UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ________ to ________
Commission
file number:
(Exact Name of Registrant as Specified in its Charter)
| (State or Other Jurisdiction | (I.R.S. Employer | |
| of Incorporation or Organization) | Identification No.) |
| (Address of Principal Executive Offices) | (Zip Code) |
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or Section 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller
Reporting Company | |
| Emerging
Growth Company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐
Yes ☒
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| OTC Markets “PINK” |
As of May 19, 2023, there were shares of the registrant’s common stock outstanding.
CARBONMETA TECHNOLOGIES, INC.
TABLE OF CONTENTS
| 2 |
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q for the period ended March 31, 2023 (the “Quarterly Report”) contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements relate to future events including, without limitation, our ability to raise capital, our operational and strategic initiatives or our future financial performance. We have attempted to identify forward-looking statements by using terminology such as “anticipates,” “believes,” “expects,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predict,” “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions; uncertainties and other factors may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels or activity, performance or achievements expressed or implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Our expectations are as of the date this Quarterly Report is filed, and we do not intend to update any of the forward-looking statements after the date this Quarterly Report is filed to confirm these statements to actual results, unless required by law.
You should not place undue reliance on forward-looking statements. The cautionary statements set forth in this Quarterly Report identify important factors which you should consider in evaluating our forward-looking statements. These factors include, among other things:
| ● | Our ability to effectively execute our business plans including transitioning from being focused on end-to-end consumer product innovation, development, and commercialization to being focused on digital media, advertising and content technologies innovation, development, and commercialization; | |
| ● | Our ability to manage our expansion, growth and operating expenses; | |
| ● | Our ability to protect our brands, reputation and intellectual property rights; | |
| ● | Our ability to obtain adequate financing to support our development plans; | |
| ● | Our ability to repay our debts; | |
| ● | Our ability to rely on third-party suppliers, content contributors, developers, and other business partners; | |
| ● | Our ability to evaluate and measure our business, prospects and performance metrics; | |
| ● | Our ability to compete and succeed in a highly competitive and evolving industry; | |
| ● | Our ability to respond and adapt to changes in technology and consumer behavior; | |
| ● | Our dependence on information technology, and being subject to potential cyberattacks, security problems, network disruptions, and other incidents; | |
| ● | Our ability to comply with complex and evolving laws and regulations including those relating to privacy, data use and data protection, content, competition, safety and consumer protection, e-commerce, digital assets and other matters, many of which are subject to change and uncertain interpretation; | |
| ● | Our ability to enhance disclosure and financial reporting controls and procedures and remedy the existing weakness; | |
| ● | Risks in connection with completed or potential acquisitions, dispositions and other strategic growth opportunities and initiatives; | |
| ● | Taxes; | |
| ● | The stability of the governments and political and business conditions in certain foreign countries in which we or certain of our business partners may operate now or in the future; | |
| ● | Costs and results of potential litigation; | |
| ● | Changes in accounting standards or inaccurate estimates or assumptions in the application of accounting policies; | |
| ● | The use of social or digital media to disseminate false, misleading and/or unreliable or inaccurate information regarding our products, services or the industry in which we operate; | |
| ● | Other risk factors discussed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 20, 2023. |
These and other factors discussed above could cause results to differ materially from those expressed in the estimates made by any independent parties and by us.
| 3 |
TRADEMARKS, SERVICE MARKS AND TRADE NAMES
Solely for convenience, we refer to trademarks in this Quarterly Report without the ® or the ™ or symbols, but such references are not intended to indicate that we will not assert, to the fullest extent under applicable law, our rights to our own trademarks. Other service marks, trademarks and trade names referred to in this Quarterly Report, if any, are the property of their respective owners, although for presentational convenience we may not use the ® or the ™ symbols to identify such trademarks.
