OCEAN THERMAL ENERGY CORPORATION
|
(Exact
name of registrant as specified in its charter)
|
Nevada
|
20-5081381
|
(State
or other jurisdiction of incorporation or
organization)
|
(I.R.S.
Employer Identification No.)
|
800 South Queen Street, Lancaster, PA 17603
|
(Address
of principal executive offices, including zip code)
|
|
(717) 299-1344
|
(Registrant’s
telephone number, including area code)
|
|
n/a
|
(Former
name, former address and former fiscal year, if changed since last
report)
|
Title
of each class
|
Trading
Symbol(s)
|
Name of
each exchange on which registered
|
|
|
|
Yes
|
[X]
|
No
|
[ ]
|
Yes
|
[X]
|
No
|
[ ]
|
|
Large
accelerated filer [ ]
|
Accelerated
filer [ ]
|
|
Non-accelerated
filer [X]
|
Smaller
reporting company [X]
|
|
Emerging
growth company [ ]
|
|
Yes
|
[ ]
|
No
|
[X]
|
|
Description
|
Page
|
|
|
|
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3
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3
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4
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5
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7
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8
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21
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23
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23
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24
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24
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25
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26
|
|
June
30,
2020
|
December
31,
2019
|
ASSETS
|
(unaudited)
|
|
Current
Assets
|
|
|
Cash
|
$25,169
|
$23,243
|
Prepaid
expenses
|
21,000
|
20,000
|
Total
Current Assets
|
46,169
|
43,243
|
|
|
|
Total
Assets
|
$46,169
|
$43,243
|
|
|
|
LIABILITIES
AND STOCKHOLDERS' DEFICIENCY
|
|
|
|
|
|
Current
Liabilities
|
|
|
Accounts
payable and accrued expense
|
$12,311,313
|
$11,176,751
|
Notes payable
- related party
|
2,345,473
|
2,364,473
|
Convertible
notes payable - related party
|
87,500
|
87,500
|
Notes
payable
|
3,132,903
|
3,001,250
|
Convertible
note payable
|
2,264,120
|
2,264,120
|
Derivative
liability
|
5,034,099
|
3,032,056
|
Total Current
Liabilities
|
25,175,409
|
21,926,150
|
|
|
|
Long-term
Liabilities
|
|
|
Convertible
note payable, net
|
104,267
|
14,124
|
Convertible
notes payable - related party, net
|
8,414
|
1,292
|
Notes
payable
|
176,438
|
168,334
|
Total
Liabilities
|
25,464,528
|
22,109,900
|
|
|
|
Stockholders'
deficiency
|
|
|
Preferred
Stock, Series B, $0.001 par value; 1,250,000 shares
authorized,
|
|
|
518,750 and 518,750
shares issued and outstanding, respectively
|
519
|
519
|
Preferred
Stock, Series C, $0.001 par value; 2,700,000 shares
authorized,
|
|
|
2,300,000
and 2,300,000 shares issued and outstanding,
respectively
|
2,300
|
2,300
|
Common stock,
$0.001 par value; 200,000,000 shares authorized,
|
|
|
134,775,136 and
134,775,136 shares issued and outstanding,
respectively
|
134,775
|
134,775
|
Additional paid-in
capital
|
58,259,171
|
58,259,171
|
Accumulated
deficit
|
(83,815,124)
|
(80,463,422)
|
Total
Stockholders' Deficiency
|
(25,418,359)
|
(22,066,657)
|
|
|
|
Total
Liabilities and Stockholders' Deficiency
|
$46,169
|
$43,243
|
|
For the three
months ended
|
For the six
months ended
|
||
|
June 30,
2020
|
June 30,
2019
|
June 30,
2020
|
June 30,
2019
|
Operating
Expenses
|
|
|
|
|
Salaries
and wages
|
$208,511
|
$163,428
|
$425,539
|
$315,845
|
Professional
fees
|
202,963
|
97,006
|
322,200
|
301,571
|
General
and administrative
|
48,588
|
69,728
|
127,796
|
130,165
|
Stock-based
compensation
|
-
|
159,337
|
-
|
159,337
|
Total
Operating Expenses
|
460,062
|
489,499
|
875,535
|
906,918
|
|
|
|
|
|
Loss
from Operations
|
(460,062)
|
(489,499)
|
(875,535)
|
(906,918)
|
|
|
|
|
|
Other
(Expenses) Income
|
|
|
|
|
Interest
expense, net
|
(326,042)
|
(230,395)
|
(646,860)
|
(443,098)
|
Amortization
of debt discount
|
(54,412)
|
(9,998)
|
(97,264)
|
(23,839)
|
Change
in FV of derivative liability
|
(1,420)
|
40,337
|
(1,732,043)
|
452,009
|
Total
Other Expense
|
(381,874)
|
(200,056)
|
(2,476,167)
|
(14,928)
|
|
|
|
|
|
Loss
Before Income Taxes
|
(841,936)
|
(689,555)
|
(3,351,702)
|
(921,846)
|
|
|
|
|
|
Provision
for Income Taxes
|
-
|
-
|
-
|
-
|
|
|
|
|
|
Net
Loss
|
$(841,936)
|
$(689,555)
|
$(3,351,702)
|
$(921,846)
|
|
|
|
|
|
Net
Loss per Common Share Basic and Diluted
|
$(0.01)
|
$(0.01)
|
$(0.02)
|
$(0.01)
|
|
|
|
|
|
Weighted
Average Number of Common Shares Outstanding
|
134,775,136
|
133,816,966
|
134,775,136
|
133,249,441
|
|
Preferred
Stock
|
Common
Stock
|
|
|
|
||||
|
Series B
Preferred
|
Series C
Preferred
|
|
|
|
|
|
||
|
Number
of
Shares
|
$0.001
Par
Value
|
Number
of
Shares
|
$0.001
Par
Value
|
Number
of
Shares
|
$0.001
Par
Value
|
Additional
Paid-in
capital
|
Accumulated
Deficit
|
Stockholders'
Deficiency
|
Balance, December 31,
2018
|
-
|
$-
|
-
|
$-
|
131,038,944
|
$131,039
|
$57,683,015
|
$(75,583,231)
|
$(17,769,177)
|
Stock issued for
conversions of notes payable
|
-
|
-
|
-
|
-
|
2,800,000
|
2,800
|
71,547
|
-
|
74,347
|
Reclassification of
derivative liabilities
|
-
|
-
|
-
|
-
|
-
|
-
|
103,412
|
-
|
103,412
|
Preferred stock issued
for cash
|
62,500
|
63
|
-
|
-
|
-
|
-
|
24,937
|
-
|
25,000
|
Preferred stock issued
for services
|
-
|
-
|
2,300,000
|
2,300
|
-
|
-
|
157,037
|
-
|
159,337
|
Net
Loss
|
|
-
|
-
|
-
|
-
|
-
|
-
|
(921,846)
|
(921,846)
|
Balance, June 30, 2019
(unaudited)
|
62,500
|
$63
|
2,300,000
|
$2,300
|
133,838,944
|
$133,839
|
$58,039,948
|
$(76,505,077)
|
$(18,328,927)
|
|
Preferred
Stock
|
Common
Stock
|
|
|
|
||||
|
Series B
Preferred
|
Series C
Preferred
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
Number
of
Shares
|
$0.001
Par
Value
|
Number
of
Shares
|
$0.001
Par
Value
|
Number
of
Shares
|
$0.001
Par
Value
|
Additional
Paid-in
capital
|
Accumulated
Deficit
|
Stockholders'
Deficiency
|
Balance, December 31,
2019
|
518,750
|
$519
|
2,300,000
|
$2,300
|
134,775,136
|
$134,775
|
$58,259,171
|
$(80,463,422)
|
$(22,066,657)
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(3,351,702)
|
(3,351,702)
|
Balance, June
30, 2020 (unaudited)
|
518,750
|
$519
|
2,300,000
|
$2,300
|
134,775,136
|
$134,775
|
$58,259,171
|
$(83,815,124)
|
$(25,418,359)
|
|
Preferred
Stock
|
Common
Stock
|
|
|
|
||||
|
Series B
Preferred
|
Series C
Preferred
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
Number
of
Shares
|
$0.001
Par
Value
|
Number
of
Shares
|
$0.001
Par
Value
|
Number
of
Shares
|
$0.001
Par
Value
|
Additional
Paid in
capital
|
Accumulated
Deficit
|
Stockholders'
Deficiency
|
Balance, March 31, 2019
(unaudited)
|
-
|
$-
|
-
|
$-
|
132,838,944
|
$132,839
|
$57,796,595
|
$(75,815,522)
|
$(17,886,088)
|
Common stock
issued for conversions of notes payable
|
-
|
-
|
-
|
-
|
1,000,000
|
1,000
|
23,733
|
-
|
24,733
|
Reclassification
of derivative liabilities
|
-
|
-
|
-
|
-
|
-
|
-
|
37,646
|
-
|
37,646
|
Preferred
stock issued for cash
|
62,500
|
63
|
-
|
-
|
-
|
-
|
24,937
|
-
|
25,000
|
Preferred
stock issued for services
|
-
|
-
|
2,300,000
|
2,300
|
-
|
-
|
157,037
|
-
|
159,337
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(689,555)
|
(689,555)
|
Balance, June
30, 2019 (unaudited)
|
62,500
|
$63
|
2,300,000
|
$2,300
|
133,838,944
|
$133,839
|
$58,039,948
|
$(76,505,077)
|
$(18,328,927)
|
|
Preferred
Stock
|
Common
Stock
|
|
|
|
||||
|
Series B
Preferred
|
Series C
Preferred
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
Number
of
Shares
|
$0.001
Par
Value
|
Number
of
Shares
|
$0.001
Par
Value
|
Number
of
Shares
|
$0.001
Par
Value
|
Additional
Paid-in
capital
|
Accumulated
Deficit
|
Stockholders'
Deficiency
|
Balance, March
31, 2020 (unaudited)
|
518,750
|
$519
|
2,300,000
|
$2,300
|
134,775,136
|
$134,775
|
$58,259,171
|
$(82,973,188)
|
$(24,576,423)
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
(841,936)
|
(841,936)
|
Balance, June
30, 2020 (unaudited)
|
518,750
|
$519
|
2,300,000
|
$2,300
|
134,775,136
|
$134,775
|
$58,259,171
|
$(83,815,124)
|
$(25,418,359)
|
|
2020
|
2019
|
Cash
Flows From Operating Activities:
|
|
|
Net
loss
|
$(3,351,702)
|
$(921,846)
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
Depreciation
|
-
|
172
|
Change in
derivative liability
|
1,732,043
|
(452,009)
|
Amortization of
debt discount
|
97,264
|
23,839
|
Preferred stock
issued for services
|
-
|
159,337
|
Changes in assets
and liabilities
|
|
|
Prepaid
expense
|
(1,000)
|
-
|
Accounts payable
and accrued expenses
|
1,134,564
|
849,950
|
Net
Cash Used In Operating Activities
|
(388,831)
|
(340,557)
|
|
|
|
Cash
Flows From Financing Activities:
|
|
|
Repayment of notes
payable - related party
|
(19,000)
|
(5,000)
|
Repayment of notes
payable
|
(2,328)
|
(2,327)
|
Advance from
related party
|
-
|
32,000
|
Proceeds from notes
payable
|
125,000
|
310,000
|
Proceeds from
convertible notes payable
|
260,000
|
-
|
Proceeds from
convertible notes payable - related party
|
10,000
|
-
|
Proceeds from PPP
loan
|
17,085
|
-
|
Proceeds
from the sale of preferred stock
|
-
|
25,000
|
Net
Cash Provided by Financing Activities
|
390,757
|
359,673
|
|
|
|
Net increase in
cash and cash equivalents
|
1,926
|
19,116
|
Cash and cash
equivalents at beginning of period
|
23,243
|
8,398
|
Cash
and Cash Equivalents at End of Period
|
$25,169
|
$27,514
|
|
|
|
Supplemental
disclosure of cash flow information
|
|
|
Cash paid for
interest expense
|
$1,260
|
$4,747
|
Cash paid for
income taxes
|
$-
|
$-
|
|
|
|
Supplemental
disclosure of non-cash investing and financing
activities:
|
|
|
Debt discount on
convertible note payable
|
$270,000
|
$-
|
Reclassification of
derivative liability
|
$-
|
$103,412
|
Convertible note
payable and accrued interest into common stock
|
$-
|
$74,347
|
Name
|
Place of Incorporation / Establishment
|
Principal Activities
|
Date Formed
|
Ocean
Thermal Energy Bahamas Ltd.
