges on principal and interest, if any, except as specifically permitted by the terms of the April Note. The April Note is convertible into shares of common stock at $0.03 per share.

 

May Convertible Notes - Walleye Opportunities Master Fund Ltd

 

On May 26, 2023, the Company entered into that certain Securities Purchase Agreement (the “May Purchase Agreement”) with certain institutional investors (the “May Investors”), pursuant to which the May Investor purchased a senior convertible promissory note in the aggregate original principal amount of $1,714,285.71 (the “May Note”) and warrants to purchase 44,069,041 shares of the Company’s common stock (the “May Warrants”).

 

The May Note matures 12 months after issuance and bears interest at a rate of 5% per annum, as may be adjusted from time to time in accordance with Section 2 of the May Note. The May Note has an original issue discount of 30%. The Company may not prepay any portion of the outstanding principal amount, accrued and unpaid interest or accrued and unpaid late charges on principal and interest, if any, except as specifically permitted by the terms of the May Note. The May Note is convertible into shares of common stock at $0.0389 per share.

 

At any time, the Company shall have the right to redeem all, but not less than all, of the amount then outstanding under the May Note (the “Company Optional Redemption Amount”) on the Company Optional Redemption Date (as defined in the Note) (a “Company Optional Redemption”). The portion of the May Note subject to a Company Optional Redemption shall be redeemed by the Company in cash at a price equal to the greater of (i) 10% premium to the amount then outstanding under the May Note to be redeemed, and (ii) the equity value of our common stock underlying the May Note. The equity value of our common stock underlying the May Note is calculated using the greatest closing sale price of our common stock on any trading day immediately preceding such redemption and the date we make the entire payment required. The Company may exercise its right to require redemption under the May Note by delivering a written notice thereof by electronic mail and overnight courier to all, but not less than all, of the holders of May Note.

 

The May Warrants are exercisable for shares of the Company’s common stock at a price equal to 120% of the closing sale price of the common stock on the trading day ended immediately prior to the closing date (the “May Warrant Exercise Price”) and expire five years from the date of issuance. The May Warrant Exercise Price is subject to customary adjustments for stock dividends, stock splits, recapitalizations and the like.

 

 F-12

 

 

August 2023 Note - Coventry Enterprises, LLC

 

On July 31, 2023 (the “August Note Original Issue Date”), the Company entered into a securities purchase agreement (the “August Purchase Agreement”) with an accredited investor (the “August Investor”), pursuant to which the August Investor purchased a senior convertible promissory note in the original principal amount of $500,000 (the “August Note”). In addition, as an additional inducement to the August Investor for purchasing the August Note, the Company issued 21,000,000 shares of its common stock to the August Investor at the closing. These shares are being valued at the closing stock price on the date of grant with the relative fair value accounted for as a debt discount. The transactions contemplated under the August Purchase Agreement closed on August 4, 2023.

 

The August Note matures on July 31, 2024 and bears interest at a rate of 10% per annum (the “Guaranteed Interest”), carries an original issue discount of 15% and has a default conversion price of 90% per share of the lowest VWAP during the 20 trading day period before the conversion. The August Note requires monthly payments of $78,571.42, beginning December 31, 2023. The Company may prepay any portion of the outstanding principal amount and the guaranteed interest at any time and from time to time, without penalty or premium, provided that any such prepayment will be applied first to any unpaid collection costs, then to any unpaid fees, then to any unpaid Default Rate interest (as defined in the August Note), and any remaining amount shall be applied first to any unpaid guaranteed interest, and then to any unpaid principal amount.

 

The August Investor was granted a right of first refusal as the exclusive party with respect to any Equity Line of Credit transaction or financing (an “Additional Financing”) that the Company enters into during the 24-month period after the August Note Original Issue Date. In the event the Company enters into an Additional Financing, the Company must provide notice to the August Investor not less than 10 trading days in advance of the proposed entry. If the August Investor accepts all usual and customary terms set forth in the Additional Financing notice, the August Investor must, within 20 trading days of receipt of the notice, prepare all relevant documents in respect thereof for execution and delivery by the Company, provided, however, that the Company’s outside counsel must prepare the relevant registration statement to be filed with the United States Securities and Exchange Commission no later than 45 days after the Company receives the documents.

