UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
¨ 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: 000-53443
COOL TECHNOLOGIES, INC. |
(Exact name of registrant as specified in its charter) |
Nevada |
75-3076597 |
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
8875 Hidden River Parkway, Suite 300
Tampa, Florida 33637
(Address of principal executive office)
Registrant's telephone number, including area code: (813) 975-7467
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $0.001 par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x
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 x No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted 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 x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting 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 |
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Accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicated 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 is a shell company (as defined in Rule 12b-2 of the Act). Yes ¨ No x
The aggregate market value of the shares of voting and non-voting common stock held by non-affiliates of the Registrant as of June 28, 2019, the last business day of the Registrant’s last completed second quarter, based upon the closing price of $0.07 per share as reported by the OTCQB Stock Market on such date was $13,861,961. This computation is based on the number of issued and outstanding shares held by persons other than officers, directors and shareholders of 5% or more of the registrant’s common stock.
As of May 18, 2020, 395,929,942 shares of common stock are issued, and outstanding excluding 1,000,000 shares held in escrow.
Documents incorporated by reference: None
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Forward-Looking Statements
This Report contains predictions, estimates and other forward-looking statements that relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expects," "plans," "anticipates," "believes," "estimates," "predicts," "potential," "continue" or the negative of these terms or other comparable terminology.
Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. Forward-looking statements represent our management's beliefs and assumptions only as of the date of this Annual Report. You should read this Report and the documents that we have filed as exhibits to this Report completely and with the understanding that our actual future results may be materially different from what we expect.
All forward-looking statements speak only as of the date on which they are made. We undertake no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they are made, except as required by federal securities and any other applicable law.
The Company previously filed a Current Report on Form 8-K with the Securities and Exchange Commission on March 31, 2020 (the “Current Report”) to avail itself of the relief provided by the Securities and Exchange Commission (SEC) Order under Section 36 of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”), granting exemptions from specified provisions of the Exchange Act, as set forth in SEC Release No. 34-88318 (the “Order”). By filing the Current Report on Form 8-K, the Company relied on the Order to receive until May 29, 2020 (this includes a normal extension of 15 days beyond an original extension of 45 days from the original filing deadline of May 14, 2020) to file its Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (the “Annual Report”) due to the circumstances related to COVID-19. In particular, COVID-19 and the extraordinary measures undertaken to minimize its spread has caused severe disruptions in transportation, limited access to facilities resulting in limited support from its staff and professional advisors and interfered with the timely exchange of information.
This in turn, delayed the Company’s ability to complete its audit and prepare the Annual Report.
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As used in this Annual Report on Form 10-K (this "Report"), references to the "Company," the "registrant," "we," "our" or "us" refer to Cool Technologies, Inc. and our 95% owned subsidiary, Ultimate Power Truck, LLC ("UPT"), unless the context otherwise indicates.
Corporate History
We were incorporated on July 22, 2002 in the State of Nevada under the name Bibb Corporation.
On September 3, 2010, we changed our name to Z3 Enterprises, Inc. ("Z3"), and on April 5, 2012, to HPEV, Inc. ("HPEV") and on August 19, 2015 our stockholders voted to approve a name change to Cool Technologies, Inc. Our 95% owned subsidiary, Ultimate Power Truck, LLC ("UPT"), was formed on April 17, 2014 in the State of Florida.
On March 29, 2011, we entered into a share exchange agreement (which was amended on June 14, 2011) with HPEV, Inc., a Delaware corporation ("the Share Exchange Agreement") to acquire 100 shares, constituting all of the issued and outstanding shares of HPEV, Inc. in consideration for the issuance of 22,000,000 shares of common stock. Upon closing of the share exchange on April 15, 2011, HPEV, Inc. became our wholly owned subsidiary. There was a change of control of our company on April 15, 2011 as a result of the issuance of 21,880,000 shares of our common stock to the original shareholders of HPEV, Inc. pursuant to the terms of the Share Exchange Agreement. An additional 120,000 shares were issued during the fourth quarter of 2011 which completed the issuance of 22,000,000 shares of common stock under the terms of the amended Share Exchange Agreement.
We filed an amendment to our Articles of Incorporation with the Secretary of State of the State of Nevada increasing our authorized shares of common stock, from 140,000,000 shares to 350,000,000 shares, effective March 22, 2017. We filed a second amendment to our Articles of Incorporation with the Secretary of State of the State of Nevada increasing our authorized shares of common stock, from 350,000,000 shares to 500,000,000 shares, effective October 28, 2019.
As of May 1, 2020, we have seven US patents, one Canadian patent, two granted patents (1 Mexican, 1 Canadian) and two pending applications (1 in the US, 1 in Brazil) covering composite heat structures, motors, and related structures, heat pipe architecture, and applications (commonly referred to as "thermal" or "heat dispersion technology"). We also have one Patent Cooperation Treaty ("PCT") application pending that covers integrated electrical power generation methods and systems.
The Company intends to sell a mobile electric power system to commercial vehicle and fleet owners. It intends to commercialize its patents by licensing its thermal technologies and applications to electric motor, pump and vehicle component manufacturers. It may license its mobile electric power system as well.
