UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly
period ended
For the transition period from _______ to _______
Commission File Number:
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction
of incorporation or organization) |
(IRS Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
| ( |
| (Registrant’s telephone number, including area code) |
| (Former name, former address and former fiscal year, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name
of each exchange on which registered | ||
| N/A | N/A | N/A |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
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, 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.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
As of November 14, 2023, there were shares of the issuer’s common stock issued and outstanding.
CLEAN VISION CORPORATION
FORM 10-Q
For the Quarterly Period Ended September 30, 2023
INDEX
| PART I | Financial Information | |
| Item 1. | Financial Statements (unaudited) | 1 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 24 |
| Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 28 |
| Item 4. | Controls and Procedures | 29 |
| PART II | Other Information | |
| Item 1. | Legal Proceedings | 29 |
| Item 1A. | Risk Factors | 30 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 30 |
| Item 3. | Defaults Upon Senior Securities | 30 |
| Item 4. | Mine Safety Disclosures | 30 |
| Item 5. | Other Information | 30 |
| Item 6. | Exhibits | 30 |
| Signatures | 31 | |
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INDEX TO FINANCIAL STATEMENTS
| Consolidated Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022 | F-2 |
| Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2023 and 2022 (unaudited) | F-3 |
| Consolidated Statements of Changes in Stockholders’ Equity for the Three and Nine Months Ended September 30, 2023, and 2022 (unaudited) | F-4 |
| Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2023 and 2022 (unaudited) | F-6 |
| Notes to the Consolidated Financial Statements (unaudited) | F-7 |
1
CLEAN VISION CORPORATION
CONSOLIDATED BALANCE SHEETS
| September
30, 2023 | December 31, 2022 | |||||||
| ASSETS | (Unaudited) | |||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaids and other assets | ||||||||
| Accounts receivable | ||||||||
| Total Current Assets | ||||||||
| Property and equipment | ||||||||
| Goodwill | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued compensation | ||||||||
| Accrued expenses | ||||||||
| Lines of credit | ||||||||
| Convertible
note payable, net of discount of $ | ||||||||
| Derivative liability | ||||||||
| Loans payable | ||||||||
| Loans payables – related party | ||||||||
| Liabilities of discontinued operations | ||||||||
| Total current liabilities | ||||||||
| Economic incentive (Note 12) | ||||||||
| Total Liabilities | ||||||||
| Commitments and contingencies | ||||||||
| Mezzanine Equity: | ||||||||
| Series B Preferred stock, $ par value, shares authorized; and shares issued and outstanding, respectively | ||||||||
| Total mezzanine equity | ||||||||
| Stockholders' Deficit: | ||||||||
| Preferred stock, $ par value, shares authorized; shares issued and outstanding | ||||||||
| Series
A Preferred stock, $ par value, shares authorized; shares issued and outstanding | ||||||||
| Series C Preferred stock, $ par value, shares authorized; shares issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized, and shares issued and outstanding, respectively | ||||||||
| Common stock to be issued | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive loss | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Non-controlling interest | ||||||||
| Total stockholders' deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders' deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-2
CLEAN VISION CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
| For
the Three Months Ended September 30, | For
the Nine Months Ended September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of revenue | ( | ) | ||||||||||||||
| Gross margin | $ | $ | $ | $ | ||||||||||||
| Operating Expenses: | ||||||||||||||||
| Consulting | $ | $ | $ | $ | ||||||||||||
| Professional fees | ||||||||||||||||
| Payroll expense | ||||||||||||||||
| Director fees | ||||||||||||||||
| General and administration expenses | ||||||||||||||||
| Total operating expense | ||||||||||||||||
| Loss from Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense): | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Change in fair value of derivative | ||||||||||||||||
| Loss on debt issuance | ( | ) | ( | ) | ||||||||||||
| Gain on conversion of debt | ||||||||||||||||
| Gain on extinguishment of debt | ||||||||||||||||
| Total other expense | ( | ) | ( | ) | ( | ) | ||||||||||
| Net loss before provision for income tax | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Provision for income tax expense | ||||||||||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss (income) attributed to non-controlling interest | ( | ) | ( | ) | ||||||||||||
| Net loss attributed to Clean Vision Corporation | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other comprehensive income: | ||||||||||||||||
| Foreign currency translation adjustment | ( | ) | ( | ) | ( | ) | ||||||||||
| Comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Loss per share - basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average shares outstanding - basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-3
CLEAN VISION CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
For the Three and Nine Months Ended September 30, 2023
(Unaudited)
| Series
A Preferred Stock | Series
C Preferred Stock | Common Stock | Additional paid | Common Stock to be | Accumulated
Other Comprehensive | Accumulated | Minority | Total Stockholders' | ||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | In Capital | Issued | Loss | Deficit | Interest | Deficit | |||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | — | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||||||||||
| Stock dividend | — | — | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Stock issued for services – related party | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Stock issued for services | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Stock
issued for cash | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Stock issued for debt conversion | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Debt issuance cost – warrants issued | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Shares cancelled | — | — | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||||||
| Adjust stock dividend shares | — | — | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Stock issued for services | — | — | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Stock issued for debt conversion | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Debt issuance cost – warrants issued | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Settlement of debt-related party | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Balance, June 30, 2023 | — | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Stock sold for cash | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||
| Stock issued for services | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Stock issued for debt conversion | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Shares issued for settlement | — | — | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2023 | — | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-4
| Series A Preferred Stock | Series C Preferred Stock | Common Stock | Additional paid | Common Stock To be | Other Comprehensive | Accumulated | Total Stockholders' | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | In Capital | Issued | Loss | Deficit | Deficit | ||||||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||
| Cancellation of preferred | ( | ) | ( | ) | — | — | ||||||||||||||||||||||||||||||||||||||
| Stock issued for services | — | — | ( | ) | ||||||||||||||||||||||||||||||||||||||||
| Debt issuance cost | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Stock issued for cash | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Stock issued for services | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Debt issuance cost | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||
| Balance, June 30, 2022 | — | ( | ) | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Stock issued for services | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||||||
| Balance, September 30, 2022 | — | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||||||||||||||
F-5
CLEAN VISION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For
the Nine Months Ended September 30, | ||||||||
| 2023 | 2022 | |||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments
to reconcile net loss to net cash used by operating activities: | ||||||||
| Stock based compensation | ||||||||
| Stock issued for services | ||||||||
| Stock issued for services – related party | ||||||||
| Debt discount amortization | ||||||||
| Loss on issuance of debt | ||||||||
| Change in fair value of derivative | ( | ) | ||||||
| Gain on conversion of debt | ( | ) | ||||||
| Gain on extinguishment of debt | ( | ) | ||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid | ( | ) | ( | ) | ||||
| Accounts receivable | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accruals | ||||||||
| Accrued compensation | ( | ) | ||||||
| Net cash used by operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Purchase of 51% interest in Clean-Seas Morocco, LLC | ( | ) | ||||||
| Purchase of property and equipment | ( | )) | ||||||
| Net cash used by investing activities | ( | ) | ( | )) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Cash overdraft acquired in acquisition | ( | ) | ||||||
| Proceeds from convertible notes payable | ||||||||
| Payments-convertible notes payable | ( | ) | ||||||
| Proceeds from the sale of common stock | ||||||||
| Proceeds from notes payable - related party | ||||||||
| Repayment of related party loans | ( | ) | ( | ) | ||||
| Proceeds from notes payable | ||||||||
| Proceeds from long term note payable | ||||||||
| Payments - notes payable | ( | ) | ( | ) | ||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ( | ) | ||||||
| Effects of currency translation | ( | ) | ||||||
| Cash at beginning of period | ||||||||
| Cash at end of period | $ | |||||||
| Supplemental schedule of cash flow information: | ||||||||
| Interest paid | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Supplemental non-cash disclosure: | ||||||||
| Common stock issued for conversion of debt | $ | $ | ||||||
| Common stock issued for prepaid services | $ | $ | ||||||
| Note payable issued for acquisition | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-6
CLEAN VISION CORPORATION
Notes to Unaudited Consolidated Financial Statements
September 30, 2023
NOTE 1 – ORGANIZATION AND NATURE OF BUSINESS
Clean Vision Corporation (“Clean Vision,” “we,” “us,” or the “Company”) is a new entrant in the clean energy and waste-to-energy industries focused on clean technology and sustainability opportunities. Currently, we are focused on providing a solution to the plastic and tire waste problem by recycling the waste and converting it into saleable byproducts, such as hydrogen and other clean-burning fuels that can be used to generate clean energy. Using a technology known as pyrolysis, which heats the feedstock (i.e., plastic) at high temperatures in the absence of oxygen so that the material does not burn, we are able to turn the feedstock into (i) low sulfur fuel, (ii) clean hydrogen and (iii) carbon black or char (char is created when plastic is used as feedstock). Our goal is to generate revenue from three sources: (i) service revenue from the recycling services we provide (ii) revenue generated from the sale of the byproducts; and (iii) revenue generated from the sale of fuel cell equipment. Our mission is to aid in solving the problem of cost-effectively upcycling the vast amount of waste plastic generated on land before it flows into the world’s oceans.
