NewStream Energy Technologies Group Inc - Quarter Report: 2019 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: June 30, 2019

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________________ to ____________________.

Commission file number:  000-50053

CLEAN COAL TECHNOLOGIES, INC.

 (Exact name of small business issuer as specified in its charter)

(646) 727-4847

(Issuer’s telephone number)

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

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), Yes ☒  and (2) has been subject to such filing requirements for the past 90 days.  No ☒

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐           Accelerated filer ☐           Non-accelerated filer ☒           Smaller reporting company ☒           Emerging growth company ☐

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

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

The number of shares outstanding of Registrant’s Common Stock as of Date: August 12, 2019: 179,472,218  

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

The accompanying unaudited financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission and, therefore, do not include all information and footnotes necessary for a complete presentation of our financial position, results of operations, cash flows, and stockholders’ deficit in conformity with generally accepted accounting principles. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature.

Clean Coal Technologies, Inc.

Balance Sheets

(Unaudited)

The accompanying notes are an integral part of these unaudited financial statements.

Clean Coal Technologies, Inc.

Statements of Operations

(Unaudited)

The accompanying notes are an integral part of these unaudited financial statements.

 Clean Coal Technologies, Inc.

Unaudited Statements of Changes in Stockholders’ Deficit

For the Three Months Ended June 30, 2018 and 2019

The accompanying notes are an integral part of these unaudited financial statements.

Clean Coal Technologies, Inc.

Unaudited Statements of Changes in Stockholders’ Deficit

For the Six Months Ended June 30, 2018 and 2019

The accompanying notes are an integral part of these unaudited financial statements.

Clean Coal Technologies, Inc.

Statements of Cash Flows

(Unaudited)

The accompanying notes are an integral part of these unaudited financial statements.

Clean Coal Technologies, Inc.

Notes to Financial Statements

(Unaudited)

NOTE 1: BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of Clean Coal Technologies, Inc. (“Clean Coal”, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in Clean Coal’s Annual Report on Form 10-K filed with the SEC. In the opinion of management, the accompanying unaudited interim financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial position and the results of operations for the interim period presented herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year or for any future period. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for fiscal 2018 as reported in the Form 10K have been omitted.

Net Income (Loss) per Common Share

Basic net income (loss) per share is computed on the basis of the weighted average number of common shares outstanding during each year. Diluted net income (loss) per share is computed similar to basic net income (loss) per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. In periods where losses are reported, the weighted-average number of common stock outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive.

For the six months ended June 30, 2019 and 2018, the Company realized net losses, resulting in outstanding warrants and convertible debt having an antidilutive effect. All potentially dilutive instruments were excluded from the calculation of diluted net loss per share as their inclusion would have been anti-dilutive.

The following table summarizes the potential shares of common stock that were excluded from the computation of diluted net loss per share for the six months ended June 30, 2019 and 2018 as such shares would have had an anti-dilutive effect:

Recent Accounting Pronouncements

The Company has implemented all new accounting pronouncements that are in effect and that may impact its financial statements. The Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.

NOTE 2: GOING CONCERN

The accompanying financial statements have been prepared on a going concern basis of accounting which contemplates continuity of operations, realization of assets, liabilities, and commitments in the normal course of business. The accompanying financial statements do not reflect any adjustments that might result if Clean Coal is unable to continue as a going concern. Clean Coal has an accumulated deficit and a working capital deficit as of June 30, 2019 with no significant revenues anticipated for the near term. Management believes Clean Coal will need to raise capital in order to operate over the next 12 months. As shown in the accompanying financial statements, Clean Coal has also incurred significant losses from operations since inception. Clean Coal’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability. Clean Coal has limited capital with which to pursue its business plan. There can be no assurance that Clean Coal’s future operations will be significant and profitable, or that Clean Coal will have sufficient resources to meet its objectives. These conditions raise substantial doubt as to Clean Coal’s ability to continue as a going concern. Management may pursue either debt or equity financing or a combination of both, in order to raise sufficient capital to meet Clean Coal’s financial requirements over the next twelve months and to fund its business plan. There is no assurance that management will be successful in raising additional funds.

NOTE 3: RESEARCH AND DEVELOPMENT

Research and development expenses include salaries, related employee expenses, facility lease expense, research expenses and consulting fees. All costs for research and development activities are expensed as incurred. In addition, the Company expenses the costs of licenses of patents and the prosecution of patents until the issuance of such patents and the commercialization of related products is reasonably assured. During the six months ended June 30, 2019 and 2018, the Company recognized $39,182 and $224,724 of research and development costs, respectively.

