CLNV 10-Q/A
Clean Vision Corp (CLNV)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
Amendment No. 1
For the quarterly
period ended
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As of October 16, 2024, there were shares of the issuer’s common stock issued and outstanding.
Explanatory Note:
CLEAN VISION CORPORATION
FORM 10-Q/A
For the Quarterly Period Ended March 31, 2024
INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INDEX TO FINANCIAL STATEMENTS
1
CLEAN VISION CORPORATION
CONSOLIDATED BALANCE SHEETS
| March 31, 2024 | December 31, 2023 | |||||||
| ASSETS | (Unaudited)/ (Restated) | (Audited)/ (Restated) | ||||||
| Current Assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaids and other assets | ||||||||
| Accounts receivable | ||||||||
| Loan receivable | ||||||||
| Trading securities | ||||||||
| Total Current Assets | ||||||||
| Property and equipment | ||||||||
| Goodwill | ||||||||
| Total Assets | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) | ||||||||
| Current Liabilities: | ||||||||
| Cash overdraft | $ | $ | ||||||
| Accounts payable | ||||||||
| Accrued compensation | ||||||||
| Accrued expenses | ||||||||
| Convertible note payable, net of discount of 1,717,702 and $1,701,403, respectively | ||||||||
| Derivative liability | | |||||||
| Loans payable | ||||||||
| Related party payables | ||||||||
| 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 March 31, | ||||||||
| 2024 | 2023 | |||||||
| (Restated) | ||||||||
| Revenue | $ | $ | ||||||
| Cost of revenue | ||||||||
| Gross margin | $ | $ | ||||||
| Operating Expenses: | ||||||||
| Consulting | $ | $ | ||||||
| Advertising and promotion | ||||||||
| Development expense | ||||||||
| 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 extinguishment of debt | ||||||||
| Other expense, net | ( | ) | ||||||
| Total other expense | ( | ) | ( | ) | ||||
| Net loss before provision for income tax | ( | ) | ( | ) | ||||
| Provision for income tax expense | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Net loss 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’ EQUITY (DEFICIT)
For the Three Months Ended March 31, 2024 and 2023
(Unaudited)
| Series A Preferred Stock | Series C Preferred Stock | Common Stock | Additional paid | Common Stock To be | Accumulated Other Comprehensive | Minority | Accumulated | Total Stockholders' | |||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | In Capital | Issued | Loss | Interest | Deficit | Deficit | ||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 (Restated) | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||
| Stock issued for services | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock issued for debt commitments | |||||||||||||||||||||||||||||||||||||||||||||||||
| Stock issued for cash | — | — | |||||||||||||||||||||||||||||||||||||||||||||||
| Stock issued for warrant exercise | — | — | ( | ) | |||||||||||||||||||||||||||||||||||||||||||||
| Debt issuance cost – warrants issued | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 (Restated) | $ | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||||||
F-4
| Series A Preferred Stock | Series C Preferred Stock | Common Stock | Additional paid |
Common Stock to be | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | |||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Shares | Amount | In Capital | Issued | Loss | Deficit | 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 | $ | $ | $ | $ | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-5
CLEAN VISION CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
| For the Three Months Ended March 31, | ||||||||
| 2024 | 2023 | |||||||
| (Restated) | ||||||||
| Cash Flows from Operating Activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used by operating activities: | ||||||||
| 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 extinguishment of debt | ( | ) | ||||||
| Depreciation expense | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Prepaid | ( | ) | ( | ) | ||||
| Accounts receivable | ||||||||
| Accounts payable | ( | ) | ||||||
| Accruals | ||||||||
| Related-party payables - short-term | ||||||||
| Accrued compensation | ( | ) | ||||||
| Net cash used by operating activities | ( | ) | ( | ) | ||||
| Cash Flows from Investing Activities: | ||||||||
| Prepaid for acquisition | ( | ) | ||||||
| Purchase of property and equipment | ( | ) | ||||||
| Net cash used by investing activities | ( | ) | ( | ) | ||||
| Cash Flows from Financing Activities: | ||||||||
| Cash overdraft | ||||||||
| 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 | ||||||||
| 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 | $ | $ | ||||||
| Warrants issued with notes payable | $ | |||||||
The accompanying notes are an integral part of these unaudited consolidated financial statements.
F-6
CLEAN VISION CORPORATION
Notes to Unaudited Consolidated Financial Statements
March 31, 2024
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.
All operations are currently being conducted through Clean-Seas, a wholly-owned subsidiary. 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 EcoSynergie, which changed its name to Clean-Seas Morocco, LLC 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 TPD of waste plastic through pyrolysis.
We believe that our current projects 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.
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 had ceased operations.
Endless Energy, Inc. (“Endless Energy”) was incorporated in Nevada on December 10, 2021, as a wholly owned subsidiary of the Company. EndlessEnergy was incorporated for the purpose of investing in wind and solar energy projects but does not currently have any operations.
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. Pursuant to that certain Memorandum of Understanding signed on November 4, 2022, Arizona State University (ASU) and the Rob and Melani Walton Sustainability Solution Services (WS3), the parties intend for Clean-Seas Arizona to establish a plastic feedstock to clean hydrogen conversion facility to be located in Phoenix, Arizona. In furtherance of these goals, and pursuant to a Services Agreement (the “Arizona Services Agreement”) signed on June 12, 2023, with ASU and WS3, this facility is currently intended to source and convert plastic feedstock from the Phoenix area and import plastic from California. Pursuant to the Arizona Services Agreement, the Arizona facility is expected to begin processing plastic feedstock in Q4 2024, now expected in Q4 2025, at 100 TPD and scale up to a maximum of 500 TPD at full capacity. Additionally, we are exploring plans for this facility to be powered by renewable energy, which, if successful, would become the first completely off grid pyrolysis conversion facility in the world.
Clean-Seas West Virginia, formed on April 1, 2023, is our first PCN facility slated for the United States and is currently expected to be operational in the second quarter of 2025. This facility will be located in the city of Belle, outside of Charleston, the capital of West Virginia, and is expected to begin operations converting 100 TPD of plastic feedstock. The Company expects to expand to greater than 500 TPD within three years of beginning operations. Clean-Seas has engaged MacVallee, LLC (“MacVallee”) to secure mixed plastic feedstock from material recovery facilities and industrial suppliers.
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 three month period ending March 31, 2024 and not necessarily indicative of the results to be expected for the full year ending December 31, 2024. 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, 2023.