OTHER PERTINENT INFORMATION
Unless the context otherwise indicates, when used in this Annual Report, the terms “CarbonMeta,” “COWI,” “we,” “us,” “our,” the “Company” and similar terms refer to CarbonMeta Technologies, Inc., a Delaware corporation, and all of our consolidated subsidiaries and variable interest entities.
| 4 |
PART I - FINANCIAL INFORMATION
CARBONMETA TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | $ | ||||||
| Accounts receivable | ||||||||
| Inventory | ||||||||
| Total Current Assets | ||||||||
| Property
and equipment, net of accumulated depreciation of $ | ||||||||
| Licenses,
net of accumulated amortization of $ | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Obligations collateralized by receivables | ||||||||
| Convertible debt, net | ||||||||
| Notes payable | ||||||||
| Notes payable - related parties | ||||||||
| Small Business Administration loan | ||||||||
| Derivative liability | ||||||||
| Total Current Liabilities | ||||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| Commitments and contingencies | ||||||||
| STOCKHOLDERS’ DEFICIT: | ||||||||
| Redeemable convertible preferred stock, Series A, $ par value, shares authorized, shares issued and outstanding | ||||||||
| Redeemable convertible preferred stock, Series B, $ par value, shares authorized, and shares issued and outstanding | ||||||||
| Redeemable convertible preferred stock, Series C, $ par value, shares authorized, and shares issued and outstanding | ||||||||
| Redeemable convertible preferred stock, Series D, $ par value, shares authorized, and shares issued and outstanding | ||||||||
| Redeemable convertible preferred stock, Series E, $ par value, shares authorized, and shares issued and outstanding, respectively | ||||||||
| Redeemable convertible preferred stock, Series F, $ par value, shares authorized, and shares issued and outstanding | ||||||||
| Redeemable convertible preferred stock, Series G, $ par value, shares authorized, and shares issued and outstanding | ||||||||
| Common stock; and shares authorized at $ par value, and shares issued, respectively; and shares outstanding, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Treasury stock – and shares of common stock | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| TOTAL STOCKHOLDERS’ DEFICIT | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 5 |
CARBONMETA TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
For the three months ended March 31, 2023 and 2022
March 31, 2023 | March 31, 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| Contract services revenue | $ | $ | ||||||
| Operating expenses: | ||||||||
| Executive compensation | ||||||||
| Legal and professional fees | ||||||||
| Investor relations | ||||||||
| Consulting fees | ||||||||
| Sales and marketing | ||||||||
| Research and development | ||||||||
| Amortization of licenses | ||||||||
| Depreciation of equipment | ||||||||
| Other operating expenses | ||||||||
| Total operating expenses | ||||||||
| Operating (loss) | ( | ) | ( | ) | ||||
| Other income (expenses): | ||||||||
| Gain (loss) from derivative liability | ( | ) | ( | ) | ||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other income (expenses) - net | ( | ) | ( | ) | ||||
| Income (loss) before income taxes | ( | ) | ( | ) | ||||
| Income tax provision | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
| Net income per common share: | ||||||||
| Basic | $ | ( | ) | $ | ( | ) | ||
| Diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted-average common shares outstanding: | ||||||||
| Basic | ||||||||
| Diluted | ||||||||
| Comprehensive income (loss): | ||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | ||
Foreign currency translation adjustments | ( | ) | ||||||
| Comprehensive income (loss) | $ | ( | ) | $ | ( | ) | ||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 6 |
CARBONMETA TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ (DEFICIT)
For the three months ended March 31, 2023 and 2022
(Unaudited)
| Preferred Stock | Common Stock | Additional | Accumulated Other | |||||||||||||||||||||||||||||||||||||||||||||||||
| Series B | Series D | Series E | Series F | Series G | Amount | Shares | Amount | Paid-In Capital | Treasury Stock | Accumulated Deficit | Comprehensive Income | Total | ||||||||||||||||||||||||||||||||||||||||
| Balances, December 31, 2021 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Common stock issued for license | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Common