Business Description
Cool Technologies has spent years designing and developing its technologies. The core technologies are:
Thermal Dispersion – patented technologies (totally enclosed heat pipe cooled and radial vent) that deliver liquid-cooled results for rotating equipment, multi-plate clutches, brakes and rotors without the use of liquid. Liquid cooling is the best, most effective cooling system for electric motors, however, it is also the most expensive. Our technologies reduce the cost of rotating equipment by eliminating the active material and, otherwise, extra components that liquid cooling requires. Our technologies also reduce production costs by increasing the power densities of the rotating equipment which enables them to output the same power from a smaller package.
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Mobile Power Generation -- a patented and patents pending in-chassis system that outputs electrical power in amounts equal to or greater than skid-mounted generators or tow-behind generators from a smaller, lighter, more efficient package.
The markets for products utilizing our technology include consumer, industrial and military markets, both in the U.S. and worldwide. Our initial target markets include those involved in moving materials and moving people, such as:
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Motors/Generators, |
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Mobile auxiliary power, |
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Compressors, |
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Turbines (Wind, Micro), |
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Bearings, |
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Electric Vehicles: rail, off-highway, mining, delivery, refuse, |
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Brakes/rotors/calipers, |
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Pumps/fans, |
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Passenger vehicles: autos, RVs, buses, trains, aircraft, |
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Commercial vehicles: SUV, light trucks, trams, bucket trucks |
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Military: boats, Humvees, trucks, aircraft, and |
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Marine: boats ranging in size from 30 feet to 120 feet and beyond. |
Our Technologies
Our technologies are divided into two distinct but complementary categories: heat dispersion technology and mobile power generation (MG).
Totally Enclosed Heat Pipe and Radial Vent Heat Pipe
The Company has developed, designed, prototyped and third party tested Totally Enclosed Heat Pipe Cooled (TEHPC) designs. It also owns the patents on the designs. The designs apply to dry pit submersible motors and
650kVA marine duty generators.
Our patent portfolio covers the application and integration of our heat pipes into various other cooling schemes for enhanced heat removal in motors (i.e. electric motorcycles, cars and trucks), generators (i.e. e-axles and the MG system) and numerous other industrial applications including multi-clutches for vehicles and brakes and rotors for vehicles marine, aviation and military. We believe that our technologies have the potential to deliver power output increases and cost reductions, depending on the machine type or motor/generator size, as follows:
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Increase power density of current motor platforms by 20% to 40%, |
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Reduce total product cost by 12.5% to 25%, |
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Increase motor and generator efficiency by 1% to 2%, and |
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Increase motor and generator life. |
We also believe that products produced with our technologies have the potential to deliver operational savings as well, including savings from:
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reduced maintenance costs, |
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the standardization of multiple platforms down to a single platform, |
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the standardization of drawings and data around existing platforms, |
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the ability to use standard designs and standard insulation systems versus customization, and |
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the ability to integrate and produce on existing production lines with no retooling and no additional, or minimal, capital investment. |
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Testing conducted by independent laboratories showed a 200% increase in horsepower capability for a dry pit submersible pump and a 25 to 35% increase in power density for a 650 kVA generator.
In October 2019, a new Canadian patent covering a Heat Pipe Cooled Wet Rotating Disc Engagement System and a Radial Vent Composite Heat Pipe was added to the Company’s existing patents in the US and Mexico. It’s a utility patent which is more difficult to circumvent and, therefore, easier to defend. The designation ’utility patent’ means that the patent covers the Company’s cooling technologies when used in a wide variety of specific applications as opposed to simply covering the cooling method or technology itself. This is an extremely important distinction with regard to defending patents. These applications include electric vehicle motors, standard electric motors, generators, engine hot spots, pistons, ERG (Exhaust Gas Recirculation) coolers and more. Similar patents are pending in many other countries as part of the Global PCT patent process.
Our revenue model for the heat dispersion technology is to license the technology in exchange for royalties. Our design and manufacturing experience will be put to use by taking current product in the market, retrofitting with our TEHPC and radial vent heat pipes and handing back to the OEM a third party tested and validated, manufacturable product that increases performance and lowers cost.
The electric motorcycle industry which includes brands such as Harley Davidson, Zero and others, relies on both air- cooled and liquid-cooled motors. We believe our technology can result in the production of smaller, lighter weight motors as well as cooler motors, batteries and controls. We believe it will also address common performance issues such as overheating which shuts down the motor and forces the rider to stop and let the motor cool. Finally, we believe our wet rotating disc engagement system can cool motorcycle clutches and brakes.
Mobile Power Generation (MG)
The Company’s mobile power generation system enables work trucks to power an in-chassis generator, eliminating the need for some commercial vehicles to tow a mobile generator to a work site. Management believes that there is a need for on-board, continuous generation of up to 350 to 400 kilowatts (kW) of power to remote jobsites, charge electric vehicles and generate emergency power in the event of an outage or disaster. Recent meetings with Mexican farmers, military personnel and electric vehicle companies along with feedback from international representatives and agents of the Company have validated the need for such applications. We offer an in-chassis generator installation kit as a stand-alone (Mobile Generator or MG) for third parties and have contracted with Craftsmen Industries to perform domestic installations. It’s likely the company will also contract with a facility overseas to handle the foreign orders it has received.
