COOL TECHNOLOGIES, INC. - Annual Report: 2022 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

For the fiscal year ended December 31, 2022

For the transition period from _______ to ______

Commission File Number: 000-53443

8875 Hidden River Parkway, Suite 300

Tampa, Florida 33637

(Address of principal executive office)

Registrant’s telephone number, including area code: (813) 975-7467

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large, accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicated by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

The aggregate market value of the shares of voting and non-voting common stock held by non-affiliates of the Registrant as of June 30, 2022, the last business day of the Registrant’s last completed second quarter, based upon the closing price of $0.0187 per share as reported by the OTCQB Stock Market on such date was $11,418,921. This computation is based on the number of issued and outstanding shares held by persons other than officers, directors and shareholders of 5% or more of the registrant’s common stock.

As of April 10, 2023, 705,393,993 shares of common stock are issued, and outstanding excluding 1,000,000 shares held in escrow.

Documents incorporated by reference: None

TABLE OF CONTENTS

Forward-Looking Statements

This Report contains predictions, estimates and other forward-looking statements that relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. 

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Annual Report. You should read this Report and the documents that we have filed as exhibits to this Report completely and with the understanding that our actual future results may be materially different from what we expect. 

All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made, except as required by federal securities and any other applicable law. 

PART I

Item 1. Business

As used in this Annual Report on Form 10-K (this “Report”), references to the “Company,” the “registrant,” “we,” “our” or “us” refer to Cool Technologies, Inc. and our 95% owned subsidiary, Ultimate Power Truck, LLC (“UPT”), unless the context otherwise indicates.

Corporate History

We were incorporated on July 22, 2002, in the State of Nevada under the name Bibb Corporation.

On September 3, 2010, we changed our name to Z3 Enterprises, Inc. (“Z3”), and on April 5, 2012, to HPEV, Inc. (“HPEV”) and on August 19, 2015, our stockholders voted to approve a name change to Cool Technologies, Inc. Our 95% owned subsidiary, Ultimate Power Truck, LLC (“UPT”), was formed on April 17, 2014, in the State of Florida.

On March 29, 2011, we entered into a share exchange agreement (which was amended on June 14, 2011) with HPEV, Inc., a Delaware corporation (“the Share Exchange Agreement”) to acquire 100 shares, constituting all of the issued and outstanding shares of HPEV, Inc. in consideration for the issuance of 22,000,000 shares of common stock. Upon closing of the share exchange on April 15, 2011, HPEV, Inc. became our wholly owned subsidiary. There was a change of control of our company on April 15, 2011, as a result of the issuance of 21,880,000 shares of our common stock to the original shareholders of HPEV, Inc. pursuant to the terms of the Share Exchange Agreement. An additional 120,000 shares were issued during the fourth quarter of 2011 which completed the issuance of 22,000,000 shares of common stock under the terms of the amended Share Exchange Agreement. 

We filed an amendment to our Articles of Incorporation with the Secretary of State of the State of Nevada increasing our authorized shares of common stock, from 140,000,000 shares to 350,000,000 shares, effective March 22, 2017. We filed a second amendment to our Articles of Incorporation with the Secretary of State of the State of Nevada increasing our authorized shares of common stock, from 350,000,000 shares to 500,000,000 shares, effective October 28, 2019. We filed a third amendment to our Articles of Incorporation with the Secretary of State of the State of Nevada increasing our authorized shares of common stock, from 500,000,000 shares to 1,000,000,000 shares, effective February 13, 2020.

As of December 31, 2022, we have seven US patents, two Canadian patents, one Mexican patent, one Brazilian patent and one pending US patent application covering integrated electrical power generation methods and systems.

The Company intends to sell a mobile electric power system to government, military and commercial vehicle and fleet owners. It intends to commercialize its patents by licensing its thermal technologies and applications to electric motor, pump and vehicle component manufacturers. It may license its mobile electric power system as well. 

Business Description

Cool Technologies has spent years designing and developing its technologies. The core technologies are:

Thermal Dispersion - patented technologies (totally enclosed heat pipe cooled and radial vent) that deliver liquid-cooled results for rotating equipment, multi-plate clutches, brakes and rotors without the use of liquid. Liquid cooling is the best, most effective cooling system for electric motors, however, it is also the most expensive. Our technologies reduce the cost of rotating equipment by eliminating the active material and, otherwise, extra components that liquid cooling requires. Our technologies also reduce production costs by increasing the power densities of the rotating equipment which enables them to output the same power from a smaller package.

Mobile Power Generation - a patent pending in-chassis system that outputs electrical power in amounts equal to or greater than skid-mounted generators or tow-behind generators from a smaller, lighter, more efficient package.

The markets for products utilizing our technology include consumer, industrial and military markets, both in the U.S. and worldwide. Our initial target markets include those involved in moving materials and moving people, such as:

Our Technologies

Our technologies are divided into two distinct but complementary categories: heat dispersion technology and mobile power generation (eMGen).

Totally Enclosed Heat Pipe and Radial Vent Heat Pipe

The Company has developed, designed, prototyped and third party tested Totally Enclosed Heat Pipe Cooled (TEHPC) designs. It also owns the patents on the designs. The designs apply to dry pit submersible motors and 650 kVA marine duty generators.

Our patent portfolio covers the application and integration of our heat pipes into various other cooling schemes for enhanced heat removal in motors (i.e., electric motorcycles, cars and trucks), generators (i.e. e-axles and the eMGen system) and numerous other industrial applications including multi-clutches for vehicles and brakes and rotors for vehicles marine, aviation and military. We believe that our technologies have the potential to deliver power output increases and cost reductions, depending on the machine type or motor/generator size, as follows:

We also believe that products produced with our technologies have the potential to deliver operational savings as well, including savings from:

Testing conducted by independent laboratories showed a 200% increase in horsepower capability for a dry pit submersible pump and a 25 to 35% increase in power density for a 650 kVA generator.

In 2019, a new Canadian patent covering a Heat Pipe Cooled Wet Rotating Disc Engagement System and a Radial Vent Composite Heat Pipe was added to the Company’s existing patents. It’s a utility patent which is more difficult to circumvent and, therefore, easier to defend. The designation ‘utility patent’ means that the patent covers the Company’s cooling technologies when used in a wide variety of specific applications as opposed to simply covering the cooling method or technology itself. This is an extremely important distinction with regard to defending patents. These applications include electric vehicle motors, standard electric motors, generators, engine hot spots, pistons, ERG (Exhaust Gas Recirculation) coolers and more. Similar patents are pending in other countries as part of the Global PCT patent process.

Our revenue model for the heat dispersion technology is to license the technology in exchange for royalties. Our design and manufacturing experience will be put to use by taking current product in the market, retrofitting with our TEHPC and radial vent heat pipes and handing back to the OEM a third party tested and validated, manufacturable product that increases performance and lowers cost.

The electric motorcycle industry which includes brands such as Harley Davidson, Zero and others, relies on both air-cooled and liquid-cooled motors. We believe our technology can result in the production of smaller, lighter weight motors as well as cooler motors, batteries and controls. We believe it will also address common performance issues such as overheating which shuts down the motor and forces the rider to stop and let the motor cool. Finally, we believe our wet rotating disc engagement system can cool motorcycle clutches and brakes.

Mobile Power Generation (eMGen) 

The Company’s mobile power generation system enables work trucks to power an in-chassis generator, eliminating the need for some commercial vehicles to tow a mobile generator to a work site. Management believes that there is an unmet demand for on-board, continuous generation of up to 800 kilowatts (kW) of power to remote jobsites, charge electric vehicles and generate emergency power in the event of an outage or disaster. Meetings with Mexican farmers, military personnel and electric vehicle companies along with feedback from international representatives and agents of the Company have confirmed the need for such applications. We offer an in-chassis generator installation kit as a stand-alone (Mobile Generator or eMGen) for third parties and have contracted with Craftsmen Industries to perform domestic installations. It’s likely the Company will also contract with a facility overseas to handle the foreign orders.

Management, along with key directors, members of the Board of Advisors and the Company’s outside contractors, utilized 2022 to refine specifications and design modifications to improve efficiency and simplify the parts lists. They conducted customer research, maintained existing business relationships with the Army Corps of Engineers, FEMA, state and local disaster preparedness agencies as well as federal and state firefighting agencies. They also expanded federal, state and local government relationships in Mexico and established new business relationships in the Middle East. 

The Company has signed international joint ventures in Turkey (Belirti Teknoloji) and Australia (KeyOptions) as well as a strategic alliance with VerdeWatts and FirmGreen. Belirti Teknoloji will market and sell CoolTech’s entire product platform in Southern Europe, the Middle East and some North African nations. KeyOptions will market and sell CoolTech’s entire product platform in Australia and neighboring countries in Southeast Asia.

The Company has also signed an independent agent agreement with H&K Ventures to generate investment funding and revenues from its business relationships in Eastern Europe, the Middle East, Africa and the US.

As the Company is still pre-revenue,  CoolTech has continued to pursue non-dilutive financing based upon the third-party valuation of the Company’s intellectual property, however, there can be no assurance that financing will be obtained.

As a result of a cross marketing and license agreement the Company signed with FirmGreen (a producer of commercial water systems) and the interest we received from Mexican government officials, we are commercializing our water desalination and purification capability. The Company now offers eMGen 125 water purification and desalination systems capable of producing up to 14,000 gallons of potable water per day as well as delivery if a rolling tank is hitched to the truck. The truck-mounted systems should cleanse contaminated, polluted and wastewater or remove saline from saltwater. The desalination unit should output either clean potable water for drinking and cooking or non-potable water for agricultural or mining use.

In July 2019, our CEO attended a meeting with senators, federal, local, and Oaxaca state deputies, as well as representatives of state and federal agencies in Villa Alta, Mexico to discuss ways to clean the water in the Atoyac River, which is considered to be one of the most polluted rivers in Mexico.

Since then, elected officials in the states of Jalisco, Hidalgo and Sonora, Chihuahua and Txlaca have also expressed interest in using the eMGen to treat water from their rivers. The need in Hidalgo is especially urgent. Over 100,000 people were infected with the coronavirus in 2020 due to the contamination of their drinking water. For most states, the primary contaminant is sewage. In Sonora, it’s salt. Both impact drinking water and irrigation.

We expect the license agreement signed with VerdeWatts (a solar panel and energy storage manufacturer) will also act as a catalyst in the development of a no-idle option that will enable the eMGen system to operate solely through battery and solar power without the need to idle the truck’s engine. An eMGen outfitted with a solar or battery-powered no idle system could output clean drinkable water for almost no cost.

Mexican interest extends beyond immediate applications. Federal Deputy Efrain Rocha Vega announced in 2020, the Mexican government will also support a Cool Technologies Center of Excellence to help integrate CoolTech’s green energy platform into other areas of the Mexican economy. A Center of Excellence is a shared facility or entity that provides leadership, best practices, research, support and/or training for our eMGen power systems, our mobile water purification and desalination systems and possibly our solar-powered and no-idle technology

The joint venture the Company signed with VerdeWatts and FirmGreen added a new application for the eMGen System: making it an integral part of mobile microgrids. VerdeWatts solar panels and battery storage systems would provide the sustainable energy. eMGen Systems would recharge or back-up the microgrids and simultaneously power FirmGreen water purification and desalination systems.

The mobile microgrids would interface with existing infrastructure for power, water, wireless communications and healthcare. They would provide or increase resilience during grid outages such as what occurred this past winter in Texas, using clean energy alternatives to mobile fossil fuel generators. The microgrids could also power, light and provide potable water and irrigation for farming villages throughout rural America and the developing world. VerdeWatts has publicly stated it has microgrid projects in Puerto Rico, Chile and Nigeria and that it intends to build mobile medical clinics and emergency command posts powered by eMGen systems.

An application that the Company has demonstrated publicly is truck mounted electric vehicle charging.

The Inflation Reduction Act of 2022 aims to stimulate domestic production of electric vehicles by providing tax credits to purchase new and used electric vehicles, among other incentives and requirements.  To that end, the Biden administration set an ambitious national target to make EVs total half of all new car sales by 2030.  Specifically, 50% of new passenger cars and light trucks sold should be battery-electric vehicles,  plug-in hybrid electric vehicles or fuel-cell electric vehicles, which run on hydrogen.

European Union and California targets are even more far reaching. The EU has announced a ban on new sales of gasoline and diesel cars after 2035 while California's Air Resources Board (“CARB”) voted to require all new vehicles sold in the state by 2035 to be either electric or plug-in electric hybrids. The CARB requirement , however, must still be approved by the Biden administration before it can take effect.

If the nation reaches the administration’s sales target, the number of EVs should grow from less than three million today to approximately 48 million or about 15 percent of all vehicles on the road in the U.S. 

One large obstacle in the way of achieving those targets is the lack of charging infrastructure.  The U.S. Department of Transportation's Federal Highway Administration calculates there are about 41,000 publicly accessible, non-Tesla specific, charging stations in the US. The Biden administration wants to increase that to 500,000 by 2030.

To help address the shortage and promote sales of electric vehicles, the November 2021 Bipartisan Infrastructure Law allots $7.5 billion to strategically deploy a national EV recharging network of publicly accessible charging stations compatible with all vehicles and technologies as well as to establish a network to facilitate data collection, access, and reliability.  Funding is available for up to 80% of eligible project costs. The requirements and considerations include: 

In September 2022, the Department of Transportation announced the release of $5 billion in funding to build EV chargers across 35 states along 53,000 miles of highway over the next five years.

The private sector is also stepping up.

A quarter of GM's dealer network will install 40,000 US-built EV chargers in an effort to drive community adoption.  GM said dealers will pick nearby sites such as entertainment venues, schools and other popular destinations to host the co-branded stations. 

Ford is requiring dealers who want to sell the automaker’s electric vehicles to invest $500,000 to  $1.2 million in upgrades like offering at least one fast-charging DC port, with two plugs -- both open to the public by 2024. Jeep parent company Stellantis will also begin requiring its dealerships to offer EV charging by the beginning of 2024.  Assuming every GM, Ford and Jeep dealer installs EV chargers that will total approximately 45,500 charging stations.

The addition of over half a million public chargers could still be insufficient. In a scenario in which 50% of 150-kW chargers, the cost of an upgrade (not including the charging equipment) could be more than $150,000. all vehicles sold are zero-emission by 2030, McKinsey & Company calculates that the US would require 1.2 million public EV chargers and 28 million private EV chargers.  All told, the country would need almost 20 times more chargers than it has now.

Furthermore, as the number of EVs on the road increases, McKinsey estimates that annual demand for electricity to charge them would surge from 11 billion now to 230 billion kilowatt-hours in 2030 or approximately 5 percent of current total electricity demand in the United States.

A particular concern is that grid constraints will occur locally, in neighborhoods and business districts (and near fleet depots) where EV charging will be concentrated. Upgrading grids and/or the charging sites will be costly: for a single public direct-current fast-charging (DCFC) station consisting of four DC 150-kW chargers  (https://tinyurl.com/5n8kh2hn).

The higher the level and the faster the charge, the more expensive an EV charger is to install. Level 3 chargers cost $120,000 to $260,000 installed on average, according to AlixPartners. Others estimate the cost around $50,000 for a single port for Level 3 stations. In the European Union, a typical 350-kilowatt (kW) charger can cost $150,000, including hardware, installation, and planning.

Actual hardware costs usually total a bit more than 50% of total project costs. The other costs include bringing additional power or utility service to the site. Especially with DC fast chargers, a host site likely will not have enough power available and the local utility may have to upgrade the electrical grid to expand power capacity. Electrical conduit upgrades such as the cost of installing a dedicated 480 volt circuit can average $12,000 to $15,000 according to Future Energy. Plus, an electrical upgrade involves associated expenses including electrical panels, meters to monitor electricity use, or even an additional transformer.

Construction includes the underground preparation such as boring and trenching as well as concrete pads and cement work for power lines needed to support multiple DC fast chargers.

Soft costs (anything not including labor and materials) include everything from architectural and engineering fees to legal fees, easement processes, inspections, permits and taxes and insurance. In many locations, securing permits and approvals to build chargers, construct sites, and connect to the electric grid can require months, or even years, of planning.

One final consideration is that resources including skilled technicians and production capacity for fast charging hardware and high voltage electrical equipment are in short supply.

The eMGen’s EV charging option helps quickly address those adoption concerns in a very cost-effective way. Mobile charging vehicles don’t require permits or build out of infrastructure.