We currently operate through our wholly-owned subsidiary, Clean-Seas, Inc. (“Clean-Seas”), which we acquired on May 19, 2020. Clean-Seas acquired its first pyrolysis unit in November 2021 for use in a pilot project in India, which began operations in early May 2022. On April 23, 2023, Clean-Seas completed its acquisition of a fifty-one percent (51%) interest in Eco Synergie S.A.R.L., a limited liability company organized under the laws of Morocco, which changed its name to Clean-Seas Morocco, LLC (“Clean-Seas Morocco”) on such date. Clean-Seas Morocco began operations at its pyrolysis facility in Agadir, Morocco, in April 2023, which currently has capacity to convert 20 tons per day (“TPD”) of waste plastic.
We believe that our projects in India and Morocco will showcase our ability to pyrolyze waste plastic (using pyrolysis), which will generate three byproducts: (i) low sulfur fuel, (ii) clean hydrogen, AquaHtm, and (iii) char. We intend to sell the majority of the byproducts, while retaining a small amount of the low sulfur fuels and/or hydrogen to power our facilities and equipment. To date, our operations in India have not generated any revenue. However, since commencing operations at our Morocco facility in April 2023, Clean-Seas Morocco has generated $161,297 in revenue, with a gross margin of $127,435 from the provision of pyrolysis services and its sale of byproducts.
Clean-Seas India Private Limited was incorporated on November 17, 2021 as a wholly owned subsidiary of Clean-Seas.
Clean-Seas, Abu Dhabi PVT. LTD was incorporated in Abu Dhabi on December 9, 2021 as a wholly owned subsidiary of the Company. On January 19, 2022, the Company changed the name of its wholly owned subsidiary, Clean-Seas, Abu Dhabi PVT. LTD, to Clean-Seas Group. As of July 4, 2022, the Clean-Seas Group ceased operations and is in the process of dissolving.
Endless Energy, Inc. (“Endless Energy”) was incorporated in Nevada on December 10, 2021 as a wholly owned subsidiary of the Company. EndlessEnergy does not currently have any operations, but it was incorporated for the purpose of investing in wind and solar energy projects.
EcoCell, Inc. ("EcoCell”) was incorporated on March 4, 2022 as a wholly owned subsidiary of the Company. EcoCell does not currently have any operations, but we intend to use EcoCell for the purpose of licensing fuel cell patented technology.
Clean-Seas Arizona, Inc. ("Clean-Seas Arizona”) was incorporated in Arizona on September 19, 2022 as a wholly owned subsidiary of Clean-Seas. Clean-Seas Arizona was formed pursuant to a Memorandum of Understanding (the “MOU”) signed on November 4, 2022 with Arizona State University and the Rob and Melani Walton Sustainability Solution Service. Pursuant to the MOU, the parties intend to establish a 100 ton per day waste plastic to clean hydrogen conversion facility in Arizona.
Clean-Seas West Virginia, Inc. (“Clean-Seas West Virginia”), established on April 1, 2023, is our first facility in the United States and is expected to be operational in the first quarter of 2024. The facility will be located outside of Charleston, the capital of West Virginia, and is expected to begin operations converting 100 TPD of waste plastic. The Company expects Clean-Seas West Virginia to expand to greater than 500 TPD over the course of the next three years.
F-7
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The Company’s unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and reflect all adjustments, consisting of normal recurring adjustments, which management believes are necessary to fairly present the financial position, results of operations and cash flows of the Company as of and for the nine month period ending September 30, 2023 and not necessarily indicative of the results to be expected for the full year ending December 31, 2023. These unaudited consolidated financial statements should be read in conjunction with the financial statements and related notes included in the Company’s financial statements for the year ended December 31, 2022.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.
Concentrations of Credit Risk
We maintain our cash
in bank deposit accounts, the balances of which at times may exceed federally insured limits. We continually monitor our banking relationships
and consequently have not experienced any losses in our accounts. At times, such deposits may be in excess of the Federal Deposit Insurance
Corporation insurable amount (“FDIC”). As of September 30, 2023, the Company had $
Cash equivalents
The Company considers
all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. There were
Principles of Consolidation
The accompanying consolidated financial statements for the quarter ended September 30, 2023, include the accounts of the Company and its wholly owned subsidiaries, Clean-Seas, Clean-Seas India Private Limited, Clean-Seas Group, Endless Energy, Inc. (“Endless Energy”), EcoCell, Inc., Clean-Seas Arizona, Clean-Seas West Virginia, and our 51% owned subsidiary, Clean-Seas Morocco. As of September 30, 2023, there was no activity in Clean-Seas Group, Endless Energy or Clean-Seas Arizona.
Translation Adjustment
The accounts of the Company’s subsidiary Clean-Seas India are maintained in Rupees and the accounts of Clean-Seas Morocco in Moroccan dirham. In accordance with the Codification, all assets and liabilities were translated at the current exchange rate at respective balance sheets dates, members’ capital are translated at the historical rates and income statement items are translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with the Comprehensive Income Topic of the Codification (ASC 220), as a component of members’ capital. Transaction gains and losses are reflected in the income statement.
Comprehensive Income
The Company uses SFAS 130 “Reporting Comprehensive Income” (ASC Topic 220). Comprehensive income is comprised of net income and all changes to the statements of members’ capital, except those due to investments by members, changes in paid-in capital and distributions to members. Comprehensive income is included in net loss and foreign currency translation adjustments.
F-8
Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification. Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period. Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period. The weighted average number of common shares outstanding and potentially outstanding common shares assumes that the Company incorporated as of the beginning of the first period presented. As of September 30, 2023, there are warrants to purchase up to 116,944,802 shares of common stock and approximately 158,000,000 dilutive shares of common stock from a convertible notes payable. As of September 30, 2023 and 2022, there are 20,000,000 and 20,000,000 potentially dilutive shares of common stock, respectively, if the Series C preferred stock were to be converted. There are 2,000,000 shares of Series B preferred stock outstanding. The Series B Preferred Stock can automatically be converted on January 1, 2023, into shares of common stock at the rate of 10 shares of Common Stock for each share of Preferred Stock. As of September 30, 2023 and 2022, the Company’s diluted loss per share is the same as the basic loss per share, as the inclusion of any potential shares would have had an anti-dilutive effect due to the Company generating a loss.
Stock-based Compensation
In June 2018, the FASB issued ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. ASU 2018-07 allows companies to account for nonemployee awards in the same manner as employee awards. The guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within those annual periods. We adopted this ASU on January 1, 2019.
Goodwill
The Company accounts for business combinations under the acquisition method of accounting in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations, where the total purchase price is allocated to the tangible and identified intangible assets acquired and liabilities assumed based on their estimated fair values. The purchase price is allocated using the information currently available, and may be adjusted, up to one year from acquisition date, after obtaining more information regarding, among other things, asset valuations, liabilities assumed and revisions to preliminary estimates. The purchase price in excess of the fair value of the tangible and identified intangible assets acquired less liabilities assumed is recognized as goodwill.
In accordance with ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, the Company will test for indefinite-lived intangibles and goodwill impairment in the fourth quarter of each year and whenever events or circumstances indicate that the carrying amount of the asset exceeds its fair value and may not be recoverable.
Derivative Financial Instruments
The Company evaluates its convertible notes to determine if such instruments have derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. For stock-based derivative financial instruments, the Company uses a weighted-average Black-Scholes-Merton option pricing model to value the derivative instruments at inception and on subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period.
Fair value of financial instruments
The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP) and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels. The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:
F-9
Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date.
Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
Level 3: Pricing inputs that are generally unobservable inputs and not corroborated by market data.
The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity of those instruments. The Company’s notes payable represents the fair value of such instruments as the notes bear interest rates that are consistent with current market rates.
The following table classifies the Company’s liabilities measured at fair value on a recurring basis into the fair value hierarchy as of September 30, 2023:
| Description | Level 1 | Level 2 | Level 3 | ||||||||
| Derivative | $ | $ | $ | ||||||||
| Total | $ | $ | $ | ||||||||
Revenue Recognition
The Company recognizes revenue under ASC 606, “Revenue from Contracts with Customers” (“ASC 606”). The Company determines revenue recognition through the following steps:
| ● | Identification of a contract with a customer; | |
| ● | Identification of the performance obligations in the contract; | |
| ● | Determination of the transaction price; | |
| ● | Allocation of the transaction price to the performance obligations in the contract; and | |
| ● | Recognition of revenue when or as the performance obligations are satisfied. |
Revenue is recognized when control of the promised goods or services is transferred to customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. Shipping and handling activities associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment activity and recognized as revenue at the point in time at which control of the goods transfers to the customer. As a practical expedient, the Company does not adjust the transaction price for the effects of a significant financing component if, at contract inception, the period between customer payment and the transfer of goods or services is expected to be one year or less.
Our business model is focused on generating revenue from the following sources:
(i) Service revenue from the recycling services we provide. We plan to establish plastic feedstock agreements with a number of feedstock suppliers for the delivery of plastic to our facilities. Much of this plastic is currently a cost center for such feedstock suppliers, who pay "tipping fees" to landfills or incinerators. We will accept this plastic feedstock at reduced price or for no tipping fees. In some cases, feedstock suppliers will also share in revenue on products produced from their feedstock. This revenue will be realized and recognized upon receipt of feedstock at one of our facilities.
F-10
(ii) Revenue generated from the sale of commodities. We will produce commodities including, but not limited to, pyrolysis oil, fuel oil, lubricants, synthetic gas, hydrogen, and carbon char. We are in negotiation with chemical and oil companies for purchasing, or off-taking, fuels and oils we produce, and exploring applications for carbon char. This revenue will be recognized upon shipment of products from one of our facilities and in some cases off-takers may pre-pay for a contractual obligation to buy our commodities.
