UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
þ ☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 2020March 31, 2021
¨ ☐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: 000-56030
ENERGY ANDand WATER DEVELOPMENT CORP.
(Exact(Exact Name of Registrant as Specified in Its Charter)
Florida | 30-0781375 | |
|
| |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
7901 4th4th StreetN STE #4174, St Petersburg, Florida33702
(Address of Principal Executive Offices, including Zip Code)
Tel No.: 305-517-7330305-517-7330
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
None | None | None |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ☐No¨☒
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yesþ☒ No ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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 not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨☐Noþ☒
The number of shares outstanding of the registrant’s classes of common stock as of November 09, 2020September 27, 2021 was 111,372,107 shares.
INDEX
Page | |||
| |||
PART I. FINANCIAL INFORMATION | |||
Financial Statements | 1 | ||
Condensed | 1 | ||
Condensed | 2 | ||
Condensed | 3 | ||
Condensed |
| ||
Notes to Condensed |
| ||
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
| ||
Quantitative and Qualitative Disclosures about Market Risk | 19 | ||
Controls and Procedures | 19 | ||
PART II. OTHER INFORMATION | |||
Legal Proceedings |
| ||
Risk Factors |
| ||
Unregistered Sales of Equity Securities and Use of Proceeds |
| ||
Defaults Upon Senior Securities |
| ||
Mine Safety Disclosures |
| ||
Other Information |
| ||
Exhibits |
| ||
| |||
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
The information contained in this Report, including in the documents incorporated by reference into this Report, includes some statements that are not purely historical and that are “forward-looking statements.” Such forward-looking statements include, but are not limited to, statements regarding our Company and management’s expectations, hopes, beliefs, intentions or strategies regarding the future, including our financial condition, results of operations, and the expected impact of the offering on the parties’ individual and combined financial performance. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” and similar expressions, or the negatives of such terms, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.
The forward-looking statements contained in this Report are based on current expectations and beliefs concerning future developments and the potential effects on the parties and the transaction. There can be no assurance that future developments actually affecting us will be those anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the parties’ control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date hereof.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. The following discussion should be read in conjunction with our financial statements and the related notes included in this Report.
i
PART I. FINANCIAL INFORMATION
Energy and Water Development Corp.
Condensed Consolidated Balance Sheets
March 31, | December 31, | |||||||||||||||
|
| September 30, 2020 |
| December 31, 2019 |
| 2021 | 2020 | |||||||||
|
| (Unaudited) |
|
|
| (Unaudited) | ||||||||||
ASSETS |
|
|
|
|
| |||||||||||
CURRENT ASSETS: |
|
|
|
|
| |||||||||||
CURRENT ASSETS | ||||||||||||||||
Cash |
| $ | 9,270 |
|
| $ | — |
| $ | 105,256 | $ | 12,047 | ||||
Prepaid expenses |
|
| 148,384 |
|
|
| 30,375 |
| ||||||||
Accounts receivable | 52,761 | 52,761 | ||||||||||||||
Deferred cost | 350,000 | 350,000 | ||||||||||||||
Prepaid expenses and other current assets | 87,133 | 14,184 | ||||||||||||||
TOTAL CURRENT ASSETS |
|
| 157,654 |
|
|
| 30,375 |
| 595,150 | 428,992 | ||||||
|
|
|
|
|
| |||||||||||
TOTAL ASSETS |
| $ | 157,654 |
|
| $ | 30,375 |
| $ | 595,150 | $ | 428,992 | ||||
|
|
|
|
|
| |||||||||||
LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||||||||||
|
|
|
|
|
| |||||||||||
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
|
| |||||||||||
CURRENT LIABILITIES: |
|
|
|
|
| |||||||||||
CURRENT LIABILITIES | ||||||||||||||||
Accounts payable and accrued expenses |
| $ | 1,139,893 |
| $ | 1,137,446 |
| $ | 777,461 | $ | 902,226 | |||||
Customer/investor deposit (Note 6) |
| 303,742 |
| 313,742 |
| |||||||||||
Due to affiliate distributor (Note 6) |
| — |
| 4,959 |
| |||||||||||
Convertible loan payables, net of discounts (Note 7) |
| 83,453 |
| 243,923 |
| |||||||||||
Deferred revenue | 550,000 | 550,000 | ||||||||||||||
Convertible loans payable, net of discounts (Note 6) | 32,156 | 149,241 | ||||||||||||||
Due to officers (Note 5) |
| 261,653 |
| 2,276,770 |
| 114,843 | 84,676 | |||||||||
Derivative liability |
|
| 344,186 |
|
|
| 413,795 |
| 663,223 | 310,641 | ||||||
TOTAL CURRENT LIABILITIES |
|
| 2,132,927 |
|
|
| 4,390,635 |
| $ | 2,137,683 | $ | 1,996,784 | ||||
|
|
|
|
|
| |||||||||||
COMMITMENTS AND CONTINGENCIES (Note 7) |
|
|
|
|
| |||||||||||
COMMITMENTS AND CONTINGENCIES (Note 9) | ||||||||||||||||
|
|
|
|
|
| |||||||||||
STOCKHOLDERS' DEFICIT: |
|
|
|
|
| |||||||||||
Preferred stock, par value $.001 per share; 500,000,000 shares authorized, 3,780,976 and 0 shares issued and outstanding in September 30, 2020 and December 31, 2019, respectively |
| 3,781 |
| — |
| |||||||||||
Common stock, par value $.001 per share; 1,000,000,000 shares authorized, 108,714,615 and 93,462,483 shares issued and outstanding in September 30, 2020 and December 31, 2019, respectively |
| 108,714 |
| 93,462 |
| |||||||||||
Preferred stock, par value $ | per share; shares authorized, shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively9,781 | 9,781 | ||||||||||||||
Common stock, par value $ | per share; shares authorized, and shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively135,057 | 123,316 | ||||||||||||||
Common stock subscriptions | 20,000 | 1,504,000 | ||||||||||||||
Additional paid in capital |
| 11,231,738 |
| 7,491,197 |
| 18,087,109 | 16,153,038 | |||||||||
Accumulated deficit |
|
| (13,319,506 | ) |
|
| (11,944,919 | ) | (19,791,979 | ) | (19,357,927 | ) | ||||
Accumulated other comprehensive loss | (2,501 | ) | — | |||||||||||||
TOTAL STOCKHOLDERS' DEFICIT |
|
| (1,975,273 | ) |
|
| (4,360,260 | ) | (1,542,533 | ) | (1,567,792 | ) | ||||
|
|
|
|
|
| |||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT |
| $ | 157,654 |
|
| $ | 30,375 |
| $ | 595,150 | $ | 428,992 |
See accompanying notes to the condensed consolidatedd financial statements (unaudited).
1 |
Energy and Water Development Corp.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
|
| For the Three Months Ended |
|
| For the Nine Months Ended |
| For the Three Months Ended | |||||||||||||||||
|
| September 30, |
|
| September 30, |
| March 31, | |||||||||||||||||
|
| 2020 |
|
| 2019 |
|
| 2020 |
|
| 2019 |
| 2021 | 2020 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||
GENERAL and ADMINISTRATIVE EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
GENERAL AND ADMINISTRATIVE EXPENSES | ||||||||||||||||||||||||
Marketing fees | $ | 165,188 | $ | — | ||||||||||||||||||||
Professional fees | 57,002 | 67,484 | ||||||||||||||||||||||
Officers’ salaries and payroll taxes | 75,000 | 80,738 | ||||||||||||||||||||||
Other general and administrative expenses | 8,292 | 7,285 | ||||||||||||||||||||||
Management fees to affiliate |
| $ | 75,000 |
|
| $ | 75,000 |
|
| $ | 225,000 |
|
| $ | 225,000 |
| — | 75,000 | ||||||
Officer’s salaries and payroll taxes |
|
| 81,150 |
|
|
| 80,738 |
|
|
| 243,038 |
|
|
| 242,213 |
| ||||||||
Professional fees |
|
| 78,148 |
|
|
| 195,796 |
|
|
| 276,221 |
|
|
| 261,296 |
| ||||||||
Travel and entertainment |
|
| — |
|
|
| — |
|
|
| 33 |
|
|
| 8,082 |
| — | 33 | ||||||
Other general and administrative expenses |
|
| 7,709 |
|
|
| 9,613 |
|
|
| 275,148 |
|
|
| 15,599 |
| ||||||||
TOTAL GENERAL and ADMINISTRATIVE EXPENSES |
|
| 242,007 |
|
|
| 361,147 |
|
|
| 1,019,440 |
|
|
| 752,190 |
| 305,482 | 230,540 | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
LOSS FROM OPERATIONS |
|
| (242,007 | ) |
|
| (361,147 | ) |
|
| (1,019,440 | ) |
|
| (752,190 | ) | (305,482 | ) | (230,540 | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
OTHER INCOME (EXPENSE) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Change in fair value of derivative liability |
|
| 694,096 |
|
|
| 199,149 |
|
|
| 912,825 |
|
|
| 199,149 |
| 310,348 | 322,948 | ||||||
Interest and other income (expense), net |
|
| (921,706 | ) |
|
| (79,697 | ) |
|
| (1,256,970 | ) |
|
| (130,290 | ) | ||||||||
Interest expense | (438,918 | ) | (103,707 | ) | ||||||||||||||||||||
TOTAL OTHER INCOME (EXPENSE) |
|
| (227,610 | ) |
|
| 119,452 |
|
|
| (344,145 | ) |
|
| 68,859 |
| (128,570 | ) | 219,241 | |||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
LOSS BEFORE TAXES |
|
| (469,617 | ) |
|
| (241,695 | ) |
|
| (1,363,585 | ) |
|
| (683,331 | ) | (434,052 | ) | (11,299 | ) | ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
TAXES |
|
| (11,002 | ) |
|
| — |
|
|
| (11,002 | ) |
|
| — |
| — | — | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
NET LOSS |
| $ | (480,619 | ) |
| $ | (241,695 | ) |
| $ | (1,374,587 | ) |
| $ | (683,331 | ) | $ | (434,052 | ) | $ | (11,299 | ) | ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Loss per share - Basic and diluted |
| $ | (0.00 | ) |
| $ | (0.00 | ) |
| $ | (0.01 | ) |
| $ | (0.01 | ) | ||||||||
OTHER COMPREHENSIVE LOSS | ||||||||||||||||||||||||
Foreign currency translation adjustments | (2,501 | ) | — | |||||||||||||||||||||
TOTAL OTHER COMPREHENSIVE LOSS | (2,501 | ) | — | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
Weighted average number of shares outstanding - Basic and diluted |
|
| 107,287,560 |
|
|
| 92,994,440 |
|
|
| 100,764,795 |
|
|
| 90,569,338 |
| ||||||||
COMPREHENSIVE LOSS | (436,553 | ) | (11,299 | ) | ||||||||||||||||||||
Net loss per common share - Basic and diluted | $ | (0.00 | ) | $ | (0.00 | ) | ||||||||||||||||||
Weighted average number of common shares outstanding - Basic and diluted | 129,783,492 | 95,546,644 |
See accompanying notes to the condensed consolidated financial statements (unaudited).
2 |
Energy and Water Development Corp.
