As
filed with the Securities and Exchange Commission on April 22,
2022
Registration No. 333-262198
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
FORM S-1/A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Kronos Advanced Technologies, Inc.
(Exact
name of registrant as specified in its charter)
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Nevada
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3564
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87-0440410
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State or
Other Jurisdiction of
Incorporation or Organization)
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(Primary
Standard Industrial
Classification Number)
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(IRS
Employer
Identification Number)
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2501 Garfield Avenue
Parkersburg, WV 61018
(800)
723-3247
(Address, including zip code, and telephone number, including area
code, of registrant’s principal executive offices)
Incorp Services, Inc.
3773 Howard Hughes Parkway, Suite 500S,
Las Vegas, NV 89169
Phone:
(800) 246-2677
(Address, including zip code, and telephone number, including area
code, of agent for service)
Copies to:
Tad
Mailander, Esq.
Mailander Law Office, Inc.
4811
49th Street
San
Diego, CA 92115
Tel
(619) 239-9034
Approximate date of proposed sale to the public: As soon as
practicable and from time to time after the effective date of this
Registration Statement.
If
any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box: ☒
If
this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering. ☐
1
If
this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
☐
If
this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box, and list
the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer,
or a smaller reporting company. See definitions of “large
accelerated filer,” “accelerated filer,” and “smaller reporting
company” in Rule 12b-2 of the Exchange Act (Check One):
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Large
accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting
company
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☒
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(Do
not check if a smaller reporting company)
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Emerging growth company
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☒
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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 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
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Title of Each Class
of Securities to be
Registered
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Amount to be
Registered (1)
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Proposed Maximum
Offering Price
Per Share (2)
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Proposed Maximum
Aggregate Offering
Price
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Amount of
Registration Fee (3)
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Common stock to be
offered for resale by selling stockholder
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80,526,056
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$
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0.026
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$
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2,093,677
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$
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194.08
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(1)
Includes of up to 80,526,056 shares of common stock to be sold to
Dutchess Capital Growth Fund, LP, under a Common Stock Common Stock
Purchase Agreement dated September 21, 2021.
(2)
Estimated solely for the purpose of calculating the amount of the
registration fee in accordance with Rule 457(c) under the
Securities Act of 1933.
(3)
Based on the closing price per share of $0.026 for Kronos Advanced
Technologies, Inc.’s common stock on January 10, 2022, as reported
by the OTC Markets Group.
THE
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE
OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE
REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES
THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE
IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE
ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION
8(A), MAY DETERMINE.
The information
in this preliminary Prospectus is not complete and may be changed.
These securities may not be sold until the registration statement
filed with the U.S. Securities and Exchange Commission (“SEC”) is
effective. This preliminary Prospectus is not an offer to sell
these securities and it is not soliciting an offer to buy these
securities in any jurisdiction where the offer or sale is not
permitted.
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PRELIMINARY PROSPECTUS
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SUBJECT TO COMPLETION, DATED April
22, 2022
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KRONOS ADVANCED TECHNOLOGIES, INC.
80,526,056 Shares of Common Stock
This
Prospectus relates to the offer and resale, from time to time, by
the selling stockholders identified herein of up to an aggregate of
80,526,056 shares our Common Stock par value $0.001 per share (the
“Shares”) to be issued to Dutchess Capital Growth Fund, LP
(“Dutchess”), a selling stockholder pursuant to a “Drawdown Notice”
under an executed and binding Common Stock Purchase Agreement (the
“Common Stock Purchase Agreement”), dated September 21, 2021. For a
period of 36 months after this registration is deemed effective, we
may issue Drawdown Notices to Dutchess for an aggregate of ten
million dollars ($10,000,000) in shares of our common stock until
the date on which Dutchess shall have sold all the Shares covered
thereby, and no available amount remains under the Common Stock
Purchase Agreement, or until $10,000,000 of such shares have been
subject to Drawdown Notices.
Pursuant to the Common Stock Purchase Agreement, after the
effectiveness of this Registration Statement and for a period of 36
months, we have the option, but not the obligation, to issue
Dutchess a Drawdown Notice to purchase our registered shares. The
number of shares subject to any Drawdown Notice shall not exceed
the lesser of; (i) $250,000 or (ii) 200% of the Average Daily
Traded Value of the Stock during the five (5) days immediately
preceding the Drawdown Notice date or (iii) the Beneficial
Ownership Limitation of 4.99% of the number of shares of the Common
Stock outstanding immediately prior to the issuance of shares of
Common Stock issuable pursuant to a Drawdown Notice. Our issuance
of a drawdown notice shall not include an amount of shares that
would result in Dutchess exceeding the Beneficial Ownership
Limitation at any time. The sale price of the Shares sold to
Dutchess pursuant to any Drawdown Notice is ninety-two percent
(92%) of the lowest traded price of the Common Stock the five (5)
Business Day prior to the Closing Date of each Drawdown Notice. If
we issue a Drawdown Notice to Dutchess, Dutchess’ purchase and
subsequent sales could result in dilution and a corresponding
lessening of the value of our common stock (See Risk Factors &
Dilution).
Disregarding the Beneficial Ownership Limitation, Dutchess may own,
based upon the closing price of our common stock on January 10,
2022, 384,615,385 shares of common stock. The value of the shares
of common stock registered in this registration statement is
$2,093,677.
Dutchess will sell their shares offered pursuant to this Prospectus
only at a fixed price or within a specified, bona fide price range,
until our shares are listed or quoted on an existing public trading
market.
Dutchess is an underwriter within the meaning of the Securities Act
of 1933, and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the
meaning of the Securities Act of 1933 in connection with such
sales. In such event, any commissions received by such
broker-dealers or agents, and any profit on the resale of the
shares purchased by them, may be deemed to be underwriting
commissions or discounts under the Securities Act of 1933.
The
OTC Markets Group Pink tier quotes our common stock under the
symbol “KNOS.” On January 10, 2022, the closing price of our common
stock was $0.026 per share.
We
will not receive any proceeds from the sale of shares of our common
stock made by Dutchess. However, we will receive proceeds from the
initial sale of shares of our common stock pursuant to our exercise
of the Drawdown Notice right offered by Dutchess. We will pay for
expenses of this offering, except that Dutchess will pay any broker
discounts or commissions or equivalent expenses and expenses of its
legal counsel applicable to the sale of its shares.
INVESTING IN OUR SECURITIES INVOLVES RISKS. YOU SHOULD REVIEW
CAREFULLY THE RISKS AND UNCERTAINTIES DESCRIBED UNDER THE HEADING
“RISK FACTORS” CONTAINED ON PAGE 12 HEREIN. YOU SHOULD READ THE
ENTIRE PROSPECTUS CAREFULLY BEFORE YOU MAKE YOUR INVESTMENT
DECISION.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE
SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES
OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
This
Prospectus is not an offer to sell these securities and is not
soliciting an offer to buy these securities in any state where the
offer or sale is not permitted.
The
date of this Prospectus is April 22, 2022
3
TABLE OF CONTENTS
Please read this Prospectus carefully. It describes our business,
our financial condition, and the results of operations. We have
prepared this Prospectus to have the information necessary to make
an informed investment decision.
ABOUT THIS PROSPECTUS
You should
rely only on the information we have provided in this Prospectus or
any applicable Prospectus supplement. We have not authorized anyone
to provide you with information different from that contained in
this Prospectus, any applicable Prospectus supplement. No dealer,
salesperson or other person is authorized to give any information
or to represent anything not contained in this Prospectus, any
applicable Prospectus supplement. You must not rely on any
unauthorized information or representation. This Prospectus is an
offer to sell only the Shares offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. You
should assume that the information in this Prospectus, and any
applicable Prospectus supplement, is accurate only as of the date
on the front of the document, regardless of the time of delivery of
this Prospectus or any sale of a security.
Dutchess
is offering the Shares only in jurisdictions where such issuances
are permitted. The distribution of this Prospectus and the issuance
of the Shares in certain jurisdictions may be restricted by law.
Persons outside the United States who come into possession of this
Prospectus must inform themselves about, and observe any
restrictions relating to, the issuance of the Shares and the
distribution of this Prospectus outside the United States. This
Prospectus does not constitute, and may not be used in connection
with, an offer to sell, or a solicitation of an offer to buy, the
Shares offered by this Prospectus by any person in any jurisdiction
in which it is unlawful for such person to make such an offer or
solicitation.
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This
Prospectus is part of a registration statement on Form S-1 that we
filed with the U.S. Securities and Exchange Commission (the
“Commission”), under which Dutchess may offer from time to
time up to an aggregate of 80,526,056 Shares in one or more
offerings. If required, each time Dutchess offers Shares, we will
provide you with, in addition to this Prospectus, a Prospectus
Supplement that will contain specific information about the terms
of that offering. We may also use a Prospectus Supplement to add,
update or change any of the information contained in this
Prospectus. This Prospectus, together with any applicable
Prospectus supplements, includes all material information relating
to this offering. To the extent that any statement that we make in
a Prospectus Supplement is inconsistent with statements made in
this Prospectus, the statements made in this Prospectus will be
deemed modified or superseded by those made in a Prospectus
Supplement. Please carefully read both this Prospectus and any
Prospectus Supplement together with the additional information
described below under the section entitled “Incorporation of
Certain Information by Reference” before buying any of the
securities offered.
This
Prospectus contains summaries of certain provisions contained in
some of the documents described herein, but reference is made to
the actual documents for complete information. All of the summaries
are qualified in their entirety by the actual documents. Copies of
the documents referred to herein have been filed as exhibits to the
registration statement of which this Prospectus is a part, and you
may obtain copies of those documents as described below under the
section entitled “Where You Can Find More Information.”
WHERE YOU CAN FIND
MORE INFORMATION
We have
filed with the Commission a registration statement on Form S-1
under the Securities Act of 1933, as amended (the “Securities
Act”), with respect to the Shares being offered by Dutchess
under this Prospectus. For further information with respect to us
and the Shares offered by Dutchess, we refer you to the
registration statement and its exhibits. Statements contained in
this Prospectus as to the contents of any contract or any other
document referred to are not necessarily complete, and in each
instance, we refer you to the copy of the contract or other
document filed as an exhibit to the registration statement. Each of
these statements is qualified in all respects by this
reference.
We are not
currently subject to the disclosure requirements of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”).
However, after this registration becomes effective, and, in
accordance with the Exchange Act, we will file Form 8a-12g
registering our common stock and thereafter file annual, quarterly,
and special reports, proxy statements and other information with
the Commission. The Commission maintains an internet website at
http://www.sec.gov that contains reports, proxy and information
statements and other information regarding issuers that file
electronically with the Commission. The periodic reports, proxy
statements and other information we expect to file with the
Commission will be available for inspection on the Commission’s
website free of charge as soon as reasonably practicable after they
are electronically filed with, or furnished to, the Commission. We
maintain a website at https://kronosati.co where you will also be
able to access these materials free of charge after our annual,
quarterly, and special reports, proxy statements or other
information is filed with the Commission. Our website address will
include an inactive textual reference only and the information
contained in, and that can be accessed through, our website is not
incorporated into and is not part of this Prospectus.
GENERAL MATTERS
Unless
otherwise noted or the context indicates otherwise “we,” “us,”
“our,” “Company” or “KNOS” refers to Kronos Advanced Technologies,
Inc.
References to “Management” in this Prospectus mean the senior
officers of the Company. See “Directors and Executive Officers.”
Any statements in this Prospectus made by or on behalf of
Management are made in such persons’ capacities as officers of the
Company and not in their personal capacities.
Prospective purchasers should rely only on the information
contained in this Prospectus. We have not authorized any other
person to provide prospective purchasers with additional or
different information. If anyone provides prospective purchasers
with additional or different or inconsistent information, including
information or statements in media articles about us, prospective
purchasers should not rely on it. Prospective purchasers should
assume that the information appearing in this Prospectus is
accurate only as at its date, regardless of its time of delivery or
of any distribution of the Offered Shares. Our business, financial
conditions, results of operations and prospects may have changed
since that date.
We
present our Financial Statements (as defined below) in United
States dollars. Unless otherwise indicated, all references to
dollar amounts in this Prospectus are to United States dollars.
Reference to “United States” or “U.S.” are references to the United
States of America.
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CAUTIONARY NOTE AND
FORWARD-LOOKING STATEMENTS TO INVESTORS
In
March 2020, the World Health Organization declared a novel
coronavirus (COVID-19) outbreak as a pandemic worldwide. Many
countries, including China and the United States, have implemented
significant governmental measures to control the spread of the
virus, including temporary closure of businesses, severe
restrictions on travel and the movement of people, and other
material limitations on business. These measures have resulted in
worldwide work stoppages, absenteeism in the labor workforce, and
other disruptions. China started as the center of the COVID-19
epidemic, which is where our product parts and supplies are
sourced, and our products are assembled and shipped. The pandemic
resulted in an increase in the lead time for the manufacturing and
delivery of our products. The extent to which the coronavirus and
its variants impacts our continuing operations will depend on
future developments. These developments are highly uncertain. We
cannot predict them with confidence, including the duration and
severity of the outbreak, the spread and effects of coronavirus
variants, and the actions required to contain the coronavirus, its
variants, or treat its impact. In particular, the continued spread
of the coronavirus and its variants globally could adversely impact
our operations and workforce, including our marketing and sales
activities and ability to raise additional capital, which could
harm our business, financial condition, and operation results.
This
Prospectus may contain certain “forward-looking” statements as such
term is defined by the Securities Exchange Commission in its rules,
regulations, and releases, which represent our expectations or
beliefs, including but not limited to, statements concerning our
operations, economic performance, financial condition, growth and
acquisition strategies, investments, and future operational plans.
For this purpose, any statements contained herein that are not
historical fact statements may be deemed forward-looking
statements. Without limiting the generality of the foregoing, words
such as “may,” “will,” “expect,” “believe,” “anticipate,” “intent,”
“could,” “estimate,” “might,” “plan,” “predict” or “continue” or
the negative or other variations thereof or comparable terminology
are intended to identify forward-looking statements. These
statements by their nature involve substantial risks and
uncertainties, certain of which are beyond our control, and actual
results may differ materially depending on a variety of important
factors, including uncertainty related to acquisitions,
governmental regulation, managing and maintaining growth, the
operations of the Company, volatility of stock price, federal
enforcement, and state enforcement, and any other factors discussed
in this Prospectus.
The
risks and uncertainties and other factors include but are not
limited to those set forth under “Risk Factors” of this Prospectus.
Given these risks and uncertainties, readers are cautioned not to
place undue reliance on our forward-looking statements. All
subsequent written and oral forward-looking statements attributable
to persons acting on our behalf or to us are expressly qualified in
their entirety by these cautionary statements. Except as otherwise
required by applicable law, we undertake no obligation to publicly
update or revise any forward-looking statements or the risk factors
described in this Prospectus or in the documents we incorporate by
reference, whether as a result of new information, future events,
changed circumstances or any other reason after the date of this
Prospectus.
Actual events or results may differ materially from those discussed
in forward-looking statements due to various factors, including,
without limitation, the risks outlined under “Risk Factors” and
matters described in Prospectus generally. In light of these risks
and uncertainties, there can be no assurance that the
forward-looking statements contained in this Prospectus will occur.
We caution you not to place undue reliance on these forward-looking
statements. In addition to the information expressly required to be
included in this Prospectus, we will provide such further material
information, if any, as may be necessary to make the required
statements, in light of the circumstances under which they are made
not misleading.
Except as required by federal securities laws, we do not intend to
update or revise any forward-looking statements, whether as a
result of new information, future events, or otherwise.
See
sections entitled “Risk Factors.”
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PROSPECTUS SUMMARY
The
following summary highlights material information contained in this
Prospectus. This summary does not include all of the information
you should consider before investing in securities. Before making
an investment decision, you should read the entire Prospectus
carefully, including the risk factors section, the financial
statements, and the notes to the financial statements. You should
also review the other available information referred to in the
section entitled “Where You Can Find More Information” in this
Prospectus and any amendment or supplement hereto.
The Prospectus
Offering
This
Prospectus relates to the resale of up to 80,526,056 shares of our
Common Stock issuable to Dutchess pursuant to a “Drawdown Notice
Right” under an executed and binding Common Stock Purchase
Agreement.
Pursuant to the Common Stock Purchase Agreement, after the
effectiveness of this Registration Statement, we have the option,
but not the obligation, to issue Dutchess a Drawdown Notice to
purchase our registered shares. The number of shares subject to any
Drawdown Notice shall not exceed the lesser of; (i) $250,000 or
(ii) 200% of the Average Daily Traded Value of the Stock during the
five (5) days immediately preceding the Drawdown Notice date or
(iii) the Beneficial Ownership Limitation of 4.99% of the number of
shares of the Common Stock outstanding immediately prior to the
issuance of shares of Common Stock issuable pursuant to a Drawdown
Notice. Our issuance of a drawdown notice shall not include an
amount of shares that would result in Dutchess exceeding the
Beneficial Ownership Limitation at any time. The sale price of the
Shares sold to Dutchess pursuant to any Drawdown Notice is
ninety-two percent (92%) of the lowest traded price of the Common
Stock the five (5) Business Day prior to the Closing Date of each
Drawdown Notice. . If we issue a Drawdown Notice to Dutchess,
Dutchess’ purchase and subsequent sales could result in dilution
and a corresponding lessening of the value of our common stock (See
Risk Factors & Dilution).
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Common Stock Offered by the Selling Security Holders
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Eighty million, five hundred twenty-six thousand, fifty-six
(80,526,056) shares of common stock subject to our election to
issue a Drawdown Notice to Dutchess.
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Common Stock Outstanding Before the Offering
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659,323,911 shares of common stock as of April 18, 2022.
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Common Stock Outstanding After the Offering
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739,849,967 shares of common stock. (1)
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Terms of the Offering
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Dutchess will determine when and how to sell the common stock
offered in this Prospectus.
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Termination of the Offering
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Thirty-six (36) months immediately following the initial date of
effectiveness of the S-1 Registration Statement Agreement.
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Use of Proceeds
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We
will not receive any proceeds from Dutchess’ secondary sales of
registered common stock in this offering. However, we will receive
proceeds from our decision to issue Dutchess a Drawdown Notice to
purchase our registered common stock in this registration
statement, and Dutchess’ purchase thereof. We will use these
proceeds for general corporate and working capital purposes and
acquisitions or assets, software development, businesses, or
operations, or for other purposes that our board of directors, in
its good faith, deems to be in the Company’s best interest. See
“Use of Proceeds.”
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Risk Factors
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The
common stock offered hereby involves a high degree of risk and
should not be purchased by investors who cannot afford the loss of
their entire investment. See “Risk Factors” beginning on page
12.
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OTC Markets Symbol
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KNOS
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(1) Assumes our sale, and Dutchess’ purchase, of all
80,526,056 shares pursuant to the Common Stock Purchase Agreement
dated September 21, 2021.
7
About the Company
Kronos Advanced Technologies, Inc. (“Kronos” or the “Company”) was
originally incorporated under the laws of the State of Utah on
September 17, 1980, as Penguin Petroleum, Inc. Penguin
Petroleum Inc.'s stockholders approved a name change on October 6,
1982, to Petroleum Corporation of America, Inc. On December 29,
1996, stockholders approved a reorganization whereby they exchanged
their stock on a one-for-one basis with Technology Selection, Inc.,
a Nevada corporation. Technology Selection, Inc.'s shares
began trading on the Over-the-Counter Bulletin Board on August 28,
1996, under the symbol "TSET”. On November 19, 1998,
Technology Selection, Inc. changed its name to TSET, Inc.
Effective January 12, 2001, we began doing business as Kronos
Advanced Technologies, Inc.; and, as of January 18, 2002, we
changed our ticker symbol to “KNOS”.
Emerging Growth Company
We are an emerging growth company under the JOBS Act. We shall
continue to be deemed an emerging growth company until the earliest
of:
(a)the
last day of the fiscal year of the issuer during which it had total
annual gross revenues of $1.07 billion (as such amount is indexed
for inflation every five years by the Commission to reflect the
change in the Consumer Price Index for All Urban Consumers
published by the Bureau of Labor Statistics, setting the threshold
to the nearest 1,000,000) or more;
(b)the
last day of the fiscal year of the issuer following the fifth
anniversary of the date of the first sale of common equity
securities of the issuer pursuant to an effective IPO registration
statement;
(c)the
date on which such issuer has, during the previous three-year
period, issued more than $1.0 billion in nonconvertible debt;
or
(d)the
date on which such issuer is deemed to be a ‘large accelerated
filer’, as defined in section 240.12b-2 of title 17, Code of
Federal Regulations, or any successor thereto.’
The Section 107 of the JOBS Act provides that we may elect to
utilize the extended transition period for complying with new or
revised accounting standards and such election is irrevocable if
made. As such, we have made the election to use the extended
transition period for complying with new or revised accounting
standards under Section 102(b)(1) of the JOBS Act. Please refer to
a discussion under “Risk Factors” of the effect on our financial
statements of such election.
As an emerging growth company, we are exempt from Section 404(b) of
Sarbanes Oxley. Section 404(a) requires Issuers to publish
information in their annual reports concerning the scope and
adequacy of the internal control structure and procedures for
financial reporting. This statement shall also assess the
effectiveness of such internal controls and procedures. Section
404(b) requires that the registered accounting firm shall, in the
same report, attest to and report on the assessment on the
effectiveness of the internal control structure and procedures for
financial reporting. As an emerging growth company, we are also
exempt from Section 14A (a) and (b) of the Securities Exchange Act
of 1934 which require the shareholder approval of executive
compensation and golden parachutes.
We
have elected to use the extended transition period for complying
with new or revised accounting standards under Section 102(b)(2) of
the JOBS Act, that allows us 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.
Business Overview
Indoor air contains pollutants can affect the quality of life. Some
of these pollutants come from outdoors, and others come from indoor
sources and activities, such as cooking, cleaning, secondhand
smoke, building materials, consumer products, and home furnishings.
These indoor air pollutants can be particles or gases, including
volatile organic compounds. Common contaminants that can be found
indoors include both fine and coarse particulate matter,
formaldehyde, mold, and pollen. Indoor air quality will vary from
home to home and over the course of a day within a home. Since most
people spend about 90% of their time indoors, mostly in their
homes, much of their exposures to airborne pollutants will happen
in the home.
Our
business focus is on the consumer air cleaning market. We do not
design, market, or sell our air cleaning products as medical
devices. We do not claim our products mitigate, treat, cure, or
prevent disease. Our business develops and sells consumer products
and new technologies that significantly change the way air is
moved, filtered, and cleansed. Our product technology, uses
state-of-the-art, high voltage processes, thereby eliminating the
need for traditional porous HEPA filters. We believe our products
move air silently, have superior filtering capabilities, and in
general, cleans ambient air while offering dramatically reduced
energy consumption. Our
8
products have unique, variable, and
superior filtering capabilities in both shape and size. They are
available in a smaller footprint to provide air cleaning in cars.
Larger units are available for consumer home use, for business use,
or even in extreme industrial applications requiring the
destruction of certain hazardous gases. The Company also sells
bio-aerosol sensors and wearable sensors which are designed to
identify aerosol contaminants in the air.
Our Products
Our
technology is currently offered in the form of multiple stand-alone
portable products designed to move, filter, and clean the air for
businesses, homes, and vehicles. On a broader basis, additional
markets that could immediately be impacted using standalone,
embedded Kronos® devices include schools, universities,
manufacturing clean-rooms, personal automobiles, buses, taxis, and
commercial aircraft cabins. Our products are marketed under the
Airdog® and KRONOS® brand names.
Our
primary products include:
·Kronos
Air Purifier 5G Model 3; an ionic air purifier with washable
filter. This stand-alone device measures 10.2" in length x 10.2"
wide x 20.5" high and is portable weighing 11 pounds and is
manufactured with flame resistant plastic, with the ability to
clean the air from an area of up to 215 square feet.
·Kronos
Air Purifier 5G Model 5; an ionic air purifier with washable
filter. This stand-alone device measures 12.4" in length x 12"wide
x 25.6" high and weighing 23.6 pounds and is manufactured with
flame resistant plastic, with the ability to clean the air from an
area of up to 450 square feet.
·Kronos
Air Purifier 5G Model 8; an ionic air purifier with washable
filter. This stand-alone device measures 15" in length x 15" wide x
30" high and weighing 43.4 pounds and is manufactured with flame
resistant plastic, with the ability to clean the air from an area
of up to 1000 square feet.
·Kronos
Fit Air; This portable device weighs 7.8 ounces and measures
7.2" in length x 3.5" wide x 3.1" high with the ability to be
attached to a wristband, tote or desk or car, clean the air from an
area of up to 25 square feet.
·Kronos
Fit Air Bundle; combines the Kronos Fit Air with a connected
face mask providing personal filtered air with the benefits of a
mask.
·Kronos
Car Air Purifier; at 2.4" high, 8.11" long and 6.89" wide, this
portable device powered by a DC 12volt car charger is designed to
clean the air in a vehicle.
·Kronosati
Mini; the device is designed to be able to be held in hand on
worn on a lanyard to filter the immediate airspace around an
individual; the device measures 2" x 3" x ⅔" and weighs. It
contains a re-chargeable battery that connects via USB for
recharging.
We
also sell 5-layer graphene face masks that are not meant for
medical use, and we also sell replacement parts for our principal
products.
We
also have a number of other products in various stages of research
and development, including space heaters, vaporizers, disinfectors,
deodorizers and/or fans. These products have all been
conceptualized during our research and development efforts over the
past years. Each product varies in its respective level of
completion, with none having been finalized and brought to market
for sale. All products are waiting on capital and should be
finalized as capital becomes available.
The
following table discloses our revenues from July, 2020 to June 30,
2021 based on sales of our primary products:
|
Product
|
Quantity Sold
|
Revenue
|
|
Kronos Air Purifier 5G Model 3
|
43
|
$15,601.65
|
|
Kronos Air Purifier 5G Model 5
|
667
|
$341,348.10
|
|
Kronos Air Purifier 5G Model 8
|
113
|
$101,005.11
|
|
Kronos Fit Air
|
33
|
$3,063.45
|
|
Kronos Fit Air Bundle
|
100
|
$11,669.70
|
|
Kronos Car Air Purifier
|
41
|
$6,278.75
|
|
Kronosati Mini
|
39
|
$3,003.56
|
|
Replacement Parts
|
32
|
$1,423.57
|
|
TOTAL
|
|
$483,393.89
|
We
market and sell our products directly through our web site:
https://1800safeair.com/, and also through independent sales
representatives and select retail outlets.
Kronos also owns and operates special vanity phone number
1-800-SAFE-AIR that spells out words that correspond to what
our business does, we believe that this is a very effective
marketing tool. It positions our company as one of the experts in
the field, and
9
most certainly a toll-free number with
two words that are self-explanatory looks be very memorable in any
form of advertising, TV, radio, print and online.
A combination of the domain name (www.1800SafeAir.com) and
telephone number 1-800-SAFE-AIR also helps prospective
customers and shareholders remember our business and what it does.
A customer or shareholder is more likely to call a number that they
can recall easily, and it will always be easier to memorize a word
than a string of random numbers. In addition, 1-800-SAFE-AIR phone
number makes our business immediately memorable to new customers
and returning customers needing help with our products.
On
August 27, 2021, we announced our e-commerce initiative through
Channelize.io, which is a Platform-as-a-Service (PaaS) product that
allows any of our satisfied customers the ability to sell our
products online and earn commissions from sales. Known as “Live
Stream Shopping and Real-time Engagement,” we expect this to boost
our sales and enhance our brand perception by connecting with our
buyers who may showcase and market our products in ways that lead
to informed, trusted, and accelerated purchases by new buyers. As
of the date of this filing, we have not paid any commissions on
customers who have sold any of our products using the PaaS
product.
Mountain Marketing Group conducts surveys and research to rate the
success of various types of advertising and marketing. In
their latest study, they found:
90% of Americans have used toll-free numbers to contact a company
after watching an advertisement.
Of these 90%, a productive ad using an 800-vanity number generated
a response rate of 30% or more.
As
much as 84 percent of these prospects were able to recall the phone
number because of visual aids and the use of letters rather than
numbers.
Our “Transition to America” Manufacturing Plan
Kronos is committed to the “Transition to America Initiative” of
the Company, effectively moving our manufacturing from China to the
United States. This commitment is evident by our acquisition of a
10-acre campus containing manufacturing and warehouse space of
85,000 square feet. This acquisition also included the intellectual
property and manufacturing equipment necessary to manufacture
electro-mechanical assemblies. As such, this acquisition provided
us with the following:
•85,000
square feet of manufacturing facilities
•High-speed
electronic manufacturing equipment capable of placing 50,000 plus
electronic components (resistors, capacitors, Integrated Circuits,
etc.) per hour.
•Facility
infrastructure and Intellectual Property including but not limited
to proper lighting and power, material handling mezzanines, racks,
workstations, conveyors and carts, custom manufacturing software,
Standard Operating Procedures, Quality System, personnel records of
trained employees, and Enterprise Resource Planning integrated
software (ERP) including specialized Material Resource Planning
supply chain management software (MRP).
This acquisition is a true turn-key manufacturing company ready to
go.
The following constituent, and possibly the most important, is the
experience and vision of our Chief Operating Officer, Joseph
Florence, the architect of this vision, and the following is a
brief bio of his business experience:
Additionally, a critical constituent is our Design For eXcellence
Strategy (DFX). This strategy understands that Kronos cannot simply
manufacture our products within the USA with the intent to build
the same design as our globally sourced products. This will not
work. Our strategy is to design, utilizing DFX, our next generation
of products to be manufactured in the USA. This means we will
specifically develop the products for our factory and reduce part
counts, incorporating design-for-automation philosophies, all the
while improving both the functionality and the aesthetics of our
new USA designs. We will ensure our current proprietary and
patented technologies are implemented, and we will also develop and
patent other technologies, as well as, patent the uniqueness of our
latest designs during this process. This will naturally occur as
part of our process. This process will include fully
embracing the new manufacturing initiative called Industry 4.0. We
will push our existing highly automated electronic assembly
methodologies throughout the factory, genuinely becoming a near
“Touchless Manufacturing” facility.
These three items, turnkey facility, management experience and
guidance, and best-in-class design process reduce much if not all
of the risk of transitioning to a USA manufacturing company. The
other key component to point out is that Kronos currently has a
viable and
10
best-in-class global product line.
Therefore, we will continue to sell this product line and introduce
our USA-designed products concurrently as we continue to market and
sell our globally manufactured products. We believe this strategy
will again emphasize additional risk reduction to our USA-designed
products. We will let the design progression and market demand
drive our introduction of these new products with little or no
business operational pressures.
Our current globally sourced products are comparatively a simple
supply chain. Kronos only needs to forecast and order turn-key
assemblies. Kronos will continually access the current
manufacturing lead time (the time Kronos issued a Purchase order
until the time to receive those purchased products into the Kronos
warehouses) for these products, our current inventory levels, and
our estimated market demand. This ongoing analysis will drive the
requirement to place the new purchase orders in a timely manner to
ensure we have product inventory to meet market demand.
Kronos has had discussions with our current global manufacturers
analyzing the critical sub-assemblies that Kronos could manufacture
in our new USA facility to the benefit of both parties. The focus
of these discussions is the cost justification when considering the
potential savings related to both the tariff costs and shipping
costs of sub-assemblies versus those of a completed assembly, as
well as a plan to select the most economical components to
manufacture in the USA. Additionally, Kronos has reached out to
other global research and development companies having conceptual
and early-stage manufacturing products in our Air Purification
market. In doing so, we have strategically approached these
companies and began conversations to jointly select the components
or in some cases, the entire product, to be built in the USA.
All of these efforts have been well received. Each party is
motivated to bring on new USA manufacturing capacity. They view
this as an opportunity to have geographic-local manufacturing,
improved supply chain management, decentralized manufacturing, and
rapid response capabilities to better serve their USA customers. It
is important to emphasize that these strategies do no harm to our
current supply chain of products. In fact, they enhance our market
viability by providing a broader offering of products of which all
will represent our Brand with excellence.
Industry Trends
The
global portable air cleaner market is experiencing rapid traction.
This growth is primarily led by the rising adoption of portable air
cleaners for residential and commercial purposes. In pre-COVID 19
periods, people had a general notion that clean air, based on
proper ventilation alone, would provide a more healthful
environment free of airborne particulate that may include allergens
including excessive dust, plant pollen, animal dander, hair, and
the like.
The
onset of the novel coronavirus pandemic and its variants increased
interest in the proper methods to achieve clean air. As a result,
the use of air cleaners in both residential and commercial settings
have increased drastically over the past year. Although undoubtedly
recognized as a global disaster, the coronavirus pandemic and the
spread of coronavirus variants impacted the portable air cleaner
industry in a positive manner. After the onset of the pandemic, the
public interest was focused on air purity, general hygiene, and the
overall efforts needed to improve each individual’s health
generally, and especially to invisible, airborne contaminants.
Life-threatening epidemics like H1N1 Swine flu, H5N1 Avian
influenza, and now the COVID 19 pandemic and variants have served
to focus the general public’s attention, resulting in the increased
use of air cleaners in residential and commercial locations.
However, we do not market or sell our air purification products as
medical devices. We do not claim our products mitigate, treat,
cure, or prevent disease.
Market Opportunity
We
expect that the growth of the portable air cleaner market is
projected to occur in both commercial and residential markets in
the future. Helping to drive this expected domestic growth is a
well-educated consumer base with rising awareness of airborne
contaminants; becoming accustomed to adapting to preventative
measures; and, having both an expendable income and the willingness
to invest in products perceived to promote a healthy environment.
Other “external” factors contributing to the growth of the domestic
air purifier market include global warming, including increases in
national disasters, such as seasonal large forest fires and
hurricanes, as well as prolonged sweltering heat zones. Such events
and conditions are projected to remain and perhaps even increase
for the foreseeable future.
The commercial segment can best be identified as business
applications embodying offices, academic centers, stores, hotels,
conference rooms, service automobiles/busing, and small indoor
public gathering sites. In contrast, the residential segment
consists of single-family homes, condos, and apartments. Of
particular note is a recent internal study we conducted indicating
that our “satisfied customers” having single-family homes often
resort to secondary purchases resulting in multiple air purifiers
located in separate rooms throughout their homes. This we believe
should be particularly true in families having children or aging
parents living at home.
