CCTC Catalyst Crew Technologies Corporation (PK)

Notes to Financial Statements

(Unaudited)

NOTE 1: BASIS OF PRESENTATION

The accompanying unaudited interim financial statements of Clean Coal Technologies, Inc. (“Clean Coal”, the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in Clean Coal’s Annual Report on Form 10-K filed with the SEC. In the opinion of management, the accompanying unaudited interim financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial position and the results of operations for the interim period presented herein. Prior period presentation of gains on settlement of accounts payable have been reclassified to conform to the current period’s presentation. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year or for any future period. Notes to the financial statements which would substantially duplicate the disclosure contained in the audited financial statements for fiscal 2020 as reported in the Form 10K have been omitted.

Net Income (Loss) per Common Share

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

For the nine months ended September 30, 2021 and 2020, the Company realized net losses, resulting in outstanding warrants and convertible debt having an anti-dilutive effect. All potentially dilutive instruments were excluded from the calculation of diluted net loss per share as their inclusion would have been anti-dilutive.

The following table summarizes the potential shares of common stock that were excluded from the computation of diluted net loss per share for the nine months ended September 30, 2021 and 2020 as such shares would have had an anti-dilutive effect:

Recent Accounting Pronouncements

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

NOTE 2: GOING CONCERN

The accompanying financial statements have been prepared on a going concern basis of accounting which contemplates continuity of operations, realization of assets, liabilities, and commitments in the normal course of business. The accompanying financial statements do not reflect any adjustments that might result if Clean Coal is unable to continue as a going concern. Clean Coal has a working capital deficit as of September 30, 2021 and has generated recurring net losses since inception. Management believes Clean Coal will need to raise capital in order to operate over the next 12 months.

As shown in the accompanying financial statements, Clean Coal has also incurred significant losses from operations since inception. Clean Coal’s continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis and ultimately to attain profitability. Clean Coal has limited capital with which to pursue its business plan. There can be no assurance that Clean Coal’s future operations will be significant and profitable, or that Clean Coal will have sufficient resources to meet its objectives. These conditions raise substantial doubt as to Clean Coal’s ability to continue as a going concern. Management may pursue either debt or equity financing or a combination of both, in order to raise sufficient capital to meet Clean Coal’s financial requirements over the next twelve months and to fund its business plan. There is no assurance that management will be successful in raising additional funds.

NOTE 3: RESEARCH AND DEVELOPMENT

Research and development expenses include salaries, related employee expenses, facility lease expense, research expenses and consulting fees. All costs for research and development activities are expensed as incurred. In addition, the Company expenses the costs of licenses of patents and the prosecution of patents until the issuance of such patents and the commercialization of related products is reasonably assured. During the nine months ended September 30, 2021 and 2020, the Company recognized $9,879 and $86,245 of research and development costs, respectively.

NOTE 4: RELATED PARTY TRANSACTIONS

Wages and bonus payable to related parties

Accruals for salary and bonuses to officers and directors are included in accrued liabilities in the balance sheets and totaled $4,259,662 and $3,726,943 as of September 30, 2021 and December 31, 2020, respectively. As part of the separation agreement with Mr. Ponce de Leon, the Company agreed to pay him all his accrued salary within two years but agreed to pay him $200,000 by November 2015 out of revenues earned. As the Company did not earn revenue in 2015 and as of September 30, 2021 has still not earned revenue, the obligation to Mr. Ponce de Leon of $1,766,463 is currently in default and the amount includes $539,749 in accrued interest. It is the Company’s intention to pay Mr. Ponce de Leon immediately upon receiving revenue.

Convertible Debt

During the nine months ended September 30, 2021, the Company issued three convertible notes totaling $18,600. The convertible notes are secured by Company assets and the common stock of the Company, bear interest at 12% per annum, are convertible into shares of the Company’s common stock at $0.06 per share and are due three years from the dates of issuance.

