UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended June 30, 2021

 

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

 

Commission File Number 033-19411-C

 

OCEAN THERMAL ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

 

Nevada

 

20-5081381

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

800 South Queen Street, Lancaster, PA 17603

(Address of principal executive offices, including zip code)

 

(717) 299-1344

(Registrant’s telephone number, including area code)

 

n/a

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to Section 12(b) of the Exchange Act: None

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

 

 

 

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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). Yes ☒    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 ☐    No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

As of August 13, 2021, issuer had 164,370,469 outstanding shares of common stock, par value $0.001.

  

 

 

 

TABLE OF CONTENTS

 

 

Description

 

Page

 

 

 

 

 

 

PART I—FINANCIAL INFORMATION

 

Item 1

Financial Statements

 

 3

 

 

Condensed Consolidated Balance Sheets

 

 3

 

 

Condensed Consolidated Statements of Operations

 

 4

 

 

Condensed Consolidated Statements of Changes in Stockholders’ Deficiency

 

 5

 

 

Condensed Consolidated Statements of Cash Flows

 

 7

 

 

Notes to the Condensed Consolidated Financial Statements

 

8

 

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

 20

 

Item 3

Quantitative and Qualitative Disclosures about Market Risk

 

22

 

Item 4

Controls and Procedures

 

22

 

 

 

 

 

 

PART II—OTHER INFORMATION

 

Item 1

Legal Proceedings

 

23

 

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

 

23

 

Item 3

Defaults upon Senior Securities

 

23

 

Item 6

Exhibits

 

25

 

 

Signature

 

26

 

    

 

2

 

 

PART I - FINANCIAL INFORMATION

 

 

 

 

 

 

 

ITEM 1. FINANCIAL STATEMENTS

 

OCEAN THERMAL ENERGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

June 30, 2021

 

 

December 31, 2020

 

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

Cash

 

$ 8,110

 

 

$ 7,442

 

Prepaid expenses

 

 

-

 

 

 

10,000

 

Total Current Assets

 

 

8,110

 

 

 

17,442

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$ 8,110

 

 

$ 17,442

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payables and accrued expense

 

$ 16,075,702

 

 

$ 14,457,379

 

Notes payable - related party

 

 

2,329,473

 

 

 

2,329,473

 

Convertible notes payable -related party

 

 

110,775

 

 

 

87,500

 

Notes payable

 

 

3,631,620

 

 

 

3,530,475

 

Convertible note payable

 

 

2,351,656

 

 

 

2,319,040

 

Derivative liability

 

 

3,939,720

 

 

 

5,321,395

 

Total Current Liabilities

 

 

28,438,946

 

 

 

28,045,262

 

 

 

 

 

 

 

 

 

 

Long-term Liabilities

 

 

 

 

 

 

 

 

Convertible note payable, net

 

 

31,000

 

 

 

211,110

 

Convertible notes payable - related party, net

 

 

-

 

 

 

15,905

 

Notes payable

 

 

158,334

 

 

 

158,334

 

Total Liabilities

 

 

28,628,280

 

 

 

28,430,611

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (See Note 7)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Stockholders' deficiency

 

 

 

 

 

 

 

 

Preferred Stock, Series B, $0.001 par value; 1,250,000 shares authorized,

 

 

 

 

 

 

 

 

518,750 and 518,750 shares issued and outstanding, respectively

 

 

519

 

 

 

519

 

Preferred Stock, Series C, $0.001 par value; 2,700,000 shares authorized,

 

 

 

 

 

 

 

 

2,300,000 and 2,300,000 shares issued and outstanding, respectively

 

 

2,300

 

 

 

2,300

 

Common stock, $0.001 par value; 200,000,000 shares authorized,

 

 

 

 

 

 

 

 

159,370,469 and 134,847,005 shares issued and outstanding, respectively

 

 

159,371

 

 

 

137,847

 

Additional paid-in capital

 

 

59,124,401

 

 

 

58,360,044

 

Accumulated deficit

 

 

(87,906,761 )

 

 

(86,913,879 )

Total Stockholders' Deficiency

 

 

(28,620,170 )

 

 

(28,413,169 )

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders' Deficiency

 

$ 8,110

 

 

$ 17,442

 

 

 

 

 

 

 

 

 

 

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

  

 
3

Table of Contents

 

OCEAN THERMAL ENERGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

For the three months ended

 

 

For the six months ended

 

 

 

 June 30, 2021

 

 

 June 30, 2020

 

 

 June 30, 2021

 

 

 June 30, 2020

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and wages

 

$ 181,886

 

 

$ 208,511

 

 

$ 376,229

 

 

$ 425,539

 

Professional fees

 

 

206,556

 

 

 

202,963

 

 

 

563,613

 

 

 

322,200

 

General and administrative

 

 

84,736

 

 

 

48,588

 

 

 

137,303

 

 

 

127,796

 

Total Operating Expenses

 

 

473,178

 

 

 

460,062

 

 

 

1,077,145

 

 

 

875,535

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from Operations

 

 

(473,178 )

 

 

(460,062 )

 

 

(1,077,145 )

 

 

(875,535 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Income (Expenses) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense, net

 

 

(408,889 )

 

 

(326,042 )

 

 

(879,655 )

 

 

(646,860 )

Amortization of debt discount

 

 

(76,226 )

 

 

(54,412 )

 

 

(146,476 )

 

 

(97,264 )

Change in FV of derivative liability

 

 

1,360,990

 

 

 

(1,420 )

 

 

1,065,348

 

 

 

(1,732,043 )

Gain on conversion of debt

 

 

37,519

 

 

 

-

 

 

 

45,046

 

 

 

-

 

Total Other Income (Expense)

 

 

913,394

 

 

 

(381,874 )

 

 

84,263

 

 

 

(2,476,167 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) Before Income Taxes

 

 

440,216

 

 

 

(841,936 )

 

 

(992,882 )

 

 

(3,351,702 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Provision for Income Taxes

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss)

 

$ 440,216

 

 

$ (841,936 )

 

$ (992,882 )

 

$ (3,351,702 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss) per Common Share - Basic

 

$ 0.00

 

 

$ (0.01 )

 

$ (0.01 )

 

$ (0.02 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss per Common Share - Diluted

 

 (0.00

 

 (0.01

 

  (0.01

 

 (0.02

) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Number of Common Shares Outstanding - Basic

 

 

157,502,337

 

 

 

134,775,136

 

 

 

150,912,815

 

 

 

134,775,136

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Number of Common Shares Outstanding - Diluted

 

 

 329,789,028

 

 

 

 134,775,136

 

 

 

 150,912,815

 

 

 

 134,775,136

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

  

 
4

Table of Contents

 

OCEAN THERMAL ENERGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Series B Preferred

 

 

Series C Preferred

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

 

 

 

Number of

 

 

$0.001

 

 

Number of

 

 

        $0.001

 

 

Number of

 

 

$0.001

 

 

Paid-in

 

 

Accumulated

 

 

Total

 

 

 

Shares

 

 

Par Value

 

 

Shares

 

 

Par Value

 

 

Shares

 

 

Par Value

 

 

capital

 

 

Deficit

 

 

 

 

Balance, December 31, 2019

 

 

518,750

 

 

$ 519

 

 

 

2,300,000

 

 

$ 2,300

 

 

 

134,775,136

 

 

$ 134,775

 

 

$ 58,259,171

 

 

$ (80,463,422 )

 

$ (22,066,657 )

Net Loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,351,702 )

 

 

(3,351,702 )

Balance, June 30, 2020 (unaudited)

 

 

518,750

 

 

$ 519

 

 

 

2,300,000

 

 

$ 2,300

 

 

 

134,775,136

 

 

$ 134,775

 

 

$ 58,259,171

 

 

$ (83,815,124 )

 

$ (25,418,359 )

 

 

 

Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 

Series B Preferred

 

 

Series C Preferred

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

 

Number of

 

 

$0.001

 

 

Number of

 

 

$0.001

 

 

Number of

 

 

$0.001

 

 

Paid-in

 

 

Accumulated

 

 

Total

 

 

 

Shares

 

 

Par Value

 

 

Shares

 

 

Par Value

 

 

Shares

 

 

Par Value

 

 

capital

 

 

Deficit

 

 

 

 

Balance, December 31, 2020

 

 

518,750

 

 

$ 519

 

 

 

2,300,000

 

 

$ 2,300

 

 

 

137,847,005

 

 

$ 137,847

 

 

$ 58,360,044

 

 

$ (86,913,879 )

 

$ (28,413,169 )

Common stock issued for conversion of notes payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

19,829,587

 

 

 

19,830

 

 

 

683,051

 

 

 

-

 

 

 

702,881

 

Common stock issued for second commitment fee

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,693,877

 

 

 

1,694

 

 

 

81,306

 

 

 

-

 

 

 

83,000

 

Net Loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(992,882 )

 

 

(992,882 )

Balance, June 30, 2021 (unaudited)

 

 

518,750

 

 

$ 519

 

 

 

2,300,000

 

 

$ 2,300

 

 

 

159,370,469

 

 

$ 159,371

 

 

$ 59,124,401

 

 

$ (87,906,761 )

 

$ (28,620,170 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 
5

Table of Contents

 

OCEAN THERMAL ENERGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

FOR THE THREE MONTHS ENDED JUNE 30, 2021 AND 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 

Series B Preferred

 

 

Series C Preferred

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

 

Number of

 

 

$0.001

 

 

Number of

 

 

$0.001

 

 

Number of

 

 

$0.001

 

 

Paid-in

 

 

Accumulated

 

 

Total

 

 

 

Shares

 

 

Par Value

 

 

Shares

 

 

Par Value

 

 

Shares

 

 

Par Value

 

 

capital

 

 

Deficit

 

 

 

 

Balance, March 31, 2020 (unaudited)

 

 

518,750

 

 

$ 519

 

 

 

2,300,000

 

 

$ 2,300

 

 

 

134,775,136

 

 

$ 134,775

 

 

$ 58,259,171

 

 

$ (82,973,188 )

 

$ (24,576,423 )

Net Loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(841,936 )

 

 

(841,936 )

Balance, June 30, 2020 (unaudited)

 

 

518,750

 

 

$ 519

 

 

 

2,300,000

 

 

$ 2,300

 

 

 

134,775,136

 

 

$ 134,775

 

 

$ 58,259,171

 

 

$ (83,815,124 )

 

$ (25,418,359 )

 

 

 

Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

Series B Preferred

 

 

Series C Preferred

 

 

Common Stock

 

 

Additional

 

 

 

 

 

 

 

Number of

 

 

$0.001

 

 

Number of

 

 

$0.001

 

 

Number of

 

 

$0.001

 

 

Paid-in

 

 

Accumulated

 

 

Total

 

 

 

Shares

 

 

Par Value

 

 

Shares

 

 

Par Value

 

 

Shares

 

 

Par Value

 

 

capital

 

 

Deficit

 

 

 

 

Balance, March 31, 2021 (unaudited)

 

 

518,750

 

 

$ 519

 

 

 

2,300,000

 

 

$ 2,300

 

 

 

146,870,469

 

 

$ 146,871

 

 

$ 58,782,901

 

 

$ (88,346,977 )

 

$ (29,414,386 )

Common stock issued for conversions of notes payable

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

12,500,000

 

 

 

12,500

 

 

 

341,500

 

 

 

-

 

 

 

354,000

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

440,216

 

 

 

440,216

 

Balance ,June 30, 2021 (unaudited)

 

 

518,750

 

 

$ 519

 

 

 

2,300,000

 

 

$ 2,300

 

 

 

159,370,469

 

 

$ 159,371

 

 

$ 59,124,401

 

 

$ (87,906,761 )

 

$ (28,620,170 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 
6

Table of Contents

 

OCEAN THERMAL ENERGY CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW

FOR THE SIX MONTHS ENDED JUNE 30, 2021 AND JUNE 30, 2020

(Unaudited)

 

 

 

 

 

 

2021

 

 

2020

 

Cash Flows From Operating Activities:

 

 

 

 

 

 

Net loss

 

$ (992,882 )

 

$ (3,351,702 )

