CCTC Catalyst Crew Technologies Corporation (PK)

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 2019 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 nine months ended September 30, 2020 and 2019, 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 nine months ended September 30, 2020 and 2019 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 September 30, 2020 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 nine months ended September 30, 2020 and 2019, the Company recognized $86,245 and $92,182 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 $3,431,536 and $3,090,052 as of September 30, 2020 and December 31, 2019, 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 September 30, 2020 has still not earned revenue, the obligation to Mr. Ponce de Leon of $1,643,793 is currently in default and the amount includes $466,147 in accrued interest. It is the Company’s intention to pay Mr. Ponce de Leon immediately upon receiving revenue.

Convertible Debt

During the nine months ended September 30, 2020, the Company borrowed $47,300, net of beneficial conversion features of $4,150, and issued 1,250,000 shares of common stock in conversion of $100,000 principal 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 September 30, 2020, and December 31, 2019, the Company had outstanding short-term convertible notes payable of $8,844,692 and $6,594,469, net of unamortized discounts of $497,406 and $658,922, respectively and outstanding long-term convertible notes payable of $981,753 and $2,626,753, net of unamortized discounts of $461,045 and $1,558,289, respectively.

The convertible notes payable are convertible at $0.06 per share, which was a discount to the market price on the dates of issuance. Amortization expense related to debt discounts on convertible debt for the nine months ended September 30, 2020 and 2019 was $1,262,910 and $893,835, respectively.

Nonconvertible Debt

As of September 30, 2020, and December 31, 2019, the Company had outstanding notes payable of $705,000 and $675,000, respectively.

As of September 30, 2020, and December 31, 2019, the Company had outstanding advances payable to an officer of the Company of $79,600 and $79,600, respectively. The advances payable are unsecured, bear no interest and are due on demand.

Non-Binding License Agreement – related party

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 two million tons per annum. The remainder of the license fee will be due upon the signing of a definitive license agreement. 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

Accounts Payable

In January 2020, following mediation with a vendor of an outstanding balance, the Company successfully won the case and the balance of $131,539 was waived. The company had previously recognized the $131,539 balance in accounts payable, which was reversed in 2020 and recognized as a gain on debt settlement.

Notes Payable

As of September 30, 2020, and December 31, 2019, 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

In accordance with Accounting Series Codification 480, Distinguishing Liabilities from Equity, the Company evaluates its hybrid convertible debt instruments with unconditional obligations allowing settlement by issuing a variable number of its equity shares to determine proper classification and accounting. The Company classifies the following hybrid convertible debt instruments as a liability upon being convertible at the option of the holders due to the conversion terms being based on fixed monetary amounts known at inception, in this case, settlement with a variable number of the Company’s equity shares. As such, conversion option and are carried as a liability at fair value at each balance sheet date with a re-measurement reported as a change in fair value of share-settled debt in other (income) expense in the accompanying condensed statements of operations.

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 was originally due January 18, 2019. Between January 2019 and March 2020, the due date on the note was extended multiple times in exchange for a total of $85,000 debt extension fee added to the principal of the note, the addition of a conversion feature and $20,000 in extension fees. 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 May 2020, the remaining note principal of $135,000 note and accrued interest totaling $32,881 were converted into 6,432,216 shares of common stock. During the nine months ended September 30, 2020 and 2019, the Company recognized $0 and $8,804 in in debt discount amortization expense, respectively.

During February 2019, the Company issued a convertible note payable in the amount of $315,000. The convertible note payable was 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 was convertible at any time 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. Between February 2019 and June 2020, the Company extended the note conversion feature multiple times through April 15, 2020, paying two payments of $25,000 each, with a total of $30,000 applied to principal, $20,000 to debt extension fees, and incurring prepayment penalties added to principal of $7,500. During April 2020, the note became convertible at the option of the holder. During July 2020, the Company issued a total of 11,700,908 shares of common stock for the conversion of $95,000 in note principal.

The fair value of the discount conversion feature on the remaining principal balance was $43,260 as of September 30, 2020. As of September 30, 2020 and December 31, 2019, the balance on the convertible note payable was $71,589 and $145,829, respectively. During the nine months ended September 30, 2020 and 2019, the Company recognized $8,671 and $2,548 in debt discount amortization expense, respectively.

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. Between May 2019 and June 2020, the Company extended the note conversion feature multiple times through April 15, 2020, paying payments totaling $187,500, with a total of $140,000 applied to principal, $10,000 to interest, $37,500 to debt extension fees and incurring prepayment penalties added to principal of $35,000. Between May and June 2020, the Company issued a total of 12,509,667 shares of common stock for the conversion of $150,000 in note principal. On May 27, 2020, the Company incurred a 25% late fee of $39,375, which was added to the principal balance. During April 2020, the note became convertible at the option of the holder. The fair value of the discount conversion feature on the remaining principal balance was $31,024 as of September 30, 2020.

As of September 30, 2020, and December 31, 2019, the balance on the convertible note payable was $63,083 and $202,500, respectively. During the nine months ended September 30, 2020 and 2019, the Company recognized $4,863 and $4,486 in debt discount amortization expense, respectively.

During August 2019, the Company issued a convertible note payable in the amount of $157,500. The convertible note payable is due one year from the date of issuance, has an original issuance discount of $7,500, 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.