(iii) Revenue generated from the sale of environmental credits. Our products are eligible for numerous environmental credits, including but not limited to carbon credits, plastic credits, and biodiversity credits. These credits may be monetized directly on the relevant markets or may be realized as value-add to off-takers, who will pay a premium for eligible products. Revenue from these credits will be recognized upon sale of applicable environmental credits on recognized markets, and/or upon sale of commodities to off-takers when that off-take includes an environmental credit premium.
(iv) Revenue generated from royalties and/or the sale of equipment. We expect to develop or acquire intellectual property which could generate revenue through royalties and/or sales of manufactured equipment. Revenue may be recognized upon the terms of a contracted sale agreement.
As of September 30, 2023, our operations in Morocco had generated approximately $188,000 in revenue, with a gross margin of approximately $166,000 from the sale of commodities (the provision of pyrolysis services and its sale of byproducts). As of September 30, 2023, we did not generate revenue from any other sources .
Recently issued accounting pronouncements
The Company has implemented all new applicable accounting pronouncements that are in effect. These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.
NOTE 3 - GOING CONCERN
The accompanying
unaudited consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. The Company has not yet established a source of revenue sufficient
to cover its operating costs, had an accumulated deficit of $
Management plans to continue to implement its business plan and to fund operations by raising additional capital through the issuance of debt and equity securities. The Company’s existence is dependent upon management's ability to implement its business plan and/or obtain additional funding. There can be no assurance that the Company’s financing efforts will result in profitable operations or the resolution of the Company's liquidity problems. Even if the Company is able to obtain additional financing, it may include undue restrictions on our operations in the case of debt or cause substantial dilution for our stockholders in the case of equity financing.
F-11
NOTE 4 — BUSINESS COMBINATIONS
On April 25, 2023 (the “Morocco Closing Date”), Clean-Seas, a wholly owned subsidiary of the Company, completed its acquisition of a fifty-one percent (51%) interest (the “Morocco Acquisition”) in Eco Synergie S.A.R.L., a limited liability company organized under the laws of Morocco (“Ecosynergie”), pursuant to that certain Notarial Deed (the “Morocco Purchase Agreement”) dated as of January 23, 2023 (the “Signing Date”) setting forth the terms and provisions applicable to the Morocco Acquisition (the “Purchase Agreement”). On the Morocco Closing Date, (i) Ecosynergie’s name was changed to Clean-Seas Morocco, LLC, (ii) Mrs. Halima Aboudeine and Mr. Daniel C. Harris, the Company’s CRO, were appointed as managers of Clean-Seas Morocco and (iii) Mr. Harris was appointed to serve as the Chief Executive Officer of Clean-Seas Morocco. Ecosynergie was not acquired from a related party and the Company did not have common control with Ecosynergie at the time of the Morocco Acquisition.
Pursuant to the Morocco Purchase Agreement, Clean-Seas paid an aggregate purchase price of $6,500,000 for the Morocco Acquisition, of which (i) $2,000,000 was paid on the Morocco Closing Date and (ii) the remaining $4,500,000 is to be paid to Ecosynergie Group over a period of ten (10) months from the Morocco Closing Date. Additionally, Clean-Seas committed to invest up to $50,000,000 in Clean-Seas Morocco over a period of ten (10) months from the Morocco Closing Date (the “Clean-Seas Morocco Investment”). The Clean-Seas Morocco Investment is currently contemplated to be funded in tranches based on a to be agreed to schedule tied to milestones related to the technology being deployed by Clean-Seas Morocco. The parties intend to complete the funding schedule applicable to the Clean-Seas Morocco investment in the first quarter 2024. To date, none of the Clean-Seas Morocco Investment has been funded
The Company accounted for the transaction as a business combination under ASC 805 and as a result, allocated the fair value of the identifiable assets acquired and liabilities assumed as of the acquisition date as outlined in the table below. Although the accounting for operations is not yet complete, the results of operations of the business acquired by the Company have been included in the consolidated statements of operations since the date of acquisition. All amounts are considered provisional until a more thorough analysis of the books and records and the accounting for the acquisition can be completed. Per ASC 805-10-25-13, if the initial accounting for a business combination is incomplete by the end of the reporting period in which the combination occurs, the acquirer shall report in its financial statements provisional amounts for the items for which the accounting is incomplete.
The excess of the purchase price over the estimated fair values of the underlying identifiable assets acquired, liabilities assumed, and non-controlling interest was allocated to goodwill. The provisional estimated fair value of the noncontrolling interest was based on the price the Company paid for their 51% of their controlling interest. The goodwill represents expected synergies from the combined operations.
The allocation of the purchase price and the estimated fair market values of the assets acquired and liabilities assumed are shown below:
| Consideration | ||||
| Consideration issued | $ | |||
| Identified assets and liabilities | ||||
| Cash | ||||
| Prepaid and other assets | ||||
| Accounts receivable | ||||
| Property and equipment, net | ||||
| Accounts payable | ( | ) | ||
| Accrued Expenses | ( | ) | ||
| Loans payable | ( | ) | ||
| Lines of credit | ( | ) | ||
| Total identified assets and liabilities | ||||
| Excess purchase price allocated to goodwill | $ | |||
F-12
NOTE 5 - PROPERTY & EQUIPMENT
Property and equipment are recorded at cost. The Company capitalizes purchases of property and equipment over $5,000. Depreciation is computed using the straight-line method over the estimated useful lives of the various classes of assets as follows between three and five years.
Long lived assets, including property and equipment, to be held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. Impairment losses are recognized if expected future cash flows of the related assets are less than their carrying values. Measurement of an impairment loss is based on the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
Maintenance and repair expenses, as incurred, are charged to expense. Betterments and renewals are capitalized in plant and equipment accounts. Cost and accumulated depreciation applicable to items replaced or retired are eliminated from the related accounts with any gain or loss on the disposition included as income.
Clean-Seas, Inc. has purchased a pyrolysis unit for piloting and demonstration purposes which has been commissioned in Hyderabad, India as of May 2022. The unit will be used to showcase the Company’s technology and services, turning waste plastic into environmentally friendly commodities, to potential customers.
Property and equipment stated at cost, less accumulated depreciation consisted of the following:
| September
30, 2023 | December
31, 2022 | |||||||
| Pyrolysis unit | $ | $ | ||||||
| Equipment | ||||||||
| Clean-Seas Morocco | ||||||||
| Less: accumulated depreciation | ||||||||
| Property and equipment, net | $ | $ | ||||||
Depreciation expense
As of September 30, 2023, the Company’s fixed assets have not yet been placed into service. Depreciation will begin on the date the assets are placed into service.
NOTE 6 – LOANS PAYABLE
As of December 31,
2020, a third party loaned the Company a total of $
Effective January 1, 2023, the Company acquired a financing loan for its Director and Officer Insurance for $42,500. The loan bears interest at 7.75%, requires monthly payments of $4,402.42 and is due within one year. As of September 30, 2023, the balance due is $8,540.
NOTE 7 – CONVERTIBLE NOTES
Silverback Capital Corporation
On March 31, 2022, the Company issued a Promissory Note to Silverback Capital Corporation (“Silverback”) in the amount of $360,000. The Company received $300,000, net of a $60,000 OID. The note bears interest at 8% per annum and matures in one year. The note may be converted to shares of common stock at $0.02 per share, provided, that if the Company effects a Qualified Offering (as defined in the note) the conversion price will be such price that represents a 20% discount to the offering price of the Company’s common Stock in the Offering. In the event of a default Silverback will have the option to convert at the lower of 1) .02 per share, or 2) a 20% discount to the five day trailing VWAP of the common stock. On February 21, 2023, Silverback fully converted the $360,000 note and $25,723 of interest into 19,286,137 shares of common stock.
F-13
Coventry Enterprises, LLC
On December 9, 2022, the Company entered into the Purchase Agreement (the “Coventry Purchase Agreement”) with Coventry Enterprises, LLC (“Coventry”), pursuant to which the Company issued to Coventry a Promissory Note (the “Coventry Note”) in the principal amount of $300,000 in exchange for a purchase price of $255,000, net of a discount of $45,000. In addition, the Company issued to Coventry 15,500,000 shares of Common Stock (the “Commitment Stock”), of which 12,500,000 shares of Commitment Stock were returned to the Company pursuant to the terms of the Coventry Purchase Agreement in the first quarter of 2023.
The Coventry Note bears guaranteed interest at the rate of 5% per annum for the 12 months from and after the date of issuance (notwithstanding the 11-month term of the Coventry Note for aggregate guaranteed interest of fifteen thousand Dollars ($15,000), all of which Guaranteed Interest shall be deemed earned as of the date of the Coventry Note. The principal amount and the Guaranteed Interest are due and payable in seven equal monthly payments of $45,000, commencing on May 6, 2023, and continuing on the 6th day of each month thereafter until paid in full not later than November 6, 2023. During the nine months ended September 30, 2023, the Company repaid $270,000 of the principal amount.
February Convertible Notes
On February 17, 2023, the Company entered into a securities purchase agreement (the “February Purchase Agreement”) with certain institutional buyers. Pursuant to the February Purchase Agreement, the Company issued senior convertible notes in the aggregate principal amount of $4,080,000, which notes shall be convertible into shares of common stock at the lower of (a) 120% of the closing price of the common stock on the day prior to closing, or (b) a 10% discount to the lowest daily volume weighted average price (“VWAP”) reported by Bloomberg of the common stock during the 10 trading days prior to the conversion date.