We
expect trends will continue to accelerate the growth of the global
portable air purifier market. In fact, with improved tools and
techniques, scientists and health organizations are just beginning
to fully understand and accurately quantify the impact of airborne
pollutants and contaminants in today’s world.
11
We
plan to expand to a larger, more diverse product platform in the
near future, offering Clean Air, Clean Water, and Clean Food
solutions for the consumer. Similar to the projected exponential
market growth for the portable air purifier market, independent
Market Research also indicates dramatic forecasted growth for the
water purifier market. As of the date of this Prospectus, we do not
offer or have any timetable for the introduction to market of any
Clean Air, Clean Water, and Clean Food solutions for the
consumer.
Government Regulation of Air Purifiers
Federal Regulation
Under
the Federal Food, Drug, and Cosmetic Act (FDCA), the U.S. Food and
Drug Administration (FDA) regulates devices that include an
“instrument, apparatus, implement, machine, contrivance, implant,
in vitro reagent, or other similar or related article, including
any component, part, or accessory” that is intended to cure,
mitigate, treat, or prevent disease or is intended to affect the
structure of any function of the body. The FDA regulates air
purifiers intended for medical purposes that are used to destroy
bacteria in the air by exposure to UV radiation or remove particles
from the air through filtration or electrostatic precipitation. Our
products use a high voltage electrostatic method of destroying
airborne contaminants, and do not use UV radiation methods. We do
not market or sell our air purification products as an instrument,
apparatus, implement, machine, contrivance, implant, in vitro
reagent, or other similar or related article, including any
component, part, or accessory that is intended to cure, mitigate,
treat, or prevent disease. We do not claim our products mitigate,
treat, cure, or prevent disease or eliminate viruses from the air.
Our products are not medical devices and not subject to FDA
regulation.
The U.S. Environmental Protection Agency does not regulate,
certify, or register air cleaning devices or manufacturers. The
Agency does provide consumer information on air purification
devices on its web site:
https://www.epa.gov/indoor-air-quality-iaq/does-epa-certifyregister-or-provide-lists-acceptable-air-cleaners-or-1,
and references to industry sources including the Association of
Home Appliance Manufacturers, so that consumers may learn about air
purification devices.
Pursuant to the Energy Policy and Conservation Act (“EPCA”), The
U.S. Department of Energy is authorized to regulate the energy
efficiency of a number of consumer products and certain industrial
equipment. The EPCA established the “Energy Conservation Program
for Consumer Products Other Than Automobiles,” which sets forth a
variety of provisions designed to improve energy efficiency for
certain consumer products, referred to generally as “covered
products.” In addition to specifying a list of consumer products
that are covered products, EPCA contains provisions enable the
Secretary of Energy to classify additional types of consumer
products as covered products The U.S. Department of Energy has
tentatively determined that air cleaners qualify as a covered
product under Part A of Title III of the EPCA, as amended. The
Department of Energy has tentatively determined that coverage of
air cleaners is necessary and appropriate to carry out the purposes
of EPCA, and that the average U.S. household energy use for air
cleaners is likely to exceed 100 kilowatt-hours per year. The
Department of Energy is currently engaged in soliciting public
comments for proposed rules governing air cleaners. The public
comment period concluded November 15, 2021.
As of the date of this filing, the Department of Energy has not
published an abstract of the proposed regulations or conducted a
rulemaking for air cleaners. If, after public comment, the
Department of Energy issues a final determination of coverage for
air cleaners, it may prescribe both test procedures and energy
conservation standards for these products. DOE will publish a final
decision on coverage as a separate notice, an action that will be
completed prior to the initiation of any test procedure or energy
conservation standards rulemaking. If the Department of Energy
determines that coverage is warranted, it will proceed with its
typical rulemaking process for both test procedures and standards.
As of the date of this filing, the Department of Energy is not
proposing test procedures or energy conservation standards as part
of this proposed determination. If the Department of Energy
proceeds with a rulemaking to establish energy conservation
standards, it would determine if air cleaners satisfy the
provisions of 42 U.S.C. 6295(l)(1) (which prescribe energy
conservation standards) during the course of that rulemaking.
State Regulation
On June 3, 2019, the California Air Resources Board (CARB) adopted
the indoor air cleaner regulation pursuant to California Assembly
Bill 2276 in response to emerging concerns about indoor ozone
emissions. While several states and the U.S. Environmental
Protection Agency only warn against using ozone generators in
occupied indoor spaces, and the Food and Drug Administration limits
ozone emissions from medical air cleaner devices, California’s
program is unique in that it is the first state to promulgate
regulations of air cleaners, and in its breadth and coverage.
The regulation generally imposes certification, ozone testing,
electrical safety testing, labeling, notification, and
recordkeeping requirements on covered devices intended for use in
occupied spaces in California. The ozone emissions concentration
limit is 0.050 parts per million (ppm). Personal air cleaners, air
cleaners used in motor vehicles, stand-alone air cleaners, and
products with a primary purpose other than air cleaning but that
include an air cleaner are all examples of covered devices.
12
Certain exemptions are provided in the current regulation for
industrial-use devices. In addition, due to the lack of available
test methods and sales data at the time of adoption, the regulation
exempts “in-duct” air cleaners that are physically integrated into
HVAC systems.
In the years since the regulation was finalized, CARB has observed
a significant increase in the use of air cleaners in the state,
including in-duct air cleaners, in response to recent large fires,
floods, and indoor marijuana use (https://ww2.arb.ca.gov/sites/default/files/2019-05/California%20Air%20Cleaning%20Units%20Market%202023.pdf).
CARB believes that this market data along with other new sources of
information, including revisions to test methods and the
availability of a test method for in-duct devices, warrant
regulatory changes.
On October 1, 2020, the regulation was amended with several
significant changes. These changes include the immediate
elimination of the ozone test requirement for portable air cleaners
that use UVGI lamp(s), with or without mechanical filtration, as
long as they meet other requirements that are outlined in section
94804(b) of the regulation. The exemption from the regulation of
electronic in-duct air cleaning devices has also been eliminated,
meaning this type of air cleaner must be CARB certified prior to
sale to California residents or businesses. There is a
24-month phase-in period for meeting this new requirement, which
will end on October 1, 2022. CARB is not certifying mechanical
in-duct air cleaning devices that use only HEPA filtration. The
text required on labels of certified air cleaners has also been
changed and should now read: “Meets California ozone emissions
limits. CARB certified.” The label must still meet the
same size requirements. There are also changes to the
industrial use exemptions, including the added requirement that
ozone-producing air cleaning devices can only be used when no
people are present. There are also changes made to the
advisory that is required to be placed on an uncertified
ozone-producing air cleaner and additional information to be
included in owners, operations, and installation manuals for the
device. The notification requirement has been eliminated for
manufacturers of certified air cleaners, although manufacturers of
uncertified ozone-producing air cleaning devices are still required
to carry-out the notification requirement as described in section
94807 of the regulation.
As of the date of this filing, our products comply with all CARB
regulations related to air cleaners for sale in California, and the
Company’s manufacturer is registered with the State of California
CARB.
Competitive Strengths
oOur
Products are efficacious air cleaners with patented technologies,
that provide superior filtering capabilities and the ability to
remove airborne contaminants up to 20 times smaller than HEPA
filters, while operating at levels much quieter than HEPA based air
purifiers. According to the U.S. Environmental Protection Agency,
HEPA filters are able to filter airborne particulates sized at 0.3
microns (https://www.epa.gov/indoor-air-quality-iaq/what-hepa-filter-1).
Our products contain automatic laser sensors and electrostatic
precipitators which, based on our internal testing, as well as
independent third party lab, effectively removed airborne
particulate sized as small as 0.0146 microns. Thus, based on our
analysis of test data and third-party studies, including that of a
2020 study on electrostatic indoor air cleaners published by the
Department of the Built Environment, Aalborg University, which also
discusses the efficacy of technologies used by the Company; a 2008
efficacy study of the Company’s air purifiers conducted and
published by the Disinfection Research Institute in Moscow, Russia
and by Environmental Health and Engineering based in Needham,
Massachusetts; and a study published in 2018 by the Association of
Home Appliance Manufacturers. Based on the Company testing results,
analysis of the test data and an independent third-party
testing-our filtering technology is able to capture particulate 20
times smaller than HEPA filters.
oOur
products operate continually to sense the amount of airborne
contaminants in the air, and automatically adjust the performance
of our products to filter and cleanse the air. Our Auto-Mode also
adjusts noise levels ranging from 22dB (sleep mode) to 57dB (turbo
mode) and averages at 34dB. This volume is half the noise level of
traditional air cleaner systems while being far more effective. In
fact, this noise level is as quiet as a soft hum, which, when in
Auto Mode, only increases slightly when detecting and purifying the
ambient air of more significant pollutants. The laser sensors in
our products also alert users when to remove and clean our
collector plates.
oHEPA
filters are designed to trap pollutants such as pollen and dust.
Unfortunately, based on this very design, over time, the
"collection process" creates a clogged filter, and as such, HEPA
air purifiers will stop working if the filter isn't changed
regularly. This clogging action can also result in pollutants that
were once trapped and collected migrating through the filter
elements and escaping back into the air. Furthermore, when the air
temperature is warm and contains high humidity, mold and bacteria
can grow on the HEPA filter, causing foul odors and potentially
hazardous waste to be emitted back into the room. Kronos's
ultra-efficient air purification module, with its removable
washable collector plates, solves this problem by offering to the
consumer an easy-clean system that is both safe and effective by
handwashing or placing the purification module in a dishwasher. The
removable collector plates eliminate the need to replace otherwise
expensive HEPA filters and is a significant competitive advantage
to the Company’s products.
oSince
mold and bacteria like to grow on HEPA filters, they must be
replaced every six months; and most likely, more frequently if
filtering heavy contaminates. Spending money on HEPA filters can
easily cost $500 per year, and the better quality HEPA
13
filters cost even more. Kronos's Air
Purifier technology eliminates having to purchase replacement
filters and saves the user a significant amount of unneeded yearly
expenses, making Kronos an economical option.
oAir
cleaners using HEPA filters are made of dangerous fiberglass
materials that are not bio-degradable, making the disposed of HEPA
filters a long-lasting, damaging component to our environment.
Kronos's Filterless technology creates no recurring waste stream of
contaminated HEPA filters.
Competitive Strategies
oRecently
published Market Reports are forecasting significant growth in both
the Global and the North American portable air purifier market over
the next seven-year period.1 This growth is
projected across the entire spectrum of Room Sized Units, Portable
Automotive Units, and also Wearable Devices. The filtering or air
purification process itself generally falls into four categories:
HEPA Filters; Activated Carbon Filters; Ion Generator based
Filters; and Electrostatic Precipitator based Filters. Currently,
products using HEPA filters are the consumers' primary choice,
controlling approximately 40% of the residential air purifier
market. The other three processes all share similar market share
sizes of 18% - 22%. During the forecasted period of 2019
– 2027, each filtering technique is projected to realize
substantial growth.
oWe
intend to leverage our Filterless technology to emphasize the
benefits of collecting common contaminants that are not trapped
"within" a filter, but instead are neutralized, the remaining
airborne contaminates are ionized and then gathered onto the
"collector plates" surface. The airflow rate itself remains
unaffected during this neutralization and collection process. Thus,
the unit itself experiences no degradation in performance and
generates no unnecessary noises.
oOur
products incorporate many intelligent, self-monitoring and
reporting technologies, including:
oCHILD
LOCK: Prevents children from changing the settings; in addition,
the unit Powers-Off Immediately if the rear panel is opened.
oONE
BUTTON OPERATION: The unit operates with the push of a single
button. This allows the user to cycle through different airflow
settings quickly and easily or simply pick the Auto Mode
setting.
oAUTO
MODE - SMART CONTROL: By selecting Auto Mode, the unit
automatically adjusts the fan speed according to the contaminate
levels that the internal AQI (Air Quality Index) module is reading
in real-time. This feature not only provides a hands-free automated
process of monitoring the room's air quality, but it also serves to
help the homeowner better manage their power bills.
oSMART
APP WITH REAL-TIME AQI: Based on World Health Organization
established Air Quality Standards, Kronos' air purifiers display an
Air Quality Index reading (AQI) on a scale ranging from 0-500. With
a quick glance, the homeowner can easily verify that their
immediate environment offers the highest air quality. In addition,
each user can install on their mobile phone a Smart App that will
display the measure AQI reading. Even from a remote location, the
homeowner can not only
1 a. Globe
News Wire, Portable Air Purifier Market to grow at 11.5% CAGR by
2027 - Market Research Future (MRFR), May 20, 2021;
b. ENERGEN RESEARCH,
Air Purifier Market By Technology (HEPA, Activated Carbon, Ionic
Filters, and Others), By Applications (Commercial, Residential,
Industrial, and Others), and By Regions Forecasts to 2027,
September 2020;
c. Allied Market
Research, Portable Air Purifier Market by Type (Dust Collectors,
Fume & Smoke Detectors, and Others), Technique (High-efficiency
Particulate Air, Activated Carbon Filtration and Others): Global
Opportunity Analysis and Industry Forecast 2020-2027, June 2020.
Report #3;
d. Globe News Wire,
Water Purifier Market Analysis – Market Research Future
(MRFR), May 20, 2021;
e. Bloomberg Green
Energy & Science Section, Covid -19 and Wildfires Spell Big
Business for the Air Purifier Industry, August 5, 2021;
f. DATA INTELO, Air
Purifier Market by Technology (high-efficiency particulate air
(HEPA, ionizers, ozone generators, and electrostatic
precipitators), by Type (stand-alone and duct), and Geography
(North America, Europe, Asia Pacific, Latin America, and the Middle
East & Africa) – Global Industry Analysis, Share, Size,
Trends, and Forecast 2021-2028; and,
g. Mordor
Intelligence, Residential Air Purifiers Market – Growth,
Trends, COVID-19 Impact, and Forecasts (2021-2026).
14
monitor a specific room's air quality,
but they can also reset the fan speed or even turn the unit off if
desired. Therefore, this Smart App serves as a remote
control.
oNIGHT
MODE: This feature allows the user, if desired, to run the air
purifier without the operating lights.
oDETACHABLE
AIR QUALITY LASER DETECTOR: The homeowner can use the
detachable detector to measure the air quality in "other rooms"
throughout the house. Such readings can then be compared to the AQI
levels in the room being "cleansed" by the Kronos air purifier.
This information can be vital in helping the homeowner decide
whether or not to add additional air purifiers to the strategic
locations within their living space.
oGREEN
FRIENDLY: The need to replace HEPA filters on a periodic basis, as
used in our competitor's room-sized products, creates a secondary
problem: “Non-Degradable Waste.” This seems to be an even greater
issue than other non-degradable waste since HEPA filters are
"collecting and storing" contaminates by their very nature. In
fact, depending on the severity of the environment, used HEPA
filters may be considered toxic waste. All Kronos room-sized air
purifiers using the Kronos Filterless technology offer a “Green
Friendly” alternative.
Financial Summary
The
following information represents selected audited financial
information for our Company for the years ended June 30, 2021, and
2020 and selected unaudited financial information for our Company
for the period ended September 30, 2021.
The
Company has prepared consolidated financial statements on a going
concern basis, which contemplates the realization of assets and the
settlement of liabilities and commitments in the ordinary business
course. The Company earned $503,742 in revenues for the year ended
June 30, 2021 and $41,215 for the year ended June 30, 2020. At June
30, 2021, and June 30, 2020, the accumulated deficit was
$40,672,502and $38,207,393, respectively. On June 30, 2021, and
June 30, 2020, the working capital deficits were $267,309 and
$2,103,302. Our cash balance is $19,320 as of June 30, 2021. We do
not believe that our cash balance is sufficient to fund our
operations. During the year ended June 30, 2021, and 2020, the
Company incurred a net loss of $1,465,109and $493,443.
The
summarized financial information presented below is derived from
and should be read in conjunction with our audited financial
statements, as applicable, including the notes to those financial
statements which are included elsewhere in this Prospectus along
with the section entitled Management’s Discussion and Analysis of
Financial Condition and Results of Operations beginning on page 41
of this Prospectus.
|
Statements of Operations Data
|
|
|
|
|
|
Year Ended June 30, 2021
|
|
|
Year Ended June 30, 2020
|
|
|
Revenues
|
|
|
|
|
|
$
|
503,472
|
|
|
$
|
41,215
|
|
|
Cost of Sales
|
|
|
|
|
|
$
|
276,083
|
|
|
$
|
6,756
|
|
|
Gross
Profit
|
|
|
|
|
|
$
|
227,658
|
|
|
$
|
34,459
|
|
|
Total operating
expenses
|
|
|
|
|
|
$
|
2,145,883
|
|
|
$
|
171,344
|
|
|
Total other
expenses
|
|
|
|
|
|
$
|
(544,578
|
)
|
|
$
|
356,568
|
|
|
Net Income
(Loss)
|
|
|
|
|
|
$
|
(1,373,647
|
)
|
|
$
|
(493,443
|
)
|
|
Net income (loss) per
common share, basic and diluted
|
|
|
|
|
|
$
|
(0.01
|
)
|
|
$
|
(0.00
|
)
|
|
Balance Sheets Data
|
|
June 30, 2021
|
|
|
June 30, 2020
|
|
|
|
|
Cash and Cash
Equivalents
|
|
$
|
19,320
|
|
|
$
|
19,381
|
|
|
|
|
Total Current
Assets
|
|
$
|
289,482
|
|
|
$
|
154,264
|
|
|
|
|
Total Current
Liabilities
|
|
$
|
556,791
|
|
|
$
|
2,257,566
|
|
|
|
|
Working Capital
(deficit)
|
|
$
|
(267,309)
|
|
|
$
|
(2,103,302
|
)
|
|
|
|
Total Stockholders’
Equity (deficit)
|
|
$
|
3,159,453
|
|
|
$
|
($859,052)
|
|
|
|
|
Accumulated
Deficit
|
|
$
|
($40,672,502)
|
|
|
$
|
(38,207,393
|
)
|
|
|
Since
December 31, 2018, the Company has issued an aggregate of
$1,487,500 of convertible promissory notes. Of this amount
$1,250,000 was issued for acquisitions and $237,500 was issued for
cash. Of the issued notes, four were paid back prior to maturity.
One note is outstanding in the amount of $100,000, which is
convertible into common stock, but as of the date of this filing
has not been converted. A description of each note follows:
On
December 31, 2018, the Company issued a convertible promissory note
in the amount of $1,000,000. The note is due on December 31, 2023
and bears interest at 5% per annum. The loan and any accrued
interest may be converted into shares of the Company’s common stock
at a rate of 80% multiplied by the average of the three lowest
trading prices during the previous ten (10) day trading period
ending on the latest completed trading day prior to the conversion
date. Pursuant to current accounting guidelines, the Company
recorded a note discount of $1,000,000 to account for the note’s
derivative liability. In addition, the Company recorded an amount
of discount in excess
15
of the note principal of $250,000 that
was expensed as a financing cost. On June 30, 2021, The Company
converted the entirety of the note into shares eliminating the
liability of this note completely.
On
April 29, 2020, we issued a convertible promissory note to Julius
Toth in the amount of $37,500. Mr. Toth is not an affiliate or
control person of the Company and is not a related party having a
direct or indirect interest in any current or proposed transaction
with the Company. The note included interest of 5% per annum. The
maturity date was April 29, 2021. The note included rights to
convert outstanding principal and interest into shares of our
common stock calculated at a discount of 20% to the lowest three
trading prices over a ten-day period prior to the date a conversion
notice is delivered. We repaid principal and interest on this note
prior to the maturity date.
On
April 29, 2020, we issued a convertible promissory note to Nina
Levy in the amount of $40,000. Ms. Levy is not an affiliate or
control person of the Company and is not a related party having a
direct or indirect interest in any current or proposed transaction
with the Company. The note included interest of 5% per annum. The
maturity date was April 29, 2021. The note included rights to
convert outstanding principal and interest into shares of our
common stock calculated at a discount of 20% to the lowest three
trading prices over a ten-day period prior to the date a conversion
notice is delivered. We repaid principal and interest on this note
prior to the maturity date.
On
June 5, 2020, we issued a convertible promissory note to Mark
Grossman in the amount of $20,000. Mr. Grossman is not an affiliate
or control person of the Company and is not a related party having
a direct or indirect interest in any current or proposed
transaction with the Company. The note included interest of 5% per
annum. The maturity date was June 5, 2020. The note included rights
to convert outstanding principal and interest into shares of our
common stock calculated at a discount of 20% to the lowest three
trading prices over a ten-day period prior to the date a conversion
notice is delivered. We repaid principal and interest on this note
prior to the maturity date.
On
June 8, 2020, we issued a convertible promissory note to
Intellicalm, Inc. in the amount of $40,000. Neither Intellicalm,
Inc. nor any Intellicalm control person is an affiliate or control
person of the Company and are not related parties having a direct
or indirect interest in any current or proposed transaction with
the Company. The note included interest of 5% per annum. The
maturity date was April 29, 2021. The note included rights to
convert outstanding principal and interest into shares of our
common stock calculated at a discount of 20% to the lowest three
trading prices over a ten-day period prior to the date a conversion
notice is delivered. We repaid principal and interest on this note
prior to the maturity date.
On
July 21, 2020, we issued a convertible promissory note to
Intellicalm, Inc. in the amount of 100,000. Neither Intellicalm,
Inc. nor any Intellicalm control person is an affiliate or control
person of the Company and are not related parties having a direct
or indirect interest in any current or proposed transaction with
the Company. The note included interest of 5% per annum. The
maturity date was July 21, 2021. The note included rights to
convert outstanding principal and interest into shares of our
common stock calculated at a discount of 20% to the lowest three
trading prices over a ten-day period prior to the date a conversion
notice is delivered. This note remains outstanding.
On
October 1, 2019, the Company issued a convertible promissory note
in the amount of $250,000 to First Bitcoin Capital, LLC (“First
Bitcoin”). Neither First Bitcoin nor any First Bitcoin affiliate
are a control person or affiliate of the Company. The note is
outstanding and due on October 1, 2024 and bears interest at 5% per
annum. The loan and any accrued interest may be converted into
shares of the Company’s common stock at a rate of 80% multiplied by
the average of the three lowest trading prices during the previous
ten (10) day trading period ending on the latest complete trading
day prior to the conversion date. Pursuant to current accounting
guidelines, the Company recorded a note discount of $250,000 to
account for the note’s derivative liability. In addition, the
Company recorded an amount of discount in excess of the note
principal of $62,500 that was expensed as a financing cost. This
note was assigned by First Bitcoin to ANI Holdings, Pty. Ltd. The
note remains outstanding.
On June 17th, 2021, West Virginia Economic Development and
Authority (WVEDA) approved in a meeting of its board of directors
to grant Kronos two loan offers with the aggregate principal amount
not to exceed $2,610,000. The loans are for the Company’s
acquisition of the manufacturing facility in West Virginia and for
fixed equipment. The loans contain repayment terms of 15 years and
10 years respectively. Interest rates for the two notes are as
follows:
Loan (1) $1,845,000: This loan shall bear interest fixed as of the
third business day prior to closing equal to the rate of the 20
Year US Treasury Note rate plus 0.75%. This loan has a floor
(minimum) interest rate of 2. 75% and shall be adjustable every
five years. The loan will be secured by a first lien deed of trust
on the project land, improvements, and appurtenances in the amount
of $1,845,000, and will be cross collateralized with Loan (2),
discussed below.
Loan (2) $765,000: This loan shall bear interest fixed as of the
third business day prior to closing equal to the rate of the Wall
Street Journal Prime rate multiplied by 0.75%. This loan has a
floor (minimum) interest rate of 2.75%. The loan will be
secured by a UCC-1 security filing on all assets of the Company and
will be cross collateralized with Loan (1).
16
On April 7, 2022, we completed all conditions precedent and the
loans closed by our purchase of fixed equipment, providing proofs
of hazard and flood insurance, title insurance and liability
insurance. We also installed all equipment and completed all
renovations at the facility, which resulted in the transfer of
title of the real estate to the Company from a "contract of sale"
to recorded ownership.
We
are an “emerging growth company” within the meaning of the federal
securities laws. For as long as we are an emerging growth company,
we will not be required to comply with the requirements that are
applicable to other public companies that are not “emerging growth
companies,” including, but not limited to, not being required to
comply with the auditor attestation requirements of Section 404 of
the Sarbanes-Oxley Act, the reduced disclosure obligations
regarding executive compensation in our periodic reports and proxy
statements and the exemptions from the requirements of holding a
nonbinding advisory vote on executive compensation and shareholder
approval of any golden parachute payments not previously approved.
We intend to take advantage of these reporting exemptions until we
are no longer an emerging growth company.
The
Risk Factors are an explanation of the qualifications and other
requirements applicable to such emerging growth companies. It
describes certain elections that we have made due to our status as
an emerging growth company.
RISK FACTORS
This investment has a high degree of risk. Before you invest,
you should carefully consider the risks and uncertainties described
below and the other information in this Prospectus. If any of the
following risks occur, it will harm our operating results and
financial condition, and the value of our stock could go down. This
means you could lose all or a part of your investment.
The novel coronavirus (COVID-19) pandemic may have an
expected effect on our business, financial condition, and results
of operations.
In
March 2020, the World Health Organization declared a novel
coronavirus (COVID-19) outbreak as a pandemic worldwide. Many
countries, including China and the United States, from time to
time, implemented significant governmental measures to control the
spread of the virus, including temporary closure of businesses,
severe restrictions on travel and the movement of people, and other
material limitations on business generally. These measures have
resulted in worldwide work stoppages, absenteeism in the labor
workforce, and other disruptions. China started as the center of
the COVID-19 epidemic, which is where our product supplies are
sourced, and our products are assembled and shipped. The pandemic
resulted in an increase in the lead time for the manufacturing and
delivery of our products. The extent to which the coronavirus and
its variants impacts our continuing operations will depend on
future developments. These developments are highly uncertain. We
cannot predict them with confidence, including the duration and
severity of the outbreak, the spread and effects of coronavirus
variants, and the actions required to contain the coronavirus, its
variants, or treat its impact. In particular, the continued spread
of the coronavirus and its variants globally could adversely impact
our operations and workforce, including our marketing and sales
activities and ability to raise additional capital, which could
harm our business, financial condition, and operation results.
RISKS RELATED TO THE COMPANY
We may not be able to continue our business as a going
concern – Our Auditor has issued a “Going Concern”
Opinion.
Our
independent registered public accounting firm included in its
opinion for the year ended June 30, 2021 and 2020 an explanatory
paragraph referring to our recurring losses from operations and
expressing substantial doubt in our ability to continue as a going
concern. Our ability to continue as a going concern is dependent
upon our ability to develop profitable operations and to obtain
additional funding sources. Our financial statements as of June 30,
2021 and 2020 did not include any adjustments that might result
from the outcome of this uncertainty. The reaction of investors to
the inclusion of a going concern statement by our auditors, and our
potential inability to continue as a going concern, in future years
could materially adversely affect our share price and our ability
to raise new capital or implement our business plans.
We may need to obtain additional financing, which may not be
available.
We
need the proceeds from this offering to implement our business plan
and expand our operations as described in the “Plan of Operation”
section of this Prospectus. As of the year ended June 30, 2021, we
had $19,320 cash on hand and total current liabilities of $556,791.
The Company earned $503,742 in revenues for the fiscal year ended
June 30, 2021. Our net loss for the year ended June 30, 2021 is
$1,465,109. The proceeds of this offering may not be sufficient for
us to achieve future profitable operations. We need additional
funds to achieve a sustainable sales level to fund ongoing
operations out of revenues. There is no assurance that any
additional financing will be available or, if available, on terms
that will be acceptable to us.
17
Our operating history may not serve as a complete or adequate
basis to judge our future prospects and results of
operations.
Although we have operated in the air cleaning business since 2002,
our historical operating results may not provide a meaningful basis
for evaluating our business, financial performance, and prospects.
Even though we have generated revenues, we are also involved in
organizational activities, research, and development, and
developing our new technologies. Accordingly, you should not rely
on our results of operations for any prior periods as an indication
of our future performance. At June 30, 2021, and June 30, 2020, our
accumulated deficit was $40,672,502and $38,207,393, respectively.
There is a substantial risk that we will not be successful in our
development and sales activities, or if initially successful, in
thereafter generating significant operating revenues or in
achieving profitable operations. Our operations will be subject to
all the risks inherent in the establishment of a developing
enterprise and the uncertainties arising from the limitations of a
significant operating history. If our business plan is not
successful, and we are not able to operate profitably, investors
may lose some or all of their investment in our company.
We cannot accurately predict future revenues or profitability
in the emerging market for air cleaners.
The
market for air cleaners is rapidly evolving. As is typical for a
rapidly evolving industry, demand, and market acceptance for
recently introduced products are subject to a high level of
uncertainty. Moreover, since the market for our products is
evolving, it is difficult to predict the future growth rate, if
any, and size of this market. Because of our limited operating
history and the emerging nature of the markets in which we compete,
we are unable to accurately forecast our revenues or our
profitability. The market for our products and the long-term
acceptance of our products are uncertain, and our ability to
attract and retain qualified personnel with industry expertise,
particularly sales and marketing personnel, is uncertain. To the
extent we are unsuccessful in increasing revenues, we may be
required to appropriately adjust spending to compensate for any
unexpected revenue shortfall, or to reduce our operating expenses,
causing us to forego potential revenue generating activities,
either of which could have a material adverse effect on our
business, results of operations and financial condition.
We currently
depend on Chinese suppliers for the sourcing of parts and the
manufacturing and shipping of our products.
We
are, and will continue to be for the foreseeable future,
substantially dependent on our Chinese suppliers to deliver parts
and manufacturing for our products. Although we plan on moving our
supply chain and manufacturing to our West Virginia facility, this
is not complete as of the date of this filing, and we continue to
rely upon our Chinese parts suppliers and manufacturing services.
The time and cost associated with relocating our supply chain and
manufacturing facilities are uncertain. Although we have
established contracts with our Chinese supply chain and
manufacturers, we can make no assurance that we will be able to
maintain these third-party relationships or establish additional
relationships as necessary to support growth and profitability of
our business on economically viable terms until we can complete the
relocation of our parts and manufacturing business to the United
States. As independent companies, our Chinese suppliers make their
own business decisions. The suppliers may choose not to do business
with us for a variety of reasons, including competition, brand
identity, product standards and concerns regarding our economic
viability. In addition, their financial condition could also be
adversely affected by conditions beyond our control and our
business could concurrently suffer. In addition, we will face risks
associated with any supplier’s failure to adhere to quality control
and service guidelines or failure to ensure an adequate and timely
supply of product to our potential and future customers. Any of
these factors could negatively affect our business and financial
performance. As noted, the coronavirus has affected our lead times
for the manufacturing and delivery of our products from China. If
we are unable to obtain and maintain a source of supply for our
products, our business will be materially and adversely
affected.
Price
competition could negatively affect our gross margins.
Price
competition could negatively affect our operating results. To
respond to competitive pricing pressures, we will have to offer our
products at lower prices in order to retain or gain market share
and customers. If our competitors offer discounts on products in
the future, we may need to lower prices to match the competition,
which could adversely affect our gross margins and operating
results.
If we are
unable to build and maintain our brand image and corporate
reputation, our business may suffer.
Regardless of our development history, we are nonetheless a
relatively new company, having conducted new research and
development in the last few years in the air cleaner space.
Therefore, our success depends on our ability to build and maintain
the brand image for our air cleaner products and effectively build
the brand image for any new products. We cannot assure you that any
additional expenditure on advertising and marketing will have the
desired impact on our products’ brand image and on consumer
preferences. Actual or perceived product quality issues or
allegations of product flaws, even if false or unfounded, could
tarnish the image of our brand and may cause consumers to choose
other products. Allegations of product defects, even if untrue, may
require us from time to time to recall a product from all of the
markets in which the affected product was distributed. Product
recalls would negatively affect our profitability and brand
image.
18
If we are
unable to complete and implement our plan to manufacture, market
and sell our Air Cleaner products in our West Virginia facility,
our growth, sales, and profitability operations may
suffer.
We
have not yet fully implemented our business plans to manufacture,
market and sell our air cleaners and we have initial revenues from
the sale of our air cleaners. The success of our business will
depend on the completion of our plan to relocate our supply chain
and manufacturing to the United States in our West Virginia
facility, our access to the loans approved by the West Virginia
Economic Development and Authority, and the acceptance of our air
cleaner products by the general public. Achieving such milestones
will require significant investments of time and money. Our sales
of air cleaner products may not be accepted by consumers at
sufficient levels to support our operations and build our business.
If our Air cleaner products are not accepted at sufficient levels,
our growth, sales, and profitability may suffer.
The loans offered by the West Virginia Economic Development
Authority closed on April 7, 2022, and Kronos is liable for
repayment of the loans and interest to West Virgina Economic
Development Authority. Without adequate funding the Company may not
be able to pay back principal and interest under the loan
agreements.
On June 17th, 2021, West Virginia Economic Development Authority
(WVEDA) approved in a meeting of its board of directors to grant
Kronos two loan offers with the aggregate principal amount not to
exceed $2,610,000. The loans are for the Company’s acquisition of
the manufacturing facility in West Virginia and for fixed
equipment. The loans contain repayment terms of 15 years and 10
years respectively. Interest rates for the two notes are as
follows:
Loan (1) $1,845,000: This loan shall bear interest fixed as of the
third business day prior to closing equal to the rate of the 20
Year US Treasury Note rate plus 0.75%. This loan has a floor
(minimum) interest rate of 2. 75% and shall be adjustable every
five years. The loan will be secured by a first lien deed of trust
on the project land, improvements, and appurtenances in the amount
of $1,845,000, and will be cross collateralized with Loan (2),
discussed below.
Loan (2) $765,000: This loan shall bear interest fixed as of the
third business day prior to closing equal to the rate of the Wall
Street Journal Prime rate multiplied by 0.75%. This loan has a
floor (minimum) interest rate of 2.75%. The loan will be
secured by a UCC-1 security filing on all assets of the Company and
will be cross collateralized with Loan (1).
The Company satisfied the conditions precedent to the closing of
the loans, which closed on April 7, 2022, including renovations to
the physical buildings and the purchase of the real property,
purchase of fixed equipment, hazard and flood insurance, title
insurance and liability insurance. However, without adequate
funding to implement and develop our business plans, the Company
may not be unable to pay back the principal and interest on these
secured loans when due.