|
Bahamas
|
Intermediate
holding company of OTE BM Ltd. and OTE Bahamas O&M
Ltd.
|
07/04/2011
|
|
|
|
|
OTE BM
Ltd.
|
Bahamas
|
OTEC/SDC
development in the Bahamas
|
09/07/2011
|
|
|
|
|
OCEES
International Inc.
|
Hawaii,
USA
|
Research and
development for the Pacific Rim
|
01/21/1998
|
|
|
|
|
|
|
|
|
Related
Party
|
Non
Related Party
|
||
Date
of Issuance
|
Maturity
Date
|
Interest
Rate
|
In
Default
|
Original
Principal
|
Principal
at
June 30,
2020
|
Discount
at
June 30,
2020
|
Carrying
Amount at June 30, 2010
|
Current
|
Long-Term
|
Current
|
Long-Term
|
12/12/06
|
01/05/13
|
6.25%
|
Yes
|
58,670
|
2,227
|
-
|
2,227
|
-
|
-
|
2,227
|
-
|
12/01/07
|
09/01/15
|
7.00%
|
Yes
|
125,000
|
85,821
|
-
|
85,821
|
-
|
-
|
85,821
|
-
|
09/25/09
|
10/25/11
|
5.00%
|
Yes
|
50,000
|
50,000
|
-
|
50,000
|
-
|
-
|
50,000
|
-
|
12/23/09
|
12/23/14
|
7.00%
|
Yes
|
100,000
|
94,480
|
-
|
94,480
|
-
|
-
|
94,480
|
-
|
12/23/09
|
12/23/14
|
7.00%
|
Yes
|
25,000
|
23,619
|
-
|
23,619
|
-
|
-
|
23,619
|
-
|
12/23/09
|
12/23/14
|
7.00%
|
Yes
|
25,000
|
23,620
|
-
|
23,620
|
-
|
-
|
23,620
|
-
|
02/03/12
|
12/31/19
|
10.00%
|
Yes
|
1,000,000
|
1,000,000
|
-
|
1,000,000
|
|
-
|
1,000,000
|
-
|
08/15/13
|
10/31/23
|
10.00%
|
No
|
158,334
|
158,334
|
-
|
158,334
|
-
|
-
|
-
|
158,334
|
12/31/13
|
12/31/15
|
8.00%
|
Yes
|
290,000
|
130,000
|
-
|
130,000
|
-
|
-
|
130,000
|
-
|
04/01/14
|
12/31/18
|
10.00%
|
Yes
|
2,265,000
|
1,102,500
|
-
|
1,102,500
|
1,102,500
|
-
|
-
|
-
|
12/22/14
|
03/31/15
|
22.00%*
|
Yes
|
200,000
|
200,000
|
-
|
200,000
|
-
|
-
|
200,000
|
-
|
12/26/14
|
12/26/15
|
22.00%*
|
Yes
|
100,000
|
100,000
|
-
|
100,000
|
-
|
-
|
100,000
|
-
|
03/12/15
|
(1)
|
6.00%
|
No
|
394,380
|
394,380
|
-
|
394,380
|
394,380
|
-
|
-
|
-
|
04/07/15
|
04/07/18
|
10.00%
|
Yes
|
50,000
|
50,000
|
-
|
50,000
|
-
|
-
|
50,000
|
-
|
11/23/15
|
(1)
|
6.00%
|
No
|
50,000
|
50,000
|
-
|
50,000
|
50,000
|
-
|
-
|
-
|
02/25/16
|
(1)
|
6.00%
|
No
|
50,000
|
50,000
|
-
|
50,000
|
50,000
|
-
|
-
|
-
|
05/20/16
|
(1)
|
6.00%
|
No
|
50,000
|
50,000
|
-
|
50,000
|
50,000
|
-
|
-
|
-
|
10/20/16
|
(1)
|
6.00%
|
No
|
50,000
|
12,500
|
-
|
12,500
|
12,500
|
-
|
-
|
-
|
10/20/16
|
(1)
|
6.00%
|
No
|
12,500
|
12,500
|
-
|
12,500
|
12,500
|
-
|
-
|
-
|
12/21/16
|
(1)
|
6.00%
|
No
|
25,000
|
25,000
|
-
|
25,000
|
25,000
|
-
|
-
|
-
|
03/09/17
|
(1)
|
10.00%
|
No
|
200,000
|
177,000
|
-
|
177,000
|
177,000
|
-
|
-
|
-
|
07/13/17
|
07/13/19
|
6.00%
|
Yes
|
25,000
|
25,000
|
-
|
25,000
|
-
|
-
|
25,000
|
-
|
07/18/17
|
07/18/19
|
6.00%
|
Yes
|
25,000
|
25,000
|
-
|
25,000
|
-
|
-
|
25,000
|
-
|
07/26/17
|
07/26/19
|
6.00%
|
Yes
|
15,000
|
15,000
|
-
|
15,000
|
-
|
-
|
15,000
|
-
|
12/20/17
|
(2)
|
10.00%
|
Yes
|
979,156
|
979,156
|
-
|
979,156
|
-
|
-
|
979,156
|
-
|
11/06/17
|
12/31/18
|
10.00%
|
Yes
|
646,568
|
559,093
|
-
|
559,093
|
559,093
|
-
|
-
|
-
|
02/19/18
|
(3)
|
18.00%*
|
Yes
|
629,451
|
1,161,136
|
-
|
1,161,136
|
-
|
-
|
1,161,136
|
-
|
09/19/18
|
09/28/21
|
6.00%
|
No
|
10,000
|
10,000
|
-
|
10,000
|
-
|
-
|
-
|
10,000
|
12/14/18
|
12/22/18
|
24.00%*
|
Yes
|
474,759
|
987,986
|
-
|
987,986
|
-
|
-
|
987,986
|
-
|
01/02/19
|
(4)
|
17.00%
|
No
|
310,000
|
310,000
|
-
|
310,000
|
-
|
-
|
310,000
|
-
|
08/14/19
|
10/31/2021
|
8.00%
|
No
|
26,200
|
26,200
|
15,317
|
10,883
|
-
|
-
|
-
|
10,883
|
(5)
|
10/31/2021
|
8.00%
|
No
|
105,000
|
105,000
|
69,604
|
35,396
|
-
|
3,445
|
-
|
31,951
|
(6)
|
01/02/22
|
8.00%
|
No
|
306,750
|
306,750
|
240,348
|
66,402
|
-
|
4,969
|
-
|
61,433
|
(7)
|
(7)
|
10.00%
|
No
|
125,000
|
125,000
|
-
|
125,000
|
-
|
-
|
125,000
|
-
|
04/28/20
|
04/28/22
|
1.00%
|
No
|
17,085
|
17,085
|
-
|
17,085
|
-
|
-
|
8,978
|
8,107
|
|
|
|
|
$8,973,853
|
$8,444,387
|
$325,269
|
$8,119,115
|
$2,432,973
|
$8,414
|
$5,397,023
|
$280,705
|
|
|
|
|
|
|
|
|
Related
Party
|
Non
Related Party
|
||
Date
of Issuance
|
Maturity
Date
|
Interest
Rate
|
In
Default
|
Original
Principal
|
Principal
at
December
31, 2019
|
Discount
at December 31, 2019
|
Carrying
Amount at December 31, 2019
|
Current
|
Long-Term
|
Current
|
Long-Term
|
12/12/06
|
01/05/13
|
6.25%
|
Yes
|
58,670
|
4,555
|
-
|
4,555
|
-
|
-
|
4,555
|
-
|
12/01/07
|
09/01/15
|
7.00%
|
Yes
|
125,000
|
85,821
|
-
|
85,821
|
-
|
-
|
85,821
|
-
|
09/25/09
|
10/25/11
|
5.00%
|
Yes
|
50,000
|
50,000
|
-
|
50,000
|
-
|
-
|
50,000
|
-
|
12/23/09
|
12/23/14
|
7.00%
|
Yes
|
100,000
|
94,480
|
-
|
94,480
|
-
|
-
|
94,480
|
-
|
12/23/09
|
12/23/14
|
7.00%
|
Yes
|
25,000
|
23,619
|
-
|
23,619
|
-
|
-
|
23,619
|
-
|
12/23/09
|
12/23/14
|
7.00%
|
Yes
|
25,000
|
23,620
|
-
|
23,620
|
-
|
-
|
23,620
|
-
|
02/03/12
|
12/31/19
|
10.00%
|
Yes
|
1,000,000
|
1,000,000
|
-
|
1,000,000
|
|
-
|
1,000,000
|
-
|
08/15/13
|
10/31/23
|
10.00%
|
No
|
158,334
|
158,334
|
-
|
158,334
|
-
|
-
|
-
|
158,334
|
12/31/13
|
12/31/15
|
8.00%
|
Yes
|
290,000
|
130,000
|
-
|
130,000
|
-
|
-
|
130,000
|
-
|
04/01/14
|
12/31/18
|
10.00%
|
Yes
|
2,265,000
|
1,102,500
|
-
|
1,102,500
|
1,102,500
|
-
|
-
|
-
|
12/22/14
|
03/31/15
|
22.00%*
|
Yes
|
200,000
|
200,000
|
-
|
200,000
|
-
|
-
|
200,000
|
-
|
12/26/14
|
12/26/15
|
22.00%*
|
Yes
|
100,000
|
100,000
|
-
|
100,000
|
-
|
-
|
100,000
|
-
|
03/12/15
|
(1)
|
6.00%
|
No
|
394,380
|
394,380
|
-
|
394,380
|
394,380
|
-
|
-
|
-
|
04/07/15
|
04/07/18
|
10.00%
|
Yes
|
50,000
|
50,000
|
-
|
50,000
|
-
|
-
|
50,000
|
-
|
11/23/15
|
(1)
|
6.00%
|
No
|
50,000
|
50,000
|
-
|
50,000
|
50,000
|
-
|
-
|
-
|
02/25/16
|
(1)
|
6.00%
|
No
|
50,000
|
50,000
|
-
|
50,000
|
50,000
|
-
|
-
|
-
|
05/20/16
|
(1)
|
6.00%
|
No
|
50,000
|
50,000
|
-
|
50,000
|
50,000
|
-
|
-
|
-
|
10/20/16
|
(1)
|
6.00%
|
No
|
50,000
|
12,500
|
-
|
12,500
|
12,500
|
-
|
-
|
-
|
10/20/16
|
(1)
|
6.00%
|
No
|
12,500
|
12,500
|
-
|
12,500
|
12,500
|
-
|
-
|
-
|
12/21/16
|
(1)
|
6.00%
|
No
|
25,000
|
25,000
|
-
|
25,000
|
25,000
|
-
|
-
|
-
|
03/09/17
|
(1)
|
10.00%
|
No
|
200,000
|
177,000
|
-
|
177,000
|
177,000
|
-
|
-
|
-
|
07/13/17
|
07/13/19