In the first quarter of 2019, the Company launched our MG30-MG125 kilovolt amp products. Management, along with key directors and members of the Board of Advisors utilized 2019 to establish production centers, add new optional capabilities, build vendor relationships, expand existing business relationships and establish new ones in the USA, Mexico, the Middle East, Africa and Australia.
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The Company signed international joint ventures in Turkey (Belirti Teknoloji) and Australia (KeyOptions) as well as a strategic alliance with VerdeWatts and FirmGreen. Beliriti Teknoloji will market and sell CoolTech’s entire product platform in Southern Europe, the Middle East and some North African nations. KeyOptions will market and sell CoolTech’s entire product platform in Australia and neighboring countries in Southeast Asia.
The Company also signed a new sales agent based in Gdansk, Poland -- Gaia Energy -- which has representatives and existing business relationships in Eastern Europe, the Middle East and Africa.
Our joint venture with Belirti Teknoloji (a multi-national, multibillion-dollar engineering firm) has produced a non-contingent purchase order for six hundred MG80, MG125 and MG200 Mobile Generation systems.
As the company is still pre-revenue, any production funding will likely be made in conjunction with projects that involve Wilburn’s companies’ FirmGreen or VerdeWatts. In the meantime, it has continued to pursue non-dilutive financing based upon the third party valuation of the Company’s intellectual property, however there can be no assurance that financing will be obtained
In March and May of 2019, the Company held product demonstrations of our MG Systems. These demonstrations were conducted for OEMs (Original Equipment Manufacturers), the US military, Mexican government officials and commercial vehicle upfitters (companies that build trucks and other vehicles for utility companies and other commercial industries).
In April, our CEO flew to Mexico City to meet with the Secretaries of Energy, Agriculture and the Environment for the new administration of Mexican President Andrés Manuel López Obrador as well as business leaders, federal deputies, and other government representatives.
In July 2019, our CEO attended a meeting with senators, federal, local, and state deputies, as well as representatives of state and federal agencies in Villa Alta, Mexico to discuss ways to clean the water in the Atoyac River ,which is considered to be one of the most polluted rivers in Mexico.
As a result of a cross marketing and license agreement the Company signed with FirmGreen (a producer of commercial water systems) and the interest we received from Mexican government officials, we are commercializing our water desalination and purification capability. The Company now offers MG125 water purification and desalination Systems capable of producing up to 10,000 gallons of potable water per day as well as delivery if a rolling tank is hitched to the truck. The truck-mounted systems should cleanse contaminated, polluted and wastewater or remove saline from saltwater. The desalination unit should output either clean potable water for drinking and cooking or non-potable water for agricultural use.
We expect the license agreement signed with VerdeWatts (a solar panel and energy storage manufacturer) will also act as a catalyst in the development of a no-idle option that will enable the MG system to operate solely through battery and solar power without the need to idle the truck’s engine. An MG outfitted with a solar or battery-powered no idle system could output clean drinkable water for virtually no cost.
The joint venture the Company signed with VerdeWatts and FirmGreen added a new application for the MG System: making it an integral part of mobile microgrids to power farming villages throughout rural America and the developing world. VerdeWatts solar panels and battery storage systems would provide the sustainable energy. MG Systems would recharge or back-up the microgrids and simultaneously power FirmGreen water purification and desalination systems.
An application that the company has demonstrated publicly is truck mounted electric vehicle charging. Mobile charging vehicles don’t require permits or build out of infrastructure which, depending on the type of charging required can cost $300,000 to $400,000. (https://electrek.co/2018/10/16/porsche-taycan-dealers-charging-stations/). Our technology can provide Level 2 and DC Fast Charging (up to and including 350 kVA on a Class 7 13 liter) and should deliver even more power in the future. Because the system is retrofittable, it can be uninstalled and reinstalled on a larger truck that generates more torque.
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Our revenue model for an in-chassis mobile electric power generation system is driven by the efforts of partner up-fitters and truck body builders along with regional sales teams and independent representatives as well as strategic alliances and joint ventures.
We believe that in head-to-head competition with tow behind generators, our mobile generation technology should prove very disruptive. Operators in such markets as the military, utilities and agriculture, to name a few, will be able to work in remote locations without having to tow or drop in a generator. We believe that the reduction in overall weight and size should also deliver significant operating efficiencies and savings to government and work truck fleets. Furthermore, we believe that our new applications will enhance adoption of the MG across an even wider range of industries, NGOs and government entities in both first and third world countries.
Competition
Heat Dispersion Technologies (Totally Enclosed Heat Pipe Cooled and Radial Vent Heat Pipe)
Cooling solutions to remove or control heat produced by industrial electric motors, generators and alternators are provided by the manufacturers. Their current best practices are based on technology that's over 50 years old. They either add a liquid cooling system to the motor or build an extra-large frame around the motor to provide additional surface area to help dissipate the heat. Both practices increase the cost and complexity of their products.
