UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
| (Mark One) |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For
the quarterly period ended |
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 Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) | |
| (Address of principal executive offices) | (Zip Code) |
(Registrant’s telephone number, including area code)
N/A
(Former name or former address and former fiscal year, if changed since last report)
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.
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 such files).
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 ☐ |
| 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 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐
APPLICABLE
ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of the registrant’s Common Stock, $0.001 par value, outstanding as of August 8, 2023 was . The number of shares of the registrant’s Preferred Stock, $0.001 par value, outstanding as of August 8, 2023 was 150,000.
TABLE OF CONTENTS
| Page No. | ||
| PART I | FINANCIAL INFORMATION | 4 |
| Item 1. | Financial Statements (2023 unaudited, 2022 audited) | 4 |
| Consolidated Balance Sheets | 4 | |
| Consolidated Statements of Operations and Comprehensive Loss | 5 | |
| Consolidated Statements of Stockholders’ Equity (deficit) | 6 | |
| Consolidated Statements of Cash Flows | 7 | |
| Notes to the Consolidated Financial Statements | 8-21 | |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 22 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 26 |
| Item 4. | Controls and Procedures | 26 |
| PART II | OTHER INFORMATION | 27 |
| Item 1. | Legal Proceedings | 27 |
| Item 1A. | Risk Factors | 27 |
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 27 |
| Item 3. | Defaults Upon Senior Securities | 28 |
| Item 4. | Mine Safety Disclosures | 28 |
| Item 5. | Other Information | 28 |
| Item 6. | Exhibits | 28 |
| SIGNATURES | 29 | |
| 2 |
CAUTIONARY NOTE REGARDING FORWARD LOOKING-STATEMENTS
This quarterly report on Form 10-Q (“Form 10-Q”) of Rainmaker Worldwide Inc. (the “Company”) includes statements that are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In some cases, these forward-looking statements can be identified by the use of such terms as “believes,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “could,” “might,” “will,” “should,” “approximately” or the negative or other variations thereon or comparable terminology, although not all forward-looking statements contain these words. They appear in a number of places throughout this Form 10-Q and include statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things, our results of operations, financial condition, our available cash, liquidity, prospects, growth and strategies, the length of time that we will be able to continue to fund our operating expenses and capital expenditures, our expected financing needs and sources of financing, the industry in which we operate and the trends that may affect our industry or us.
By their nature, forward-looking statements involve risks and uncertainties because they relate to the occurrence and timing of events or circumstances, many of which are beyond the control of the Company. As a result of this, we cannot assure you that the forward-looking statements in this Form 10-Q will prove to be accurate. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Form 10-Q, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate, may differ materially from the forward-looking statements contained in this Form 10-Q. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate, are consistent with the forward-looking statements contained in this Form 10-Q, they may not be predictive of results or developments in future periods.
Some of the material factors that we believe could cause actual results to differ from those anticipated or predicted include:
| ● | the successful development and implementation of our sales and marketing campaigns; |
| ● | the size and growth of the potential markets for our product and our ability to serve those markets; |
| ● | regulatory developments in the United States and other countries; |
| ● | our available cash; |
| ● | the accuracy of our estimates regarding expenses, future revenues, capital requirements and needs for additional financing; |
| ● | our ability to obtain additional funding; |
| ● | our ability to manufacture and the performance of third-party manufacturers; |
| ● | our ability to identify license and collaboration partners and to maintain existing relationships; and |
| ● | our ability to successfully implement our strategy. |
You should also read carefully the factors described in the “Risk Factors” section of the Form 10-12GA. Any forward-looking statements that we make in this Form 10-Q speak only as of the date of such statement, and we undertake no obligation to update such statements to reflect events or circumstances after the date of this Form 10-Q except as required by the federal securities laws.
This Form 10-Q includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe these industry publications and third-party research, surveys and studies are reliable, we have not independently verified such data.
| 3 |
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
RAINMAKER WORLDWIDE INC.
(Formerly Gold and Silver Mining of Nevada Inc.)
Consolidated Balance Sheets
| June 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| (Unaudited) | (Audited) | |||||||
| Assets | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Other receivables | ||||||||
| Prepaid expenses | ||||||||
| Total Current Assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity (Deficit) | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Related party payables | ||||||||
| Accrued liabilities | ||||||||
| Customer deposits | ||||||||
| Contingent liability | ||||||||
| Convertible notes payable net of discount of $ | ||||||||
| Notes payable - related parties | ||||||||
| Other loans payable | ||||||||
| Derivative liabilities | ||||||||
| Total Current Liabilities | ||||||||
| Total Liabilities | $ | $ | ||||||
| Mezzanine Equity | ||||||||
| Stock payable-preferred | $ | $ | ||||||
| Total Mezzanine Equity | $ | $ | ||||||
| Stockholders’ Equity (Deficit) | ||||||||
| Common stock - $ par value; authorized shares; and outstanding at June 30, 2023 and December 31, 2022 | $ | $ | ||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive income | ||||||||
| Total Stockholders’ Equity (Deficit) | $ | ( | ) | $ | ( | ) | ||
| Total Liabilities and Stockholders’ Equity (Deficit) | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 4 |
RAINMAKER WORLDWIDE INC.
(Formerly Gold and Silver Mining of Nevada Inc.)
Consolidated Statements of Operations and Comprehensive Loss
| Three month | Three month | Six month | Six month | |||||||||||||
| June 30 | June 30 | June 30 | June 30 | |||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| (Unaudited) | (Unaudited) | (Unaudited) | (Unaudited) | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Expenses | ||||||||||||||||
| General and administrative expense | ||||||||||||||||
| Total Expenses | ||||||||||||||||
| Loss from Operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expense) | ||||||||||||||||
| Other income | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Amortization of debt discount | ( | ) | ( | ) | ||||||||||||
| Change in derivative liabilities expense | ||||||||||||||||
| Total other income (expense) | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Loss from continuing operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Discontinued operations: | ||||||||||||||||
| Loss from operations of discontinued operations | ||||||||||||||||
| Total discontinued operations | $ | $ | $ | $ | ||||||||||||
| Net income (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income (loss) | ||||||||||||||||
| Foreign exchange translation gain (loss) | ||||||||||||||||
| Net income (loss) and comprehensive income (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Net loss per share: | ||||||||||||||||
| Basic and diluted | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Weighted average number of common shares outstanding: | ||||||||||||||||
| Basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 5 |
RAINMAKER WORLDWIDE INC.
(Formerly Gold and Silver Mining of Nevada Inc.)
