CCTC Catalyst Crew Technologies Corporation (PK)

Notes to Financial Statements

NOTE 1: NATURE OF BUSINESS

Clean Coal Technologies, Inc. (“CCTI”, the “Company”, “Clean Coal”, “we”, “our”), a Nevada corporation, is developing a patented multi-stage process that transforms coal with high levels of impurities, contaminants and other polluting elements into an exceptionally efficient, clean and inexpensive source of high energy, low polluting fuel.

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Accounting Methods

The Company’s financial statements are prepared using the accrual method in accordance with Generally Accepted Accounting Principles in the United State of America (“GAAP”). Certain amounts have been reclassified to conform to the current period’s presentation including Notes payable; Notes payable – related parties; short and long term Convertible debt, net of unamortized discounts; short and long term Convertible debt, net of unamortized discounts – related party.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure on contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

On January 1, 2018, the Company adopted Financial Accounting Standards Board (FASB) Accounting Series Update (ASU) 2014-09 Revenue from Contracts with Customers (“ASU 2014-09”) and all subsequent amendments to the ASU, which (i) creates a single framework for recognizing revenue from contracts with customers that fall within its scope and (ii) revises when it is appropriate to recognize a gain (loss) from the transfer of nonfinancial assets. The core principle of ASU 2014-09 is that revenue is recognized when the transfer of goods or services to customers occurs in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. ASU 2014-09 requires the disclosure of sufficient information to enable readers of the Company’s financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. ASU 2014-09 also requires disclosure of information regarding significant judgments and changes in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 provides two methods of retrospective application, full and modified retrospective. Full retrospective requires companies to apply ASU 2014-09 to each prior reporting period presented while modified retrospective requires companies to retrospectively apply ASU 2014-09 with the cumulative effect recognized at the date of initial application. The Company elected to adopt ASU 2014-09 using the modified retrospective application effective for the quarter ending March 31, 2018, with no impact the Company’s financial statements as it has no current contracts for revenue generating activities and a limited history of generating revenue from operations as discussed below.

The Company generated revenue in 2012 related to license fees received for the use of its technology. The license fee revenue requires no continuing performance on the Company’s part and is recognized upon receipt of the licensing fee and grant of the license.

During 2012, the Company granted a 25-year technology license agreement for a one-time license fee of $750,000. The first installment of the license fee of $375,000 has been collected pursuant to the signing of a coal testing plant construction contract and the balance of $375,000 will be due upon the successful testing of the coal testing plant, estimated sometime in fiscal 2020. In addition, under the technology license agreement, the Company will receive an on-going royalty fee of $1 per metric ton on all coal processed using the technology, up to $4,000,000 per annum. No revenue has been earned in 2020 or 2021.

Net Loss per Common Share

Basic net loss per share is computed on the basis of the weighted average number of common shares outstanding during each year. Diluted net loss per share is computed similar to basic net 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. The Company uses the “if-converted” method for calculating the earnings per share impact of outstanding convertible debentures, whereby the securities are assumed converted and an earnings per incremental share is computed. Options, warrants and their equivalents are included in EPS calculations through the treasury stock method. 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.

The calculation of basic and diluted net loss per share for the years ended December 31, 2021 and 2020 are as follows:

The following table summarizes the potential shares of common stock that were excluded from the computation of diluted net loss per share for the years ended December 31, 2021 and 2020 as such shares would have had an anti-dilutive effect:

Cash and Cash Equivalents

Clean Coal considers all highly liquid investments with an original maturity of three months or less to be cash equivalents for purposes of preparing its Statements of Cash Flows. There are no cash equivalents at December 31 2021 and 2020.

Federal Income Tax

Clean Coal files income tax returns in the U.S. federal jurisdiction, and the state of Nevada. Clean Coal’s policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carry forwards and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Net deferred tax assets consist of the following components as of December 31, 2021 and 2020:

The federal income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate of 21% to pretax income from continuing operations for the years ended December 31, 2021 and 2020 due to the following:

The Company had net operating losses of approximately $47,600,000 that begin to expire in 2029. Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations. Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years. In accordance with the statute of limitations for federal tax returns, the Company’s federal tax returns for the years 2017 through 2020 are subject to examination.

