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 (eMGen) that enables
work trucks to generate electric power by running an in-chassis generator. The
eMGen system can be retrofitted onto new and existing global truck platforms.
Optional applications include water purification and desalination as well as
electric vehicle charging. CoolTech intends to market and sell the mobile power
generation systems to government, commercial and fleet vehicle owners as well as
original equipment manufacturers and individual users. 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 eMGen 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, CoolTech has applied for trademarks for a brand name
for its mobile power generation system and for one of its technologies and its
acronym. Cool Technologies currently owns two trademarks: eMGen and TEHPC
(Totally Enclosed Heat Pipe Cooled).
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.
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, 2022, we have seven US patents, two Canadian patents, one
Mexican patent, one allowed Brazilian patent and one pending US patent
application covering 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 eMGen 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 eMGen 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 eMGen 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.
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In November 2017, the Company received a purchase commitment for 234 eMGen
systems from a Mexican Producers' Union. That was followed by a purchase
commitment for 24 to 50 eMGen 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 eMGen 80 kVA systems
installed. On May 7, 2019, Turkish technology company Belirti Teknoloji, A.S.
delivered a purchase order for six hundred eMGen 80, eMGen 125 and eMGen 200
Mobile Generation systems.
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.
As of September 30, 2022, the Company does not have the funds available to
fulfill the orders.
Management is awaiting the receipt of the first tranche of funding, 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.
To that end, on March 11, 2020, Cool Technologies, Inc. and 3&1 Capital
Partners, LLC, signed a non-binding Memorandum of Terms for Debt Financing
pursuant to which the Company is due to receive gross proceeds of at least $12.5
million minus administration and origination fees as well as other expenses. The
debt financing will be structured as a promissory note with a security
interest. The first priority security interest will encompass all intellectual
property ("IP") owned by the Company on the closing date and all intellectual
property acquired by or issued to the Company during the term of the 36-month
note. Also included as collateral are all equipment and contracts related to the
IP.
Pursuant to the Memorandum, the Company agreed to a cash prepayment equal to 18
months of interest that will fund an Interest Escrow Account from the proceeds
or 12 months of the prepayment interest which shall be considered earned and
nonrefundable.
Monthly interest payments based on a term loan rate of 5.85% per annum will be
debited from the prepayment Interest Escrow Amount on the first day of the month
for 18 months. One month later, the Company shall commence making 17 equal
payments of principal and accrued and unpaid interest on the first day of the
month. A final payment of all unpaid principal and accrued and unpaid interest
shall be due on the Maturity Date.
For the first eighteen months of the loan, the Company agreed to apply at least
25% of the profits from all sales, purchase orders, or any other
revenue-generating transactions to the outstanding principal and interest, and
then 50%, thereafter, until its obligations have been satisfied.
Since the signing of the Memorandum, definitive documents have been drawn up and
financing instruments have been created and packaged. Central to the provision
of the funds is the successful underwriting of the financial instruments. Buyers
have recently signed subscription agreements to purchase the financial
instruments. In addition, Cool Technologies and 3&1 Capital Partners have
polished and perfected the final funding documents.
The signing of subscription agreements are definitive actions that the Company
will likely receive some, if not all, of the funds promised.
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.
Currently, the Company owns most of the parts needed to build 4 or 5 generator
systems and one water unit. A second water unit, that has already been paid for,
has not yet been shipped.
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Over the past two years, the Company has achieved price reductions by comparing
vendor quotes and by negotiating with a select few. Inflation will eliminate the
quoted reductions. A 10% overall increase in the price of components will likely
occur when the Company makes its next round of purchases. By working with fewer
suppliers, using volume discounts and providing payment with orders, the Company
believes it can hold prices within the expected 10% increase. That will
ultimately depend on whether the Federal Reserve successfully manages to control
inflation.
Other than acting as one of the catalysts for inflation, the Russo-Ukrainian War
should have no impact on the Company. If the geo-political tensions spread
beyond the region, it could impact some of the Company's customers who have
existing purchase orders.
A more immediate concern appears to be easing a bit. Our primary supply chain
issue involves the shortage of semiconductor chips needed for vehicle
manufacturing. According to CNBC, Ford reported that part shortages had
prevented 40 to 45,000 vehicles, primarily trucks and SUVs, from reaching
dealers (https://tinyurl.com/43ky9tny). J.P. Morgan Research predicts that more
chips will become available in the second half of 2022, however, the chips
available may not be the right type to satisfy all demand
(https://tinyurl.com/yc9kmbpp). McKinsey & Company research indicates that the
auto industry's reliance on 90 nanometer chips will keep supply and demand out
of balance for some time (https://tinyurl.com/mvt4z4cf ).
We rely extensively on computer systems to manage our business. This includes
valuable trade secrets and intellectual property, corporate strategic plans,
marketing plans, supplier and customer information, and personally identifiable
information, such as employee information. Processing and maintaining this data
in a secure manner is critical to our business operations and strategy.