Our technology can provide Level 2, DC Fast Charging and even mega charging (up to and including 825 kVA on a medium duty Class 6 truck) and should deliver even more power in the future. Because the system is retrofittable, it can be uninstalled and reinstalled on a larger or newer model truck that generates more torque. More torque is an upgrade to the system as more torque produces more power.

Our revenue model for an in-chassis mobile electric power generation system is driven by the efforts of partner up-fitters and truck body builders along with regional sales teams and independent representatives as well as strategic alliances and joint ventures.

We believe that in head-to-head competition with tow behind generators, our mobile generation technology should prove very disruptive. Operators in such markets as the military, utilities and agriculture, to name a few, will be able to work in remote locations without having to tow or drop in a generator. We believe that the reduction in overall weight and size should also deliver significant operating efficiencies and savings to government and work truck fleets. Furthermore, we believe that our new applications will enhance adoption of the eMGen across an even wider range of industries, NGOs and government entities in both first and third world countries. 

Competition

Heat Dispersion Technologies (Totally Enclosed Heat Pipe Cooled and Radial Vent Heat Pipe)

Cooling solutions to remove or control heat produced by industrial electric motors, generators and alternators are provided by the manufacturers. Their current best practices are based on technology that’s over 50 years old. They either add a liquid cooling system to the motor or build an extra-large frame around the motor to provide additional surface area to help dissipate the heat. Both practices increase the cost and complexity of their products.

The Company is not aware of any new alternatives on the market.

Mobile Electric Power (eMGen 30-eMGen 825.8) 

The worldwide market for power generation off site spans a broad range. We believe the competitive factors in our markets include but are not limited to:

We believe our primary competition in the mobile generator market will be from well-established companies such as Cummins, Caterpillar Inc., Doosan Group, Wacker Neuson SE, Multi Quip Inc. and Generac Power Systems. All of them offer towable, trailer-mounted generators. Cummins Onan, Harrison Hydra-Gen and Smart Power Systems offer an onboard generator, specifically engineered for mobile emergency vehicle use.

Portable generators address a need for mobile electric power in the commercial, leisure and residential markets. As outputs tend to range from 1 to 17.5 kilowatts (kW), the competition they provide is only at the lowest end of our power output spectrum. Onan, Honda and Kohler are among the well-established brand names.

A standard option that can be ordered when purchasing a truck is a power take-off or PTO. PTOs are mounted to a truck’s drivetrain and redirect engine power to operate onboard equipment. Integrated power systems use the PTO to run an alternating current generator. Cool Tech has the capability to power the generator directly from the drivetrain or from a PTO.

Real Power from Contour Hardening, Inc. offers alternating current (AC) power systems driven by a PTO. System voltages range from 15 to 180 kVA. Those under 60 kW retrofit under the beds of class 3 to 5 diesel trucks. Systems larger than 100 kW require Class 6 or 8 diesel trucks and a side mount. An important difference between the Real Power and the eMGen systems is that the eMGen can generate up to 125 kW on class 3 to 5 trucks and it can operate independently from the transmission.

Modular integrated systems offer varying combinations of air compressors, welders, hydraulics and generators. Vanair Manufacturing, Inc’s Underdeck uses a PTO to power various combinations and output from 6.6 to 25 kilowatts. The company also offers an hydraulic driven generator that outputs up to 15 kilowatts of electric power.

HIPPO Multipower packages hydraulic, air, electric and welding into a single unit. Outputs range from 5.2 to 9 kW. The Enpak from Miller Electric Manufacturing Company offers the same package powered by a separate diesel engine that exports 7 kW of power.

Many electric vehicles (“EV”) and plug-in hybrid electric vehicles (“PHEV”) can use excess battery capacity to provide exportable power with no idling. Ford’s 2022 hybrid F-150 pickup truck exports 2.4 to 9.6 kilowatts of power. Odyne Systems, LLC, manufactures hybrid systems for medium and heavy-duty work trucks over 14,000 pounds. The systems export 6 to 18 kW of AC power.

Another way EV and PHEV can power onboard equipment is through an ePTO or electric power take-off which is essentially a battery-powered version of a PTO. Terex’s Corporation’s hybrid-electric system uses an SmartPTO to export up to 12 (Volts) 3.8 kW of power. Cummins, Inc.  Powerdrives (hybrid and electric powertrains) offer an exportable power option that provides up to 200 kW of grid-synchronized power.

Allison Transmission and a partner company combine a generator and transmission into a single casing to produce 30 to 125 kW of electric power. The company’s electrification portfolio also includes the Transmission Integral Generator which provides up to 120kW of electrical power to reduce reliance on traditional towable generators

While both the eMGen and the Allison Transmission are retrofittable, there are important differences. The Allison is limited to new vehicles that incorporate its 3,000 and 4,000 Series transmissions. The eMGen can produce up to 125 kW on an 8,000 pound as opposed to a 40,000-pound vehicle. Also, the eMGen’s power is produced independently from the transmission, consequently, the truck can still operate if the generator stops working.

In January 2022, Oshkosh Defense, a wholly owned subsidiary of Oshkosh Corporation, demonstrated the first-ever silent drive hybrid-electric Joint Light Tactical Vehicle (JLTV), the JLTV provides export power capacity of up to 115kW.

Other companies use a vehicle’s engine to charge on-board batteries, which then run the generator when the vehicle is stopped. Output tends to be less than 50 kW and lithium-ion batteries typically power the system. The batteries have limited runtimes and a shorter lifespan than acid batteries. In addition, they must be cooled to operate properly. As an example, Altec Inc’s. Jobsite Energy Management System provides up to 4 kW of exportable power.

Aura Systems, Inc. and Mobile Electric Power Solutions, Inc. (“MEPS”) use a vehicle engine’s drive belt to turn a generator. MEPS provides up to 15 kW of AC power whereas Aura Systems generates up to 20 kW of direct current (DC) or AC power. Other MEPS engine or transmission-based electrical power take-off systems output small amounts in the range of 7 kW or 15 kW when two generators are aligned.

CoolTech’s Mobile Generation system can also provide Level 2 and Level 3 DC Fast Charging (up to and including 350 kVA on a Class 7, 13 liter truck). ‘Levels’ indicate the charging power. The higher the level, the higher the power. More power equals shorter charging times. Level 2 is typically 240 volt AC (alternating current) power. Level 3 relies on 480 volt DC (direct current) power. Most Level 3 chargers provide an 80% charge in 30 minutes.

The Company expects to deliver even more power in the future. That is because the system is retrofittable. It can be uninstalled and reinstalled on a larger truck that generates more torque.

Real Power uses a PTO driven generator to output 70 kW of power for Level 3 DC fast charging. Lightning Mobile puts a rechargeable package into a trailer to deliver DC fast charging at up to 80 kW and, optionally, Level 2 AC charging at up to 19.2 kW. In China, vans operated by Nio store about 200 kilowatt hours (kWh) for vehicle charging. The Blink Mobile Emergency Charger outputs up to 9.6 kW which equates to about 1 mile of charge per minute.

It can also supply on-demand mobile EV charging, Energy as a Service (EAAS) having provided mobile and portable EC energy for rapid mobile electric vehicle charging.

NIO’s Power Mobile t offers a 40-60kW mobile charging service. The vans operated by the company  store about 200 kWh for vehicle charging and carry both AC and DC connections.

In China, NIO’s mobile charging services are also provided by the Beijing Automotive Group’s all-EV brand Beijing Electric Vehicle. According to two China-based websites, Chinese car-maker BYD had also launched its own mobile charging service which is similar to NIO's power replenishment car.

The Mobi EV Charger is essentially batteries on wheels with a joystick drive system. The Level 2 fast charger is equipped with an 80-kWh battery.

Evesco, a part of Power Sonic Corp, mobile DC power chargers EVMO S Series output 30 to 60 kW. The caster-mounted can be rolled to any DC-compatible electric vehicle on the market via CHAdeMO (preferred system of most Japanese manufacturers),  Combined Charging System (preferred system of most American and European car manufacturers) or GB/T (a national standard used in China).

Heliox Energy provides a mobile 40 kW wheeled charger that plugs into any standard European AC wall-socket

SparkCharge’s transportable fast-charging system incorporates a battery module that provides up to 20 kW of power. The SparkCharge service vehicle comes to the customer’s location with a portable charge system which is essentially several batteries stacked together into a unit, that can provide DC (direct current) fast charging on the spot.

Currently uses SparkCharge’s Roadie portable charging systems. Each charge delivers up to 100 miles. Currently will only charge your vehicle up to 80%.  The built-in 56kWh battery pack provides 60kW DC power for EV charging. Service available in Los Angeles, San Francisco, San Jose and Dallas

SETEC Power, a Chinese company, offers a modular emergency mobile EV charging system that can be mounted inside a utility van. The built-in 56kWh battery pack provides 60 kW  of DC power.

Companies that offer containerized systems for vehicle or trailer mounted charging installed in any vehicle or trailer that meets size and weight specifications

Lightning Mobile is charged from a standard Level 2 AC charger at up to 18kW and can deliver DC Fast Charging at up to 80kW and Level 2 AC charging at up to 19.2kW. Mobile Disaster Relief And Rescue Easily tow Lightning Mobile to where fast vehicle charging is needed, including,

The e-Boost GOAT  from Pioneer Power Mobility offers 50-90 kW Level 3 DC fast charging from propane-fueled generators. The company also offers skid, pod and trailer-mounted propane charging units that provide 50-350 kW.

ZAPME from UK-based ZPN Energy offers battery-based EV charging systems in containerized, trailer-mounted, vehicle-mounted or hand movable units. Outputs range from 10 to 300 KWh. A 50 KWh vehicle-mounted unit deliver charge rates up to 150 kW.

Another variation on mobile charging relies on a self-contained unit that is dropped into place. EV Safe Charge offers a temporary Level 2 and DC fast charging systems delivered to locations on demand. Depending upon on-site capabilities, chargers are powered either through existing power at the location, solar panels, or self-contained generating systems. Ziggy is a robotic mobile EV charging platform that serves all parking spaces, not just a few. Ziggy then motors over to hold a reserved parking space where owners plug in and charge at up to a 19.2-kWh pace, roughly the peak of current Level 2 onboard capabilities. (The company plans to develop DC fast-charging capability at roughly 50 kilowatts, well below the 150-to-350-kWh peaks of the most powerful ultrafast chargers, but still a useful jolt).

The EV ARC from Beam Global uses a solar array to export up to 5.7 kW of power. It provides Level 2 charging to as many as 6 EVs at a time.

Both the battery-on-wheels and the delivery and drop-off systems aim to address the problems with permitting, construction and electrical infrastructure upgrades common to permanent charging installations.

We believe our proprietary technology is so powerful, innovative, versatile, easy to use and offers very attractive price points that we can compete in and even disrupt the remote power generation market in spite of the challenges posed by our competition.

Equipment

As a company that intends to commercialize or license its proprietary technology for others to install, manufacture and/or distribute, our equipment needs are project specific and temporary. We do not intend to purchase any production equipment to implement our business operations, but instead we will rent, lease or outsource as needed.

Manufacturing

We do not plan to manufacture in-house. The Company works with Craftsmen Industries utilizing its assets and system integrators to upfit our Mobile Generation technology. For our thermal technologies, the Company plans to rely on product development agreements with manufacturers who will then pay a license or royalty per unit. We anticipate that such agreements will delineate the respective intellectual property owned by both companies, describe the goal of the testing to verify the savings and value to a particular company, the equipment to be modified, the criteria that constitutes successful testing, how and where the tests will be conducted and the next steps to be taken in the event of successful testing.

Suppliers

For mobile power generation, the required software and its vehicle integration were supplied by a third party provider of engineering services along with partner truck up-fitter and others to be named later. Production level quantities of system components will be handled by at least three suppliers.

For the thermal technology applications in large electric motors, a single supplier will provide the heat pipes and mechanical structure, which combine to make the heat exchangers. We will coordinate with them to combine our thermal technology with their designs in the creation of heat exchangers.

For dry pit submersibles (a type of submersible pump which can also operate in a dry environment), we intend to purchase the wound stator and the rotor-shaft from one of the largest electric motor manufacturers in the world. We intend to purchase the fully-machined castings from an American company and rely on assembly and testing by another corporation based in the USA.

As of April 5, 2023, we have not signed formal agreements with any suppliers.

Intellectual Property

Our success depends in part on our ability to protect our technology and intellectual property. To accomplish this, we rely on a combination of patents, patent applications, trade secrets, copyright laws, trademarks, intellectual property licenses and other contractual rights to establish and protect our proprietary rights. Currently, we have no licenses or contractual rights in place to protect our technology and intellectual property, only patents or patents pending.

As of December 31, 2022, we have seven US patents, two Canadian patents, one Mexican patent, one allowed Brazilian patent and one pending US patent application covering integrated electrical power generation methods and systems. In addition, we have applied for and received trademarks for an acronym for one of our technologies: “TEHPC” and “eMGen” which will function as the brand name for CoolTech’s Mobile Power Generation System.

Our success will likely depend upon our ability to preserve our proprietary technologies and operate without infringing the proprietary rights of other parties. However, we may also rely on certain proprietary technologies and know-how that are not patentable.

We strive to protect such proprietary information, in part, by the use of confidentiality agreements with our employees, consultants and contractors. The Company has a policy of not disclosing its patent applications in order to protect the underlying technology. 

The following table sets forth the patents we own or license which we believe support our technology.

Government and Industry Regulation

We intend to conduct business worldwide and, therefore, we must comply with local, state, federal, and international regulations, both in operations and for our products.

As a company, we do not plan to manufacture any of our products. Therefore, the government regulations we will be subject to will be limited to storage and involve rotating the shafts of stored electric motors on a regular basis.

Applicable laws and regulations include those governing, among other things, the handling, storage and transportation of materials and products as well as noise and employee safety. 

In addition, some of our products are subject to various laws and regulations relating to, among other things, emissions and fuel requirements.

Accordingly, we may be required or may voluntarily determine to obtain approval of our products from one or more of the organizations engaged in regulating product or environmental safety. These approvals could require significant time and resources from our technical staff and, if redesign were necessary, could result in a delay in the introduction of our products in various markets and applications.

Although we believe that our operations and products are in material compliance with current applicable regulations noted within this section, there can be no assurance that changes in such laws and regulations will not impose costly compliance requirements on us or otherwise subject us to future liabilities. New regulations could also require our licensees to redesign their products which could cause us to redesign our technologies which, consequently, could affect market growth for our products.

As our thermal technologies are incorporated in existing motors, generators and other manufactured products that are already subject to regulation. The regulatory burden will fall on the original equipment manufacturers that license our technology. 

The Company adds a mobile power generation system to Class 3-8 work trucks. In addition to an existing generator incorporating our thermal technology, the gearing system will incorporate our thermal technology as well. The vehicle and drive train operate normally in accordance with manufacturer’s specifications. No regulations are violated or exceeded. Nonetheless, in some markets, the Company will have to certify that it meets federal, state or local noise and emission regulations.

Our designs comply with current EPA emission standards, and we believe they will comply with future requirements.

No original vehicle parts will be significantly modified in the retrofitting process. There will be some additional parts (generator, touchscreens, software, sensors and controls) added, but these parts will not change how the vehicle operates in any way. The drive train will operate according to the manufacturer’s specifications. Therefore, we believe that the original warranty will remain in effect, and we do not believe that the conversion will violate the Magnuson-Moss Act.

The Magnuson-Moss Warranty Act is a federal law that protects consumers by barring a vehicle manufacturer from voiding the warranty on a vehicle due to an aftermarket part unless the manufacturer can prove that the aftermarket part caused or contributed to the failure in the vehicle. The Company will warranty the eMGen System with an industry standard warranty. All of our other components (generator, human machine interface, software, controller/sensors) will be warranted by their respective manufacturers.

The Department of Transportation, National Highway Traffic Safety Administration (“NHTSA”) is charged with writing and enforcing safety and fuel economy standards for motor vehicles through their Federal Motor Vehicle Safety Standards. These standards require manufacturers to design their electrically powered vehicles so that, in the event of a crash, the electrical energy storage, conversion, and traction systems are either electrically isolated from the vehicle’s chassis, or their voltage is below specified levels considered safe from electric shock hazards. Our planned no-idle version of our Mobile Generation system will be designed to meet or exceed these requirements.

Optional components such as solar panels, batteries, water purification or desalination systems will be supplied and warrantied by their manufacturers

In addition, the total weight of the additional components should remain within the vehicle’s gross vehicle weight rating. As a result, we believe that our retrofits will comply with federal and state transportation regulations.

