Overview
Cool Technologies, Inc. and subsidiary, ("the Company" or "Cool Technologies" or
"CoolTech") was incorporated in the State of Nevada in July 2002. In April 2014,
CoolTech formed Ultimate Power Truck, LLC ("Ultimate Power Truck" or "UPT"), of
which the Company owns 95% and a shareholder of Cool Technologies owns 5%. Cool
Technologies was formerly known as Bibb Corporation, as Z3 Enterprises, and as
HPEV, Inc. On August 20, 2015, the Company changed its name to Cool
Technologies, Inc.
The Company's technologies are divided into two distinct but complementary
categories: mobile power generation and heat dispersion technology.
The Company has developed a mobile power generation system (MG) that enables
work trucks to generate electric power by running an in-chassis generator. The
MG system can be retrofit onto new and existing American trucks. CoolTech
intends to sell the mobile electric power system to government, commercial and
fleet vehicle owners. Sales are expected to occur through the direct efforts of
the Company, its sales agents and its joint venture partners. CoolTech may also
license the MG system as well.
The markets targeted include consumer, agricultural, industrial, military and
emergency responders, both in the U.S. and worldwide.
CoolTech has also developed heat dispersion technologies based on proprietary
composite heat structures and heat pipe architecture in various product
platforms such as electric motors, pumps, turbines, bearings and vehicle
components. In preparation, Cool Technologies filed for and received a trademark
for Totally Enclosed Heat Pipe Cooled: TEHPC.
When a generator is enhanced by CoolTech's patented thermal technologies, it
should be able to output more power than any other generator of its size on the
market. That's because third party testing has demonstrated that the cooling
provided by the thermal technologies can help increase the efficiency of
electric motors.
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Furthermore, management believes that the technologies will increase the
lifespan as well as help meet regulatory emissions standards for electric motors
and other heat producing equipment and components. The simplicity of the heat
pipe architecture as well as the fact that it provides effective new
applications for existing manufacturing processes should enhance the cost
structure in several large industries including motor/generator and engine
manufacturing.
As of September 30, 2020, we have seven US patents, one Canadian patent, two
granted patents (1 Mexican, 1 Canadian) and two pending applications (1 in the
US, 1 in Brazil) covering composite heat structures, motors, and related
structures, heat pipe architecture, and applications (commonly referred to as
"thermal" or "heat dispersion technology"). We also have one Patent Cooperation
Treaty ("PCT") application pending that covers integrated electrical power
generation methods and systems.
The Company intends to commercialize its patents by integrating the thermal
technologies and applications with Original Equipment Manufacturer (OEM)
partners and by licensing them to electric motor, generator, pump and vehicle
component (brake, resistor, caliper) manufacturers.
We believe the benefits of our mobile power generation systems are quickly
realized once potential customers see it in operation. Public demonstrations of
the MG systems began in April 2017. An inspection and performance demonstration
for Mexican government officials and business leaders occurred in May 2018.
Feedback from initial viewers resulted in more government officials and fruit
growers coming to see the MG power equipment and to learn about the water
purification options in March 2019. Even more officials and growers followed --
flying to St. Louis for a review in May 2019.
We generated our first Mobile Generation order during the quarter ended June 30,
2014 and received a partial deposit in advance of completing the sale. On June
9, 2017, the Company received a purchase order for 10 MG systems from Craftsmen
Industries. As Craftsmen builds custom vehicles designed to the individual
specifications of their customers whose businesses and technical requirements
vary widely, it is impossible to estimate when the order will be fulfilled.
In November 2017, the Company received a purchase commitment for 234 MG systems
from a Mexican Producers' Union. That was followed by a purchase commitment for
24 to 50 MG units from a second Mexican Producers' Union in December 2017. On
April 9, 2018, the first Mexican Producers' Union executed a purchase order with
the Company for 10 Ford F350s with MG80 kVA systems installed. On May 7, 2019,
Turkish technology company Belirti Teknoloji, A.S. delivered a purchase order
for six hundred MG80, MG125 and MG200 Mobile Generation systems. As of the
September 30, 2020, the Company does not have the funds available to fulfill the
orders.
Craftsmen Industries was selected to produce the first systems due to its
engineering capabilities and extensive facilities. In January 2019, it began
production on the initial vehicles and completed an initial production run
vehicle two months later.
We have not generated any revenues to date. Consequently, there can be no
assurances that the Company will be able to generate new orders nor fulfill the
existing ones nor address all the requirements of all the interested parties.
Management is pursuing various financing alternatives, based upon a third-party
assessment of the historically demonstrated or contractually committed
profit-earning capacities of our IP. We see this as the best path forward for
non-dilutive funding.