Information technology security threats -- from user error to cybersecurity
attacks designed to gain unauthorized access to our individual computers,
systems and data -- are increasing in frequency and sophistication. Most of our
business is conducted in a virtual environment which increases the types and
range of vulnerabilities that need to be protected as well as introduces new
risks to the confidentiality, integrity and availability of critical company
data and supporting systems. Moreover, the planned incorporation of vehicle
telematics into our products could also increase our exposure to potential
costs, expenses and reputational harm in the event of cyberattacks impacting
these products or services.
According to Verizon's 2022 Data Breach Investigations Report, 61% of small
businesses experienced a cyberattack in 2021 (https://tinyurl.com/2p98udvt). The
2022 IBM Cost of Breach report calculates that the average global cost of a data
breach is $4.35 million. For the United States exclusively, the average total
cost of a data breach of $9.44 million.
Due to the interest in secrecy by many of the victims, the costs of some
cyberattacks, such as ransomware in which data is encrypted, are difficult to
determine. According to Palo Alto Networks' Unit 42, a team of researchers and
security consultants, reported that in the first five months of 2022, the
average ransomware payment increased to $925,162 (https://tinyurl.com/4spa6tx8).
That's before additional costs incurred by victims including remediation
expenses, downtime, reputational harm and other damages.
As a small company, Cool Technologies does not have an in-house network nor a
staff of IT specialists to address its cybersecurity needs. We rely on
third-party providers to create a layered cyber deterrence plan to avoid or
mitigate the occurrence and impact of cyber-attacks.
The occurrence of an uncontrollable event such as the COVID-19 pandemic
negatively affected our operations. The pandemic resulted in social distancing,
travel bans and quarantines. This limited access to our facilities, customers,
management, support staff and professional advisors. These, in turn, impacted
our operations and financial condition.
While the pandemic phase of COVID-19 has receded and the virus is now considered
to be endemic in the US as of this filing, the evolution of an acute and more
contagious variant is possible. In such a case, it may impact demand for our
products and may again hamper our efforts to provide our investors with timely
information and comply with our filing obligations with the Securities and
Exchange Commission.
Real GDP growth, inflation, employment levels, oil prices, interest rates, tax
rates, availability of customer financing, foreign currency exchange rate
fluctuations, and other macroeconomic trends can adversely affect demand for the
products that we offer. Geopolitical issues around the world and how our markets
are positioned can also impact macroeconomic conditions and could have a
material adverse impact on our financial results.
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Recent Developments
Amendment of Series B Preferred Stock
On October 31, 2016, the Company filed an amended and restated Series B
Preferred Stock Certificate of Designation (which was originally filed with the
Secretary of State of Nevada on April 19, 2016 and amended on August 12, 2016)
to designate 3,636,360 shares as Series B Preferred Stock and to provide for
supermajority 66 2/3% voting rights for the Series B Preferred Stock. The Series
B Preferred Stock will not bear dividends, will not be entitled to receive any
distributions in the event of any liquidation, dissolution or winding up of the
Company, and will have no other preferences, rights, restrictions, or
qualifications, except as otherwise provided by law or the articles of
incorporation of the Company. The holders of Class B Stock shall have the right,
at such holder's option, at any time to convert such shares into common stock,
in a conversion ratio of one share of common stock for each share of Class B
Stock. If the common stock trades or is quoted at a price per share in excess of
$2.25 for any twenty consecutive day trading period, (subject to appropriate
adjustment for forward or reverse stock splits, recapitalizations, stock
dividends and the like), the Series B Stock will automatically be convertible
into the common stock in a conversion ratio of one share of common stock for
each share of Series B Stock. The Series B Stock may not be sold, hypothecated,
transferred, assigned or disposed without the prior written consent of the
Company and the holders of the outstanding Series B Preferred Stock.
Craftsmen Industries, Inc.
As a consequence of the first public demonstration of the eMGen 30 kilovolt amp
("kVA") system at the North America International Auto Show in Detroit in
January 2017, the Company entered into an agreement in principle, dated February
21, 2017, with Craftsmen Industries, Inc. ("Craftsmen'), a company engaged in
the design, engineering and production of mobile marketing vehicles,
experiential marketing platforms and industrial mobile solutions.
On April 25, 2017, we delivered to Craftsmen Industries, a Class III Vehicle
(Ford F-350 dually) up-fitted with a production-ready eMGen 30 kVA (single
phase/three phase) system.
Subsequently, Craftsmen invited the Company to demonstrate its mobile generation
technology and the potential benefits for Craftsmen products at Craftsmen's 35th
Anniversary Party on April 27, 2017. Over 100 current and prospective Craftsmen
customers were in the audience for the demonstrations.
Craftsmen recently signed a manufacturing contract with Translux-Fair Play.
