Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended June 30, 2020

 

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

 

For the transition period from ____________to _____________

 

Commission file number 000-54464

 

THUNDER ENERGIES CORPORATION
(Exact Name of Registrant as specified in its charter)

 

Florida   45-1967797

(State or jurisdiction of

Incorporation or organization

 

(I.R.S Employer

Identification No.)

 

111 Moorings Dr Lantana, FL   33462
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: 561 570 4301

 

Securities registered under Section 12(b) of the Exchange Act:

 

Title of each class   Name of each exchange on which registered
None   N/A

 

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

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
None        

 

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 checkmark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to rule 405 of Regulation S-T 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, emerging growth company or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, “emerging growth company” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer   Accelerated filer
Non-accelerated filer (Do not check if a smaller company) 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 Act). ☐ Yes ☒ No

 

The number of shares outstanding of the issuer’s Common Stock, $0.001 par value, as of August 12, 2020 was 12,645,255 shares.

 

   

 

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

This quarterly report on Form 10-Q contains certain forward-looking statements. Forward-looking statements may include our statements regarding our goals, beliefs, strategies, objectives, plans, including product and service developments, future financial conditions, results or projections or current expectations. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue,” the negative of such terms, or other comparable terminology. For example, when we discuss our pursuit of strategic transactions including acquisitions, dispositions, capital raising and debt restructuring, that our revenues will increase in 2020, and that we intend to invest in sales, marketing, product development and innovation, we are using forward-looking statements. These statements are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause actual results to be materially different from those contemplated by the forward-looking statements. These factors include, but are not limited to, our ability to implement our strategic initiatives, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors. Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. The business and operations of Thunder Energies Corporation are subject to substantial risks, which increase the uncertainty inherent in the forward-looking statements contained in this report. Except as required by law, we undertake no obligation to release publicly the result of any revision to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. Further information on potential factors that could affect our business is described under “Item 1A. Risk Factors” in our restated annual report on Form 10-K as filed with the Securities and Exchange Commission, or the SEC, on May 15, 2020 and in this quarterly report on Form 10-Q. Readers are also urged to carefully review and consider the various disclosures we have made in this report and in our restated annual report on Form 10-K.”

 

 

 

 

 

 

 

 

 

 

 

 

 

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THUNDER ENERGIES CORPORATION

Quarterly Period Ended June 30, 2020

 

TABLE OF CONTENTS

 

Heading   Page  
       
PART I – FINANCIAL INFORMATION  
   
Item 1. Condensed Financial Statements (unaudited)     4  
           
  Condensed Balance Sheets – June 30, 2020 (unaudited) and December 31, 2019     4  
           
  Condensed Statements of Operations – Three and six months ended June 30, 2020 and 2019 (unaudited)     5  
           
  Condensed Statements of Changes in Stockholders’ Deficit for the Three and six months ended June 30, 2020 and 2019 (unaudited)      6  
           
  Condensed Statements of Cash Flows – Three and six months ended June 30, 2020 and 2019 (unaudited)     7  
           
  Notes to the Condensed Financial Statements (unaudited)     8  
           
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations     29  
         
Item 3. Quantitative and Qualitative Disclosures About Market Risk     38  
         
Item 4. Controls and Procedures     38  
           
PART II – OTHER INFORMATION  
         
Item 1. Legal Proceedings     40  
         
Item1A. Risk Factors     40  
         
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds     40  
         
Item 3. Defaults Upon Senior Securities     40  
         
Item 4. Mine Safety Disclosure     40  
         
Item 5. Other Information     40  
           
Item 6. Exhibits     41  
           
  Signatures     42  

 

 

 

  3  

 

  

PART I – FINANCIAL INFORMATION

 

Item 1. Condensed Financial Statements.

 

THUNDER ENERGIES CORPORATION

Condensed Balance Sheets

 

    June 30,     December 31,  
    2020     2019  
ASSETS                
Current Assets                
Cash   $ 1,655     $ 3,111  
Prepaid expenses     56,500        
Total current assets     58,155       3,111  
                 
Non-current assets                
Intangible assets, net of accumulated amortization and impairment of $15,320 and $15,320, respectively            
Total non-current assets            
                 
TOTAL ASSETS   $ 58,155     $ 3,111  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT                
Current Liabilities                
Accounts payable   $ 1,550     $  
Accrued interest     23,204       5,365  
Derivative liability     216,443       60,909  
Convertible note payable, net of discount of $46,308 and $0, respectively     107,458       57,000  
Total current liabilities     348,655       123,274  
                 
Long-term liabilities:                
Convertible note payable, net of discount of $12,222 and $0, respectively     37,778        
Total long-term liabilities     37,778        
                 
TOTAL LIABILITIES     386,433       123,274  
                 
COMMITMENTS AND CONTINGENCIES                
                 
Stockholders’ deficit                
Preferred stock - Series A: $0.001 par value, 50,000,000 authorized; 50,000,000 and 50,000,000 shares issued and outstanding, respectively     50,000       50,000  
Preferred stock - Series B: $0.001 par value, 10,000,000 authorized; 5,000 and 0 shares issued and outstanding, respectively     5        
Preferred stock - Series C: $0.001 par value, 10,000,000 authorized; 10,000 and 0 shares issued and outstanding, respectively     10        
Common stock: $0.001 par value 900,000,000 authorized; 12,645,255 and 11,544,923 shares issued and outstanding, respectively*     12,645       11,545  
Additional paid in capital     5,383,426       4,989,405  
Accumulated deficit     (5,774,364 )     (5,171,113 )
Total stockholders’ deficit     (328,278 )     (120,163 )
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT   $ 58,155     $ 3,111  

 

* Reflects the 1-for-20 reverse stock split that became effective on June 7, 2019. Refer to Note 3 – Summary of Significant Accounting Policies for further information.

 

See notes to financial statements

 

  4  

 

 

THUNDER ENERGIES CORPORATION

Condensed Statements of Operations

 

    For the Six Months Ended     For the Three Months Ended  
    June 30,     June 30,  
    2020     2019     2020     2019  
                         
REVENUE                        
Product sales   $     $     $     $  
                                 
OPERATING EXPENSES                                
Research and development     2,741       41,310             27,053  
Stock in exchange for services           817,075             738,050  
Professional fees     78,260       83,166       29,300       38,718  
Selling, general and administrative expenses     31,505       113,897       31,009       53,025  
Total operating expenses     112,506       1,055,448       60,309       856,846  
                                 
Loss from operations     (112,506 )     (1,055,448 )     (60,309 )     (856,846 )
                                 
Other expense (income)                                
Interest expense in conjunction with debt issuance     81,605       11,724       12,835       9,908  
Accretion of debt discount     106,522       21,850       55,018       21,850  
Change in fair value of derivative liability     (9,044 )     (681 )     (2,416 )     (681 )
Extinguishment of derivative liability related to debt conversion     (25,686 )                  
Loss on extinguishment of change in control     337,348                    
Total other expense     490,745       32,893       65,437       31,077  
                                 
Loss before income tax     (603,251 )     (1,088,341 )     (125,746 )     (887,923 )
                                 
Provision for income taxes                        
                                 
Net loss   $ (603,251 )   $ (1,088,341 )   $ (125,746 )   $ (887,923 )
                                 
Net loss per share of common stock:                                
Basic and diluted   $ (0.05 )   $ (0.18 )   $ (0.01 )   $ (0.13 )
                                 
Weighted average shares outstanding:                                
Basic and diluted     11,602,292       6,157,465       11,768,332       6,618,317  

 

* Reflects the 1-for-20 reverse stock split that became effective on June 7, 2019. Refer to Note 3 – Summary of Significant Accounting Policies for further information.

 

See notes to financial statements

 

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THUNDER ENERGIES CORPORATION

Condensed Statements of Changes in Stockholders’ Deficit

 

    Preferred Stock A     Preferred Stock B     Preferred Stock C     Common Stock*     Additional paid     Accumulated        
    Shares     Amount     Shares     Amount     Shares     Amount     Shares     Amount     capital     Deficit     Total  
Balance, December 31, 2018     50,000,000     $ 50,000           $                 $             5,207,330     $ 5,207     $ 3,159,848     $ (3,781,938 )   $ (565,933 )
Common stock issued for services                                         469,167       469       78,556             79,025  
Common stock issued for cash                                         577,258       578       53,122             53,700  
Net loss                                                           (200,418 )     (200,418 )
Balance, March 31, 2019     50,000,000     $ 50,000           $           $       6,253,755     $ 6,254     $ 33,291,527     $ (3,982,356 )   $ (633,626 )
                                                                                         
Common stock issued for service                                         587,500       588       737,462             738,050  
Adjustment for fractional shares due to 1 for 20 reverse split*                                         9             950              
Paid-in capital – Derivative liability                                                     (6,788 )           (6,788 )
Net loss                                                           (887,923 )     (887,923 )
Balance, June 30, 2019     50,000,000     $ 50,000           $           $       6,841,264     $ 6,841     $ 4,023,151     $ (4,870,279 )   $ (790,286 )
                                                                                         
Balance, December 31, 2019     50,000,000     $ 50,000           $           $       11,544,923     $ 11,545     $ 4,989,405     $ (5,171,113 )   $ (120,163 )
Cancellation of shares to director                                         (299,668 )     (300 )     300              
Paid-in capital – Derivative liability                                                     (25,212 )           (25,212 )
Preferred stock issued in conjunction with convertible notes payable                 5,000       5       10,000       10                   34,985             35,000  
Loss on extinguishment of change of control                                                     337,348             337,348  
Net loss                                                           (477,505 )     (477,505 )
Balance as at March 31, 2020     50,000,000     $ 50,000       5,000     $ 5       10,000     $ 10       11,245,255     $ 11,245     $ 5,336,826     $ (5,648,618 )   $ (250,532 )
                                                                                         
Common stock issued for cash                                         1,400,000       1,400       46,600             48,000  
Net loss                                                           (125,746 )     (125,746 )
Balance, June 30, 2019     50,000,000     $ 50,000       5,000     $ 5       10,000     $ 10       12,644,923     $ 12,645     $ 5,383,426     $ (5,774,364 )   $ (328,278 )

 

* Reflects the 1-for-20 reverse stock split that became effective on June 7, 2019. Refer to Note 3 – Summary of Significant Accounting Policies for further information

 

See notes to financial statements

 

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THUNDER ENERGIES CORPORATION

Condensed Statements of Cash Flows

 

    For the Six Months Ended June 30,  
    2020     2019  
             
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net loss   $ (603,251 )   $ (1,088,341 )
Adjustment to reconcile net loss to net cash used in operations:                
Change in fair value of derivative liability     (9,044 )     (681 )
Accretion of debt discount     106,522       21,850  
Extinguishment of derivative liability related to debt conversions     (25,686 )      
Loss on extinguishment of change of control     337,348        
Interest expense in conjunction with debt issuance     81,605        
Stock issued for services provided           817,075  
Changes in assets and liabilities:                
Increase (decrease) in operating liabilities:                
Prepaid expenses     (56,500 )      
Accounts payable     1,550        
Accrued interest           1,717  
Accrued interest – related party           129,008  
Net cash used in operating activities     (167,456 )     (119,372 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES:                
Proceeds from shareholder loans           4,000  
Proceeds from convertible notes payable     118,000       57,000  
Issuance of common stock     48,000       53,700  
Net cash provided by financing activates     166,000       114,700  
                 
Net decrease in cash     (1,456 )     (4,672 )
                 
Cash                
Beginning of period     3,111       7,920  
End of period   $ 1,655     $ 3,248  
                 
Supplemental cash flow information                
Cash paid for interest   $     $  
Cash paid for taxes   $     $  
                 
Non-cash transactions:                
Preferred stock issued in conjunction with convertible notes payable   $ 34,995     $  
Cancellation of shares to director against additional paid in capital     300        
Extinguishment of derivative liability related to debt conversions     25,686        
Original discount recorded on the recognition of notes with derivative liability     165,052       57,000  

 

See notes to financial statements

 

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THUNDER ENERGIES CORPORATION

Notes to Condensed Financial Statements

For the Three Months Ended June 30, 2020 and 2019

 

NOTE 1 – NATURE OF BUSINESS

 

Thunder Energies Corporation (“we”, “us”, “our”, “TEC” or the “Company”) was incorporated in the State of Florida on April 21, 2011.

 

On July 29, 2013, the Company filed with the Florida Secretary of State, Articles of Amendment to its Articles of Incorporation (the “Amendment”) which changed the name of the Company from CCJ Acquisition Corp. to Thunder Fusion Corporation. The Amendment also changed the principal office address of the Company to 150 Rainville Road, Tarpon Springs, Florida 34689. On May 1, 2014, the Company filed with the Florida Secretary of State, Articles of Amendment to its Articles of Incorporation (the “Amendment”) which changed the name of the Company from Thunder Fusion Corporation to Thunder Energies Corporation. The Company subsequently changed its principal office address to 111 Moorings Dr., Lantana, Florida 33462.