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Change in the fair value derivative liability

 

 

(1,065,348 )

 

 

1,732,043

 

Gain on conversion of debt

 

 

(45,046 )

 

 

-

 

Stock issued for additional comittment fee

 

 

83,000

 

 

 

-

 

Amortization of debt discount

 

 

146,476

 

 

 

97,264

 

Changes in assets and liabilities

 

 

 

 

 

 

 

 

Prepaid expense

 

 

10,000

 

 

 

(1,000 )

Accounts payable and accrued expenses

 

 

1,618,323

 

 

 

1,134,564

 

Net Cash Used In Operating Activities

 

 

(245,477 )

 

 

(388,831 )

 

 

 

 

 

 

 

 

 

Cash Flows From Financing Activities:

 

 

 

 

 

 

 

 

Repayment of notes payable - related party

 

 

-

 

 

 

(19,000 )

Repayment of notes payable

 

 

(3,855 )

 

 

(2,328 )

Proceeds from notes payable

 

 

105,000

 

 

 

125,000

 

Proceeds from convertible notes payable

 

 

145,000

 

 

 

260,000

 

Proceeds from convertible notes payable - related party

 

 

-

 

 

 

10,000

 

Proceeds from PPP loan

 

 

-

 

 

 

17,085

 

Net Cash Provided by Financing Activities

 

 

246,145

 

 

 

390,757

 

 

 

 

 

 

 

 

 

 

Net increase in cash

 

 

668

 

 

 

1,926

 

Cash at beginning of period

 

 

7,442

 

 

 

23,243

 

Cash at End of Period

 

$ 8,110

 

 

$ 25,169

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest expense

 

$ 1,260

 

 

$ 1,260

 

Cash paid for income taxes

 

$ -

 

 

$ -

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Debt discount on convertible note payable

 

$ 145,000

 

 

$ 270,000

 

Convertible note payable and accrued interest converted into common stock

 

$ 286,600

 

 

$ -

 

Common stock issued for conversion of notes payable

 

$ 702,881

 

 

$ -

 

Derivative liability extinguished upon conversion of note payable

 

$ 461,327

 

 

$ -

 

 

 

 

 

 

 

 

 

 

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

 

 
7

Table of Contents

 

OCEAN THERMAL ENERGY CORPORATION AND SUBSIDIARIES

 

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Note 1: Nature of Business and Business Presentation

 

Ocean Thermal Energy Corporation is currently in the businesses of:

 

 

·

OTEC and SWAC/LWAC—designing ocean thermal energy conversion (“OTEC”) power plants and seawater air conditioning and lake water air conditioning (“SWAC/LWAC”) plants for large commercial properties, utilities, and municipalities. These technologies provide practical solutions to humanity’s three oldest and most fundamental needs: clean drinking water, plentiful food, and sustainable, affordable energy without the use of fossil fuels. OTEC is a clean technology that continuously extracts energy from the temperature difference between warm surface ocean water and cold deep seawater. In addition to producing electricity, some of the seawater running through an OTEC plant can be efficiently desalinated using the power generated by the OTEC technology, producing thousands of cubic meters of fresh water every day for use in agriculture and human consumption in the communities served by its plants. This cold, deep, nutrient-rich water can also be used to cool buildings (SWAC/LWAC) and for fish farming/aquaculture. In short, it is a technology with many benefits, and its versatility makes OTEC unique.

 

 

 

 

·

EcoVillages—developing and commercializing our EcoVillages, as well as working to develop or acquire new complementary assets. EcoVillages are communities whose goal is to become more socially, economically, and ecologically sustainable and whose inhabitants seek to live according to ecological principles, causing as little impact on the environment as possible. We expect that our EcoVillage communities will range from a population of 50 to 150 individuals, although some may be smaller. We may also form larger EcoVillages, of up to 2,000 individuals, as networks of smaller subcommunities. We expect that our EcoVillages will grow by the addition of individuals, families, or other small groups.

   

We expect to use our technology in the development of our EcoVillages, which should add significant value to that line of business.

 

The condensed consolidated financial statements include the accounts of the company and our wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, our financial statements reflect all adjustments that are of a normal recurring nature necessary for presentation of financial statements in accordance with U.S. generally accepted accounting principles (GAAP).

 

We condensed or omitted certain information and footnote disclosures normally included in our annual audited financial statements, which we prepared in accordance with GAAP. The operating results for the six months ended June 30, 2021, are not necessarily indicative of the results to be expected for the year. Our interim financial statements should be read in conjunction with our annual report on Form 10-K for the year ended December 31, 2020, including the financial statements and notes.

 

Note 2: Summary of Significant Accounting Policies

 

Principal Subsidiary Undertakings

 

Our condensed consolidated financial statements include the following subsidiaries:

 

Name

Place of Incorporation

/ Establishment

Principal Activities

Date Formed

Ocean Thermal Energy Bahamas Ltd.

Bahamas

Intermediate holding company of OTE BM Ltd. and OTE Bahamas O&M Ltd.

07/04/2011

 

 

 

 

OTE BM Ltd.

Bahamas

OTEC/SDC development in the Bahamas

09/07/2011

 

 

 

 

OCEES International Inc.

Hawaii, USA

Research and development for the Pacific Rim

01/21/1998

 

We have an effective interest of 100% in each of our subsidiaries.

 

 
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Use of Estimates

 

In preparing financial statements in conformity with GAAP, management is required 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 revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include the assumptions used in the valuation of equity-based transactions, valuation of derivative liabilities, and valuation of deferred tax assets.

 

Cash and Cash Equivalents

 

We consider all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At June 30, 2021, and December 31, 2020, we had no cash equivalents.

 

Income Taxes

 

We use the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities and on the amount of operating loss carryforwards and are measured using the enacted tax rates and laws that will be in effect when the temporary differences and carryforwards are expected to reverse. An allowance against deferred tax assets is recorded when it is more likely than not that such tax benefits will not be realized.

 

Our ability to use our net operating loss carryforwards may be substantially limited due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), as well as similar state provisions. These ownership changes may limit the amount of net operating loss that can be utilized annually to offset future taxable income and tax, respectively. In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50.0% of the outstanding stock of a company by certain stockholders or public groups.

 

We have not completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since we became a “loss corporation” under the definition of Section 382. If we have experienced an ownership change, utilization of the net operating loss carryforwards would be subject to an annual limitation under Section 382 of the Code, which is determined by first multiplying the value of our stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the net operating loss carryforwards before utilization. Further, until a study is completed and any limitation known, no positions related to limitations are being considered as an uncertain tax position or disclosed as an unrecognized tax benefit. Any carryforwards that expire prior to utilization as a result of such limitations will be removed from deferred tax assets with a corresponding reduction of the valuation allowance. Due to the existence of the valuation allowance, it is not expected that any possible limitation will have an impact on our results of operations or financial position.

 

Business Segments

 

We operate in one segment and therefore segment information is not presented.

 

Fair Value

 

Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value under GAAP, and enhances disclosures about fair value measurements. ASC 820 describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:

 

 

·

Level 1–Pricing inputs are quoted prices available in active markets for identical assets or liabilities as of the reporting date.

 

 

 

 

·

Level 2–Pricing inputs are quoted for similar assets or inputs that are observable, either directly or indirectly, for substantially the full term through corroboration with observable market data. Level 2 includes assets or liabilities valued at quoted prices adjusted for legal or contractual restrictions specific to these investments.

 

 

 

 

·

Level 3–Pricing inputs are unobservable for the assets or liabilities; that is, the inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability.

   

Management believes the carrying amounts of the short-term financial instruments, including cash and cash equivalents, prepaid expense, accounts payable, accrued liabilities, notes payable, deferred compensation, and other liabilities reflected in the accompanying balance sheets approximate fair value at June 30, 2021, and December 31, 2020, due to the relatively short-term nature of these instruments.

 

 
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We account for derivative liability at fair value on a recurring basis under level 3 at June 30, 2021, and December 31, 2020 (see Note 5).

 

Concentrations

 

Cash, cash equivalents, and restricted cash are deposited with major financial institutions, and at times, such balances with any one financial institution may be in excess of FDIC-insured limits. Management believes the risk in these situations to be minimal. As of June 30, 2021, and December 31, 2020, $0 and $0, respectively, were deposited in excess of FDIC-insured limits.

 

Loss per Share

 

The basic loss per share is calculated by dividing our net loss available to common shareholders by the weighted average number of common shares during the period. The diluted loss per share is calculated by dividing our net loss by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. We have 125,073 and 350,073 shares issuable upon the exercise of warrants and 172,353,358 and 122,753,322 shares issuable upon the conversion of convertible notes that were not included in the computation of dilutive loss per share because their inclusion is antidilutive for the six months ended June 30, 2021 and 2020, respectively.

 

Diluted loss per share for the three months ended June 30, 2021 is calculated as follows:

 

Diluted loss per share

 

 

 

Net income attributable to common shareholders

 

$ 440,216

 

Expense attributable to convertible notes payable

 

 

 

 

Interest expense on the convertible notes payable

 

 

152,284

 

Amortization of debt discount

 

 

76,226

 

Income attributable to convertible notes payable

 

 

 

 

Change in FV of derivative liability

 

 

(1,360,990 )

Gain on conversion of debt

 

 

(37,519 )

Diluted loss attributable to common shareholders

 

$ (729,783 )

 

 

 

 

 

Basic shares outstanding

 

 

157,502,337

 

Convertible instruments*

 

 

172,286,691

 

Diluted shares outstanding

 

 

329,789,028

 

 

 

 

 

 

Diluted loss per share

 

$ (0.00 )

_____________

* Excludes warrants as they are not "in the money" and the convertible note dated April 17, 2015 with a conversion price of $0.75 as it is deemed to be anti-dilutive.

 

Revenue Recognition

 

We account for our revenue in accordance with Accounting Standard Update 2014-09, Revenue from Contracts with Customers (Topic 606), which requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services.

 

Recent Accounting Pronouncements

 

We have reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on our consolidated results of operations, financial position, and cash flows. Based on that review, we believe that none of these pronouncements will have a significant effect on current or future earnings or operations.

 

Note 3: Going Concern

 

The accompanying unaudited condensed consolidated financial statements have been prepared on the assumption that we will continue as a going concern. As reflected in the accompanying condensed consolidated financial statements, we had a net loss of $992,882 and used $245,477 of cash in operating activities for the six months ended June 30, 2021. We had a working capital deficiency of $28,430,836 and a stockholders’ deficiency of $28,620,170 as of June 30, 2021. These factors raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to increase sales and obtain external funding for our projects under development. The Biden administration has announced a range of financial support for renewable and sustainable companies. Details from the administration are not available yet, but we are already in the process of filing for financial support. Additional applications for financial support will be made as appropriate. The financial statements do not include any adjustments that may result from the outcome of this uncertainty.

 

Note 4: Convertible Notes and Notes Payable

 

On December 12, 2006, we borrowed funds from the Southeast Idaho Council of Governments (SICOG), the EDA-#180 loan. The interest rate is 6.25%, and the maturity date was January 5, 2013. The remaining loan principal of $3,779 was repaid in full during the quarter ending March 31, 2021.

 

On December 23, 2009, we borrowed funds from SICOG, the EDA-#273 loan. The interest rate is 7%, and the maturity date was December 23, 2014. The loan principal was $94,414 with accrued interest of $23,279 as of June 30, 2021. This note is in default.

 

On December 23, 2009, we borrowed funds from SICOG, the MICRO I-#274 loan and MICRO II-#275 loan. The interest rate is 7%, and the maturity date was December 23, 2014. The combined loan principal was $47,230 with accrued interest of $12,402 as of June 30, 2021. These notes are in default.

 

On December 1, 2007, we borrowed funds from the Eastern Idaho Development Corporation and the Economic Development Corporation. The interest rate is 7%, and the maturity date was September 1, 2015. The loan principal was $85,821 with accrued interest of $54,633 as of June 30, 2021. This note is in default.

 

 
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On September 25, 2009, we borrowed funds from the Pocatello Development Authority. The interest rate is 5%, and the maturity date was October 25, 2011. The loan principal was $50,000 with accrued interest of $27,074 as of June 30, 2021. This note is in default.

