Cyber Enviro-Tech, Inc 10-Q for FY2024 Q1
Cyber Enviro-Tech, Inc. (CETI)
About this 10-Q
Cyber Enviro-Tech, Inc filed this 10-Q on May 21, 2024, covering the quarter ended March 31, 2024 (FY2024 Q1).
Headline figures
Quarter ended March 31, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $1.12M
- compared with a net loss of $504.05K a year earlier
- Diluted EPS
- -$0.01
- compared with $0.00 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
Or
For the transition period from ___________ to ___________
Commission file number:
| (Exact name of registrant as specified in charter) |
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
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| (Address of principal executive office) | (Zip Code) |
| +1 ( |
| (Registrant’s telephone number, including area code) |
Securities registered pursuant to Section 12(b) of the Act: None
(Title of Class)
Indicate
by checkmark whether the registrant has (1) 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 if any, every Interactive Data
File required to be submitted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12
months (or for such shorter period that the registrant was required to submit).
Indicate by checkmark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act..
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |
| ☐ | Smaller reporting company | |||
| Emerging growth company |
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standard provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐
No
At May 20, 2024 there were shares of the registrant’s Common Stock issued and outstanding.
TABLE OF CONTENTS
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
CYBER ENVIRO-TECH, INC.
BALANCE SHEETS
March 31, 2024 (Unaudited) | December 31,2023 (Audited) | ||||||
| ASSETS | |||||||
| Current Assets: | |||||||
| Cash and cash equivalents | $ | $ | |||||
| Loan receivable | |||||||
| Prepaid expenses and other current assets | |||||||
| Total current assets | |||||||
| Property and equipment | |||||||
| Acquired intangible assets, net | |||||||
| Assets of discontinued operations, non-current | |||||||
| Total Assets | $ | $ | |||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Current Liabilities: | |||||||
| Accounts payable | $ | $ | |||||
| Accrued interest | |||||||
| Note payables, current maturities | |||||||
| Convertible notes payable, net of discount of $ | |||||||
| Convertible notes payable – related parties | |||||||
| Liabilities of discontinued operations, current | |||||||
| Total current liabilities | |||||||
| Note payable, related party, net of discount of $ | |||||||
| Convertible notes payable | |||||||
| Derivative liability | |||||||
| Liabilities of discontinued operations, non-current | |||||||
| Total Liabilities | |||||||
| Commitments and contingencies (Note 4) | |||||||
| Stockholders’ Equity: | |||||||
| Series A Convertible Preferred Stock, par value $, shares authorized; shares issued and outstanding | |||||||
| Series B Convertible Preferred Stock, par value $, shares authorized; share issued and outstanding | |||||||
| Series C Non-convertible, Preferred Stock, par value $, shares authorized; shares issued and outstanding | |||||||
| Special 2020 Series A Preferred Stock, par value $, share authorized; share issued and outstanding | |||||||
| Common Stock, par value $, shares authorized; and shares issued and outstanding, respectively | |||||||
| Additional paid-in capital | |||||||
| Common stock to be issued | |||||||
| Treasury stock, at cost | ( | ) | ( | ||||
| Accumulated deficit | ( | ) | ( | ||||
| Total Stockholders’ Equity | |||||||
| Total Liabilities and Stockholders’ Equity | $ | $ |
The accompanying notes are an integral part of these unaudited financial statements
| 1 |
CYBER ENVIRO-TECH, INC.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDING MARCH 31, 2024 AND 2023
(Unaudited)
| March 31, 2024 | March 31, 2023 | |||||||
| Operating Expenses: | ||||||||
| Professional fees | ||||||||
| General and administrative | ||||||||
| Consulting | ||||||||
| Total operating expenses | ||||||||
| Loss from continuing operations | ( | ) | ( | ) | ||||
| Other Income (Expense): | ||||||||
| Change in fair value of derivatives | ||||||||
| Loss on issuance of derivatives | ( | ) | ||||||
| Gain on extinguishment of derivative liability | ||||||||
| Amortization of intangible assets | ( | ) | ||||||
| Change in fair value of contingent liability | ( | ) | ||||||
| Interest income | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total other income (expense) | ( | ) | ( | ) | ||||
| Loss from continuing operations | ( | ) | ( | ) | ||||
| Discontinued Operations: | ||||||||
| Loss from operations of discontinued operations | ( | ) | ( | ) | ||||
| Total Discontinued Operations | ( | ) | ( | ) | ||||
| Net Loss | $ | ( | ) | $ | ( | ) | ||
| Loss per share, basic and diluted | $ | ) | $ | ) | ||||
| Weighted average shares outstanding, basic and diluted | ||||||||
The accompanying notes are an integral part of these unaudited financial statements
| 2 |
CYBER ENVIRO-TECH, INC.
STATEMENTS OF STOCKHOLDERS’ EQUITY
THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(Unaudited)
| Preferred | Common Stock | CS to be Issued | Accumulated | |||||||||||||||||||||||||||||||||||||
| Description | Shares | Amt | Shares | Amt | APIC | Treasury | Shares | Amt | Deficit | Total | ||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( | ) | $ |
| $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Options granted for services | — | — | — | |||||||||||||||||||||||||||||||||||||
| Shares issued for services | — | |||||||||||||||||||||||||||||||||||||||
| Shares issued for conversion of convertible notes payable | — | — | $ | |||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||
| Shares issued from prior periods | — | | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||
| Shares issued for interest | — | |||||||||||||||||||||||||||||||||||||||
| Shares issued for conversion of convertible notes payable | — | |||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | |||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | $ | |||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited financial statements
| 3 |
CYBER ENVIRO-TECH, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2024 AND 2023
(Unaudited)
| March 31, 2024 | March 31, 2023 | |||||||
| Cash flow from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash from operating activities: | ||||||||
| Change in fair value of derivatives | ( | ) | ( | ) | ||||
| Loss on issuance of derivatives | ||||||||
| Debt discount on issuance of derivative | ||||||||
| Change in fair value of contingent liability | ||||||||
| Gain on extinguishment of derivative liability | ( | ) | ||||||
| Stock compensation | ||||||||
| Amortization of debt discount | ||||||||
| Amortization expense | ||||||||
| Changes in operating assets and liabilities | ||||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Accounts payable | ( | ) | ||||||
| Accrued interest | ||||||||
| Net cash from operating activities from continuing operations | ( | ) | ( | ) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | ( | ) | ||||||
| Issuance of loan receivable | ( | ) | ||||||
| Net cash from investing activities from continuing operations | ( | ) | ||||||
| Cash flows from financing activities: | ||||||||
| Repayment of convertible notes payable | ( | ) | ( | ) | ||||
| Proceeds from convertible notes payable | ||||||||
| Proceeds from convertible notes payable | ||||||||
| Proceeds from notes payable | ||||||||
| Repayment of notes payable | ( | ) | ( | ) | ||||
| Repayment of notes payable – related party | ( | ) | ||||||
| Net cash from financing activities from continuing operations | ||||||||
| Net change in cash and cash equivalents from continuing operations | ||||||||
| Cash flow from discontinued operations: | ||||||||
| Net cash from operating activities from discontinued operations | ( | ) | ||||||
| Net cash from investing activities from discontinued operations | ( | ) | ( | ) | ||||
| Net cash from financing activities from discontinued operations | ||||||||
| Net change in cash and cash equivalents from discontinued operations | ( | ) | ( | ) | ||||
| Cash and cash equivalents at beginning of year | ||||||||
| Cash and cash equivalents at end of period | $ | $ | ||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities: | ||||||||
| Shares issued for conversion of convertible notes payable and accrued interest | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited financial statements.
| 4 |
CYBER ENVIRO-TECH, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION AND DESCRIPTION OF BUSINESS
Cyber Enviro-Tech, Inc. (the “Company”) is a publicly held water science technology company that designs water purification solutions for commercial applications and industries with an initial emphasis on the oil & gas industry. The corporate headquarters are located in Scottsdale, Arizona.