stock and warrants issued in connection with convertible notes financings, net of placement agent fee of $ | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for accrued executive compensation | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for accrued consulting fees | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Net loss for three months ended March 31, 2022 | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Balances, March 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Balances, December 31, 2022 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Common stock issued in connection with conversion of convertible notes | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Common stock issued for services | - | - | - | - | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Sale of Treasury stock | - | - | - | - | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Net loss for three months ended March 31, 2023 | - | - | - | - | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Balances, March 31, 2023 | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 7 |
CARBONMETA TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 2023 and 2022
| March 31, 2023 | March 31, 2022 | |||||||
| (Unaudited) | (Unaudited) | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net income (loss) for the period | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
| Depreciation of equipment | ||||||||
| Amortization of licenses | ||||||||
| Amortization of debt discounts | ||||||||
| Stock based compensation | ||||||||
| Loss (gain) from derivative liability | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Prepaid expenses | ||||||||
| Accounts payable and accrued expenses | ||||||||
| NET CASH (USED IN) OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| INVESTING ACTIVITIES: | ||||||||
| Purchase of equipment | ||||||||
| NET CASH USED IN INVESTING ACTIVITIES | ||||||||
| FINANCING ACTIVITIES: | ||||||||
| Proceeds from convertible debt financings | ||||||||
| Proceeds from sales of treasury stock | ||||||||
| Payments towards notes payable | ( | ) | ||||||
| NET CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| EXCHANGE RATE EFFECT ON CASH | ( | ) | ||||||
| NET INCREASE (DECREASE) IN CASH | ||||||||
| CASH, BEGINNING OF PERIOD | ||||||||
| CASH, END OF PERIOD | $ | $ | ||||||
| SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
| Cash paid during the year for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES: | ||||||||
| Common Stock issued in satisfaction of accrued executive compensation | $ | $ | ||||||
| Common Stock issued for accrued consulting fees | $ | $ | ||||||
| Common stock issued for prepaid marketing fees | $ | $ | ||||||
| Common stock issued for license | $ | $ | ||||||
| Common stock and warrants issued in connection with new convertible notes | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
| 8 |
CARBONMETA TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2023 and 2022
(Unaudited)
NOTE A – ORGANIZATION
CarbonMeta Technologies, Inc. (f/k/a CoroWare, Inc.) (“CarbonMeta”, the “Company”, “we”, “us”, or “our”) is a publicly quoted environmental research and development company that is commercializing technologies for processing organic wastes into hydrogen and high-value carbon products economically and sustainably.
The Company was incorporated on June 8, 2001 under the laws of the State of Nevada as SRM Networks, Inc. In connection with the acquisition of Hy-Tech Computer Systems, Inc. on January 31, 2003, the Company changed its name to Hy-Tech Technology Group, Inc. In connection with the Agreement and Plan of Merger of Robotics Workspace Technology, Inc., Innova Holdings, Inc. and the Company’s wholly owned subsidiary, RWT Acquisition, Inc., dated July 21, 2004, the Company’s name changed to Innova Holdings, Inc. Subsequently, the Company redomiciled in the State of Delaware and on November 20, 2006, the Company changed its name to Innova Robotics and Automation, Inc. and then on April 23, 2008, the Company changed its name to CoroWare, Inc. On or about July 28, 2021, the Company filed Articles of Amendment to its Amended and Restated Certificate of Incorporation with the State of Delaware to reflect a name change from CoroWare, Inc. to CarbonMeta Technologies, Inc.
The
Company has six wholly-owned subsidiaries: CoroWare Technologies, Inc. (“CTI”), CoroWare Robotics Solutions, Inc. (“CRS”),
Robotic Workspace Technologies, Inc. (“RWT”), Carbon Source, Inc. (“CS”), CoroWare Treasury, Inc. (“CWT”),
and CarbonMeta Research Ltd. (“CMR”). The Company has two majority owned subsidiaries: a
CoroWare Technologies, Inc. (“CTI”) was incorporated in the State of Florida on May 16, 2006, was administratively dissolved on November 19, 2016, and its principal business was a software professional services company with a strong focus on information technology integration and robotics integration, business automation solutions, and unmanned systems solutions to its customers in North America and Europe.
