10-K 1 cpwr_10k.htm FORM 10-K cpwr_10k.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

(Mark One)

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

 

For the fiscal year ended December 31, 2023

 

or

 

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

 

For the transition period from _____________ to ___________________

 

Commission File No. 033-19411-C

 

OCEAN THERMAL ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

 

Nevada

 

20-5081381

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

3675 Market Street, Suite 200, Philadelphia PA 19104

(Address of principal executive offices, including Zip Code)

 

717-299-1344

(Registrant’s telephone number, including area code)

 

Securities Registered pursuant to Section 12(b) of the Exchange Act:

 

Title of Class

 

Trading Symbol

 

Name of Each Exchange on Which Registered

N/A

 

N/A

 

N/A

 

 Securities Registered pursuant to Section 12(g) of the Exchange Act: None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐     No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐     No

 

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

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒     No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

☒ 

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.

 

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

 

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to § 240.10D-1(b). ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes      No ☒

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. The aggregate market value of the voting and nonvoting common equity held by nonaffiliates computed as of the price at which the common equity was last sold on the last business day of the registrant’s most recently completed second fiscal quarter was $1,750,539.

 

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. As of March 25, 2024, there were 184,370,469 shares of the registrant’s common stock outstanding, par value $0.001.

 

DOCUMENTS INCORPORATED BY REFERENCE: None

 

 

 

 

TABLE OF CONTENTS

 

 

 

Page

 

PART I

 

 

 

ITEM 1. BUSINESS

 

4

 

ITEM 1A. RISK FACTORS

 

13

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

20

 

ITEM 1C. CYBERSECURITY

 

20

 

ITEM 2. PROPERTIES

 

20

 

ITEM 3. LEGAL PROCEEDINGS

 

21

 

ITEM 4. MINE SAFETY DISCLOSURES

 

21

 

PART II

 

 

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

22

 

ITEM 6. [RESERVED]

 

22

 

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

23

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

25

 

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

26

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

26

 

ITEM 9A. CONTROLS AND PROCEDURES

 

26

 

ITEM 9B. OTHER INFORMATION

 

27

 

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

 

27

 

PART III

 

 

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

28

 

ITEM 11. EXECUTIVE COMPENSATION

 

29

 

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

30

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, DIRECTOR INDEPENDENCE

 

31

 

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

32

 

PART IV

 

 

 

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

33

 

SIGNATURES

 

37

 

 

 
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Table of Contents

 

Throughout this report, unless otherwise designated, the terms “we,” “us,” “our,” and “our company” refer to Ocean Thermal Energy Corporation, a Nevada corporation, and our subsidiary. All amounts in this report are in U.S. dollars, unless otherwise indicated.

 

CAUTIONARY STATEMENT ON FORWARD-LOOKING STATEMENTS

 

This report may contain certain “forward-looking” statements as such term is defined by the U.S. Securities and Exchange Commission (“SEC”) in its rules, regulations, and releases, which represent our expectations or beliefs, including statements concerning our operations, economic performance, financial condition, growth and acquisition strategies, investments, and future operational plans. For this purpose, any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the generality of the foregoing, words such as “may,” “expect,” “believe,” “anticipate,” “intend,” “could,” “estimate,” “might,” “plan,” “propose,” “predict,” or “should,” or the negative or other variations thereof or comparable terminology, are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, certain of which are beyond our control, and actual results may differ materially depending on a variety of important factors, including uncertainty related to acquisitions, governmental regulation, management and maintenance of growth, the operations of the company and its subsidiaries, volatility of stock price, commercial viability of OTEC systems, and any other factors discussed in this and our other filings with the SEC.

 

These risks, uncertainties, and other factors include those set forth under “Risk Factors” of this report. Given these risks and uncertainties, readers are cautioned not to place undue reliance on our forward-looking statements. All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by these cautionary statements. Except as otherwise required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements or the risk factors described in this report or in the documents we incorporate by reference, whether as a result of new information, future events, changed circumstances, or any other reason after the date of this report.

 

This report contains forward-looking statements, including statements regarding, among other things:

 

 

·

the significant international political and economic disruption caused by Russia’s military invasion of Ukraine;

 

 

 

 

·

our ability to continue as a going concern;

 

 

 

 

·

our anticipated needs for working capital;

 

 

 

 

·

our ability to secure financing;

 

 

 

 

·

the possibility that actual capital costs, operating costs, production, and economic returns may differ significantly from those that we have anticipated;

 

 

 

 

·

the financial model for our proposed projects has not been tested and may not be successful;

 

 

 

 

·

changing attitudes about environmental risks;

 

 

 

 

·

substantial regulation of our projects;

 

 

 

 

·

financial, technical, managerial, and sales risks that may make us unsuccessful;

 

 

 

 

·

our exposure to political and legal risks in developing or emerging markets where we propose to locate our plants;

 

 

 

 

·

technological advances that may render our technologies obsolete; and

 

 

 

 

·

operational problems, natural events or catastrophes, casualty loss, or other events that may impair the commercial operation of our projects.

 

The forward-looking information is based on present circumstances and on our predictions respecting events that have not occurred, that may not occur, or that may occur with different consequences from those now assumed or anticipated. Actual events or results may differ materially from those discussed in forward-looking statements because of various factors, including the risks outlined under “Risk Factors,” and matters described in this report generally. The forward-looking statements included in this report are made only as of the date of this report.

 

 
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PART I

 

ITEM 1. BUSINESS

 

Overview

 

We use our proprietary technology to develop designs for renewable energy systems, primarily for Ocean Thermal Energy Conversion (“OTEC”), Seawater Air Conditioning (“SWAC”), and Lake Source Cooling (“LSC”) systems. Our geographical markets are tropical and subtropical regions of the world for OTEC, SWAC, and LSC and worldwide markets for SWAC and LSC. We develop projects for renewable power generation, desalinated water production, and air conditioning using our proprietary technologies designed to extract energy from the temperature differences between warm surface water and cold deep water. In addition, our projects provide ancillary products such as potable/bottled water and high-profit aquaculture, mariculture, and agriculture opportunities.

 

Agreement to Sell Subsidiary

 

On August 25, 2022, we entered into a Stock Purchase Agreement to sell OCEES International, Inc., our wholly owned subsidiary (“OCEES”), to Epaphus Global Energy, LLC (“Epaphus”). Epaphus is controlled by Jeremy Feakins, our chief executive officer and a director. The transaction was approved unanimously by our directors who do not have an interest in the transaction.

 

In exchange for the sale of OCEES, we will receive:

 

 

·

$1,000,000 in the form of canceled amounts owed by us to certain individuals, including Mr. Feakins, who have assigned their right to receive those payments to Epaphus;

 

·

$75,000 in cash per month for 12 months following the date of the purchase agreement; and

 

·

70% of the net profit of any currently contemplated project to build an ocean thermal energy conversion power plant entered into by OCEES.

 

Under the terms of the purchase agreement, Epaphus has the unilateral right to return OCEES to us and receive a full refund of all portions of the purchase price paid as of the return of OCEES at any time for one year following the date of the purchase agreement.

 

By mutual consent of the parties, the purchase agreement has not closed as of December 31, 2023, or through the date of filing of this report. As a result, it has not been reflected in our financial statements at December 31, 2023.

 

Our Business

 

We develop projects for renewable power generation, desalinated water production, and air conditioning using proprietary intellectual property designed and developed by our own experienced oceanographers, engineers, and marine scientists. Plants using our technologies are designed to extract energy from the temperature difference between warm surface ocean water and cold deep seawater at a depth of approximately 3,000 feet. We believe these technologies provide practical solutions to the fundamental human needs for sustainable, affordable energy; desalinated water for domestic, agricultural, and aquaculture uses; and cooling, all without the use of fossil fuels.

 

 

Ocean Thermal Electrical Conversion, known in the industry as “OTEC,” power plants are designed to produce electricity. In addition, some of the seawater running through an OTEC plant can be desalinated efficiently, producing fresh water for agriculture and human consumption.

 

 

Seawater Air Conditioning, known in its industry as SWAC, plants are designed to use cold water from ocean depths to provide air conditioning for large commercial buildings or other facilities. This same technology can also use deep cold water from lakes, known as Lake Source Cooling or LSC.

 

Both OTEC and SWAC/LSC systems can be engineered to produce desalinated water for potable, agricultural, and fish farming/aquaculture uses.

 

The Natural Energy Laboratory of Hawaii Authority, or NELHA, test facility (http://nelha.hawaii.gov) has developed many applications for technologies based on ocean temperature differences between surface and deep seawater, including desalinated seawater, fish farming, and agriculture. Note: All URL addresses in this report are inactive textual references only. We believe our proprietary advances to existing technologies developed by others in the industry enhance their commercialization for the plants we propose to develop.

 

We have recruited a scientific and engineering team that includes oceanographers, engineers, and marine scientists who have worked for various organizations since the 1970s on several systems based on extracting energy from the temperature differences between surface and deep seawater, including projects by NELHA, the Argonne National Laboratory (http://www.anl.gov), and others. Our executive team members have complementary experience in leading engineering and technical companies and projects from start-up to commercialization.

 

We expect to use our technology to develop OTEC and SWAC systems for various applications for potential customers in tropical and subtropical regions, the U.S. Department of Defense, and the U.S. Department of Agriculture. We have conducted scientific and engineering studies for an OTEC EcoVillage in St. Croix, U.S. Virgin Islands, which should add significant value to our business. We plan to facilitate the development of sustainable living communities by creating an ecologically sustainable “OTEC EcoVillage” powered by 100% fossil-fuel-free electricity. In the development, buildings will be cooled by energy-efficient and chemical-free systems, and desalinated water will be produced for drinking, aquaculture, and agriculture. The OTEC EcoVillage project consists, in part, of an OTEC plant that will provide all power and water to about 400 residences, a hotel, a shopping center, and models of sustainable agriculture, food production, and other economic developments. Each sale of luxury EcoVillage residences will support the development of environmentally responsible affordable communities in tropical and subtropical regions of the world. We believe our OTEC EcoVillage will be the first development in the world offering a net-zero carbon footprint.

 

 
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Through our Small Business Innovation Research credentials, we continue to discuss opportunities to design, build, own, and operate an OTEC system producing base-load sustainable electricity and desalinated water without using fossil fuels to do so. Our discussions have included OTEC designs for a Naval Support Facility in the Indian Ocean as a part of our Small Business Innovation Research program. We have also discussed plans with the U.S. Department of Defense for our company to build, own, and operate an OTEC system producing base-load renewable energy and desalinated water for a remote military base in the South Pacific.  We have been contacted by interested parties from India and an engineering company based in France, both of whom are interested in OTEC systems producing desalinated water.  Discussions with these and other interested parties are ongoing.  

 

Our Vision

 

Our vision is to bring our technologies to tropical and subtropical regions where about three billion people live. Our market includes 68 countries and 29 territories with suitable sea depth, shore configuration, and need. We plan to be the first company in the world to design and build a commercial-scale OTEC plant and, to that end, have several projects in the planning stages. Our initial markets and potential projects include several U.S. Department of Defense bases in Asia Pacific and other regions where energy independence is crucial. Currently, we have projects in the planning and development stages with the U.S. Department of Defense, the Ministry of Earth Sciences at the Government of India, and an Engineering Company from France.

 

Our Technology

 

OTEC is a self-sustaining energy source, with no supplemental power required to generate continuous (24/7) electricity. It works by converting heat from the sun, which has warmed ocean surface water, into electric power, and then completing the process by cooling the plant with cold water from deep in the ocean. The cold water can also be used for very efficient air conditioning and desalinated to produce fresh water. OTEC has worked in test settings where there exists a natural temperature gradient of 20 degrees Celsius or greater in the ocean. We believe OTEC can deliver sustainable electricity in tropical and subtropical regions of the world at rates approximately 20-40% lower than typical costs for electricity produced by fossil fuels in those markets.

 

Further, a small, commercial OTEC plant could offer competitive returns even in a market where electricity costs as low as $0.30 per kilowatt-hour, or kWh. Caribbean consumers face some of the highest energy prices globally due to heavy reliance on expensive and volatile fossil fuel imports. According to the World Bank, electricity prices in the Caribbean average around US$ 0.25 per kWh, more than double the average price in the United States, and, in some countries, reach over $0.40 per KWh. Out of 11 Caribbean countries with available data, nine generated more than 80 % of their electricity using imported fuels, and five imported 90% of their energy. For the U.S. Virgin Islands, the Water and Power Authority of the Virgin Islands reported that as of March 2022, (latest data available), the average price for electricity for commercial customers was nearly $0.47 per kWh. We believe that we have an opportunity to offer base-load energy (the amount of energy required to meet minimum requirements) pricing that is better than our customer’s next best alternative in the markets where electricity costs are $0.30 or more per kWh.

 

Technology advancements have significantly reduced the capital costs of OTEC to make it competitive compared to traditional energy sources. Technology improvements include larger diameter seawater pipes manufactured with improved materials, increased pumping capabilities from OTEC depths, better understanding of material requirements in the deep ocean environment, more experience in deep water pipeline and cable installation techniques, and more accurate sea bottom mapping technology, which is required for platform positioning and pipe installation. The cold-water pipes at a demonstration site in Hawaii have been in continuous operation for more than 20 years, and the technology has improved significantly since the Hawaiian installation.

 

We estimate that a small OTEC plant that delivers 10 megawatts (MWs) per hour would currently cost approximately $250 million. This is the plant size that we typically propose for our initial target markets to meet 20% or more of their current demand for electricity and a large portion of their need for fresh drinking water and agricultural water, although discussions with the U.S. Department of Defense have included OTEC plants of 17.5 MW. OTEC has been proven in test settings at NELHA, where a Department of Energy-sponsored OTEC plant operated successfully throughout the 1990s to produce continuous, affordable electricity from the sea without using fossil fuels. Spin-off desalination and seawater cooling technologies, developed from the OTEC plant at NELHA, have also become economically and technically feasible.

 

Finally, we believe the decreasing supply and increasing cost of fossil-fuel-based energy has intensified the search for renewable alternatives. Renewable energy sources, although traditionally more expensive than comparable fossil-fuel plants, have many advantages, including increased national energy security, decreased carbon emissions, and compliance with renewable energy mandates and air quality regulations. We believe these market forces will continue and potentially increase. Renewable energy sources may be attractive in remote islands where shipping costs and limited economies of scale substantially increase fossil-fuel-based energy. Many islands contain strategic military bases with high-energy demands that we believe would greatly benefit from a less expensive, reliable source of energy that is produced locally, such as OTEC.

 

SWAC//LSC is a process that uses cold water from locations such as the ocean or deep lakes to provide the cooling capacity to replace traditional electrical chillers in an air conditioning system. SWAC/LSC applications can reduce the energy consumption of a traditional air-conditioning system by as much as 90%. Even when the capital cost amortization of building a typically sized SWAC/LSC system providing 9,800 tons of cooling ($140-$150 million) are taken into account, SWAC/LSC can save the customer approximately 25-40% when compared to conventional systems—we estimate savings can be as high as 50% in locations where air temperatures and electricity costs are high. Cooling systems using seawater or groundwater for large commercial structures are in use at numerous locations developed and operated by others worldwide, including Bora Bora (Intercontinental Hotel), Finland (Google Data Center); Cornell University, NY; Stockholm, Sweden; and the City of Toronto, Canada.

 

 
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How Our Technology Works

 

OTEC uses the natural temperature difference between cooler deep ocean water at a depth of approximately 3,000 feet and warmer shallow or surface water to create energy. An OTEC plant project involves installing about 6.0 feet diameter, deep-ocean intake pipes (which can readily be purchased), together with surface water pipes, to bring seawater onshore. OTEC uses a heat pump cycle to generate power. In this application, an array of heat exchangers transfers the warm ocean surface water as an energy source to vaporize a liquid in a closed loop, driving a turbine, which in turn drives a generator to produce electricity. The cold deep ocean water provides the required temperature to condense vapor back into a liquid, thus completing the thermodynamic cycle, which is constantly and continuously repeated. The working fluid is typically ammonia, as it has a low boiling point. Its high hydrogen density makes ammonia a very promising green energy storage and distribution media. Among practical fuels, ammonia has the highest hydrogen density, including hydrogen itself, in either its low temperature, or cryogenic, and compressed forms. Moreover, since the ammonia molecule is free of carbon atoms (unlike many other practical fuels), combustion of ammonia does not result in any carbon dioxide emissions. The fact that ammonia is already a widely produced and used commodity with well-established distribution and handling procedures allows for its use as an alternative fuel. This same general principle is used in steam turbines, internal combustion engines, and, in reverse, refrigerators. Rather than using heat energy from the burning of fossil fuels, OTEC power draws on temperature differences of the ocean caused by the sun’s warming of the ocean’s surface, providing an unlimited and free source of energy.

 

OTEC and SWAC/LSC infrastructure offers a modular design that facilitates adding components to satisfy customer requirements and access to a sufficient supply of cold water. These components include reverse-osmosis desalination plants to produce drinkable water, bottling plants to commercialize the drinkable water, and off-take solutions for aquaculture uses (such as fish farms), which benefit from the enhanced nutrient content of deep ocean water. A further advantage of a modular design is that, depending on the patterns of electricity demand and output of the OTEC plant, a desalination plant can be run using the excess electricity capacity.