The Company is not aware of any new alternatives on the market.
Mobile Electric Power (MG30-MG200)
Management believes that the Company can compete in the mobile electric power market because there is a need for in-chassis generators, as opposed to trailer-mounted generators towed behind a vehicle. A primary benefit is that the in-chassis installation enables a truck to tow other trailers and equipment, however, we believe the greatest selling point is value. In comparison to the purchase price of a new Doosan towable generator, we can provide up to 200 kilowatts ("kW") of auxiliary mobile power to any location for less than half the production cost of a towable, trailer-mounted generator, which may weigh over 10,000 pounds. We deliver the same power at under 3,000 pounds. Our Mobile Generation system also offers the same features of a tow behind generator including single and three phase outputs, as well as a full function generator panel with enhanced capabilities including a touchscreen, digital controls and optional telematics.
We believe our competition in the mobile generator market will be from well-established companies such as Cummins, Caterpillar Inc. (“Caterpillar”), Doosan Group (“Doosan”), Wacker Neuson SE (“Wacker Neuson”), Multi Quip Inc. (“Multi Quip”) and Generac Power Systems (“Generac”). All of them offer towable, trailer-mounted generators. Only Cummins Onan offers an onboard generator and it is specifically engineered for mobile emergency vehicle use.
Portable generators also address a need for mobile electric power in the commercial, leisure and residential markets. As outputs tend to range from 1 to 20 kilowatts, the competition they provide is only at the lowest end of our power output spectrum and only from the higher power, higher quality and higher price commercial level units. Onan, Honda and Kohler are among the well-established brand names in the market.
A standard option that is usually ordered from the manufacturer when purchasing a truck is a power take-off or PTO. PTOs are mounted to a truck’s drivetrain and redirect engine power to operate onboard equipment. Integrated power systems use the PTO to run an alternating current generator. Cool Tech has the capability to power the generator directly from the drivetrain or from a PTO.
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Real Power from Contour Hardening, Inc. offers one and three phase AC power systems driven by a PTO. According to their website, system voltages range from 10 to 200 kW. Systems under up to 30kW retrofit under the beds of class 3 to 5 diesel trucks. Systems larger than 100 kW require Class 6 diesel trucks and a side mount. An important difference between the Real Power and the MG systems is that MG can generate up to 125 kW on class 3 to 5 trucks and it does so independently from the transmission.
Modular integrated systems offer varying combinations of air compressors, welders, hydraulics and generators. Vanair Manufacturing, Inc’s Underdeck uses a PTO to power air compressors, hydraulics and either 6.6 or 9.6 kW generators, according to the Company’s website. A generator-only version and a generator and air compressor combination output up to 25 kW of single-phase power.
HIPPO Multipower packages hydraulic, air, electric and welding into a single unit. The company’s website showcases two models, one which connects to a truck’s PTO. The other is powered by a separate diesel engine. Power exported ranges from 5.2 to 9 kW.
The Miller Enpak from Miller Electric Manufacturing Company, which is owned by Illinois Tool Works, Inc. offers the same package powered by a separate diesel engine that exports 6 kW of power, according to Miller’s website.
Many electric vehicles (“EV”) and plug-in hybrid electric vehicles (“PHEV”) can use excess battery capacity to provide exportable power with no idling. Most can be recharged from either the electrical grid or the vehicle’s engine.
Via Motors’ website highlights sales of plug-in hybrid electric vans into hybrids. The optional power export module provides 14.4 kW at 60 amps through 120 and 240 volt outlets. The Company is also working on a utility-grade output module to deliver 50 kW. In January of 2018, Via announced it was partnering with China-based Zhejiang Geely New Energy Vehicle Co. Ltd., a subsidiary of Zhejiang Geely Commercial Vehicle Group, to co-develop a medium-duty extended range electric truck. It has since rebranded itself as Via Motors International emphasizing its engineering capabilities and proprietary development technologies. With the capability of being equipped with two 240-volt outlets right on the rear of the van,
Ford announced in September 2019 that they will offer a hybrid F-150 with exportable power next year. No further specifics have been released. It’s doubtful that the hybrid will export more than 20 kW of power.
Workhouse Group, Inc. has either delayed or eliminated their W-15 Plug-in Electric Pickup Truck which was scheduled to export 7.2 to 14.4 kilowatts of power. As of January 2020, the truck is no longer listed on their website.
Odyne Systems, LLC, is a manufacturer of hybrid systems for medium and heavy-duty work trucks over 14,000 pounds. According to their website, the systems are capable of exporting 6 to 18 kW of AC power.
Another way EV and PHEV can power onboard equipment is through an ePTO or electric power take-off which is essentially a battery-powered version of a PTO.
Terex’s Corporation’s hybrid-electric system, HyPower, targets the utility industry, specifically aerial lift, bucket truck and digger derrick applications. According to the Company’s website, it features a plug-in ePTO that harnesses stored energy from rechargeable batteries to power onboard equipment and export up to 3.8 kW of power for up to six hours before needing to be recharged.
