UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March
31, 2020
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________________ to
____________________.
Commission file number: 000-50053
CLEAN COAL TECHNOLOGIES, INC.
(Exact name of small business issuer as specified in its
charter)
|
NEVADA
|
26-1079442
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
|
295 Madison Avenue (12th Floor), New York, NY
|
10017
|
|
(Address of principal executive offices)
|
(Zip Code)
|
(646) 727-4847
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
|
Title of Class
|
Trading Symbol
|
Name of Exchange on Which Registered
|
|
Common
|
CCTC
|
OTCQB
|
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), Yes ☒ and (2) has been subject to such
filing requirements for the past 90 days. No ☒
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the
registrant was required to submit such
files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer”, “accelerated filer”,
“smaller reporting company” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
Large accelerated
filer ☐
Accelerated
filer ☐
Non-accelerated
filer ☒
Smaller reporting company ☒
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the
registrant has elected to not use the extended transition period
for complying with any new or revisited financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).
Yes ☐ No ☒
The number of shares outstanding of Registrant’s Common Stock as of
date: May 11, 2020: 186,857,749
TABLE OF
CONTENTS
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL
STATEMENTS
The accompanying unaudited financial statements have been prepared
in accordance with the instructions to Form 10-Q pursuant to the
rules and regulations of the Securities and Exchange Commission
and, therefore, do not include all information and footnotes
necessary for a complete presentation of our financial position,
results of operations, cash flows, and stockholders’ deficit in
conformity with generally accepted accounting principles. In the
opinion of management, all adjustments considered necessary for a
fair presentation of the results of operations and financial
position have been included and all such adjustments are of a
normal recurring nature.
Clean Coal Technologies, Inc.
Balance Sheets
(Unaudited)
|
|
|
March 31,
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
Cash
|
|
$ |
3,020 |
|
|
$ |
92,282 |
|
|
Prepaid
Expenses
|
|
|
39,219 |
|
|
|
39,219 |
|
|
Total Current Assets
|
|
|
42,239 |
|
|
|
131,501 |
|
| |
|
|
|
|
|
|
|
|
|
Right to use ground lease, net of accumulated amortization of
$23,000 and $20,000, respectively
|
|
|
13,000 |
|
|
|
16,000 |
|
| |
|
|
|
|
|
|
|
|
|
Total Assets
|
|
$ |
55,239 |
|
|
$ |
147,501 |
|
| |
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$ |
895,889 |
|
|
$ |
1,022,110 |
|
|
Accrued liabilities
|
|
|
8,018,652 |
|
|
|
7,671,748 |
|
|
Customer deposit – related party
|
|
|
100,000 |
|
|
|
100,000 |
|
|
Convertible debt, net of unamortized discounts – related party
|
|
|
7,301,496 |
|
|
|
6,593,459 |
|
|
Notes payable – related party
|
|
|
754,600 |
|
|
|
754,600 |
|
|
Convertible notes payable, net of unamortized discount
|
|
|
1,833,238 |
|
|
|
1,396,682 |
|
|
Notes payable
|
|
|
413,185 |
|
|
|
413,185 |
|
|
Total Current Liabilities
|
|
|
19,317,060 |
|
|
|
17,951,784 |
|
| |
|
|
|
|
|
|
|
|
|
Long-Term Liabilities
|
|
|
|
|
|
|
|
|
|
Convertible debt, net of unamortized discounts – related party
|
|
|
775,986 |
|
|
|
1,068,464 |
|
|
Total Liabilities
|
|
|
20,093,046 |
|
|
|
19,020,248 |
|
| |
|
|
|
|
|
|
|
|
|
Stockholders’ Deficit:
|
|
|
|
|
|
|
|
|
|
Common stock, $0.00001 par value; 500,000,000 shares
authorized, 181,347,218 and 181,347,218 shares issued
and outstanding, respectively
|
|
|
1,815 |
|
|
|
1,815 |
|
|
Additional paid-in capital
|
|
|
260,131,700 |
|
|
|
260,127,550 |
|
|
Accumulated deficit
|
|
|
(280,171,322 |
)
|
|
|
(279,002,112 |
)
|
|
Total Stockholders’ Deficit
|
|
|
(20,037,807 |
)
|
|
|
(18,872,747 |
)
|
|
Total Liabilities and Stockholders’ Deficit
|
|
$ |
55,239 |
|
|
$ |
147,501 |
|
The accompanying notes are an integral part of these unaudited
financial statements.
Clean Coal Technologies, Inc.
Statements of Operations
(Unaudited)
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
| |
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
$ |
348,630 |
|
|
$ |
377,494 |
|
|
Research and development
|
|
|
69,545 |
|
|
|
3,000 |
|
|
Consulting services
|
|
|
998 |
|
|
|
4,498 |
|
|
Gain on settlement of accounts payable
|
|
|
(131,539 |
)
|
|
|
- |
|
|
Loss from Operations
|
|
|
(287,634 |
)
|
|
|
(384,992 |
)
|
| |
|
|
|
|
|
|
|
|
|
Other Expenses:
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
826,576 |
|
|
|
637,909 |
|
|
Debt prepayment and default expense
|
|
|
55,000 |
|
|
|
119,000 |
|
|
Total Other Expenses
|
|
|
(881,576 |
)
|
|
|
(756,909 |
)
|
| |
|
|
|
|
|
|
|
|
|
Net Loss
|
|
$ |
(1,169,210 |
)
|
|
$ |
(1,141,901 |
)
|
| |
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding – basic and diluted
|
|
|
181,347,218 |
|
|
|
174,427,854 |
|
| |
|
|
|
|
|
|
|
|
|
Net loss per share basic and diluted
|
|
$ |
(0.01 |
)
|
|
$ |
(0.01 |
)
|
The accompanying notes are an integral part of these unaudited
financial statements.