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 March 31, 2024, the Company had no cash in excess of the FDIC’s $
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 no cash equivalents for the periods ended March 31, 2024 and December 31, 2023.
Principles of Consolidation
The accompanying unaudited consolidated financial statements for the period ended March 31, 2024, include the accounts of the Company and its wholly owned subsidiaries, Clean-Seas, Inc., Clean-Seas India Private Limited, Clean-Seas Group, Endless Energy, Inc., EcoCell, Inc., Clean-Seas Arizona, Inc., Clean-Seas West Virginia, and our 51% owned subsidiary, Clean-Seas Morocco, LLC. As of March 31, 2024, there was no activity in Clean-Seas Group, Endless Energy or Clean-Seas Arizona. All intercompany transactions are eliminated in consolidation.
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.
F-8
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.
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 March 31, 2024, there are warrants to purchase up to 296,138,059 shares of common stock and approximately 193,000,000 dilutive shares of common stock from a convertible notes payable. As of March 31, 2023 , there are warrants to purchase up to 55,214,850 shares of common stock and approximately 45,539,000 dilutive shares of common stock from a convertible note payable. As of March 31, 2024 and 2023, 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 March 31, 2024 and 2023, 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.
F-9
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:
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:
March 31, 2024
| Description | Level 1 | Level 2 | Level 3 | ||||||||
| Derivative | $ | $ | $ | ||||||||
| Total | $ | $ | $ | ||||||||
December 31, 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. |
F-10
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.
(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.
For the period ended
March 31, 2024, our operations in Morocco had generated approximately $
Trade Accounts Receivable
Trade accounts receivable are amounts due from customers under normal trade terms. After assessing the creditworthiness of our customers and considering our historical experience, anticipated future operations, and prevailing economic conditions, we have determined that the application of the current expected credit loss (CECL) methodology would be immaterial to our financial statements. Consequently, no allowance for credit losses has been recorded as of the year-end. The absence of a recorded allowance for credit losses reflects our judgment that potential credit losses on outstanding receivables are negligible. As of March 31, 2024, approximately 87% of accounts receivable are due from one customer.
F-11
Inventory
Inventory consists of plastic bottles that are acquired at no cost and are held for use in our pyrolysis process, which converts these materials into pyrolysis oil, carbon char, and other commodities. In accordance with U.S. Generally Accepted Accounting Principles (GAAP), these bottles are recorded at the lower of cost or market. Since the acquisition cost of the bottles is zero, and there is no significant alternative market value attributable to these materials before conversion, the carrying value of this inventory is recorded at $0 on our consolidated balance sheets.
The absence of a recorded cost for the plastic bottles does not reflect their importance to our production process or potential value of the end products. This accounting treatment is specific to the characteristics of the materials used and does not imply any underlying concerns about the viability or value of the final products produced through our pyrolysis process.
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.
NOTE 4 — BUSINESS COMBINATIONS
On April 23, 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 Ecosynergie 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 2025. To date, none of the Clean-Seas Morocco Investment has been funded.
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 the minority interest (49%) in net assets as of the acquisition date. The goodwill of $4,854,622 represents expected synergies from the combined operations.
F-12
NOTE 5 — PROPERTY & EQUIPMENT
Property and equipment are recorded at cost. The Company capitalizes purchases of property and equipment over $. Depreciation is computed using the straight-line method over the estimated useful lives of the various classes of assets as follows between three and 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, plant, and equipment at our Clean-Seas Morocco facility comprise equipment, buildings and fixtures, automobiles, furniture, and land. Upon acquisition, buildings and land were recorded at their estimated fair value, determined through a valuation conducted in 2018. Subsequently, these assets have been adjusted annually to reflect an approximate 5% increase in fair value, consistent with local real estate market trends. Depreciation for equipment, buildings, automobiles, and furniture is computed using the straight-line method over estimated useful lives of 5 to 10 years.
Property and equipment stated at cost, less accumulated depreciation consisted of the following:
| March 31, 2024 | December 31, 2023 | |||||||
| Pyrolysis unit | $ | $ | ||||||
| Equipment | ||||||||
| Buildings and fixtures | ||||||||
| Land | ||||||||
| Office furniture | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
F-13
Depreciation expense
For
the three months ended March 31, 2024 and 2023, depreciation expense was $
NOTE 6 — LOANS PAYABLE
Effective January
1, 2024, the Company acquired a financing loan for its Director and Officer Insurance for $
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 7 — CONVERTIBLE NOTES PAYABLE
February Convertible Notes - Walleye Opportunities Master Fund Ltd
On February 21, 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 $4,000,000, 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 21, 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.
The terms of the February convertible note were amended pursuant to the March 2024 note (discussed below). The amendment changes the conversion price to $0.03 and extends the maturity date to December 1, 2024.
April Convertible Note - Walleye Opportunities Master Fund Ltd
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 . The April Note is convertible into shares of common stock at $0.03 per share.
May Convertible Notes - Walleye Opportunities Master Fund Ltd
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 bears 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 has 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. The May Note is convertible into shares of common stock at $0.0389 per share.
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 - Coventry Enterprises, LLC
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 default conversion price of 90% per share of the lowest VWAP during the 20 trading day period before the conversion. The August Note requires monthly payments of $78,571.42, beginning December 31, 2023. 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.
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.
F-15
October 2023 Note - GS Capital Partners
On October 26, 2023, the Company entered into a Securities Purchase Agreement (the “October Purchase Agreement”) with an accredited investor (the “October Investor”) related to the Company’s sale of two 12% convertible notes in the aggregate principal amount of $660,000 (each note being in the amount of $330,000 and containing an original issue discount of $30,000 such that the purchase price of each note is $300,000) (each “Note,” and together the “Notes”) are convertible into shares of the Company’s common stock, par value $0.001 per share, upon the terms and subject to the limitations set forth in each Note. The Company issued and sold the first Note (the “First Note”) on October 26, 2023 (the “First Closing Date” or the “First Issuance Date”). The second note was not funded.