 

The Company is primarily involved in offering yachts and jets to the end-user and the general public for sale and or charter.

 

Description of Business, Principal Products, Services

 

Thunder Energies is doing business as NACAELI. A luxurious new brand of fractional luxury yachts, and private jets. Nacaeli, meaning Air and Water, is derived from the merger of the Latin word Na and Caeli from the South Pacific (Hawaiian) dialect to create and formulate our Air+Water Nacaeli unique Corporate identity name and brand

 

On March 24, 2020, Thunder Energies, Inc. announced its operational affiliate plans with Saveene.Com Inc. (“Saveene”) the preferred shareholder. Under the agreement, Saveene will grant Thunder Energies access to several yachts and jets for the purpose of offering these vessels to the end-user and the general public for sale and or charter. Additionally, Thunder Energies will gain access to several patent-pending technologies and the entire Saveene back office that focuses on the yacht and jet industry sector. This operational affiliate plan with Saveene.Com will allow Thunder Energies to offer a white-label type solution and OEM or original equipment manufacturer under Thunder Energies, Inc. own brand name Nacaeli, dispensing the need to acquire and carry any inventory. All future Thunder Energies, Inc. and or Nacaeli brand fulfillment orders for general maintenance, and any upkeep matters such as mechanical repair, buffering, and similar will be outsourced, other than administrative operational and corporate governance tasks.

 

NOTE 2 – Basis of Presentation

 

The included (a) condensed balance sheet as of December 31, 2019, which has been derived from audited financial statements, and (b) the unaudited condensed financial statements as of June 30, 2020 and 2019, 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 (“SEC”), and should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s December 31, 2019 and 2018 audited financial statements filed on Form 10-K on May 15, 2020. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for future quarters or for the full year. Notes to the condensed financial statements which substantially duplicate the disclosure contained in the financial statements as reported in the Annual Report on Form 10-K for the year ended December 31, 2019 as filed on May 15, 2020, have been omitted.

 

The Company currently operates in one business segment. The Company is not organized by market and is managed and operated as one business. A single management team reports to the chief operating decision maker, the Chief Executive Officer, who comprehensively manages the entire business. The Company does not currently operate any separate lines of businesses or separate business entities.

 

 

 

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Going Concern

 

For the six months ended June 30, 2020 and 2019, the Company had net losses of $603,251 and $1,088,341, respectively. As of June 30, 2020, the Company had a working capital deficit of $282,518. The Company has generated $0 and $0 in revenues for the six months ended June 30, 2020 and 2019, respectively.

 

The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating cost and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan to obtain such resources for the Company include, obtaining capital from management and significant stockholders sufficient to meet its minimal operating expenses. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.

 

There is no assurance that the Company will be able to obtain sufficient additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to the Company. In addition, profitability will ultimately depend upon the level of revenues received from business operations. However, there is no assurance that the Company will attain profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

The condensed financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements. The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to GAAP and have been consistently applied in the preparation of the financial statements.

 

USE OF ESTIMATES

 

The preparation of these financial statements in accordance 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 and disclosures of contingent assets and liabilities at the dates of the financial statements and the reported amounts of net sales and expenses during the reported periods. Actual results may differ from those estimates and such differences may be material to the financial statements.

 

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimates are revised if the revision affects only that period, or in the period of the revision and future periods.

 

The areas involving higher degree of judgment and complexity, or areas where assumptions and estimates made by the management are significant to the financial statements are as follows:

 

i) Useful life of intangible assets
ii) Impairment of non-financial assets
iii) Provision for impairment of trade receivables
iv) Research and development expense
v) Determination of the fair value

 

 

 

  9  

 

 

REVERSE STOCK SPLIT

 

On May 14, 2019, the Board of Directors of the Company approved Articles of Amendment to the Company’s Articles of Incorporation that provided for a 1 for 20 reverse stock split of the Company’s Common Stock. The Company’s Articles of Amendment were filed with the Secretary of State of the State of Florida on May 17, 2019. The effective date of the reverse stock split was subject to approval by FINRA, and the reverse stock split was published to the market and effective on June 24, 2019. At the effective time of the reverse stock split, every 20 issued and outstanding shares of the Company’s Common Stock were automatically combined into one issued and outstanding share of common stock, without any change in the par value per share or number of authorized shares of Common Stock. All share and per share amounts contained in this Quarterly Report on Form 10-Q and the accompanying Financial Statements have been adjusted to reflect the Reverse Stock Split for all prior periods presented.

 

CASH AND CASH EQUIVALENTS

 

The Company considers all highly liquid investments with an original maturity of three months or less at the date of acquisition to be cash equivalents. Cash totaled $1,655 and $3,111 at June 30, 2020 and December 31, 2019, respectively. The Company had no cash equivalents as of June 30, 2020 and December 31, 2019, respectively.

 

ACCOUNTS RECEIVABLE

 

Accounts receivable are non-interest-bearing obligations due under normal course of business. Management reviews accounts receivable on a monthly basis to determine if any receivables will be potentially uncollectible. Historical bad debts and current economic trends are used in evaluating the allowance for doubtful accounts. The Company includes any accounts receivable balances that are determined to be uncollectible in its overall allowance for doubtful accounts. After all attempts to collect a receivable have failed, the receivable is written off against the allowance. Based on the information available, the Company believes its allowance for doubtful accounts as of June 30, 2020 and December 31, 2019 is adequate.

 

CASH FLOWS REPORTING

 

The Company follows ASC 230, Statement of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period.

 

RELATED PARTIES

 

The Company follows ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions.

 

REVENUE RECOGNITION

 

On January 1, 2018, the Company adopted Accounting Standards Codification ASC 606 (“ASC 606”), Revenue from Contracts with Customers, using the modified retrospective approach for all contracts not completed as of the date of adoption. As a result of adopting ASC 606, amounts reported under ASC 606 were not materially different from amounts that would have been reported under the previous revenue guidance of ASC 605, as such, no cumulative adjustment to retained earnings.

 

 

 

  10  

 

 

The Company sells a wide portfolio of products to its customers. The Company’s agreements have varying requirements depending on the goods and services being sold, the rights and obligations conveyed, and the legal jurisdiction of the arrangement. The Company recognizes revenue when we satisfy a performance obligation by transferring control of the promised services to a customer in an amount that reflects the consideration that we expect to receive in exchange for those services. The Company determines revenue recognition through the following steps:

 

1. Identification of the contract, or contracts, with a customer.

2. Identification of the performance obligations in the contract.

3. Determination of the transaction price.

4. Allocation of the transaction price to the performance obligations in the contract

5. Recognition of revenue when, or as, we satisfy a performance obligation.

 

At contract inception, the Company assesses the services promised in our contracts with customers and identify a performance obligation for each promise to transfer to the customer a service (or bundle of services) that is distinct. To identify the performance obligations, the Company considers all of the services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices. The Company allocates the entire transaction price to a single performance obligation.

 

No allowance has been provided for uncollectible accounts. Management has evaluated the receivables and believes they are collectable based on the nature of the receivables, historical experience of credit losses, and all other currently available evidence. Discounts are recorded as a reduction of the transaction price. Revenue excludes any amounts collected on behalf of third parties, including sales taxes.

 

The Company evaluates whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. Generally, when the Company is primarily obligated in a transaction, are subject to inventory risk, have latitude in establishing prices and selecting suppliers, or have several but not all of these indicators, revenue is recorded at the gross sale price. The Company generally records the net amounts as commissions earned if we are not primarily obligated and do not have latitude in establishing prices. The Company records all revenue transactions at the gross sale price.

 

There is a no return policy. The return policy is currently being evaluated to be more in line with industry standards.

 

DEFERRED REVENUE

 

Deferred revenue is recorded when the Company has a right to invoice or payments have been received for undelivered products or services, or in situations where revenue recognition criteria have not been met. Deferred revenue also represents amounts received in advance for extended warranty services and software maintenance. Revenue is recognized on these items when the revenue recognition criteria are met, generally resulting in ratable recognition over the contract term. The Company also has deferred revenue related to undelivered hardware and professional services, consisting of installations and consulting engagements, which are recognized when the Company’s performance obligations under the contract are completed.

 

PROPERTY AND EQUIPMENT

 

Property and equipment are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets, generally five years. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. Fixed assets are examined for the possibility of decreases in value when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.

 

 

 

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ADVERTISING AND MARKETING COSTS

 

Advertising and marketing costs are recorded as general and administrative expenses when they are incurred. The Company had no advertising and marketing expenses for the three and six months ended June 30, 2020 and 2019, respectively.

 

FINANCIAL INSTRUMENTS

 

The Company’s balance sheet includes financial instruments, including cash, accounts payable, accrued expenses and notes payable. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.

 

ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:

 

Level 1

Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

   
Level 2

Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

   
Level 3 Inputs that are both significant to the fair value measurement and unobservable.

 

The carrying value of financial assets and liabilities recorded at fair value is measured on a recurring or nonrecurring basis. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. There were no financial assets or liabilities carried and measured on a nonrecurring basis during the reporting periods. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. The warrant and the embedded derivative liabilities are recognized at fair value on a recurring basis at June 30, 2020 and December 31, 2019 and are Level 3 measurements (see Note 8). There have been no transfers between levels.

 

The derivatives are evaluated under the hierarchy of ASC 480-10, ASC Paragraph 815-25-1 and ASC Subparagraph 815-10-15-74 addressing embedded derivatives. The fair value of the Level 3 financial instruments was performed internally by the Company using Monte Carlo valuation method.

 

The following table summarize the Company’s fair value measurements by level at June 30, 2020 for the assets measured at fair value on a recurring basis:

 

    Level 1     Level 2     Level 3  
Derivative liability   $     $     $ 216,443  

 

 

 

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The following table summarize the Company’s fair value measurements by level at December 31, 2019 for the assets measured at fair value on a recurring basis:

 

    Level 1     Level 2     Level 3  
Derivative liability   $     $     $ 60,909  

 

The carrying values of the Company’s financial instruments, including cash, other current assets, accounts payable, accruals, and other current liabilities approximate their fair values due to the short period of time to maturity or repayment. 

 

DEBT

 

The Company issues debt that may have separate warrants, conversion features, or no equity-linked attributes.

 

Debt with warrants – When the Company issues debt with warrants, the Company treats the warrants as a debt discount, record as a contra-liability against the debt, and amortize the balance over the life of the underlying debt as amortization of debt discount expense in the statements of operations.  When the warrants require equity treatment under ASC 815, the offset to the contra-liability is recorded as additional paid in capital in our balance sheet.  When the Company issues debt with warrants that require liability treatment under ASC 815, such as a clause requiring repricing, the warrants are considered to be a derivative that is recorded as a liability at fair value.  If the initial value of the warrant derivative liability is higher than the fair value of the associated debt, the excess is recognized immediately as interest expense.  The warrant derivative liability is adjusted to its fair value at the end of each reporting period, with the change being recorded as expense or gain to Other (income) expense in the Statements of Operations.  If the debt is retired early, the associated debt discount is then recognized immediately as amortization of debt discount expense in the statement of operations.  The debt is treated as conventional debt.

 

Convertible debt – derivative treatment – When the Company issues debt with a conversion feature, we must first assess whether the conversion feature meets the requirements to be treated as a derivative, as follows: a) one or more underlyings, typically the price of our common stock; b) one or more notional amounts or payment provisions or both, generally the number of shares upon conversion; c) no initial net investment, which typically excludes the amount borrowed; and d) net settlement provisions, which in the case of convertible debt generally means the stock received upon conversion can be readily sold for cash. An embedded equity-linked component that meets the definition of a derivative does not have to be separated from the host instrument if the component qualifies for the scope exception for certain contracts involving an issuer’s own equity. The scope exception applies if the contract is both a) indexed to its own stock; and b) classified in shareholders’ equity in its statement of financial position.

 

If the conversion feature within convertible debt meets the requirements to be treated as a derivative, we estimate the fair value of the convertible debt derivative using Monte Carlo Method upon the date of issuance. If the fair value of the convertible debt derivative is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the fair value of the convertible debt derivative is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the carrying amount of the debt. The convertible debt derivative is revalued at the end of each reporting period and any change in fair value is recorded as a gain or loss in the statement of operations. The debt discount is amortized through interest expense over the life of the debt.

 

Convertible debt – beneficial conversion feature – If the conversion feature is not treated as a derivative, we assess whether it is a beneficial conversion feature (“BCF”). A BCF exists if the conversion price of the convertible debt instrument is less than the stock price on the commitment date. This typically occurs when the conversion price is less than the fair value of the stock on the date the instrument was issued. The value of a BCF is equal to the intrinsic value of the feature, the difference between the conversion price and the common stock into which it is convertible, and is recorded as additional paid in capital and as a debt discount in the balance sheet. The Company amortizes the balance over the life of the underlying debt as amortization of debt discount expense in the statement of operations. If the debt is retired early, the associated debt discount is then recognized immediately as amortization of debt discount expense in the Statement of Operations.