Clean Coal Technologies, Inc.
Unaudited Statements of Changes in Stockholders’ Deficit
For the Three Months Ended March 31,
2019 and 2020
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
Total
|
|
|
|
|
Common Stock
|
|
|
Paid-In
|
|
|
Accumulated
|
|
|
Stockholders’
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Capital
|
|
|
Deficit
|
|
|
Deficit
|
|
|
Balance December 31, 2018
|
|
|
174,427,854 |
|
|
$ |
1,745 |
|
|
$ |
259,320,220 |
|
|
$ |
(273,971,664 |
)
|
|
$ |
(14,649,699 |
)
|
|
Beneficial conversion feature on convertible debt
|
|
|
- |
|
|
|
- |
|
|
|
50,992 |
|
|
|
- |
|
|
|
50,992 |
|
|
Net loss for the three months ended March 31, 2019
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,141,901 |
)
|
|
|
(1,141,901 |
)
|
|
Balance, March 31, 2019
|
|
|
174,427,854 |
|
|
$ |
1,745 |
|
|
$ |
259,371,212 |
|
|
$ |
(275,113,565 |
)
|
|
$ |
(15,740,608 |
)
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2019
|
|
|
181,347,218 |
|
|
$ |
1,815 |
|
|
$ |
260,127,550 |
|
|
$ |
(279,002,112 |
)
|
|
$ |
(18,872,747 |
)
|
|
Beneficial conversion feature on convertible debt
|
|
|
- |
|
|
|
- |
|
|
|
4,150 |
|
|
|
- |
|
|
|
4,150 |
|
|
Net loss for the three months ended March 31, 2020
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
(1,169,210 |
)
|
|
|
(1,169,210 |
)
|
|
Balance, March 31, 2020
|
|
|
181,347,218 |
|
|
$ |
1,815 |
|
|
$ |
260,131,700 |
|
|
$ |
(280,171,322 |
)
|
|
$ |
(20,037,807 |
)
|
The accompanying notes are an integral part of these unaudited
financial statements.
Clean Coal Technologies, Inc.
Statements of Cash Flows
(Unaudited)
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$ |
(1,169,210 |
)
|
|
$ |
(1,141,901 |
)
|
|
Adjustment to reconcile net loss to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
Amortization of debt discounts
|
|
|
436,365 |
|
|
|
306,448 |
|
|
Gain on settlement of accounts payable
|
|
|
(131,539 |
)
|
|
|
- |
|
|
Amortization of lease asset
|
|
|
3,000 |
|
|
|
3,000 |
|
|
Debt extension expense
|
|
|
30,000 |
|
|
|
55,000 |
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in accounts payable
|
|
|
5,318 |
|
|
|
(85,302 |
)
|
|
Increase in accrued expenses
|
|
|
346,904 |
|
|
|
304,898 |
|
|
Net Cash Used in Operating Activities
|
|
|
(479,162 |
)
|
|
|
(557,857 |
)
|
| |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Borrowings on convertible debt, net of original issue discounts
|
|
|
535,000 |
|
|
|
- |
|
|
Payments on convertible debt
|
|
|
(150,000 |
)
|
|
|
- |
|
|
Payments of debt issuance costs
|
|
|
(20,000 |
)
|
|
|
- |
|
|
Borrowings on convertible debt, net of original issue discounts –
related party
|
|
|
24,900 |
|
|
|
125,000 |
|
|
Borrowings on notes payable – related party
|
|
|
- |
|
|
|
292,000 |
|
|
Borrowings on notes payable
|
|
|
- |
|
|
|
300,000 |
|
|
Payments on notes payable
|
|
|
- |
|
|
|
(160,000 |
)
|
|
Net Cash Provided by Financing Activities
|
|
|
389,900 |
|
|
|
557,000 |
|
| |
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH EQUIVALENTS
|
|
|
(89,262 |
)
|
|
|
(857 |
)
|
|
CASH AND CASH EQUIVALENTS - beginning of period
|
|
|
92,282 |
|
|
|
25,745 |
|
|
CASH AND CASH EQUIVALENTS - end of period
|
|
$ |
3,020 |
|
|
$ |
24,888 |
|
| |
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES:
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$ |
- |
|
|
$ |
- |
|
|
Cash paid for income taxes
|
|
$ |
- |
|
|
$ |
- |
|
| |
|
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Beneficial conversion feature on convertible debt – related
party
|
|
$ |
4,150 |
|
|
$ |
50,992 |
|
The accompanying notes are an integral part of these unaudited
financial statements.
Clean Coal Technologies, Inc.
Notes to Financial Statements
(Unaudited)
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited interim financial statements of Clean
Coal Technologies, Inc. (“Clean Coal”, the “Company”) have been
prepared in accordance with accounting principles generally
accepted in the United States of America and the rules of the
Securities and Exchange Commission, and should be read in
conjunction with the audited financial statements and notes thereto
contained in Clean Coal’s Annual Report on Form 10-K filed with the
SEC. In the opinion of management, the accompanying unaudited
interim financial statements reflect all adjustments, consisting of
normal recurring adjustments, necessary to present fairly the
financial position and the results of operations for the interim
period presented herein. The results of operations for interim
periods are not necessarily indicative of the results to be
expected for the full year or for any future period. Notes to the
financial statements which would substantially duplicate the
disclosure contained in the audited financial statements for fiscal
2019 as reported in the Form 10K have been omitted.