Condensed Consolidated StatementStatements of Changes in Stockholders’ Deficit
|
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
|
|
| Total |
| |||||||
|
| Preferred Stock |
|
| Common Stock |
|
| Paid-in |
|
| Accumulated |
|
| Stockholders' |
| |||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Deficit |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
BALANCE AT DECEMBER 31, 2018 |
|
| — |
|
| $ | — |
|
|
| 87,913,933 |
|
| $ | 87,914 |
|
| $ | 7,187,862 |
|
| $ | (11,016,304 | ) |
| $ | (3,740,528 | ) |
Sale of common stock |
|
| — |
|
|
| — |
|
|
| 200,000 |
|
|
| 200 |
|
|
| 31,800 |
|
|
| — |
|
|
| 32,000 |
|
Net Loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (213,920 | ) |
|
| (213,920 | ) |
BALANCE AT MARCH 31, 2019 (Unaudited) |
|
| — |
|
|
| — |
|
|
| 88,113,933 |
|
|
| 88,114 |
|
|
| 7,219,662 |
|
|
| (11,230,224 | ) |
|
| (3,922,448 | ) |
Sale of common stock |
|
| — |
|
|
| — |
|
|
| 11,200 |
|
|
| 11 |
|
|
| 11,189 |
|
|
| — |
|
|
| 11,200 |
|
Conversion of debt |
|
| — |
|
|
| — |
|
|
| 4,611,350 |
|
|
| 4,611 |
|
|
| 483,213 |
|
|
| — |
|
|
| 487,824 |
|
Conditional shares issued to debt holders |
|
| — |
|
|
| — |
|
|
| 56,000 |
|
|
| 56 |
|
|
| (56 | ) |
|
| — |
|
|
| — |
|
Beneficial conversion feature |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 98,000 |
|
|
| — |
|
|
| 98,000 |
|
Net Loss |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (227,716 | ) |
|
| (227,716 | ) |
BALANCE AT JUNE 30, 2019 (Unaudited) |
|
| — |
|
|
| — |
|
|
| 92,792,483 |
|
|
| 92,792 |
|
|
| 7,812,008 |
|
|
| (11,457,940 | ) |
|
| (3,553,140 | ) |
Common stock issued for services |
|
| — |
|
|
| — |
|
|
| 140,000 |
|
|
| 140 |
|
|
| 39,060 |
|
|
|
|
|
|
| 39,200 |
|
Common stock issued to debt holders |
|
| — |
|
|
| — |
|
|
| 266,000 |
|
|
| 266 |
|
|
| 58,734 |
|
|
|
|
|
|
| 59,000 |
|
Conditional shares resolved by debt holder |
|
| — |
|
|
| — |
|
|
| (16,000 | ) |
|
| (16 | ) |
|
| 16 |
|
|
|
|
|
|
| — |
|
Reclassification of tainted notes |
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
| (559,300 | ) |
|
|
|
|
|
| (559,300 | ) |
Net Loss |
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (241,695 | ) |
|
| (241,695 | ) |
BALANCE AT SEPTEMBER 30, 2019 (Unaudited) |
|
| — |
|
| $ | — |
|
|
| 93,182,483 |
|
| $ | 93,182 |
|
| $ | 7,350,518 |
|
| $ | (11,699,635 | ) |
| $ | (4,255,935 | ) |
(Unaudited)
Common Stock | Additional | Accumulated Other | Total | |||||||||||||||||||||||||||||||||||||
Preferred Stock | Common Stock | Subscriptions | Paid-in | Accumulated | Comprehensive | Stockholders' | ||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Capital | Deficit | Loss | Deficit | |||||||||||||||||||||||||||||||
BALANCE AT DECEMBER 31, 2019 | — | $ | — | 93,462,483 | $ | 93,462 | — | $ | — | $ | 7,491,197 | $ | (11,944,919 | ) | $ | — | $ | (4,360,260 | ) | |||||||||||||||||||||
Common and preferred stock issued to satisfy accrued payroll to officers | 3,780,976 | 3,781 | 2,044,190 | 2,044 | — | — | 2,232,175 | — | — | 2,238,000 | ||||||||||||||||||||||||||||||
Conversion of debt | — | — | 691,522 | 692 | — | — | 37,808 | — | — | 38,500 | ||||||||||||||||||||||||||||||
Conversion of interest and fees | — | — | 46,789 | 47 | — | — | 2,573 | — | — | 2,620 | ||||||||||||||||||||||||||||||
Derivative settled upon conversion of debt | — | — | — | — | — | — | 23,940 | — | — | 23,940 | ||||||||||||||||||||||||||||||
Reclassification of equity to liability for derivatives | — | — | — | — | — | — | (54,159 | ) | — | — | (54,159 | ) | ||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (11,299 | ) | — | (11,299 | ) | ||||||||||||||||||||||||||||
BALANCE AT MARCH 31, 2020 | 3,780,976 | $ | 3,781 | 96,244,984 | $ | 96,245 | — | $ | — | $ | 9,733,534 | $ | (11,956,218 | ) | $ | — | $ | (2,122,658 | ) | |||||||||||||||||||||
BALANCE AT DECEMBER 31, 2020 | 9,780,976 | $ | 9,781 | 123,316,886 | $ | 123,316 | 10,040,000 | $ | 1,504,000 | $ | 16,153,038 | $ | (19,357,927 | ) | $ | — | $ | (1,567,792 | ) | |||||||||||||||||||||
Sale of common stock | — | — | 471,433 | 471 | 200,000 | 20,000 | 139,550 | — | — | 160,021 | ||||||||||||||||||||||||||||||
Common stock issued for services | — | — | 500,000 | 500 | — | — | 164,500 | — | — | 165,000 | ||||||||||||||||||||||||||||||
Common stock issued to satisfy convertible loans payable | — | — | 690,606 | 691 | — | — | 65,309 | — | — | 66,000 | ||||||||||||||||||||||||||||||
Common stock issued for interest and fees on convertible loans payable | — | — | 38,690 | 39 | — | — | 3,402 | — | — | 3,441 | ||||||||||||||||||||||||||||||
Derivative liability settled upon conversion of loans payable | — | — | — | — | — | — | 67,350 | — | — | 67,350 | ||||||||||||||||||||||||||||||
Common stock issued on subscriptions | — | — | 10,040,000 | 10,040 | (10,040,000 | ) | (1,504,000 | ) | 1,493,960 | — | — | — | ||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | (434,052 | ) | — | (434,052 | ) | ||||||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | — | — | — | — | (2,501 | ) | (2,501 | ) | ||||||||||||||||||||||||||||
BALANCE AT MARCH 31, 2021 | 9,780,976 | $ | 9,781 | 135,057,615 | $ | 135,057 | 200,000 | $ | 20,000 | $ | 18,087,109 | $ | (19,791,979 | ) | $ | (2,501 | ) | $ | (1,542,533 | ) |
See accompanying notes to the condensed consolidated financial statements (unaudited).
3 |
Energy and Water Development Corp.
Condensed Consolidated StatementStatements of Changes in Stockholders’ DeficitCash Flows
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
| Additional |
|
|
|
|
| Total |
| |||||||
|
| Preferred Stock |
|
| Common Stock |
|
| Paid-in |
|
| Accumulated |
|
| Stockholders' |
| |||||||||||||
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Capital |
|
| Deficit |
|
| Deficit |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
BALANCE AT DECEMBER 31, 2019 |
|
| — |
|
| $ | — |
|
|
| 93,462,483 |
|
| $ | 93,462 |
|
| $ | 7,491,197 |
|
| $ | (11,944,919 | ) |
| $ | (4,360,260 | ) |
Common and preferred stock issued to satisfy accrued payroll to officers |
|
| 3,780,976 |
|
|
| 3,781 |
|
|
| 2,044,190 |
|
|
| 2,044 |
|
|
| 2,232,175 |
|
|
| — |
|
|
| 2,238,000 |
|
Conversion of debt |
|
| — |
|
|
| — |
|
|
| 691,522 |
|
|
| 692 |
|
|
| 37,808 |
|
|
| — |
|
|
| 38,500 |
|
Conversion of interest and fees |
|
| — |
|
|
| — |
|
|
| 46,789 |
|
|
| 47 |
|
|
| 2,573 |
|
|
| — |
|
|
| 2,620 |
|
Derivative settled upon conversion of debt |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 23,940 |
|
|
| — |
|
|
| 23,940 |
|
Reclassification of equity to liability for derivatives |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (54,159 | ) |
|
| — |
|
|
| (54,159 | ) |
Net Loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (11,299 | ) |
|
| (11,299 | ) |
BALANCE AT MARCH 31, 2020 (Unaudited) |
|
| 3,780,976 |
|
|
| 3,781 |
|
|
| 96,244,984 |
|
|
| 96,245 |
|
|
| 9,733,534 |
|
|
| (11,956,218 | ) |
|
| (2,122,658 | ) |
Sale of common stock |
|
|
|
|
|
|
|
|
|
| 1,301,111 |
|
|
| 1,301 |
|
|
| 67,699 |
|
|
| — |
|
|
| 69,000 |
|
Conversion of debt |
|
| — |
|
|
| — |
|
|
| 4,426,091 |
|
|
| 4,426 |
|
|
| 239,074 |
|
|
| — |
|
|
| 243,500 |
|
Conversion of interest and fees |
|
|
|
|
|
| — |
|
|
| 139,275 |
|
|
| 139 |
|
|
| 5,641 |
|
|
| — |
|
|
| 5,780 |
|
Common stock issued for marketing services |
|
|
|
|
|
|
|
|
|
| 2,500,000 |
|
|
| 2,500 |
|
|
| 247,500 |
|
|
|
|
|
|
| 250,000 |
|
Derivative settled upon conversion of debt |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 151,434 |
|
|
| — |
|
|
| 151,434 |
|
Subscription deposits received |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 161,000 |
|
|
|
|
|
|
| 161,000 |
|
Net Loss |
|
|
|
|
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (882,669 | ) |
|
| (882,669 | ) |
BALANCE AT JUNE 30, 2020 (Unaudited) |
|
| 3,780,976 |
|
|
| 3,781 |
|
|
| 104,611,461 |
|
|
| 104,611 |
|
|
| 10,605,882 |
|
|
| (12,838,887 | ) |
|
| (2,124,613 | ) |
Sale of common stock |
|
|
|
|
|
|
|
|
|
| 2,120,000 |
|
|
| 2,120 |
|
|
| 214,880 |
|
|
| — |
|
|
| 217,000 |
|
Conversion of debt |
|
| — |
|
|
| — |
|
|
| 1,924,397 |
|
|
| 1,924 |
|
|
| 197,076 |
|
|
| — |
|
|
| 199,000 |
|
Conversion of interest and fees |
|
|
|
|
|
| — |
|
|
| 58,757 |
|
|
| 59 |
|
|
| 4,341 |
|
|
| — |
|
|
| 4,400 |
|
Derivative settled upon conversion of debt |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 283,559 |
|
|
| — |
|
|
| 283,559 |
|
Subscription deposits received/used |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (74,000 | ) |
|
|
|
|
|
| (74,000 | ) |
Net Loss |
|
|
|
|
|
|
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (480,619 | ) |
|
| (480,619 | ) |
BALANCE AT SEPTEMBER 30, 2020 (Unaudited) |
|
| 3,780,976 |
|
| $ | 3,781 |
|
|
| 108,714,615 |
|
| $ | 108,714 |
|
| $ | 11,231,738 |
|
| $ | (13,319,506 | ) |
| $ | (1,975,273 | ) |
For the Three Months Ended | ||||||||
March 31, | ||||||||
2021 | 2020 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net loss | $ | (434,052 | ) | $ | (11,299 | ) | ||
Reconciliation of net loss to net cash used in operating activities | ||||||||
Amortization of debt discount and deferred financing costs | 405,196 | 98,036 | ||||||
Change in fair value of derivative liability | (310,348 | ) | (322,948 | ) | ||||
Stock issued for services | 165,000 | — | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other current assets | (72,949 | ) | (95,890 | ) | ||||
Accounts payable and accrued expenses | (121,325 | ) | 60,060 | |||||
Due to Commercial Distributor & Services Supplier | — | (4,959 | ) | |||||
Due to officers | 30,167 | 70,000 | ||||||
CASH USED IN OPERATING ACTIVITIES | (338,311 | ) | (207,000 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from convertible loans payable | 369,500 | 207,000 | ||||||
Proceeds from sale of common stock | 160,021 | — | ||||||
Payments of convertible loans payable | (95,500 | ) | — | |||||
CASH PROVIDED BY FINANCING ACTIVITIES | 434,021 | 207,000 | ||||||
Effect of exchange rate changes on cash | (2,501 | ) | — | |||||
Net change in cash | 93,209 | — | ||||||
Cash beginning of period | 12,047 | — | ||||||
Cash end of period | $ | 105,256 | $ | — | ||||
SUPPLEMENTAL CASH FLOW INFORMATION: | ||||||||
Cash paid for interest | $ | 28,864 | $ | — | ||||
Cash paid for taxes | $ | — | $ | — | ||||
NON-CASH INVESTING AND FINANCING ACTIVITIES: | ||||||||
Common and preferred stock issued to satisfy accrued payroll to officers | $ | — | $ | 2,238,000 | ||||
Common stock issued for interest and fees | $ | 3,441 | $ | 2,620 | ||||
Common stock issued to convert loans payable | $ | 66,000 | $ | 38,500 | ||||
Derivative liability discount | $ | 730,280 | $ | (109,880 | ) | |||
Derivative liability settled upon conversion of debt | $ | 67,350 | $ | 23,940 | ||||
Reclassification of equity to liability for derivatives | $ | — | $ | (54,159 | ) | |||
Reclassification of subscriptions | $ | 1,504,000 | — |
See accompanying notes to the condensed consolidated financial statements (unaudited).