On the First Closing Date, the Company issued 800,000 restricted shares of Common Stock to the Purchaser as additional consideration for the purchase of the First Note (the “First Note Commitment Shares”). Upon the closing of the Second Note, the Company will issue additional commitment shares in an amount calculated based on the price per share of the Common Stock at the time of funding of such Second Note (the “Second Note Commitment Shares,” and together with the First Note Commitment Shares, the “Commitment Shares”). In addition to the Commitment Shares, the Company agreed to issue 7,500,000 shares of Common Stock to the Purchaser (the “Returnable Shares”) for each Note. Each issuance of Returnable Shares is subject to recalculation based on the price per share of Common Stock at the time of funding for each Note, such that the economic value of each set of Returnable Shares shall be equal to the value of the initial set of Returnable Shares. For example, if on the Second Closing Date, the closing price of the Common Stock is 50% of the closing price of the Common Stock on the First Closing Date, the Company will be required to issue 15,000,000 Returnable Shares on the Second Note Closing Date. The Returnable Shares must be returned to the Company unless each Note enters into an uncured default during its term, or the Company is otherwise unable to repay each Note on or prior to maturity.
ClearThink Financing
On February 12, 2024, the Company and ClearThink Capital LLC (“ClearThink”) entered into a (i) Securities Purchase Agreement (the “SPA”) and (ii) STRATA Purchase Agreement (the “STRATA Agreement” and together with the SPA, collectively, the “ClearThink Agreements”).
SPA
Pursuant to the SPA, the Company agreed to sell, and ClearThink agreed to purchase, two (2) separate 12% convertible notes of the Company (the first such note, the “First Note Tranche,” the second such note, the “Second Note Tranche,” and collectively, the “ClearThink Notes”) in the aggregate principal amount of $440,000 (each such ClearThink Note being in the amount of $220,000.00 and containing an original issue discount of $20,000, resulting in the purchase price of each such ClearThink Note being $200,000.00), which are convertible Common Stock. In addition, the Company agreed to issue 3,100,000 shares of restricted Common Stock (the “Commitment Shares”) to ClearThink as additional consideration for the First Note Tranche and as an inducement for the Investor to enter into the STRATA Agreement; provided, however, that 2,500,000 shares of Commitment Shares will be returned to the Company if the Company, at its option, does not consummate the transactions contemplated by the STRATA Agreement by not filing the Registration Statement on Form S-1 with the U.S. Securities and Exchange Commission covering the resale of all securities issuable under each of the ClearThink Agreements (the “Resale Registration Statement”).
The First Note Tranche was issued on February 12, 2024 and the Second Note Tranche shall be issued within three (3) days after the Company’s filing of the Resale Registration Statement.
While any of the securities issued or issuable under the SPA are outstanding, upon any issuance by the Company or any of its subsidiaries of any security, or amendment to a security that was originally issued before the SPA Closing Date, with any term that the Investor reasonably believes is more favorable to the Investor of such security or with a term in favor of the Investor of such security that the Investor reasonably believes was not similarly provided to ClearThink in the ClearThink Note, (i) the Company shall notify the Investor of such additional or more favorable term within one (1) business day of the issuance and/or amendment (as applicable) of the respective security, and (i) such term, at Investor's option, shall become a part of the transaction documents with the Investor (regardless of whether the Company complied with the notification provision herein). The types of terms contained in another security that may be more favorable to the Investor of such security include, but are not limited to, terms addressing prepayment rate, interest rates, and original issue discounts, conversion or exercise prices warrant coverage and pricing, commitment shares and similar terms and conditions.
F-16
The ClearThink Note contains a principal amount of $220,000 (the “Principal”) with guaranteed interest (the “Interest”) at a rate of twelve percent (12%) per calendar year from the date of issuance. All Principal and Interest, along with any and all other amounts, shall be due and owing on November 12, 2024 (the “Maturity Date”), with a lump-sum interest payment equal to $26,400 payable on the SPA Closing Date, which is added to the principal balance and payable by the Company on the Maturity Date or upon acceleration or by prepayment or otherwise, notwithstanding the number of days which the Principal is outstanding. Unless the Investor elects to convert the Note into shares of Common Stock, Principal payments shall be made in four installments, each in the amount of $50,000 commencing on the one hundred eightieth (180th) day anniversary following the SPA Closing Date and continuing thereafter each thirty (30) days for four (4) months thereafter. The ClearThink Note may be prepaid in whole or in part as set forth therein and any amount of Principal or Interest on the ClearThink Note which is not paid when due shall bear interest at the rate of the lesser of (i) twenty four percent (24%) per annum (which shall be guaranteed and applied to the balance due under the ClearThink Note upon an Event of Default (as defined in the ClearThink Note)) and (ii) the maximum amount permitted under law from the due date thereof until the same is paid.
Trillium Financing
On February 15, 2024, the Company entered into a Securities Purchase Agreement (the “Trillium Agreement”) with Trillium Partners L.P. (“Trillium”), whereby the Company issued and sold to Trillium (i) a promissory note (the “Trillium Note”) in the aggregate principal amount of $580,000 (which includes $87,500 of Original Issue Discount) (the “Trillium Principal”), convertible into Common Stock, upon default, upon the terms and subject to the limitations and conditions set forth in such Trillium Note, and (ii) 4,000,000 restricted shares of Common Stock (the “Commitment Shares”).
Although the Trillium Agreement was dated and signed on February 15, 2024, it did not become effective until the conditions set forth in Section 6 and Section 7 of the Trillium Agreement were satisfied, which occurred on February 22, 2024 (the “Trillium Closing Date”).
The maturity date of the Trillium Note is January 15, 2025 (the “Trillium Maturity Date”) and a one-time interest charge of ten percent (10%) or $58,000 (the “Trillium Interest Rate”) shall be applied to the Trillium Principal on the date of issuance. The Company has the right to prepay the Trillium Note in full at any time with no prepayment penalty. Accrued, unpaid Trillium Interest and outstanding Trillium Principal, subject to adjustment, shall be paid in seven payments, each in the amount of $91,142.86 (a total payback to the Holder of $638,000).
At any time following an Event of Default (as defined in the Trillium Note), Trillium has the right to convert all or any part of the outstanding and unpaid amount of the Trillium Note into fully paid and non-assessable shares of Common Stock, as such Common Stock exists on the date of issuance, or any shares of capital stock or other securities of the Company into which such Common Stock shall hereafter be changed or reclassified at the conversion price determined as provided herein (a “Conversion”), provided, that such Conversion or Conversions do not result in Trillium beneficially owning more than 9.99% of the outstanding shares of Common Stock.