 

On March 12, 2015, we combined convertible notes issued in 2010, 2011, and 2012, payable to our officers and directors in the aggregate principal amount of $320,246, plus accrued but unpaid interest of $74,134, into a single, $394,380 consolidated convertible note (the “Consolidated Note”). The Consolidated Note was assigned to JPF Venture Group, Inc., an investment entity that is majority-owned by Jeremy Feakins, our director, chief executive officer, and chief financial officer. The Consolidated Note was convertible to common stock at $0.025 per share, the approximate market price of our common stock as of the date of the issuance. On February 24, 2017, the Consolidated Note was amended to eliminate the conversion feature. The Consolidated Note bears interest at 6% per annum and is due and payable within 90 days after demand. As of June 30, 2021, the outstanding loan balance was $394,380 and the accrued but unpaid interest was $155,151 on the Consolidated Note.

 

During 2016 and 2015, we borrowed $75,000 from JPF Venture Group, Inc. pursuant to promissory notes. The terms of the notes are as follows: (i) interest is payable at 6% per annum; (ii) the notes are payable 90 days after demand; and (iii) payee is authorized to convert part or all of the note balance and accrued interest, if any, into shares of our common stock at the rate of one share each for $0.03 of principal amount of the note. This conversion share price was adjusted to $0.01384 for the reverse stock splits. As of December 31, 2018, we have recorded a debt discount of $75,000 for the fair value derivative liability and fully amortized the debt discount. As of June 30, 2021, the outstanding balance of these notes was $75,000, plus accrued interest of $23,574.

 

During 2016, we borrowed $112,500 from JPF Venture Group, Inc. pursuant to promissory notes. The terms of each note are as follows: (i) interest is payable at 6% per annum; (ii) the notes are payable 90 days after demand; and (iii) payee is authorized to convert part or all of the note balance and accrued interest, if any, into shares of our common stock at the rate of one share for each $0.03 of principal amount of the note. On February 24, 2017, the notes were amended to eliminate the conversion features. As of June 30, 2021, the outstanding balance of these notes was $112,500, plus accrued interest of $35,297.

 

On October 20, 2016, we borrowed $12,500 from our independent director pursuant to a promissory note. The terms of the note are as follows: (i) interest is payable at 6% per annum; (ii) the note is payable 90 days after demand; and (iii) the payee is authorized to convert part or all of the note balance and accrued interest, if any, into shares of our common stock at the rate of one share for each $0.03 of principal amount of the note. This conversion share price was adjusted to $0.01384 for the reverse stock splits. As of December 31, 2018, we have recorded a debt discount of $12,500 for the fair value of derivative liability and fully amortized the debt discount. As of June 30, 2021, the outstanding note balance was $12,500, plus accrued interest of $3,654.

 

During 2012, we issued a note payable for $1,000,000. The note had an interest rate of 10% per annum, was secured by a first lien in all of our assets, and was due on February 3, 2015. On March 6, 2018, the note was amended to extend the due date to December 31, 2018. On March 29, 2019, the maturity date of the note was extended to December 31, 2019. As of June 30, 2021, the outstanding note balance was $1,000,000, plus accrued interest of $890,281. This note is in default.

 

During 2013, we issued Series B units. Each unit is comprised of a note agreement, a $50,000 promissory note that matures on September 30, 2023, and bears interest at 10% per annum payable annually in arrears, and a security agreement. During 2013, we issued $525,000 of 10% promissory notes. As of June 30, 2021, the loan balances were $158,334 and the accrued interest was $125,058.

 

During 2013, we issued a note payable for $290,000 in connection with the reverse merger transaction with Broadband Network Affiliates, Inc. We have determined that no further payment of principal or interest on this note should be made because the note holder failed to perform his underlying obligations giving rise to this note. As described in Note 7, the note holder filed suit on May 21, 2019, and we remain confident that the court will decide in our favor by either voiding the note or awarding damages sufficient to offset the note value. As of June 30, 2021, the balance outstanding was $130,000, and the accrued interest as of that date was $77,204. This note is in default.

 

On January 18, 2018, Jeremy P. Feakins & Associates, LLC, an investment entity owned by our chief executive, chief financial officer, and a director, agreed to extend the due date for repayment of a $2,265,000 note issued in 2014 to the earlier of December 31, 2018, or the date of the financial closings of our Baha Mar project (or any other project of $25 million or more), whichever occurs first. As of June 30, 2021, the note balance was $1,102,500 and the accrued interest was $796,566. This note is in default.

 

We have $300,000 in principal amount of outstanding notes due to unrelated parties, issued in 2014, in default since 2015, accruing interest at a default rate of 22%. We intend to repay the notes and accrued interest upon the Baha Mar SWAC/LWAC project’s financial closing. Accrued interest totaled $414,246 as of June 30, 2021.

 

We have a $50,000 promissory note with an unaffiliated investor that was payable on April 7, 2019. The note and accrued interest can be converted into our common stock at a conversion rate of $0.75 per share at any time prior to the repayment. This conversion price is not required to adjust for the reverse stock split as per the note agreement. Accrued interest totaled $31,583 as of June 30, 2021. The note is in default.

 

 
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On March 9, 2017, an entity owned and controlled by our chief executive officer agreed to provide up to $200,000 in working capital. The note bears interest of 10% and is due and payable within 90 days of demand. During the year ended December 31, 2017, we received an additional $2,000 and repaid $25,000. As of June 30, 2021, the balance outstanding was $177,000, plus accrued interest of $77,691

 

During the third quarter of 2017, we completed a $2,000,000 convertible promissory note private placement offering. The terms of the notes are as follows: (i) interest is payable at 6% per annum; (ii) payable two years after purchase; and (iii) all principal and interest on each note automatically converts on the conversion maturity date into shares of our common stock at a conversion price of $4.00 per share, as long as the closing share price of our common stock on the trading day immediately preceding the conversion maturity date is at least $4.00, as adjusted for stock splits, stock dividends, reclassification, and the like. If the price of our shares on such date is less than $4.00 per share, the notes (principal and interest) will be repaid in full. As of June 30, 2021, the outstanding balance for the remaining three notes was $65,000, plus accrued interest of $15,444. These notes are in default.

 

On November 6, 2017, we entered into an agreement and promissory note with JPF Venture Group, Inc. to loan up to $2,000,000 to us. The terms of the note are as follows: (i) interest is payable at 10% per annum; (ii) all unpaid principal and all accrued and unpaid interest is due and payable at the earliest of a resolution of the Memphis litigation (as defined therein), December 31, 2018, or when we are otherwise able to pay. As of June 30, 2021, the outstanding note balance was $543,093 and the accrued interest was $226,604. This note is in default.

 

In December 2017, we entered into a series of unsecured promissory notes and warrant purchase agreements with accredited investors. These notes accrue interest at a rate of 10% per annum payable on a quarterly basis and are not convertible into shares of our capital stock. The notes are payable within five business days after receipt of gross proceeds of at least $1,500,000 from L2 Capital, LLC, an unaffiliated Kansas limited liability company (“L2 Capital”). We may prepay the notes in whole or in part, without penalty or premium, on or before the maturity date of July 30, 2019. In connection with the issuance of the notes, for each note purchased, the note holder received a warrant as follows:

 

 

·

$10,000 note with a warrant to purchase 2,000 shares

 

 

 

 

·

$20,000 note with a warrant to purchase 5,000 shares

 

 

 

 

·

$25,000 note with a warrant to purchase 6,500 shares

 

 

 

 

·

$30,000 note with a warrant to purchase 8,000 shares

 

 

 

 

·

$40,000 note with a warrant to purchase 10,000 shares

 

 

 

 

·

$50,000 note with a warrant to purchase 14,000 shares

   

The exercise price per share of the warrants is equal to 85% of the closing price of our common stock on the day immediately preceding the exercise of the relevant warrant, subject to adjustment as provided in the warrant. The warrant includes a cashless net exercise provision whereby the holder can elect to receive shares equal to the value of the warrant minus the fair market value of shares being surrendered to pay the exercise price. As of June 30, 2021, the balance of the outstanding loans was $979,156 and the accrued interest was $303,877. These notes are in default.

 

On February 15, 2018, we entered into an agreement with L2 Capital for a loan of up to $565,555, together with interest at the rate of 8% per annum, which consists of up to $500,000, a prorated original issuance discount of $55,555, and $10,000 for transactional expenses to L2 Capital. L2 Capital has the right at any time to convert all or any part of the note into fully paid and nonassessable shares of our common stock at the fixed conversion price, which is equal to $0.50 per share; however, at any time on or after the occurrence of any event of default under the note, the conversion price will adjust to the lesser of $0.50 or 65% multiplied by the lowest volume weighted average price of the common stock during the 20-trading-day period ending, in L2 Capital’s sole discretion on each conversion, on either the last complete trading day prior to the conversion date or the conversion date. During the year ended December 31, 2018, we received five tranches totaling $482,222. As of December 31, 2018, we issued warrants to purchase 56,073 shares of common stock in accordance with a nonexclusive finder’s fee arrangement. These warrants have a fair value of $2,668 based on the Black-Scholes option-pricing model. The fair value was recorded as a discount on the notes payable and is being amortized over the life of the notes payable. As of December 31, 2018, we had fully amortized $91,222 of the debt issuance cost and have recorded a debt discount of $749,026 for the fair value of derivative liability and fully amortized the debt discount. During the year ended December 31, 2019, we issued 1,936,192 shares of common stock to L2 Capital for the conversion of a portion of our notes payable in the amount of $44,733. On August 1, 2019, L2 Capital, LLC sold the outstanding loan balance and accrued interest on our note to Oasis Capital, LLC. The terms and conditions of the original note remain in place. As of June 30, 2021, we have outstanding warrants to purchase 56,073 shares of common stock. As of June 30, 2021, the outstanding balance of the original loan was $323,412, plus a default penalty and fees of $837,724, for a total of $1,161,136, and accrued interest was $711,694. This note is in default.

 

 
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On September 19, 2018, we executed a note payable for $10,000 with an unrelated party that bears interest at 6% per annum, which is due quarterly beginning as of September 30, 2018. The maturity date for the note is three years after date of issuance. In addition, the lender received warrants to purchase 2,000 shares of common stock upon signing the promissory note. The warrant can be exercised at a price per share equal to a 15% discount from the price of common stock on the last trading day before such purchase. As of June 30, 2021, the balance outstanding was $10,000 and the accrued interest was $1,692. We have defaulted in payment of the quarterly interest payments.

 

On December 14, 2018, L2 Capital LLC purchased our note payable from Collier Investments, LLC. The total consideration was $371,250, including the outstanding note balance of $281,250, the accrued interest of $33,750, and liquidated damages of $56,250. There was also a default penalty of $153,123. In addition, we issued 400,000 shares of common stock to L2 Capital as commitment shares with a fair value of $21,200 in connection with the purchase of the note. We executed a replacement convertible note with L2 Capital in the amount of $371,250 with an interest rate of 12% per annum. The maturity date of the note is December 22, 2018. The holder of the note can convert the note, or any portion of it, into shares of common stock at any time after the issuance date. The conversion price is 65% of the market price, which is defined as the lowest trading price for our common stock during the 20-trading-day period prior to the conversion date. As of December 31, 2018, we have recorded a debt discount of $665,690 for the fair value of derivative liability and fully amortized the debt discount. On August 1, 2019, Oasis Capital LLC purchased our note payable from L2 Capital. The terms and conditions of the original note remain in place. During the year ended December 31, 2019, we issued 1,800,000 shares of common stock to L2 Capital for the conversion of a portion of our notes payable in the amount of $49,614. During the six months ended June 30, 2021, we issued 19,829,587 shares of common stock to Oasis Capital, LLC, with a fair value of $702,881, for the conversion of a portion of our notes payable in the amount of $286,600. We recorded a gain on conversion of $45,046. As of June 30, 2021, the outstanding note balance was $756,305, which includes a default penalty and fees, and the accrued interest was $584,230. This note is in default.