On September 3, 2020,
Synergy Management Group, LLC (“Synergy”) and Global Environmental Technologies, Inc (“Global”), which was formed
on April 20, 2020, entered into a securities purchase agreement, whereby Synergy sold its share of Special 2020 Series A preferred stock
and its one-half share of Series C preferred stock to Global for $
NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Revenue recognition
The Company recognizes revenue in accordance with Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers,” (“Topic 606”). Revenue is recognized when a customer obtains control of promised goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The amount of revenue that is recorded reflects the consideration that the Company expects to receive in exchange for those goods. The Company applies the following five-step model in order to determine this amount: (i) identification of the promised goods in the contract; (ii) determination of whether the promised goods are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.
The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Once a contract is determined to be within the scope of Topic 606 at contract inception, the Company reviews the contract to determine which performance obligations the Company must deliver and which of these performance obligations are distinct. The Company expects to recognize revenues as the amount of the transaction price that is allocated to the respective performance obligation when the performance obligation is satisfied or as it is satisfied.
The Company recognizes sales when oil is picked up by the delivery company and control passes to the customer.
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
Property and Equipment
Property and equipment is recorded at cost. Cost of improvements that substantially extend the useful lives of the assets are capitalized. Maintenance and repair costs are expensed when incurred. When other property and equipment is sold or retired, the capitalized costs and related accumulated depreciation are removed from their respective accounts.
| 5 |
Discontinued Operations
A component of an entity that is disposed of by sale or abandonment is reported as discontinued operations if the transaction represents a strategic shift that will have a major effect on an entity's operations and financial results. The results of discontinued operations are aggregated and presented separately in the Consolidated Statement of Operations. Assets and liabilities of the discontinued operations are aggregated and reported separately as assets and liabilities of discontinued operations in the Consolidated Balance Sheet, including the comparative prior year period. The Company is in the processing of spinning off its oil field operations known as the Alvey oil field (Alvey). Alvey’s cash flows are reflected as cash flows from discontinued operations within the Company’s Consolidated Statements of Cash Flows for each period presented.
Amounts presented in discontinued operations have been derived from our consolidated financial statements and accounting records using the historical basis of assets, liabilities, and historical results of Alvey. The discontinued operations exclude general corporate allocations.
Note Receivable
CETI provided two Short-Term Capital
Bridge Loan totaling $
Impairment of Long-Lived Assets
In accordance with authoritative guidance on accounting for the impairment or disposal of long-lived assets, as set forth in Topic 360 of the Accounting Standards Codification (“ASC”), the Company assesses the recoverability of the carrying value of its non-oil and gas long-lived assets when events occur that indicate an impairment in value may exist. An impairment loss is indicated if the sum of the expected undiscounted future net cash flows is less than the carrying amount of the assets. If this occurs, an impairment loss is recognized for the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets.
Intangible Assets
The Company recognizes intangible assets in accordance with ASC 350. Intangible assets are defined as identifiable non-monetary assets without physical substance, acquired through purchase, internally generated, or acquired as part of a business combination, which provide future economic benefits and are under the control of the Company.
Intangible assets with finite useful lives are amortized over their estimated useful lives on a straight-line basis, unless another systematic and rational method better represents the consumption of the economic benefits. Intangible assets with indefinite useful lives are not amortized but are tested for impairment annually or more frequently if there are indications of impairment.
The Company reviews intangible assets for indicators of impairment whenever events or circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss is recognized if the carrying amount of the asset exceeds its recoverable amount. The recoverable amount is the higher of an asset's fair value less costs to sell and its value in use. Any impairment loss is recognized in the income statement. Upon impairment, the carrying amount of the intangible asset is reduced to its recoverable amount.
| 6 |
The Company applies the fair value method of Financial Accounting Standards Board (“FASB”) ASC 718, “Share Based Payment”, in accounting for its stock-based compensation. This standard states that compensation cost is measured at the grant date based on the fair value of the award and is recognized over the service period, which is usually the vesting period. The Company values stock-based compensation at the market price for the Company’s common stock and other pertinent factors at the grant date. During the three months ended March 31, 2024 and 2023, the Company recorded $ and $ in stock-based compensation expense, respectively. In addition, the Company recorded prepaid stock compensation of $and $at March 31, 2024 and December 31, 2023, respectively.
Fair Value of Financial Instruments
The Company adopted ASC 820, “Fair Value Measurements.” ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:
| 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 approximates the fair value of such instruments as the notes bear interest rates that are consistent with current market rates.
The Company evaluates convertible instruments, options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under ASC 815, “Derivatives and Hedging”. The result of this accounting treatment is that the fair value of the derivative is marked to market each balance sheet date and recorded as a liability. In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations as other income (expense). Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity. Equity instruments that are initially classified as equity that become subject to reclassification under ASC 815 are reclassified to liabilities at the fair value of the instrument on the reclassification date.
The following table classifies the Company’s liability measured at fair value on a recurring basis into the fair value hierarchy as of March 31, 2024:
| Schedule of derivative liability | ||||||||||||||||
| Description | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Derivative | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
Income taxes
Income states are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss, capital loss and tax credit carryforwards. Deferred tax assets and liabilities are measures using enacted tax rates expected to apply to the taxable income in the years in which those temporary differences are expect to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits as a component of general and administrative expenses. The Company’s federal tax return and any state tax returns are not currently under examination.
| 7 |
The Company has adopted ASC 740, “Accounting for Income Taxes,” which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually from differences between the financial statement and tax basis of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.
Under the provisions of ASC 260, “Earnings per Share”, basic loss per common share is computed by dividing net loss available to common shareholders by the weighted average number of shares of common stock outstanding for the periods presented. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that would then share in the income of the Company, subject to anti-dilution limitations. The following potential common shares were excluded from the calculation of diluted net income (loss) per share available to common stockholders because their effect would have been antidilutive:
| Schedule of diluted net income (loss) per share available to common stockholders | ||||||||
Three months ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Warrants | ||||||||
| Stock options | ||||||||
| Convertible notes payable | ||||||||
| Preferred stock | ||||||||
| Total | ||||||||
Concentration of credit risks
The Company maintains accounts with financial institutions. All cash in checking accounts is non-interest bearing and is fully secured by the Federal Deposit Insurance Corporation (FDIC). At times, cash balances may exceed the maximum coverage provided by the FDIC on insured depositor accounts. The Company believes it mitigates its risk by depositing its cash and cash equivalents with major financial institutions.