|
6.00%
|
Yes
|
25,000
|
25,000
|
-
|
25,000
|
-
|
-
|
25,000
|
-
|
07/18/17
|
07/18/19
|
6.00%
|
Yes
|
25,000
|
25,000
|
-
|
25,000
|
-
|
-
|
25,000
|
-
|
07/26/17
|
07/26/19
|
6.00%
|
Yes
|
15,000
|
15,000
|
-
|
15,000
|
-
|
-
|
15,000
|
-
|
12/20/17
|
(2)
|
10.00%
|
Yes
|
979,156
|
979,156
|
|
979,156
|
-
|
-
|
979,156
|
-
|
11/06/17
|
12/31/18
|
10.00%
|
Yes
|
646,568
|
578,093
|
-
|
578,093
|
578,093
|
-
|
-
|
-
|
02/19/18
|
(3)
|
18.00%*
|
Yes
|
629,451
|
1,161,136
|
-
|
1,161,136
|
-
|
-
|
1,161,136
|
-
|
09/19/18
|
09/28/21
|
6.00%
|
No
|
10,000
|
10,000
|
-
|
10,000
|
-
|
-
|
-
|
10,000
|
12/14/18
|
12/22/18
|
24.00%*
|
Yes
|
474,759
|
987,986
|
-
|
987,986
|
-
|
-
|
987,986
|
-
|
01/02/19
|
(4)
|
17.00%
|
No
|
310,000
|
310,000
|
|
310,000
|
-
|
-
|
310,000
|
-
|
08/14/19
|
10/31/2021
|
8.00%
|
No
|
26,200
|
26,200
|
21,211
|
4,989
|
-
|
-
|
-
|
4,989
|
(5)
|
10/31/2021
|
8.00%
|
No
|
105,000
|
105,000
|
95,559
|
9,441
|
-
|
1,000
|
-
|
8,441
|
(6)
|
01/02/22
|
8.00%
|
No
|
36,750
|
36,750
|
35,764
|
986
|
-
|
292
|
-
|
694
|
|
|
|
|
$8,561,768
|
$8,053,630
|
$152,534
|
$7,901,096
|
$2,451,973
|
$1,292
|
$5,265,373
|
$182,458
|
|
|
Quoted market
prices
|
|
|
|
|
for
identical
|
Significant
other
|
Significant
|
|
Fair value
at
|
assets/liabilities
|
observable
inputs
|
unobservable
inputs
|
|
June 30,
2020
|
(Level
1)
|
(Level
2)
|
(Level
3)
|
Derivative
Liability
|
$5,034,099
|
$-
|
$-
|
$5,034,099
|
|
|
|
|
|
|
|
|
|
Derivative
Liability
|
Derivative
liability as of December 31, 2019
|
|
|
|
$3,032,056
|
Fair
value at the commitment date for convertible
instruments
|
|
|
926,850
|
|
Change in fair
value of derivative liability
|
|
|
|
1,075,193
|
Reclassification
to additional paid-in capital for financial
instruments
|
|
|
||
that
ceased to be a derivative liability
|
|
|
|
-
|
Derivative
liability as of June 30, 2020
|
|
|
|
$5,034,099
|
|
|
|
|
|
|
Change
in
|
|
Fair Value
of
|
|
Derivative
Liability*
|
Change in fair
value of derivative liability at the beginning of
period
|
$-
|
Day one
gains/(losses) on valuation
|
656,850
|
Gains/(losses) from
the change in fair value of derivative liability
|
1,075,193
|
Change in fair
value of derivative liability at the end of the period
|
$1,732,043
|
|
Measurement
and
Remeasurement
Date**
|
Expected
dividends
|
0%
|
Expected
volatility
|
180.0% to
468.7%
|
Risk free interest
rate
|
0.011% to
0.29%
|
Expected term (in
years)
|
.025
to 3.56
|
|
Number of
Warrants
|
Weighted Average
Exercise Price
|
Balance at December
31, 2019
|
350,073
|
$0.18
|
Granted
|
-
|
-
|
Exercised
|
-
|
-
|
Forfeited
|
-
|
-
|
Balance at June 30,
2020
|
350,073
|
$0.18
|
Exercisable at June
30, 2020
|
350,073
|
$0.18
|
Exhibit
Number*
|
Title of Document
|
Location
|
Item 31
|
Rule 13a-14(a)/15d-14(a) Certifications
|
|
Certification
of Principal Executive and Principal Financial Officer Pursuant to
Rule 13a-14
|
This
filing.
|
|
|
|
|
Item 32
|
Section 1350 Certifications
|
|
Certification
of Chief Executive Officer and Chief Financial Officer Pursuant to
18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002
|
This
filing.
|
|
|
|
|
Item 101**
|
Interactive Data File
|
|
101.INS
|
XBRL
Instance Document
|
This
filing.
|
101.SCH
|
XBRL
Taxonomy Extension Schema
|
This
filing.
|
101.CAL
|
XBRL
Taxonomy Extension Calculation Linkbase
|
This
filing.
|
101.DEF
|
XBRL
Taxonomy Extension Definition Linkbase
|
This
filing.
|
101.LAB
|
XBRL
Taxonomy Extension Label Linkbase
|
This
filing.
|
101.PRE
|
XBRL
Taxonomy Extension Presentation Linkbase
|
This
filing.
|
*
|
All
exhibits are numbered with the number preceding the decimal
indicating the applicable SEC reference number in Item 601 and the
number following the decimal indicating the sequence of the
particular document.
|
**
|
The
XBRL related information in Exhibit 101 will not be deemed
“filed” for purposes of Section 18 of the Securities
Exchange Act of 1934, as amended, or otherwise subject to liability
of that section and will not be incorporated by reference into any
filing or other document pursuant to the Securities Act of 1933, as
amended, except as is expressly set forth by specific reference in
such filing or document.
|
|
OCEAN
THERMAL ENERGY CORPORATION
|
|
|
|
|
|
|
|
Date:
August 13, 2020
|
By:
|
/s/
Jeremy P. Feakins
|
|
|
Jeremy
P. Feakins
|
|
|
Chief
Executive Officer and Chief Financial Officer
|
|
|
(Principal
Executive and Financial Officer)
|
|
(a)
|
Designed such
disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by
others within those entities, particularly during the period in
which this report is being prepared;
|
|
(b)
|
Designed such
internal control over financial reporting, or caused such internal
control over financial reporting to be designed under our
supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally
accepted accounting principles;
|
|
(c)
|
Evaluated the
effectiveness of the registrant’s disclosure controls and
procedures and presented in this report our conclusions about the
effectiveness of the disclosure controls and procedures, as of the
end of the period covered by this report based on such evaluation;
and
|
|
(d)
|
Disclosed in this
report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s
most recent fiscal quarter (the registrant’s fourth fiscal
quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the
registrant’s internal control over financial reporting;
and
|
|
(a)
|
All significant
deficiencies and material weaknesses in the design or operation of
internal control over financial reporting which are reasonably
likely to adversely affect the registrant’s ability to
record, process, summarize and report financial information;
and
|
|
|
|
|
(b)
|
Any fraud, whether or
not material, that involves management or other employees who have
a significant role in the registrant’s internal control over
financial reporting.
|
|
|
|
Dated: August 12,
2020
|
By:
|
/s/ Jeremy P.
Feakins
|
|
|
Jeremy P.