CoroWare Robotics Solutions, Inc. (“CRS”) was incorporated in the State of Texas on February 27, 2015, and its principal business was as a technology incubation company whose focus was on the delivery of mobile robotics and IOT products, solutions and services for university, government and corporate researchers, and enterprise customers. CRS’s business operations were discontinued in October 2016 when the Company’s gross margins and financing costs became unsustainable.
Robotic Workspace Technologies, Inc. (“RWT”) was incorporated in the State of Florida on July 1, 1994, was administratively dissolved on September 25, 2009, and its principal business was developing and marketing open-architecture PC controls and related products that could improve the performance, applicability, and productivity of robots and other automated equipment. RWT’s business operations were discontinued in September 2007 when the Company’s losses became unsustainable.
Carbon Source, Inc. (“CS”) was incorporated in the State of Wyoming on June 14, 2021 and its principal business is waste reclamation technologies and processing.
CoroWare Treasury, Inc. (“CWT”) was incorporated in the State of Wyoming on July 8, 2021 and its principal business is acquisitions related to acquiring technologies and subsidiary businesses related to waste processing.
CarbonMeta Research Ltd. (‘CMR”) was incorporated in England and Wales on August 12, 2021 and its principal business is the development of technologies and solutions for processing organic wastes and generating economically sustainable hydrogen and high-value carbon products. Using proprietary and patented technologies, it plans to implement new industrial methods using inexpensive, environmentally friendly catalysts that process collected plastic waste material into high value products such as hydrogen gas, graphene and carbon nanotubes.
CarbonMeta Green Building Materials, LLC (“CMGBM”) is a joint venture with Salvum Corporation organized on August 30, 2022 to develop and market construction mix products that are carbon negative (see Production Agreement below).
AriCon, LLC (“AriCon”) was a joint venture that was intended to develop mobile robot platforms, applications, and solutions for the construction industry. In October 2016, AriCon ceased operations of all subsidiary business operations when the Company’s losses became unsustainable, and the Company was not able to obtain investment financing.
In 2021, the Company began investigating emerging technologies, strategic intellectual property partnerships, and sustainable growth business opportunities related to the production of hydrogen and high value carbon products from organic waste streams. Working cooperatively with Oxford University Innovation, CarbonMeta plans to implement proven and patented technologies to add value to organic waste streams. By utilizing these proven proprietary technologies, collected and captured plastic waste material can be upcycled to high value products such as carbon nanotubes (“CNTs”) and hydrogen gas.
| 9 |
CARBONMETA TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2023 and 2022
(Unaudited)
NOTE A – ORGANIZATION (continued)
CNTs can be used for improved electrical conduction and reinforcing materials that are used in a wide variety of industries including the automotive industry, aviation industry, medical industry, and construction. The number one growth driver is the increasing need for high performance batteries for the electric vehicle market.
Plastic waste is a cheap and abundant feedstock that will allow the Company to scale quickly and produce hydrogen gas for a competitive price.
License Agreements
Oxford University Innovation Limited
On
June 2, 2021, the Company (the “Licensee”) entered into a License Agreement (the “Agreement”) with Oxford University
Innovation Limited (the “Licensor”). Under the terms of the Agreement, the Licensee will license the licensed technology
(OUI Project- Hydrogen from plastics via microwave-initiated catalytic dehydrogenation). The Agreement is non-exclusive and includes
the United States and European Union. Signing fees for the Agreement were £
The process that the Company licensed from Licensor for producing hydrogen and carbon products from waste plastics has not been demonstrated on a larger scale. It is not yet known whether the process will be cost-effective or profitable to implement on a larger scale. The Company has conducted tests to prove the percentage of carbon nanotubes up to 10 grams. The Company is working with a microwave reactor company to help demonstrate this process at a scale of 100 kilograms and 1,000 kilograms per day.