Recently issued accounting pronouncements
The Company has implemented all new 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 Company’s financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities and commitments in the normal course of business for the foreseeable future. The Company has just begun generating revenue and does not yet have sufficient revenue to cover its operating expenses. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability to continue as a going concern is dependent upon generating profitable operations in the future and/or to obtain the necessary financing to meet the Company’s obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with increased revenue and private placement loans or institutional investors. While the Company believes that it will be successful in obtaining the necessary financing and generating revenue to fund the Company’s operations, meet regulatory requirements and achieve commercial goals, there are no assurances that such additional funding will be achieved and that the Company will succeed in its future operations.
The financial statements of the Company do not include any adjustments that may result from the outcome of these uncertainties.
NOTE 4 – COMMITMENTS AND CONTINGENCIES
During the normal course of business, the Company may be exposed to litigation. When the Company becomes aware of potential litigation, it evaluates the merits of the case in accordance with ASC 450, Contingencies. The Company evaluates its exposure to the matter, possible legal or settlement strategies and the likelihood of an unfavorable outcome. If the Company determines that an unfavorable outcome is probable and can be reasonably estimated, it establishes the necessary accruals. As of March 31, 2024 and December 31, 2023, the Company is not aware of any contingent liabilities related to potential litigation that should be reflected in the financial statements.
In December 2021, the Company entered into
an agreement to operate the wells on the Alvey Oil Field. Under this agreement, the Company owes a contingent amount based upon a
| 8 |
NOTE 5 – PROPERTY AND EQUIPMENT
As of March 31, 2024 and December 31, 2023, property and equipment consisted of the following:
| Schedule of property and equipment | ||||||||||
| March 31, 2024 | December 31, 2023 | Useful Lives | ||||||||
| Equipment | $ | $ | ||||||||
| Vehicles | ||||||||||
| Property and equipment, net | $ | $ | — | |||||||
No assets were placed in service under either periods so there is no depreciation expense.
NOTE 6 – INTANGIBLE ASSETS
The intangible assets
consist of exclusive licenses for United States distribution obtained by the Company from KAM Biotechnology Ltd (“KAM”) in
May 2023 and the agreement has a term of ten years. The asset is stated at the fair value of $
NOTE 7 – DEBT
| Schedule of debt | ||||||||
| March 31, 2024 | December 31, 2023 | |||||||
| Note payables | $ | $ | ||||||
| Loan payable – related party | ||||||||
| Convertible notes payable | ||||||||
| Convertible notes payable – related party | ||||||||
| Debt discount | ( | ) | ( | ) | ||||
| Less current portion | ||||||||
| Long term portion | $ | $ | ||||||
The following is a schedule of debt maturity and the years in which the debt is scheduled to mature:
| Schedule of debt maturity | |||||
| Year | Amount | ||||
| 2024 | |||||
| 2025 | |||||
| $ | |||||
Notes payable
At December 31, 2022, the Company had a note
payable to a shareholder for $
At December 31, 2022, the Company had a note
payable to a related party for $
In May 2023, the Company acquired certain intellectual
property rights from KAM Biotechnology. The total acquisition price was $
In June 2023, the Company
had a loan payable to an individual for $
In September 2023, a
related party issued a loan to the Company for a total
amount of $
In March 2024, the Company borrowed a total of $
| 9 |
Convertible notes payable
In 2020, the Company
executed a convertible note payable with a related party for $
During the year ended December 31, 2021, the Company
received $
During the
year ended December 31, 2022, the Company received $
During the year ended December 31, 2023, the Company
raised a net of $
During the
year ended December 31, 2023, the Company converted $
During the first three months of 2024, the Company
raised a net of $
NOTE 8 – DERIVATIVE FINANCIAL INSTRUMENTS
Embedded derivatives
The Company’s convertible promissory notes gave rise to derivative financial instruments. The notes embodied certain terms and conditions that were not clearly and closely related to the host debt agreement in terms of economic risks and characteristics. These terms and features consist of the embedded conversion option.
The following tables summarize the components of the Company’s derivative liabilities and linked common shares as of March 31, 2024 and December 31, 2023 and the amounts that were reflected in income related to derivatives for the period ended:
| Schedule of derivative liabilities | ||||||||
| March 31, 2024 | ||||||||
| The financings giving rise to derivative financial instruments | Indexed Shares | Fair Values | ||||||
| Embedded derivatives | $ | |||||||
| Total | $ | |||||||
| December 31, 2023 | ||||||||
| The financings giving rise to derivative financial instruments | Indexed Shares | Fair Values | ||||||
| Embedded derivatives | $ | |||||||
| Total | $ | |||||||
The following table summarizes the effects on the Company’s gain (loss) associated with changes in the fair values of the derivative financial instruments by type of financing for the three months ended March 31, 2024 and 2023:
| Schedule of changes in gain loss fair values of the derivative financial instruments | ||||||||
| For the Three Months Ended | ||||||||
| March 31, 2024 | March 31, 2023 | |||||||
| Embedded derivatives | $ | $ | ||||||
| Loss on issuance of derivative | ( | ) | ||||||
| Total gain (loss) | $ | $ | ( | ) | ||||
Current accounting principles that are provided in ASC 815 - Derivatives and Hedging require derivative financial instruments to be classified in liabilities and carried at fair value with changes recorded in income. The Company has selected the Monte Carlo Simulation Model, which approximates the Monte Carlo Simulations, valuation technique to fair value the embedded derivative because it believes that this technique is reflective of all significant assumption types, and ranges of assumption inputs, that market participants would likely consider in transactions involving embedded derivatives. Such assumptions include, among other inputs, interest risk assumptions, credit risk assumptions and redemption behaviors in addition to traditional inputs for option models such as market trading volatility and risk-free rates. The Binomial Lattice Model technique is a level three valuation technique because it requires the development of significant internal assumptions in addition to observable market indicators. For instruments in which the time to expiration has expired, the Company has utilized the intrinsic value as the fair value. The intrinsic value is the difference between the quoted market price on the valuation date and the applicable conversion price.
Significant inputs and results arising from the Monte Carlo Simulation process are as follows for the embedded derivatives that have been bifurcated from the convertible notes and classified in liabilities:
| Schedule of embedded derivatives | ||||||||||||
| Inception Date | Inception Date | |||||||||||
| September 27 2023 Note | December 29 2023 Note | March 31, 2024 | ||||||||||
| Quoted market price on valuation date | $ | $ | $ | |||||||||
| Effective contractual conversion rates | $ | $ | $ | |||||||||
| Contractual term to maturity | ||||||||||||
| Market volatility: | ||||||||||||
| Volatility | %-% | %-% | %-% | |||||||||
| Risk-adjusted interest rate | % | % | % | |||||||||
The following table reflects the issuances of embedded derivatives and changes in fair value inputs and assumptions related to the embedded derivatives as of March 31, 2024 and December 31, 2023.
| Schedule of fair value assumptions | ||||||||
Period Ended March 31, 2024 | Year Ended December 31, 2023 | |||||||
| Balances at beginning of period | $ | $ | ||||||
| Issuances: | ||||||||
| Embedded derivatives | ||||||||
| Gain on extinguishment of derivative liability | ( | ) | ||||||
| Conversions | ( | ) | ||||||
| Changes in fair value inputs and assumptions reflected in income | ( | ) | ( | ) | ||||
| Balances at end of period | $ | $ | ||||||
| 10 |
NOTE 9 – RELATED PARTY TRANSACTIONS
At March 31, 2024 and December 31, 2023, the Company
had a convertible note payable for $
At December 31, 2023, the Company had accounts payable
to various related parties for a total of $
At December 31, 2022, the Company had a note payable
of $
In September 2023, a related party loaned $
During periods ended March 31, 2024 and December 31,
2023, the Company paid various related parties for consulting services in the amounts of $
NOTE 10 – PREFERRED STOCK
Series A Convertible Preferred Stock
The Company previously designated shares of
Preferred Stock as Series A Convertible Preferred Stock and had issued shares.