While we do not create and market our products around government subsidies and tax incentives, a class 3 to 5 eMGen truck equipped with a charger can provide a Level II charge to one or more electric vehicles. Our 200 kVA truck will provide Level III DC fast charging and a medium duty class 6 truck (Ford F-650) can power what is informally known as a mega-charger for vehicles like the Porsche Taycan or Tesla - all from the truck bed. Assuming the eMGen truck qualifies as a charging station, almost every state and a number of municipalities and utilities offer grants, rebates, tax credits, or other incentives for electric vehicle charging stations.

If we fulfill all elements of our business plan, we will have to prepare for, understand and ultimately meet emerging product environmental regulations around the world. Our products will have to comply with the new Euro VII emission standards that are expected to go into effect in the European Union in 2022, as well as the standards in other international markets, including Japan, Mexico, Australia, Brazil, Russia, India, and China that are becoming more stringent. 

Employees

As of April 9, 2023, we had two full time employees and four part-time contractors. We hope to hire additional employees, on an as-needed basis, subject to sufficient funding, as products and services are developed.

Research and Development

During the years 2022 and 2021, we incurred research and development costs of $19,854 and $19,853, respectively. All costs were borne by the Company.

Item 1A: Risk Factors

RISKS RELATED TO OUR BUSINESS AND INDUSTRY

Our independent auditors have expressed their concern as to our ability to continue as a going concern.

As a result of our financial condition, we have received a report from our independent registered public accounting firm for our consolidated financial statements for the years ended December 31, 2022, and 2021 that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern. As of December 31, 2022, we have incurred net losses of $61,120,707 since inception and have not yet commenced full operations, raising substantial doubt about our ability to continue as a going concern. As of December 31, 2022, we had $142 in cash on hand. Our ability to continue as a going concern is dependent on our ability to generate revenue, achieve profitable operations and repay our obligations when they come due. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty. We are pursuing various financing alternatives to support the sales, component acquisition and assembly of our mobile power generation systems as well as the completion of the secondary elements of our business plan: to license its thermal technologies and applications, including submersible dry-pit applications. There can be no assurance, however, that we will obtain adequate funding or that we will be successful in accomplishing any of our objectives. The Company believes that if it does not obtain adequate working capital by the end of the second  quarter 2023, it may need to cease or curtail operations.

We have approximately $1,362,050 in principal amount of promissory notes and another $1,078,500 in promissory notes currently in default.

We have approximately $1,362,050 in principal amount of promissory notes and another $1,078,500 in promissory notes currently in default. We do not have enough cash on hand to pay our obligations when due and may default on the rest of the notes. As a result, if we default on the notes the lender will be able to seek to enforce the obligations on the notes which will hurt our business operations and may cause us to curtail or cease operations.

Our limited operating history makes evaluating our business and future prospects difficult and may increase the risk of your investment.

We have a limited operating history on which investors can base an evaluation of our business, operating results and prospects. We have no operating history with respect to commercializing our heat pipe technology and licensing it to motor and generator manufacturers or selling mobile generators or translating our thermal technology from testing and one-off applications into mass market production. Consequently, it is difficult to predict our future revenues, if any, and appropriately budget for our expenses, and we have limited insight into trends that may emerge and affect our business.

We have only recently commercialized our mobile power generation system. Funds from the bridge financing financed a pilot run by Craftsmen Industries, which is our manufacturing partner. We also have reason to believe from current negotiations that funds will be available for the transition from pilot run to full production of the mobile generation system. If we are unable to obtain additional funding in a timely manner it will have a negative impact. Any additional equity financing may involve substantial dilution to our then existing stockholders. The inability to raise the additional capital will restrict our ability to develop and conduct business operations

We have a history of operating losses and can provide no assurance of our future operating results.

From incorporation in 2002 to December 31, 2022, we have incurred net losses of $61,120,707. The losses may continue into the foreseeable future. There can be no assurance we will ever operate profitably or that we will have adequate working capital to meet our obligations as they become due. Investors must consider the risks and difficulties frequently encountered by early stage companies, particularly in rapidly evolving markets. We cannot be certain that our business strategy will be successful or that we will successfully address these risks. In the event that we do not successfully address these risks, our business, prospects, financial condition, and results of operations could be materially and adversely affected.

The market for mobile power generation is changing.

 Although tow-behind generators have been the standard for more than 60 years, the market is changing. A greater number of hybrid and electric vehicles are being sold and low power generation systems are being incorporated in internal combustion trucks. As the eMGen System produces power equal to tow behinds from a smaller, lighter package, it is reflective of that change. In addition, usage of electric vehicles continues to increase, however, in many countries, charging infrastructure is not likely to keep pace. As the eMGen Systems offer both slow and fast charging capabilities, this creates new opportunities for the Company. Nonetheless, significant increases in the electrical output of existing mobile power systems, rapid build-out of electric vehicle charging infrastructure, new government regulations or changes in consumer demand and behavior may slow the growth of our business and negatively impact our financial results.

Many of our potential competitors are better established and have significantly greater resources.

The market for the products we develop is highly competitive. Many of our potential competitors are well established with larger and better resources, longer relationships with customers and suppliers, greater name recognition and greater financial, technical and marketing resources than we have. Increased competition may result in price reductions, reduced gross margins, loss of market share and loss of licensees, any of which could materially and adversely affect our business, operating results and financial condition. We cannot ensure that prospective competitors will not adopt technologies or business plans similar to ours or develop products which may be superior to ours or which may prove to be more popular. It is possible that new competitors will emerge and rapidly acquire market share. We cannot ensure that we will be able to compete successfully against future competitors or that the competitive pressures will not materially and adversely affect our business, operating results and financial condition.

We may experience significant delays in the design and implementation of our thermal technology into the motors and/or generators of the companies with which we have research and development agreements which could harm our business and prospects.

Motor manufacturers often experience delays in the design, manufacture and commercial release of new product lines. Any delay in the financing, design, and implementation of our thermal technology into the motor and/or generator lines of companies with which we may have research and development agreements could materially damage our brand, business, prospects, financial condition and operating results.

If we are unable to adequately control the costs associated with operating our business, including our costs of sales and materials, our business, financial condition, operating results and prospects will suffer.

If we are unable to maintain a sufficiently low level of costs for designing, marketing, selling and distributing our conversion system and thermal technologies relative to their selling prices, our operating results, gross margins, business and prospects could be adversely impacted. We have made, and will be required to continue to make, significant investments for the design and sales of our system and technologies. There can be no assurances that our costs of producing and delivering our system and technologies will be less than the revenue, if any, we may generate from sales and/or licensing. We may be required to incur substantial marketing costs and expenses to promote our systems and technologies, even though our marketing expenses to date have been relatively limited. Many of the factors that impact our operating costs are beyond our control. For example, the costs of our components could increase due to disruptions to the supply chain or shortages if global demand for such components increases.

We will be dependent on our suppliers. The inability or refusal of these suppliers to deliver components at prices and volumes acceptable to us would have an adverse effect on our business.

We have selected suppliers, issued purchase orders and received products for our mobile power generation system. We source globally from a number of suppliers, none of which are single source suppliers for these components.

Failure to obtain reliable sources of component supply that will enable us to meet quality, price, engineering, design and production standards, as well as the production volumes required to successfully market our conversion system could negatively affect our Company’s revenues and business operations. Even if we are successful in developing a high-volume mobile power manufacturing platform and reliable sources of component supply, we do not know whether we will be able to do so in a manner that avoids significant delays and cost overruns.

If we experience significant increased demand, or need to replace our existing suppliers, there can be no assurance that additional supplies of component parts will be available when required on terms that are favorable to us, or that a supplier would allocate sufficient supplies to us in order to meet our requirements or fill our orders in a timely manner. The loss of any single or limited source supplier or the disruption in the supply of components from these suppliers could lead to delays to our customers, which could hurt our relationships with our customers, result in negative publicity, damage our brand and adversely affect our business, prospects and operating results.

Any significant disruption in our supplier relationships, particularly relationships with sole source suppliers, could harm our business. Furthermore, some of our suppliers may not be able to handle any commodity cost volatility and/or sharply changing volumes while still performing as we expect. To the extent our suppliers experience supply disruptions, there is a risk for delivery delays, production delays, production issues or delivery of non-conforming products by our suppliers. Even where these risks do not materialize, we may incur costs as we try to make contingency plans for such risks.

Our research and commercialization efforts may not be sufficient to adapt to technological changes.

As technologies change, we plan to upgrade or adapt our mobile power generation system in order to continue to provide vehicles with the latest technology. However, our installations or retrofits may not compete effectively with alternative vehicles if we are not able to source and integrate the latest technology into our mobile power generation system. We plan to offer a no-idle system, however, since we do not plan to manufacture battery cells and/or solar panels, we are dependent on suppliers of battery cell and/or solar panel technology for our no idle systems. To help mitigate the risk, we have signed a strategic alliance with a solar power and energy storage company (VerdeWatts). However, there can be no guarantee that such risk mitigation will be successful. Furthermore, any failure to keep up with advances in electric or hybrid vehicle technology would result in a decline in our competitive position which would adversely affect our business, prospects, operating results and financial condition.

An occurrence of an uncontrollable event such as the COVID-19 pandemic is likely to negatively affect our operations.

The occurrence of an uncontrollable event such as the COVID-19 pandemic and its subsequent variants is likely to negatively affect our operations. A pandemic typically results in social distancing, travel bans and quarantine, and this has limited access to our facilities, customers, management, support staff and professional advisors. These, in turn, will not only impact our operations, financial condition and demand for our products but our overall ability to react timely to mitigate the impact of this event. Also, it may substantially hamper our efforts to provide our investors with timely information and comply with our filing obligations with the Securities and Exchange Commission.

While the pandemic phase of COVID-19 has receded and the virus is now considered to be endemic in the US as of this filing, the evolution of an acute and more contagious variant is possible. In such a case, it may impact demand for our products and may again hamper our efforts to provide our investors with timely information and comply with our filing obligations with the Securities and Exchange Commission.

A prolonged economic downturn or economic uncertainty could adversely affect our business and cause us to require additional sources of financing, which may not be available.

Real GDP growth, inflation, employment levels, oil prices, interest rates, tax rates, availability of customer financing, foreign currency exchange rate fluctuations, and other macroeconomic trends can adversely affect demand for the products that we offer. Geopolitical issues around the world (such as the war in Ukraine) and how our markets are positioned can also impact macroeconomic conditions and could have a material adverse impact on our financial results.

Economic cycles and any related fluctuation in the businesses of our potential fleet customers, electric motor manufacturers or income of the general public may have a material adverse effect on our financial condition, results of operations or cash flows. If global economic conditions deteriorate or economic uncertainty increases, our potential customers may experience lowered incomes or deterioration of their businesses, which may result in the delay or cancellation of plans to convert their vehicles, reduced license sales or reduced royalties from sales by licensees. As a consequence, our cash flow could be adversely impacted.

Any changes in business credit availability or cost of borrowing could adversely affect our business.

Declines in the availability of business credit and increases in corporate borrowing costs could negatively impact the number of mobile generators installed and the number of electric motors and generators manufactured. Substantial declines in the number of installations or retrofits by our customers could have a material adverse effect on our business, results of operations and financial condition.

If we lose any of our key management personnel, we may not be able to successfully manage our business or achieve our objectives.

Our future success depends in large part upon the leadership and performance of our management and consultants. The Company’s operations and business strategy are dependent upon the knowledge and business contacts of our executive officers and our consultants. We have employment agreements with our Chief Executive Officer and our Vice President and interim Chief Financial Officer. Although, we hope to retain the services of all of our officers, if an officer should choose to leave us for any reason before we have hired additional personnel, our operations may suffer. If we should lose their services before we are able to engage and retain qualified employees and consultants to execute our business plan, we may not be able to continue to develop our business as quickly or efficiently.

In addition, we and our production partners/affiliates must be able to attract, train, motivate and retain highly skilled and experienced technical employees in order to successfully develop our business. Qualified technical employees often are in great demand and may be unavailable in the time frame required to satisfy our business requirements. We may not be able to attract and retain sufficient numbers of highly skilled technical employees in the future. The loss of technical personnel or our inability to hire or retain sufficient technical personnel at competitive rates of compensation could impair our ability to successfully grow our business. If we lose the services of any of our consultants, we may not be able to replace them with similarly qualified personnel, which could harm our business.

We may incur material losses and costs as a result of product defects, warranty claims or product liability actions that may be brought against us.

We face an inherent business risk of exposure to product liability if our mobile power generation system or other products fail to perform as expected or failure of our products results in bodily injury or property damage.

If flaws in the design of our products were to occur, we could experience a rate of failure in our mobile power generation system or other products that could result in significant charges for product re-work or replacement costs. Although we plan to engage in extensive quality programs and processes, these may not be sufficient to avoid conversion or product failures, which could cause us to:

All of the above could negatively affect our financial condition and results of operations.

If any of our mobile power generation systems or other products are or are alleged to be defective, we may be required to participate in a recall involving such installations, retrofits, or products. A recall claim brought against us, or a product liability claim brought against us in excess of our insurance, may have a material adverse effect on our business.

Depending on the terms under which we supply products to a vehicle component or engine manufacturer, a manufacturer may attempt to hold us responsible for some or all of the repair or replacement costs of defective products under their warranties when the manufacturer asserts that the product supplied did not perform as warranted.

Developments or assertions by us or against us relating to intellectual property rights could materially impact our business.

We own significant intellectual property, including a number of patents, and intend to be involved in numerous licensing arrangements. Our intellectual property should play an important role in maintaining our competitive position in a number of the markets we intend to serve.

We will attempt to protect proprietary and intellectual property rights to our products and conversion system through available patent laws and licensing and distribution arrangements with reputable domestic and international companies. Despite these precautions, patent laws afford only limited practical protection in certain countries.

Litigation may also be necessary in the future to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others or to defend against claims of invalidity. Such litigation could result in substantial costs and the diversion of resources.

As we create or adopt new technology, we will also face an inherent risk of exposure to the claims of others that we have allegedly violated their intellectual property rights.

Our products could infringe on the intellectual property rights of others which may result in costly litigation and, if we do not prevail, could also cause us to pay substantial damages and prohibit us from selling or licensing our products.

Third parties may assert infringement or other intellectual property claims against us. We may have to pay substantial damages, including damages for past infringement if it is ultimately determined that our products or technology infringe a third party’s proprietary rights. Further, we may be prohibited from selling or providing products before we obtain additional licenses, which, if available at all, may require us to pay substantial royalties or licensing fees. Even if claims are determined to be without merit, defending a lawsuit takes significant time, may be expensive and may divert management’s attention from our other business concerns. Any public announcements related to litigation or interference proceedings initiated or threatened against us could cause our business to be negatively impacted and our stock price to decline.

We may incur losses, additional costs or even interruption of business operations as a result of fines or sanctions brought by government regulators.

Our business will be subject to various U.S. federal, state and local, and non-U.S. environmental, transportation and safety laws and regulations.

We cannot assure you that we will be at all times in complete compliance with such laws, regulations and permits. If we violate or fail to comply with these laws, regulations or certifications, we could be fined or otherwise sanctioned by regulators.

We may face risks from doing business internationally.

We have signed joint venture and/or sales representation agreements with companies in Turkey and Australia. It is likely that there will be further sales, licensing and distribution of products and technologies outside the United States, and that we will derive revenues from these sources. Consequently, our revenues and results of operations will be vulnerable to currency fluctuations. We will report our revenues and results of operations in United States dollars, but a significant portion of our revenues may be earned outside of the United States. We cannot accurately predict the impact of future exchange rate fluctuations on revenues and operating margins. Such fluctuations could have an adverse effect on our business, results of operations and financial condition.

Our business will also be subject to other risks inherent in the international marketplace, many of which are beyond our control. These risks include:

Any of the foregoing could have an adverse effect on our business, financial condition and results of operations.

If we are unable to effectively implement or maintain a system of internal control over financial reporting, we may not be able to accurately or timely report our financial results and our stock price could be adversely affected.

Section 404 of the Sarbanes-Oxley Act of 2002 and related regulations require us to evaluate the effectiveness of our internal control over financial reporting as of the end of each fiscal year, and to include a management report assessing the effectiveness of our internal control over financial reporting in our Annual Report on Form 10-K for that fiscal year. Management determined that as of December 31, 2022, our disclosure controls and procedures and internal control over financial reporting were not effective to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act were recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Act Commission’s rules and forms and that our disclosure controls are not effectively designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our internal controls are not effective for the following reasons, (1) we have limited entity-level controls because of the limited time and abilities of the three officers, (2) we have not implemented adequate system and manual controls, and (3) there is no separate audit committee.