If funding is received, it will be used to support completion of the initial
phases of our business plan, which is to license our thermal technologies and
applications; to license or sell a mobile electric power system; and to license
our submersible motor dry pit technologies and/or to bring to market our
technologies and applications through key distribution and joint venture
partners. As of the filing date, it is uncertain whether COVID-19 will have a
significant impact on production and distribution of Company products.
The occurrence of an uncontrollable event such as the COVID19 pandemic has
negatively affected our operations. A pandemic typically results in social
distancing, travel bans and quarantine. This has limited access to our
facilities, customers, management, support staff and professional advisors.
These, in turn, have impacted our operations and financial condition. It may
also impact demand for our products and may continue to hamper our efforts to
provide our investors with timely information and comply with our filing
obligations with the Securities and Exchange Commission.
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Recent Developments
Aon Risk Services Central, Inc and Lee and Hayes, PLLC
On January 18, 2018, the Company entered into an agreement with Aon Risk
Services Central, Inc. and Lee and Hayes, PLLC, through its operating unit,
601West, which provides intellectual property ("IP") analytics, to assess the
value of the Company's IP. As set forth in the agreement, the assessment will be
founded on historically demonstrated or contractually committed profit-earning
capacities of the IP and may be used to obtain financing, including but not
limited to, non-dilutive financing. The Company is using the valuation to obtain
non-dilutive funding.
Live MG80 Demonstration in Fort Collins, Colorado
On May 4, 2018, nine representatives from Mexico's farming, banking, and
government sectors flew to Fort Collins, Colorado for a live demonstration of
CoolTech's generator-equipped truck. The demonstration showcased the
capabilities and ease of operation of the system. The Company demonstrated how
an operator is able to control the generator from the comfort and safety of the
truck's cab using a Panasonic Toughpad. The Company also used the electricity
from the truck to power a screw compressor, an industrial fan, and an industrial
load bank. Additional capabilities, such as purifying water and using batteries
and solar power to make operations more sustainable and environmentally friendly
were discussed with the attendees.
CoolTech plans to put the generator-equipped truck into production as soon as
final funding is secured. Based on initial feedback and subsequent meetings and
conversations with other attendees, the Company expects the demonstration will
lead to new orders.
Unveiling of Initial Production Run Vehicle
On March 27, 2019 the Company unveiled the initial production run of its Mobile
Generation (MG) work trucks for inspection by an audience of agricultural and
community leaders from Latin America at Craftsmen Industries.
The itinerary for the showcase event included a tour of the St Louis
manufacturing facility and inspection of the first production run MG vehicle in
operation as it powered a variety of equipment.
The purpose of the viewing was not only to show the truck's capabilities, but to
get feedback from the attendees and learn what are their specific needs and
applications as well as what features and functions are important to them.
Mexican Government
On April 25, 2019, the CEO of the Company flew to Mexico City to meet with the
Secretaries of Energy, Agriculture and the Environment for the new
administration as well as federal deputies and representatives.
On May 13, 2019, government officials and fruit growers were at Craftsmen
Industries in St. Louis for a review of a first run MG80 production vehicle and
water purification/desalination options.
Introduction of new options
During the past quarter, the Company has introduced new options which include an
MG System that generates up to 200 kVA of electric power, water purification and
desalination systems.
The truck-mounted water purification and desalination units can produce from
2,800 to 10,000 gallons of fresh water every day. Assuming the average person
needs 2 liters per day, 10,000 gallons is enough for 18,927 people.
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A 30 kVA MG system could power any size unit as well as the pumps to deliver the
water or five units at once which would conceivably be enough to keep the
population of Santa Barbara hydrated. It could even tow a 1,250 gallon water
tanker, if needed.
The purification and desalinization units feature fully automated controls and
monitoring. When combined with the optional telematics offered in the vehicles,
each unit could be remotely controlled and monitored from distant locations.
Belirti Teknoloji
On May 7, 2019, the Company entered into a joint venture agreement ("JV") with
Turkish technology company Belirti Teknoloji, A.S. ("BelirtiTech"). To launch
the business, BelirtiTech awarded Cool Technologies a purchase order for up to
$42 million USD for the purchase of several different models of its Mobile
Generation kits. The purchase order will supply the JV with its initial
inventory for resale into the Middle East and some African nations. The Company
is actively working with the customer's bank in addition to insurance companies
and other financial entities to facilitate the financing of the orders. As of
the date of this filing, the funds to fulfill the orders are not in place.
The initial purchase order is for six hundred MG80, MG125 and MG200 Mobile
Generation systems. The MG systems will be integrated into the end customer's
choice of vehicles.
The order also includes an additional MG80 installed in a Ford F-450 with the
2,500 gallon per day mobile water desalinization option included.
KeyOptions
On May 30, 2019, the Company entered into a joint venture agreement ("JV") with
KeyOptions Pty Ltd., a privately held technology and security provider based in
Victoria, Australia.