Consolidated Statements of Stockholders’ Equity (deficit) (Unaudited)
Mezzanine Equity Stock Payable- |
Common Stock | Additional paid-in | Deficit | Accumulated other Comprehensive | ||||||||||||||||||||||||
Preferred |
Shares | Amount |
capital ($) | ($) |
income ($) | Total | ||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Foreign currency translation | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Net gain (loss) for the quarter | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance March 31, 2022 | ( | ) | ( | ) | ||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Foreign currency translation | - | |||||||||||||||||||||||||||
| Net gain (loss) for the quarter | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, June 30, 2022 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||
| Conversion of convertible promissory notes | ||||||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Foreign currency translation | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Net gain (loss) for the quarter | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | ( | ) | $ | $ | ( | ) | |||||||||||||||||||
| Conversion of convertible promissory notes | ||||||||||||||||||||||||||||
| Stock-based compensation | - | |||||||||||||||||||||||||||
| Stock payable-Preferred | - | |||||||||||||||||||||||||||
| Foreign currency translation re disposal of foreign subsidiary | - | ( | ) | |||||||||||||||||||||||||
| Net gain (loss) for the quarter | - | ( | ) | ( | ) | |||||||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 6 |
RAINMAKER WORLDWIDE INC.
(Formerly Gold and Silver Mining of Nevada Inc.)
Consolidated Statements of Cash Flows (Unaudited)
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash provided by (used for) operating activities: | ||||||||
| Stock-based compensation | ||||||||
| Change in fair value of derivative liabilities | ( | ) | ||||||
| Discount amortization | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses | ( | ) | ( | ) | ||||
| Accounts payable, related party payables and accrued liabilities | ||||||||
| Customer deposits | ||||||||
| CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES | ( | ) | ( | ) | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||
| Restructuring/discontinued operations | ||||||||
| CASH USED FOR INVESTING ACTIVITIES | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||
| Proceeds from sale of stock-Preferred stock payable | ||||||||
| Proceeds from convertible notes | ||||||||
| Borrowed on debt | ( | ) | ||||||
| Borrowed on debt-related party | ||||||||
| Repayments on debt-related party | ( | ) | ( | ) | ||||
| CASH PROVIDED BY FINANCING ACTIVITIES | ||||||||
| Effect on Foreign Currency Exchange | ( | ) | ||||||
| NET INCREASE (DECREASE) IN CASH | ( | ) | ||||||
| CASH AT BEGINNING OF YEAR | ||||||||
| CASH AT PERIOD END | $ | $ | ||||||
| NON-CASH TRANSACTIONS | ||||||||
| Receipts of prepaid inventory | ||||||||
| Shares issued for conversion | ||||||||
| Initial Derivative Liability/Discount | ||||||||
| Reattribution of AOCI for disposal of foreign subsidiary | ||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| 7 |
Note 1: Nature of Operations and Going Concern
Nature of Operations
Rainmaker Worldwide Inc. (“Rainmaker” or the “Company” or “RAKR”) is a Nevada company which previously operated Rainmaker Worldwide Inc. (Ontario) (“RWI”) until March 31, 2023, with its head office in Peterborough, Ontario, Canada. The Company distributes two main types of energy-efficient, fresh water-producing technologies: (1) Air-to-Water (“AW”), which harvests fresh water from humidity in the atmosphere, and (2) Water-to-Water (“WW”), which transforms seawater or polluted water into drinking water. The technology can be wind, solar, or use conventional power sources (grid or generator), is deployable anywhere, and leaves no carbon trace if renewable resources are deployed.
Rainmaker
holds a
Effective April 1, 2023, Rainmaker (RAKR) divested
Company History
RWI
was incorporated on
On
April 1, 2023, the Company’s wholly owned subsidiary, RWI (Rainmaker Worldwide Inc. (Ontario)), completed the issuance of
representing % of the outstanding shares of RWI shares to an investor. As a result, the investor will take over management of RWI,
and the Company will retain a
| 8 |
Ongoing Partnerships
On July 28, 2022, the Company signed a Joint Development Agreement (“JDA”) with Miranda Environmental and Water Treatment Technologies, Energy, Natural Resources, Engineering, Consulting, Construction and Commerce Inc. (“Miranda”) whose primary operations reside in Ankara, Turkey. This JDA allows for reciprocal distribution rights for all of RAKR’s and Miranda’s combined technologies and fosters a long-term technological integration strategy between the two companies. The first result of this JDA was achieved in May of 2023 with a purchase order from Turks and Caicos. Delivery and commissioning is expected in September 2023. We will also deliver an Air-to-Water machine to be commissioned alongside the water treatment plant.
On October 5, 2022, the Company entered into a Memorandum of Understanding (the “MOU”) with Miranda to formalize the mutual intention to integrate the two firms at both strategic and operating levels. This is a non-binding agreement allowing for standard due diligence to take place before the creation of, and agreement to definitive agreements. There can be no assurance that the parties will reach a definitive agreement.
Going Concern
The
Company has incurred continuing losses from its operations and has an accumulated deficit of $
The Company’s ability to continue its operations and to pay its obligations when they become due is contingent upon the Company obtaining additional financing. Management’s plans include seeking to procure additional funds through debt and equity financing to enable it to meet its operating needs including current and future sales orders. In addition, revenues are being forecasted at the operational level.
Note 2: Significant Accounting Policies
Basis of Preparation
The
consolidated and non-consolidated financial statements presented are for the entity Rainmaker and its wholly owned subsidiary,
Rainmaker Worldwide Inc. (Ontario) as a consolidated entity until March 31, 2023, the point at which
The preparation of the consolidated and non-consolidated financial statements, in conformity with GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
| 9 |
All accounting policies are chosen to ensure the resulting financial information satisfies the concepts of relevance and reliability.
Foreign Currency Translation
The reporting currency of the Company is the United States dollar. The financial statements of the subsidiary located outside of the United States is measured in its functional currency: Until March 31, 2023, Rainmaker Worldwide Inc. (Ontario) reported in Canadian dollars. Monetary assets and liabilities of this subsidiary are translated at the exchange rate at the balance sheet date. Income and expense items are translated using average annual exchange rates. Non-monetary assets are translated at their historical exchange rates. Translation adjustments are included in accumulated other comprehensive income in the consolidated balance sheets.
Intangible Assets
No Intangible Assets.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and any recognized impairment loss. Cost includes the original purchase price of the asset and any costs attributable to bringing the asset to its working condition for its intended use.