  

The August Note sets forth certain standard events of default (each such event, an “August Note Event of Default”), which, upon such August Note Event of Default, the principal amount and the guaranteed interest then outstanding under the August Note becomes convertible into shares of the Company’s common stock pursuant to a notice provided by the August Investor to the Company. At any time after the occurrence of an August Note Event of Default, the outstanding principal amount and the outstanding guaranteed interest then outstanding on the August Note, plus accrued but unpaid Default Rate (as defined in the August Note) interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become immediately due and payable at the August Investor’s option, in cash or in shares of the Company’s common stock at 120% of the outstanding principal amount of the August Note and accrued and unpaid interest, plus other amounts, costs, expenses and liquidated damages due in respect of the August Note. 

 

October 2023 Note - GS Capital Partners

 

On October 26, 2023, the Company entered into a Securities Purchase Agreement (the “October Purchase Agreement”) with an accredited investor (the “October Investor”) related to the Company’s sale of two 12% convertible notes in the aggregate principal amount of $660,000 (each note being in the amount of $330,000 and containing an original issue discount of $30,000 such that the purchase price of each note is $300,000) (each “Note,” and together the “Notes”) are convertible into shares of the Company’s common stock, par value $0.001 per share, upon the terms and subject to the limitations set forth in each Note. The Company issued and sold the first Note (the “First Note”) on October 26, 2023 (the “First Closing Date” or the “First Issuance Date”). The second note was not funded.

 

On the First Closing Date, the Company issued 800,000 restricted shares of Common Stock to the Purchaser as additional consideration for the purchase of the First Note (the “First Note Commitment Shares”). Upon the closing of the Second Note, the Company will issue additional commitment shares in an amount calculated based on the price per share of the Common Stock at the time of funding of such Second Note (the “Second Note Commitment Shares,” and together with the First Note Commitment Shares, the “Commitment Shares”). In addition to the Commitment Shares, the Company agreed to issue 7,500,000 shares of Common Stock to the Purchaser (the “Returnable Shares”) for each Note. Each issuance of Returnable Shares is subject to recalculation based on the price per share of Common Stock at the time of funding for each Note, such that the economic value of each set of Returnable Shares shall be equal to the value of the initial set of Returnable Shares. For example, if on the Second Closing Date, the closing price of the Common Stock is 50% of the closing price of the Common Stock on the First Closing Date, the Company will be required to issue 15,000,000 Returnable Shares on the Second Note Closing Date. The Returnable Shares must be returned to the Company unless each Note enters into an uncured default during its term, or the Company is otherwise unable to repay each Note on or prior to maturity.

 

 F-13

 

 

ClearThink Financing

 

On February 12, 2024, the Company and ClearThink Capital LLC (“ClearThink”) entered into a (i) Securities Purchase Agreement (the “SPA”) and (ii) STRATA Purchase Agreement (the “STRATA Agreement” and together with the SPA, collectively, the “ClearThink Agreements”).

 

SPA

 

Pursuant to the SPA, the Company agreed to sell, and ClearThink agreed to purchase, two (2) separate 12% convertible notes of the Company (the first such note, the “First Note Tranche,” the second such note, the “Second Note Tranche,” and collectively, the “ClearThink Notes”) in the aggregate principal amount of $440,000 (each such ClearThink Note being in the amount of $220,000.00 and containing an original issue discount of $20,000, resulting in the purchase price of each such ClearThink Note being $200,000.00), which are convertible Common Stock. In addition, the Company agreed to issue 3,100,000 shares of restricted Common Stock (the “Commitment Shares”) to ClearThink as additional consideration for the First Note Tranche and as an inducement for the Investor to enter into the STRATA Agreement; provided, however, that 2,500,000 shares of Commitment Shares will be returned to the Company if the Company, at its option, does not consummate the transactions contemplated by the STRATA Agreement by not filing the Registration Statement on Form S-1 with the U.S. Securities and Exchange Commission covering the resale of all securities issuable under each of the ClearThink Agreements (the “Resale Registration Statement”).

  

The First Note Tranche was issued on February 12, 2024 and the Second Note Tranche shall be issued within three (3) days after the Company’s filing of the Resale Registration Statement.

 

While any of the securities issued or issuable under the SPA are outstanding, upon any issuance by the Company or any of its subsidiaries of any security, or amendment to a security that was originally issued before the SPA Closing Date, with any term that the Investor reasonably believes is more favorable to the Investor of such security or with a term in favor of the Investor of such security that the Investor reasonably believes was not similarly provided to ClearThink in the ClearThink Note, (i) the Company shall notify the Investor of such additional or more favorable term within one (1) business day of the issuance and/or amendment (as applicable) of the respective security, and (i) such term, at Investor's option, shall become a part of the transaction documents with the Investor (regardless of whether the Company complied with the notification provision herein). The types of terms contained in another security that may be more favorable to the Investor of such security include, but are not limited to, terms addressing prepayment rate, interest rates, and original issue discounts, conversion or exercise prices warrant coverage and pricing, commitment shares and similar terms and conditions.