4 |
Energy and Water Development Corp.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
| For the Nine Months Ended |
| |||||
|
| September 30, |
| |||||
|
| 2020 |
|
| 2019 |
| ||
|
|
|
|
|
|
| ||
CASH FLOW FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
NET LOSS |
| $ | (1,374,587 | ) |
| $ | (683,331 | ) |
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Amortization of debt discount (Note 6 and 7) |
|
| 1,142,520 |
|
|
| 79,746 |
|
Common stock issued for services |
|
| 250,000 |
|
|
| 39,200 |
|
Change in fair value of derivative liability |
|
| (912,825 | ) |
|
| (199,149 | ) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets |
|
| (118,009 | ) |
|
| (1,875 | ) |
Accrued management fees and due to/from officers |
|
| 222,883 |
|
|
| 208,487 |
|
Accounts payable and accrued expenses |
|
| 15,247 |
|
|
| 305,722 |
|
Due to affiliates |
|
| (4,959 | ) |
|
| — |
|
Net cash used in operating activities |
|
| (779,730 | ) |
|
| (251,200 | ) |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from convertible loans |
|
| 416,000 |
|
|
| 208,000 |
|
Proceeds from the sale of common stock |
|
| 286,000 |
|
|
| 43,200 |
|
Proceeds from subscriptions |
|
| 87,000 |
|
|
| — |
|
Net cash provided by financing activities |
|
| 789,000 |
|
|
| 251,200 |
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH |
|
| 9,270 |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
CASH AT THE BEGINNING OF THE PERIOD |
|
| — |
|
|
| — |
|
CASH AT THE END OF THE PERIOD |
| $ | 9,270 |
|
| $ | — |
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
NON-CASH INVESTING AND FINANCING TRANSACTION: |
|
|
|
|
|
|
|
|
Derivative liability discount |
| $ | 409,302 |
|
| $ | 110,000 |
|
Conditional shares issued to debt holders |
| $ | — |
|
| $ | 40 |
|
Common shares issued to satisfy related party liability |
| $ | 2,238,000 |
|
| $ | — |
|
Common shares issued for interest and fees |
| $ | 12,800 |
|
| $ | — |
|
Debt discount related to beneficial conversion feature |
| $ | — |
|
| $ | 98,000 |
|
Reclassify derivative liability upon conversion |
| $ | 458,933 |
|
| $ | — |
|
Stock issued to satisfy convertible debt |
| $ | 481,000 |
|
| $ | 546,824 |
|
Reclassify equity to liability for derivatives |
| $ | 54,159 |
|
| $ | — |
|
See accompanying notes to the condensed consolidated financial statements (unaudited).
Energy and Water Development Corp.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
September 30, 2020 and December 31, 2019
Note 1. Incorporation and Nature of Operations
In September 2019, Eurosport Active World Corp. changed its name to Energy and Water Development Corp. (the “Corporation”, “Company”, “EAWC” or “EAWD”) to better present the Company’s purpose and business sector. The name change received approval by Financial Industry Regulatory Authority (“FINRA”) on October 22, 2019. The Company, was incorporated under the laws of the State of Florida on December 12, 2007. In September 2019, the Company changed its name from Eurosport Active World Corp. to Energy and Water Development Corp. to better present the Company’s purpose and business sector. We are an engineering services company formed as an outsourcing green tech platform, seeking to exploit renewable energy and water technologies.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The condensed consolidated financial statements (unaudited) include the accounts of Energy and Water Development Corp. and its wholly-owned subsidiaries, and 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. These unaudited condensed consolidated financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20192020 filed with the SEC.
In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements of Energy and Water Development Corp. for the fiscal year ended December 31, 2019,2020, have been omitted.
Certain reclassifications have been made in Fiscal 2019December 31, 2020 results to conform to the presentation used in Fiscal 2020.March 31, 2021 including the reclassification of $10,040,000 from additional paid-in capital to subscriptions on the condensed balance sheets and condensed statements of changes in stockholders’ deficit. These reclassifications had no effect on the reported results of operations of the Company.
Foreign currency translation
The United States dollar (“USD”) is the Company’s reporting currency. The Company has a branch located in Germany. The net sales generated, and the related expenses directly incurred from the operations, if any, are denominated in local currency, Euro (“Euro”). The functional currency of the subsidiary is generally the same as the local currency.
Assets and liabilities measured in Euros are translated into USD at the prevailing exchange rates in effect as of the financial statement date and the related gains and losses, net of applicable deferred income taxes, are reflected in accumulated other comprehensive loss in its balance sheets. Income and expense accounts are translated at the average exchange rate for the period. The Company has not, to the date of these condensed financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.
Use of Estimates
The preparation of condensed financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates. Estimates which are particularly significant to the condensed financial statements include estimates relating to the determination of impairment of assets, assessment of going concern, the useful life of property and equipment, the determination of the fair value of stock-based compensation, and the recoverability of deferred income tax assets.
Energy and Water Development Corp.
Notes to the Condensed Financial Statements (Unaudited)
Leases
Effective January 1, 2019, the Company adopted ASC 842- Leases (“ASC 842”). The lease standard provided a number of optional practical expedients in transition. The Company elected the package of practical expedients. As such, the Company did not have to reassess whether expired or existing contracts are or contain a lease; did not have to reassess the lease classifications or reassess the initial direct costs associated with expired or existing leases. The lease standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption under which the Company will not recognize right-of-use (“ROU”) assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases. The Company elected the practical expedient to not separate lease and non-lease components for certain classes of assets (facilities).
At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and short-term and long-term lease liabilities, as applicable.
Cash
The Company considers short-term interest-bearing investments with initial maturities of three months or less to be cash equivalents. The Company has $105,256 and $12,047 cash at March 31, 2021 and December 31, 2020, respectively.
Revenue Recognition
The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services.
To achieve this core principle, five basic criteria must be met before revenue can be recognized: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance obligations in the contract; and (5) recognize revenue when or as the Company satisfies a performance obligation. The Company has not generated any revenues to date.
Fair Value of Financial Instruments
Due to their short maturities, the carrying amounts of Cash, Prepaid, Other Current Assets, Accounts Payable Accrued Expenses, Accrued Salaries and Other Current Liabilities approximate their fair value.
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at a measurement date. A fair value hierarchy requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value.
Energy and Water Development Corp.
Notes to the Condensed Financial Statements (Unaudited)
Described below are the three levels of inputs that may be used to measure fair value:
Level 1 – Quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities,
Level 2 – Observable prices that are based on inputs not quoted on active markets, but corroborated by market data,
Level 3 – Unobservable inputs are used when little or no market data is available.
The application of the three levels of the fair value hierarchy under ASC Topic 820-10-35, our derivative liabilities as of September 30, 2020March 31, 2021 and December 31, 2019,2020, were $344,186$663,223 and $413,795,$310,641, respectively and measured on Level 3 inputs.
Certain assets and liabilities are required to be recorded at fair value on a recurring basis. The Company adjusts derivative financial instruments to fair value on a recurring basis. The fair value for other assets and liabilities such as cash, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses, deferred cost and deferred revenue have been determined to approximate carrying amounts due to the short maturities of these instruments. The Company believes that its indebtedness approximates fair value based on current yields for debt instruments with similar terms.
The Corporation accounts for earnings (loss) per share in accordance with FASB ASC Topic No. 260 - 10, “Earnings Per Share”, which establishes the requirements for presenting earnings per share (“EPS”). FASB ASC Topic No. 260 - 10 requires the presentation of “basic” and “diluted” EPS on the face of the statement of operations. Basic EPS amounts are calculated using the weighted-average number of common shares outstanding during each period. Diluted EPS assumes the exercise of all stock options, warrants and convertible securities having exercise prices less than the average market price of the common stock during the periods, using the treasury stock method. When a loss from operations exists, potential common shares are excluded from the computation of diluted EPS because their inclusion would result in an anti-dilutive effect on per share amounts.
6
Energy and Water Development Corp.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
September 30, 2020 and December 31, 2019
For the ninethree months ended September 30,March 31, 2020, and 2019, an aggregate of stock options to purchase shares of common stock were excluded from the computation of diluted net loss per share, as the inclusion of such shares would be anti-dilutive. These stock options expired as of March 31, 2021.
As discussed more fully in Note 6, convertible note holders have the option of converting their loans into common shares subject to the terms and features offered by the specific convertible notes. Some note holders were also granted purchase options to purchase additional shares subject to the features of each purchase option. If the convertible note holders of unexercised convertible notes exercised their conversion feature and the additional purchase options, they would represent 2,897,917 and 5,380,000 in additional common shares at September 30,March 31, 2021 and 2020, and December 31, 2019, respectively. The potential shares from both the conversion feature and the rights to purchase additional shares were excluded from the computation of diluted net loss per share, as the inclusion of such shares would be anti-dilutive.
Deferred Financing Costs
The Company has recorded deferred financing costs as a result of fees incurred by the Company in conjunction with its debt financing activities. These costs are amortized to interest expense using the straight-line method which approximates the interest rate method over the term of the related debt. As of March 31, 2021 and December 31, 2020, unamortized deferred financing costs were $30,510, and $0, respectively and are netted against the related debt.
Related Party Transactions
A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. A related party is generally defined as:
(i) | any person that holds 10% or more of the Company’s securities including such person’s immediate families, | ||
(ii) | the Company’s management, | ||
(iii) | someone that directly or indirectly controls, is controlled by or is under common control with the Company, or | ||
(iv) | anyone who can significantly influence the financial and operating decisions of the Company. |
Customer deposit
The Company´s Distributor EAWC-TV, placed a $550,000 order for a solar powered atmospheric water generator (“AWG”) for one of its customers. EAWC-TV and the Company on December 13, 2019, agreed to accept a $303,742 reduction in the balance owed by EAWD to EAWC-TV as a deposit with EAWD related to this order. The deposit will be satisfied through delivery of the equipment when performance has occurred. The equipment was built in Germany. EAWC-TV has an unpaid balance on the equipment of $52,761, which represents the entire balance of the Company´s outstanding accounts receivables as March 31, 2021.
7 |
Energy and Water Development Corp.
Notes to the Condensed Financial Statements (Unaudited)
Note 3. Recently Issued Accounting Standards
Accounting standards promulgated by the FASB are subject to change. Changes in such standards may have an impact on the Corporation’s future consolidated financial statements. The following are a summary of recent accounting developments.