KeyOptions develops and markets products for governments, defense contractors
and other commercial applications to counter security and cyber threats. The
Company will provide a license for the JV to market and sell CoolTech's entire
product platform in Australia and neighboring countries in Southeast Asia.
New Strategic Alliance:
On December 16, 2019, the Company signed a cross marketing and licensing
agreement with VerdeWatts, LLC., an energy generation and storage company
encompassing everything from mobile solar power generation systems to large
scale biogas turbine installations. Pursuant to the agreement VerdeWatts and the
Company each granted the other a royalty free non-exclusive license to certain
patents which license is subject to certain future negotiation.
Like CoolTech's Mobile Generation systems ("MG"), VerdeWatts' products are
scalable and offer the ability to bring power nearly anywhere it is needed.
Their proprietary Smart Solar Power Generation Units and energy storage systems
combine to deliver sustainable power long after the sun has set.
The agreement with VerdeWatts also included a cross marketing and royalty free
non-exclusive licensing agreement with FirmGreen, Inc., a water treatment
facilities developer that works closely with VerdeWatts to create a suite of
synergistic products that address significant needs in the global marketplace.
FirmGreen specializes in water purification and desalination technologies. Their
mobile, solar and container applications feature 6 levels of water purification
for unrivaled drinkability. Pursuant to the agreement FirmGreen and the Company
each granted the other a royalty free non-exclusive license to certain patents
which license is subject to certain future negotiation.
CoolTech's MG platform makes the companies' product offering complete with
mobile power generation. It provides the capability to power everything from
irrigation for farms and water purification for rural areas to electric vehicle
charging and fast charging in the urban ones.
Consider the solar-powered generator system with a built-in water purification
unit that makes seawater desalination sustainable. The system pumps and purifies
up to 3,000 gallons per day and interfaces with CoolTech's MG system for 24-hour
operation. The solar panels collapse and fold together, so the entire system
fits easily in the bed of a work truck. It can be set up and operate anywhere a
four-wheel drive vehicle can reach. All of these systems are patent protected
and cross licensed to each of the three companies.
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FirmGreen and VerdeWatts have a global presence with projects on 3 continents.
The largest encompasses the installation of 14 natural gas generators to produce
over 60 megawatts (MW) of power. The generators will be integrated with 50
megawatt hours of battery storage and another 6 MW of solar to ensure a
consistent flow of power. VerdeWatts intend to replace most of the legacy
on-site generators with CoolTech's MG systems, however the Company has not
received any orders and there cannot be any assurance that any orders will be
placed.
Together the companies can create an energy or utility ecosystem that can enable
less developed countries to leapfrog non-existent, inadequate or failing
infrastructure to deliver reliable power and water quickly, sustainably and cost
effectively to their citizens, agriculture and other businesses. The scale and
impact can reach from the individual farms and villages to cities and regions.
In fact, by combining their respective technologies: energy generation, energy
storage and load management controls into a single suite of products, the
companies create what is called a "microgrid". Varying combinations of energy
sources such as solar, wind, biogas and MG systems both backup and supplement
one another to provide consistent, uninterrupted primary power even during
severe weather or other emergency situations.
The synergies between the companies extend beyond water purification and power
generation. VerdeWatts' wind and gas turbines and generators which produce
electric power can all be improved by CoolTech's thermal reduction technologies.
New Sales Agent:
In early December 2019, the Company entered into an agreement with Gaia Energy
of Gdansk, Poland to act as an independent agent for the Company by developing
markets in Eastern Europe, the Middle East and Africa. The agreement describes
the agent's duties as "generating revenue, and investment funding, for the
Company from various organizations including investment funds, end-users,
channel partners, integrators, and OEMs."
Team members of Gaia Energy include executives with more than twenty-five years'
experience with Panasonic, Ford Motor Company, Electronic Data Systems and the
US Air Force in the fields of advanced technologies and an African diplomat with
a thirty-year background working with and for diplomatic missions,
non-governmental organizations and international disasters and aid management
services.
The diplomat introduced CoolTech products at a recent African technical summit
attended by representatives from 54 countries.
Request for Collaboration Sent to US Government Officials
On December 11, 2019, letters signed by 13 government officials and Congressmen
in Mexico were mailed to their counterparts in the US, specifically Governor
Gavin Newsom, Secretary Rick Perry, Secretary Wilbur Ross, Senator Mitch
McConnell and Speaker of the House Nancy Pelosi.
The letters were a request for collaborative support between the two countries
to accelerate CoolTech's product deployment into Mexico to help solve urgent
rural power and water purification problems that are hurting rural communities.
Those problems include irregular and faulty power in rural areas which hinders
crop irrigation and water pollution which affects crops farmed for sale to the
US.