Between January and March 2020, the Company extended the note conversion feature through April 15, 2020, paying $37,500, with $30,000 applied to principal, $7,500 to debt extension fees and incurring prepayment penalties added to principal of $7,500. During April 2020, the note became convertible at the option of the holder. The fair value of the discount conversion feature on the remaining principal balance was $115,850 as of September 30, 2020. On August 10, 2020, the Company incurred a 25% late fee of $33,837, which was added to the principal balance.

As of September 30, 2020, and December 31, 2019, the balance on the convertible note payable was $227,187 and $135,000, respectively. During the nine months ended September 30, 2020 and 2019, the Company recognized $4,459 and $1,151 in debt discount amortization expense, respectively.

During September 2019, the Company issued two convertible notes payable totaling $270,000, or $135,000 each. The convertible notes payable were due one year from the date of issuance, each had an original issuance discount of $11,500, accrued interest at the rate of 6% per annum, unsecured and were 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 April 2020, the notes became convertible at the option of the holder. Between May and June 2020, the Company repaid $12,500 in principal in cash and the holders elected to convert the remaining principal of $257,000 and $12,050 in accrued interest for 18,002,387 shares of the Company’s common stock. As of September 30, 2020, and December 31, 2019, the balance on the convertible notes payable was $0 and $270,000, respectively. During the nine months ended September 30, 2020 and 2019, the Company recognized $16,888 and $0 in debt discount amortization expense, respectively.

During November 2019, the Company issued a convertible note payable in the amount of $336,000. The convertible note payable is due one year from the date of issuance, has an original issuance discount of $45,000, 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 ten trading days immediately preceding the conversion. During May 2020, the note became convertible at the option of the holder. Between July and September 2020, the note holder elected to convert $201,000 of principal and $14,642 in accrued interest for 32,662,941 shares of the Company’s common stock.

The fair value of the discount conversion feature on the remaining principal balance was $129,986 as of September 30, 2020. As of September 30, 2020, and December 31, 2019, the balance on the convertible note payable was $264,986 and $336,000, respectively. During the nine months ended September 30, 2020, the Company recognized $33,781 in debt discount amortization expense.

During December 2019, the Company issued a convertible note payable in the amount of $220,000. The convertible note payable is due one year from the date of issuance, has an original issuance discount of $26,000, accrues interest at the rate of 7% 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 June 2020, the note became convertible at the option of the holder. Between July and September 2020, the note holder elected to convert $169,923 of principal for 22,600,000 shares of the Company’s common stock.

The fair value of the discount conversion feature on the remaining principal balance was $57,314 as of September 30, 2020. As of September 30, 2020 and December 31, 2019, the balance on the convertible note payable was $107,391 and $220,000, respectively. During the nine months ended September 30, 2020, the Company recognized $19,518 in debt discount amortization expense.

During January 2020, the Company issued a convertible note payable in the amount of $138,000. The convertible note payable is due one year from the date of issuance, has an original issuance discount of $3,000, accrues interest at the rate of 8% 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 July 2020, the note became convertible at the option of the holder.

The fair value of the discount conversion feature on the remaining principal balance was $134,401 as of September 30, 2020. As of September 30, 2020, the balance on the convertible note payable was $272,401. During the nine months ended September 30, 2020, the Company recognized $2,022 in debt discount amortization expense.

During February 2020, the Company issued a convertible note payable in the amount of $440,000. The convertible note payable is due one year from the date of issuance, has an original issuance discount of $40,000, accrues interest at the rate of 5% 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 August 2020, the note became convertible at the option of the holder.

The fair value of the discount conversion feature on the remaining principal balance was $422,714 as of September 30, 2020. As of September 30, 2020, the balance on the convertible note payable was $862,713. During the nine months ended September 30, 2020, the Company recognized $38,959 in debt discount amortization expense.

During April 2020, the Company issued a convertible note payable in the amount of $247,500. The convertible note payable is due one year from the date of issuance, has an original issuance discount of $22,500, accrues interest at the rate of 5% 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. 

As of September 30, 2020, the balance on the convertible note payable was $247,500. During the nine months ended September 30, 2020, the Company recognized $10,418 in debt discount amortization expense.

During the three months ended September 30, 2020, the Company paid $20,000 as a debt financing fee on the above financings.

During the nine months ended September 30, 2020, the Company recognized $934,548 in fair value losses as a result of the conversion options on the above mentioned convertible debt.

NOTE 6: STOCKHOLDERS’ EQUITY

Common Stock

During January 2020, in conjunction with the issuance of a convertible note payable to a related party, the Company recognized a $4,150 debt discount to additional paid-in capital.

During April 2020, the Company issued 1,250,000 shares of common stock for the conversion of $100,000 in principal of a convertible note payable due to a related party.

Between May and September 2020, the Company issued a total of 115,370,419 shares of common stock for the conversion of $1,072,739 in principal, $69,758 in accrued interest and $4,750 in conversion fees on eight convertible notes payable.

During July and August 2020, the Company issued 479,123 shares of common stock for services valued at $7,859 and 13,275,153 shares of common stock to officers and directors for bonuses valued at $172,549. Common stock issued for services was valued at the market prices of the Company’s common stock on the date of grant.

Common Stock Warrants

There were no common stock warrants issued during the nine months ended September 30, 2020 or the year ended December 31, 2019. The following table presents the common stock warrant activity during the nine months ended September 30, 2020:

The intrinsic value of the exercisable warrants as of September 30, 2020 was $0.