Translux' Hazelwood, Missouri facility encompasses over 45,000 square feet of
manufacturing space and offers extensive laser cutting and metal bending
machinery. The contract significantly enhances Craftsmen's capabilities to
produce boxes and control panels for the eMGen Systems and the vehicles they're
upfitted to, but also all the eMGen's optional tasks and capabilities, including
welding, water purification and solar power.
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Not only will basic production be optimized and improved, but control panels and
displays should be upgraded. CoolTech is expected to benefit from Translux'
electronics expertise which has been refined through their years of
manufacturing digital scoring panels for sporting arenas and ball parks.
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 our IP and may be used to obtain financing, including but not
limited to, non-dilutive financing. Since then, significant progress has been
achieved. As noted above, definitive actions have occurred which indicate that
the Company will receive funding in the near future.
Live eMGen 80 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.
A representative from one of the Mexican farming producers' unions approved the
generator-equipped truck. CoolTech plans to put this into production as soon as
final funding is secured.
Purchase and Delivery of Truck to Craftsman Industries
On July 15, 2018, the Company purchased a Ford F-450 Chassis Cab Truck.
Subsequently, a metal flatbed was manufactured and installed. The truck was
delivered to Craftsmen on September 15, 2018. It will be used for the
installation and refinement of the eMGen 80 kVA system. A second F-450 will be
used for the eMGen 125 kVA system.
Order of Parts and Components
As of September 2022, the Company has acquired enough parts and components to
build 4 eMGen 80s and 2 eMGen 125s. It is currently procuring two mobile water
purification systems and components for mobile electric vehicle charging
systems.
In addition, the Company has purchased another Ford F-450 and is seeking to
acquire more F-450s and 550s for use in demonstrations of the capabilities noted
above and for initial order fulfillment.
Unveiling of Initial Production Run Vehicle
On March 27, 2019, the Company unveiled the initial production run of its mobile
power generation (eMGen) work trucks for inspection by an audience of
agricultural and community leaders from Latin America at Craftsmen Industries.
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The itinerary for the showcase event included a tour of the St. Louis
manufacturing facility and inspection of the first production run eMGen 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.
Mexico's population is expected to grow from 129 million to nearly 150 million
by 2050. As a result, energy and water demand should increase significantly.
Increased water demand for both human consumption and agricultural production,
along with lagging water management practices have resulted in a rapid depletion
of water reserves in Mexico, particularly in Northern Mexico. The forecast of
high temperatures in the summer combined with a developing La Nina weather
pattern could prolong an existing drought and spread water shortages.
According to an article in the NYTimes (https://tinyurl.com/2n76rjy7), Mexico's
National Water Commission (CONAGUA) determined that in July 2022, eight of
Mexico's 32 states were experiencing extreme to moderate drought, resulting in
1,546 of the country's 2,463 municipalities confronting water shortages, By
mid-July, about 48 percent of Mexico's territory was suffering drought,
according to the commission, compared with about 28 percent of the country's
territory during the same period last year. In June of 2021, 77 of Mexico's 210
principal water reservoirs were below 25% capacity. For the region encompassing
Western North America, this period is now the driest two decades in 1,200 years.
With reservoirs drying and ground water levels declining, water is at a premium.
In many locations, sewage water is reused for irrigation. Water treatment is
scarce and pollution regulations are rarely enforced.
As long as investment in wastewater treatment lags behind population growth,
large numbers of consumers eating raw produce face heightened threats to food
safety from diseases such as salmonella, E Coli and roundworm. Add unchecked or
minimally treated industrial pollution and unusually large numbers of cases of
cancer and kidney problems have been documented in consumers living near
polluted waterways.
While access to electricity is high across the nation, in rural areas, power can
be sporadic or even non-existent. Many communities, particularly in regions
populated by indigenous people, are still not connected to the grid. They rely
on diesel generators to light homes and draw water from shrinking aquifers.
Interest from Mexican authorities is high in the eMGen systems as they seek to
mitigate the effects of drought and guarantee access to drinking water as well
as provide a consistent source of electricity and mobile medical services for
underserved populations.
Through the efforts of its representatives in the country, the Company has been
in contact with and in some cases made presentations to the National Water
Commission as well as cabinet secretaries, senators, representatives and
deputies at the federal level; to governors, legislators, commissioners and
municipal presidents at the state level and to mayors and county and local
politicians in cities and towns beset by energy and water problems. Private
entities such as distilleries, fruit growers, cattle rancher's associations and
mining companies have also requested information.
Conversations are ongoing and interested politicians are helping to promote,
coordinate and refine the Company's approach to secure funding for pilot
programs, full blown projects and purchases of eMGen systems and vehicles.
Mexican Government
On May 13, 2019, government officials and fruit growers were at Craftsmen
Industries in St. Louis for a review of a first run eMGen 80 production vehicle
and water purification/desalination options.