During 2023, the Company changed the terms this series of stock whereby one (1) share of Series A Convertible Preferred, after a minimum two-year holding period, can be converted into three thousand (3,000) shares of the Company’s common stock and has the same equivalent voting rights. In October 2023, the three top shareholders cancelled common shares of stock and were issued shares of Series A Convertible Preferred Stock. As of March 31, 2024 and December 31, 2023, there are shares of Series A Convertible Stock issued and outstanding.
Series B Convertible Preferred Stock
The Company previously designated
shares of Preferred Stock as Series B Convertible Preferred Stock and had issued
shares.
Series C Non-Convertible Preferred Stock
The Company previously designated shares of
Preferred Stock as Series C Non-Convertible Preferred Stock and had issued all shares.
| 11 |
Special 2020 Series A Preferred
The Company has one share of preferred stock designated
as Special 2020 Series A Preferred, par value $. The holder for the Special 2020 Series A Preferred shall vote with the holders
of both preferred and common stockholders as a single class. The holder is entitled to 60% of all votes. The one share of Series A is
convertible into shares of common stock at any time and is not entitled to dividends. The Company purchased that one series
A preferred share for $
NOTE 11 – STOCK OPTIONS AND WARRANTS
In connection with a consulting agreement dated March
7, 2022, the Company issued options at an exercise price of $
On June 3, 2023, the
The following table summarizes the accounting effects of the modification:
| Schedule of accounting effects | ||||
| June 3, 2023 | ||||
| Replacement Award | ||||
| Fair value of new award | $ | |||
| Fair value of original award on modification date | $ | |||
| Incremental cost | $ | |||
| Unrecognized grant-date fair value of original award on modification date | $ | |||
| Cost to be recognized after modification | $ | |||
| Recognition Period | ||||
Significant inputs and results arising from the Black-Scholes process are as follows for the options:
| Schedule of significant inputs and results in options | ||||
| Quoted market price on valuation date | $ | |||
| Exercise price | $ | |||
| Expected life (in years) | Years | |||
| Equivalent volatility | % | |||
| Interest rates | % | |||
Stock option activity for the three months ended March 31, 2024 is summarized as follows:
| Schedule of stock option activity | ||||||||||||||
| Number of Shares | Weighted Average Exercise Price |
Weighted Average Remaining Contractual Life | ||||||||||||
| Options outstanding December 31, 2023 | ||||||||||||||
| Issued | — | |||||||||||||
| Exercised | — | |||||||||||||
| Cancelled | — | |||||||||||||
| Options outstanding March 31, 2024 | ||||||||||||||
| Options exercisable March 31, 2024 | $ | |||||||||||||
In connection
with a different consulting agreement dated March 1, 2023, the Company initially agreed to pay shares of common stock, along
with a monthly consulting fee. This common stock was valued at $ on the date of the agreement and was amortized equally over the six-month
agreement. On July 1, 2023, the Company and consultant decided to amend the agreement so that the consultant would receive
| 12 |
Significant inputs and results arising from the Black-Scholes process are as follows for the warrants:
| Schedule of assumptions | ||||
| Quoted market price on valuation date | $ | |||
| Effective contractual strike price | $ | |||
| Market volatility | % | |||
| Contractual term to maturity | years | |||
| Risk-adjusted interest rate | % | |||
Stock warrant activity for the three months ended March 31, 2024 is summarized as follows:
| Schedule of stock warrant activity | |||||||||||||||
| Number of Shares | Weighted Average Exercise Price |
Weighted Average Remaining Contractual Life |
|||||||||||||
| Warrants exercisable December 31, 2023 | $ | ||||||||||||||
| Issued | — | ||||||||||||||
| Exercised | — | ||||||||||||||
| Expired | — | ||||||||||||||
| Warrants outstanding March 31, 2024 | |||||||||||||||
| Warrants exercisable March 31, 2024 | $ | ||||||||||||||
NOTE 12 – DISCONTINUED OPERATIONS
CETI is planning to spin-off the Alvey oil field operations into a new entity called Phoenix Well Development Inc (PWD). The shareholders of CETI will get a pro rata stock distribution of PWD common shares. A new investor group will run the operation.
Accordingly, the Company has categorized Alvey as discontinued operations in the financial statements for the periods ended March 31, 2024 and December 31, 2023.
The operating results for discontinued operations have been presented in the accompanying consolidated statement of operations for the three months ended March 31, 2024 and 2023 as discontinued operations and are summarized below:
| Schedule of discontinued operations consolidated statement of operations | ||||||||
| Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| Total revenue | $ | $ | ||||||
| Total cost of revenue | ||||||||
| Gross profit | ||||||||
| Operating expenses | ||||||||
| Loss from operations | ( | ) | ||||||
| Other income (expenses) | ( | ) | ||||||
| Loss before tax expense | ( | ) | ( | ) | ||||
| Tax expense | ||||||||
| Loss from operations of discontinued operations | $ | ( | ) | $ | ( | ) | ||
| 13 |
The assets and liabilities of the discontinued operations at March 31, 2024 and December 31, 2023 are summarized below:
| Schedule of assets and liabilities of the discontinued operation | ||||||||
| Periods Ended | ||||||||
| March 31, 2024 | December 31, 2023 | |||||||
| Property and equipment, net(1) | $ | $ | ||||||
| Texas Railroad Commission bond(2) | ||||||||
| Assets of discontinued operations, non-current | ||||||||
| Total assets | $ | $ | ||||||
| Accounts payable | $ | $ | ||||||
| Note payable, current maturities | ||||||||
| Liabilities of discontinued operations, current | ||||||||
| Estimated asset retirement obligation | ||||||||
| Liabilities of discontinued operations, non-current | ||||||||
| Total liabilities | $ | $ | ||||||
(1) Property and equipment, net
Property and equipment, at cost, for the discontinued operations consisted of the following at March 31, 2024 and December 31, 2023:
| Schedule of Property and equipment cost, for discontinued operations | ||||||||||
| March 31, 2024 | December 31, 2023 | Useful Lives | ||||||||
| Equipment | $ | $ | ||||||||
| Vehicles | ||||||||||
| Well development costs | * | |||||||||
| Less accumulated depreciation | ( |
) | ( |
) | — | |||||
| Property and equipment, net | $ | $ | — | |||||||
| * |
Depreciation expense for the discontinued operations
for periods ended March 31, 2024 and 2023 was $
Oil and Gas Producing Activities
The Company uses the successful efforts method of accounting
for oil and gas activities. Under this method, the costs of productive exploratory wells, all development wells, related asset retirement
obligation assets, and productive leases are capitalized and amortized, principally by field, on a units-of-production basis over the
life of the remaining proved reserves. Exploration costs, including personnel costs, geological and geophysical expenses, and delay rentals
for oil and gas leases are charged to expense as incurred. Exploratory drilling costs are initially capitalized, but charged to expense
if and when the well is determined not to have found reserves in commercial quantities. The sale of a partial interest in a proved property
is accounted for as a cost recovery, and no gain or loss is recognized as long as this treatment does not significantly affect the units-of-production
amortization rate. A gain or loss is recognized for all other sales of producing properties. There were capitalized costs of $
Unproved oil and gas properties are assessed annually
to determine whether they have been impaired by the drilling of dry holes on or near the related acreage or other circumstances, which
may indicate a decline in value. When impairment occurs, a loss is recognized. When leases for unproved properties expire, the costs thereof,
net of any related allowance for impairment, is removed from the accounts and charged to expense. During the three months ended March
31, 2024 and 2023, there was
| 14 |
Costs associated with development wells that are unevaluated
or are waiting on access to transportation or processing facilities are reclassified into developmental wells-in-progress ("WIP").