On July 2, 2018, Cummins, Inc. announced that it had acquired Efficient Drivetrains, Inc. which develops and markets a range of PHEV and EV drivetrain systems. The drivetrain integrates with light, medium, or heavy-duty vehicle designs. Their exportable power options provide 50 up to 200 kW of power for up to 12 hours. As a result of the acquisition, Cummins is now one of the few companies that offers an option to export synchronized power that enables the vehicle to connect directly to the utility power grid (V2G).
First Priority Greenfleet replaces stock transmissions with a drive system that operates in hybrid or electric modes. According to the Company’s website, a V2G option exports up to a 120 kW of grid-synchronized power.
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Allison Transmission partnered with another company to offer a generator integrated with the transmission into a single casing. The TITAN On-Board Vehicle Power produces electrical power from 30 to 125 kW for medium tactical and combat vehicles which can weigh as much as 40,000 pounds.
While both the MG and the Titan are retrofittable, there are important differences. The Titan is limited to new vehicles that incorporate the Allison 3,000 and 4,000 Series Transmissions and is not available as a retrofit. The MG can produce up to 125 kW on an 8,000 pound as opposed to a 40,000-pound vehicle. Also, the MG’s power is produced independently from the transmission, consequently, the truck can still operate if the generator stops working.
Other companies use a vehicle's engine to charge on-board batteries, which then run the generator when the vehicle is stopped. While this eliminates idling, output tends to be less than 50 kilowatts (kW) and lithium-ion batteries typically power the system. The batteries have limited runtimes and a shorter lifespan than acid batteries. In addition, they must be cooled to operate properly.
Altec Inc. JEMS (Jobsite Energy Management System) is an integrated plug-in system that uses stored electrical energy to power equipment and provide up to 4 kW of exportable power, according to the Company’s website.
Two companies dominate belt driven systems: Aura Systems, Inc. and Mobile Electric Power Solutions, Inc. ("MEPS"). Both systems use a vehicle's engine to power a generator and produce electricity whenever the engine is running. The interface to the vehicle is under the hood via a separate belt system.
Aura Systems generates up to 20 kW whereas MEPS provides up to 15 kW. Both companies provide clean power to operate sophisticated electronic equipment. MEPS delivers alternating current ("AC") power, whereas Aura Systems outputs both AC and direct current ("DC").
A variety of MEPS engine or transmission-based electrical power take-off systems also provide exportable power. They tend to output small amounts in the range of 7 kW of 110/220 volt power. MEPS is able to align two generators to double the output to 15 kW.
Our Mobile Generation system can also provide Level 2 and Level 3 DC Fast Charging (up to and including 350 kVA on a Class 7 13 liter). ‘Levels’ indicate the charging power. The higher the level, the higher the power. More power equals shorter charging times. Level 2 is typically 240 volt AC (alternating current) power. Level 3 relies on 480 volt DC (direct current) power. Most Level 3 chargers provide an 80% charge in 30 minutes.
The Company expects to deliver even more power in the future. That’s because the system is retrofittable. It can be uninstalled and reinstalled on a larger truck that generates more torque.
The only competition for mobile electric vehicle charging of which we are aware is Real Power, a division of Contour Hardening, Inc. Their self-contained system allows for Level 3 DC fast charging of compatible electric vehicles and uses a PTO driven generator. As noted above, Real Power cannot output more than 30 kW on Class 3-5 trucks. To achieve Level 3 DC fast charging, their system requires a class 6 vehicle.
Mobi EV Charger offers a battery powered electric chargers that are essentially batteries on wheels with a built-in drive system operated by a joystick. It is designed for fixed locations such as parking lots and dealerships and, consequently, it is not street legal. The Level 3 fast charger is equipped with a 160-kilowatt-hour battery and will charge at around 50 kilowatts.
Another variation on mobile charging relies on a self-contained unit that is dropped into place. EVgo launched Fast Start, which incorporates a pair of 50-kilowatt fast chargers on a metal sled.
EV Safe Charge offers EV Charge Mobile, a temporary Level 2 and DC fast charging systems delivered to locations on demand. EV Safe Charge provides this rental service to event organizers and any site in need of temporary power. Depending upon on-site capabilities, chargers are powered either through existing power at the location, solar panels, or self-contained generating systems. Volkswagen intends to offer a similar system with up to 360 kWh charging capacity. Both the battery-on-wheels and the delivery and drop-off systems aim to address the problems with permitting, construction and electrical infrastructure upgrades common to permanent charging installations.
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Most of our potential competitors are significantly larger than we are, have been in business much longer than we have, and have significantly more resources at their disposal and may be able to respond more quickly and efficiently to changes in the marketplace, whether as a result of technological, economic or customer requirements or preferences.
This also enhances their ability to obtain top engineering talent as well as sales representatives with strong industry ties. Plus, their greater market clout could effectively overwhelm our promotional and marketing efforts.