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Among the politicians in attendance was Congressman Efraín Rocha Vega who is
Secretary of the Commission of Development and Rural, Agricultural and Food
Self-sufficiency Conservation, a member of the commission of Livestock and the
commission of Environment, Sustainability, Climate Change and Natural Resources.
Subsequent to the event, in an official Congressional Letter of Support, dated
May 20, 2019, Congressman Rocha wrote: "The successful demonstration of these
technologies further strengthens the Mexican Government's support of Mexican
entities that desire to purchase CoolTech products, as well as affirms our
position to provide financial assistance to such entities." The letter can be
viewed in its entirety at:
http://www.cooltechnologiesinc.com/content/pdf/MexicanLegislationandFinancialAssistanceLetter.pdf.
Introduction of new options
During the fourth quarter of 2019, the Company has introduced new options, which
include an eMGen System that generates up to 200 kVA of electric power, water
purification and desalination systems.
The Company's mobile electric generation system ("eMGen") offers optional 30 to
125 kVA water purification and desalination units capable of producing 2,800 to
14,000 gallons of potable water per day. Assuming the average person needs 2
liters per day, 10,000 gallons is enough for 26,498 people. If delivery is
required, an eMGen truck can also tow a water tanker.
The truck-mounted units cleanse contaminated, polluted and wastewater or remove
saline from saltwater. Submerge the input pipe into any water source. Chemicals,
particulates, salts, heavy metals, bacteria, viruses and other impurities are
removed. Six levels of water purification output a range of water qualities from
clean potable water for drinking and cooking to non-potable water for
agricultural or other commercial and emergency usage.
The eMGen systems as well as the purification and desalinization units feature
fully automated controls and monitoring. A Panasonic Toughpad tablet provides a
rugged touchscreen interface for operation from the truck cab or anywhere within
a 300 foot radius. When outfitted with the optional telematics package, the
systems can be remotely controlled and monitored from distant locations.
The next generation of eMGens will include a solar-powered generator system with
a built-in water purification unit that makes seawater desalination sustainable.
The system pumps and purifies up to 4,500 gallons of potable water per day. It
can be set up and operated anywhere a four-wheel drive vehicle can go. Once the
batteries are drained, the systems shift to fuel power for 24 hour operation.
The solar panels collapse and fold, so the entire system fits easily in the bed
of a work truck.
Rugged, reliable and versatile, the eMGen trucks are designed to operate in
extreme environments. A variety of capabilities handle a variety of needs
including:
· agriculture,
· municipalities,
· mining,
· emergency response,
· and disaster relief.
The applications for hurricanes, floods, earthquakes and other natural disasters
are obvious, others less so.
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Here are a few common yet relatively unknown problems the system and units
address:
· In poorly served or third world countries, irregular power service
prevents farmers from irrigating on a regular schedule which reduces the
size of the harvest.
· In areas where water tables are dropping, powerful pumps are required to
pull water up from deep underground. A mobile pump is far more cost
effective than permanent ones positioned out in the fields.
· Use of polluted irrigation water stunts crops and restricts sales which
limit farmers' incomes.
· Over-pumping of aquifers enables saltwater intrusion to contaminate
coastal water supplies. Water must either be pumped and transported from
further away or very expensive desalination plants must be built to remove
the salt. The plants can take years to build.
Consider the Texas Freeze in February of 2021. Power failures at water treatment
plants necessitated boil water orders. Burst pipes and dripping faucets dropped
water reserves to dangerously low levels.
More than 800 public water systems serving 162 of the state's 254 counties were
disrupted. Over 13 million people were left without safe drinking water. The
town of Kyle almost ran dry.
Cities opened water distribution sites, water was trucked in to flush toilets,
homeowners melted icicles and snow for drinking water, medical workers resorted
to using bottled water for chemotherapy treatments.
Key Options
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 power generation systems ("eMGen"), 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.
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CoolTech's eMGen 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 eMGen 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.
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 eMGen 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 eMGen 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.
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.
New Sales Agent
In January 2021, the Company terminated its independent agent agreement with
Gaia Energy of Gdansk, Poland.
On January 26, 2021, the Company signed an independent agent agreement with H&K
Ventures, LLC of Morganhill, California. H&K will act as the Company's
independent agent.
The principals of H&K were also part of Gaia Energy. Consequently, the agreement
and the expertise provided by H&K are essentially the same. H&K will concentrate
on 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." To that end, H&K has
requested quotes from the Company for eMGen 200 to 300 kVA systems with mobile
water desalination capabilities of up to 900,000 gallons per day.
Team members of H&K Ventures 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 former has joined the Company's advisory board while the diplomat introduced
CoolTech products at an African technical summit attended by representatives
from 54 countries.
Order and Delivery of Water Units and Charger
Over the past fifteen months, the Company has ordered two reverse osmosis water
purification units and an electric vehicles charger.