Net Income (Loss) per Common Share
Basic net income (loss) per share is computed on the basis of the
weighted average number of common shares outstanding during each
year. Diluted net income (loss) per share is computed similar to
basic net income (loss) per share except that the denominator is
increased to include the number of additional common shares that
would have been outstanding if the potential common shares had been
issued and if the additional common shares were dilutive. In
periods where losses are reported, the weighted-average number of
common stock outstanding excludes common stock equivalents, because
their inclusion would be anti-dilutive.
For the three months ended March 31, 2020 and 2019, the Company
realized net losses, resulting in outstanding warrants and
convertible debt having an antidilutive effect. All potentially
dilutive instruments were excluded from the calculation of diluted
net loss per share as their inclusion would have been
anti-dilutive.
The following table summarizes the potential shares of common stock
that were excluded from the computation of diluted net loss per
share for the three months ended March 31, 2020 and 2019 as such
shares would have had an anti-dilutive effect:
|
|
|
March 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Common stock warrants
|
|
|
2,852,329 |
|
|
|
4,180,000 |
|
|
Convertible notes payable
|
|
|
149,536,533 |
|
|
|
145,088,981 |
|
|
Total
|
|
|
152,388,862 |
|
|
|
149,268,981 |
|
Recent Accounting Pronouncements
The Company has implemented all new accounting pronouncements that
are in effect and that may impact its financial statements. The
Company does not believe that there are any other new accounting
pronouncements that have been issued that might have a material
impact on its financial position or results of operations.
NOTE 2: GOING CONCERN
The accompanying financial statements have been prepared on a going
concern basis of accounting which contemplates continuity of
operations, realization of assets, liabilities, and commitments in
the normal course of business. The accompanying financial
statements do not reflect any adjustments that might result if
Clean Coal is unable to continue as a going concern. Clean Coal has
an accumulated deficit and a working capital deficit as of March
31, 2020 with no significant revenues anticipated for the near
term. Management believes Clean Coal will need to raise capital in
order to operate over the next 12 months. As shown in the
accompanying financial statements, Clean Coal has also incurred
significant losses from operations since inception. Clean Coal’s
continuation as a going concern is dependent upon its ability to
generate sufficient cash flow to meet its obligations on a timely
basis and ultimately to attain profitability. Clean Coal has
limited capital with which to pursue its business plan. There can
be no assurance that Clean Coal’s future operations will be
significant and profitable, or that Clean Coal will have sufficient
resources to meet its objectives. These conditions raise
substantial doubt as to Clean Coal’s ability to continue as a going
concern. Management may pursue either debt or equity financing or a
combination of both, in order to raise sufficient capital to meet
Clean Coal’s financial requirements over the next twelve months and
to fund its business plan. There is no assurance that management
will be successful in raising additional funds.
NOTE 3: RESEARCH AND DEVELOPMENT
Research and development expenses include salaries, related
employee expenses, facility lease expense, research expenses and
consulting fees. All costs for research and development activities
are expensed as incurred. In addition, the Company expenses the
costs of licenses of patents and the prosecution of patents until
the issuance of such patents and the commercialization of related
products is reasonably assured. During the three months ended March
31, 2020 and 2019, the Company recognized $69,545 and $3,000 of
research and development costs, respectively.
NOTE 4: RELATED PARTY TRANSACTIONS
Wages and bonus payable to related parties
Accruals for salary and bonuses to officers and directors are
included in accrued liabilities in the balance sheets and totaled
$3,071,280 and $3,090,052 as of March 31, 2020 and December 31,
2019, respectively. As part of the separation agreement with Mr.
Ponce de Leon, the Company agreed to pay him all his accrued salary
within two years but agreed to pay him $200,000 by November 2015
out of revenues earned. As the Company did not earn revenue in 2015
and as at March 31, 2020 has still not earned revenue, the
obligation to Mr. Ponce de Leon of $1,619,259 is currently in
default and the amount includes $417,079 in accrued interest. It is
the Company’s intention to pay Mr. Ponce de Leon immediately upon
receiving revenue.
Convertible Debt
During the three months ended March 31, 2020, the Company
borrowed $24,900, net of beneficial conversion features of $4,150,
under a convertible note payable from a Company with an interest
owned by a significant stockholder. The convertible note is secured
by assets and the common stock of the Company, bears interest at
12% per annum and is due three years from the dates of issuance. As
of March 31, 2020 and December 31, 2019, the Company had
outstanding short-term convertible notes payable of $8,494,891 and
$6,594,469, net of unamortized discounts of $1,193,385 and
$658,922, respectively and outstanding long-term convertible notes
payable of $1,409,153 and $2,626,753, net of unamortized discounts
of $633,167 and $1,558,289, respectively. The convertible notes
payable are convertible at $0.06 per share, which was a discount to
the market price on the date of issuance. Amortization expense
related to debt discounts on convertible debt for the three months
ended March 31, 2020 and 2019 was $394,809 and $289,932,
respectively.
Nonconvertible Debt
As of March 31, 2020 and December 31, 2019, the Company had
outstanding notes payable of $675,000 and $675,000,
respectively.
As of March 31, 2020 and December 31, 2019, the Company had
outstanding advances payable to an officer of the Company of
$79,600 and $79,600, respectively. The advances payable are
unsecured, bear no interest and are due on demand.
NOTE 5: DEBT
Accounts Payable
In January2020, following mediation with a vendor of an outstanding
balance, the Company successfully won the case and the balance of
$131,539 was waived. The company had previously recognized the
$131,539 balance in accounts payable, which was reversed in 2020
and recognized as a gain on debt settlement.
Notes Payable
As of March 31, 2020 and December 31, 2019, the Company had
outstanding notes payable to former affiliates of the Company of
$413,185 and $413,185, respectively. The notes payable are
unsecured, bear no interest and are due on demand.