 

The ClearThink Note contains a principal amount of $220,000 (the “Principal”) with guaranteed interest (the “Interest”) at a rate of twelve percent (12%) per calendar year from the date of issuance. All Principal and Interest, along with any and all other amounts, shall be due and owing on November 12, 2024 (the “Maturity Date”), with a lump-sum interest payment equal to $26,400 payable on the SPA Closing Date, which is added to the principal balance and payable by the Company on the Maturity Date or upon acceleration or by prepayment or otherwise, notwithstanding the number of days which the Principal is outstanding. Unless the Investor elects to convert the Note into shares of Common Stock, Principal payments shall be made in four installments, each in the amount of $50,000 commencing on the one hundred eightieth (180^th) day anniversary following the SPA Closing Date and continuing thereafter each thirty (30) days for four (4) months thereafter. The ClearThink Note may be prepaid in whole or in part as set forth therein and any amount of Principal or Interest on the ClearThink Note which is not paid when due shall bear interest at the rate of the lesser of (i) twenty four percent (24%) per annum (which shall be guaranteed and applied to the balance due under the ClearThink Note upon an Event of Default (as defined in the ClearThink Note)) and (ii) the maximum amount permitted under law from the due date thereof until the same is paid.

 

Trillium Financing

 

On February 15, 2024, the Company entered into a Securities Purchase Agreement (the “Trillium Agreement”) with Trillium Partners L.P. (“Trillium”), whereby the Company issued and sold to Trillium (i) a promissory note (the “Trillium Note”) in the aggregate principal amount of $580,000 (which includes $87,500 of Original Issue Discount) (the “Trillium Principal”), convertible into Common Stock, upon default, upon the terms and subject to the limitations and conditions set forth in such Trillium Note, and (ii) 4,000,000 restricted shares of Common Stock (the “Commitment Shares”).

 

 F-14

 

 

Although the Trillium Agreement was dated and signed on February 15, 2024, it did not become effective until the conditions set forth in Section 6 and Section 7 of the Trillium Agreement were satisfied, which occurred on February 22, 2024 (the “Trillium Closing Date”). 

 

The maturity date of the Trillium Note is January 15, 2025 (the “Trillium Maturity Date”) and a one-time interest charge of ten percent (10%) or $58,000 (the “Trillium Interest Rate”) shall be applied to the Trillium Principal on the date of issuance. The Company has the right to prepay the Trillium Note in full at any time with no prepayment penalty. Accrued, unpaid Trillium Interest and outstanding Trillium Principal, subject to adjustment, shall be paid in seven payments, each in the amount of $91,142.86 (a total payback to the Holder of $638,000).

 

At any time following an Event of Default (as defined in the Trillium Note), Trillium has the right to convert all or any part of the outstanding and unpaid amount of the Trillium Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the date of issuance, or any shares of capital stock or other securities of the Company into which such Common Stock shall hereafter be changed or reclassified at the conversion price determined as provided herein (a “Conversion”), provided, that such Conversion or Conversions do not result in Trillium beneficially owning more than 9.99% of the outstanding shares of Common Stock.

 

Pursuant to the Trillium Note, beginning on the fifth month anniversary of the Issuance Date, and for the next six months after, the Company will make a total of seven (7) equal monthly payments of $91,142.85. In the event that the Company defaults and misses a payment, then the Investor will be able to do a “default conversion. The conversion price (the “Trillium Conversion Price”) is equal to the lower of: (i) the Fixed Conversion Price of $0.03; (ii) the Variable Conversion Price (70% of the lowest trade for the twenty days prior to conversion); and (iii) the Alternative Conversion Price (lowest price os any common stock during the period thirty days prior to a default).   The Company agreed to initially reserve from its authorized and unissued Common Stock, 72,000,000 shares of Common Stock (the “Reserve Amount”), which Reserve Amount shall be increased from time to time in accordance with the terms of the Trillium Note.

   

Under the terms of the Trillium Agreement, the Company agreed to use its best efforts to effect the registration and the sale of the Commitment Shares and the Conversion Shares (collectively, the “Registerable Securities”) by filing with the SEC an amendment to its Registration Statement on Form S-1 (as initially filed with the SEC on November 3, 2023 as amended on December 15, 2023) with respect to such Registrable Securities.