Depreciation is provided at rates estimated to write off the cost of the relevant assets less their estimated residual values by equal annual amounts over their expected useful lives. Residual values and expected useful lives are reviewed and adjusted, if appropriate, at the end of each reporting period. Depreciation periods for the Company’s property and equipment are as follows:
| Leasehold Improvements – | Manufacturing
Equipment – |
| Office
Furniture & Equipment – |
Demonstration
Equipment – |
| Intellectual
Property – |
Computer
Software – |
Embedded Conversion Features
Until December 31, 2021, the Company evaluated embedded conversion features within convertible debt under ASC 815 Derivatives and Hedging to determine whether the embedded conversion feature(s) should be bifurcated from the host instrument and accounted for as a derivative at fair value with changes in fair value recorded in earnings. If the conversion feature did not require derivative treatment under ASC 815, the instrument was evaluated under ASC 470-20 Debt with Conversion and Other Options for consideration of any beneficial conversion features. On January 1, 2022, the Company adopted ASU 2020-06 using the modified retrospective method and reviewed and calculated the impact on the outstanding financial instruments as of this adoption date concluding there was no impact.
Derivative Financial Instruments
The Company does not use derivative instruments to hedge exposures to cash flow, market, or foreign currency risks. The Company evaluates all of its financial instruments, including stock purchase warrants, to determine if such instruments are derivatives or contain features that qualify as embedded derivatives.
For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported as charges or credits to income. For option-based simple derivative financial instruments, the Company uses a Monte Carlo simulation model to value the derivative instruments at inception and subsequent valuation dates. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period.
| 10 |
Debt Issue Costs and Debt Discount
The Company may record debt issue costs and/or debt discounts in connection with raising funds through the issuance of debt. These costs may be paid in the form of cash, or equity (such as warrants). These costs are amortized to interest expense over the life of the debt. If a conversion of the underlying debt occurs, a proportionate share of the unamortized amounts is immediately expensed.
Demonstration Equipment
Demonstration equipment is stated at cost less accumulated depreciation and any recognized impairment loss. Cost includes the original purchase price of the asset and any costs attributable to bringing the asset to its working condition for its intended use.
Depreciation for the demonstration equipment is at a rate estimated to write off the cost of the equipment less its estimated residual value by an equal annual amount over its expected useful life. The residual value and expected useful life of the demonstration equipment is reviewed and adjusted, if appropriate, at the end of each reporting period.
Revenue Recognition
In May 2014, the FASB issued an accounting standard update (‘ASU”), 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU amends the existing accounting standards for revenue recognition and is based on the principle that revenue should be recognized to depict the transfer of goods or services to a customer at an amount that reflects the consideration a company expects to receive in exchange for those goods or services. On January 1, 2018, the Company adopted the new Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers using the modified retrospective method, and the Company determined the new guidance does not change the Company’s policy of revenue recognition.
The Company generates its revenue through the direct sales of water production and purification systems. A contract with a customer is established once an agreement is signed and the initial down payment is received. Each transaction price is established in the signed contract. Unearned revenue is recognized upon receipt of the down payment for the system. The revenue is recognized once title of the system transfers to the customer. The nature of the business of equipment sales implies there is only one performance obligation, which is delivery of the end product to the customer. Our contracts outline each party’s rights and obligations including the terms and timing of payments. Another source of revenue is in exchange for operating, maintenance and professional services to these joint ventures. That revenue is recognized in the period it is earned.
In June 2018, the FASB issued guidance clarifying the revenue recognition and measurement issues for grants, contracts, and similar arrangements, ASU Topic 958. Government grants and contracts are agreements that generally provide cost reimbursement for certain types of expenditures in return for research and development activities over a contractually defined period. Accordingly, the Company recognizes revenue from grants and contracts in the period during which the related costs are incurred, provided that the conditions under which the grants and contracts were provided have been met and only perfunctory performance obligations are outstanding.
Related Party Transactions
Parties are considered to be related if one party has the ability to directly or indirectly control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to be related if they are subject to common control or common significant influence. Related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. Related party transactions that are in the normal course of business and have commercial substance are measured at the exchange amount.
| 11 |
Share-based Payment Expense
The Company follows the fair value method of accounting for stock awards granted to employees, directors, officers, and consultants. Share-based awards to employees are measured at the fair value of the related share-based awards. Share-based payments to others are valued based on the related services rendered or goods received or if this cannot be reliably measured, on the fair value of the instruments issued. Issuances of shares are valued using the fair value of the shares at the time of grant; issuances of options are valued using the Black-Scholes model with assumptions based on historical experience and future expectations.
Financial Liabilities and Equity Instruments
Financial liabilities and equity instruments are classified and accounted for as debt or equity according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Company after deducting all of its liabilities.
Marketing, Advertising and Promotional Costs
As required by Generally Accepted Accounting Principles of the United States, the Company records marketing costs as an expense in the year to which such costs relate. The Company does not defer amounts on its year-end consolidated balance sheets with respect to marketing costs. Advertising costs are expensed as incurred.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the year. Management bases its estimates on historical experience and on other assumptions considered to be reasonable under the circumstances. However, actual results may differ from the estimates.
The Company reports loss per share in accordance with ASC 260, “Earnings per Share”. Basic loss per share is computed by dividing net loss by the weighted average number of common stock outstanding during each period. Diluted loss per share is computed by dividing net loss by the weighted average number of shares of common stock and other potentially dilutive securities outstanding during the year. .
Income Taxes
The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, we determine deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.
The Company recognizes deferred tax assets to the extent that we believe that these assets are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If we determine that we would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.
| 12 |
The Company records uncertain tax positions in accordance with ASC 740 on the basis of a two-step process in which (1) we determine whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, we recognize the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority.
Income tax assets and liabilities for the current period are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted by the date of the statement of financial position.
Equity-Settled Transactions
The costs of equity-settled transactions with employees are measured by reference to the fair value at the date on which they are granted.
The costs of equity-settled transactions are recognized, together with a corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled, ending on the date on which the relevant employees become fully entitled to the award (“the vesting date”). The cumulative expense is recognized for equity-settled transactions at each reporting date until the vesting date reflects the Company’s best estimate of the number of equity instruments that will ultimately vest. The profit or loss charge or credit for a period represents the movement in cumulative expense recognized as at the beginning and end of that period and the corresponding amount is represented in share-based compensation reserve.
No expense is recognized for awards that do not ultimately vest, except for awards where vesting is conditional upon a market condition, which are treated as vesting irrespective of whether or not the market condition is satisfied provided that all other performance and/or service conditions are satisfied.
Where the terms of an equity-settled award are modified, the minimum expense recognized is the expense as if the terms had not been modified. An additional expense is recognized for any modification which increases the total fair value of the share-based payment arrangement or is beneficial to the employee as measured at the date of modification.