The letters also detail the Mexican officials' satisfaction with CoolTech's
solutions and management team and that they have met with the Company on several
occasions for product demonstrations as well as strategic and technical advice.
They highlight the benefits of CoolTech products, how they could quickly and
efficiently address the problems noted, and how they expect them to become a
viable part of the country's infrastructure.
Export Import Bank of the United States
With the help of VerdeWatts and FirmGreen, CoolTech has initiated a relationship
with the Export-Import Bank of the United States (EXIM), a U.S. government
agency whose sole mission is to support U.S. exports. The bank fulfills its
mission by offering very cost-effective financing for international customers
and project developers to purchase U.S.-made services and purchase or lease
U.S.-made goods.
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To that end, the two companies applied to finance the Mexican projects
referenced above. CoolTech also sent product information for due diligence
review by the technical team at EXIM bank. Subsequently, CoolTech has received a
Letter of Interest from EXIM, however, there cannot be any assurance that EXIM
will provide any funding to the Company.
Increase in Number of Authorized Shares
On August 10, 2020, the Nevada Secretary of State accepted and filed the
Company's Certificate of Amendment to the Company's Articles of Incorporation.
The filing amends Article II of the Articles of Incorporation by increasing the
number of authorized shares of common stock from 500,000,000 to 1,000,000,000.
Results of Operations
The following table sets forth, for the periods indicated, condensed
consolidated statements of operations data. The table and the discussion below
should be read in conjunction with the accompanying condensed consolidated
financial statements and the notes thereto, appearing elsewhere in this report.
Three months ended September 30,
2020 2019 Change %
Revenues $ -- $ -- N/A N/A
Operating expenses
Payroll and related
expenses 102,484 106,004 (3,520 ) -3.3 %
Consulting 60,000 66,500 (6,500 ) -9.8 %
Professional fees 83,975 37,100 46,875 126.3 %
Research and
development 3,797 10,000 (6,203 ) -62.0 %
General and
administrative 17,256 48,945 (31,689 ) -64.7 %
Total operating
expenses 267,512 268,549 (1,037 ) -0.4 %
Interest expense (301,182 ) (518,271 ) 217,089 -41.9 %
Change in fair value
of derivative
liability 127,186 1,039,330 (912,144 ) -87.8 %
(Loss), gain on
extinguishment of debt -- -- N/A N/A
Net loss (441,508 ) 252,510 (694,018 ) -274.8 %
Less: Noncontrolling
interest (190 ) (123 ) (67 ) 54.5 %
Net loss to )
shareholders $ (441,318 ) $ 252,387 $ (693,705 -274.9 %
Nine months ended September 30,
2020 2019 Change %
Revenues $ -- $ -- N/A N/A
Operating expenses
Payroll and related
expenses 268,642 369,258 (100,616 ) -27.2 %
Consulting 173,000 245,207 (72,207 ) -29.4 %
Professional fees 183,084 163,569 19,515 11.9 %
Research and development 14,105 57,102 (42,997 ) -75.3 %
General and administrative 30,709 198,643 (167,934 ) -84.5 %
Total operating expenses 669,540 1,033,779 (364,239 ) -35.2 %
Interest expense, net (1,190,582 ) (1,588,457 ) 397,875 -25.0 %
Change in fair value of
derivative liability (46,679 ) 470,710 (517,389 ) -109.9 %
Gain on extinguishment of
debt -- 208,325 (208,325 ) -100.0 %
Net loss (1,906,801 ) (1,943,201 ) 36,400 -1.9 %
Less: Noncontrolling
interest (715 ) (1,159 ) 444 -38.3 %
Net loss to shareholders $ (1,906,086 ) $ (1,942,042 ) $ 35,956 -1.9 %
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Revenues
During the three and nine months ended September 30, 2020, and since inception,
the Company has not generated any revenues. Cool Technologies generated its
first Mobile Generation order during the quarter ended June 30, 2014 and
received a partial deposit in advance of completing the sale with companies
controlled by the individual who is a 5% owner of UPT and a shareholder of the
Company. The order is in the production queue along with other existing orders.
Operating Expenses
Payroll and related expenses decreased during the three months ended September
30 from $106,004 in 2019 to $102,484 in 2020 and during the nine months ended
September 30 from $369,258 in 2019 to $268,642 in 2020 due to the elimination of
Mark Hodowanec's salary after he resigned in July 2019 and due to the fact that
the remaining officers received no salary during the first quarter and only one
month's salary in the second quarter.
Consulting expenses decreased during the three months ended September 30 from
$66,500 in 2019 to $60,000 in 2020 and during the nine months ended September 30
from $245,207 in 2019 to $173,000 in 2020. This was due primarily to the reduced
workload and payments for related-party consultants and general consultants. In
both cases the decreases reflected the Company's need to conserve cash.