 

March 2024 Financing Walleye Opportunities Master Fund Ltd.

 

On February 17, 2023, the Company entered into a Securities Purchase Agreement (the “Prior Agreement”) with Walleye Opportunities Master Fund Ltd. (the “March Investor”) for the sale of up to $4,000,000 in aggregate principal amount of senior convertible promissory notes and warrants to acquire shares Common Stock. The initial closing under the Prior Agreement occurred on February 21, 2023, when the Company issued to the March Investor (i) a senior convertible promissory note in the principal amount of $2,500,000 (the “Existing Note”) and (ii) warrants to purchase up to 29,434,850 shares of Common Stock (the “Existing Warrant”). 

 

On March 25, 2024 (the “Issue Date”), the Company and March Investor entered into a Securities Purchase Agreement (the “March Purchase Agreement”), whereby: (i) the Company issued to the March Investor (a) a convertible note in the aggregate principal amount of $666,666 (the “March 2024 Note”), and (b) a warrant initially exercisable to acquire up to 22,222,220 shares of Common Stock at an exercise price of $0.03 per share (the “March 2024 Warrant”); and (ii) the parties agreed to amend and restate the Existing Note and Existing Warrant as discussed below.

 

March 2024 Note

 

At any time on or after the Issue Date, the March Investor shall be entitled to convert any portion of the outstanding Conversion Amount (as defined in the March 2024 Note) into validly issued, fully paid and non-assessable shares of Common Stock at a conversion price equal to $0.03 per share, subject to adjustment as set forth in the March 2024 Note.

 

 F-15

 

 

Interest accruing on the March 2024 Note is payable to the March Investor in shares of Common Stock; provided, however, that the Company may pay any such interest in cash or in a combination of cash and shares of Common Stock. The March 2024 Note bears interest at a rate of 5% per annum, as may be adjusted from time to time, and matures on October 1, 2024 (the “March Note Maturity Date”); provided, however, that the March Note Maturity Date may be extended at the option of the Investor as provided in the March 2024 Note.

 

The Company shall have the right to redeem all, but not less than all, of the amount then outstanding under the March 2024 Note at any time. Any redemption shall be made by the Company in cash at a price equal to the greater of (i) 120% of the Conversion Amount (as defined in the March 2024 Note), and (ii) the product of (1) the Conversion Rate (as defined in the March 2024 Note) with respect to the Conversion Amount being redeemed multiplied by (2) the greatest closing sale price of the Common Stock on any trading day immediately preceding the date such redemption payment is made  . Upon the occurrence of an Event of Default under the March 2024 Note, the Investor may require the Company to redeem all or any portion of the March 2024 Note, regardless of whether such Event of Default has been cured.

 

March 2024 Warrant

 

The March 2024 Warrant (i) is exercisable for the purchase of up to 22,222,220 shares of Common Stock at an exercise price of $0.03 per share, subject to customary adjustments, and (ii) expires five years from the date of issuance.

 

Registration Rights Agreement

 

On the Issue Date, the Company and the March Investor entered into a registration rights agreement (the “RRA”), pursuant to which the Company agreed to file with the SEC, within 45 days after the Issue Date, a registration statement covering the resale of all securities issuable to the March Investor under the March Purchase Agreement.

 

Amended and Restated Note

 

In connection with the March Purchase Agreement, the Company and March Investor amended and restated the Existing Note as set forth in that certain Amended and Restated Convertible Note dated March 25, 2024 (the “A&R Note). At any time, the March Investor shall be entitled to convert any portion of the outstanding Conversion Amount (as defined in the A&R Note) into validly issued, fully paid and non-assessable shares of Common Stock at a conversion price equal to $0.03 per share, subject to adjustment as set forth in the A&R Note.

 

Interest accruing on the A&R Note is payable to the March Investor in shares of Common Stock; provided, however, that the Company may pay any such interest in cash or in a combination of cash and shares of Common Stock. The A&R Note bears interest at a rate of 5% per annum and matures on December 1, 2024 (the “A&R Note Maturity Date”); provided, however, that the A&R Note Maturity Date may be extended at the option of the as provided in the A&R Note).

 

The Company shall have the right to redeem all, but not less than all, of the amount then outstanding amount under the A&R Note at any time. Any redemption shall be made by the Company in cash at a price equal to the greater of (i) 120% of the Conversion Amount (as defined in the A&R Note), and (ii) the product of (1) the Conversion Rate (as defined in the A&R Note) with respect to the Conversion Amount being redeemed multiplied by (2) the greatest closing sale price of our Common Stock on any trading day immediately preceding the date such redemption payment is made.