These costs are not put into a depletable field basis until the wells are fully evaluated or access is gained to transportation and processing
facilities. Costs associated with WIP are included in the cash flows from investing as part of investment in oil and gas properties. At
March 31, 2024 and December 31, 2023,
Depreciation, depletion and amortization of proved
oil and gas properties is calculated using the units-of- production method based on proved reserves and estimated salvage values. During
the three months ended March 31, 2024 and 2023, the Company recorded
The Company reviews its proved oil and natural gas
properties for impairment whenever events and circumstances indicate that a decline in the recoverability of its carrying value may have
occurred. It estimates the undiscounted future net cash flows of its oil and natural gas properties and compares such undiscounted future
cash flows to the carrying amount of the oil and natural gas properties to determine if the carrying amount is recoverable. If the carrying
amount exceeds the estimated undiscounted future cash flows, the Company will adjust the carrying amount of the oil and natural gas properties
to fair value. During the three months ended March 31, 2024 and 2023, there was
(2) Texas Railroad Commission Bond and Estimated Asset Retirement Obligation
To cover the estimated future asset retirement obligations
("ARO") related to its oil and gas properties, the Company maintains a $
Revisions to the liability could occur due to changes in estimated abandonment costs, changes in well economic lives, or if federal or state regulators enact new requirements regarding the abandonment of wells
NOTE 13 – INCOME TAXES
Deferred taxes are provided on a liability method
whereby deferred tax assets are recognized for deductible temporary differences and operating loss, and tax credit carryforwards and
deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion
of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets
and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment. The U.S. federal income tax rate
of
Income taxes consist of the following components as of:
| Schedule of federal income tax rate | ||||||||
| March 31, 2024 | March 31, 2023 | |||||||
| Federal income tax benefit attributable to: | ||||||||
| Current Operations | $ | $ | ||||||
| Less: Valuation allowance | ( | ) | ( | ) | ||||
| Net provision for Federal income taxes | $ | $ | ||||||
The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the periods ended March 31, 2024 and December 31, 2023, due to the following:
| Schedule of deferred tax asset | ||||||||
| March 31, 2024 | December 31, 2023 | |||||||
| Deferred tax asset attributable to: | ||||||||
| Net operating loss carryover | $ | $ | ||||||
| Less: Valuation allowance | ( | ) | ( | ) | ||||
| Net deferred tax asset | $ | $ | ||||||
| 15 |
At March 31, 2024, the Company had net operating loss
carry forwards of $
Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carry forwards for Federal Income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carry forwards may be limited as to use in future years.
NOTE 14 – SUBSEQUENT EVENTS
The following are subsequent events that the Company considers may be material:
| · | New money raised from investors since March 31, 2024 to May 15, 2024 – $ | |
| · | New money borrowed from a lender since March 31, 2024 - $ |
| 16 |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis should be read in conjunction with our financial statements, including the notes thereto, appearing in this Form 10-Q and are hereby referenced. The following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed below and elsewhere in this report. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. We believe it is important to communicate our expectations. However, our management disclaims any obligation to update any forward-looking statements whether as a result of new information, future events or otherwise.
These forward-looking statements are based on our management’s current expectations and beliefs and involve numerous risks and uncertainties that could cause actual results to differ materially from expectations. You should not rely upon these forward-looking statements as predictions of future events because we cannot assure you that the events or circumstances reflected in these statements will be achieved or will occur. You can identify a forward-looking statement by the use of the forward-terminology, including words such as “may”, “will”, “believes”, “anticipates”, “estimates”, “expects”, “continues”, “should”, “seeks”, “intends”, “plans”, and/or words of similar import, or the negative of these words and phrases or other variations of these words and phrases or comparable terminology. These forward-looking statements relate to, among other things: our sales, results of operations and anticipated cash flows; capital expenditures; depreciation and amortization expenses; sales, general and administrative expenses; our ability to maintain and develop relationship with our existing and potential future customers, and, our ability to maintain a level of investment that is required to remain competitive. Many factors could cause our actual results to differ materially from those projected in these forward-looking statements, including, but not limited to: variability of our revenues and financial performance; risks associated with technological changes; the acceptance of our products in the marketplace by existing and potential customers; disruption of operations or increases in expenses due to our involvement with litigation or caused by civil or political unrest or other catastrophic events; general economic conditions, government mandates; and, the continued employment of our key personnel and other risks associated with competition.
GENERAL OVERVIEW
Business Background
CYBER ENVIRO-TECH, INC. is a publicly held Wyoming oil and water filtration technology company that designs water purification solutions for commercial applications and industries
Our principal executive office is located at Cyber Enviro-Tech, Inc., 6991 E. Camelback Road, Suite D-300, Scottsdale, Arizona 85251. Our telephone number is 866 687-6856. Our Internet site is located at: www.cyberenviro.tech. We maintain our statutory registered agent's office at Registered Agents Inc. 30 N Gould St Ste R Sheridan, WY 82801 USA Telephone Number. (307) 200-2803
June 12, 2020, the District Court of Laramie County, Wyoming appointed Benjamin Berry of Synergy Management Group LLC (“Synergy”) as custodian of the Company.
On September 3, 2020, Synergy and Global Environmental Technologies, Inc. (“Global”), entered into a Securities Purchase Agreement, whereby Synergy sold its one share of Special Series A preferred stock and one-half share of Series C preferred stock to Global Environmental Technologies, Inc.
On September 23, 2020, the Company entered into a share exchange agreement with Global Environmental Technologies, Inc., (“Global”) a Wyoming corporation. Per the terms of the agreement, NexGen exchanged thirty-five shares of common stock for one share of Global.