The Company has met the following milestones of its development plan set forth in the license agreement with Oxford University Innovation:
| ● | September 2021: established subsidiary in Oxford, United Kingdom | |
| ● | March 2022: produced 0.025 kilograms per day of marketable carbon nanotubes |
Oxford University Innovation may terminate the license due to the company not using commercially reasonable efforts to develop, exploit and market the licensed technology in accordance with the development plan.
From July 2022 to present (see Service Award below), CarbonMeta Technologies has been working with University of Oxford on a project with a global multi-energy provider based in Europe to assess the feasibility of processing mixed plastic waste into clean hydrogen fuel and value-added carbon products using microwave catalysis on a large commercial scale.
Ecomena Limited
On
December 2, 2021, the Company (“Licensee”) entered into a License of Agreement (the “Agreement”) with Ecomena
Limited (an entity located in the United Kingdom) (“Licensor”). Under the terms of the Agreement, the Licensee will license
the Licensed Technology to recycle industrial byproduct into cement free pavers and mortars that are environmentally friendly and continuously
absorb carbon dioxide. The signing fees payable to the Licensor under the Agreement are £
| 10 |
CARBONMETA TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2023 and 2022
(Unaudited)
NOTE A – ORGANIZATION (continued)
Production Agreement
On January 11, 2022, the Company entered into an Interim Joint Product Development and Sales Representation Agreement (the “Agreement”) with Salvum Corporation. Under the terms of the Agreement, the parties agree to work together to develop both CarbonMeta’s proprietary cementless paver products known as “Cementless Paver” and Salvum’s proprietary concrete alternative products known as “EarthCrete.” During the Term, Salvum agrees to manufacture CarbonMeta’s proprietary cementless paver products known as “Cementless Paver”. CarbonMeta reserves the right to appoint other manufacturers of the products and/or to engage other sales representatives for CarbonMeta’s proprietary cementless paver products known as “Cementless Paver” outside the United States of America. Although the Interim Joint Product Development and Sales Representation Agreement with Salvum Corporation had a term of 180 days and expired on July 11, 2022, the companies continued to work together, and the companies formed CarbonMeta Green Building Materials, LLC (“CMGBM”) and signed an Operating Agreement for Management of CMGBM on August 28, 2022 that supersedes the Interim Joint Product Development and Sales Representation Agreement.
Service Award
On
June 10, 2022, our subsidiary, CarbonMeta Research Ltd. (“CMR”), was granted a Service Award (entitled “Waste Plastic
Catalysis Proof of Concept”) from a business company located in Spain. The award provided for CMR to provide the customer with
an initial prototype process for converting mixed waste plastic to hydrogen and solid carbon and for the customer to pay CMR a total
of
In
October 2022, CMR was granted a second Service Award for
In order to further grow its business, the Company plans to:
| ● | Develop and patent new microwave catalysis processes that can yield high value hydrogen and carbon products; | |
| ● | Work closely with commercial building and solar farm general contractors that want to purchase “carbon negative” construction materials that can generate carbon credits; | |
| ● | Acquire or develop patents that will help the Company generate royalty revenues with potential customers and partners, and protect the Company’s competitive position against potential competitors; | |
| ● | Develop new proprietary and patented technologies to implement new industrial methods that can use inexpensive, environmentally friendly catalysts to process collected plastic waste material into high value products such as hydrogen gas, graphene and carbon nanotubes; | |
| ● | seek out government programs in the United Kingdom, European Union and United States that encourage the development of high value production of hydrogen and high value carbon products from organic waste streams; and | |
| ● | Attract investment funds who will actively work with the Company to achieve these goals and help the Company grow rapidly during the next 3 years. |
| 11 |
CARBONMETA TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2023 and 2022
(Unaudited)
NOTE A – ORGANIZATION (continued)
Some potential joint venture candidates have been identified and discussions initiated. These candidates are within the Company’s core business model, serving commercial properties, accretive to cash flow, and geographically favorable. One of these joint ventures, CarbonMeta Green Building Materials LLC will be focused on the development at marketing of construction mix products that are carbon negative. Two other joint ventures under discussion are focused on processing waste plastics into hydrogen and high value carbon products. We plan to fund these joint ventures with customer purchase orders and invoice payments, federal loans, federal grants, and commercial loans.