Property and Equipment

Property and equipment consists of furniture and fixtures and computer equipment, recorded at cost, depreciated upon placement in service over estimated useful lives ranging from three to five years on a straight-line basis. As of December 31, 2021 and 2020, Clean Coal had property and equipment with no net book value. Expenditures for normal repairs and maintenance are charged to expense as incurred.

Impairment of Long Lived Assets

In the event facts and circumstances indicate the carrying value of a long-lived asset, including associated intangibles, may be impaired, an evaluation of recoverability is performed by comparing the estimated future undiscounted cash flows associated with the asset to the asset’s carrying amount to determine if a write-down to market value or discounted cash flow is required.

Research and Development Costs

Research and development expenses include salaries, related employee expenses, research expenses and consulting fees. All costs for research and development activities are expensed as incurred. Clean Coal 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 years ended December 31, 2021 and 2020, the Company recognized $13,171 and $1,089,340 of research and development costs, respectively.

Stock-based Compensation

FASB ASC 718, Compensation—Stock Compensation, (ASC 718) established financial accounting and reporting standards for stock-based employee compensation plans. It defines a fair value based method of accounting for an employee stock option or similar equity instrument. Clean Coal accounts for stock-based compensation to employees in accordance with FASB ASC 718.

Derivative Financial Instruments

Clean Coal evaluates its convertible instruments to determine if those contracts or embedded components of those contracts qualify as derivative financial instruments to be separately accounted for in accordance with ASC 815 Derivatives and Hedging (“ASC 815”). The accounting treatment of derivative financial instruments requires that the Company record embedded conversion options and any related freestanding instruments 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. Conversion options are recorded as a discount to the host instrument and are amortized as amortization of debt discount on the statements of operations over the life of the underlying instrument. 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.

Sequencing Policy

Under ASC 815-40-35, Clean Coal follows a sequencing policy, whereby, in the event that reclassification of contracts from equity to assets or liabilities is necessary pursuant to ASC 815 due to the Company’s inability to demonstrate it has sufficient authorized shares as a result of certain securities with a potentially indeterminable number of shares, shares will be allocated on the basis of the earliest issuance date of potentially dilutive instruments, with the earliest grants receiving the first allocation of shares. Pursuant to ASC 815, issuance of securities to the Company’s employees or directors are not subject to the sequencing policy.

Fair Value of Financial Instruments

ASC 820, Fair Value Measurements (“ASC 820”) and ASC 825, Financial Instruments (“ASC 825”), requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. It establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. It prioritizes the inputs into three levels that may be used to measure fair value:

Level 1 - Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.

Level 2 - Level 2 applies to assets or liabilities for which there are inputs other than quoted prices that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.

Level 3 - Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

The carrying value of accounts payable and accrued expenses, notes payable and notes and convertible notes payable related parties approximate their fair value due to the short-term maturity of those items.

Certain convertible notes of the Company are required to be recorded at fair value on a recurring basis. Fair value is determined based on the price that would be received for an asset or paid to transfer a liability in an orderly transaction based on market participants. Factors that the Company considered when estimating the fair value of its convertible notes payable included quoted market prices of the Company’s common stock. The level of the convertible notes payable is considered as Level 1.

The following table presents the Company’s liabilities that are measured at fair value on a recurring basis, consistent with the fair value hierarchy provisions.

Convertible Debt Instruments

The Company follows ASC 480-10, Distinguishing Liabilities from Equity in its evaluation of the accounting for a hybrid instrument. A financial instrument that embodies an unconditional obligation, or a financial instrument other than an outstanding share that embodies a conditional obligation, that the issuer must or may settle by issuing a variable number of its equity shares shall be classified as a liability (or an asset in some circumstances) if, at inception, the monetary value of the obligation is based solely or predominantly on any one of the following: (a) a fixed monetary amount known at inception; (b) variations in something other than the fair value of the issuer’s equity shares; or (c) variations inversely related to changes in the fair value of the issuer’s equity shares. Hybrid instruments meeting these criteria are not further evaluated for any embedded derivatives and are carried as a liability at fair value at each balance sheet date with remeasurements reported in change on fair value expense in the accompanying Statements of Operations.

Recently Issued 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.