Changes in
economic conditions that impact consumer spending could harm our
business.
Our
financial performance is sensitive to changes in overall economic
conditions that impact consumer spending. Future economic
conditions affecting consumer income such as employment levels,
business conditions, interest rates, and tax rates could reduce
consumer spending or cause consumers to shift their spending to
other products. A general reduction in the level of consumer
spending or shifts in consumer spending to other products could
have a material adverse effect on our growth, sales, and
profitability.
New federal and expanded state regulations may result in
increased costs which could affect our business.
The
Department of Energy has tentatively determined that coverage of
air cleaners is necessary and appropriate to carry out the purposes
of EPCA, and that the average U.S. household energy use for air
cleaners is likely to exceed 100 kilowatt-hours per year. The
Department of Energy is currently engaged in soliciting public
comments for proposed rules governing air cleaners. The public
comment period concluded November 15, 2021. As of the date of this
filing, the Department of Energy has not published an abstract of
the proposed regulations or conducted a rulemaking for air
cleaners. If, after public comment, the Department of Energy issues
a final determination of coverage for air cleaners, it may
prescribe both test procedures and energy conservation standards
for these products.
On
June 3, 2019, the California Air Resources Board (CARB) adopted the
indoor air cleaner regulation pursuant to California Assembly Bill
2276 in response to emerging concerns about indoor ozone emissions.
While several states and the U.S. Environmental Protection Agency
only warn against using ozone generators in occupied indoor spaces,
and the Food and Drug Administration limits ozone emissions from
medical air cleaner devices, California’s program is unique in that
it is the first state to promulgate regulations of air cleaners,
and in its breadth and coverage.
Potential federal rulemaking and possible expanding state
regulations concerning air cleaners may result in increased costs
complying with new and existing law, and this could impact our
growth, sales, and profitability.
19
During 2018, we both acquired digital assets as consideration
for conducting operations, and separately accepted digital
currencies as consideration for the purchase of our products. Prior
to our decision to stop transacting in digital currencies in June,
2021, we conducted transactions resulting in the sale and
conversion of our digital currencies into U.S. dollars and
transferred digital assets we acquired to a third party in a spin
off transaction. We maintain a de minimis amount of digital
currency on our balance sheet. From 2018 to June, 2021, regulatory
opinions and rules concerning whether or not digital currencies
were securities under federal law were in a state of flux, which
although unsettled at the time, may expose the company to
regulatory scrutiny or liability as a result of our digital
currency transactions.
During 2018, we sold our products in exchange for digital
currencies including Ethereum, Bitcoin and Dogecoin. Also, during
2018, we acquired 600 million digital tokens (COIN:BIT) from First
Bitcoin Capital, LLC as a transactional currency with a view
towards using it as an alternative currency to purchase products
for resale. In 2021, we determined to stop transacting in digital
currencies for the sale of our products. And we transacted our on
hand digital currencies in 2021 sales generating $19,635.14. We
later transferred in a spin off transaction the 600 million digital
tokens acquired in 2018 to DogeSPAC, LLC in exchange for DogeSPAC,
LLC issuing to all our shareholders one restricted unit in
DogeSPAC, LLC for each share of our common stock. The spin off and
unit dividend were completed on June 15, 2021 based on the record
date and subsequently paid to all shareholders. The Company is not
an affiliate of DogeSPAC, LLC and does not maintain any ownership
or control over it.
The
SEC has stated that certain digital assets may be considered
“securities” under the federal securities laws and subject to those
laws. During the period when we decided to both transact and
acquire digital assets in 2018, the test for determining whether a
particular digital asset was a “security” was complex and the
outcome is difficult to predict. Public statements by senior
officials at the SEC, including a June 2018 speech by the director
of the SEC’s division of Corporation Finance, indicated that the
SEC did not intend to take the position that Bitcoin or Ether are
currently securities. Subsequently in a March 2019 statement, the
chairman of the SEC expressed agreement with certain statements
from the June 2018 speech by the director of the SEC’s division of
Corporation Finance, including the analysis of federal securities
laws that the director applied to Bitcoin and Ethereum. Such
statements were not official policy statements by the SEC and
reflected only the speaker’s views, which were not binding on the
SEC or any other agency or court and cannot be generalized to any
other digital asset. Similarly, in April 2019, the SEC’s Strategic
Hub for Innovation and Financial Technology published a framework
for the analysis of digital assets. However, this framework was not
a rule, regulation or statement of the Commission and is not
binding on the Commission. If our 2018 acquisitions of digital
currencies and subsequent sales and transfer in the spin off
transaction with DogeSPAC, LLC are determined to be a “security”
and a possible violation of federal or state securities laws by the
SEC or any other agency, or in a proceeding in a court of law or
otherwise, it may have material adverse consequences for our
company, our 2018 acquisitions, and/or our spin off transaction
with DogeSPAC, LLC.
We have incurred losses in prior periods and may incur losses
in the future.
We
incurred net losses of $1,465,109and $493,443 for our fiscal year
ended June 30, 2021 and 2020 respectively. As of June 30, 2021, we
had an accumulated deficit of $40,672,502. We have not achieved
profitability in any period, and we expect to continue to incur net
losses for the foreseeable future. Should we continue to incur net
losses in future periods, we may not be able to increase the number
of employees or our investment in capital equipment, sales and
marketing programs and research and development in accordance with
present plans. Continuation of net losses may also require us to
secure additional financing sooner than expected. Such financing
may not be available in sufficient amounts, or on terms acceptable
to us and may dilute existing shareholders.
We will require additional capital in the future in order to
maintain and expand our operations. Failure to obtain required
capital would adversely affect our business.
Until
such time as we become profitable, we will be required to obtain
additional financing or capital investments in order to maintain
and expand our operations and take advantage of future business
opportunities. Obtaining additional financing will be subject to,
among other factors, market conditions, industry trends, investor
sentiment and investor acceptance of our business plan and
management. These factors may make the timing, amount, terms, and
conditions of additional financing unattractive or unavailable to
us. There are no assurances that we will be able to raise cash from
equity or debt financing efforts or that, even if raised, such cash
would be sufficient to satisfy our anticipated capital
requirements. Further, there is no assurance concerning the terms
on which such capital might be available. Failure to obtain
financing sufficient to meet our anticipated capital requirements
could have a material adverse effect on our business, operating
results, and financial condition.
The markets in which we operate are very competitive, and
many of our competitors and potential competitors are larger, more
established, and better capitalized than we are.
Although air cleaner technology is a rapidly emerging technology,
the market for these products is highly competitive and we expect
that competition will continue to intensify. Our products compete
broadly with other current companies offering air cleaner
technology, including companies that offer air purification
technology, such as 3M Corporation, Honeywell, Whirlpool, Sharp and
Phillips. These products compete directly with the products offered
by us.
20
Many
competitors have longer operating histories, larger customer bases,
and greater financial, research and development, technical,
marketing and sales, and personnel resources than we have. Given
their capital resources, the larger companies with whom we compete
or may compete in the future, are in a better position to
substantially increase their manufacturing capacity, research, and
development efforts or to withstand any significant reduction in
orders by customers in our markets. Such larger companies typically
have broader and more diverse product lines and market focus and
thus are not as susceptible to downturns in a particular market. In
addition, some of our competitors have been in operation much
longer than we have been and therefore may have more longstanding
and established relationships with current and potential
customers.
Because we are small and do not have much capital, we must limit
our activities. Our relative lack of capital and resources will
adversely affect our ability to compete with large entities that
market air purifier products. We compete against other air purifier
manufacturers and retailers, some of which sell their products
globally, and some of these providers have considerably greater
resources and abilities than we have. These competitors may have
greater marketing and sales capacity, established sales and
distribution networks, significant goodwill, and global name
recognition. Furthermore, it may become necessary for us to reduce
our prices in response to competition. A reduction in prices of our
products could adversely affect our revenues and profitability.
In
addition, other entities not currently offering products similar to
us may enter the market. Any delays in the general market
acceptance of our products may harm our competitive position. Any
such delay would allow our competitors additional time to improve
their service or product offerings and provide time for new
competitors to develop. Increased competition may result in pricing
pressures, reduced operating margins and loss of market share,
which could have an adverse effect on our business, operating
results, and financial condition.
We operate in an industry that is competitive and subject to
technological change.
The
air purification industry is characterized by competition and
technological change, where we compete on a variety of factors,
including price, product features and services. Potential
competitors include large air cleaner manufacturers and other
companies, some of which have significantly greater financial and
marketing resources than we do, and firms that are more specialized
than we are with respect to particular markets. Our competitors may
be able spend more money on marketing campaigns, respond quicker to
new technological changes, or be better adept at attracting
customers, employees, and partners. If our competition is better
able to develop and market products or services that are cheaper,
safer, more effective, or otherwise more appealing to consumers, we
may be unable to effectively compete.
Our business model may not be sufficient to ensure our
success in our intended market.
Our
survival is currently dependent upon our planned development
efforts to gain market acceptance of our products in the global
market, including but limited to North America, Europe, and Asia.
Should our existing and developing target markets not be as
responsive to our products as we anticipate, we may not have in
place alternate products that we can offer to ensure our
survival.
We may receive a significant number of warranty claims or our
air purification products that may require significant amounts of
service after sale.
Sales
of our air purification products may include a warranty to cover
issues other than for normal wear and tear. As the possible number
and complexity of the features and functionalities of our products
increase, we may experience a higher level of warranty claims. If
product returns or warranty claims are significant or exceed our
expectations, we could incur unanticipated expenditures for parts
and services, which could have a material adverse effect on our
operating results.
Product and software defects could harm our
business.
Manufacturing or design defects, unanticipated use of our products,
or inadequate disclosure of risks relating to the use of our
products, can lead to injury or other adverse events, including
recalls or safety alerts relating to our products. These recalls
could lead to significant costs or the removal of our air
purification products from the market. Further, even though we rely
on third-party manufacturers, their liability is limited
contractually; therefore, we could bear the burden of the costs for
manufacturing defects. In addition, any defects could subject us to
product liability claims, reputational damage, and negative
publicity, all of which would negatively impact our business.
We could be subject to litigation.
Product liability claims are common. Even though we have not been
subject to such claims in the past, we could be a named defendant
in a lawsuit alleging product liability claims including, but not
limited to, defects in the design, manufacture or labeling of our
air purification products. Any litigation, regardless of its merit
or eventual outcome, could result in significant legal costs and
high damage
21
awards or settlements. Although we
currently maintain product liability insurance, the coverage is
subject to deductibles and limitations, and may not be adequate to
cover future claims. Additionally, we may be unable to maintain our
existing product liability insurance in the future at satisfactory
rates or at adequate amounts.
If product liability lawsuits are brought against us, our
business may be harmed, and we may be required to pay
damages.
Our
business exposes us to potential product liability claims that are
inherent in the testing, manufacture, and sale of air purification
devices and equipment. We could become the subject of product
liability lawsuits alleging that component failures, malfunctions,
manufacturing flaws, design defects or inadequate disclosure of
product-related risks or product-related information resulted in an
unsafe condition or injury to patients.
Regardless of the merit or eventual outcome, product liability
claims may result in:
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decreased demand for our air purification products;
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injury to our reputation;
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significant litigation costs;
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substantial monetary awards to or costly settlements with
patients;
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material defense costs;
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the
inability to commercialize new products or product candidates; and
diversion of management attention from pursuing our business
strategy
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Our business may suffer if we are unable to attract or retain
talented personnel.
Our
success will depend in large measure on the abilities, expertise,
judgment, discretion, integrity, and good faith of management, as
well as other personnel. We have a small management team, and the
loss of a key individual or our inability to attract suitably
qualified replacements or additional staff could adversely affect
our business. Our success also depends on the ability of management
to form and maintain key commercial relationships within the
marketplace. No assurance can be given that key personnel will
continue their association or employment with us or that
replacement personnel with comparable skills will be found. If we
are unable to attract and retain key personnel and additional
employees, our business may be adversely affected. We do not
maintain key-man life insurance on any of our executive employees,
and do not have directors’ and officers’ insurance coverage as of
the date this Prospectus is filed.
The lack of available and cost-effective directors and
officer’s insurance coverage in our industry may cause us to be
unable to attract and retain qualified executives, and this may
result in our inability to further develop our
business.
Our
business depends on attracting independent directors, executives,
and senior management to advance our business plans. We currently
do not have directors and officer’s insurance to protect directors
and the Company against the possible third-party claims. This is
due to the significant lack of availability of funds and the offer
of such policies at reasonably competitive prices. As a result, the
Company and our executive directors and officers are susceptible to
liability claims arising by third parties, and as a result, we may
be unable to attract and retain qualified independent directors and
executive management causing the development of our business plans
to be impeded as a result.
The loss of one or more of our key personnel, or our failure
to attract and retain other highly qualified personnel in the
future, could harm our business.
Our
future performance is dependent on the ability to retain key
personnel. The Company’s performance is substantially dependent on
the performance of Senior Management. The loss of the services of
any of its executive officers or other key employees could have a
material adverse effect on the Company’s business, results of
operations, and financial condition. If we do not succeed in
retaining and motivating our existing personnel, we may be unable
to grow effectively.
Management of growth will be necessary for us to be
competitive
Successful expansion of our business will depend on our ability to
effectively attract and manage staff, strategic business
relationships, and shareholders. Specifically, we will need to hire
skilled management and technical personnel and manage partnerships
to navigate
22
shifts in the general economic
environment. The expansion can place significant strains on
financial, management, and operational resources, yet failure to
expand will inhibit our profitability goals.
Because we are small and do not have much capital, our
marketing campaign may not attract enough customers to operate
profitably. If we do not make a profit, our financial conditions
will be adversely affected.
Since
we are small and do not have much capital, we must limit our
marketing activities and may not be able to make our products known
to potential customers. Because we will be initially limiting our
marketing activities to online sales, independent sales
representatives and select retail outlets, we may not be able to
attract enough immediate customers to operate profitably. If we
cannot operate profitably, our financial conditions will be
negatively affected and limit our ability to raise additional
funding to increase our sales and marketing efforts.
We are pursuing a variety of possible strategies to grow our
business, including:
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collaborations, licensing arrangements, joint ventures, strategic
alliances, or partnerships;
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pursuing sales in international markets; and
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acquisitions of complementary products or technologies.
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In
addition to stretching our financial and management resources, each
of these strategies has its own inherent risks. For instance,
arranging collaborations, licensing arrangements, joint ventures,
strategic alliances, partnerships, and acquisitions can be a
lengthy and complex process and we may not enter into such
arrangements in a timely manner, on a cost-effective basis, on
acceptable terms or at all. Even if we do enter into such
arrangements, they may not result in achieving and developing new
products and revenue streams. Expansion of international
development could result in additional costs and risks, including
those related to development of new distribution channels,
increased shipping and distribution costs, compliance with foreign
laws and regulations, as well as U.S. law controlling international
business practices of U.S. companies, currency fluctuations as well
as subjecting us to geopolitical and trade risks. Failure to
implement growth strategies could severely impair our business.
If our products do not achieve greater market acceptance, or
if alternative brands are developed and gain market traction, our
business would be adversely affected.
Our
success is dependent upon the successful development and marketing
of our products. Our future success depends on increased market
acceptance of our technology and air purifier product lines. The
air purification community may not embrace our product line.
Acceptance of our products will depend on several factors,
including cost, product effectiveness, convenience, strategic
partnerships, and reliability. We also cannot be sure that our
business model will gain wide acceptance among retailers or the air
cleanser community. If the market fails to continue to develop, or
develops more slowly than we expect, our business, results of
operations and financial condition will be adversely affected.
Moreover, if new air purifier brands are developed, our prospective
products and current technologies could become less competitive or
obsolete. Any of these factors could have a material and adverse
impact on our growth and profitability.
Inability of our officers and directors to manage the growth
of the business may limit our success.
We
expect to grow as we execute our business strategy. Rapid
growth would place a significant strain on our management and
operational resources. In addition, we expect the demands on our
infrastructure and technical support resources to grow along with
our customer base, and if we are successful in implementing our
marketing strategy, it could experience difficulties responding to
demand for our products and technical support in a timely manner
and in accordance with market expectations. These demands may
require the addition of new management personnel or the development
of additional expertise by existing management personnel. There can
be no assurance that our networks, procedures, or controls will be
adequate to support our operations or that management will be able
to keep pace with such growth. Failure to manage growth effectively
could have a material adverse effect on our business, operating
results, and financial condition.
As we expand, management will be faced with new challenges
due to increases in operating expenses and risks related to
expansion.
As our
business grows and expands, we will spend substantial financial and
other resources on developing and introducing new products and
expanding our sales and marketing organization, strategic
relationships, and operating infrastructure. If our business and
revenues grow, we expect that our cost of revenues, sales and
marketing expenses, general and administrative expenses,
operations, and customer support expenses will increase.
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If we fail to capitalize and integrate potential acquisitions
with our operations, our business could suffer.
In the
future we may acquire more air purification technologies,
businesses, or assets. The integration of acquired businesses,
technologies or assets requires significant effort and entails
risks. We may find it difficult to integrate operations of acquired
businesses as personnel may leave and licensees, distributors or
suppliers may terminate their arrangements or demand amended terms
to these arrangements. Additionally, our management may have their
attention diverted while trying to integrate businesses or assets
that may be acquired. If we are not able to successfully integrate
any businesses or assets that we acquire, we may not realize the
anticipated benefits of these acquisitions.
Our success depends on our ability to capitalize on our
strategic relationships and partnerships with suppliers,
distributors, purchasers, and users of our products.
We
will rely on strategic relationships with third parties to expand
our manufacturing and distribution channels and to undertake
product development and marketing efforts. Our ability to increase
sales depends on marketing our products through new and existing
strategic relationships. We intend to partner with established
existing suppliers and distributors in order to reach target
markets such as the medical, healthcare, hospitality, food service
and lodging markets. The termination of one or more of our
strategic relationships may have a material adverse effect on our
business, operating results, and financial condition.
Our newly filed non-provisional patent application may not
result in an issued patent, and this could materially affect our
current and future business plans, operations, and future
profitability.
We
applied for two new provisional patents that are relevant to our
current and future operations, product development and business.
Under United States patent law, a provisional application is a
legal document filed in the United States Patent and Trademark
Office, that establishes an early filing date, but does not mature
into an issued patent unless the applicant files a regular
non-provisional patent application within one year. As of the date
of this filing, we have not filed non-provisional patent
applications concerning our two provisional patent filings, and
there is no guarantee that we will file such non-provisional patent
applications or, if filed, that the U.S. Patent and Trademark
Office will issue us patents, which will affect our
profitability.
Our
profitability may depend in part on our ability to effectively
protect our proprietary rights, including obtaining patent
protection for our proprietary designs, utilities, and methods of
manufacturing our air purification products, maintaining the
secrecy of our internal workings, and preserving our trade secrets,
as well as our ability to operate without inadvertently infringing
on the proprietary rights of others. There can be no assurance that
we will be able to obtain future patents or defend our current and
future patents. Further, policing and protecting our intellectual
property against unauthorized use by third parties is
time-consuming and expensive, and certain countries may not even
recognize our intellectual property rights. There can also be no
assurance that a third party will not assert patent infringement
claims with respect to our products or technologies. Any litigation
relating to either protecting our intellectually property or
defending our use of certain technologies could have material
adverse effect on our business, operating results, and financial
condition, regardless of the outcome of such litigation.
The Company’s products are new, and its industry is
evolving.
You
should consider the Company’s prospects considering the risks,
uncertainties, and difficulties frequently encountered by companies
in their early stage of development, especially companies in the
rapidly evolving air purification industry. To be successful in
this industry, the Company must, among other things:
·develop
and introduce functional and attractive air purification
products;
·attract
and maintain a large base of consumers;
·increase
awareness of the Company brand and develop consumer
loyalty;
·establish
and maintain strategic relationships with distribution partners and
service providers;
·respond
to competitive and technological developments;
·build
an operations structure to support the Company business;
and
·attract,
retain, and motivate qualified personnel.
The
Company cannot guarantee that it will succeed in achieving these
goals. Its failure to do so would have a material adverse effect on
its business, prospects, financial condition, and operating
results.
Some
of the Company’s products are new and are only in the early stages
of commercialization. The Company is not certain that these
products will function as anticipated or be desirable to its
intended market. Also, some of the Company’s products and services
may have limited functionalities, limiting their appeal to
consumers and putting the Company at a competitive disadvantage.
The Company could lose customers or be subject to claims if our
current or future products and services fail to function correctly
or if the Company
24
does not achieve or sustain market
acceptance. The failure of our product could have a material
adverse effect on the Company’s business, financial condition, and
operating results.
As is
typical in a new and rapidly evolving industry, demand, and market
acceptance for recently introduced products are subject to a high
level of uncertainty and risk. Because the company’s market is new
and evolving, it is difficult to predict with any certainty the
size of this market and its growth rate, if any. The Company cannot
guarantee that a market for the Company will develop or that demand
for Company services will emerge or be sustainable. If the market
fails to materialize, develops more slowly than expected, or
becomes saturated with competitors, the Company’s business,
financial condition, and operating results would be materially
adversely affected.
As a growing company, we have to develop reliable accounting
resources and internal controls. Failure to achieve and maintain
effective controls could prevent us from producing reliable
financial reports.
Effective internal controls and accounting resources are necessary
for us to provide reliable financial reports. We have not
implemented a system of internal controls. Failure to implement and
maintain an effective internal accounting and control environment
could cause us to face regulatory action, and also cause investors
to lose confidence in our reported financial information, either of
which could have an adverse effect on our business and financial
results. We plan on developing internal controls focused on
processes and classes of transactions for financial statements
accounts and disclosures that are most likely to have a material
impact on the financial statements and assessments of risk, and
those controls that address the risk that the financial statements
could be materially misstated. We intend to assign responsibility
for the development, implementation, and testing of our internal
controls to our independent board member Mary Taylor, a CPA, who
will develop and review controls in light of identified risks and
monitor the operation and assessment of those controls for the
financial reporting process. Our emphasis as a smaller reporting
company will focus on (i) segregation of duties; (ii) systems
access and security; (iii) safeguarding assets; and, (iv) approval
and review process. we intend to have these controls established
and implemented by the date of our first annual report required to
be filed under the Act after our registration becomes effective and
we are subject to periodic reporting. We do not have a reliable
estimate on the costs of our plans at this time.
Our Certificate of Incorporation and bylaws provide for
indemnification of officers and directors at our expense and limit
their liability, resulting in a high cost to us and hurting our
shareholders’ interests. The Company may spend corporate resources
for the benefit of officers and directors.
Our
Certificate of Incorporation and Bylaws include provisions that
eliminate the personal liability of our directors for monetary
damages to the fullest extent possible under the laws of the State
of Nevada or other applicable law. These provisions eliminate the
liability of our directors and our shareholders for monetary
damages arising out of any violation of a director of his fiduciary
duty of due care. Under Nevada law, however, such provisions do not
eliminate the personal liability of a director for (i) breach of
the director’s duty of loyalty, (ii) acts or omissions not in good
faith or involving intentional misconduct or knowing violation of
law, (iii) payment of dividends or repurchases of stock other than
from lawfully available funds, or (iv) any transaction from which
the director derived an improper benefit. These provisions do not
affect a director’s liabilities under the federal securities laws
or the recovery of damages by third parties.
If we fail to establish and maintain an effective internal
control system, we may be unable to report our financial results
accurately or prevent fraud. Any ability to report and file our
financial results accurately and timely could harm our reputation
and adversely impact the future trading price of our common
stock.
Effective internal control is necessary for us to provide reliable
financial reports and prevent fraud. If we cannot provide reliable
financial reports or prevent fraud, we may not be able to manage
our business as effectively. As a result, it may harm our business
and reputation. Our small size and any current internal control
deficiencies may adversely affect our financial condition,
operation results, and access to capital.
Because of the Company’s limited resources, there are limited
controls over information processing. There is inadequate
segregation of duties consistent with control objectives. Our
Company’s Management is composed of a small number of individuals,
resulting in limitations on segregation of duties. To remedy this
situation, we would need to hire additional staff. Currently, the
Company cannot hire other staff to facilitate greater segregation
of duties but will reassess its capabilities after completing the
Offering.
We may need and may be unable to obtain additional funding on
satisfactory terms, which could dilute our stockholders or impose
burdensome financial restrictions on our business.
We
have relied upon cash from financing activities, and in the future,
we intend to rely on revenues generated from operations to fund all
the cash requirements of our activities. There is no assurance that
we will generate any significant cash from our operating activities
in the future. Any debt financing or financing of involving our
common stock will likely include financial and other covenants that
will restrict our flexibility. At a minimum, these covenants may
include restrictions that may impact the number of authorized
shares we are required to maintain in order obtain such financing,
or our ability to conduct other forms of financing at different
terms. Any failure to
25
comply with these covenants would have
a material adverse effect on our business, prospects, financial
condition, and results of operations because we could lose our
existing sources of funding and impair our ability to secure new
sources of financing.
As an “emerging growth company” under the jobs act permits us
to rely on exemptions from certain disclosure
requirements.
We
qualify as an “emerging growth company” under the JOBS Act. As a
result, we are permitted to and intend to rely on exemptions from
certain disclosure requirements. For so long as we are an emerging
growth company, we will not be required to:
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an auditor report on our internal controls over financial reporting
pursuant to Section 404(b) of the Sarbanes-Oxley Act;
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provide an auditor attestation concerning Management’s report on
the effectiveness of our internal controls over financial
reporting;
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comply with any requirement that the Public Company Accounting
Oversight Board may adopt regarding mandatory audit firm rotation
or a supplement to the auditor’s report providing additional
information about the audit and the financial statements (i.e., an
auditor discussion and analysis);
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submit certain executive compensation matters to shareholder
advisory votes, such as “say-on-pay” and “say-on-frequency;”
and
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disclose certain executive compensation-related items such as the
correlation between executive compensation and performance and
comparisons of the Chief Executive’s compensation to median
employee compensation.
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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 for complying with new or revised accounting standards. In
other words, an emerging growth company can delay the adoption of
certain accounting standards until those standards would otherwise
apply to private companies. We have elected to take advantage of
the benefits of this extended transition period. Therefore, our
financial statements may not be comparable to those of companies
that comply with such new or revised accounting standards.
We
will 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 total annual gross revenues is $1.07 billion, (ii) the
date that we become a “large accelerated filer” as defined in Rule
12b-2 under the Securities Exchange Act of 1934, which would occur
if the market value of our ordinary shares that are held by
non-affiliates is $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.
Until
such time, however, we cannot predict if investors will find our
common stock less attractive because we may rely on these
exemptions. If some investors find our common stock less
attractive, there may be a less active trading market for our
common stock, and our stock price may be more volatile.
RISKS RELATING TO OUR COMMON STOCK AND THIS OFFERING
There is limited liquidity for our common stock, and we may
not be successful in obtaining a quotation on a recognized
quotation service. In such an event, it may be difficult to sell
your shares.
Our
common stock is currently quoted for public trading on the OTC
Markets Pink Tier. The trading price of our common stock has been
subject to wide fluctuations. Trading prices of our common stock
may fluctuate in response to many factors, many of which will be
beyond our control. The stock market has generally experienced
extreme price and volume fluctuations that have often been
unrelated or disproportionate to the operating performance of
companies with no current business operation. There can be no
assurance that trading prices and price-earnings ratios previously
experienced by our common stock will be matched or maintained.
These broad market and industry factors may adversely affect the
market price of our common stock, regardless of our operating
performance. In the past, following periods of volatility in the
market price of a company’s securities, securities class-action
litigation has often been instituted. Such litigation, if
instituted, could result in substantial costs for us and a
diversion of Management’s attention and resources.
Our common stock will be subject to the “penny stock” rules
of the Securities and Exchange Commission. The trading market in
our securities may be limited, which makes transactions in our
stock cumbersome and may reduce the value of an investment in our
stock.
Under
U.S. federal securities legislation, our common stock will
constitute “penny stock.” Penny stock is any equity security with a
market price of less than $5.00 per share, subject to certain
exceptions. For any transaction involving a penny stock, unless
exempt, the rules require that a broker or dealer approve a
potential investor’s account for transactions in penny stocks. The
broker or dealer receives a written agreement to the transaction
from the investor, setting forth the identity and quantity of the
penny stock to be purchased. To
26
approve an investor’s account for
transactions in penny stocks, the broker or dealer must obtain
financial information and investment experience objectives of the
person and make a reasonable determination that the transactions in
penny stocks are suitable for that person. The person has
sufficient knowledge and experience in financial matters to
evaluate the risks of penny-stock transactions. Before any
transaction in a penny stock, the broker or dealer must also
deliver a disclosure schedule prepared by the Commission relating
to the penny stock market, which, in highlight form, sets forth the
basis on which the broker or dealer made the suitability
determination. Brokers may be less willing to execute transactions
in securities subject to the “penny stock” rules. This may make it
more difficult for investors to dispose of our common stock and
cause a decline in the market value of our stock. The disclosure
also must be made about the risks of investing in penny stocks in
both public offerings and secondary trading and about the
commissions payable to both the broker-dealer and the registered
representative, current quotations for the securities, and the
rights and remedies available to an investor in cases of fraud in
penny stock transactions. Finally, monthly statements must be sent
disclosing recent price information for the penny stock held in the
account and information on the limited market in penny
stocks.
FINRA sales practice requirements may also limit a
stockholder’s ability to buy and sell our stock.
In
addition to the “penny stock” rules described above, the Financial
Industry Regulatory Authority (known as “FINRA”) has adopted rules
that require that in recommending an investment to a customer, a
broker-dealer must have reasonable grounds for believing that the
investment is suitable for that customer. Before recommending
speculative low-priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain
information about the customer’s financial status, tax status,
investment objectives, and other information. Under interpretations
of these rules, FINRA believes that there is a high probability
that speculative low-priced securities will not be suitable for at
least some customers. FINRA requirements make it more difficult for
broker-dealers to recommend that their customers buy our common
shares, which may limit your ability to buy and sell our stock and
harm the market for our shares.
Since our shares of Common Stock have low or thin liquidity,
it is more susceptible to extreme rises or declines in price, and
you may not be able to sell your shares at or above the price
paid.
Since
our shares of Common Stock have low or thin liquidity, its trading
price is likely to be highly volatile. It could be subject to
extreme fluctuations in response to various factors, many of which
are beyond our control, including (but not necessarily limited to):
the trading volume of our shares, the number of analysts,
market-makers, and brokers following our shares of Common Stock,
new products or services introduced or announced by our competitors
or us, actual or anticipated variations in quarterly operating
results, conditions or trends in our business industries, additions
or departures of key personnel, sales of our shares of Common Stock
and general stock market price and volume fluctuations of publicly
traded, and particularly microcap, companies.
Investors may have difficulty reselling shares of our Common Stock,
either at or above the price they paid for our stock or even at
fair market value. The stock markets often experience significant
price and volume changes that are not related to the operating
performance of individual companies, and because our shares of
Common Stock have low or tin liquidity, it is particularly
susceptible to such changes. These broad market changes may cause
the market price of our shares of Common Stock to decline
regardless of how well we perform as a company. In addition, there
is a history of securities class action litigation following
periods of volatility in the market price of a company’s
securities. Although there is no such litigation currently pending
or threatened against us, such a suit against us could result in
the incursion of substantial legal fees, potential liabilities, and
the diversion of Management’s attention and resources from our
business. Moreover, as noted below, our shares are currently traded
on the OTC Markets Pink Tier and are subject to the penny stock
regulations. Price fluctuations in such shares are particularly
volatile and subject to potential manipulation by market-makers,
short-sellers, and options traders.
We may, in the future, issue additional common shares, which
would reduce investors’ percent of ownership and may dilute our
share value.
Our
Articles of Incorporation authorize the issuance of 2,000,000,000
shares of common stock. As of April 18, 2022, the Company had
659,323 ,911 shares of common stock outstanding. Accordingly, we
may issue and sell up to an additional 80,526,056 shares of common
stock pursuant to the Common Stock Purchase Agreement. The future
issuance of common stock may result in substantial dilution in the
percentage of our common stock held by our then existing
shareholders. We may value any common stock in the future on an
arbitrary basis. The issuance of common stock for future services
or acquisitions or other corporate actions may have the effect of
diluting the value of the shares held by our investors and might
harm any trading market for our common stock.
Our issuance of
Drawdown Notices to Dutchess could result in
significant dilution and a material reduction
of the market price of our common stock.
We
expect that significant additional capital will be needed in the
future to continue our planned operations, including research and
development, increased marketing, hiring new personnel,
commercializing our products, and continuing activities as an
operating public company. Dutchess may immediately sell the common
stock it purchases from us pursuant to this registration statement
and our issuance
27
of Drawdown Notices and as a result,
investors may be materially diluted by subsequent Dutchess sales.
Such sales may also result in a lessening of the market value of
our common stock.
The sale of our stock could encourage short sales by third
parties, contributing to the future decline of our stock
price.
In
many circumstances, the provision of financing based on the
distribution of equity for companies traded on the OTC Markets can
cause significant downward pressure on the common stock price. It
is especially the case if the shares being placed into the market
exceed the market’s ability to take up the increased stock or if we
have not performed in such a manner to show that the equity funds
raised will be used to grow our business. Such an event could place
further downward pressure on the price of our common stock.
Regardless of our activities, the opportunity exists for short
sellers and others to contribute to the future decline of our stock
price. If there are significant short sales of our common stock,
the price decline from this activity will cause the share price to
decline more, which may cause other stockholders of the stock to
sell their shares, thereby contributing to sales of common stock in
the market. If there are many more shares of our common stock on
the market for sale than the market will absorb, the price of our
common shares will likely decline.
We are not likely to issue dividends for the foreseeable
future.
We
cannot assure you that our proposed operations will result in
adequate revenues to enable profitable operations or to generate
positive cash flow. For the foreseeable future, we anticipate that
we will use any funds available to finance the growth of the
Company and that we will not pay cash dividends to stockholders.
Unless we pay cash dividends, our stockholders will not receive a
return on their shares unless they sell them. There is no assurance
that stockholders will be able to sell shares when desired.
Dutchess will pay less than the then-prevailing market price
for our common stock.