Any failure to implement new or improved controls necessary to remedy the material weaknesses described above, or difficulties encountered in the implementation or operation of these controls, could harm our operations, decrease the reliability of our financial reporting, and cause us to fail to meet our financial reporting obligations, which could adversely affect our business and reduce our stock price. 

We may be at risk to accurately report financial results or detect fraud if we fail to maintain an effective system of internal controls.

As directed by Section 404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring public companies to include a report that contains an assessment by management on the Company’s internal control over financial reporting in their annual and quarterly reports on Form 10-K and 10-Q. We cannot assure you that significant deficiencies or material weaknesses in our disclosure controls and internal control over financial reporting will not be identified in the future. Also, future changes in our accounting, financial reporting, and regulatory environment may create new areas of risk exposure. Failure to modify our existing control environment accordingly may impair our controls over financial reporting and cause our investors to lose confidence in the reliability of our financial reporting, which may adversely affect our stock price.

RISKS ASSOCIATED WITH OUR COMMON STOCK

The issuance of shares upon conversion of our preferred stock and exercise of outstanding warrants and options will cause immediate and substantial dilution to our existing stockholders.

As of December 31, 2022, there are three shares of Series A preferred stock (“Series A Stock”) issued and outstanding (each such share of Series A Stock has the voting right of 50,000 shares of common stock) convertible into an aggregate of 150,000 shares of common stock and 2,727,270 shares of Series B preferred stock (“Series B Stock”) issued and outstanding. For so long as the Series B Stock is issued and outstanding, the holders of Series B Stock shall vote together as a single class with the holders of the common stock and the holders of any other class or series of shares entitled to vote with the common stock, with the holders of Series B Stock being entitled to 66 2/3% of the total votes on all such matters. There are also warrants to purchase an aggregate of 41,850,000 shares of common stock and options to purchase an aggregate of 4,000,000 shares of common stock outstanding. The issuance of shares upon conversion of preferred stock and exercise of warrants and options will result in substantial dilution to the interests of other stockholders.

The holders of the Series B Stock have 66 2/3% of the voting rights of the Company.

Because the holders of the Series B Stock have 66 2/3% of the voting rights of the Company if they act together, they will be able to influence the outcome of all corporate actions requiring approval of our stockholders, including the election of directors and approval of significant corporate transactions, which may result in corporate action with which other stockholders do not agree. If the Series B stockholders vote in favor of the foregoing action and have sufficient voting power to approve such actions through their ownership of Series B Stock, no other stockholder approvals will be required.

Our common stock is subject to the “penny stock” rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.

The SEC has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person’s account for transactions in penny stocks; and (ii) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person’s account for transactions in penny stocks, the broker or dealer must: (i) obtain financial information and investment experience objectives of the person; and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.

The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form: (i) sets forth the basis on which the broker or dealer made the suitability determination; and (ii) that the broker or dealer received a signed, written agreement from the investor prior to the transaction.

Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.

Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.

Because we do not intend to pay any cash dividends on our shares of common stock, our stockholders will not be able to receive a return on their shares unless they sell them.

We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them at a price higher than that which they initially paid for such shares.

The market price of our shares of common stock is subject to fluctuation.

The market prices of our shares may fluctuate significantly in response to factors, some of which are beyond our control, including:

Recently, the stock market in general has experienced extreme price and volume fluctuations. Continued market fluctuations could result in extreme market volatility in the price of our shares of common stock which could cause a decline in the value of our shares.

There is a limited trading market for our securities.

There is currently only a limited trading market for our common stock. We cannot predict the extent investor interest will lead to development of an active trading market or how liquid that trading market might become. If an active trading market does not develop or is not sustained, it may be difficult for investors to sell shares of our common stock at a price that is attractive or at all. In such a case, you may find that you are unable to achieve any benefit from your investment or liquidate your shares.

Because we are not subject to compliance with rules requiring the adoption of certain corporate governance measures, our stockholders have limited protections against interested director transactions, conflicts of interest and similar matters.

The Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the SEC, the New York Stock Exchange, the Amex Equities Exchanges and NASDAQ, as a result of Sarbanes-Oxley, require the implementation of various measures relating to corporate governance. These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities which are listed on those exchanges or the NASDAQ.

Although our shareholders appointed independent directors to the board, we do not currently have independent audit or compensation committees. Until then, the directors who are part of management have the ability, among other things, to determine their own level of compensation. Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our stockholders without protections against interested director transactions, conflicts of interest and similar matters and investors may be reluctant to provide us with funds necessary to expand our operations.

Our Articles of Incorporation allow for our board of directors to create new series of preferred stock without further approval by our stockholders, which could adversely affect the rights of the holders of our common stock.

Our Board has the authority to fix and determine the relative rights and preferences of preferred stock. As a result, our Board could authorize the issuance of a series of preferred stock that would grant to such holders (i) the preferred right to our assets upon liquidation, (ii) the right to receive dividend payments before dividends are distributed to the holders of common stock and (iii) the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock. In addition, our Board could authorize the issuance of a series of preferred stock that has greater voting power than our common stock or that is convertible into our common stock, which could decrease the relative voting power of our common stock or result in dilution to our existing common stockholders.

Any of the actions described in the preceding paragraph could significantly adversely affect the investment made by holders of our common stock. Holders of common stock could potentially not receive dividends that they might otherwise have received. In addition, holders of our common stock could receive less proceeds in connection with any future sale of the Company, whether in liquidation or on any other basis.

Our officers, directors and Series B preferred shareholders own a substantial amount of our common stock and exercise significant control over our corporate governance and affairs which may result in their taking actions with which other shareholders do not agree.

Our executive officers and directors control approximately 3.4% of our outstanding common stock. In addition, a former director owns Series B preferred shares with two other stockholders. Together, they control 66 and 2/3 of the voting rights of the Company. The officers, directors and Series B stockholders, if they act together, may be able to exercise substantial influence over the outcome of all corporate actions requiring approval of our stockholders, including the election of directors and approval of significant corporate transactions, which may result in corporate action with which other stockholders do not agree. This concentration of ownership may also have the effect of delaying or preventing a change in control which might be in other stockholders’ best interest, but which might negatively affect the market price of our common stock.

We are in breach of our agreements with certain investors for failure to timely file a registration statement with the SEC registering shares offered and sold to such investors.

In connection with the offer and sale of shares and warrants to purchase shares of common stock, the Company agreed to file a registration statement with the SEC including these shares once the Company sold an aggregate of one million shares. The Company sold 1 million shares in July 2013. In addition, our placement agents also have “piggyback” registration rights for shares underlying warrants issued to them. If an investor or placement agent decides to bring an action against the Company before this registration statement is deemed effective, we may be faced with litigation and other costs and damages if unsuccessful in any such action.

We may, in the future, issue additional common shares, which would reduce investors’ percent of ownership and may dilute our share value.

Our Articles of Incorporation authorizes the issuance of 1,000,000,000 shares of common stock, par value $0.001 per share, of which as of April 10, 2023, 705,393,993 shares are issued, and outstanding excluding 1,000,000 shares held in escrow. On February 13, 2020, stockholders holding shares that entitled them to exercise at least a majority of the voting power, voted in favor of increasing the number of authorized shares of common stock, from 500,000,000 shares to 1,000,000,000 shares. The future issuance of common stock may result in substantial dilution in the percentage of our common stock held by our then existing stockholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors and may have an adverse effect on any trading market of our common stock.

Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.

If our stockholders sell substantial amounts of our common stock in the public market under Rule 144 or upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an “overhang” and in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

Item 1B. Unresolved Staff Comments

Not applicable.

Item 2. Properties

The Company rents a virtual office, which it uses as its corporate headquarters for a monthly rent of $300. The office is located at 8875 Hidden River Parkway, Suite 300, Tampa, Florida 33637. We believe this space is adequate for our current operations.

Item 3. Legal Proceedings 

Securities and Exchange Commission Settlement

On September 20, 2018, the Securities and Exchange Commission (SEC) approved an offer to settle the enforcement proceedings against the Company pursuant to Section 21C of the Securities Exchange Act of 1934.

These proceedings arose out of the violation of the Regulation S-X requirement that interim financial statements filed as part of a Form 10-Q be reviewed by an independent public accounting firm prior to filing.

On three occasions, specifically, May 20, 2013, August 19, 2013, and August 22, 2016, Cool Technologies filed Form 10-Qs that contained financial statements that were not reviewed by an independent public accounting firm. In two cases, the Company properly disclosed that the 10Q’s were “unaudited and unreviewed” as set forth by the guidance in the Division of Corporation Finance Financial Reporting Manual Section 4410.3. And in each case, the Company subsequently filed a restated and amended Form 10-Q/A that complied with the Interim Review Requirement. In no instance were the filings ever subjected to audit challenge.

Pursuant to the enforcement proceeding instituted by the SEC, the Company settled for a fine of $75,000 and agreed to cease and desist from any future violations of Sections 13(a) of the Exchange Act and Rule 13a-13 thereunder, and Rule 8-03 of Regulation S-X.

PGC Investments, LLC Settlement

Cool Technologies’ subsidiary Ultimate Power Truck, LLC (“UPT”) was in pending litigation (PGC Investments, LLC, et al. v. Ultimate Power Truck, LLC, in the Circuit Court for the Sixth Judicial Circuit, Pinellas County, Florida). The litigation was a commercial landlord-tenant action wherein the Plaintiffs sought damages for nonpayment of rent arising out of a commercial lease agreement for which UPT was the tenant.  The plaintiffs also named Cool Technologies as a defendant in the amended and second amended complaint. Cool Technologies moved to dismiss the second amended complaint for lack of personal jurisdiction and failure to state a cause of action. In July, the parties entered into a settlement agreement.

PGC Investments, LLC  also initiated an AAA arbitration proceeding against Cool Technologies seeking damages in the amount of $360,500 for breach of contract and breach of the implied covenant of good faith and fair dealing. The parties entered into a settlement agreement in conjunction with the Pinellas County litigation.

As per the settlement agreement, Cool Technologies must pay Dennis Campbell and PGC Investments $25,000 within 5 business days of the effective date (July 7, 2022), another $25,000 on or before September 30, 2022, and 50,000 unregistered shares of the Company’s common stock on or before September 30, 2022.

Within two days of the issuance of the shares, the receipt of the final payment made and confirmation of clear funds, PGC was required to file a Notice of Voluntary Dismissal with Prejudice of the Litigation and a Notice of Voluntary Dismissal with Prejudice of the Arbitration.

Cool Technologies paid the initial $25,000 on July 13, 2022 and the second $25,000 on September 28, 2022. 50,000 restricted shares were issued to Dennis Campbell on September 28, 2022. 

On October 21, 2022, PGC Investments, LLC and Dennis Campbell filed a Notice of Voluntary Dismissal with Prejudice in the Circuit Court of the Sixth Judicial Circuit for Pinellas County. On the same date, PGC Investments also filed a Notice of Voluntary Dismissal with Prejudice with the American Arbitration Association.

Because the Arbitration’s final hearing was scheduled for September 22-23, 2022,  the dismissal was filed after the final payment and stock issuance were made. This was in keeping with the Settlement Agreement which was conditioned upon PGC obtaining the arbitrator’s approval of the terms and conditions of the settlement.

From time to time, the Company may be a party to other legal proceedings. Management currently believes that the ultimate resolution of these other matters, if any, and after consideration of amounts accrued, will not have a material adverse effect on our consolidated results of operations, financial position, or cash flow.

Item 4. Mine Safety Disclosures

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock was quoted on the OTC Bulletin Board from July 30, 2009, to March 26, 2010, under the symbol BIBB. Prior to September 2010, there was no active market for our common stock. Our common stock is currently quoted on the OTCQB under the trading symbol WARM.

The following table sets forth the high and low sales prices as reported on the OTCQB. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.

The last reported sales price of our common stock on the OTCQB on April 10, 2023, was $0.0046.

As of April 10, 2023, there were 211 stockholders of record of our common stock.

Dividend Policy

The Company has never paid dividends on its common stock and does not anticipate that it will pay dividends in the foreseeable future. It intends to use any future earnings for the expansion of its business. Any future determination of applicable dividends will be made at the discretion of the board of directors and will depend on the results of operations, financial condition, capital requirements and other factors deemed relevant. 

Securities Authorized for Issuance under Equity Compensation Plans

The following table provides information regarding our equity compensation plans as of December 31, 2022:

Equity Compensation Plan Information

______________

Recent Sales of Unregistered Securities

On February 24, 2022, the Company issued 2,500,000 shares of common stock to Power Up Lending Group, Ltd upon conversion of $50,000 on principal of $135,000.

On February 25, 2022, the Company issued 1,750,000 shares of common stock to Power Up Lending Group, Ltd upon conversion of $35,000 on principal of $135,000.

On February 28, 2022, the Company issued 980,392 shares of common stock to Power Up Lending Group, Ltd upon conversion of $20,000 on principal of $135,000.

On March 4, 2022, the Company issued 1,208,791 shares of common stock to Power Up Lending Group, Ltd upon conversion of $22,000 on principal of $135,000.

On March 7, 2022, the Company issued 790,361 shares of common stock to Power Up Lending Group, Ltd. upon final conversion of $8,000 in principal and $5,120 in interest on principal of $135,000.

On March 22, 2022, the Company issued 2,447,552 shares of common stock to Power Up Lending Group, Ltd upon conversion of $35,000 on principal of $111,000.

On March 29, 2022, the Company issued 2,447,552 shares of common stock to Power Up Lending Group, Ltd upon conversion of $35,000 on principal of $111,000. 

On April 18, 2022, the Company issued 3,798,319 shares of common stock to Power Up Lending Group, Ltd upon conversion of $41,000 on principal of $111,000.

On May 31, 2022, the Company issued 1,652,893 shares of common stock to 1800 Diagonal Lending, LLC upon conversion of $20,000 on principal of $66,750.

On June 6, 2022, the Company issued 2,252,252 shares of common stock to 1800 Diagonal Lending, LLC upon conversion of $25,000 on principal of $66,750.

On June 15, 2022, the Company issued 2,333,654 shares of common stock to 1800 Diagonal Lending, LLC upon final conversion of $21,750 on principal of $66,750.

On August 8, 2022, the Company issued 2,752,294 shares of common stock to 1800 Diagonal Lending LLC upon conversion of $30,000 on principal of $56,000.

On August 11, 2022, the Company issued 2,323,967 shares of common stock to 1800 Diagonal Lending LLC upon final conversion of $26,000 in principal and $2,120 in interest on principal of $56,000.  

On August 22, 2022, the Company issued 10,000,000 shares of common stock to LGH Investments, LLC upon conversion of $121,410 on principal of $825,000.

On September  8, 2022, the Company issued 2,100,840 shares of common stock to 1800 Diagonal Lending LLC upon conversion of $25,000 on principal of $61,500.

On September 12, 2022, the Company issued 3,273,950 shares of common stock to 1800 Diagonal Lending LLC upon final conversion of $36,500 in principal and $2,460 in interest on principal $61,500.

On September 27, 2022, the Company issued 2,325,581 shares of common stock to 1800 Diagonal Lending LLC upon conversion of $20,000 on principal of $61,500.

On September 28, 2022, the Company issued 2,625,000 shares of common stock to 1800 Diagonal Lending LLC upon conversion of $21,000 on principal of $61,500.

On September 30, 2022, the Company issued 3,214,085 shares of common stock to 1800 Diagonal Lending LLC upon final conversion of $20,500 in principal and $2,320 in interest on principal of $61,500.  

On October 27, 2022, the Company issued 7,500,000 shares of common stock to LGH Investments, LLC upon conversion of $59,640 on principal of $825,000.

On October 31, 2022, the Company issued 2,247,191 shares of common stock to 1800 Diagonal Lending, LLC upon conversion of $20,000 on principal of $61,500.

On November 4, 2022, the Company issued 2,777,778 shares of common stock to 1800 Diagonal Lending, LLC upon conversion of $20,000 on principal of $61,500.

On November 7, 2022, the Company issued 3,308,333 shares of common stock to 1800 Diagonal Lending, LLC upon final conversion of $21,500 and interest of $2,320 on principal of $61,500.

On November 21, 2022, the Company issued 4,787,324 shares of common stock to LGH Investments, LLC upon final conversion of $33,000 in principal and $990 in interest on principal of $33,000.

On November 25, 2022, the Company issued 3,521,127 shares of common stock to 1800 Diagonal Lending, LLC upon final conversion of $25,000 on principal of $35,000.