 

cpwr_10kimg1.jpg

 

Currently, OTEC requires a minimum temperature difference of approximately 20 degrees Celsius to operate, with each degree greater than this increasing output by approximately 10-15%. OTEC has potential applications in tropical and subtropical zones and is particularly well suited for tropical islands and coastal areas with proximate access to both cold deep water and warm surface water. These communities are typically subject to high and fluctuating energy costs ranging from $0.28-$0.75 per kWh, as they rely on importing fossil fuels for power generation. Data from the National Renewable Energy Laboratory of the U.S. Department of Energy website indicated that at least 68 countries and 29 territories around the globe appear to meet these criteria.

 

The world’s largest OTEC power plant to date was operational at the NELHA facility in Hawaii and was connected to the electrical grid. It provided base-load electricity produced by OTEC to residential homes. Around the world, a couple of other successful developmental and experimental plants have been built, and the U.S. National Oceanic and Atmospheric Administration, or NOAA, has stated that: “The qualitative analysis of the technical readiness of OTEC by experts at this workshop suggest that a <10 MWe floating, closed-cycle OTEC facility is technically feasible using current design, manufacturing, deployment techniques and materials” (https://coast.noaa.gov/data/czm/media/otec_nov09_tech.pdf). We believe that we have sufficient skill and knowledge to now commercialize 5-MW to 30-MW land-based OTEC plants, using off-the-shelf components, including the cold-water piping.

 

SWAC/LSC is a significantly more cost-effective and environmentally friendly way to implement air-conditioning using cold water sourced from lakes or, analogous with OTEC, deep ocean water, rather than from an electric chiller. Comparing Federal Energy Management Program engineering efficiency requirements of approximately 0.94 kilowatts of electricity per ton of cooling capacity with our own engineering estimates of 0.09 kilowatts of electricity per ton of cooling capacity, as calculated by DCO Energy, our engineering, procurement, and construction partner, we estimate that SWAC/LSC systems can reduce electricity consumption by up to 80-90% over conventional systems. Therefore, we believe energy reductions may make SWAC/LSC systems well-suited for large structures, such as office complexes, medical centers, resorts, data centers, airports, and shopping malls. We believe that other SWAC/LSC plants we may develop will likely achieve similar efficiencies. There are examples of proven successful SWAC/LSC systems in use, including a large 79,000-ton system used to cool buildings in the downtown area of the City of Toronto, Canada; a SWAC system in Google’s data center in Finland that uses waters from the Baltic Sea to keep servers cool; and a system with more than 18,000 tons of cooling in operation at Cornell University, Ithaca, New York. .

 

 
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OTEC Versus Other Energy Sources

 

The construction costs of power plants using any technology are much higher in remote locations, such as tropical islands, than on the mainland of the United States, principally due to the need to transport materials, components, and other construction supplies and labor unavailable locally. There are also considerations that make those other technologies less attractive in those areas. We believe the consistency of OTEC during its life provides clear advantages over other power-generation technology in the tropical and subtropical markets because its base-load power (available at all times and not subject to fluctuations throughout the day) is an important asset to the small transmission grid, which is typical in these regions.

 

Combined-cycle natural gas plants typically need to be capable of generating several hundred MWs to attain the lower-cost, per-kilowatt installed values that make the plant economically feasible. Tropical locations do not have large enough grids and market demand to make that plant size reasonable. Further, tropical locations frequently do not have domestic fuel supplies, requiring fuel to be imported. In order to import natural gas, it must be liquefied for shipment and then vaporized at the location. There are initial cost and public safety concerns with such facilities. In addition, gas-fired plants emit undesirable nitrogen oxide, carbon dioxide, and volatile organic compounds.

 

Solar applications continue to increase as the cost and effectiveness of photovoltaic panels improve. However, we estimate that the cost to install solar panels in tropical regions remains high. Beyond the issues with shipping and labor costs that all construction must overcome, the design and building code requirements are tougher in storm-prone areas, which are subject to potential wind damage from hurricanes, earthquakes, and typhoons, than are typically encountered in mainland nontropical installations. Support structures must be more substantial in order to hold the solar panels in place in case of hurricane-force winds. Solar power, like wind power, places substantial stress on an electrical grid. Since the input of both of these sources is subject to weather conditions, they cannot be considered reliable suppliers of power, and back-up capacity is necessary. Further, instantaneous changes in output due to sporadic cloud cover create transient power flow to the grid and difficulties in maintaining proper voltages and stability. OTEC is a stabilizing source to the grid, providing constant and predictable power, and has no emissions. The ability of OTEC to provide constant, continuous power is a large benefit as compared to any of the other renewable options available.

 

Our estimated price for OTEC-generated power of approximately $0.30 per kWh under current economic conditions, which can be as low as $0.18 net per kWh with maximum efficiency and revenue from water production, is also constant both throughout the year and over a plant’s life. OTEC’s power price, determined almost entirely by the amortization of its initial cost, is a protection against inflation and rising interest rates, which greatly affect coal and oil. Customers in our target markets currently pay from $0.25 to as high as $0.60 per kWh for power from coal and oil-fueled power plants. However, imported fuels are subject to price volatility, which directly impacts the cost of electricity and adds operating risk during a plant's life. The fuel handling to allow for shipping, storage, and local transport is expensive, a potential source of damaging fuel spills, and a basis for environmental concerns. Fossil-fuel plants create pollution, emit carbon dioxide, and are visually unappealing, which is of particular concern in tropical areas renowned for their clear, pristine air and beauty. We project OTEC can save these markets up to 40%, compared to their current electrical costs, and when revenues from fresh drinking water, aquaculture, and agriculture production are considered, the justification is even more compelling.

 

Overview of the Market and the Feasibility of OTEC in Current Market Conditions

 

We believe that OTEC is now an economically, technologically, and environmentally competitive power source, especially for developing or emerging countries in certain tropical and subtropical regions contiguous to oceans. Our natural target markets are communities in countries around the Caribbean, Asia, and the Pacific. These locations are typically characterized by limited infrastructure, high energy costs, mostly imported or expensively generated electricity, and frequent significant fresh water and food shortages. These are serious limitations on economic development, which we believe our OTEC technology can address.  

 

The National Oceanic and Atmospheric Administration (NOAA) reports that the development of OTEC technology has promise in tropical areas, where year-round temperature differences between the deep cold and warm surface waters are greater than 20 degrees Celsius (36 degrees Fahrenheit). This energy technology also has the potential to generate potable water, hydrogen, and ammonia. Cold water from the OTEC process can be used to benefit commercial products, such as air conditioning and aquaculture.

 

Over the past 15 years, there have been substantial changes in many areas that have now made the commercialization of OTEC a reality, influenced by the frequently changing and unpredictable price of oil and the effects of climate change leading to violent weather patterns and drought conditions around the world.

 

U.S. oil companies and refiners are likely to face another challenging 12 months in 2024, Bank of America (BofA) analysts wrote in January 2024. BofA expects Brent crude to average $80 per barrel this year.

 

Facts like these have increased attention and interest in OTEC in the commercial sector and among candidates. With OTEC power, customers can decouple the price of electricity from the price of oil, combat the effects of climate change, and reduce greenhouse gases escaping into the atmosphere.

 

Greenhouse gas emissions from fossil fuels are projected to reach a record 36.8 billion metric tons in 2023, an increase of 1.1% over 2022, according to an annual report by the Global Carbon Project. The US and EU have been the biggest climate polluters, historically.

 

China, the US, India, and the EU are the top four polluters responsible for more planet-heating emissions than the rest of the world combined. According to a CNN report in January 2024, they accounted for more than 56% of total global emissions in 2022 (latest figures).

 

According to the U.S. Environmental Protection Agency: “Global carbon emissions from fossil fuels have significantly increased since 1900. Since 1970, CO2 emissions have increased by about 90%, with emissions from fossil fuel combustion and industrial processes contributing about 78% of the total greenhouse gas emissions increase from 1970 to 2011. Agriculture, deforestation, and other land-use changes have been the second-largest contributors.”

 

Greenhouse gas emissions from electricity have increased between 1990 and 2007 as electricity demand grew and fossil fuels remained the dominant source for generations. Fossil-fuel-fired power plants are a significant source of domestic carbon dioxide emissions, the primary cause of global warming. To generate electricity, fossil-fuel-fired power plants use natural gas, petroleum, coal, or any form of solid, liquid, or gaseous fuel derived from such materials. Along with the increasing use of renewable energy, the greenhouse emissions from power generation have decreased since 2007, approaching the 1990 levels.

 

 
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According to the U.S. Energy Information Administration (“EIA”), renewable energy can play an important role in U.S. energy security and in reducing greenhouse gas emissions. Using renewable energy can help to reduce energy imports and reduce fossil fuel use, which is the largest source of U.S. carbon dioxide emissions. In the Annual Energy Outlook 2021 reference case, EIA projects that U.S. renewable energy consumption will continue to increase through 2050. The reference case generally assumes that current laws and regulations that affect the energy sector, including laws that have end dates, remain unchanged throughout the projection period.

 

Interest in renewable energy from the U.S. military, especially the U.S. Army, has increased as articulated by Secretary of the Army Christine E. Wormuth in the 2022 United States Army Climate Strategy:

 

As the Army optimizes the use of fuel, water, electricity, and other resources, we increase our resilience while saving taxpayer dollars and reducing our impact on the planet. The Army will mitigate and adapt to climate change, and in doing so gain a strategic advantage, especially as we continue to outpace our near-peer competitors.

 

President Biden’s purpose in Executive Order 14008 clearly stated the need to combat climate change:

 

It is the policy of my Administration to lead the Nation’s effort to combat the climate crisis by example—specifically, by aligning the management of Federal procurement and real property, public lands and waters, and financial programs to support robust climate action. By providing an immediate, clear, and stable source of product demand, increased transparency and data, and robust standards for the market, my Administration will help to catalyze private sector investment into and accelerate the advancement of America’s industrial capacity to supply, domestic clean energy, buildings, vehicles, and other necessary products and materials.

 

People in many countries today, including the United States, are concerned with environmental issues caused by fossil-fuel-generated power. Gallup surveys find public acceptance of climate change is rising.  Americans favor “green” solutions over those involving increased production of traditional energy supplies when asked how to better address the nation’s energy problems. Approximately 35-59% of the public believes the nation should emphasize the development of alternative energy sources over producing energy from oil, gas, and coal. Gallup found that Americans have consistently favored conservation or alternative energy production over traditional energy-source production, though the sizes of the gaps have varied, depending on the current energy situation.

 

The international concern about the harmful effects of climate change led to the negotiation of the Paris Agreement in December 2015 as the culmination of the 2015 United Nations Climate Change Conference. The agreement provides for members to reduce their carbon output as soon as possible and to do their best to keep global warming to no more than two degrees Celsius, or 3.6 degrees Fahrenheit. In order to achieve the desired results, there would have to be a worldwide reduction in emissions from fossil fuels and a shift to renewable resources.

 

Global acceptance of human influence on climate change may also contribute to a shift in the demand for OTEC. As evidenced by the Paris Agreement reached in December 2015 to combat climate change, 195 nations expressly recognized that conventional fossil-fuel powered energy technologies affect global climate change and the need to embrace a sustainable future in energy and water. Low-lying coastal countries (sometimes referred to as small island developing states) that tend to share similar sustainable development challenges, including small but growing populations, limited resources, remoteness, susceptibility to natural disasters, vulnerability to external shocks, excessive dependence on international trade, and fragile environments, have embraced this recognition and are keenly aware that they are on the frontline of early impact of sea level rise and are aggressively trying to embrace sustainable-energy alternatives. This is a major driving force for OTEC in primary early markets.

 

In February 2021, the United States officially rejoined the Paris Climate Accord, standing with the world to help fight the ‘existential crisis’ of global warming. Even during the years the United States had withdrawn from the Paris Climate Accord, a coalition of 14 U.S. states, including California and New York, said they were on track to meet the U.S. target of a 26-28% reduction in greenhouse gas emissions by 2025, compared to 2005 level.

 

According to the UN Climate Change Live Blog of January 12, 2024:

 

The COP28 UN Climate Change Conference in Dubai, the United Arab Emirates, was the biggest of its kind. Some 85,000 participants, including more than 150 Heads of State and Government, were among the representatives of national delegations, civil society, business, Indigenous Peoples, youth, philanthropy, and international organizations in attendance at the Conference from 30 November to 13 December 2023.

 

COP28 was particularly noteworthy as it marked the conclusion of the first ‘global stocktake’ of the world’s efforts to address climate change under the Paris Agreement. Having shown that progress was too slow across all areas of climate action – from reducing greenhouse gas emissions to strengthening resilience to a changing climate to getting financial and technological support to vulnerable nations – countries responded with a decision on accelerating action across all areas by 2030. This includes a call on governments to speed up the transition away from fossil fuels to renewables such as wind and solar power in their next round of climate commitments.

 

We believe the ongoing concerns about environmental issues and the price instability of fossil-fuel prices are motivation for increased commercial interest in OTEC, renewed activity in the commercial sector, and increased interest among communities and agencies that recognize the potential benefits of this technology, including the U.S. Department of Defense and U.S. Department of the Interior territories.

 

Several large companies have used their OTEC technology experience to introduce OTEC systems worldwide, supporting the argument that the technology is now at the point where it can be introduced at a commercial level:

 

 

Since early 2014, we have been working with several industrialized and developing countries, including U.S. Virgin Islands, The Bahamas, Cayman Islands, and others, and investigating suitable OTEC sites, infrastructural solutions, and funding opportunities.

 

 

Two nongovernmental organizations promoting OTEC have been created: OTEC Foundation (based in The Netherlands) and OTEC Africa (based in Sweden).

 

 

New technological advances for larger and more robust deep seawater pipes and more efficient and cost-effective heat exchangers, pumps, and other components have, in our opinion, further improved the economics for OTEC.

 

 
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Many countries, including a large number of Caribbean nations, now have renewable energy standards and are looking at ways to reduce their carbon footprints, decouple the price of electricity from the volatile price of oil, and increase energy security. Along with these countries, we are aware that Hawaii, U.S. territories, and the U.S. Department of Defense are looking at OTEC as a possible source of renewable energy and water for drinking, fish farming, and agriculture.

 

 

The NELHA demonstration OTEC plant in Hawaii produced 100 kilowatts of sustainable, continuous electricity annually and had powered a neighborhood of 120 homes.

 

Recent international political instability, especially in Eastern Europe and the Middle East proved that fossil-fuel-producing regions and oil price volatility have exposed the criticality of energy security and independence for all countries. The need to have tighter control of domestic energy requirements is a matter of increasing international concern. Continued reliance on other countries (particularly those in oil-producing regions) is no longer a favorable option. We believe these considerations will continue to drive renewable research and commercialization efforts that promote technologies with global potential to replace fossil-fuel-based energy systems and benefit from base-load capabilities like OTEC.

 

Our current management team has led the development of the business since 2010 and has advanced the technology and understanding of OTEC, SWAC/LSC to worldwide markets. These efforts have helped us establish an eager marketplace for our technology and an understanding of the importance of designing, building, and operating a commercial-grade OTEC system. Our efforts in the U.S. Virgin Islands included an extensive feasibility study explaining how OTEC could operate successfully. The Public Services Commission of the U.S. Virgin Islands has approved our application to be a “qualified facility” and build a 15MW OTEC plant on the island of St. Croix. In addition to the OTEC plant, we have presented testimony to the territory showing how OTEC could provide potable water to the U.S. Virgin Islands. We have held multiple meetings with the U.S. Army, U.S. Department of Defense Officials, Indian Government Officials, and others to explain more about OTEC technology. We believe we have made good progress in explaining the benefits of OTEC and that the technology is ready for commercialization by our company.

 

We are discussing both OTEC and SWAC/LSC projects with various federal government departments and large U.S. engineering companies. Currently, several projects are in the planning and discussion phase:

 

 

We are in discussions with the U.S. Department of Defense for a 17.5 MW OTEC system for a remote military base in the South Pacific.

 

 

 

 

We have prepared designs for OTEC and/or SWAC/LSC for an Eco Village powered by an OTEC plant for the U.S. Virgin Islands.

 

 

We have made application for several grants through the U.S. Department of Energy to support the commercialization of OTEC technology together with the production of "green hydrogen.”

 

 

We continue to respond to inquiries for OTEC/SWAC/LSC from potential customers around the world.

 

 

We continue to utilize our Small Business Innovation Research credentials in discussions with the U.S. government, including for remote military bases in tropical regions.

 

In light of the foregoing, we believe it is appropriate to seek additional funding to further progress and build our engineering and technical teams, develop our intellectual property, file patents for several OTEC technical systems, and advance our current opportunities to support our growth strategy.

 

Our Competition

 

We compete in the development, construction, and operation of OTEC and SWAC/LSC plants with other operators that develop similar facilities powered by other energy sources, primarily oil, natural gas, nuclear energy, and solar power. These traditional energy sources have well-established infrastructures for production, delivery, and supply, with well-known commercial terms. In developing our OTEC and SWAC/LSC plants, we will need to satisfy our customers that these technologies are sound and economical, which may be a challenge until and unless we have an established successful operating history. The energy industry is dominated by an array of companies of all sizes that have proven technologies and well-established fuel sources from a number of suppliers.

 

We expect that we will encounter increasing competition for OTEC and SWAC/LSC plants. Other firms with greater financial and technical resources are focusing on commercialization of these technologies. Our competitors may benefit from collaborative relationships with countries, including a large number of Caribbean nations, that now have renewable-energy standards and are looking at ways to reduce their carbon footprints, decouple the price of electricity from the volatile price of oil, and increase energy security. Other competitors may have advantageous relationships with authorities such as Hawaii, U.S. territories, and the U.S. Department of Defense, which are looking at OTEC as a possible source of renewable energy and water for drinking, fish farming, and agriculture. 