 

If the conversion feature does not qualify for either the derivative treatment or as a BCF, the convertible debt is treated as traditional debt.

 

 

 

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INTANGIBLE ASSETS

 

The Company has applied the provisions of ASC topic 350 – Intangible – goodwill and other, in accounting for its intangible assets. Intangible assets are being amortized on a straight-line method on the basis of a useful life of 5 to 17 years. On January 9, 2020, in conjunction with the Mina Mar Group (“Mina Mar”) acquisition of the Company’s 50,000,000 shares of Series A Convertible Preferred Stock from Hadronic Technologies, Inc, (“Hadronic”) the ex-management of the Company has removed all the equipment previously used by the Company in its operations. The entire enterprise (telescope business) was written off and removed by former management (see Note 7) as full and final settlement for any future claims the ex-management may have against the Company. The balance at June 30, 2020 and December 31, 2019 was $0 and $0, respectively.

 

 

June 30, 2020 and December 31, 2019

 

Gross

Carrying

Value

   

Accumulated Amortization

and

Impairment

 
Intellectual property   $        –     $ 1,000  
Patents           14,320  

 

IMPAIRMENT OF LONG- LIVED ASSETS

 

We periodically evaluate whether the carrying value of property, equipment and intangible assets has been impaired when circumstances indicate the carrying value of those assets may not be recoverable. The assets are subject to impairment consideration under FASB ASC 360-10-35-17 if events or circumstances indicate that their carrying amount might not be recoverable. The carrying amount is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value is not recoverable, the impairment loss is measured as the excess of the asset’s carrying value over its fair value. There was no impairment charge for the periods ended June 30, 2020 and December 31, 2019, respectively.

 

Our impairment analyses require management to apply judgment in estimating future cash flows as well as asset fair values, including forecasting useful lives of the assets, assessing the probability of different outcomes, and selecting the discount rate that reflects the risk inherent in future cash flows. If the carrying value is not recoverable, we assess the fair value of long-lived assets using commonly accepted techniques, and may use more than one method, including, but not limited to, recent third-party comparable sales and discounted cash flow models. If actual results are not consistent with our assumptions and estimates, or our assumptions and estimates change due to new information, we may be exposed to an impairment charge in the future.

 

DERIVATIVE LIABILITIES

 

Derivative liabilities include the fair value of instruments such as common stock warrants, preferred stock warrants and convertible features of notes, that are initially recorded at fair value and are required to be re-measured to fair value at each reporting period under provisions of ASC 480, Distinguishing Liabilities from Equity, or ASC 815, Derivatives and Hedging. The change in fair value of the instruments is recognized as a component of other income (expense) in the Company’s statements of operations until the instruments settle, expire or are no longer classified as derivative liabilities. The Company estimates the fair value of these instruments using the Black-Scholes pricing model. The significant assumptions used in estimating the fair value include the exercise price, volatility of the stock underlying the instrument, risk-free interest rate, estimated fair value of the stock underlying the instrument and the estimated life of the instrument.

 

 

 

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NON-MONETARY TRANSACTION

 

According to ASC 845-10-S99, transfers of non-monetary assets to a company by its promoters or shareholders in exchange for stock prior to or at the time of the entity’s initial public offering should be recorded at the transferors’ historical cost basis determined under GAAP. As such, the cost basis carried on Hyfuel’s books and records was nominal. Therefore, the accounting principles in ASC 845-10-S99 were followed and the Company recorded the intellectual and physical properties at its historical cost basis, which was at the historical cost basis of a nominal amount. In the transfer agreement 1,000,000 shares of common stock was transferred in exchange for the properties. The transfer was valued at $1,000 (the par value of the shares issued in exchange for the intellectual property); this amount was determined by the Company to be the value received in the exchange and approximates the basis of those assets.

 

EXPENSES

 

Operating expenses encompass research and development, professional fees, selling general and administrative expenses and impairment expense. Total operating expenses were $60,309 and $112,506 and $856,846 and $1,055,448 for the three and six months ended June 30, 2020 and 2019, respectively.

 

RESEARCH AND DEVELOPMENT

 

The Company expenses research and development costs when incurred. Research and development costs include engineering and testing of product and outputs. Indirect costs related to research and developments are allocated based on percentage usage to the research and development. We spent $0 and $2,741 and $27,053 and $41,310 for the three and six months ended June 30, 2020 and 2019, respectively.

 

PROFESSIONAL FEES

 

Professional services are principally comprised of outside legal, audit and consulting services as well as the costs related to being a publicly traded company. Total professional fees were $29,300 and $78,260 and $38,718 and $83,166 for the three and six months ended June 30, 2020 and 2019, respectively.

 

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

 

Selling, general and administrative expenses consist primarily of management fees, technology services, public relations and travel expenses. Total selling, general and administrative expenses were $31,009 and $31,505 and $53,025 and $113,897 for the three and six months ended June 30, 2020 and 2019, respectively.

 

DEFERRED INCOME TAXES AND VALUATION ALLOWANCE

 

Income taxes are accounted for under an asset and liability approach. This process involves calculating the temporary and permanent differences between the carrying amounts of the assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The temporary differences result in deferred tax assets and liabilities, which would be recorded on the Balance Sheets in accordance with ASC 740, which established financial accounting and reporting standards for the effect of income taxes. The likelihood that its deferred tax assets will be recovered from future taxable income must be assessed and, to the extent that recovery is not likely, a valuation allowance is established. Changes in the valuation allowance in a period are recorded through the income tax provision in the Statements of Operations.

 

 

 

  15  

 

 

ASC 740-10-30 was adopted from the date of its inception. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an entity’s financial statements and prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. Under ASC 740-10, the impact of an uncertain income tax position on the income tax return must be recognized at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. Additionally, ASC 740-10 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. As a result of the implementation of ASC 740-10, the Company does not have a liability for unrecognized income tax benefits.

 

NET LOSS PER COMMON SHARE

 

Net loss per share is calculated in accordance with ASC 260, “Earnings Per Share.” The weighted-average number of common shares outstanding during each period is used to compute basic earning or loss per share. Diluted earnings or loss per share is computed using the weighted average number of shares and diluted potential common shares outstanding. Dilutive potential common shares are additional common shares assumed to be exercised.

 

Basic net loss per common share is based on the weighted average number of shares of common stock outstanding at June 30, 2020 and December 31, 2019, respectively. As of June 30, 2020 and December 31, 2019, the common stock equivalents have not been included as they are anti-dilutive.

 

The following potentially dilutive securities were excluded from the calculation of diluted net loss per share because the effects were anti-dilutive based on the application of the treasury stock method and because the Company incurred net losses during the period:

 

    June 30, 2020     December 31, 2019  
Options to purchase shares of common stock            
Series A convertible preferred stock     50,000,000       50,000,000  
Series B convertible preferred stock     5,000,000        
Series C convertible preferred stock     10,000,000        
Total potentially dilutive shares     65,000,000       50,000,000  

 

SHARE-BASED EXPENSE

 

ASC 718, Compensation – Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

 

The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, Equity – Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued.

 

Shares of equity instruments issued for non-cash consideration are recorded at the fair value of the consideration received based on the market value of services to be rendered, or at the value of the stock given, considered in reference to contemporaneous cash sale of stock.

 

Share-based expense for the three and six months ended June 30, 2020 and 2019 was $0 and $0 and $738,050 and $817,075, respectively.

 

 

 

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COMMITMENTS AND CONTINGENCIES

 

The Company follows ASC 450-20, Loss Contingencies, to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. There were no known commitments or contingencies as of June 30, 2020 and December 31, 2019.

 

CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS

 

Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, accounts receivable and restricted cash. The Company limits its exposure to credit loss by placing its cash and cash equivalents with high credit-quality financial institutions in bank deposits, money market funds, U.S. government securities and other investment grade debt securities that have strong credit ratings. The Company has established guidelines relative to diversification of its cash and marketable securities and their maturities that are intended to secure safety and liquidity. These guidelines are periodically reviewed and modified to take advantage of trends in yields and interest rates and changes in the Company’s operations and financial position. Although the Company may deposit its cash and cash equivalents with multiple financial institutions, its deposits, at times, may exceed federally insured limits.

 

The Company did not have any revenues for the three and six months ended June 30, 2020 and 2019.

 

The Company had no customers that accounted for 10% of total revenue for the three and six months ended June 30, 2020 and 2019. The Company had no customers that accounted for 10% or more of total accounts receivable at June 30, 2020 and December 31, 2019.

 

RECENT ACCOUNTING PRONOUNCEMENTS

 

Recently Issued Accounting Pronouncements Not Yet Adopted

 

Fair Value Measurements

 

In August 2018, the FASB amended "Fair Value Measurements" to modify the disclosure requirements related to fair value. The amendment removes requirements to disclose (1) the amount of and reasons for transfers between levels 1 and 2 of the fair value hierarchy, (2) our policy related to the timing of transfers between levels, and (3) the valuation processes used in level 3 measurements. It clarifies that, for investments measured at net asset value, disclosure of liquidation timing is only required if the investee has communicated the timing either to us or publicly. It also clarifies that the narrative disclosure of the effect of changes in level 3 inputs should be based on changes that could occur at the reporting date. The amendment adds a requirement to disclose the range and weighted average of significant unobservable inputs used in level 3 measurements. The guidance is effective for the Company with the Company’s quarterly filing for the period ended June 30, 2020 and the Company will make the required disclosure changes in that filing. Adoption will not have an impact on the Company’s results of operations, financial position, and cash flows.

 

Retirement Plans

 

In August 2018, the FASB amended "Retirement Plans" to modify the disclosure requirements for defined benefit plans. For the Company, the amendment requires the disclosure of the weighted average interest crediting rate used for cash balance plans and an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. It removes the requirement to disclose the approximate amount of future benefits covered by insurance contracts. The guidance is effective for the Company with the Company’s annual filing for the year ended December 31, 2020 and the Company will make the required disclosure changes in that filing. Adoption will not have an impact on the Company’s results of operations, financial position, and cash flows.

 

 

 

  17  

 

 

Intangibles – Goodwill and other – Internal-Use Software

 

In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. This standard aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). The Company’s accounting for the service element of a hosting arrangement that is a service contract is not affected by the proposed amendments and will continue to be expensed as incurred in accordance with existing guidance. This standard does not expand on existing disclosure requirements except to require a description of the nature of hosting arrangements that are service contracts. This standard is effective for fiscal years, and for interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted, including adoption in any interim period for which financial statements have not been issued. Entities can choose to adopt the new guidance prospectively or retrospectively. The Company plans to adopt the updated disclosure requirements of ASU No. 2018-15 prospectively in the first quarter of fiscal 2020, coinciding with the standard’s effective date, and expects the impact from this standard to be immaterial.

 

Improvements to Nonemployee Share-based Payment Accounting

 

In June 2018, the FASB issued ASU No. 2018-07 “Improvements to Nonemployee Share-Based Payment Accounting” (“ASU 2018-07”). ASU 2018-07 aligns the accounting for share-based payment awards to employees and non-employees.  Under ASU 2018-07 the existing employee guidance will apply to nonemployee share-based transactions, except for specific guidance related to the attribution of compensation cost. ASU 2018-07 should be applied to all new awards granted after the date of adoption. ASU 2018-07 is effective for annual and interim periods beginning after December 15, 2018, and early adoption is permitted.  The Company adopted ASU 2018-07 effective January 1, 2019; such adoption had no material impact on the Company’s financial statements.

 

Income Statement – Reporting Comprehensive Income

 

In February 2018, the FASB issued Accounting Standards Update No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220) (ASU 2018-02), which amends existing standards for income statement-reporting comprehensive income to allow a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from Tax Cuts and Jobs Act and improve the usefulness of information reported to financial statements users. ASU 2018-02 will be effective for beginning after December 15, 2018, and early adoption is permitted. The Company adopted ASU 2018-02 effective January 1, 2019; such adoption had no material impact on the Company’s financial statements.

 

Goodwill

 

In January 2017, the FASB amended "Goodwill" to simplify the subsequent measurement of goodwill. The amended guidance eliminates Step 2 from the goodwill impairment test. Instead, impairment is defined as the amount by which the carrying value of the reporting unit exceeds its fair value, up to the total amount of goodwill of the reporting unit. The new guidance is effective for the Company on January 1, 2020 and is not expected to have an impact on our results of operations, financial position, and cash flows.

 

 

 

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Financial Instruments

 

In June 2016, the FASB amended "Financial Instruments" to provide financial statement users with more decision-useful information about the expected credit losses on debt instruments and other commitments to extend credit held by a reporting entity at each reporting date. During November 2018 and April 2019, the FASB made amendments to the new standard that clarified guidance on several matters, including accrued interest, recoveries, and various codification improvements. The new standard, as amended, replaces the incurred loss impairment methodology in the current standard with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to support credit loss estimates.  The new guidance is effective for us on January 1, 2020, and in the first half of 2019, we established an implementation team and began analyzing the impact on our current policies and procedures to identify potential differences that would result from applying the requirements of the new standard. The implementation team reports findings and progress of the project to management on a frequent basis. Through this process, we have identified appropriate changes to our processes, systems, and controls to support recognition and disclosure under the new standard.  The Company is still evaluating the impact of the new standard on the Company’s results of operations, financial position, and cash flows.