Equipment
As a company that intends to commercialize or license its proprietary technology for others to install, manufacture and/or distribute, our equipment needs are project specific and temporary. We do not intend to purchase any production equipment to implement our business operations, but instead we will rent, lease or outsource as needed.
Manufacturing
We do not plan to manufacture in-house. The Company works with Craftsmen Industries utilizing its assets and system integrators to upfit our Mobile Generation technology. For our thermal technologies, the Company plans to rely on product development agreements with manufacturers who will then pay a license or royalty per unit. We anticipate that such agreements will delineate the respective intellectual property owned by both companies, describe the goal of the testing to verify the savings and value to a particular company, the equipment to be modified, the criteria that constitute successful testing, how and where the tests will be conducted and the next steps to be taken in the event of successful testing.
Suppliers
For mobile power generation, the required software and its vehicle integration will be supplied by Czero, Inc. along with partner truck up-fitter, Craftsman Industries and others to be named later.
Production level quantities of system components will be handled by a variety of suppliers such as Panasonic, Nidec Motor Corporation and Woodward, an independent designer, manufacturer, and service provider of control solutions for the aerospace and industrial markets.
Panasonic System Communications Company of North America supplied Panasonic Toughpad tablets, equipped with the CoolTech software to function as the Human Machine Interfaces. Field technicians control and calibrate the Mobile Generation systems through the touchscreens. The Toughpads are deployed in the trucks’ cabs.
For the thermal technology applications in electric motors, Aavid Thermacore, a division of Boyd Corporation, will supply the heat pipes and mechanical structure, which combine to make the heat exchangers. We will coordinate with them to combine our thermal technology with Aavid Thermacore technology in the creation of heat exchangers.
For dry pit submersibles (a type of submersible pump which can also operate in a dry environment), we intend to purchase the wound stator and the rotor-shaft from Nidec Motor Corporation or other partner sources such as Baldor Electric, Regal Beloit and others. We intend to purchase the fully-machined castings from the Quality Castings Company, located in Orville, Ohio. We intend that these components will then be assembled and tested by Consulting Point, Inc. located in Brownsville, Texas or another partner assembler in the USA.
As of May 1, 2020, we have not signed formal agreements with any suppliers.
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Intellectual Property
Our success depends in part on our ability to protect our technology and intellectual property. To accomplish this, we rely on a combination of patents, patent applications, trade secrets, copyright laws, trademarks, intellectual property licenses and other contractual rights to establish and protect our proprietary rights. Currently, we have no licenses or contractual rights in place to protect our technology and intellectual property, only patents or patents pending.
As of May 1, 2020, we have seven US patents, one Canadian patent, two granted patents (1 Mexican, 1 Canadian) and two pending applications (1 in the US, 1 in Brazil) covering composite heat structures, motors, and related structures, heat pipe architecture, and applications (commonly referred to as "thermal" or "heat dispersion technology"). We also have a Patent Cooperation Treaty (“PCT”) application pending that covers integrated electrical power generation methods and systems. In addition, we have applied for and received a trademark for an acronym for one of our technologies: "TEHPC"
Our success will likely depend upon our ability to preserve our proprietary technologies and operate without infringing the proprietary rights of other parties. However, we may also rely on certain proprietary technologies and know-how that are not patentable.
We strive to protect such proprietary information, in part, by the use of confidentiality agreements with our employees, consultants and contractors. The Company has a policy of not disclosing its patent applications in order to protect the underlying technology.
The following table sets forth the patents we own or license which we believe support our technology.
Patent Number |
Country |
Filing Date |
Issue Date |
Expiration Date |
Title |
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8,283,818 B2 |
US |
February 4, 2010 |
October 9, 2012 |
October 9, 2032 |
Electric Motor with Heat Pipes |
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8,134,260 B2 |
US |
July 31, 2009 |
March 13, 2012 |
March 13, 2032 |
Electric Motor with Heat Pipes |
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8,148,858 B2 |
US |
August 6, 2009 |
April 3, 2012 |
April 3, 2032 |
Totally Enclosed Heat Pipe Cooled Motor |
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8,198,770 B2 |
US |
April 3, 2009 |
June 12, 2012 |
June 12, 2032 |
Heat Pipe Bearing Cooler Systems and Methods |
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7,569,955 B2 |
US |
June 19, 2007 |
August 4, 2009 |
August 4, 2029 |
Electric Motor with Heat Pipes |
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9,618,068 |
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US |
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December 18, 2014 |
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April 11, 2017 |
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April 11, 2037 |
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Heat Pipe Cooled Wet Brake |
9,543,809 |
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US |
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February 25, 2014 |
January 10, 2017 |
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January 10, 2037 |
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Radial Vent Composite Heat Pipe |
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2,971,404 |
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Canada |
|
June 16, 2017 |
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November 15, 2019 |
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June 16, 2037 |
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Heat Pipe Cooled Wet Brake |
Government and Industry Regulation
We intend to conduct business worldwide and, therefore, we must comply with local, state, federal, and international regulations, both in operations and for our products.
As a company, we do not plan to manufacture any of our products. Therefore, the government regulations we will be subject to will be limited to storage and involve rotating the shafts of stored electric motors on a regular basis.