 

We cannot assure that we will be able to compete effectively as the industry grows and becomes more established and as OTEC and SWAC/LSC plants become more accepted as viable and economic energy solutions. 

 

We believe competition in this industry is and will be based on technical soundness and viability, the economics of plant outputs as compared to other energy sources, developmental reputation and expertise, financial capability, and ability to develop relationships with potential customers. All these factors are outside our control.

 

Our Operational Strategy and Economic Models

 

We have developed economic models of costs and potential revenue structures that we will seek to implement as we develop OTEC and SWAC/LSC projects.

 

OTEC Projects

 

The estimated construction costs for a 20-MW plant are approximately $445 million with hard costs of approximately $301 million for the power system and platform construction and piping, which make up 68% of the total. The remaining 32% consists of other construction costs and the deployment of the cold-water pipe and soft costs of approximately $144 million for design, permits and licensing, environmental impact assessment, bathymetry, contractor fees, and insurance.

 

 
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Once operational, the capacity factor, which is the projected percent of time that a power system will be fully operational, considering maintenance, inspections, and estimated unforeseen events, is expected to be 95% annually. This factor is used in our financial calculations, which means the plant will not be generating revenue for 5% of the year. Most fossil-fuel plants have capacity factors around 90%, as a result of the major maintenance for high-temperature boilers, fossil-fuel feed in systems, safety inspections, cleaning, etc. The normal maintenance cycle for the pumps, turbine, and generators used in the OTEC plant is typically every five years. This includes the cleaning of the heat exchangers and installation of new seals. 

 

We anticipate that project returns will be comprised of two components: First, as the project developer, we will seek a lump-sum payment as a development fee at the time of closing the project financing for each project. These payments will be allocated toward reimbursement of development costs and perhaps a financial return at the early stage of each project. The development fee will vary, but initially we will seek a fee of approximately 3% of the project cost, payable upon closing the project financing. Second, we will retain a percentage of equity in the project, with a goal to retain a minimum of 51% of the equity in any OTEC project in order to participate in operating revenues.

 

We will seek revenue from OTEC plants from contract pricing charged on an energy-only price per kWh or on the basis of a generating capacity payment priced per kilowatt per month and an energy usage price per kWh. In many of the countries of the world where we intend to build OTEC and SWAC/LSC plants, potable water is in short supply. In some locations, water is considered the more important commodity. Depending on the part of the world in which the plant is built, in addition to revenue from power generation, supplying water for drinking, fish farming, and agriculture would significantly increase plant revenue.

 

We cannot assure that we can maintain the revenue points noted above, that any fees received will offset development costs incurred to date, or that any operating plant will generate revenue.

 

SWAC/LSC Projects

 

The estimated construction costs for a SWAC/LSC plant are approximately $150 million with hard costs of approximately $91 million for piping and installation, which make up 60% of the total. The remaining 40% consists of the pump house, central utility plant (CUP), mechanical and engineering equipment, design, and other contingency costs and soft costs of approximately $59 million for the CUP license, permits, environmental impact assessment, bathymetry, and insurance.

 

Under our economic model, we will seek revenue at two stages of the project. First, as the project developer, we will seek a lump-sum payment of a development fee equal to approximately 3% of the project cost at the time of closing the project financing for each project. These payments would provide us with income at the early stage of each project. If we are able to negotiate a development fee, we estimate that it will vary, but typically will be in the $2,500,000-$3,500,000 range. The second component of project returns is based upon the percentage of equity we will retain in the project.

 

SWAC/LSC contract revenue will be based typically on three charges:

 

 

Fixed Price–this is based upon the capital costs of the project paid over the term of the debt and with the intention of covering the costs of debt.

 

 

Operation and Maintenance–this payment covers the cost of the labor and fixed overhead needed to run the SWAC/LSC system, as well as any traditional chiller plant operating to fulfill back-up or peak-load requirements.

 

 

Chilled Water Payment–this is a variable charge based on the actual chilled water use and chilled water generated both by the SWAC/LSC and conventional system at the agreed upon conversion factors of kilowatt/ton and current electricity costs in U.S. dollars per kWh.

 

We plan to structure project financing with the goal of retaining 100% of the equity in any SWAC/LSC project. We cannot assure that we will recover project development costs or realize a financial return over the life of the project.

 

Our Project Timeline

 

We have not  constructed or placed into operation any OTEC or SWAC/LSC plants. However, based on our planning process and early development experience to date, we estimate that it will take approximately two years or more, depending on local conditions, including regulatory and permitting requirements, to take a project from a preliminary memorandum of understanding with a potential power or other product purchaser to completion and commencement of operation.

 

Our Strategic Relationships

 

We have a strategic relationship with DCO Energy, LLC, Mays Landing, New Jersey, an American energy development company specializing in the development, engineering, construction, start-up, commissioning, operation, maintenance, and management, as well as ownership, of central energy centers, renewable energy producing facilities of approximately 275 MW of electricity facilities. DCO Energy was formed in 2000 and has independently developed and/or operated energy producing facilities of approximately 275 MW of electric, 400 MMBtu/hr of heat recovery, 1,500 MMBtu/hr of boiler capacity, and 130,000 tons of chilled water capacity, totaling over $1 billion of assets. DCO Energy provides financing, engineering and design, construction management, start-up and commissioning resources, and long-term operating and maintenance services for its own projects as well as third-party clients.

 

Our Construction and Components

 

Once we have designed the system, we will review the design with our engineering, procurement, and construction partner to maximize the chances that the project can be delivered according to plan and on budget. We expect our construction contracts to be at a fixed price and to include penalties if the construction timetable is missed. We may, but are not obligated to, engage DCO Energy to construct our plants or serve as our owners’ engineer.

 

In our systems, the two most important components are heat exchangers and deep-water intake pipes. Although there are multiple providers of each of these components, the supply of the best components comes from just a few companies globally. We expect to source our deep-water intake pipes from  pipe manufacturing companies in the U.S. and Norway, the only companies  we know of that make pipes of sufficient quality, strength, and diameter (2.5 meters) to support our planned OTEC plants. 

 

 
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We will also need the highest quality, large heat exchangers for our systems; heat exchangers represent a large percentage of the projected costs of our OTEC and SWAC/LSC systems and account for a significant portion of the complexity inherent in commercial OTEC and SWAC/LSC designs.

 

Other major components, such as ammonia turbines, generators, and pumps, are manufactured by several multinational companies, including General Electric and Siemens.

 

Our Operations

 

For OTEC electricity-generating facilities, we intend to enter into 20- to 30-year power purchase agreements, or PPAs, pursuant to which the project would supply fixed-price, baseload electricity to satisfy the minimum demand of the purchaser’s customers. This PPA structure allows customers to plan and budget their energy costs over the life of the contract. For our SWAC/LSC systems, we intend to enter into 20- to 30-year energy service agreements, or ESAs, to supply minimum quantities of chilled water for use in a customer’s air conditioning system.

 

We anticipate that operations of OTEC and SWAC/LSC plants will be subcontracted to third parties that will take responsibility for ensuring the efficient operation of the plants. These arrangements may reduce our exposure to operational risk, although they may also reduce our financial return if actual operating costs are less than the subcontract payments. We cannot assure that any OTEC and SWAC/LSC plants will permit the PPAs and ESAs to yield minimum target internal rates of return. Our first projects are likely to have lower returns than subsequent projects. Variances in internal rates of return may occur due to a range of factors, including availability and structure of project financing and localized issues such as taxes, some of which may be outside of our control.

 

We expect our OTEC contract pricing will be charged either on an energy-only price per kWh or on the basis of a capacity payment priced per kilowatt per month and an energy usage price per kWh. We cannot assure that this pricing will enable us to recoup our funding and project costs and allow us to earn a profit.

 

We continue to review other contracting opportunities that will help commercialize OTEC technology. 

 

Marketing Strategies

 

Our marketing and sales efforts are managed and directed by our chairman and chief executive officer, Jeremy P. Feakins, who has 40 years’ experience of senior-level sales in both commercial and governmental markets. Our marketing campaign has focused on explaining to potential customers the economic, environmental, and other benefits of OTEC and SWAC/LSC through personal contacts, industry interactions, our website, and social media channels.

 

Our target markets are comprised of large institutional customers that typically include governments, utilities, large resorts, hospitals, educational institutions, and municipalities. We market to them directly through personal meetings and contact by our chief executive officer and other key team members. We also make extensive use of centers of influence either to heighten awareness of our products in the minds of key customers’ decision-makers or to secure face-to-face meetings and preliminary agreements between our customers and our chief executive officer.

 

Sales cycles in our business are extraordinarily long and complex and often involve multiple meetings with the governmental, regulatory, electric utility, and corporate entities. Therefore, we cannot predict when or if any projects we currently have under development will progress to a signed contract or operational phase and generate revenue. We do not expect sales to be seasonal or cyclical.

 

 
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Material Regulation

 

Our business and products are subject to material regulation. However, because we contemplate offering our products and services in different countries, the specific nature of the regulatory requirements will be wholly dependent on the nation where the project will be located and the national, state, and local regulations that apply at that location. In all cases, we expect the level of regulation will be material and will require significant permitting and ongoing compliance during the life of the project.

 

The most significant regulations will likely be environmental and will include mitigating possible adverse effects during both the construction and operational phases of the project. However, we believe that the limited plant site disturbance of both SWAC/LSC and OTEC projects, together with the significantly lower emissions that result from these projects as compared to fossil-fuel electrical generation, will make compliance with all such regulation manageable in the normal course.

 

The second most significant regulations will likely involve coordination with existing infrastructure. We believe compliance with this type of regulation is a routine civil engineering coordination process that exists for all new buildings and infrastructure projects of all types. Again, we believe that the design of both SWAC/LSC and OTEC projects can readily be modified to avoid interference with existing infrastructure in most cases.

 

Facilities

 

Our principal executive offices are located at. 3675 Market Street, Suite 200, Philadelphia PA 19104. We also maintain a small office in Lancaster, PA, pursuant to a lease with a company controlled by our chief executive officer. Our telephone number at that address is (717) 299-1344.

 

Intellectual Property

 

We use or intend to employ in the performance of our material contracts, intellectual property rights in relation to the design and development of OTEC plants. Our intellectual property rights can be categorized broadly as proprietary know-how, technical databases, and trade secrets comprising concept designs, plant design, and economic models. Additionally, we have received approval from the U.S. Patent and Trademark Office for the trademark TOO DEEP®  for use with the provision of desalinated deep ocean water for consumption.

 

We may apply for patents for components of our intellectual property for OTEC and SWAC/LSC systems, including novel or new methodologies for cold-water piping, heat exchanges, and computer-aided design programs. We cannot assure that any patents we seek will be granted.

 

Our intellectual property has been developed by our employees and is protected under employee agreements confirming that the rights in the inventions and developments made by the employees are our property. Confidential information is protected by nondisclosure agreements that we entered into with prospective partners or other third parties with which we do business.

 

We have not received any notification from third parties that our processes or designs infringe any third-party rights, and we are not aware of any valid and enforceable third-party intellectual property rights that infringe our intellectual property rights. Currently, no company has a patent for OTEC technology.

 

Employees

 

We currently have two employees, one officer and one finance/accounting. Our employees do not have collective bargaining agreements, and we have not experienced work interruptions or strikes.

 

 
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ITEM 1A. RISK FACTORS 

 

Investing in our common stock involves a high degree of risk. Investors should carefully consider the risks described below, as well as the other information in this report, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our common stock. The occurrence of any of the events or developments described below could harm our business, financial condition, operating results, and growth prospects. In such an event, the market price of our common stock could decline, and investors may lose all or part of their investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.

 

Risks Related to Our Financial Condition

  

The auditors’ report for the years ended December 31, 2023 and 2022, contains an explanatory paragraph about our ability to continue as a going concern.

 

The report of our auditors on our consolidated financial statements for the years ended December 31, 2023 and 2022, as well as for prior years, contains an explanatory paragraph raising substantial doubt about our ability to continue as a going concern. We had a net loss of $9,150,677 and $6,912,102, respectively; used cash in operations of $669,463 and $327,213, respectively; had a working capital deficiency of $43,501,703 and $36,199,026, respectively; and had an accumulated deficit of $105,647,295 and $96,496,618, respectively, at December 31, 2023 and 2022. These factors raise substantial doubt about our ability to continue as a going concern. Our ability to continue as a going concern beyond December 31, 2023, is dependent on our ability to raise additional capital through the sale of debt or equity securities or stockholder loans and to implement our business plan during the next 12 months. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern. Management believes that actions presently being taken to obtain additional funding through implementing our strategic plans, broadly based marketing strategy, and sales incentives to expand operations will provide the opportunity for us to continue as a going concern.

 

We have no current project that will generate revenues in the near future.

 

None of our projects is at a stage of development that will allow them to generate revenues in the near future. Our project development cycles are relatively long, extending over several years as we identify a potential project site, complete negotiations with third parties, complete permitting, obtain financing, complete construction, and place a plant into service. We expect to receive a development fee of approximately 3% of the project cost from our projects, payable upon the close of project financing. Operating revenues from projects are expected to be received when the plant has been built and placed into operation. We are currently focusing on developing a U.S. Virgin Island project, but even if we develop it successfully, it will not generate revenues until several years in the future. Until we receive revenues from this or another project, we will depend on raising funds from external sources.

 

We will require substantial amounts of additional capital from external sources.

 

We do not have any current source of revenues or sufficient cash or other liquid resources to fund our planned activities until we receive development fees from new contracts. Accordingly, as in the past, we will need substantial amounts of capital from external sources to fund day-to-day operations and project development. We have no arrangements or commitment for such capital. We plan to continue our practice of seeking external capital through the sale of debt or equity, although we cannot assure that such efforts will be successful. Any new investments will dilute the interests of the current stockholders. Further, new investors may require preferential financial returns, security, voting rights, or other preferences that will be superior to the rights of the holders of common stock. Alternatively, as project development advances, we may be required to sell all or a portion of our interest in one or more projects, which could reduce our retained financial interest and potential return.

 

Risks Related to Our Business

 

Our efforts to develop OTEC and SWAC/LSC plants are subject to many financial, technical, managerial, and sales risks that may make us unsuccessful.

 

We incur substantial costs that we may not recover developing a new project that we may not build, operate, or sell. The identification of suitable locations, the investigation of the applicable regulatory and economic framework, the identification of potential purchasers, the completion of preliminary engineering and planning, and the funding of related administrative and support costs ordinarily require several years to complete before we determine to further develop or abandon a project. Each of these steps is fraught with risks and uncertainties, such as:

 

 

limited market due to low demand, existing competitive energy sources, low power costs, or the absence of a single or few large potential output purchasers;

 

 
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a regulatory scheme suggesting that the development and operation of a plant would be subject to excessively stringent utility regulations or environmental requirements, burdensome zoning or permitting practices and requirements, or similar factors;

 

 

shortage of suitable onshore locations, lack of available cold water with near-shore accessibility, sea wave and current conditions, and exposure to hurricanes, typhoons, earthquakes, or similar extreme events;

 

 

the unavailability of favorable tax or other incentives or excessively stringent applicable incentive requirements;

 

 

the high cost and potential regulatory difficulties in integrating into new markets;

 

 

the possibility that new markets may be limited or unstable or our exposure to competition from other sources of existing or potentially new energy sources;

 

 

difficulties in negotiating power purchase agreements (PPAs) with potential customers, including in some instances, the necessity to assist in the formation of a power purchasing group; and

 

 

the need to educate the market as well as investors regarding the reliability and economical and environmental benefits of ocean thermal technologies.

 

We cannot assure that we will be able to overcome these risks as we initiate the development of a project. We may incur substantial costs in advancing a project through the early stages, only to conclude eventually that the project is not economically or technically feasible, in which case we may be unable to recover the costs that we have then incurred. When we elect to proceed with a project, we may continue to incur substantial costs and be unable to complete the development, sell the project, or otherwise recover our investment. Even when a project is developed, constructed, and placed into operation, we cannot assure that we will be able to operate at a profit sufficient to recover our total investment.

 

We are dependent on the performance of counterparties to our agreements.

 

Our projects are and will be complex, with a number of agreements among several parties that purchase plant outputs; provide financing; complete design, construction, and other services; design and perform regulatory compliance; and fulfill other requirements. The failure of any participant in one of our projects due to its own management, financial, operating, or other deficiencies, all of which may be outside our control, can materially and adversely affect our operations and financial results. In circumstances in which we are not the prime developer of a large-scale project involving many components in addition to our OTEC, SWAC/LSC, or other components, we would have little ability to address problems resulting from performance failures by others or implement project-wide remedial measures. The foregoing is illustrated in our Baha Mar project, which is now on hold, and may never resume, because of contract performance and financing disputes by others.

 

Russia’s military intervention in Ukraine and the international community’s response have created substantial political and economic disruption, uncertainty, and risk.

 

Russia’s military intervention in Ukraine in late February 2022, Ukraine’s widespread resistance, and the NATO-led and United States coordinated economic, financial, communications, and other sanctions imposed by other countries have created significant political and economic world uncertainty. There is significant risk of expanded military confrontation between Russia and other countries, possibly including the United States. Current and likely additional international sanctions against Russia may contribute to higher costs, particularly for petroleum-based products. These actions, responses, and consequences that cannot now be predicted or controlled may contribute to worldwide economic reversals. In these circumstances, our efforts to commercialize our technology may be delayed or otherwise negatively impacted.