 

Other recently issued accounting updates are not expected to have a material impact on the Company’s Interim Financial Statements.

 

Recently Adopted Accounting Pronouncements

 

Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments 

 

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (“ASU 2016-15”), to address diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. For public entities, the standard is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. For all other entities, the standard is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The Company adopted ASU 2016-15 effective January 1, 2018; such adoption had no material impact on the Company’s financial statements.

 

Leases (ASU 2019-01)

 

In March 2019, the FASB issued ASU 2019-01, Leases (Topic 842) Codification Improvements, which removed the requirement for an entity to disclose in the interim periods after adoption, the effect of the change on income from continuing operations, net income, any other affected financial statement line item, and any affected per share amount. For lessors, the new leasing standard requires leases to be classified as a sales-type, direct financing or operating leases. These criteria focus on the transfer of control of the underlying lease asset. This standard and related update was effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted. The Company adopted ASU 2016-02 effective January 1, 2019; such adoption had no material impact on the Company’s financial statements, given that the noncancelable term of the Company’s current lease is less than 12 months.

 

Leases (ASU 2016-02)

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires the recognition of lease assets and lease liabilities on the balance sheet by lessees for those leases currently classified as operating leases under ASC 840 “Leases.” These amendments also require qualitative disclosures along with specific quantitative disclosures. These amendments are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early application is permitted. The Company can elect to record a cumulative-effect adjustment as of the beginning of the year of adoption or apply a modified retrospective transition approach. The Company expects that substantially all of its operating lease commitments will be subject to the new guidance and will be recognized as operating lease liabilities and right-of-use assets upon adoption. The Company adopted ASU 2016-02 effective January 1, 2019; such adoption had no material impact on the Company’s financial statements, given that the noncancelable term of the Company’s current lease is less than 12 months.

 

 

 

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NOTE 4 – INTANGIBLE PROPERTY

 

Intangible assets consisted of the following as of:

 

    June 30, 2020     December 31, 2019  
             
Intellectual property   $     –     $ 1,000  
Patents           14,320  
Accumulated amortization           (15,320 )
    $     $  

 

On August 10, 2013, the Company entered into an Asset Assignment Agreement (the “IBR Assignment Agreement”) with Institute For Basic Research, Inc., a Florida corporation (“IBR”) that also is beneficially controlled by our previous Chief Executive Officer, Dr. Ruggero M. Santilli. Pursuant to the IBR Assignment Agreement, IBR irrevocably assigned to the Company all rights, title, ownership and interests in all of IBR’s internet website domain name assets, owned and hereinafter acquired by IBR including, but not limited to, all physical and intangible assets and intellectual property related to the assets.

 

On August 11, 2013, Thunder Energies Corporation (f/k/a Thunder Fusion Corporation) entered into an Asset Assignment Agreement (the “Assignment Agreement”) with HyFuels, Inc., a Florida corporation (“HyFuels”) beneficially controlled by our previous Chief Executive Officer, Dr. Ruggero M. Santilli. Pursuant to the Assignment Agreement, HyFuels irrevocably assigned to the Company all physical assets, intangible assets, accounts receivable, intellectual property, accounting software, billing software, client lists, client prospects, trade secrets, proprietary property, the intellectual and physical property known as intermediate nuclear fusion without radiation, the physical property consisting of seven (7) Hadronic reactors, all copyrights, patents, patent applications, patent assignments, trademarks and anything having commercial or exchange value and the like.

 

Consideration for the assignment agreements consisted of one million (1,000,000) shares of our common stock that were issued to Dr. Ruggero M. Santilli, as designee for IBR and HyFuels. Company management determined the amount of consideration based upon ASC 845-10-S99 pertaining to transfer of non-monetary assets. According to ASC 845-10-S99, transfers of non-monetary assets to a company by its promoters or shareholders in exchange for stock prior to or at the time of the entity’s initial public offering should be recorded at the transferors’ historical cost basis determined under Generally Accepted Accounting Principles. As such, the cost basis carried on the books and records of HyFuels and IBR was minimal or essentially zero. Therefore, the accounting principles in ASC 845-10-S99 were followed and the Company recorded the intellectual and physical properties at its historical cost basis, which was at the historical cost basis of a nominal amount. In connection with the aforementioned assignment agreements, 1,000,000 shares of our common stock were transferred in exchange for the assets. The transfer was valued at one thousand dollars ($1,000), the value of the shares issued at par ($0.001) in exchange for the assets. This amount was determined by the Company to approximate the basis of those assets.

 

The Company recorded the property and intangibles (7 reactors, intellectual property rights to develop the technology, and website) as an intangible asset. The valuation of the properties was the par value of the stock received in exchange for the rights and assets.

 

The Company has capitalized the legal expenses associated with filing applications with the United States Patent and Trademark Office. At December 31, 2019, the Company has capitalized $14,320. The Company has recorded $14,320 of impairment loss for the patent application process as of December 31, 2019.

 

On January 9, 2020, in conjunction with the Mina Mar Group acquisition of the Company’s 50,000,000 shares of Series A Convertible Preferred Stock from Hadronic, the ex-management of the Company has removed all the equipment previously used by the Company in its operations. The entire enterprise (telescope business) was written off and removed by former management as full and final settlement for any future claims the ex-management may have against the Company (see Note 7).

 

 

 

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NOTE 5 – NOTE PAYABLE

 

On November 26, 2018, Pubrelco Inc., a non-related party, executed the purchase of a $60,000 note from our previous CEO, Dr. Ruggero. The demand note carries a 2.15% annual percentage rate and has no maturity date. In 2019, the loan amount and unpaid interest was forgiven.

 

On March 24 2020, the Company secured a revolving line of credit of up to $2,000,000 at prime plus 5%. The Company intends to use these funds for future expansions, growth and other acquisitions in the same leisure/entertainment/sports entertainment or similar industry space. The Company drew down one tranche totaling $96,000 which remains outstanding at June 30, 2020 (see Note 6). The balance of line of credit was cancelled on July 1, 2020 in connection with the change of control of the Company.

 

NOTE 6 – CONVERTIBLE NOTE PAYABLE

 

Convertible Note Payable

 

On April 22, 2019; The Company executed a convertible promissory note with GHS Investments, LLC (“GHS Note”). The GHS Note carries a principal balance of $57,000 together with an interest rate of eight (8%) per annum and a maturity date of February 21, 2020. All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share in accordance with the terms of the note agreement shall be made in lawful money of the United States of America. Any amount of principal or interest on this GHS Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid. As of December 31, 2019, the principal balance outstanding was $57,000.

 

The holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this note, to convert all or any part of the outstanding and unpaid principal amount into Common Stock. The conversion shall equal sixty-five percent (65%) of the lowest trading prices for the Common Stock during the twenty (20) day trading period ending on the latest complete trading day prior to the conversion date, representing a discount rate of thirty-five percent (35%).

 

On January 9, 2020, Mina Mar (the “Purchaser”) acquired 50,000,000 shares of Series A Convertible Preferred Stock of the Company from Hadronic. Each share of Preferred Stock is entitled to fifteen (15) votes per share and at the election of the holder converts into ten (10) shares of Company common stock, so at completion of the stock purchase the Purchaser owns approximately 98.6% of the fully diluted outstanding equity securities of the Company and approximately 99% of the voting rights for the outstanding equity securities. The purchase price of $94,766 for the Preferred Stock was paid by the assumption of a Company note obligation of $85,766 by Emry Capital Inc. (“Emry”), with the balance paid in cash. The consideration for the purchase was provided to the Purchaser from the private funds of the principal of the Purchaser. The purchase of the Preferred Stock was the result of a privately negotiated transaction and consummation of the purchase resulted in a change of control of the Company.

 

On March 24, 2020, regarding a Company note obligation of $85,766 now due/new balance of $120,766 held by Emry was partially sold $35,000 of the face amount to the preferred shareholder Saveene. On March 24, 2020, Saveene converted the $35,000 purchase into 5,000 shares into series B and 10,000 shares of series C shares. The face amount of the Company note obligation post the aforementioned conversions and purchases is $85,766 (see Note 7).

 

Promissory Debenture

 

On February 15, 2020 and on May 14, 2020, the Company entered into Promissory Agreement and Convertible Debentures (“Promissory Debentures”) with Emry for a principal sum of $70,000 (which was paid in two tranches: $50,000, paid on February 15, 2020, and $20,000, paid in April 2020) and $48,000 (which was paid in three tranches: $23,000, paid on May 14, 2020, $15,000, paid on May 22, 2020, and $10,000, paid on June 8, 2020), respectively. The Promissory Debenture bears interest, both before and after default, at 15% per month, calculated and compounded monthly. At the election of the holder, at any time during the period between the date of issuance and the one year anniversary of the Promissory Debentures, the Promissory Debentures are convertible into shares of the Company’s common stock at any time at a conversion price of $0.0001 per share. In addition, the Promissory Debentures provide for an interest equal to 15% of the Company’s annual sales, payable on the 2nd day following the date of issuance of the Company’s audited financial statements.

 

 

 

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On June 24, 2020, Emry, holder of Promissory Debentures in principal amount of $70,000, and (ii) that certain convertible promissory note in principal amount of $57,000, sold 50% of each (Promissory Debentures and convertible promissory note), including accrued and unpaid interest, fees and penalties, in separate transactions to third party companies, SP11 Capital Investments and E.L.S.R. CORP, Florida companies, such that SP11 Capital Investments and E.L.S.R. CORP each hold 50% of each respective debt instrument. The Promissory Debenture bears interest, both before and after default, at 10% per annum.

 

The Company accounts for this embedded conversion feature as a derivative under ASC 815-10-15-83 and valued separately from the note at fair value. The embedded conversion feature of the note is revalued at each subsequent reporting date at fair value and any changes in fair value will result in a gain or loss in those periods. The Company recorded derivative liability of $190,335 and $63,107 during the six months ended June 30, 2020 and 2019, respectively, recorded a change in derivative liability of $2,487 and $34,801, and $681 and $681 during the three and six months ended June 30, 2020 and 2019, respectively and has $216,443 of unamortized debt discount remaining as of June 30, 2020.

 

NOTE 7 – SHAREHOLDERS’ EQUITY

 

COMMON STOCK

 

The Company has been authorized to issue 900,000,000 shares of common stock, $0.001 par value. Each share of issued and outstanding common stock shall entitle the holder thereof to fully participate in all shareholder meetings, to cast one vote on each matter with respect to which shareholders have the right to vote, and to share ratably in all dividends and other distributions declared and paid with respect to common stock, as well as in the net assets of the corporation upon liquidation or dissolution.

 

On May 14, 2019, the Board of Directors of the Company approved Articles of Amendment to the Company’s Articles of Incorporation that provided for a 1 for 20 reverse stock split of the Company’s Common Stock. The Company’s Articles of Amendment were filed with the Secretary of State of the State of Florida on May 17, 2019. All share and per share amounts contained in this Annual Report on Form 10-K and the accompanying Financial Statements have been adjusted to reflect the Reverse Stock Split for all prior periods presented.

 

During the six months ended June 30, 2020, the Company cancelled 299,668 shares to related parties at par value of $300. Shares of our common stock were issued at fair market value of the share price as set forth in the table below unless otherwise stated.