In May of 2021, the Company ordered a reverse osmosis system capable of treating
4,500 gallons of brackish water per day. That was followed by a 100 kW, mode 4
DC, electric vehicle charger capable of simultaneous charging and dynamic load
distribution. The Company ordered a second reverse osmosis system capable of
treating 4,500 gallons of brackish water per day in November of 2021.
A reverse osmosis system and an electric vehicle charger were delivered to
Craftsmen Industries for installation in the beds of the test vehicles
referenced in Note 3. The Company is awaiting the delivery of the second
reverse osmosis system.
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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,
2022 2021 Change %
Revenues $ -- $ -- N/A N/A
Operating expenses
Consulting 112,500 120,125 (7,625 ) (6.3 )%
Payroll and related
expenses 87,726 99,971 (12,245 ) (12.2 )%
Professional fees 35,176 45,266 (10,090 ) (22.3 )%
General and
administrative 20,442 26,003 (5,561 ) (21.4 )%
Research and
development 4,963 4,963 - 0.0 %
Total operating
expenses 260,807 296,328 (35,521 ) (12.0 )%
Interest expense, net (263,139 ) (390,419 ) (127,280 ) (32.6 )%
Change in fair value
of derivative
liability 31,707 24,234 7,473 30.8 %
Loss on settlement of
debt 10,360 52,963 (42,603 ) (80.4 )%
Net loss (481,879 ) (609,550 ) 127,671 20.9 %
Less: Noncontrolling
interest (270 ) (328 ) 58 17.7 %
Net loss to
shareholders $ (482,149 ) $ (609,222 ) $ 127,073 20.9 %
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Nine months ended September 30,
2022 2021 Change %
Revenues $ -- $ -- N/A N/A
Operating expenses
Consulting 349,394 354,341 (4,947 ) (1.4 )%
Payroll and related
expenses 266,085 275,840 (9,755 ) (3.5 )%
Professional fees 167,053 224,240 (57,187 ) (25.5 )%
General and
administrative 78,543 50,332 28,211 56.0 %
Research and development 14,890 14,890 -- 0.0 %
Total operating expenses 875,965 919,643 (43,678 ) (4.7 )%
Interest expense, net (651,441 ) (1,340,458 ) (689,017 ) (51.4 )%
Change in fair value of
derivative liability (119,877 ) (737,182 ) (617,305 ) (83.7 )%
Loss on settlement of
debt (4,135 ) 52,963 (57,098 ) (107.8 )%
Net loss (1,651,418 ) (2,944,320 ) 1,292,902 43.9 %
Less: Noncontrolling
interest 783 168 615 366.1 %
Net loss to shareholders $ (1,650,635 ) $ (2,944,152 ) $ 1,293,517 43.9 %
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Revenues
During the three months ended September 30, 2022, 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
Consulting expense decreased from $120,125 for the three months ended September
30, 2021 to $112,500 for the three months ended September 30, 2022 and during
the nine months ended September 30 from $354,341 in 2021 to $349,394 in 2022 due
to the addition of fees billed by two consultants who provide sales, financial
and strategic services on an ad hoc basis in 2021.
Payroll and related expenses decreased from $99,971 for the three months ended
September 30, 2021 to $87,726 for the three months ended September 30, 2022 and
during the nine months ended September 30 from $275,840 in 2021 to $266,085 in
2022 due to decrease in the Company's portion of FICA and unemployment taxes.
Professional fees decreased from $45,266 for the three months ended September
30, 2021 to $35,176 for the three months ended September 30, 2022 and during the
nine months ended September 30 from $224,240 in 2021 to $167,053 in 2022. The
decrease in professional fees reflects a decrease in legal fees due to reduced
activity leading up to the settlement of the litigation and arbitration with PGC
Investments, LLC as well as the timing of the service provided by our auditors
for reviews of quarterly reports filed in 2021.
General and administrative expenses increased during the nine months ended
September 30 from $50,332 in 2021 to $78,543 in 2022 as the Company began
offering health insurance in in April of 2021. Thus, 2022 includes a full nine
months of health insurance costs. General and administrative expenses decreased
from $26,003 for the three months ended September 30, 2021 to $20,442 for the
three months ended September 30, 2022 due to reduced health insurance expense
and mileage reimbursement for travel costs.
Research and development expenses remained the same for the respective periods
during both years. For the three months ended September 30, 2021, it totaled
$4,963 and for the three months ended September 30, 2022, it totaled $4,963. For
the nine months ended September 30, 2021 and 2022, it totaled $14,890 as the
Company continued to focus on the commercialization of the Company's eMGen
system.
Other Income and Expense
Interest expense decreased from $390,419 for the three months ended September
30, 2021 to $263,139 for the three months ended September 30, 2022 and during
the nine months ended September 30 from $1,340,458 in 2021 to $651,441 in 2022
due to fewer loans outstanding at the ends of the respective quarters. The
change in fair value of derivative liability increased from a gain of $24,234
for the three months ended September 30, 2021 to a gain of $31,707 for the three
months ended September 30, 2022 due to a reduction in the price of common stock
and decreased during the nine months ended September 30 from $737,182 to
$119,877 due to a reduction in derivative liabilities through debt conversion to
common stock.