As of September 30, 2021 and December 31, 2020, the Company had outstanding short-term convertible notes payable to an entity controlled by a majority shareholder of $9,669,168 and $8,950,325, net of unamortized discounts of $97,893 and $486,867, respectively and outstanding long-term convertible notes payable of $104,120 and $332,776, net of unamortized discounts of $3,543 and $86,167, respectively. The convertible notes are secured by assets and the common stock of the Company, bear interest at 12% per annum, are convertible into shares of the Company’s common stock at $0.06 per share and are due three years from the dates of issuance. Amortization expense related to debt discounts on convertible debt for the nine months ended September 30, 2021 and 2020 was $470,765 and $1,262,910, respectively.

Nonconvertible Debt

During the nine months ended September 30, 2021, the Company borrowed a total of $471,550 from an entity controlled and owned by a significant shareholder of the Company (“Related Party Note Holder”). Additionally, during September 2021, the Related Party Note Holder purchased a third-party convertible note and accrued interest for $115,000, replacing it with a new, non-convertible note. The notes are unsecured, due on demand and accrued interest at 12% per annum. As of September 30, 2021, the balance on the notes was $586,550 and the Company incurred $28,284 in accrued but unpaid interest expense.

As of September 30, 2021 and December 31, 2020, the Company had outstanding notes payable of $705,000 and $705,000, respectively, to an individual that is a significant shareholder.

As of September 30, 2021 and December 31, 2020, the Company had outstanding advances payable to an officer of the Company of $83,170 and $83,150, respectively. The advances payable are unsecured, bear no interest and are due on demand.

NOTE 5: DEBT

Notes Payable

As of September 30, 2021 and December 31, 2020, the Company had outstanding notes payable to former affiliates of the Company of $413,185 and $413,185, respectively. The notes payable are unsecured, bear no interest and are due on demand.

Convertible Debt

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

During May 2019, the Company issued a convertible note payable in the amount of $262,500, due in one year from the date of issuance, with an original issuance discount of $12,500, accrues interest at the rate of 6% per annum, is unsecured and is convertible after 180 days into shares of the Company’s common stock at a discount of 65% of the lowest trading price for the Company’s common stock during the ten trading days immediately preceding the conversion. As of September 30, 2021 and December 31, 2020, the balance on the convertible note payable was $72,159 and $48,938, respectively. The fair value of the discount conversion feature on the remaining principal balance was $40,100 as of September 30, 2021 and is included in the note principal balance. During the nine months ended September 30, 2021 and 2020, the Company recognized $0 and $4,863 in debt discount amortization expense, respectively.

During August 2019, the Company issued a convertible note payable in the amount of $157,500. The convertible note payable is due one year from the date of issuance, has an original issuance discount of $7,500, accrues interest at the rate of 6% per annum, is unsecured and is convertible after 180 days into shares of the Company’s common stock at a discount of 65% of the lowest trading price for the Company’s common stock during the ten trading days immediately preceding the conversion. As of September 30, 2021 and December 31, 2020, the balance on the convertible note payable was $259,389 and $174,168, respectively. The fair value of the discount conversion feature on the remaining principal balance was $148,052 as of September 30, 2021 and is included in the note principal balance. During the nine months ended September 30, 2021 and 2020, the Company recognized $0 and $4,459 in debt discount amortization expense, respectively.

During November 2019, the Company issued a convertible note payable in the amount of $336,000. The convertible note payable was due one year from the date of issuance, had an original issuance discount of $45,000, accrued interest at the rate of 10% per annum, was unsecured and was convertible after 180 days into shares of the Company’s common stock at a discount of 65% of the lowest trading price for the Company’s common stock during the ten trading days immediately preceding the conversion. 

During February 2021, the note holder elected to convert the remaining principal of $95,000 and accrued interest totaling $11,733 into 12,585,961 shares of the Company’s common stock. As of September 30, 2021 and December 31, 2020, the balance on the convertible note payable was $0 and $142,273, respectively. During the nine months ended September 30, 2021 and 2020, the Company recognized $0 and $33,781 in debt discount amortization expense.

During January 2020, the Company issued a convertible note payable in the amount of $138,000. The convertible note payable is due one year from the date of issuance, has an original issuance discount of $3,000, accrues interest at the rate of 8% per annum, is unsecured and is convertible after 180 days into shares of the Company’s common stock at a discount of 65% of the lowest trading price for the Company’s common stock during the ten trading days immediately preceding the conversion. During July 2020, the note became convertible at the option of the holder.