 

Date   Shares     Issuance Description   Relationship   Share Price     Amount  
1/7/19     90,000     Services   Non-related party     0.100       9,000  
1/25/19     100,000     Services   Non-related party     0.088       8,800  
2/6/19     226,715     Cash   Non-related party     0.061       13,784  
2/14/19     12,500     Services   Non-related party     0.306       3,825  
2/19/19     166,667     Services   Non-related party     0.240       40,000  
3/5/19     289,500     Cash   Non-related party     0.120       34,740  
3/7/19     50,000     Services   Non-related party     0.192       9,600  
3/13/19     50,000     Services   Non-related party     0.156       7,800  
3/19/19     61,043     Cash   Non-related party     0.085       5,176  
4/1/19     12,500     Services   Non-related party     0.100       1,250  
4/22/19     100,000     Execution of new convertible note payable   Non-related party     3.160       316,000  
4/24/19     50,000     Services   Non-related party     3.160       158,000  
4/30/19     50,000     Services   Non-related party     2.960       148,000  
5/11/19     25,000     Services   Non-related party     2.800       70,000  
5/15/19     250,000     Services   Non-related party     0.116       29,000  
5/12/19     100,000     Services   Non-related party     0.158       15,800  

 

 

 

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Date   Shares     Issuance Description   Relationship   Share Price     Amount  
7/11/19     50,000     Services   Non-related party     0.050       2,500  
7/11/19     150,000     Services   Non-related party     0.050       7,500  
8/20/19     250,000     Services   Non-related party     0.034       8,375  
8/20/19     50,000     Services   Non-related party     0.034       1,675  
8/23/19     746,520     Stock issued for Principal reduction of note payable-related party and accrued interest related party. Shares issued at FMV   Related party     0.037       27,621  
8/23/19     746,520     Stock issued for Principal reduction of note payable-related party and accrued interest related party. Shares issued at FMV   Related party     0.037       27,621  
8/29/19     350,000     Services   Non-related party     0.039       13,755  
9/6/19     200,000     Services   Non-related party     0.049       9,800  
10/1/2019     63,136     Services   Non-related party     0.024       1,515  
10/23/2019     200,000     Services   Non-related party     0.036       7,200  
10/23/2019     200,000     Services   Non-related party     0.036       7,200  
11/7/2019     300,000     Services   Non-related party     0.0235       7,050  
11/7/2019     250,000     Services   Non-related party     0.0235       5,875  
11/11/2019     97,459     Stock issued to GHS Investments for Services. Issued at a discount to the FMV   Non-related party     0.018       1,754  
11/22/2019     100,000     Services   Non-related party     0.021       2,100  
12/2/2019     150,000     Services   Non-related party     0.021       3,150  
12/2/2019     300,000     Services   Non-related party     0.021       6,300  
12/5/2019     300,000     Services   Non-related party     0.021       6,300  
12/6/2019     200,000     Services   Non-related party     0.021       4,200  
2/27/2020     (299,668)     Cancellation of director shares   Related party     0.001        
5/27/2020     1,400,000     Cash   Non-related party     0.0343       48,000  

 

PREFERRED STOCK

 

The Company has been authorized to issue 50,000,000 shares of $0.001 par value Preferred Stock. The Board of Directors is expressly vested with the authority to divide any or all of the Preferred Stock into series and to fix and determine the relative rights and preferences of the shares of each series so established, within certain guidelines established in the Articles of Incorporation.

 

Series A: The certificate of designation for the Preferred A Stock provides that as a class it possesses a number of votes equal to fifteen (15) votes per share and may be converted into ten (10) $0.001 par value common shares.

 

On October 10, 2013, the Company issued fifty million (50,000,000) shares of our Series “A” Convertible Preferred Stock to Hadronic, a Florida corporation maintaining its principal place of business at 35246 US Highway 19 North, Suite #215, Palm Harbor, Florida 34684. Our previous Directors, Dr. Ruggero M. Santilli and Mrs. Carla Santilli each own fifty percent of the equity in Hadronic. The Series “A” Convertible Preferred Stock has 15 votes per share and is convertible into 10 shares of our common stock at the election of the shareholder. Shares were valued at the par value of the common stock equivalents, $500,000.

 

 

 

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On January 9, 2020, Mina Mar (the “Purchaser”) acquired 50,000,000 shares of Series A Convertible Preferred Stock of the Company from Hadronic. Each share of Preferred Stock is entitled to fifteen (15) votes per share and at the election of the holder converts into ten (10) shares of Company common stock, so at completion of the stock purchase the Purchaser owns approximately 98.6% of the fully diluted outstanding equity securities of the Company and approximately 99% of the voting rights for the outstanding equity securities. The purchase price of $94,766 for the Preferred Stock was paid by the assumption of a Company note obligation of $85,766 by Emry, with the balance paid in cash. The consideration for the purchase was provided to the Purchaser from the private funds of the principal of the Purchaser. The purchase of the Preferred Stock was the result of a privately negotiated transaction and consummation of the purchase resulted in a change of control of the Company.

 

Regarding a Company note obligation of $85,766 now due/new balance of $120,766 held by Emry was partially sold $35,000 of the face amount to the preferred shareholder Saveene. On March 24, 2020, Saveene converted the $35,000 purchase into 5,000 shares of series B and 10,000 shares of series C shares. The face amount of the Company note obligation post the aforementioned conversions and purchases is $85,766 (see Note 6).

 

On March 24, 2020, Saveene (“Purchaser”) acquired 50,000,000 shares of Series A Convertible Preferred Stock of Company, from Mina Mar. Each share of Preferred Stock is entitled to fifteen (15) votes per share and at the election of the holder converts into ten (10) shares of Company common stock, so at the completion of the stock purchase, the Purchaser owns approximately 98.6% of the fully diluted outstanding equity securities of the Company and approximately 99% of the voting rights for the outstanding equity securities. The purchase price of $500,000 for the Preferred Stock was paid in cash. The consideration for the purchase was provided to the Purchaser from the private funds of the principal of the Purchaser. The purchase of the Preferred Stock was the result of a privately negotiated transaction and consummation of the purchase resulted in a change of control of the Company.

 

On March 24, 2020, Thunder Energies, Inc. held a meeting and voted to create two separate classes of preferred shares. Class “B” and class “C’ preferred shares. One class of shares B would be used to offer securitization for the watercraft while class C preferred shares would be used in conjunction with the securitization of air crafts.

 

Series B Convertible Preferred Stock was authorized for 10,000,000 shares of the “Company. Each share of Preferred Stock is entitled to one thousand (1,000) votes per share and at the election of the holder converts into one thousand (1,000) shares of Company common stock, so at the completion of the stock purchase, the Purchaser owns approximately 100% of the fully diluted outstanding equity securities of the Company and approximately 100% of the voting rights for the outstanding equity securities. The consideration for the purchase was provided to the Purchaser from the private funds of the principal of the Purchaser.

 

Series C Non-Convertible Preferred Stock was authorized for 10,000,000 shares of the Company. Each share of Preferred Stock is entitled to one thousand (1,000) votes per share and at the election of the holder. The series C is Non-Convertible Preferred Stock. The Purchaser owns approximately 100% of the fully diluted outstanding equity securities of the Company and approximately 100% of the voting rights for the outstanding equity securities. The consideration for the purchase was provided to the Purchaser from the private funds of the principal of the Purchaser.

 

OPTIONS AND WARRANTS

 

In accordance with employment agreements, common stock options are issued annually to the officers of the Company. The number of shares is determined by the number of shares outstanding at the end of the year at a percentage per the employment agreements, as described below. The strike price is the fair value trading price as of the anniversary date of the employment agreements. The options are based on the number of shares outstanding of the Company at the year end, at an exercise price at market price at the employment agreements annual anniversary, July 25th. As of June 30, 2019, the officers are entitled to 29,887 options, at an average exercise price of $0.2818. There is no expiration date to these options and only vest upon a change in control. The options were valued at $4,695, however no expense has been recognized with the associated options, as no options have vested or are considered by management to probable vest. The options were valued using the Black Scholes Method, using the following assumptions:

 

 

 

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Weighted Average:   June 30, 2020     December 31, 2019  
Risk-free interest rate     2.42%       1.24%  
Expected lives (years)     10.0       10.0  
Expected price volatility     188.46%       188.46%  
Dividend rate     0.0%       0.0%  
Forfeiture Rate     0.0%       0.0%  

 

There are no other warrants or options outstanding to acquire any additional shares of common stock of the Company as of June 30, 2020.

 

CHANGE IN CONTROL

 

On March 24, 2020, Saveene converted the $35,000 purchase into 5,000 shares of series B and 10,000 shares of series C shares. As a result, the Series B and C voting ownership approximates 57% and therefore, the Company has a change in ownership resulting in the recognition of a gain or loss on the sale of the interest sold and on the revaluation of any retained noncontrolling investment in accordance with ASC 810-10-40-5.

 

The Company’s stock price on March 24, 2020 was $0.03, giving the Company a value of $0.03 per share times 11,244,923 shares outstanding or $337,348. The transaction was booked to loss on extinguishment of change in control and with the off-setting entry to additional paid-in capital due to it being a related party transaction.

 

NOTE 8 – RELATED PARTY TRANSACTIONS

 

TRANSACTIONS WITH SAVEENE.COM, INC.

 

On March 24, 2020, Saveene acquired 50,000,000 shares of Series A Convertible Preferred Stock of the Company, from Mina Mar. Each share of Preferred Stock is entitled to fifteen (15) votes per share and at the election of the holder converts into ten (10) shares of Company common stock, so at the completion of the stock purchase, the Purchaser owns approximately 98.6% of the fully diluted outstanding equity securities of the Company and approximately 99% of the voting rights for the outstanding equity securities. The purchase price of $500,000 for the Preferred Stock was paid in cash. The consideration for the purchase was provided to the Purchaser from the private funds of the principal of the Purchaser. The purchase of the Preferred Stock was the result of a privately negotiated transaction and consummation of the purchase resulted in a change of control of the Company.

 

In connection with the sale of the Preferred Stock, all existing officers, directors and board members with the Company remained undisturbed.

 

Except as described herein, there are no arrangements or understandings among members of both the former and new control persons and their associates with respect to the election of directors of the Company or other matters.

 

On March 24, 2020, Thunder Energies, Inc. announced its operational affiliate plans with Saveene. Under the agreement, Saveene will grant Thunder Energies access to several yachts and jets for the purpose of offering these vessels to the end-user and the general public for sale and or charter. Additionally, Thunder Energies will gain access to several patent-pending technologies the entire Saveene back office that focuses on the yacht and jet industry sector. This operational affiliate plan with Saveene.Com will allow Thunder Energies to offer a white-label type solution and OEM or original equipment manufacturer under Thunder Energies, Inc. own brand name being Nacaeli brand dispensing the need to acquire and carry any inventory. All future Thunder Energies, Inc. and or Nacaeli brand fulfillment orders general maintenance, and upkeep matters such as mechanical repair, buffering, and similar will be outsourced other than administrative operational and corporate governance tasks.

 

 

 

  25  

 

 

On March 24, 2020, Thunder Energies, Inc. held a meeting and voted to create two separate classes of preferred shares. Class “B” and class “C’ preferred shares. One class of shares B would be used to offer securitization for the watercraft while class C preferred shares would be used in conjunction with the securitization of air crafts.

 

Series B Convertible Preferred Stock was authorized for 10,000,000 shares of the Company. Each share of Preferred Stock is entitled to one thousand (1,000) votes per share and at the election of the holder converts into one thousand (1,000) shares of Company common stock, so at the completion of the stock purchase, the Purchaser owns approximately 100% of the fully diluted outstanding equity securities of the Company and approximately 100% of the voting rights for the outstanding equity securities. The consideration for the purchase was provided to the Purchaser from the private funds of the principal of the Purchaser.

 

Series C Non-Convertible Preferred Stock was authorized for 10,000,000 shares of the Company. Each share of Preferred Stock is entitled to one thousand (1,000) votes per share and at the election of the holder. The series C is Non-Convertible Preferred Stock. The Purchaser owns approximately 100% of the fully diluted outstanding equity securities of the Company and approximately 100% of the voting rights for the outstanding equity securities. The consideration for the purchase was provided to the Purchaser from the private funds of the principal of the Purchaser.

 

Regarding a Company note obligation of $85,766 now due/new balance of $120,766 held by Emry was partially sold $35,000 of the face amount to the preferred shareholder Saveene. On March 24, 2020, Saveene converted the $35,000 purchase into 5,000 shares of series B and 10,000 shares of series C shares. The face amount of the Company note obligation post the aforementioned conversions and purchases is $85,766.

 

On March 24, 2020, Saveene converted the $35,000 purchase into 5,000 shares of series B and 10,000 shares of series C shares. As a result, the Series B and C voting ownership approximates 57% and therefore, the Company has a change in ownership resulting in the recognition of a gain or loss on the sale of the interest sold and on the revaluation of any retained noncontrolling investment in accordance with ASC 810-10-40-5.

 

The Company’s stock price on March 24, 2020 was $0.03, giving the Company a value of $0.03 per share times 11,244,923 shares outstanding or $337,348. The transaction was booked to loss on extinguishment of change in control and with the off-setting entry to additional paid-in capital due to it being a related party transaction.

 

TRANSACTIONS WITH MINA MAR GROUP

 

On January 9, 2020, Mina Mar (the “Purchaser”) acquired 50,000,000 shares of Series A Convertible Preferred Stock of the Company from Hadronic. Each share of Preferred Stock is entitled to fifteen (15) votes per share and at the election of the holder converts into ten (10) shares of Company common stock, so at completion of the stock purchase the Purchaser owns approximately 98.6% of the fully diluted outstanding equity securities of the Company and approximately 99% of the voting rights for the outstanding equity securities. The purchase price of $94,766 for the Preferred Stock was paid by the assumption of a Company note obligation of $85,766 by Emry, with the balance paid in cash. The consideration for the purchase was provided to the Purchaser from the private funds of the principal of the Purchaser. The purchase of the Preferred Stock was the result of a privately negotiated transaction and consummation of the purchase resulted in a change of control of the Company.