In FebruaryJune 2016, the FASB issued ASU 2016-02, 2016-13, Financial Instruments – Credit Losses to improve information on credit losses for financial assets and net investment in leases that are not accounted for at fair value through net income. ASU 2016-13 replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses. In April 2019 and May 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” and ASU No. 2019-05, “Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief” which provided additional implementation guidance on the previously issued ASU. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Loss (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842),” which defers the effective date for public filers that are considered small reporting companies (“SRC”) as defined by the Securities and Exchange Commission to increase transparency and compatibility among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 affects any entity that enters into a lease, with some specific scope exceptions. The guidance in this update supersedes Topic 840, Leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The amendments in this update became effective for our 2019 fiscal yearyears beginning after December 15, 2022, including interim periods within those fiscal years. Since the 2019 fiscal year.Company is an SRC, implementation is not needed until January 1, 2023. The Company will continue to evaluate the effect of adopting ASU 2016-13 will have on the Company’s financial statements and disclosures.
On January 1, 2021, the Company adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The adoption of ASU No. 2016-02 had no2019-12 did not have a material impact on ourthe Company’s condensed financial statements.
In June 2020, the FASB issued ASU No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). This standard eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. For public business entities, it is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years using the fully retrospective or modified retrospective method. Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the potential impact of this standard on its financial statements.
8 |
Energy and Water Development Corp.
Notes to the Condensed Financial Statements (Unaudited)
In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modification or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”), which will clarify and reduce diversity in practice. Specifically, the new standard includes a recognition model comprising four categories of transactions and corresponding accounting treatment for each category. The category that would apply to a modification or an exchange of an equity-classified warrant would depend on the substance of the modification transaction (e.g., a financing transaction to raise equity versus one to raise debt). This recognition model is premised on the idea that the accounting for the transaction should not differ from what it would have been had the issuer of the warrants paid cash instead of modifying the warrants. ASU 2021-04 will be effective for fiscal years beginning after December 15, 2021 and interim periods within those fiscal years. Early adoption is permitted. This ASU will be applied prospectively to modifications or exchanges occurring on or after the effective date of the ASU. The Company is currently evaluating the impact this new guidance will have on its condensed financial statements.
Note 4. Going Concern
The Company has begun to commercialize its products by beginning the build out of its initial revenue opportunity. The Company has received a deposit ondelivered its first order, which it has not yet been delivered dueequipment on December 26, 2020 pursuant to delays caused byan equipment sale agreement and will record the COVID-19 global pandemic, consequently it has recognized no revenue. Due tosale once the timing of the project build out,installation is complete. Once installed, the Company has not currently recorded any revenue and consequentlywill record a sale for $550,000 along with associate $350,000 cost of construction, earning $200,000 gross profit. The Company has incurred operating losses since it began operations (December 2012) totaling $13,319,506$19,791,979 at September 30, 2020.March 31, 2021. During the ninethree months ended September 30, 2020,March 31, 2021, the Corporation incurred net losses of $1,374,587.$434,052. The Company also incurred a working capital deficit of $1,975,273$1,542,533 at September 30, 2020.March 31, 2021.
These factors raise substantial doubt regarding the Corporation’sThe Company’s ability to transition to profitable operations is dependent upon achieving a level of revenues adequate to support its cost structure. The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations and the anticipated growth of our business and availability to sufficient resources.
Management expects sales operations to continue as a going concern.to expand. If necessary, the Company will need to raise additional funds during 2021. Management of the Company intends to raise additional funds through the issuance of equity securities or debt, credit lines or advances from suppliers. The ability of the CorporationCompany to continue as a going concern depends upon its ability to generate sales or obtain additional funding to finance operating losses until the Corporation is profitable. The Corporation expects to be financed through equity capital, debt financing or from deposits related to purchases orders on proposals pending customer acceptance.
InThese factors raise substantial doubt about the event the Corporation does not generate sufficient funds from issuance of common stock, debt financing or purchase orders, it may be unableCompany’s ability to fully implement its business plan and pay its obligationscontinue as they become due, any of which circumstances would have a material adverse effect on its business prospects, financial condition, and results of operations.going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might result frombe necessary if the outcome of these uncertainties.
7
Energy and Water Development Corp.
NotesCompany is unable to the Condensed Consolidated Financial Statements (Unaudited)continue as a going concern.
September 30, 2020 and December 31, 2019
Note 5. Related Party Transactions
Due to officers
Amounts due to officers as of September 30, 2020March 31, 2021 and December 31, 20192020 are comprised of the following:
Due to Officers | ||||||||||||||||
|
| 2020 |
| 2019 |
| 2021 | 2020 | |||||||||
|
| (Unaudited) |
|
|
| (Unaudited) | ||||||||||
Ralph Hofmeier: |
|
|
|
|
| |||||||||||
Unsecured advances due to officer |
| $ | 17,778 |
| $ | 17,778 |
| $ | - | $ | 17,778 | |||||
Accrued salaries |
|
| 112,500 |
|
|
| 1,175,000 |
| 24,678 | - | ||||||
Total due to Ralph Hofmeier |
|
| 130,278 |
|
|
| 1,192,778 |
| 24,678 | 17,778 | ||||||
|
|
|
|
|
| |||||||||||
Irma Velazquez: |
|
|
|
|
| |||||||||||
Unsecured advances due to officer |
| 18,875 |
| 20,992 |
| 52,665 | 66,898 | |||||||||
Accrued salaries |
|
| 112,500 |
|
|
| 1,063,000 |
| 37,500 | - | ||||||
Total due to Irma Velazquez |
|
| 131,375 |
|
|
| 1,083,992 |
| 90,165 | 66,898 | ||||||
|
| $ | 261,653 |
|
| $ | 2,276,770 |
| $ | 114,843 | $ | 84,676 |
9 |
Energy and Water Development Corp.
Notes to the Condensed Financial Statements (Unaudited)
Unsecured advances due to officers represent unreimbursed Corporation expenses paid by the officers on behalf of the Corporation. These advances are non-interest bearing and are due on demand.
Officer Compensation
Accrued salaries represent amounts earned for services renderedaccrued in accordance with the employment agreements for Mr. Hofmeier, the Corporation’sCompany’s President, Chief Executive Officer and Chairman of the Board, and Ms. Velazquez, the Company’s Chief Operating Officer but were unpaid asand Vice-Chairman. Mr. Hofmeier and Ms. Velazquez are also significant stockholders.
On December 18, 2020, the Company entered into a Settlement Agreement with each of December 31, 2019. On January 9, 2020, settlementMr. Hofmeier and release agreements were signed byMs. Velazquez whereby Mr. Hofmeier and Ms. Velazquez each agreed to receive shares of its Series A Preferred Stock with a fair market value of $ (collectively, the “Compensation Shares”). Compensation Shares are issued in full satisfaction of $150,000 accrued salary due the Employees, Mr. Ralph Hofmeier and Mrs. Irma Velazquez, regarding the accrued compensation due toMSc. simultaneously herewith, each employee received a one-time bonus of them. Ralph Hofmeier received 1,022,095 common(i) shares of its Common Stock with a fair market value of $1,500,000and 2,002,488(ii) shares of its Series A preferred shares in satisfactionPreferred Stock, with a fair market value of $1,175,000 of accrued salaries. Irma Velazquez received 1,022,095 common shares and 1,778,488 Series A preferred shares in satisfaction of $1,063,000 of accrued salaries. $1,350,000 (collectively the “Bonus Shares”).
Note 6. Other Current Liabilities
Due to/from Commercial Distributor & Services Supplierto affiliate distributor
During the year ended December 31, 2019,2020, EAWC-TV provided $200,000$75,000 of paid services and $100,000 $225,000 of accrued services plus $13,389 $6,464 net in interest and remitted $155,537$187,518 to vendors in satisfaction of EAWD obligations. EAWD also raised from investors and lenders and remitted $358,540$445,865 to EAWC-TV. TheEAWD also executed several payments totaling $66,500 as a deposit on the equipment purchase and $124,352 which represent the final net balance due toin the D/T/F EAWC-TV by EAWD at December 31, 2019account which was $4,959 in paid charges and $100,000 in unpaid services.
Duringaccounted for as a deposit for the nine months ended September 30, 2020,customer’s purchase. In addition, EAWC-TV provided $75,000 of paid services and $150,000 of accrued services plus $3,606 net in interest and remitted $176,018 to vendors in satisfactionalso functions as a distributor of EAWD obligations. The escrow agent (see below) remitted $218,909 to EAWC-TV. The balance due to EAWDproduct and as such, has placed a $550,000 order for a solar powered atmospheric water generator (“AWG”) for an EAWC-TV customer, which has been secured by EAWC-TV at September 30, 2020 was $101,245. This balance has been offset againstaccepting a $303,742 reduction in the accounts payable due to EAWC-TV for unpaid monthly management fees of $249,250, bringing the net amount due to EAWC-TV to $148,005.
Escrow Arrangement
During the nine months ended September 30, 2020, the Company engaged an escrow agent to receive funds and make disbursements of company funds held in escrow. During the nine months ended September 30, 2020 the escrow agent accepted $333,000 from lenders who acquired convertible notes and paid $114,089 of company expenses on behalf of EAWD, forwarding the remaining funds of $218,909 to EAWC-TV to manageexchange for a customer deposit with EAWD. The escrow arrangement ended in Julyequipment was delivered on December 26, 2020.
8
Energy and Water Development Corp.
Notes As of December 31, 2020, no amounts were due to the Condensed Consolidated Financial Statements (Unaudited)distributor as the deposit was satisfied out of proceeds from customer deposit.
September 30, 2020 and December 31, 2019
Customer deposit
In 2019, in addition to providing management services and disbursement processing to EAWD as described above, EAWC-TV also functions as a distributor of EAWD products and engineering services. EAWC-TV, having secured EAWD’s first customer, has placed a $550,000$550,000 order for a solar powered atmospheric water generator (“AWG”) for one of its customers. EAWC-TV and the Company on December 13, 2019 agreed to accept a $303,742$303,742 reduction in the balance owed by EAWD to EAWC-TV as a deposit with EAWD related to this order. The deposit will be satisfied through delivery of the equipment when performance has occurred. The equipment is beingwas built in Germany.
In 2020, manufacture of the unit was delayed due to Covid-19 related issues. The Company and EAWC-TV agreed as it had done in 2019, to clear the outstanding balances in the D/T/F EAWC-TV and the outstanding balance it carried in its accounts payable account for administrative services, which it did on December 26, 2020 which resulted in an additional down payment of $193,497. EAWC-TV has an unpaid balance on the equipment of $52,761, which represents the entire balance of the Company’s outstanding accounts receivables as of both March 31, 2021 and December 31, 2020.
Investor deposit and officer compensation
On December 16, 2019,31, 2020, the Company received $10,000 fromrecorded $1,500,000 as officer compensation and $4,000 in common stock subscriptions stock issuance transactions in process. The $4,000 is part of a potential investor to purchase 50,000pending stock sale for shares that has been funded were issued on January 20, 2021. The $1.5 million is part of the Company’s common stock.bonus payment to officers authorized on December 18, 2020. The Company did not receive the required signed and completed subscription stock purchase agreements and accordingly did not issued the shares. The instructions were formalized and signed purchase documents were received in July, 2020 and the shares were then issued.issued as of March 31, 2021.
10 |
Energy and Water Development Corp.
Notes to the Condensed Financial Statements (Unaudited)
For the three months ended March 31, 2021, the Company recorded $20,000 in common stock subscriptions for stock issuance transactions in process. The $20,000 was part of pending stock sales for shares that has been funded and was waiting issuance to complete the sale. Shares were issued within the period of April and August 2021.