Pursuant to the Trillium Note, beginning on the fifth month anniversary of the Issuance Date, and for the next six months after, the Company will make a total of seven (7) equal monthly payments of $91,142.85. In the event that the Company defaults and misses a payment, then the Investor will be able to do a “default conversion. The conversion price (the “Trillium Conversion Price”) is equal to the lower of: (i) the Fixed Conversion Price of $0.03; (ii) the Variable Conversion Price (70% of the lowest trade for the twenty days prior to conversion); and (iii) the Alternative Conversion Price (lowest price os any common stock during the period thirty days prior to a default). The Company agreed to initially reserve from its authorized and unissued Common Stock, 72,000,000 shares of Common Stock (the “Reserve Amount”), which Reserve Amount shall be increased from time to time in accordance with the terms of the Trillium Note.
F-17
Under the terms of the Trillium Agreement, the Company agreed to use its best efforts to effect the registration and the sale of the Commitment Shares and the Conversion Shares (collectively, the “Registerable Securities”) by filing with the SEC an amendment to its Registration Statement on Form S-1 (as initially filed with the SEC on November 3, 2023 as amended on December 15, 2023) with respect to such Registrable Securities.
March 2024 Financing Walleye Opportunities Master Fund Ltd.
On February 17, 2023, the Company entered into a Securities Purchase Agreement (the “Prior Agreement”) with Walleye Opportunities Master Fund Ltd. (the “March Investor”) for the sale of up to $4,000,000 in aggregate principal amount of senior convertible promissory notes and warrants to acquire shares Common Stock. The initial closing under the Prior Agreement occurred on February 21, 2023, when the Company issued to the March Investor (i) a senior convertible promissory note in the principal amount of $2,500,000 (the “Existing Note”) and (ii) warrants to purchase up to 29,434,850 shares of Common Stock (the “Existing Warrant”).
On March 25, 2024 (the “Issue Date”), the Company and March Investor entered into a Securities Purchase Agreement (the “March Purchase Agreement”), whereby: (i) the Company issued to the March Investor (a) a convertible note in the aggregate principal amount of $666,666 (the “March 2024 Note”), and (b) a warrant initially exercisable to acquire up to 22,222,220 shares of Common Stock at an exercise price of $0.03 per share (the “March 2024 Warrant”); and (ii) the parties agreed to amend and restate the Existing Note and Existing Warrant as discussed below.
March 2024 Note
At any time on or after the Issue Date, the March Investor shall be entitled to convert any portion of the outstanding Conversion Amount (as defined in the March 2024 Note) into validly issued, fully paid and non-assessable shares of Common Stock at a conversion price equal to $0.03 per share, subject to adjustment as set forth in the March 2024 Note.
Interest accruing on the March 2024 Note is payable to the March Investor in shares of Common Stock; provided, however, that the Company may pay any such interest in cash or in a combination of cash and shares of Common Stock. The March 2024 Note bears interest at a rate of 5% per annum, as may be adjusted from time to time, and matures on October 1, 2024 (the “March Note Maturity Date”); provided, however, that the March Note Maturity Date may be extended at the option of the Investor as provided in the March 2024 Note.
The Company shall have the right to redeem all, but not less than all, of the amount then outstanding under the March 2024 Note at any time. Any redemption shall be made by the Company in cash at a price equal to the greater of (i) 120% of the Conversion Amount (as defined in the March 2024 Note), and (ii) the product of (1) the Conversion Rate (as defined in the March 2024 Note) with respect to the Conversion Amount being redeemed multiplied by (2) the greatest closing sale price of the Common Stock on any trading day immediately preceding the date such redemption payment is made . Upon the occurrence of an Event of Default under the March 2024 Note, the Investor may require the Company to redeem all or any portion of the March 2024 Note, regardless of whether such Event of Default has been cured.
March 2024 Warrant
The March 2024 Warrant (i) is exercisable for the purchase of up to 22,222,220 shares of Common Stock at an exercise price of $0.03 per share, subject to customary adjustments, and (ii) expires five years from the date of issuance.
Registration Rights Agreement
On the Issue Date, the Company and the March Investor entered into a registration rights agreement (the “RRA”), pursuant to which the Company agreed to file with the SEC, within 45 days after the Issue Date, a registration statement covering the resale of all securities issuable to the March Investor under the March Purchase Agreement.
F-18
Amended and Restated Note
In connection with the March Purchase Agreement, the Company and March Investor amended and restated the Existing Note as set forth in that certain Amended and Restated Convertible Note dated March 25, 2024 (the “A&R Note). At any time, the March Investor shall be entitled to convert any portion of the outstanding Conversion Amount (as defined in the A&R Note) into validly issued, fully paid and non-assessable shares of Common Stock at a conversion price equal to $0.03 per share, subject to adjustment as set forth in the A&R Note.
Interest accruing on the A&R Note is payable to the March Investor in shares of Common Stock; provided, however, that the Company may pay any such interest in cash or in a combination of cash and shares of Common Stock. The A&R Note bears interest at a rate of 5% per annum and matures on December 1, 2024 (the “A&R Note Maturity Date”); provided, however, that the A&R Note Maturity Date may be extended at the option of the as provided in the A&R Note).
The Company shall have the right to redeem all, but not less than all, of the amount then outstanding amount under the A&R Note at any time. Any redemption shall be made by the Company in cash at a price equal to the greater of (i) 120% of the Conversion Amount (as defined in the A&R Note), and (ii) the product of (1) the Conversion Rate (as defined in the A&R Note) with respect to the Conversion Amount being redeemed multiplied by (2) the greatest closing sale price of our Common Stock on any trading day immediately preceding the date such redemption payment is made.
Amended and Restated Warrant
In connection with the Purchase Agreement, the Company and March Investor agreed to amend and restate the Existing Warrant as set forth in that certain Amended and Restated Warrant to Purchase Common Stock dated March 25, 2024 (the “A&R Warrant). The A&R Warrant is exercisable for the purchase of up to 22,222,220 shares of Common Stock at an exercise price of $0.03 per share, subject to customary adjustments, and (ii) expires five years from the Issue Date.
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 three months ended March 31, 2024, the Company recognized a total loss of the issuance of convertible debt of $252,376.