 

In connection with the sale of the Preferred Stock: 

 

  · Dr. Ruggero Santilli and Carla Santilli, former board members and the chief executive officer and secretary and treasurer, respectively, of the Company, resigned as board members and officers;

 

  · The Company’s relationship with the law firm of Clifford J. Hunt, P.A. has been terminated and Clifford J. Hunt, P.A. is no longer serving as legal counsel of record to the Company;

 

  · The Company’s relationship with E&E Communications has been terminated and E&E Communications is no longer providing investor relations services to the Company; and

 

  · The Company’s relationship with GHS Investments, LLC has been terminated and GHS Investments, LLC is no longer providing underwriting, investment banking or brokerage services to the Company.

 

 

 

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Also in connection with the sale of the Preferred Stock, Irina Veselinovic has been appointed to the Board of Directors of the Company and has been appointed as Secretary of the Company; Aleksandar Sentic has been appointed to the Board of Directors of the Company; and Andrea  Zecevic has been appointed to the Board of Directors and to the position of Company President and Chief Executive Officer. None of Ms. Veselinovic, Mr. Sentic or Ms. Zecevic is a party to an employment agreement with the Company. The Company has made the appropriate filings with the Division of Corporations for the Florida Secretary of State to memorialize the appointment of these officers in the Division of Corporations’ records.  

 

Except as described herein, there are no arrangements or understandings among members of both the former and new control persons and their associates with respect to the election of directors of the Company or other matters.

 

ADVANCES, PAYABLES AND ACCRUALS

 

Amounts included in accruals represent amounts previously due to the officers and directors for corporate obligations under the employment agreements. Payments on behalf of the Company and accruals made under contractual obligation are accrued (see below). As of June 30, 2020 and December 31, 2019, accrued expenses were $0 and $0, respectively. On December 31, 2019, the accrued compensation – related party was forgiven and booked the offsetting entry to Additional paid-in Capital due to it being a related party transaction.

 

NOTE PAYABLE

 

In support of the Company’s efforts and cash requirements, it has relied on advances from the majority shareholders until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by shareholders. All advances made in support of the Company are formalized by demand notes, at a 2.15% interest rate.

 

During the six months ended June 30, 2020 and 2019, our previous Chief Executive Officer, Dr. Ruggero M. Santilli loaned the Company $0 and $5,000 for operations. During the six months ended June 30, 2020 and 2019 the Company repaid the principal amounts by $0 and $5,000, respectively.

 

At June 30, 2020 and December 31, 2019, the demand notes accumulative balances were $0 and $0, respectively. Accrued interest at June 30, 2020 and December 31, 2019 was $0 and $0, respectively. On December 31, 2019, the demand notes plus accrued interest totaling $376,276 were forgiven and booked the offsetting entry to Additional paid-in Capital due to it being a related party transaction.

 

EQUITY TRANSACTIONS

 

On December 31, 2019, our previous Chief Executive Officer, Dr. Ruggero M. Santilli requested the extinguishment of $376,276 of notes payable due. The Company extinguished $376,276 of notes payable due Dr. Rugger M. Santilli on December 31, 2019 and booked the off-setting entry to additional paid-in capital due to it being a related party transaction.

 

On December 31, 2019, the Company's previous Chief Executive Officer, Dr. Ruggero M. Santilli and previous Director, Carla Santilli requested the extinguishment of $315,000 and $126,000, respectively, of accrued compensation due. The Company extinguished $315,000 and $126,000 of accrued compensation due to Dr. Rugger M. Santilli and Carla Santilli, respectively, on December 31, 2019 and booked the off-setting entry to additional paid-in capital due to it being a related party transaction.

 

EMPLOYMENT CONTRACTS

 

The Company has no employment contracts with its key employees.

 

 

 

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OTHER

 

The Company does not own or lease property or lease office space. At the current time, the office space used by the Company was arranged by the majority shareholders of the Company to use at no charge. It is anticipated that the Company will enter into formal lease arrangements in the near future.

 

The amounts and terms of the above transactions may not necessarily be indicative of the amounts and terms that would have been incurred had comparable transactions been entered into with independent third parties.

 

NOTE 9 – COMMITMENTS AND CONTINGENCIES

 

From time to time the Company may be a party to litigation matters involving claims against the Company. Management believes that there are no current matters that would have a material effect on the Company’s financial position or results of operations.

 

NOTE 10 – SUBSEQUENT EVENTS

 

On July 1, 2020, Yogev Shvo, a third party individual and principal shareholder of Nature Consulting, LLC., a Florida limited liability company, (“Purchaser”) personally acquired 100% of the issued and outstanding shares of preferred stock (“Preferred Stock”) of the Company from Saveene (“Seller”) for total cash consideration of $250,000.

 

The Preferred Stock acquired by the Purchaser consisted of:

 

  1.

50,000,000 shares of Series A Convertible Preferred Stock wherein each share is entitled to fifteen (15) votes and converts into ten (10) shares of the Company’s common stock.

     
  2.

5,000 shares of Series B Convertible Preferred Stock wherein each share is entitled to one thousand (1,000) votes and converts into one thousand (1,000) shares of the Company’s common stock.

     
  3.

10,000 shares of Series C Non-Convertible Preferred Stock wherein each share is entitled to one thousand (1,000) votes and is non-convertible into shares of the Company’s common stock.

 

As a result of the purchase and change of control of the Company, the existing officers and directors of the Company, Andrea Zecevic, CEO and President, Irina Veselinovic, Secretary and Alexander Sentic, Treasurer have resigned.

 

Under the terms of the stock purchase agreement the new controlling shareholder was permitted to elect representatives to serve on the Board of Directors to fill the seat(s) vacated by prior directors. Mr. Yogev Shvo became the sole Director and Chairman of the Board of the Company, and the acting sole officer of the Company (“Chairman”). The salary of the Chairman is fixed at $1 per annum effective July 23, 2020 with any future payments due to the Chairman via preferred convertible shares at the sole discretion of the Chairman.

 

There were no other events subsequent to June 30, 2020, and up to the date of this filing that would require disclosure.

 

 

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

Special Note Regarding Forward Looking Statements.

 

This quarterly report on Form 10-Q of Thunder Energies Corporation for the period ended June 30, 2020 contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. To the extent that such statements are not recitations of historical fact, such statements constitute forward looking statements which, by definition, involve risks and uncertainties. In particular, statements under the Sections; Description of Business, Management’s Discussion and Analysis of Financial Condition and Results of Operations contain forward looking statements. Where in any forward-looking statements, the Company expresses an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished.

 

The following are factors that could cause actual results or events to differ materially from those anticipated and include but are not limited to: general economic, financial and business conditions; changes in and compliance with governmental regulations; changes in tax laws; and the cost and effects of legal proceedings.

 

You should not rely on forward looking statements in this quarterly report. This quarterly report contains forward looking statements that involve risks and uncertainties. We use words such as “anticipates,” “believes,” “plans,” “expects,” “future,” “intends,” and similar expressions to identify these forward-looking statements. Prospective investors should not place undue reliance on these forward-looking statements, which apply only as of the date of this quarterly report. Our actual results could differ materially from those anticipated in these forward-looking statements.

 

Our Business Overview.

 

Thunder Energies Corporation f/k/a Thunder Fusion Corporation and CCJ Acquisition Corp. (“we”, “us”, “our”, (“TEC” or the “Company”) was incorporated in the State of Florida on April 21, 2011. The Company selected December 31 as its fiscal year end.

 

On July 25, 2013, Dr. Ruggero M. Santilli acquired from Company’s existing shareholders, a control block of stock in the Company consisting of two million nine hundred forty thousand (2,940,000) shares of restricted common stock of the Company, in a private equity transaction. As a result of this acquisition, Dr. Ruggero M. Santilli owned 98% of the issued and outstanding shares of common stock of the Company.

 

On August 10, 2013, the Company entered into an Asset Assignment Agreement (the “IBR Assignment Agreement”) with Institute For Basic Research, Inc., a Florida corporation (“IBR”) that also is beneficially controlled by our previous Chief Executive Officer, Dr. Ruggero M. Santilli. Pursuant to the IBR Assignment Agreement, IBR irrevocably assigned to the Company all rights, title, ownership and interests in all of IBR’s internet website domain name assets, owned and hereinafter acquired by IBR including, but not limited to, all physical and intangible assets and intellectual property related to the assets.

 

On August 11, 2013, Thunder Energies Corporation (the “Company”) entered into an Asset Assignment Agreement (the “Assignment Agreement”) with HyFuels, Inc., a Florida corporation (“HyFuels”) beneficially controlled by our previous Chief Executive Officer, Dr. Ruggero M. Santilli. Pursuant to the Assignment Agreement, HyFuels irrevocably assigned to the Company all physical assets, intangible assets, accounts receivable, intellectual property, accounting software, billing software, client lists, client prospects, trade secrets, proprietary property, the intellectual and physical property known as intermediate nuclear fusion without radiation, the physical property consisting of seven (7) Hadronic Technologies, Inc., a Florida corporation (“Hadronic”) reactors, all copyrights, patents, patent applications, patent assignments, trademarks and anything having commercial or exchange value and the like.

 

 

 

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Consideration for the assignment agreements consisted of one million (1,000,000) shares of our common stock that were issued to Dr. Ruggero M. Santilli, as designee for IBR and HyFuels. Company management determined the amount of consideration based upon ASC 845-10-S99 pertaining to transfer of non-monetary assets. According to ASC 845-10-S99, transfers of non-monetary assets to a company by its promoters or shareholders in exchange for stock prior to or at the time of the entity’s initial public offering should be recorded at the transferors’ historical cost basis determined under Generally Accepted Accounting Principles. As such, the cost basis carried on the books and records of HyFuels and IBR was minimal or essentially zero. Therefore, the accounting principles in ASC 845-10-S99 were followed and the Company recorded the intellectual and physical properties at its historical cost basis, which was at the historical cost basis of a nominal amount. In connection with the aforementioned assignment agreements, 1,000,000 shares of our common stock were transferred in exchange for the assets. The transfer was valued at one thousand dollars ($1,000), the value of the shares issued at par ($0.001) in exchange for the assets. This amount was determined by the Company to be de-minimus to the value received in the exchange and approximates the basis of those assets.

 

The Company has recorded the property and intangibles (7 reactors, intellectual property rights to develop the technology, and website) as an intangible asset. The valuation of the properties will be the par value of the stock received in exchange for the rights and assets. The Company’s filings will include a disclosure in the MD&A section and notes to the financial statement under the heading “Non-Monetary Transaction”. Management believes that the $1,000 valuation is reflective of the salvage value of the physical property, at a minimum. Our Company purchased internet website domain name assets owned by IBR and the intellectual and physical property known as intermediate nuclear fusion without radiation, the physical property consisting of seven (7) Hadronic reactors, all copyrights, patents, patent applications, patent assignments, trademarks and anything having commercial or exchange value owned by HyFuels as related to the reactors. None of the assets purchased had ever generated revenue for IBR or HyFuels. Although the Asset Assignment Agreements were more comprehensive in their description of “assets”, the aforementioned items were the only assets assigned to the Company.

 

Our Company purchased internet website domain name assets owned by IBR and the intellectual and physical property known as intermediate nuclear fusion without radiation, the physical property consisting of seven (7) Hadronic reactors, all copyrights, patents, patent applications, patent assignments, trademarks and anything having commercial or exchange value owned by HyFuels as related to the reactors. None of the assets purchased had ever generated revenue for IBR or HyFuels. Although the Asset Assignment Agreements were more comprehensive in their description of “assets”, the aforementioned items were the only assets assigned to the Company.

 

A further description of the assignors, IBR and HyFuels, follows. IBR is a Florida Corporation whose only business operations are the publication of an internet blog relating to scientific and academic matters. IBR does not generate revenue and has no expenses. Furthermore, IBR has never maintained a checking account. This status has been consistent over the last several years. Our Chief Executive Officer and Director, Dr. Ruggero M. Santilli is president and a director for IBR. IBR does not have any ownership interest in any of our securities.

 

HyFuels is a Florida corporation that utilized research and development funds to create the seven Hadronic reactors, but otherwise has no business operations since its inception. Its sole purpose is to serve as a patent holding company. Our previous Chief Executive Officer and Director, Dr. Ruggero M. Santilli is president and a director for HyFuels. HyFuels also does not have any ownership interest in any of our securities.

 

Neither IBR nor HyFuels has made any effort to commercialize the assets for purposes of generating revenue. Both IBR and HyFuels continue to exist as Florida corporations separate and distinct from the Company. Though they are deemed “related” entities through a common officer and director with our Company, they remain otherwise “unaffiliated” with our Company.

 

IBR maintains its principal place of business at 90 East Winds Court, Palm Harbor, Florida 34689. HyFuels maintains its principal place of business at 35246 US Highway 19 North, #215, Palm Harbor, Florida 34684. There is no continuity of facilities with the Company.

 

 

 

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Neither IBR nor HyFuels had an employee base, a distribution system, a sales force, a customer base, production techniques or trade names associated with the assets. Their ownership rights may arguably be referred to as operating rights but there were essentially no operations associated with the assets.