Professional fees increased during the three months ended September 30 from
$37,100 in 2019 to $83,975 in 2020 and increased during the nine months ended
September 30 from $163,569 in 2019 to $183,084 in 2020. The increase in
professional fees during the three and nine months ended September 30 was due
primarily to fees to retain legal representation to defend the Company against
the eviction complaint.
Research and development expenses decreased during the three months ended
September 30 from $10,000 in 2019 to $3,797 in 2020 due to the completion of the
design of the MG system and the Company's focus on its commercialization. During
the nine months ended September 30, research and development expenses decreased
from $57,102 in 2019 to $14,105 in 2020 due again to the Company moving from the
development of its products to the commercialization of its products.
General and administrative expenses decreased during the three months ended
September 30 from $48,945 in 2019 to $17,256 in 2020 due to limited funds.
During the nine months ended September 30, general and administrative expense
decreased from $198,643 in 2019 to $30,709 in 2020 also due to limited funds.
Other Income and Expense
Interest expense decreased during the three months ended September 30 from
$518,271 in 2019 to $301,182 in 2020 due to a number of vendors adding
previously unrecognized interest to their bills. Interest expense decreased
during the nine months ended September 30 from $1,588,457 in 2019 to $1,190,582
in 2020 primarily due to accelerated debt discount amortization upon the
conversion of convertible notes.
Net Loss and Noncontrolling interest
Since Cool Technologies has incurred losses since inception, it has not recorded
any income tax expense or benefit. Accordingly, the Company's net loss is driven
by operating and other expenses. Noncontrolling interest represents the 5%
third-party ownership in UPT, which is subtracted to calculate net loss to
shareholders.
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Liquidity and Capital Resources
The Company has historically met its liquidity requirements primarily through
the public sale and private placement of equity securities, debt financing, and
exchanging common stock warrants and options for professional and consulting
services. On September 30, 2020, CoolTech had cash of $8,950.
Working capital is the amount by which current assets exceed current
liabilities. The Company had negative working capital of $7,389,677 and
$6,821,643, respectively, on September 30, 2020 and December 31, 2019. The
decrease in working capital was due to the large reduction in cash combined with
increases in accounts payable and accrued liabilities - related party that more
than offset a small increase in the value of the inventory and reductions in
derivative liability and current debt. To that end, the Company owes
approximately $552,501 for convertible notes and it owes another $2,650,149 in
notes payable. Based on its current forecast and budget, management believes
that its cash resources will not be sufficient to fund its operations through
the end of the year. Unless the Company can generate sufficient revenue from the
execution of the Company's business plan, it will need to obtain additional
capital to continue to fund the Company's operations. There is no assurance that
capital in any form would be available to us, and if available, on terms and
conditions that are acceptable. If the Company is unable to obtain sufficient
funds, it may be forced to curtail and/or cease operations.
May Convertible Note -- On May 13, 2019, the Company entered into a convertible
note agreement. It received $150,000 after an original issue discount of $15,000
in lieu of interest, for a total amount of $165,000 due on December 13, 2019.
After 180 days, at the holder's option, a portion or all of the unpaid principal
and interest may be converted into shares of common stock at a 29% discount to
the lowest VWAP during the 10 trading days preceding the conversion date. In the
event of default, the outstanding balance will increase by 25% and a daily
penalty of $100 will accrue until the default is remedied.
The note also included a clause which stated that if the effective conversion
price is less than $0.01 at any time, the principal amount of the note shall
increase by $10,000 and that the conversion price will be permanently redefined
to equal 40% of the lowest traded price that occurred during the 15 consecutive
trading days immediately preceding the date on which the note holder elects to
convert all or part of the note. On December 20, 2019, the effective conversion
price reached sub-penny threshold. The principal amount and the subsequent
conversion price were adjusted as noted above. Therefore, as of December 31,
2019, the convertible balance remaining totaled $179,950.
On January 7, 2020, Cool Technologies issued 5,000,000 shares of common stock to
LGH Investments, LLC upon partial conversion of $17,920 on convertible debt of
$179,950. On January 21, 2020, Cool Technologies issued 10,000,000 shares of
common stock to LGH Investments, LLC upon partial conversion of $22,400 on
convertible debt of $179,950. On February 24, 2020, Cool Technologies issued
15,000,000 shares of common stock to LGH Investments, LLC upon partial
conversion of $17,400 on convertible debt of $179,630. On March 5, 2020, Cool
Technologies issued 6,500,000 shares of common stock to LGH Investments, LLC
upon partial conversion of $8,840 on convertible debt of $179,630. On March 24,
2020, Cool Technologies issued 8,500,000 shares of common stock to LGH
Investments, LLC upon partial conversion of $23,120 on convertible debt of
$179,950. As of September 30, 2020, the convertible balance remaining totaled
approximately $21,270.