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
We have historically met our 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, 2022, we had cash and cash equivalents of $1,050.
Working capital is the amount by which current assets exceed current
liabilities. We had negative working capital of $7,993,078 and $7,370,524 on
September 30, 2022 and December 31, 2021, respectively. The increase in negative
working capital was due to a reduction in cash as well as increases in accounts
payable, accrued interest payable, accrued liabilities - related party and
accrued payroll taxes. To that end, we owe approximately $1,788,355 including
interest and prepayment penalties for convertible notes that mature in the next
eleven months and we owe another $3,519,660 including interest for 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
fourth quarter. 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 we are unable to obtain sufficient funds, we
may be forced to curtail and/or cease operations.
February Convertible Note -- On February 25, 2021, the Company entered into a
convertible note agreement with an accredited investor. It issued 2,000,000
inducement shares of restricted common stock and received $150,000 after an
original issue discount of $15,000 in lieu of interest. The total amount of
$165,000 plus 3% interest or $4,950 will be due on November 25, 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 fixed price of $0.025
per share. 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. On
November 22, 2021, the investor signed an amendment to the agreement extending
the maturity date until March 31, 2022. On March 30, 2022, the investor signed
an amendment to the agreement extending the maturity date until April 30, 2022.
On April 29, 2022, the investor signed an amendment to the agreement extending
the maturity date until May 30, 2022. On May 29, 2022, the investor signed an
amendment to the agreement extending the maturity date until August 30, 2022. On
August 30, 2022 the investor signed an amendment to the agreement extending the
maturity date until November 30, 2022. As of September 30, 2022, the remaining
balance totaled $169,950.
March Convertible Note -- On March 24, 2021, the Company entered into a
convertible note agreement with an accredited investor. It issued two sets of
commitment shares: a block of 500,000 and a block of 2,500,000 shares of
restricted common stock as well as warrants to purchase 1,000,000 shares of
common stock at an exercise price of $0.10 per share. In return, the Company
received $250,000 after an original issue discount of $25,000 in lieu of
interest. The total amount of $275,000 plus 8% interest or $22,000 will be due
on December 24, 2021. After 60 days, if the note has not been paid in full, the
investor will have the right to purchase up to 6 million additional warrant
shares. 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 fixed
price of $0.055 per share. If the note is repaid by the maturity date, the
investor will forfeit the block of 2,500,000 shares of restricted common stock
and the shares will be returned to the Company's treasury. In the event of
default, the outstanding balance will increase by 25% and a daily penalty of
$1,000 will accrue until the default is remedied. On December 21, 2021, the
investor signed an amendment to the agreement extending the maturity date until
March 31, 2022. On March 30, 2022, the investor signed an amendment to the
agreement extending the maturity date until April 30, 2022. On April 29, 2022,
the investor signed an amendment to the agreement extending the maturity date
until May 30, 2022. On May 29, 2022, the investor signed an amendment to the
agreement extending the maturity date until August 30, 2022. On August 30, 2022
the investor signed an amendment to the agreement extending the maturity date
until November 30, 2022. As of September 30, 2022, the remaining balance
totaled $297,000.
March Convertible Note -- On March 24, 2021, the Company entered into a
convertible note agreement with an accredited investor. It issued two sets of
commitment shares: a block of 500,000 and a block of 2,500,000 shares of
restricted common stock as well as warrants to purchase 1,000,000 shares of
common stock at an exercise price of $0.10 per share. In return, the Company
received $750,000 after an original issue discount of $75,000 in lieu of
interest. The total amount of $825,000 plus 8% interest or $66,000 will be due
on December 24, 2021. After 60 days, if the note has not been paid in full, the
investor will have the right to purchase up to 2 million additional warrant
shares. 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 fixed
price of $0.055 per share. If the note is repaid by the maturity date, the
investor will forfeit the block of 2,500,000 shares of restricted common stock
and the shares will be returned to the Company's treasury. In the event of
default, the outstanding balance will increase by 25% and a daily penalty of
$1,000 will accrue until the default is remedied. On December 21, 2021, the
investor signed an amendment to the agreement extending the maturity date until
March 31, 2022. On March 30, 2022, the investor signed an amendment to the
agreement extending the maturity date until April 30, 2022. On April 29, 2022,
the investor signed an amendment to the agreement extending the maturity date
until May 30, 2022. On May 29, 2022, the investor signed an amendment to the
agreement extending the maturity date until August 30, 2022. On August 22,
2022, the Company issued 10,000,000 shares of common stock to LGH Investments,
LLC upon conversion of $121,410. On August 30, 2022 the investor signed an
amendment to the agreement extending the maturity date until November 30, 2022.
As of September 30, 2022, the remaining balance totaled $769,590.