Inventory
Inventory and work in progress are valued at the lower of cost and net realizable value. The production cost of inventory includes an appropriate proportion of depreciation and production overheads based on the ratio of indirect vs. direct costs. Cost is determined on the following bases: Raw materials and consumables are valued at cost on a first in, first out (FIFO) basis; finished products are valued at raw material cost, labor cost and a proportion of manufacturing overhead expenses.
Financial Instruments
ASC 820 “Fair Value Measurements and Disclosures” provides the framework for measuring fair value. That framework provides a fair value hierarchy prioritizing the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements).
Fair value is defined as an exit price, representing the amount that would be received upon the sale of an asset or payment to transfer a liability in an orderly transaction between market participants.
Fair value is a market-based measurement that is determined based on assumptions that market participants would use in pricing an asset or liability. A three-tier fair value hierarchy is used to prioritize the inputs in measuring fair value as follows:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable, either directly or indirectly.
Level 3 - Significant unobservable inputs that cannot be corroborated by market data.
| 13 |
The Company’s policy is to recognize transfers into and out of Level 3 as of the date of the event or change in the circumstances that caused the transfer. There were no such transfers during the periods being reported.
Customer Concentration
Due to the infancy of the Company’s market penetration, current sales are concentrated on a limited number of customers.
Cash and Cash Equivalents
The
Company considers all highly liquid instruments with a maturity of three months or less to be cash equivalents. The Company maintains
the majority of its cash accounts at a commercial bank. Cash balances are insured by the Canada Deposit Insurance Corporation (“CDIC”)
up to CAD
Customer Deposits
The
typical arrangement for customer deposits for purchases of Company products is
Note 3: Convertible Notes Payable
The Convertible Notes Payable are defined below.
An
$
On
September 14, 2020, the Company issued a Senior Secured Convertible Promissory Note in the amount of $
On
February 7, 2022, the Company issued a convertible promissory note in the amount of $
| 14 |
On
March 11, 2022, the Company issued a convertible promissory note in the amount of $
On
June 28, 2022, the Company issued a convertible promissory note in the amount of $
On
July 26, 2022, the Company issued a convertible promissory note in the amount of $
On
September 12, 2022, the Company issued a convertible promissory note in the amount of $
On
October 25, 2022, the Company issued a convertible promissory note in the amount of $
On
February 21, 2023, the Company issued a convertible promissory note in the amount of $
On
May 8, 2023, the Company issued a convertible promissory note in the amount of $
| 15 |
Note 4: Derivative Liabilities
Derivative liabilities – Convertible Notes
In
Q3, 2022, the convertible debt issued February 7, 2022, March 11, 2022, June 28, 2022 and July 26, 2022 became eligible for conversion
on August 6, 2022, September 7, 2022, December 25, 2022 and January 22, 2023 respectively. The Company engaged a third-party consultant
to determine the fair value of the convertible notes at the end of each quarter. The subsequent evaluation determined that the notes
should be accounted for as derivative liabilities upon the date they became convertible due to the variable conversion price included
in each note based on Financial Accounting Standards Board (“FASB”) guidance. The derivative component of the obligation
is initially valued and classified as a derivative liability with an offset to discounts on convertible debt. Discounts have been amortized
to interest expense over the respective terms of the related notes. Since the issuance of the convertible notes mentioned above, three
more convertible notes were issued (as discussed in Note 3) for a total of seven of which five are fully converted and debt discount
fully amortized. The total derivative liabilities associated with these notes eligible for conversion at June 30, 2023 was $
On
July 26, 2022, due to the tainted equity environment, existing convertible notes required derivative treatment. The convertible note
in the amount of $
Derivative liabilities – Warrants
Due
to the tainted equity environment at July 26, 2022, the Company recognized derivative liability for existing warrants in the amount of
$
| Derivative liabilities (fair value) | ||||
| Beginning Balance | $ | |||
| Change due to Issuances | ||||
| Change due to Conversions | ( |
) | ||
| Mark-to-market | ( |
) | ||
| Ending Balance | $ | |||
Note 5: Notes Payable, Related Parties
Promissory
notes dated November 6, 2016 with a principal amount of $
In
2017 compensation was due to members of the executive management team in the amount of $
During
2021, a related party loaned the Company, on a short-term basis, $
| 16 |
Note 6: Other Loans Payable
On
February 2, 2021, the company entered into a short-term loan agreement in the amount of $
Note 7: Intellectual Property
As of the filing, the Company holds no intellectual property.
Note 8: Property and Equipment
Demonstration Equipment
The Company may have demonstration equipment to allow it to show a working version of its technology and equipment to customers and organizations in the future. Demonstration equipment is stated at cost less accumulated depreciation and any recognized impairment loss. Cost would include the original purchase price of the asset and any costs attributable to bringing the asset to its working condition for its intended useful life. Depreciation for the demonstration equipment would be at a rate estimated to write off the cost of the equipment less its estimated residual value by an equal annual amount over its expected useful life. The residual value and expected useful life of the demonstration equipment is reviewed and adjusted, if appropriate, at the end of each reporting period. The Company does not currently have any demonstration equipment but could in the future.
Note 9: Common Stock
Common Stock
As at December 31, 2021, the Company had authorized common stock with $ par value with shares issued and outstanding. Effective June 29, 2022, the Company filed a Certificate of Amendment to its Articles of Incorporation with the Secretary of State of the State of Nevada to increase the aggregate number of authorized shares to , of which shares are common stock with a par value of $ per share and shares are preferred stock (see Note 17) with a par value of $ per share.
At June 30, 2023, common stock was issued and outstanding. The following table details the number of common stock issued:
| Number of Stock | ||||
| Balance, December 31, 2021 | ||||
| Conversion of convertible promissory notes | ||||
| Shares cancelled | ( |
) | ||
| Balance, December 31, 2022 | ||||
| Conversion of convertible promissory notes | ||||
| Balance, June 30, 2023 | ||||
On August 9, 2022, the Company issued shares upon a partial conversion of a convertible promissory note. (See Note 3 for details).
| 17 |
On August 16, 2022, the Company issued shares upon a partial conversion of a convertible promissory note. (See Note 3 for details).
On September 1, 2022 (effective June 13, 2022), shares were rescinded by a shareholder.
On September 6, 2022, the Company issued shares upon a partial conversion of a convertible promissory note. (See Note 3 for details).
On
September 12, 2022, the Company issued shares completing the full conversion of a convertible promissory note including accrued
interest of $
On September 20, 2022, the Company issued shares upon a partial conversion of a convertible promissory note. (See Note 3 for details).