Applicable laws and regulations include those governing, among other things, the handling, storage and transportation of materials and products as well as noise and employee safety.
In addition, some of our products are subject to various laws and regulations relating to, among other things, emissions and fuel requirements.
Accordingly, we may be required or may voluntarily determine to obtain approval of our products from one or more of the organizations engaged in regulating product or environmental safety. These approvals could require significant time and resources from our technical staff and, if redesign were necessary, could result in a delay in the introduction of our products in various markets and applications.
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Although we believe that our operations and products are in material compliance with current applicable regulations noted within this section, there can be no assurance that changes in such laws and regulations will not impose costly compliance requirements on us or otherwise subject us to future liabilities. New regulations could also require our licensees to redesign their products which could cause us to redesign our technologies which, consequently, could affect market growth for our products.
As our thermal technologies are incorporated in existing motors, generators and other manufactured products that are already subject to regulation. The regulatory burden will fall on the original equipment manufacturers that license our technology.
The Company adds a mobile power generation system to Class 3-8 work trucks. In addition to an existing generator incorporating our thermal technology, the gearing system will incorporate our thermal technology as well. The vehicle and drive train operate normally in accordance with manufacturer's specifications. No regulations are violated or exceeded. Nonetheless, in some markets, the Company will have to certify that it meets federal, state or local noise and emission regulations.
Our designs comply with current EPA emission standards and we believe they will comply with future requirements.
No original vehicle parts will be significantly modified in the retrofitting process. There will be some additional parts (generator, touchscreens, software, sensors and controls) added, but these parts will not change how the vehicle operates in any way. The drive train will operate according to the manufacturer's specifications. Therefore, we believe that the original warranty will remain in effect and we do not believe that the conversion will violate the Magnuson-Moss Act.
The Magnuson-Moss Warranty Act is a federal law that protects consumers by barring a vehicle manufacturer from voiding the warranty on a vehicle due to an aftermarket part unless the manufacturer can prove that the aftermarket part caused or contributed to the failure in the vehicle. The Company will warranty the MG System with an industry standard warranty. All of our other components (generator, human machine interface, software, controller/sensors) will be warranted by their respective manufacturers.
The Department of Transportation, National Highway Traffic Safety Administration ("NHTSA") is charged with writing and enforcing safety and fuel economy standards for motor vehicles through their Federal Motor Vehicle Safety Standards. These standards require manufacturers to design their electrically powered vehicles so that, in the event of a crash, the electrical energy storage, conversion, and traction systems are either electrically isolated from the vehicle's chassis or their voltage is below specified levels considered safe from electric shock hazards. Our planned no-idle version of our Mobile Generation system will be designed to meet or exceed these requirements.
Optional components such as solar panels, batteries, water purification or desalination systems will be supplied and warrantied by their manufacturers
In addition, the total weight of the additional components should remain within the vehicle's gross vehicle weight rating. As a result, we believe that our retrofits will comply with federal and state transportation regulations.
While we do not create and market our products around government subsidies and tax incentives, an MG truck equipped with a charger can provide a Level II charge to one or more electric vehicles. Our 200 kVA truck will enable Level III DC fast charging capability. Assuming the MG truck qualifies as a charging station at least 33 states and a number of municipalities offer grants, rebates, tax credits, or other incentives for electric vehicle charging stations.
If we fulfill all elements of our business plan, we will have to prepare for, understand and ultimately meet emerging product environmental regulations around the world. Our products will have to comply with the current emission standards that went into effect in the European Union in 2015, as well as the standards in other international markets, including Japan, Mexico, Australia, Brazil, Russia, India, and China that are becoming more stringent.
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Employees
As of May 1, 2020, we had two full time employees, one full time consultant and two part time employees. We hope to hire additional employees, on an as-needed basis, subject to sufficient funding, as products and services are developed.
Research and Development
During the years 2019 and 2018, we incurred research and development costs of $296,800 and $501,342, respectively. All costs were borne by the Company.
RISKS RELATED TO OUR BUSINESS AND INDUSTRY
Our independent auditors have expressed their concern as to our ability to continue as a going concern.
As a result of our financial condition, we have received a report from our independent registered public accounting firm for our consolidated financial statements for the years ended December 31, 2019 and 2018 that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern. As of December 31, 2019, we have incurred net losses of $52,107,440 since inception and have not yet commenced full operations, raising substantial doubt about our ability to continue as a going concern. As of December 31, 2019 we only had $15,306 in cash on hand. Our ability to continue as a going concern is dependent on our ability to generate revenue, achieve profitable operations and repay our obligations when they come due. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty. We are pursuing various financing alternatives to support the sales, component acquisition and assembly of our mobile power generation systems as well as the completion of the secondary elements of our business plan: to license its thermal technologies and applications, including submersible dry-pit applications. There can be no assurance, however, that we will obtain adequate funding or that we will be successful in accomplishing any of our objectives. The Company believes that if it does not obtain adequate working capital by the end of the second quarter 2020, it may need to cease or curtail operations.