We have unrestricted discretion in seeking and participating in a business opportunity, subject to the availability of such opportunities, economic conditions, and other factors.
The selection of a business opportunity in which to participate is complex and risky. Additionally, we have only limited resources and may find it difficult to locate good opportunities. There can be no assurance that we will be able to identify and acquire any business opportunity which will ultimately prove to be beneficial to us and our shareholders. We will select any potential business opportunity based on our management’s best business judgment.
Our activities are subject to several significant risks, which arise primarily as a result of the fact that we have no specific business and may acquire or participate in a business opportunity based on the decision of management, which potentially could act without the consent, vote, or approval of our shareholders. The risks faced by us are further increased as a result of our lack of resources and our inability to provide a prospective business opportunity with significant capital.
Principal Products or Services and Markets
The Company is in the business of developing and marketing technologies and solutions that can process organic and construction wastes into economically high-value and ecologically sustainable products.
The Company is partnering with a microwave reactor manufacturer in the United States to “scale up” the patented waste plastics microwave processes that the Company licensed from Oxford University Innovation, and with a university partner in the United States to separate, purify and characterize carbon nanotubes that the UK and US developers shall produce.
The principal products that the Company intends to market comprise:
| ● | amorphous carbon, graphite, nano-graphite, graphene, carbon nanotubes, and hydrogen; and | |
| ● | carbon-negative building products that help alleviate climate change by capturing carbon dioxide (CO2) for renewable energy projects. |
| 12 |
CARBONMETA TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2023 and 2022
(Unaudited)
NOTE B – SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
The accompanying unaudited financial statements are presented in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring accruals) considered necessary in order to make the financial statements not misleading, have been included. Operating results for the three months ended March 31, 2023 are not necessarily indicative of results that may be expected for the year ending December 31, 2023. The balance sheet information as of December 31, 2022 was derived from the audited financial statements included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 20, 2023. These financial statements should be read in conjunction with that report.
Principles of Consolidation
The consolidated financial statements include the accounts of CarbonMeta Technologies, Inc. and its six wholly-owned subsidiaries, CoroWare Technologies, Inc., CoroWare Robotics Solutions, Inc., Robotic Workspace Technologies, Inc., Carbon Source, Inc., CoroWare Treasury, Inc., and CarbonMeta Research Ltd., and its two majority owned subsidiaries CarbonMeta Green Building Materials, LLC and ARiCon, LLC (collectively, the “Company”). All significant inter-company balances and transactions have been eliminated in the consolidated financial statements.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities 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. The Company uses all available information and appropriate techniques to develop its estimates. However, actual results could differ from its estimates.
Foreign Currency Translation
The
accompanying consolidated financial statements are presented in United States dollars (“$”), which is the reporting
currency of the Company. The functional currency of CarbonMeta Research Ltd. (“CMR”) is the Great Britain pound
(“GBP”); the functional currency of the Company and its other subsidiaries is the United States dollar. The assets and
liabilities of CMR are translated at the GBR currency exchange rate at the end of the period ($
Cash and Cash Equivalents
The
Company considers highly liquid investments with original maturities of three months or less when purchased as cash equivalents. The
Company had
Property and Equipment
Property and equipment are recorded at cost. Expenditures for major renewals and improvements are capitalized while expenditures for minor replacements, maintenance and repairs are expensed as incurred. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Upon retirement or disposal of assets, the accounts are relieved of cost and accumulated depreciation and the related gain or loss, if any, is reflected in loss on disposal of assets in the consolidated statement of income and comprehensive income.