On February 17, 2023, the initial investor under the February Purchase Agreement purchased a senior convertible promissory note (the “February Note”) in the original principal amount of $2,500,000 and a warrant to purchase 29,434,850 shares of the Company’s common stock. The maturity date of the February Note is February 21, 2024 (the “Maturity Date”). The February Note bears interest at a rate of 5% per annum. The February Note carries an original issue discount of 2%. The Company may not prepay any portion of the outstanding principal amount, accrued and unpaid interest or accrued and unpaid late charges on principal and interest, if any, except as specifically permitted by the terms of the February Note. The Company also issued a warrant to the initial investor that is exercisable for shares of the Company’s common stock at a price of $0.0389 per share and expires five years from the date of issuance.
April Convertible Note
Pursuant to the February Purchase Agreement, on April 10, 2023, an investor purchased a senior convertible promissory note (the “April Note”) in the original principal amount of $1,500,000 and the Company issued warrants for the purchase of up to 17,660,911 shares of the Company’s common stock to the investor. The April Note bears interest at a rate of 5% per annum. The April Note carries an original issue discount of 2%. The Company may not prepay any portion of the outstanding principal amount, accrued and unpaid interest or accrued and unpaid late charges on principal and interest, if any, except as specifically permitted by the terms of the April Note.
May Convertible Notes
On May 26, 2023, the Company entered into that certain Securities Purchase Agreement (the “May Purchase Agreement”) with certain institutional investors (the “May Investors”), pursuant to which the May Investor purchased a senior convertible promissory note in the aggregate original principal amount of $1,714,285.71 (the “May Note”) and warrants to purchase 44,069,041 shares of the Company’s common stock (the “May Warrants”).
F-14
The May Note matures 12 months after issuance and bear interest at a rate of 5% per annum, as may be adjusted from time to time in accordance with Section 2 of the May Note. The May Note have an original issue discount of 30%. The Company may not prepay any portion of the outstanding principal amount, accrued and unpaid interest or accrued and unpaid late charges on principal and interest, if any, except as specifically permitted by the terms of the May Note.
At any time, the Company shall have the right to redeem all, but not less than all, of the amount then outstanding under the May Note (the “Company Optional Redemption Amount”) on the Company Optional Redemption Date (as defined in the Note) (a “Company Optional Redemption”). The portion of the May Note subject to a Company Optional Redemption shall be redeemed by the Company in cash at a price equal to the greater of (i) 10% premium to the amount then outstanding under the May Note to be redeemed, and (ii) the equity value of our common stock underlying the May Note. The equity value of our common stock underlying the May Note is calculated using the greatest closing sale price of our common stock on any trading day immediately preceding such redemption and the date we make the entire payment required. The Company may exercise its right to require redemption under the May Note by delivering a written notice thereof by electronic mail and overnight courier to all, but not less than all, of the holders of May Note.
The May Warrants are exercisable for shares of the Company’s common stock at a price equal to 120% of the closing sale price of the common stock on the trading day ended immediately prior to the closing date (the “May Warrant Exercise Price”) and expire five years from the date of issuance. The May Warrant Exercise Price is subject to customary adjustments for stock dividends, stock splits, recapitalizations and the like.
August 2023 Note
On July 31, 2023 (the “August Note Original Issue Date”), the Company entered into a securities purchase agreement (the “August Purchase Agreement”) with an accredited investor (the “August Investor”), pursuant to which the August Investor purchased a senior convertible promissory note in the original principal amount of $500,000 (the “August Note”). In addition, as an additional inducement to the August Investor for purchasing the August Note, the Company issued 21,000,000 shares of its common stock to the August Investor at the closing. These shares are being valued at the closing stock price on the date of grant with the relative fair value accounted for as a debt discount. The transactions contemplated under the August Purchase Agreement closed on August 4, 2023.
The August Note matures on July 31, 2024 and bears interest at a rate of 10% per annum (the “Guaranteed Interest”), carries an original issue discount of 15% and has a conversion price of 90% per share of the lowest VWAP during the 20 trading day period before the conversion. The Company may prepay any portion of the outstanding principal amount and the guaranteed interest at any time and from time to time, without penalty or premium, provided that any such prepayment will be applied first to any unpaid collection costs, then to any unpaid fees, then to any unpaid Default Rate interest (as defined in the August Note), and any remaining amount shall be applied first to any unpaid guaranteed interest, and then to any unpaid principal amount.
F-15
The August Investor was granted a right of first refusal as the exclusive party with respect to any Equity Line of Credit transaction or financing (an “Additional Financing”) that the Company enters into during the 24-month period after the August Note Original Issue Date. In the event the Company enters into an Additional Financing, the Company must provide notice to the August Investor not less than 10 trading days in advance of the proposed entry. If the August Investor accepts all usual and customary terms set forth in the Additional Financing notice, the August Investor must, within 20 trading days of receipt of the notice, prepare all relevant documents in respect thereof for execution and delivery by the Company, provided, however, that the Company’s outside counsel must prepare the relevant registration statement to be filed with the United States Securities and Exchange Commission no later than 45 days after the Company receives the documents.
The August Note sets forth certain standard events of default (each such event, an “August Note Event of Default”), which, upon such August Note Event of Default, the principal amount and the guaranteed interest then outstanding under the August Note becomes convertible into shares of the Company’s common stock pursuant to a notice provided by the August Investor to the Company. At any time after the occurrence of an August Note Event of Default, the outstanding principal amount and the outstanding guaranteed interest then outstanding on the August Note, plus accrued but unpaid Default Rate (as defined in the August Note) interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become immediately due and payable at the August Investor’s option, in cash or in shares of the Company’s common stock at 120% of the outstanding principal amount of the August Note and accrued and unpaid interest, plus other amounts, costs, expenses and liquidated damages due in respect of the August Note.
The Company accounted for the above Convertible Notes according to ASC 815. For the derivative financial instruments that are accounted for as liabilities, the derivative liability was initially recorded at its fair value and is being re-valued at each reporting date, with changes in the fair value reported in the statements of operations.
For the warrants that were issued with each tranche of funding, the Company uses a weighted-average Black-Scholes-Merton option pricing model to value the warrants at inception and then calculates the relative fair value for each loan.
The Company deducts the total value of all discounts (OID, value of warrants, discount for derivative) from the calculated derivative liability with any difference accounted for as a loss on debt issuance. For the nine months ended September 30, 2023, the Company recognized a total loss of the issuance of convertible debt of $2,676,526.
From April 2023 through September 30, 2023, Walleye Opportunities Master Fund Ltd., converted $2,063,684 of the principal amount of the February Note into 97,450,000 shares of our common stock. The Company accounted for the conversions per ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20), resulting in a gain from conversion of debt of $881,660.
The following table summarizes the convertible notes outstanding as of September 30, 2023:
| Note Holder | Date | Maturity Date | Interest | Balance December 31, 2022 |
Additions | Conversions / Repayments | Balance September 30, 2023 | |||||||||||||||
| Silverback Capital Corporation | $ | $ | $ | ( |
$ | |||||||||||||||||
| Coventry Enterprises, LLC | ( |
|||||||||||||||||||||
| Walleye Opportunities Fund | ( |
|||||||||||||||||||||
| Walleye Opportunities Fund | — | |||||||||||||||||||||
| Walleye Opportunities Fund | — | |||||||||||||||||||||
| Coventry Enterprises, LLC | — | — | ||||||||||||||||||||
| Total | $ | $ | $ | ( |
$ | |||||||||||||||||
| Less debt discount | $ | ( |
( | |||||||||||||||||||
| Convertible note payable, net | $ | $ | ||||||||||||||||||||
F-16
A summary of the activity of the derivative liability for the notes above is as follows:
| Balance at December 31, 2022 | $ | |||
| Increase to derivative due to new issuances | ||||
| Decrease to derivative due to conversions | ( |
) | ||
| Decrease to derivative due to mark to market | ( |
) | ||
| Balance at September 30, 2023 | $ | |||
The Company uses the Black Scholes pricing model to estimate the fair value of its derivatives. A summary of quantitative information about significant unobservable inputs (Level 3 inputs) used in measuring the Company’s derivative liability that are categorized within Level 3 of the fair value hierarchy, as of September 30, 2023 is as follows:
| Inputs | September 30, 2023 | Initial
Valuation | ||||||
| Stock price | $ | $ | - | |||||
| Conversion price | $ | $ | ||||||
| Volatility (annual) | % | % | ||||||
| Risk-free rate | % | % | ||||||
| Dividend rate | — | |||||||
| Years to maturity | ||||||||
NOTE 8 – RELATED PARTY TRANSACTIONS
Dan Bates, CEO
On February 21, 2021, the Company amended the employment agreement with Daniel Bates, the Company’s Chief Executive Officer. The amendment extended the term of his agreement from three years commencing May 27, 2020, to expire on May 27, 2025.
As of September 30, 2023 and December 31, 2022, the Company owed Mr. Bates $189,000 and $220,000, respectively, for accrued compensation.