 

Ongoing world economic, currency-exchange, energy-price, contagious disease, and political circumstances adversely affect our project development activities.

 

Recent and ongoing world events outside of our control or influence adversely affect our development activities. Economic uncertainties have resulted in the unpredictable availability of credit, debt, and equity financing; volatile interest rates; currency exchange-rate fluctuations that add risk to international projects; restrictions on the availability of borrowing; concerns respecting inflation and deflation; economic turmoil resulting from unpredictable political events and tensions in the Middle East and other international relations; substantial reductions in hydrocarbon energy prices and the impact of such declines on the cost of energy generally; shifts in the economic feasibility of competitive energy sources; and similar factors. These adverse factors frequently have a particularly intense effect on emerging markets and developing countries, which we believe provide the greatest opportunity for the development of our projects. It now appears that emerging markets and developing countries may be slower in vaccinating their populations against the coronavirus, which may make it more difficult for us to operate in our target markets. The possibility that principal energy prices will continue at current or even lower levels, which could reduce the projected cost at which power could be generated by hydrocarbon-fueled power plants, could make our relatively higher-cost plants less competitive. These emerging and developing markets are particularly vulnerable to the negative impacts of these adverse circumstances. The economic feasibility of alternative energy, including the process we develop and propose to operate, as compared to hydrocarbon energy is adversely affected as the prices for hydrocarbon fuels decline. Accordingly, possible continuing low hydrocarbon prices may retard the potential increase in the economic feasibility of alternative energy. The decline in crude oil prices from over $100 per barrel several years ago to approximately one quarter of that today has adversely affected alternative energy development. Our ability to develop and operate alternative energy plants and our ability to generate revenue will be adversely affected by continuing, relatively soft hydrocarbon energy prices. Further, alternative energy development may be adversely affected by uncertainty in hydrocarbon prices or public expectations that hydrocarbon prices may continue to decline.

 

We require substantial amounts of capital for all phases of our proposed activities.

 

We require substantial amounts of capital to fund efforts to identify, research, preliminarily engineer, permit, and design our projects and to negotiate PPAs for them. These costs may not be recovered, because we may not elect to complete the development of the project or because the development and operation of the project are not successful. We will rely on external capital to fund our operations, and we cannot assure that such capital will be available. Our efforts to access capital markets will be limited, particularly at the outset, because we have not yet developed and placed into operation our first plant. Accordingly, we expect that we will have to provide the potential for a significant economic return for the initial capital we obtain, which will likely dilute the interests of our existing stockholders. We expect that each project that we are able to fully develop, construct, and place into operation will require several stages and levels of debt and equity financing. For example, we expect that a 20-MW OTEC plant may require total capital expenditures of approximately $445 million, consisting of $365 million in project debt financing and $80 million in equity. We cannot assure that we will be able to obtain financing. If obtained, such financing may be on terms that we will retain only a minority financial interest in the completed project and its operations. Our inability to obtain required financing for any activity or project could have a material adverse effect on our activities and operations.

 

 
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We are reliant on our key executives and personnel.

 

Our business, development, and prospects are highly dependent upon the continued services and performance of our directors and other key personnel, on whom we rely for experience, technical skills, and commercial relationships. We believe that the loss of services for any reason of any existing key executives, or failure to attract and retain necessary personnel, could have a material adverse impact on our business, development, financial condition, results of operations, and prospects. Although we have entered into employment agreements with our key executives, we may not be able to retain them. We do not maintain key-man life insurance on any of our executive employees.

 

Our projects will be subject to substantial regulations and policies governing energy projects, power generation, desalinated water sales, and other aspects of our OTEC and SWAC/LSC plants, which may adversely affect our ability to develop projects, and any changes in the applicable regulatory schemes may adversely affect projects that we are constructing or have constructed and are operating.

 

Our projects likely will be significant commercial or industrial enterprises in each of their locations and, as such, will be subject to numerous environmental, health and safety, antidiscrimination, and similar laws and regulations in each of the jurisdictions governing our locations. These laws and regulations will require our projects to obtain and maintain permits and approvals; complete environmental impact assessments or statements prior to construction; and review processes and operations to implement environmental, health and safety, antidiscrimination, and other programs and procedures to control risks associated with our operations.

 

Environmental health and safety laws, regulations, and permit requirements applicable to any specific project at the time of construction may change or become more stringent during the life of the operation. Any such changes could require that our projects incur substantial additional costs, alter their operations, or limit or curtail their operations in order to comply, which would have a material adverse effect on our operations. We may not be able to pass on any additional costs that we incur to our power purchasers, particularly in those cases in which we sell power pursuant to a long-term, fixed-price agreement.

 

The financial model for our proposed projects has not been tested and may not be successful.

 

We are proposing a financial model for the development of individual projects that includes development financing provided by us, construction financing provided by equity investors in the specific projects, and project debt financing; the payment of a development fee to us at the time of construction; and continuing equity participation by us throughout the plant’s operation. We have not used this model in the financing or completion of any plant, and we cannot assure that the financial model and, therefore, the anticipated financial return to us will be acceptable to those that might provide the requisite external capital.

 

We may need to revise extensively our financing structure for each project, and we cannot assure that any restructured proposal would not substantially reduce our financial return or increase our risk. The financial, investment, and credit community are generally unfamiliar with OTEC and SWAC/LSC projects, which will adversely affect our financing efforts. We have no existing relationships with potential sources of debt or equity capital, and any financing sources that we may develop may be inadequate to support the anticipated capital needs of our business. Our efforts to obtain financing may be adversely affected by the fact that our projects will likely be located in developing or emerging markets. Our inability to obtain financing may force us to abandon projects in which we have invested substantial costs, which we may be unable to recover. The process of identifying new sources of debt and equity financing and agreeing on all relevant business and legal terms could be lengthy and could require us to limit the rate at which we can develop projects or reduce our financial return.

 

 
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We may be exposed to political and legal risks in the developing or emerging markets in which we propose to locate plants.

 

Many of the markets that may be suitable for a potential OTEC or SWAC/LSC plants are located in emerging or developing countries that may have evolving and untested regulatory and legal environments for large-scale, international, commercial enterprises. Further, political instability, regime change, or other factors may increase uncertainty and instability, which in turn may adversely affect our ability to secure necessary regulatory approvals and obtain required project financing, which increases related costs and reduces our financial return. Any changes in applicable laws and regulations, including any governmental incentives, environmental requirements or restrictions, safety requirements, and similar matters, and the risk or likelihood of such a change could adversely affect the availability and cost of financing. Further, in some jurisdictions, applicable legal requirements may not have been fully tested and are still being developed in the face of modern international commercial transactions and environmental requirements, which may lead to changes in interpretation or application that may be adverse to us. Our expectations regarding the size of the potential OTEC and SWAC/LSC markets and the number of possible suitable locations may not be accurate.

 

Our business plan and models are based on our identification of potential suitable locations for OTEC or SWAC/LSC plants based on a preliminary evaluation of public information respecting demographic data, current power-generation costs, and local seafloor contours and seawater temperatures, which may be inaccurate. Any material inaccuracy could substantially reduce the total market available to us for plant development.

 

We may be unable to arrange or complete future construction projects on time, within expected budgets, or without interruption due to materials availability and disruptions in supply, labor, or other factors. If any project reaches the point at which we undertake construction, such construction may be subject to actual prices higher than the amount budgeted, the limited or delayed availability of components or materials, shortages or interruptions of labor or materials, or similar circumstances. In the case we have insufficient budget flexibility to pay increased construction costs, corresponding delays could result to construction completion and the commencement of operations.

 

Emerging markets are often associated with growth rates that may not be sustainable and may be accompanied by periods of high inflation. Rising inflation or related government monetary and economic policies in certain project jurisdictions may affect our ability to obtain external financing and reduce our ability to implement our expansion strategy. We can give no assurances that a local government will not implement general or project-specific measures to tighten external financing standards, or that if any such measure is implemented, it will not adversely affect our future operating results and profitability.

 

We are subject to changing attitudes about environmental risks.

 

Our projects may face opposition from environmental groups that may oppose our development, construction, or operation of OTEC or SWAC/LSC plants. Each project is expected to have different environmental issues, especially as many of our projects are based in different settings having a wide range of environmental standards. We intend to solicit input from environmental organizations and activists early in our design process for our projects in an effort to consider appropriately these organizations’ recommendations in order to mitigate subsequent conflict or opposition, but we cannot assure that such outreach will be effective in all cases, and if it is not, opposition to our projects could increase our cost and adversely affect the results of our operations.

  

We may be unable to find land suitable for our projects.

 

Each project site requires land of differing characteristics to permit the cost-effective construction of OTEC or SWAC/LSC plants, and suitable land may not always be available. Even if available, such land may be difficult to obtain in a timely or cost-effective manner. For example, we would prefer to place OTEC power systems and facilities as close to the ocean as possible. We hope to mitigate this risk by using land owned by local governments, rather than private individuals or entities, as targeting local governments with favorable energy policies or mandates should reduce land rights risks. Our inability to secure appropriate land at a reasonable cost may render certain of our future projects economically unfeasible.

 

 
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We have a limited number of suppliers for certain materials, which could increase our costs or delay completion of projects.

 

In our systems, the two most important components are heat exchangers and deep-water intake pipes. Although there are multiple providers of each of these components, the supply of the best components comes from just a few companies globally. Should these resources become unavailable for any reason or too costly, we would be required to seek alternative suppliers. The products from such suppliers could be of a lower quality or more costly, in any event requiring us to expend additional monies or time to complete our projects as planned. This could result in financial penalties or other costs to us.

 

There may be greater cost in building OTEC plants that generate over 10 MWs of electricity.

 

In order to successfully obtain debt financing for OTEC facilities, we must find engineering, procurement, and construction contractors willing to enter into fixed-price contracts at a pricing that is economically viable for us. Based on our preliminary discussions, we believe that engineering, procurement, and construction contractors may be willing to consider fixed-price arrangements for up to 10-MW OTEC facilities, but we have not yet discussed performance risk guarantees for OTEC plants greater than 10 MWs. The cost of construction for larger OTEC power systems may vary considerably, and these variances could include increased costs for construction, design, and component procurement. As we gain more experience, we may improve upon efficiencies and accuracy in pricing. Failure to procure engineering, procurement, and construction contractors willing to perform fixed-price contracts on facilities that produce more than 20 MWs may have a material adverse effect on our operations.

 

Technological advances may render our technologies, products, and services obsolete.

 

We operate in a fast-moving sector in which innovative forms of power generation and new energy sources are continuously being researched. New technologies may be able to provide power, coolant, desalinated seawater, or other outputs at a lower cost, including amortization of capital costs, or with less environmental impact. We will remain subject to these risks for the useful life of our projects, which could extend for 20 years or more. Any such technological improvements could render our projects obsolete.

 

We may not successfully manage growth.

 

We intend to continue to develop the projects in our pipeline of opportunities and to construct and operate plants as we deem warranted and as we are able to finance. This is an ambitious growth strategy. Our growth and future success will depend on the successful completion of the expansion strategies and the sufficiency of demand for our energy products. The execution of our expansion strategies may also place a strain on our managerial, operational, and financial reserves. Should we fail to effectively implement such expansion strategies or should there be insufficient demand for our products and services, our business operations, financial performance, and prospects would be adversely affected.

 

There will likely be a single or limited number of power purchasers from each plant, so we will be dependent on their economic viability and stability and continued operations.

 

We expect that any plant that we operate will provide power, cooling, desalinated water, or other products to a few or a limited number of key power purchasers that will use the power for specific commercial enterprises, such as resorts, manufacturing or processing plants, or similar large-scale operations. Accordingly, our ability to sell power and other outputs will be dependent on the economic viability of these purchasers. If one or more key purchasers were to fail, we would be required to obtain alternative purchasers for our power and other outputs, and there may be no or a limited number of alternative purchasers in the merging and developing markets where we anticipate our plants may be located. Accordingly, a failure of an output purchaser may result in the failure of our power plant project. We do not anticipate that we will be able to obtain insurance on acceptable terms to protect us against such a loss. Further, our project output purchasers may not comply with contractual payment obligations or may otherwise fail to perform their contracts, and they may have greater economic bargaining power and negotiating leverage as we seek to enforce our contractual rights. To the extent that any of our project power purchasers are, or are controlled by, governmental entities, our projects may also be subject to legislative, administrative, or other political action or policies that impair their contractual performance. Any failure of any key power purchasers to meet their contractual obligations for any reason could have a material adverse effect on our business and operations.

 

Operational problems, natural events or catastrophes, casualty loss, or other events may impair the commercial operation of our projects.

 

Our ability to meet our delivery obligations under power-generation contracts, as well as our ability to meet economic projections, will depend on our ability to maintain the efficient working order of our plants. Severe weather, natural disasters, accidents, failure of significant equipment components, inability to obtain replacement parts, failure of power transmission facilities, or other catastrophes or occurrences could materially interrupt our activities and consequently reduce our economic return. Since all our plants will be located on the shore within close proximity to deep-ocean or lake water, our plants will be subject to extraordinary natural occurrences, such as wave surges from hurricanes or typhoons, tsunamis, earthquakes, and other events, over which we will have absolutely no control. We cannot assure that we can obtain sufficient insurance to protect us from all risks resulting from such catastrophes. Further, we cannot assure that any design features or operating policies that we may use will mitigate the risks to which our plants may be exposed. Any threatened or actual events could expose us to plant shutdowns, substantial repairs, interruptions of operations, damages to our power purchasers, and similar events that could require us to incur substantial costs and significantly impair our revenues and results of operations.

 

 
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We may be adversely affected by climate change.

 

Climate change may result in changes in ocean currents and water temperatures that could have a material adverse effect on our results of operations. These changes may require additional capital costs or impair the efficiency of our operations. Because of the size and cost of major components of our power plants, we typically will not inventory spare components, so that any substantial damage may require that we await the custom manufacture and delivery of such items, which may involve substantial delays. Significant changes may render any plant inefficient and uneconomical.

 

Insurance to cover anticipated risks may become more expensive.

 

There are no known commercial OTEC and SWAC/LSC plants in operation, so the nature and cost of insurance is difficult to predict. Insurance costs may substantially exceed the costs forecast during the planning process or budgeted during actual operations. We cannot assure that adequate insurance coverage will be available to protect us against all risks or that any related costs will be economical. Accordingly, if we are unable or cannot afford to purchase insurance against specific risks, our projects may be fully exposed to those risks, which also could have a material adverse effect on the viability of any affected plant.

 

Risks Related to Our International Operations

 

Certain risks of loss arise from our need to conduct transactions in foreign currencies.

 

Our business activities outside the United States and its territories may be conducted in foreign currencies. In the future, our capital costs and financial results may be affected by fluctuations in exchange rates between the applicable currency and the dollar. Other currencies used by us may not be convertible at satisfactory rates. In addition, the official conversion rates between a particular foreign currency and the U.S. dollar may not accurately reflect the relative value of goods and services available or required in other countries. Further, inflation may lead to the devaluation of such other currencies.

 

Foreign governmental entities may have the authority to alter the terms of our rights or agreements if we do not comply with the terms and obligations indicated in such agreements.

 

Pursuant to the laws in some jurisdictions in which we may develop or operate plants, foreign governmental entities may have the authority to alter the terms of our contractual or financial rights or override the terms of privately negotiated agreements. In extreme circumstances, some foreign governments have taken the step of confiscating private property on the assertion that such action is necessary in the public interest of the country. If this were to occur, we may not be compensated fairly or at all. We cannot assure that we have complied, and will comply, with all the terms and obligations imposed on us under all foreign laws to which one or more of our operations and assets may be subject.

 

Our operations will require our compliance with the Foreign Corrupt Practices Act.

 

We must conduct our activities in or related to foreign companies in compliance with the U.S. Foreign Corrupt Practices Act, or FCPA, and similar anti-bribery laws that generally prohibit companies and their intermediaries from making improper payments to foreign government officials for the purpose of obtaining or retaining business. Enforcement officials interpret the FCPA’s prohibition on improper payments to government officials to apply to officials of state-owned enterprises, including state-owned enterprises with which we may develop or operate projects or to which we may sell plant outputs. While our employees and agents are required to acknowledge and comply with these laws, we cannot assure that our internal policies and procedures will always protect us from violations of these laws, despite our commitment to legal compliance and corporate ethics. The occurrence or allegation of these activities may adversely affect our business, performance, prospects, value, financial condition, reputation, and results of operations.

 

Our competitors may not be subject to laws similar to the FCPA, which may give them an advantage in negotiating with underdeveloped countries and the government agencies.

 

Our competitors outside the United States may not be subject to anti-bribery or corruption laws as encompassing or stringent as the U.S. laws to which we are subject, which may place us at a competitive disadvantage.

 

 
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We may encounter difficulties repatriating income from foreign jurisdictions.

 

As we develop and place plants into operation, we intend to enter into revenue-generating agreements in which we are paid only in U.S. dollars directly to our U.S. banks or through countries in which repatriation of the funds to our U.S. accounts is unrestricted. However, situations could arise in which we agree to accept payment in foreign jurisdictions and for which restrictions make it difficult or costly to transfer these funds to our U.S. accounts. In this event, we could incur costs and expenses from our U.S. assets for which we cannot recover income directly. This could require us to obtain additional working capital from other sources, which may not be readily available, resulting in increased costs and decreased profits, if any.

 

Risks Related to Our Common Stock

 

Our common stock is thinly traded, and there is no guarantee of the prices at which the shares will trade.