On October 6, 2020, the Company formally changed its name with the State of Wyoming from NexGen Holdings to Cyber Enviro-Tech, Inc.
| 17 |
DESCRIPTION OF BUSINESS
Cyber Enviro-Tech, Inc is a water science technology company focusing on the remediation of contaminated industrial wastewater with an initial emphasis on the oil & gas industry. We are an emerging growth company with limited revenues and operating history. Our independent auditor has issued an audit opinion which includes a statement expressing substantial doubt as to our ability to continue as a going concern. Our pilot project is an oil field in West Texas. We currently own the mineral rights to a 479- acre, 33-well, located in Callahan County, Texas. This oil field operation known as the Alvey oil field will be spun-off into a new entity in the second quarter of 2024. In addition, the Company will soon be testing its oil water filtration machine in a few locations Southwest Texas and Oklahoma. In addition, the Company is in conversations to purchase its own Salt Water Disposal facility.
GENERAL OVERVIEW
Form and year of organization;
Cyber Enviro-Tech, Inc., also referred to as “CETI” and the “Company”, was founded in the State of Wyoming as Biolectronics, Corp. in April 1986.
Bankruptcy, receivership;
The company has never filed Bankruptcy or been involved in any receiverships or similar proceedings.
Material reclassification;
Cyber Enviro-Tech, Inc - CURRENT.
NexGen Holdings Corp - Until April 30, 2021
WindPower Innovations, Inc. until January 2014
Educational Services International, Inc. until November 2009
Bio-Life Systems, Inc. until November 2001
Biolectronics, Corp. to April 1992
Electronic Biotek, Inc. April 1986
Business of the Cyber Enviro-Tech, Inc.;
Cyber Enviro-Tech, Inc is a water science technology company focusing on the remediation of contaminated industrial wastewater with an initial emphasis on the oil & gas industry. We do this by integrating technologies to include cyber, aerospace, satellite, industrial and AI engineering telemetry. Our water filtration, waste water and alternative energy systems will have neural sensors, controls and networks - all connected to a cellular device.
The Company is testing its oil water filtration machine in a few locations Southwest Texas. Upon successful completion, the Company has plans to expand to other locations in Texas.
During 2023, the Company purchased the licensing to several patents from KAM Biotechnology, Ltd. These patents enhance the Company’s ability to treat wastewater in an environmentally friendly manner.
Our focus for the current fiscal year will be on:
| 1) | Expanding our water and oil filtration operations in the Middle East and Texas |
| 2) | Developing in initial commercial tests with at least one significant meat packing client | |
| 3) |
Acquisition of salt water disposal facilities to vertically expand the Company’s operations |
| 4) | Spinning off the Alvey oil field operation into separate corporation called Phoenix Well Development, Inc via stock dividend to current shareholders of CETI. |
| 18 |
Sales Strategy – CETI’s B2B Sales Strategy will include partnering with individuals and companies who have many years of experience and developed relationships within their respective aforementioned targeted verticals. Prior knowledge of those specific industry issues, water filtration needs, history and relationships developed over many years will enable them to shorten the sales cycle for our water filtration system. As of March 31, 2024, the Company has agreements with several individuals who are pursuing a variety of opportunities but no contracts with have been ratified so far.
Market Demand and Size - CETI’s water filtration system can be modified to address many of the water contamination issue that exists anywhere in the world. The markets envisioned for the CETI Water system when funds permit would be both domestic (U.S.) and global.
Results of Operations for the Three Months Ending March 31, 2024 and 2023
| 2024 | 2023 | $ | % | |||||||||||||
| Operating Expenses: | ||||||||||||||||
| Professional Fees | 48,403 | 44,836 | 3,567 | 8 | % | |||||||||||
| General and administrative | 400,769 | 28,761 | 372,008 | 901 | % | |||||||||||
| Consulting | 574,827 | 367,810 | 207,017 | 56 | % | |||||||||||
| Total operating expenses | 1,023,999 | 441,407 | 582,592 | 129 | % | |||||||||||
| Loss from operations | (1,023,999 | ) | (441,407 | ) | (582,592 | ) | 128 | % | ||||||||
| Other Income (Expense): | ||||||||||||||||
| Change in fair value of derivative | 24,516 | 72,369 | (47,853 | ) | -66 | % | ||||||||||
| Loss on issuance of derivative | — | (86,858 | ) | 86,858 | -100 | % | ||||||||||
| Amortization of intangible assets | (28,213 | ) | — | (28,213) | -100 | % | ||||||||||
| Interest expense | (161,152 | ) | (31,146 | ) | (130,006 | ) | 417 | % | ||||||||
| Gain on extinguishment of derivative liability | 79,564 | — | 79,564 | 100 | % | |||||||||||
| Change in fair value of contingent liability | — | (300 | ) | 300 | -100 | % | ||||||||||
| Interest income | 924 | — | 924 | 100 | % | |||||||||||
| Total Other Income (Expense) | (84,361 | ) | (45,935 | ) | (38,426 | ) | 84 | % | ||||||||
| Loss from continuing operations | (1,108,360 | ) | (487,342 | ) | (621,018 | ) | 127 | % | ||||||||
| Discontinued operations: | ||||||||||||||||
| Gain (loss) from operations of discontinued operations | (11,812 | ) | (16,705 | ) | 4,893 | -29 | % | |||||||||
| Net Income (Loss) | $ | (1,120,172 | ) | (504,047 | ) | (616,125 | ) | 122 | % | |||||||
General and administrative Expenses. General and administrative expenses for the three months ended March 31, 2024 were up by 901% vs 2023 largely due to an increase in investment in CETI’s water filtration system, travel expenses overseas, testing of water samples and increase marketing expenses.
Professional fees. These fees are largely made up of audit and audit-related fees ($46,142 and $41,436 as of March 31, 2024 and 2023 respectively).
Consulting fees. Increased by 56% due significant push in marketing services related introducing the Company to potential clients and revenue sources. Around $280,000 of this amount is non-cash, stock-based compensation.
Other income (expense). Much of this is related to the issuance and conversion of convertible debentures used to raise money for the Company’s operations. $870,000 and $872,000 was raised by the sale of convertible debentures in first quarter of 2024 and 2023, respectively. For March 2024, there is $1,615,000 of convertible debt issued in 2023 and 2022 which has not converted which results in a higher interest expense, Loss on issuance of derivatives is higher in 2023 since a new loan was taken out in the 1st Qtr of 2023 but no new loans with derivatives were taken out in 1st Qtr of 2024. The gain on extinguishment of derivative liability represents a partial payoff of the underlying loan in 1st Qtr 2024.
Net income (loss) from continuing operations. The above changes resulted in net loss of $1,120,172 in the first three months of 2024 compared to a loss of $504,047 in 2023. As noted above, there was significant expenses incurred in the first quarter of 2024 related to building and testing CETI’s water filtration machine as well as overseas travel to expand the Company’s operations.