The following table summarizes the convertible notes outstanding as of March 31, 2024:
| Note Holder | Date | Maturity Date | Interest | Balance December 31, 2023 |
Additions | Repayments | Balance March 31, 2024 | ||||||||||||||
| Walleye Opportunities Fund | — | ||||||||||||||||||||
| Walleye Opportunities Fund | — | ||||||||||||||||||||
| Walleye Opportunities Fund | — | ||||||||||||||||||||
| Coventry Enterprises, LLC | ( |
||||||||||||||||||||
| GS Capital Partners | — | ||||||||||||||||||||
| Clearthink Capital Partners | — | ||||||||||||||||||||
| Trillium Partners LP | — | ||||||||||||||||||||
| Walleye Opportunities Fund | — | ||||||||||||||||||||
| Total | $ | $ | $ | ( |
$ | ||||||||||||||||
| Less debt discount | $ | ( |
( | ||||||||||||||||||
| Convertible notes payable, net | $ | $ | |||||||||||||||||||
| (1) | $314,284 was repaid in cash, $146,430 was forgiven along with $50,000 of accrued interest. |
F-19
A summary of the activity of the derivative liability for the notes above is as follows:
| Balance at December 31, 2023 | $ | |||
| Increase to derivative due to new issuances | ||||
| Decrease to derivative due to mark to market | ( |
) | ||
| Decrease to derivative due to modification of conversion terms | ( |
) | ||
| Balance at March 31, 2024 | $ | |||
NOTE 8 — RELATED PARTY TRANSACTIONS
Daniel Bates, CEO
On February 21, 2021, the Company amended the employment agreement with Daniel Bates, CEO. The amendment extended the term of his agreement from three years commencing May 27, 2020, to expire on May 27, 2025.
As of March 31, 2024 and December 31, 2023, the Company owed Mr. Bates $189,000 and $189,000 , respectively, for accrued compensation.
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.
Daniel Harris, Chief Revenue Officer
As of March 31, 2024 and December 31, 2023, the Company owed Mr. Harris, $17,500 and $17 ,500, respectively, for accrued compensation.
Erfran Ibrahim, former CTO
As of March 31, 2024 and 2023, the Company owed Mr. Ibrahim, $60,000 and $60,000, respectively, for accrued compensation.
Michael Dorsey, Director
During the three months ended March 31, 2024 and 2023, the Company paid Mr. Dorsey, $4,500 and $4,500, respectively, for director fees.
Greg Boehmer, Director
During the three months ended March 31, 2024 and 2023, the Company paid Mr. Boehmer, $4,500 and $4,500, respectively, for director fees. In addition, the Company owes Mr. Boehmer $3,000 and $0, for consulting services as of March 31, 2024 and December 31, 2023.
F-20
Bart Fisher, Director
During the three months ended March 31, 2024 and 2023, the Company paid Mr. Fisher, $4,500 and $4,500, respectively, for director fees.
Green Invest Solutions Ltd.
During September 2023, a $70,000 note was issued to Green Invest Solutions Ltd. which is managed by the same individuals as Clean-Seas Morocco. The loan is considered to be short-term and is not accruing interest.
Management of Clean-Seas Morocco
On occasion, management of Clean-Seas Morocco provides funds to the company for general operations. As of March 31, 2024 and December 31, 2023, $706,642 and $549,946 was due to management, respectively. There are no agreements and no interest rates applied.
Note Payable
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 . To date no additional payments have been made.
NOTE 9 — COMMON STOCK
On January 9, 2024, the Company entered into a Securities Purchase Agreement (the “January Agreement”) with an accredited investor (the “Purchaser”) whereby the Company agreed to sell, and the Purchaser agreed to purchase, up to 15,000,000 shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), for an aggregate purchase price of up to $300,000, or $0.02 per share. Pursuant to the January Agreement, which became effective on January 17, 2024, the Purchaser paid $100,000 to the Company in exchange for 5,000,000 shares of Common Stock.
On February 9, 2024, the Company granted 455,840 shares of common stock for services. The shares were valued at $0.0351, the closing stock price on the date of grant, for total non-cash compensation expense of $16,000.
On February 22, 2024, the Company granted 3,600,000 shares of common stock for services. The shares were valued at $0.0248, the closing stock price on the date of grant, for total non-cash compensation expense of $89,280. The expense is being recognized over the term of the agreement. As of March 31, 2024, the shares have not yet been issued by the transfer agent and are disclosed of common stock to be issued.
On February 23, 2024, the Company granted 5,000,000 shares of common stock for services. The shares were valued at $0.0351, the closing stock price on the date of grant, for total non-cash compensation expense of $171,500. The expense is being recognized over the term of the agreement. As of March 31, 2024, the shares have not yet been issued by the transfer agent and are disclosed of common stock to be issued.
On February 9, 2024, the Company issued 1,600,000 shares of common stock to ClearThink, pursuant to the terms of a Securities Purchase Agreement (Note 7).
On February 15, 2024, the Company issued 4,000,000 shares of common stock to Trillium Partners, pursuant to the terms of a Securities Purchase Agreement (Note 7).
On March 22, 2024, the Company granted 40,000 shares of common stock for services. The shares were valued at $0.0248, the closing stock price on the date of grant, for total non-cash compensation expense of $992. As of March 31, 2024, the shares have note yet been issued by the transfer agent and are disclosed of common stock to be issued.
Refer to Note 8 for shares issued to related parties.
F-21
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.
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 (“Tucker”). Per the terms of the agreement, Tucker received 2,000,000 shares of Series B Preferred Stock for services provided, which shares of Series B Preferred Stock are to be classified as mezzanine equity until they are fully issued. As a result of the arbitrator’s April decision regarding the Company’s litigation with Tucker, April 15, 2024, Tucker does not hold any shares of Series B Preferred Stock. See Note 12 – Commitments and Contingencies (Legal Proceedings) below.
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 March 25, 2024, the Company entered into that certain Securities Purchase Agreement with Walleye pursuant to which the Company warrants to purchase 181,365,075 shares of the Company’s common stock. The Warrants are exercisable for shares of the Company’s common stock at a price of $0.03 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 $575,690 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, 2022 | $ | |||||||||||||
| Issued | $ | |||||||||||||
| Cancelled | $ | — | ||||||||||||
| Exercised | $ | — | ||||||||||||
| Outstanding, December 31, 2023 | $ | $ | ||||||||||||
| Issued | $ | |||||||||||||
| Cancelled | $ | — | ||||||||||||
| Exercised | ( |
$ | — | |||||||||||
| Outstanding, March 31, 2024 | $ | $ | — | |||||||||||
F-22
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.
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 arose 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 shares of Series B Preferred Stock and a consulting
fee of $
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, among other things, the action filed by the SEC 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, as amended (the “Securities Act”) and aided and abetted violations of Section 10(b) and Rule 10-b5 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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. On February 24, 2023, the Company removed the Tucker Litigation to the United States District of Nevada (Case No. 2:23-cv-00296).