In July 2021, the FASB issued ASU 2021-05, Lessors—Certain Leases with Variable Lease Payments (“ASU 2021-05”). ASU 2021-05 was issued to address the day-one loss issue related to a lessor’s accounting for certain leases with variable lease payments, requiring a lease with variable lease payments that do not depend on an index or a rate to be classified as operating under certain conditions. ASU 2021-05 is effective for the Company for interim periods beginning after December 15, 2021. The Company is currently assessing the potential impact of the adoption of ASU 2021-05, but does not expect it to have a material effect on the Company’s financial statements and related disclosures.

In May 2021, the FASB issued ASU 2021-04, Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”). ASU 2021-04 codifies how an issuer should account for modifications made to equity-classified written call options. The guidance in ASU 2021-04 requires the issuer to treat a modification of an equity-classified warrant that does not cause the warrant to become liability-classified as an exchange of the original warrant for a new warrant. This guidance applies whether the modification is structured as an amendment to the terms and conditions of the warrant or as termination of the original warrant and issuance of a new warrant. ASU 2021-04 is effective for fiscal years beginning after December 15, 2021. The Company is currently assessing the potential impact of the adoption of ASU 2021-04, but does not expect it to have a material effect on the Company’s financial statements and related disclosures.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts on an entity’s own equity by removing the separation models for convertible debt with cash conversion and beneficial conversion features by requiring entities not to separately present in equity an embedded conversion feature in such debt and instead will account for a convertible debt instrument and convertible preferred stock as a single unit of account unless a convertible instrument contains features that require bifurcation as a derivative under ASC 815 or was issued at a substantial premium. The ASU was early adopted for the fiscal year ending December 31, 2021. The adoption of ASU 2020-06 did not have a material effect on the Company’s financial statements and related disclosures.

NOTE 3: 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 a working capital deficit as of December 31, 2021 and has generated recurring net losses since inception. 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 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 $6,653,566 and $3,726,943 as of December 31, 2021 and 2020, 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 of December 31, 2021 has still not earned revenue, the obligation to Mr. Ponce de Leon of $1,790,997 is currently in default and the amount includes $564,283 in accrued interest. It is the Company’s intention to pay Mr. Ponce de Leon immediately upon receiving revenue.

Nonconvertible Debt

During the year ended December 31, 2021, the Company borrowed a total of $625,050 and repaid $10,000 cash to, an entity controlled and owned by a significant shareholder of the Company (“Related Party Note Holder”). Additionally, during September 2021, the Related Party Note Holder purchased a third-party convertible note and accrued interest for $115,000, replacing it with a new, non-convertible note. The notes are unsecured, due on demand and accrued interest at 12% per annum.

During the years ended December 31, 2021 and 2020, the Company received $0 and $30,000 from the issuance of related party notes payable to an affiliate, respectively. These notes payable of the Company are unsecured, bear no interest and are due on demand. As of December 31, 2021 and 2020, the Company had outstanding notes payable to affiliates of the Company of $705,000 and $705,000, respectively.

During the years ended December 31, 2021 and 2020, the Company received $30 and $15,050 from related party advances, respectively. The Company repaid $0 and $11,500 on these advances during the years ended December 31, 2021 and 2020, respectively. The advances payable are unsecured, bear no interest and are due on demand. As of December 31, 2021 and 2020, the Company had outstanding advances payable to an officer of the Company of $83,180 and $83,150, respectively.

Convertible Debt

During the years ended December 31, 2021 and 2020, the Company borrowed an aggregate of $18,600 and $76,990, net of beneficial conversion features of $0 and $4,150, respectively, under convertible notes payable. During the year ended December 31, 2020, the Company issued 1,250,000 shares of common stock for the conversion of $100,000 of principal on the convertible notes payable. The convertible notes are secured by assets and the common stock of the Company, bear interest at 12% per annum, are convertible into shares of the Company’s common stock at $0.06 per share and are due three years from the dates of issuance.

As of December 31, 2021 and 2020, the Company had outstanding short-term convertible notes payable of $9,779,145 and $9,437,192, net of unamortized discounts of $40,200 and $486,867, respectively; and, outstanding long-term convertible notes payable of $95,590 and $418,943, net of unamortized discounts of $1,663 and $86,167, respectively. The convertible notes payable mature(d) between November 2018 and November 2022 and are convertible at $0.06 per share, which, occasionally has been a discount to the market price on the dates of issuance. Amortization expense related to debt discounts on convertible debt for the years ended December 31, 2021 and 2020 was $530,348 and $1,648,339, respectively. As of December 31, 2021 and 2020, $9,436,845 and $7,152,383 in convertible notes are past due, respectively.