 

On January 2, 2019, we issued a series of promissory notes totaling $310,000 to accredited investors. Proceeds from these notes were used to support the administrative and legal expenses of our lawsuit before the United District Court for the Western District of Tennessee, Ocean Thermal Energy Corporation v. Robert Coe, et al., Case No. 2:17-cv-02343SHL-cgc, and any subsequent actions brought about as a result of or in connection with this litigation. These notes are secured against the proceeds from the litigation. The notes bear an interest rate of 17%, plus one quarter of one percent of the actual funds received from the litigation. The repayment of the principal, accrued interest, and the percentage of the litigation funds received will be paid immediately following the receipt of sufficient funds from this litigation. As of June 30, 2021, the outstanding balance of these loans is $310,000 and the accrued interest was $130,858.

 

On August 14, 2019, we executed a note payable for $26,200 with an unrelated party that bears interest at 8% per annum and has a maturity date of October 31, 2021. The note automatically converts into 1,310,000 shares of our common stock either at the time the closing sale price for our common stock is equal to or greater than $1.00 per share, as adjusted for stock splits, stock dividends, reclassification, and the like, or at the maturity date of October 31, 2021, whichever occurs first. As of June 30, 2021, we have recorded a debt discount of $26,200 for the fair value of derivative liability and amortized $21,666 of the debt discount. As of June 30, 2021, the balance outstanding was $21,666, net of debt discount of $4,534, and the accrued interest was $4,723.

 

In 2019, we issued a series of convertible promissory notes to accredited investors that totaled $105,000. Of the amount received, $10,000 was from our chief executive officer and our independent director. The notes bear simple interest on outstanding principal at the rate of 8% per annum, computed on the basis of the actual number of days elapsed in a year of 365 days. Each $5,000 loan automatically converts into 250,000 shares of our common stock, either at the time the closing sale price for our common stock is equal to or greater than $1.00 per share, as adjusted for stock splits, stock dividends, reclassification, and the like, or at the maturity date of October 31, 2021, whichever comes first. As of June 30, 2021, we have recorded a debt discount of $105,000 for the fair value of derivative liability and amortized $87,454 the debt discount. As of June 30, 2021, the total outstanding balances of all these loans are $79,107, net of debt discount of $15,893 to unrelated parties, and $8,347 net of debt discount of $1,653, to related parties. The accrued interest was $14,080 as of June 30, 2021.

 

In 2020 and 2019, we issued a series of convertible promissory notes to accredited investors. The total outstanding as of June 30, 2021 was $391,750. Of the total amount received, $20,000 was from our chief executive officer and an independent director. The notes bear simple interest on outstanding principal at the rate of 8% per annum, computed on the basis of the actual number of days elapsed in a year of 365 days. Each $5,000 loan automatically converts into 250,000 shares of our common stock, either at the time the closing sale price for our common stock is equal to or greater than $1.00 per share, as adjusted for stock splits, stock dividends, reclassification, and the like, or at the maturity date of January 2, 2022, whichever comes first. As of June 30, 2021, we have recorded a debt discount of $306,750 for the fair value of derivative liability and amortized $225,369 of the debt discount. As of June 30, 2021, the total outstanding value of these loans was $210,441, net of debt discount of $76,309 to unrelated parties and $14,928, net of debt discount of $5,072, to related parties. As of June 30, 2021, the accrued interest was $36,824.

 

 
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During the year ended December 31, 2020, we issued a series of convertible promissory notes to accredited investors, which totaled $15,000. The notes bear simple interest on outstanding principal at the rate of 8% per annum, computed on the basis of the actual number of days elapsed in a year of 365 days. Each $5,000 loan automatically converts into 250,000 shares of our common stock, either at the time the closing sale price for our common stock is equal to or greater than $1.00 per share, as adjusted for stock splits, stock dividends, reclassification, and the like, or at the maturity date of May 12, 2022, whichever comes first. As of June 30, 2021, we have recorded debt discount of $15,000 for the fair value of derivative liability and amortized $5,985 of debt discount. As of June 30, 2021, the total outstanding value of these loans was $8,000, net of debt discount of $7,000. The accrued interest was $1,197 as of June 30, 2021.

 

During the year ended December 31, 2020, we issued a series of convertible promissory notes to accredited investors, which totaled $15,000. During the six months ended June 30, 2021, we issued a series of convertible promissory notes, which totaled $145,000, and the total outstanding as of June 30, 2021, is $160,000. The notes bear simple interest on outstanding principal at the rate of 8% per annum, computed on the basis of the actual number of days elapsed in a year of 365 days. Each $5,000 loan automatically converts into 250,000 shares of our common stock, either at the time the closing sale price for our common stock is equal to or greater than $1.00 per share, as adjusted for stock splits, stock dividends, reclassification, and the like, or at the maturity date of September 1, 2022, whichever comes first. As of June 30, 2021, we have recorded a debt discount of $160,000 for the fair value of derivative liability and amortized $31,000 of debt discount. As of June 30, 2021, the total outstanding value of these loans was $31,000, net of debt discount of $129,000. The accrued interest was $1,506 as of June 30, 2021.

 

During the year ended December 31, 2020, we issued a series of promissory notes to accredited investors and the total outstanding as of June 30, 2021, is $520,000. During the six months ended June 30, 2021, we issued a series of promissory notes to accredited investors, which totaled $105,000. The notes bear simple interest on outstanding principal at the rate of 10% per annum, computed on the basis of the actual number of days elapsed in a year of 360 days and, for each additional of $20,000 (prorated), an additional payment of 0.00125% (one eighth of one-percent) of the actual funds received (as settlement, collection, or otherwise) from possible future litigation based on fraud in the inducement claims (such future litigation hereinafter referred to as the “Phase Two Litigation”) arising from the current litigation before the United States District Court for the Western District of Tennessee and Central District of California, Ocean Thermal Energy Corp. v. Robert Coe, et al. (Case No. 2:17-cv-02343SHL-cgc and Case No. 2:19-cv-05299-VAP-JPR, respectively) (this current litigation hereinafter is referred to as the “Phase One Litigation”). Repayment will be made as follows: (i) the principal and interest within five business days following our receipt of $25.5 million from the Phase One Litigation; and (ii) the additional payment within five business days following our actual receipt of any funds from the Phase Two Litigation, less legal fees accrued up to that date. If any such funds are received on more than one date, payment will be made as such funds are actually received by us and after deduction of accrued legal fees up to that date. The outstanding balance of these notes as of June 30, 2021, was $625,000 and the accrued interest was $49,542.

 

 
14

Table of Contents

 

The following convertible note and notes payable were outstanding at June 30, 2021:

 

 

 

 

 

 

 

 

 

 

 

 

Original

 

 

Principal at

June 30,

 

 

Discount at

June 30,

 

 

Carrying

Amount at

June 30,

 

 

Related Party

 

 

Non Related Party

 

Date of Issuance

 

 

Maturity Date

 

 

Interest Rate

 

 

In Default

 

Principal

 

 

2021

 

 

2021

 

 

2021

 

 

Current

 

 

Long-Term

 

 

Current

 

 

Long-Term

 

12/01/07

 

 

09/01/15

 

 

 

7.00 %

 

Yes

 

 

125,000

 

 

 

85,821

 

 

 

-

 

 

 

85,821

 

 

 

-

 

 

 

-

 

 

 

85,821

 

 

 

-

 

09/25/09

 

 

10/25/11

 

 

 

5.00 %

 

Yes

 

 

50,000

 

 

 

50,000

 

 

 

-

 

 

 

50,000

 

 

 

-

 

 

 

-

 

 

 

50,000

 

 

 

-

 

12/23/09

 

 

12/23/14

 

 

 

7.00 %

 

Yes

 

 

100,000

 

 

 

94,414

 

 

 

-

 

 

 

94,414

 

 

 

-

 

 

 

-

 

 

 

94,414

 

 

 

-

 

12/23/09

 

 

12/23/14

 

 

 

7.00 %

 

Yes

 

 

25,000

 

 

 

23,620

 

 

 

-

 

 

 

23,620

 

 

 

-

 

 

 

-

 

 

 

23,620

 

 

 

-

 

12/23/09

 

 

12/23/14

 

 

 

7.00 %

 

Yes

 

 

25,000

 

 

 

23,610

 

 

 

-

 

 

 

23,610

 

 

 

-

 

 

 

-

 

 

 

23,610

 

 

 

-

 

02/03/12

 

 

12/31/19

 

 

 

10.00 %

 

Yes

 

 

1,000,000

 

 

 

1,000,000

 

 

 

-

 

 

 

1,000,000

 

 

 

 -

 

 

 

-

 

 

 

1,000,000

 

 

 

-

 

08/15/13

 

 

10/31/23

 

 

 

10.00 %

 

No

 

 

158,334

 

 

 

158,334

 

 

 

-

 

 

 

158,334

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

158,334

 

12/31/13

 

 

12/31/15

 

 

 

8.00 %

 

Yes

 

 

290,000

 

 

 

130,000

 

 

 

-

 

 

 

130,000

 

 

 

-

 

 

 

-

 

 

 

130,000

 

 

 

-

 

04/01/14

 

 

12/31/18

 

 

 

10.00 %

 

Yes

 

 

2,265,000

 

 

 

1,102,500

 

 

 

-

 

 

 

1,102,500

 

 

 

1,102,500

 

 

 

-

 

 

 

-

 

 

 

-

 

12/22/14

 

 

03/31/15

 

 

 

22.00 %*

 

Yes

 

 

200,000

 

 

 

200,000

 

 

 

-

 

 

 

200,000

 

 

 

-

 

 

 

-

 

 

 

200,000

 

 

 

-

 

12/26/14

 

 

12/26/15

 

 

 

22.00 %*

 

Yes

 

 

100,000

 

 

 

100,000

 

 

 

-

 

 

 

100,000

 

 

 

-

 

 

 

-

 

 

 

100,000

 

 

 

-

 

03/12/15

 

 

(1)

 

 

6.00 %

 

No

 

 

394,380

 

 

 

394,380

 

 

 

-

 

 

 

394,380

 

 

 

394,380

 

 

 

-

 

 

 

-

 

 

 

-

 

04/07/15

 

 

04/07/18

 

 

 

10.00 %

 

Yes

 

 

50,000

 

 

 

50,000

 

 

 

-

 

 

 

50,000

 

 

 

-

 

 

 

-

 

 

 

50,000

 

 

 

-

 

11/23/15

 

 

(1)

 

 

6.00 %

 

No

 

 

50,000

 

 

 

50,000

 

 

 

-

 

 

 

50,000

 

 

 

50,000

 

 

 

-

 

 

 

-

 

 

 

-

 

02/25/16

 

 

(1)

 

 

6.00 %

 

No

 

 

50,000

 

 

 

50,000

 

 

 

-

 

 

 

50,000

 

 

 

50,000

 

 

 

-

 

 

 

-

 

 

 

-

 

05/20/16

 

 

(1)

 

 

6.00 %

 

No

 

 

50,000

 

 

 

50,000

 

 

 

-

 

 

 

50,000

 

 

 

50,000

 

 

 

-

 

 

 

-

 

 

 

-

 

10/20/16

 

 

(1)

 

 

6.00 %

 

No

 

 

50,000

 

 

 

12,500

 

 

 

-

 

 

 

12,500

 

 

 

12,500

 

 

 

-

 

 

 

-

 

 

 

-

 

10/20/16

 

 

(1)

 

 

6.00 %

 

No

 

 

12,500

 

 

 

12,500

 

 

 

-

 

 

 

12,500

 

 

 

12,500

 

 

 

-

 

 

 

-

 

 

 

-

 

12/21/16

 

 

(1)

 

 

6.00 %

 

No

 

 

25,000

 

 

 

25,000

 

 

 

-

 

 

 

25,000

 

 

 

25,000

 

 

 

-

 

 

 

-

 

 

 

-

 

03/09/17

 

 

(1)

 

 

10.00 %

 

No

 

 

200,000

 

 

 

177,000

 

 

 

-

 

 

 

177,000

 

 

 

177,000

 

 

 

-

 

 

 

-

 

 

 

-

 

07/13/17

 

 

07/13/19

 

 

 

6.00 %

 

Yes

 

 

25,000

 

 

 

25,000

 