At least annually, the Company evaluates, and adjusts when necessary, the estimated useful lives. There were no changes in estimated useful lives for the periods presented. The estimated useful lives are:
| Computer equipment and software | ||||
| Filament production equipment |
Licenses
The
licenses acquired from Oxford University Innovation Limited and Ecomena Limited (see Note A) are stated at cost less accumulated
amortization. For the Oxford license, amortization is calculated using the straight-line method over the
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CARBONMETA TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2023 and 2022
(Unaudited)
NOTE B – SIGNIFICANT ACCOUNTING POLICIES (continued)
Impairment of Long-lived Assets
The Company evaluates the carrying value and recoverability of its long-lived assets when circumstances warrant such evaluation by applying the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 360-35, Property, Plant and Equipment, Subsequent Measurement (“ASC 360-35”). ASC 360-35 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.
Income Taxes
Income taxes are computed using the asset and liability method. Under the asset and liability method, deferred income tax assets and liabilities are determined based on the differences between the financial reporting and tax bases of assets and liabilities and are measured using the currently enacted tax rates and laws. A valuation allowance is provided for the amount of deferred tax assets that, based on available evidence, are not expected to be realized. Additionally, taxes are calculated and expensed in accordance with applicable tax code.
Segment Reporting
FASB
ASC 280-10, Segment Reporting, defines operating segments as components of a company about which separate financial information
is available that is evaluated regularly by the chief decision maker in deciding how to allocate resources and in assessing performance.
The Company reports according to
Fair Value of Financial Instruments
The Company follows FASB ASC 820-10-35-37 (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments and paragraph 825-10-50-10 of the FASB ASC for disclosures about fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in 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 broad levels. The three 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 unobservable 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 amounts reported in the Company’s consolidated financial statements for cash, accounts receivable and accounts payable and accrued expenses approximate their fair value because of the immediate or short-term nature of these financial instruments. The carrying amounts reported in the balance sheet for its notes and loans payable approximates fair value as the contractual interest rate and features are consistent with similar instruments of similar risk in the marketplace.
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CARBONMETA TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2023 and 2022
(Unaudited)
NOTE B – SIGNIFICANT ACCOUNTING POLICIES (continued)
Transactions involving related parties cannot be presumed to be carried out on an arm’s-length basis, as the requisite conditions of competitive, free-market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm’s-length transactions unless such representations can be substantiated.
It is not, however, practical to determine the fair value of advances from stockholders, if any, due to their related party nature.
The following table presents assets and liabilities that are measured and recognized at fair value as of March 31, 2023 and December 31, 2022, on a recurring basis:
SUMMARY OF ASSETS AND LIABILITIES MEASURED AND RECOGNIZED AT FAIR VALUE:
| Assets and liabilities measured at fair value on a recurring basis at March 31, 2023 | Level 1 | Level 2 | Level 3 | Total Carrying Value | ||||||||||||
| Derivative liabilities | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Assets and liabilities measured at fair value on a recurring basis at December 31, 2022 | Level 1 | Level 2 | Level 3 | Total
Carrying Value | ||||||||||||
| Derivative liabilities | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in its convertible instruments in accordance with professional standards for FASB ASC 815, Derivatives and Hedging (“ASC 815”).
Professional standards generally provide three criteria that, if met, require companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments. These three criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under otherwise applicable generally accepted accounting principles with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument. Professional standards also provide an exception to this rule when the host instrument is deemed to be conventional as defined under professional standards as “The Meaning of Conventional Convertible Debt Instrument.”
The Company accounts for convertible instruments (when it has determined that the embedded conversion options should not be bifurcated from their host instruments) in accordance with professional standards under “Accounting for Convertible Securities with Beneficial Conversion Features,” as those professional standards pertain to “Certain Convertible Instruments.” Accordingly, the Company records, when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their earliest date of redemption. The Company also records when necessary deemed dividends for the intrinsic value of conversion options embedded in preferred shares based upon the differences between the fair value of the underlying common stock at the commitment date of the preferred stock transaction and the effective conversion price embedded in the preferred stock. ASC 815 provides that, among other things, generally, if an event is not within the entity’s control, could or require net cash settlement, then the contract shall be classified as an asset or a liability.