June Convertible Note -- On June 6, 2019, the Company entered into a convertible
note agreement. It received $130,000 with an original issue discount of $13,000
and an annual interest rate of 8%. The principal ($143,000) and interest will be
due on June 6, 2020. After 180 days, at the holder's option, a portion or all of
the unpaid principal and interest may be converted into shares of common stock
at a 29% discount to the lowest VWAP during the 10 trading days preceding the
conversion date. In the event of default, the interest rate will be 24% per
annum, require the Company to pay the product of the then outstanding principal
amount, plus accrued interest and default interest, divided by the conversion
price multiplied by the highest price at which the common stock traded at any
time between the issuance date and the date of the event of default.
On December 19, 2019, Cool Technologies issued 1,128,687 shares of common stock
to the holder upon partial conversion of $10,418 in debt. On December 24, 2019,
the Company issued 2,674,064 shares of common stock to the holder upon partial
conversion of $20,884 in debt.
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On January 13, 2020, Cool Technologies issued 4,220,881 shares of common stock
to Eagle Equities, LLC upon partial conversion of $20,978 on convertible debt of
$143,300. On January 28, 2020, Cool Technologies issued 6,173,709 shares of
common stock to Eagles Equities, LLC upon partial conversion of $21,040 on
convertible debt of $143,300. On February 3, 2020, Cool Technologies issued
9,573,426 shares of common stock to Eagle Equities, LLC upon partial conversion
of $21,071 on convertible debt of $143,300. On February 13, 2020, Cool
Technologies issued 11,992,022 shares of common stock to Eagle Equities, LLC
upon partial conversion of $26,394 on convertible debt of $143,300. On March 2,
2020, Cool Technologies issued 9,820,030 shares of common stock to Eagle
Equities, LLC upon partial conversion of $26,494 on convertible debt of
$143,300. On June 7, 2020, the Company defaulted on the Note. As a result, the
principal increases by 10% and a default interest rate of 24% per annum was
applied. As of September 30, 2020, the balance remaining totals approximately
$3,540.
July Convertible Note - On July 3, 2019, the Company entered into a convertible
note agreement. It received $150,000 with an original issue discount of $15,300
in lieu of interest, for a total amount of $168,300 plus 8% annual interest due
on July 3, 2020. After 180 days, at the holder's option, a portion or all of the
unpaid principal and interest may be converted into shares of CoolTech's common
stock at a 29% discount to the lowest VWAP during the 10 trading days preceding
the conversion date. In the event of default, the interest rate will be 22% per
annum, require the Company to redeem all or any portion of the note at a premium
of 150%.
On January 3, 2020, Cool Technologies issued 2,238,806 shares of common stock to
PowerUp Lending Group Ltd. upon partial conversion of $15,000 on convertible
debt of $168,300. On January 8, 2020, Cool Technologies issued 3,174,603 shares
of common stock to PowerUp Lending Group Ltd. upon partial conversion of $20,000
on convertible debt of $168,300. On January 14, 2020, Cool Technologies issued
3,921,569 shares of common stock to PowerUp Lending Group, Ltd. upon partial
conversion of $20,000 on convertible debt of $168,300. On January 16, 2020, Cool
Technologies issued 4,444,444 shares of common stock to PowerUp Lending Group,
Ltd. upon partial conversion of $20,000 on convertible debt of $168,300. On
January 21, 2020, Cool Technologies issued 5,111,111 shares of common stock to
PowerUp Lending Group, Ltd. upon partial conversion of $23,000 on convertible
debt of $168,300. On January 30, 2020, Cool Technologies issued 7,142,857 shares
of common stock to PowerUp Lending Group, Ltd. upon partial conversion of
$20,000 on convertible debt of $168,300. On February 3, 2020, Cool Technologies
wired $72,000 to PowerUp Lending Group, Ltd. and the note was retired.
August Convertible Note -- On August 28, 2019, the Company entered into a
convertible note agreement. It received $115,000 with an original issue discount
of $11,500 and an annual interest rate of 8%. The principal ($126,500) and
interest will be due on August 28, 2020. After 180 days, at the holder's option,
a portion or all of the unpaid principal and interest may be converted into
shares of common stock at a 29% discount to the lowest VWAP during the 10
trading days preceding the conversion date. In the event of default, the
interest rate will be 24% per annum or the highest rate of interest permitted by
law.