Upon
our decision to issue a Drawdown Notice to Dutchess, which is at
our sole discretion, Dutchess’ purchase of our common stock will be
ninety-two percent (92%) of the lowest traded price of the Common
Stock the five (5) Business Day prior to the Closing Date of each
Drawdown Notice per the Common Stock Purchase Agreement dated
September 21, 2021. Dutchess has a financial incentive to
immediately sell our common stock upon receiving the shares to
realize the profit equal to the difference between the discounted
and market prices. If Dutchess sells the shares, the price of our
common stock could decrease. If our stock price decreases, Dutchess
may have a further incentive to sell the shares of our common stock
that it holds. These sales may have an additional impact on our
stock price.
Your ownership interest may be diluted, and the value of our
common stock may decline by our exercising the Drawdown Notice
right according to the Common Stock Purchase Agreement with
Dutchess.
Pursuant to the Common Stock Purchase Agreement with Dutchess, when
we deem it necessary, we may raise capital through the private sale
of our common stock to Dutchess at a discounted price. Because the
Drawdown Notice price is lower than the prevailing market price of
our common stock, to the extent Dutchess exercises the right in the
Drawdown Notice, the ownership interest of shareholders may get
diluted.
We may not have access to the total amount available under
the Common Stock Purchase Agreement with Dutchess.
Our
ability to draw down funds and sell shares under the Common Stock
Purchase Agreement with Dutchess requires that the registration
statement of which this Prospectus forms a part be declared
effective and continue to be effective. The registration statement
of which this Prospectus includes the resale of 80,526,056 shares
issuable under the Common Stock Purchase Agreement with Dutchess,
and our ability to sell any remaining shares issuable under the
Common Stock Purchase Agreement with Dutchess is subject to our
ability to prepare and file one or more additional registration
statements registering the resale of these shares. These
registration statements may be subject to review and comment by the
Securities and Exchange Commission staff. They will require the
consent of our independent registered public accounting firm.
Therefore, we cannot assure the timing of the effectiveness of the
registration statements. The effectiveness of these registration
statements is a condition precedent to our exercising discretion to
issue Drawdown Notices and sell shares of our common stock to
Dutchess under the Common Stock Purchase Agreement. Even if we are
successful in causing one or more registration statements to be
effective by the Securities and Exchange Commission on time,
resulting in the registering some or all of the shares issuable
under the Common Stock Purchase Agreement with Dutchess, we may not
be able to sell the shares unless certain other conditions are met,
such as having an adequate number of authorized shares to issue.
Any increase in our authorized shares would board and stockholder
approval. Accordingly, because our ability to draw down any amounts
under the Common Stock Purchase Agreement with Dutchess are subject
to many conditions outside of the Investor’s control there is no
guarantee that we will draw down any portion or all of the proceeds
of $10,000,000 under the investment with Dutchess.
28
Certain restrictions on the extent of puts and the delivery
of advance notices may have little, if any, effect on the adverse
impact of our issuance of shares in connection with the Common
Stock Purchase Agreement with Dutchess. As such, Dutchess may sell
many shares, resulting in substantial dilution to the value of
shares held by existing stockholders.
Dutchess has agreed, subject to certain exceptions listed in the
Common Stock Purchase Agreement, to refrain from holding shares,
resulting in Dutchess or its affiliates owning more than 4.99% of
the then-outstanding shares of our common stock at any one time.
Our issuance of a drawdown notice shall not include an amount of
shares that would result in Dutchess exceeding the Beneficial
Ownership Limitation at any time. These restrictions, however, do
not prevent Dutchess from selling shares of our common stock
received in connection with a Drawdown Notice and then acquiring
additional shares of our common stock in connection with a
subsequent Drawdown Notice. In this way, Dutchess could sell more
than 4.99% of the outstanding common stock in a relatively short
time frame while never holding more than 4.99% at one time. If we
issue a Drawdown Notice to Dutchess, Dutchess’ purchase and
subsequent sales could result in dilution and a corresponding
lessening of the value of our common stock (See Risk Factors &
Dilution).
USE OF PROCEEDS
We
will not receive any proceeds from the secondary sale of shares of
our common stock by Dutchess. However, we will receive proceeds
from the initial sale of shares of our common stock according to
our decision to exercise Drawdown Notices offered by Dutchess. We
will use these proceeds for general corporate and working capital
purposes and acquisitions or assets, software development,
businesses, or operations, or for other purposes that our board of
directors, in its good faith, deems to be in the Company’s best
interest.
|
|
|
One-third of investment commitment
|
|
|
Two-third of investment commitment
|
|
|
One
Hundred percent (100%) of investment commitment
|
|
|
Net proceeds from
the offering (1) (2)
|
|
$
|
3,333,333.00
|
|
|
$
|
6,666,666.00
|
|
|
$
|
10,000,000.00
|
|
|
Product Development,
Sales & Marketing
|
|
|
1,450,767.00
|
|
|
|
2,005,265.00
|
|
|
|
3,648,000.00
|
|
|
Corporate Development
|
|
|
403,061.00
|
|
|
|
1,816,358.00
|
|
|
|
1,321,675.00
|
|
|
Fixed
Assets
|
|
|
400,000.00
|
|
|
|
1,400,000.00
|
|
|
|
2,870,325.00
|
|
|
Working Capital
|
|
|
1,079,505.00
|
|
|
$
|
1,445,043.00
|
|
|
$
|
2,160,000.00
|
|
|
Total
|
|
$
|
3,333,333.00
|
|
|
$
|
6,666,666.00
|
|
|
$
|
10,000,000.00
|
|
(1) Expenditures for the 12 months following the
completion of this offering. We have categorized the expenditures
by significant area of activity. Please see a detailed description
of the use of proceeds in the “Plan of Operations” section of this
Prospectus.
(2) Excludes estimated offering expenses of
$21,194.08.
The
Company may change the use of proceeds if it feels it is in the
best interest of the shareholders to use the proceeds to discharge
indebtedness relevant to the Company’s business. We will pay for
expenses of this offering, except that the selling stockholder will
pay any broker discounts or commissions or equivalent costs and
costs of its legal counsel applicable to the sale of its
shares.
DETERMINATION OF
OFFERING PRICE
The prices at which
the shares covered by this Prospectus may actually be sold by
Dutchess will be determined by the prevailing public market price
for shares of our common stock, or as otherwise described in the
“Plan of Distribution.”
DILUTION
The
sale of our common stock to Dutchess following the Common Stock
Purchase Agreement dated September 21, 2021, may negatively impact
our stockholders. As a result, our net loss per share could
increase in future periods, and the market price of our common
stock could decline. In addition, the lower our stock price is when
we exercise our Drawdown Notice, the more shares of our common
stock we will have to issue to Dutchess to drawdown according to
the Common Stock Purchase Agreement. If our stock price decreases
during the pricing period, then our existing stockholders would
experience more significant dilution.
Dilution represents the difference between the offering price and
the net tangible book value per share immediately after completion
of this offering. Net tangible book value is the amount that
results from subtracting total liabilities and intangible assets
from total assets. Dilution arises mainly because of our arbitrary
determination of the offering price of the shares being offered.
Dilution of the value of the shares you purchase is also a result
of our existing stockholders’ lower book value.
29
THE OFFERING
THE PRIVATE
PLACEMENT TRANSACTION
On
September 21, 2021, we entered into a binding Common Stock Purchase
Agreement with Dutchess, a Delaware limited partnership. Pursuant
to the Common Stock Purchase Agreement terms, Dutchess committed to
purchasing up to $10,000,000 of our common stock until September
21, 2024. We also agreed to issue to Dutchess five million shares
of restricted common stock as commitment shares. From time to time,
after the effectiveness of the registration statement, we may
elect, in our sole discretion, to deliver a Drawdown Notice to
Dutchess. The number of shares subject to any Drawdown Notice shall
not exceed the lesser of; (i) $250,000 or (ii) 200% of the Average
Daily Traded Value of the Stock during the five (5) days
immediately preceding the Drawdown Notice date or (iii) the
Beneficial Ownership Limitation of 4.99% of the number of shares of
the Common Stock outstanding immediately prior to the issuance of
shares of Common Stock issuable pursuant to a Drawdown Notice. Our
issuance of a drawdown notice shall not include an amount of shares
that would result in Dutchess exceeding the Beneficial Ownership
Limitation at any time. The sale price of the Shares sold to
Dutchess pursuant to any Drawdown Notice is ninety-two percent
(92%) of the lowest traded price of the Common Stock the five (5)
Business Day prior to the Closing Date of each Drawdown Notice. If
we issue a Drawdown Notice to Dutchess, Dutchess’ purchase and
subsequent sales could result in dilution and a corresponding
lessening of the value of our common stock (See Risk Factors &
Dilution).
In
the event of a material breach of contract, we may terminate the
common stock purchase agreement with Dutchess. Otherwise, the
common stock purchase agreement will terminate after our sale and
Dutchess’ purchase of all of the commitment amount, when the
registration is no longer effective, or if we or a third party
commences a bankruptcy petition against the Company, or if a
custodian is appointed for the Company or if we make a general
assignment of all our property for the benefit of our
creditors.
In
connection with the Common Stock Purchase Agreement with Dutchess,
we also entered into a registration rights agreement with Dutchess,
as amended, pursuant to which we agreed to use our best efforts to,
to file with the Securities and Exchange Commission a registration
statement, covering the resale of 80,526,056 shares of our common
stock underlying the Common Stock Purchase Agreement with Dutchess.
The 80,526,056 shares being offered pursuant to the Common Stock
Purchase Agreement with Dutchess represents 12.53% of the shares
issued and outstanding, assuming that the selling stockholders will
sell all of the shares offered for sale. The 80,526,056 shares
being offered pursuant to this Prospectus represent 34.98% of the
shares issued and outstanding held by non-affiliates of our
company. The Common Stock Purchase Agreement with Dutchess is not
transferable, and any benefits attached thereto may not be
assigned.
At an
assumed purchase price under the Common Stock Purchase Agreement of
$0.024 (equal to 92% of the closing price of our common stock of
$0.026 on January 10, 2022, we will be able to receive up to
$1,932,625 in gross proceeds, assuming we elect to sell the entire
80,526,056 Drawdown Notice Shares being registered hereunder to
Dutchess pursuant to the Common Stock Purchase Agreement. At an
assumed purchase price of $0.024 under the Common Stock Purchase
Agreement, we would be required to register 366,140,610 additional
shares to obtain the balance of $8,787,375 under the Common Stock
Purchase Agreement. Due to the floating offering price, we are
unable to determine the exact number of shares that we will issue
under the Common Stock Purchase Agreement.
There
are substantial risks to investors due to the issuance of shares of
our common stock under the Common Stock Purchase Agreement with
Dutchess. These risks include dilution of stockholders’ percentage
ownership, a significant decline in our stock price, and our
inability to draw sufficient funds when needed. We intend to sell
Dutchess periodically our common stock under the Common Stock
Purchase Agreement, and Dutchess will, in turn, sell such shares to
investors in the market at the market price. This may cause our
stock price to decline, which will require us to issue increasing
numbers of common shares to Dutchess to raise the same amount of
funds as our stock price declines.
The
aggregate investment amount of $10,000,000 was determined based on
numerous factors, including the following: The proceeds received
from any Drawdown Notices tendered to Dutchess under the Common
Stock Purchase Agreement will be used for general corporate,
product development, sales and marketing, working capital purposes
and acquisitions or assets, businesses or operations or for other
purposes that our board of directors, in its good faith deem to be
in the best interest of the Company. The Company may change the use
of proceeds if it feels it is in the best interest of the
shareholders to use the proceeds to carry out its strategic
business plans.
We
may have to increase our authorized shares to issue the shares to
Dutchess if we reach our current authorized shares of common stock.
Increasing the number of our authorized shares will require board
and stockholder approval. There is no guarantee that we will be
able to draw down any portion or all of the proceeds of $10,000,000
under the Common Stock Purchase Agreement with Dutchess because our
ability to draw down any amounts under the Common Stock Purchase
Agreement with Dutchess is subject to many conditions.
30
SELLING STOCKHOLDERS
This
Prospectus relates to the resale of 80,526,056 shares of our common
stock, par value $0.001 per share, which are issuable to Dutchess
Capital Growth Fund, LP (“Dutchess”).
Pursuant to the Common Stock Purchase Agreement, and after the
effectiveness of this Registration Statement, we have the option,
but not the obligation, to issue Dutchess a Drawdown Notice to
purchase our registered shares. The number of shares subject to any
Drawdown Notice shall not exceed the lesser of; (i) $250,000 or
(ii) 200% of the Average Daily Traded Value of the Stock during the
five (5) days immediately preceding the Drawdown Notice date or
(iii) the Beneficial Ownership Limitation of 4.99% of the number of
shares of the Common Stock outstanding immediately prior to the
issuance of shares of Common Stock issuable pursuant to a Drawdown
Notice. Our issuance of a drawdown notice shall not include a
number of shares that would result in Dutchess exceeding the
Beneficial Ownership Limitation at any time. The sale price of the
Shares sold to Dutchess pursuant to any Drawdown Notice is
ninety-two percent (92%) of the lowest traded price of the Common
Stock the five (5) Business Day prior to the Closing Date of each
Drawdown Notice. If we issue a Drawdown Notice to Dutchess,
Dutchess’ purchase and subsequent sales could result in dilution
and a corresponding lessening of the value of our common stock (See
Risk Factors & Dilution).
The
Common Stock Purchase Agreement permits us to issue Drawdown
Notices to Dutchess for an aggregate of ten million dollars
($10,000,000) in shares of our common stock until (i) the date
Dutchess may sell all of the Shares without restriction pursuant to
Rule 144 promulgated under the Securities Act, or (ii) the date on
which Dutchess shall have sold all the Shares covered thereby, and
no available amount remains under the Common Stock Purchase
Agreement, or until $10,000,000 of such shares have been subject to
a Drawdown Notice.
We
expect that Dutchess will offer and sell any or all of the shares
of our common stock upon our issuance of a Drawdown Notice (See
Risk Factors & Dilution),
The
following table sets forth certain information regarding the
beneficial ownership of shares of common stock by the selling
stockholder as of January 10, 2022, and the number of shares of our
common stock being offered according to this Prospectus. We believe
that the selling stockholder has sole voting and investment powers
over its shares. Because we expect that Dutchess will offer and
sell all or only some portion of the shares of our common stock
purchased as a result of our issuance of a Drawdown Notice, the
numbers in the table below representing the amount and percentage
of these shares of our common stock that Dutchess will hold upon
the termination of the offering are only estimates based on the
assumption that Dutchess will sell all of its shares of our common
stock being offered in the offering.
The
selling stockholders have not had any position or office, or other
material relationship with us or any of our affiliates over the
past three years. To our knowledge, the selling stockholders are
not a broker-dealer or an affiliate of a broker-dealer. We may
require the selling stockholders to suspend the sales of the shares
of our common stock being offered pursuant to this Prospectus upon
the occurrence of any event that makes any statement in this
Prospectus, or the related registration statement untrue in any
material respect or that requires the changing of statements in
those documents to make statements in those documents not
misleading.
|
|
|
Shares
Owned by the
Selling
Stockholder
|
|
|
Total
Shares
|
|
|
Number of Shares to
Be
Owned by
Selling
Stockholder After
the
Offering and Percent
of
Total Issued
and
Outstanding
Shares (1)
|
|
|
Name of the Selling Stockholder
|
|
before the
Offering (1)
|
|
|
Offered in
the
Offering
|
|
|
#
of
Shares (2)
|
|
|
%
of
Class (2), (3)
|
|
|
Dutchess Capital
Growth Fund, LP (4)
|
|
$
|
0
|
|
|
|
80,526,056
|
|
|
|
80,526,056
|
|
|
|
10.74
|
%
|
(1) Beneficial ownership is determined in accordance
with Securities and Exchange Commission rules and generally
includes voting or investment power with respect to shares of
common stock. Shares of common stock subject to options and
warrants currently exercisable, or exercisable within 60 days, are
counted as outstanding for computing the percentage of the person
holding such options or warrants but are not counted as outstanding
for computing the percentage of any other person.
(2) We have assumed for the purposes of this tabular
disclosure that the selling stockholder will sell all of the shares
being offered in offering represented in this Prospectus.
(3) Based on 749,323,911 shares of our common stock
issued and outstanding as of January 10, 2022, including the total
number shares being offered pursuant to this Prospectus, which are
counted as outstanding for computing the percentage of the selling
stockholder.
(4) Michael Novielli has the voting and dispositive
power over the shares owned by Dutchess.
31
PLAN OF DISTRIBUTION
Pursuant to the Common Stock Purchase Agreement with Dutchess, and
after the effectiveness of this Registration Statement, we have the
option, but not the obligation, to issue Dutchess a Drawdown Notice
to purchase our registered shares. The number of shares subject to
any Drawdown Notice shall not exceed the lesser of; (i) $250,000 or
(ii) 200% of the Average Daily Traded Value of the Stock during the
five (5) days immediately preceding the Drawdown Notice date or
(iii) the Beneficial Ownership Limitation of 4.99% of the number of
shares of the Common Stock outstanding immediately prior to the
issuance of shares of Common Stock issuable pursuant to a Drawdown
Notice. Our issuance of a drawdown notice shall not include an
amount of shares that would result in Dutchess exceeding the
Beneficial Ownership Limitation at any time. The sale price of the
Shares sold to Dutchess pursuant to any Drawdown Notice is
ninety-two percent (92%) of the lowest traded price of the Common
Stock the five (5) Business Day prior to the Closing Date of each
Drawdown Notice. . If we issue a Drawdown Notice to Dutchess,
Dutchess’ purchase and subsequent sales could result in dilution
and a corresponding lessening of the value of our common stock (See
Risk Factors & Dilution).
The
Common Stock Purchase Agreement permits us to issue Drawdown
Notices to Dutchess for an aggregate of ten million dollars
($10,000,000) in shares of our common stock until (i) the date
Dutchess may sell all of the Shares without restriction pursuant to
Rule 144 promulgated under the Securities Act, or (ii) the date on
which Dutchess shall have sold all the Shares covered thereby, and
no available amount remains under the Common Stock Purchase
Agreement, or until $10,000,000 of such shares have been subject to
a Drawdown Notice.
The
Common Stock Purchase Agreement with Dutchess is not
transferable.
At an
assumed purchase price under the Common Stock Purchase Agreement of
$0.024 (equal to 92% of the closing price of our common stock of
$0.026 on January 10, 2022, we will be able to receive up to
$1,932,625 in gross proceeds, assuming we elect to sell the entire
80,526,056 Drawdown Notice Shares being registered hereunder to
Dutchess pursuant to the Common Stock Purchase Agreement. At an
assumed purchase price of $0.024 under the Common Stock Purchase
Agreement, we would be required to register 366,140,610 additional
shares to obtain the balance of $8,787,375 under the Common Stock
Purchase Agreement. Due to the floating offering price, we are
unable to determine the exact number of shares that we will issue
under the Common Stock Purchase Agreement.
From
time to time, Dutchess may sell any or all of the shares of our
common stock covered hereby on the OTC Markets or any other stock
exchange, market, or trading facility on which the shares are
traded or in private transactions. Dutchess may sell all or a
portion of the shares being offered pursuant to this Prospectus at
a fixed price, or within a specified, bona fide price range until
our shares are listed or quoted on an existing public trading
market. Dutchess may use any one or more of the following methods
when selling securities:
|
|
●
|
ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
|
|
|
|
|
|
|
●
|
block
trades in which the broker-dealer will attempt to sell the shares
as an agent but may position and resell a portion of the block as
principal to facilitate the transaction;
|
|
|
|
|
|
|
●
|
purchases by a broker-dealer as principal and resale by the
broker-dealer for its account;
|
|
|
|
|
|
|
●
|
an
exchange distribution following the rules of the applicable
exchange;
|
|
|
|
|
|
|
●
|
privately negotiated transactions;
|
|
|
|
|
|
|
●
|
in
transactions through broker-dealers that agree with the selling
stockholder to sell a specified number of such securities at a
stipulated price per security;
|
|
|
|
|
|
|
●
|
through the writing or settlement of options or other hedging
transactions, whether through an options exchange or otherwise;
|
|
|
|
|
|
|
●
|
a
combination of any such methods of sale; or
|
|
|
|
|
|
|
●
|
any
other method permitted pursuant to applicable law.
|
Broker-dealers engaged by Dutchess may arrange for other
broker-dealers to participate in sales. Broker-dealers may receive
commissions or discounts from Dutchess (or, if any broker-dealer
acts as agent for the purchaser of securities, from the purchaser)
in amounts to be negotiated, but except as outlined in a supplement
to this Prospectus, in the case of an agency transaction not over a
customary brokerage commission in compliance with FINRA Rule 2440;
and in the case of a principal transaction a markup or markdown in
compliance with FINRA IM-2440.
32
Any
broker-dealers or agents involved in selling the shares may be
deemed to be “underwriters” within the meaning of the Securities
Act of 1933 in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed
to be underwriting commissions or discounts under the Securities
Act of 1933. We are required to pay certain fees and expenses
incurred by us incident to the registration of the securities. The
selling stockholder will be subject to the Prospectus delivery
requirements of the Securities Act of 1933, including Rule 172
thereunder.
Dutchess will sell the resale securities only through registered or
licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the resale
securities covered hereby may not be sold unless they have been
registered or qualified for sale in the applicable state or an
exemption from the registration or qualification requirement is
available and is complied with applicable laws.
Under
applicable rules and regulations under the Securities Exchange Act
of 1934, any person engaged in distributing the resale securities
may not simultaneously engage in market-making activities
concerning the common stock for the applicable restricted period,
as defined in Regulation M, before the commencement of the
distribution. Such prohibited activities include making
arrangements where purchasers are induced to purchase securities in
the form of agreements or solicitations of aftermarket bids or
purchases prior to the completion of a purchase of our common
shares related to a Drawdown Notice; solicitation for sales prior
to the completion of a purchase of our common shares related to a
Drawdown Notice; accepting or soliciting interest from customers
for purchases of shares in the aftermarket prior to the completion
of a purchase of our common shares resulting from a Drawdown Notice
in an amount linked to the initial purchase; and, soliciting
aftermarket orders before the completion of a purchase of our
common shares resulting from a Drawdown Notice or rewarding
customers for aftermarket orders by allocating additional
securities to those customers in the initial distribution. In
addition, the selling stockholder will be subject to applicable
provisions of the Securities Exchange Act of 1934 and the rules and
regulations thereunder, including Regulation M, which may limit the
timing of purchases and sales of securities of the common stock by
the selling stockholder or any other person. We will make copies of
this Prospectus available to the selling stockholders. We will
inform them of the need to deliver a copy of this Prospectus to
each purchaser at or before the time of the sale (including by
compliance with Rule 172 under the Securities Act of 1933).
DESCRIPTION OF
SECURITIES TO BE REGISTERED
General
The
Company is authorized to issue one class of shares of stock. The
total number of shares which the Company is authorized to issue is
two billion (2,000,000,000) shares of common stock, $.001 par
value. As of January 10, 2022, there were 749,323,911 shares of our
common stock issued and outstanding. As of January 10, 2022, we had
400 shareholders of record.
Common Stock
The
following is a summary of the material rights and restrictions
associated with our common stock. This description does not purport
to be a complete description of all the rights of our stockholders
and is subject to, and qualified in its entirety by, the provisions
of our most current Articles of Incorporation and Bylaws, which are
included as exhibits to this Registration Statement.
The
holders of our common stock currently have (i) equal ratable rights
to dividends from funds legally available, therefore, when, as and
if declared by the Board of Director of the Company; (ii) are
entitled to share ratably in all of the assets of the Company
available for distribution to holders of common stock upon
liquidation, dissolution or winding up of the affairs of the
Company (iii) do not have pre-emptive, subscription or conversion
rights and there are no redemption or sinking fund provisions or
rights applicable thereto; and (iv) are entitled to one
non-cumulative vote per share on all matters on which stockholders
may vote.
Our
Bylaws provide that at all meetings of the stockholders for the
election of directors, a plurality of the votes cast shall be
sufficient to elect. On all other matters, except as otherwise
required by Nevada law or the Articles of Incorporation, a majority
of the votes cast at a meeting of the stockholders shall be
necessary to authorize any corporate action to be taken by vote of
the stockholders. A “plurality” means the excess of the votes cast
for one candidate over any other. When there are more than two
competitors for the same office, the person who receives the
greatest number of votes has a plurality.
EXPERTS AND COUNSEL
The
financial statements of our company included in this Prospectus for
the fiscal years ended June 30, 2021 and June 30, 2020, have been
audited by Weinstein International CPA, and are included in
reliance upon such report given upon the authority of said firm as
experts in auditing and accounting.
Mailander Law Office, Inc. will render a legal opinion as to the
validity of the shares of the Common Stock to be registered
hereby.
33
INTERESTS OF NAMED
EXPERTS AND COUNSEL
No expert named in the registration statement of which this
Prospectus forms a part as having prepared or certified any part
thereof (or is named as having prepared or certified a report or
valuation for use in connection with such registration statement)
or counsel named in this Prospectus as having given an opinion upon
the validity of the securities being offered pursuant to this
Prospectus, or upon other legal matters in connection with the
registration or offering such securities was employed for such
purpose on a contingency basis. Also, at the time of such
preparation, certification, or opinion or at any time thereafter,
through the date of effectiveness of such registration statement or
that part of such registration statement to which such preparation,
certification or opinion relates, no such person had, or is to
receive, in connection with the offering, a substantial interest,
as defined in Item 509 of Regulation SK, in our company or any of
its parents or subsidiaries. Nor was any such person connected with
our company or any of its parents or subsidiaries as a promoter,
managing or principal underwriter or voting trustee.
34
INFORMATION WITH
RESPECT TO OUR COMPANY
DESCRIPTION OF
BUSINESS
General
Development of the Business
Kronos Advanced Technologies, Inc. (“Kronos” or the “Company”) was
originally incorporated under the laws of the State of Utah on
September 17, 1980, as Penguin Petroleum, Inc. Penguin
Petroleum Inc.'s stockholders approved a name change on October 6,
1982, to Petroleum Corporation of America, Inc. On December 29,
1996, stockholders approved a reorganization whereby they exchanged
their stock on a one-for-one basis with Technology Selection, Inc.,
a Nevada corporation. Technology Selection, Inc.'s shares
began trading on the Over-the-Counter Bulletin Board on August 28,
1996, under the symbol "TSET”. On November 19, 1998,
Technology Selection, Inc. changed its name to TSET, Inc.
Effective January 12, 2002, we began doing business as Kronos
Advanced Technologies, Inc.; and, as of January 18, 2002, we
changed our ticker symbol to “KNOS”.
Kronos Advanced Technologies, Inc. (Kronos) was initially founded
in 2002 with the primary business focus of designing and developing
air movers. Over time Kronos migrated its business to focus on the
consumer air cleaner business. Kronos began this stage of
operations as a product development company whose designs
introduced new technologies that significantly changed the way air
was moved, filtered, and cleansed. Our current air cleaner products
use collection plates, located internally which are easily cleaned
and long-lasting, unlike some of our competitors' designs, which
require the replacement of less efficient and costly HEPA filters
multiple times a year.
Business Overview
HEPA
filters used in most consumer air cleaners are designed to trap
pollutants such as pollen and dust. Unfortunately, based on this
very design, over time, the "collection process" creates a clogged
filter, and as such, HEPA air purifiers will stop working if the
filter isn't changed regularly. This clogging action can also
result in pollutants that were once trapped and collected migrating
through the filter elements and escaping back into the air.
Further, when the air temperature is warm and contains high
humidity, mold and bacteria can grow on a HEPA filter, causing foul
odors and potentially hazardous waste to be emitted back into the
room. Kronos's ultra-efficient air purification module, with its
washable collector plates, solves this problem by offering to the
consumer an easy-clean system that is both safe and effective,
allowing the collector plates to be cleansed by a simple handwash
with detergent and warm water, or simply put it in the dishwasher
to clean.
Our
products feature a five-stage air purification process which starts
at the bottom of the unit, where air is taken into the device and a
pre-filter screen designed to collect large particulates, such as
hair, pollen, and pet dander. The second stage forces air to pass
through an array of electric emitter wires that kills bacteria and
germs. The third stage forces the air through an ionic field
consisting of negative ions that latch on to particles in the air,
giving them an electrical charge. The electrical charge causes
particles to clump together and become heavy. As the particulates
move to the fourth stage, they are collected onto a plate. At the
last stage – the Catalyst Stage – the purified air is
freshened to remove any odors. The following diagram illustrates
our process:
Today, Kronos’ product research and development produce products
that move the air silently, have excellent filtering and
purification capabilities, and in general, cleans ambient room air
while offering reduced energy consumption. They are available in a
smaller footprint to provide unequaled air cleaning in cars.
Larger units are available for consumer home use, for
business use, or even in extreme industrial applications requiring
the destruction of certain hazardous gases. Our technology has the
ability to remove contaminants and allergens down to 14.6
nanometers which is 20 times smaller than HEPA filters – a
market advantage.
35
We
are also exploring the development of a series of small
multifunctional devices that can be used as space heaters,
vaporizers, disinfectors, deodorizers and/or fans. The space
heaters, vaporizers, disinfectors, deodorizers and/or fans have all
been conceptualized during our Research and Development efforts
over the past years. Each product varies in its respective level of
completion. For example, our space heater design is completed and
ready to go to manufacturing, our other products are still in the
developmental stage. All products are waiting on capital and should
be finalized as capital becomes available.
Plan of Operations
On June 17th, 2021, West Virginia Economic Development Authority
(WVEDA) approved in a meeting of its board of directors to grant
Kronos two loan offers with the aggregate principal amount not to
exceed $2,610,000. The loans are for the Company’s acquisition of
the manufacturing facility in West Virginia and for fixed
equipment. The loans contain repayment terms of 15 years and 10
years respectively. Interest rates for the two notes are as
follows:
Loan (1) $1,845,000: This loan shall bear interest fixed as of the
third business day prior to closing equal to the rate of the 20
Year US Treasury Note rate plus 0.75%. This loan has a floor
(minimum) interest rate of 2. 75% and shall be adjustable every
five years. The loan will be secured by a first lien deed of trust
on the project land, improvements, and appurtenances in the amount
of $1,845,000, and will be cross collateralized with Loan (2),
discussed below.
Loan (2) $765,000: This loan shall bear interest fixed as of the
third business day prior to closing equal to the rate of the Wall
Street Journal Prime rate multiplied by 0.75%. This loan has a
floor (minimum) interest rate of 2.75%. The loan will be
secured by a UCC-1 security filing on all assets of the Company and
will be cross collateralized with Loan (1).
On April 7, 2022, we completed all conditions precedent and the
loans closed by our purchase of fixed equipment, providing proofs
of hazard and flood insurance, title insurance and liability
insurance. We also installed all equipment and completed all
renovations at the facility, which resulted in the transfer of
title of the real estate to the Company from a "contract of sale"
to recorded ownership.
While we currently source parts and manufacturing from China, we
recently decided to eliminate our Company's current dependence on
the Chinese supply chain and transition Kronos to be a company
committed to manufacturing "Made in the USA Products" using our
West Virginia facility and a predominantly U.S. based supply chain.
As of the date of this filing, we are in transitioning and
preparing our West Virginia facility with a projected opening in
the first quarter of 2022.
We
believe our transition to United States suppliers and manufacturing
at our West Virginia facility will provide benefits to our
business. China is geographically distant from major US consumer
markets. Our parts suppliers and manufacturers in China have
experienced supply chain difficulties during the pandemic resulting
in greater lead times to produce and ship our products.
Additionally, in January 2021, tariffs and customs duties on our
products increased to 25%. As such, additional tariffs now apply to
almost all goods imported from China. All companies importing to
the US are affected by the new tariffs, including non-US companies
importing as a foreign importer of record. For many product
categories, it’s still not an option to simply shift orders to
suppliers in other Asian countries, as for most categories there
simply are no factories outside of China. As a result of shifting
our supply and manufacturing operations to the United States, we
can avoid these tariffs.
Our Products
Our
technology is currently offered in the form of multiple products
designed to move, sterilize, filter, and cleanse the air for
businesses, homes, vehicles, and even individuals themselves. On a
broader basis, the additional markets that could immediately be
impacted using standalone, embedded Kronos devices include schools,
universities, manufacturing clean-rooms, retail shops, hospitality,
personal automobiles, buses, taxis, and commercial aircraft
cabins.
Our
air cleaner products are targeted to the size of the space sought
to be cleansed. Our current product Kronos® Air 5G®, Models 3, 5
and 8 product line includes our devices that cleanse spaces
consisting of 300, 400, and 1,000 square feet respectively. We also
developed the FitAir™, a personal air cleaner device that cleans
personal air space in a small room consisting of 25 square feet or
less, perfect for a small office. Our personal air cleaner products
also include the Kronos Car Air Cleaner™ designed to sit securely
on the dashboard of cars, and the Kronosati Mini™, a wearable air
purifier that is worn on a lanyard and provides the wearer with
purified air around a personal breathing space.
Our
air cleaners are used in homes, schools, laboratories, and retail
spaces to remove allergens, airborne contaminants, and odor from
the air and maintain indoor air quality for people as well as
employees working in these facilities. Our product line consists of
the following:
36
Kronos® Air 5G®
The Kronos® Air 5G® models 3, 5 and 8 are all stand-alone air
cleaners used in residential and business spaces and all feature
our five-stage air cleaning process. The Model 3 cleans
approximately 200 square feet of space; the Model 5G® cleans 400
square feet of space; and the Model 8 cleans 1,000 square feet of
space.
Kronos Car
Air
Using
the same Kronos air purification technologies used in our Kronos®
Air Model 5G®, this unit is designed to sit securely on a car
dashboard and is powered through a DC 12V Car Charger.
Fit-Air
Bundle™
This device is
designed to be used in conjunction with a Kronos® designed face
mask to provide the user with personal air filtration and
purification within 2.5 cubic feet of personal space. The mask is
not a surgical mask nor one designed to provide antimicrobial or
antiviral protection. The product has not been FDA cleared or
approved and we do not claim that the Fit-Air Bundle™ mitigates,
treats, cures, or prevents disease.