  

Amended and Restated Warrant

 

In connection with the Purchase Agreement, the Company and March Investor agreed to amend and restate the Existing Warrant as set forth in that certain Amended and Restated Warrant to Purchase Common Stock dated March 25, 2024 (the “A&R Warrant). The A&R Warrant is exercisable for the purchase of up to 22,222,220 shares of Common Stock at an exercise price of $0.03 per share, subject to customary adjustments, and (ii) expires five years from the Issue Date.

 

May 2024 SPA and STRATA

 

On May 29, 2024 (the “SPA Closing Date”), the Company closed on the transactions contemplated by that certain Securities Purchase Agreement (the “SPA”) with an accredited investor (the “Investor”) and entered into a STRATA Purchase Agreement (the “STRATA Agreement” and together with the SPA, collectively, the “Agreements”) with the Investor, whereby the Investor agreed to purchase up to $5,000,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”).

 

 F-16

 

 

Pursuant to the SPA, the Company agreed to sell, and the Investor agreed to purchase, a convertible amortization note of the Company (the “Note”) in the aggregate principal amount of $110,000 (such Note being in the amount of $110,000 and containing an original issue discount of $10,000, resulting in the purchase of such Note being $110,000), which Note is convertible into shares of Common Stock as set forth in the Note. In addition, on the SPA Closing Date, the Company issued 5,000,000 shares of restricted Common Stock (the “Commitment Shares”) to the Investor as additional consideration and an inducement for the Investor to enter into the STRATA Agreement.

 

Beginning on the Commencement Date (as defined in the STRATA Agreement) and subject to the terms and conditions in the STRATA Agreement, the Company shall have the right, but not the obligation, to direct the Investor to purchase up to Five Million Dollars ($5,000,000) of Common Stock (the “Purchase Shares”), subject to adjustment, up to the Request Limit (as defined below), at the Purchase Price (as defined below) on the date on which the Investor receives a valid notice (the “Purchase Notice”) from the Company directing the Investor to acquire the Purchase Shares (the date on which the Investor receives such notice, the “Closing Request Date”). Pursuant to the STRATA Agreement, the Company is not allowed to issue a Purchase Notice to the Investor until the Registration Statement (as defined below) has been declared effective with the SEC.

 

The foregoing description of the May 29, 2024 transactions does not purport to be complete and is qualified in its entirety by reference to the form of SPA, Note, STRATA Agreement and RRA attached to Current Report on Form 8-K file by the Company June 4, 2024 with the SEC on as Exhibits 10.1, 4.1, 10.2 and 10.3, respectively.

 

On June 14, 2024, the Company issued a convertible promissory note to Coventry Enterprises, LLC in the aggregate principal amount of $100,000 (which includes $10,000 of Original Issue Discount). Coventry received 5,000,000 restricted shares of Common Stock as Commitment Shares.

 

The Company accounted for the above Convertible Notes according to ASC 815. For the derivative financial instruments that are accounted for as liabilities, the derivative liability was initially recorded at its fair value and is being re-valued at each reporting date, with changes in the fair value reported in the statements of operations.

 

For the warrants that were issued with each tranche of funding, the Company uses a weighted-average Black-Scholes-Merton option pricing model to value the warrants at inception and then calculates the relative fair value for each loan.

 

Commitment shares are valued at the closing stock price on the effective date of the promissory note. The value of the shares is accounted for as debt discount.

 

The Company deducts the total value of all discounts (OID, value of warrants, discount for derivative) from the calculated derivative liability with any difference accounted for as a loss on debt issuance.

  

The following table summarizes the convertible notes outstanding as of September 30, 2024:

 

 F-17

 

Schedule of convertible notes outstanding
Note Holder		Date		Maturity Date		Interest			Balance December 31, 2023				Additions				Repayments / Conversions			Balance September 30, 2024
Walleye Opportunities Fund		2/21/2023		12/1/2024			5%			436,316				—				—			436,316
Walleye Opportunities Fund		4/10/2023		4/10/2024			5%			1,500,000				—				—			1,500,000
Walleye Opportunities Fund		5/26/2023		5/26/2024			5%			1,714,286				—				—			1,714,286
Coventry Enterprises, LLC		7/31/2023		7/31/2024			10%			500,000				—				(500,000) (1)			—
GS Capital Partners		10/26/2023		7/26/2024			12%