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August Convertible Note - On August 16, 2021, the Company signed a promissory
note agreement with an accredited investor. It received $125,000 after an
original issue discount of $7,000 and reimbursement of $3,000 to cover the
investor's legal fees. The total amount of $135,000 will be due on August 16,
2022. 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 50% and
the interest rate will increase to 22% until the default is remedied. On
February 24, 2022, the Company issued 2,500,000 shares of common stock to Power
Up Lending Group, Ltd upon conversion of $50,000, leaving a principal balance
remaining of $85,000. On February 25, 2022, the Company issued 1,750,000 shares
of common stock to Power Up Lending Group, Ltd upon conversion of $35,000,
leaving a principal balance remaining of $50,000. On February 28, 2022, the
Company issued 980,392 shares of common stock to Power Up Lending Group, Ltd
upon conversion of $20,000, leaving a principal balance remaining of $30,000. On
March 4, 2022, the Company issued 1,208,791 shares of common stock to Power Up
Lending Group, Ltd upon conversion of $22,000, leaving a principal balance
remaining of $8,000. On March 7, 2022, the Company issued 790,361 shares of
common stock to Power Up Lending Group, Ltd. upon final conversion of $8,000 in
principal and $5,120 in accrued interest. The note was then retired.
September Convertible Note -- On September 21, 2021, the Company signed a
promissory note agreement with an accredited investor. It received $102,000
after an original issue discount of $6,000 and reimbursement of $3,000 to cover
the investor's legal fees. The total amount of $111,000 will be due on September
21, 2022. 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 50% and
the interest rate will increase to 22% until the default is remedied. On March
22, 2022, the Company issued 2,447,552 shares of common stock to Power Up
Lending Group, Ltd upon conversion of $35,000, leaving a principal balance
remaining of $76,000. On March 29, 2022, the Company issued 2,447,552 shares of
common stock to Power Up Lending Group, Ltd upon conversion of $35,000, leaving
a principal balance remaining of $41,000. On April 18, 2022, the Company issued
3,798,319 shares of common stock to Power Up Lending Group, Ltd upon final
conversion of $41,000 in principal and $4,200 in accrued interest. The note was
then retired.
November Convertible Note -- On November 22, 2021, the Company signed a
promissory note agreement with an accredited investor. It received $60,000 after
an original issue discount of $3,750 and reimbursement of $3,000 to cover the
investor's legal fees. The total amount of $66,750 will be due on November 22,
2022. 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 50% and
the interest rate will increase to 22% until the default is remedied. On May 31,
2022, the Company issued 1,652,893 shares of common stock to Power Up Lending
Group, Ltd upon conversion of $20,000, leaving a principal balance remaining of
$46,750. On June 6, 2022, the Company issued 2,252,252 shares of common stock to
Power Up Lending Group, Ltd upon conversion of $25,000, leaving a principal
balance remaining of $21,750. On June 15, 2022, the Company issued 2,233,654
shares of common stock to Power Up Lending Group, Ltd upon final conversion of
$21,750 in principal and $2,520 in accrued interest. The note was then retired.
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December Convertible Note -- On December 20, 2021, the Company entered into a
convertible note agreement with an accredited investor. It received $33,000
after an original issue discount of $3,000 in lieu of interest. The total amount
of $33,000 plus 3% interest or $990 will be due on September 20, 2022. 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 fixed price of $0.02
per share. 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. On August
30, 2022 the investor signed an amendment to the agreement extending the
maturity date until November 30, 2022. As of September 30, 2022, the remaining
balance totaled $33,000.
February Convertible Note -- On February 1, 2022, the Company signed a
promissory note agreement with an accredited investor. It received $50,000 after
an original issue discount of $3,000 and reimbursement of $3,000 to cover the
investor's legal fees. The total amount of $56,000 will be due on February 1,
2023. 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 50% and
the interest rate will increase to 22% until the default is remedied. On August
8, 2022, the Company issued 2,752,294 shares of common stock to Sixth Street
Lending LLC upon conversion of $30,000, leaving a principal balance remaining of
$26,000. On August 12, 2022, the Company issued 2,323,967 shares of common stock
to Sixth Street Lending LLC upon final conversion of $26,000 in principal and
$2,120 in accrued interest. The note was then retired.
March Convertible Note -- On March 4, 2022, the Company signed a promissory note
agreement with an accredited investor. It received $55,000 after an original
issue discount of $3,500 and reimbursement of $3,000 to cover the investor's
legal fees. The total amount of $61,500 will be due on March 4, 2023. 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 50% and the interest
rate will increase to 22% until the default is remedied. On September 8, 2022,
the Company issued 2,100,840 shares of common stock to Sixth Street Lending LLC
upon conversion of $25,000, leaving a principal balance remaining of $36,500. On
September 12, 2022, the Company issued 3,273,950 shares of common stock to Sixth
Street Lending LLC upon final conversion of $36,500 in principal and $2,460 in
accrued interest. The note was then retired.