On October 6, 2022, the Company issued shares upon a partial conversion of a convertible promissory note. (See Note 3 for details).
On October 24, 2022, the Company issued shares upon a partial conversion of a convertible promissory note. (See Note 3 for details).
On January 9, 2023, the Company issued shares upon partial conversion of a convertible promissory note (see Note 3 for details).
On January 26, 2023, the Company issued shares upon a partial conversion of a convertible promissory note. (See Note 3 for details).
On February 2, 2023, the Company issued shares upon a partial conversion of a convertible promissory note. (See Note 3 for details).
On February 3, 2023, the Company issued shares upon partial conversion of a convertible promissory note (see Note 3 for details).
On February 7, 2023, the Company issued shares upon partial conversion of a convertible promissory note (see Note 3 for details).
On February 8, 2023, the Company issued shares upon partial conversion of a convertible promissory note (see Note 3 for details).
On February 13, 2023, the Company issued shares upon partial conversion of a convertible promissory note (see Note 3 for details).
On February 14, 2023, the Company issued shares upon partial conversion of a convertible promissory note (see Note 3 for details).
On February 21, 2023, the Company issued shares upon partial conversion of a convertible promissory note (see Note 3 for details).
On March 15, 2023, the Company issued shares upon partial conversion of a convertible promissory note (see Note 3 for details).
On March 20, 2023, the Company issued shares upon partial conversion of a convertible promissory note (see Note 3 for details).
On March 27, 2023, the Company issued shares upon partial conversion of a convertible promissory note (see Note 3 for details).
| 18 |
On April 24, 2023, the Company issued shares upon partial conversion of a convertible promissory note (see Note 3 for details).
On May 22, 2023, the Company issued shares upon partial conversion of a convertible promissory note (see Note 3 for details).
On May 25, 2023, the Company issued shares upon partial conversion of a convertible promissory note (see Note 3 for details).
On June 5, 2023, the Company issued shares upon partial conversion of a convertible promissory note (see Note 3 for details).
On June 9, 2023, the Company issued shares upon partial conversion of a convertible promissory note (see Note 3 for details).
On June 14, 2023, the Company issued shares upon partial conversion of a convertible promissory note (see Note 3 for details).
On June 16, 2023, the Company issued shares upon partial conversion of a convertible promissory note (see Note 3 for details).
On June 20, 2023, the Company issued shares upon partial conversion of a convertible promissory note (see Note 3 for details).
Note 10: Related Party Transactions
Outstanding
compensation and expense reimbursements due to consultants engaged by the Company $
Refer to other related party payables in Notes 5 and 6.
The
Company (the lender) signed a loan agreement with RHBV (the borrower) on June 21, 2022. RAKR agreed to a two-year loan facility with
an interest rate of
Note 11: Commitments and Contingencies
In the ordinary course of operating the Company’s business, it may, from time to time, be subject to various claims or possible claims. Management’s view that there are no claims or possible claims that if resolved would either individually or collectively result in a material adverse impact on the Company’s financial position, results of operations, or cash flows. These matters are inherently uncertain, and management’s view of these matters may change in the future.
On
April 27, 2018, the Company identified a judgement dated August 8, 2016 against six Defendants including a former subsidiary of the Company
as well as a predecessor of the Company as currently named and constituted. The amount of the judgement including costs is $
| 19 |
Note 12: Inventory
Inventory is stated at the lower of cost or market. Cost is recorded at standard cost, which approximates actual cost, on the first-in first-out basis. The Company, at this time, holds no inventory but may in the future.
Note 13: Leases
The Company determines whether a contract is or contains a lease at inception of the contract and whether that lease meets the classification criteria of a finance or operating lease. When available, the Company uses the rate implicit in the lease to discount lease payments to present value; the Company’s leases do not provide a readily determinable implicit rate. Therefore, the Company must discount lease payments based on an estimate of its incremental borrowing rate.
There are no lease-related assets and liabilities recorded on the Company’s consolidated balance sheet and the Company has no lease expenses.
In order to compensate members of the board and executives, the following stock options have been granted, vesting as described.
| ● | Effective July 1, 2022, the Company granted options as compensation to the newly filled position, VP Sales and to the newly filled position, Executive VP Finance. and options respectively vested immediately and the remaining options vest over one year, with a term of years and exercisable at $ per Share. | |
| ● | For
the period ended December 31, 2022, the Company recorded a stock option expense of $ |
| Warrants and Options | |||||||||||||||||
| Vested | Expired | Granted | Vested | Non-Vested | |||||||||||||
| Dec 31, 2022 | To June 30, 2023 | To June 30, 2023 | To June 30, 2023 | To June 30, 2023 | |||||||||||||
| ● | The assumptions used in the Company’s Black Scholes option pricing is as follows: |
| Stock Price | $ | -$ | ||
| Exercise Price | $ | -$ | ||
| Number of Options Granted | ||||
| Dividend Yield | % | |||
| Expected Volatility | - % | |||
| Weighted Average Risk-Free Interest Rate | - % | |||
| Term (in years) |
| 20 |
Note 15: Income Taxes
The
Company recognizes deferred tax assets and liabilities using the asset and liability method. Deferred tax assets and liabilities are
recorded based on the differences between the financial statement and tax bases of assets and liabilities and the tax rates in effect
when these differences are expected to reverse. This method requires the reduction of deferred tax assets by a valuation allowance if,
based on the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
As of December 31, 2022, the Company’s deferred tax assets relate to net operating loss (“NOL”) carry-forwards that
were derived from operating losses and stock-based compensation from prior years. A full valuation allowance has been applied to the
Company’s deferred tax assets. The valuation allowance will be reduced when and if the Company determines it is more likely than
not that the related deferred income tax assets will be realized. At June 30, 2023, the Company had federal net operating loss carry-forwards,
which are available to offset future taxable income, of $
Quarter ended June 30, | Year ended December 31, | |||||||
| 2023 | 2022 | |||||||
| Net Loss | ( | ) | ( | ) | ||||
| Add back: | ||||||||
| Stock Compensation | ||||||||
| Amortization of Debt Discount | ||||||||
| Taxable Income | ( | ) | ( | ) | ||||
| Tax Rate | % | % | ||||||
| Deferred Tax Asset: | ||||||||
| Net Operating (Gain) Loss | ||||||||
| Valuation Allowance | ( | ) | ( | ) | ||||
| Net Deferred Asset | ||||||||
Note 16: Investments
None.