The Company issued to Mr. Bates three separate promissory notes, 1) on August 1, 2022, for $1,000, 2) on September 15, 2022, for $35,040, and 3) on October 6, 2022, for $1,000. The notes bear interest at 8% and are due on demand. As of December 31, 2022, the Company repaid $20,000, for a balance due of principal and interest of $26,040 and $977. During the nine months ended September 30, 2023, Mr. Bates loaned the Company an additional $5,000. AS of September 30, 2023, the loans and all accrued interest were repaid in full.
Rachel Boulds, CFO
The Company entered into a consulting agreement with Rachel Boulds, effective as of May 1, 2021, to serve as part-time Chief Financial Officer for compensation of $5,000 per month, which increased to $7,500 in June 2023. As of September 30, 2023 and December 31, 2022, the Company owes Ms. Boulds $7,500 and $25,000 for accrued compensation, respectively.
F-17
Daniel Harris, Chief Revenue Officer
As of September 30, 2023 and December 31, 2022, the Company owed Mr. Harris, $12,500 and $37,500, respectively, for accrued compensation.
John Owen
Mr. Owen’s consulting agreement and his role as Chief Operating Officer were terminated effective as of November 21, 2022. Per the terms of the separation agreement with Mr. Owen, the Company acknowledges past due salary of $62,500. The Company made an initial payment of $2,500 and agreed to pay $5,000 a month beginning in January 2023. As of September 30, 2023, the Company owed Mr. Owen $15,000.
Erfran Ibrahim, former CTO
As of September 30, 2023 and December 31, 2022, the Company owed Mr. Ibrahim, $60,000 and $60,000, respectively, for accrued compensation.
Michael Dorsey, Director
As of September 30, 2023 and December 31, 2022, the Company owed Mr. Dorsey, $0 and $9,000, respectively, for accrued director fees.
Greg Boehmer, Director
As of September 30, 2023 and December 31, 2022, the Company owed Mr. Boehmer, $0 and $4,500, respectively, for accrued director fees. In addition, the Company owes Mr. Boehmer $0 and $7,000, for consulting services as of September 30, 2023 and December 31, 2022.
Bart Fisher, Director
On February 23, 2023. Mr. Fisher was granted 500,000 shares of common stock. The shares were valued at $0.122, the closing stock price on the date of grant, for total non-cash stock compensation of $61,000.
NOTE 9 – COMMON STOCK
The Company has entered into three consulting agreements that required the issuance of a total of 31,251 shares of common stock per month through December 2023. For the nine months ended September 30, 2023, the shares were valued at the closing stock price on the date of grant for total non-cash stock compensation of $13,000. As of September 30, 2023, the shares due have not been issued by the transfer agent and are included in common stock to be issued.
The Company has entered into a consulting agreement that requires the issuance of 5,000 shares of common stock per month beginning February 2022. For the nine months ended September 30, 2023, the shares were valued at the closing stock price on the date of grant for total non-cash stock compensation of $4,333. As of September 30, 2023, the shares due have not been issued by the transfer agent and are included in common stock to be issued.
In addition to the monthly shares granted the Company also granted the following:
On January 26, 2023, the Company issued a total of 10,500,000 shares of common stock and warrants to purchase up to 10,500,000 additional shares of common stock, to four individuals pursuant to the Signed Securities Purchase Agreements on January 26, 2023, for total cash proceeds of $210,000. The Warrants are exercisable for shares of the Company’s common stock at a price of $0.03 per share and expires three years from the date of issuance.
F-18
On January 30, 2023, the Company granted 1,000,000 shares of common stock for services. The shares were valued at $0.063, the closing stock price on the date of grant, for total non-cash compensation expense of $62,800.
On February 16, 2023, the Board of Directors approved a special dividend of five shares of the Company's common stock for every one hundred shares of common stock issued and outstanding (the "Dividend"). The record date for the Dividend is February 27, 2023, and the payment date is March 13, 2023. The shares were valued at $0.068, for a total value of $1,483,528, which has been debited to the accumulated deficit.
On February 21, 2023, Silverback Capital Corporation, fully converted its note dated March 31, 2022, with principal and interest of $360,000 and $25,723, respectively, into 19,286,137 shares of common stock.
On February 22, 2023, the Company issued 6,250,000 shares of common stock and warrants to purchase up to 6,250,000 additional shares of common stock, to an individual pursuant to the Signed Securities Purchase Agreement, for total cash proceeds of $125,000. The Warrants are exercisable for shares of the Company’s common stock at a price of $0.03 per share and expires three years from the date of issuance.
On February 23, 2023, the Company granted 600,000 shares of common stock for services. The shares were valued at $0.122, the closing stock price on the date of grant, for total non-cash compensation expense of $73,200.
On March 7, 2023, the Company granted 850,000 shares of common stock for services. The shares were valued at $0.068, the closing stock price on the date of grant, for total non-cash compensation expense of $57,375.
On March 17, 2023, the Company granted 3,000,000 shares of common stock for services. The shares were valued at $0.065, the closing stock price on the date of grant, for total non-cash compensation expense of $194,400.
From April 2023 through September 30, 2023, Walleye Opportunities Master Fund Ltd., converted $2,063,684 of the principal amount of the February Note into 97,450,000 shares of our common stock.
On July 6, 2023, the Company issued Brad Listermann 430,000 shares of common stock. The shares were issued per the terms of a Settlement Agreement effective June 13, 2023.
On July 18, 2023, the Company issued 6,000,000 shares of common stock for services. The shares were valued at $0.03, the closing stock price on the date of grant, for total non-cash compensation expense of $181,800.
On July 24, 2023, the Company issued 5,725,000 shares of common stock for conversion of a loan payable in the amount $114,500.
On August 1, 2023, the Company granted 500,000 shares of common stock for services. The shares were valued at $0.025, the closing stock price on the date of grant, for total non-cash compensation expense of $12,650.
On August 29, 2023, the Company granted 500,000 shares of common stock for services. The shares were valued at $0.021, the closing stock price on the date of grant, for total non-cash compensation expense of $10,600.
On September 15, 2023, the Company granted 5,000,000 shares of common stock for services. The shares were valued at $0.026, the closing stock price on the date of grant, for total non-cash compensation expense of $130,000.
On September 26, 2023, the Company entered into the Dorado Purchase Agreement with Dorado. Pursuant to which the Company issued and sold to Dorado (i) 10,000,000 shares of Common Stock to the Dorado at a purchase price of $0.0198 per share, or $198,000 in the aggregate, and (ii) 5,000,000 shares of restricted Common Stock to Dorado.
Refer to Note 8 for shares issued to related parties.
NOTE 10 – PREFERRED STOCK
The Company is authorized to issue 10,000,000 shares of Preferred Stock at $0.001 par value per share with the following designations.
F-19
Series A Redeemable Preferred Stock
On September 21, 2020, the Company created a series of Preferred Stock designating 2,000,000 shares as Series A Redeemable Preferred Stock ranks senior to the Company’s Common Stock upon the liquidation, dissolution or winding up of the Company. The Series A Preferred Stock does not bear a dividend or have voting rights and is not convertible into shares of our Common Stock.
Series B Preferred Stock
On December 14, 2020, the Company designated 2,000,000 shares of its authorized preferred stock as Series B Convertible Non-voting Preferred Stock (the “Series B Preferred Stock”). The Series B Preferred Stock does not bear a dividend or have voting rights. The Series B Preferred Stock automatically converted into shares of common stock on January 1, 2023, at the rate of 10 shares of common stock for each share of Series B Preferred Stock; however, due to an ongoing dispute with certain holders of the Series B Preferred Stock, which is expected to be resolved through binding arbitration in December 2023, such conversion has not been effectuated as of the date hereof. Holders of our Series B Preferred Stock have anti-dilution rights protecting their interests in the Company from the issuance of any additional shares of capital stock for a two year period following conversion of the Series B Preferred Stock calculated at the rate of 20% on a fully diluted basis.
On December 17, 2020, the Company entered into a three-year consulting agreement with Leonard Tucker LLC. Per the terms of the agreement, Leonard Tucker LLC received 2,000,000 shares of Series B Preferred Stock for services provided, which shares of Series B Preferred Stock is to be classified as mezzanine equity until they are fully issued.
Series C Preferred Stock
On February 19, 2021, the Company amended its Articles of Incorporation whereby 2,000,000 shares of preferred stock were designated Series C Convertible Preferred Stock. The holders of the Series C Convertible Preferred Stock are entitled to 100 votes and shall vote together with the holders of common stock. Each share of the Series C Convertible Preferred Stock automatically converted into ten shares of common stock on January 1, 2023; however, such conversion has not been effectuated as of the date hereof.
NOTE 11 – WARRANTS
On October 6, 2022, the Company issued warrants to purchase up to 40,000 shares of common stock in conjunction with the issuance of a note payable. The warrants are exercisable for 3 years with an exercise price of $0.01. The warrants were evaluated for purposes of classification between liability and equity. The warrants do not contain features that would require a liability classification and are therefore considered equity.
January 26, 2023, the Company issued a total of 10,500,000 shares of common stock and warrants to purchase up to 10,500,000 additional shares of common stock, to four individuals pursuant to a Securities Purchase Agreement signed on January 26, 2023, for total cash proceeds of $210,000. The warrants are exercisable for shares of the Company’s common stock at a price of $0.03 per share and expire three years from the date of issuance. Using the fair value calculation, the relative fair value for the warrants was calculated to determine the warrants recorded equity amount of $134,836, which has been accounted for in additional paid in capital.