 

Our common stock is quoted on the OTC marketplace operated by the OTC Markets Group, Inc., under the ticker symbol “CPWR.” Not being listed on an established securities exchange has an adverse effect on the liquidity of our common stock, not only in terms of the number of shares that can be bought and sold at a given price, but also through delays in the timing of transactions and reduction in security analysts’ and the media’s coverage of our company. This may result in lower prices for our common stock than might otherwise be obtained and could also result in a larger spread between the bid and asked prices for our common stock. Historically, our common stock has been thinly traded, and there is no guarantee of the prices at which the shares will trade or of the ability of stockholders to sell their shares without having an adverse effect on market prices. 

  

We have never paid dividends on our common stock, and we do not anticipate paying any dividends in the foreseeable future.

 

We have not paid dividends on our common stock to date, and we may not be in a position to pay dividends in the foreseeable future. Our ability to pay dividends depends on our ability to successfully develop our OTEC business and generate revenue from future operations. Further, our initial earnings, if any, will likely be retained to finance our growth. Any future dividends will depend upon our earnings, our then-existing financial requirements, and other factors and will be at the discretion of our board of directors.

 

Because our common stock is a “penny stock,” it may be difficult to sell shares of our common stock at times and prices that are acceptable.

 

Our common stock is a “penny stock.” Broker-dealers that sell penny stocks must provide purchasers of these stocks with a standardized risk disclosure document prepared by the SEC. This document provides information about penny stocks and the nature and level of risks involved in investing in the penny stock market. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser, and obtain the purchaser’s written agreement to the purchase. The penny stock rules may make it difficult for investors to sell their shares of our common stock. Because of these rules, many brokers choose not to participate in penny stock transactions and there is less trading in penny stocks. Accordingly, investors may not always be able to resell shares of our common stock publicly at times and prices that they feel are appropriate.

 

 
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In addition to the “penny stock” rules described above, the Financial Industry Regulatory Authority (known as “FINRA”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative, low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives, and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative, low-priced securities will not be suitable for at least some customers. FINRA requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit an investor’s ability to buy and sell our stock and have an adverse effect on the market for our shares.

 

Investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock may be negatively affected.

 

As a public reporting company, we are subject to the Sarbanes-Oxley Act of 2002 as well as to the information and reporting requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and other federal securities laws. As a result, we incur significant legal, accounting, and other expenses, including costs associated with our public company reporting requirements and corporate governance requirements. As an example of public reporting company requirements, we evaluate the effectiveness of disclosure controls and procedures and of our internal control over financing reporting to allow management to report on such controls.

 

Our management concluded that our internal control over financial reporting was not effective as of December 31, 2023, due to a failure to maintain an effective control environment, failure of segregation of duties, failure of entity-level controls, and our sole executive’s access to cash.

 

If significant deficiencies or other material weaknesses are identified in our internal control over financial reporting that we cannot remediate in a timely manner, investors and others may lose confidence in the reliability of our financial statements. This would likely have an adverse effect on the trading price of our common stock and our ability to secure any necessary additional equity or debt financing.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 1C. CYBERSECURITY

 

Risk Management and Strategy

 

We store and transmit data, including sensitive and nonpublic data regarding our company, employees, and counterparties. Given our limited size, resources and operations, we believe we have appropriate processes in place, as well as appropriate physical and administrative controls, to allow oversight and identification of cybersecurity threats to our operations.  The Company depends on the proper functioning, availability, and security of its information systems, including financial, data processing, communications, and operating systems. Several information systems are software applications provided by third parties. We monitor risks through routine security assessments and implementation of enhancements to security measures used to protect our systems and data.

 

Like many companies, we might be subjected to attempts by unauthorized actors to disrupt our operations, access our data, or otherwise cause damage to our technology infrastructure, including through the use of phishing, malware, and other attack vectors.

 

In addition, we are subject to cybersecurity risk in connection with vendors we use. For example, a weakness in vendor systems or software products that we use in the operation of our business may provide a mechanism for a cyber threat actor to access our systems or information through trusted paths. Recent global supply chain security incidents such as compromises of reputable software update services are illustrative of this type of occurrence.

 

To date, we have not been materially affected by cybersecurity incidents and believe our risk to such a threat is low.

 

Governance

 

Our board of directors is responsible for the oversight of risks related to cybersecurity threats. Management communicates with the board of directors on a regular basis regarding cybersecurity efforts through risk reporting and the development and testing of procedures and exercises for responding to both internal and external cyber threats. We believe our board of directors is capable of addressing the full spectrum of potential risks to us, estimating the likelihood of such an occurrence, and predicting the potential financial impact of each risk, for the purpose of prioritizing risks, including the risk of a cybersecurity threat. 

 

Given our limited resources, we believe we have appropriate processes in place, as well as appropriate physical and administrative controls, to allow oversight and identification of cybersecurity threats to our operations.

 

ITEM 2. PROPERTIES

 

Our principal corporate offices are located at 3675 Market Street, Suite 200, Philadelphia PA 19104 and leased from CIC, Philadelphia. We are at the heart of University City, just steps away from UPenn and Drexel University. Our rent is approximately $500 per month. These facilities are generally in good condition, well maintained, and suitable and adequate for our current and projected operating needs. In May 2023, we entered into a month-to-month agreement for shared use of an office and facilities at 128 E Grant Street, Lancaster, Pennsylvania 17602, for $1,000 per month, pursuant to a lease with a company controlled by our chief executive officer.

  

 
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ITEM 3. LEGAL PROCEEDINGS

 

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

 

On May 4, 2018, we reached a settlement of the claims at issue in Ocean Thermal Energy Corp. v. Robert Coe, et al., Case No. 2:17-cv-02343SHL-cgc, before the United States District Court for the Western District of Tennessee. Between May 30 and July 19, 2018, we received three payments totaling $100,000 from the defendants. On August 8, 2018, an $8 million judgment was entered against the defendants and in our favor. On May 28, 2019, we further settled the claims at issue with two of the defendants, Brett M. Regal and his company, Trade Base Sales, Inc. (“Regal Debtors”), for $17,500,000, bringing the combined judgment and settlement amount owed to us is $25,500,000. On July 1, 2019, the United States District Judge for the Central District of California (case number: 2:19-cv-05299-VAP-JPR), approved our stipulated application for an order permitting us to levy on property and appointing a receiver to carry out the levy on Regal Debtors’ property, such that it may be sold (subject to further order of the court approving and confirming such sales), to satisfy the $25,500,000 settlement and judgment amounts in our favor. On August 15, 2019, the court-appointed receiver notified the court that he had taken custody, possession, and control of certain gemstone and mineral specimens, known as the “Ophir Collection” and 350,000 pounds of unrefined gold and other precious metal bearing ore. By order of the court, the receiver was given the authority to assign, sell, and transfer the debtor property. The proceeds of any sales will be used to satisfy the judgment and settlement agreement, receivership’s reasonable costs and fees, as well as any other claims as determined by the court. Various parties have come forward asserting ownership and priority lien rights to the property. In our ongoing efforts to collect the $25,500,000 judgment obtained, a third party has intervened in our case in the Central District of California (case number: 2:19-cv-05299-VAP-JPR), asserting that it is the rightful owner of the “Ophir Collection” of gems and mineral specimens that is now in possession of the court-appointed receiver. On February 25, 2022, all parties who have appeared in this case stipulated to dismiss all pending claims while leaving the receivership established by the court in place. On the same date, the court ordered that upon a successful sale of the Ophir Collection, the net proceeds shall be distributed in accordance with the terms of the January 3, 2022, confidential settlement between the parties.

  

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

 

On August 22, 2018, Fugro USA Maine, Inc. (“Fugro”), filed suit against us in Fugro USA Marine, Inc. v. Ocean Thermal Energy Corp., Cause No. 2018-56396, in the District Court for Harris County, TX, 165th Judicial District, seeking approximately $500,000 allegedly owed for engineering services provided. On June 23, 2020, a settlement was reached under which we would pay Fugro $375,000 by June 30, 2021. We were unable to pay the remaining balance and therefore entered into a second amendment to the settlement agreement extending the deadline for full payment, with 18% interest per annum, to December 31, 2021. We will continue to make regular monthly payments to Fugro of $10,000 per month, until the balance owed has been paid. We have recorded the amount of accrued legal settlement as of December 31, 2023. We have repaid $260,000, and the balance at December 31, 2023, was $115,000, with accrued interest of $72,542 at December 31, 2023.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

 
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PART II

 

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Our common stock is quoted on the OTC marketplace operated by the OTC Markets Group, Inc., under the ticker symbol “CPWR.” The following table sets forth, for the periods indicated, the range of high and low closing prices of our common stock per quarter as reported by the OTC Markets. All quoted prices reflect interdealer prices without retail mark-up, mark-down, or commission, adjusted to account for past stock splits, and may not necessarily represent actual transactions:

 

 

 

Low

 

 

High

 

Year Ended December 31, 2023

 

 

 

 

 

 

Fourth Quarter

 

$0.006

 

 

$0.015

 

Third Quarter

 

$0.001

 

 

$0.015

 

Second Quarter

 

$0.006

 

 

$0.017

 

First Quarter

 

$0.006

 

 

$0.010

 

 

 

 

 

 

 

 

 

 

Year Ended December 31, 2022

 

 

 

 

 

 

 

 

Fourth Quarter

 

$0.006

 

 

$0.017

 

Third Quarter

 

$0.009

 

 

$0.020

 

Second Quarter

 

$0.007

 

 

$0.043

 

First Quarter

 

$0.006

 

 

$0.018

 

 

On March 19, 2024, the closing price per share of our common stock as quoted on the OTC marketplace was $0.0157. As of March 19, 2024, there were approximately 1,470 stockholders of record of our common stock.

   

Dividends

 

We have not paid or declared any cash dividends since our inception and do not intend to declare or pay any such dividends in the foreseeable future. Our ability to pay cash dividends is subject to limitations imposed by state law.

 

Equity Compensation Plan

 

We do not have any securities authorized under equity compensation plans.

 

Recent Sales of Unregistered Securities

 

During the year ended December 31, 2023, we issued 393 shares of Series D Preferred Stock for cash proceeds of $786,000.

 

During the year ended December 31, 2023, we issued 500 shares of Series D Preferred Stock to a related party upon conversion of $35,303 of notes and $964,697 of related accrued interest.

 

During the year ended December 31, 2023, we issued 31 shares of Series D Preferred Stock upon conversion of $46,750 of notes and $12,670 of related accrued interest.

 

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

 

ITEM 6. [RESERVED]

 

 
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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of our financial condition and operating results should be read together with our financial statements and related notes included elsewhere in this report. This discussion and analysis and other parts of this report contain forward-looking statements based upon current beliefs, plans, and expectations that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” or in other parts of this report. Our fiscal quarters end on March 31, June 30, September 30, and December 31, and our current fiscal year ended on December 31, 2023.

 

Overview

 

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

 

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

 

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

 

Results of Operations

 

Comparison of Years Ended December 31, 2023 and 2022

 

We had no revenue in the years ended December 31, 2023 and 2022.

 

We had miscellaneous services income of $12,000 during the year ended December 31, 2023, with no income in the 2022 period.

 

During the year ended December 31, 2023, we had salaries and compensation of $888,790, compared to salaries and wages of $791,392 during the same period for 2022, an increase of 12.3%, which is primarily attributable to a net increase in executive compensation.

 

During the years ended December 31, 2023 and 2022, we recorded professional fees of $451,717 and $557,055, respectively, a decrease of 18.9% year over year due to decreased fees related to the continuing Memphis litigation issues. 

 

General and administrative expenses were $138,048 during the year ended December 31, 2023, compared to $170,160 for the same period in 2022, a decrease of 18.9%. A decrease in rent expense was partially offset by increases in travel and other corporate expenses.

 

Our interest expense was $2,186,557 for the year ended December 31, 2023, compared to $1,815,800 for the same period of the previous year, an increase of 20.4% due to an increase in debt and higher interest rates on defaulted notes.

 

Our amortization of debt discount and loan fee expenses was $88,540 for the year ended December 31, 2023, compared to $210,351 for the same period of the previous year. The decrease reflects the continued amortization of the fair value of embedded conversion options related with convertible notes payable and recorded as discount, which is amortized over the life of the convertible notes payable. There were no additions to debt discount during 2023 and 2022. In addition, there was a loss on change in the fair value of the derivative liability of $5,409,047 during the year ended December 31, 2023, as compared to a loss of $3,428,245 for the same period in 2022. Also, we recorded gain on conversion of convertible notes of $22 and $60,901 for the years ended December 31, 2023 and 2022, respectively.

 

Our operations used net cash of $669,463 in 2023, as compared to $327,213 in the prior year. The increase in cash used was primarily the result of an increase in loss, after adjusting for noncash activities, of $318,705, plus a decrease in the change in accounts payable and accrued expenses of $23,545.

 

 
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Financing activities provided cash of $783,208 for our operations during the year ended December 31, 2023, as compared to providing cash of $327,660 in the prior year, an increase of 139%. During 2023, we received $786,000 in proceeds from the sale of preferred stock and $3,708 in working capital advances from related parties. We also made repayments of notes of $6,500. During 2022, we received $270,000 in proceeds from the sale of preferred stock and $57,660 in working capital advances from related parties.

 

Liquidity and Capital Resources

 

At December 31, 2023, our principal source of liquidity consisted of $115,149 of cash, as compared to $1,404 of cash at December 31, 2022. At December 31, 2023, we had negative working capital (current assets minus current liabilities) of $43,501,703. In addition, our stockholders’ deficiency was $43,501,703 at December 31, 2023, compared to stockholders’ deficiency of $36,199,026 at December 31, 2022, an increase in the deficiency of $7,302,677. We are focusing our efforts on promoting and marketing our technology by developing and executing contracts. We are exploring external funding alternatives, as our current cash is insufficient to fund operations for the next 12 months.

 

Our consolidated financial statements have been prepared assuming we will continue as a going concern. We have experienced recurring losses from operations and have an accumulated deficit. Our ability to continue our operations as a going concern is dependent on the success of management’s plans, which include the raising of capital through debt and/or equity markets until such time that revenue provided by operations is sufficient to fund working capital requirements. We will require additional funding to finance the growth of our current and expected future operations as well as to achieve our strategic objectives The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

  

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

 

Critical Accounting Policies and Estimates

 

We have identified the policies outlined below as critical to our business operations and an understanding of our results of operations. The list is not intended to be a comprehensive list of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by accounting principles generally accepted in the United States, with no need for management’s judgment in their application. The impact and any associated risks related to these policies on our business operations is discussed throughout Management’s Discussion and Analysis of Financial Condition and Results of Operations when such policies affect our reported and expected financial results. For a detailed discussion on the application of these and other accounting policies, see the notes to our consolidated financial statements for the year ended December 31, 2023. Note that our preparation of the consolidated financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of our consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. We cannot assure that actual results will not differ from those estimates.

 

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 carry-forwards and are measured using the enacted tax rates and laws that will be in effect when the temporary differences and carry-forwards 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.

 

 
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Fair Value of Derivative Liability

 

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. We value the derivative liabilities using the Black-Scholes option valuation model. The derivative liabilities are valued at each reporting date and the change in fair value is reflected as change in fair value of derivative liability.

  

Contingencies

 

In the normal course of business, we are subject to contingencies, including legal proceedings and claims arising out of our business that relate to a wide range of matters, such as government investigations and tax matters. We recognize a liability for such contingency if we determine it is probable that a loss has occurred and a reasonable estimate of the loss can be made. We may consider many factors in making these assessments including historical and the specific facts and circumstances of each matter.

 

Recent Accounting Pronouncements

 

We have reviewed all recently issued, but not yet adopted, accounting standards 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 (see Note 1 of the notes to our consolidated financial statements for the year ended December 31, 2023.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

 
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

Our consolidated financial statements, including the Report of Independent Registered Public Accounting Firm on our consolidated financial statements, are included beginning on page F-1 of this report, which are incorporated herein by reference.

 

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

None.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us, in the reports that we file or submit to the SEC under the Exchange Act, is recorded, processed, summarized, and reported within the periods specified by the SEC’s rules and forms and that information is accumulated and communicated to our management, including our principal executive and principal financial officer (whom we refer to in this periodic report as our Certifying Officer), as appropriate to allow timely decisions regarding required disclosure. Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our management evaluated, with the participation of our Certifying Officer, the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December 31, 2023, pursuant to Rule 13a-15(b) under the Exchange Act. Based upon that evaluation, our Certifying Officer concluded that, as of December 31, 2023, our disclosure controls and procedures were not effective to provide reasonable assurance because certain deficiencies involving internal controls constituted material weaknesses, as discussed below. The material weaknesses identified did not result in the restatement of any previously reported financial statements or any other related financial disclosure, and management does not believe that the material weaknesses had any effect on the accuracy of our financial statements for the current reporting period.

  

Limitations on Effectiveness of Controls

 

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

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended December 31, 2023, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 
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Management’s Annual Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. We have assessed the effectiveness of those internal controls as of December 31, 2023, using the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) Internal Control—Integrated Framework (2013) as a basis for our assessment.

 

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance respecting financial statement preparation and presentation. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

 

A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects our ability to initiate, authorize, record, process, or report external financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a material misstatement of our annual or interim financial statements that is more than inconsequential will not be prevented or detected.

 

Based on our evaluation of internal control over financial reporting, our management concluded that our internal control over financial reporting was not effective as of December 31, 2023.

 

As of December 31, 2023, management identified the following material weaknesses:

 

 

Control Environment - We did not maintain an effective control environment for internal control over financial reporting.