Note 7.6. Convertible Loans Payable
As of September 30, 2020March 31, 2021 and December 31, 2019,2020, the balance of convertible loans payable net of discount was $83,453$32,156 and $243,923, respectively of which$149,241, respectively. During the year ended December 31, 2020, the Company issued convertible loans held by shareholders amounted to $0in the aggregate principal amount of $468,500. The aggregate purchase price of the notes was $441,000 and $203,923. the remaining $27,500 of principal represents the original issue discount. The notes bear interest between 0% and 8% per annum and all mature within one year. The embedded beneficial conversion feature in the notes meet the definition of a derivative and requires bifurcation and liability classification, at fair value. The fair value of the derivative liability as of the date of issuance was $1,609,895 and was recorded as a discount of the note.
The convertible loans were issued in several different forms as discussed below.
Convertible loans
From December 2015 through December 2018, During the three months ended March 31, 2021, the Company issued convertible loans payable to anin the aggregate amount of 11 note holders, raising $586,825. These convertible loans were due on demand, unsecured, have no maturity date and were generally non-interest bearing although a few of the$404,000. The notes provide for 2% interest. During the year ended December 31, 2019, by mutual agreement between the Company and the debt holders, an aggregate of $546,824 of outstanding convertible debt was converted into 4,877,350 common shares of the Company at a conversion price ranging from $0.10 - $1.00 per share. In addition, the Company has issued 40,000 conditional shares to several note holders pending paperwork to complete the conversion. As of September 30, 2020 and December 31, 2019, the Company had outstanding convertible loans in this form of $40,000 and $40,000, respectively.
Convertible loans with beneficial conversion feature
During the first quarter of 2019, the Company issued two convertible loans payable, which totaled $98,000. The convertible loans payable are due on February 19, 2020, accruebear interest at 0-2%8% per annum and all mature within one year. The embedded beneficial conversion features in the notes meet the definition of a derivative and requires bifurcation and liability classification, at fair value. The fair value of the derivative liability as of the date of issuance was $730,280 and was recorded as a discount of the notes.
Schedule of Notes Payable | ||||
Amount | ||||
Balance of convertible loan payables, net of discounts on December 31, 2019 | $ | 243,923 | ||
Issuances of debt | 468,500 | |||
Settlement of debt | (66,000 | ) | ||
Amortization of debt discount | 514,244 | |||
Debt discount | (440,426 | ) | ||
Conversions | (571,000 | ) | ||
Balance of convertible loan payables, net of discounts on December 31, 2020 | $ | 149,241 | ||
Issuances of debt | 404,000 | |||
Amortization of debt discount | 77,425 | |||
Debt discount | (406,500 | ) | ||
Settlement of debt | (95,500 | ) | ||
Conversions | (66,000 | ) | ||
Deferred financing costs | (30,510 | ) | ||
Balance of convertible loan payables, net of discounts on March 31, 2021 | $ | 32,156 |
Derivative Liability
The Company issued debts that consist of the issuance of convertible notes with variable conversion provisions. The conversion terms of the convertible notes are convertible into 1,960,000 sharesvariable based on certain factors, such as the future price of the Company’s common stock. The number of shares of common stock at $0.05 per share whichto be issued is a discountbased on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Due to the market price on the date of the issuance (beneficial conversion feature). After performing an analysis of the conversion option under ASC Topic 815, “Derivatives and Hedging” and determiningfact that the instrument does not qualify for derivative accounting treatment. The Company therefore performed an analysis ifnumber of shares of common stock issuable could exceed the conversion option was subject to a beneficial conversion featureCompany’s authorized share limit, the equity environment is tainted, and determined that it was. Accordingly, the Company recorded a debt discount of $98,000 forall additional convertible debentures and warrants are included in the value of the beneficial conversion feature. Forderivative liabilities. Pursuant to ASC 815-15 Embedded Derivatives, the nine months ended September 30, 2020 and 2019 the Company amortized debt discount of $8,148 and $0, respectively. The debt discount was fully amortized in the first quarter of 2020. On May 14, 2020 these notes ($98,000) were converted into 1,960,000 common shares. As of September 30, 2020 and December 31, 2019, the Company had no outstanding convertible loans netfair values of the beneficial conversion feature.
Convertible loans with a variable conversion feature
On August 7, 2019, the Company entered into an $110,000 8% convertible noteoptions and warrants and shares to provide interim financing. The note bears interest at the rate of 8% per annum. All interest and principal must be repaid before or on August 7, 2020. The note is convertible into common stock, at the holder’s option, at a price equal to 70% of the lowest closing bid price of the common stock during the 20 trading day period prior to conversion. In the event the Company prepays the note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by:
(i)
115% if prepaid during the period commencingissued were recorded as derivative liabilities on the closingissuance date through 60 days thereafter,and revalued at each reporting period.
(ii)
120% if prepaid 61 days following the closing through 120 days following the closing, and
(iii)
135% if prepaid 121 days following the closing through 180 days following the closing.
After the expiration of 180 days following the date of the Note, the Company has no right of prepayment.
9
11 |
Energy and Water Development Corp.
Notes to the Condensed Consolidatedd Financial Statements (Unaudited)
September 30, 2020 and December 31, 2019
The Company has identifiedBased on the embedded derivatives related tovarious convertible notes described above, the above described note. This embedded derivative included variable conversion features. The accounting treatment of derivative financial instruments requires that the Company record fair value of theapplicable derivative as of the inception date of the noteliabilities on notes and to fair value as of each subsequent reporting date.
At the inception of the note, the Company determined the aggregate fair value of $183,809 of embedded derivatives, which resulted in a $73,809 loss from fair value charged to current period operations. The fair value of the embedded derivatives was determined using the Black Scholes Option Pricing Model based on the following assumptions:
Assumptions |
| Conversion |
| Remeasurement |
|
|
|
|
|
(1) dividend yield of |
| 0% |
| 0% |
(2) expected volatility of |
| 147.2–176.79% |
| 180.74% |
(3) weighted average risk-free interest rate of |
| 0% |
| 0.00% |
(4) expected life of |
| 0.22-0.32 years |
| 0.10 years |
(5) estimated fair value |
| $0.02-0.03 |
| $0.00 |
The Company recorded $110,000 as a derivative liability discount at inception. At December 31, 2019, the Company determined the aggregate fair value of the embedded derivatives had fallen to $129,477, which resulted in a $54,332 change in fair value credited to current period operations. As of September 30, 2020derivative liability are as follows as of March 31, 2021 and December 31, 20192020:
Outstanding Derivative Liability | ||||
Total | ||||
Balance of derivative liability as of December 31, 2019 | $ | 413,795 | ||
Change due to issuances | 1,609,895 | |||
Change due to exercise / redemptions | (455,576 | ) | ||
Change in fair value | (1,257,473 | ) | ||
Balance of derivative liability as of December 31, 2020 | $ | 310,641 | ||
Change due to issuances | 730,280 | |||
Change due to exercise / redemptions | (67,350 | ) | ||
Change in fair value | (310,348 | ) | ||
Balance of derivative liability as of March 31, 2021 | $ | 663,223 |
A summary of quantitative information with respect to valuation methodology and significant unobservable inputs used for the outstanding derivative liability related to these convertible notes was $0 and $129,477, respectively.
For the nine months ended September 30, 2020 and 2019 the Company amortized debt discount of $70,540 and $14,595, respectively. Also during the nine months ended September 30, 2020, the loan holder on six occasions converted in aggregate, $110,000 of convertible debt into 2,417,613Company’s common shares at pricing ranging from $0.04 to $0.09, which fully converted the debt to common shares. These conversions were fair valued to determine the reductionstock purchase warrants that are categorized within Level 3 of the derivative liability associated withfair value hierarchy for the conversions. As of September 30, 2020periods ended March 31, 2021 and December 31, 2019, the Company had outstanding convertible loans net2020 is as follows:
Summary of Quantitative Information | |||||||
March 31, 2021 | December 31, 2020 | ||||||
Stock price | $0.23 - 0.45 | $0.07 – 1.20 | |||||
Exercise price | $0.04 - 0.16 | $0.04 – 0.20 | |||||
Contractual term (in years) | 0.21 - 1 | 0.01 - 1 | |||||
Volatility (annual) | 215 - 308 | % | 125 - 424 | % | |||
Risk-free rate | 0.05% - 0.07 | % | 0.08% - 1.46 | % |
The foregoing assumptions are reviewed quarterly and are subject to change based primarily on management’s assessment of the debt discountprobability of $0 and $39,460, respectively.the events described occurring. Accordingly, changes to these assessments could materially affect the valuations.
TheFinancial Liabilities Measured at Fair Value on a Recurring Basis
Financial liabilities measured at fair value of the conversions was determined using the Black Scholes Option Pricing Model basedon a recurring basis are summarized below and disclosed on the following assumptions:balance sheet under Derivative liability – warrants and derivative liabilities:
Summary of Financial Liabilities Measured on Recurring Basis | ||||||||||||||||
Fair Value measured at March 31, 2021 (Unaudited) | ||||||||||||||||
Quoted prices in | Significant other | Significant | ||||||||||||||
active markets | observable inputs | unobservable inputs | Fair value at | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | March 31, 2021 | |||||||||||||
Derivative liability | $ | — | $ | — | $ | 663,223 | $ | 663,223 | ||||||||
Total | $ | — | $ | — | $ | 663,223 | $ | 663,223 |
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Convertible loans with a variable vested conversion feature, Original Issue Discount
On January 23, 2020, February 27, 2020, April 8, 2020, June 11, 2020, July 17, 2020 and September 25, 2020 the Company entered into three $60,000, two $48,000 and one $43,000 8% convertible notes with original issue discount to provide interim financing. The debt agreements provide that these notes are convertible 180 days after their issuance date. The notes bear interest at the rate of 8% per annum. All interest and principal must be repaid before or on January 24, 2021, February 28, 2021, April 15, 2021, June 15, 2021, July 17, 2021 and September 25, 2021. The notes are convertible into common stock, at the holder’s option after a one-year vesting period, at a price equal to 70% of the lowest closing bid price of the common stock during the 20 trading day period prior to conversion. In the event the Company prepays the note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by:
(i)
120% if prepaid during the period commencing on the closing date through 90 days thereafter,
(ii)
125% if prepaid 91 days following the closing through 120 days following the closing,
(iii)
130% if prepaid 121 days following the closing through 150 days following the closing, and
(iv)
135% if prepaid 151 days following the closing through 180 days following the closing.
10
Energy and Water Development Corp.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
September 30,
Fair value measured at December 31, 2020 | ||||||||||||||||
Quoted prices in | Significant other | Significant | ||||||||||||||
active markets | observable inputs | unobservable inputs | Fair value at | |||||||||||||
(Level 1) | (Level 2) | (Level 3) | December 31, 2020 | |||||||||||||
Derivative liability | $ | — | $ | — | $ | 310,641 | $ | 310,461 | ||||||||
Total | $ | — | $ | — | $ | 310,641 | $ | 310,461 |
There were no transfers between Level 1, 2 or 3 during the three months ended March 31, 2021 and 2020.
During the three months ended March 31, 2021 and 2020, and December 31, 2019
After the expiration of 180 days following the date of the Note, the Company has no rightrecorded gains of prepayment.
As of July 30$310,348 and $322,948, respectively, from the Company completed three transactions converting debt to common stock to fully convert the January 23, 2020 $60,000 loan into 800,359 shares of common stock. As of September 30 the Company completed four transactions converting debt to common stock to fully convert the February 27, 2020 $60,000 loan into 669,002 shares of common stock.
As of September 30, 2020 and December 31, 2019, the Company had outstanding convertible loans with variable vested conversion feature net of the debt discount of $43,453 and $0, respectively. For the nine months ended September 30, 2020 and 2019, the Company amortized debt discount including original issue discount of $112,577 and $0, respectively.
Derivative liability
The Company’s derivative liability consists of transactions discussedchange in the previous loan category (Convertible loans with a variable conversion feature) and loan category (Convertible loans with beneficial conversion).