Convertible Debt
During October 2018, the Company borrowed $345,000, net of
original debt discount of $45,000 under a note payable bearing
interest at 7% per annum, unsecured and was due January 18, 2019.
During January 2019, the due date on the note was extended to April
18, 2019 in exchange for a $55,000 debt extension fee added to the
principal of the note and the addition of a conversion feature. The
conversion feature allowed the holder to convert the principal and
accrued interest into shares of the Company’s common stock at a
discount of 70% of the lowest trading price for the Company’s
common stock during the twenty trading days immediately preceding
the conversion. Between April and December 2019, the note was
extended several times through January 1, 2020.
Between January and March 2020, the Company extended the note an
additional three additional times, paying two payments of $25,000
each, with a total of $30,000 applied to principal and $20,000 to
debt extension fees. As of March 31, 2020 and December 31, 2019,
the balance on the convertible note payable was $135,000 and
$165,000, respectively. These notes have been extended through May
15 and May 30 2020. During the three months ended March 31, 2020
and 2019, the Company recognized $0 and $8,804 in in debt discount
amortization expense, respectively.
During February 2019, the Company issued a convertible note payable
in the amount of $315,000. The convertible note payable was due one
year from the date of issuance, has an original issuance discount
of $15,000, accrues interest at the rate of 6% per annum, is
unsecured and was convertible at any time into shares of the
Company’s common stock at a discount of 65% of the lowest trading
price for the Company’s common stock during the ten trading days
immediately preceding the conversion. During 2019, the note
conversion feature was extended three times through January 6,
2020.
Between January and March 2020, the Company extended the note
conversion feature an additional three times through April 15,
2020, paying two payments of $25,000 each, with a total of $30,000
applied to principal, $20,000 to debt extension fees, and incurring
prepayment penalties added to principal of $7,500. As of March 31,
2020 and December 31, 2019, the balance on the convertible note
payable was $123,329 and $145,829, respectively. During the three
months ended March 31, 2020 and 2019, the Company recognized $3,740
and $1,356 in debt discount amortization expense, respectively.
During May 2019, the Company issued a convertible note payable in
the amount of $262,500. The convertible note payable is due one
year from the date of issuance, has an original issuance discount
of $12,500, accrues interest at the rate of 6% per annum, is
unsecured and is convertible after 180 days into shares of the
Company’s common stock at a discount of 65% of the lowest trading
price for the Company’s common stock during the ten trading days
immediately preceding the conversion. During 2019, the note
conversion feature was extended three times through January 22,
2020.
Between January and March 2020, the Company extended the note
conversion feature an additional three times through April 15,
2020, paying payments totaling $87,500, with a total of $60,000
applied to principal, $10,000 to interest, $17,500 to debt
extension fees and incurring prepayment penalties added to
principal of $15,000. As of March 31, 2020 and December 31, 2019,
the balance on the convertible note payable was $157,500 and
$202,500, respectively. During the three months ended March 31,
2020, the Company recognized $3,116 in debt discount amortization
expense.
During August 2019, the Company issued a convertible note payable
in the amount of $157,500. The convertible note payable is due one
year from the date of issuance, has an original issuance discount
of $7,500, accrues interest at the rate of 6% per annum, is
unsecured and is convertible after 180 days into shares of the
Company’s common stock at a discount of 65% of the lowest trading
price for the Company’s common stock during the ten trading days
immediately preceding the conversion.
Between January and March 2020, the Company extended the note
conversion feature through April 15, 2020, paying $37,500, with
$30,000 applied to principal, $7,500 to debt extension fees and
incurring prepayment penalties added to principal of $7,500. As of
March 31, 2020 and December 31, 2019, the balance on the
convertible note payable was $157,500 and $135,000, respectively.
During the three months ended March 31, 2020, the Company
recognized $1,870 in debt discount amortization expense.
During September 2019, the Company issued two convertible notes
payable totaling $270,000, or $135,000 each. The convertible notes
payable are due one year from the date of issuance, each have an
original issuance discount of $11,500, accrue interest at the rate
of 6% per annum, are unsecured and are convertible after 180 days
into shares of the Company’s common stock at a discount of 65% of
the lowest trading price for the Company’s common stock during the
ten trading days immediately preceding the conversion.
Between January and March 2020, the Company extended the note
conversion feature through April 15, 2020. As of March 31, 2020 and
December 31, 2019, the balance on the convertible notes payable
were $135,000 and $135,000 each, respectively. During the three
months ended March 31, 2020, the Company recognized $5,734 in debt
discount amortization expense.
During November 2019, the Company issued a convertible note payable
in the amount of $336,000. The convertible note payable is due one
year from the date of issuance, has an original issuance discount
of $45,000, accrues interest at the rate of 10% per annum, is
unsecured and is convertible after 180 days into shares of the
Company’s common stock at a discount of 65% of the lowest trading
price for the Company’s common stock during the ten trading days
immediately preceding the conversion.
As of March 31, 2020 and December 31, 2019, the balance on the
convertible note payable was $336,000 and $336,000, respectively.
During the three months ended March 31, 2020, the Company
recognized $11,219 in debt discount amortization expense.
During December 2019, the Company issued a convertible note payable
in the amount of $220,000. The convertible note payable is due one
year from the date of issuance, has an original issuance discount
of $26,000, accrues interest at the rate of 7% per annum, is
unsecured and is convertible after 180 days into shares of the
Company’s common stock at a discount of 65% of the lowest trading
price for the Company’s common stock during the ten trading days
immediately preceding the conversion.