Note 17: Discontinued Operations
Effective
April 1, 2023, the Company came to an agreement to divest
Note 18: Mezzanine Equity
Effective June 29, 2022, the Company filed a
Certificate of Amendment to its Articles of Incorporation with the Secretary of State of the State of Nevada to increase the
aggregate number of authorized shares to ,
of which
shares are common stock (see Note 9) with a par value of $
per share and
shares are preferred stock with a par value of $
per share. On May 23, 2023, a Certificate of Designation was executed designating
Preferred Stock as a new class of Preferred Stock designated Series A Preferred Stock. This Series A Preferred Stock receives
As of June 30, 2023 the Company has received
proceeds of $
Note 19: Subsequent Events
On July 20, 2023, Series A Preferred Stock were issued.
| 21 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis contain forward-looking statements about our plans and expectations of what may happen in the future. Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our results could differ materially from the results indicated by our forward-looking statements as a result of many known or unknown factors, including, but not limited to, those factors discussed in Item 1A. “Risk Factors” in our on Form 10-12GA below in Part II Item 1A. “Risk Factors” of this Form 10-Q and in the “Cautionary Note Regarding Forward-Looking Statements” set forth at the beginning of this report.
You should read the following discussion and analysis in conjunction with the audited financial statements, and the related footnotes thereto, appearing elsewhere in this Form 10-Q. In addition, we intend to use our media and investor section on our website (www.rainmakerww.com/category/investor-updates/), SEC filings and press releases to communicate with the public about Rainmaker, its services and other issues.
Overview
Rainmaker Worldwide Inc. (“RAKR”, the “Company”, “we”, “us” or “our”) is a Nevada corporation originally formed on February 27, 1998. The corporation became RAKR on July 3, 2017 in a reverse merger. We are currently developing projects in various locations around the globe. We are implementing these projects using proprietary technology of our former subsidiary based in the Netherlands, Rainmaker Holland B.V. (“RHBV”). The Company retains a 12% ownership stake in RHBV. RAKR retains access to the technology based on a cost-plus formula.
The Company has its head office based in Peterborough, Ontario, Canada. The Company utilizes two main types of products that it produces: energy-efficient, fresh water-producing/purification technologies: (1) Air-to-Water (“AW”), which harvests fresh water from humidity and heat in the atmosphere, and (2) Water-to-Water (“WW”), which transforms seawater or polluted water into drinking water. The technologies can be wind driven, solar based, or can use conventional power sources, such as grid or generator. It is deployable anywhere and leaves no carbon trace if renewable resources are deployed. The Company also distributes complementary technology through Joint Development Agreements.
The Company is pursuing projects in Turks and Caicos and other Caribbean countries. The Company has completed the sale of a water purification system in the Turks and Caicos using a combination of Miranda and Rainmaker technologies. In the Caribbean and Central America, locations have been identified and operating plans defined.
The Company has generated limited revenue up until the present time, and its operations for the past four years have been typically focused on business development, market research, technology research and development activities. The Company, on a consolidated basis, had total assets of $43,038, as of December 31, 2022. As of June 30th, 2023, net assets were $90,727.
At present, the Company executes consulting agreements with experienced executive personnel and senior advisors. Sales are heavily driven by independent distributors and project developers. The Company had no revenue for the quarter ended June 30, 2023 and no revenue the year ended December 31, 2022 and had net losses of $753,992 and $485,851 for the quarters ended June 30, 2023 and 2022, respectively. The losses incurred to June 30, 2023, consist of general and administrative expenses (56%) and interest expense, amortization of debt discount, change in derivative liabilities and gain from operations of discontinued operations net of other income (44%). The Company has suffered recurring losses from operations, negative cash flows from operating activities and has limited resources or revenues to cover its operating costs. The Company’s auditor’s report for 2022 stated that there was substantial doubt about the Company’s ability to continue as a going concern.
| 22 |
Products and Services
Overview
Across the world, fresh water is unevenly distributed. Many regions are desperately under-served, including North Africa, the Middle East, India, Mexico, large portions of South America, and various island geographies.
Fundamentally, the solutions are based on deploying technology with the following attributes to ensure low-cost delivery and Company profitability:
| ● | Versatile | |
| ● | Scalable & Cost-effective | |
| ● | Environmentally & Socially Sustainable | |
| ● | Applying Proprietary Technology through partners and affiliates |
Air-to-Water (AW) – Harvests fresh water from airborne humidity by using advanced heating and cooling technologies.
Water-to-Water (WW) – Transforms contaminated water (saltwater, sewage, polluted) into safe, clean water by using an environmentally sustainable process called Multi-Effect Membrane Distillation.
The operating efficiency of these technologies allows us to provide customers with clean water at a price that is highly competitive relative to traditional alternatives. We substantially out-perform peer competitors because we can deploy remotely where the water is consumed and use up to 50% less power than those same competitors. The compact and scalable systems for AW and WW enable decentralized deployment, in which water is distributed directly to the consumption site with no expensive piping or truck transport. AW and WW are both cost-effective technology solutions and can be powered by solar, wind, or grid electricity, or a combination of power sources. They can produce roughly 5,000 to 150,000 liters of water per unit, per day, depending on the local conditions and the type of unit deployed.
Cost Information
The relevant Cost Information is the cost per liter of alternative suppliers. Currently in remote locations, the principal source of supply is bottled water. Accordingly, our solutions are optimally profitable when we compete head-to-head with bottled water that is transported or bulk water that is transported by truck to local communities. In most remote communities where this water is imported, the minimum cost per liter is US$0.30 reaching as high as US$2.00, according to our market research. The Company’s fully amortized cost of water per liter allows us to compete profitably to generate corporate value beneficial to our shareholders.
Market Opportunity
In the past ten years, there has been a growing awareness of the shortage of fresh water—and the associated economic and social effects the problem magnifies in impoverished and underdeveloped communities. Entities ranging from Water.Org to the United Nations (access to safe drinking water represents #6 of the 17 Sustainable Development Goals articulated by the United Nations) are at the forefront of driving international policy momentum and prospects for multilateral cooperation in the realms of global governance and public-private co-regulation. Common to these efforts is the search for scalable and practical solutions that possess applications uniquely suited to the problem of shortage.