On February 17, 2023, the investor under that certain Securities Purchase Agreement (the “February Purchase Agreement”) purchased a senior convertible promissory note in the original principal amount of $2,500,000 and a warrant to purchase 29,424,850 shares of the Company’s common stock (the “February Warrant”). The February Warrant is exercisable for shares of the Company’s common stock at a price of $0.0389 per share and expires five years from the date of issuance. Using the fair value calculation, the relative fair value for the warrants was calculated to determine the warrants recorded equity amount of $1,381,489 which has been accounted for in additional paid in capital.
On February 22, 2023, the Company entered into and closed on those certain Securities Purchase Agreements with five (5) investors (the “Reg. D Investors”), pursuant to which the Company issued 6,250,000 shares of common stock and warrants to purchase up to 6,250,000 additional shares of common stock (the “Reg. D Warrants”) for total cash proceeds of $125,000. The Reg. D Warrants are exercisable for shares of the Company’s common stock at a price of $0.03 per share and expires three years from the date of issuance. Using the fair value calculation, the relative fair value for the warrants was calculated to determine the warrants recorded equity amount of $193,063 which has been accounted for in additional paid in capital.
F-20
Pursuant to the February Purchase Agreement, on April 10, 2023, the Company issued a senior convertible promissory note in the original principal amount of $1,500,000 and warrants to purchase 17,660,911 shares of the Company’s common stock (the “April Warrants”). The April Warrants are exercisable for shares of the Company’s common stock at a price of $0.0389 per share and expire five years from the date of issuance. Using the fair value calculation, the relative fair value for the warrants was calculated to determine the warrants recorded equity amount of $587,384 which has been accounted for in additional paid in capital.
On May 26, 2023, the Company entered into that certain Securities Purchase Agreement (the “May Purchase Agreement”) with certain institutional investors (the “May Investors”), pursuant to which the May Investors purchased senior convertible promissory notes in the aggregate original principal amount of $1,714,285.71 and warrants to purchase 44,069,041 shares of the Company’s common stock (the “May Warrants”). The May Warrants are exercisable for shares of the Company’s common stock at a price of $0.0389 per share and expire five years from the date of issuance. Using the fair value calculation, the relative fair value for the warrants was calculated to determine the warrants recorded equity amount of $760,980 which has been accounted for in additional paid in capital.
| Number
of Warrants |
Weighted Average Exercise Price |
Weighted
Average Remaining Contract Term |
Intrinsic Value | |||||||||||
| Outstanding, December 31, 2021 | — | |||||||||||||
| Issued | $ | |||||||||||||
| Cancelled | $ | — | ||||||||||||
| Exercised | $ | — | ||||||||||||
| Outstanding, December 31, 2022 | $ | |||||||||||||
| Issued | $ | |||||||||||||
| Cancelled | $ | — | ||||||||||||
| Exercised | $ | — | ||||||||||||
| Outstanding, September 30, 2023 | $ | $ | ||||||||||||
NOTE 12 – COMMITMENTS AND CONTINGENCIES
Project Finance Arrangement
On November 4, 2022, the Company entered into a consulting agreement (the “Agreement”) with Edge Management, LLC (“Edge”), a services firm based in New York City. Under the Agreement, Edge will assist us to develop, structure and implement project finance strategies (“Project Finance”) for our clean energy installations around the world. Financing strategies will be in amounts and upon terms acceptable to us, and may include, without limitation, common and preferred equity financing, mezzanine and other junior debt financing, and/or senior debt financing, including but not limited to one or more bond offerings (“Project Financing(s)”). Under the Agreement, Edge is engaged as our exclusive representative for Project Financing matters. Edge is entitled to receive a cash payment for any Project Financing involving as follows: 5% of the gross amount of the funding facilities (up to $500 million) of all forms approved by the lender (“Lender”) introduced by Edge and or its affiliates and accepted by the Company on closing (“Closing”), 4% of the gross amount of the funding facilities (for the tranche of funding ranging from $500,000,001 to $1,000,000,000) approved by the Lender introduced by Edge and or its affiliates and accepted by the Company on Closing, and 3% of the subsequent gross amount ($1,000,000,001 and greater) of the funding facilities of all forms approved by the Lender introduced by Edge and/or its affiliates and accepted by the Company on Closing. In addition to the cash consulting fee, Edge shall be issued cashless, five-year warrants equal to: 2% (at a strike price to be mutually determined by the Parties for the first tranche of funding, up to $500 million), 1% (at a strike price to be mutually determined by the Parties for the tranche of funding ranging from $500,000,001 to $1,000,000,000), and 1% (at a strike price to be mutually determined by the Parties for any and all subsequent Debt Funding ($1,000,000,001 and greater)) of the outstanding common and preferred shares, warrants, options, and other forms of participation in the our Company on Closing.. The Agreement has an initial term of one (1) year and is cancellable by either party on ninety (90) days written notice. There is no guarantee that Edge will be successful in helping us obtain Project Financing.
F-21
Legal Proceedings
Presently, except as described below, there are not any material pending legal proceedings to which the Company is a party or as to which any of its property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.
On January 30, 2023, Leonard Tucker, LLC (“Tucker”), one of the holders of the Company’s Series B Convertible Non-Voting Preferred Stock (the “Series B Preferred Stock”) filed an action against the Company (the “Tucker Litigation”) in the Second Judicial District Court of the State of Nevada (Case No. CV23-00188) alleging breach of contract, breach of implied covenant of good faith and fair dealing, unjust enrichment, specific performance and declaratory relief (the “Tucker Complaint”). The Tucker Litigation arises from the 3-year Consulting Agreement the Company entered into with Tucker on December 17, 2020 (the “Tucker Agreement”), whereby Tucker agreed to perform certain strategic and business development services to the Company in exchange for 2,000,000 shares of Series B Preferred Stock and a consulting fee of $20,000 per month.
The 2,000,000 shares of Series B Preferred Stock automatically converted into 20,000,000 shares of the Company’s common stock (the “Common Stock”) on January 1, 2023. However, the Company’s Transfer Agent was instructed to not issue the shares of Common Stock because of the ongoing dispute between the Company and Tucker regarding Tucker’s ability to perform under the Tucker Agreement due to the action filed by the United States Securities and Exchange Commission against Profile Solutions, Inc., Dan Oran and Tucker on September 9, 2022 in the United States District Court Southern District of Florida (Case No. 1:22-cv-22881) alleging, among other things, that Tucker violated Section 17(a)(1) and 17(a)(3) of the Securities Act of 1933 and aided and abetted violations of Section 10(b) and Rule 10-b5.
Tucker is seeking, among other things, that the Company issue the shares of Common Stock issuable upon conversion of the Series B Preferred Stock pursuant to the Tucker Agreement. The Company is contesting all of the allegations set forth in the Tucker Complaint.
Pursuant to the terms of the Tucker Agreement, the Company expects to have the Tucker Litigation resolved through binding arbitration in December 2023.
On July 3, 2023, the Company entered into a Settlement Agreement and Mutual Release (the “Settlement Agreement”) by and between the Company, Christopher Percy and Daniel Bates, whereby the parties agreed to a global settlement to a lawsuit filed by the Company against Mr. Percy in September 2022 in Clark County, Nevada in the Eighth Judicial District Court (Case No: A-22-85843-B), with the case being subsequently removed to the United States District Court, District of Nevada (2:22-cv-01862-ART-NJK). Thereafter, Mr. Percy counterclaimed against the Company and brought third-party claims against Mr. Bates (the “ Percy Litigation”). Pursuant to the Settlement Agreement, none of the parties admitted to fault or liability, Mr. Percy agreed to pay $150,000 to the Company (the “Percy Payment”) and, within ten (10) business days of the Percy Payment being received, Mr. Bates agreed to remit $25,000 to Mr. Percy (the “Bates Payment”). In addition, the parties agreed to work together to promptly release the $5,000 Temporary Restraining Order/Preliminary Injunction bond currently deposited with the Clerk of the Court for the Eighth Judicial District Court, Clark County, Nevada. Once released, said bond shall be remitted to Mr. Percy. In addition, pursuant to the Settlement Agreement, the Company agreed to, within ten (10) days of the effective date, instruct its transfer agent to (i) issue 1,500,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”) to Mr. Percy, (ii) restore and/or reissue to Mr. Percy the 3,000,000 shares of Common Stock that was previously cancelled by the Company and (iii) withdraw its stop-transfer demand current in place with respect to 4,200,000 shares of Common Stock owned by Mr. Percy (collectively, the “Percy Shares”). Mr. Percy agreed to not sell, on any given trading day, the Percy Shares in an amount that exceeds more than 10% of the daily trading volume of the Common Stock, with such trading volume determined by the trading platform upon which the Common Stock is then traded. As consideration for entering into the Settlement Agreement, the parties agreed to a customary mutual release of claims. Within five (5) business dates of the Bates Payment being remitted, the parties agreed to submit a joint stipulation to the United States District Court, District of Nevada, dismissing all claims, crossclaims, counterclaims, and/or third-party claims in the Litigation, with prejudice.