 

 

Segregation of Duties - As a result of limited resources and staff, we did not maintain proper segregation of incompatible duties. The effect of the lack of segregation of duties potentially affects multiple processes and procedures.

 

 

Entity Level Controls - We failed to maintain certain entity-level controls as defined by the 2013 framework issued by COSO. Specifically, our lack of staff does not allow us to effectively maintain a sufficient number of adequately trained personnel necessary to anticipate and identify risks critical to financial reporting. There is a risk that a material misstatement of the financial statements could be caused, or at least not be detected in a timely manner, due to lack of adequate staff with such expertise.

 

 

Access to Cash - One executive had the ability to transfer from our bank accounts.

 

These weaknesses are continuing. Management and the board of directors are aware of these weaknesses that result because of limited resources and staff. Management has begun the process of formally documenting our key processes as a starting point for improved internal control over financial reporting. Efforts to fully implement the processes we have designed have been put on hold due to limited resources, but we anticipate a renewed focus on this effort in the future. Due to our limited financial and managerial resources, we cannot assure when we will be able to implement effective internal controls over financial reporting.

 

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.

 

ITEM 9B. OTHER INFORMATION

 

None.

 

ITEM 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

 

None

 

 
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PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

The following table sets forth the names, ages, and positions of our executive officers and directors as of December 31, 2023:

 

Name

 

Age

 

Position

Jeremy P. Feakins

 

70

 

Chairman of the Board, Chief Executive Officer, Chief Financial Officer and Secretary/Treasurer

Peter H. Wolfson

 

59

 

Director

Antoinette K. Hempstead

 

59

 

Director

 

Jeremy P. Feakins has served as chairman of our board and our chief executive officer, chief financial officer, and secretary/treasurer since March 2015. Mr. Feakins has over 40 years of experience as an entrepreneur and investor, having founded two technology-based companies. Between 1990 and 2006, Mr. Feakins was the chairman and chief executive officer of Medical Technology & Innovations, Inc. (MTI), a developer and manufacturer of a microprocessor-based, vision-screening device and other medical devices located in Lancaster, PA. In 1996, he managed the public listing of MTI on the over-the-counter markets and subsequently structured the sale of the rights to MTI’s vision-screening product to a major international eyewear company. Between 1998 and 2006, he was a managing member of Growth Capital Resources LLC, a venture capital company located in Lancaster, PA, where he successfully managed the public listings for four small companies on the over-the-counter market. Between 2005 and 2008, he served as executive vice chairman and member of the board of directors of Caspian International Oil Corporation (OTC: COIC), an oil exploration and services company located in Houston, TX and Almaty, KZ, where he managed its public listing. Since 2008, Mr. Feakins has been the chairman and managing partner of the JPF Venture Fund 1, LP, a venture capital company located in Lancaster, PA, focused on companies involved with humanitarian and/or sustainability projects. Since 2014, Mr. Feakins has been chairman and chief executive officer of JPF Venture Group, Inc., which provides strategic and operational business assistance to start-up, early-stage, and middle-market high-growth businesses and is a principal stockholder of our stock. Mr. Feakins graduated from the Defence College of Logistics and Personnel Administration, Shrivenham, UK, and served seven years in the British Royal Navy. He is a member of the Institute of Directors in the United Kingdom and the British American Business Council in the United States. Based on his background in the technology industry and his financial and management background, the board of directors has concluded that Mr. Feakins is qualified to serve as a director.

 

Peter Wolfson has served as one of our directors since March 2015. Mr. Wolfson is a qualified commercial pilot and has been actively flying with Delta Airlines, a major U.S.-owned international airline company, since 1996. In addition, Mr. Wolfson is the founder and currently involved as president, and chief executive officer of Hans Construction, a developer and builder of upscale homes located in Lancaster, PA, organized in 2005. He also has 10 years’ experience as a financial consultant with a subsidiary of Mass Mutual, developing financial strategies and tax planning. He holds a Bachelor of Science degree in Science, Technology, and Business from Embry Riddle Aeronautical University and Edison State College. Based on his financial background, the board of directors has concluded that Mr. Wolfson is qualified to serve as director.

 

Antoinette Knapp Hempstead was appointed as a director in February 2017. Prior to that, Ms. Hempstead served as our chief executive officer and president from April 2013 until March 2015 and as our deputy chief executive officer and vice president from August 2002 until March 2015. Currently, she is an IT Project Management Professional for Hexcel Corporation, an international carbon fiber manufacturing company. Ms. Hempstead has over 30 years’ experience in management, software management, software development, and finance. Ms. Hempstead has also served as adjunct faculty for University of Idaho where she taught Computer Science courses. Ms. Hempstead has a Master of Science degree in Computer Science from the University of Idaho and a Bachelor of Science degree in Applied Mathematics from the University of Idaho. Ms. Hempstead provides experience in software development and project management, as well as experience in financial statement preparation and regulatory reporting, to our board of directors. Based on her technical background, the board of directors has concluded that Ms. Hempstead is qualified to serve as a director.

 

Family Relationships

 

There are no family relationships between any director and executive officer.

 

Involvement in Certain Legal Proceedings

 

During the past 10 years, none of our directors and executive officers has been involved in any of the events described in Item 401(f) of Regulation S-K.

 

Shareholder Nominations to the Board

 

Our board of directors, acting as the nominating committee, will consider shareholder nominations to the board of directors.

 

Committees of the Board

 

We currently do not have nominating, compensation, or audit committees or committees performing similar functions, and we do not have a written nominating, compensation, or audit committee charter. Our board of directors believes that it is not necessary to have these committees, at this time, because the directors can adequately perform the functions of such committees.

 

Code of Ethics

 

We have adopted a code of ethics that applies to all employees, including our executive officers, a copy of which is included as an exhibit to this report.

 

 
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ITEM 11. EXECUTIVE COMPENSATION

 

The following table sets forth, for the fiscal years ended December 31, 2023 and 2022, the dollar value of all cash and noncash compensation earned by any person that was our principal executive officer, or PEO, during the preceding fiscal year:

 

 

 

 

 

 

 

 

 

 

 

 

Non-Equity

 

 

Non-Qualified

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Incentive

 

 

Deferred

 

 

All

 

 

 

 

 

Year

 

 

 

 

 

Stock

 

 

Option

 

 

Plan

 

 

Compensation

 

 

Other

 

 

 

 

 

Ended

 

Salary

 

 

Bonus

 

 

Awards

 

 

Awards

 

 

Compensation

 

 

Earnings

 

 

Compensation

 

 

Total

 

Name and Principal Position

 

December 31,

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

 

$

 

Jeremy P. Feakins

 

2023

 

 

568,422

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

568,422

 

Principal Executive Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Principal Financial Officer

 

2022

 

 

427,022

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

427,022

 

 

(1)

For the fiscal year ended December 31, 2023, $568,422 of Mr. Feakins’ was accrued, but unpaid.

(2)

For the fiscal year ended December 31, 2022, $427,022 of Mr. Feakins’ was accrued, but unpaid.

 

Narrative Disclosure to Summary Compensation Table

 

On January 1, 2011, we entered into a five-year employment agreement with an individual to serve as our chief executive officer. The employment agreement provides for successive one-year term renewals unless it is expressly cancelled by either party 100 days prior to the end of the term. Under the agreement, the 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 annual salary plus 500,000 shares of common stock for each additional project that generates $25 million or more revenue to us. The 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 June 3, 2019, we issued 1,000,000 shares of Series C Preferred Stock to the chief executive officer, with a fair value of $69,277, to compensate him for his performance.

 

On June 29, 2017, the board of directors approved extending the employment agreement for the chief executive officer for an additional five years. The salary and other compensation will be increased to account for inflation since the original employment agreement was executed.

 

Effective June 9, 2022, we entered into a second addendum to the employment contract. Among other provisions, the addendum extends the employment agreement through December 31, 2025, and increases the annual salary to $454,738 from $388,220.

 

Effective January 1, 2023, the board of directors approved an increase in the chief executive officer’s annual salary for 2023 to $568,422 from $454,738.

 

Outstanding Equity Awards at Fiscal Year-End

 

No stock option awards were exercisable or unexercisable as of December 31, 2023, for any executive officer.

 

Director Compensation

 

For the year 2023, non-employee directors earned the following:

 

Name

 

Fees

Earned

or Paid in

Cash

($)

 

 

Stock

Awards

($)

 

 

Option

Awards

($)

 

 

Non-Equity

Incentive Plan

Compensation

($)

 

 

Non-Qualified

Deferred

Compensation

Earnings

($)

 

 

All Other

Compensation

($)

 

 

Total

($)

 

Antoinette Hempstead

 

 

40,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

40,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Peter H. Wolfson

 

 

40,000

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

40,000

 

 

All 2023 director fees were accrued but unpaid at December 31, 2023, and through March 15, 2024.

 

 
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

The following table sets forth, as of March 15, 2024, the name and shareholdings of each person that owns of record, or was known by us to own beneficially, 5% or more of the common stock currently outstanding; the name and shareholdings of each named executive officer and each director; and the shareholdings of all executive officers and directors as a group.  Unless indicated otherwise in the footnotes, each person named below has, to the best of our knowledge, sole voting and investment power with respect to all shares of common stock shown as beneficially owned by each person:

 

 

 

 

 

 

 

Common

 

 

 

 

 

 

 

 

 

 

 

Stock 

 

 

 

 

 

 

 

 

 

Voting

 

 

Underlying

 

 

 

 

 

 

 

Common

 

 

Preferred

 

 

Convertible

 

 

 

 

Percent of

 

Name and Address of Beneficial Owner(1)

 

Stock

 

 

Stock(3)(4)

 

 

Securities

 

 

Total

 

 

Class(2)

 

Principal Stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jeremy Feakins (4)

 

 

7,816,985

 

 

 

102,200,000

 

 

 

10,669,075

 

 

 

120,686,060

 

 

 

40.6%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Directors and Named Executive Officers:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jeremy Feakins (4)

 

 

7,816,985

 

 

 

102,200,000

 

 

 

10,669,075

 

 

 

120,686,060

 

 

 

40.6%

Antoinette Hempstead (5)

 

 

114,925

 

 

 

-

 

 

 

1,000,000

 

 

 

1,114,925

 

 

*

 

Peter H. Wolfson (6)

 

 

1,396,442

 

 

 

-

 

 

 

2,903,179

 

 

 

4,299,621

 

 

 

2.3%

All directors and executive officers as a group (3 persons)

 

 

9,328,352

 

 

 

102,200,000

 

 

 

14,572,254

 

 

 

126,100,606

 

 

 

41.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5% Shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Michael D. Stauch (7)

 

 

-

 

 

 

30,000,000

 

 

 

4,250,000

 

 

 

34,250,000

 

 

 

15.7%

Paula Vitz (8)

 

 

1,144,749

 

 

 

13,400,000

 

 

 

812,500

 

 

 

15,357,249

 

 

 

7.7%

Joseph Layman (9)

 

 

1,987,128

 

 

 

7,600,000

 

 

 

1,875,000

 

 

 

11,462,128

 

 

 

5.9%

 

* Less than 1%           

  

(1)

3675 Market Street, Suite 200, Philadelphia PA 19104, is the address for all stockholders in the table.

 

 

(2)

Based on 184,370,469 shares of common stock issued and outstanding as of March 15, 2024.

 

 

(3)

Each share of Series D Preferred stock is convertible into 200,000 shares of common stock. Each share of Series D Preferred Stock votes with common stock on an as-if converted basis

 

 

(4)

Includes 7,452,554 shares of common stock owned of record by Jeremy P. Feakins and 364,431 shares of common stock owned of record by JPF Venture Group, Inc., which is an investment entity that is majority-owned and controlled by Mr. Feakins and, as such, is deemed to be beneficially owned by him. Also includes 5,000,000 shares of our common stock issuable upon conversion of preferred stock within 60 days from March 15, 2024, and 5,669,075 shares of our common stock issuable upon conversion of notes within 60 days from March 15, 2024. Also includes 511 shares of Series D Preferred Stock, which is convertible into 102,200,000 shares of common stock (but not within 60 days of March 15, 2024) and votes with common stock on an as-if converted basis.

 

 

(5)

Includes 226 shares of common stock owned of record by Antoinette Hempstead and 114,699 shares of common stock owned of record by A.R. Hempstead Revocable Trust, which is owned and controlled by Ms. Hempstead and, as such, is deemed to be beneficially owned by her. Also includes 1,000,000 shares of our common stock issuable upon conversion of preferred stock within 60 days from March 15, 2024.

 

 

(6)

Includes 1,000,000 shares of our common stock issuable upon conversion of preferred stock within 60 days from March 15, 2024, and 1,903,179 shares of our common stock issuable upon conversion of notes within 60 days from March 15, 2024.

 

 

(7)

Includes 4,250,000 shares of our common stock issuable upon conversion of notes within 60 days from March 15, 2024. Also includes 150 shares of Series D Preferred Stock, which is convertible into 30,000,000 shares of common stock (but not within 60 days of March 15, 2024) and votes with common stock on an as-if converted basis.

 

 

(8)

Includes 312,500 shares of our common stock issuable upon conversion of preferred stock within 60 days from March 15, 2024, and 500,000 shares of our common stock issuable upon conversion of notes within 60 days from March 15, 2024. Also includes 67 shares of Series D Preferred Stock, which is convertible into 13,400,000 shares of common stock (but not within 60 days of March 15, 2024) and votes with common stock on an as-if converted basis.

 

 

(9)

Includes 625,000 shares of our common stock issuable upon conversion of preferred stock within 60 days from March 15, 2024, and 1,250,000 shares of our common stock issuable upon conversion of notes within 60 days from March 15, 2024. Also includes 38 shares of Series D Preferred Stock, which is convertible into 7,600,000 shares of common stock (but not within 60 days of March 15, 2024) and votes with common stock on an as-if converted basis.

 

 
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PERSONS, AND DIRECTOR INDEPENDENCE

 

Related-Party Transactions

 

Through May 31, 2023, we incurred monthly rent of $10,000 to a company controlled by our chief executive officer under an operating lease agreement. The lease was for a one-year term and, unless either party gave written notice of termination to the other, the term would renew for a further period of one year, and so on from year to year until terminated by either party. The lease was terminated on May 31, 2023. For the years ended December 31, 2023 and 2022, rent expense pursuant to this lease was $50,000 and $120,000, respectively. At December 31, 2023 and 2022, we had a payable to the entity of $10,000 and $70,000, respectively.  

 

In May 2023, we entered into a month-to-month agreement with a company controlled by our chief executive officer for shared use of an office and facilities at $1,000 per month. For the year ended December 31, 2023, rent expense was $8,000.

 

For the years ended December 31, 2023 and 2022, we recorded charges incurred to a company controlled by our chief executive officer for reimbursement of accounting and administrative services provided to us by an employee of that company. For the years ended December 31, 2023 and 2022, we recorded expense of $119,508 and $114,814, respectively, to this company. At December 31, 2023 and 2022, we had a payable to the entity of $16,493 and $74,070, respectively.

 

On October 20, 2016, we borrowed $12,500 from an independent director pursuant to a promissory note. The terms of the note are as follows: (i) interest is payable at 6% per annum; (ii) the note is payable 90 days after demand; and (iii) the payee is authorized to convert part or all of the note balance and accrued interest, if any, into shares of our common stock at the rate of one share for each $0.03 of principal amount of the note. This conversion share price was adjusted to $0.01384 for the reverse stock splits. As of December 31, 2023, the outstanding balance was $12,500, plus accrued interest of $5,558.

 

On March 9, 2017, we issued a promissory note payable of $200,000 to a related party in which our chief executive officer is an officer and director. The note bears interest of 10% and is due and payable within 90 days after demand. During the year ended December 31, 2018, we received an additional $2,000 and repaid $25,000. The outstanding balance was $177,000 and accrued interest was $122,629 as of December 31, 2023.

 

On November 6, 2017, we entered into an agreement and promissory note with JPF Venture Group, Inc. to loan up to $2,000,000 to us. The terms of the note are as follows: (i) interest is payable at 10% per annum; (ii) all unpaid principal and all accrued and unpaid interest is due and payable at the earliest of resolution of the Memphis litigation (as defined therein), December 31, 2020, or when we are otherwise able to pay. On September 30, 2018, the note was amended to extend the maturity date to the earliest of a resolution of the Memphis litigation, December 31, 2020, or when we are otherwise able to pay. This note is in default. As of December 31, 2023, the outstanding balance was $543,093 and the accrued interest was $364,489.

 

On January 18, 2018, Jeremy P. Feakins & Associates, LLC, an investment entity owned by our chief executive, chief financial officer, and a director, agreed to extend the due date for repayment of a $2,265,000 note issued in 2014 to the earlier of December 31, 2020, or the date of the financial closings of our Baha Mar project (or any other project of $25 million or more), whichever occurs first. On August 15, 2018, principal of $618,500 and accrued interest of $207,731 were converted to 826,231 shares at $1.00 per share, which was ratified by a disinterested majority of the board of directors. In January 2023 we issued 500 shares of preferred stock upon conversion of $35,303 of principal and $964,697 of accrued interest. As of December 31, 2023, the note balance was $1,067,197 and the accrued interest was $108,202. This note is in default. 

 

We remain liable for the loans made to us by JPF Venture Group, Inc. before the 2018 merger. As of December 31, 2023, the outstanding balance of these loans was $581,880 and the accrued interest was $302,661. These notes are in default.