On March 10, 2020, Cool Technologies issued 10,282,003 shares of common stock to
Eagle Equities, LLC upon partial conversion of $40,151 on convertible debt of
$126,500. On May 5, 2020, the Company issued 4,460,094 shares of common stock
upon partial conversion of $31,667. On June 5, 2020, the Company issued
3,325,335 shares of common stock upon partial conversion of $25,000. On June 15,
2020, the Company issued 3,924,883 shares of common stock upon partial
conversion $23,408. On June 30, 2020, the Company issued 2,067,880 shares of
common stock upon final conversion of $11,746 and the note was retired.
October Convertible Note -- On October 3, 2019, the Company entered into a
convertible note agreement. It issued 350,000 inducement shares of restricted
common stock and received $115,000 with an original issue discount of $11,500
and an annual interest rate of 8%. The principal ($126,500) and interest will be
due on October 2, 2020. After 180 days, at the holder's option, a portion or all
the unpaid principal and interest may be converted into shares of common stock
at a 29% discount to the lowest closing price during the 10 trading days
preceding the conversion date. In the event of default, the interest rate will
be 24% per annum or the highest rate of interest permitted by law. As of
September 30, 2020, the remaining balance totaled approximately $126,500.
November Convertible Note -- On November 9, 2019, the Company entered into a
convertible note agreement. It received $126,000 with an original issue discount
of $13,000 and an annual interest rate of 8%. The principal ($141,000) and
interest will be due on November 6, 2020. After 180 days, at the holder's
option, a portion or all the unpaid principal and interest may be converted into
shares of common stock at a 29% discount to the lowest closing price during the
10 trading days preceding the conversion date. In the event of default, the
interest rate will be 24% per annum or the highest rate of interest permitted by
law. On May 8, 2020, Cool Technologies issued 2,352,941 shares of common stock
upon partial conversion of $20,000. On May 14, 2020, the noteholder sold the
convertible note to LGH Investments, LLC for $162,700. All terms and conditions
remained the same. As of September 30, 2020, the remaining balance totaled
approximately $162,700.
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December Convertible Note -- On December 5, 2019, the Company entered into a
convertible note agreement. It received $103,000 with an original issue discount
of $6,000 and an annual interest rate of 8%. The principal ($109,000) and
interest will be due on December 5, 2020. After 180 days, at the holder's
option, a portion or all of the unpaid principal and interest may be converted
into shares of common stock at a 29% discount to the lowest Volume Weighted
Average Price (VWAP) during the 10 trading days preceding the conversion date.
In the event of default, the interest rate will be 18% per annum or the highest
rate of interest permitted by law. On May 6, 2020, the noteholder sold the
convertible note to LGH Investments, LLC for $144,313. All terms and conditions
remained the same. As of September 30, 2020, the remaining balance totaled
approximately $144,313.
January Convertible Note -- On January 30, 2020, the Company entered into a
convertible note agreement with an accredited investor. It received $36,000
after an original issue discount of $4,000 in lieu of interest, for a total
amount of $40,000 due on July 30, 2020. After 180 days, at the holder's option,
a portion or all of the unpaid principal and interest may be converted into
shares of common stock at a 29% discount to the lowest VWAP during the 10
trading days preceding the conversion date. In the event of default, the
outstanding balance will increase by 25% and a daily penalty of $100 will accrue
until the default is remedied. As of September 30, 2020, the remaining balance
totaled $40,000.
January Promissory Note -- On January 31, 2020, the Company entered into a
Promissory Note Agreement with an accredited investor. It received $36,000 in
financing and promised to pay the principal amount together with simple interest
of 3% per annum. Furthermore, the Company issued cashless warrants to purchase
4,000,000 shares of common stock at an exercise price of $0.005. The warrants
expire after five years.
May Government Loan -- On May 4, 2020, the Company received loan proceeds of
$52,612 (the "PPP Loan") under the Paycheck Protection Program ("PPP" under the
Coronavirus Aid, Relief and Economic Security Act).
The PPP Loan is evidenced by a promissory note (the "Note"), between the Company
and Small Business Administration (the "Lender"). The Note has a two-year term,
bears interest at the rate of 1.00% per annum, and may be prepaid at any time
without payment of any premium. No collateral or guarantees were provided in
connection with the PPP Notes. No payments of principal or interest are due
during the six-month period beginning on the date of the Note (the "Deferral
Period").
The principal and accrued interest under the Note is forgivable after eight
weeks if the Company uses the PPP Loan proceeds for eligible purposes, including
payroll, benefits, rent and utilities, and otherwise complies with PPP
requirements. In order to obtain forgiveness of the PPP Loan, the Company must
submit a request and provide satisfactory documentation regarding its compliance
with applicable requirements. The Company must repay any unforgiven principal
amount of the Note, with interest, on a monthly basis following the Deferral
Period. The Company intends to use the proceeds of the PPP Loan for eligible
purposes and to pursue forgiveness, although the Company may take action that
could cause some or all of the PPP Loan to become ineligible for forgiveness. No
assurance can be provided that forgiveness for all or any portion of the PPP
Loan will be obtained.