A summary of transactions follows:
Fair value as of December 31, 2018 |
| $ | — |
|
Fair value on the date of issuance recorded as debt discount |
|
| 183,809 |
|
Fair value on the date of issuance recorded as loss on derivative |
|
| (73,809 | ) |
Gain on change in fair value of derivatives |
|
| (255,505 | ) |
Reclassification of tainted notes to derivative |
|
| 559,300 |
|
Fair value as of December 31, 2019 |
|
| 413,795 |
|
Debt discount from derivatives |
|
| 409,302 |
|
Reclassification of equity to liability for derivatives |
|
| 54,159 |
|
Amortization of debt discount from derivatives |
|
| 838,688 |
|
Change in fair value of derivatives |
|
| (912,825 | ) |
Derivative settled upon conversion of debt |
|
| (458,933 | ) |
Fair value as of September 30, 2020 |
| $ | 344,186 |
|
Convertible loans with purchase option
In November of 2019, the Company entered into convertible loans with 2 lenders totaling $122,000. These loans provide for a six month maturity, which may be extended up to one year, do not pay interest, and may be converted any time following the six month anniversary at a fixed price of $0.10 per share and fixed shares. One of the above loans for $55,000 became convertible on February 19, 2020 and was converted into 275,000 shares on May 5, 2020 along with exercising the purchase option for 275,000 common shares. On July 23, 2020 the second loan was converted in 335,000 common shares.
The convertible loans also provide a purchase option to acquire an additional matching number of shares as results from a conversion at the same $0.10 per share price. The fair value of the purchase options originated in 2020 was determined using the Black Scholes Option Pricing Model based on the following assumptions:
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11
Energy and Water Development Corp.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
September 30, 2020 and December 31, 2019
As of September 30, 2020 and December 31, 2019, the Company had outstanding convertible loans with purchase options net of debt discount of $0 and $74,611, respectively. As of September 30, 2020 and December 31, 2019 the outstanding derivative liability related to these convertible notes was $0 and $0, respectively. For the nine months ended September 30, 2020 and 2019, the Company amortized debt discount for these two notes of $47,389 and $0, respectively.liability.
During February and March 2020, the Company entered into additional convertible loans with purchase options with seven lenders totaling $97,000. These loans provide for a six month maturity, which may be extended up to one year, do not pay interest, and may be converted any time following the six month anniversary at a fixed price of $0.10 per share and fixed shares. The fair value of the purchase options originated in 2020 was determined using the Black Scholes Option Pricing Model based on the following assumptions:
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In June 2020, three of notes totaling $19,000 were converted into 190,000 shares of common stock and noteholders exercised their option to purchase an additional 190,000 shares for $19,000. In July 2020, three of the notes totaling $12,000 were converted into120,000 common shares. One loan was cancelled by mutual agreement with the note holder. The original note was changed to a stock purchase for 660,000 common shares utilizing the $66,000 original proceeds of the loan. As of September 30, 2020 and December 31, 2019, the Company had outstanding convertible loans net of debt discount of $0 and $0, respectively. As of September 30, 2020 and December 31, 2019 the outstanding derivative liability related to these convertible notes was $0 and $0, respectively. Total debt discount amortized for these 7 convertible notes with purchase options for the nine months ended September 30, 2020 was $65,175.
Note 8.7. Stockholders’ Deficit
Preferred Stock
Authorized:
shares of voting preferred stock with a par value of $0 .Common Stock
Authorized:
shares of voting common stock with a par value of $0 .During the three months ended March 31, 20202021 the Company engaged in the following equity transactions:events:
· | 160,021 for the sale of shares, | common shares issued for $
· | 165,000 in marketing and consulting, | common shares issued for $
· | 66,000 to convertible note holder is satisfaction of their notes, | common shares were issued for $
· | 3,441 to pay interest and fees, | common shares were issued for $
· | 1,500,000 to our CEO as a compensation bonus, and | common shares were issued for $
· | 4,000 for sales of shares. | common shares were issued for $
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issued 3,780,976 shares of preferred series A stock and 2,044,190 shares of common stock to our Chief Executive and Chief Operating officers in exchange for $2,238,000 in accrued salaries, collectively,
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issued 691,522 common shares for conversion of $38,500 of convertible debt as discussed in Note 7,
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issued 46,789 common shares for interest and fees,
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removed $23,940 of derivative for converted debt, and
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recorded $54,159 for reclassification of equity to liability for derivatives.
During the three months ended June 30, 2020 the Company engaged in the following equity transactions:
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issued 2,500,000 shares of common stock for $250,000 in web site services, data records and marketing services,
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issued 4,426,091 common shares for conversion of $243,500 of convertible debt as discussed in Note 7,
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issued 139,275 common shares for interest and fees,
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sold 1,301,111 common shares for $69,000,
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sold $161,000 in subscriptions to purchase 1,610,000 common shares, and
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removed $151,434 of derivative for converted debt.
During the three months ended September 30, 2020 the Company engaged in the following equity transactions:
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issued 1,924,397 common shares for conversion of $199,000 of convertible debt as discussed in Note 7,
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issued 58,757 common shares for interest and fees,
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sold 2,120,000 common shares for $217,000,
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issued common shares for $74,000 in subscriptions received in the previous quarter, and
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removed $283,559 of derivative for converted debt.
12
13 |
Energy and Water Development Corp.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
September 30, 2020 and December 31, 2019
Issuance of Series A Preferred Stock
On January 30, 2020 the articles were amended to authorize 3,780,976 shares of the authorized and unissued Preferred Stock of the Corporation are hereby designated “Series A Preferred Stock” with the following highlights of rights, preferences, powers, privileges and restrictions, qualifications and limitations.
1.
Dividends. Series A Preferred Stock shall be treated pari passu with Common Stock except that the dividend on each share of Series A Preferred Stock shall be equal to the amount of the dividend declared and paid on each share of Common Stock multiplied by the Conversion Rate.
2.
Liquidation, Dissolution, or Winding Up. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, Series A Preferred Stock shall be treated pari passu, with Common Stock except that the payment on each share of Series A Preferred Stock shall be equal to the amount of the payment on each share of Common Stock multiplied by the Conversion Rate.
3.
Voting. On any matter presented to the shareholders of the Corporation for their action or consideration at any meeting of shareholders of the Corporation (or by written consent of shareholders in lieu of meeting), each holder of outstanding shares of Series A Preferred Stock shall be entitled to cast the number of votes equal to the number of shares of Series A Preferred Stock held by such holder as of the record date for determining shareholders entitled to vote on such matter multiplied by the Conversion Rate. Except as provided by law or by the other provisions of the Articles of Incorporation, holders of Series A Preferred Stock shall vote together with the holders of Common Stock as a single class.
4.
Conversion Rate and Adjustments.
a.
Conversion Rate. The “Conversion Rate” shall be five (5) shares of Common Stock (as adjusted pursuant to this Section 4) for each share of Series A Preferred Stock.
Stock Options
On January 2, 2012, the Corporation’s Board of Directors approved the creation of the 2012 Non-Qualified Stock Option Plan (the “2012 Plan”). The 2012 Plan provides for the issuance of incentive stock options to designated employees, certain key advisors and non-employee members of the Board of Directors with the opportunity to receive grant awards to acquire, in the aggregate, up to
shares of the Corporation’s common stock.A summary of information regarding the Corporation’s common stock options outstanding is as follows:
Common Stock Options Outstanding | ||||||||||||||||||||||||
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Outstanding at December 31, 2018 |
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Outstanding at December 31, 2019 |
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Issued |
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Exercised |
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Outstanding at September 30, 2020 |
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Outstanding at December 31, 2020 | 2,200,000 | 0.10 | ||||||||||||||||||||||
Issued | — | — | — | |||||||||||||||||||||
Expired | (2,200,000 | ) | — | — | ||||||||||||||||||||
Outstanding at March 31, 2021 | — | $ | — | — |
The above outstanding options were granted on January 1, 2012, to a former executive of the Company. The options were fully vested and exercisable at December 31, 2016. Accordingly, during the ninethree months ended September 30,March 31, 2021 and 2020, and 2019, the Corporation did not0t recognize any stock-based compensation expense.
Warrants
13
On February 17, 2021, the Company entered into an agreement with a consultant to provide Business Development advisement and analysis services. In consideration, the consultant will be issued warrant shares. warrants were issued on February 17, 2021, and the remaining 500,000 will be issued on the six-month anniversary of initial issuance. On August 31, 2021, due to a failure by the consultant to provide the services as required by the agreement, the Company terminated the agreement, and the warrants were canceled.
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Energy and Water Development Corp.
Notes to the Condensed Consolidated Financial Statements (Unaudited)
September 30, 2020 and December 31, 2019
Note 10.9. Commitments and Contingencies
Commitments
Employment Agreements
The Corporation entered into employment agreements with its Chief Executive Officer, Mr. Ralph Hofmeier, and its Chief Operating Officer, Ms. Irma Velazquez (collectively the “Employment Agreements”), effective January 1, 2012. Under the Employment Agreements, the Corporation will pay each of Mr. Hofmeier and Ms. Velazquez an annual base salary of $125,000$125,000 during the first year and $150,000$150,000 during the second year and forward. Any increase to the annual base salary after the second year is subject to approval by the Corporation’s Board of Directors. The Employment Agreements each has initial terms of ten (10) years and is automatically renewed for successive one-year terms unless either party delivers timely notice of its intention not to renew.
Lease
Effective January 1,Our registered office is located at 7901 4th Street N STE #4174, St. Petersburg, Florida 33702. Our telephone number is +1 (727) 677-9408. Office services are contracted for on a month-to-month basis in this Address. In October 2020, the Company established its 7901 4th Street N STE# 4174 St Petersburg FL 33702 asofficial registered Branch in Hamburg Germany; the official corporate address.office Address until March 31, 2021 was Offakamp 9f- 2.17. On April 1, 2021, the Company entered into two lease agreements for a workshop located at Industriestraße 17, 25462 Relligen and an office located at Ballindam 3 20095 Hamburg, Germany. Our Telephone number is +49 40 809081354. Rent expense in the three months ending March 31, 2021 and 2020 amounted to $2,034 and $0, respectively.
Contingencies
From time to time, the Corporation may be a defendant in pending or threatened legal proceedings arising in the normal course of its business. While the outcome and impact of currently pending legal proceedings cannot be predicted with certainty, the Corporation’s management and legal counsel believe that the resolution of these proceedings through settlement or adverse judgment will not have a material adverse effect on its consolidated operating results, financial position or cash flows.
Litigation
Norwood - Action proceeding on concluded litigation, Case Number 10-58982 CA 09 – Miami-Dade County, FL Circuit Court. Nick Norwood vs. Eurosport Active World Corp. and Ralph Hofmeier. The case is resolved. On June 2, 2020, the Company paid $107,872 and settled the judgement with the plaintiff.
EAWD vs Packard and Co-Defendant Nick Norwood - Case number 18-031011 CA-01 Miami-Dade County Circuit Court. The Company is requesting the proof of payment for shares issued in 2008.
CocoGrove – Case No. 09-81555 CA 21 in Miami-Dade County, Florida. The nature of the litigation was for breach of a lease agreement. This case is concluded with a judgement against the Company inon July 7, 2010 for $84,393$84,393 plus 6% interest.6% interest which as of March 31, 2021 interest had accrued to $54,338. There have been no efforts to seek collection of this judgement. Management intends to settle this judgement when it is in a financial position to make a payment.
Note 11. 10. Subsequent Events
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On July 29, 2020, EAWD received qualification of its Form 1-A regardingDuring the offering of 20 million shares.