 

 

-

 

 

 

25,000

 

 

 

-

 

 

 

-

 

 

 

25,000

 

 

 

-

 

07/18/17

 

 

07/18/19

 

 

 

6.00 %

 

Yes

 

 

25,000

 

 

 

25,000

 

 

 

-

 

 

 

25,000

 

 

 

-

 

 

 

-

 

 

 

25,000

 

 

 

-

 

07/26/17

 

 

07/26/19

 

 

 

6.00 %

 

Yes

 

 

15,000

 

 

 

15,000

 

 

 

-

 

 

 

15,000

 

 

 

-

 

 

 

-

 

 

 

15,000

 

 

 

-

 

12/20/17

 

 

(2)

 

 

10.00 %

 

Yes

 

 

979,156

 

 

 

979,156

 

 

 

-

 

 

 

979,156

 

 

 

-

 

 

 

-

 

 

 

979,156

 

 

 

-

 

11/06/17

 

 

12/31/18

 

 

 

10.00 %

 

Yes

 

 

646,568

 

 

 

543,093

 

 

 

-

 

 

 

543,093

 

 

 

543,093

 

 

 

-

 

 

 

-

 

 

 

-

 

02/19/18

 

 

(3)

 

 

18.00 %*

 

Yes

 

 

629,451

 

 

 

1,161,136

 

 

 

-

 

 

 

1,161,136

 

 

 

-

 

 

 

-

 

 

 

1,161,136

 

 

 

-

 

09/19/18

 

 

09/28/21

 

 

 

6.00 %

 

No

 

 

10,000

 

 

 

10,000

 

 

 

-

 

 

 

10,000

 

 

 

-

 

 

 

-

 

 

 

10,000

 

 

 

 -

 

12/14/18

 

 

12/22/18

 

 

 

24.00 %*

 

Yes

 

 

756,305

 

 

 

756,305

 

 

 

-

 

 

 

756,305

 

 

 

-

 

 

 

-

 

 

 

756,305

 

 

 

-

 

01/02/19

 

 

(4)

 

 

17.00 %

 

No

 

 

310,000

 

 

 

310,000

 

 

 

-

 

 

 

310,000

 

 

 

-

 

 

 

-

 

 

 

310,000

 

 

 

-

 

08/14/19

 

 

10/31/2021

 

 

 

8.00 %

 

No

 

 

26,200

 

 

 

26,200

 

 

 

4,534

 

 

 

21,666

 

 

 

-

 

 

 

-

 

 

 

21,666

 

 

 

 -

 

(5)

 

10/31/2021

 

 

 

8.00 %

 

No

 

 

105,000

 

 

 

105,000

 

 

 

17,546

 

 

 

87,454

 

 

 

8,347

 

 

 

-

 

 

 

79,107

 

 

 

-

 

(6)

 

01/02/22

 

 

 

8.00 %

 

No

 

 

306,750

 

 

 

306,750

 

 

 

81,381

 

 

 

225,369

 

 

 

14,928

 

 

 

-

 

 

 

210,441

 

 

 

-

 

(8)

 

05/12/22

 

 

 

8.00 %

 

No

 

 

15,000

 

 

 

15,000

 

 

 

7,000

 

 

 

8,000

 

 

 

 -

 

 

 

-

 

 

 

8,000

 

 

 

-

 

(9)

 

09/01/22

 

 

 

8.00 %

 

No

 

 

160,000

 

 

 

160,000

 

 

 

129,000

 

 

 

31,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

31,000

 

(7)

 

(7)

 

 

10.00 %

 

No

 

 

625,000

 

 

 

625,000

 

 

 

-

 

 

 

625,000

 

 

 

-

 

 

 

-

 

 

 

625,000

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

$ 9,854,644

 

 

$ 8,852,319

 

 

$ 239,461

 

 

$ 8,612,858

 

 

$ 2,440,248

 

 

$ -

 

 

$ 5,983,276

 

 

$ 189,334

 

  

(1)

Maturity date is 90 days after demand.

(2)

Bridge loans were issued at dates between December 2017 and May 2018. Principal is due on the earlier of 18 months from the anniversary date or the completion of L2 financing with a gross proceeds of a minimum of $1.5 million.

(3)

L2 - Note was drawn down in five tranches between 02/16/18 and 05/02/18.

(4)

Loans were issued from January 2, 2019 to March 23, 2019. Principal and interest are due when funds are received from the litigation between Ocean Thermal Energy Corporation vs., Robert Coe el al.

(5)

Notes were issued between 10/14/19 1nd 11/5/19. The notes bear an interest rate of 8% and mature 10/31/21. They can be converted into 250,000 shares of common stock. They can be converted when the stock closing price reaches $1 or on the maturity, whichever occurs first.

(6)

Notes were issued between 12/9/19 and 11/25/20. The notes bear an interest rate of 8% and mature 1/2/22. They can be converted into 250,000 shares of common stock. They can be converted when the stock closing price reaches $1 or on the maturity, whichever occurs first.

(7)

Notes were issued between 11/2/2020 and 3/18/21. The notes bear an interest rate of 10%. Repayment will be made as follows: (i) the principal and interest within five business days following our receipt of $25.5 million from the Phase One Litigation; and (ii) the additional payment within five business days following our actual receipt of any funds from the Phase Two Litigation, less legal fees accrued up to that date. If any such funds are actually received on more than one date, payment will be made as such funds are actually received by us and after deductions of accrued legal fees up to that date.

(8)

Notes were issued between 5/14/20 and 8/11/20. The notes bear an interest rate of 8% and mature 1/2/22. They can be converted into 250,000 shares of common stock. They can be converted when the stock closing price reaches $1 or on the maturity, whichever occurs first.

(9)

Notes were issued on November 2020 and during the first two quarters of 2021. The notes bear an interest rate of 8% and mature 9/1/22. They can be converted into 250,000 shares of common stock. They can be converted when the stock closing price reaches $1 or on the maturity, whichever occurs first.

*

Default interest rate

 

 
15

Table of Contents

 

The following convertible notes and notes payable were outstanding at December 31, 2020:

 

 

 

 

 

 

 

 

 

 

Original

 

 

Principal at December 31,

 

 

Discount at December 31,

 

 

Carrying Amount at December 31,

 

 

Related Party

 

 

Non Related Party

 

Date of Issuance

 

Maturity Date

 

Interest Rate

 

 

In Default

 

Principal

 

 

2020

 

 

2020

 

 

2020

 

 

Current

 

 

Long-Term

 

 

Current

 

 

Long-Term

 

12/12/06

 

01/05/13

 

 

6.25 %

 

Yes

 

 

58,670

 

 

 

3,779

 

 

 

-

 

 

 

3,779

 

 

 

-

 

 

 

-

 

 

 

3,779

 

 

 

-

 

12/01/07

 

09/01/15

 

 

7.00 %

 

Yes

 

 

125,000

 

 

 

85,821

 

 

 

-

 

 

 

85,821

 

 

 

-

 

 

 

-

 

 

 

85,821

 

 

 

-

 

09/25/09

 

10/25/11

 

 

5.00 %

 

Yes

 

 

50,000

 

 

 

50,000

 

 

 

-

 

 

 

50,000

 

 

 

-

 

 

 

-

 

 

 

50,000

 

 

 

-

 

12/23/09

 

12/23/14

 

 

7.00 %

 

Yes

 

 

100,000

 

 

 

94,480

 

 

 

-

 

 

 

94,480

 

 

 

-

 

 

 

-

 

 

 

94,480

 

 

 

-

 

12/23/09

 

12/23/14

 

 

7.00 %

 

Yes

 

 

25,000

 

 

 

23,619

 

 

 

-

 

 

 

23,619

 

 

 

-

 

 

 

-

 

 

 

23,619

 

 

 

-

 

12/23/09

 

12/23/14

 

 

7.00 %

 

Yes

 

 

25,000

 

 

 

23,620

 

 

 

-

 

 

 

23,620

 

 

 

-

 

 

 

-

 

 

 

23,620

 

 

 

-

 

02/03/12

 

12/31/19

 

 

10.00 %

 

Yes

 

 

1,000,000

 

 

 

1,000,000

 

 

 

-

 

 

 

1,000,000

 

 

 

 -

 

 

 

-

 

 

 

1,000,000

 

 

 

-

 

08/15/13

 

10/31/23

 

 

10.00 %

 

No

 

 

158,334

 

 

 

158,334

 

 

 

-

 

 

 

158,334

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

158,334

 

12/31/13

 

12/31/15

 

 

8.00 %

 

Yes

 

 

290,000

 

 

 

130,000

 

 

 

-

 

 

 

130,000

 

 

 

-

 

 

 

-

 

 

 

130,000

 

 

 

-

 

04/01/14

 

12/31/18

 

 

10.00 %

 

Yes

 

 

2,265,000

 

 

 

1,102,500

 

 

 

-

 

 

 

1,102,500

 

 

 

1,102,500

 

 

 

-

 

 

 

-

 

 

 

-

 

12/22/14

 

03/31/15

 

 

22.00 %*

 

Yes

 

 

200,000

 

 

 

200,000

 

 

 

-

 

 

 

200,000

 

 

 

-

 

 

 

-

 

 

 

200,000

 

 

 

-

 

12/26/14

 

12/26/15

 

 

22.00 %*

 

Yes

 

 

100,000

 

 

 

100,000

 

 

 

-

 

 

 

100,000

 

 

 

-

 

 

 

-

 

 

 

100,000

 

 

 

-

 

03/12/15

 

(1)

 

 

6.00 %

 

No

 

 

394,380

 

 

 

394,380

 

 

 

-

 

 

 

394,380

 

 

 

394,380

 

 

 

-

 

 

 

-

 

 

 

-

 

04/07/15

 

04/07/18

 

 

10.00 %

 

Yes

 

 

50,000

 

 

 

50,000

 

 

 

-

 

 

 

50,000

 

 

 

-

 

 

 

-

 

 

 

50,000

 

 

 

-

 

11/23/15

 

(1)

 

 

6.00 %

 

No

 

 

50,000

 

 

 

50,000

 

 

 

-

 

 

 

50,000

 

 

 

50,000

 

 

 

-

 

 

 

-

 

 

 

-

 

02/25/16

 

(1)

 

 

6.00 %

 

No

 

 

50,000

 

 

 

50,000

 

 

 

-

 

 

 

50,000

 

 

 

50,000

 

 

 

-

 

 

 

-

 

 

 

-

 

05/20/16

 

(1)

 

 

6.00 %

 

No

 

 

50,000

 

 

 

50,000

 

 

 

-

 

 

 

50,000

 

 

 

50,000

 

 

 

-

 

 

 

-

 

 

 

-

 

10/20/16

 

(1)

 

 

6.00 %

 

No

 

 

50,000

 

 

 

12,500

 

 

 

-

 

 

 

12,500

 

 

 

12,500

 

 

 

-

 

 

 

-

 

 

 

-

 

10/20/16

 

(1)

 

 

6.00 %

 

No

 

 

12,500

 

 

 

12,500

 

 

 

-

 

 

 

12,500

 

 

 

12,500

 

 

 

-

 

 

 

-

 

 

 

-

 

12/21/16

 

(1)

 

 

6.00 %

 

No

 

 

25,000

 

 

 

25,000

 

 

 

-

 

 

 

25,000

 

 

 

25,000

 

 

 

-

 

 

 

-

 

 

 

-

 

03/09/17

 

(1)

 

 

10.00 %

 

No

 

 

200,000

 

 

 

177,000

 

 

 

-

 

 

 

177,000

 

 

 

177,000

 

 

 

-

 

 

 

-

 

 

 

-

 

07/13/17

 

07/13/19

 

 

6.00 %

 

Yes

 

 

25,000

 

 

 

25,000

 

 

 

-

 

 

 

25,000

 

 

 

-

 

 

 

-

 

 

 

25,000

 

 

 

-

 

07/18/17

 

07/18/19

 

 

6.00 %

 

Yes

 

 

25,000

 

 

 

25,000

 

 

 

-

 

 

 

25,000

 

 

 

-

 

 

 

-

 

 

 

25,000

 

 

 

-

 