Feakins
|
|
|
Chief Executive Officer
and Chief Financial Officer
|
|
|
(Principal Executive
Office and Principal Financial Officer)
|
|
(1)
|
the Report fully
complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934; and
|
|
(2)
|
the information
contained in the Report fairly presents, in all material respects,
the financial condition and results of operations of the
Company.
|
Document and Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2020 |
Aug. 11, 2020 |
|
Document and Entity Information: | ||
Entity Registrant Name | Ocean Thermal Energy Corp | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2020 | |
Amendment Flag | false | |
Entity Central Index Key | 0000827099 | |
Current Fiscal Year End Date | --12-31 | |
Entity Common Stock, Shares Outstanding | 134,775,136 | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Current Reporting Status | Yes | |
Entity Shell Company | false | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q2 | |
Entity Interactive Data Current | Yes | |
Entity Incorporation State Country Code | NV | |
Entity File Number | 033-19411-C |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Preferred stock, par value | $ .001 | $ .001 |
Common stock, par value | $ .001 | $ 0.001 |
Common stock, shares authorized | 200,000,000 | 200,000,000 |
Common stock, shares issued | 134,775,136 | 134,775,136 |
Common stock, shares outstanding | 134,775,136 | 134,775,136 |
Preferred Stock Series B | ||
Preferred stock, shares authorized | 1,250,000 | 1,250,000 |
Preferred stock, shares issued | 518,750 | 518,750 |
Preferred stock, shares outstanding | 518,750 | 518,750 |
Preferred Stock Series C | ||
Preferred stock, shares authorized | 2,700,000 | 2,700,000 |
Preferred stock, shares issued | 2,300,000 | 2,300,000 |
Preferred stock, shares outstanding | 2,300,000 | 2,300,000 |
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
|
Operating Expenses | ||||
Salaries and wages | $ 208,511 | $ 163,428 | $ 425,539 | $ 315,845 |
Professional fees | 202,963 | 97,006 | 322,200 | 301,571 |
General and administrative | 48,588 | 69,728 | 127,796 | 130,165 |
Stock-based compensation | 0 | 159,337 | 0 | 159,337 |
Total Operating Expenses | 460,062 | 489,499 | 875,535 | 906,918 |
Loss from Operations | (460,062) | (489,499) | (875,535) | (906,918) |
Other Income & Expenses | ||||
Interest expense, net | (326,042) | (230,395) | (646,860) | (443,098) |
Amortization of debt discount | (54,412) | (9,998) | (97,264) | (23,839) |
Change in FV of derivative liability | (1,420) | 40,337 | (1,732,043) | 452,009 |
Total Other Expense | (381,874) | (200,056) | (2,476,167) | (14,928) |
Loss Before Income Taxes | (841,936) | (689,555) | (3,351,702) | (921,846) |
Provision for Income Taxes | 0 | 0 | 0 | 0 |
Net Loss | $ (841,936) | $ (689,555) | $ (3,351,702) | $ (921,846) |
Net Loss per Common Share Basic and Diluted | $ (0.01) | $ (0.01) | $ (0.02) | $ (0.01) |
Weighted Average Number of Common Stock Outstanding Basic and Diluted | 134,775,136 | 133,816,966 | 134,775,136 | 133,249,441 |
1. Nature of Business and Business Presentation |
6 Months Ended |
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Jun. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Business and Business Presentation | Ocean Thermal Energy Corporation is currently in the businesses of:
● OTEC and SWAC/LWAC—designing ocean thermal energy conversion (“OTEC”) power plants and seawater air conditioning and lake water air conditioning (“SWAC/LWAC”) plants for large commercial properties, utilities, and municipalities. These technologies provide practical solutions to humanity’s three oldest and most fundamental needs: clean drinking water, plentiful food, and sustainable, affordable energy without the use of fossil fuels. OTEC is a clean technology that continuously extracts energy from the temperature difference between warm surface ocean water and cold deep seawater. In addition to producing electricity, some of the seawater running through an OTEC plant can be efficiently desalinated using the power generated by the OTEC technology, producing thousands of cubic meters of fresh water every day for use in agriculture and human consumption in the communities served by its plants. This cold, deep, nutrient-rich water can also be used to cool buildings (SWAC/LWAC) and for fish farming/aquaculture. In short, it is a technology with many benefits, and its versatility makes OTEC unique.
● EcoVillages—developing and commercializing our EcoVillages, as well as working to develop or acquire new complementary assets. EcoVillages are communities whose goal is to become more socially, economically, and ecologically sustainable and whose inhabitants seek to live according to ecological principles, causing as little impact on the environment as possible. We expect that our EcoVillage communities will range from a population of 50 to 150 individuals, although some may be smaller. We may also form larger EcoVillages, of up to 2,000 individuals, as networks of smaller subcommunities. We expect that our EcoVillages will grow by the addition of individuals, families, or other small groups.
We expect to use our technology in the development of our EcoVillages, which should add significant value to that line of business.
The condensed consolidated financial statements include the accounts of the company and our wholly owned subsidiaries. Intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, our financial statements reflect all adjustments that are of a normal recurring nature necessary for presentation of financial statements in accordance with U.S. generally accepted accounting principles (GAAP).
We condensed or omitted certain information and footnote disclosures normally included in our annual audited financial statements, which we prepared in accordance with GAAP. The operating results for the six months ended June 30, 2020, are not necessarily indicative of the results to be expected for the year. Our interim financial statements should be read in conjunction with our annual report on Form 10-K for the year ended December 31, 2019, including the financial statements and notes.
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2. Summary of Significant Accounting Policies |
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Jun. 30, 2020 | |||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||
Summary of Significant Accounting Policies | Principal Subsidiary Undertakings
Our condensed consolidated financial statements include the following subsidiaries:
We have an effective interest of 100% in each of our subsidiaries.
Use of Estimates
In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include the assumptions used in the valuation of equity-based transactions, valuation of derivative liabilities, valuation of deferred tax assets, and depreciable lives of property and equipment.
Cash and Cash Equivalents
We consider all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At June 30, 2020, and December 31, 2019, we had no cash equivalents.
Income Taxes
We use the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities and on the amount of operating loss carryforwards and are measured using the enacted tax rates and laws that will be in effect when the temporary differences and carryforwards are expected to reverse. An allowance against deferred tax assets is recorded when it is more likely than not that such tax benefits will not be realized.
Our ability to use our net operating loss carryforwards may be substantially limited due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), as well as similar state provisions. These ownership changes may limit the amount of net operating loss that can be utilized annually to offset future taxable income and tax, respectively. In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50.0% of the outstanding stock of a company by certain stockholders or public groups.
We have not completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since we became a “loss corporation” under the definition of Section 382. If we have experienced an ownership change, utilization of the net operating loss carryforwards would be subject to an annual limitation under Section 382 of the Code, which is determined by first multiplying the value of our stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the net operating loss carryforwards before utilization. Further, until a study is completed and any limitation known, no positions related to limitations are being considered as an uncertain tax position or disclosed as an unrecognized tax benefit. Any carryforwards that expire prior to utilization as a result of such limitations will be removed from deferred tax assets with a corresponding reduction of the valuation allowance. Due to the existence of the valuation allowance, it is not expected that any possible limitation will have an impact on our results of operations or financial position.
Business Segments
We operate in one segment and therefore segment information is not presented.
Fair Value
Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value under GAAP, and enhances disclosures about fair value measurements. ASC 820 describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:
● Level 1–Pricing inputs are quoted prices available in active markets for identical assets or liabilities as of the reporting date.
● Level 2–Pricing inputs are quoted for similar assets or inputs that are observable, either directly or indirectly, for substantially the full term through corroboration with observable market data. Level 2 includes assets or liabilities valued at quoted prices adjusted for legal or contractual restrictions specific to these investments.
● Level 3–Pricing inputs are unobservable for the assets or liabilities; that is, the inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability.
Management believes the carrying amounts of the short-term financial instruments, including cash and cash equivalents, prepaid expense, accounts payable, accrued liabilities, notes payable, deferred compensation, and other liabilities reflected in the accompanying balance sheets approximate fair value at June 30, 2020, and December 31, 2019, due to the relatively short-term nature of these instruments.
We account for derivative liability at fair value on a recurring basis under level 3 at June 30, 2020, and December 31, 2019 (see Note 5).
Concentrations
Cash, cash equivalents, and restricted cash are deposited with major financial institutions, and at times, such balances with any one financial institution may be in excess of FDIC-insured limits. Management believes the risk in these situations to be minimal. As of June 30, 2020, and December 31, 2019, $0 and $0, respectively, were deposited in excess of FDIC-insured limits.
Loss per Share
The basic loss per share is calculated by dividing our net loss available to common shareholders by the weighted average number of common shares during the period. The diluted loss per share is calculated by dividing our net loss by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. We have 350,073 and 350,073 shares issuable upon the exercise of warrants and 122,753,322 and 52,334,858 shares issuable upon the conversion of convertible notes that were not included in the computation of dilutive loss per share because their inclusion is antidilutive for the six months ended June 30, 2020 and 2019, respectively.
Revenue Recognition
We account for our revenue in accordance with Accounting Standard Update 2014-09, Revenue from Contracts with Customers (Topic 606), which requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services.
Recent Accounting Pronouncements
We have reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on our consolidated results of operations, financial position, and cash flows. Based on that review, we believe that none of these pronouncements will have a significant effect on current or future earnings or operations.
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3. Going Concern |
6 Months Ended |
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Jun. 30, 2020 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Going Concern | The accompanying unaudited condensed consolidated financial statements have been prepared on the assumption that we will continue as a going concern. As reflected in the accompanying condensed consolidated financial statements, we had a net loss of $3,351,702 and used $388,831 of cash in operating activities for the six months ended June 30, 2020. We had a working capital deficiency of $25,129,240 and a stockholders’ deficiency of $25,418,359 as of June 30, 2020. These factors raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern is dependent on our ability to increase sales and obtain external funding for our projects under development. The financial statements do not include any adjustments that may result from the outcome of this uncertainty.
In recent months, the continued spread of COVID-19 has led to disruption and volatility in the global capital markets, which increases the cost of capital and adversely impacts access to capital. The members of our executive team and contract outside accountant live in different cities in Pennsylvania. On March 23, 2020, the Governor of Pennsylvania issued statewide stay-at-home orders to mitigate the spread of COVID-19. Non-life-sustaining physical businesses, like our company, were closed. Individuals were permitted to leave their residences only for tasks essential to maintaining health and safety. On June 26, 2020, Lancaster County, where we are located, finally moved into the least restrictive phase for reopening our business; however, we must still follow specific guidelines established by the Governor. These include continuing to telework as much as possible, updating our buildings to meet business and safety requirements, decreasing our office usage to 75% occupancy, and following CDC and DOH guidelines for social distancing and cleaning. This has negatively impacted our ability to access the capital markets for additional working capital. We cannot assure that we will not experience further adverse impacts on our ability to raise capital through debt and/or equity markets to fund working capital requirements or our ability to continue as a going concern as a result the COVID-19.
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4. Convertible Notes and Notes Payable |
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Convertible Notes and Notes Payable | On December 12, 2006, we borrowed funds from the Southeast Idaho Council of Governments (SICOG), the EDA-#180 loan. The interest rate is 6.25%, and the maturity date was January 5, 2013. During the six months ended June 30, 2020, we made a repayment of $2,328. The loan principal was $2,227 with accrued interest of $0 as of June 30, 2020. This note is in default.