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CARBONMETA TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2023 and 2022
(Unaudited)
NOTE B – SIGNIFICANT ACCOUNTING POLICIES (continued)
Stock Based Compensation
The Company follows FASB ASC 718, Compensation – Stock Compensation, which prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the consolidated financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of FASB ASC 505-50, Equity–based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued. The fair value of the share-based payment transaction is determined at the earlier of performance commitment date or performance completion date.
Through newly issued restricted common stock, the Company pays qualified contractors and advisors common shares in lieu of compensation for services provided including business development, management, technology development, consulting, legal services and accounting services.
Revenue Recognition
The Company will recognize revenue for its sales of energy products pursuant to the License Agreements with Oxford University Innovation Limited and Ecomena Limited (see Note A) when persuasive evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable and collectability is probable. Product sales will be recognized by us generally at the time product is shipped. Shipping and handling costs will be included in cost of goods sold.
Research and Development
Research
and development costs relate to the development of new products, including significant improvements and refinements to existing products,
and are expensed as incurred. Research and development expenses for the three months ended March 31, 2023 and 2022 were $
The Company computes basic and diluted earnings per common share amounts in accordance with FASB ASC 260, Earnings per Share. Basic earnings per common share is computed by dividing net income (loss) available to common shareholders by the weighted average number of common shares outstanding during the reporting period. Diluted earnings per common share reflects the potential dilution that could occur if stock options, convertible securities and other commitments to issue common stock were exercised or equity awards vest resulting in the issuance of common stock that could share in the earnings of the Company.
The Company currently has convertible debt and preferred stock, which, if converted, as of March 31, 2023 and 2022, would have caused the Company to issue diluted shares totaling and , respectively.
Dividend Policy
The
Company has never declared or paid any cash dividends on its common stock. The Company anticipates that any earnings will be
retained for development and expansion of its business and does not anticipate paying any cash dividends in the foreseeable future.
Additionally, as of March 31, 2023 and December 31, 2022, the Company has issued, and has outstanding, shares of Series B Preferred
Stock which are entitled, prior to the declaration of any dividends on common stock, to earn a
Recent Accounting Pronouncements
Certain accounting pronouncements have been issued by the FASB and other standard setting organizations which are not yet effective and therefore have not yet been adopted by the Company. The impact on the Company’s financial position and results of operations from adoption of these standards is not expected to be material.
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CARBONMETA TECHNOLOGIES, INC.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the three months ended March 31, 2023 and 2022
(Unaudited)
NOTE C – GOING CONCERN
The
Company has a working capital deficit of $
There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placements, public offerings and/or bank financing necessary to support the Company’s working capital requirements. To the extent that funds generated from operations, any private placements, public offerings and/or bank financing are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
NOTE D – PROPERTY AND EQUIPMENT, NET
Property and equipment, net, consists of the following at March 31, 2023 and December 31, 2022:
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| Computer equipment and software | $ | $ | ||||||
| Filament production equipment | ||||||||
| Subtotal | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
Depreciation
of equipment expense for the three months ended March 31, 2023 and 2022 was $
NOTE E – LICENSES, NET
The licenses, net, consist of the following at March 31, 2023 and December 31, 2022:
| March 31, | December 31, | |||||||
| 2023 | 2022 | |||||||
| License acquired from Oxford University Innovation Limited on June 2, 2021 (see Note A) | $ | $ | ||||||
| License acquired from Ecomena Limited effective February 17, 2022 (see Note A) | ||||||||
| Subtotal | ||||||||
| Accumulated amortization | ( | ) | ( | ) | ||||
| License, net | $ | $ | ||||||
Amortization
of licenses expense for the three months ended March 31, 2023 and 2022 was $
At March 31, 2023, the expected future amortization of licenses expense was:
| Fiscal year ending December 31: | ||||
| 2023 (excluding the three months ended March 31, 2023) | $ | |||
| 2024 | ||||