07/26/17

 

07/26/19

 

 

6.00 %

 

Yes

 

 

15,000

 

 

 

15,000

 

 

 

-

 

 

 

15,000

 

 

 

-

 

 

 

-

 

 

 

15,000

 

 

 

-

 

12/20/17

 

(2)

 

 

10.00 %

 

Yes

 

 

979,156

 

 

 

979,156

 

 

 

-

 

 

 

979,156

 

 

 

-

 

 

 

-

 

 

 

979,156

 

 

 

-

 

11/06/17

 

12/31/18

 

 

10.00 %

 

Yes

 

 

646,568

 

 

 

543,093

 

 

 

-

 

 

 

543,093

 

 

 

543,093

 

 

 

-

 

 

 

-

 

 

 

-

 

02/19/18

 

(3)

 

 

18.00 %*

 

Yes

 

 

629,451

 

 

 

1,161,136

 

 

 

-

 

 

 

1,161,136

 

 

 

-

 

 

 

-

 

 

 

1,161,136

 

 

 

-

 

09/19/18

 

09/28/21

 

 

6.00 %

 

No

 

 

10,000

 

 

 

10,000

 

 

 

-

 

 

 

10,000

 

 

 

-

 

 

 

-

 

 

 

10,000

 

 

 

 -

 

12/14/18

 

12/22/18

 

 

24.00 %*

 

Yes

 

 

474,759

 

 

 

1,042,905

 

 

 

-

 

 

 

1,042,905

 

 

 

-

 

 

 

-

 

 

 

1,042,905

 

 

 

-

 

01/02/19

 

(4)

 

 

17.00 %

 

No

 

 

310,000

 

 

 

310,000

 

 

 

-

 

 

 

310,000

 

 

 

-

 

 

 

-

 

 

 

310,000

 

 

 

-

 

08/14/19

 

10/31/2021

 

 

8.00 %

 

No

 

 

26,200

 

 

 

26,200

 

 

 

9,845

 

 

 

16,355

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

16,355

 

(5)

 

10/31/2021

 

 

8.00 %

 

No

 

 

105,000

 

 

 

105,000

 

 

 

43,361

 

 

 

61,639

 

 

 

-

 

 

 

5,916

 

 

 

-

 

 

 

55,723

 

(6)

 

01/02/22

 

 

8.00 %

 

No

 

 

336,750

 

 

 

336,750

 

 

 

187,729

 

 

 

149,021

 

 

 

-

 

 

 

9,989

 

 

 

-

 

 

 

139,032

 

(7)

 

(7)

 

 

10.00 %

 

No

 

 

520,000

 

 

 

520,000

 

 

 

-

 

 

 

520,000

 

 

 

-

 

 

 

-

 

 

 

520,000

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

$ 9,381,768

 

 

$ 8,892,773

 

 

$ 240,935

 

 

$ 8,651,838

 

 

$ 2,416,973

 

 

$ 15,905

 

 

$ 5,849,516

 

 

$ 369,444

 

  

(1)

Maturity date is 90 days after demand.

(2)

Bridge loans were issued at dates between December 2017 and May 2018. Principal is due on the earlier of 18 months from the anniversary date or the completion of L2 financing with a gross proceeds of a minimum of $1.5 million.

(3).

L2 - Note was drawn down in five tranches between 02/16/18 and 05/02/18.

(4).

Loans were issued from January 2, 2019 to March 23, 2019. Principal and interest are due when funds are received from the litigation between Ocean Thermal Energy Corporation vs., Robert Coe el al.

(5).

Notes were issued between 10/14/19 1nd 11/5/19. The notes bear an interest rate of 8% and mature 10/31/21. They can be converted into 250,000 shares of common stock. They can be converted when the stock closing price reaches $1 or on the maturity, whichever occurs first.

(6).

Notes were issued between 12/9/19 and 11/25/20. The notes bear an interest rate of 8% and mature 1/2/22. They can be converted into 250,000 shares of common stock. They can be converted when the stock closing price reaches $1 or on the maturity, whichever occurs first.

(7).

Notes were issued between 5/12/2020 and 11/25/2020. The notes bear an interest rate of 10%. Repayment will be made as follows: (i) the principal and interest within five business days following our receipt of $25.5 million from the Phase One Litigation; and (ii) the additional payment within five business days following our actual receipt of any funds from the Phase Two Litigation, less legal fees accrued up to that date. If any such funds are actually received on more than one date, payment will be made as such funds are actually received by us and after deductions of accrued legal fees up to that date.

*

Default interest rate

 

Note 5: Derivative Liability

 

We measure the fair value of our assets and liabilities under the guidance of ASC 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but its provisions apply to all other accounting pronouncements that require or permit fair value measurement.

 

We identified conversion features embedded within convertible debt issued. We have determined that the features associated with the embedded conversion option should be accounted for at fair value as a derivative liability. We have elected to account for these instruments together with fixed conversion price instruments as derivative liabilities as we cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions.

 

 
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Following is a description of the valuation methodologies used to determine the fair value of our financial liabilities, including the general classification of such instruments pursuant to the valuation hierarchy:

 

 

 

 

 

 

Quoted market prices

 

 

 

 

 

 

 

 

 

 

 

 

for identical

 

 

Significant other

 

 

Significant

 

 

 

Fair value at

 

 

assets/liabilities

 

 

observable inputs

 

 

unobservable inputs

 

 

 

June 30, 2021

 

 

(Level 1)

 

 

(Level 2)

 

 

(Level 3)

 

Derivative Liability

 

$ 3,939,720

 

 

$ -

 

 

$ -

 

 

$ 3,939,720

 

 

 

 

Derivative Liability

 

Derivative liability as of December 31, 2020

 

$ 5,321,395

 

Addition to derivative instruments

 

 

236,589

 

Change in fair value of derivative liability

 

 

(1,156,937 )

Derivative liability extinguished upon conversion of notes payable

 

 

(461,327 )

Derivative liability as of June 30, 2021

 

$ 3,939,720

 

 

 

 

 Change in

 

 

 

   Fair Value of 

 

 

 

  Derivative Liability*

 

Change in fair value of derivative liability at the beginning of period

 

$ -

 

Day one gains/(losses) on valuation

 

 

91,589

 

Gains/(losses) from the change in fair value of derivative liability

 

 

(1,156,937 )

Change in fair value of derivative liability at the end of the period

 

$ (1,065,348 )

 

* Gains/(losses) related to the revaluation of Level 3 financial liabilities is included in “Change in fair value of derivative liability” in the accompanying condensed consolidated unaudited statement of operations.

 

The fair value of the derivative liability was estimated using the income approach and the Black-Scholes option-pricing model. The fair values at the commitment and remeasurement dates for our derivative liabilities were based upon the following management assumptions:

 

 

 

 Measurement and

 

 

 

Remeasurement Date**

 

Expected dividends

 

 

0%

Expected volatility

 

180.0% to 468.7%

 

Risk free interest rate

 

0.011% to 0.29%

 

Expected term (in years)

 

.025 to 3.56

 

 

 

 

 

 

** The fair value at the remeasurement date is equal to the carrying value on the balance sheet.

 

 

 

 

    

Note 6: Stockholders’ Equity

 

Common Stock

 

For the six months ended June 30, 2021, we issued 19,829,587 shares of common stock to Oasis Capital LLC with a fair value of $702,881 for the conversion of a portion of our notes payable in the amount of $286,600.

 

On March 31, 2021, we issued 1,693,877 shares of common stock to Oasis Capital, LLC for $83,000. This was a settlement of a second commitment for a convertible promissory note dated May 22, 2018. The initial commitment was 400,000 shares of common stock issued on May 22, 2018.

 

Preferred Stock

 

On June 3, 2019, our board of directors designated two classes of preferred stock and approved the following issuances:

 

Series B Preferred Stock – We are authorized to issue 1,250,000 shares of Series B Preferred Stock with a par value of $0.001. These shares will not have voting rights alongside the common stock, and each share of Series B Preferred Stock will be convertible into ten shares of our common stock. As of June 30, 2021, 518,750 shares of Series B Preferred Stock are issued and outstanding.

 

Series C Preferred Stock – We are authorized to issue 2,700,000 shares of Series C Preferred Stock with a par value of $0.001. These shares are a one-time grant and will have voting rights alongside the common stock. Each share of Series C Preferred Stock will be convertible into five shares of our common stock. As of June 30, 2021, 2,300,000 shares of Series C Preferred Stock are issued and outstanding.

 

 
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Warrants

 

The following table summarizes all warrants outstanding and exercisable for the three months ended June 30, 2021:

  

 

 

Number of

 

 

Weighted Average

 

 

 

Warrants

 

 

Exercise Price

 

Balance at December 31, 2020

 

 

125,073

 

 

$ 0.18

 

Granted

 

 

-

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

Forfeited

 

 

-

 

 

 

-

 

Balance at June 30, 2021

 

 

125,073

 

 

$ 0.18

 

Exercisable at June 30, 2021

 

 

125,073

 

 

$ 0.18

 

   

During the six months ended June 30, 2021, no warrants were exercised. The aggregate intrinsic value represents the excess amount over the exercise price that optionees would have received if all options had been exercised on the last business day of the period indicated, based on our closing stock price of $0.0218 per share on June 30, 2021. Of the total outstanding on June 30, 2021, warrants to purchase 125,073 shares had no intrinsic value, as the price of the stock on that date was lower than the exercise price.

 

Note 7: Commitments and Contingencies

 

Litigation

 

From time to time, we are involved in legal proceedings and regulatory proceedings arising from operations. We establish reserves for specific liabilities in connection with legal actions that management deems to be probable and estimable.

 

On May 4, 2018, we reached a settlement of the claims at issue in Ocean Thermal Energy Corp. v. Robert Coe, et al., Case No. 2:17-cv-02343SHL-cgc, before the United States District Court for the Western District of Tennessee. Between May 30 and July 19, 2018, we received three payments totaling $100,000 from the defendants. On August 8, 2018, an $8 million judgment was entered against the defendants and in our favor. On May 28, 2019, we further settled the claims at issue with two of the defendants, Brett M Regal and his company, Trade Base Sales, Inc. (“Regal Debtors”), for $17,500,000, bringing the combined judgment and settlement amount owed to us is $25,500,000. On July 1, 2019, the United States District Judge for the Central District of California (case number: 2:19-cv-05299-VAP-JPR), approved our stipulated application for an order permitting us to levy on property and appointing a receiver to carry out the levy on Regal Debtors’ property, such that it may be sold (subject to further order of the court approving and confirming such sales), to satisfy the $25,500,000 settlement and judgment amounts in our favor. On August 15, 2019, the court-appointed receiver notified the court that he had taken custody, possession, and control of certain gemstone and mineral specimens, known as the “Ophir Collection” and 350,000 pounds of unrefined gold and other precious metal bearing ore. By order of the court, the receiver was given the authority to assign, sell, and transfer the debtor property. The proceeds of any sales will be used to satisfy the judgment and settlement agreement, receivership’s reasonable costs and fees, as well as any other claims as determined by the court. Various parties have come forward asserting ownership and priority lien rights to the property. In our ongoing efforts to collect the $25,500,000 judgment obtained, a third party has intervened in our case in the Central District of California (case number: 2:19-cv-05299-VAP-JPR), asserting that it is the rightful owner of the “Ophir Collection” of gems and mineral specimens that is now in possession of the court-appointed receiver. The court has not yet addressed the claims of that third party.

 

On May 21, 2019, Theodore T. Herman filed a complaint against us in Theodore T. Herman v. Ocean Thermal Energy Corporation, Case No. CI-19-04780, in the Court of Common Pleas of Lancaster County, Pennsylvania, asserting that he is entitled to payment on the promissory note described in Note 4: Convertible Notes and Notes Payable. On July 1, 2019, we filed preliminary objections to the complaint, and subsequently filed an answer and new matter on August 20, 2019, to which the plaintiff filed a reply on September 9, 2019. We will continue to defend our position that no further payment on this note is owed.