Outstanding notes payable and convertible notes payable to related parties consisted of the following as of December 31, 2021 and 2020:

Principal payments on convertible debt to related parties for each of the following five years is as follows:

Common Stock Issued to Related Parties

During March 2021, an officer and director of the Company agreed to return and retire 4,516,960 shares of common stock previously issued for common stock compensation.

During July and August 2020, the Company issued two of its officers a total of 13,275,153 shares of common stock for services valued at $172,550. The shares are not forfeitable and considered to be earned as of the date of issuance.

During April 2020, the Company issued 1,250,000 shares of common stock for the conversion of $100,000 related party convertible notes payable, or the stated conversion price $0.08 per share.

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 expected in 2022. 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 December 31, 2021 and 2020, 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 ASC 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 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. Between July and October 2020, the Company issued a total of 18,731,446 shares of common stock for the conversion of the remaining $123,329 in note principal. During the year ended December 31, 2020, the Company recognized $8,671 in debt discount amortization expense.

During May 2019, the Company issued a convertible note payable in the amount of $262,500. The convertible note payable is past due and in default, had an original issuance discount of $12,500, accrues interest at the default rate of 16% 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. 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. Between May and July 2020, the Company issued a total of 16,355,821 shares of common stock for the conversion of $175,000 in note principal. The fair value of the discount conversion feature on the remaining principal balance was $21,455 and $16,879 as of December 31, 2021 and 2020, respectively.

As of December 31, 2021 and 2020, the balance on the convertible note payable was $53,514 and $48,938, respectively. During the years ended December 31, 2021 and 2020, the Company recognized $0 and $4,863 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 past due and in default, had an original issuance discount of $7,500, accrues interest at the default rate of 16% 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. On August 10, 2020, the Company incurred a 25% late fee of $33,837, which was added to the principal balance. During August and September 2020, the Company issued a total of 7,616,146 shares of common stock for the conversion of $50,000 in note principal. The fair value of the discount conversion feature on the remaining principal balance was $79,023 and $62,831 as of December 31, 2021 and 2020, respectively.

As of December 31, 2021 and 2020, the balance on the convertible note payable was $190,360 and $174,168, respectively. During the years ended December 31, 2021 and 2020, the Company recognized $0 and $4,459 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. During the years ended December 31, 2020, the Company recognized $16,888 in debt discount amortization expense.

During November 2019, the Company issued a convertible note payable in the amount of $336,000. The convertible note payable was due one year from the date of issuance, had 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. As the note is past due it currently accrues interest at the default rate of 16% per annum. During May 2020, the note became convertible at the option of the holder. Between July and November 2020, the note holder elected to convert $241,000 of principal and $18,379 in accrued interest for 41,696,169 shares of the Company’s common stock. During February 2021, the note holder elected to convert the remaining principal of $95,000 and accrued interest totaling $11,733 into 12,585,961 shares of the Company’s common stock. The fair value of the discount conversion feature on the remaining principal balance was $47,273 as of December 31, 2020. During the years ended December 31, 2021 and 2020, the Company recognized $0 and $33,781 in debt discount amortization expense, respectively.

During December 2019, the Company issued a convertible note payable in the amount of $220,000. The convertible note payable was due one year from the date of issuance, has an original issuance discount of $26,000, accrued interest at the rate of 7% per annum, was unsecured and was 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 December 2020, the note holder elected to convert the remaining $220,000 of principal and $11,489 in accrued interest for 31,900,000 shares of the Company’s common stock. During the year ended December 31, 2020, the Company recognized $25,047 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 past due, had an original issuance discount of $3,000, accrues interest at the rate of 8% per annum, has a default interest rate of 22%, 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 $82,369 and $71,193 as of December 31, 2021 and 2020, respectively. As of December 31, 2021, the balance on the convertible note payable was $220,369. During the years ended December 31, 2021 and 2020, the Company recognized $222 and $2,778 in debt discount amortization expense, respectively.

During February 2020, the Company issued a convertible note payable in the amount of $440,000. The convertible note payable is past due, had an original issuance discount of $40,000, accrues interest at the rate of 5% per annum, has a default interest rate of 24%, 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. During the year ended December 31, 2021, the note holder elected to convert principal of $346,642 into 69,124,933 shares of the Company’s common stock.