 

The only activities of the assignors involved the creation of the Internet website domain names and the creation of the seven Hadronic reactors and associated patents pending. These assets did not generate revenue prior to the assignment, so there is essentially no financial data to report regarding “revenue producing activity previously associated with the acquired assets”. Furthermore, there is no “sufficient continuity of operations with our Company so that disclosure of prior financial information regarding IBR or HyFuels is material to an understanding of future operations regarding our Company.

 

Recent Developments

 

On July 1, 2020, Yogev Shvo, a third party individual and principal shareholder of Nature Consulting, LLC., a Florida limited liability company, (“Purchaser”) personally acquired 100% of the issued and outstanding shares of preferred stock (“Preferred Stock”) of the Company from Saveene (“Seller”) for total cash consideration of $250,000.

 

The Preferred Stock acquired by the Purchaser consisted of:

 

  1.

50,000,000 shares of Series A Convertible Preferred Stock wherein each share is entitled to fifteen (15) votes and converts into ten (10) shares of the Company’s common stock.

     
  2.

5,000 shares of Series B Convertible Preferred Stock wherein each share is entitled to one thousand (1,000) votes and converts into one thousand (1,000) shares of the Company’s common stock.

     
  3.

10,000 shares of Series C Non-Convertible Preferred Stock wherein each share is entitled to one thousand (1,000) votes and is non-convertible into shares of the Company’s common stock.

 

As a result of the purchase and change of control of the Company, the existing officers and directors of the Company, Andrea Zecevic, CEO and President, Irina Veselinovic, Secretary and Alexander Sentic, Treasurer have resigned.

 

Under the terms of the stock purchase agreement the new controlling shareholder was permitted to elect representatives to serve on the Board of Directors to fill the seat(s) vacated by prior directors. Mr. Yogev Shvo became the sole Director and Chairman of the Board of the Company, and the acting sole officer of the Company (“Chairman”). The salary of the Chairman is fixed at $1 per annum effective July 23, 2020 with any future payments due to the Chairman via preferred convertible shares at the sole discretion of the Chairman.

 

Convertible Note Payable

 

On January 9, 2020, Mina Mar Corporation, a Florida corporation (d/b/a Mina Mar Group) (“Mina Mar” or the “Purchaser”) acquired 50,000,000 shares of Series A Convertible Preferred Stock of Thunder Energies Corporation (the “Company”), from Hadronic. Each share of Preferred Stock is entitled to fifteen (15) votes per share and at the election of the holder converts into ten (10) shares of Company common stock, so at completion of the stock purchase the Purchaser owns approximately 98.6% of the fully diluted outstanding equity securities of the Company and approximately 99% of the voting rights for the outstanding equity securities. The purchase price of $94,766 for the Preferred Stock was paid by the assumption of a Company note obligation of $85,766 by Emry Capital Inc (“Emry”), with the balance paid in cash. The consideration for the purchase was provided to the Purchaser from the private funds of the principal of the Purchaser. The purchase of the Preferred Stock was the result of a privately negotiated transaction and consummation of the purchase resulted in a change of control of the Company.

 

 

 

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In connection with the sale of the Preferred Stock:

 

  · Dr. Ruggero Santilli and Carla Santilli, former board members and the chief executive officer and secretary and treasurer, respectively, of the Company, resigned as board members and officers;

 

  · The Company’s relationship with the law firm of Clifford J. Hunt, P.A. has been terminated and Clifford J. Hunt, P.A. is no longer serving as legal counsel of record to the Company;

 

  · The Company’s relationship with E&E Communications has been terminated and E&E Communications is no longer providing investor relations services to the Company; and 

 

  · The Company’s relationship with GHS Investments, LLC has been terminated and GHS Investments, LLC is no longer providing underwriting, investment banking or brokerage services to the Company.

 

Also in connection with the sale of the Preferred Stock, Irina Veselinovic has been appointed to the Board of Directors of the Company and has been appointed as Secretary of the Company; Aleksandar Sentic has been appointed to the Board of Directors of the Company; and Andrea  Zecevic has been appointed to the Board of Directors and to the position of Company President and Chief Executive Officer. None of Ms. Veselinovic, Mr. Sentic or Ms. Zecevic is a party to an employment agreement with the Company. The Company has made the appropriate filings with the Division of Corporations for the Florida Secretary of State to memorialize the appointment of these officers in the Division of Corporations’ records.

 

Except as described herein, there are no arrangements or understandings among members of both the former and new control persons and their associates with respect to the election of directors of the Company or other matters.

 

The Company will be using @CorpTnrg as its social media account going forward; its interim corporate web site is www.otc-tnrg.com; The Company’s new operating business web site is www.nacaeli.com.

 

The ex-management of the Company has removed all the equipment previously used by the Company in its operations. The entire enterprise (telescope business) was written off and removed by former management.  Current management anticipates a new business model for the Company with the launch of its Nacaeli brand www.nacaeli.com.

 

Promissory Debenture

 

On February 15, 2020 and on May 14, 2020, the Company entered into Promissory Agreement and Convertible Debentures (“Promissory Debentures”) with Emry for a principal sum of $70,000 (which was paid in two traunches: $50,000, paid on February 15, 2020, and $20,000, paid in April 2020) and $48,000 (which was paid in three traunches: $23,000, paid on May 14, 2020, $15,000, paid on May 22, 2020, and $10,000, paid on June 8, 2020), respectively. The Promissory Debenture bears interest, both before and after default, at 15% per month, calculated and compounded monthly. At the election of the holder, at any time during the period between the date of issuance and the one year anniversary of the Promissory Debenture, the Promissory Debenture is convertible into shares of the Company’s common stock at any time at a conversion price of $0.0001 per share. In addition, the Promissory Debenture provides for an interest equal to 15% of the Company’s annual sales, payable on the 2nd day following the date of issuance of the Company’s audited financial statements.

 

On June 24, 2020, Emry, holder of Promissory Debentures in principal amount of $70,000, and (ii) that certain convertible promissory note in principal amount of $57,000, sold 50% of each (Promissory Debentures and convertible promissory note), including accrued and unpaid interest, fees and penalties, in separate transactions to third party companies, SP11 Capital Investments and E.L.S.R. CORP, Florida companies, such that SP11 Capital Investments and E.L.S.R. CORP each hold 50% of each respective debt instrument. The Promissory Debenture bears interest, both before and after default, at 10% per annum.

 

 

 

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The Company accounts for this embedded conversion feature as a derivative under ASC 815-10-15-83 and valued separately from the note at fair value. The embedded conversion feature of the note is revalued at each subsequent reporting date at fair value and any changes in fair value will result in a gain or loss in those periods. The Company recorded derivative liability of $190,335 and $63,107 during the six months ended June 30, 2020 and 2019, respectively, recorded a change in derivative liability of $2,487 and $34,801, and $681 and $681 during the three and six months ended June 30, 2020 and 2019, respectively and has $216,443 of unamortized debt discount remaining as of June 30, 2020.

 

Preferred Stock

 

On March 24, 2020, Saveene (the “Purchaser”) acquired 50,000,000 shares of Series A Convertible Preferred Stock of the Company, from Mina Mar. Each share of Preferred Stock is entitled to fifteen (15) votes per share and at the election of the holder converts into ten (10) shares of Company common stock, so at the completion of the stock purchase, the Purchaser owns approximately 98.6% of the fully diluted outstanding equity securities of the Company and approximately 99% of the voting rights for the outstanding equity securities. The purchase price of $500,000 for the Preferred Stock was paid in cash. The consideration for the purchase was provided to the Purchaser from the private funds of the principal of the Purchaser. The purchase of the Preferred Stock was the result of a privately negotiated transaction and consummation of the purchase resulted in a change of control of the Company.

 

In connection with the sale of the Preferred Stock, all existing officers, directors and board members with the Company remained undisturbed.

 

Except as described herein, there are no arrangements or understandings among members of both the former and new control persons and their associates with respect to the election of directors of the Company or other matters.

 

On March 24, 2020, Thunder Energies, Inc. announced its operational affiliate plans with Saveene, the preferred shareholder. Under the agreement, Saveene will grant Thunder Energies access to several yachts and jets for the purpose of offering these vessels to the end-user and the general public for sale and or charter. Additionally, Thunder Energies will gain access to several patent-pending technologies the entire Saveene back office that focuses on the yacht and jet industry sector. This operational affiliate plan with Saveene.Com will allow Thunder Energies to offer a white-label type solution and OEM or original equipment manufacturer under Thunder Energies, Inc. own brand name being Nacaeli brand dispensing the need to acquire and carry any inventory. All future Thunder Energies, Inc. and or Nacaeli brand fulfillment orders general maintenance, and upkeep matters such as mechanical repair, buffering, and similar will be outsourced other than administrative operational and corporate governance tasks.

 

On March 24, 2020, Thunder Energies, Inc. held a meeting and voted to create two separate classes of preferred shares. Class “B” and class “C’ preferred shares. One class of shares B would be used to offer securitization for the watercraft while class C preferred shares would be used in conjunction with the securitization of air crafts.

 

Series B Convertible Preferred Stock was authorized for 10,000,000 shares of the Company. Each share of Preferred Stock is entitled to one thousand (1,000) votes per share and at the election of the holder converts into one thousand (1,000) shares of Company common stock, so at the completion of the stock purchase, the Purchaser owns approximately 100% of the fully diluted outstanding equity securities of the Company and approximately 100% of the voting rights for the outstanding equity securities. The consideration for the purchase was provided to the Purchaser from the private funds of the principal of the Purchaser.

 

Series C Non-Convertible Preferred Stock was authorized for 10,000,000 shares of the “Company. Each share of Preferred Stock is entitled to one thousand (1,000) votes per share and at the election of the holder. The series C is Non-Convertible Preferred Stock. The Purchaser owns approximately 100% of the fully diluted outstanding equity securities of the Company and approximately 100% of the voting rights for the outstanding equity securities. The consideration for the purchase was provided to the Purchaser from the private funds of the principal of the Purchaser.

 

Regarding a Company note obligation of $85,766 now due/new balance of $120,766 held by Emry was partially sold $35,000 of the face amount to the preferred shareholder Saveene. On March 24, 2020, Saveene converted the $35,000 purchase into 5,000 shares of series B and 10,000 shares of series C shares. The face amount of the Company note obligation post the aforementioned conversions and purchases is $85,766.

 

 

 

  33  

 

 

On March 24, 2020, Saveene converted the $35,000 purchase into 5,000 shares of series B and 10,000 shares of series C shares. As a result, the Series B and C voting ownership approximates 57% and therefore, the Company has a change in ownership resulting in the recognition of a gain or loss on the sale of the interest sold and on the revaluation of any retained noncontrolling investment in accordance with ASC 810-10-40-5.

 

The Company’s stock price on March 24, 2020 was $0.03, giving the Company a value of $0.03 per share times 11,244,923 shares outstanding or $337,348. The transaction was booked to loss on extinguishment of change in control and with the off-setting entry to additional paid-in capital due to it being a related party transaction.

 

Revolving Line of Credit

 

On March 24 2020, Thunder Energies secured a revolving line of credit of up to $2,000,000 at prime plus 5%. The Company intends to use these funds for future expansions, growth and other acquisitions in the same leisure/entertainment/sports entertainment or similar industry space. The Company drew down one tranche totaling $96,000 which remains outstanding at June 30, 2020. The balance of line of credit was cancelled on July 1, 2020 in connection with the change of control of the Company.

 

Description of Business, Principal Products, Services

 

Thunder Energies is doing business as NACAELI. A luxurious new brand of fractional luxury yachts, and private jets. Nacaeli, meaning Air and Water, is derived from the merger of the Latin word Na and Caeli from the South Pacific (Hawaiian) dialect to create and formulate our Air+Water Nacaeli unique Corporate identity name and brand

 

On March 24, 2020, Thunder Energies, Inc. announced its operational affiliate plans with Saveene, the preferred shareholder. Under the agreement, Saveene will grant Thunder Energies access to several yachts and jets for the purpose of offering these vessels to the end-user and the general public for sale and or charter. Additionally, Thunder Energies will gain access to several patent-pending technologies and the entire Saveene back office that focuses on the yacht and jet industry sector. This operational affiliate plan with Saveene.Com will allow Thunder Energies to offer a white-label type solution and OEM or original equipment manufacturer under Thunder Energies, Inc. own brand name Nacaeli, dispensing the need to acquire and carry any inventory. All future Thunder Energies, Inc. and or Nacaeli brand fulfillment orders for general maintenance, and any upkeep matters such as mechanical repair, buffering, and similar will be outsourced, other than administrative operational and corporate governance tasks.

 

Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements Or Labor Contracts, Including Duration

 

The Company has no patents. No franchisee or license is expected during the first three years of operation. Labor contracts for employees are planned for implementation following legal assistance and decisions by our Board of Directors.

 

Need For Any Government Approval Of Principal Products Or Services

 

No governmental approval or permits are necessary for our products.

 

Effect Of Existing Or Probable Governmental Regulations On The Business

 

There are no governmental regulations affecting the Company.