F-22
Non-Related Party Consulting Agreements
The following is a summary of compensation related to consulting agreements in 2023.
| Stock Compensation | |||||||||||||
| Consultant | Current Contract Date | # Shares | Value | 2023 Compensation | Owed
as of 9/30/2023 | ||||||||
| John Shaw | — | $ | — | $ | $ | ||||||||
| Chris Galazzi | $ | $ | $ | ||||||||||
| Venkat Kumar Tangirala | — | $ | — | $ | $ | ||||||||
| Alpen Group LLC | $ | $ | $ | ||||||||||
| Strategic Innovations | — | — | $ | $ | |||||||||
| Fraxon Marketing | — | — | $ | $ | |||||||||
West Virginia State Incentive Package
On June 12, 2023, Clean-Seas announced that it secured $12 million in state incentives, which includes $1.75 million in cash to establish a PCN facility outside of Charleston, West Virginia. Clean-Seas West Virginia, Inc., a West Virginia corporation (“Clean-Seas West Virginia”), has an existing feedstock supply agreement for 100 TPD of post-industrial plastic waste and is planned to be a PCN hub servicing the Mid-Atlantic states. The project will commence in phases, Phase 1 being 100 TPD, scaling up to 500 TPD. Additional project finance capital is in the process of being secured and the Company received the $1.75 million cash disbursement on September 25, 2023.
NOTE 13 - DISCONTINUED OPERATIONS
In accordance with the provisions of ASC 205-20, Presentation of Financial Statements, we have separately reported the liabilities of the discontinued operations in the consolidated balance sheets. The liabilities have been reflected as discontinued operations in the consolidated balance sheets as of September 30, 2023 and December 31, 2022, and consist of the following:
| September 30, 2023 | December 31, 2022 | |||||||
| Current Liabilities of Discontinued Operations: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Loans payable | ||||||||
| Total Current Liabilities of Discontinued Operations: | $ | $ | ||||||
NOTE 14 – SUBSEQUENT EVENTS
In accordance with SFAS 165 (ASC 855-10) management has performed an evaluation of subsequent events through the date of this Quarterly Report on Form 10-Q and has determined that it does not have any material subsequent events to disclose in these consolidated financial statements.
F-23
Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
The information in this report contains forward-looking statements. All statements other than statements of historical fact made in this report are forward looking. In particular, the statements herein regarding industry prospects and future results of operations or financial position are forward-looking statements. These forward-looking statements can be identified by the use of words such as “believes,” “estimates,” “could,” “possibly,” “probably,” anticipates,” “projects,” “expects,” “may,” “will,” or “should” or other variations or similar words. No assurances can be given that the future results anticipated by the forward-looking statements will be achieved. Forward-looking statements reflect management’s current expectations and are inherently uncertain. If underlying assumptions prove inaccurate or unknown risks or uncertainties materialize, our actual results may differ significantly from management’s expectations. Should one or more of these uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those anticipated in these forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q or, in the case of documents referred to or incorporated by reference, the date of those documents.
The following discussion and analysis should be read in conjunction with our unaudited financial statements, included herewith. This discussion should not be construed to imply that the results discussed herein will necessarily continue into the future, or that any conclusion reached herein will necessarily be indicative of actual operating results in the future. Such discussion represents only the best present assessment of our management.
Company Overview and Description of Business
Overview
Clean Vision is a new entrant in the clean energy and waste-to-energy industries focused on clean technology and sustainability opportunities. By leveraging innovative technology, we aim to responsibly resolve environmental challenges by producing valuable products and strive to be recognized as an environmental, social and governance company (“ESG”). Currently, we are focused on providing a solution to the plastic waste problem by converting plastic waste into saleable byproducts, such as precursors used in the production of new plastic products, hydrogen and other clean-burning fuels that can be used to generate clean energy. Using a technology known as pyrolysis, which heats the feedstock (i.e., plastic waste) at high temperatures in the absence of oxygen so that the material does not burn, we are able to convert the plastic feedstock into (i) low-sulfur fuels, (ii) clean hydrogen (specifically, the Company’s branded AquaH™, which trademark application is currently pending with the United States Patent and Trademark Office (the “USPTO”)), and (iii) carbon char. Our goal is to generate revenue from three sources: (i) service revenue from the recycling services we provide (ii) revenue generated from the sale of the byproducts; and (iii) revenue generated from the sale of fuel cell equipment. Our mission is to aid in solving the problem of cost-effectively upcycling the vast amount of waste plastic generated on land before it flows into the world’s oceans.
Clean Vision was established in 2017 as a company focused on the acquisition of disruptive technologies that will impact the digital economy. The Company, which was formerly known as Byzen Digital Inc., changed its corporate name to Clean Vision on March 12, 2021.
We are now a holding company and currently operate through our wholly owned subsidiary, Clean-Seas, Inc. (“Clean-Seas”) which we acquired on May 19, 2020. Clean-Seas acquired its first pyrolysis unit in November 2021 for use in a pilot project in India, which began operations in early May 2022. On April 25, 2023 (the “Morocco Closing Date”), Clean-Seas completed its acquisition of a fifty-one percent (51%) interest in Eco Synergie S.A.R.L., a limited liability company organized under the laws of Morocco (“Ecosynergie”). On the Morocco Closing Date, (i) Ecosynergie’s name was changed to Clean-Seas Morocco, LLC (“Clean-Seas Morocco”), (ii) Mrs. Halima Aboudeine and Mr. Daniel C. Harris, the Company’s Chief Revenue Officer (“CRO”), were appointed as managers of Clean-Seas Morocco and (iii) Mr. Harris was appointed to serve as the Chief Executive Officer of Clean-Seas Morocco. Clean-Seas Morocco began operations at its pyrolysis facility in Agadir, Morocco, in April 2023, which currently has capacity to convert 20 TPD of waste plastic through pyrolysis.
Employees
As of September 30, 2023, we employed thirty-one (31) individuals, of which nine (9) are part time. Ten (10) of our employees reside in India, nine (9) of our employees reside in Morocco and one (1) of our employees resides in France.
24
Available Information
All reports of the Company filed with the U.S. Securities and Exchange Commission (the “SEC”) are available free of charge through the SEC’s website at www.sec.gov. In addition, the public may read and copy materials filed by the Company at the SEC’s Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549. The public may also obtain additional information on the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330.
Our principal executive offices are located at 2711 N. Sepulveda Blvd., Suite #1051, Manhattan Beach, CA 90266. Our telephone number is (424) 835-1845.
Our common stock is quoted on the OTCQB maintained by OTC Markets, Inc. under the symbol “CLNV”.
Results of Operations
Management’s discussion and analysis of financial condition and results of operations (“MD&A”) includes a discussion of the consolidated results from operations of the Company and its subsidiaries for the three and nine months ended September 30, 2023 and 2022.
Three Months Ended September 30, 2023 Compared to the Three Months Ended September 30, 2022
Revenue
For the three months ended September 30, 2023, the Company recognized revenue of $26,908, from our subsidiary Clean-Seas Morocco. Revenue from operations is generated from the processing of plastic waste material ("feedstock") at our plant in Agadir, Morocco. The plastic feedstock is put through a pyrolysis system which applies pressure and heat, in the absence of oxygen (no incineration), converting the plastic back to its petroleum form. The revenue was generated from selling the output product, "pyrolysis oil," to a local oil and gas wholesaler in Morocco, called the "off-taker". We receive the plastic feedstock in Agadir at $0 cost, but variable expenses include labor, land lease, and overhead such as insurance.
We recognized no revenue for three months ended September 30, 2022.
Consulting Expense
For the three months ended September 30, 2023 and 2022, we had consulting expenses of $389,925 and $311,808, respectively, an increase of $78,117 or 25.1%. The increase is mainly due to an increase in stock compensation expense. In the current year we issued stock for services for non-cash compensation expense of approximately $172,000 compared to $150,000 of stock compensation expense for preferred shares in the prior period.
Professional Fees
For the three months ended September 30, 2023 and 2022, we incurred professional fees of $79,527 and $131,535, respectively, a decrease of $52,008 or 39.5%. In the current period we had a decrease in legal expense of approximately $38,000 as well as a decrease of $4,000 in accounting expense.
Payroll Expense
For the three months ended September 30, 2023 and 2022, we had payroll expenses of $217,806 and $171,260, respectively, an increase of $46,546 or 27.2%. Payroll has increased due to both new hires and to salary increases for some of our employees.
Director Fees
For the three months ended September 30, 2023 and 2022, we had director fees of $13,500 and $4,500, respectively, an increase of $9,000. Our directors are compensated $4,500 per quarter. In the prior period expense was incurred for just one director. In the current period we have three directors.
25
General and Administrative expense
For the three months ended September 30, 2023 and 2022, we had G&A expenses of $401,845 and $227,374, respectively, an increase of $174,471 or 76.7%. The increase in the current period is primarily due to promotional expense. We issued shares of common stock for promotional services for $181,800 of non-cash expense. Our Clean Seas India a subsidiary also incurred approximately $17,000 of G&A expense during the period. These increases were offset by a decrease in investor relation expense of $141,500.
Other Income and Expense
For the three months ended September 30, 2023, we had total other income of $68,473 compared to total other expense of $22,791 for the three months ended September 30, 2022. In the current period we recognized $1,590,647 of interest expense, of which $1,532,111 was amortization of debt discount, a gain in the change in fair value of derivative of $1,038,342 and a gain on the conversion of debt of $620,778. In the prior period we recognized $23,465 of interest expense, of which $15,000 was amortization of debt discount.
Net Loss
Net loss for the three months ended September 30, 2023, was $1,047,330, after deducting $51,697 for the non-controlling interest, and $869,268, respectively.