As of March 31, 2020 and December 31, 2019, the balance on the
convertible note payable was $220,000 and $220,000, respectively.
During the three months ended March 31, 2020, the Company
recognized $6,482 in debt discount amortization expense.
During January 2020, the Company issued a convertible note payable
in the amount of $138,000. The convertible note payable is due one
year from the date of issuance, has an original issuance discount
of $3,000, accrues interest at the rate of 8% per annum, is
unsecured and is convertible after 180 days into shares of the
Company’s common stock at a discount of 65% of the lowest trading
price for the Company’s common stock during the ten trading days
immediately preceding the conversion.
As of March 31, 2020, the balance on the convertible note payable
was $138,000. During the three months ended March 31, 2020, the
Company recognized $518 in debt discount amortization expense.
During February 2020, the Company issued a convertible note payable
in the amount of $440,000. The convertible note payable is due one
year from the date of issuance, has an original issuance discount
of $40,000, accrues interest at the rate of 5% per annum, is
unsecured and is convertible after 180 days into shares of the
Company’s common stock at a discount of 65% of the lowest trading
price for the Company’s common stock during the ten trading days
immediately preceding the conversion.
As of March 31, 2020, the balance on the convertible note payable
was $440,000. During the three months ended March 31, 2020, the
Company recognized $8,877 in debt discount amortization
expense.
During the three months ended March 31, 2020, the Company paid
$20,000 as a debt financing fee on the above financings.
NOTE 6: COMMON STOCK WARRANTS
There were no warrants issued during the three months ended March
31, 2020 or the year ended December 31, 2019. The following table
presents the common stock warrant activity during the three months
ended March 31, 2020:
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Weighted
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Weighted
|
|
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|
|
|
|
|
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Average
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Average
|
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Warrants
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Exercise Price
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Remaining Term
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|
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Outstanding - December 31, 2019
|
|
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2,852,329
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|
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$
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0.11
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1.25
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Granted
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-
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|
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-
|
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-
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Forfeited/expired
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-
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-
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-
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Exercised
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-
|
|
|
|
-
|
|
|
|
-
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|
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Outstanding – March 31, 2020
|
|
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2,852,329
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|
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$
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0.11
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|
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1.00
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|
|
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|
|
|
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Exercisable – March 31, 2020
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2,852,329
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$
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0.11
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1.00
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The intrinsic value of the exercisable warrants as of March 31,
2020 was $0.
NOTE 7: SUBSEQUENT EVENTS
During April 2020, a related party convertible note holder elected
to convert $100,000 of note principal into 1,250,000 shares of the
Company’s common stock at $0.08 per share.
During April 2020, the company entered into a six month 5%
convertible note with a third party for $247,500. The note
attracted approx. 10% OID and will be convertible after six months
at a 35% discount. The company retains the right to buy back the
note during the first six months.
During May 2020, convertible note holders elected to convert a
total of $139,500 of note principal and $4,000 in accrued interest
and $500 in fees into 4,430,768 shares of the Company’ common stock
at approximately $0.03 per share.
ITEM 2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE
RESULTS
This Quarterly Report on Form 10-Q contains forward-looking
statements that involve risks and uncertainties, as well as
assumptions that, if they do not materialize or prove correct,
could cause our results to differ materially from those expressed
or implied by such forward-looking statements. All statements other
than statements of historical fact are statements that could be
deemed forward-looking statements, including, but not limited to,
statements concerning: our plans, strategies and objectives for
future operations; new products or developments; future economic
conditions, performance or outlook; the outcome of contingencies;
expected cash flows or capital expenditures; our beliefs or
expectations; activities, events or developments that we intend,
expect, project, believe or anticipate will or may occur in the
future; and assumptions underlying any of the foregoing.
Forward-looking statements may be identified by their use of
forward-looking terminology, such as “believes,” “expects,” “may,”
“should,” “would,” “will,” “intends,” “plans,” “estimates,”
“anticipates,” “projects” and similar words or expressions. You
should not place undue reliance on these forward-looking
statements, which reflect our management’s opinions only as of the
date of the filing of this Quarterly Report on Form 10-Q and are
not guarantees of future performance or actual results
Overview
Over the past decade, Clean Coal Technologies, Inc. has developed
processes that address what we believe are the key technology
priorities of the global coal industry. We currently have three
processes in our intellectual property portfolio:
The original process, called Pristine, is designed to remove
moisture and volatile matter, rendering a high-efficiency, cleaner
thermal coal. The process has been tested successfully
on bituminous and subbituminous coals, and lignite from various
parts of the United States and from numerous countries around the
world.
Our second process, called Pristine-M, is a low-cost coal
dehydration technology. In tests, this process has succeeded in
drying coal economically and stabilizing it using volatile matter
released by the feed coal. Construction of our coal testing plant
was completed in December 2015 and was successfully tested through
April 2016 at AES Coal Power Utility in Oklahoma. Additional tests
commenced and were completed in the fourth quarter of 2017. This
test facility has been moved from AES to Wyoming where reassembly
has commenced and testing of international coal is expected upon
completion of the reassembly. Changes identified to the process by
the University of Wyoming and our EPC contractors will be included
in the reassembly and it is expected to provide a higher quality
end product with a lower capital cost for a commercial unit. The
reassembly is expected to be completed in Q2 2020 but is subject to
potential delays due to the current pandemic.
Our third process, called Pristine-SA, is designed to eliminate
100% of the volatile matter in the feed coal and to achieve stable
combustion by co-firing it with biomass or natural
gas. The process is expected to produce a cleaner fuel
that eliminates the need for emissions scrubbers and the corollary
production of toxic coal ash. We anticipate that treated
coal that is co-fired with other energy resources will burn as
clean as natural gas.