 

 

 

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Costs and Effects Of Compliance With Environmental Laws

 

There are no environmental laws affecting the Company.

 

Number Of Total Employees And Number Of Full-Time Employees

 

At this time, the Company has no full time employees and two persons working part time in various functions.

 

Implications of Being an Emerging Growth Company

 

We qualify as an emerging growth company as that term is used in the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:

 

  · A requirement to have only two years of audited financial statements and only two years of related MD&A;

 

  · Exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002;

 

  · Reduced disclosure about the emerging growth company’s executive compensation arrangements; and

 

  · No non-binding advisory votes on executive compensation or golden parachute arrangements.

 

We have already taken advantage of these reduced reporting burdens in this Form 10-Q, which are also available to us as a smaller reporting company as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).

 

In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards. We are choosing to utilize the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act. This election allows our Company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.

 

We could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.

 

We are a reporting company and file all reports required under sections 13 and 15d of the Exchange Act.

 

 

 

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Results of Operations and Critical Accounting Policies and Estimates.

 

The results of operations are based on preparation of financial statements in conformity with accounting principles generally accepted in the United States. The preparation of financial statements requires management to select accounting policies for critical accounting areas as well as estimates and assumptions that affect the amounts reported in the financial statements. The Company’s accounting policies are more fully described in Note 3 to the Notes of Financial Statements.

 

Results of Operations for the Three Months ended June 30, 2020 and 2019.

 

Revenues.

 

Total Revenue. For the three months ended June 30, 2020 and 2019, we had no revenues.

 

Expenses.

 

Total Operating Expenses. Total operating expenses for the three months ended June 30, 2020 and June 30, 2019 were $60,309 and $856,846, respectively. Total operating expenses consisted of research and development of $0 and $27,053, respectively; stock in exchange for services of $0 and $738,050, respectively; professional fees of $29,300 and $38,718, respectively and selling, general and administrative expenses of $31,009 and $53,025, respectively. Research and development expense decreased by approximately 100% primarily due to a reduction in equipment and supplies. Stock in exchange for services decreased by approximately 100% due to no shares of common stock being issued in exchange for certain expenses. Professional fees decreased by approximately 24% due to a decrease in consulting services.

 

Other Expense. Total other income expense for the three months ended June 30, 2020 and 2019 was $65,437 and $31,077, respectively. Other expense consisted of interest expense in conjunction with debt issuance of $12,835 and $9,908, respectively; accretion of debt discount of $55,018 and $21,850, respectively, and the change in fair value of derivative liability of $2,416 and $681, respectively.

 

Results of Operations for the Six Months ended June 30, 2020 and 2019.

 

Revenues.

 

Total Revenue. For the six months ended June 30, 2020 and 2019, we had no revenues.

 

Expenses.

 

Total Operating Expenses. Total operating expenses for the six months ended June 30, 2020 and June 30, 2019 were $112,506 and $1,055,448, respectively. Total operating expenses consisted of research and development of $2,741 and $41,310, respectively; stock in exchange for services of $0 and $817,075, respectively; professional fees of $78,260 and $83,166, respectively and selling, general and administrative expenses of $31,505 and $113,897, respectively. Research and development expense decreased by approximately 93% primarily due to a reduction in equipment and supplies. Stock in exchange for services decreased by approximately 100% due to no shares of common stock being issued in exchange for certain expenses. Professional fees decreased by approximately 6% due to a decrease in consulting services.

 

 

 

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Other Expense. Total other income expense for the six months ended June 30, 2020 and 2019 was $490,745 and $32,893, respectively. Other expense consisted of interest expense in conjunction with debt issuance of $81,605 and $11,724, respectively; accretion of debt discount of $106,522 and $21,850, respectively, change in fair value of derivative liability of $9,044 and $681, respectively, extinguishment of derivative liability related to debt conversion of $25,686 and $0, respectively, and the loss on extinguishment of change in control of $337,348 and $0, respectively. Interest expense in conjunction with debt issuance increased by approximately 596% due to the issuance of notes payable; accretion of debt discount increased by approximately 388% due to the issuance of notes payable and the extinguishment of derivative liability related to debt conversion decreased by approximately 100% due to the convertible note payable being paid in full.

 

Financial Condition.

 

Total Assets. Total assets at June 30, 2020 and December 31, 2019 were $58,155 and $3,111, respectively. Total assets at June 30, 2020 consist of cash of $1,655 and prepaid expenses of $56,500 and at December 31, 2019 consist of cash of $3,111. Total assets decreased by approximately 1,769%. The primary reason for the increase was an increase in prepaid expenses at period end.

 

Total Liabilities. Total liabilities at June 30, 2020 and December 31, 2019 were $386,433 and $123,274, respectively. Total liabilities consist of accounts payable of $1,550 and $0, respectively, accrued interest of $23,204 and $5,365, respectively; convertible note payable of $107,458 (net of discount of $46,308) and $57,000, respectively, derivative liability of $216,443 and $60,909, respectively, and convertible note payable of $37,778 (net of discount of $12,222) and $0, respectively. Total liabilities increased by approximately 213%. Accrued interest increased by approximately 333% due to borrowings for operations. Convertible note payable increased by approximately 155% due to a new convertible note payable.

 

Liquidity and Capital Resources.

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business.

 

The Company sustained a loss of $603,251 and $1,088,341 for the six months ended June 30, 2020 and 2019, respectively. The Company has accumulated losses totaling $5,774,364 at June 30, 2020. Because of the absence of positive cash flows from operations, the Company will require additional funding for continuing the development and marketing of products. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

We are presently able to meet our obligations as they come due through the support of our shareholders. At June 30, 2020, we had a working capital deficit of $290,500. Our working capital deficit is due to the results of operations.

 

Net cash used in operating activities for the six months ended June 30, 2020 and 2019 were $167,456 and $119,372, respectively. Net cash used in operating activities includes our net loss, prepaid expenses, accretion of debt discount, and loss on extinguishment of change in control.

 

Net cash provided by financing activities for the six months ended June 30, 2020 and 2019 were $166,000 and $114,700, respectively. Net cash provided by financing activities includes proceeds from convertible note payable of $118,000 and the issuance of stock of $48,000.

 

 

 

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We anticipate that our future liquidity requirements will arise from the need to fund our growth from operations, pay current obligations and future capital expenditures. The primary sources of funding for such requirements are expected to be cash generated from operations and raising additional funds from the private sources and/or debt financing. However, we can provide no assurances that we will be able to generate sufficient cash flow from operations and/or obtain additional financing on terms satisfactory to us, if at all, to remain a going concern. Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis and ultimately to attain profitability. Our Plan of Operation for the next twelve months is to raise capital to implement our strategy. We do not have the necessary cash and revenue to satisfy our cash requirements for the next twelve months. We cannot guarantee that additional funding will be available on favorable terms, if at all. If adequate funds are not available, then we may not be able to expand our operations. If adequate funds are not available, we believe that our officers and directors will contribute funds to pay for some of our expenses. However, we have not made any arrangements or agreements with our officers and directors regarding such advancement of funds. We do not know whether we will issue stock for the loans or whether we will merely prepare and sign promissory notes. If we are forced to seek funds from our officers or directors, we will negotiate the specific terms and conditions of such loan when made, if ever. Although we are not presently engaged in any capital raising activities, we anticipate that we may engage in one or more private offering of our company’s securities after the completion of this offering. We would most likely rely upon the transaction exemptions from registration provided by Regulation D, Rule 506 or conduct another private offering under Section 4(2) of the Securities Act of 1933. See “Note 2 – Going Concern” in our financial statements for additional information as to the possibility that we may not be able to continue as a “going concern.”

 

We are not aware of any trends or known demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in material increases or decreases in liquidity.

 

Capital Resources.

 

We had no material commitments for capital expenditures as of June 30, 2020.

 

Off-Balance Sheet Arrangements

 

We have made no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

 

Inflation

 

We do not believe that inflation has had a material effect on our results of operations.

 

Item 3. Quantitative and Qualitative Disclosure About Market Risk.

 

The registrant qualifies as a smaller reporting company, as defined by SEC Rule 229.10(f)(1) and is not required to provide the information required by this Item.

 

Item 4. Controls and Procedures.

 

(a) Management’s Annual Report on Internal Control over Financial Reporting.

 

The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with U.S. generally accepted accounting principles.

 

 

 

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With respect to the period ending June 30, 2020, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934.

 

Based upon our evaluation regarding the period ending June 30, 2020, the Company’s management, including its Principal Executive Officer and Principal Financial Officer, has concluded that its disclosure controls and procedures were not effective due to the Company’s limited internal resources and lack of ability to have multiple levels of transaction review. Material weaknesses noted are lack of an audit committee, lack of a majority of outside directors on the board of directors, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures; and management is dominated by two individuals, without adequate compensating controls. Through the use of external consultants and the review process, management believes that the financial statements and other information presented herewith are materially correct.

 

The Company’s disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. However, the Company’s management, including its Principal Executive Officer and Principal Financial Officer, does not expect that its disclosure controls and procedures will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefit of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.

 

(b) Change in Internal Control Over Financial Reporting

 

We have not made any significant changes to our internal controls during the period ending June 30, 2020. We have not identified any significant deficiencies or material weaknesses or other factors that could significantly affect these controls, and therefore, no corrective action was taken.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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PART II – OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

None.

 

Item 1A. Risk Factors.

 

We are a Smaller Reporting Company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

 

During the three months ended June 30, 2020, the Company issued 1,400,000 shares to non-related parties for cash as set forth in the table below.

 

Date   Shares     Issuance Description   Relationship   Share Price     Amount  
5/27/20     1,400,000     Cash   Non-related party     0.0343       $48,000  

 

Item 3. Defaults Upon Senior Securities.

 

None.

 

Item 4. Mine Safety Disclosure.

 

Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities from the Federal Mine Safety and Health Administration, or MSHA, under the Federal Mine Safety and Health Act of 1977, or the Mine Act. During the quarter ended June 30, 2020, we did not have any projects that were in production and as such, were not subject to regulation by MSHA under the Mine Act.

 

Item 5. Other Information.

 

None.

 

 

 

 

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Item 6. Exhibits.

 

Exhibit Number and Description   Location Reference
       
(a) Financial Statements   Filed herewith
           
(b) Exhibits required by Item 601, Regulation S-K;    
           
  (3.0) Articles of Incorporation    
           
    (3.1) Initial Articles of Incorporation filed with Form 10 Registration Statement on July 21, 2011   See Exhibit Key
           
    (3.2) Amendment to Articles of Incorporation dated July 29, 2013   See Exhibit Key
           
    (3.3) Amendment to Articles of Incorporation dated October 7, 2013   See Exhibit Key
           
    (3.4) Amendment to Articles of Incorporation dated April 25, 2014   See Exhibit Key
           
    (3.5) Bylaws filed with Form 10 Registration Statement on July 21, 2011.   See Exhibit Key
           
  (10.1) Stock Purchase Agreement with Northbridge Financial, Inc.   See Exhibit Key
           
  (11.1) Statement re: computation of per share Earnings.   Note 3 to Financial Stmts.
         
  (14.1) Code of Ethics   See Exhibit Key
         
  (31.1) Certificate of Chief Executive Officer And Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002   Filed herewith
         
  (32.1) Certification of Chief Executive Officer And Principal Financial and Accounting Officer Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002   Filed herewith
         
(101.INS) XBRL Instance Document   Filed herewith
(101.SCH) XBRL Taxonomy Ext. Schema Document   Filed herewith
(101.CAL) XBRL Taxonomy Ext. Calculation Linkbase Document   Filed herewith
(101.DEF) XBRL Taxonomy Ext. Definition Linkbase Document   Filed herewith
(101.LAB) XBRL Taxonomy Ext. Label Linkbase Document   Filed herewith
(101.PRE) XBRL Taxonomy Ext. Presentation Linkbase Document   Filed herewith

  

 

 

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Exhibit Key

 

3.1 Incorporated by reference herein to the Company’s Form 10 Registration Statement filed with the Securities and Exchange Commission on July 21, 2011.
   
3.2 Incorporated by reference herein to the Company’s Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on November 15, 2013.
   
3.3 Incorporated by reference herein to the Company’s Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on November 15, 2013.
   
3.4 Incorporated by reference herein to the Company’s Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on August 13, 2018.
   
3.5 Incorporated by reference herein to the Company’s Form 10 Registration Statement filed with the Securities and Exchange Commission on July 21, 2011.
   
10.0 Incorporated by reference herein to the Company’s Form S-1 Registration Statement filed with the Securities and Exchange Commission on March 2, 2018.
   
14.0 Incorporated by reference herein to the Company’s Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on January 17, 2012.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Signatures

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

THUNDER ENERGIES CORPORATION

 

NAME   TITLE   DATE
         
/s/ Yogev Shvo   President and Chief Executive Officer, Chief Financial Officer and Director   August 13, 2020
Yogev Shvo   (Principal Executive Officer and Principal Accounting Officer)    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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