On November 30, 2022, the Company issued 1,594,366 shares of common stock to 1800 Diagonal Lending, LLC upon final conversion of $10,000 in principal and $1,320 in interest on principal of $35,000.

On December 5, 2022, the Company issued 10,000,000 shares of common stock to LGH Investments upon conversion of $68,373 on principal of $825,000.

On December 28, 2022, the Company issued 7,500,000 shares of common stock to LGH Investments upon conversion of $71,355 on principal of $825,000.

None of the above issuances involved any underwriters, underwriting discounts or commissions, or any public offering and we believe were exempt from the registration requirements of the Securities Act of 1933 by virtue of Section 4(2) thereof and/or Regulation D promulgated thereunder.

Defaults Upon Senior Securities

On March 19, 2020, the Company defaulted on a note payable. A $250,000 note was purchased on March 18, 2019. In return, the Company promised to pay the principal amount together with simple interest of 15% per annum on or before the one-year anniversary. As of the filing date, the Company has not received a notice of default for the note. As per the terms of the note, interest will continue to accrue at 15% per annum until paid in full.

On May 1, 2020, the Company defaulted on two notes payable. A $250,000 note was purchased on September 11, 2018 and a $125,000 note was purchased on September 25, 2018 by the same accredited investor. In return, the Company promised to pay the principal amount together with simple interest of 15% per annum on or before the one-year anniversaries. On March 16, 2020, the investor signed an amendment to the agreement extending the maturity dates until April 30, 2020. As of the filing date, the Company has not received a notice of default. As per the terms of the note, interest will continue to accrue at 15% per annum until paid in full.

On May 26, 2020, the Company defaulted on a Promissory Note Agreement. A $250,000 note was purchased on October 26, 2018 by an accredited investor. It received $250,000 in financing and promised to pay the principal amount together with simple interest of 15% per annum on or before the one-year anniversary. On October 26, 2019, the investor signed an amendment to the agreement extending the maturity date for seven months. On November 20, 2020, they signed another amendment to the agreement in which they agreed that in the event there are any amounts outstanding under the Note on January 1, 2021, the investor shall be able to convert, any amounts outstanding under the Note into shares of common stock, at a conversion price of seventy one percent of the lowest Volume Weighted

Average Price (VWAP) over the previous ten trading days prior to the delivery of a conversion notice. The investor subsequently converted all amounts outstanding in a series of three conversions on January 20 and 22, and February 3, 2021.

Item 6. Selected Financial Data

As a smaller reporting company, we are not required to provide the information required by this Item. 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes and pandemics; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the SEC.

Because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. The following discussion and analysis of financial condition and results of operations of the Company is based upon, and should be read in conjunction with, the audited consolidated financial statements and related notes elsewhere in this Annual Report on Form 10-K. 

Plan of Operation

Cool Technologies, Inc. and subsidiary, (“the Company” or “Cool Technologies” or “CoolTech”) was incorporated in the State of Nevada in July 2002. In April 2014, CoolTech formed Ultimate Power Truck, LLC (“Ultimate Power Truck” or “UPT”), of which the Company owns 95% and a shareholder of Cool Technologies owns 5%. Cool Technologies was formerly known as Bibb Corporation, as Z3 Enterprises, and as HPEV, Inc. On August 20, 2015, the Company changed its name to Cool Technologies, Inc.

The Company’s technologies are divided into two distinct but complementary categories: mobile power generation and heat dispersion technology.

The Company has developed a mobile power generation system (eMGen) that enables work trucks to generate electric power by running an in-chassis generator. The eMGen system can be retrofit onto new and existing American trucks. CoolTech intends to sell the mobile electric power system to government, commercial and fleet vehicle owners. Sales are expected to occur through the direct efforts of the Company, its sales agents and its joint venture partners. CoolTech may also license the eMGen system as well.

The markets targeted include consumer, agricultural, industrial, military and emergency responders, both in the U.S. and worldwide.

CoolTech has also developed heat dispersion technologies based on proprietary composite heat structures and heat pipe architecture in various product platforms such as electric motors, pumps, turbines, bearings and vehicle components. In preparation, Cool Technologies filed for and received a trademark for Totally Enclosed Heat Pipe Cooled: TEHPC.

When a generator is enhanced by CoolTech’s patented thermal technologies, it should be able to output more power than any other generator of its size on the market. That’s because third party testing has demonstrated that the cooling provided by the thermal technologies can help increase the efficiency of electric motors.

Furthermore, management believes that the technologies will increase the lifespan as well as help meet regulatory emissions standards for electric motors and other heat producing equipment and components. The simplicity of the heat pipe architecture as well as the fact that it provides effective new applications for existing manufacturing processes should enhance the cost structure in several large industries including motor/generator and engine manufacturing.

As of December 31, 2022, we have seven US patents, two Canadian patents, one Mexican patent, one allowed Brazilian patent and one pending US patent application covering integrated electrical power generation methods and systems.

The Company intends to commercialize its patents by integrating the thermal technologies and applications with Original Equipment Manufacturer (OEM) partners and by licensing them to electric motor, generator, pump and vehicle component (brake, resistor, caliper) manufacturers.

We believe the benefits of our mobile power generation systems are quickly realized once potential customers see it in operation. Public demonstrations of the eMGen systems began in April 2017. An inspection and performance demonstration for Mexican government officials and business leaders occurred in May 2018. Feedback from initial viewers resulted in more government officials and fruit growers coming to see the eMGen power equipment and to learn about the water purification options in March 2019. Even more officials and growers followed -- flying to St. Louis for a review in May 2019.

Craftsmen Industries was selected to produce the first systems due to its engineering capabilities and extensive facilities. In January 2019, it began production on the initial vehicles and completed an initial production run vehicle two months later.

While the Company awaits funding to begin continuous production, it has continued to expand its contacts with potential clients -- meeting with government agencies, emergency responders and city officials as well as military engineers and procurement specialists. Specifications for custom applications have been noted and preliminary designs drawn up.

We have not generated any revenues to date. Consequently, there can be no assurances that the Company will be able to generate new orders, fulfill the existing ones, nor address all the requirements of all the interested parties.

Management is pursuing various financing alternatives, based upon a third-party assessment of the historically demonstrated or contractually committed profit-earning capacities of our IP. We see this as the best path forward for non-dilutive funding.

If funding is received, it will be used to support completion of the initial phases of our business plan, which is to license our thermal technologies and applications; to license or sell a mobile electric power system; and to license our submersible motor dry pit technologies and/or to bring to market our technologies and applications through key distribution and joint venture partners.

While the pandemic phase of COVID-19 has receded and the virus is now considered to be endemic in the US as of this filing, the evolution of an acute and more contagious variant is possible. In such a case, it may impact demand for our products and may again hamper our efforts to provide our investors with timely information and comply with our filing obligations with the Securities and Exchange Commission.

Real GDP growth, inflation, employment levels, oil prices, interest rates, tax rates, availability of customer financing, foreign currency exchange rate fluctuations, and other macroeconomic trends can adversely affect demand for the products that we offer. Geopolitical issues around the world and how our markets are positioned can also impact macroeconomic conditions and could have a material adverse impact on our financial results.

Significant Developments

Amendment of Series B Preferred Stock

On October 31, 2016, the Company filed an amended and restated Series B Preferred Stock Certificate of Designation (which was originally filed with the Secretary of State of Nevada on April 19, 2016 and amended on August 12, 2016) to designate 3,636,360 shares as Series B Preferred Stock and to provide for supermajority 66 2/3% voting rights for the Series B Preferred Stock. The Series B Preferred Stock will not bear dividends, will not be entitled to receive any distributions in the event of any liquidation, dissolution or winding up of the Company, and will have no other preferences, rights, restrictions, or qualifications, except as otherwise provided by law or the articles of incorporation of the Company. The holders of Class B Stock shall have the right, at such holder’s option, at any time to convert such shares into common stock, in a conversion ratio of one share of common stock for each share of Class B Stock. If the common stock trades or is quoted at a price per share in excess of $2.25 for any twenty consecutive day trading period, (subject to appropriate adjustment for forward or reverse stock splits, recapitalizations, stock dividends and the like), the Series B Stock will automatically be convertible into the common stock in a conversion ratio of one share of common stock for each share of Series B Stock. The Series B Stock may not be sold, hypothecated, transferred, assigned or disposed without the prior written consent of the Company and the holders of the outstanding Series B Preferred Stock.

Craftsmen Industries, Inc. 

As a consequence of the first public demonstration of the eMGen 30 kilovolt amp (“kVA”) system at the North America International Auto Show in Detroit in January 2017, the Company entered into an agreement in principle, dated February 21, 2017, with Craftsmen Industries, Inc.(“Craftsmen’), a company engaged in the design, engineering and production of mobile marketing vehicles, experiential marketing platforms and industrial mobile solutions.

On April 25, 2017, we delivered to Craftsmen Industries, a Class III Vehicle (Ford F-350 dually) up-fitted with a production-ready eMGen 30 kVA (single phase/three phase) system.

Subsequently, Craftsmen invited the Company to demonstrate its mobile generation technology and the potential benefits for Craftsmen products at Craftsmen’s 35^th Anniversary Party on April 27, 2017. Over one hundred current and prospective Craftsmen customers were in the audience for the demonstrations.

Craftsmen recently signed a manufacturing contract with Translux-Fair Play. Translux’ Hazelwood, Missouri facility encompasses over 45,000 square feet of manufacturing space and offers extensive laser cutting and metal bending machinery. The contract significantly enhances Craftsmen’s capabilities to produce boxes and control panels for the eMGen Systems and the vehicles they’re upfitted to, but also all the eMGen’s optional tasks and capabilities, including welding, water purification and solar power.

Not only will basic production be optimized and improved, but control panels and displays should be upgraded. CoolTech is expected to benefit from Translux’ electronics expertise which has been refined through their years of manufacturing digital scoring panels for sporting arenas and ball parks.

Aon Risk Services Central, Inc and Lee and Hayes, PLLC

On January 18, 2018, the Company entered into an agreement with Aon Risk Services Central, Inc. and Lee and Hayes, PLLC, through its operating unit, 601West, which provides intellectual property (“IP”) analytics, to assess the value of the Company’s IP. As set forth in the agreement, the assessment will be founded on historically demonstrated or contractually committed profit-earning capacities of our IP and may be used to obtain financing, including but not limited to, non-dilutive financing. Since then, significant progress has been achieved, although at a pace much slower than anticipated.

Live eMGen 80 Demonstration in Fort Collins, Colorado

On May 4, 2018, nine representatives from Mexico’s farming, banking, and government sectors flew to Fort Collins, Colorado for a live demonstration of CoolTech’s generator-equipped truck. The demonstration showcased the capabilities and ease of operation of the system. The Company demonstrated how an operator is able to control the generator from the comfort and safety of the truck’s cab using a Panasonic Toughpad. The Company also used the electricity from the truck to power a screw compressor, an industrial fan, and an industrial load bank. Additional capabilities, such as purifying water and using batteries and solar power to make operations more sustainable and environmentally friendly were discussed with the attendees.

A representative from one of the Mexican farming producers’ unions approved the generator-equipped truck. CoolTech plans to put this into production as soon as final funding is secured.

Purchase and Delivery of Truck to Craftsman Industries

On July 15, 2018, the Company purchased a Ford F-450 Chassis Cab Truck. Subsequently, a metal flatbed was manufactured and installed. The truck was delivered to Craftsmen on September 15, 2018. It will be used for the installation and refinement of the eMGen 80 kVA system. A second F-450 will be used for the eMGen 125 kVA system.

Order of Parts and Components

As of September 2021, the Company has acquired enough parts and components to build 5 eMGen 80s and 2 eMGen 125s. It is currently procuring two mobile water purification systems and components for mobile electric vehicle charging systems.

In addition, the Company has purchased another Ford F-450 and is seeking to acquire more F-450s and 550s for use in demonstrations of the capabilities noted above and for initial order fulfillment.

Unveiling of Initial Production Run Vehicle

On March 27, 2019, the Company unveiled the initial production run of its mobile power generation (eMGen) work trucks for inspection by an audience of agricultural and community leaders from Latin America at Craftsmen Industries.

The itinerary for the showcase event included a tour of the St. Louis manufacturing facility and inspection of the first production-run eMGen vehicle in operation as it powered a variety of equipment.

The purpose of the viewing was not only to show the truck’s capabilities but to get feedback from the attendees.

Mexico’s population is expected to grow from 129 million to nearly 150 million by 2050. As a result, energy and water demand should increase significantly.

Increased water demand for both human consumption and agricultural production, along with lagging water management practices have resulted in a rapid depletion of water reserves in Mexico, particularly in Northern Mexico. The forecast of high temperatures in the summer combined with a developing La Nina weather pattern could prolong an existing drought and spread water shortages.

According to an article in the NYTimes (https://tinyurl.com/2n76rjy7), Mexico’s National Water Commission (CONAGUA) determined that in July 2022, eight of Mexico’s 32 states were experiencing extreme to moderate drought, resulting in 1,546 of the country’s 2,463 municipalities confronting water shortages, By mid-July, about 48 percent of Mexico’s territory was suffering drought, according to the commission, compared with about 28 percent of the country’s territory during the same period last year. In June of 2021, 77 of  Mexico’s 210 principal water reservoirs were below 25% capacity. For the region encompassing Western North America, this period is now the driest two decades in 1,200 years.

With reservoirs drying and groundwater levels declining, water is at a premium. In many locations, sewage water is reused for irrigation. Water treatment is scarce and pollution regulations are rarely enforced.

As long as investment in wastewater treatment lags behind population growth, large numbers of consumers eating raw produce face heightened threats to food safety from diseases such as salmonella, E Coli and roundworm. Add unchecked or minimally treated industrial pollution and unusually large numbers of cases of cancer and kidney problems have been documented in consumers living near polluted waterways.

While access to electricity is high across the nation, in rural areas, power can be sporadic or even non-existent. Many communities, particularly in regions populated by indigenous people, are still not connected to the grid. They rely on diesel generators to light homes and draw water from shrinking aquifers.

Interest from Mexican authorities is high in the eMGen systems as they seek to mitigate the effects of drought and guarantee access to drinking water as well as provide a consistent source of electricity and mobile medical services for underserved populations.

Through the efforts of its representatives in the country, the Company has been in contact with and in some cases made presentations to the national water commission (CONAQUA) as well as cabinet secretaries, senators, representatives and deputies at the federal level; to governors, legislators, commissioners and municipal presidents at the state level and mayors and county and local politicians in cities and towns beset by energy and water problems. Private entities such as distilleries, fruit growers, cattle rancher’s associations and mining companies have also requested information.

Conversations are ongoing and interested politicians are helping to promote, coordinate and refine the Company’s approach to secure funding for pilot programs, full-blown projects and purchases of eMGen systems and vehicles.

Mexican Government

On May 13, 2019, government officials and fruit growers were at Craftsmen Industries in St. Louis for a review of a first-run eMGen 80 production vehicle and water purification/desalination options.

Among the politicians in attendance was Congressman Efraín Rocha Vega who is Secretary of the Commission of Development and Rural, Agricultural and Food Self-sufficiency Conservation, a member of the commission of Livestock and the commission of Environment, Sustainability, Climate Change and Natural Resources. Subsequent to the event, in an official Congressional Letter of Support, dated May 20, 2019, Congressman Rocha wrote: “The successful demonstration of these technologies further strengthens the Mexican Government’s support of Mexican entities that desire to purchase CoolTech products, as well as affirms our position to provide financial assistance to such entities.” The letter can be viewed in its entirety at: http://www.cooltechnologiesinc.com/content/pdf/MexicanLegislationandFinancialAssistanceLetter.pdf.

Introduction of new options

During the fourth quarter of 2019, the Company has introduced new options, which include an eMGen System that generates up to 200 kVA of electric power, water purification and desalination systems.

The Company’s mobile electric generation system (“eMGen”) offers optional 30 to 125 kVA water purification and desalination units capable of producing 2,800 to 14,000 gallons of potable water per day. Assuming the average person needs 2 liters per day, 10,000 gallons is enough for 26,498 people. If delivery is required, an eMGen truck can also tow a water tanker.

The truck-mounted units cleanse contaminated, polluted wastewater or remove saline from saltwater. Submerge the input pipe into any water source. Chemicals, particulates, salts, heavy metals, bacteria, viruses and other impurities are removed. Six levels of water purification output a range of water qualities from clean potable water for drinking and cooking to to-potable water for agricultural or other commercial and emergency usage.