 

On August 22, 2018, Fugro USA Maine, Inc. (“Fugro”), filed suit against us in Fugro USA Marine, Inc. v. Ocean Thermal Energy Corp., Cause No. 2018-56396, in the District Court for Harris County, TX, 165th Judicial District, seeking approximately $500,000 allegedly owed for engineering services provided. On June 23, 2020, a settlement was reached under which we would pay Fugro $375,000 by June 30, 2021. We have recorded the amount of accrued legal settlement as of June 30, 2021. We repaid $130,000 and the balance at June 30, 2021 was $245,000. We were unable to pay the remaining balance and therefore entered into a second amendment to the settlement agreement extending the deadline for full payment, with 18% interest per annum, to December 31, 2021.

 

Consulting Agreements

 

On June 4, 2018, we entered into a consulting agreement to pay 20,000 shares of common stock when one of the conditions of the contract was satisfied. Although this condition was satisfied on August 31, 2018, as of June 30, 2021, we have not issued the shares, and we have accrued the share compensation at fair value totaling $1,600.

 

 
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Table of Contents

 

On August 14, 2018, we entered into a consulting agreement to pay $40,000 by issuing shares of common stock. As of June 30, 2021, we have not issued the shares and have accrued the amount.

 

Employment Agreements

 

On January 1, 2011, we entered into a five-year employment agreement with our chief executive officer, which provides for successive one-year term renewals unless it is expressly cancelled by either party100 days prior to the end of the term. Under the agreement, our chief executive officer will receive an annual salary of $350,000, a car allowance of $12,000, and company-paid health insurance. The agreement also provides for bonuses equal to one times his annual salary plus 500,000 shares of common stock for each additional project that generates $25 million or more in revenue to us. Our chief executive officer is entitled to receive severance pay in the lesser amount of three years’ salary or 100% of the remaining salary if the remaining term is less than three years. On September 15, 2017, an addendum was added to the employment agreement stating that effective June 30, 2017, his salary will be increased to $388,220 per year; that he will receive interest at a rate of 8% on his accrued unpaid wages; and that the term of employment agreement is extended for an additional five years.

 

Note 8: Related-Party Transactions

 

For the six months ended June 30, 2021 and 2020, we paid rent of $30,000 and $30,000 to a company controlled by our chief executive officer.

 

On January 18, 2018, Jeremy P. Feakins & Associates, LLC, an investment entity owned by our chief executive, chief financial officer, and a director, agreed to extend the due date for repayment of a $2,265,000 note issued in 2014 to the earlier of December 31, 2020, or the date of the financial closings of our Baha Mar project (or any other project of $25 million or more), whichever occurs first. On August 15, 2018, principal of $618,500 and accrued interest of $207,731 were converted to 826,231 shares at $1.00 per share, which was ratified by a disinterested majority of the board of directors. The conversion was recorded at historical cost due to the related-party nature of the transaction. As of June 30, 2021, the note balance was $1,102,500 and the accrued interest was $796,566. This note is in default.

 

On March 9, 2017, we issued a promissory note payable of $200,000 to a related party in which our chief executive officer is an officer and director. The note bears interest of 10% and is due and payable within 90 days after demand. During the year ended December 31, 2018, we received an additional $2,000 and repaid $25,000. The outstanding balance was $177,000 and accrued interest was $77,691 as of June 30, 2021.

 

On November 6, 2017, we entered into an agreement and promissory note with JPF Venture Group, Inc. to loan up to $2,000,000 to us. The terms of the note are as follows: (i) interest is payable at 10% per annum; (ii) all unpaid principal and all accrued and unpaid interest is due and payable at the earliest of resolution of the Memphis litigation (as defined therein), December 31, 2020, or when we are otherwise able to pay. As of June 30, 2021, the outstanding balance was $543,093 and the accrued interest was $226,604. This note is in default.

 

We remain liable for the loans made to us by JPF Venture Group, Inc. before the merger in 2017. As of June 30, 2021, the outstanding balance of these loans was $581,880 and the accrued interest was $214,021. All of these notes are in default.

 

On October 20, 2016, we borrowed $12,500 from an independent director pursuant to a promissory note.The terms of the note are as follows: (i) interest is payable at 6% per annum; (ii) the note is payable 90 days after demand; and (iii) the payee is authorized to convert part or all of the note balance and accrued interest, if any, into shares of our common stock at the rate of one share for each $0.03 of principal amount of the note. This conversion share price was adjusted to $0.01384 for the reverse stock splits. As of June 30, 2021, the outstanding balance was $12,500, plus accrued interest of $3,654.

 

In the fourth quarter of 2019, we issued a series of convertible promissory notes to accredited investors. The notes bear simple interest on outstanding principal at the rate of 8% per annum, computed on the basis of the actual number of days elapsed in a year of 365 days. Each $5,000 loan automatically converts into 250,000 shares of our common stock, either at the time the closing sale price for our common stock is equal to or greater than $1.00 per share, as adjusted for stock splits, stock dividends, reclassification and the like, or at the maturity date of October 31, 2021, whichever comes first. On October 14, 2019, we borrowed $5,000 from Jeremy P. Feakins, our chief executive officer. As of June 30, 2021, the outstanding balance of his loan was $5,000 and the accrued interest was $585. On October 14, 2019, we borrowed $5,000 from an independent director. As of June 30, 2021, the outstanding balance of his loan was $5,000 and the accrued interest was $624.

   

In the fourth quarter of 2019, and during the year ended December 31, 2020, we issued a series of convertible promissory notes to accredited investors.The notes bear simple interest on outstanding principal at the rate of 8% per annum, computed on the basis of the actual number of days elapsed in a year of 365 days. Each $5,000 loan automatically converts into 250,000 shares of our common stock, either at the time the closing sale price for our common stock is equal to or greater than $1.00 per share, as adjusted for stock splits, stock dividends, reclassification and the like, or at the maturity date of January 2, 2022, whichever comes first. On December 9, 2019, we borrowed $5,000 from Jeremy P. Feakins, our chief executive officer. On January 21, 2020, we borrowed an additional $5,000 from Jeremy P. Feakins, our chief executive officer. As of June 30, 2021, the outstanding balance of his loans was $10,000 and the accrued interest was $1,001. On December 7, 2019, we borrowed $5,000 from an independent director. On January 21, 2020, we borrowed an additional $5,000 from an independent director. As of June 30, 2021, the outstanding balance of his loans was $10,000 and the accrued interest was $1,200.

 

Note 9: Subsequent Events

 

Subsequent to June 30, 2021, we issued a series of convertible promissory notes to accredited investors in the amount of $120,000. The notes bear interest at 8% per annum. The maturity date for each note is August 30, 2023. Each note automatically converts into 250,000 shares of our common stock either at the time the closing sale price for our common stock is equal to or greater than $1.00 per share, as adjusted for stock splits, stock dividends, reclassification and the like, or at the maturity date of August 30, 2023, whichever occurs first.

 

Subsequent June 30, 2021, we issued 5,000,000 shares of common stock to Oasis Capital, LLC with a fair value of $115,000 for the conversion of a portion of our notes payable in the amount of $59,400.

 

 
19

Table of Contents

 

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

  

The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes to our financial statements included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors discussed elsewhere in this report.

 

Certain information included herein contains statements that may be considered forward-looking statements such as statements relating to our anticipated revenues, gross margins and operating results, estimates used in the preparation of our financial statements, future performance and operations, plans for future expansion, capital spending, sources of liquidity, and financing sources. Forward-looking information involves important risks and uncertainties that could significantly affect anticipated results in the future, and accordingly, such results may differ from those expressed in any forward-looking statements made herein. These risks and uncertainties include those relating to our liquidity requirements; the continued growth of our industry; the success of marketing and sales activity; the dependence on existing management; the availability and cost of substantial amounts of project capital; leverage and debt service (including sensitivity to fluctuations in interest rates); domestic and global economic conditions; the inherent uncertainty and costs of prolonged arbitration or litigation; and changes in federal or state tax laws or the administration of such laws.

 

Overview

 

We develop projects for renewable power generation, desalinated water production, and air conditioning using our proprietary technologies designed to extract energy from the temperature differences between warm surface water and cold deep water. In addition, our projects can provide ancillary products such as potable/bottle water and high-profit aquaculture, mariculture, and agriculture opportunities.

 

We currently have no source of revenue, so as we continue to incur costs we are dependent on external funding in order to continue. We cannot assure that such funding will be available or, if available, can be obtained on acceptable or favorable terms.

 

Our operating expenses consist principally of expenses associated with the development of our projects until we determine that a particular project is feasible. Salaries and wages consist primarily of employee salaries and wages, payroll taxes, and health insurance. Our professional fees are related to consulting, engineering, legal, investor relations, outside accounting, and auditing expenses. General and administrative expenses include travel, insurance, rent, marketing, and miscellaneous office expenses. The interest expense includes interest and discounts related to our loans and notes payable.

 

Results of Operations

 

Comparison of Three Months Ended June 30, 2021 and 2020

 

We had no revenue in the three months ended June 30, 2021 and 2020.

 

During the three months ended June 30, 2021, we had salaries and wages of $181,886, compared to salaries and wages of $208,511 during the same three-month period for 2020, a decrease of 12.8%, which is attributed to management’s focus on reducing expenses.

 

During the three months ended June 30, 2021 and 2020, we recorded professional fees of $206,556 and $202,963, respectively, an increase of 1.8%. During the first quarter of 2021, our legal fees were higher due to the continuing Memphis litigation issues.

 

 
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We incurred general and administrative expenses of $84,736 during the three months ended June 30, 2021, compared to $48,588 for the same three-month period for 2020, an increase of 74.4%. Of the increase, $28,327 was for administrative service fees.

 

Our interest expense was $408,889 for the three months ended June 30, 2021, compared to $326,042 for the same period of the previous year, an increase of 25.4%. This change was due to increased debt and higher interest rates on defaulted notes.

 

Our debt discount amortization was $76,226 for the three months ended June 30, 2021, compared to $54,412 for the same period of the previous year. The increase of 40.1% is due to debt discount recorded on additional loans that were obtained during the second quarter of 2021. There was a decrease in the fair value of the derivative liability of $1,360,990 during the three months ended June 30, 2021, compared to a $1,420 an increase in the fair value of derivative liability for the same period in 2020. There was a gain on the conversion of debt during the three months ended June 30, 2021, of $37,519 as compared to none in the same period of 2020.

 

Comparison of Six Months Ended June 30, 2021 and 2020

 

We had no revenue in the six months ended June 30, 2021 and 2020.

 

During the six months ended June 30, 2021, we had salaries and wages of $376,229, compared to salaries and wages of $425,539 during the same six-month period for 2020, a decrease of 11.6%. Decrease in 2021 is due to the decrease in headcount.

 

During the six months ended June 30, 2021 and 2020, we recorded professional fees of $563,613 and $322,200, respectively, an increase of 74.9%. Our legal fees for the six-month periods were higher due to the continuing Memphis litigation issues.

 

We incurred general and administrative expenses of $137,303 during the six months ended June 30, 2021, compared to $127,796 for the same six-month period for 2020, a 7.4% increase. Most of the increase was for administrative service fees in the second quarter of 2021.

 

Our interest expense was $879,655 for the six months ended June 30, 2021, compared to $646,860 for the same period of the previous year, an increase of 36.0% due to increased debt and higher interest rates on defaulted notes.

 

Our debt discount amortization was $146,476 for the six months ended June 30, 2021, compared to $97,264 for the same period of the previous year. The increase of 50.6% is due to the debt discount on the convertible notes payable issued during the period. This was due to the increase in the amount of convertible loans in 2021. There was a decrease in the fair value of the derivative liability of $1,065,348 during the six months ended June 30, 2021, compared to a $1,732,043 increase in the fair value of the derivative liability for the same period in 2020. There was a gain on the conversion of debt during the six months ended June 30, 2021, of $45,046 as compared to none in the same period of 2020.

 

Liquidity and Capital Resources

 

At June 30, 2021, our principal source of liquidity consisted of $8,110 of cash, as compared to $7,442 of cash at December 31, 2020. In addition, our stockholders’ deficiency was $28,620,170 at June 30, 2021, compared to stockholders’ deficiency of $28,413,169 at December 31, 2020, an increase in the deficiency of $992,882, which is attributable to the net loss during the period.