On December 23, 2009, we borrowed funds from SICOG, the EDA-#273 loan. The interest rate is 7%, and the maturity date was December 23, 2014. The loan principal was $94,480 with accrued interest of $21,935 as of June 30, 2020. This note is in default.
On December 23, 2009, we borrowed funds from SICOG, the MICRO I-#274 loan and MICRO II-#275 loan. The interest rate is 7%, and the maturity date was December 23, 2014. The combined loan principal was $47,239 with accrued interest of $9,602 as of June 30, 2020. These notes are in default.
On December 1, 2007, we borrowed funds from the Eastern Idaho Development Corporation and the Economic Development Corporation. The interest rate is 7%, and the maturity date was September 1, 2015. The loan principal was $85,821 with accrued interest of $48,542 as of June 30, 2020. This note is in default.
On September 25, 2009, we borrowed funds from the Pocatello Development Authority. The interest rate is 5%, and the maturity date was October 25, 2011. The loan principal was $50,000 with accrued interest of $24,539 as of June 30, 2020. This note is in default.
On March 12, 2015, we combined convertible notes issued in 2010, 2011, and 2012, payable to our officers and directors in the aggregate principal amount of $320,246, plus accrued but unpaid interest of $74,134, into a single, $394,380 consolidated convertible note (the “Consolidated Note”). The Consolidated Note was assigned to JPF Venture Group, Inc., an investment entity that is majority-owned by Jeremy Feakins, our director, chief executive officer, and chief financial officer. The Consolidated Note was convertible to common stock at $0.025 per share, the approximate market price of our common stock as of the date of the issuance. On February 24, 2017, the Consolidated Note was amended to eliminate the conversion feature. The Consolidated Note bears interest at 6% per annum and is due and payable within 90 days after demand. As of June 30, 2020, the outstanding loan balance was $394,380 and the accrued but unpaid interest was $131,159 on the Consolidated Note.
During 2016 and 2015, we borrowed $75,000 from JPF Venture Group, Inc. pursuant to promissory notes. The terms of the notes are as follows: (i) interest is payable at 6% per annum; (ii) the notes are payable 90 days after demand; and (iii) payee is authorized to convert part or all of the note balance and accrued interest, if any, into shares of our common stock at the rate of one share each for $0.03 of principal amount of the note. This conversion share price was adjusted to $0.01384 for the reverse stock splits. As of December 31, 2018, we have recorded a debt discount of $75,000 for the fair value derivative liability and fully amortized the debt discount. As of June 30, 2020, the outstanding balance of these notes was $75,000, plus accrued interest of $19,011.
During 2016, we borrowed $112,500 from JPF Venture Group, Inc. pursuant to promissory notes. The terms of each note are as follows: (i) interest is payable at 6% per annum; (ii) the notes are payable 90 days after demand; and (iii) payee is authorized to convert part or all of the note balance and accrued interest, if any, into shares of our common stock at the rate of one share for each $0.03 of principal amount of the note. On February 24, 2017, the notes were amended to eliminate the conversion features. As of June 30, 2020, the outstanding balance of these notes was $112,500, plus accrued interest of $28,453.
On October 20, 2016, we borrowed $12,500 from our independent director pursuant to a promissory note. The terms of the note are as follows: (i) interest is payable at 6% per annum; (ii) the note is payable 90 days after demand; and (iii) the payee is authorized to convert part or all of the note balance and accrued interest, if any, into shares of our common stock at the rate of one share for each $0.03 of principal amount of the note. This conversion share price was adjusted to $0.01384 for the reverse stock splits. As of December 31, 2018, we have recorded a debt discount of $12,500 for the fair value of derivative liability and fully amortized the debt discount. As of June 30, 2020, the outstanding note balance was $12,500, plus accrued interest of $2,894.
During 2012, we issued a note payable for $1,000,000. The note had an interest rate of 10% per annum, was secured by a first lien in all of our assets, and was due on February 3, 2015. On March 6, 2018, the note was amended to extend the due date to December 31, 2018. On March 29, 2019, the maturity date of the note was extended to December 31, 2019. As of June 30, 2020, the outstanding note balance was $1,000,000, plus accrued interest of $788,893. This note is in default.
During 2013, we issued Series B units. Each unit is comprised of a note agreement, a $50,000 promissory note that matures on September 30, 2023, and bears interest at 10% per annum payable annually in arrears, and a security agreement. During 2013, we issued $525,000 of 10% promissory notes. As of June 30, 2020, the loan balances were $158,334 and the accrued interest was $109,005.
During 2013, we issued a note payable for $290,000 in connection with the reverse merger transaction with Broadband Network Affiliates, Inc. We have determined that no further payment of principal or interest on this note should be made because the note holder failed to perform his underlying obligations giving rise to this note. As described in Note 7, the note holder filed suit on May 21, 2019, and we remain confident that the court will decide in our favor by either voiding the note or awarding damages sufficient to offset the note value. As of June 30, 2020, the balance outstanding was $130,000, and the accrued interest as of that date was $66,660. This note is in default.
On January 18, 2018, Jeremy P. Feakins & Associates, LLC, an investment entity owned by our chief executive, chief financial officer, and a director, agreed to extend the due date for repayment of a $2,265,000 note issued in 2014 to the earlier of December 31, 2018, or the date of the financial closings of our Baha Mar project (or any other project of $25 million or more), whichever occurs first. As of June 30, 2020, the note balance was $1,102,500 and the accrued interest was $684,784. This note is in default.
We have $300,000 in principal amount of outstanding notes due to unrelated parties, issued in 2014, in default since 2015, accruing interest at a default rate of 22%. We intend to repay the notes and accrued interest upon the Baha Mar SWAC/LWAC project’s financial closing. Accrued interest totaled $347,329 as of June 30, 2020. These notes are in default.
The due date of April 7, 2017, on a $50,000 promissory note with an unaffiliated investor, was extended to April 7, 2019. The note and accrued interest can be converted into our common stock at a conversion rate of $0.75 per share at any time prior to the repayment. This conversion price is not required to adjust for the reverse stock split as per the note agreement. Accrued interest totaled $26,514 as of June 30, 2020. The note is in default.
On March 9, 2017, an entity owned and controlled by our chief executive officer agreed to provide up to $200,000 in working capital. The note bears interest of 10% and is due and payable within 90 days of demand. During the year ended December 31, 2017, we received an additional $2,000 and repaid $25,000. As of June 30, 2020, the balance outstanding was $177,000, plus accrued interest of $59,745.
During the third quarter of 2017, we completed a $2,000,000 convertible promissory note private placement offering. The terms of the notes are as follows: (i) interest is payable at 6% per annum; (ii) the notes are payable two years after purchase; and (iii) all principal and interest on each note automatically converts on the conversion maturity date into shares of our common stock at a conversion price of $4.00 per share, as long as the closing share price of our common stock on the trading day immediately preceding the conversion maturity date is at least $4.00, as adjusted for stock splits, stock dividends, reclassification, and the like. If the price of our shares on such date is less than $4.00 per share, the notes (principal and interest) will be repaid in full. During third quarter of 2019, $15,000 in notes was repaid. As of June 30, 2020, the outstanding balance for the remaining three notes was $65,000, plus accrued interest of $11,544. These notes are in default.
On November 6, 2017, we entered into an agreement and promissory note with JPF Venture Group, Inc. to loan up to $2,000,000 to us. The terms of the note are as follows: (i) interest is payable at 10% per annum; (ii) all unpaid principal and all accrued and unpaid interest is due and payable at the earliest of a resolution of the Memphis litigation (as defined therein), December 31, 2018, or when we are otherwise able to pay. During the six months ended June 30, 2020, we repaid $19,000. As of June 30, 2020, the outstanding note balance was $559,093 and the accrued interest was $170,003. This note is in default.
In December 2017, we entered into a series of unsecured promissory notes and warrant purchase agreements with accredited investors. These notes accrue interest at a rate of 10% per annum payable on a quarterly basis and are not convertible into shares of our capital stock. The notes are payable within five business days after receipt of gross proceeds of at least $1,500,000 from L2 Capital, LLC, an unaffiliated Kansas limited liability company (“L2 Capital”). We may prepay the notes in whole or in part, without penalty or premium, on or before the maturity date of July 30, 2019. In connection with the issuance of the notes, for each note purchased, the note holder received a warrant as follows:
The exercise price per share of the warrants is equal to 85% of the closing price of our common stock on the day immediately preceding the exercise of the relevant warrant, subject to adjustment as provided in the warrant. The warrant includes a cashless net exercise provision whereby the holder can elect to receive shares equal to the value of the warrant minus the fair market value of shares being surrendered to pay the exercise price. As of June 30, 2020, the balance of the outstanding loans was $979,156 and the accrued interest was $210,961. During 2019, 98,000 warrants were transferred from a warrant holder to JPF Venture Group Inc. These warrants were issued in exchange for shares issued by JPF Venture Group to the warrant holders. The warrant terms remain the same. As of June 30, 2020, we have outstanding warrants to purchase 223,000 shares of common stock. These notes are in default.
On February 15, 2018, we entered into an agreement with L2 Capital for a loan of up to $565,555, together with interest at the rate of 8% per annum, which consists of up to $500,000, a prorated original issuance discount of $55,555, and $10,000 for transactional expenses to L2 Capital. L2 Capital has the right at any time to convert all or any part of the note into fully paid and nonassessable shares of our common stock at the fixed conversion price, which is equal to $0.50 per share; however, at any time on or after the occurrence of any event of default under the note, the conversion price will adjust to the lesser of $0.50 or 65% multiplied by the lowest volume weighted average price of the common stock during the 20-trading-day period ending, in L2 Capital’s sole discretion on each conversion, on either the last complete trading day prior to the conversion date or the conversion date. During the year ended December 31, 2018, we received five tranches totaling $482,222. As of December 31, 2018, we have issued warrants to purchase 56,073 shares of common stock in accordance with a nonexclusive finder’s fee arrangement. These warrants have a fair value of $2,668 based on the Black-Scholes option-pricing model. The fair value was recorded as a discount on the notes payable and is being amortized over the life of the notes payable. As of December 31, 2018, we have fully amortized $91,222 of the debt issuance cost and have recorded a debt discount of $749,026 for the fair value of derivative liability and fully amortized the debt discount. As of June 30, 2020, we have outstanding warrants to purchase 56,073 shares of common stock. As of June 30, 2020, the outstanding balance of the original loan was $323,412, plus a default penalty and fees of $837,724, for a total of $1,161,136, and accrued interest was $398,256. On August 1, 2019, L2 Capital, LLC sold the outstanding loan balance and accrued interest on our note to Oasis Capital, LLC. The terms and conditions of the original note remain in place. This note is in default.