Discontinued operations: The Company is spinning off the Alvey oil field in May 2024, and this represent the non-capitalized expenses related to the Alvey.
| 19 |
Liquidity and Capital Resources
As of March 31, 2024, the Company had total assets of $5,701,644 including current assets of $749,579 as well as $3,405,152 from the discontinued operations of the Alvey oil field. We also have current liabilities of $935,960 which consist of accounts payable of $178,540 and short-term loans payable of $221,398, net of discount of $40,246, and $401,112 from the discontinued operations of the Alvey oil field which is mostly the payable due on the Alvey Oil Field leasehold improvements. We also have $2,859,400 of long-term liabilities which is largely due to convertible notes payable of $2,485,000. We believe our ability to achieve commercial success and continued growth will be dependent upon our continued access to capital either through sale of additional convertible debentures, sale of our equity or cash generated from operations. We will attempt to obtain additional capital through private investors; however, we have no agreements or understandings with third parties at this time in regards to investing additional monies.
S-1 Registration Statement Effective January 2023
The Company filed an S-1 Registration statement in 2022 and it became effective in January 2023. This gives the Company the right to sell 10 million shares of common stock at $0.40 per share and allowed almost seven million shares of stock from debentures converted in 2022 to become free trading shares. As of May 20, 2024, none of the 10 million shares of common stock have been sold.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As a "smaller reporting company," as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
Item 4. Controls and Procedures.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management to allow timely decisions regarding required disclosure.
As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Exchange Act, our management, with the participation of our chief executive officer (our principal executive officer) and our chief financial officer (our principal financial officer and principal accounting officer) evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report, being December 31, 2022.
Based on this evaluation, these officers concluded that, as of December 31, 2023 these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities Exchange Commission. The conclusion that our disclosure controls and procedures were not effective was due to the Company was lacking in pre-planning for expenses and documentation of all transactions. As of March 31, 2024, some progress has been made in implementing enhanced controls and procedures.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a more than remote possibility that a misstatement of our company's annual or interim financial statements could occur. In its assessment of the effectiveness of our internal control over financial reporting as of March 31, 2024, we determined that there were control deficiencies that constituted material weaknesses which are indicative of many small companies with small staff, such as:
| (1) |
inadequate segregation of duties and effective risk assessment; and
| |
| (2) | insufficient written policies and procedures for documenting all transactions with vendors. |
Our management is currently evaluating remediation plans for the above deficiencies. During the period covered by this quarterly report on Form 10-Q, we have been able to remediate some of the weaknesses described above. However, we plan to take steps to enhance and improve the design of our internal control over financial reporting.
| 20 |
PART II—OTHER INFORMATION
Instruction. The report shall contain the item numbers and captions of all applicable items of Part II, but the text of such items may be omitted provided the responses clearly indicate the coverage of the item. Any item which is inapplicable or to which the answer is negative may be omitted and no reference thereto need be made in the report. If substantially the same information has been previously reported by the registrant, an additional report of the information on this form need not be made. The term “previously reported” is defined
in Rule 12b-2 (17 CFR 240. 12b-2). A separate response need not be presented in Part II where information called for is already disclosed in the financial information provided in Part I and is incorporated by reference into Part II of the report by means of a statement to that effect in Part II which specifically identifies the incorporated information.
Item 1. Legal Proceedings.
We are not a party to any legal proceedings, nor are we aware of any threatened litigation whatsoever.
Item 1A. Risk Factors.
As a "Smaller Reporting Company," as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
|
Date of Transaction |
Transaction type (e.g. new issuance, cancellation, shares returned to treasury) | Number of Shares Issued (or cancelled) | Class of Securities | Value of shares issued ($/per share) at Issuance | Individual/ Entity Shares were issued to (entities must have individual with voting / investment control disclosed). | Reason for share issuance (e.g. for cash or debt conversion) -OR- Nature of Services Provided | Restricted or Unrestricted as of this filing. | |||||||||||||||
| 2/24/2021 | New | 123,457 | Common | 0.097 | Lester Black | Cash | Restricted | |||||||||||||||
| 3/18/2021 | New | 14,286 | Common | 0.350 | Frank Kigenyi | Cash | Restricted | |||||||||||||||
| 3/20/2021 | New | 14,286 | Common | 0.350 | Ramonte Parea Hackman | Cash | Restricted | |||||||||||||||
| 3/22/2021 | New | 28,572 | Common | 0.350 | Lenora Rodriguez | Cash | Restricted | |||||||||||||||
| 3/25/2021 | New | 14,286 | Common | 0.350 | Ernest Bevans | Cash | Restricted | |||||||||||||||
| 4/5/2021 | New | 14,286 | Common | 0.350 | Vanessa DeMattei | Cash | Restricted | |||||||||||||||
| 5/4/2021 | New | 50,000 | Common | 0.200 | Greg Hebert | Grant fee | Restricted | |||||||||||||||
| 9/27/2021 | New | 144,033 | Common | 0.097 | Lester Black | Cash | Restricted | |||||||||||||||
| 2/25/2022 | New | 3,000,000 | Common | 0.078 | Markham and ML Broughton RT, Markham Broughton | Cash | Restricted | |||||||||||||||
| 2/25/2022 | New | 750,000 | Common | 0.133 | Gary E. Smith Living Trust, Gary Smith | Cash | Restricted | |||||||||||||||
| 12/31/2022 | New | 400,000 | Common | 0.420 | Joe Isaac, Axiom Group | Services | Restricted | |||||||||||||||
| 12/31/2022 | New | 42,000 | Common | 0.457 | Malcolm Mcquire | Services | Restricted | |||||||||||||||
| 3/24/2023 | New | 300,000 | Common | 0.420 | Joe Isaac, Axiom Group | Services | Restricted | |||||||||||||||
| 4/3/2023 | New | 3,000,000 | Common | 0.001 | Joe Isaacs | Services | Unrestricted | |||||||||||||||
| 5/23/2023 | New | 250,000 | Common | 0.42 | Joe Isaacs | Services | Restricted | |||||||||||||||
| 5/23/2023 | New | 250,000 | Common | 0.38 | Frank Straw | Services | Restricted | |||||||||||||||
| 5/23/2023 | New | 250,000 | Common | 0.31 | Markus Miller | Services | Restricted | |||||||||||||||
| 5/23/2023 | New | 200,000 | Common | 0.38 | Bruce Moore | Services | Restricted | |||||||||||||||
| 5/23/2023 | New | 1,000,000 | Common | 0.38 | US Affiliated Inc, Karen Fowler | Services | Restricted | |||||||||||||||
| 7/21/2023 | New | 15,000 | Common | 0.35 | Benjamin Berry | Contingent Lability Paid | Restricted | |||||||||||||||
| 10/18/2023 | New | 600,000 | Common | 0.10 | Jaron Mossman & Jode Vallejos JTTEN | Debt conv | Restricted | |||||||||||||||