Anticipated Benefits of the Technology:
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Reduction of undesired emissions and greenhouse gases through the
removal of compounds that are not required for combustion in
conventional boilers.
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•
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Cost savings and environmental impact reduction. Our pre-combustion
solution is expected to be significantly less expensive than
post-combustion solutions such as emissions
scrubbers. Not only are the latter prohibitively
expensive, they produce coal ash containing the “scrubbed”
compounds, which is dumped in toxic waste disposal sites where it
may pose continuing environmental risk. Coal treated
using our processes may eliminate the need for post-combustion
emissions scrubbers and the resulting toxic ash. By beneficiating
the coal it requires less coal to be consumed to achieve the same
energy output. This will save on transportation and handling
costs.
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•
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Potential use of compounds removed from treated coal. Volatile
matter captured in the Pristine process is removed in the form of
hydrocarbon liquids that we believe will be easily blended with
crude oil or used as feedstock for various products. For
example, sulfur, which can be removed using the Pristine process,
is a basic feedstock for fertilizer. The harvesting of
hydrocarbon liquids from abundant, cheaper coal is a potentially
lucrative side benefit of our processes. All coal by-products
including Rare Earth Minerals extraction will be tested in the
second-generation facility.
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Successful testing of the Pristine M process resulted in an
increase in BTU of the processed coal and a reduction in moisture
content making it less expensive to transport (as moisture has been
removed) with the end product being a dust free stabilized enhanced
coal which we believe will address the issue of coal dust pollution
during transportation.
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Energy Independence. To the extent that volatile matter
is removed from coal, coal’s use as an energy resource is greatly
improved, enabling the United States and other coal-rich countries
to move towards energy independence owing to coal’s greater
abundance. Extraction of by-products including Rare Earth Minerals
is also expected to provide coal derivative product
independence.
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Development Status:
Pristine process. Pristine process successfully lab tested on small
scale and through advanced computer modeling. As at May, 2020,
various aspects of the Pristine process were successfully tested at
our test facility at the AES coal Power plant in Oklahoma as part
of the overall testing of Pristine M. The second-generation
facility in Wyoming is expected to perform a more detailed testing
of the Pristine process.
Pristine-M. Testing of the Pristine M process on Powder River Basin
coal at the AES facility in Oklahoma was completed in December
2017. The Pristine M process was successfully tested and the
process, engineering and science were independently proven. The
test facility was moved from the AES location to Wyoming where
reassembly commenced in Q4 2019 and testing of international coal
is expected upon completion of reassembly. The reassembly is
expected to be completed in Q2 2020. Over several months in 2018
and early 2019 the University of Wyoming independently validated
the Pristine M process in their laboratory.
Pristine-SA process. Pristine SA process analysis is at a very
early stage. Further research and development is expected using the
test facility at its permanent location in Wyoming.
Business Outlook
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•
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Wyoming New Power, a related party company, has agreed to sign a
two million ton per annum license agreement to use Pristine M at a
location in Wyoming. They have paid a non-refundable $100,000
deposit on the license agreement. The definitive license agreement
is expected to be signed following the receipt of commercial design
which will incorporate the suggested changes proposed by the
University of Wyoming and our EPC contractor. Wyoming New Power is
a Related Party because it is controlled by a party that also
controls the entity, which is the major lender and significant
stockholder of the Company.
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•
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Jindal Steel & Power is expected to send though their coal for
sampling immediately following the plants re-assembly. The bespoke
commercial facility design is expected after the testing.
In Q2, 2019 the Company signed a non binding MOU with Universitas
Indonesia in a combined effort to assess the impact of our
technology on Indonesian Coal both from a coal beneficiation
perspective and also coal by-products.
The second-generation test facility will have the capability of
producing Char. There is local Wyoming demand for this product that
the company expects to sell.
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•
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The Company entered into a partnership with the University of
Wyoming with the sole focus of using our suite of technologies to
increase the use of and value of Wyoming Powder River Basin coal.
Primary focus is on utilizing our technology to extract valuable
derivative products from coal. Changes to the process have been
identified by the University and the company EPC engineers and will
be incorporated in the reassembly of the facility in Wyoming. The
University confirmed in Q2, 2019 that they had successfully
validated the Pristine M process in their laboratory and as a
result entered into an agreement with the Company. The agreement
between the University and the Company is for the reassembly of the
second generation test facility. The University will advance to the
EPC contractor on a two to one basis up to $500,000 in 2019 and
additional $500,000 in 2020. The company will need to first pay
$1,000,000 per year for 2019 and 2020, in order for the University
to advance their portion of the funds. As of the date of this
filing the University has advanced a total of $811,000 directly to
the manufacturer of the Rotary Kiln. An additional $200,000 will be
paid to the manufacturer by the University upon delivery of the
kiln.
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•
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The Company has been engaged with AusTrade (The Australian Trade
and Investment Commission) and through that relationship has
partnered with three separate universities in Australia. Like the
University of Wyoming these Universities have a focus on their
local coal both from a beneficiation perspective and also
extracting derivative by products from coal using our technology.
The Company received full Australian patents in Q2, 2019 so the
company plans to move forward with this relationship in Q2-Q3, 2020
following the assembly of the second-generation test facility.
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•
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The Company continues in discussions with the Minister for Coal in
India and a number of the Energy governmental bodies in India. Coal
samples are expected to be sent for testing once the Second
Generation Test Facility is assembled which is expected in Q2,
2020.
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•
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Meetings occurred in Q2, 2019 with the US DOE, DOD and Wyoming
State Representatives to further our technology to benefit US coal.