 

In the fourth quarter of 2019 and during the year ended December 31, 2020, we issued a series of convertible promissory notes to accredited investors. The notes bear simple interest on outstanding principal at the rate of 8% per annum, computed based on the actual number of days elapsed in a year of 365 days. Each $5,000 loan automatically converts into 250,000 shares of our common stock, either at the time the closing sale price for our common stock is equal to or greater than $1.00 per share, as adjusted for stock splits, stock dividends, reclassification, and the like, or at the maturity date of January 2, 2022, whichever comes first. On December 9, 2019, we borrowed $5,000 from Jeremy P. Feakins, our chief executive officer. On January 21, 2020, we borrowed $5,000 from Jeremy P. Feakins. During 2022, the December 9, 2019 $5,000 note and related accrued interest of $991 was converted into preferred stock. As of December 31, 2023, the outstanding balance of his loans was $5,000 and the accrued interest was $1,578. On December 7, 2019, we borrowed $5,000 from independent director. On January 21, 2020, we borrowed an additional $5,000 from an independent director. As of December 31, 2023, the outstanding balance of his loans was $10,000 and the accrued interest was $3,204. These notes are in default.

 

In the fourth quarter of 2019 and during the year ended December 31, 2020, we issued a series of convertible promissory notes to accredited investors. The notes bear simple interest on outstanding principal at the rate of 8% per annum, computed based on the actual number of days elapsed in a year of 365 days. Each $5,000 loan automatically converts into 250,000 shares of our common stock, either at the time the closing sale price for our common stock is equal to or greater than $1.00 per share, as adjusted for stock splits, stock dividends, reclassification, and the like, or at the maturity date of January 2, 2022, whichever comes first. On December 9, 2019, we borrowed $5,000 from Jeremy P. Feakins, our chief executive officer. On January 21, 2020, we borrowed $5,000 from Jeremy P. Feakins. During 2022, the December 9, 2019 $5,000 note and related accrued interest of $991 was converted into preferred stock. As of December 31, 2023, the outstanding balance of his loans was $5,000 and the accrued interest was $1,578. On December 7, 2019, we borrowed $5,000 from independent director. On January 21, 2020, we borrowed an additional $5,000 from an independent director. As of December 31, 2022, the outstanding balance of his loans was $10,000 and the accrued interest was $3,204. These notes are in default.

 

In the third quarter of 2021, 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 based on 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 August 30, 2023, whichever comes first. On July 27, 2021, we borrowed $5,000 from an independent director. As of December 31, 2023, the outstanding balance of his loan was $5,000 and the accrued interest was $973. These notes are in default.

 

On November 11, 2021, we issued a convertible promissory note to an entity controlled by Jeremy P. Feakins, our chief executive officer, in the amount of $5,000. The note bears simple interest on outstanding principal at the rate of 8% per annum, computed based on the actual number of days elapsed in a year of 365 days. The 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 November 30, 2023, whichever comes first. As of December 31, 2023, the total outstanding value of this loan was $5,000. The accrued interest was $856 as of December 31, 2023.

 

 
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Director Independence

 

Peter Wolfson and Antoinette Hempstead are independent directors under Nasdaq Rule 5605.

 

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

Principal Accountant Fees and Services

 

The following table summarizes the approximate aggregate fees billed to us or expected to be billed to us by our independent auditors for our 2023 and 2022 fiscal years:

 

 

 

Year Ended December 31,

 

 

 

2023

 

 

2022

 

Audit Fees (1)

 

$

58,000

 

 

$

52,112

 

Tax fees

 

 

-

 

 

 

-

 

Total Fees

 

$

58,000

 

 

$

52,112

 

_______________

(1) 

Includes fees for: (i) audits of our consolidated financial statements for the fiscal years ended December 31, 2023 and 2022; (ii) review of our interim period financial statements for fiscal years 2023 and 2022; and (iii) fees related to services normally provided by the accountant in connection with statutory and regulatory filings or engagements.

 

BF Borgers CPA PC provided our audits for the years ended 2023 and 2022. The firm provided no other services, other than those listed above.

 

Audit and Non-Audit Service Preapproval Policy

 

In accordance with the requirements of the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated thereunder, our board of directors has adopted an informal approval policy that it believes will result in an effective and efficient procedure to preapprove services performed by the independent registered public accounting firm.

 

Audit Services. Audit services include the annual financial statement audit (including quarterly reviews) and other procedures required to be performed by the independent registered public accounting firm to be able to form an opinion on our consolidated financial statements. The board of directors preapproves specified annual audit services engagement terms and fees and other specified audit fees. All other audit services must be specifically preapproved by the board of directors. The board of directors monitors the audit services engagement and may approve, if necessary, any changes in terms, conditions, and fees resulting from changes in audit scope or other items.

 

Audit-Related Services. Audit-related services are assurance and related services that are reasonably related to the performance of the audit or review of our consolidated financial statements, which historically have been provided to us by the independent registered public accounting firm and are consistent with the SEC’s rules on auditor independence. The board of directors has approved specified audit-related services within preapproved fee levels. All other audit-related services must be preapproved by the board of directors.

 

Tax Services. The board of directors preapproves specified tax services that it believes would not impair the independence of the independent registered public accounting firm and that are consistent with SEC’s rules and guidance. The board of directors must specifically approve all other tax services.

 

All Other Services. Other services are services provided by the independent registered public accounting firm that do not fall within the established audit, audit-related, and tax services categories. The board of directors preapproves specified other services that do not fall within any of the specified prohibited categories of services.

 

Procedures. All proposals for services to be provided by the independent registered public accounting firm, which must include a detailed description of the services to be rendered and the amount of corresponding fees, are submitted to the chairman of the board of directors and the chief financial officer. The chief financial officer authorizes services that have been preapproved by the board of directors. The chief financial officer submits requests or applications to provide services that have not been preapproved by the board of directors, which must include an affirmation by the chief financial officer and the independent registered public accounting firm that the request or application is consistent with the SEC’s rules on auditor independence, to the board of directors (or its chair or any of its other members pursuant to delegated authority) for approval.

 

 
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PART IV

 

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

(a)

The following financial statements are filed as part of this report:

 

 

 

Page

 

 

 

 

 

Audited Consolidated Financial Statements for the Years Ended December 31, 2023 and 2022:

 

 

 

Report of BF Borgers CPA PC, Independent Registered Public Accounting Firm (PCAOB ID# 5041)

 

F-2 

 

Consolidated Balance Sheets as of December 31, 2023 and 2022

 

F-3 

 

Consolidated Statements of Operations for the Years Ended December 31, 2023 and 2022

 

F-4 

 

Consolidated Statements of Changes in Stockholders’ Deficiency Years Ended December 31, 2023 and 2022

 

F-5 

 

Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2022

 

F-6 

 

Notes to the Consolidated Financial Statements

 

F-7 

 

 

 
33

Table of Contents

  

(b)

The following exhibits are filed as part of this report:

 

Exhibit Number*

 

Title of Document

 

Location

 

 

 

 

 

Item 3

 

Articles of Incorporation and Bylaws

 

 

3.01

 

Articles of Incorporation of TetriDyn Solutions, Inc., dated May 15, 2006

 

Incorporated by reference from the Current Report on Form 8-K filed June 7, 2006

3.02

 

Bylaws

 

Incorporated by reference from the Current Report on Form 8-K filed June 7, 2006

3.03

 

Designation of Rights, Privileges, and Preferences of Series A Preferred Stock

 

Incorporated by reference from the Annual Report on Form 10-K for the year ended December 31, 2009, filed March 31, 2010

3.04

 

Certificate of Change Pursuant to NRS 78.209 of TetriDyn Solutions, Inc., filed with the Nevada Secretary of State on December 6, 2016

 

Incorporated by reference from the Current Report on Form 8-K filed December 12, 2016

3.05

 

Certificate of Correction of TetriDyn Solutions, Inc., filed with the Nevada Secretary of State on December 15, 2016

 

Incorporated by reference from the Current Report on Form 8-K filed December 12, 2016

3.06

 

Certificate of Amendment to Articles of Incorporation dated May 8, 2018

 

Incorporated by reference from the Current Report on Form 8-K filed May 12, 2018

3.07

 

Certificate of Designation filed with the Nevada Secretary of State on June 6, 2019

 

Incorporated by reference from the Quarterly Report for the quarter ended June 30, 2019, filed August 13, 2019

3.08

 

Certificate of Amendment to Designation (Series D Convertible Preferred Stock) filed June 12, 2023

 

Incorporated by reference from the Current Report on Form 8-K filed June 15, 2023

Item 4

 

Instruments Defining the Rights of Security Holders, including indentures

 

 

4.01

 

Specimen Stock Certificate

 

Incorporated by reference from the Registration Statement on Form S-8 filed August 25, 2018

Item 10

 

Material Contracts

 

 

10.07

 

Loan Agreement between TetriDyn Solutions, Inc., and Southeast Idaho Council of Governments, Inc., together with related promissory notes, dated December 23, 2009

 

Incorporated by reference from the Annual Report on Form 10-K for the year ended December 31, 2009, filed March 31, 2010

10.18

 

Consolidated Promissory Note for $394,350 dated December 31, 2014

 

Incorporated by reference from the Current Report on Form 8-K filed June 8, 2015

10.25

 

Promissory Note dated February 25, 2016

 

Incorporated by reference from the Current Report on Form 8-K filed March 1, 2016

10.26

 

Promissory Note dated November 23, 2015

 

Incorporated by reference from the Annual Report on Form 10-K for the year ended December 31, 2015, filed March 30, 2016

10.29

 

Promissory Note dated October 20, 2016

 

Incorporated by reference from the Current Report on Form 8-K filed October 20, 2016

10.30

 

Promissory Note dated May 20, 2016

 

Incorporated by reference from the Current Report on Form 8-K filed May 24, 2016

 

 
34

Table of Contents

 

10.31

 

Amendment to Convertible Promissory Notes dated February 24, 2018

 

Incorporated by reference from the Current Report on Form 8-K filed March 2, 2018

10.32

 

Agreement and Plan of Merger between TetriDyn Solutions, Inc. and Ocean Thermal Energy Corporation dated March 1, 2018

 

Incorporated by reference from the Current Report on Form 8-K filed March 10, 2018

10.36

 

Note and Warrant Purchase Agreement dated December 28, 2018

 

Incorporated by reference from the Current Report on Form 8-K filed January 3, 2018

10.37

 

Form of Unsecured Promissory Note

 

Incorporated by reference from the Current Report on Form 8-K filed January 3, 2018

10.38

 

Form of Unsecured Common Stock Purchase Warrant

 

Incorporated by reference from the Current Report on Form 8-K filed January 3, 2018

10.42

 

Securities Purchase Agreement dated February 16, 2018, between Ocean Thermal Energy Corporation and L2 Capital, LLC

 

Incorporated by reference from the Current Report on Form 8-K filed February 23, 2018

10.43

 

Senior Secured Promissory Note dated February 16, 2018, issued to L2 Capital, LLC

 

Incorporated by reference from the Current Report on Form 8-K filed February 23, 2018

10.44

 

Security Agreement dated February 16, 2018, between Ocean Thermal Energy Corporation and L2 Capital, LLC

 

Incorporated by reference from the Current Report on Form 8-K filed February 23, 2018

10.45

 

Common Stock Purchase Warrant dated February 16, 2018, issued to L2 Capital, LLC

 

Incorporated by reference from the Current Report on Form 8-K filed February 23, 2018

10.46

 

Common Stock Purchase Warrant dated February 16, 2018, issued to Craft Capital Management, LLC

 

Incorporated by reference from the Current Report on Form 8-K filed February 23, 2018

10.47

 

Lease Agreement between Ocean Thermal Energy Corporation and Queen Street Development Partners 1, LP, as amended

 

Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019

10.48

 

Employment Agreement with Jeremy P. Feakins dated January 1, 2011**

 

Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019

10.49

 

Loan Agreement, Promissory Note, and Warrant to Purchase up to 3,295,761 Shares of Common Stock between Ocean Thermal Energy Corporation and DCO Energy, LLC, dated February 10, 2012, including Forbearance and Loan Extension Agreement dated April 1, 2016

 

Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019

10.50

 

Form of Loan Agreement, Promissory Note (Series B), Security Agreement, and Warrant (with related schedule) [2013]

 

Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019

10.51

 

Promissory Note for $290,000 payable to Theodore Herman dated December 31, 2013

 

Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019

10.52

 

Loan Agreement, Promissory Note, and Warrant to Purchase up to 12,912,500 Shares of Common Stock between Ocean Thermal Energy Corporation and Jeremy P. Feakins & Associates, LLC, dated April 1, 2014, including Forbearance and Loan Extension Agreement (Revised and Reformed) dated April 1, 2016

 

Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019 

10.53

 

Loan Agreement, Promissory Note, and Warrant to Purchase up to 200,000 Shares of Common Stock between Ocean Thermal Energy Corporation and Mart Inn, Inc., dated December 22, 2014

 

Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019 

 

 
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Table of Contents

 

10.54

 

Loan Agreement, Promissory Note, and Warrant to Purchase up to 100,000 Shares of Common Stock between Ocean Thermal Energy Corporation and James G. Garner, Jr., dated December 26, 2014

 

Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019 

10.55

 

Promissory Note dated April 17, 2015, with extensions

 

Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019

10.56

 

Promissory Note dated October 20, 2016, to Peter Wolfson

 

Incorporated by reference from the Current Report on Form 8-K filed October 20, 2016.

10.57

 

Promissory Note dated December 21, 2016, to JPF Venture Group

 

Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019

10.58

 

Promissory Note dated March 9, 2018, to Jeremy P. Feakins & Associates, LLC

 

Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019

10.59

 

Loan Agreement and Promissory Note with JPF Venture Group, Inc., dated November 6, 2018

 

Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019

10.60

 

Form of Bridge Loan, Warrant, and Promissory Note for December 2018, together with schedule of investors

 

Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019.

10.61

 

Replacement Convertible Promissory Note to L2 Capital, LLC, dated December 14, 2018

 

Incorporated by reference from the Annual Report for the year ended December 31, 2018, filed March 22, 2019

10.62

 

Form of Loan Agreement made January 2, 2019, between Ocean Thermal Energy Corporation and the lenders identified on the scheduled attached thereto

 

Incorporated by reference from the Annual Report for the year ended December 31, 2019, filed March 20, 2020

10.63

 

Form of Convertible Loan Agreement with a maturity date of October 31, 2021, between Ocean Thermal Energy Corporation and the lenders identified on the scheduled attached thereto

 

Incorporated by reference from the Annual Report for the year ended December 31, 2019, filed March 20, 2020

10.64

 

Form of Convertible Loan Agreement with a maturity date of December 31, 2022, between Ocean Thermal Energy Corporation and the lenders identified on the scheduled attached thereto

 

Incorporated by reference from the Annual Report for the year ended December 31, 2019, filed March 20, 2020

10.65

 

Stock Purchase Agreement between Ocean Thermal Energy Corporation and Epaphus Global Energy, LLC, dated August 23, 2022, and executed August 25, 2022

 

Incorporated by reference from the Current Report on Form 8-K filed August 29, 2022.

10.66

 

Addendum to Chief Executive Officer Employment Agreement Effective June 9, 2022

 

Incorporated by reference from the Quarterly Report for the quarter ended September 30, 2022, filed November 8, 2022

10.67

 

Philadelphia lease agreement

 

This filing 

10.68

 

Grant Street, Lancaster PA lease agreement

 

This filing 

Item 14

 

Code of Ethics

 

 

14.01

 

TetriDyn Solutions, Inc. Code of Ethics

 

Incorporated by reference from the annual report on Form 10-KSB for the year ended December 31, 2006, filed April 2, 2007

Item 21

 

Subsidiaries of the Registrant

 

 

21.01

 

Schedule of Subsidiaries

 

Incorporated by reference from Post-Effective Amendment No. 1/A to the Registration Statement on Form S-1 (Amendment No. 1) filed January 10, 2019

Item 31

 

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

 

 

31.01

 

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

 

This filing

Item 32

 

Section 1350 Certifications

 

 

32.01

 

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

 

This filing

 

Item 101

 

Interactive Data Files***

 

 

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. Omitted numbers in the sequence refer to documents previously filed as an exhibit.

**

Identifies each management contract or compensatory plan or arrangement required to be filed as an exhibit, as required by Item 15(a)(3) of Form 10-K.

***

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 will be expressly set forth by specific reference in such filing or document.

 

 
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Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

OCEAN THERMAL ENERGY CORPORATION

 

 

 

 

Dated: March 28, 2024

By:

/s/ Jeremy P. Feakins

 

 

 

Jeremy P. Feakins

 

 

 

Principal Executive Officer and

 

 

 

Principal Financial Officer

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

Name

 

Title

 

Date

 

 

 

 

 

/s/ Jeremy P. Feakins

 

Director, Chief Executive Officer and Chief

 

March 28, 2024

Jeremy P. Feakins

 

Financial Officer (Principal Executive Officer and Principal Financial Officer)

 

 

 

 

 

 

 

/s/ Peter Wolfson

 

Director

 

March 28, 2024

Peter Wolfson

 

 

 

 

 

 

 

 

 

/s/ Antoinette K. Hempstead

 

Director

 

March 28, 2024

Antoinette K. Hempstead

 

 

 

 

 

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT

TO SECTION 15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED

SECURITIES PURSUANT TO SECTION 12 OF THE ACT

 

We will furnish to the SEC, at the same time that it is sent to stockholders, any proxy or information statement that we send to our stockholders in connection with any annual stockholders’ meeting.