Nine Months Ended September 30, 2023 Compared to the Nine Months Ended September 30, 2022
Revenue
For the nine months ended September 30, 2023, the Company recognized revenue of $188,205 and cost of revenue of $22,273, from our new subsidiary Clean-Seas Morocco. Revenue from operations is generated from the processing of plastic waste material ("feedstock") at our plant in Agadir Morocco. The feedstock is put through a pyrolysis system which applies pressure and heat, in the absence of oxygen (no incineration), converting the plastic back to its petroleum form. The revenue was generated from selling the output product, "pyrolysis oil," to a local oil and gas wholesaler in Morocco, called the "off-taker". We receive the plastic feedstock in Agadir at $0 cost, but variable expenses include labor, land lease, and overhead such as insurance.
We recognized no revenue for the nine months ended September 30, 2022.
Consulting Expense
For the nine months ended September 30, 2023 and 2022, we had consulting expenses of $1,084,423 and $1,094,768 respectively, a decrease of $10,345 or 0.9%. In the current period approximately $571,000 of our consulting expense was non-cash stock compensation. In the prior period that amount was approximately $484,000.
Professional Fees
For the nine months ended September 30, 2023 and 2022, we incurred professional fees of $621,087 and $258,165, respectively, an increase of $362,922 or 140.6%. In the current period we had additional legal expense of approximately $352,000 mostly related to both the filing of our Regulation A Offering Statements and ongoing litigation.
Payroll Expense
For the nine months ended September 30, 2023 and 2022, we had payroll expenses of $750,070 and $623,549, respectively, an increase of $126,521 or 20.3%. In the current period we recognized payroll expense from Clean-Seas Morocco of approximately $83,000. In addition, payroll increased due to salary increases for some of our employees and additional new hires.
26
Director Fees
For the nine months ended September 30, 2023 and 2022, we had director fees of $101,500 and $13,500, respectively, an increase of $88,000. Our directors are compensated $4,500 per quarter. In the prior period expense was incurred for just one director. In the current period we have three directors. In addition, we issued 500,000 shares of common stock to a new director for total non-cash compensation expense of $61,000.
General and Administrative expense
For the nine months ended September 30, 2023 and 2022, we had G&A expense of $1,162,648 and $824,344, respectively, an increase of $338,304 or 41%. Some of our larger G&A expenses were for promotional expense (~$472,000), transfer agent fees (~$24,000) and public company fees (~$35,000). Our Clean Seas India and Eco Synergie subsidiaries also incurred approximately $99,000 and $38,000, respectively, of G&A expense during the period.
Other Income and Expense
For the nine months ended September 30, 2023, we had total other expense of $2,902,745 compared to $241,739 for the nine months ended September 30, 2022. In the current period we recognized $3,299,800 of interest expense, of which $3,169,050 was amortization of debt discount and a loss on debt issuance of $2,676,526. This was offset with a gain of $881,660 for the conversion of debt, $17,500 from extinguishment of debt and a gain in the change in fair value of derivative of $2,174,421. In the prior year we recognized $46,256 interest expense, of which $30,000 was amortization of debt discount and a loss on debt issuance of $195,483.
Net Loss
Net loss for the nine months ended September 30, 2023, was $6,474,944, after deducting $18,403 for the non-controlling interest, and $3,056,065, respectively. Our net loss increased mainly due to non-cash expense associated with our convertible debt.
Liquidity and Capital Resources
Changes in Cash Flows
For the nine months ended September 30, 2023, we used $3,412,108 of cash in operating activities, which included $3,626,965 for non-cash items and $582,532 for operating activities. For the nine months ended September 30, 2022, we used $1,846,811 of cash in operating activities.
For the nine months ended September 30, 2023 and 2022, we used $2,000,000 for the acquisition of Morocco-based Ecosynergie Group. In the prior period we used $54,713 for the purchase of property and equipment, respectively.
For the nine months ended September 30, 2023 and 2022, we received net cash of $6,753,217 and $1,062,074, respectively, from financing activities. In the current period we received $4,809,500 from a convertible note payable, $42,500 from a note payable, $5,000 from our CEO, and $533,000 from the sale of our common stock. We also received $1,750,000 for a long-term liability. We repaid $32,910 of the loans owed to related parties, $270,000 of a convertible note and $72,780 on other notes payable. In the prior period, we received $300,000 from a convertible note payable, $600,000 from the sale of common stock and $131,436 from other notes, $14,402 of which was repaid.
Liquidity and Capital Resources
At September 30, 2023, the Company had cash of $1,318,424 and a working capital deficit of $6,259,559.
27
Going Concern
The Company’s financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern basis, which contemplates the realization of assets and the liquidation of liabilities in the normal course of business. As of September 30, 2023, the Company had a working capital deficit of $6,259,559, an accumulated deficit of $27,018,878 and net loss of $6,456,541 for the nine months ended September 30, 2023. The Company has not yet established a source of revenue sufficient to cover its operating, and has incurred net losses since inception. The obtainment of additional financing, the successful development of the Company’s contemplated plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The Company’s ability to raise additional capital through the future issuances of common stock and/or debt financing is unknown.
The Company believes that its current cash on hand will not be sufficient to fund its projected operating requirements for the next twelve months since the date of this Quarterly Report on Form 10-Q.
Management plans to continue to implement its business plan and to fund operations by raising additional capital through the issuance of debt and equity securities. The Company’s existence is dependent upon management's ability to implement its business plan and/or obtain additional funding. There can be no assurance that the Company’s financing efforts will result in profitable operations or the resolution of the Company's liquidity problems. Even if the Company is able to obtain additional financing, it may include undue restrictions on our operations in the case of debt or cause substantial dilution for our stockholders in the case of equity financing. These conditions and the ability to successfully resolve these factors raise substantial doubt about the Company’s ability to continue as a going concern for the next twelve-month period since the date of this Quarterly Report on Form 10-Q.
Off Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, sales or expenses, results of operations, liquidity or capital expenditures, or capital resources that are material to an investment in its securities.
Capital Raising Transactions
Proceeds from Notes Payable
We generated net proceeds of $4,809,500 from the issuance of convertible notes during the nine months ended September 30, 2023.
Other outstanding obligations at September 30, 2023
Convertible Notes Payable
The Company had convertible promissory notes aggregating $4,180,602 outstanding at September 30, 2023. The accrued interest amounted to approximately $131,000 as of September 30, 2023. The convertible notes payable bear interest at rates ranging between 5% and 15% per annum. At September 30, 2023, none of the convertible promissory notes have matured and are in default.
Critical Accounting Policies
See the Company’s discussion under Note 2 - Summary of Significant Accounting Policies in its financial statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.
28
ITEM 4. CONTROLS AND PROCEDURES
During the quarter ended September 30, 2023, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, using the Internal Control - Integrated Framework (2013) developed by the Committee of Sponsoring Organizations of the Treadway Commission, of the effectiveness of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, are recorded, processed, summarized and reported within the required time periods specified in the Commission’s rules and forms and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Our principal executive officer and principal financial officer, do not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal controls over financial reporting that occurred during the quarter ended September 30, 2023, that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Presently, except as descried below, there are not any material pending legal proceedings to which the Company is a party or as to which any of its property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.
On January 30, 2023, Leonard Tucker, LLC (“Tucker”), one of the holders of the Company’s the Series B Preferred Stock filed an action against the Company (the “Tucker Litigation”) in the Second Judicial District Court of the State of Nevada (Case No. CV23-00188) alleging breach of contract, breach of implied covenant of good faith and fair dealing, unjust enrichment, specific performance and declaratory relief (the “Tucker Complaint”). The Tucker Litigation arises from the 3-year Consulting Agreement the Company entered into with Tucker on December 17, 2020 (the “Tucker Agreement”), whereby Tucker agreed to perform certain strategic and business development services to the Company in exchange for 2,000,000 shares of Series B Preferred Stock and a consulting fee of $20,000 per month.
The 2,000,000 shares of Series B Preferred Stock automatically converted into 20,000,000 shares of the Company’s common stock (the “Common Stock”) on January 1, 2023. However, the Company’s Transfer Agent was instructed to not issue the shares of Common Stock because of the ongoing dispute between the Company and Tucker regarding Tucker’s ability to perform under the Tucker Agreement due to the action filed by the United States Securities and Exchange Commission against Profile Solutions, Inc., Dan Oran and Tucker on September 9, 2022 in the United States District Court Southern District of Florida (Case No. 1:22-cv-22881) alleging, among other things, that Tucker violated Section 17(a)(1) and 17(a)(3) of the Securities Act of 1933 and aided and abetted violations of Section 10(b) and Rule 10-b5.
Tucker is seeking, among other things, that the Company issue the shares of Common Stock issuable upon conversion of the Series B Preferred Stock pursuant to the Tucker Agreement. The Company is contesting all of the allegations set forth in the Tucker Complaint.
Pursuant to the terms of the Tucker Agreement, the Company expects to have the Tucker Litigation resolved through binding arbitration in January 2024.
29
ITEM 1A. RISK FACTORS
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and, as such, are not required to provide the information under this Item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the three-month period ended September 30, 2023, the Company did not issue any shares not previously reported in a Current Report on Form 8-K.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Date: November 14, 2023 | By: | /s/ Daniel Bates |
| Name: | Daniel Bates | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: November 14, 2023 | By: | /s/ Rachel Boulds |
| Name: | Rachel Boulds | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
31