NOTE 4: RELATED PARTY TRANSACTIONS

Wages and bonus payable to related parties

Accruals for salary and bonuses to officers and directors are included in accrued liabilities in the balance sheets and totaled $2,818,596 and $2,719,653 as of June 30, 2019 and December 31, 2018, respectively. As part of the separation agreement with Mr. Ponce de Leon, the Company agreed to pay him all his accrued salary within two years but agreed to pay him $200,000 by November 2015 out of revenues earned. As the Company did not earn revenue in 2015 and as at June 30, 2019 has still not earned revenue, the obligation to Mr. Ponce de Leon of $1,545,657 is currently in default and the amount includes $318,957 in accrued interest. It is the Company’s intention to pay Mr. Ponce de Leon immediately upon receiving revenue.

During May 2019, the Company issued two of its officers a total of 4,408,000 shares of common stock for services valued at $440,800. The shares are not forfeitable and considered to be earned as of the date of issuance.

Convertible Debt

During the six months ended June 30, 2019, the Company borrowed an aggregate of $165,000, net of beneficial conversion features of $78,159, under convertible notes payable from a Company with an interest owned by a significant stockholder. The convertible notes are secured by assets and the common stock of the Company, bear interest at 12% per annum and are due three years from the dates of issuance. As of June 30, 2019 and December 31, 2018, the Company had outstanding short-term convertible notes payable of $5,495,487 and $4,660,381, net of unamortized discounts of $339,231 and $139,977, respectively and outstanding long-term convertible notes payable of $1,545,879 and $5,026,800, net of unamortized discounts of $2,446,584 and $3,154,012, respectively. The convertible notes payable are convertible at $0.06 per share, which was a discount to the market price on the date of issuance. Amortization expense related to debt discounts on convertible debt for the six months ended June 30, 2019 and 2018 was $589,000 and $724,675, respectively.

Nonconvertible Debt

During the six months ended June 30, 2019, the Company received $385,000 from the issuance of related party notes payable. The notes are unsecured, due on demand and do not accrue interest. As of June 30, 2019 and December 31, 2018, the Company had outstanding notes payable of $470,000 and $85,000, respectively.

During the six months ended June 30, 2019, the Company received $26,000 from an officer and repaid $15,000. The advances are unsecured, due on demand and do not accrue interest. As of June 30, 2019 and December 31, 2018, the Company had outstanding advances payable to an officer of the Company of $12,600 and $1,600, respectively.

Customer Deposit

During July 2017, the Company entered into a non-binding agreement to explore the opportunity of engaging in a license of Clean Coal Pristine M technology. As part of the non-binding agreement, in September 2017, the Company received a non-refundable deposit of $100,000, subject to application to any future license agreement, from Wyoming New Power. The license agreement is for 2 million ton per annum agreement. The remainder of the license fee will be due upon the signing of a definitive license agreement expected in the second half of 2019. Wyoming New Power is a related party because it is controlled by an entity that has a significant interest in Clean Coal Technologies, Inc.

NOTE 5: DEBT

Notes Payable

As of June 30, 2019 and December 31, 2018, the Company had outstanding notes payable to former affiliates of the Company of $413,185 and $413,185, respectively. The notes payable are unsecured, bear no interest and are due on demand.

Convertible Debt

During August 2018, the Company issued a convertible note payable in the amount of $160,000. The convertible note payable is due one year from the date of issuance, has an original issuance discount of $10,000, accrues interest at the rate of 10% per annum, is unsecured and is convertible after 180 days into shares of the Company’s common stock at a discount of 65% of the lowest trading price for the Company’s common stock during the twenty trading days immediately preceding the conversion.

During the six months ended June 30, 2019, the Company incurred $64,000 in debt extension fees, the entire balance of the note was repaid and the Company recognized the remaining $6,356 in debt discount amortization expense.