On September 19, 2018, we executed a note payable for $10,000 with an unrelated party that bears interest at 6% per annum, which is due quarterly beginning as of September 30, 2018. The maturity date for the note is three years after date of issuance. In addition, the lender received warrants to purchase 2,000 shares of common stock upon signing the promissory note. The warrant can be exercised at a price per share equal to a 15% discount from the price of common stock on the last trading day before such purchase. As of June 30, 2020, we have outstanding warrants to purchase 2,000 shares of common stock. As of June 30, 2020, the balance outstanding was $10,000 and the accrued interest was $1,083.
On December 14, 2018, L2 Capital LLC purchased our note payable from Collier Investments, LLC. The total consideration was $371,250, including the outstanding note balance of $281,250, the accrued interest of $33,750, and liquidated damages of $56,250. There was also a default penalty of $153,123. In addition, we issued 400,000 shares of common stock to L2 Capital as commitment shares with a fair value of $21,200 in connection with the purchase of the note. We executed a replacement convertible note with L2 Capital in the amount of $371,250 with an interest rate of 12% per annum. The maturity date of the note is December 22, 2018. The holder of the note can convert the note, or any portion of it, into shares of common stock at any time after the issuance date. The conversion price is 65% of the market price, which is defined as the lowest trading price for our common stock during the 20-trading-day period prior to the conversion date. As of December 31, 2018, we have recorded a debt discount of $665,690 for the fair value of derivative liability and fully amortized the debt discount. As of June 30, 2020, the outstanding note balance was $987,986, which includes a default penalty and fees of $665,550, and the accrued interest was $357,853. This note is in default.
On January 2, 2019, we issued a series of promissory notes totaling $310,000 to accredited investors. Proceeds from these notes were used to support the administrative and legal expenses of our lawsuit before the United District Court for the Western District of Tennessee, Ocean Thermal Energy Corporation v. Robert Coe, et al., Case No. 2:17-cv-02343SHL-cgc, and any subsequent actions brought about as a result of or in connection with this litigation. These notes are secured against the proceeds from the litigation. The notes bear an interest rate of 17%, plus one quarter of one percent of the actual funds received from the litigation. The repayment of the principal, accrued interest, and the percentage of the litigation funds received will be paid immediately following the receipt of sufficient funds from this litigation. As of June 30, 2020, the outstanding balance of these loans is $310,000 and the accrued interest was $77,426.
On August 14, 2019, we executed a note payable for $26,200 with an unrelated party that bears interest at 8% per annum and has a maturity date of October 31, 2021. The note automatically converts into 1,310,000 shares of our common stock either at the time the closing sale price for our common stock is equal to or greater than $1.00 per share, as adjusted for stock splits, stock dividends, reclassification, and the like, or at the maturity date of October 31, 2021, whichever occurs first. As of June 30, 2020, we have recorded a debt discount of $26,200 for the fair value of derivative liability and amortized $10,883 of the debt discount. As of June 30, 2020, the balance outstanding was $26,200 and the accrued interest was $2,103.
In the fourth quarter of 2019, we issued a series of convertible promissory notes to accredited investors that totaled $105,000. Of the amount received, $10,000 was from our chief executive officer and our independent director. The notes bear simple interest on outstanding principal at the rate of 8% per annum, computed on the basis of the actual number of days elapsed in a year of 365 days. Each $5,000 loan automatically converts into 250,000 shares of our common stock, either at the time the closing sale price for our common stock is equal to or greater than $1.00 per share, as adjusted for stock splits, stock dividends, reclassification, and the like, or at the maturity date of October 31, 2021, whichever comes first. As of June 30, 2020, we have recorded a debt discount of $105,000 for the fair value of derivative liability and amortized $35,396 the debt discount. As of June 30, 2020, the total outstanding balances of all these loans are $31,951, net of debt discount of $63,049 to unrelated parties, and $3,445 net of debt discount of $6,555, to related parties. The accrued interest was $5,680.
In the fourth quarter of 2019 and the first two quarters of 2020, we issued a series of convertible promissory notes to accredited investors, which totaled $306,750. Of the amount received, $20,000 was from our chief executive officer and an independent director. The notes bear simple interest on outstanding principal at the rate of 8% per annum, computed on the basis of the actual number of days elapsed in a year of 365 days. Each $5,000 loan automatically converts into 250,000 shares of our common stock, either at the time the closing sale price for our common stock is equal to or greater than $1.00 per share, as adjusted for stock splits, stock dividends, reclassification, and the like, or at the maturity date of January 2, 2022, whichever comes first. As of June 30, 2020, we have recorded a debt discount of $306,750 for the fair value of derivative liability and amortized $66,402 of the debt discount. As of June 30, 2020, the total outstanding value of these loans was $61,433, net of debt discount of $225,317 to unrelated parties and $4,969, net of debt discount of $15,031, to related parties. The outstanding balance of the notes as of June 30, 2020 was $306,750 and the accrued interest was $4,374.
During May and June 2020, we issued a series of promissory notes to accredited investors, which totaled $125,000. The notes bear simple interest on outstanding principal at the rate of 10% per annum, computed on the basis of the actual number of days elapsed in a year of 360 days and an additional payment of 0.00125% (one eighth of one-percent) of the actual funds received (as settlement, collection, or otherwise) from possible future litigation based on fraud in the inducement claims (such future litigation hereinafter referred to as the “Phase Two Litigation”) arising from the current litigation before the United States District Court for the Western District of Tennessee and Central District of California, Ocean Thermal Energy Corp. v. Robert Coe, et al. (Case No. 2:17-cv-02343SHL-cgc and Case No. 2:19-cv-05299-VAP-JPR, respectively) (this current litigation hereinafter is referred to as the “Phase One Litigation”). Repayment will be made as follows: (i) the principal and interest within five business days following our receipt of $25.5 million from the Phase One Litigation; and (ii) the additional payment within five business days following our actual receipt of any funds from the Phase Two Litigation, less legal fees accrued up to that date. If any such funds are received on more than one date, payment will be made as such funds are actually received by us and after deduction of accrued legal fees up to that date. The outstanding balance of these notes as of June 30, 2020, was $125,000 and the accrued interest was $1,157.
On April 28, 2020, we received the proceeds from an unsecured $17,085 loan (the “PPP Loan”) through LinkBank under the Paycheck Protection Program (the “PPP”) pursuant to the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which is administered by the United States Small Business Administration. In accordance with the requirements of the CARES Act, we will use proceeds from the PPP Loan primarily for payroll costs. The PPP Loan is scheduled to mature on April 28, 2022 (the “Maturity Date”) and has a 1% interest rate. Commencing on October 28, 2020, and continuing on the same day of each following month, we must pay principal and interest payments until the Maturity Date, at which time the remaining principal and accrued interest is due in full; however, the monthly payment will not be calculated until such time as the application for forgiveness has been processed and the remaining loan amount can be determined. The PPP Loan may be prepaid by us at any time prior to maturity with no prepayment penalties. The PPP Loan is unsecured and is a nonrecourse obligation. All or a portion of the PPP Loan may be forgiven upon application to the lender during the eight-week period beginning on the date of first disbursement for certain expenditure amounts, including payroll costs, in accordance with the requirements under the PPP. In the event all or any portion of the PPP Loan is forgiven, the amount forgiven is applied to outstanding principal. The outstanding loan balance as of June 30, 2020, was $17,085 and the accrued interest was $30.
The following convertible note and notes payable were outstanding at June 30, 2020:
* Loans are in default
The following convertible notes and notes payable were outstanding at December 31, 2019:
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5. Derivative Liability |
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Derivative Liability [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Liability | We measure the fair value of our assets and liabilities under the guidance of ASC 820, Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosures about fair value measurements. ASC 820 does not require any new fair value measurements, but its provisions apply to all other accounting pronouncements that require or permit fair value measurement.
We identified conversion features embedded within convertible debt issued. We have determined that the features associated with the embedded conversion option should be accounted for at fair value as a derivative liability. We have elected to account for these instruments together with fixed conversion price instruments as derivative liabilities as we cannot determine if a sufficient number of shares would be available to settle all potential future conversion transactions.
Following is a description of the valuation methodologies used to determine the fair value of our financial liabilities, including the general classification of such instruments pursuant to the valuation hierarchy:
* Gains/(losses) related to the revaluation of Level 3 financial liabilities is included in “Change in fair value of derivative liability” in the accompanying condensed consolidated unaudited statement of operations.
The fair value of the derivative liability was estimated using the income approach and the Black-Scholes option-pricing model. The fair values at the commitment and remeasurement dates for our derivative liabilities were based upon the following management assumptions:
** The fair value at the remeasurement date is equal to the carrying value on the balance sheet.
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6. Stockholders' Equity |
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Stockholders' Equity | Preferred Stock
On June 3, 2019, our board of directors designated two classes of Preferred Stock and approved the following issuances:
Series B Preferred Stock – We are authorized to issue 1,250,000 shares of Series B Preferred Stock with a par value of $0.001. These shares will not have voting rights alongside the common stock, and each share of Series B Preferred Stock will be convertible into ten shares of our common stock. As of June 30, 2020, 518,750 shares of Series B Preferred Stock are issued and outstanding.
Series C Preferred Stock – We are authorized to issue 2,700,000 shares of Series C Preferred Stock with a par value of $0.001. These shares are a one-time grant and will have voting rights alongside the common stock. Each share of Series C Preferred Stock will be convertible into five shares of our common stock. As of June 30, 2020, 2,300,000 shares of Series C Preferred Stock are issued and outstanding.
Warrants
The following table summarizes all warrants outstanding and exercisable for the three months ended June 30, 2020:
During the six months ended June 30, 2020, no warrants were exercised. The aggregate intrinsic value represents the excess amount over the exercise price that optionees would have received if all options had been exercised on the last business day of the period indicated, based on our closing stock price of $0.039 per share on June 30, 2020. The intrinsic value of warrants to purchase 350,073 shares on that date was $1,316.