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On October 08, 2020three month period ended June 30, 2021, the Company sold 335,000 shares of its common sharesstock to 29 investors raising $241,000
Also, during the three month period ended June 30, of 2021, the Company accepted subscriptions for $67,000.the sale of of its common stock to 40 investors raising $ . The subscriptions were fully funded as of June 30, 2021, however due to delays caused by investors not completing required paperwork, the delivery of the certificates was not completed until after June 30, 2021. Subsequent to June 30, 2021, all share certificates paid for have been delivered to the investor
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On October 08, 2020 theSeptember 2, 2021, Company issued 1,250,000 common shares valued at $204,750received global patent protection for investor relations services.its innovative solution Self Sufficient Energy Supply Atmosphere Water Generation System (EAWG).
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On October 15, 2020 the Company issued 194,805 common shares to convert $15,000 of debt.
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On October 19, 2020 the Company sold 200,000 common shares for $20,000.
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On October 22, 2020 the Company issued 262,123 common shares to convert $20,000 of debt.
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On October 28, 2020 the Company issued 225,564 common shares to convert $15,000 of debt.
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On November 02, 2020 the Company issued 190,000 common shares valued at $20,000 for finders fees.
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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
INTRODUCTORY STATEMENT
The following discussion should be read in conjunction with our condensed consolidated financial statements and the notes to those consolidatedcondensed financial statements that are included elsewhere in this Report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. See “Forward-Looking Statements.”
RESULTS of OPERATIONS
Results of Operations for the NineThree Months ended September 30, 2020March 31, 2021 Compared to the Ninethree Months ended September 30, 2019March 31, 2020
Revenue
For the nine months ended September 30, 2020, although the Company has received a deposit on its first order, which it has not yet been delivered; consequently it has recognized no revenue. The Company agreed to accept a $303,742 reduction in the balance owed by EAWD to EAWC-TV as a deposit with EAWD related to this order. The deposit will be satisfied through delivery of the equipment when performance has occurred by the end of 2020. The timing of the delivery has been extended several months due to the impact of COVID-19.
Another contract has been signed for the sale of a SPAWG to our South African customer, the build out began inDuring the fourth quarter of 2019.2020, EAWD delivered its first equipment sale pursuant to an equipment sale agreement; however, the revenue of $550,000 along with the associate $350,000 of construction costs will not be recognized until the equipment is installed. The timinginstallation of the deliveryequipment has been extended several months duedeemed to be an unfulfilled performance obligation. The sales agreement, as amended states that EAWD will complete the equipment installation upon notice from the buyer of the final location of the system. Due to the impact of COVID-19.
On June 18,COVID 19 situation in Mexico, the installation has been delayed. For both the three months ended March 31, 2021 and 2020, the Company has received a Contract Award with a value of USD$14,650,640 from the Iraqi Project and Contracting Office to supply 20 self-sufficient energy supply atmosphere water generation systems to various Iraqi projects.we generated no revenue.
General and Administrative Expense
General and administrative expense increased by $267,250$74,942 to $1,019,440$305,482 for the ninethree months ended September 30, 2020March 31, 2021 from $752,190$230,540 for the ninethree months ended September 30, 2019.March 31, 2020.
The increase in general and administrative expenses was primarily due to increasesan increase in marketing fees of $165,188 as we entered into a new agreement with a consulting firm to provide marketing services, offset by a reduction in management fees to affiliate by $75,000 as the following categories:contract with EAWC-TV was terminated as of December 31, 2020 and a reduction in professional fees by $10,482.
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Other Income (Expense)
Other income (Expense)(expense) increased expense of $413,004by $350,312 from $68,859$219,241 income (2019)(2020) to ($344,145)$128,570 expense (2020)(2021) primarily as a result of the following:
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Net Loss
Net Lossloss increased by $691,256 expense$422,753 to $1,374,587 expense$434,052 for the ninethree months ended September 30, 2020March 31, 2021 from $683,331$11,299 for the ninethree months ended September 30, 2019.March 31, 2020. This increase was attributable to the net increases and decreases as discussed above.
Results of Operations for the Three Months ended September 30, 2020 Compared to the Three Months ended September 30, 2019
Revenue
For the three months ended September 30, 2020, although we signed a contract for the sale of a SPAWG to our South African customer, the build out which began in the fourth quarter of 2019, will take 6-8 months to complete before revenue will occur. On June 18, 2020, the Company has received a Contract Award with a value of USD$14,650,640 from the Iraqi Project and Contracting Office to supply 20 self-sufficient energy supply atmosphere water generation systems to various Iraqi projects. The timing of the delivery will be extended several months due to the impact of COVID- 19. These transactions represent a revenue opportunity for EAWD.
General and Administrative Expense
General and administrative expense decreased by $119,140 to $242,007 expense for the three months ended September 30, 2020 from $361,147 expense for the three months ended September 30, 2019.
The increase in general and administrative expenses was primarily due to increases in the following categories:
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Other Income (Expense)
Other income (Expense) increased $347,062 from $119,452 income (2019) to $227,610 expense (2020) primarily as a result of the following:
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Net Loss
Net Loss increased by $238,924 to $480,619 for the three months ended September 30, 2020 from $241,694 for the three months ended September 30, 2019. This increase was attributable to the net increases and decreases as discussed above.
LIQUIDITY and CAPITAL RESOURCES
We had $9,270$105,256 cash and a working capital deficit of $1,975,273$1,542,533 at September 30, 2020.March 31, 2021. Our operating and capital requirements in connection with supporting our operations will continue to be significant. Since inception, our losses from operations and working capital requirements have been satisfied through the deferral of payment for services performed by our founders and related parties discussed more fully below.
We have sustained operating losses since our operations began. At September 30, 2020,March 31, 2021, we had an accumulated deficit of $13,319,506.$19,791,979. The Company cannot predict how long it will continue to incur further losses or whether it will ever become profitable as this is dependent upon the reduction of certain expenses and success in obtaining more project contracts, among other things. These conditions raise substantial doubt about the entity’s ability to continue as a going concern.
16 |
We have satisfied our cash and working capital requirements in the ninethree months ended September 30, 2020,March 31, 2021, through the issuance of convertible loans and the sale of common stock. During the ninethree months ended September 30, 2020,March 31, 2021, the Company entered into $97,000 in simple convertible loans, which contained a purchase option for an additional 970,000 shares. The holders of the convertible loan instruments have the option to convert these loans into common stock at a conversion price of $0.10 per share up to six months from the note issuance. The Company also issued $294,000$404,000 of convertible loans with a variable vested conversion feature. Refer to Note 7 of the financial statements under section “Convertible loans with a variable vested conversion feature, Original Issue Discount”for more information. In fourtwo individual transactions ranging from January 23, 2020February 9, 2021 to June 11, 2020,March 25, 2021, the Company secured interim financing. The notes provide for interest at 8% per annum and require the all interest and principal be repaid in one year.
Comparison of Cash Flows for the NineThree Months Ended September 30,March 31, 2021 (2021) and March 31, 2020 (2020) and September 30, 2019 (2019)
Cash Flows from Operating Activities
Net cash used in operating activities
We used $779,730$338,311 of cash in our operating activities in 2020for the three months ended March 31, 2021 compared to $251,200$207,000 used in 2019.for the three months ended March 31, 2020. The increase in cash used of $528,530 was$131,311 is due primarily due to:
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$397,172 decrease in cash provided from changesto a $193,318 net reduction in working capital components to $115,162 (2020)decreases of $164,106 for 2021 compared to $512,334 (2019). The decrease was primarily derived from $116,134 increaseincreases of $29,211 in cash used to reduce prepaid expenses for vendor advances and a $290,475 increase in cash used by accounts payable accrued expenses.2020.
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$131,358 increase in cash used from net loss and noncash adjustments to $894,892 (2020) compared to $763,534 (2019). This increase in cash used was primarily associated with an increase in net loss of 691,256 that was reduced by adjustments for noncash charges of $250,000 for stock issued for services, $1,062,774 increase for amortization of debt discount and $713,676 decreased by changes in fair value for derivative liabilities.
Cash Flows from Investing Activities
We received $0 cashused or provided byno funds from our investing activities in 20202021 or 2019. 2020.
Cash Flows from Financing Activities
We received $789,000$434,021 (2021) and $207,000 (2020) and $251,200 (2019) in cash provided from financing activities. The net increase of $537,800$227,021 is due primarily to a $208,000$162,500 increase in financing through issuance of convertible loans, a $329,800$160,021 increase in proceeds from the sale of subscriptions and common stock.stock, and a $95,500 decrease due to payments of convertible loans payable.
Financial Position
Total Current Assets – At September 30, 2020March 31, 2021 the Company had $157,654$595,150 representing $9,270$105,256 in cash, $134,200$52,761 in deposits for the manufacture of equipment comprising our first saleaccounts receivable, $350,000 in deferred cost, and $14,184 advance payments for services primarily legal retainers for new corporate/SEC counsel.$87,133 in prepaid expenses and other current assets.
PLAN OF OPERATION AND FUNDING
We have no lines of credit or other bank financing arrangements. Until we beginexpect to generate our first revenues which should, grow in time and lead to a positive cash flow, from our signed contracts,flow. In the near future, we expect that working capital requirements will continue to be funded through affiliatelines of credit, convertible loans and/or further issuances of other securities. There is no assurancesecurities in sufficient quantities that we will be able to meet our working capital requirement from these possible sources. Additional issuances of equity or convertible debt will result in dilution to our current shareholders.
We may not be ableseek to secure the additional financing necessary to commercialize our products and execute our business strategy, at terms that are acceptable to us.
Our mission is to provide sustainable water production design and already commercialized systems as well as energy design and systems basedfocus on high efficiency and renewable sources, and also smart grid and storage solutions. Through a combinationthree main aspects of the best designwater and stateenergy business: (1) generation, (2) supply, and (3) maintenance. We seek to assist private companies, government entities and NGO’s to build profitable and sustainable supplies/generation capabilities of water and energy as required, by selling them the art configurationrequired technology or technical service to enhance their productivity/operability. With its outsourced technical arm and its commission-based global network of AquaTech, EnergyTech and waste management assisted solutions and technologies, we believe that it is possiblevendors, the Company expects to create a completely self-sufficientsustainable added value to each project it takes on while generating revenue from its engineering and technical consultancy services, project management, sale of our patent pending Self Sufficient Power Supply Atmosphere Water Generation Systems (eAWGs) Solar Energy Generation Systems and Energy Management Systems, royalties from the commercialization of energy generation and water production system, which can be used atin certain cases, and revenues from the same time to meet the potable water requirements as well as the electrical energy needs of businesses, communities and entire States, like Californialicensed innovated technologies.
Through our BlueTech Alliance for Water Generation established in USA and or Cape Town in South Africa.
EAWD seeks to promote green technology solutions through commissioned-based distributers and agents worldwide. EAWD anticipates using Made in Germany Green Tech, Swiss and US technologies such as: atmosphere water generators (AWGs), CO2-free energy production, plasma-assisted gasification and sterilizations systems, solar-powered water purification systems, as well as those in solar and wind energy solutions which we may, when our financial condition permits, further develop ourselves.
Today we believeDecember 2020, we have potentialstate-of the art technology partners, technology transfer agreements, and technology representation agreements in place relating to aspects of renewable energy and water supply and we believe one of oursupply. These unique key uniquerelationships offer important selling features and capabilities is this relationship. We believe that onedifferentiated EAWD from its competitors.
17 |
The Company plans to generate revenue from its engineering and technical consultancy services, project management, sale of our key unique selling featuresSelf-Sufficient Power Supply Atmosphere Water Generation Systems (eAWGs), Solar Energy Generation Systems, and capabilities is the combination of the different disciplines of water, energy and waste management.
Revenue would be generated by the sales of Engineering and Technical Consultancy Services, sales of various identified technologies,Energy Management Systems, royalties from the salescommercialization of energy and/orand water in certain projects.cases, and revenues from the licensed innovated technologies.