During October 2018, the Company borrowed $345,000, net of original debt discount of $45,000 under a note payable bearing interest at 7% per annum, unsecured and due January 18, 2019. During January 2019, the due date on the note was extended to April 18, 2019 in exchange for a $55,000 debt extension fee added to the principal of the note and the addition of a conversion feature. The conversion feature allowed the holder to convert the principal and accrued interest into shares of the Company’s common stock at a discount of 70% of the lowest trading price for the Company’s common stock during the twenty trading days immediately preceding the conversion. During April 2019, the note and conversion right were extended until May 31, 2019 in exchange for a $10,000 extension fee and a $15,000 principal payment. During May 2019, the note and conversion right were extended until June 30, 2019 in exchange for a $10,000 extension fee and a $40,000 principal payment. During July and August 2019, the note was extended through August 30, 2019 (see Note 7).

As of June 30, 2019 and December 31, 2018, the balance on the convertible note payable was $345,000 and $345,000, respectively. During the six months ended June 30, 2019, the Company recognized the remaining $8,804 in amortization of the debt discount.

During February 2019, the Company issued a convertible note payable in the amount of $315,000. The convertible note payable is due one year from the date of issuance, has an original issuance discount of $15,000, accrues interest at the rate of 6% per annum, is unsecured and is convertible after 180 days into shares of the Company’s common stock at a discount of 65% of the lowest trading price for the Company’s common stock during the ten trading days immediately preceding the conversion.

During the six months ended June 30, 2019, the Company recognized $2,548 in debt discount amortization expense related to the issuance of the convertible note payable.

During May 2019, the Company issued a convertible note payable in the amount of $262,500. The convertible note payable is due one year from the date of issuance, has an original issuance discount of $12,500, accrues interest at the rate of 6% per annum, is unsecured and is convertible after 180 days into shares of the Company’s common stock at a discount of 65% of the lowest trading price for the Company’s common stock during the ten trading days immediately preceding the conversion.

During the six months ended June 30, 2019, the Company recognized $1,336 in debt discount amortization expense related to the issuance of the convertible note payable.

NOTE 6: STOCKHOLDERS’ EQUITY

Common Stock

During the six months ended June 30, 2019, the Company issued 636,364 shares of its common stock to consultants for services valued at $0.10 per share, or $63,637.

During the six months ended June 30, 2019, the Company issued 4,408,000 shares of its common stock to officers for bonuses at $0.10 per share, or $440,800.

Common Stock Options

A summary of common stock option activity for the six months ended June 30, 2019 is as follows:

The intrinsic value of the exercisable options as of June 30, 2019 was $0.

Common Stock Warrants

The following table presents the common stock warrant activity during the six months ended June 30, 2019:

The intrinsic value of the exercisable warrants as of June 30, 2019 was $421,037.

NOTE 7: SUBSEQUENT EVENTS

During July 2019, the note and conversion rights on a convertible note payable due June 30, 2019 were extended until July 30, 2019 in exchange for a $10,000 extension fee and a $40,000 principal payment (see Note 5).

During August 2019, the note and conversion rights on a convertible note payable due July 30, 2019 were extended until August 30, 2019 in exchange for a $10,000 extension fee and a $40,000 principal payment (see Note 5).

Management advanced a total of $50,000 as a loan to the company. The loan does not accrue interest and is payable on demand.

In August the company entered into a convertible note for $157,500 of which $7,500 is OID, with an existing debt holder. The note is for a duration of one year and has interest of 6%.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS AND FACTORS THAT MAY AFFECT FUTURE RESULTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they do not materialize or prove correct, could cause our results to differ materially from those expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including, but not limited to, statements concerning: our plans, strategies and objectives for future operations; new products or developments; future economic conditions, performance or outlook; the outcome of contingencies; expected cash flows or capital expenditures; our beliefs or expectations; activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future; and assumptions underlying any of the foregoing. Forward-looking statements may be identified by their use of forward-looking terminology, such as “believes,” “expects,” “may,” “should,” “would,” “will,” “intends,” “plans,” “estimates,” “anticipates,” “projects” and similar words or expressions. You should not place undue reliance on these forward-looking statements, which reflect our management’s opinions only as of the date of the filing of this Quarterly Report on Form 10-Q and are not guarantees of future performance or actual results

Overview 

Over the past decade, Clean Coal Technologies, Inc. has developed processes that address what we believe are the key technology priorities of the global coal industry. We currently have three processes in our intellectual property portfolio:

The original process, called Pristine, is designed to remove moisture and volatile matter, rendering a high-efficiency, cleaner thermal coal.  The process has been tested successfully on bituminous and subbituminous coals, and lignite from various parts of the United States and from numerous countries around the world.