The eMGen systems as well as the purification and desalinization units feature fully automated controls and monitoring. A Panasonic Toughpad tablet provides a rugged touchscreen interface for operation from the truck cab or anywhere within a 300-foot radius. When outfitted with the optional telematics package, the systems can be remotely controlled and monitored from distant locations.

The next generation of eMGens will include a solar-powered generator system with a built-in water purification unit that makes seawater desalination sustainable. The system pumps and purifies up to 4,500 gallons of potable water per day. It can be set up and operated anywhere a four-wheel drive vehicle can go. Once the batteries are drained, the systems shift to fuel power for 24-hour operation. The solar panels collapse and fold, so the entire system fits easily in the bed of a work truck.

Rugged, reliable and versatile, the eMGen trucks are designed to operate in extreme environments. A variety of capabilities handle a variety of needs including:

The applications for hurricanes, floods, earthquakes and other natural disasters are obvious, others less so.

Here are a few common yet relatively unknown problems the system and units address:

Consider the Texas Freeze in February of 2021. Power failures at water treatment plants necessitated boil water orders. Burst pipes and dripping faucets dropped water reserves to dangerously low levels.

More than 800 public water systems serving 162 of the state’s 254 counties were disrupted. Over 13 million people were left without safe drinking water. The town of Kyle almost went dry.

Cities opened water distribution sites, water was trucked in to flush toilets, homeowners melted icicles and snow for drinking water, medical workers resorted to using bottled water for chemotherapy treatments.

KeyOptions

On May 30, 2019, the Company entered into a joint venture agreement (“JV”) with KeyOptions Pty Ltd., a privately held technology and security provider based in Victoria, Australia.

KeyOptions develops and markets products for governments, defense contractors and other commercial applications to counter security and cyber threats. The Company will provide a license for the JV to market and sell CoolTech’s entire product platform in Australia and neighboring countries in Southeast Asia.

New Strategic Alliance:

On December 16, 2019, the Company signed a cross-marketing and licensing agreement with VerdeWatts, LLC., an energy generation and storage company encompassing everything from mobile solar power generation systems to large-scale biogas turbine installations. Pursuant to the agreement VerdeWatts and the Company each granted the other a royalty-free non-exclusive license to certain patents which license is subject to certain future negotiation.

Like CoolTech’s mobile power generation systems (“eMGen”), VerdeWatts’ products are scalable and offer the ability to bring power nearly anywhere it is needed. Their proprietary Smart Solar Power Generation Units and energy storage systems combine to deliver sustainable power long after the sun has set.

The agreement with VerdeWatts also included a cross-marketing and royalty-free non-exclusive licensing agreement with FirmGreen, Inc., a water treatment facilities developer that works closely with VerdeWatts to create a suite of synergistic products that address significant needs in the global marketplace. FirmGreen specializes in water purification and desalination technologies. Their mobile, solar and container applications feature 6 levels of water purification for unrivaled drinkability. Pursuant to the agreement FirmGreen and the Company each granted the other a royalty-free non-exclusive license to certain patents which license is subject to certain future negotiations.

CoolTech’s eMGen platform makes the companies’ product offerings complete with mobile power generation. It provides the capability to power everything from irrigation for farms and water purification for rural areas to electric vehicle charging and fast charging in the urban ones.

Consider the solar-powered generator system with a built-in water purification unit that makes seawater desalination sustainable. The system pumps and purifies up to 3,000 gallons per day and interfaces with CoolTech’s eMGen system for 24-hour operation. The solar panels collapse and fold together, so the entire system fits easily in the bed of a work truck. It can be set up and operate anywhere a four-wheel drive vehicle can reach. All of these systems are patent-protected and cross-licensed to each of the three companies.

FirmGreen and VerdeWatts have a global presence with projects on three continents. The largest encompasses the installation of 14 natural gas generators to produce over 60 megawatts (MW) of power. The generators will be integrated with 50-megawatt hours of battery storage and another 6 MW of solar to ensure a consistent flow of power. VerdeWatts intend to replace most of the legacy on-site generators with CoolTech’s eMGen systems, however, the Company has not received any orders and there cannot be any assurance that any orders will be placed.

Together the companies can create an energy or utility ecosystem that can enable less developed countries to leapfrog non-existent, inadequate or failing infrastructure to deliver reliable power and water quickly, sustainably and cost-effectively to their citizens, agriculture and other businesses. The scale and impact can reach from individual farms and villages to cities and regions.

In fact, by combining their respective technologies: energy generation, energy storage and load management controls into a single suite of products, the companies create what is called a “microgrid”. Varying combinations of energy sources such as solar, wind, biogas and eMGen systems both backup and supplement one another to provide consistent, uninterrupted primary power even during severe weather or other emergencies.

The synergies between the companies extend beyond water purification and power generation. VerdeWatts’ wind and gas turbines and generators which produce electric power can all be improved by CoolTech’s thermal reduction technologies.

Request for Collaboration Sent to US Government Officials

On December 11, 2019, letters signed by thirteen government officials and Congressmen in Mexico were mailed to their counterparts in the US, specifically Governor Gavin Newsom, Secretary Rick Perry, Secretary Wilbur Ross, Senator Mitch McConnell and Speaker of the House Nancy Pelosi.

The letters were a request for collaborative support between the two countries to accelerate CoolTech’s product deployment into Mexico to help solve urgent rural power and water purification problems that are hurting rural communities. Those problems include irregular and faulty power in rural areas which hinders crop irrigation and water pollution which affects crops farmed for sale to the US.

The letters also detail the Mexican officials’ satisfaction with CoolTech’s solutions and management team and that they have met with the Company on several occasions for product demonstrations as well as strategic and technical advice. They highlight the benefits of CoolTech products, how they could quickly and efficiently address the problems noted, and how they expect them to become a viable part of the country’s infrastructure.

Export Import Bank of the United States

With the help of VerdeWatts and FirmGreen, CoolTech has initiated a relationship with the Export-Import Bank of the United States (EXIM), a U.S. government agency whose sole mission is to support U.S. exports. The bank fulfills its mission by offering very cost-effective financing for international customers and project developers to purchase U.S.-made services and purchase or lease U.S.-made goods.

To that end, the two companies applied to finance the Mexican projects referenced above. CoolTech also sent product information for due diligence review by the technical team at EXIM bank. Subsequently, CoolTech has received a Letter of Interest from EXIM, however, there cannot be any assurance that EXIM will provide any funding to the Company.

New Sales Agent

In January 2021, the Company terminated its independent agent agreement with Gaia Energy of Gdansk, Poland.

On January 26, 2021, the Company signed an independent agent agreement with H&K Ventures, LLC of Morganhill, California. H&K will act as the Company’s independent agent.

The principals of H&K were also part of Gaia Energy. Consequently, the agreement and the expertise provided by H&K are essentially the same. H&K will concentrate on developing markets in Eastern Europe, the Middle East and Africa. The agreement describes the agent’s duties as “generating revenue, and investment funding, for the Company from various organizations including investment funds, end-users, channel partners, integrators, and OEMs.” To that end, H&K has requested quotes from the Company for eMGen 200 to 300 kVA systems with mobile water desalination capabilities of up to 900,000 gallons per day.

Team members of H&K Ventures include executives with more than twenty-five years experience with Panasonic, Ford Motor Company, Electronic Data Systems and the US Air Force in the fields of advanced technologies and an African diplomat with a thirty-year background working with and for diplomatic missions, non-governmental organizations and international disasters and aid management services.

The former has joined the Company’s advisory board while the diplomat introduced CoolTech products at a recent African technical summit attended by representatives from 54 countries.

Order and Delivery of Water Units and Charger

Over the past six months, the Company has ordered two reverse osmosis water purification units and an electric vehicle charger.

In May of 2021, the Company ordered a reverse osmosis system capable of treating 4,500 gallons of brackish water per day. That was followed by a 100 kW, mode 4 DC, electric vehicle charger capable of simultaneous charging and dynamic load distribution. The Company ordered a second reverse osmosis system capable of treating 4,500 gallons of brackish water per day in July of 2021.

A reverse osmosis system and an electric vehicle charger were delivered to Craftsmen Industries for installation in the beds of the test vehicles referenced in Note 3.  The Company is awaiting the delivery of the second reverse osmosis system.

Going Concern

As a result of our financial condition, we have received a report from our independent registered public accounting firm for our consolidated financial statements for the years ended December 31, 2022, and 2021 that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern. As of December 31, 2022, we have not commenced full operations, raising substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to generate revenue, achieve profitable operations and repay our obligations when they come due. As of December 31, 2022, we have $142 in cash and we owe $1,231,272 for convertible notes, $1,362,050 for promissory notes and currently have another $1,078,500 in promissory notes in default. We are pursuing various financing alternatives to address the payment of outstanding debt and to support the sales, component acquisition and assembly of our mobile power generation systems as well as the completion of the secondary elements of our business plan: to license its thermal technologies and applications, including submersible dry-pit applications. There can be no assurance, however, that we will obtain adequate funding or that we will be successful in accomplishing any of our objectives. Consequently, we may not be able to continue as an operating company.

Results of Operations

The following table sets forth, for the periods indicated, consolidated statements of operations data. The table and the discussion below should be read in conjunction with the accompanying consolidated financial statements and the notes thereto, appearing elsewhere in this report.

Revenues

During the years ended December 31, 2022, and 2021, and since inception, we have not generated any revenues. We generated our first Mobile Generation order during the quarter that ended June 30, 2014 and received a partial deposit in advance of completing the sale with companies controlled by the individual who is a 5% owner of UPT and a shareholder of our Company. The order is in the production queue.

Operating Expenses

Operating expenses increased during the year ended December 31, 2022, compared to the year ended December 31, 2021, due to increases in consulting costs, payroll and related expenses as well as general and administrative.

During the year ended December 31, 2022, payroll and related expenses increased by $6,068 due to an increase in accrued payroll taxes.

Consulting expenses increased from $467,241 in 2021 to $470,645 in 2022 which was in line with the increase in macroeconomic conditions.

Professional fees decreased from $254,793 in 2021 to $204,430 in 2022. The decrease reflects elimination of legal fees after the settlement of the Company’s eviction complaint and arbitration proceeding in October.

Research and development expenses essentially remained the same in 2021 and 2022 as the Company maintained its focus on the commercialization of the eMGen System.

General and administrative expenses increased from $87,064 in 2021 to $149,194 in 2022 due to an inventory adjustment and the attendant adjustment in miscellaneous office expense, transfer agents fees associated with the substantial amount of debt converted (noted below), the purchases of new computer equipment and the completion of the first full year of health insurance provided by the company.

Other Income and Expense

Interest expense during the years ended December 31, 2022 and 2021 related primarily to our debt. The change in fair value of derivative liability reflects the change in fair value of the conversion features embedded in the convertible debt agreements entered into in July, August, September, October and December 2022.

Interest expense decreased during the year ended December 31 from $1,675,726 in 2021 to $726,028 in 2022 due to the substantial amount of debt converted in 2022.

Net Loss and Noncontrolling Interest

Since we have incurred losses since inception, we have not recorded any income tax expense or benefit. Accordingly, our net loss is driven by our operating and other expenses. Noncontrolling interest represents the 5% third-party ownership in UPT, which is subtracted to calculate net loss to shareholders.

Liquidity and Capital Resources

We have historically met our liquidity requirements primarily through the public sale and private placement of equity securities, debt financing, and exchanging common stock warrants and options for professional and consulting services. On December 31, 2022, we had cash and cash equivalents of $142. 

Working capital is the amount by which current assets exceed current liabilities. We had negative working capital of $7,792,632 and $7,370,524 on December 31, 2022, and 2021, respectively. The increase in negative working capital was due to increases in accounts payable, accrued interest payable, and accrued payroll. To that end, we owe approximately $1,232,872 for convertible notes that mature in the next nine months and we owe another $1,362,050 in notes payable and currently have another $1,078,500 in promissory notes in default. Based on its current forecast and budget, management believes that its cash resources will not be sufficient to fund its operations through the end of the second quarter. Unless the Company can generate sufficient revenue from the execution of the Company’s business plan, it will need to obtain additional capital to continue to fund the Company’s operations. There is no assurance that capital in any form would be available to us, and if available, on terms and conditions that are acceptable. If we are unable to obtain sufficient funds, we may be forced to curtail and/or cease operations. 

February Convertible Note -- On February 25, 2021, the Company entered into a convertible note agreement with an accredited investor. It issued 2,000,000 inducement shares of restricted common stock and received $150,000 after an original issue discount of $15,000 in lieu of interest. The total amount of $165,000 plus 3% interest or $4,950 will be due on November 25, 2021. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a fixed price of $0.025 per share. In the event of default, the outstanding balance will increase by 25% and a daily penalty of $100 will accrue until the default is remedied. On November 22, 2021, the investor signed an amendment to the agreement extending the maturity date until March 31, 2022. On March 30, 2022, the investor signed an amendment to the agreement extending the maturity date until April 30, 2022. On April 29, 2022, the investor signed an amendment to the agreement extending the maturity date until May 30, 2022. On May 29, 2022, the investor signed an amendment to the agreement extending the maturity date until August 30, 2022. On August 30, 2022 the investor signed an amendment to the agreement extending the maturity date until November 30, 2022. On November 30, 2022, the investor signed an amendment to the agreement extending the maturity date until May 1, 2023. As of December 31, 2022, the remaining balance totaled $169,950.

March Convertible Note -- On March 24, 2021, the Company entered into a convertible note agreement with an accredited investor. It issued two sets of commitment shares: a block of 500,000 and a block of 2,500,000 shares of restricted common stock as well as warrants to purchase 1,000,000 shares of common stock at an exercise price of $0.10 per share. In return, the Company received $250,000 after an original issue discount of $25,000 in lieu of interest. The total amount of $275,000 plus 8% interest or $22,000 will be due on December 24, 2021. After 60 days, if the note has not been paid in full, the investor will have the right to purchase up to 6 million additional warrant shares. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a fixed price of $0.055 per share. If the note is repaid by the maturity date, the investor will forfeit the block of 2,500,000 shares of restricted common stock and the shares will be returned to the Company’s treasury. In the event of default, the outstanding balance will increase by 25% and a daily penalty of $1,000 will accrue until the default is remedied. On December 21, 2021, the investor signed an amendment to the agreement extending the maturity date until March 31, 2022. On March 30, 2022, the investor signed an amendment to the agreement extending the maturity date until April 30, 2022. On April 29, 2022, the investor signed an amendment to the agreement extending the maturity date until May 30, 2022. On May 29, 2022, the investor signed an amendment to the agreement extending the maturity date until August 30, 2022. On August 30, 2022 the investor signed an amendment to the agreement extending the maturity date until November 30, 2022. On November 30, 2022, the investor signed an amendment to the agreement extending the maturity date until May 1, 2023. As of December 31, 2022, the remaining balance totaled $297,000.

March Convertible Note -- On March 24, 2021, the Company entered into a convertible note agreement with an accredited investor. It issued two sets of commitment shares: a block of 500,000 and a block of 2,500,000 shares of restricted common stock as well as warrants to purchase 1,000,000 shares of common stock at an exercise price of $0.10 per share. In return, the Company received $750,000 after an original issue discount of $75,000 in lieu of interest. The total amount of $825,000 plus 8% interest or $66,000 will be due on December 24, 2021. After 60 days, if the note has not been paid in full, the investor will have the right to purchase up to 2 million additional warrant shares. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a fixed price of $0.055 per share. If the note is repaid by the maturity date, the investor will forfeit the block of 2,500,000 shares of restricted common stock and the shares will be returned to the Company’s treasury. In the event of default, the outstanding balance will increase by 25% and a daily penalty of $1,000 will accrue until the default is remedied. On December 21, 2021, the investor signed an amendment to the agreement extending the maturity date until March 31, 2022. On March 30, 2022, the investor signed an amendment to the agreement extending the maturity date until April 30, 2022. On April 29, 2022, the investor signed an amendment to the agreement extending the maturity date until May 30, 2022. On May 29, 2022, the investor signed an amendment to the agreement extending the maturity date until August 30, 2022. On August 22, 2022, the Company issued 10,000,000 shares of common stock to LGH Investments, LLC upon conversion of $121,410. On August 30, 2022 the investor signed an amendment to the agreement extending the maturity date until November 30, 2022. On October 27, 2022,  the Company issued 7,500,000 shares of common stock to LGH Investments, LLC upon conversion of $59,640. On November 30, 2022, the investor signed an amendment to the agreement extending the maturity date until May 1, 2023. On December 5, 2022, the Company issued 10,000,000 shares of common stock to LGH Investments, LLC upon conversion of $68,373. On December 28, 2022,  the Company issued 7,500,000 shares of common stock to LGH Investments, LLC upon conversion of $71,355. As of December 31, 2022, the remaining balance totaled $570,222.  