As of September 30, 2021 and December 31, 2020, the balance on the convertible note payable was $295,388 and $209,194, respectively. The fair value of the discount conversion feature on the remaining principal balance was $157,388 as of September 30, 2021. During the nine months ended September 30, 2021 and 2020, the Company recognized $222 and $2,022 in debt discount amortization expense, respectively.

During February 2020, the Company issued a convertible note payable in the amount of $440,000. The convertible note payable is due one year from the date of issuance, has an original issuance discount of $40,000, accrues interest at the rate of 5% per annum, is unsecured and is convertible after 180 days into shares of the Company’s common stock at a discount of 65% of the lowest trading price for the Company’s common stock during the ten trading days immediately preceding the conversion. During August 2020, the note became convertible at the option of the holder. During the nine months ended September 30, 2021, the note holder elected to convert principal of $346,642 into 69,124,933 shares of the Company’s common stock.

The fair value of the discount conversion feature on the remaining principal balance was $130,477 as of September 30, 2021. As of September 30, 2021 and December 31, 2020, the balance on the convertible note payable was $223,835 and $666,724, respectively. During the nine months ended September 30, 2021 and 2020, the Company recognized $5,918 and $38,959 in debt discount amortization expense, respectively.

During April 2020, the Company issued a convertible note payable in the amount of $247,500. The convertible note payable is due one year from the date of issuance, has an original issuance discount of $22,500, accrues interest at the rate of 5% per annum, is unsecured and is convertible after 180 days into shares of the Company’s common stock at a discount of 65% of the lowest trading price for the Company’s common stock during the ten trading days immediately preceding the conversion. During October 2020, the note became convertible at the option of the holder.

The fair value of the discount conversion feature on the remaining principal balance was $279,490 as of September 30, 2021. As of September 30, 2021 and December 31, 2020, the balance on the convertible note payable was $526,990 and $371,018, respectively. During the nine months ended September 30, 2021 and 2020, the Company recognized $6,411 and $10,418 in debt discount amortization expense, respectively.

During December 2020, the Company issued a convertible note payable in the amount of $112,000. The convertible note payable was due one year from the date of issuance, had an original issuance discount of $12,000, incurred debt issuance costs of $2,000, accrued interest at the rate of 5% per annum, was unsecured and convertible immediately into shares of the Company’s common stock at $0.005 per share. As a result of the conversion price being lower than the market price of the Company’s common stock on the date of issuance, the Company recognized a beneficial conversion feature of $98,000 upon issuance.

During June 2021, as discussed above, the Related Party Note Holder purchased the convertible promissory note and accrued interest for a total of $115,000 and agreed to replace it with a non-convertible promissory note. The principal and accrued interest at the time of conversion totaled $117,585, resulting in a gain of $2,585 on note conversion. As of September 30, 2021 and December 31, 2020, the balance on the convertible note payable was $0 and $112,000, respectively. During the nine months ended September 30, 2021, the Company recognized $111,901 in debt discount amortization expense.

During the nine months ended September 30, 2021 and 2020, the Company recognized $207,089 and $934,548 in fair value losses, respectively, as a result of the conversion options on the above mentioned convertible debt.

NOTE 6: STOCKHOLDERS’ EQUITY

Common Stock

During the nine months ended September 30, 2021, the Company issued a total of 81,710,894 shares of its common stock to holders of convertible notes payable for principal totaling $441,642, accrued interest totaling $11,733 and conversion fees of $600.

During March 2021, an officer and director of the Company agreed to return and retire 4,516,310 shares of common stock previously issued for common stock compensation.

The intrinsic value of the exercisable warrants as of September 30, 2021 was $0.

NOTE 7: RIGHT OF USE ASSET

In April 2018, the company secured a permanent location in Wyoming for its test facility at the Fort Union Industrial Park. The term of the lease was three years. The Company elected to renew the lease for another three years in May 2021. The renewal calls for rent of $36,000, prepaid. The $36,000 covering three years rent was paid in May 2021 and is being amortized to lease expense using the straight-line method over the three-year term of the lease. During the nine months ended September 30, 2021 and 2020, the Company recognized $9,000 and $9,000 in amortization of right of use assets, respectively.