37
Market and Competition
Kronos
expects growth in both the Global and the North American portable
air purifier market over the next seven-year period. This growth is
projected across the entire spectrum of room sized units, portable
automotive units, and also wearable devices. The market is expected
to be driven by rising airborne contaminants and increasing
pollution levels in urban areas. Moreover, growing health
consciousness, improving standards of living, and rising disposable
income are expected to fuel the market growth. The rising adoption
of air pollution control equipment, especially in developing
regions across the globe, is anticipated to drive the market in the
future. The rising awareness regarding a healthy lifestyle,
especially among the urban youth, is expected to significantly
contribute to the market growth. The filtering or air purification
process itself generally falls into four categories: HEPA Filters;
Activated Carbon Filters; Ion Generator based Filters; and
Electrostatic Precipitator based Filters. Currently, products using
HEPA filters are the consumers' primary choice, controlling
approximately 40% of the residential air purifier market. The other
three processes all share similar market share sizes of 18% -
22%.
The
primary competitors in the air purification market are well
established name brands using HEPA filters:
|
NAME
|
TECHNOLOGY
|
|
3M
|
HEPA
|
|
Carrier
|
HEPA
|
|
Honeywell
|
HEPA
|
|
LG
|
HEPA
|
|
Phillips
|
HEPA
|
|
Sharp
|
HEPA
|
|
Whirlpool
|
HEPA
|
Each
of these listed companies (and others) provides portable air
purifiers to the North American market. Of particular significance
is that even with the summation of such a diverse listing of
manufacturers and suppliers participating in the portable air
purifier market, no single entity, nor even a combined segment
representing the sales of the top 5 companies, have a dominant
market position. This market, through various market studies, is
quantified and recognized as a fragmented market. The fact that
such exponential growth is projected over the seven-year forecasted
period in such a highly fragmented market further supports Kronos'
business decision to introduce its advanced product platform on a
national scale, having superior air purification technologies for
use in both commercial and consumer settings.
Today,
the most significant sales and distribution channels for portable
air purifiers are the large box stores. This fact is attributed to
the variety of manufacturers and products being offered "firsthand"
to a customer base just beginning to understand the product
offerings. A recent Market Report for the forecasted period of
2019-2027 predicts a significantly growing market that will
continue to see gains in this well-established (big box)
distribution channel; however, per this report, the largest growth
of portable air purifiers will be attributed to online store sales.
In fact, on a global basis, online stores are expected to witness
the fastest growth, registering a CAGR of 13.22% during the
forecast period (2020-2027).
The
global air purifier market size was valued at USD 10.67 billion in
2020 and is expected to expand at a compound annual growth rate of
10.0% from 2021 to 2028.
38
Sales and Marketing
We
sell our products directly through our web site: https://1800safeair.com/,
through independent sales representative and through select retail
outlets. While we currently source components for our products in
an international supply chain, we recently decided to move
eliminate our Company's current dependence on today's Chinese
Supply Chain and instead transition Kronos to be a company
committed to manufacturing "Made in the USA Products" using our
West Virginia facility and a predominantly U.S. based supply chain.
We expect that our physical plant in West Virginia will be
completed in the first quarter of 2022 and expect that our parts
sourcing and manufacturing will develop apace after opening as we
transition from our Chinese supply chain to the United States.
Research and Development
We are
continuing our research and development into specific product
applications across two distinct product application platforms:
standalone devices and embedded applications. Standalone products
are self-contained and only require the user to plug the Kronos
device into a wall outlet to obtain air movement and filtration for
their home, office, or hotel room. Embedded applications of the
Kronos technology require the technology be added into another
system, such as abuilding ventilation system for more efficient air
movement and filtration or into an electrical device such as
computer or medical equipment to replace the cooling fan or heat
sink.
We are
also exploring the development of our products for usage in
healthcare settings. We are also researching the development of a
series of small multifunctional devices that can be used as space
heaters, vaporizers, disinfectors, deodorizers and/or fans. The
space heaters, vaporizers, disinfectors, deodorizers and/or fans
have all been conceptualized during our Research and Development
efforts over the past years. Each product varies in its respective
level of completion. For example, our space heater design is
completed and ready to go to manufacturing, our other products are
still in the developmental stage. All products are waiting on
capital and should be finalized as capital becomes available.
Intellectual
Property
Our
current patent portfolio consists of patents issued from 2003 to
2008, as follows:
|
Jurisdiction/Number
|
Type
|
Termination
Date
|
|
United States:
6,664,741 B1
|
Utility
|
December 16, 2023
|
|
United States:
6,727,657 B2
|
Utility
|
April 27, 2024
|
|
United States:
6,888,314 B2
|
Utility
|
May 3, 2025
|
|
United States:
6,937,455 B2
|
Utility
|
August 30, 2025
|
|
United States:
6,963,479 B2
|
Utility
|
November 8, 2025
|
|
United States:
7,053,565 B2
|
Utility
|
May 30, 2026
|
|
United States:
7,150,780 B2
|
Utility
|
December 19, 2026
|
|
United States:
7,122,070 B2
|
Utility
|
October 17, 2026
|
|
United States:
7,248,003 B2
|
Utility
|
July 24, 2027
|
|
United States:
7,262,654 B2
|
Utility
|
August 28, 2027
|
|
United States:
7,410,532 B2
|
Utility
|
August 12, 2028
|
|
United States:
6,504,308 B1
|
Utility
|
January 7, 2023
|
|
United States:
6,919,698 B2
|
Utility
|
July 19, 2025
|
|
United States:
7,157,704 B2
|
Utility
|
January 2, 2027
|
|
United States:
6,888,314 B2
|
Utility
|
May 3, 2025
|
On
July 9, 2021, our agent Ms. Dana Rubin applied a utility patent
application for a “Antibacterial and Cellphone Radiation-proof Face
Mask.” She subsequently assigned the patent application to us. The
patent application number is 17/372,170 and is pending review with
the U.S. Patent and Trademark Office. Another previously
filed provisional patent expired.
Employees
As of
August 25, 2021, we have five (5) employees, all of whom are U.S
based. None of our U.S employees are represented by a labor
union.
DESCRIPTION OF
PROPERTY
Our corporate headquarters are located at 2501 Garfield Avenue,
Parkersburg, WV 26101. We acquired the property in a transaction on
June 30, 2021 in an exchange transaction with GX7 Limited, a West
Virginia limited partnership, 50% of which is owned by current
39
Chief Operating Officer, Joseph
Florence. The property includes a 62,400 square foot manufacturing
facility, a 15,900 square foot warehouse, and a 7,500 square foot
auxiliary building respectively. A 10-acre paved parking lot is
also included. The total purchase price of the property is
$5,800,000. The Company and GX7 agreed to payment terms as follows:
the issuance of 91 million shares of common stock to GX7, and the
payment of $2,610,000 in cash. The Company intends to pay GX7 from
the proceeds of the loans offered by the West Virginia Economic
Development Authority (“WVEDA”). On April 7, 2022, we completed all
conditions precedent and the loans closed by virtue of our purchase
of fixed equipment, providing proofs of hazard and flood insurance,
title insurance and liability insurance. We also installed all
equipment and completed all renovations at the facility,
which resulted in the transfer of
title of the real estate to the Company from a "contract of sale"
to recorded ownership.
The 91,000,000 shares issued to GX7 amount represents approximately
12.14% of the issued and outstanding common stock of the Company as
of January 10, 2022.
LEGAL PROCEEDINGS
The
Company discloses a loss contingency if at least a reasonable
possibility that a material loss has been incurred. The Company
records its best estimate of loss related to pending legal
proceedings when the loss is considered probable, and the amount
can be reasonably estimated. The Company records the minimum
estimated liability where it can reasonably estimate a range of
loss with no best estimate. As additional information becomes
available, the Company assesses the potential liability related to
pending legal proceedings, revises its estimates, and updates its
disclosures accordingly. The Company’s legal costs associated with
defending itself are recorded to expenses as incurred. The Company
currently is not involved in any litigation.
MARKET FOR COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
Market
Information
Shares of Common Stock trades under the symbol “KNOS” on the OTC
Markets Quotation System.
The
OTC Markets Quotation System is quotation service that display
real-time quotes, last-sale prices, and volume information in
over-the-counter equity securities. The market is limited for our
stock and any prices quoted may not be a reliable indication of the
value of our shares of Common Stock. The following Table 1sets
forth the high and low bid prices per share of our shares of Common
Stock by both the OTC Bulletin Board and OTC Markets for the
periods indicated.
|
For the Period
Ending
|
|
High
|
|
|
Low
|
|
|
First Quarter,
September 30, 2020
|
|
$
|
0.38
|
|
|
$
|
0.06
|
|
|
Second Quarter,
December 31, 2020
|
|
$
|
0.06
|
|
|
$
|
0.04
|
|
|
Third Quarter, March
31, 2021
|
|
$
|
0.14
|
|
|
$
|
0.08
|
|
|
Fourth Quarter, June
30, 2021
|
|
$
|
0.07
|
|
|
$
|
0.04
|
|
|
First Quarter,
September 30, 2021
|
|
$
|
0.08
|
|
|
$
|
0.03
|
|
|
Second Quarter,
December 31, 2021
|
|
$
|
0.04
|
|
|
$
|
0.02
|
|
Holders of Record
As of January 10, 2022, we have 749,323,911 shares of our Common
Stock issued and outstanding immediately prior to this offering
held by approximately 400 shareholders of record.
DIVIDEND POLICY
We
have never declared nor paid any cash dividends on our common
stock, and currently intend to retain all of our cash and any
earnings for use in our business and, therefore, do not anticipate
paying any cash dividends in the foreseeable future. Any future
determination to pay cash dividends on our common stock will be at
the discretion of the Board of Directors and will be dependent upon
our consolidated financial condition, results of operations,
capital requirements and such other factors as the Board of
Directors deems relevant.
On
December 31 2018, the Company acquired 600 million digital tokens
from First Bitcoin Capital, LLC, an unrelated party, in exchange
for a convertible promissory note in the amount of one million
dollars. On March 30, 2021, First Bitcoin assigned the promissory
note to ANI Holdings, Pty. Ltd., an unrelated third party, granting
rights to convert the note into unregistered restricted common
stock of the Company. Subsequently ANI Holdings, Pty. Ltd.
converted the note into 23,550,100 shares of the Company,
terminating the underlying obligation.
40
On March 22, 2021, the Company formed
DogeSPAC, LLC in Puerto Rico as a wholly owned subsidiary. In April
and May, 2021, the Company decided to no longer hold or acquire
significant amounts of digital assets and began a process whereby
the resulting 600,000,000 Dogecoin Cash tokens would be transferred
in a spin off transaction to DogeSPAC, LLC, in exchange for
DogeSPAC, LLC issuing to all our shareholders one restricted unit
in DogeSPAC, LLC for each share of our common stock. The spin off
and unit dividend were completed on June 15, 2021 based on the
record date and subsequently paid to all shareholders. The Company
is therefore no longer an affiliate of DogeSPAC, LLC and does not
maintain any ownership or control over it. The only operating
subsidiary of the Company is Kronos Advanced Technologies L.L.C., a
Colorado limited liability company.
RELATED STOCKHOLDER MATTERS
On
October 1, 2019, the Company issued a convertible promissory note
in the amount of $250,000. The note is due on October 1, 2024 and
bears interest at 5% per annum. The loan and any accrued interest
may be converted into shares of the Company’s common stock at a
rate of 80% multiplied by the average of the three lowest trading
prices during the previous ten (10) day trading period ending on
the latest complete trading day prior to the conversion date.
Pursuant to current accounting guidelines, the Company recorded a
note discount of $250,000 to account for the note’s derivative
liability. In addition, the Company recorded an amount of discount
in excess of the note principal of $62,500 that was expensed as a
financing cost.
During the period ended June 30, 2021, the Company amortized
$21,875 of debt discount, and as of June 30, 2021, the balance of
the unamortized debt discount was $175,000.
In April 2020 the Company issued four convertible promissory notes
with investors totaling $137,500. These convertible notes payable
are due one year from issuance, with interest at 5% per annum and
are convertible at 80% multiplied by the Market Price (representing
a discount rate of 20%). Market Price is defined as the average of
the lowest three (3) trading prices for the common stock during the
ten (10) trading day period ending one trading day prior to the
date the conversion. Pursuant to current accounting guidelines, the
Company recorded a note discount of $137,500 to account for the
note’s derivative liability. In addition, the Company recorded an
amount of discount in excess of the note principal of $48,177 that
was expensed as a financing cost.
On July 21, 2020, the Company issued a convertible promissory note
in the amount of $100,000. The note is due on July 21, 2021 and
bears interest at 5% per annum. The loan and any accrued interest
may be converted into shares of the Company’s common stock at a
Variable Conversion Price” meaning 80% multiplied by the Market
Price (representing a discount rate of 20%). “Market Price” means
the average of the lowest three (3) Trading Prices (as defined
below) for the Common Stock during the ten (10) Trading Day period
ending one Trading Day prior to the date the Conversion Notice is
sent by the Holder to the Borrower via facsimile (the “Conversion
Date”).
Loan Offers From West Virginia Economic Development
Authority
On June 17th, 2021, West Virginia Economic Development Authority
(WVEDA) approved in a meeting of its board of directors to grant
Kronos two loan offers with the aggregate principal amount not to
exceed $2,610,000. The loans are for the Company’s acquisition of
the manufacturing facility in West Virginia and for fixed
equipment. The loans contain repayment terms of 15 years and 10
years respectively. Interest rates for the two notes are as
follows:
Loan (1) $1,845,000: This loan shall bear interest fixed as of the
third business day prior to closing equal to the rate of the 20
Year US Treasury Note rate plus 0.75%. This loan has a floor
(minimum) interest rate of 2. 75% and shall be adjustable every
five years. The loan will be secured by a first lien deed of trust
on the project land, improvements, and appurtenances in the amount
of $1,845,000, and will be cross collateralized with Loan (2),
discussed below.
Loan (2) $765,000: This loan shall bear interest fixed as of the
third business day prior to closing equal to the rate of the Wall
Street Journal Prime rate multiplied by 0.75%. This loan has a
floor (minimum) interest rate of 2.75%. The loan will be
secured by a UCC-1 security filing on all assets of the Company and
will be cross collateralized with Loan (1).
On
April 7, 2022, we completed all conditions precedent and the loans
closed by virtue of our purchase of fixed equipment, providing
proofs of hazard and flood insurance, title insurance and liability
insurance. We also installed all equipment and completed all
renovations at the facility, which resulted in the transfer of
title of the real estate to the Company from a "contract of sale"
to recorded ownership.
41
INDEX TO FINANCIAL
STATEMENTS
42
WEINSTEIN
INTERNATIONAL
C.P.A.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
To the Shareholders and the Board of Directors of Kronos Advanced
Technologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of
Kronos Advanced Technologies, Inc. ("the Company") as of June 30,
2020, and 2019 and the related statements of operations, changes in
stockholders' deficit and cash flows, for each of the years ended
June 30, 2020, and 2019, and the related notes and schedules
(collectively referred to as the "financial statements"). In our
opinion, the financial statements present fairly, in all material
respects, the financial position of the Company as of June 30,
2020, and 2019, and the results of its operations and its cash
flows for each of the periods ended June 30, 2020, and 2019, in
conformity with generally accepted accounting principles in the
United States of America.
Basis for Opinion
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on the
Company's financial statements based on our audits. We are a public
accounting firm registered with the Public Company Accounting
Oversight Board (United States) ("PCAOB") and are required to be
independent with respect to the Company in accordance with the U.S.
federal securities laws and the applicable rules
and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the
PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement, whether due to error
or fraud. The company is not required to have, nor were we engaged
to perform, an audit of its internal control over financial
reporting. As part of our audits, we are required to obtain an
understanding of internal control over financial reporting but not
for the purpose of expressing an opinion on the effectiveness of
the Company's internal control over financial reporting.
Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of
material misstatement of the financial statements, whether due to
error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the financial
statements. Our audits also included evaluating the accounting
principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable basis
for our opinion.
Going Concern
The accompanying financial statements have been prepared assuming
the Company will continue as a going concern. As more fully
described in Note 3, the Company has incurred significant losses
and needs to raise additional funds to meet its obligations and
sustain its operations. These conditions raise substantial doubt
about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in
Note 3. These financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/Weinstein
International C.P.A.
We have served as the Company’s auditor since 2020.
Tel- Aviv, Israel November 26, 2020
US Number: 1-661-466-2466 Local: +972 58-6886666
Email: i@dwacc.com Web: www.dwacc.com
F-1
Kronos Advanced Technologies, Inc.
Consolidated Balance
Sheets
for
the Fiscal Year Ended June 30, 2020
(Audited)
|
|
|
June 30, 2020
|
|
June 30, 2019
|
|
ASSETS
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
19,381
|
|
|
$
|
5,698
|
|
|
Prepaid expenses
|
|
|
123,382
|
|
|
|
|
|
|
Accounts receivable
|
|
|
7,721
|
|
|
|
—
|
|
|
Loans to officer
|
|
|
3,780
|
|
|
|
3,748
|
|
|
Total current assets
|
|
|
154,264
|
|
|
|
9,446
|
|
|
Property and
equipment, net
|
|
|
234,250
|
|
|
|
—
|
|
|
Intangible assets
|
|
|
1,010,000
|
|
|
|
1,010,000
|
|
|
Total Assets
|
|
$
|
1,398,514
|
|
|
$
|
1,019,446
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
9,601
|
|
|
$
|
9,555
|
|
|
Accrued expenses
|
|
|
182,216
|
|
|
|
25,000
|
|
|
Operating loan
|
|
|
31,650
|
|
|
|
23,500
|
|
|
Derivative liability
|
|
|
1,679,276
|
|
|
|
1,250,000
|
|
|
Convertible notes payable, net of discount
|
|
|
354,823
|
|
|
|
100,000
|
|
|
Total current
liabilities
|
|
|
2,257,566
|
|
|
|
1,408,055
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitment and
Contingencies
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholder
Deficit:
|
|
|
|
|
|
|
|
|
|
Common stock, par
value $0.001, 2,000,000,000 shares authorized 499,689,291 and
487,689,291 shares issued and outstanding as of June 30, 2020 and
June 30, 2019, respectively
|
|
|
499,689
|
|
|
|
487,689
|
|
|
Additional paid in
capital
|
|
|
36,848,900
|
|
|
|
36,837,900
|
|
|
Accumulated
deficit
|
|
|
(38,207,641
|
)
|
|
|
(37,714,198
|
)
|
|
Total Stockholders’ Deficit
|
|
|
(859,052
|
)
|
|
|
(388,609
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholder’s Deficit
|
|
$
|
1,398,514
|
|
|
$
|
1,019,446
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-2
Kronos Advanced Technologies, Inc.
Consolidated
Statements of Operations
For
the Fiscal Year Ended June 30, 2020
(Audited)
|
|
|
June 30, 2020
|
|
June 30, 2019
|
|
Revenue
|
|
$
|
41,215
|
|
|
$
|
616
|
|
|
Cost of goods
sold
|
|
|
6,756
|
|
|
|
183
|
|
|
Gross
Profit
|
|
|
34,459
|
|
|
|
433
|
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
General and
administrative
|
|
|
171,334
|
|
|
|
14,542
|
|
|
Total operating
expenses
|
|
|
171,334
|
|
|
|
14,542
|
|
|
Loss from
operations
|
|
|
(136,875
|
)
|
|
|
(14,109
|
)
|
|
Other (Income)
Expense
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
59,969
|
|
|
|
25,000
|
|
|
Change in value of
derivative liability
|
|
|
(68,901
|
)
|
|
|
—
|
|
|
Financing cost
|
|
|
110,677
|
|
|
|
250,000
|
|
|
Amortization of debt
discount
|
|
|
254,823
|
|
|
|
100,000
|
|
|
Total Other
(Income) Expense
|
|
|
356,568
|
|
|
|
375,000
|
|
|
Net Income
(Loss)
|
|
$
|
(493,443
|
)
|
|
$
|
(389,109
|
)
|
|
Net income (loss)
-Basic and diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
Weighted average
common shares outstanding
- Basic and diluted
|
|
|
489,189,291
|
|
|
|
487,689,291
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
Kronos Advanced Technologies, Inc.
Consolidated
Statement of Stockholders' Equity
For
the Fiscal Year Ended June 30, 2020
(Audited)
|
|
|
Common Shares
$0.001 Par Value
|
|
Additional
|
|
|
|
|
|
|
|
Shares
Issued
|
|
Amount
|
|
Paid in
Capital
|
|
Accumulated Deficit
|
|
Equity
(Deficit)
|
|
Year Ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2019
|
|
|
487,689,291
|
|
|
$
|
487,689
|
|
|
$
|
36,837,900
|
|
|
|
(37,714,198
|
)
|
|
$
|
(388,609
|
)
|
|
Issuance of common stock upon conversion of
accrued interest
|
|
|
12,000,000
|
|
|
|
12,000
|
|
|
|
11,000
|
|
|
|
|
|
|
|
23,000
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(493,443
|
)
|
|
$
|
(493,443
|
)
|
|
Balance, June 30, 2020
|
|
|
499,689,291
|
|
|
$
|
499,689
|
|
|
$
|
36,848,900
|
|
|
|
$(38,207,641)
|
|
|
$
|
(859,052)
|
|
|
Year Ended June 30, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30, 2018
|
|
|
487,626,691
|
|
|
$
|
487,627
|
|
|
$
|
36,837,962
|
|
|
$
|
(37,625,089
|
)
|
|
$
|
500
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(389,109)
|
|
|
$
|
(389,109)
|
|
|
Balance, June 30, 2019
|
|
|
487,626,691
|
|
|
$
|
487,627
|
|
|
$
|
36,837,962
|
|
|
$
|
(37,714,198)
|
|
|
$
|
(388,609)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-4
Kronos Advanced Technologies, Inc.
Consolidated
Statements of Cash Flows
For
the Fiscal Year Ended June 30, 2020
(Audited)
|
|
|
For
the Year Ended
|
|
|
|
June 30, 2020
|
|
June 30, 2019
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(493,443
|
)
|
|
$
|
(389,109
|
)
|
|
Adjustments to
reconcile net income (loss) to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
15,750
|
|
|
|
—
|
|
|
Change in value of
derivative liability
Financing cost
|
|
|
110,677
|
|
|
|
250,000
|
|
|
Amortization of debt
discount
|
|
|
254,823
|
|
|
|
100,000
|
|
|
Changes in operating
liabilities
Accounts receivable
|
|
|
(7,721
|
)
|
|
|
—
|
|
|
Prepaid expenses
|
|
|
(123,382
|
)
|
|
|
—
|
|
|
Accounts
payable and accrued expenses
|
|
|
111,361
|
|
|
|
25,055
|
|
|
Net Cash Used in
Operating Activities
|
|
|
(131,935
|
)
|
|
|
(14,054
|
)
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Proceeds from convertible notes
payable
|
|
|
137,500
|
|
|
|
—
|
|
|
Operating loan
|
|
|
8,150
|
|
|
|
23,500
|
|
|
Loans to officer
|
|
|
(32
|
)
|
|
|
(3,748
|
)
|
|
Net Cash Provided by
Financing Activities
|
|
|
145,618
|
|
|
|
19,752
|
|
|
Net Increase in
Cash
|
|
|
13,683
|
|
|
|
5,698
|
|
|
Cash at Beginning of
Period
|
|
|
5,698
|
|
|
|
—
|
|
|
Cash at End of
Period
|
|
$
|
19,381
|
|
|
$
|
5,698
|
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
Cash paid during the
year for:
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Income taxes paid
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Fair value of common
stock upon conversion of accrued interest
|
|
$
|
23,000
|
|
|
$
|
—
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
KRONOS ADVANCED TECHNOLOGIES,
INC.
NOTES TO AUDITED FINANCIAL
STATEMENTS
For the Year Ended June 31, 2020,
and 2019
NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS
Kronos
Advanced Technologies, Inc. ("Kronos") is a Nevada corporation (the
"Company"). The Company's shares began trading on the
over-the-counter bulletin board exchange on August 28, 1996, under
the symbol "TSET." Effective January 12, 2002, the Company began
doing business as Kronos Advanced Technologies, Inc. and, as of
January 18, 2002, it changed the Company ticker symbol to "KNOS”
and was trading on the Pink Sheets.
GENERAL
Kronos
Advanced Technologies, Inc. is a product development and Production
Company that develops and patents technology that among other
things fundamentally changes the way air is moved, filtered, and
sterilized. Historically, Kronos has focused on developing,
marketing, and selling the Company's proprietary air movement and
purification technology. Serving the Indoor Air Quality (IAQ)
market, Kronos technology uses state-of-the-art high voltage
processes without the use of traditional HEPA filters. Kronos-based
products move air silently, filter and purify the air, and
dramatically reduce energy consumption to half of a 60-watt light
bulb. Kronos devices can be variable in shape or size, and,
therefore, have the potential to be scaled down for air
purification in cars or scaled up in size for industrial and
hazardous gas destruction. The technology is currently being
implemented in standalone products to move and filter air replacing
HEPA and other filtration systems. There are broad ranges of
additional markets for standalone and embedded Kronos CORE
technology-based devices. Examples of immediately addressable
markets include health care facilities, operating rooms,
manufacturing clean rooms, and cabins of automobiles and commercial
aircraft.
Currently, the Company is planning to file additional patents to
improve its existing technology as well as enter into new market
segments but will continue to market air purifiers and other
consumer products. Recently the Company became the exclusive
distributor and licensee of the latest generation of air purifiers
based on the Company's CORE technologies.
Fourteen of the Company's U.S. patent applications and three
international patent applications have been allowed for issuance.
To date, our ability to execute our strategy has been restricted by
our limited amount of capital.
The
Kronos technology has numerous valuable characteristics for
applications in the indoor air quality market, including moving air
and gases at high velocities while filtering odors, smoke and
particulates and sterilizing air from bacteria and virus
contamination. In the past - a number of the scientific claims of
the Kronos technology have been tested by the U. S. and foreign
governments, multi-national companies and independent testing
facilities (see “Independent Testing – Product Claims
Platform”).
Technology Description and Benefits
The
proprietary Kronos technology involves the management of corona
discharge by applying high voltage management across paired
electrical grids to create an ion exchange. Applications for
efficient high voltage management, efficient corona discharge and
ion exchange include but are not limited to:
|
·
|
air
movement, including dielectric fluid movement and propulsion;
|
|
·
|
air
purification, including particulate removal, bacterial and viral
removal, biohazard destruction, and odor removal;
|
|
·
|
temperature and environmental management, including space heating
and cooling;
|
|
·
|
microchip, MEMS and other electronics devices and components
cooling;
|
|
·
|
air
management, including sorting and separation of air streams by
particle content;
|
F-6
|
·
|
sound
generation, including high fidelity sound recreation and active
noise cancellation;
|
|
·
|
high
voltage management, including development of high voltage power
supplies and control of energy surges and electrical
discharges;
|
|
·
|
control of water and moisture content in air streams, including
dehumidification and humidification; and
|
|
·
|
water
treatment, including water purification, ionization, and water
desalination.
|
Independent Testing - Product Claims Platform
A
number of the scientific claims of the Kronos technology have been
tested by the U. S. and foreign governments, multi-national
companies, and independent testing facilities. These include the
2017 research article published by the China Medical
University/National Taiwan University discussing technologies used
by the Company; a 2020 study on electrostatic indoor air cleaners
published by the Department of the Built Environment, Aalborg
University, which also discusses the efficacy of technologies used
by the Company; a 2008 efficacy study of the Company’s air
purifiers conducted and published by the Disinfection Research
Institute in Moscow, Russia and by Environmental Health and
Engineering based in Needham, Massachusetts; and a study published
in 2018 by the Association of Home Appliance Manufacturing that
discussed technologies used by the Company. To date,
independent laboratory testing conducted in the joint study by the
Disinfection Research Institute in Moscow and the Environmental
Health and Engineering, Inc. has verified the filtration and
sterilization capability of the Kronos technology.
Filtration Testing Results:
|
·
|
Environmental Health and Engineering - reduced particle matter by
up to 47% compared to days when the Kronos air purifiers were not
operating in the waiting room of a pediatric office while patients
were present.
|
|
·
|
Aerosol and Air Quality Research Laboratory - up to 99.8%
filtration of 0.02 to 0.20-micron (20 to 200 nanometers) size
particles;
|
|
·
|
LMS
Industries - removal of over 99.97% of 0.10 micron (100 nanometers)
and above size particles using HVAC industry's ASHRAE 52.2 testing
standard for filtration;
|
|
·
|
MicroTest Laboratories - HEPA Clean Room Class 1000 quality
particulate reduction; and
|
|
·
|
Intertek - tobacco smoke elimination tests in accordance with
ANSI/AHAM AC-1-1988 standard entitled "American National Standard
Method for Measuring Performance of Portable Household Electric
Cord- Connected Room Air Cleaners," which demonstrated a Clean Air
Delivery Rate ("CADR") for the Kronos air purifier of over 300 for
the larger size Kronos air purifier and 80 for the smaller size
using consumer filtration testing standards for the Association of
Home Appliance Manufacturers ("AHAM").
|
Sterilization Testing Results:
|
·
|
Environmental Health and Engineering (viral analysis by the
University of Wisconsin Department of Pediatrics and Medicine):
|
|
|
-
|
collection and removal of a wide range of respiratory viruses,
including influenza A, influenza B, human rhinoviruses, human
coronavirus, respiratory syncytial virus, adenovirus, and
bocavirus, from the waiting room of a pediatric office while
patients were present.
|
|
·
|
Scientific Institution of Health Care, Central Clinical Hospital #2
in Moscow (clinical trial):
|
|
-
|
100%
decontamination of bacteria (Staphylococcus aureus) in under one
hour and 80% decontamination of general bacteria in under 24 hours
from a 48m (3) hospital room while people were present.
|
F-7
|
·
|
Pulmonary Department of Municipal Hospital #2 in Moscow (clinical
trial):
|
|
|
-
|
100%
decontamination of bacteria (Staphylococcus aureus) in under five
hours from a 66m (3)
hospital room while four patients were present; and
|
|
|
-
|
100%
decontamination of mildew fungi in under two hours from a 113.2m(3)
hospital room.
|
|
·
|
Disinfection Research Institute Sterilization Laboratory in
Moscow:
|
|
|
-
|
disinfected a room completely contaminated with Bacteriophage
|
|
|
-
|
a microorganism
which lives in the E. Coli bacteria. (Bacteriophage is widely used
in virus testing because the microorganism's biological structure
and size share many functional similarities with a
wide range of viruses); and
|
|
|
-
|
100%
decontamination of room infected with bacteria (Staphylococcus
aureus strain 906 (S. aureus)
and Bacillus cereus strain 96 (B. cereus)
|
|
|
-
|
S.
aureus is a known cause of hospital-acquired infections, including
skin lesions such as boils and furunculosis and more serious
infections such as pneumonia and meningitis.
|
|
·
|
Institute for Veterinary Medicine in the Ukraine - destroy and
sterilize air which had been inseminated with Anthrax and E. coli
spores;
|
|
·
|
New
Hampshire Materials Laboratory - up to 95% reduction of hazardous
gases, including numerous carcinogens found in cigarette smoke;
|
|
·
|
Battelle PNNL - 95% destruction of Bg (anthrax simulant); and
|
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·
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Dr.
Sergey Stoylar, a bacteriologist from the American Bacteriological
Society - 100% destruction of Bacillus subtilis 168 (bacteria
simulant).
|
Market Segmentation
Kronos had an initial business development strategy to attempt to
develop and produce products based on the Kronos technology to six
distinct air quality market segments: (1) air movement and
purification (residential, health care, hospitality, and commercial
facilities); (2) embedded cooling and cleaning (electronic devices
and medical equipment); (3) air purification for unique spaces
(clean rooms, airplanes, automotive, and cruise ships); (4)
specialized military (naval vessels, closed vehicles and mobile
facilities); (5) industrial scrubbing (produce storage and diesel
and other emissions); and (6) hazardous gas destruction
(incineration and chemical facilities).
Technology Application and Product Development
To
best serve Kronos' targeted market segments, the Company is
developing specific product applications across two distinct
product application platforms. A Kronos device can be either used
as a standalone product or can be embedded. Standalone products are
self-contained and only require the user to plug the Kronos device
into a wall outlet to obtain air movement and filtration for their
home, office, or hotel room. Embedded applications of the Kronos
technology require the technology be added into another system,
such as a building ventilation system for more efficient air
movement and filtration or into an electrical device such as
computer or medical equipment to replace the cooling fan or heat
sink.
Standalone Platform
Residential Products. The Company had developed a
residential product SilentNight Air Purifier and in the past sold
it through independent sales reps.
Medical Products. The Company is planning to engage in
development of Healthcare related products based on our
technology.
Commercial and Other Standalone Products. Utilizing our
expanded product development resources, in the past Kronos
completed the initial design, development and production of a
series of small multifunctional devices that can be used as space
heaters, vaporizers, disinfectors, deodorizers and/or fans.
Embedded Platform
F-8
In
addition, Kronos has developed an air filtration and purification
mechanism capable of performing to HEPA quality standards, while
eliminating bacteria and viruses. The Company believes that Kronos
devices could replace current HEPA filters with a permanent, easily
cleaned, low-cost solution. Among the technical advantages of the
Kronos technology over HEPA filters is the ability of the
Kronos-based devices to eliminate the energy burden on air handling
systems, which must generate high levels of backpressure necessary
to move air through HEPA-based systems. Kronos-based devices
enhance the air flow, while providing better than HEPA level
filtration and purification. Kronos is seeking one or more
strategic partners to commercialize, market and distribute Kronos
based commercial embedded air filtration and purification devices;
however, due to a lack of funding, the Company is no longer working
on this project.
Market Segmentation
Kronos' initial business development strategy was to develop and
produce products based on the Kronos technology to six distinct air
quality market segments: (1) air movement and purification
(residential, health care, hospitality, and commercial facilities);
(2) embedded cooling and cleaning (electronic devices and medical
equipment); (3) air purification for unique spaces (clean rooms,
airplanes, automotive, and cruise ships); (4) specialized military
(naval vessels, closed vehicles and mobile facilities); (5)
industrial scrubbing (produce storage and diesel and other
emissions); and (6) hazardous gas destruction (incineration and
chemical facilities).