MATERIAL COMMITMENTS
Employment Agreements
The Company entered into employment agreements with each of Mr. Hofmeier, its President, Chief Executive Officer and Chairman of the Board, and Ms. Velazquez, its Chief Operating Officer and Vice-Chairman (together, the “Employment Agreements”), effective January 1, 2012. Under the Employment Agreements, the companyCompany agreed to pay each of Mr. Hofmeier and Ms. Velazquez an annual base salary of $125,000 during the first year and $150,000 during the second year and forward. Any increase to the annual base salary after the second year is subject to approval by the company’s Board of Directors. Each Employment Agreement has an initial term of ten (10) years and is automatically renewed for successive one-year terms unless either party delivers timely notice of its intention not to renew.
OFF-BALANCE SHEET ARRANGEMENTS
NoneWe have no off-balance sheet arrangements.
GOING CONCERN
The Company has begun to commercializedelivered its products by beginning the build out of its initial revenue opportunity.first equipment sale on December 26, 2020. The Company has receivedwill recognize the sale for $550,000 net of costs of $350,000 and earning a deposit on its first order, which it has not yet delivered due$200,000 gross profit once the installation is complete. The next operational step to delays caused by the COVID-19 global pandemic, consequently it has recognized no revenue.accomplish is to achieve sufficient sales volume to yield positive a net income. Due to the timing of the project build out, the Company has not currently recorded any revenue and consequently has incurred operating losses since it began operations (December 2012) totaling $13,319,506$19,791,979 at September 30, 2020.March 31, 2021. During the ninethree months ended September 30, 2020,March 31, 2021, the Corporation incurred net losses of $1,374,587.$434,052. The Company also incurred a working capital deficit of $1,975,273$1,542,533 at September 30, 2020.March 31, 2021.
These factors raise substantial doubt regarding the Corporation’sThe Company’s ability to transition to profitable operations is dependent upon achieving a level of revenues adequate to support its cost structure. The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations and the anticipated growth of our business and availability to sufficient resources.
At the filling date of this report, management plans to conclude the sales in Germany and in other regions of the world further the received approved proposals, which would bring a growing revenue. Managements plans to expand the sales operations by greater market penetration of the Agriculture, Industrial and Community development market with its water and energy generation, innovative solution, this to make sales operations to continue to expand. Management also plans to raise additional funds through during 2021; through the issuance of equity securities and from deposits related to purchases orders on proposals pending customer acceptance as a going concern. well, if necessary, loans from management and third-party lender. Management also plans to deferral expenses by centralizing assembling, logistic and administration operations expenses.
The ability of the CorporationCompany to continue as a going concern depends upon its ability to generate sales or obtain additional funding to finance operating losses until the Corporation is profitable. The Corporation expects to be financed through equity capital, debt financing or from deposits related to purchases orders on proposals pending customer acceptance.
InADDRESSING CHALLENGES POST-COVID-19
As of October 19, 2021, the eventcumulative number of cases reported globally is now over 241 million and the Corporation does not generate more sufficient funds from issuancecumulative number of common stock, debt financing or purchase orders, it may be unabledeaths is just over 4.9 million (WHO) and has caused the worst global economic contraction of the past 80 years (IMF). The concerted global efforts achieved the development of vaccines that have helped to fully implement itsreduce a person´s risk of contracting the virus. However, as the COVID-19 pandemic continues to evolve, the disruptions due to COVID 19 could continue causing a materially and adversely affect our business, plan and pay its obligations as they become due, any of which circumstances would have a material adverse effect on its business prospects, financial condition and results of operations. If the corona virus cannot get under control and or worsens in any regions in which we have material operations or sales, our business activities originating from affected areas, including sales, manufacturing and supply chain related activities, could be adversely affected. Disruptive activities could include the temporary closure of our manufacturing facilities and those used in our supply chain processes, restrictions on the export or shipment of our products, significant cutback of ocean container delivery from Germany, business closures in impacted areas, and restrictions on our employees’ and consultants’ ability to travel and to meet with customers. The accompanying consolidated financial statements do not include any adjustments that mightextent to which COVID-19 impacts our results will depend on future developments, which still uncertain and cannot be predicted, including new information which may emerge concerning the severity of the virus variants and the actions to contain it or treat its impact, among others. COVID-19 could also continue to result fromin social, economic and labor instability in the outcome of these uncertainties.countries in which we or our customers and suppliers operate.
CRITICAL ACCOUNTING POLICIES
Our critical accounting policies are set forth in Note 2 to the condensed consolidated financial statements.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
We do not expect the adoption of recently issued accounting pronouncements as discussed in Note 3 to have a significant impact on our results of operations, financial position or cash flow.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company and are not required to provide the information under this item.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13(a)-15(e) and 15(d)-15(e)) as of December 31, 2019.2020. This evaluation was carried out by our Principal Executive Officer and our Principal Finance Officer. Based on that evaluation, our Principal Executive Officer and our Principal Finance Officer concluded that, as of September 30, 2020,March 31, 2021, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses, which have caused management to conclude that, as of September 30, 2020,March 31, 2021, our disclosure controls and procedures were not effective:
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| Inadequate segregation of duties, due to lack of human resources |
· | Limited level of multiple reviews among those tasked with preparing the financial statements, | |
· | Lack of a more formal internal control environment. |
Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting
Our company plansWe intend to take stepsimplement changes to enhance and improve the design ofstrengthen our internal controls overin addition to the enhanced controls discussed above. We are in the process of implementing a remediation plan for the identified material weaknesses and we expect that work on the plan will continue throughout 2021, as financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been ableresources permit. Specifically, to remediateaddress the material weaknesses identified above. To remediate such weaknesses, we planarising from insufficient accounting personnel, the Company plans to implementhire a full-time Chief Financial Officer and has secured the following changes during our fiscal year ending December 31, 2019: (i) appointservices of additional qualifiedaccounting personnel on a consulting basis which begins to address inadequate segregation of duties and limited reviews (ii) adopt sufficient writtenduties. The Company is currently formalizing its policies and procedures forin writing and to improve the integration of its financial reporting system into non accounting departments. Where appropriate, the Company is receiving advice and assistance from third-party experts as it implements and refines its remediation plan.
Additional measures may be necessary, and the measures we expect to take to improve our internal controls may not be sufficient to address the issues identified, to ensure that our internal controls are effective or to ensure that such material weakness or other material weaknesses would not result in a material misstatement of our annual or interim financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to coverstatements. In addition, other material weaknesses or significant deficiencies may be identified in the costs of implementing the changes required.future. If we are unsuccessfulunable to correct deficiencies in securing such funds, remediation efforts mayinternal controls in a timely manner, our ability to record, process, summarize and report financial information accurately and within the time periods specified in the rules and forms of the SEC will be adversely affectedaffected. This failure could negatively affect the market price and trading liquidity of our common stock, cause investors to lose confidence in a material manner.
We are unableour reported financial information, subject us to remedycivil and criminal investigations and penalties, and generally materially and adversely impact our controls related to the inadequate segregation of dutiesbusiness and ineffective risk management until we receive financing to hire additional employees.financial condition.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting during the fiscal quarter ended September 30, 2020March 31, 2021 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.
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Limitations on the Effectiveness of Internal Controls
Management’s conclusion that our disclosure controls and procedures were not effective means that if a fraud or material misstatement of the company’s annual or interim financial statements were to occur; there is a reasonable possibility that they will not be prevented or detected on a timely basis. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the internal control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.
PART II. OTHER INFORMATION
Norwood - Action proceeding on concluded litigation, Case Number 10-58982 CA 09 – Miami-Dade County, FL Circuit Court. Nick Norwood vs. Eurosport Active World Corp. and Ralph Hofmeier. The case is resolved. On June 2, 2020, the Company paid $107,872 and settled the judgement with the plaintiff.
EAWD vs Packard and Co-Defendant Nick Norwood - Case number 18-031011 CA-01 Miami-Dade County Circuit Court.
The company is requesting the proof of payment for shares issued in 2008.
CocoGrove – Case No. 09-81555 CA 21 in Miami-Dade County, Florida. The nature of the litigation was for breach of a lease agreement. This case is concluded with a judgement against the Company inon July 7, 2010 for $84,393 plus 6% interest.interest which as of March 31, 2021 interest had accrued to $54,338. There have been no efforts to seek collection of this judgement. Management intends to settleresolve this judgementmatter when it is in a financial position to make a payment.
We are a smaller reporting company and are not required to provide the information under this item.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
The Company issued the following common shares during the ninethree months ended September 30, 2020:March 31, 2021:
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issued 2,044,190 common shares and 3,780,976 Series A preferred stock, to satisfy accrued salaries of our Chief Executive Officer and our Chief Operating Officer of $2,238,000.
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issued 691,522 common shares in three transactions for converting $38,500 in convertible debt.
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issued 46,789 common shares in three transactions for interest and fees related to debt conversion.
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Issued 1,865,365 common shares in three transactions for converting $71,500 in convertible debt along with interest and fees.
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Issued 1,960,000 common shares for converting $98,000 in convertible debt.
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Issued 550,000 common shares for converting $55,000 in convertible debt.
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Issued 280,000 common shares for converting $14,000 in convertible debt and purchasing $14,000 in common stock.
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Issued 2,250,000 common shares for purchasing $250,000 a data record.
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Issued 250,000 common shares for purchasing $25,000 in website services.
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Issued 50,000 common shares for converting $2,500 in convertible debt and purchasing $2,500 in common stock.
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Issued 50,000 common shares for converting $2,500 in convertible debt and purchasing $2,500 in common stock.
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Issued 3,421,111 common shares for $286,000 in cash.
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Issued 455,000 common shares in four transactions for converting $79,000 in convertible debt.
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Issued 800,395 common shares in three transactions for converting $60,000 in convertible debt along with 27,329 common shares for interest.
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Issued 669,002 common shares in four transactions for converting $60,000 in convertible debt along with 31,428 common shares for interest.
· | 471,433 common shares issued for $160,021 for the sale of shares, |
· | 500,000 common shares issued for $165,000 in marketing and consulting, |
· | 690,606 common shares were issued for $66,000 to convertible note holder is satisfaction of their notes, |
· | 38,690 common shares were issued for $3,441 to pay interest and fees, |
· | 10,000,000 common shares were issued for $1,500,000 to our CEO as a compensation bonus, and |
· | 40,000 common shares were issued for $4,000 for sales of shares. |
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. MINE SAFETY DISCLOSURES
N/A
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On October 15, 2020, EAWD announced its official registration of a new branch of the corporation in Hamburg Germany. The new location in Germany will allow the company to expand capacity for assembling, manufacturing, customer support, engineering, sales and services, and leadership functions across the entity.
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EXHIBIT INDEX
Incorporated by Reference | Filed or Furnished | ||||||||||||||||
Exhibit # | Exhibit Description | Form | Date Filed | Exhibit # | Herewith | ||||||||||||
31.1 | Certification of Principal | * | |||||||||||||||
31.2 | * | ||||||||||||||||
32.1 | Certification of Principal Executive Officer and Principal Financial Officer (Section 906) | * | |||||||||||||||
| Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) | * | |||||||||||||||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | * | |||||||||||||||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | * | |||||||||||||||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | * | |||||||||||||||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | * | |||||||||||||||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | * | |||||||||||||||
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | * |
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Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Energy and Water Development Corp. | |||
Date: | By: | /s/ Ralph Hofmeier | |
Ralph Hofmeier | |||
President and Chief Executive Officer |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature | Title | Date | ||||
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/s/ Ralph Hofmeier | President, Chief Executive Officer, Director, and |
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Ralph Hofmeier | Chairman (Principal Executive Officer) | |||||
/s/ Irma Velazquez | Chief Operating Officer (Principal Financial Officer and |
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Irma Velazquez | Principal Accounting Officer), Director and Vice-Chairman | |||||
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