 

Our operations used net cash of $245,477 during the six months ended June 30, 2021, as compared to using net cash of $388,832 during the six months ended June 30, 2020, a decrease of 36.9%. The decrease in net cash used in operations is due to the overall decrease in net loss of approximately $2.4 million and offset by the decrease in the change in the fair value of derivative liability of $2.8 million and the increase in accounts payable and accrued expenses of $483,760 during the same period 2020.

 

Financing activities provided cash of $246,145 for our operations during the six months ended June 30, 2021, as compared to $390,757 for the six months ended June 30, 2020, a decrease of 37.0%. During six months ended June 30, 2021, we received $145,000 from convertible notes and notes payable as compared to $260,000 in the same period of 2020.

 

Our Capital Resources and Anticipated Requirements

 

As noted above, at June 30, 2021, we had negative working capital (current assets minus current liabilities) of $28,430,836. We continue to focus our efforts on promoting and marketing our technology and developing contracts for execution. We are exploring external funding alternatives, as our current cash is insufficient to fund operations for the next 12 months.

 

 
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Our condensed consolidated financial statements have been prepared assuming we will continue as a going concern. We have experienced recurring losses from operations and have an accumulated deficit. Our ability to continue our operations as a going concern is dependent on the success of management’s plans, which include the raising of capital through debt and/or equity markets until such time that revenue provided by operations is sufficient to fund working capital requirements. We will require additional funding to finance the growth of our current and expected future operations as well as to achieve our strategic objectives. The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. These financial statements do not include any adjustments relating to the recovery of the recorded assets or the classification of the liabilities that might be necessary should we be unable to continue as a going concern. The Biden administration has announced a range of financial support for renewable and sustainable companies. Details from the administration are not available yet, but we are already in the process of filing for financial support. Additional applications for financial support will be made as appropriate.

 

We have no significant contractual obligations or commercial commitments not reflected on our balance sheet as of this date.

 

Recent Accounting Pronouncements

 

Information concerning recently issued accounting pronouncements is set forth in Note 2 of our notes to unaudited condensed consolidated financial statements appearing elsewhere in this report.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us, in the reports that we file or submit to the U.S. Securities and Exchange Commission (“SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported within the periods specified by the SEC’s rules and forms and that information is accumulated and communicated to our management, including our principal executive and principal financial officer (whom we refer to in this periodic report as our Certifying Officer), as appropriate to allow timely decisions regarding required disclosure. Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our management evaluated, with the participation of our Certifying Officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of June 30, 2021, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officer concluded that, as of June 30, 2021, our disclosure controls and procedures were not effective to provide reasonable assurance as of June 30, 2021, because certain deficiencies involving internal controls constituted material weaknesses, as discussed in our annual report on Form 10-K for the year ended December 31, 2020.

 

Limitations on Effectiveness of Controls

 

A system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the system will meet its objectives. The design of a control system is based, in part, upon the benefits of the control system relative to its costs. Control systems can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. In addition, over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. In addition, the design of any control system is based in part upon assumptions about the likelihood of future events.

 

Changes in Internal Control over Financial Reporting

 

There has been no change in our internal control over financial reporting during the three months ended June 30, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

 
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PART II–OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

On August 22, 2018, Fugro USA Maine, Inc. filed suit against us in Fugro USA Marine, Inc. v. Ocean Thermal Energy Corp., Cause No. 2018-56396, in the District Court for Harris County, TX, 165th Judicial District, seeking approximately $500,000 allegedly owed for engineering services provided. On June 23, 2020, a settlement was reached under which we would pay Fugro $375,000 by December 31, 2020. We were unable to pay the remaining balance by that date and therefore entered into an amendment to the settlement agreement extending the deadline for full payment, with 18% interest per annum, to December 31, 2021.

 

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

 

During the quarter ended June 30, 2021, we issued 12,500,000 shares of common stock to Oasis Capital LLC with a fair value of $182,400 for the conversion of a portion of our notes payable in the amount of $354,000.

 

Subsequent June 30, 2021, we issued 5,000,000 shares of common stock to Oasis Capital, LLC with a fair value of $115,000 for the conversion of a portion of our notes payable in the amount of $59,400.

 

These securities were issued in reliance on the exemption from registration provided in Section 4(a)(2) of the Securities Act of 1933, as amended, for transactions not involving any public offering. Oasis Capital is an “accredited investor,” as that term is defined in Rule 501(a) of Regulation D, and confirmed the foregoing and acknowledged, in writing, that the securities were acquired and will be held for investment. No underwriter participated in the offer and sale of these securities, and no commission or other remuneration was paid or given directly or indirectly in connection therewith.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

On December 1, 2007, we borrowed funds from the Eastern Idaho Development Corporation (the EIDC loan). The interest rate is 7%, and the maturity date was September 1, 2015. The loan principal is $85,821 and the accrued interest is $54,633 as of June 30, 2021. This note is in default.

 

On September 25, 2009, we borrowed funds from the Pocatello Development Authority. The interest rate is 5%, and the maturity date was October 25, 2011. The loan principal is $50,000 and the accrued interest is $27,074 as of June 30, 2021. This note is in default.

 

On December 23, 2009, we borrowed funds from SICOG (EDA-#273 loan). The interest rate is 7%, and the maturity date was December 23, 2014. The loan principal is $94,414 and the accrued interest is $23,279 as of June 30, 2021. This note is in default.

 

On December 23, 2009, we borrowed funds from SICOG (MICRO I-#274 loan). The interest rate is 7%, and the maturity date was December 23, 2014. The loan principal is $23,620 and the accrued interest is $5,390 as of June 30, 2021. This note is in default.

 

On December 23, 2009, we borrowed funds from SICOG (MICRO II-#275 loan). The interest rate is 7%, and the maturity date was December 23, 2014. The loan principal is $23,610 and the accrued interest is $7,012 as of June 30, 2021. This note is in default.

 

During 2012, we issued a note payable for $1,000,000. The note had an interest rate of 10% per annum, was secured by a first lien in all of our assets, and was due on February 3, 2015. On March 6, 2018, the note was amended to extend the due date to December 31, 2018. On March 29, 2019, the maturity date of the note was extended to December 31, 2019. As of June 30, 2021, the outstanding note balance was $1,000,000, plus accrued interest of $890,281. This note is in default.

 

During 2013, we issued a note payable for $290,000 in connection with the reverse merger transaction with Broadband Network Affiliates, Inc. We have determined that no further payment of principal or interest on this note should be made because the note holder failed to perform his underlying obligations giving rise to this note. As described in Note 7, the note holder filed suit on May 21, 2019, and we remain confident that the court will decide in our favor by either voiding the note or awarding damages sufficient to offset the note value. As of June 30, 2021, the note balance outstanding was $130,000, and the accrued interest as of that date was $77,204. This note is in default.

 

On January 18, 2018, Jeremy P. Feakins & Associates, LLC, an investment entity owned by our chief executive, chief financial officer, and a director, agreed to extend the due date for repayment of a $2,265,000 note issued in 2014 to the earlier of December 31, 2018, or the date of the financial closings of our Baha Mar project (or any other project of $25 million or more), whichever occurs first. As of June 30, 2021, the note balance was $1,102,500 and the accrued interest was $796,566. This note is in default.

 

During 2014, we issued notes payable of $300,000. Accrued interest totaled $414,246 as of June 30, 2021. As of June 30, 2021, the notes are in default. We intend to repay the notes and accrued interest upon the project’s financial closing.

 

We have a $50,000 promissory note with an unaffiliated investor that was payable on April 7, 2019. The note and accrued interest can be converted into our common stock at a conversion rate of $0.75 per share at any time prior to the repayment. This conversion price is not required to adjust for the reverse stock split as per the note agreement. Accrued interest totaled $31,583 as of June 30, 2021. As of the date of this report, the note is in default.

 

 
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During the third quarter of 2017, we completed a $2,000,000 convertible promissory note private placement offering. The terms of the note are as follows: (i) interest is payable at 6% per annum; (ii) payable two years after purchase; and (iii) all principal and interest on each note automatically converts on the conversion maturity date into shares of our common stock at a conversion price of $4.00 per share, as long as the closing share price of our common stock on the trading day immediately preceding the conversion maturity date is at least $4.00, as adjusted for stock splits, stock dividends, reclassification, and the like. If the price of our shares on such date is less than $4.00 per share, the note (principal and interest) will be repaid in full. During the third quarter of 2019, $15,000 of the note was repaid. As of June 30, 2021, the outstanding balance of these notes was $65,000, plus accrued interest of $15,444. The notes are in default.

 

On November 6, 2017, we entered into an agreement and promissory note with JPF Venture Group, Inc. to loan up to $2,000,000 to us. The terms of the note are as follows: (i) interest is payable at 10% per annum; (ii) all unpaid principal and all accrued and unpaid interest is due and payable at the earliest of a resolution of the Memphis litigation (as defined therein), December 31, 2018, or when we are otherwise able to pay. As of June 30, 2021, the outstanding note balance was $543,093 and the accrued interest was $226,604. This note is in default.

 

In December 2017, we entered into a series of unsecured promissory notes and warrant purchase agreements with accredited investors. These notes accrue interest at a rate of 10% per annum payable on a quarterly basis and are not convertible into shares of our capital stock. As of June 30, 2021, the balance of the notes outstanding was $979,156 and the accrued interest was $303,877. These notes are in default.

 

During the year ended December 31, 2018, we borrowed $482,222 from L2 Capital in five separate tranches. The interest rate is 8%, and the maturity dates are three months from the date of issue. The outstanding loan balance was $1,161,136, which includes the default penalty, and the accrued interest was $711,694 as of June 30, 2021. These notes are in default.

 

On December 14, 2018, L2 Capital LLC purchased our note payable from Collier Investments, LLC. The total consideration was $371,250, including the outstanding note balance of $281,250, the accrued interest of $33,750, and liquidated damages of $56,250. There was also a default penalty of $153,123. In addition, we issued 400,000 shares of common stock to L2 Capital, LLC as commitment shares with a fair value of $21,200 in connection with the purchase of the note. We executed a convertible note with L2 Capital in the amount of $371,250 with an interest rate of 12% per annum. The maturity date of the note is December 22, 2018. The holder of the note can convert the note, or any portion of it, into shares of common stock at any time after the issuance date. The conversion price is 65% of the market price, which is defined as the lowest trading price for our common stock during the 20-trading-day period prior to the conversion date. As of June 30, 2021, the outstanding note balance was $756,305, which includes a default penalty, and the accrued interest was $584,230. This note is in default.

 

 
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ITEM 6. EXHIBITS

 

The following exhibits are filed as a part of this report:

 

Exhibit

Number*

 

 

Title of Document

 

 

Location

 

 

 

 

 

Item 31

 

Rule 13a-14(a)/15d-14(a) Certifications

 

 

31.01

 

Certification of Principal Executive and Principal Financial Officer Pursuant to Rule 13a-14

 

This filing.

 

 

 

 

 

Item 32

 

Section 1350 Certifications

 

 

32.01

 

Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

This filing.

 

 

 

 

 

Item 101**

 

Interactive Data File

 

 

101.INS

 

XBRL Instance Document

 

This filing.

101.SCH

 

XBRL Taxonomy Extension Schema

 

This filing.

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase

 

This filing.

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase

 

This filing.

101.LAB

 

XBRL Taxonomy Extension Label Linkbase

 

This filing.

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase

 

This filing.

_______________

*

All exhibits are numbered with the number preceding the decimal indicating the applicable SEC reference number in Item 601 and the number following the decimal indicating the sequence of the particular document.

**

The XBRL related information in Exhibit 101 will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and will not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as is expressly set forth by specific reference in such filing or document.

 

 
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SIGNATURE

 

Pursuant to the requirements 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.

 

 

OCEAN THERMAL ENERGY CORPORATION

 

 

 

 

 

Date: August 13, 2021

By:

/s/ Jeremy P. Feakins

 

 

 

Jeremy P. Feakins

 

 

 

Chief Executive Officer and Chief Financial Officer

 

 

 

(Principal Executive and Financial Officer)

 

 

 
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