Patents and Intellectual Property
Kronos has received notification that fifteen of its patent
applications have been allowed for issuance by the United States
Patent and Trademark Office and six of its international patent
applications have been allowed for issuance by the Canadian
Intellectual Property Office, the Commonwealth of Australia Patent
Office, and the Mexican Institute of Industrial Property. These
patents are considered utility patents which describe fundamental
innovations in the generation, management, and control of
electrostatic fluids, including air movement, filtration, and
purification. Each of the patents contain multiple part claims for
both general principles as well as specific designs for
incorporating the Kronos technology into air movement, filtration,
and purification products. The patents provide protection for both
specific product implementations of the Kronos technology, as well
as more general processes for applying the unique attributes and
performance characteristics of the technology.
U.S.
Patents
i.December, 2003; #664741; Method and Apparatus for
Electrostatic Fluid Acceleration Control of a Fluid Flow;
Expires
2022;
ii.April, 2004; #6,727,657; Electrostatic Fluid Accelerator
for and a Method for Controlling Fluid; Expires 2022;
iii.May, 2005; #6,888,314; Electrostatic Fluid Accelerator
– Electrode design Geometries; Expires 2022;
iv.August 2005; #6,937,455; Spark Management Method &
Device; Expires 2022;
v.November 2005; #6,963,479; Electrostatic Fluid Accelerator
– Electrode design Geometries; Expires 2023;
vi.May 2006; #7,053,565; Electrostatic Fluid Accelerator
– Power Management; Expires 2024;
vii.July 2006; #7,150,780; Electrostatic Air Cleaning Device;
Expires 2024;
viii.October 2006; #7,122,070; Method of and Apparatus for
Electrostatic Fluid Acceleration; Expires 2025;
ix.July, 2007; #7,248,003; Electric Field Management; Expires
2025;
x.August 2007; #7,262,564; Alternative Geometries and Voltage
Supply Management; Expires 2024; and,
xi.August 2008; #7,410,531; Method of Controlling Fluid
Control; Expires 2025.
xii.January 7, 2003; #6,504,308; Electrostatic Fluid
Accelerator; Expires 2023.
xiii.July 19, 2005; #6,919,698; Electrostatic Fluid
Accelerator and for Method of Controlling Fluid Flow; Expires
2025.
xiv.January 2, 2007; #7,157,704; Corona Discharge Electrode
and Method for Operating Same; Expires 2027.
xv.January 7, 2003; #6,504,308; Electrostatic Fluid
Accelerator; Expires 2023.
xvi.May 3, 2005; # 6,888,314; Electrostatic Fluid
Accelerator; Expires 2025.
International
Patents
Kronos intends to
continue to aggressively file patent applications in the U.S. and
internationally.
NOTE 2 - SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The
consolidated financial statements of the Company include those of
the Company and its subsidiary for the periods in which the
subsidiary was owned/held by the Company. All significant
intercompany accounts and transactions have been eliminated in the
preparation of the consolidated financial statements. At June 30,
2020 and 2019, respectively, the Company had only one subsidiary,
Kronos Advanced Technologies, LLC.
Accounting Estimates
F-9
The
preparation of financial statements in conformity with Generally
Accepted Accounting Principles (“GAAP”) requires management to make
estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Significant estimates include assumptions made in estimated useful
lives of property and equipment, assumptions inherent in a purchase
price allocation, accruals for potential liabilities, certain
assumptions used in deriving the fair value of derivative
liabilities, share-based compensation, and beneficial conversion
feature of notes payable, and realization of deferred tax
assets.
Stock-Based Compensation
The
Company periodically issues stock options and warrants to employees
and non-employees in non-capital raising transactions for services
and for financing costs. The Company accounts for stock option and
warrant grants issued and vesting to employees based on the
authoritative guidance provided by the Financial Accounting
Standards Board whereas the value of the award is measured on the
date of grant and recognized over the vesting period. The Company
accounts for stock option and warrant grants issued and vesting to
non-employees in accordance with the authoritative guidance of the
Financial Accounting Standards Board whereas the value of the stock
compensation is based upon the measurement date as determined at
either a) the date at which a performance commitment is reached, or
b) at the date at which the necessary performance to earn the
equity instruments is complete. Non-employee stock- based
compensation charges generally are amortized over the vesting
period on a straight-line basis. In certain circumstances where
there are no future performance requirements by the non-employee,
option grants are immediately vested and the total stock-based
compensation charge is recorded in the period of the measurement
date.
The fair value of the Company's common stock option and warrant
grants is estimated using the Black- Scholes option pricing model,
which uses certain assumptions related to risk-free interest rates,
expected volatility, expected life of the common stock options, and
future dividends. Compensation expense is recorded based upon the
value derived from the Black-Scholes option pricing model and based
on actual experience. The assumptions used in the Black-Scholes
option pricing model could materially affect compensation expense
recorded in future periods.
Fair Value of Financial Instruments
The
Company follows paragraph 820-10-35-37 of the FASB Accounting
Standards Codification (“Paragraph 820-10-35-37”) to measure the
fair value of its financial instruments and paragraph 825-10-50-10
of the FASB Accounting Standards Codification for disclosures about
fair value of its financial instruments. Paragraph 820-10-35- 37
establishes a framework for measuring fair value in accounting
principles generally accepted in the United States of America (U.S.
GAAP) and expands disclosures about fair value measurements. To
increase consistency and comparability in fair value measurements
and related disclosures, Paragraph 820-10-35-37 establishes a fair
value hierarchy which prioritizes the inputs to valuation
techniques used to measure fair value into three (3) broad levels.
The three (3) levels of fair value hierarchy defined by Paragraph
820-10-35-37 are described below:
Level
1Quoted market prices available in active markets for
identical assets or liabilities as of the reporting date.
Level
2Pricing inputs other than quoted prices in active markets
included in Level 1, which are either directly or indirectly
observable as of the reporting date.
Level
3Pricing inputs that are generally observable inputs and not
corroborated by market data.
Financial assets are considered Level 3 when their fair values are
determined using pricing models, discounted cash flow methodologies
or similar techniques and at least one significant model assumption
or input is unobservable. The fair value hierarchy gives the
highest priority to quoted prices (unadjusted) in active markets
for identical assets or liabilities and the lowest priority to
unobservable inputs. If the inputs used to measure the financial
assets and liabilities fall within more than one level described
above, the categorization is based on the lowest level input that
is significant to the fair value measurement of the instrument.
The carrying amount of the Company’s derivative liability of
$1,679,276 and $1,250,000 as of June 30, 2020 and June 30, 2019,
respectively and was based on Level 3 measurements.
The
carrying amounts of the Company’s other financial assets and
liabilities, such as cash, prepaid expense, accounts payable and
accrued payables and notes payable, approximate their fair values
because of the short maturity of these instruments.
Acquisitions and Business Combinations
The
Company allocates the fair value of purchase consideration to the
tangible assets acquired, liabilities assumed, and separately
identified intangible assets acquired based on their estimated fair
values. The excess of the fair value of purchase consideration over
the fair values of these identifiable assets and liabilities is
recorded as goodwill. Such valuations require management to make
significant estimates and assumptions, especially with respect to
intangible assets. Significant estimates in valuing certain
intangible assets include,
F-10
but are not limited to, future
expected cash flows from, acquired technology, trademarks and trade
names, useful lives, and discount rates. Management’s estimates of
fair value are based upon assumptions believed to be reasonable,
but which are inherently uncertain and unpredictable and, as a
result, actual results may differ from estimates. During the
measurement period, which is one year from the acquisition date, we
may record adjustments to the assets acquired and liabilities
assumed, with the corresponding offset to goodwill. Upon the
conclusion of the measurement period, any subsequent adjustments
are recorded to earnings.
Derivative Financial Instruments
The
Company evaluates its financial instruments to determine if such
instruments are derivatives or contain features that qualify as
embedded derivatives. For derivative financial instruments that are
accounted for as liabilities, the derivative instrument is
initially recorded at its fair value and is then re-valued at each
reporting date, with changes in the fair value reported in the
consolidated statements of operations. The classification of
derivative instruments, including whether such instruments should
be recorded as liabilities or as equity, is evaluated at the end of
each reporting period. Derivative instrument liabilities are
classified in the balance sheet as current or non-current based on
whether or not net-cash settlement of the derivative instrument
could be required within 12 months of the balance sheet date.
Cash Equivalents
The
Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
Accounts Receivable
All
of the Company’s accounts receivable balance is related to trade
receivables. Trade accounts receivable are recorded at the invoiced
amount and do not bear interest. The allowance for doubtful
accounts, if any, is the Company’s best estimate of the amount of
probable credit losses in its existing accounts receivable. The
Company will maintain allowances for doubtful accounts, estimating
losses resulting from the inability of its customers to make
required payments for products. Accounts with known financial
issues are first reviewed and specific estimates are recorded. The
remaining accounts receivable balances are then grouped into
categories by the number of days the balance is past due, and the
estimated loss is calculated as a percentage of the total category
based upon past history. Account balances are charged off against
the allowance when it is probable that the receivable will not be
recovered.
Net Income (Loss) Per Share
Basic earnings
(loss) per share is computed using the weighted-average number of
common shares outstanding during the period. Diluted earnings
(loss) per share is computed using the weighted-average number of
common shares and the dilutive effect of contingent shares
outstanding during the period. Potentially dilutive contingent
shares, which primarily consist of convertible notes, stock
issuable to the exercise of stock options and warrants have been
excluded from the diluted loss per share calculation because their
effect is anti-dilutive.
Segments
The
Company determined its reporting units in accordance with ASC 280,
“Segment Reporting” (“ASC 280”). Management evaluates a reporting
unit by first identifying its’ operating segments under ASC 280.
The Company then evaluates each operating segment to determine if
it includes one or more components that constitute a business. If
there are components within an operating segment that meet the
definition of a business, the Company evaluates those components to
determine if they must be aggregated into one or more reporting
units. If applicable, when determining if it is appropriate to
aggregate different operating segments, the Company determines if
the segments are economically similar and, if so, the operating
segments are aggregated.
Management has determined that the Company has one consolidated
operating segment. The Company’s reporting segment reflects the
manner in which its chief operating decision maker reviews results
and allocates resources. The Company’s reporting segment meets the
definition of an operating segment and does not include the
aggregation of multiple operating segments.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is
provided over the estimated useful lives of the assets, which range
from three to seven years. Expenditures for major renewals and
betterments that extend the original estimated economic useful
lives of the applicable assets are capitalized. Expenditures for
normal repairs and maintenance are charged to expense as incurred.
The cost and related accumulated depreciation of assets sold or
otherwise disposed of are removed from the accounts, and any gain
or loss is included in operations.
Digital Assets Translations and Remeasurements
Digital Assets are included in intangible assets in the
consolidated balance sheets. Digital Assets are recorded at cost
less impairment.
F-11
An intangible asset with an indefinite useful life is not amortized
but assessed for impairment annually, or more frequently, when
events or changes in circumstances occur indicating that it is more
likely than not that the indefinite-lived asset is impaired.
Impairment exists when the carrying amount exceeds its fair value.
In testing for impairment, the Company has the option to first
perform a qualitative assessment to determine whether it is more
likely than not that an impairment exists. If it is determined that
it is not more likely than not that an impairment exists, a
quantitative impairment test is not necessary. If the Company
concludes otherwise, it is required to perform a quantitative
impairment test. To the extent an impairment loss is recognized,
the loss establishes the new cost basis of the asset. Subsequent
reversal of impairment losses is not permitted.
Realized gain (loss) on sale of Digital Assets are included in
other income (expense) in the consolidated statements of
operations.
The Company assesses impairment of Digital Assets quarterly if the
fair value of digital assets is less than its cost basis. The
Company recognizes impairment losses on Digital Assets caused by
decreases in fair value using the average U.S. dollar spot price of
the related Digital Asset as of each impairment date. Such
impairment in the value of Digital Assets are recorded as a
component of costs and expenses in our consolidated statements of
operations. There were no impairment losses related to Digital
Assets during the period ended June 30, 2020.
Intangibles
The
Company uses assumptions in establishing the carrying value, fair
value and estimated lives of the Company’s long-lived assets and
goodwill. The criteria used for these evaluations include
management's estimate of the assets’ continuing ability to generate
positive income from operations and positive cash flow in future
periods compared to the carrying value of the asset, the strategic
significance of any identifiable intangible asset in its business
objectives, as well as the market capitalization of the Company.
Cash flow projections used for recoverability and impairment
analysis use the same key assumptions and are consistent with
projections used for internal budgeting, and for lenders and other
third parties. If assets are considered to be impaired, the
impairment recognized is the amount by which the carrying value of
the assets exceeds the fair value of the assets. Useful lives and
related amortization or depreciation expense are based on the
Company’s estimate of the period that the assets will generate
revenues or otherwise be used by Kronos. Factors that would
influence the likelihood of a material change in the Company’s
reported results include significant changes in the assets’ ability
to generate positive cash flow, loss of legal ownership or title to
the asset, a significant decline in the economic and competitive
environment on which the asset depends, significant changes in the
Company’s strategic business objectives, and utilization of the
asset.
Income Taxes
Income taxes are accounted for in accordance with the provisions of
Statement of Financial Accounting Standards ("SFAS”) No. 109.
Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. Valuation
allowances are established, when necessary, to reduce deferred tax
assets to the amounts expected to be realized, but no less than
quarterly. Currently the company has not valued any NOL because of
the expectation that it will not be used.
Research and Development Expenses
Costs
related to research and development are charged to research and
development expense as incurred.
Revenue Recognition
The
Company accounts for revenues in accordance with Accounting
Standards Codification (“ASC”) 606, Revenue from
Contracts with Customers. The underlying principle of ASC 606
is to recognize revenue to depict the transfer of goods or services
to customers at the amount expected to be collected. ASC 606
creates a five-step model that requires entities to exercise
judgment when considering the terms of contract(s), which includes
(1) identifying the contract(s) or agreement(s) with a customer,
(2) identifying our performance obligations in the contract or
agreement, (3) determining the transaction price, (4) allocating
the transaction price to the separate performance obligations, and
(5) recognizing revenue as each performance obligation is
satisfied. Under ASC 606, revenue is recognized when performance
obligations under the terms of a contract are satisfied, which
occurs for the Company upon shipment or delivery of products or
services to our customers based on written sales terms, which is
also when control is transferred. Revenue is measured as the amount
of consideration we expect to receive in exchange for transferring
the products or services to a customer.
Recently Issued Accounting Pronouncements
F-12
In February
2016, the FASB issued ASU No. 2016-02, Leases. This ASU
establishes a right-of-use model that requires a lessee to record a
right-of-use asset and a lease liability on the balance sheet for
all leases with terms longer than 12 months. Leases will be
classified as either finance or operating, with classification
affecting the pattern of expense recognition in the income
statement. This ASU and all the related amendments are effective
for fiscal years beginning after December 15, 2018, including
interim periods within those fiscal years. The Company adopted this
guidance in the first quarter of fiscal 2020, the quarter ended
September 30, 2019 using the optional transitional method afforded
under ASU No. 2018-11, Leases (Topic 842): Targeted
Improvements. Results for reporting periods beginning after the
adoption date are presented under Topic 842, while prior period
amounts are not adjusted and continue to be reported in accordance
with the Company’s historic accounting under ASC 840 (see Note 7 -
Leases).
The
Company elected and applied the available transition practical
expedients. By electing these practical expedients, the Company
did:
a.not
reassess whether expired or existing contracts contain leases under
the new definition of a lease;
b.not
reassess lease classification for expired or existing leases;
and
c.not
reassess whether previously capitalized initial direct costs would
qualify for capitalization under Topic 842.
In
June 2016, the FASB issued ASU No. 2016-13, Financial Instruments -
Credit Losses (Topic 326): Measurement of Credit Losses on
Financial Instruments. The amendments in this ASU replace the
incurred loss impairment methodology in current GAAP with a
methodology that reflects expected credit losses and requires
consideration of a broader range of reasonable and supportable
information to inform credit loss estimates. This ASU is effective
for fiscal years, and for interim periods within those fiscal
years, beginning after December 15, 2019. In November 2018, the
FASB issued ASU No. 2018-19, Codification Improvements to Topic
326, Financial Instruments
- Credit Losses. The amendments in this ASU align the
implementation date for nonpublic entities’ annual financial
statements with the implementation date for their interim financial
statements. In addition, the amendment clarifies that receivables
arising from operating leases are not within the scope of Subtopic
326-20; instead, impairment of receivables arising from operating
leases should be accounted for in accordance with Topic 842:
Leases. This ASU is effective for fiscal years beginning after
December 15, 2019, including interim periods within those fiscal
years. In April 2019, the FASB issued ASU No. 2019-04, Codification
Improvements to Topic 326, Financial Instruments
-
Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825
Financial Instruments. The amendments in this ASU further clarify
certain aspects of ASU No. 2016-13. For entities that have not yet
adopted ASU No. 2016-13, this ASU is effective for fiscal years
beginning after December 15, 2019, including interim periods within
those fiscal years. In May 2019, the FASB issued ASU No. 2019-05,
Financial Instruments - Credit Losses (Topic 326): Targeted
Transition Relief. The amendments in this ASU provide transition
relief for ASU No. 2016-13 by providing an option to irrevocably
elect the fair value option for certain financial assets measured
at an amortized cost basis. For entities that have not yet adopted
ASU No. 2016-13, this ASU is effective for fiscal years beginning
after December 15, 2019, including interim periods within those
fiscal years. The Company is currently evaluating the impact this
ASU will have on its financial statements and related
disclosures.
Other recent accounting pronouncements issued by the FASB,
including its Emerging Issues Task Force, the American Institute of
Certified Public Accountants and the SEC did not or are not
believed by management to have a material impact on the Company’s
present or future consolidated financial statement presentation or
disclosures.
NOTE 3 - REALIZATION OF ASSETS AND GOING CONCERN
The accompanying consolidated financial statements have been
prepared in conformity with accounting principles generally
accepted in the United States of America, which contemplate
continuation of the Company as a going concern. The Company has
sustained losses from operations in recent years, and such losses
have continued through the current period ended June 30, 2020. In
addition, the Company has used, rather than provided, cash in its
operations. The Company has attempted during the period to use its
resources to commercialize its technology and develop viable
commercial products and to provide for its working capital
needs.
In view of the matters described in the preceding paragraph,
recoverability of a major portion of the asset amounts shown in the
accompanying balance sheet is dependent upon continued operations
of the Company, which in turn is dependent upon the Company's
ability to meet its financing requirements on a continuing basis,
to maintain present financing and to succeed in its future
operations. The consolidated financial statements do not include
any adjustments relating to the recoverability and classification
of recorded asset amounts or amounts and classification of
liabilities that might be necessary should the Company be unable to
continue in existence.
NOTE 4. ACQUSITION OF CERTAIN ASSETS
On
October 1, 2019, the Company entered into an operating assets
purchase agreement with the First Bitcoin Capital, LLC wherein the
Company acquired three check cashing kiosks operating in the United
States. The purchase price for the assets was $250,000 in the form
of a convertible note payable. (See Note 6.)
F-13
NOTE 5 - INTANGIBLES
Intangible
assets consisted of the following at June 30, 2020:
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Crypto Currency
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$
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1,000,000
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Developed and Purchased Patent Technology
(devalued)
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10,000
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Less accumulated amortization
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—
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Net intangible assets
|
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$
|
1,010,000
|
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Developed and purchased patent technology includes developed
technology as well as property that was acquired in the Kronos
acquisition. See Note 1. Management had assessed that the value is
not more than $10,000 and the patents were written down to that
amount in 2009.
Intangible assets will be amortized on a straight-line basis over
10 years once operations increase.
NOTE 6 – CONVERTIBLE NOTES PAYABLE
On
December 31, 2018, the Company issued a convertible promissory note
in the amount of $1,000,000. The note is due on December 31, 2023
and bears interest at 5% per annum. The loan and any accrued
interest may be converted into shares of the Company’s common stock
at a rate of 80% multiplied by the average of the three lowest
trading price during the previous ten (10) day trading period
ending on the latest complete trading day prior to the conversion
date. Pursuant to current accounting guidelines, the Company
recorded a note discount of $1,000,000 to account for the note’s
derivative liability. In addition, the Company recorded an amount
of discount in excess of the note principal of $250,000 that was
expensed as a financing cost.
During the period ended June 30, 2020 the Company amortized
$200,000 of debt discount, and as of June 30, 2020, the balance of
the unamortized debt discount was $700,000.
On October 1,
2019, the Company issued a convertible promissory note in the
amount of $250,000. The note is due on October 1, 2024 and bears
interest at 5% per annum. The loan and any accrued interest may be
converted into shares of the Company’s common stock at a rate of
80% multiplied by the average of the three lowest trading price
during the previous ten (10) day trading period ending on the
latest complete trading day prior to the conversion date. Pursuant
to current accounting guidelines, the Company recorded a note
discount of $250,000 to account for the note’s derivative
liability. In addition, the Company recorded an amount of discount
in excess of the note principal of $62,500 that was expensed as a
financing cost.
During the
period ended June 30, 2020 the Company amortized $37,500 of debt
discount, and as of June 30,
2020, the balance of the unamortized debt discount was
$212,500.
In April, and
June 2020, the Company issued four convertible promissory notes
with investors totaling $137,500. These convertible notes payable
are due one year from issuance, with interest at 5% per annum and
are convertible at 80% multiplied by the Market Price (representing
a discount rate of 20%). Market Price is defined as the average of
the lowest three (3) trading prices for the common stock during the
ten (10) trading day period ending one trading day prior to the
date the conversion.
Pursuant to current accounting guidelines, the Company recorded a
note discount of $137,500 to account for the note’s derivative
liability. In addition, the Company recorded an amount of discount
in excess of the note principal of $48,177 that was expensed as a
financing cost.
During the period ended June 30, 2020 the Company amortized $17,323
of debt discount, and as of June 30, 2020, the balance of the
unamortized debt discount was $120,177.
NOTE 7 – DERIVATIVE LIABILITY
The FASB has issued authoritative guidance whereby instruments
which do not have fixed settlement provisions are deemed to be
derivative instruments. Certain warrants issued to investors and
conversion features of notes payable did not have fixed settlement
provisions because either their exercise prices will be lowered if
the Company issues securities at lower prices in the future or the
conversion price is variable. In addition, since the number of
shares to be issued is not explicitly limited, the Company is
unable to conclude that enough authorized and unissued shares are
available to share settle the conversion option. In accordance with
the FASB authoritative guidance, the conversion feature of the
notes was separated from the host contract (i.e., the notes) and
the fair value of the warrants have been recognized as a derivative
and will be re-measured at the end of every reporting period with
the change in value reported in the statement of operations.
F-14
The derivative liabilities were valued at the following dates using
a Binomial Lattice Model with the following average
assumptions:
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June 30, 2020
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|
June 30, 2019
|
|
Stock Price
|
|
|
0.0909
|
|
|
|
0.0042
|
|
|
Risk free interest
rate
|
|
|
0.37
|
|
|
|
2.50
|
|
|
Expected
Volatility
|
|
|
506
|
|
|
|
573
|
|
|
Expected life in
years
|
|
|
3.75
-4.50
|
|
|
|
4.50
|
|
|
Expected dividend
yield
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
– Warrants
|
|
|
0
|
|
|
|
0
|
|
|
Fair Value
– Note Conversion Feature
|
|
|
1,679,276
|
|
|
|
1,250,000
|
|
|
Total
|
|
$
|
1,679,276
|
|
|
|
1,250,000
|
|
The risk-free
interest rate was based on rates established by the Federal Reserve
Bank. The Company uses the historical volatility of its common
stock to estimate the future volatility for its common stock. The
expected life of the derivative securities was determined by the
remaining contractual life of the derivative instrument. For
derivative instruments that already matured, the Company used the
estimated life. The expected dividend yield was based on the fact
that the Company has not paid dividends to its common stockholders
in the past and does not expect to pay dividends to its common
stockholders in the future.
During the period ended June 30, 202, the Company recorded $498,177
in derivative liability as a result of conversion features from the
issuance of new convertible note payables (see Note 6). In
addition, the Company recorded a gain of $68,901 as a result of the
change in value of derivative liability at June 30, 2019.
NOTE 8 – LEASES
The Company sub-leases its offices on a month-to-month basis as of
June 30, 2020.
NOTE 9 – LEGAL PROCEEDINGS
The company had several lawsuits from 2008 and prior. These have
all run their course as far as the statute of limitations is
concerned. It is the opinion of management that no lawsuits or
debts exist as of June 30, 2020.
NOTE 10 - MAJOR CUSTOMERS
As of June 30, 2020 Kronos, has no major customers.
NOTE 11 - SEGMENTS OF BUSINESS
The Company operates principally in one segment of business: the
Kronos segment licenses, manufactures and distributes air movement
and purification devices utilizing the Kronos technology. The
Company operates only in the United States of America.
NOTE 12 - RELATED PARTIES
During the period ended June 30, 2020, the Company advanced to the
Company’s former CEO the amount of $3,780. This advance is due on
demand and bears no interest.
NOTE 13 - STOCKHOLDERS' EQUITY/ (DEFICIT)
During the year ended June 30, 2020, the Company issued 12,000,000
shares of common stock valued at $23,000 upon conversion of accrued
interest, convertible at 80% multiplied by the Market Price
(representing a discount rate of 20%). Market Price is defined as
the average of the lowest three (3) trading prices for the common
stock during the ten (10) trading day period ending one trading day
prior to the date the conversion.
NOTE 14 - SUBSEQUENT EVENTS
The Company received a Notice of Conversion from the holder of the
$1,000,000 convertible note payable (See Note 6). The holder of the
note is converting principal of $58,693 and accrued interest of
$41,142 into 13,000,000 shares of common stock. The principal
F-15
balance of the note after conversion will be
$941,307.
Subsequent to the
year ended June 30, 2020, the Company received Notice of
Conversions from the four holders of the $137,500 convertible notes
payable (See Note 6). The holders of the notes are converting the
principal balance of $137,500 into 7,611,666 shares of common
stock.
F-16
WEINSTEIN INTERNATIONAL
C.P.A.
REPORT
OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Shareholders and the Board of Directors of
Kronos Advanced Technologies, Inc.
Opinion
on the Financial Statements
We have audited the
accompanying consolidated balance sheets of Kronos
Advanced Technologies, Inc. ("the
Company") as of June 30, 2021, and 2020 and the related
statements of operations,
changes in stockholders' deficit
and
cash flows, for each of the years ended June 30, 2021, and
2020, and the related notes and schedules
(collectively referred to as the "financial
statements").
In our opinion, the financial
statements present fairly, in all
material respects, the financial position of the Company
as of June 30,
2021, and 2020, and the
results of its operations
and its cash flows for each of the
periods ended June 30, 2021 and 2020, in conformity
with generally accepted accounting
principles in the United States of America.
Basis for Opinion
These financial statements are the
responsibility of the Company's management.
Our responsibility is to express an opinion on the
Company's financial statements based on our
audits. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States)
("PCAOB") and are
required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable
rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance
with the standards of the PCAOB. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement,
whether due to error or
fraud. The company is not required to have, nor were we
engaged to perform,
an audit of its internal control over
financial reporting. As part of our audits, we are required to
obtain an understanding of internal control over financial
reporting but not for the purpose of expressing an opinion
on the effectiveness of the Company's internal
control over financial reporting. Accordingly, we express no
such opinion.
Our audits included performing
procedures to assess the risks of material misstatement of the
financial statements, whether due to error or
fraud, and performing procedures that respond to those
risks. Such procedures included examining,
on a test basis, evidence
regarding the amounts and
disclosures in the financial statements.
Our audits also
included evaluating the accounting
principles used and
significant
estimates made by
management,
as well as
evaluating the overall presentation of the financial
statements. We believe that our audits provide a reasonable
basis for our opinion.
Going Concern
The
accompanying financial statements
have been
prepared
assuming the
Company will
continue as a
going
concern. As more fully described in
Note 3, the Company has incurred significant
losses and needs to raise additional
funds to meet its obligations and sustain its operations. These
conditions raise substantial doubt about the Company's ability to
continue as a going concern. Management's plans in
regard to these matters are also described in Note
3. These financial
statements do not include any adjustments that might result from
the outcome of
this uncertainty.
/s/
Weinstein
International. C.P.A.
We have served as the Company's
a
Tel - Aviv, Israel Sep
26, 2021
US Number: 1-661-466-2466
Local: +972 58-6886666 Email:
i@dwacc.com Web: www.dwacc.com
F-17
KRONOS ADVANCED TECHNOLOGIES, INC.
Consolidated Balance
Sheets
For
the Fiscal Year Ended June 30, 2021
(Audited)
|
|
|
June 30, 2021
|
|
June 30, 2020
|
|
ASSETS
|
|
|
|
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
19,320
|
|
|
$
|
19,381
|
|
|
Inventory
|
|
|
233,154
|
|
|
|
—
|
|
|
Prepaid expenses
|
|
|
16,893
|
|
|
|
123,382
|
|
|
Accounts receivable
|
|
|
20,115
|
|
|
|
7,721
|
|
|
Loans to officer
|
|
|
0
|
|
|
|
3,780
|
|
|
Total current assets
|
|
|
289,482
|
|
|
|
154,264
|
|
|
Property and
equipment, net
|
|
|
5,802,276
|
|
|
|
234,250
|
|
|
Intangible assets
|
|
|
234,486
|
|
|
|
1,010,000
|
|
|
Total Assets
|
|
$
|
6,326,244
|
|
|
$
|
1,398,514
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' DEFICIT
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
10,200
|
|
|
$
|
9,601
|
|
|
Accrued expenses
|
|
|
29,232
|
|
|
|
182,216
|
|
|
Accrued Interest Payable
|
|
|
26,585
|
|
|
|
0
|
|
|
Operating loan
|
|
|
31,650
|
|
|
|
31,650
|
|
|
Derivative liability
|
|
|
302,055
|
|
|
|
1,679,276
|
|
|
Sales Tax Payable
|
|
|
11,290
|
|
|
|
—
|
|
|
Convertible notes payable, net of discount
|
|
|
175,000
|
|
|
|
354,823
|
|
|
Total current
liabilities
|
|
|
586,012
|
|
|
|
2,257,566
|
|
|
|
|
|
|
|
|
|
|
|
|
Long Term
Liabilities
|
|
|
|
|
|
|
|
|
|
State of West
Virginia
|
|
|
2,610,000
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities
|
|
|
3,196,012
|
|
|
|
2,257,566
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholder
Deficit:
|
|
|
|
|
|
|
|
|
|
Common stock, par
value $0.001, 2,000,000,000 shares authorized 659,323,911 and
499,689,291 shares issued and outstanding as of June 30, 2021 and
June 30, 2020, respectively
|
|
|
659,324
|
|
|
|
499,689
|
|
|
Additional paid in
capital
|
|
|
43,143,410
|
|
|
|
36,848,900
|
|
|
Accumulated
deficit
|
|
|
(40,672,502
|
)
|
|
|
(38,207,641
|
)
|
|
Total Stockholders’ Equity (Deficit)
|
|
|
3,130,232
|
|
|
|
(859,052
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholder’s Deficit
|
|
$
|
6,326,244
|
|
|
$
|
1,398,514
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-18
Kronos Advanced Technologies, Inc.
Consolidated
Statements of Operations
For
the Fiscal Year Ended June 30, 2021
(Audited)
|
|
|
June 30, 2021
|
|
June 30, 2020
|
|
Revenue
|
|
$
|
503,742
|
|
|
$
|
41,215
|
|
|
Cost of goods sold
|
|
|
276,083
|
|
|
|
6,756
|
|
|
Gross Profit
|
|
|
227,658
|
|
|
|
34,459
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
2,164,633
|
|
|
|
171,334
|
|
|
Total operating expenses
|
|
|
2,164,633
|
|
|
|
171,334
|
|
|
Loss from operations
|
|
|
(1,936,975
|
)
|
|
|
(136,875
|
)
|
|
Other (Income) Expense
|
|
|
|
|
|
|
|
|
|
Capital Gain on Crypto Currency
|
|
|
(19,635
|
)
|
|
|
—
|
|
|
Interest expense
|
|
|
183,463
|
|
|
|
59,969
|
|
|
Change in value of derivative liability
|
|
|
(1,377,221
|
)
|
|
|
(68,901
|
)
|
|
Bad Debt Expense
|
|
|
4,027
|
|
|
|
110,677
|
|
|
Financing cost
|
|
|
0
|
|
|
|
|
|
|
Amortization of debt discount
|
|
|
737,500
|
|
|
|
254,823
|
|
|
Total Other (Income) Expense
|
|
|
(471,866
|
)
|
|
|
356,568
|
|
|
Net Income (Loss)
|
|
$
|
(1,465,109
|
)
|
|
$
|
(493,443
|
)
|
|
Net income (loss)
-Basic and diluted
|
|
$
|
(0.01
|
)
|
|
$
|
(0.01
|
)
|
|
Weighted average common shares
outstanding
- Basic and diluted
|
|
|
659,323,911
|
|
|
|
489,189,291
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-19
Kronos Advanced Technologies, Inc.
Consolidated
Statement of Stockholders' Equity
For
the Fiscal Year Ended June 30, 2021
(Audited)
|
|
|
Common Shares
$0.001 Par Value
|
|
Additional
|
|
|
|
|
|
|
|
Shares
Issued
|
|
Amount
|
|
Paid in
Capital
|
|
Accumulated Deficit
|
|
Equity
(Deficit)
|
|
Year Ended June
30, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30,
2020
|
|
|
499,689,291
|
|
|
$
|
499,689
|
|
|
$
|
36,848,900
|
|
|
|
(38,207,393
|
)
|
|
$
|
(858,805
|
)
|
|
Issuance of common
stock for services rendered
|
|
|
10,986,115
|
|
|
|
10,986
|
|
|
|
877,288
|
|
|
|
|
|
|
|
888,275
|
|
|
Issuance of common
stock for retirement
|
|
|
13,100,000
|
|
|
|
13,100
|
|
|
|
1,126,600
|
|
|
|
|
|
|
|
1,139,700
|
|
|
Issuance of common
stock for notes payable conversions
|
|
|
44,548,505
|
|
|
|
44,549
|
|
|
|
1,191,622
|
|
|
|
|
|
|
|
1,236,171
|
|
|
Issuance of common
stock for acquisition
|
|
|
91,000,000
|
|
|
|
91,000
|
|
|
|
3,099,000
|
|
|
|
|
|
|
|
3,190,000
|
|
|
Dividend Declared
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,000,000)
|
|
|
$
|
(1,000,000
|
)
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,465,109
|
)
|
|
$
|
(1,465,109
|
)
|
|
Balance, June 30,
2021
|
|
|
659,323,911
|
|
|
$
|
659,324
|
|
|
$
|
43,143,410
|
|
|
|
$(40,672,502
|
)
|
|
$
|
(3,130,232)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended June
30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June 30,
2019
|
|
|
487,689,291
|
|
|
$
|
487,689
|
|
|
$
|
36,837,900
|
|
|
$
|
(37,714,198
|
)
|
|
$
|
(388,609
|
)
|
|
Issuance of common
stock upon conversion of accrued interest
|
|
|
12,000,000
|
|
|
|
12,000
|
|
|
|
11,000
|
|
|
|
|
|
|
|
23,000
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(493,443)
|
|
|
$
|
(493,443)
|
|
|
Balance, June 30,
2020
|
|
|
499,689,291
|
|
|
$
|
499,689
|
|
|
$
|
36,848,900
|
|
|
$
|
(38,207,641)
|
|
|
$
|
(859,052)
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-20
Kronos Advanced Technologies, Inc.