The metrics that underpin the international need for ingenuity and action are the same as those that animate and sustain the market opportunity for our Company:
| (1) | Less than 3% of the world’s water is fresh – the rest is seawater and undrinkable in its current state. | |
| (2) | Of this 3%, over 2.5% is frozen and locked up in Antarctica, the Arctic and glaciers. | |
| (3) | People and animals rely on 0.5% of the world’s water. (Source: Unwater.org - Facts and Trends: Water) |
Moreover, at any moment, the atmosphere contains approximately 37.5 million billion gallons of water. This potential is not currently harvested by the means of private organizations or government institutions and thus presents a significant opportunity for AW technology to satisfy worldwide demand for water.
| 23 |
The World Health Organization estimates that 50 liters of water per day is required per individual to meet basic needs. It is estimated by the OECD that by 2030 nearly half of humanity will be living in a condition of severe water stress. Currently, according to UNICEF, 2.2 billion people around the globe lack safe drinking water. While high-income countries only treat 70% of wastewater, low-income countries treat 8%. With the world’s population expected to reach 9 billion by 2038, the global need is indisputably high. Much of the population expansion is or will be in the very areas that are already suffering from the problem of water scarcity.
The above analysis points to a global market for water that is extraordinarily immense. Today, the annual global water market for all purposes and uses is $650 billion and is expected to expand to $1 trillion by 2025. (Source: RobecoSAM Study (2015, June). Water: the market of the future). Applying RAKR’s approach against the purposes and uses defined above, our solutions are tailored to meet roughly 70% of that global level of demand.
Suppliers
As stated previously, our principal supplier for the core technologies to be deployed is RHBV. RHBV in turn has built a global supply chain for its components. Should RHBV not supply the appropriate scale of technology required by a project, RAKR has identified multiple technologies of different sizes and types.
Supplemental technology (i.e., bottling, pre-post wastewater treatment, mineralization solutions, and renewable energy) – suppliers are global, abundant, and highly competitive so as to ensure the lowest cost per liter for any given project planned implemented by the Company. The Company is pursuing projects as a distributor of supplementary products based on Joint Development Agreements.
Competition
The Rainmaker business model that will deliver potable water at the source of demand is uniquely positioned to address alternative competitive models. We believe that competitive models, while relevant and plausible alternatives, will not ultimately fully support the global level of demand for water at a reasonable price per liter. By virtue of our current affiliations, we believe we have a cost per liter competitive advantage. Accordingly, on a global basis, we do not believe competitive conditions will thwart our ability to produce long-term, corporate value or significantly diminish our financial results in the near term. However, other companies with sufficiently greater resources may develop competing products and have an advantage over us based on the relative size.
Results of Operations for the Three Months ended June 30th, 2023 and 2022
Revenue
Revenue was $0 and $0 for the six months ended June 30th, 2023, and June 30th, 2022. The Company received a deposit for a contract in Turks and Caicos which is expected to be fulfilled in September at which point revenue will be recognized.
General and Administrative Expenses
General and administrative expenses primarily include consultant expenses and benefit costs and stock-based compensation expense for executive consultants, outside legal and professional services, marketing and advertising, and facilities costs. General and administrative expenses for the six months ended June 30, 2023 and June 30, 2022 were as follows:
| Six Months Ended June 30, | Increase (Decrease) | |||||||||||||||
| 2023 | 2022 | $ | % | |||||||||||||
| General and administrative expense | $ | 376,009 | $ | 337,056 | $ | 38,953 | 11.6 | % | ||||||||
| Stock-based compensation expense included in general and administrative expense | $ | 69,474 | $ | 43,991 | $ | 25,483 | 57.9 | % | ||||||||
| 24 |
General and administrative expenses, including stock-based compensation, for the six months ended June 30, 2023, increased $38,953, or 11.6%, compared to the same period in 2022. This increase primarily relates to (1) an increase of $65,948 in consulting fees, (2) stock option expense increased by approximately $25,483 and (3) Travel increased by approximately $806, combined with decreases in (1) marketing, advertising and promotion expense of approximately $1,032 and (2) general and administrative expenses of approximately $52,251. Excluding stock-based compensation, general and administrative expenses increased $13,470.
Liquidity and Capital Resources
Management’s Plans
Similar to other development stage companies, our products have yet to generate significant revenue. As a result, we have historically suffered recurring losses and we do not have the required cash resources to fully execute our business plans.
Historically, the Company’s major sources of cash have comprised proceeds from various private offerings of its securities (including common stock) and debt financing. From 2015 through to the date of this filing, the Company raised approximately $8.22 million in gross proceeds from various private offerings of our common stock, preferred stock and convertible debt. These funds were raised during various stages of the company and allowed us first to develop a commercially ready product and as soon as logistics and supply chains allow, deliver these products into identified projects and begin to generate revenue. The Company has sustained losses from operations in each fiscal year since our inception, and we expect losses to continue for the indefinite future. As of June 30, 2023 and June 30, 2022, the Company had an accumulated deficit of approximately $73.5 million and $72.8 million, respectively, and stockholders’ equity of approximately $(10.4) million and $(10.3) million, respectively. As of June 30, 2023, the Company had approximately $34,000 in cash.
The Company recognizes and is addressing the need to raise additional capital in order to continue to execute its business plan in the future. There is no assurance that additional financing will be available when needed or that the Company will be able to obtain financing on terms acceptable to it or whether the Company will become profitable and generate positive operating cash flow.
Off-Balance Sheet Arrangements
As of June 30, 2023, the Company had no off-balance sheet arrangements.
Critical Accounting Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts and related disclosures in the financial statements. Management considers an accounting estimate to be critical if:
| ● | it requires assumptions to be made that were uncertain at the time the estimate was made, and | |
| ● | changes in the estimate or different estimates that could have been selected could have material impact in our results of operations or financial condition. |
While we base our estimates and judgments on our experience and on various other factors that we believe to be reasonable under the circumstances, actual results could differ from those estimates and the differences could be material. The most significant estimates impact the following transactions or account balances: stock compensation.
See Note 2 in our consolidated financial statements for a discussion of our significant accounting policies.
| 25 |
Recently Issued Accounting Standards Not Yet Effective or Adopted
Management does not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on the accompanying condensed consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Based on an evaluation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) required by paragraph (b) of Rule 13a-15 or Rule 15d-15, as of December 31, 2022, our Chief Executive Officer and Acting Chief Financial Officer has concluded that our disclosure controls and procedures were not effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms. Our Chief Executive Officer and Acting Chief Financial Officer also concluded that, as of June 30, 2023, our disclosure controls and procedures were not effective in ensuring that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our Chief Executive Officer and Acting Chief Financial Officer, to allow timely decisions regarding required disclosure.