March Convertible Note -- On March 21, 2022, the Company signed a promissory
note agreement with an accredited investor. It received $55,000 after an
original issue discount of $3,500 and reimbursement of $3,000 to cover the
investor's legal fees. The total amount of $61,500 will be due on March 21,
2023. 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 50% and
the interest rate will increase to 22% until the default is remedied. On
September 27, 2022, the Company issued 2,325,581 shares of common stock to
Sixth Street Lending LLC upon conversion of $20,000, leaving a principal balance
remaining of $41,500. On September 28, 2022, the Company issued 2,625,000
shares of common stock to Sixth Street Lending LLC upon conversion of $21,000,
leaving a principal balance remaining of $20,500. On September 30, 2022, the
Company issued 3,214,085 shares of common stock to Sixth Street Lending LLC upon
final conversion of $20,500 in principal and $2,320 in accrued interest. The
note was then retired.
April Convertible Note -- On April 25, 2022, the Company signed a promissory
note agreement with an accredited investor. It received $55,000 after an
original issue discount of $3,500 and reimbursement of $3,000 to cover the
investor's legal fees. The total amount of $61,500 will be due on April 25,
2023. 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 50% and
the interest rate will increase to 22% until the default is remedied. As of
September 30, 2022, the remaining balance totaled $61,500.
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May Convertible Note -- On May 23, 2022, the Company signed a promissory note
agreement with an accredited investor. It received $30,000 after an original
issue discount of $2,000 and reimbursement of $3,000 to cover the investor's
legal fees. The total amount of $35,000 will be due on May 23, 2023. 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 50% and the interest
rate will increase to 22% until the default is remedied. As of September 30,
2022, the remaining balance totaled $35,000.
July Convertible Note -- On July 22, 2022, the Company signed a promissory note
agreement with an accredited investor. It received $30,000 after an original
issue discount of $3,200 and reimbursement of $3,000 to cover the investor's
legal fees. The total amount of $56,200 will be due on July 22, 2023. 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 50% and the interest
rate will increase to 22% until the default is remedied. As of September 30,
2022, the remaining balance totaled $57,050.
August Convertible Note -- On August 18, 2022, the Company signed a promissory
note agreement with an accredited investor. It received $40,000 after an
original issue discount of $2,600 and reimbursement of $3,000 to cover the
investor's legal fees. The total amount of $45,600 will be due on August 18,
2023. 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 50% and
the interest rate will increase to 22% until the default is remedied. As of
September 30, 2022, the remaining balance totaled $46,020.
September Convertible Note -- On September 21, 2022, the Company signed a
promissory note agreement with an accredited investor. It received $60,000 after
an original issue discount of $3,750 and reimbursement of $3,000 to cover the
investor's legal fees. The total amount of $66,750 will be due on September 21,
2023. 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 50% and
the interest rate will increase to 22% until the default is remedied. As of
September 30, 2022, the remaining balance totaled $66,838.
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,
2022 2021
Net cash from operating activities $ (577,449 ) $ (1,330,178 )
Net cash from investing activities
(30,355 ) (24,921 )
Net cash from financing activities 536,463 1,657,000
Net cash from operating activities increased primarily due to a 44% decrease in
our loss offset by a decrease in our non-cash interest expense. The change in
net cash from investing activities reflects a 22% decrease in the purchase of
intangible assets. Cash provided by financing activities included debt
borrowings of $547,550 during the first nine months of 2022 which was a 67%
decrease from the debt borrowings of $1,632,000 during the first nine months of
2021.
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The Company's estimated capital requirements for the next 12 months will total
$3.9 million. This consists of $1.6 million for salaries, public company
filings, consultants and professional fees. It also consists of $2.3 million for
production of mobile power generation systems and related mobile products such
as water purification or desalination equipment as well as onboard vehicle
charging units.
Management believes the Company's funds are insufficient to provide for its
projected needs for operations for the next 12 months. The Company is awaiting
the receipt of the first tranche of additional non-dilutive funding to support
product development or for other purposes. As previously noted under Item 2
"Overview", the Company signed a Memorandum of Terms for Debt Financing with 3&1
Capital Partners, LLC ("3&1") in March of 2020. Five months later, the Company
signed an agreement in which 3&1 agreed to definitively provide insurance
related debt, surety bond financing and/or standby letter of credit financing as
per the terms of the memorandum. In the event that 3&1 fails to deliver the
financing, 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 $60,926,600 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, 2022, we have $1,050 in cash and we owe
$1,788,355 (including interest and prepayment penalties) and $3,519,660
(including interest) for convertible and promissory notes, respectively We are
awaiting the receipt of the first tranche of non-dilutive funding 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 expected funding will arrive, that we will obtain
alternative funding or that we will be successful in accomplishing any of our
objectives. Consequently, we 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, 2021 in "Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations."
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COOL TECHNOLOGIES, INC. 