Consolidated
Statements of Cash Flows
For
the Fiscal Year Ended June 30, 2021
(Audited)
|
|
|
For
the Year ended
|
|
|
|
June 30, 2021
|
|
June 30, 2020
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
|
|
|
|
|
|
Net loss
|
|
$
|
(1,465,109
|
)
|
|
$
|
(493,443
|
)
|
|
Adjustments to
reconcile net income (loss) to net cash used in operating
activities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
21,000
|
|
|
|
15,750
|
|
|
Change in value of derivative liability
|
|
|
(1,377,221
|
)
|
|
|
0
|
|
|
Financing cost
|
|
|
0
|
|
|
|
110,677
|
|
|
Consulting Fees
|
|
|
-
|
|
|
|
254,823
|
|
|
Inventory
|
|
|
(233,154)
|
|
|
|
—
|
|
|
Convertible Notes Adjustments
|
|
|
(179,823)
|
|
|
|
—
|
|
|
Changes in operating
liabilities
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(10,967
|
)
|
|
|
(7,721
|
)
|
|
Prepaid expenses
|
|
|
106,490
|
|
|
|
(123,282
|
)
|
|
Sales Tax Payable
|
|
|
11,190
|
|
|
|
|
|
|
Accounts payable and accrued expenses
|
|
|
(125,699)
|
|
|
|
111,361
|
|
|
Net Cash Used in
Operating Activities
|
|
|
(3,253,293)
|
|
|
|
(131,935
|
)
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Machinery
& Equipment
|
|
|
(315,000)
|
|
|
|
|
|
|
Building
& Land Acquisition
|
|
|
(5,419,026)
|
|
|
|
|
|
|
Intangible Assets Adjustments
|
|
|
986,487
|
|
|
|
|
|
|
Intellectual Property Purchases
|
|
|
(65,974)
|
|
|
|
|
|
|
Net Cash Used in
Investing Activities
|
|
|
(4,813,513)
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
Proceeds from
convertible notes payable
|
|
|
0
|
|
|
|
137,500
|
|
|
Operating loan
|
|
|
0
|
|
|
|
8,150
|
|
|
Long-Term Loans
|
|
|
2,610,000
|
|
|
|
|
|
|
Additional Paid-in
Capital
|
|
|
6,294,511
|
|
|
|
|
|
|
Common Stock
|
|
|
159,634
|
|
|
|
|
|
|
Dividends
Declared
|
|
|
(1,000,000)
|
|
|
|
|
|
|
Loans to officer
|
|
|
4,027
|
|
|
|
(32
|
)
|
|
Net Cash Provided by
Financing Activities
|
|
|
8,068,172
|
|
|
|
145,618
|
|
|
Net Increase in
Cash
|
|
|
1,366
|
|
|
|
13,683
|
|
|
Cash at Beginning of
Period
|
|
|
19,381
|
|
|
|
5,698
|
|
|
Cash at End of
Period
|
|
$
|
20,747
|
|
|
$
|
19,381
|
|
|
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
Cash paid during the
year for:
|
|
|
|
|
|
|
|
|
|
Interest
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Income taxes paid
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Fair value of common
stock upon conversion of accrued interest
|
|
$
|
—
|
|
|
$
|
—
|
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-21
KRONOS ADVANCED TECHNOLOGIES,
INC.
NOTES TO AUDITED FINANCIAL
STATEMENTS
For the Year Ended June 31, 2021,
and 2020
NOTE 1 - ORGANIZATION
AND NATURE OF OPERATIONS
Kronos Advanced Technologies, Inc.
("Kronos") is a Nevada corporation (the "Company"). The Company's
shares began trading on the over-the-counter bulletin board
exchange on August 28, 1996, under the symbol "TSET." Effective
January 12, 2002, the Company began doing business as Kronos
Advanced Technologies, Inc. and, as of January 18, 2002, it changed
the Company ticker symbol to “KNOS” and is trading on the OTC
Markets
GENERAL
Kronos Advanced Technologies, Inc., is
a product development and Production Company that develops and
patents technology that among other things fundamentally changes
the way air is moved, filtered, and sterilized. Historically,
Kronos has focused on developing, marketing, and selling the
Company's proprietary air movement and purification technology.
Serving the Indoor Air Quality (IAQ) market, Kronos technology uses
state-of-the-art high voltage processes without the use of
traditional HEPA filters. Kronos-based products move air silently,
filter and purify the air, and dramatically reduce energy
consumption to half of a 60-watt light bulb. Kronos devices can be
variable in shape or size, and, therefore, have the potential to be
scaled down for air purification in cars or scaled up in size for
industrial and hazardous gas destruction. The technology is
currently being implemented in standalone products to move and
filter air replacing HEPA and other filtration systems. There are
broad ranges of additional markets for standalone and embedded
Kronos CORE technology-based devices. Examples of immediately
addressable markets include health care facilities, operating
rooms, manufacturing clean rooms, and cabins of automobiles and
commercial aircraft.
Currently, the Company is planning to
file additional patents to improve its existing technology as well
as enter into new market segments but will continue to market air
purifiers and other consumer products. Recently the Company became
the exclusive distributor and licensee of the latest generation of
air purifiers based on the Company's CORE technologies.
Fourteen of the Company's U.S. patent
applications and three international patent applications have been
allowed for issuance. To date, our ability to execute our strategy
has been restricted by our limited amount of capital.
On July 13, 2020 Kronos filed for
provisional us patent protection for new antibacterial face mask
with cellphone radiation protection features
The
Kronos technology has numerous valuable characteristics for
applications in the indoor air quality market, including moving air
and gases at high velocities while filtering odors, smoke and
particulates and sterilizing air from bacteria and virus
contamination. In the past - a number of the scientific claims of
the Kronos technology have been tested by the U. S. and foreign
governments, multi- national companies, and independent testing
facilities (see “Independent Testing – Product Claims
Platform”).
Technology Description and
Benefits
The
proprietary Kronos technology involves the management of corona
discharge by applying high voltage management across paired
electrical grids to create an ion exchange. Applications for
efficient high voltage management, efficient corona discharge and
ion exchange include but are not limited to:
·air
movement, including dielectric fluid movement and
propulsion;
·air
purification, including particulate removal, bacterial and viral
removal, biohazard destruction, and odor removal;
F-22
|
temperature and environmental management,
including space heating and cooling;
·microchip,
MEMS and other electronics devices and components
cooling;
·air
management, including sorting and separation of air streams by
particle content;
·sound
generation, including high fidelity sound recreation and active
noise cancellation;
·high
voltage management, including development of high voltage power
supplies and control of energy surges and electrical
discharges;
·control
of water and moisture content in air streams, including
dehumidification and humidification; and,
·water
treatment, including water purification, ionization, and water
desalination.
|
Independent Testing - Product Claims
Platform
A
number of the scientific claims of the Kronos technology have been
tested by the U. S. and foreign governments, multi-national
companies, and independent testing facilities. These include the
2017 research article published by the China Medical
University/National Taiwan University discussing technologies used
by the Company; a 2020 study on electrostatic indoor air cleaners
published by the Department of the Built Environment, Aalborg
University, which also discusses the efficacy of technologies used
by the Company; a 2008 efficacy study of the Company’s air
purifiers conducted and published by the Disinfection Research
Institute in Moscow, Russia and by Environmental Health and
Engineering based in Needham, Massachusetts; and a study published
in 2018 by the Association of Home Appliance Manufacturing that
discussed technologies used by the Company. To date,
independent laboratory testing conducted in the joint study by the
Disinfection Research Institute in Moscow and the Environmental
Health and Engineering, Inc. has verified the filtration and
sterilization capability of the Kronos technology.
Filtration Testing
Results:
|
·
|
Environmental Health and Engineering -
reduced particle matter by up to 47% compared to days when the
Kronos air purifiers were not operating in the waiting room of a
pediatric office while patients were present.
|
|
·
|
Aerosol and Air Quality Research
Laboratory - up to 99.8% filtration of 0.02 to 0.20-micron (20 to
200 nanometers) size particles;
|
|
|
LMS Industries - removal of over 99.97%
of 0.10 micron (100 nanometers) and above size particles using HVAC
industry's ASHRAE 52.2 testing
standard for filtration;
|
|
·
|
Micro Test Laboratories - HEPA Clean
Room Class 1000 quality particulate reduction; and
|
|
·
|
Intertek - tobacco smoke elimination
tests in accordance with ANSI/AHAM AC-1-1988 standard entitled
"American National Standard Method for Measuring Performance of
Portable Household Electric Cord-Connected Room Air Cleaners,"
which demonstrated a Clean Air Delivery Rate ("CADR") for the
Kronos air purifier of over 300 for the larger size Kronos air
purifier and 80 for the smaller size using consumer filtration
testing standards for the Association of Home Appliance
Manufacturers ("AHAM").
|
Sterilization Testing
Results
|
·
|
Environmental Health and Engineering
(viral analysis by the University of Wisconsin Department of
Pediatrics and Medicine):
|
|
|
-
|
collection and removal of a wide range
of respiratory viruses, including influenza A, influenza B,
human
rhinoviruses, human coronavirus,
respiratory syncytial virus, adenovirus, and bocavirus, from the
waiting room of a pediatric office while patients were
present.
|
|
·
|
Scientific Institution of Health Care,
Central Clinical Hospital #2 in Moscow (clinical trial):
|
F-23
|
|
-
|
100% decontamination of bacteria
(Staphylococcus aureus) in under one hour and 80% decontamination
of general bacteria in under 24 hours from a 48m (3) hospital room
while people were present.
|
|
·
|
Pulmonary Department of Municipal
Hospital #2 in Moscow (clinical trial):
|
|
|
-
|
100% decontamination of bacteria
(Staphylococcus aureus) in under five hours from a 66m (3) hospital
room while four patients were present; and
|
|
|
-
|
100% decontamination of mildew fungi in
under two hours from a 113.2m(3) hospital room.
|
|
·
|
Disinfection Research Institute
Sterilization Laboratory in Moscow:
|
|
|
-
|
disinfected a room completely
contaminated with Bacteriophage
|
|
|
-
|
a microorganism which lives in the E.
Coli bacteria. (Bacteriophage is widely used in virus testing
because the microorganism's biological structure and size share
many functional similarities with a wide range of viruses);
and
|
|
|
-
|
100% decontamination of room infected
with bacteria (Staphylococcus aureus strain 906 (S. aureus) and
Bacillus cereus strain 96 (B. cereus)
|
|
|
-
|
S. aureus is a known cause of
hospital-acquired infections, including skin lesions such as boils
and furunculosis and more serious infections such as pneumonia and
meningitis.
|
|
·
|
Institute for Veterinary Medicine in
the Ukraine - destroy and sterilize air which had been inseminated
with Anthrax and E. coli spores;
|
|
·
|
New Hampshire Materials Laboratory - up
to 95% reduction of hazardous gases, including numerous carcinogens
found in cigarette smoke:
|
|
·
|
Battelle PNNL - 95% destruction of Bg
(anthrax simulant); and,
|
|
·
|
Dr. Sergey Stoylar, a bacteriologist
from the American Bacteriological Society - 100% destruction of
Bacillus subtilis 168 (bacteria simulant).
|
Market Segmentation
Kronos had an initial business
development strategy to attempt to develop and produce products
based on the Kronos® technology to six distinct air quality market
segments: (1) air movement and purification (residential, health
care, hospitality, and commercial facilities); (3) air purification
for unique spaces (clean rooms, airplanes, automotive, and cruise
ships); (4) specialized military (naval vessels, closed vehicles
and mobile facilities); (5) industrial scrubbing (produce storage
and diesel and other emissions); and (6) hazardous gas destruction
(incineration and chemical facilities).
Technology Application and Product
Development
To best serve Kronos' targeted market
segments, the Company is developing specific product applications
across two distinct product application platforms. A Kronos device
can be either used as a standalone product or can be embedded.
Standalone products are self- contained and only require the user
to plug the Kronos device into a wall outlet to obtain air movement
and filtration for their home, office, or hotel room. Embedded
applications of the Kronos technology require the technology be
added into another system, such as a
F-24
building ventilation system for more efficient air
movement and filtration or into an electrical device such as
computer or medical equipment to replace the cooling fan or heat
sink.
Standalone Platform
Residential Products. The Company had
developed a residential product “SilentNight” Air Purifier and in
the past sold it through independent sales reps.
Medical Products. The Company is
planning to engage in development of Healthcare related products
based on our technology.
Commercial and Other Standalone
Products. Utilizing our expanded product development resources, in
the past Kronos completed the initial design, development and
production of a series of small multifunctional devices that can be
used as space heaters, vaporizers, disinfectors, deodorizers and/or
fans.
Embedded Platform
In addition, Kronos has developed an
air filtration and purification mechanism capable of performing to
HEPA quality standards, while eliminating bacteria and viruses. The
Company believes that Kronos devices could replace current HEPA
filters with a permanent, easily cleaned, low-cost solution. Among
the technical advantages of the Kronos technology over HEPA filters
is the ability of the Kronos-based devices to eliminate the energy
burden on air handling systems, which must generate high levels of
backpressure necessary to move air through HEPA-based systems.
Kronos-based devices enhance the air flow, while providing better
than HEPA level filtration and purification. Kronos is seeking one
or more strategic partners to commercialize, market and distribute
Kronos based commercial embedded air filtration and purification
devices.
Market Segmentation
Kronos' initial business development
strategy was to develop and produce products based on the Kronos
technology to six distinct air quality market segments: (1) air
movement and purification (residential, health care, hospitality,
and commercial facilities); (2) embedded cooling and cleaning
(electronic devices and medical equipment); (3) air purification
for unique spaces (clean rooms, airplanes, automotive, and cruise
ships); (4) specialized military (naval vessels, closed vehicles
and mobile facilities); (5) industrial scrubbing (produce storage
and diesel and other emissions); and (6) hazardous gas destruction
(incineration and chemical facilities).
Patents and Intellectual
Property
Kronos has received notification that
fifteen of its patent applications have been allowed for issuance
by the United States Patent and Trademark Office and six of its
international patent applications have been allowed for issuance by
the Canadian Intellectual Property Office, the Commonwealth of
Australia Patent Office, and the Mexican Institute of Industrial
Property. These patents are considered utility patents which
describe fundamental innovations in the generation, management, and
control of electrostatic fluids, including air movement,
filtration, and purification. Each of the patents contain multiple
part claims for both general principles as well as specific designs
for incorporating the Kronos technology into air movement,
filtration, and purification products. The patents provide
protection for both specific product implementations of the Kronos
technology, as well as more general processes for applying the
unique attributes and performance characteristics of the
technology.
U.S.
Patents
i.December, 2003; #664741; Method and Apparatus for
Electrostatic Fluid Acceleration Control of a Fluid Flow;
Expires
2022;
ii.April, 2004; #6,727,657; Electrostatic Fluid Accelerator
for and a Method for Controlling Fluid; Expires 2022;
iii.May, 2005; #6,888,314; Electrostatic Fluid Accelerator
– Electrode design Geometries; Expires 2022;
iv.August 2005; #6,937,455; Spark Management Method &
Device; Expires 2022;
v.November 2005; #6,963,479; Electrostatic Fluid Accelerator
– Electrode design Geometries; Expires 2023;
vi.May 2006; #7,053,565; Electrostatic Fluid Accelerator
– Power Management; Expires 2024;
vii.July 2006; #7,150,780; Electrostatic Air Cleaning Device;
Expires 2024;
viii.October 2006; #7,122,070; Method of and Apparatus for
Electrostatic Fluid Acceleration; Expires 2025;
ix.July, 2007; #7,248,003; Electric Field Management; Expires
2025;
x.August 2007; #7,262,564; Alternative Geometries and Voltage
Supply Management; Expires 2024; and,
xi.August 2008; #7,410,531; Method of Controlling Fluid
Control; Expires 2025.
xii.January 7, 2003; #6,504,308; Electrostatic Fluid
Accelerator; Expires 2023.
F-25
xiii.July 19, 2005; #6,919,698; Electrostatic Fluid
Accelerator and for Method of Controlling Fluid Flow; Expires
2025.
xiv.January 2, 2007; #7,157,704; Corona Discharge Electrode
and Method for Operating Same; Expires 2027.
xv.January 7, 2003; #6,504,308; Electrostatic Fluid
Accelerator; Expires 2023.
xvi.May 3, 2005; # 6,888,314; Electrostatic Fluid
Accelerator; Expires 2025.
International Patents
Kronos intends to continue to
aggressively file patent applications in the U.S. and
internationally. On July 13, 2020 Kronos filed for provisional us
patent protection for new antibacterial face mask with cellphone
radiation protection features.
NOTE 2 - SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Principles
of Consolidation
The consolidated financial statements
of the Company include those of the Company and its subsidiary for
the periods in which the subsidiary was owned/held by the Company.
All significant intercompany accounts and transactions have been
eliminated in the preparation of the consolidated financial
statements. At June 30, 2021 and 2020, respectively, the Company
had only one subsidiary, Kronos Advanced Technologies,
LLC.
Accounting
Estimates
The preparation of financial statements
in conformity with Generally Accepted Accounting Principles
(“GAAP”) requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ
from those estimates. Significant estimates include assumptions
made in estimated useful lives of property and equipment,
assumptions inherent in a purchase price allocation, accruals for
potential liabilities, certain assumptions used in deriving the
fair value of derivative liabilities, share-based compensation, and
beneficial conversion feature of notes payable, and realization of
deferred tax assets.
Stock-Based
Compensation
The Company periodically issues stock
options and warrants to employees and non-employees in non-capital
raising transactions for services and for financing costs. The
Company accounts for stock option and warrant grants issued and
vesting to employees based on the authoritative guidance provided
by the Financial Accounting Standards Board whereas the value of
the award is measured on the date of grant and recognized over the
vesting period. The Company accounts for stock option and warrant
grants issued and vesting to non-employees in accordance with the
authoritative guidance of the Financial Accounting Standards Board
whereas the value of the stock compensation is based upon the
measurement date as determined at either a) the date at which a
performance commitment is reached, or b) at the date at which the
necessary performance to earn the equity instruments is complete.
Non-employee stock-based compensation charges generally are
amortized over the vesting period on a straight-line basis. In
certain circumstances where there are no future performance
requirements by the non-employee, option grants are immediately
vested and the total stock- based compensation charge is recorded
in the period of the measurement date.
The fair value of the Company's common
stock option and warrant grants is estimated using the
Black-Scholes option pricing model, which uses certain assumptions
related to risk-free interest rates, expected volatility, expected
life of the common stock options, and future dividends.
Compensation expense is recorded based upon the value derived from
the Black-Scholes option pricing model and based on actual
experience. The assumptions used in the Black-Scholes option
pricing model could materially affect compensation expense recorded
in future periods.
Fair
Value of Financial Instruments
The Company follows paragraph
820-10-35-37 of the FASB Accounting Standards Codification
(“Paragraph 820-10-35-37”) to measure the fair value of its
financial instruments and paragraph 825-10-50-10 of the FASB
Accounting Standards Codification for disclosures about fair value
of its financial instruments. Paragraph 820-10-35-37 establishes a
framework for measuring fair value in accounting principles
generally accepted in the United States of America (U.S. GAAP) and
expands disclosures about fair value measurements. To increase
consistency and comparability in fair value measurements and
related disclosures, Paragraph 820-10-35-37 establishes a
fair
F-26
value hierarchy which prioritizes the inputs to
valuation techniques used to measure fair value into three (3)
broad levels. The three (3) levels of fair value hierarchy defined
by Paragraph 820-10-35-37 are described below:
|
Level 1
|
Quoted market prices available in
active markets for identical assets or liabilities as of the
reporting date.
|
|
Level 2
|
Pricing inputs other than quoted prices
in active markets included in Level 1, which are either directly or
indirectly observable as of the reporting date.
|
|
Level 3
|
Pricing inputs that are generally
observable inputs and not corroborated by market data.
|
Financial assets are considered Level 3
when their fair values are determined using pricing models,
discounted cash flow methodologies or similar techniques and at
least one significant model assumption or input is unobservable.
The fair value hierarchy gives the highest priority to quoted
prices (unadjusted) in active markets for identical assets or
liabilities and the lowest priority to unobservable inputs. If the
inputs used to measure the financial assets and liabilities fall
within more than one level described above, the categorization is
based on the lowest level input that is significant to the fair
value measurement of the instrument.
The carrying amount of the Company’s
derivative liability of $302,055 and $1,679,276 as of June 30, 2021
and June 30, 2020, respectively and was based on Level 3
measurements.
The carrying amounts of the Company’s
other financial assets and liabilities, such as cash, prepaid
expense, accounts payable and accrued payables and notes payable,
approximate their fair values because of the short maturity of
these instruments.
Acquisitions
and Business Combinations
The Company allocates the fair value of
purchase consideration to the tangible assets acquired, liabilities
assumed, and separately identified intangible assets acquired based
on their estimated fair values. The excess of the fair value of
purchase consideration over the fair values of these identifiable
assets and liabilities is recorded as goodwill. Such valuations
require management to make significant estimates and assumptions,
especially with respect to intangible assets. Significant estimates
in valuing certain intangible assets include, but are not limited
to, future expected cash flows from, acquired technology,
trademarks and trade names, useful lives, and discount rates.
Management’s estimates of fair value are based upon assumptions
believed to be reasonable, but which are inherently uncertain and
unpredictable and, as a result, actual results may differ from
estimates. During the measurement period, which is one year from
the acquisition date, we may record adjustments to the assets
acquired and liabilities assumed, with the corresponding offset to
goodwill. Upon the conclusion of the measurement period, any
subsequent adjustments are recorded to earnings.
Derivative
Financial Instruments
The Company evaluates its financial
instruments to determine if such instruments are derivatives or
contain features that qualify as embedded derivatives. For
derivative financial instruments that are accounted for as
liabilities, the derivative instrument is initially recorded at its
fair value and is then re-valued at each reporting date, with
changes in the fair value reported in the consolidated statements
of operations. The classification of derivative instruments,
including whether such instruments should be recorded as
liabilities or as equity, is evaluated at the end of each reporting
period. Derivative instrument liabilities are classified in the
balance sheet as current or non-current based on whether or not
net-cash settlement of the derivative instrument could be required
within 12 months of the balance sheet date.
Cash
Equivalents
The Company considers all highly liquid
investments with a maturity of three months or less when purchased
to be cash equivalents.
Accounts
Receivable
All of the Company’s accounts
receivable balance is related to trade receivables. Trade accounts
receivable are recorded at the invoiced amount and do not bear
interest. The allowance for doubtful accounts, if any, is the
Company’s best estimate of the amount of probable credit losses in
its existing accounts receivable. The Company will maintain
allowances for doubtful accounts, estimating losses resulting from
the inability of its customers to make required payments for
products. Accounts with known financial issues are first reviewed
and specific estimates are recorded. The remaining accounts
receivable balances are then grouped into categories by the number
of days the
F-27
balance is past due, and the estimated loss is
calculated as a percentage of the total category based upon past
history. Account balances are charged off against the allowance
when it is probable that the receivable will not be
recovered.
Net
Income (Loss) Per Share
Basic earnings (loss) per share is
computed using the weighted-average number of common shares
outstanding during the period. Diluted earnings (loss) per share is
computed using the weighted-average number of common shares and the
dilutive effect of contingent shares outstanding during the period.
Potentially dilutive contingent shares, which primarily consist of
convertible notes, stock issuable to the exercise of stock options
and warrants have been excluded from the diluted loss per share
calculation because their effect is anti-dilutive.
Segments
The Company determined its reporting
units in accordance with ASC 280, “Segment Reporting” (“ASC 280”).
Management evaluates a reporting unit by first identifying its’
operating segments under ASC 280. The Company then evaluates each
operating segment to determine if it includes one or more
components that constitute a business. If there are components
within an operating segment that meet the definition of a business,
the Company evaluates those components to determine if they must be
aggregated into one or more reporting units. If applicable, when
determining if it is appropriate to aggregate different operating
segments, the Company determines if the segments are economically
similar and, if so, the operating segments are
aggregated.
Management has determined that the
Company has one consolidated operating segment. The Company’s
reporting segment reflects the manner in which its chief operating
decision maker reviews results and allocates resources. The
Company’s reporting segment meets the definition of an operating
segment and does not include the aggregation of multiple operating
segments.
Property
and Equipment
Property and equipment are recorded at
cost. Depreciation is provided over the estimated useful lives of
the assets, which range from three to seven years. Expenditures for
major renewals and betterments that extend the original estimated
economic useful lives of the applicable assets are capitalized.
Expenditures for normal repairs and maintenance are charged to
expense as incurred. The cost and related accumulated depreciation
of assets sold or otherwise disposed of are removed from the
accounts, and any gain or loss is included in
operations.
Digital
Assets Translations and Remeasurements
Digital Assets are included in current
assets in the consolidated balance sheets. Digital Assets are
recorded at cost less impairment.
An intangible asset with an indefinite
useful life is not amortized but assessed for impairment annually,
or more frequently, when events or changes in circumstances occur
indicating that it is more likely than not that the
indefinite-lived asset is impaired.
Impairment exists when the carrying
amount exceeds its fair value. In testing for impairment, the
Company has the option to first perform a qualitative assessment to
determine whether it is more likely than not that an impairment
exists. If it is determined that it is not more likely than not
that an impairment exists, a quantitative impairment test is not
necessary. If the Company concludes otherwise, it is required to
perform a quantitative impairment test. To the extent an impairment
loss is recognized, the loss establishes the new cost basis of the
asset. Subsequent reversal of impairment losses is not
permitted.
Realized gain (loss) on sale of Digital
Assets are included in other income (expense) in the consolidated
statements of operations.
The Company assesses impairment of
Digital Assets quarterly if the fair value of digital assets is
less than its cost basis. The Company recognizes impairment losses
on Digital Assets caused by decreases in fair value using the
average U.S. dollar spot price of the related Digital Asset as of
each impairment date. Such impairment in the value of Digital
Assets is recorded as a component of costs and expenses in our
consolidated statements of operations. There were no impairment
losses related to Digital Assets during the period ended June 30,
2021.
Intangibles
The
Company uses assumptions in establishing the carrying value, fair
value and estimated lives of the Company’s long-lived assets and
goodwill. The criteria used for these evaluations include
management's estimate of the assets’ continuing ability to generate
positive income from operations and positive cash flow in future
periods compared to the carrying value of the asset, the strategic
significance
F-28
of any identifiable intangible asset
in its business objectives, as well as the market capitalization of
the Company. Cash flow projections used for recoverability and
impairment analysis use the same key assumptions and are consistent
with projections used for internal budgeting, and for lenders and
other third parties. If assets are considered to be impaired, the
impairment recognized is the amount by which the carrying value of
the assets exceeds the fair value of the assets. Useful lives and
related amortization or depreciation expense are based on the
Company’s estimate of the period that the assets will generate
revenues or otherwise be used by Kronos. Factors that would
influence the likelihood of a material change in the Company’s
reported results include significant changes in the assets’ ability
to generate positive cash flow, loss of legal ownership or title to
the asset, a significant decline in the economic and competitive
environment on which the asset depends, significant changes in the
Company’s strategic business objectives, and utilization of the
asset.
Income
Taxes
Income taxes are accounted for in
accordance with the provisions of Statement of Financial Accounting
Standards ("SFAS") No. 109. Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that
includes the enactment date. Valuation allowances are established,
when necessary, to reduce deferred tax assets to the amounts
expected to be realized, but no less than quarterly. Currently the
company has not valued any NOL because of the expectation that it
will not be used.
Research
and Development Expenses
Costs related to research and
development are charged to research and development expense as
incurred.
Revenue
Recognition
The Company accounts for revenues in
accordance with Accounting Standards Codification (“ASC”) 606,
Revenue from Contracts with Customers. The underlying principle of
ASC 606 is to recognize revenue to depict the transfer of goods or
services to customers at the amount expected to be collected. ASC
606 creates a five-step model that requires entities to exercise
judgment when considering the terms of contract(s), which includes
(1) identifying the contract(s) or agreement(s) with a customer,
(2) identifying our performance obligations in the contract or
agreement, (3) determining the transaction price, (4) allocating
the transaction price to the separate performance obligations, and
(5) recognizing revenue as each performance obligation is
satisfied. Under ASC 606, revenue is recognized when performance
obligations under the terms of a contract are satisfied, which
occurs for the Company upon shipment or delivery of products or
services to our customers based on written sales terms, which is
also when control is transferred. Revenue is measured as the amount
of consideration we expect to receive in exchange for transferring
the products or services to a customer.
Recently
Issued Accounting Pronouncements
In February 2016, the FASB issued ASU
No. 2016-02, Leases. This ASU establishes a right-of-use model that
requires a lessee to record a right-of-use asset and a lease
liability on the balance sheet for all leases with terms longer
than 12 months. Leases will be classified as either finance or
operating, with classification affecting the pattern of expense
recognition in the income statement. This ASU and all the related
amendments are effective for fiscal years beginning after December
15, 2018, including interim periods within those fiscal years. The
Company adopted this guidance in the first quarter of fiscal 2020,
the quarter ended September 30, 2019, using the optional
transitional method afforded under ASU No. 2018-11, Leases (Topic
842): Targeted Improvements. Results for reporting periods
beginning after the adoption date are presented under Topic 842,
while prior period amounts are not adjusted and continue to be
reported in accordance with the Company’s historic accounting under
ASC 840 (see Note 7 - Leases).
The Company elected and applied the
available transition practical expedients. By electing these
practical expedients, the Company did:
|
a.
|
not reassess whether expired or
existing contracts contain leases under the new definition of a
lease;
|
|
b.
|
not reassess lease classification for
expired or existing leases; and
|
|
c.
|
not reassess whether previously
capitalized initial direct costs would qualify for capitalization
under Topic 842.
|
F-29
In June 2016, the FASB issued ASU No.
2016-13, Financial Instruments - Credit Losses (Topic 326):
Measurement of Credit Losses on Financial Instruments. The
amendments in this ASU replace the incurred loss impairment
methodology in current GAAP with a methodology that reflects
expected credit losses and requires consideration of a broader
range of reasonable and supportable information to inform credit
loss estimates. This ASU is effective for fiscal years, and for
interim periods within those fiscal years, beginning after December
15, 2019. In November 2018, the FASB issued ASU No. 2018-19,
Codification Improvements to Topic 326, Financial Instruments -
Credit Losses. The amendments in this ASU align the implementation
date for nonpublic entities’ annual financial statements with the
implementation date for their interim financial statements. In
addition, the amendment clarifies that receivables arising from
operating leases are not within the scope of Subtopic 326-20;
instead, impairment of receivables arising from operating leases
should be accounted for in accordance with Topic 842: Leases. This
ASU is effective for fiscal years beginning after December 15,
2019, including interim periods within those fiscal years. In April
2019, the FASB issued ASU No. 2019-04, Codification Improvements to
Topic 326, Financial Instruments - Credit Losses, Topic 815,
Derivatives and Hedging, and Topic 825 Financial Instruments. The
amendments in this ASU further clarify certain aspects of ASU No.
2016-13. For entities that have not yet adopted ASU No. 2016-13,
this ASU is effective for fiscal years beginning after December 15,
2019, including interim periods within those fiscal years. In May
2019, the FASB issued ASU No. 2019-05, Financial Instruments -
Credit Losses (Topic 326): Targeted Transition Relief. The
amendments in this ASU provide transition relief for ASU No.
2016-13 by providing an option to irrevocably elect the fair value
option for certain financial assets measured at an amortized cost
basis. For entities that have not yet adopted ASU No. 2016-13, this
ASU is effective for fiscal years beginning after December 15,
2019, including interim periods within those fiscal years. The
Company is currently evaluating the impact this ASU will have on
its financial statements and related disclosures.
Other
recent accounting pronouncements issued by the FASB, including its
Emerging Issues Task Force, the American Institute of Certified
Public Accountants and the SEC did not or are not believed by
management to have a material impact on the Company’s present or
future consolidated financial statement presentation or
disclosures.
NOTE 3 - REALIZATION OF ASSETS AND
GOING CONCERN
The accompanying consolidated financial
statements have been prepared in conformity with accounting
principles generally accepted in the United States of America,
which contemplate continuation of the Company as a going concern.
The Company has sustained losses from operations in recent years,
and such losses have continued through the current year ended June
30, 2021. In addition, the Company has used, rather than provided,
cash in its operations. The Company has attempted during the period
to use its resources to commercialize its technology and develop
viable commercial products and to provide for its working capital
needs.
In view of the matters described in the
preceding paragraph, recoverability of a major portion of the asset
amounts shown in the accompanying balance sheet is dependent upon
continued operations of the Company, which in turn is dependent
upon the Company's ability to meet its financing requirements on a
continuing basis, to maintain present financing and to succeed in
its future operations. The consolidated financial statements do not
include any adjustments relating to the recoverability and
classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should the
Company be unable to continue in existence.
NOTE 4. ACQUSITION OF CERTAIN
ASSETS
On October 1, 2019, the Company entered
into an operating assets purchase agreement wherein the Company
acquired three check cashing kiosks operating in the United States.
The purchase price for the assets was $250,000 in the form of a
convertible note payable. (See Note 6.)
On June 30, 2021, the Company completed
an acquisition that begun on June 18, 2020, wherein the Company
acquired an electronic manufacturing facility, all intellectual
property belonging to the seller regarding the facility, and all
manufacturing equipment within the facility located in Parkersburg,
WV. The purchase price for the assets was $5,800,000 in the form of
partial cash payment ($2,610,000) with the remainder paid in shares
totaling $3,190,000.