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7. Commitments and Contingencies |
6 Months Ended |
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Jun. 30, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments
On December 11, 2017, we entered into an equity purchase agreement with L2 Capital, LLC, for up to $15,000,000. As provided in the agreement, we may require L2 Capital to purchase shares of common stock from time to time by delivering a “put” notice to L2 Capital specifying the total number of shares to be purchased. L2 Capital will pay a purchase price equal to 85% of the “market price,” which is defined as the lowest traded price on the OTCQB marketplace during the five consecutive trading days following the “put date” or the date on which the applicable shares are delivered to L2 Capital. The number of shares may not exceed 300% of the average daily trading volume for our common stock during the five trading days preceding the date on which we deliver the applicable put notice. Additionally, such amount may not be lower than $10,000 or higher than $1,000,000. L2 Capital has no obligation to purchase shares under this agreement to the extent that such purchase would cause L2 Capital to own more than 4.99% of our common stock. Upon the execution of this agreement, we issued 1,714,285 shares of common stock valued at $514,286 as a commitment fee in connection with the agreement. The shares to be issued pursuant to this agreement were covered by a Registration Statement on Form S-1 effective on January 29, 2018, with a post-effective amendment effective April 15, 2019. The commitment period is the period commencing on the execution date and ending on the earlier of: (i) the date on which L2 Capital shall have purchased Put Shares pursuant to the agreement equal to the maximum commitment amount, (ii) December 20, 2020, or (iii) written notice of termination by us to L2 Capital (which shall not occur at any time that L2 Capital holds any of the Put Shares). During the six months ended June 30, 2020, we did not execute any put options with L2 Capital to purchase any shares of common stock.
On June 26, 2017, we entered a nonexclusive finder’s arrangement with Craft Capital Management LLC (“Craft”) in the event that proceeds with a debt and/or equity transaction or to finance a merger/acquisition and/or another transaction are arranged by Craft. We have no obligation to consummate any transaction, and we can choose to accept or reject any transaction in our sole and absolute discretion. Upon the successful completion of a placement, we will pay to Craft 8% of the gross proceeds from an equity placement and 3% for a debt placement. In addition, we will issue to Craft, at the time of closing, warrants with an aggregate exercise price equal to 3% of the amount raised. As of June 30, 2020, we have issued to Craft warrants to purchase 56,073 shares of common stock for L2 Capital equity transactions and warrants to purchase 69,000 shares of common stock for L2 Capital debt transactions, for a total of warrants to purchase 125,073 shares of common stock, none of which has been exercised. These warrants have a fair value of $3,286 based on the Black-Scholes option-pricing model. The warrants have exercise prices ranging from $0.0425 to $0.25 per share and are exercisable for a period of five years after the closing of the placement. If we, at any time while these warrants are outstanding, sell or grant any option to purchase or sell or grant any right to reprice, or otherwise dispose of or issue any common stock or securities entitling any person or entity to acquire shares of common stock, at an effective price per share less than the then-exercise price, then the exercise price will be reduced to equal the lower share price, at the option of Craft. Such adjustment will be made whenever such common stock is issued. We will notify Craft in writing, no later than the trading day following the issuance of any common stock, of the applicable issuance price or applicable reset price, exchange price, conversion price, and other pricing terms.
Litigation
From time to time, we are involved in legal proceedings and regulatory proceedings arising from operations. We establish reserves for specific liabilities in connection with legal actions that management deems to be probable and estimable.
On May 4, 2018, we reached a settlement of the claims at issue in Ocean Thermal Energy Corp. v. Robert Coe, et al., Case No. 2:17-cv-02343SHL-cgc, before the United States District Court for the Western District of Tennessee. Between May 30 and July 19, 2018, we received three payments totaling $100,000 from the defendants. On August 8, 2018, an $8 million judgment was entered against the defendants and in our favor. On May 28, 2019, we further settled the claims at issue with two of the defendants, Brett M Regal and his company, Trade Base Sales, Inc. (“Regal Debtors”), for $17,500,000, bringing the combined judgment and settlement amount owed to us is $25,500,000. On July 1, 2019, the United States District Judge for the Central District of California (case number: 2:19-cv-05299-VAP-JPR), approved our stipulated application for an order permitting us to levy on property and appointing a receiver to carry out the levy on Regal Debtors’ property, such that it may be sold (subject to further order of the court approving and confirming such sales), to satisfy the $25,500,000 settlement and judgment amounts in our favor. On August 15, 2019, the court-appointed receiver notified the court that he had taken custody, possession, and control of certain gemstone and mineral specimens, known as the “Ophir Collection” and 350,000 pounds of unrefined gold and other precious metal bearing ore. By order of the court, the receiver was given the authority to assign, sell, and transfer the debtor property. The proceeds of any sales will be used to satisfy the judgment and settlement agreement, receivership’s reasonable costs and fees, as well as any other claims as determined by the court. Various parties have come forward asserting ownership and priority lien rights to the property. In our ongoing efforts to collect the $25,500,000 judgment obtained in settlement of our claims in Ocean Thermal Energy Corp. v. Robert Coe, et al, a third party has intervened in our case in the Central District of California (case number: 2:19-cv-05299-VAP-JPR), asserting that it is the rightful owner of the “Ophir Collection” of gems and mineral specimens that is now in possession of the Court-appointed receiver. The claims of that third party have not yet been addressed by the Court.
On May 21, 2019, Theodore T. Herman filed a complaint against us in Theodore T. Herman v. Ocean Thermal Energy Corporation, Case No. CI-19-04780, in the Court of Common Pleas of Lancaster County, Pennsylvania, asserting that he is entitled to payment on the promissory note described in Note 4: Convertible Notes and Notes Payable. On July 1, 2019, we filed preliminary objections to the complaint, and subsequently filed an answer and new matter on August 20, 2019, to which the plaintiff filed a reply on September 9, 2019. We will continue to defend our position that no further payment on this note is owed.
On August 22, 2018, Fugro USA Maine, Inc. (“Fugro”), filed suit against us in Fugro USA Marine, Inc. v. Ocean Thermal Energy Corp., Cause No. 2018-56396, in the District Court for Harris County, TX, 165th Judicial District, seeking approximately $500,000 allegedly owed for engineering services provided. On June 23, 2020, a settlement was reached under which we will pay Fugro $375,000 by December 31, 2020. We have recorded the amount of accrued legal settlement as of June 30, 2020. We are in compliance with making the payments per the agreement.
Consulting Agreements
On June 4, 2018, we entered into a consulting agreement to pay 20,000 shares of common stock when one of the conditions of the contract was satisfied. Although this condition was satisfied on August 31, 2018, as of June 30, 2020, we have not issued the shares, and we have accrued the share compensation at fair value totaling $1,600.
On August 14, 2018, we entered into a consulting agreement to pay $40,000 by issuing shares of common stock. As of June 30, 2020, we have not issued the shares and have accrued the amount.
Employment Agreements
On January 1, 2011, we entered into a five-year employment agreement with our chief executive officer, which provides for successive one-year term renewals unless it is expressly cancelled by either party100 days prior to the end of the term. Under the agreement, our chief executive officer will receive an annual salary of $350,000, a car allowance of $12,000, and company-paid health insurance. The agreement also provides for bonuses equal to one times his annual salary plus 500,000 shares of common stock for each additional project that generates $25 million or more in revenue to us. Our chief executive officer is entitled to receive severance pay in the lesser amount of three years’ salary or 100% of the remaining salary if the remaining term is less than three years. On September 15, 2017, an addendum was added to the employment agreement stating that effective June 30, 2017, his salary will be increased to $388,220 per year; that he will receive interest at a rate of 8% on his accrued unpaid wages; and that the term of employment agreement is extended for an additional five years.
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8. Related-Party Transactions |
6 Months Ended |
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Jun. 30, 2020 | |
Related Party Transactions [Abstract] | |
Related-Party Transactions | For the six months ended June 30, 2020, we paid rent of $60,000 to a company controlled by our chief executive officer.
On January 18, 2018, the due date of a 2015 related-party note payable was extended to the earlier of December 31, 2018, or the date of the financial closings of our Baha Mar Project (or any other project of $25 million or more), whichever occurs first. The balance on the note payable was $1,102,500 and accrued interest was $684,784 as of June 30, 2020. The note is in default.
On March 9, 2017, we issued a promissory note payable of $200,000 to a related party in which our chief executive officer is an officer and director. The note bears interest of 10% and is due and payable within 90 days after demand. The outstanding note balance was $177,000 and accrued interest was $59,745 as of June 30, 2020.
On November 6, 2017, we entered into an agreement and promissory note with JPF Venture Group, Inc. to loan up to $2,000,000 to us. The terms of the note are as follows: (i) interest is payable at 10% per annum; (ii) all unpaid principal and all accrued and unpaid interest are due and payable at the earliest of resolution of the Memphis litigation (as defined therein), December 31, 2018, or when we are otherwise able to pay. As of June 30, 2020, the outstanding note balance was $559,093 and the accrued interest was $170,003. For the six months ended June 30, 2020, we repaid $19,000. This note is in default.
We remain liable for the loans made to us by JPF Venture Group before it was an affiliate. As of June 30, 2020, the outstanding balance of these loans was $581,880 and the accrued interest was $178,623.
In the fourth quarter of 2019, we issued a series of convertible promissory notes to accredited investors. The notes bear simple interest on outstanding principal at the rate of 8% per annum, computed on the basis of the actual number of days elapsed in a year of 365 days. Each $5,000 loan automatically converts into 250,000 shares of our common stock, either at the time the closing sale price for our common stock is equal to or greater than $1.00 per share, as adjusted for stock splits, stock dividends, reclassification and the like, or at the maturity date of January 2, 2022, whichever comes first. On January 21, 2020, we borrowed an additional $5,000 from Jeremy P. Feakins, our chief executive officer. As of June 30, 2020, the outstanding balance of his loans was $15,000 and the accrued interest was $685. On January 21, 2020, we borrowed an additional $5,000 from an independent director. As of June 30, 2020, the outstanding balance of his loans was $15,000 and the accrued interest was $678.
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9. Subsequent Events |
6 Months Ended |
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Jun. 30, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent to June 30, 2020, we issued a series of promissory notes to accredited investors, which totaled $70,000. The notes bear simple interest on outstanding principal at the rate of 10% per annum, computed on the basis of the actual number of days elapsed in a year of 360 days and an additional payment of 0.00125% (one eighth of one-percent) of the actual funds received (as settlement, collection, or otherwise) from possible Phase Two Litigation arising from the Phase One Litigation. Repayment will be made as follows: (i) the principal and interest within five business days following our receipt of $25.5 million from the Phase One Litigation; and (ii) the additional payment within five business days following our actual receipt of any funds from the Phase Two Litigation, less legal fees accrued up to that date. If any such funds are received on more than one date, payment will be made as such funds are actually received by us and after deduction of accrued legal fees up to that date.