F-23
On February 27, 2023, the Company filed counterclaims against Tucker and its principal, Leonard Tucker (the “Company Complaint”), wherein the Company sought a judgment against Tucker declaring the Tucker Agreement unenforceable and invalid, as well as damages related to its claims for breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, and breach of duty against both Tucker and its principal. On March 10, 2023, the parties subsequently stipulated to stay the Tucker Litigation to attend binding arbitration. On January 31, 2024, the arbitrator entered an interim award in favor of the Company related to a discovery dispute in the arbitration for the sum of $19,625.00.
On January 25, 2024, the arbitrator entered her decision (the “Decision”) regarding the parties’ relative liability in the Tucker Litigation. Overall, the Decision concluded that the Company substantially prevailed on its claims, counterclaims, and defenses in the Tucker Litigation. First, the Decision concluded that the Company prevailed on its claim that the Tucker Agreement is invalid and unenforceable; and further concluded that the Company prevailed against Tucker on each of Tucker’s causes of action based on the Tucker Agreement, including Tucker’s claims for breach of contract, breach of the breach of the implied covenant of good faith and fair dealing, specific performance, and declaratory relief. Second, the Decision concluded no fraud or breach of duty with respect to Tucker and its principal; and further concluded that Tucker may be entitled to retain the compensation paid by the Company for its services under an unjust enrichment theory, in an amount to be determined. Based on the forgoing Decision, the arbitrator ordered the parties to the Tucker Litigation to submit supplementary briefing regarding their respective available remedies.
On April 15, 2024, the arbitrator heard the parties arguments on the supplementary briefing regarding remedies and ruled (i) 100% of the shares issued to Tucker as compensation under the Tucker Agreement be cancelled as a result of the Tucker Agreement being invalid and unenforceable and (ii) Tucker was entitled to unjust enrichment damages in an amount equal to the monthly fee under the Tucker Agreement for the period of engagement until the Company retained a licensed broker dealer to replace the services being performed under the Tucker Agreement.
As a result of the arbitrator’s decision with
respect to remedies, the
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 March 31, 2024 and December 31, 2023, and consist of the following:
Disposal Groups, Including Discontinued Operations
| March 31, 2024 | December 31, 2023 | |||||||
| Current Liabilities of Discontinued Operations: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Loans payable | ||||||||
| Total Current Liabilities of Discontinued Operations: | $ | $ | ||||||
F-24
NOTE 14 – RESTATEMENT
Per ASC 250-10 Accounting Changes and Error Corrections, the financial statements as of and for the year ended December 31, 2023, are being restated to correct accounts payable and accounts related the conversion of convertible debt.
| As of December 31, 2023 | ||||||||||||
| As Reported | Adjusted | As Restated | ||||||||||
| ASSETS | ||||||||||||
| Current Assets: | ||||||||||||
| Cash | $ | $ | $ | |||||||||
| Prepaids and other assets | ||||||||||||
| Accounts receivable | ||||||||||||
| Loan receivable | ||||||||||||
| Trading securities | ||||||||||||
| Total Current Assets | ||||||||||||
| Property and equipment | ||||||||||||
| Goodwill | ||||||||||||
| Total Assets | $ | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||||||
| Current Liabilities: | ||||||||||||
| Cash overdraft | $ | $ | $ | |||||||||
| Accounts payable | (1) | |||||||||||
| Accrued compensation | ||||||||||||
| Accrued expenses | ||||||||||||
| Convertible note payable, net of discount of $1,701,403 | ||||||||||||
| Derivative liability | ||||||||||||
| Loans payable | ||||||||||||
| Related party payables | ||||||||||||
| 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, $0.001 par value, 2,000,000 shares authorized; 2,000,000 issued and outstanding | ||||||||||||
| Total mezzanine equity | ||||||||||||
| Stockholders' Deficit: | ||||||||||||
| Preferred stock, $0.001 par value, 4,000,000 shares authorized; no shares issued and outstanding | ||||||||||||
| Series A Preferred stock, $0.001 par value, 2,000,000 shares authorized; no shares issued and outstanding | ||||||||||||
| Series C Preferred stock, $0.001 par value, 2,000,000 shares authorized; 2,000,000 shares issued and outstanding | ||||||||||||
| Common stock, $0.001 par value, 2,000,000,000 shares authorized, 682,463,425 shares issued and outstanding | ||||||||||||
| Common stock to be issued | ||||||||||||
| Additional paid-in capital | (2) | |||||||||||
| Accumulated other comprehensive loss | ||||||||||||
| Accumulated deficit | ( | ) | ( | ) | ( | ) | ||||||
| Non-controlling interest | ||||||||||||
| Total stockholders' deficit | ( | ) | ( | ) | ( | ) | ||||||
| Total liabilities and stockholders' deficit | $ | $ | $ | |||||||||
F-25
| For The Quarter Ended March 31, 2024 | ||||||||||
| As Reported | Adjusted | As Restated | ||||||||
| Revenue | $ | $ | $ | |||||||
| Cost of revenue | ||||||||||
| Gross margin | $ | $ | $ | |||||||
| Operating Expenses: | ||||||||||
| Consulting | $ | $ | (1) | $ | ||||||
| Advertising and promotion | ||||||||||
| Development expense | ||||||||||
| Professional fees | ( |
(1) | ||||||||
| Payroll expense | ||||||||||
| Director fees | ( |
(1) | ||||||||
| General and administration expenses | (1) | |||||||||
| Total operating expense | ( |
(1) | ||||||||
| Loss from Operations | ( |
( |
||||||||
| Other income (expense): | ||||||||||
| Interest expense | ( |
(2) | ( |
|||||||
| Change in fair value of derivative | (2) | |||||||||
| Loss on debt issuance | ( |
( |
( |
|||||||
| Gain on extinguishment of debt | ||||||||||
| Other expense, net | ( |
( |
||||||||
| Total other expense | ( |
( |
( |
|||||||
| Net loss before provision for income tax | ( |
( |
( |
|||||||
| Provision for income tax expense | ||||||||||
| Net loss | $ | ( |
$ | ( |
$ | ( |
||||
| Net loss attributed to non-controlling interest | (3) | |||||||||
| 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 | ||||||||||
| (1) |
| (2) |
– Correct amount for minority October 2023 Note
| (3) |
F-26
NOTE 15 – SUBSEQUENT EVENTS
The Company evaluated subsequent events for recognition and disclosure through the date the financial statements were issued or filed. Nothing has occurred outside normal operations that required recognition or disclosure in these financial statements.