Our second process, called Pristine-M, is a low-cost coal dehydration technology. In tests, this process has succeeded in drying coal economically and stabilizing it using volatile matter released by the feed coal. Construction of our coal testing plant was completed in December 2015 and was successfully tested through April 2016 at AES Coal Power Utility in Oklahoma. Additional tests commenced and were completed in the fourth quarter of 2017. This test facility has been moved from AES to Wyoming where reassembly has commenced and testing of international coal is expected in the fourth quarter of 2019. Changes identified to the process by the University of Wyoming and our EPC contractors will be included in the reassembly and it is expected to provide a higher quality end product with a lower capital cost for a commercial unit.

Our third process, called Pristine-SA, is designed to eliminate 100% of the volatile matter in the feed coal and to achieve stable combustion by co-firing it with biomass or natural gas.  The process is expected to produce a cleaner fuel that eliminates the need for emissions scrubbers and the corollary production of toxic coal ash.  We anticipate that treated coal that is co-fired with other energy resources will burn as clean as natural gas.

Anticipated Benefits of the Technology:

Successful testing of the Pristine M process resulted in an increase in BTU of the processed coal and a reduction in moisture content making it less expensive to transport (as moisture has been removed) with the end product being a dust free stabilized enhanced coal which we believe will address the issue of coal dust pollution during transportation.

Development Status: 

Pristine process. Pristine process successfully lab tested on small scale and through advanced computer modeling. As at August, 2019, various aspects of the Pristine process were successfully tested at our test facility at the AES coal Power plant in Oklahoma as part of the overall testing of Pristine M. The second-generation facility in Wyoming is expected to perform a more detailed testing of the Pristine process.

Pristine-M. Testing of the Pristine M process on Powder River Basin coal at the AES facility in Oklahoma was completed in December 2017. The Pristine M process was successfully tested and the process, engineering and science were independently proven. The test facility was moved from the AES location to Wyoming where reassembly commenced in Q2 and testing of international coal is expected in Q4 2019. Over several months in 2018 and early 2019 the University of Wyoming independently validated the Pristine M process in their laboratory.

Pristine-SA process. Pristine SA process analysis is at a very early stage. Further research and development is expected using the test facility at its permanent location in Wyoming.

Business Outlook

Employees

As of June 30, 2019, we had two full-time executives. President and CEO Robin Eves, Chief Operations Officer and Aiden Neary, Chief Financial Officer have written employment agreements. Messrs. Eves and Neary received no compensation for their participation on the Board of Directors.

Factors Affecting Results of Operations

Our operating expenses include the following:

Results of Operations

We had no direct revenues for the six months ended June 30, 2019 or the year ended December 31, 2018. In 2017, we received $100,000 as a non-refundable deposit on a two million ton license agreement from Wyoming New Power, a related party. The definitive license agreement is expected to be completed in the first quarter of 2019.  In the year ended December 31, 2012, we have received an initial license fee of $375,000 from Jindal paid pursuant to the signing of our coal testing plant construction contract. The balance of $375,000 will be due upon the successful review and assessment of the testing completed in December 2017 at AES, currently anticipated in the third quarter of fiscal 2019. We do not anticipate any significant royalty fees for approximately 12 months thereafter.

For the Three Months Ended June 30, 2019 and June 30, 2018

Revenues

We have generated no revenues for the three months ended June 30, 2019 and 2018. During the third quarter of 2017, we received a customer deposit of $100,000 towards license revenues from Wyoming New Energy. At June 30, 2019, the $100,000 is recorded as a customer deposit payable until license acceptance and delivery.

Operating Expenses

Our operating expenses for the three months ended June 30, 2019 totaled $863,474, compared to $641,479 for the three month period in 2018. The primary component of the operating expenses for the three months ended June 30, 2019 and 2018 was general and administrative expenses, recognizing $809,419, compared to $747,080 for the three months ended June 30, 2018. The increase in general administrative is mainly due to the issuance of common stock for officer bonuses totaling $440,800. We also recognized a $22,672 decrease in consulting services and a $138,341 decrease in research and development expenses compared to the three months ended June 30, 2018.

Other Income and Expenses

During the three months ended June 30, 2019, we recognized total other expense of $649,157 compared to total other expense of $396,467 for the three months ended June 30, 2018. The increase is mainly due to a $232,690 increase in interest expense, as well as the recognition of $20,000 in debt standstill and extension expenses during the three months ended June 30, 2019, there were no such debt extension and standstill expenses in the 2018 comparative period.