| 10/18/2023 | New | 253,180 | Common | 0.10 | Mark Mitrev | Debt conv | Restricted | |||||||||||||||
| 10/18/2023 | New | 101,250 | Common | 0.10 | Jaylen Mossman | Debt conv | Restricted | |||||||||||||||
| 10/18/2023 | New | 252,850 | Common | 0.10 | Peter D. Lawrence | Debt conv | Restricted | |||||||||||||||
| 10/18/2023 | New | 121,370 | Common | 0.10 | Justin Mossman | Debt conv | Restricted | |||||||||||||||
| 11/7/2023 | New | 500,000 | Common | 0.31 | Markus Miller | Services | Restricted | |||||||||||||||
| 11/7/2023 | New | 2,000,000 | Common | 0.335 | Serdar Gurel | Services | Restricted | |||||||||||||||
| 11/7/2023 | New | 252,580 | Common | 0.10 | McKellar R Trust, Winston McKellar, trustee | Debt conv | Restricted | |||||||||||||||
| 11/7/2023 | New | 252,580 | Common | 0.10 | Susan E. Crossett | Debt conv | Restricted | |||||||||||||||
| 11/7/2023 | New | 505,050 | Common | 0.10 | Douglas Gore | Debt conv | Restricted | |||||||||||||||
| 12/28/2023 | New | 360,000 | Common | 0.25 | Markham and ML Broughton RT, Markham Broughton | Services | Restricted | |||||||||||||||
| 12/28/2023 | New | 253,240 | Common | 0.10 | Timothy and Kim Dukes | Debt conv | Restricted | |||||||||||||||
| 12/28/2023 | New | 252,470 | Common | 0.10 | Alexander Fil | Debt conv | Restricted | |||||||||||||||
| 12/28/2023 | New | 252,360 | Common | 0.10 | Chris Gressinger | Debt conv | Restricted | |||||||||||||||
| 12/28/2023 | New | 256,360 | Common | 0.10 | Dwayne Hay | Debt conv | Restricted | |||||||||||||||
| 2/2/2024 | New | 1,011,620 | Common | 0.10 | DePrima Donnelly Family Trust, Anthon DePrima, trustee | Debt conv | Restricted | |||||||||||||||
| 2/2/2024 | New | 335,850 | Common | 0.10 | Carl R. Vertuca | Debt conv | Restricted | |||||||||||||||
| 2/2/2024 | New | 335,780 | Common | 0.10 | Bryan Vertuca | Debt conv | Restricted | |||||||||||||||
| 2/28/2024 | New | 252,030 | Common | 0.10 | Jeffrey Kelley | Debt conv | Restricted | |||||||||||||||
| 2/28/2024 | New | 302,370 | Common | 0.10 | Leibowitz Living Trust, Alan Leibowitz, trustee | Debt conv | Restricted | |||||||||||||||
| 2/28/2024 | New | 336,790 | Common | 0.10 | Dominic Mancini | Debt conv | Restricted | |||||||||||||||
| 2/28/2024 | New | 253,680 | Common | 0.10 | David Townley Paton | Debt conv | Restricted | |||||||||||||||
| 2/28/2024 | New | 253,240 | Common | 0.10 | Michael Volpe/ Liliane Stachishin-Moura, JTTN | Debt conv | Restricted | |||||||||||||||
| 3/12/2024 | New | 505,820 | Common | 0.10 | Paul Stander, SEP-IRA | Debt conv | Restricted | |||||||||||||||
| 3/12/2024 | New | 202,020 | Common | 0.10 | Nicole M. Hobbs | Debt conv | Restricted | |||||||||||||||
| 3/12/2024 | New | 252,140 | Common | 0.10 | James S Benedict | Debt conv | Restricted | |||||||||||||||
| 3/12/2024 | New | 252,090 | Common | 0.10 | Cameron Turner | Debt conv | Restricted | |||||||||||||||
| 3/12/2024 | New | 100,710 | Common | 0.10 | Jill B. Mossman | Debt conv | Restricted | |||||||||||||||
Securities authorized for issuance under equity compensation plans
The Company has not reserved any securities for issuance under equity compensation plans for any officers, directors or any beneficial owners.
On November 21, 2022 the company entered into a consulting agreement with Axiom Group (Joseph Isaacs, sole Officer and director) for professional services wherein the Company paid Axiom Group (Joseph Isaacs) 950,000 common shares.
On April 25, 2023 the company entered into a consulting agreement with Dr. Markus Miller for professional services wherein the Company paid 1,000,000 common shares.
On May 17, 2023 the company entered into a consulting agreement with Frank Straw for professional services wherein the Company paid 1,000,000 common shares.
On June 3, 2023, the company entered into a consulting agreement with Ken Waters for professional services wherein the Company issued 1,000,000 options with a strike price of $0.20 a share.
On September 15, 2023, the company entered into a consulting agreement with Kaybrook Client Consulting LLC, Harry Datys, for professional services wherein the Company issued 3,950,000 warrants at a par value of $0.001.
On November 6, 2023 the company entered into a distribution and consulting agreement with Delta, Serdar Gurel, for professional services wherein the Company paid 1,000,000 common shares.
The Company has had a working relationship with Bruce Moore for several years. To keep him engaged, the Company gave him 200,000 common shares for professional services.
The Company has had a working relationship with US Affiliated, Inc, owned by Karen Fowler, for the past year. To keep the company engaged, CETI gave US Affiliated, Inc 1,000,000 common shares for professional services.
| 21 |
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
None.
Item 5. Other Information.
During the Company’s quarter ended March
31, 2024, no director or officer
Item 6. Exhibits.
| Incorporated by Reference |
Filed or Furnished | |||||||||
| Exhibit # | Exhibit Description | Form | Date | Number | Herewith | |||||
| 31.1 | Certification of Principal Executive Officer (302) | Filed | ||||||||
| 31.2 | Certification of Principal Financial Officer (302) | Filed | ||||||||
| 32.1 | Certification of Principal Executive and Principal Financial Officers (906) | Furnished* | ||||||||
| 101.INS | Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | Filed | ||||||||
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | Filed | ||||||||
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | Filed | ||||||||
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | Filed | ||||||||
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | Filed | ||||||||
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | Filed | ||||||||
| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | Filed | ||||||||
*This exhibit is being furnished rather than filed and shall not be deemed incorporated by reference into any filing, in accordance with Item 601 of Regulation S-K.
| 22 |
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.
| Signature | Title | Date | ||
|
/s/ Kim D. Southworth Kim D. Southworth
/s/ Dan Leboffe Dan Leboffe |
Chief Executive Officer
Principal Accounting Officer |
May 20, 2024
May 20, 2024 | ||
| 23 |
Exhibit 31.1
302 CERTIFICATION
I, Kim D. Southworth, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Cyber Enviro-Tech, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in the report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 20, 2024
| /s/ Kim D. Southworth | |
| Kim D. Southworth | |
| Chief Executive Officer | |
Exhibit 31.2
302 CERTIFICATION
I, Dan Leboffe, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Cyber Enviro-Tech, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in the report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: May 20, 2024
| /s/ Dan Leboffe | |
| Dan Leboffe | |
| Chief Financial Officer | |
EXHIBIT 32.1
SECTION 906 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER
In connection with the Annual Report of Cyber Enviro-Tech, Inc., (the “Company”) on Form 10-Q for the period ended March 31, 2024, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kim D. Southworth, Chief Executive Officer and Dan Leboffe, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
1. The Report fully complies with requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.
| /s/ Kim Southworth | |
| Kim D. Southworth | |
| Chief Executive Officer | |
| Dated: May 20, 2024 | |
| /s/ Dan Leboffe | |
| Dan Leboffe | |
| Chief Financial Officer | |
| Dated: May 20, 2024 | |