August Convertible Note – On August 16, 2021, the Company signed a promissory note agreement with an accredited investor. It received $125,000 after an original issue discount of $7,000 and reimbursement of $3,000 to cover the investor’s legal fees. The total amount of $135,000 will be due on August 16, 2022. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest VWAP during the 10 trading days preceding the conversion date. In the event of default, the outstanding balance will increase by 50% and the interest rate will increase to 22% until the default is remedied. On February 24, 2022, the Company issued 2,500,000 shares of common stock to Power Up Lending Group, Ltd upon conversion of $50,000, leaving a principal balance remaining of $85,000. On February 25, 2022, the Company issued 1,750,000 shares of common stock to Power Up Lending Group, Ltd upon conversion of $35,000, leaving a principal balance remaining of $50,000. On February 28, 2022, the Company issued 980,392 shares of common stock to Power Up Lending Group, Ltd upon conversion of $20,000, leaving a principal balance remaining of $30,000. On March 4, 2022, the Company issued 1,208,791 shares of common stock to Power Up Lending Group, Ltd upon conversion of $22,000, leaving a principal balance remaining of $8,000.  On March 7, 2022, the Company issued 790,361 shares of common stock to Power Up Lending Group, Ltd. upon final conversion of $8,000 in principal and $5,120 in accrued interest.  The note was then retired.

September Convertible Note -- On September 21, 2021, the Company signed a promissory note agreement with an accredited investor. It received $102,000 after an original issue discount of $6,000 and reimbursement of $3,000 to cover the investor’s legal fees. The total amount of $111,000 will be due on September 21, 2022. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest VWAP during the 10 trading days preceding the conversion date. In the event of default, the outstanding balance will increase by 50% and the interest rate will increase to 22% until the default is remedied. On March 22, 2022, the Company issued 2,447,552 shares of common stock to Power Up Lending Group, Ltd upon conversion of $35,000, leaving a principal balance remaining of $76,000. On March 29, 2022, the Company issued 2,447,552 shares of common stock to Power Up Lending Group, Ltd upon conversion of $35,000, leaving a principal balance remaining of $41,000.  On April 18, 2022, the Company issued 3,798,319 shares of common stock to Power Up Lending Group, Ltd upon final conversion of $41,000 in principal and $4,200 in accrued interest. The note was then retired. 

November Convertible Note -- On November 22, 2021, the Company signed a promissory note agreement with an accredited investor. It received $60,000 after an original issue discount of $3,750 and reimbursement of $3,000 to cover the investor’s legal fees. The total amount of $66,750 will be due on November 22, 2022. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest VWAP during the 10 trading days preceding the conversion date. In the event of default, the outstanding balance will increase by 50% and the interest rate will increase to 22% until the default is remedied. On May 31, 2022, the Company issued 1,652,893 shares of common stock to Power Up Lending Group, Ltd upon conversion of $20,000, leaving a principal balance remaining of $46,750. On June 6, 2022, the Company issued 2,252,252 shares of common stock to Power Up Lending Group, Ltd upon conversion of $25,000, leaving a principal balance remaining of $21,750. On June 15, 2022, the Company issued 2,233,654 shares of common stock to Power Up Lending Group, Ltd upon final conversion of $21,750 in principal and $2,520 in accrued interest. The note was then retired.

December Convertible Note -- On December 20, 2021, the Company entered into a convertible note agreement with an accredited investor. It received $33,000 after an original issue discount of $3,000 in lieu of interest. The total amount of $33,000 plus 3% interest or $990 will be due on September 20, 2022. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a fixed price of $0.02 per share. In the event of default, the outstanding balance will increase by 25% and a daily penalty of $100 will accrue until the default is remedied. On August 30, 2022 the investor signed an amendment to the agreement extending the maturity date until November 30, 2022. On November 22, 2022, the Company issued 4,787,324 shares of common stock to LGH Investments LLC upon final conversion of $33,000 in principal and $990 in accrued interest. The note was then retired. 

February Convertible Note -- On February 1, 2022, the Company signed a promissory note agreement with an accredited investor. It received $50,000 after an original issue discount of $3,000 and reimbursement of $3,000 to cover the investor’s legal fees. The total amount of $56,000 will be due on February 1, 2023. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest VWAP during the 10 trading days preceding the conversion date. In the event of default, the outstanding balance will increase by 50% and the interest rate will increase to 22% until the default is remedied. On August 8, 2022, the Company issued 2,752,294 shares of common stock to Sixth Street Lending LLC upon conversion of $30,000, leaving a principal balance remaining of $26,000. On August 11, 2022, the Company issued 2,323,967 shares of common stock to Sixth Street Lending LLC upon final conversion of $26,000 in principal and $2,120 in accrued interest. The note was then retired. 

March Convertible Note -- On March 4, 2022, the Company signed a promissory note agreement with an accredited investor. It received $55,000 after an original issue discount of $3,500 and reimbursement of $3,000 to cover the investor’s legal fees. The total amount of $61,500 will be due on March 4, 2023. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest VWAP during the 10 trading days preceding the conversion date. In the event of default, the outstanding balance will increase by 50% and the interest rate will increase to 22% until the default is remedied. On September  8, 2022, the Company issued 2,100,840 shares of common stock to Sixth Street Lending LLC upon conversion of $25,000, leaving a principal balance remaining of $36,500. On September 12, 2022, the Company issued 3,273,950 shares of common stock to Sixth Street Lending LLC upon final conversion of $36,500 in principal and $2,460 in accrued interest. The note was then retired. 

March Convertible Note -- On March 21, 2022, the Company signed a promissory note agreement with an accredited investor. It received $55,000 after an original issue discount of $3,500 and reimbursement of $3,000 to cover the investor’s legal fees. The total amount of $61,500 will be due on March 21, 2023. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest VWAP during the 10 trading days preceding the conversion date. In the event of default, the outstanding balance will increase by 50% and the interest rate will increase to 22% until the default is remedied. On September  27, 2022, the Company issued 2,325,581 shares of common stock to Sixth Street Lending LLC upon conversion of $20,000, leaving a principal balance remaining of $41,500. On September  28, 2022, the Company issued 2,625,000 shares of common stock to Sixth Street Lending LLC upon conversion of $21,000, leaving a principal balance remaining of $20,500. On September 30, 2022, the Company issued 3,214,085 shares of common stock to Sixth Street Lending LLC upon final conversion of $20,500 in principal and $2,320 in accrued interest. The note was then retired. 

April Convertible Note -- On April 25, 2022, the Company signed a promissory note agreement with an accredited investor. It received $55,000 after an original issue discount of $3,500 and reimbursement of $3,000 to cover the investor’s legal fees. The total amount of $61,500 will be due on April 25, 2023. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest VWAP during the 10 trading days preceding the conversion date. In the event of default, the outstanding balance will increase by 50% and the interest rate will increase to 22% until the default is remedied. . On October 31, 2022, the Company issued 2,247,191 shares of common stock to Sixth Street Lending LLC upon conversion of $20,000, leaving a principal balance remaining of $41,500. On November  4, 2022, the Company issued 2,777,778 shares of common stock to Sixth Street Lending LLC upon conversion of $20,000, leaving a principal balance remaining of $20,500. On November 7,  2022, the Company issued 3,308,333 shares of common stock to Sixth Street Lending LLC upon final conversion of $21,500 in principal and $2,320 in accrued interest. The note was then retired. 

May Convertible Note -- On May 23, 2022, the Company signed a promissory note agreement with an accredited investor. It received $30,000 after an original issue discount of $2,000 and reimbursement of $3,000 to cover the investor’s legal fees. The total amount of $35,000 will be due on May 23, 2023. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest VWAP during the 10 trading days preceding the conversion date. In the event of default, the outstanding balance will increase by 50% and the interest rate will increase to 22% until the default is remedied. On November 25, 2022, the Company issued 3,521,127 shares of common stock to Sixth Street Lending LLC upon conversion of $25,000, leaving a principal balance remaining of $10,000. On November 30, 2022, the Company issued 1,594,366 shares of common stock to Sixth Street Lending LLC upon final conversion of $10,000 in principal and $1,320 in accrued interest. The note was then retired. 

July Convertible Note -- On July 22, 2022, the Company signed a promissory note agreement with an accredited investor. It received $30,000 after an original issue discount of $3,200 and reimbursement of $3,000 to cover the investor’s legal fees. The total amount of $56,200 will be due on July 22, 2023. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest VWAP during the 10 trading days preceding the conversion date. In the event of default, the outstanding balance will increase by 50% and the interest rate will increase to 22% until the default is remedied. As of December 31, 2022, the remaining balance totaled $56,200.

August Convertible Note -- On August 18, 2022, the Company signed a promissory note agreement with an accredited investor. It received $40,000 after an original issue discount of $2,600 and reimbursement of $3,000 to cover the investor’s legal fees. The total amount of $45,600 will be due on August 18, 2023. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest VWAP during the 10 trading days preceding the conversion date. In the event of default, the outstanding balance will increase by 50% and the interest rate will increase to 22% until the default is remedied. As of December 31, 2022, the remaining balance totaled $45,600.

September Convertible Note -- On September 21, 2022, the Company signed a promissory note agreement with an accredited investor. It received $60,000 after an original issue discount of $3,750 and reimbursement of $3,000 to cover the investor’s legal fees. The total amount of $66,750 will be due on September 21, 2023. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest VWAP during the 10 trading days preceding the conversion date. In the event of default, the outstanding balance will increase by 50% and the interest rate will increase to 22% until the default is remedied. As of December 31, 2022, the remaining balance totaled $66,750.

October Convertible Note -- On October 24, 2022, the Company signed a promissory note agreement with an accredited investor. It received $40,000 after an original issue discount of $2,600 and reimbursement of $3,000 to cover the investor’s legal fees. The total amount of $45,600 will be due on October 24, 2023. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest VWAP during the 10 trading days preceding the conversion date. In the event of default, the outstanding balance will increase by 50% and the interest rate will increase to 22% until the default is remedied. As of December 31, 2022, the remaining balance totaled $45,600.

October Convertible Note -- On October 31, 2022, the Company signed a promissory note agreement with an accredited investor. It received $20,000 after an original issue discount of $2,000. The total amount of $22,000 will be due on July 31, 2023. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest VWAP during the 10 trading days preceding the conversion date. In the event of default, the outstanding balance will increase by 25% and  a daily pen penalty of $100 will accrue until the default is remedied. As of December 31, 2022, the remaining balance totaled $22,000.

December Convertible Note -- On December 8, 2022, the Company signed a promissory note agreement with an accredited investor. It received $45,000 after an original issue discount of $2,900 and reimbursement of $3,000 to cover the investor’s legal fees. The total amount of $50,900 will be due on December 8, 2023. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest VWAP during the 10 trading days preceding the conversion date. In the event of default, the outstanding balance will increase by 50% and the interest rate will increase to 22% until the default is remedied. As of December 31, 2022, the remaining balance totaled $50,900.

Off Balance Sheet Arrangements

We currently have no off-balance sheet arrangements. 

Cash Flows

Our cash flows from operating, investing and financing activities were as follows:

Net cash from operating activities increased due to increases in non-cash interest expense, in fair value of derivative liability and in accrued payroll taxes. Our investing activity increased due to an increase in expenditure for intangible assets, which relates to the development of patents. Net cash provided by financing activities increased due to an increase in proceeds of debt or debt borrowings.

The Company’s capital requirements for the next 12 months will consist of $3.8 million with anticipated expenses of $1.8 million for salaries, public company filings, and consultants and professional fees. An additional $2.0 million in working capital is expected to be needed for inventory and related costs for production of our mobile power generation systems as well as development and commercialization of our thermal dispersion technology applications.

Management believes the Company’s funds are insufficient to provide for its projected needs for operations for the next 12 months. The Company is currently negotiating additional non-dilutive funding to support product development or for other purposes. In the event that the negotiations fail, the Company may have to rely on equity or debt financing that may involve substantial dilution to our then existing stockholders. If it is unable to close additional equity financing, the Company may have to cease operations.

Critical Accounting Policies

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, the disclosure of contingent assets and liabilities, and the amounts of revenues and expenses. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In applying these critical accounting policies, our management uses its judgment to determine the appropriate assumptions to be used in making certain estimates. Actual results may differ from these estimates.

We define critical accounting policies as those that are reflective of significant judgments and uncertainties, and which may potentially result in materially different results under different assumptions and conditions. In applying these critical accounting policies, our management uses its judgment to determine the appropriate assumptions to be used in making certain estimates. These estimates are subject to an inherent degree of uncertainty.

Impairment of long-lived assets

When facts and circumstances indicate that the carrying value of long-lived assets may not be recoverable, management assesses the recoverability of the carrying value by preparing estimates of revenues and the resulting gross profit and cash flows. These estimated future cash flows are consistent with those we use in our internal planning. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, we recognize an impairment loss. The impairment loss recognized, if any, is the amount by which the carrying amount of the asset (or asset group) exceeds the fair value. We may use a variety of methods to determine the fair value of these assets, including discounted cash flow models, which are consistent with the assumptions we believe hypothetical marketplace participants would use.

If actual results are not consistent with our assumptions and estimates, or our assumptions and estimates change due to new information, we may be exposed to an impairment charge in the future.

Derivative financial instruments

When we issue debt that contains a conversion feature, we first evaluate whether the conversion feature meets the requirements to be treated as a derivative: a) one or more underlying, typically the price of the Company’s stock; b) one or more notional amounts or payment provisions or both, generally the number of shares upon conversion; c) no initial net investment, which typically excludes the amount borrowed; and d) net settlement provisions, which in the case of convertible debt generally means the stock received upon conversion can be readily sold for cash. There are certain scope exceptions from derivative treatment, but these typically exclude conversion features that provide for a variable number of shares.

When we issue warrants to purchase our common stock, we must evaluate whether they meet the requirements to be treated as a derivative. Generally, warrants would be treated as a derivative if the provisions of the warrant agreement create uncertainty as to a) the number of shares to be issued upon exercise; or b) whether shares may be issued upon exercise.

If the conversion feature within convertible debt or warrants meets the requirements to be treated as a derivative, we estimate the fair value of the derivative liability using the Black-Scholes Option Pricing Model upon the date of issuance. If the fair value of the derivative liability is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the fair value of the derivative liability is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the carrying amount of the debt. The derivative liability is revalued at the end of each reporting period and any change in fair value is recorded as a change in fair value in the consolidated statement of operations. The debt discount is amortized through interest expense over the life of the debt. Derivative instrument liabilities and the host debt agreement are classified on the balance sheet as current or non-current based on whether settlement of the derivative instrument could be required within twelve months of the balance sheet date.

The accounting treatment of derivative financial instruments requires that the Company record the embedded conversion option and warrants at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. As a result of entering into warrant agreements, for which such instruments contained a variable conversion feature with no floor, the Company has adopted a sequencing policy in accordance with ASC 815-40-35-12 whereby all future instruments may be classified as a derivative liability with the exception of instruments related to share-based compensation issued to employees or directors.

Contingent liabilities

We accrue a loss for contingencies if it is probable that an asset has been impaired or a liability has been incurred, and when the amount of loss can be reasonably estimable. When no accrual is made because one or both conditions do not exist, we disclose the contingency if there is at least a reasonable possibility that a loss may be incurred. We estimate contingent liabilities based on the best information we have available at the time. If we have a range of outcomes, we accrue the low end of the range. 

Share-based Payments

All our share-based awards are classified as equity, as they may only be settled in shares of our common stock.

We recognize expense for fully-vested warrants at the time they are granted. For awards with service or performance conditions, we generally recognize expense when the service is complete; however, there may be circumstances in which we determine that the performance condition is probable before the actual performance condition is achieved. In such circumstances, the amount recognized as expense is the pro rata amount, depending on the estimated progress towards completion of the performance condition. Nonemployee share-based payments are measured at fair value, based on either the fair value of the equity instrument issued or on the fair value of the services received. Typically, it is not practical to value the services received, so we determine the fair value of common stock grants based on the price of the common stock on the measurement date, and the fair value of common stock warrants using the Black-Scholes option-pricing model (“Black-Scholes”). We use historical data to estimate the expected price volatility, the expected stock option life and expected forfeiture rate. The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of grant for the estimated life of the stock option. For awards that are recognized when a performance condition is probable, the fair value is estimated at each reporting date. The cost recognized is the fair value of the equity award on the date the performance condition is achieved. Accordingly, the expense recognized may change between interim reporting dates and the date the performance condition is achieved.