 

 

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 OCEAN THERMAL ENERGY CORPORATION

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

AND

CONSOLIDATED FINANCIAL STATEMENTS

 

DECEMBER 31, 2023 and 2022

 

Report of BF Borgers CPA PC, Independent Registered Public Accounting Firm (PCAOB ID# 5041)

 

F-2

 

 

 

 

 

Consolidated Balance Sheets as of December 31, 2023 and December 31, 2022

 

F-3

 

 

 

 

 

Consolidated Statements of Operations for the Years Ended December 31, 2023 and 2022

 

F-4

 

 

 

 

 

Consolidated Statements of Stockholders’ Deficiency for the Years Ended December 31, 2023 and 2022

 

F-5

 

 

 

 

 

Consolidated Statements of Cash Flows for the Years Ended December 31, 2023 and 2022

 

F-6

 

 

 

 

 

Notes to Consolidated Financial Statements

 

F-7

 

 

 

F-1

 

 

 Report of Independent Registered Public Accounting Firm

 

To the shareholders and the board of directors of Ocean Thermal Energy Corporation

 

Opinion on the Financial Statements

 

We have audited the accompanying consolidated balance sheets of Ocean Thermal Energy Corporation as of December 31, 2023 and 2022, the related statements of operations, stockholders' equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.

 

Substantial Doubt about the Company’s Ability to Continue as a Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

 Critical Audit Matter

 

Critical audit matters are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

 

We determined that there are no critical audit matters.

 

/S/ BF Borgers CPA PC (PCAOB ID 5041)

We have served as the Company's auditor since 2022

Lakewood, CO

March 28, 2024

 

 
F-2

 

 

OCEAN THERMAL ENERGY CORPORATION AND SUBSIDIARY

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2023 AND 2022

 

 

 

December 31,

2023

 

 

December 31,

2022

 

ASSETS

 

Current Assets

 

 

 

 

 

 

Cash

 

$115,149

 

 

$1,404

 

Prepaid expenses

 

 

5,000

 

 

 

5,000

 

Total Current Assets

 

 

120,149

 

 

 

6,404

 

 

 

 

 

 

 

 

 

 

Total Assets

 

$120,149

 

 

$6,404

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIENCY

 

 

 

 

 

 

 

 

 

Current Liabilities

 

 

 

 

 

 

 

 

Accounts payable and accrued expense

 

$22,524,164

 

 

$20,517,881

 

Notes payable - related party

 

 

2,294,170

 

 

 

2,329,473

 

Convertible notes payable - related party, net

 

 

117,500

 

 

 

114,721

 

Notes payable

 

 

3,649,431

 

 

 

3,655,932

 

Convertible note payable, net

 

 

2,570,412

 

 

 

2,531,401

 

Advances payable - related party, net

 

 

61,468

 

 

 

57,760

 

Derivative liability

 

 

12,404,707

 

 

 

6,998,262

 

Total Current Liabilities

 

 

43,621,852

 

 

 

36,205,430

 

 

 

 

 

 

 

 

 

 

Total Liabilities

 

 

43,621,852

 

 

 

36,205,430

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (See Note 8)

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Stockholders' deficiency

 

 

 

 

 

 

 

 

Preferred Stock, Series B, $0.001par 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

 

Preferred Stock, Series D, $0.001 par value; 1,400 shares authorized, 1,202 and 278 shares issued and outstanding, respectively

 

 

1

 

 

 

-

 

Common stock, $0.001 par value; 200,000,000 shares authorized, 184,370,469 and 184,370,469 shares issued and outstanding, respectively

 

 

184,371

 

 

 

184,371

 

Additional paid-in capital

 

 

61,958,401

 

 

 

60,110,402

 

Accumulated deficit

 

 

(105,647,295 )

 

 

(96,496,618 )

Total Stockholders' Deficiency

 

 

(43,501,703 )

 

 

(36,199,026 )

 

 

 

 

 

 

 

 

 

Total Liabilities and Stockholders' Deficiency

 

$120,149

 

 

$6,404

 

 

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

 

 
F-3

Table of Contents

 

OCEAN THERMAL ENERGY CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

 

 

 

2023

 

 

2022

 

Operating Expenses

 

 

 

 

 

 

Salaries and compensation

 

$888,790

 

 

$791,392

 

Professional fees

 

 

451,717

 

 

 

557,055

 

General and administrative

 

 

138,048

 

 

 

170,160

 

Total Operating Expenses

 

 

1,478,555

 

 

 

1,518,607

 

 

 

 

 

 

 

 

 

 

Loss from Operations

 

 

(1,478,555 )

 

 

(1,518,607 )

 

 

 

 

 

 

 

 

 

Other (Expenses) Income

 

 

 

 

 

 

 

 

Service income

 

 

12,000

 

 

 

-

 

Interest expense, net

 

 

(2,186,557 )

 

 

(1,815,800 )

Amortization of debt discount

 

 

(88,540 )

 

 

(210,351 )

Change in fair value of derivative liability

 

 

(5,409,047 )

 

 

(3,428,245 )

Gain on conversion of debt

 

 

22

 

 

 

60,901

 

Total Other Expense

 

 

(7,672,122 )

 

 

(5,393,495 )

 

 

 

 

 

 

 

 

 

Loss Before Income Taxes

 

 

(9,150,677 )

 

 

(6,912,102 )

 

 

 

 

 

 

 

 

 

Provision for Income Taxes

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Net Loss

 

$(9,150,677 )

 

$(6,912,102 )

 

 

 

 

 

 

 

 

 

Net Loss per Common Share Basic and Diluted

 

$(0.05 )

 

$(0.04 )

 

 

 

 

 

 

 

 

 

Weighted Average Number of Common Shares Outstanding

 

 

184,370,469

 

 

 

178,959,510

 

 

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

 

 
F-4

Table of Contents

 

OCEAN THERMAL ENERGY CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIENCY

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional

 

 

 

 

 Total

 

 

 

Number of

 

 

Par

 

 

Number of

 

 

Par

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders’

 

 

 

Shares

 

 

Value

 

 

Shares

 

 

Value

 

 

Capital

 

 

Deficit

 

 

Deficiency

 

Balance December 31, 2021

 

 

2,818,750

 

 

$2,819

 

 

 

174,370,469

 

 

$174,371

 

 

$59,379,402

 

 

$(89,584,516 )

 

$(30,027,924 )

Series D Preferred Stock issued for cash

 

 

135

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

270,000

 

 

 

-

 

 

 

270,000

 

Series D Preferred Stock issued for conversion of notes and interest

 

 

143

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

286,000

 

 

 

-

 

 

 

286,000

 

Common Stock issued for conversions of notes payable

 

 

-

 

 

 

-

 

 

 

10,000,000

 

 

 

10,000

 

 

 

175,000

 

 

 

-

 

 

 

185,000

 

Net Loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6,912,102 )

 

 

(6,912,102 )

Balance December 31, 2022

 

 

2,819,028

 

 

 

2,819

 

 

 

184,370,469

 

 

 

184,371

 

 

 

60,110,402

 

 

 

(96,496,618 )

 

 

(36,199,026 )

Series D Preferred Stock issued for cash

 

 

393

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

786,000

 

 

 

-

 

 

 

786,000

 

Series D Preferred Stock issued for conversion of notes and interest

 

 

531

 

 

 

1

 

 

 

-

 

 

 

-

 

 

 

1,061,999

 

 

 

-

 

 

 

1,062,000

 

Net Loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(9,150,677 )

 

 

(9,150,677 )

Balance December 31, 2023

 

 

2,819,952

 

 

$2,820

 

 

 

184,370,469

 

 

$184,371

 

 

$61,958,401

 

 

$(105,647,295 )

 

$(43,501,703 )

 

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

 

 
F-5

Table of Contents

 

OCEAN THERMAL ENERGY CORPORATION AND SUBSIDIARY

CONSOLIDATED STATEMENTS OF CASH FLOW

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

 

 

 

2023

 

 

2022

 

Cash Flows From Operating Activities:

 

 

 

 

 

 

Net loss

 

$(9,150,677 )

 

$(6,912,102 )

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

 

 

 

 

 

 

 

 

Change in fair value of derivative liability

 

 

5,409,047

 

 

 

3,428,245

 

Amortization of debt discount

 

 

88,540

 

 

 

210,351

 

Gain on conversion of debt

 

 

(22 )

 

 

(60,901 )

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

 

2,983,649

 

 

 

3,007,194

 

Net Cash Used In Operating Activities

 

 

(669,463 )

 

 

(327,213 )

 

 

 

 

 

 

 

 

 

Cash Flows From Financing Activities:

 

 

 

 

 

 

 

 

Proceeds from sale of preferred stock

 

 

786,000

 

 

 

270,000

 

Advances from related parties

 

 

3,708

 

 

 

57,660

 

Repayment of notes payable

 

 

(6,500 )

 

 

-

 

Net Cash Provided by Financing Activities

 

 

783,208

 

 

 

327,660

 

 

 

 

 

 

 

 

 

 

Net increase in cash

 

 

113,745

 

 

 

447

 

Cash at beginning of year

 

 

1,404

 

 

 

957

 

Cash at End of Year

 

$115,149

 

 

$1,404

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest expense

 

$5,000

 

 

$13,823

 

Cash paid for income taxes

 

$-

 

 

$-

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Preferred stock issued for conversion of notes and accrued interest

 

$1,062,000

 

 

$286,000

 

Convertible notes payable and accrued interest converted into common stock

 

$-

 

 

$62,596

 

Convertible notes payable and accrued interest converted into preferred stock

 

$59,420

 

 

$100,945

 

Related party convertible notes payable and accrued interest converted into preferred stock

 

$-

 

 

$12,043

 

Related party note payable and accrued interest converted into preferred stock

 

$1,000,000

 

 

$-

 

Notes payable and accrued interest converted into preferred stock

 

$-

 

 

$168,138

 

Common stock issued for conversion of notes payable

 

$-

 

 

$185,000

 

Derivative liability extinguished upon conversion of note payable

 

$2,602

 

 

$199,194

 

 

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

 

 
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Table of Contents

 

OCEAN THERMAL ENERGY CORPORATION AND SUBSIDIARY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2023 AND 2022

 

NOTE 1 – NATURE OF BUSINESS AND BASIS OF PRESENTATION

 

Ocean Thermal Energy Corporation is currently in the businesses of:

 

 

·

OTEC and SWAC/LSC-designing ocean thermal energy conversion (“OTEC”) power plants and seawater air conditioning and lake water air conditioning (“SWAC/LSC”) plants for large commercial properties, utilities, and municipalities. These technologies provide practical solutions to mankind’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/LSC) 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 this line of business.

 

NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation

 

Our consolidated financial statements for the years ended December 31, 2023 and 2022 include the accounts of the company and the following subsidiary:

 

Name

 

Place of Incorporation

/ Establishment

 

Principal Activities

 

Date Formed

OCEES International Inc. (“OCEES”)

 

Hawaii, USA

 

Research and development for the Pacific Rim

 

01/21/1998

 

Intercompany balances and transactions have been eliminated in consolidation. We have an effective interest of 100% in OCEES. Former subsidiaries Ocean Thermal Energy Bahamas LTD and OTE BM Ltd. were inactive and have been dissolved.

 

Agreement to Sell Subsidiary

 

On August 25, 2022, we entered into a Stock Purchase Agreement to sell OCEES to Epaphus Global Energy, LLC (“Epaphus”). Epaphus is controlled by Jeremy Feakins, our chief executive officer and a director. The transaction was approved unanimously by our directors who do not have an interest in the transaction.

 

In exchange for the sale of OCEES, we will receive:

 

 

·

$1,000,000 in the form of canceled amounts owed by us to certain individuals, including Mr. Feakins, who have assigned their right to receive those payments to Epaphus;

 

·

$75,000 in cash per month for 12 months following the date of the purchase agreement; and

 

·

70% of the net profit of any currently contemplated project to build an ocean thermal energy conversion power plants entered into by OCEES.

 

Under the terms of the purchase agreement, Epaphus has the unilateral right to return OCEES to us and receive a full refund of all portions of the purchase price paid as of the return of OCEES at any time for year following the date of the purchase agreement.

 

By mutual consent of the parties, the purchase agreement has not closed as of December 31, 2023, or through the date of filing of this report. As a result, it has not been reflected in these financial statements.

 

 
F-7

Table of Contents

 

Use of Estimates

 

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

 

Cash and Cash Equivalents

 

We consider all highly liquid temporary cash investments with an original maturity of three months or less to be cash equivalents. We had no cash equivalents at December 31, 2023 and 2022.

 

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 carry-forwards and are measured using the enacted tax rates and laws that will be in effect when the temporary differences and carry-forwards 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 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.

 

 
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Table of Contents

 

Management believes the carrying amounts of the short-term financial instruments, including cash and cash equivalents, prepaid expenses, accounts payable, accrued liabilities, notes payable, and other liabilities, reflected in the accompanying balance sheets, approximate fair value at December 31, 2023 and December 31, 2022, due to the relatively short-term nature of these instruments.

 

We accounted for derivative liability at fair value on a recurring basis under Level 3 at December 31, 2023 and 2022 (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. As of December 31, 2023 and 2022, no balances exceeded FDIC-insured limits.

 

Loss per Share

 

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. 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.

  

The following potentially dilutive securities have been excluded from the computation of diluted weighted average shares outstanding, as they would be anti-dilutive:

 

 

 

Years Ended

December 31,

 

 

 

2023

 

 

2022

 

Shares underlying warrants outstanding

 

 

-

 

 

 

125,073

 

Shares underlying convertible notes outstanding

 

 

1,269,873,927

 

 

 

836,901,049

 

Shares underlying convertible preferred stock outstanding

 

 

16,687,500

 

 

 

16,687,500

 

 

 

 

1,286,561,427

 

 

 

853,713,622

 

 

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.

 

 
F-9

Table of Contents

 

NOTE 3 – GOING CONCERN

 

The accompanying audited consolidated financial statements have been prepared on the assumption that we will continue as a going concern. As reflected in the accompanying consolidated financial statements, we had a net loss of $9,150,677 and used $669,463 of cash in operating activities for the year ended December 31, 2023. We had a working capital deficiency of $43,501,703 and a stockholders’ deficiency of $43,501,703 as of December 31, 2023. 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. We continue to apply for grant funding from the U.S. Department of Energy. Our applications focus on desalinated water, ammonia, and hydrogen production from an OTEC facility. On March 11, 2022, President Biden signed a bill that provides $162 million for the Water Power Technologies Office budget. About $112 million of that money is slated for marine energy. We plan to apply for funding to support projects where our technology would apply. The financial statements do not include any adjustments that may result from the outcome of this uncertainty.

 

NOTE 4 – CONVERTIBLE NOTES AND NOTES PAYABLE

 

During the year ended December 31, 2023, $35,303 of related party notes and $964,697 of related accrued interest were converted into 500 shares of Series D Preferred Stock.

 

During the year ended December 31, 2023, $46,750 of notes and $12,670 of related accrued interest were converted into 31 shares of Series D Preferred Stock.

 

During the year ended December 31, 2022, $215,000 of notes and $66,126 of related accrued interest were converted into 143 shares of Series D Preferred Stock.

 

During the year ended December 31, 2022, $60,650 of notes and $1,946 of related accrued interest were converted into 10,847,262 shares of common stock. Of this common stock, 847,262 shares were borrowed from our chief executive officer to enable the conversions. We have accrued a liability for the shares to be reissued to our chief executive officer in the amount of $11,014, the fair value of the shares on the date of conversion. The replacement shares have not been issued at December 31, 2023.

 

 
F-10

Table of Contents

 

The following convertible notes and notes payable were outstanding at December 31, 2023:

 

 Date of

 

 

Maturity

 

 

Interest

 

 

In

 

Original

 

 

Principal

 at

December 31,

 

 

Discount

at

December 31,

 

 

Carrying

Amount

at

December 31,

 

 

Related Party

 

 

Non Related Party

 

Issuance

 

 

Date

 

 

Rate

 

 

 Default

 

Principal

 

 

2023

 

 

2023

 

 

2023

 

 

Current

 

 

Long-Term

 

 

Current

 

 

Long-Term

 

12/01/07

 

 

09/01/15

 

 

 

7.00%

 

Yes

 

 

125,000

 

 

 

85,821

 

 

 

-

 

 

 

85,821

 

 

 

-

 

 

 

-

 

 

 

85,821

 

 

 

-

 

09/25/09

 

 

10/25/11

 

 

 

5.00%

 

Yes

 

 

50,000

 

 

 

50,000

 

 

 

-

 

 

 

50,000

 

 

 

-

 

 

 

-

 

 

 

50,000

 

 

 

-

 

12/23/09

 

 

12/23/14

 

 

 

7.00%

 

Yes

 

 

100,000

 

 

 

78,053

 

 

 

-

 

 

 

78,053

 

 

 

-

 

 

 

-

 

 

 

78,053

 

 

 

-

 

12/23/09

 

 

12/23/14

 

 

 

7.00%

 

Yes

 

 

25,000

 

 

 

21,539

 

 

 

-

 

 

 

21,539

 

 

 

-

 

 

 

-

 

 

 

21,539

 

 

 

-

 

12/23/09

 

 

12/23/14

 

 

 

7.00%

 

Yes

 

 

25,000

 

 

 

21,529

 

 

 

-

 

 

 

21,529

 

 

 

-

 

 

 

-

 

 

 

21,529

 

 

 

-

 

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

 

 

 

1,067,197

 

 

 

-

 

 

 

1,067,197

 

 

 

1,067,197

 

 

 

-

 

 

 

-

 

 

 

-

 

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

 

 

37,500

 

 

 

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)