Kronos has purchased a turn-key
manufacturing campus centrally located in the USA in a Federal
Opportunity Zone. This factory is situated on 10.5 acres of land
with three buildings: the Main Manufacturing Facility,
Auxiliary Facility, and
Warehouse totaling 85,000 square feet. This acquisition included
Machinery and Equipment, Intellectual Property, Infrastructure,
IT assets, and planned initial Renovations. The closing of this
acquisition is pending facility improvements and is
scheduled to be completed before year's end. This acquisition is a
Critical-To-Success Tactic for Kronos in our pursuit of
manufacturing our products "In America by Americans" (Transition
To America
initiative) and executing our Touchless Manufacturing
Initiative.
F-30
NOTE 5 – INVENTORY VALUATION
AND PREPAID EXPENSES
As of June 30, 2021, Kronos has
$233,154 worth of inventory stored in their newly acquired
manufacturing facility in West Virginia. Majority of their
inventory consists of air purifiers and other related products to
sell to consumers. Kronos values their inventory based on FIFO
(First-In-First-out) accounting method.
As of June 30, 2021, prepaid expenses
were $16,893. Prepaid expenses consist of prepaid advertising
expenses for promotions and marketing that will be realized in
future months.
NOTE 6 - INTANGIBLES
Intangible assets consisted of the
following on June 30, 2021:
|
|
|
|
|
Crypto Currency
|
|
$
|
13,512
|
|
|
Developed and
Purchased Patent Technology (devalued)
|
|
|
10,000
|
|
|
Less accumulated
amortization
|
|
|
—
|
|
|
Goodwill
|
|
$
|
145,000
|
|
|
Intellectual Property
|
|
$
|
65,974
|
|
|
Net intangible
assets
|
|
$
|
89,486
|
|
Developed and purchased patent
technology includes developed technology as well as property that
was acquired in the Kronos acquisition. See Note 1. Management had
assessed that the value is not more than $10,000 and the patents
were written down to that amount in 2009.
Intellectual property includes IT
software, computer programming software, and other such intangibles
assets acquired during the acquisition of the West Virginia
manufacturing facility deal.
Intangible assets will be amortized on
a straight-line basis over 10 years once operations
increase.
NOTE 7 – CONVERTIBLE NOTES
PAYABLE
On December 31, 2018, the Company
issued a convertible promissory note in the amount of $1,000,000.
The note is due on December 31, 2023 and bears interest at 5% per
annum. The loan and any accrued interest may be converted into
shares of the Company’s common stock at a rate of 80% multiplied by
the average of the three lowest trading price during the previous
ten (10) day trading period ending on the latest completed trading
day prior to the conversion date. Pursuant to current accounting
guidelines, the Company recorded a note discount of $1,000,000 to
account for the note’s derivative liability. In addition, the
Company recorded an amount of discount in excess of the note
principal of $250,000 that was expensed as a financing
cost.
On June 30, 2021, The Company converted
the entirety of the note into shares eliminating the liability of
this note completely.
On October 1, 2019, the Company issued
a convertible promissory note in the amount of $250,000. The note
is due on October 1, 2024, and bears interest at 5% per annum. The
loan and any accrued interest may be converted into shares of the
Company’s common stock at a rate of 80% multiplied by the average
of the three lowest trading price during the previous ten (10) day
trading period ending on the latest complete trading day prior to
the conversion date. Pursuant to current accounting guidelines, the
Company recorded a note discount of $250,000 to account for the
note’s derivative liability. In addition, the Company recorded an
amount of discount in excess of the note principal of $62,500 that
was expensed as a financing cost. The lender elected to convert 12
months interest totaling 12,000 into 12 million shares of common
stock.
During the period ended June 30, 2021,
the Company amortized $21,875 of debt discount, and as of June 30,
2021, the balance of the unamortized debt discount was
$175,000.
In
April and June 2020, the Company issued four convertible promissory
notes with investors totaling $137,500. These convertible notes
payable is due one year from issuance, with interest at 5% per
annum and are convertible at 80% multiplied by the Market Price
(representing a discount rate of 20%). Market Price is defined as
the average of the lowest three (3) trading prices for the common
stock during the ten (10) trading day period ending one trading day
prior to the date the conversion. Pursuant to current accounting
guidelines,
F-31
the Company recorded a note discount
of $137,500 to account for the note’s derivative liability. In
addition, the Company recorded an amount of discount in excess of
the note principal of $48,177 that was expensed as a financing
cost.
On July 21, 2020, the Company issued a
convertible promissory note in the amount of $100,000. The note is
due on July 21, 2021, and bears interest at 5% per annum. The loan
and any accrued interest may be converted into shares of the
Company’s common stock at a rate of 80% multiplied by the average
of the three lowest trading price during the previous three (3) day
trading period ending on the latest complete trading day prior to
the conversion date.
NOTE 8-
LONG-TERM LIABILITIES
On June 17th, 2021, West Virginia
Economic Development and Authority (WVEDA) approved in a meeting of
its board of directors to grant Kronos a loan with the aggregate
principal amount not to exceed $2,610,000. This is to be considered
a loan as part of the acquisition of the manufacturing facility in
West Virginia. This loan is to serve as a cash payment for the
acquisition of the manufacturing facility as part of the agreement.
The loan is broken down into real estate improvement loan and
equipment loan with repayment terms of 15 years and 10 years
respectively.
Interest rates for the two notes are as
follows:
Loan #1: This loan shall bear interest
fixed as of the third business day prior to closing equal to the
rate of the 20 Year US Treasury Note rate plus 0.75%. This loan has
a floor (minimum) interest rate of 2. 75% and shall be adjustable
every five years.
Loan #2: This loan shall bear interest
fixed as of the third business day prior to closing equal to the
rate of the Wall Street Journal Prime rate multiplied by 0.75%.
This loan has a floor (minimum) interest rate of 2.75%.
NOTE 9- DERIVATIVE
LIABILITY
The FASB has issued authoritative
guidance whereby instruments which do not have fixed settlement
provisions are deemed to be derivative instruments. Certain
warrants issued to investors and conversion features of notes
payable did not have fixed settlement provisions because either
their exercise prices will be lowered if the Company issues
securities at lower prices in the future or the conversion price is
variable. In addition, since the number of shares to be issued is
not explicitly limited, the Company is unable to conclude that
enough authorized and unissued shares are available to share settle
the conversion option. In accordance with the FASB authoritative
guidance, the conversion feature of the notes was separated from
the host contract (i.e., the notes) and the fair value of the
warrants have been recognized as a derivative and will be
re-measured at the end of every reporting period with the change in
value reported in the statement of operations.
The derivative liabilities were valued
at the following dates using a Binomial Lattice Model with the
following average assumptions:
|
|
|
June 30, 2021
|
|
June 30, 2020
|
|
Stock Price
|
|
|
0.057
|
|
|
|
0.0909
|
|
|
Risk free interest
rate
|
|
|
0.46
|
|
|
|
0.37
|
|
|
Expected
Volatility
|
|
|
424
|
|
|
|
506
|
|
|
Expected life in
years
|
|
|
2.50 -
3.25
|
|
|
|
3.75 -
4.50
|
|
|
Expected dividend
yield
|
|
|
0
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value
– Warrants
|
|
|
0
|
|
|
|
0
|
|
|
Fair Value
– Note Conversion Feature
|
|
|
302,055
|
|
|
|
1,679,276
|
|
|
Total
|
|
|
302,055
|
|
|
|
1,679,276
|
|
The risk-free interest rate was based
on rates established by the Federal Reserve Bank. The Company uses
the historical volatility of its common stock to estimate the
future volatility for its common stock. The expected life of the
derivative securities was determined by the remaining contractual
life of the derivative instrument. For derivative instruments that
already matured, the Company used the estimated life. The expected
dividend yield was based on the fact that the Company has not paid
dividends to its common stockholders in the past and does not
expect to pay dividends to its common stockholders in the
future.
F-32
NOTE 10 – LEASES
The Company owns its offices as of June
30, 2021.
NOTE 11 – LEGAL
PROCEEDINGS
The company had several lawsuits from
2008 and prior. These have all run their course as far as the
statute of limitations is concerned. It is the opinion of
management that no debts exist as of June 30, 2021.
From time to time, the Company may be
subject to routine litigation, claims or disputes in the ordinary
course of business. The Company defends itself vigorously in all
such matters. In the opinion of management, no pending or known
threatened claims, actions or proceedings against the Company are
expected to have a material adverse effect on its financial
position, results of operations or cash flows. However, the Company
cannot predict with certainty the outcome or effect of any such
litigation or investigatory matters or any other pending
litigations or claims. There can be no assurance as to the ultimate
outcome of any such lawsuits and investigations. The Company will
record a liability when it believes that it is both probable that a
loss has been incurred and the amount can be reasonably estimated.
The Company periodically evaluates developments in its legal
matters that could affect the amount of liability that it has
previously accrued, if any, and makes adjustments as appropriate.
Significant judgment is required to determine both the likelihood
of there being, and the estimated amount of, a loss related to such
matters, and the Company’s judgment may be incorrect. The outcome
of any proceeding is not determinable in advance. Until the final
resolution of any such matters that the Company may be required to
accrue for, there may be an exposure to loss in excess of the
amount accrued, and such amounts could be material.
NOTE 12 - MAJOR
CUSTOMERS
As of June 30, 2021, Kronos’ major
customers are Walmart.com and School Districts.
NOTE 13 - SEGMENTS OF
BUSINESS
The
Company operates principally in one segment of business: the Kronos
segment licenses, manufactures, and distributes air movement and
purification devices utilizing the Kronos technology. The Company
operates primarily in the United States of America and Israel.
NOTE 14 - RELATED
PARTIES
As of June 30, 2021, in accordance with
the Exchange Transaction, GX7 Limited, partially owned by current
CTO Joseph Florence, received 91,000,000 shares as part of the
purchase agreement of the newly owned warehouse facility by Kronos.
This share amount stock represents 13.79% of the issued and
outstanding common stock of the Company as of June 30,
2021.
NOTE 15 - STOCKHOLDERS' EQUITY/
(DEFICIT)
During the
year ended June 30, 2021, total amount of shares issued throughout
the period were 159,634,620 shares:
·10,986,115
shares of common stock issued for services rendered
·13,100,000
shares of common stock issued to former officer of the company for
retirement shares
·44,548,505
shares of common stock issued for notes payable
conversions
·91,000,000
shares of common stock issued for acquisition of facility in West
Virginia
Kronos distributed $1,000,000 worth of
its assets pro rata based on record date of June 15, 2021, to its
shareholders in the form of membership interest in its former
subsidiary, DodgeSPAC LLC. Kronos acquired such membership equity
through the transfer of its $1,000,000 cost basis of its crypto
assets in April of 2021. As form of dividend, Kronos distributed to
all shareholders one unit of DogeSPAC for each one share of KNOS
held wherein each shareholder received one unit of DodgeSPAC LLC
for each share of KNOS held as of June 15, 2021.
NOTE 16 - SUBSEQUENT
EVENTS
No
Subsequent events have occurred.
F-33
|
Kronos Advanced Technologies LLC
|
|
Balance Sheet
|
|
As of December 31, 2021
UNAUDITED
|
|
|
|
|
|
|
Total
|
|
|
As of
Dec 31, 2021
|
As of
June 30, 2021
|
|
ASSETS
|
|
|
|
Current Assets
|
|
|
|
Bank Accounts
|
40,294.00
|
19,320.00
|
|
Accounts Receivable
|
23,144.00
|
20,115.00
|
|
Inventory
|
235,259.00
|
233,154.00
|
|
Loans To
Officers
|
0.00
|
0.00
|
|
Prepaid
Expenses
|
0.00
|
16,893.00
|
|
Total
Current Assets
|
$298,697.00
|
$289,482.00
|
|
Fixed
Assets
|
5,791,776.00
|
5,802,276.00
|
|
Other
Assets
|
|
|
|
Goodwill
|
145,000.00
|
145,000.00
|
|
Intangibles
|
24,931.00
|
23,512.00
|
|
Intellectual Property
|
65,974.00
|
65,974.00
|
|
Total
Other Assets
|
$235,905.00
|
$234,486.00
|
|
TOTAL ASSETS
|
$6,326,378.00
|
$6,326,244.00
|
|
LIABILITIES AND
EQUITY
|
|
|
|
Liabilities
|
|
|
|
Current Liabilities
|
|
|
|
Accounts
Payable
|
|
|
|
Accounts
Payable (A/P)
|
6,257.00
|
10,200.00
|
|
Total Accounts
Payable
|
$6,257.00
|
$10,200.00
|
|
Other Current
Liabilities
|
|
|
|
Accrued
Expenses
|
29,232.00
|
29,232.00
|
|
Accrued
Interest Payable
|
35,354.00
|
26,585.00
|
|
Convertible
Note Payable, Net of Discount
|
200,000.00
|
175,000.00
|
|
Derivative
Liability
|
302,055.00
|
302,055.00
|
|
Loans
Payable
|
845.00
|
0.00
|
|
Operating
Loan
|
143,150.00
|
31,650.00
|
|
Sales
Tax Payable
|
11,865.00
|
11,290.00
|
|
Total Other Current
Liabilities
|
$722,501.00
|
$575,812.00
|
|
Total Current Liabilities
|
$728,758.00
|
$586,012.00
|
|
Long-Term Liabilities
|
|
|
|
State of West
Virginia
|
2,610,000.00
|
2,610,000.00
|
|
Total Long-Term Liabilities
|
$2,610,000.00
|
$2,610,000.00
|
|
Total
Liabilities
|
$3,338,758.00
|
$3,196,012.00
|
|
Equity
|
|
|
|
Additional Paid In Capital
|
43,143,410.00
|
43,143,410.00
|
|
Common Stock
|
659,324.00
|
659,324.00
|
|
Retained Earnings
|
-40,815,114.00
|
-40,672,502.00
|
|
Total
Equity
|
$2,987,620.00
|
$3,130,232.00
|
|
TOTAL LIABILITIES
AND EQUITY
|
$6,326,378.00
|
$6,326,244.00
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-34
|
Kronos Advanced Technologies LLC
|
|
Profit and Loss
UNAUDITED
|
|
|
|
|
|
|
Total
|
|
|
Oct - Dec, 2021
|
April - June 2021
|
|
Income
|
22,488.00
|
503,742.00
|
|
Cost of Goods
Sold
|
16,215.00
|
276,083.00
|
|
Gross Profit
|
$6,273.00
|
$227,659.00
|
|
Expenses
|
58,161.00
|
2,164,633.00
|
|
Net Operating
Income
|
-$51,888.00
|
-$1,936,975.00
|
|
Other Expenses
|
|
|
|
Capital Gain on Crypto Currency
|
0.00
|
-19,635.00
|
|
Amortization of Debt discount
|
12,500.00
|
737,500.00
|
|
Interest Expense
|
4,385.00
|
183,463.00
|
|
Bad
Debt Expense
|
0.00
|
4,027.00
|
|
Change
in FMV of Derivative Liability
|
|
-1,377,221.00
|
|
Total Other
Expenses
|
$16,875.00
|
-$471,866.00
|
|
Net Other
Income
|
-$16,885.00
|
$471,866.00
|
|
Net Income
|
-$68,773.00
|
-$1,465,109.00
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-35
|
Kronos Advanced Technologies LLC
|
|
Statement of Stockholder's Equity
UNAUDITED
|
|
|
|
|
|
|
|
|
Quarter Ended
December 31, 2021
|
Shares Issued
|
Amount
|
Additional
Paid-In Capital
|
Accumulated Deficit
|
Equity (Deficit)
|
|
Balance September
30, 2021
|
749,323,911
|
$659,324.00
|
$43,143,410.00
|
$(40,746,341.00)
|
$3,056,393.00
|
|
Issuance of Common
Stock upon conversion
|
-
|
$-
|
$-
|
$-
|
$-
|
|
Net Income
(Loss)
|
-
|
$-
|
$-
|
$(68,773.00)
|
$(68,773.00)
|
|
Balance December
31, 2021
|
749,323,911
|
$659,324.00
|
$43,081,170.00
|
$(40,815,114.00)
|
$2,987,620.00
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended June
30, 2021
|
Shares Issued
|
Amount
|
Additional
Paid-In Capital
|
Accumulated Deficit
|
Equity (Deficit)
|
|
Balance June 30,
2020
|
499,689,291
|
$499,689.00
|
$36,848,900.00
|
$(38,207,393.00)
|
$(858,805.00)
|
|
Issuance of Common
Stock for services rendered
|
10,986,115
|
$10,986.00
|
$877,288.00
|
$-
|
$888,275.00
|
|
Issuance of common
stock for retirement
|
13,100,000
|
$
13,100.00
|
$
1,126,600.00
|
$
-
|
$
1,139,700.00
|
|
Issuance of common
stock for notes payable conversion
|
44,548,505
|
$
44,549.00
|
$
1,191,622.00
|
$
-
|
$
1,236,171.00
|
|
Issuance of common
stock for acquisition
|
91,000,000
|
$
91,000.00
|
$
3,099,000.00
|
$
-
|
$
3,190,000.00
|
|
Dividend
Declared
|
|
|
|
$(1,000,000.00)
|
$(1,000,000.00)
|
|
Net Income
(Loss)
|
-
|
$-
|
$-
|
$(1,465,109.00)
|
$(1,465,109.00)
|
|
Balance December
31, 2020
|
659,323,911
|
$659,324.00
|
$43,143,410.00
|
$(40,672,502.00)
|
$3,130,232.00
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-36
|
Kronos Advanced Technologies LLC
|
|
Cash Flow Statements
UNAUDITED
|
|
|
12/31/2021
|
6/30/2021
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net loss
|
$ (68,773.00)
|
$ (1,465,109.00)
|
|
Adjustments to reconcile net income (loss) to
net cash used in operating activities:
|
|
|
|
Depreciation
|
$ 5,250.00
|
$ 21,000.00
|
|
Change in value of derivative
liability Financing cost
|
$ -
|
$ (1,377,221.00)
|
|
Stock Based Compensation
|
$ -
|
$ -
|
|
Inventory
|
$ (3,344.00)
|
$ (233,154.00)
|
|
Convertible Notes
Adjustments
|
$ 12,500.00
|
$ (179,823.00)
|
|
Changes in
operating liabilities
Accounts receivable
|
|
|
|
Accounts
Receivable
|
$ (2,534.00)
|
$
(10,967.00)
|
|
Prepaid expenses
|
$ 12,378.00
|
$ 106,490.00
|
|
Sales Tax Payable
|
$
250.00
|
$
11,190.00
|
|
Accounts payable and accrued
expenses
|
$ 10,941.00
|
$
(125,699.00)
|
|
Net Cash Used in Operating
Activities
|
$ (33,332.00)
|
$ (3,253,293.00)
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
Machinery &
Equipment
|
|
$
(315,000.00)
|
|
Land &
Building Acquisitions
|
|
$
(5,419,026.00)
|
|
Intangible Assets
Adjustments
|
|
$
986,487.00
|
|
Intellectual
Property Purchases
|
|
$
(65,974.00)
|
|
Net Cash Provided
By Investing Activities
|
|
$
(4,813,513.00)
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES:
Crypto Currency
Net Cash Provided By Investing Activities
|
(1,418)
(1,418)
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES:
Proceeds from convertible notes payable
|
|
|
|
Operating loan
|
$ 62,000.00
|
$ -
|
|
Long-Term Loans
|
|
$
2,610,000.00
|
|
Additional Paid-In Capital
|
|
$
6,294,511.00
|
|
Common Stock
|
|
$
659,324.00
|
|
Dividends Declared
|
|
$
(1,000,000.00)
|
|
Loans to officer
|
$ -
|
$
4,027.00
|
|
Net Cash Provided by Financing
Activities
|
$ 62,000.00
|
$ 8,068,172.00
|
|
Net Increase in Cash
|
$ 27,250.00
|
$ 1,366.00
|
|
Cash at Beginning of Period
|
$ 14,466.00
|
$ 19,381.00
|
|
Cash at End of Period
|
$ 41,716.00
|
$ 20,747.00
|
The
accompanying notes are an integral part of these consolidated
financial statements.
F-37
KRONOS ADVANCED
TECHNOLOGIES, INC.
NOTES TO FINANCIAL STATEMENTS
For
the Quarter Ended December 31, 2021, Unaudited
NOTE 1 -
ORGANIZATION AND NATURE OF OPERATIONS
Kronos Advanced Technologies, Inc. ("Kronos") is a Nevada
corporation (the "Company"). The Company's shares began trading on
the over-the-counter bulletin board exchange on August 28, 1996,
under the symbol "TSET." Effective January 12, 2002, the Company
began doing business as Kronos Advanced Technologies, Inc. and, as
of January 18, 2002, it changed the Company ticker symbol to
"KNOS“ and is trading on the OTC Markets
GENERAL
Kronos Advanced Technologies, Inc., is a product development and
Production Company that develops and patents technology that among
other things fundamentally changes the way air is moved, filtered,
and sterilized. Historically, Kronos has focused on developing,
marketing, and selling the Company's proprietary air movement and
purification technology. Serving the Indoor Air Quality (IAQ)
market, Kronos technology uses state-of-the-art high voltage
processes without the use of traditional HEPA filters. Kronos-based
products move air silently, filter and purify the air, and
dramatically reduce energy consumption to half of a 60-watt light
bulb. Kronos devices can be variable in shape or size, and,
therefore, have the potential to be scaled down for air
purification in cars or scaled up in size for industrial and
hazardous gas destruction. The technology is currently being
implemented in standalone products to move and filter air replacing
HEPA and other filtration systems. There are broad ranges of
additional markets for standalone and embedded Kronos CORE
technology-based devices. Examples of immediately addressable
markets include health care facilities, operating rooms,
manufacturing clean rooms, and cabins of automobiles and commercial
aircraft.
Currently, the Company is planning to file additional patents to
improve its existing technology as well as enter into new market
segments but will continue to market air purifiers and other
consumer products. Recently the Company became the exclusive
distributor and licensee of the latest generation of air purifiers
based on the Company's CORE technologies.
Fourteen of the Company's U.S. patent applications and three
international patent applications have been allowed for issuance.
To date, our ability to execute our strategy has been restricted by
our limited amount of capital.
On
July 13, 2020 Kronos filed for provisional us patent protection for
new antibacterial face mask with cellphone radiation protection
features
The
Kronos technology has numerous valuable characteristics for
applications in the indoor air quality market, including moving air
and gases at high velocities while filtering odors, smoke and
particulates and sterilizing air from bacteria and virus
contamination. In the past - a number of the scientific claims of
the Kronos technology have been tested by the U. S. and foreign
governments, multi- national companies, and independent testing
facilities (see “Independent Testing – Product Claims
Platform”).
Technology
Description and Benefits
The proprietary
Kronos technology involves the management of corona discharge by
applying high voltage management across paired electrical grids to
create an ion exchange. Applications for efficient high voltage
management, efficient corona discharge and ion exchange include but
are not limited to:
|
·
|
air movement,
including dielectric fluid movement and propulsion;
|
|
·
|
air purification,
including particulate removal, bacterial and viral removal,
biohazard destruction, and odor removal;
|
|
·
|
temperature and
environmental management, including space heating and cooling;
|
|
·
|
microchip, MEMS and
other electronics devices and components cooling;
|
|
·
|
air management,
including sorting and separation of air streams by particle
content;
|
|
·
|
sound generation,
including high fidelity sound recreation and active noise
cancellation;
|
|
·
|
high voltage
management, including development of high voltage power supplies
and control of energy surges and electrical discharges;
|
|
·
|
control of water and
moisture content in air streams, including dehumidification and
humidification; and
|
F-38
|
·
|
water treatment,
including water purification, ionization and water
desalination.
|
Independent
Testing - Product Claims Platform
A
number of the scientific claims of the Kronos technology have been
tested by the U. S. and foreign governments, multi-national
companies, and independent testing facilities. These include the
2017 research article published by the China Medical
University/National Taiwan University discussing technologies used
by the Company; a 2020 study on electrostatic indoor air cleaners
published by the Department of the Built Environment, Aalborg
University, which also discusses the efficacy of technologies used
by the Company; a 2008 efficacy study of the Company’s air
purifiers conducted and published by the Disinfection Research
Institute in Moscow, Russia and by Environmental Health and
Engineering based in Needham, Massachusetts; and a study published
in 2018 by the Association of Home Appliance Manufacturing that
discussed technologies used by the Company. To date,
independent laboratory testing conducted in the joint study by the
Disinfection Research Institute in Moscow and the Environmental
Health and Engineering, Inc. has verified the filtration and
sterilization capability of the Kronos technology.
Filtration Testing
Results:
|
·
|
Environmental Health
and Engineering - reduced particle matter by up to 47% compared to
days when the Kronos air purifiers were not operating in the
waiting room of a pediatric office while patients were present.
|
|
·
|
Aerosol and Air
Quality Research Laboratory - up to 99.8% filtration of 0.02 to
0.20-micron (20 to 200 nanometers) size particles;
|
|
·
|
LMS Industries -
removal of over 99.97% of 0.10 micron (100 nanometers) and above
size particles using HVAC industry's ASHRAE 52.2 testing standard
for filtration;
|
|
·
|
MicroTest
Laboratories - HEPA Clean Room Class 1000 quality particulate
reduction; and
|
|
·
|
Intertek - tobacco
smoke elimination tests in accordance with ANSI/AHAM AC-1-1988
standard entitled "American National Standard Method for Measuring
Performance of Portable Household Electric Cord-Connected Room Air
Cleaners," which demonstrated a Clean Air Delivery Rate ("CADR")
for the Kronos air purifier of over 300 for the larger size Kronos
air purifier and 80 for the smaller size using consumer filtration
testing standards for the Association of Home Appliance
Manufacturers
("AHAM").
|
Sterilization
Testing Results
|
·
|
Environmental Health
and Engineering (viral analysis by the University of Wisconsin
Department of Pediatrics and Medicine):
|
|
|
-
|
collection and
removal of a wide range of respiratory viruses, including influenza
A, influenza B, human
rhinoviruses, human
coronavirus, respiratory syncytial virus, adenovirus, and
bocavirus, from the waiting room of a pediatric office while
patients were present.
|
|
·
|
Scientific
Institution of Health Care, Central Clinical Hospital #2 in Moscow
(clinical trial):
|
|
|
-
|
100% decontamination
of bacteria (Staphylococcus aureus) in under one hour and 80%
decontamination of general bacteria in under 24 hours from a 48m
(3) hospital room while people were present.
|
|
·
|
Pulmonary Department
of Municipal Hospital #2 in Moscow (clinical trial):
|
|
|
-
|
100% decontamination
of bacteria (Staphylococcus aureus) in under five hours from a 66m
(3) hospital room while four patients were present; and
|
|
|
-
|
100% decontamination
of mildew fungi in under two hours from a 113.2m(3) hospital
room.
|
|
·
|
Disinfection Research
Institute Sterilization Laboratory in Moscow:
|
|
|
-
|
disinfected a room
completely contaminated with Bacteriophage
|
|
|
-
|
a microorganism which
lives in the E. Coli bacteria. (Bacteriophage is widely used in
virus testing because the microorganism's biological structure and
size share many functional similarities with a wide range of
viruses); and
|
|
|
-
|
100% decontamination
of room infected with bacteria (Staphylococcus aureus strain 906
(S. aureus) and Bacillus cereus strain 96 (B. cereus)
|
F-39
|
|
-
|
S. aureus is a known
cause of hospital-acquired infections, including skin lesions such
as boils and furunculosis and more serious infections such as
pneumonia and meningitis.
|
|
·
|
Institute for
Veterinary Medicine in the Ukraine - destroy and sterilize air
which had been inseminated with Anthrax and E.coli
spores;
|
|
·
|
New Hampshire
Materials Laboratory - up to 95% reduction of hazardous gases,
including numerous carcinogens found in cigarette smoke:
|
|
·
|
Battelle PNNL - 95%
destruction of Bg (anthrax simulant); and
|
|
·
|
Dr. Sergey Stoylar, a
bacteriologist from the American Bacteriological Society - 100%
destruction of Bacillus subtilis 168 (bacteria simulant).
|
Market
Segmentation
Kronos had an initial business development strategy to attempt to
develop and produce products based on the Kronos® technology to six
distinct air quality market segments: (1) air movement and
purification (residential, health care, hospitality, and commercial
facilities); (3) air purification for unique spaces (clean rooms,
airplanes, automotive, and cruise ships); (4) specialized military
(naval vessels, closed vehicles and mobile facilities); (5)
industrial scrubbing (produce storage and diesel and other
emissions); and (6) hazardous gas destruction (incineration and
chemical facilities).
Technology
Application and Product Development
To
best serve Kronos' targeted market segments, the Company is
developing specific product applications across two distinct
product application platforms. A Kronos device can be either used
as a standalone product or can be embedded. Standalone products are
self- contained and only require the user to plug the Kronos device
into a wall outlet to obtain air movement and filtration for their
home, office or hotel room. Embedded applications of the Kronos
technology require the technology be added into another system,
such as a building ventilation system for more efficient air
movement and filtration or into an electrical device such as
computer or medical equipment to replace the cooling fan or heat
sink.
Standalone
Platform
Residential Products. The Company had developed a
residential product SilentNight Air Purifier and in the past sold
it through independent sales reps.
Medical Products. The Company is planning to engage in
development of Healthcare related products based on our
technology.
Commercial and Other Standalone Products. Utilizing our
expanded product development resources, in the past Kronos
completed the initial design, development and production of a
series of small multifunctional devices that can be used as space
heaters, vaporizers, disinfectors, deodorizers and/or fans.
Embedded
Platform
In
addition, Kronos has developed an air filtration and purification
mechanism capable of performing to HEPA quality standards, while
eliminating bacteria and viruses. The Company believes that Kronos
devices could replace current HEPA filters with a permanent, easily
cleaned, low-cost solution. Among the technical advantages of the
Kronos technology over HEPA filters is the ability of the
Kronos-based devices to eliminate the energy burden on air handling
systems, which must generate high levels of backpressure necessary
to move air through HEPA-based systems. Kronos-based devices
enhance the air flow, while providing better than HEPA level
filtration and purification. Kronos is seeking one or more
strategic partners to commercialize, market and distribute Kronos
based commercial embedded air filtration and purification
devices.
Market
Segmentation
Kronos' initial business development strategy was to develop and
produce products based on the Kronos technology to six distinct air
quality market segments: (1) air movement and purification
(residential, health care, hospitality, and commercial facilities);
(2) embedded cooling and cleaning (electronic devices and medical
equipment); (3) air purification for unique spaces (clean rooms,
airplanes, automotive, and cruise ships); (4) specialized military
(naval vessels, closed vehicles and mobile facilities); (5)
industrial scrubbing (produce storage and diesel and other
emissions); and (6) hazardous gas destruction (incineration and
chemical facilities).
F-40
Patents and
Intellectual Property
Kronos has received notification that fifteen of its patent
applications have been allowed for issuance by the United States
Patent and Trademark Office and six of its international patent
applications have been allowed for issuance by the Canadian
Intellectual Property Office, the Commonwealth of Australia Patent
Office and the Mexican Institute of Industrial Property. These
patents are considered utility patents which describe fundamental
innovations in the generation, management and control of
electrostatic fluids, including air movement, filtration and
purification. Each of the patents contain multiple part claims for
both general principles as well as specific designs for
incorporating the Kronos technology into air movement, filtration
and purification products. The patents provide protection for both
specific product implementations of the Kronos technology, as well
as more general processes for applying the unique attributes and
performance characteristics of the technology.
U.S.
Patents
|
Date
|
U.S. Patent #
|
Patent Title
|
Description
|
Protection
|
|
2008
|
|
Fluid Flow
|
including an array of
corona
|
|
|
|
|
|
electrodes discharge
electrodes
|
|
|
|
|
|
and an array of
acceleration flow
|
|
|
August
|
7,262,564
|
Alternative
|
geometry, voltage
ratios
|
2024
|
|
2007
|
|
Geometries and
|
and power
requirements
|
|
|
|
|
Voltage Supply
|
for improved
operational
|
|
|
|
|
Management
|
performance
|
|
|
July
|
7,248,003
|
Electric Field
|
effective electric
field
|
2025
|
|
2007
|
|
Management
|
management for
reduced
|
|
|
|
|
|
sparking
|
|
|
October
|
7,122,070
|
Method of and
|
inertialess power
supply for
|
2025
|
|
2006
|
|
Apparatus for
|
safe operation and
spark
|
|
|
|
|
Electrostatic
Fluid
|
prevention
|
|
|
|
|
Acceleration
|
|
|
|
July
|
7,150,780
|
Electrostatic Air
|
method for improving
the
|
2024
|
|
2006
|
|
Cleaning Device
|
efficiency of
electrodes for
|
|
|
|
|
|
filtering micron and
sub-
|
|
|
|
|
|
micron size
particles
|
|
|
May
|
7,053,565
|
Electrostatic
Fluid
|
effective powering of
the
|
2024
|
|
2006
|
|
Accelerator -
Power
|
electrodes for high
level of
|
|
|
|
|
Management
|
air velocity
|
|
|
November
|
6,963,479
|
Electrostatic
Fluid
|
advanced voltage
management
|
2023
|
|
2005
|
|
Accelerator -
|
impacts air
filtration and
|
|
|
|
|
Advanced
Geometries
|
sterilization, air
flow and
|
|
|
|
|
|
ozone as well as safe
operation
|
|
|
|
|
|
and spark
prevention
|
|
|
August
|
6,937,455
|
Spark Management
|
analysis, detection
and
|
2022
|
|
2005
|
|
Method and Device
|
prevention of sparks
in a
|
|
|
|
|
|
high voltage field
-
|
|
|
|
|
|
creating safe,
effective
|
|
|
|
|
|
electrostatic
technology
|
|
|
|
|
|
Products
|
|
|
May
|
6,888,314
|
Electrostatic
Fluid
|
electrode design
geometries
|
2022
|
|
2005
|
|
Accelerator -
|
and attributes
including
|
|
|
|
|
Electrode Design
|
micro channeling to
achieve
|
|
|
|
|
Geometries
|
unique air movement
and
|
|
F-41
|
|
|
|
purification
performance
|
|
|
April
|
6,727,657
|
Electrostatic
Fluid
|