We issue two types of common stock options to employees: 1) fully-vested at the time of grant and 2) market price-based vesting. We recognize expense for fully-vested stock options on the date of grant at the estimated fair value of the options using Black-Scholes. We recognize expense for market price-based options at the estimated fair value of the options using the lattice-based option valuation model (“Lattice Model”) over the estimated life of the options used in the Lattice Model. We use historical data to estimate the expected price volatility, the expected stock option life and expected forfeiture rate. The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of grant for the estimated life of the stock option. In the event, we modify the terms of a non-vested share-based payment award, we would incur additional expense for the excess of the fair value of the modified share-based payment award over the fair value of the original share-based payment award. The incremental expense would be recognized ratably over the remaining vesting period.

Income taxes

We recognize deferred income tax assets and liabilities for the expected future tax consequences of temporary differences between the income tax and financial reporting carrying amount of our assets and liabilities. We monitor our deferred tax assets and evaluate the need for a valuation allowance based on the estimate of the amount of such deferred tax assets that we believe do not meet the more-likely-than-not recognition criteria. We also evaluate whether we have any uncertain tax positions and would record a reserve if we believe it is more-likely-than-not our position would not prevail with the applicable tax authorities. We have significant net operating loss carryforwards, for which we have established a valuation allowance. If our estimate of the amount of such deferred tax assets change, we may recognize a benefit in the future. UPT is a limited liability company (“LLC”), which is treated as a partnership for income tax purposes, where all tax obligations flow through to the owners of the LLC during the period in which income taxes were incurred.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

As a smaller reporting company, we are not required to provide the information required by this Item.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA

INDEX TO FINANCIAL STATEMENTS

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Cool Technologies, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Cool Technologies, Inc. (the Company) as of December 31, 2022 and 2021, and the related consolidated statements of operations, changes in stockholders’ deficit, and cash flows for the years then ended, and the related notes and schedules (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1, the Company has incurred net losses and negative cash flow from operations since inception. These factors, and the need for additional financing in order for the Company to meet its business plans raises substantial doubt about the Company’s ability to continue as a going concern. Our opinion is not modified with respect to that matter.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Derivatives

As described in Note 1 to the Company’s consolidated financial statements, when the Company issues debt that contains a conversion feature and/or warrants to purchase common stock, it first evaluates whether the conversion feature meets the requirements to be treated as a derivative.  If the conversion feature within convertible debt meets the requirements to be treated as a derivative, the Company estimates and records the fair value of the derivative liability using the Black-Scholes Option Pricing Model upon the date of issuance.  The derivative liability is revalued at the end of each reporting period.       

We identified the Company’s application of the accounting for convertible notes and warrants as a critical audit matter.  The principal considerations for our determination of this critical audit matter related to the high degree of subjectivity in the Company’s judgments in determining the qualitative factors.  Auditing these judgments and assumptions by the Company involves auditor judgment due to the nature and extent of audit evidence and effort required to address these matters.

The primary procedures we performed to address these critical audit matters included the following:

Impairment of Long-Lived Assets

As described in Note 1 to the Company’s consolidated financial statements, when facts and circumstances indicate that the carrying value of long-lived assets may not be recoverable, management assesses the recoverability of the carrying value by preparing estimates of revenues and the resulting gross profit and cash flows.  If the sum of the expected future cash flows is less than the carrying amount, an impairment loss is recognized for the amount by which the carrying amount of the asset exceeds fair value. 

We identified the Company’s application of impairment of long-lived assets as a critical audit matter.  The principal considerations for our determination of this critical audit matter related to the high degree of subjectivity in the Company’s judgments in determining the qualitative factors.  Auditing these judgments and assumptions by the Company involves auditor judgment due to the nature and extent of audit evidence and effort required to address these matters.

The primary procedures we performed to address these critical audit matters included the following:

Cool Technologies, Inc.

Consolidated Balance Sheets

See accompanying notes to consolidated financial statements.

Cool Technologies, Inc.

Consolidated Statements of Operations

See accompanying notes to consolidated financial statements

Cool Technologies, Inc.

Consolidated Statements of Changes in Stockholders’ Deficit 

Years ended December 31, 2022, and 2021

See accompanying notes to consolidated financial statements

Cool Technologies, Inc.

Consolidated Statements of Cash Flows

See accompanying notes to consolidated financial statements.

Cool Technologies, Inc.

Notes to Consolidated Financial Statements

Note 1 – Description of Business and Summary of Significant Accounting Policies

Description of Business

Cool Technologies, Inc. and subsidiary, (“the Company” or “Cool Technologies” or “CoolTech”) was incorporated in the State of Nevada in July 2002. In April 2014, CoolTech formed Ultimate Power Truck, LLC (“Ultimate Power Truck” or “UPT”), of which the Company owns 95% and a shareholder of Cool Technologies owns 5%. Cool Technologies was formerly known as Bibb Corporation, as Z3 Enterprises, and as HPEV, Inc. On August 20, 2015, the Company changed its name to Cool Technologies, Inc.

The Company’s technologies can be divided into two distinct but complementary categories: a) mobile power generation and b) heat dispersion technology.

The Company has developed and is commercializing a mobile power generation system that enables work trucks retrofitted with the system to generate electric power. The Company intends to sell the mobile power generator system to government, commercial and fleet vehicle owners. It may license its system as well.

CoolTech has also developed and intends to commercialize patented heat dispersion technologies by licensing them to electric motor, pump and vehicle component manufacturers.

In preparation, CoolTech has applied for trademarks for one of its technologies and its acronym. Cool Technologies currently owns one trademark: TEHPC (Totally Enclosed Heat Pipe Cooled).

The Company believes that its proprietary technologies, including the patent portfolio and trade secrets, can help increase the efficiency and positively effect manufacturing cost structure in several large industries beginning with motors/generators and fleet vehicles. The markets for products utilizing the technologies include consumer, industrial, agricultural and military markets, both in the U.S. and worldwide.

As of December 31, 2022, we have seven US patents, two Canadian patents, one Mexican patent, one allowed Brazilian patent and one pending US patent application covering integrated electrical power generation methods and systems.

The Company intends to commercialize its patents by licensing its thermal technologies and applications to electric motor, pump and vehicle component manufacturers and by licensing or selling a mobile electric power system to commercial vehicle and fleet owners. If and when, the company is awarded the integrated electrical power generation methods and systems patent, it may choose to exercise or defend its rights against violators or infringers of its patent and seek damages or licenses.

Basis of Presentation, Use of Estimates and Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Cool Technologies, Inc. and Ultimate Power Truck, LLC. Intercompany accounts and transactions have been eliminated upon consolidation. The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of the consolidated financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Although these estimates are based on management’s knowledge of current events and actions the Company may undertake in the future, actual results may ultimately differ from these estimates and assumptions. Furthermore, when testing assets for impairment in future periods, if management uses different assumptions or if different conditions occur, impairment charges may result.

Noncontrolling interest represents the 5% third-party interest in UPT. There are no restrictions on the transfer of funds or net assets from UPT to Cool Technologies.

Going Concern and Management’s Plan

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. CoolTech has incurred net losses of $61,120,707 since inception. As of December 31, 2022, we owe $1,232,872 for convertible notes, $1,362,050 for promissory notes and currently have another $1,078,500 in promissory notes in default. The cash available totals $142. CoolTech has not fully commenced operations, raising substantial doubt about its ability to continue as a going concern. Management believes that the Company’s ability to continue as a going concern is dependent on its ability to generate revenue, achieve profitable operations and repay obligations when they come due. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty.

As of the filing date of this Annual Report on Form 10-K, management is negotiating additional non-dilutive funding arrangements to support completion of the initial phases of the Company’s business plan: to license its thermal technologies and applications, including submersible dry-pit applications and to license and sell mobile generation retrofit kits. There can be no assurance, however, that the Company will be successful in accomplishing these objectives. Consequently, it may have to curtail or cease operations if funding is not received by the end of the second quarter.

Summary of Significant Accounting Policies

Cash and cash equivalents

Cash and cash equivalents include cash on hand, deposits with banks, and investments that are highly liquid and have maturities of three months or less at the date of purchase.

Inventory

Inventory, consisting of mobile generation kit materials and parts, is stated at the lower of cost (first in, first out method) or net realizable value.

Intangible assets

The Company’s intangible assets consist of patents on its technology, recorded at cost. Cost is based on third party expenditures for patent applications. CoolTech will begin amortizing the intangibles over their estimated remaining useful life when it begins revenue-producing activities. Cool Technologies will determine the useful lives of its intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors that will be considered when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, the long-term strategy for using the asset, any laws or other local regulations that could impact the useful life of the asset, and other economic factors, including competition and specific market conditions.

Equipment

Equipment consists of vehicles the Company uses for testing and demonstrating its technology to potential customers. Depreciation is recorded using the straight-line method over five years, the estimated useful life.

Impairment of long-lived assets

When facts and circumstances indicate that the carrying value of long-lived assets may not be recoverable, management assesses the recoverability of the carrying value by preparing estimates of revenues and the resulting gross profit and cash flows. These estimated future cash flows are consistent with those CoolTech uses in its internal planning. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, it recognizes an impairment loss. The impairment loss recognized, if any, is the amount by which the carrying amount of the asset (or asset group) exceeds the fair value. Cool Technologies may use a variety of methods to determine the fair value of these assets, including discounted cash flow models, which are consistent with the assumption’s management believes hypothetical marketplace participants would use. The Company has not recorded any impairment expense on its long-lived assets as of December 31, 2022. 

Debt – original issue discount

When the Company issues notes payable with a face value higher than the proceeds it receives, CoolTech records the difference as a debt discount and amortizes it through interest expense over the life of the underlying note payable.

Derivative financial instruments

When the Company issues debt that contains a conversion feature, it first evaluates whether the conversion feature meets the requirements to be treated as a derivative: a) one or more underlying, typically the price of the Company’s stock; b) one or more notional amounts or payment provisions or both, generally the number of shares upon conversion; c) no initial net investment, which typically excludes the amount borrowed; and d) net settlement provisions, which in the case of convertible debt generally means the stock received upon conversion can be readily sold for cash. There are certain scope exceptions from derivative treatment, but these typically exclude conversion features that provide for a variable number of shares.

When Cool Technologies issues warrants to purchase its common stock, the Company must evaluate whether they meet the requirements to be treated as a derivative. Generally, warrants would be treated as a derivative if the provisions of the warrant agreement create uncertainty as to a) the number of shares to be issued upon exercise; or b) whether shares may be issued upon exercise. 

If the conversion feature within convertible debt or warrants meets the requirements to be treated as a derivative, CoolTech estimates the fair value of the derivative liability using the Black-Scholes Option Pricing Model upon the date of issuance. If the fair value of the derivative liability is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the fair value of the derivative liability is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the carrying amount of the debt. The derivative liability is revalued at the end of each reporting period and any change in fair value is recorded as a change in fair value in the consolidated statements of operations. The debt discount is amortized through interest expense over the life of the debt. Derivative instrument liabilities and the host debt agreement are classified on the consolidated balance sheets as current or non-current based on whether settlement of the derivative instrument could be required within twelve months of the balance sheet date.

The accounting treatment of derivative financial instruments requires that the Company record the embedded conversion option and warrants at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. As a result of entering into warrant agreements, for which such instruments contained a variable conversion feature with no floor, the Company has adopted a sequencing policy in accordance with Accounting Standards Codification or ASC 815-40-35-12 “Derivatives and Hedging” (which provides comprehensive guidance on derivative and hedging transactions) whereby all future instruments may be classified as a derivative liability with the exception of instruments related to share-based compensation issued to employees or directors.

Revenue 

The Company recognizes revenue in accordance with the Financial Accounting Standards Board (“FASB”) ASC Topic 606, “Revenue from Contracts with Customers” and all related amendments. The core principle of Topic 606 requires revenue recognition to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Topic 606 requires identifying the contract, identifying the performance obligations, determining the transaction price, allocating the transaction price to performance obligations and recognizing the revenue upon delivery of product (“satisfaction of the performance obligations”).

Research and development costs

Internal costs related to research and development efforts on existing or potential products are expensed as incurred. External costs incurred for intangible assets, such as attorney fees for patents, are capitalized.

Share-based payments

All the Company’s share-based awards are classified as equity. CoolTech does not have any liability classified share-based awards. Each warrant or stock option is exercisable for one share of common stock.

Nonemployees – Cool Technologies may enter into agreements with nonemployees to make share-based payments in return for services. These payments may be made in the form of common stock or common stock warrants. The Company recognizes expense for fully vested warrants at the time they are granted. For awards with service or performance conditions, CoolTech generally recognizes expense over the service period or when the performance condition is met; however, there may be circumstances in which it determines that the performance condition is probable before the actual performance condition is achieved. In such circumstances, the amount recognized as expense is the pro rata amount, depending on the estimated progress towards completion of the performance condition. Nonemployee share-based payments are measured at fair value, based on either the fair value of the equity instrument issued or on the fair value of the services received. Typically, it is not practical to value the services received, so the Company determines the fair value of common stock grants based on the price of the common stock on the measurement date (which is the earlier of the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, if there are sufficient disincentives to ensure performance, or the date at which the counterparty’s performance is complete), and the fair value of common stock warrants using the Black-Scholes option-pricing model (“Black-Scholes”). Cool Technologies uses historical data to estimate the expected price volatility, the expected stock option life and expected forfeiture rate. The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of grant for the estimated life of the stock option. For awards that are recognized when a performance condition is probable, the fair value is estimated at each reporting date. The cost ultimately recognized is the fair value of the equity award on the date the performance condition is achieved. Accordingly, the expense recognized may change between interim reporting dates and the date the performance condition is achieved. 

Employees – Cool Technologies issues two types of common stock options to employees: 1) fully-vested at the time of grant and 2) market price-based vesting. The Company recognizes expense for fully vested stock options on the date of grant at the estimated fair value of the options using Black-Scholes. CoolTech recognizes expense for market price-based options at the estimated fair value of the options using the lattice-based option valuation model (“Lattice Model”) over the estimated life of the options used in the Lattice Model. The Company uses historical data to estimate the expected price volatility, the expected stock option life and expected forfeiture rate. The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of grant for the estimated life of the stock option.

Modification of share-based payment awards – In the event Cool Technologies modifies the terms of a non-vested share-based payment award, it would incur additional expense for the excess of the fair value of the modified share-based payment award, measured at the date of modification, over the fair value of the original share-based payment award. The incremental expense would be recognized ratably over the remaining vesting period.

Sale of common stock with warrants – When the Company sells common stock it may also issue common stock warrants. CoolTech treats the value of these warrants as equity issuance costs. Accordingly, the value of the common stock warrants is included as a component of additional paid-in capital upon recording the sale of common stock.

Cashless exercise – Most of the common stock warrants and stock options may be exercised on a cashless basis. The number of shares of common stock received upon exercising on a cashless basis is based on a) the volume weighted-average price of the common stock for three trading days immediately preceding the exercise date; b) the exercise price of the warrant or option; and c) the number of common shares issuable under the instrument.

Income taxes

Cool Technologies recognizes deferred income tax assets and liabilities for the expected future tax consequences of temporary differences between the income tax and financial reporting carrying amount of the Company’s assets and liabilities. The Company monitors its deferred tax assets and evaluates the need for a valuation allowance based on the estimate of the amount of such deferred tax assets that it believes does not meet the more-likely-than-not recognition criteria. CoolTech also evaluates whether it has any uncertain tax positions and would record a reserve if management believes it is more-likely-than-not their position would not prevail with the applicable tax authorities. The Company’s assessment of tax positions as of December 31, 2022, and 2021, determined that there were no material uncertain tax positions.

UPT is a limited liability company (“LLC”), which is treated as a partnership for income tax purposes, where all tax obligations flow through to the owners of the LLC during the period in which income taxes were incurred. 

Fair value of financial instruments

Cool Technologies financial instruments include cash and cash equivalents, accounts payable, accrued liabilities, and debt. The carrying value of these financial instruments is considered to be representative of their fair value due to the short maturity of these instruments. The carrying amount of the debt approximates fair value, because the interest rates on these instruments approximate the interest rate on debt with similar terms available to the Company. CoolTech’s derivative liabilities were adjusted to fair market value at the end of each reporting period, using Level 3 inputs.

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities.

Recently Issued Accounting Pronouncements