Subsequent to March 31, 2024, the Company’s transfer agent issued shares of common stock. The shares were granted and expensed in prior periods.
Subsequent to March 31, 2024, the shares of Series B preferred stock were cancelled.
Subsequent to March 31, 2024, GS Capital Partners,
LLC, converted $
Subsequent to March 31, 2024, Trillium Partners LP,
converted $
On May 24, 2024, the Company issued a
convertible promissory note to Clearthink Capital Partners LLC in the aggregate principal amount of $
On May 24, 20224, the Company granted shares of common stock for services.
On June 14, 2024, the Company issued a
convertible promissory note to Coventry Enterprises, LLC in the aggregate principal amount of $
On August 7, 2024, Coventry Enterprises, LLC, converted
$
F-27
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/A 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-value industries focused on clean technology and sustainability opportunities. By leveraging innovative technology, we aim to responsibly resolve environmental challenges by producing valuable products. Currently, we are focused on providing a solution to the plastic waste problem by converting the waste (feedstock) into saleable byproducts, such as precursors for 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) at high temperatures in the absence of oxygen, so that the material does not burn, we are able to convert the feedstock into (i) clean fuels i.e. plastic pyrolysis oil, (ii) clean hydrogen (specifically, the Company’s branded clean hydrogen, AquaH®, which trademark was issued by the USPTO on November 8, 2023 and published on November 28, 2023), and (iii) carbon char. We intend to generate revenue from the following sources: (i) service revenue from the recycling services we provide; (ii) revenue generated from the sale of commodities; (iii) revenue generated from the sale of environmental credits; and (iv) revenue generated from the sale of equipment. Our mission is to aid in solving the problem of cost-effectively upcycling the vast amount of plastic feedstock generated on land before it flows into the world’s oceans.
According to analysis and projections reported by the EIA on June 14, 2023, it is estimated that while annual demand growth is expected to drop from 2.4 million barrels per day (“mb/d”) due to a shift in focus to a clean energy economy, global oil demand will rise by 6% from 2022 to 2028, reaching 105.7 mb/d. The EIA also estimates that upstream investments in oil and gas exploration, extraction and production were on course to reach their highest levels since 2015, growing 11% year-on-year to $528 billion in 2023.
Additionally, as stated in the Hydrogen Generation Market Research published by Allied Market Research in September 2022, the global hydrogen generation market size was valued at $136.3 billion in 2021 and is expected to each $262 billion by 2031, growing at a CAGR of 6.8% from 2022 to 2031. The Hydrogen Generation Market Research explains that hydrogen plays a vital role in the chemicals and oil & gas industry, with major factors driving the hydrogen generation market growth mostly due to ongoing unprecedented revolutions under the net zero emissions scenario, where global output of hydrogen is expected to reach 200 metric tons in 2030 when it is estimated that around 70% of hydrogen production will be done through low carbon technologies. It is anticipated that by 2050, the production of hydrogen will increase to roughly 500 metric tons and that energy efficiency, electrification, renewable energy, hydrogen and hydrogen based fuels, and carbon, capture, utilization and storage are some of the major technology pillars to decarbonize the world energy system.
According to the research and analysis by Argonne published in the Journal of Cleaner Production on November 1, 2023, plastics are important products for the modern economy, reaching production of 367 and 56 million tons in the world and North America, respectively, in 2022. The Argonne research also states that as of November 2023, the plastic industry relied heavily on fossil resources with data suggesting that 6% of the global production of crude oil and natural gas liquids is devoted to the production of plastics and is expected to increase to 20% in 2050, resulting in higher waste generation. According to Argonne, while recycling could reduce reliance on fossil resources and waste generation in the plastic industry while converting post-use plastic into a resource, only 9% of the post-use plastic collected in the United States is mechanically recycled due to diverse economic, technical environmental and regulatory barriers.
25
Further, the Organization for Economic Cooperation and Development has suggested that global plastics use is projected to almost triple between 2019 and 2060, with estimates of an increase from 460 million tons to 1,231 million tons yearly.
We believe that in the near future, a significant growth sector of the economy will be in clean energy and sustainable products and services. This belief was a key factor in our shift in our business focus in May 2020 and our acquisition of Clean-Seas, Inc. (“Clean-Seas”), which became our wholly owned subsidiary on May 19, 2020. We believe that Clean-Seas has made significant progress in identifying and developing its business model around the clean energy and waste-to-value sectors.
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.
All operations are currently being conducted through Clean-Seas. 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 EcoSynergie, which changed its name to Clean-Seas Morocco, LLC 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 TPD of waste plastic through pyrolysis.
Employees
As of March 31, 2024, we employed thirty-eight 38 individuals, of which none are part time. Seven (7) of our employees reside in India and eighteen (18) of our employees reside in Morocco.
Available Information
All reports of the Company filed with the U.S. Securities and Exchange Commission (the “SEC” or the “Commission”) 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”.
26
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 months ended March 31, 2024 and 2023.
Three Months Ended March 31, 2024 Compared to the Three Months Ended March 31, 2024
Revenue
For the three months ended March 31, 2024 and 2023, the Company recognized revenue of $49,692 and $0, respectively 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.
Consulting Expense
For the three months ended March 31, 2024 and 2023, we had consulting expenses of $384,732 and $543,725, respectively, a decrease of $158,993 or 29.2%. The decrease is mainly due to a decrease in stock compensation expense. In the current year we issued stock for services for non-cash compensation expense of approximately $74,000 compared to approximately $388,000 of stock compensation expense for preferred shares in the prior period.
Advertising and Promotion
For the three months ended March 31, 2024 and 2023, we incurred advertising and promotional expense of $30,672 and $0, respectively, an increase of $30,372. The increase in the current period is from a new marketing firm the Company engaged that we had not used in the prior period.
Development Expense
For the three months ended March 31, 2024 and 2023, we incurred development expense of $28,515 and $0, respectively, an increase of $28,515. In the current period our expenditures for development expense increased as we begin to work on projects in West Virginia.
Professional Fees
For the three months ended March 31, 2024 and 2023, we incurred professional fees of $271,091 and $415,746, respectively, a decrease of $144,655 or 34.8%. Our professional fees consist primarily of legal and audit fees. In the current period we had a decrease of legal fees compared to the prior period.
Payroll Expense
For the three months ended March 31, 2024 and 2023, we had payroll expenses of $301,546 and $174,124, respectively, an increase of $127,422 or 73.2%. Payroll has increased due to both new hires and to salary increases for some of our employees. In addition, we had $44,128 of payroll expense from Clean Seas Morocco.