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2. Summary of Significant Accounting Policies (Policies) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||
Principal Subsidiary Undertakings | Our condensed consolidated financial statements include the following subsidiaries:
We have an effective interest of 100% in each of our subsidiaries.
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Use of Estimates | In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. Significant estimates include the assumptions used in the valuation of equity-based transactions, valuation of derivative liabilities, valuation of deferred tax assets, and depreciable lives of property and equipment.
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Cash and Cash Equivalents | We consider all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. At June 30, 2020, and December 31, 2019, we had no cash equivalents.
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Income Taxes | We use the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are determined based on temporary differences between financial reporting and tax bases of assets and liabilities and on the amount of operating loss carryforwards and are measured using the enacted tax rates and laws that will be in effect when the temporary differences and carryforwards are expected to reverse. An allowance against deferred tax assets is recorded when it is more likely than not that such tax benefits will not be realized.
Our ability to use our net operating loss carryforwards may be substantially limited due to ownership change limitations that may have occurred or that could occur in the future, as required by Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), as well as similar state provisions. These ownership changes may limit the amount of net operating loss that can be utilized annually to offset future taxable income and tax, respectively. In general, an “ownership change” as defined by Section 382 of the Code results from a transaction or series of transactions over a three-year period resulting in an ownership change of more than 50.0% of the outstanding stock of a company by certain stockholders or public groups.
We have not completed a study to assess whether an ownership change has occurred or whether there have been multiple ownership changes since we became a “loss corporation” under the definition of Section 382. If we have experienced an ownership change, utilization of the net operating loss carryforwards would be subject to an annual limitation under Section 382 of the Code, which is determined by first multiplying the value of our stock at the time of the ownership change by the applicable long-term, tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the net operating loss carryforwards before utilization. Further, until a study is completed and any limitation known, no positions related to limitations are being considered as an uncertain tax position or disclosed as an unrecognized tax benefit. Any carryforwards that expire prior to utilization as a result of such limitations will be removed from deferred tax assets with a corresponding reduction of the valuation allowance. Due to the existence of the valuation allowance, it is not expected that any possible limitation will have an impact on our results of operations or financial position.
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Business Segments | We operate in one segment and therefore segment information is not presented.
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Fair Value | Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures, defines fair value, establishes a framework for measuring fair value under GAAP, and enhances disclosures about fair value measurements. ASC 820 describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, which are the following:
● Level 1–Pricing inputs are quoted prices available in active markets for identical assets or liabilities as of the reporting date.
● Level 2–Pricing inputs are quoted for similar assets or inputs that are observable, either directly or indirectly, for substantially the full term through corroboration with observable market data. Level 2 includes assets or liabilities valued at quoted prices adjusted for legal or contractual restrictions specific to these investments.
● Level 3–Pricing inputs are unobservable for the assets or liabilities; that is, the inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability.
Management believes the carrying amounts of the short-term financial instruments, including cash and cash equivalents, prepaid expense, accounts payable, accrued liabilities, notes payable, deferred compensation, and other liabilities reflected in the accompanying balance sheets approximate fair value at June 30, 2020, and December 31, 2019, due to the relatively short-term nature of these instruments.
We account for derivative liability at fair value on a recurring basis under level 3 at June 30, 2020, and December 31, 2019 (see Note 5).
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Concentrations | Cash, cash equivalents, and restricted cash are deposited with major financial institutions, and at times, such balances with any one financial institution may be in excess of FDIC-insured limits. Management believes the risk in these situations to be minimal. As of June 30, 2020, and December 31, 2019, $0 and $0, respectively, were deposited in excess of FDIC-insured limits.
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Loss per Share | The basic loss per share is calculated by dividing our net loss available to common shareholders by the weighted average number of common shares during the period. The diluted loss per share is calculated by dividing our net loss by the diluted weighted average number of shares outstanding during the period. The diluted weighted average number of shares outstanding is the basic weighted number of shares adjusted for any potentially dilutive debt or equity. We have 350,073 and 350,073 shares issuable upon the exercise of warrants and 122,753,322 and 52,334,858 shares issuable upon the conversion of convertible notes that were not included in the computation of dilutive loss per share because their inclusion is antidilutive for the six months ended June 30, 2020 and 2019, respectively.
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Revenue Recognition | We account for our revenue in accordance with Accounting Standard Update 2014-09, Revenue from Contracts with Customers (Topic 606), which requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services.
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Recent Accounting Pronouncements | We have reviewed all recently issued, but not yet adopted, accounting standards in order to determine their effects, if any, on our consolidated results of operations, financial position, and cash flows. Based on that review, we believe that none of these pronouncements will have a significant effect on current or future earnings or operations.
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2. Summary of Significant Accounting Policies (Tables) |
6 Months Ended | ||||||||||||||||||||||||
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Accounting Policies [Abstract] | |||||||||||||||||||||||||
Subsidiaries |
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4. Convertible Notes and Notes Payable (Tables) |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of convertible notes and notes payable | The following convertible note and notes payable were outstanding at June 30, 2020:
* Loans are in default
The following convertible notes and notes payable were outstanding at December 31, 2019:
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5. Derivative Liability (Tables) |
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Derivative Liability [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair value hierarchy |
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Changes in fair value financial liabilities |
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Assumptions |
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6. Stockholders' Equity (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2020 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stockholders' deficiency | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of warrants |
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2. Summary of Significant Accounting Policies (Details) |
6 Months Ended |
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Jun. 30, 2020 | |
Ocean Thermal Energy Bahamas Ltd. | |
Place of incorporation/establishment | Bahamas |
Principal activities | Intermediate holding company of OTE BM Ltd. and OTE Bahamas O&M Ltd. |
Date formed | Jul. 04, 2011 |
OTE BM Ltd. | |
Place of incorporation/establishment | Bahamas |
Principal activities | OTEC/SDC development in the Bahamas |
Date formed | Sep. 07, 2011 |
OCEES International Inc. | |
Place of incorporation/establishment | Hawaii, USA |
Principal activities | Research and development for the Pacific Rim |
Date formed | Jan. 21, 1998 |
2. Summary of Significant Accounting Policies (Details Narrative) - USD ($) |
6 Months Ended | ||
---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Dec. 31, 2019 |
|
Cash in excess of FDIC | $ 0 | $ 0 | |
Warrants | |||
Antidilutive shares excluded from EPS calculation | 350,073 | 350,073 | |
Convertible Notes | |||
Antidilutive shares excluded from EPS calculation | 122,753,322 | 52,334,858 |
3. Going Concern (Details Narrative) - USD ($) |
3 Months Ended | 6 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Jun. 30, 2020 |
Jun. 30, 2019 |
Jun. 30, 2020 |
Jun. 30, 2019 |
Mar. 31, 2020 |
Dec. 31, 2019 |
Mar. 31, 2019 |
Dec. 31, 2018 |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||
Net loss | $ (841,936) | $ (689,555) | $ (3,351,702) | $ (921,846) | ||||
Net cash used in operating activities | (388,831) | (340,557) | ||||||
Working capital (deficiency) | (25,129,240) | (25,129,240) | ||||||
Total stockholders' deficiency | $ (25,418,359) | $ (18,328,927) | $ (25,418,359) | $ (18,328,927) | $ (24,576,423) | $ (22,066,657) | $ (17,886,088) | $ (17,769,177) |
5. Derivative Liability (Details) - USD ($) |
Jun. 30, 2020 |
Dec. 31, 2019 |
---|---|---|
Derivative liability | $ 5,034,099 | $ 3,032,056 |
Level 1 | ||
Derivative liability | 0 | |
Level 2 | ||
Derivative liability | 0 | |
Level 3 | ||
Derivative liability | $ 5,034,099 |
5. Derivative Liability (Details 1) |
6 Months Ended |
---|---|
Jun. 30, 2020
USD ($)
| |
Derivative Liability [Abstract] | |
Derivative liability, beginning | $ 3,032,056 |
Fair value at the commitment date for convertible instruments | 926,850 |
Change in fair value of derivative liability | 1,075,193 |
Reclassification to additional paid-in capital for financial instruments that ceased to be a derivative liability | 0 |
Derivative liability, ending | 5,034,099 |
Change in fair value of derivative liability, beginning | 0 |
Day one gains/(losses) on valuation | 656,850 |
Gains/(losses) from the change in fair value of derivative liability | 1,075,193 |
Change in fair value of derivative liability, ending | $ 1,732,043 |
5. Derivative Liability (Details 2) - Remeasurement Date |
6 Months Ended |
---|---|
Jun. 30, 2020 | |
Expected dividends | 0.00% |
Minimum | |
Expected volatility | 180.00% |
Risk free interest rate | 0.011% |
Expected term (in years) | 3 months |
Maximum | |
Expected volatility | 468.70% |
Risk free interest rate | 0.29% |
Expected term (in years) | 3 years 6 months 22 days |
6. Stockholders' Equity (Details) - Warrants |
6 Months Ended |
---|---|
Jun. 30, 2020
$ / shares
shares
| |
Number of Warrants | |
Warrants outstanding, beginning | shares | 350,073 |
Warrants granted | shares | 0 |
Warrants exercised | shares | 0 |
Warrants forfeited | shares | 0 |
Warrants outstanding, ending | shares | 350,073 |
Warrants exercisable | shares | 350,073 |
Weighted Average Exercise Price | |
Warrants outstanding, beginning | $ / shares | $ .18 |
Warrants granted | $ / shares | .00 |
Warrants exercised | $ / shares | 0.00 |
Warrants forfeited | $ / shares | 0.00 |
Warrants outstanding, ending | $ / shares | .18 |
Warrants exercisable | $ / shares | $ 0.18 |
8. Related-party Transactions (Details Narrative) |
6 Months Ended |
---|---|
Jun. 30, 2020
USD ($)
| |
Company Controlled by the CEO | |
Rent expense | $ 60,000 |
Related Party 1 | |
Note payable | 1,102,500 |
Accrued interest | 684,784 |
Related Party 2 | |
Note payable | 177,000 |
Accrued interest | 59,745 |
Related Party 3 | |
Note payable | 559,093 |
Accrued interest | 170,003 |
JPF Venture Group | |
Note payable | 581,880 |
Accrued interest | 178,623 |
CEO | |
Note payable | 15,000 |
Accrued interest | 685 |
Independent Director | |
Note payable | 15,000 |
Accrued interest | $ 678 |
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