Net Income/Loss

For the three months ended June 30, 2019, we had net loss of $1,512,631, compared to a net loss of $1,037,946 for the three months ended June 30, 2018. The increase in net loss is mainly due to the increase in other expense from interest as discussed above.

For the Six Months Ended June 30, 2019 and June 30, 2018

Revenues

We have generated no revenues for the six months ended June 30, 2019 and 2018. During the third quarter of 2017, we received a customer deposit of $100,000 towards license revenues from Wyoming New Energy. At June 30, 2019, the $100,000 is recorded as a customer deposit payable until license acceptance and delivery.

Operating Expenses

Our operating expenses for the six months ended June 30, 2019 totaled $1,248,466 compared to $1,080,979 for the six month period in 2018, or an increase of $167,487. The primary component of the increase was the recognition of a $320,669 gain on the settlement of accounts payable and a gain of $18,300 on the sale of assets during the six months ended June 30, 2018, there were no such gains in the current 2019 period. Also, there was a $42,259 increase in general and administrative expenses. The decrease in gains were partially offset by decreases of $185,542 in research and development expenses and $28,199 consulting services in the six months ended June 30, 2019 compared to the six months ended June 30, 2018.

Other Income and Expenses

During the six months ended June 30, 2019, we recognized total other expense of $1,406,066, compared to $1,338,168 for the six months ended June 30, 2018. The $67,898 increase is mainly due to a $139,000 increase in debt standstill and extension fees during the six months ended June 30, 2019 compared to the six months ended June 30, 2018, partially offset by a $71,102 decrease in interest expense for the six months ended June 30, 2019 compared to the six months ended June 30, 2018.

Net Income/Loss

For the six months ended June 30, 2019, we had net loss of $2,654,532, compared to $2,419,147 for the six months ended June 30, 2018. The $235,385 increase in net loss is mainly due to the $167,487 increase in operating expenses and $67,898 increase in other expenses, as discussed above.

We anticipate losses from operations will increase during the next three months due to costs associated with moving the test plant to a permanent location, as well as anticipated increased payroll expenses as we add necessary staff and increases in legal and accounting expenses associated with maintaining a reporting company. We expect that we will continue to have net losses from operations until revenues from operating facilities become sufficient to offset operating expenses, unless we are successful in the sale of licenses for our technology once the coal testing plant testing is complete.

Liquidity and Capital Resources

We have generated minimal revenues since inception. We have obtained cash for operating expenses through advances and/or loans from affiliates and stockholders, the sale of common stock, the issuance of loans and convertible debentures 

Net Cash Used in Operating Activities. Our primary source of operating cash during the six months ended June 30, 2019, was borrowings on related party debt, third party debt and convertible debt. Our primary uses of funds in operations were the completion of the construction of the test facility including the testing of the plant, the payment of professional and consulting fees and general operating expenses.

Net cash used in operating activities, was $891,516 for the six months ended June 30, 2019 compared to $1,562,645 for the same period in 2018. The decrease is mainly a result of a net 536,622 increase in accounts payable and accrued expenses, partially offset by a $235,385 increase in net loss during the six months ended June 30, 2019 compared to the 2018 period. Adjustment items to reconcile net income to net cash used in operating activities for the six months ended June 30, 2019 consisted of amortization of debt discounts of $605,377, common stock issued for services and bonuses of $504,437, amortization of lease assets of $6,000 and debt extension fees of $55,000.

Net Cash Used In Investing Activities. Net cash used in investing activities for the six months ended June 30, 2019 and 2018 was $0 and $17,700, respectively. Cash used in investing activities in 2018 is from $36,000 in cash paid for lease asset, partially offset by $18,300 from the sale of assets.

Net Cash Provided by Financing Activities. Net cash provided by financing activities during the six months ended June 30, 2019 totaled $871,000, $165,000 of which was from the issuance of convertible notes payable to a related party, offset by $25,000 principal payments, compared to $1,582,300 in cash received from the issuance of related party convertible notes payable during the six months ended June 30, 2018. During the six months ended June 30, 2019, borrowings on convertible notes was $550,000, offset by payments on related party notes of $215,000. During the six months ended June 30, 2019, borrowings on related party notes was $411,000, offset by payments on related party notes of $15,000, compared to $1,600 in the 2018 comparable period.