Director Fees
For the three months ended March 31, 2024 and 2023, we had director fees of $13,500 and $74,500, respectively, a decrease of $61,000 or 81.9%. Our directors are compensated $4,500 per quarter. In the prior period we issued shares of common stock for non-cash expense of $61,000.
General and Administrative expense
For the three months ended March 31, 2024 and 2023, we had G&A expenses of $338,955 and $249,947, respectively, an increase of $89,008 or 35.6%. In the current period we had G&A expense from Clean Seas Morocco and West Virgina of $38,863 and $13,323, respectively.
Other Income and Expense
For the three months ended March 31, 2024 and 2023, we had total other expense of $905,919 and $1,242,960, respectively In the current period we recognized $1,475,355 of interest expense, of which $1,322,528 was amortization of debt discount, a loss on debt issuance of $252,376, a gain in the change in fair value of derivative of $625,857, a gain on the extinguishment of debt of $196,430 and other expense of $475. In the prior period we recognized $427,656 of interest expense, of which $409,442 was amortization of debt discount and a loss on debt issuance of $2,495,989. This was offset with a gain of $1,680,685 for change in fair value of derivative.
27
Net Loss
Net loss for the three months ended March 31, 2024 and 2023, was $2,168,657 (after deducting $53,596 for the non-controlling interest) and $2,701,002, respectively.
Liquidity and Capital Resources
Cash Flow from Operating Activities
During the three months ended March 31, 2024 and 2023, we used $988,729 and $1,142,976 of cash used in operating activities. During the current period, we incurred a net loss of $2,222,253, adjusted by $1,087,969 for non-cash items and $145,555 in adjustments for changes in assets and liabilities. In the prior period we used $1,142,976 of cash in operating activities, which included $1,680,455 for non-cash items and $122,429 for operating activities.
Cash Flow from Investing Activities
During the three months ended March 31, 2024, we used $142,195 for the purchase of property and equipment. During the three months ended March 31, 2023, we used $1,000,000 for prepayment for the acquisition of Morocco-based EcoSynergie Group.
Cash Flow from Financing Activities
During the three months ended March 31, 2024, we had net cash received of $1,059,398. We received $1,176,500 of proceeds from convertible notes, $100,000 proceeds from the sale of Common Stock, $83,318 from other notes payable. Cash received was offset by repayment of $314,285 of a convertible note payable and a cash overdraft of $13,865. In the prior period we received $2,120,500 from a convertible note payable, $42,500 from a note payable, $5,000 from our CEO, and $335,000 from the sale of common stock. We repaid $10,000 of the loan owed to our CEO and $8,298 on other notes payable.
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. For the three months ended March 31, 2024, the Company had a working capital deficit of $11,577,670, an accumulated deficit of $37,000,557 and net loss of $2,168,657. 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/A.
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/A.
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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 $1,176,500 from the issuance of convertible notes during the three months ended March 31, 2024.
Other outstanding obligations at March 31, 2024
Convertible Notes Payable
The Company had convertible promissory notes aggregating $5,486,553 outstanding at March 31, 2024. The accrued interest amounted to approximately $334,000 as of March 31, 2024. The convertible notes payable bear interest at rates ranging between 5% and 12% per annum. At March 31, 2024, 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.
ITEM 4. CONTROLS AND PROCEDURES
During the quarter ended March 31, 2024, 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 March 31, 2024 that have materially or are reasonably likely to materially affect, our internal controls over financial reporting
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PART II - OTHER INFORMATION
ITEM 1. 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 arose 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.
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, among other things, the action filed by the SEC 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, as amended (the “Securities Act”) and aided and abetted violations of Section 10(b) and Rule 10-b5 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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. On February 24, 2023, the Company removed the Tucker Litigation to the United States District of Nevada (Case No. 2:23-cv-00296).
On February 27, 2023, the Company filed counterclaims against Tucker and its principal, Leonard Tucker (the “Company Complaint”), wherein the Company sought a judgment against Tucker declaring the Tucker Agreement unenforceable and invalid, as well as damages related to its claims for breach of contract, breach of the implied covenant of good faith and fair dealing, fraud, and breach of duty against both Tucker and its principal. On March 10, 2023, the parties subsequently stipulated to stay the Tucker Litigation to attend binding arbitration. On January 31, 2024, the arbitrator entered an interim award in favor of the Company related to a discovery dispute in the arbitration for the sum of $19,625.00.
On January 25, 2024, the arbitrator entered her decision (the “Decision”) regarding the parties’ relative liability in the Tucker Litigation. Overall, the Decision concluded that the Company substantially prevailed on its claims, counterclaims, and defenses in the Tucker Litigation. First, the Decision concluded that the Company prevailed on its claim that the Tucker Agreement is invalid and unenforceable; and further concluded that the Company prevailed against Tucker on each of Tucker’s causes of action based on the Tucker Agreement, including Tucker’s claims for breach of contract, breach of the breach of the implied covenant of good faith and fair dealing, specific performance, and declaratory relief. Second, the Decision concluded no fraud or breach of duty with respect to Tucker and its principal; and further concluded that Tucker may be entitled to retain the compensation paid by the Company for its services under an unjust enrichment theory, in an amount to be determined. Based on the forgoing Decision, the arbitrator ordered the parties to the Tucker Litigation to submit supplementary briefing regarding their respective available remedies.
On April 15, 2024, the arbitrator heard the parties arguments on the supplementary briefing regarding remedies and ruled (i) 100% of the shares issued to Tucker as compensation under the Tucker Agreement be cancelled as a result of the Tucker Agreement being invalid and unenforceable and (ii) Tucker was entitled to unjust enrichment damages in an amount equal to the monthly fee under the Tucker Agreement for the period of engagement until the Company retained a licensed broker dealer to replace the services being performed under the Tucker Agreement.
As a result of the arbitrator’s decision with respect to remedies, the Company paid Tucker the amount of $375, calculated as $20,000 fee owed to Tucker, minus the $19,625 awarded to the Company.
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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 March 31, 2024, 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
*Filed herewith
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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: October 21, 2024 | By: | /s/ Daniel Bates |
| Name: | Daniel Bates | |
| Title: | Chief Executive Officer | |
| (Principal Executive Officer) | ||
| Date: October 21, 2024 | By: | /s/ Rachel Boulds |
| Name: | Rachel Boulds | |
| Title: | Chief Financial Officer | |
| (Principal Financial and Accounting Officer) |
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