The Note contains customary events of default relating to, among other things,
payment defaults and breaches of representations, warranties or covenants. The
occurrence of an event of default may result in the repayment of all amounts
outstanding, collection of all amounts owing from the Company, or filing suit
and obtaining judgment against the Company.
June Promissory Note -- On June 29, 2020, the Company entered into a Promissory
Note Agreement with an accredited investor. It received $85,000 in financing and
promised to pay the principal amount together with interest of $10,000 by July
29, 2020. As additional compensation, the investor received cashless warrants to
purchase 1,000,000 shares of common stock at an exercise price of $0.05. The
warrants expire after five years. In the event of a default, the investor may,
upon written notice to the Company, declare all unpaid principal and interest
immediately due and payable. As of the filing date, the company has not received
a notice of default.
September Convertible Note -- On September 15, 2020, the Company signed a
promissory note agreement with an accredited investor. It issued 1,000,000
inducement shares of restricted common stock and received $60,000 after an
original issue discount of $6,000. The total amount of $66,000 will be due on
April 15, 2021. After 180 days, at the holder's option, a portion or all of the
unpaid principal and interest may be converted into shares of common stock at a
29% discount to the lowest VWAP during the 10 trading days preceding the
conversion date. In the event of default, the outstanding balance will increase
by 25% and a daily penalty of $100 will accrue until the default is remedied. As
of September 30, 2020, the remaining balance totaled $66,000.
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Off Balance Sheet Arrangements
Currently, the Company has no off-balance sheet arrangements.
Cash Flows
Cash flows from operating, investing and financing activities were as follows:
Nine months ended September 30,
2020 2019
Net cash from operating activities $ (310,597 ) $ (1,137,416 )
Net cash from investing activities
(20,413 ) (49,090 )
Net cash from financing activities 324,654 1,162,274
Net cash from operating activities increased due to reductions in net loss,
change in fair value and derivative liability, amortization of debt discount,
and inventory as well as the elimination of the gain on extinguishment of debt.
Together they combined to overwhelm the comparatively minor increases in prepaid
assets, accounts payable and accrued liabilities - related party. Cash provided
by financing activities included debt borrowings of $384,800 during 2020 which
was a significant reduction from the debt borrowings of $1,674,500 during the
nine months of 2019. Payments on debt during the first nine months of 2020
consisted of $60,146 which was used to pay off the holder of a convertible note
and to make payments on truck loans.
The Company's capital requirements for the next 12 months will consist of $3.4
million with anticipated expenses of $1.4 million for salaries, public company
filings, and consultants and professional fees. An additional $2.0 million in
working capital is expected to be needed for inventory and related costs for
production of the mobile power generation systems as well as development and
commercialization of the thermal dispersion technology applications.
Management believes the Company's funds are insufficient to provide for its
projected needs for operations for the next 12 months. The Company is currently
negotiating additional non-dilutive funding to support product development or
for other purposes. In the event that the negotiations fail, the Company may
have to rely on equity or debt financing that may involve substantial dilution
to our then existing stockholders. If it is unable to close additional equity
financing, the Company may have to cease operations.
Going Concern
The Company has incurred net losses of $55,013,526 since inception and have not
fully commenced operations, raising substantial doubt about its ability to
continue as a going concern. Management believes that the Company's ability to
continue as a going concern is dependent on its ability to raise capital,
generate revenue, achieve profitable operations and repay its obligations when
they come due. As of September 30, 2020, the Company has $8,950 in cash and it
owes $563,150 and $2,639,500 for convertible and promissory notes, respectively.
The Company is pursuing various financing alternatives to address the payment of
outstanding debt and to support the sales, component acquisition and assembly of
our mobile power generation systems as well as the completion of the secondary
elements of our business plan: to license its thermal technologies and
applications, including submersible dry-pit applications. There can be no
assurance, however, that the Company will obtain adequate funding or that it
will be successful in accomplishing any of our objectives. Consequently, the
Company may not be able to continue as an operating company.
Critical Accounting Estimates
The condensed consolidated financial statements and the accompanying notes have
been prepared in accordance with U.S. GAAP. The preparation of these financial
statements requires management to make estimates, judgments and assumptions that
affect reported amounts of assets, liabilities, and expenses. Cool Technologies
continually evaluates the accounting policies and estimates used to prepare the
condensed consolidated financial statements. The estimates are based on
historical experience and assumptions believed to be reasonable under current
facts and circumstances. Actual amounts and results could differ from these
estimates made by management. Certain accounting policies that require
significant management estimates and are deemed critical to the results of
operations and financial position are discussed in the Annual Report on Form
10-K for the year ended December 31, 2019 in "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations."
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