These discussions continue through May 2020 in light of the recent
coal mining bankruptcies in Wyoming.
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Employees
As of March 31, 2020, we had two full-time executives. President
and CEO Robin Eves, Chief Operations Officer and Aiden Neary, Chief
Financial Officer have written employment agreements. Messrs. Eves
and Neary received no compensation for their participation on the
Board of Directors.
Factors Affecting Results of Operations
Our operating expenses include the following:
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Consulting expenses, which consist primarily of amounts paid for
technology development and design and engineering services;
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●
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General and administrative expenses, which consist primarily of
salaries, commissions and related benefits paid to our employees,
as well as office and travel expenses;
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Research and development expenses, which consist primarily of
equipment and materials used in the development and testing of our
technology; and
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Legal and professional expenses, which consist primarily of amounts
paid for patent protections, audit, disclosure, and reporting
services.
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Results of Operations
We had no direct revenues for the three months ended March 31, 2020
or March 31, 2019. In 2017, we received $100,000 as a
non-refundable deposit on a two million ton license agreement from
Wyoming New Power, a related party. The definitive license
agreement is expected to be completed in 2020 following the
assembly of the second generation test facility. In the year
ended December 31, 2012, we have received an initial license fee of
$375,000 from Jindal paid pursuant to the signing of our coal
testing plant construction contract. The balance of $375,000 will
be due upon the successful testing of Jindal coal in our second
generation test facility in Wyoming. We do not anticipate any
significant royalty fees for approximately 12-18 months
thereafter.
For the Three Months Ended March 31, 2020 and March 31,
2019
Revenues
We have generated no revenues for the three months ended March 31,
2020 and 2019.
Operating Expenses
Our operating expenses for the three months ended March 31,
2020 totaled $287,634 compared to $384,992 for the three-month
period in 2019. The primary component of the operating expenses for
the three months ended March 31, 2020 was general and
administrative expenses, recognizing $348,630, compared to $377,494
for the three months ended March 31, 2019. We recognized a $66,545
increase in research and development expenses from $3,000 during
the three months ended March 31, 2019 compared to $69,545 during
the three months ended March 31, 2020. Consulting services
decreased slightly to $998 during the three months ended March 31,
2020, from $4,498 during the three months ended March 31, 2019. The
Company also recognized a $131,539 gain from the settlement of
accounts payable during the three months ended March 31, 2020 and
had no such gain in the prior year.
Other Income and Expenses
During the three months ended March 31, 2020, we recognized total
other expense of $881,576 compared to $756,909 for the three months
ended March 31, 2019. The majority of the increase is due to an
$188,667 increase in interest expense during the three months ended
March 31, 2020 from interest accruals and amortization of debt
discounts on convertible notes payable compared to the three months
ended March 31, 2019. The Company also recognized a total of
$55,000 and $119,000 in debt extension and repayment penalties
during the three months ended March 31, 2020 and 2019,
respectively.
Net
Income/Loss
For the three months ended March 31, 2020, we had net loss of
$1,169,210, compared to a net loss of $1,141,901 for the three
months ended March 31, 2019. The increase in net loss is mainly due
to the $124,667 increase in other expenses, partially offset by a
$97,358 decrease in loss from operations as discussed above.
We anticipate losses from operations will increase during the next
three months due to costs associated with moving the test plant to
a permanent location, as well as anticipated increased payroll
expenses as we add necessary staff and increases in legal and
accounting expenses associated with maintaining a reporting
company. We expect that we will continue to have net losses from
operations until revenues from operating facilities become
sufficient to offset operating expenses, unless we are successful
in the sale of licenses for our technology once the coal testing
plant testing is complete.
Liquidity and Capital Resources
We have generated minimal revenues since inception. We have
obtained cash for operating expenses through advances and/or loans
from affiliates and stockholders, the sale of common stock, the
issuance of loans and convertible debentures
Net Cash Used in Operating Activities. Our primary source of
operating cash during the three months ended March 31, 2020, was
borrowings on related party debt, third party debt and convertible
debt. Our primary uses of funds in operations were the completion
of the construction of the test facility including the testing of
the plant, the payment of professional and consulting fees and
general operating expenses.
Net cash used in operating activities was $479,162 for the three
months ended March 31, 2020, compared to $557,857 for the same
period in 2019. The decrease is mainly a result of the $132,626
increase in accounts payable and accrued expenses during the three
months ended March 31, 2020 compared to the 2019 period, partially
offset by a $26,622 decrease in non-cash operating activities and
$27,309 increase of net loss. Adjustment items to reconcile net
income to net cash used in operating activities for the three
months ended March 31, 2020 and 2019 consisted of amortization of
debt discounts of $436,365 and $306,448, amortization of lease
assets of $3,000 and $3,000 and debt extension fees of $30,000 and
$55,000, respectively.
Net Cash Used In Investing Activities. There were no
investing activities during the three months ended March 31, 2020
or 2019.
Net Cash Provided by Financing Activities. Net cash provided
by financing activities during the three months ended March 31,
2020 totaled $389,900, compared to $557,000 during the three months
ended March 31, 2019. During the three months ended March 31, 2020,
we received $535,000 from the issuance of convertible notes
payable, paid $20,000 in debt issuance costs and repaid $150,000 in
convertible notes payable, we did not borrow or repay any amounts
in the prior 2019 period. We received $24,900 and $125,000 from the
issuance of convertible notes payable to a related party during the
three months ended March 31, 2020 and 2019, respectively. During
the three months ended March 31, 2019, borrowings on related party
notes was $292,000, we had no related party borrowings in 2020.