The fair value of the discount conversion feature on the remaining principal balance was $68,139 and $226,724 as of December 31, 2021 and 2020, respectively. As of December 31, 2021 and 2020, the balance on the convertible note payable was $161,497 and $666,724, respectively. During the years ended December 31, 2021 and 2020, the Company recognized $5,918 and $54,082 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 past due, had an original issuance discount of $22,500, accrues interest at the rate of 5% per annum, has a default interest rate of 24%, 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 October 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 $146,288 and $123,518 as of December 31, 2021 and 2020, respectively. As of December 31, 2021 and 2020, the balance on the convertible note payable was $393,788 and $371,018. During the years ended December 31, 2021 and 2020, the Company recognized $6,411 and $16,089 in debt discount amortization expense, respectively.

During December 2020, the Company issued a convertible note payable in the amount of $112,000. The convertible note payable was due one year from the date of issuance, had an original issuance discount of $12,000, incurred debt issuance costs of $2,000, accrued interest at the rate of 10% per annum, had a default interest rate of 24%, was unsecured and was convertible immediately into shares of the Company’s common stock at $0.005 per share. As a result of the conversion price being lower than the market price of the Company’s common stock on the date of issuance, the Company recognized a beneficial conversion feature of $98,000 upon issuance.

During June 2021, as discussed above, the Related Party Note Holder purchased the convertible promissory note and accrued interest for a total of $115,000 and agreed to replace it with a non-convertible promissory note. The principal and accrued interest at the time of conversion totaled $117,585, resulting in a gain of $2,585 on note conversion. As of December 31, 2021 and 2020, the balance on the convertible note payable was $0 and $112,000, respectively. During the years ended December 31, 2021 and 2020, the Company recognized $111,901 and $99 in debt discount amortization expense, respectively.

During the year ended December 31, 2020, the Company paid $20,000 as a debt financing fee on the above financings.

During the year ended December 31, 2021, the Company recognized $151,144 in fair value gains and during the year ended December 31, 2020, the Company recognized $548,419 in fair value losses, as a result of the conversion options on the above mentioned convertible debt.

NOTE 6: EQUITY TRANSACTIONS

Common Stock

2021

Between February and August 2021, the Company issued a total of 81,710,894 shares of common stock to holders of convertible notes payable for principal totaling $441,642, accrued interest totaling $11,734 and conversion fees of $600.

During March 2021, an officer and director of the Company agreed to return and retire 4,516,960 shares of common stock previously issued for common stock compensation.

2020

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 December 2020, the Company issued a total of 140,734,185 shares of common stock for the conversion of $1,191,144 in principal, $102,354 in accrued interest and $5,050 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 $7,858 and 13,275,153 shares of common stock to officers and directors for bonuses valued at $172,550. Common stock issued for services was valued at the market prices of the Company’s common stock on the date of grant.

During December 2020, in conjunction with the issuance of a convertible note payable to a related party, the Company recognized a $98,000 debt discount to additional paid-in capital.

The intrinsic value of the exercisable warrants as of December 31, 2021 and 2020 was $0 and $0, respectively.

NOTE 7: COMMITMENTS AND CONTINGENCIES

Separation Agreement

As part of the separation agreement with Mr. Ponce de Leon, the ex–Chief Operating Officer 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 2021 has still not earned revenue, the obligation to Mr. Ponce de Leon of $1,790,997 is currently in default and the amount includes $564,283 in accrued interest. It is the Company’s intention to pay Mr. Ponce de Leon upon the company receiving revenue.

Operating Leases

Clean Coal has an operating lease for its executive offices in Manhattan, New York. Effective February 1, 2014, the lease is month to month, at a monthly rate of $200 per month.

In April 2018, the company secured a permanent location in Wyoming for its test facility at the Fort Union Industrial Park. The term of the lease was three years. The Company elected to renew the lease for another three years in May 2021. The renewal calls for rent of $36,000, prepaid. The $36,000 covering three years rent was paid in May 2021 and is being amortized to lease expense using the straight-line method over the three-year term of the lease. During the years ended December 31, 2021 and 2020, the Company recognized $12,000 and $12,000 in amortization of right of use assets, respectively.