Management’s Report on Internal Control over Financial Reporting
We are responsible for establishing and maintaining adequate internal control over financial reporting in accordance with Exchange Act Rule 13a-15. With the participation of our Chief Executive Officer and Acting Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting as of June 30, 2023 based on the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013). Based on this evaluation, management concluded that our internal control over financial reporting was not effective as of June 30, 2023, based on those criteria. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. We have identified the following material weaknesses:
| 1. | As of June 30, 2023, due to the inherent issue of segregation of duties in a small company, we have relied heavily on entity or management review controls. Accordingly, management has determined that this control deficiency constitutes a material weakness. | |
| 2. | As of June 30, 2023, we did not establish a formal written policy for the approval, identification, and authorization of related party transactions. | |
| 3. | During the 2022 audit, it was necessary to record adjusting journal entries. Management has determined that the effects of the corrected misstatements are material, both individually and in aggregate, to the financial statements as a whole. The corrected misstatements or the matters underlying them could potentially cause future period financial statements to be materially misstated, even though, in the judgment of our auditor previously, such corrected misstatements are material to the financial statements under audit.
Professional standards define an audit adjustment as a proposed correction of the financial statements that, in the judgment of our auditor previously, may not have been detected except through the auditing procedures. An audit adjustment may or may not indicate matters that could have a significant effect on the Company’s financial reporting process (that is, cause future financial statements to be materially misstated). In the judgment of our auditor previously, the adjustments proposed indicate matters that could have a significant effect on the Company’s financial reporting process. |
| 26 |
Because of these material weaknesses, management has concluded that the Company did not maintain effective internal control over financial reporting as of June 30, 2023, based on the criteria established in “Internal Control-Integrated Framework” issued by the COSO.
Changes in Internal Control over Financial Reporting
During the quarter ended June 30, 2023, there were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls
Our management, including our CEO and EVP Finance, do not expect that our disclosure controls and procedures or our internal controls over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. 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. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not currently in any legal proceedings.
Item 1A. Risk Factors
Investing in our common stock involves risks. Each of these risks as well as other risks and uncertainties not presently known to us or that we currently deem immaterial could adversely affect our business, results of operations, cash flows and financial condition and cause the value of our common shares to decline, which may result in the loss of part or all of your investment.
There has been no change since filing the 2023 first quarter 10-Q.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
On January 9, 2023, a convertible promissory note dated June 28, 2022 in the amount of $64,250 was partially converted. $15,000 principal was converted into 5,769,231 shares leaving a principal balance owing of $49,250.
On January 26, 2023, a convertible promissory note dated July 26, 2022 in the amount of $35,00 was partially converted. $12,000 principal and $595.07 accrued interest was converted into 3,229,505 shares leaving a principal balance owing of $23,000.
On February 2, 2023, the Company issued shares upon a partial conversion of the June 28, 2023 convertible promissory note. $15,000 principal was converted into 7,500,000 shares leaving a principal balance owing of $34,250.
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On February 3, 2023, the Company issued shares upon partial conversion of the July 26, 2022 convertible promissory note. $8,000 principal plus accrued interest of $416.44 was converted into 4,316,123 shares leaving a principal balance of $15,000.
On February 7, 2023, the Company issued shares upon partial conversion of the June 28, 2022 convertible promissory note. $16,250 principal was converted into 9,027,778 shares leaving a principal balance of $18,000.
On February 8, 2023, the Company issued shares upon a partial conversion of the July 26, 2023 convertible promissory note. $8,000 principal and $427.40 accrued interest was converted into 4,986,627 shares leaving a principal balance of $7,000.
On February 13, 2023, the Company issued shares upon partial conversion of the June 28, 2022 convertible promissory note. $15,600 principal was converted into 9,750,000 shares leaving a principal balance of $2,400.
On February 14, 2023, the Company issued shares upon a partial conversion of the July 26, 2022 convertible promissory note. This final partial conversion was in the amount of $7,000 principal plus $383.56 accrued interest and was converted into 5,384,615 shares. This note is now fully converted.
On February 21, 2023, the Company issued shares upon a partial conversion of the June 28, 2022 convertible promissory note. This final partial conversion was in the amount of $2,400 principal plus $3212.50 accrued interest and was converted into 3,507,813 shares. This note is now fully converted.
On March 15, 2023, the Company issued shares upon partial conversion of a convertible promissory note dated September 12, 2022 in the amount of $49,250. $15,000 principal was converted into 9,375,000 shares leaving a principal balance of $34,250.
On March 20, 2023, the Company issued shares upon partial conversion of the convertible promissory note dated September 12, 2022. $12,200 principal was converted into 11,090,909 shares leaving a principal balance of $22,050.
On March 27, 2023, the Company issued shares upon partial conversion of the convertible promissory note dated September 12, 2022. $10,600 principal was converted into 11,648,352 shares leaving a principal balance of $11,450.
On April 24, 2023, the Company issued shares upon partial conversion of the convertible promissory note dated September 12, 2022. $10,400 principal was converted into 12,235,294 shares leaving a principal balance of $1,050.
On May 22, 2023, the Company issued shares upon partial conversion of the convertible promissory note dated September 12, 2022. $1,050 and accrued interest of $3,512.50 principal was converted into 5,403,846 shares. This note is now fully converted.
On May 25, 2023, the Company issued shares upon partial conversion of the convertible promissory note dated October 25, 2022. $8,500 principal was converted into 13,076,923 shares leaving a principal balance of $35,750.
On June 5, 2023, the Company issued shares upon partial conversion of the convertible promissory note dated
October 25, 2022. $8,100 principal was converted into 13,728,814 shares leaving a principal balance of $27,650.
On June 9, 2023, the Company issued shares upon partial conversion of the convertible promissory note dated October 25, 2022. $8,550 principal was converted into 14,491,525 shares leaving a principal balance of $19,100.
On June 14, 2023, the Company issued shares upon partial conversion of the convertible promissory note dated
October 25, 2022. $7,900 principal was converted into 15,192,307 shares leaving a principal balance of $11,200.
On June 16, 2023, the Company issued shares upon partial conversion of the convertible promissory note dated
October 25, 2022. $7,900 principal was converted into 15,192,307 shares leaving a principal balance of $3,300.
On June 20, 2023, the Company issued shares upon partial conversion of the convertible promissory note dated October 25, 2022. $3,300 principal and accrued interest of $2212.50 was converted into 10,600,962. This note is now fully converted.
Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not applicable to smaller companies.
Item 5. Other Information
None
Item 6. Exhibits
* Filed herewith.
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SIGNATURES
Pursuant to the requirements 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.
| Rainmaker Worldwide Inc. | ||
| Date: August 14, 2023 | By: | /s/ Michael O’Connor |
| Michael O’Connor | ||
| President, Chief Executive Officer and Interim | ||
| Chief Financial Officer | ||
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