During the three months ended March 31, 2019, cash from borrowings
on convertible notes payable was $300,000, we had no convertible
note borrowings in 2020. During the three months ended March 31,
2019, we repaid $160,000 in note principal, we had no note
repayments in 2019.
Cash Position and Outstanding Indebtedness
At March 31, 2020, we had $55,239 in total assets, consisting of
$3,020 in cash, $39,219 in prepaid expenses and $13,000 in right to
use ground lease, and $20,093,046 in liabilities, which consist of
$19,317,070 in current liabilities and $775,976 in long-term
liabilities. Current liabilities consist primarily of accounts
payable, accrued liabilities, short-term convertible and
non-convertible debt and related party convertible and
non-convertible debt.
At December 31, 2019, we had total assets of $131,501, consisting
of cash of $92,282 and prepaid assets of $39,219, and $19,020,248
in liabilities, which consisted of $17,951,784 in current
liabilities and $1,068,464 in long-term liabilities. Current
liabilities consist primarily of accounts payable, accrued
liabilities, short-term convertible and non-convertible debt and
related party convertible and non-convertible debt.
Our working capital deficit at March 31, 2020 and December 31, 2019
was $19,274,831 and $17,840,050, respectively.
Contractual Obligations and Commitments
We lease office space in New York, NY on a month to month
basis, at a monthly rate of $200 per month.
Our engineering consultants has tentatively estimated construction
costs for each one million short ton coal complete cleaning
facility of approximately $250 million (excluding land costs) or
costs and for a similar size Pristine-M-only facility of
approximately $30 -$35 million (excluding land costs). This number
is expected to be reduced given proposed changes to the process
design. All intellectual property rights associated with new art
developed by our engineering consultants remain our property.
We are also actively pursuing technology license and royalty
agreements in order to begin construction of other facilities
without incurring the capital costs associated with the
construction of future plants.
In November 2015, we entered into a month to month agreement with
South of the Rose communication to manage our Investor Relations
needs and manage social media requirements.
Construction of the coal testing plant was completed in 2015 and
testing commenced in December 2015 at the AES Coal Power Utility in
Oklahoma. As of December 31, 2019, we have paid $10,135,128 in
development costs. The facility was moved to Wyoming in the first
quarter of 2019. We anticipate that there will be an additional
cost of approximately $4 million to build the additional parts
required for the second generation test facility and for its
assembly.
Based on our current operational costs and including the capital
requirements for our project deployments, we estimate we will need
a total of approximately $6,000,000 to fund the Company for the
fiscal year 2020 and an additional $4,000,000 to continue for the
following fiscal year (2021) or until an initial commercial plant
is up and running.
Off-Balance Sheet Arrangements
We have not and do not have any relationships with unconsolidated
entities or financial partnerships, such as entities often referred
to as structured finance or special purpose entities, which would
have been established for the purpose of establishing off-balance
sheet arrangements or other contractually narrow or limited
purposes. Therefore, we do not believe we are exposed to any
financing, liquidity, market or credit risk that could arise if we
had engaged in such relationships.
ITEM 3. QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are exposed to changes in prevailing market interest rates
affecting the return on our investments but do not consider this
interest rate market risk exposure to be material to our financial
condition or results of operations. We invest primarily in United
States Treasury instruments with short-term (less than one year)
maturities. The carrying amount of these investments approximates
fair value due to the short-term maturities. Under our current
policies, we do not use derivative financial instruments,
derivative commodity instruments or other financial instruments to
manage our exposure to changes in interest rates or commodity
prices.
ITEM 4. CONTROLS AND
PROCEDURES
As of March 31, 2020, we carried out an evaluation, under the
supervision and with the participation of our management, including
our Chief Executive Officer and Chief Financial Officer, of the
effectiveness of the design and operation of our disclosure
controls and procedures pursuant to Exchange Act Rules 13a-15(e)
and 15d-15(e) under the Securities Exchange Act of 1934, as
amended. Based on this evaluation, management concluded that our
financial disclosure controls and procedures were not effective due
to our limited internal resources and lack of ability to have
multiple levels of transaction review. There is a lack of
appropriate segregation of duties within the Company, no control
documentation being produced, and no one to review control
documentation if it was being produced. As of March 31, 2020, we
had two full time officers of the company.
There were no changes in internal control over financial reporting
that occurred during the period covered by this report that have
materially affected, or are reasonably likely to materially effect,
our internal controls and procedures. We do not expect to implement
any changes to our controls and procedures until there is a
significant change in our operations or capital resources.
PART II - OTHER INFORMATION
ITEM 1. LEGAL
PROCEEDINGS
As part of the separation agreement with Mr. Ponce de Leon, the ex
COO of the Company, the Company agreed to pay him his accrued
salary of $1,226,711 within two years but agreed to pay him
$200,000 by November 2015 out of revenues earned. As the Company
did not earn revenue in 2015 and as at December 2017 has still not
earned revenue, the obligation to Mr. Ponce de Leon is
currently in default. It is the Company’s intention to pay Mr.
Ponce de Leon immediately upon receiving revenue including any
interest that has been accrued. As of March 31, 2020, the Company
has accrued a total of $1,619,259 in accrued salary and
interest.
ITEM 1A. RISK
FACTORS
For information regarding risk factors, see “Part I. Item 1A. Risk
Factors,” in our Annual Report on Form 10-K for the year ended
December 31, 2019.
ITEM 2.
UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
None.
ITEM 3. DEFAULTS
UPON SENIOR SECURITIES
None.
ITEM 5. OTHER
INFORMATION
None.
ITEM 6.
EXHIBITS
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
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Clean Coal Technologies
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Date: May 14, 2020
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By:
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/s/ Aiden Neary
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Aiden Neary
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Chief Financial Officer
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