Cash Position and Outstanding Indebtedness

At June 30, 2019, we had $5,229 in current assets consisting of cash and $16,748,864 in liabilities which consist of $15,202,985 in current liabilities and $1,545,879 in long-term liabilities. Current liabilities consist primarily of accounts payable, accrued liabilities, short-term convertible and non-convertible debt and related party convertible and non-convertible debt.

At December 31, 2018, we had current assets of $25,745 consisting of cash and $14,703,444 in liabilities, which consisted of $12,830,656 in current liabilities and $1,872,788 in long-term liabilities. Current liabilities consist primarily of accounts payable, accrued liabilities, short-term convertible and non-convertible debt and related party convertible and non-convertible debt.

Our working capital deficit at June 30, 2019 and December 31, 2018 was $15,197,756 and $12,804,911, respectively.

Contractual Obligations and Commitments

 We lease office space in New York, NY on a month to month basis, at a monthly rate of $200 per month.

Our engineering consultants has tentatively estimated construction costs for each one million short ton coal complete cleaning facility of approximately $250 million (excluding land costs) or costs and for a similar size Pristine-M-only facility of approximately $35-40 million (excluding land costs). This number is expected to be reduced given proposed changes to the process design. All intellectual property rights associated with new art developed by our engineering consultants remain our property.

We are also actively pursuing technology license and royalty agreements in order to begin construction of other facilities without incurring the capital costs associated with the construction of future plants.

In November 2015, we entered into a month to month agreement with South of the Rose communication to manage our Investor Relations needs and manage social media requirements.

Construction of the coal testing plant was completed in 2015 and testing commenced in December 2015 at the AES Coal Power Utility in Oklahoma. The test facility was moved to Wyoming in Q1 2018. In Q2, 2019 the test facility began reassembly and is expected to be completed and testing coal in Q4 2019. The total cost of re-assembly including the additional components currently being fabricated is approximately $3,600,000. This includes the fabrication of a Rotary Kiln at a cost of approximately $1,000,000 which will enable extraction of by-products and further increase the BTU of the processed coal.

Based on our current operational costs and including the capital requirements for our plant re-assembly, we estimate we will need a total of approximately $6,000,000 to fund the Company for the fiscal year 2019 and an additional $4,000,000 to continue for the following fiscal year (2020) or until we start to receive license fees.

Off-Balance Sheet Arrangements

We have not and do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of establishing off-balance sheet arrangements or other contractually narrow or limited purposes. Therefore, we do not believe we are exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to changes in prevailing market interest rates affecting the return on our investments but do not consider this interest rate market risk exposure to be material to our financial condition or results of operations. We invest primarily in United States Treasury instruments with short-term (less than one year) maturities. The carrying amount of these investments approximates fair value due to the short-term maturities. Under our current policies, we do not use derivative financial instruments, derivative commodity instruments or other financial instruments to manage our exposure to changes in interest rates or commodity prices.

ITEM 4. CONTROLS AND PROCEDURES

As of June 30, 2019, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended. Based on this evaluation, management concluded that our financial disclosure controls and procedures were not effective due to our limited internal resources and lack of ability to have multiple levels of transaction review. There is a lack of appropriate segregation of duties within the Company, no control documentation being produced, and no one to review control documentation if it was being produced. As of June 30, 2019, we had two full time officers of the company.

There were no changes in internal control over financial reporting that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially effect, our internal controls and procedures. We do not expect to implement any changes to our controls and procedures until there is a significant change in our operations or capital resources.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

As part of the separation agreement with Mr. Ponce de Leon, the ex COO of the Company, the Company agreed to pay him his accrued salary of $1,226,711 within two years but agreed to pay him $200,000 by November 2015 out of revenues earned. As the Company did not earn revenue in 2015 and as at December 2017 has still not earned revenue, the obligation to Mr. Ponce de Leon is currently in default. It is the Company’s intention to pay Mr. Ponce de Leon immediately upon receiving revenue including any interest that has been accrued. As of June 30, 2019, the Company has accrued a total of $1,545,657 in accrued salary and interest.

ITEM 1A. RISK FACTORS

For information regarding risk factors, see “Part I. Item 1A. Risk Factors,” in our Annual Report on Form 10-K for the year ended December 31, 2018.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None. 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.