We have approximately $1,125,000 in principal amount of promissory notes that mature in the next 60 days and if we are not able to timely make payments on these notes we may be in default.
We have approximately $1,125,000 in principal amount of promissory notes that mature in the next 60 days and if we are not able to timely make payments on these notes we may be in default. We do not have enough cash on hand to pay our obligations when due and will may be in default of these notes. As a result if we default on the notes the lender will be able to seek to enforce the obligations on the notes which will hurt our business operations and may cause us to curtail or cease operations.
Our limited operating history makes evaluating our business and future prospects difficult and may increase the risk of your investment.
We have a limited operating history on which investors can base an evaluation of our business, operating results and prospects. We have no operating history with respect to commercializing our heat pipe technology and licensing it to motor and generator manufacturers or selling mobile generators or translating our thermal technology from testing and one-off applications into mass market production. Consequently, it is difficult to predict our future revenues, if any, and appropriately budget for our expenses, and we have limited insight into trends that may emerge and affect our business.
We have only recently commercialized our mobile power generation system. Sufficient funds from recent bridge financing funded a pilot run by Craftsmen Industries who is our manufacturing partner. We also have reason to believe from current negotiations that funds will be available for the transition from pilot run to full production of the mobile generation system. If we are unable to obtain additional funding in a timely manner it will have a negative impact. Any additional equity financing may involve substantial dilution to our then existing stockholders. The inability to raise the additional capital will restrict our ability to develop and conduct business operations.
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We have a history of operating losses and can provide no assurance of our future operating results.
From incorporation in 2002 to December 31, 2019, we have incurred net losses of $52,107,440.These losses may continue into the foreseeable future. There can be no assurance we will ever operate profitably or that we will have adequate working capital to meet our obligations as they become due. Investors must consider the risks and difficulties frequently encountered by early stage companies, particularly in rapidly evolving markets. We cannot be certain that our business strategy will be successful or that we will successfully address these risks. In the event that we do not successfully address these risks, our business, prospects, financial condition, and results of operations could be materially and adversely affected.
The market for mobile power generation is changing.
Although tow-behind generators have been the standard for more than 60 years, the market is changing. A greater number of hybrid and electric vehicles are being sold and low power generation systems are being incorporated in internal combustion trucks. As the MG System produces power equal to tow behinds from a smaller, lighter package, it is reflective of that change. In addition, usage of electric vehicles continues to increase, however, in many countries, charging infrastructure is not likely to keep pace. As the MG Systems offer both slow and fast charging capabilities, this creates new opportunities for the Company. Nonetheless, significant increases in the electrical output of existing mobile power systems, rapid build-out of electric vehicle charging infrastructure, new government regulations or changes in consumer demand and behavior may slow the growth of our business and negatively impact our financial results.
Many of our potential competitors are better established and have significantly greater resources.
The market for the products we develop is highly competitive. Many of our potential competitors are well established with larger and better resources, longer relationships with customers and suppliers, greater name recognition and greater financial, technical and marketing resources than we have. Increased competition may result in price reductions, reduced gross margins, loss of market share and loss of licensees, any of which could materially and adversely affect our business, operating results and financial condition. We cannot ensure that prospective competitors will not adopt technologies or business plans similar to ours or develop products which may be superior to ours or which may prove to be more popular. It is possible that new competitors will emerge and rapidly acquire market share. We cannot ensure that we will be able to compete successfully against future competitors or that the competitive pressures will not materially and adversely affect our business, operating results and financial condition.
We may experience significant delays in the design and implementation of our thermal technology into the motors and/or generators of the companies with which we have research and development agreements which could harm our business and prospects.
Motor manufacturers often experience delays in the design, manufacture and commercial release of new product lines. Any delay in the financing, design, and implementation of our thermal technology into the motor and/or generator lines of companies with which we may have research and development agreements could materially damage our brand, business, prospects, financial condition and operating results.
If we are unable to adequately control the costs associated with operating our business, including our costs of sales and materials, our business, financial condition, operating results and prospects will suffer.
If we are unable to maintain a sufficiently low level of costs for designing, marketing, selling and distributing our conversion system and thermal technologies relative to their selling prices, our operating results, gross margins, business and prospects could be adversely impacted. We have made, and will be required to continue to make, significant investments for the design and sales of our system and technologies. There can be no assurances that our costs of producing and delivering our system and technologies will be less than the revenue, if any, we may generate from sales and/or licensing. We may be required to incur substantial marketing costs and expenses to promote our systems and technologies, even though our marketing expenses to date have been relatively limited. Many of the factors that impact our operating costs are beyond our control. For example, the costs of our components could increase due to shortages if global demand for such components increases.
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We will be dependent on our suppliers. The inability or refusal of these suppliers to deliver components at prices and volumes acceptable to us would have an adverse effect on our business.
We have selected suppliers, issued purchase orders and received products for our mobile power generation system. We source globally from a number of suppliers, none of which are single source suppliers for these components.
Failure to obtain reliable sources of component supply that will enable us to meet quality, price, engineering, design and production standards, as well as the production volumes required to successfully market our conversion system could negatively affect our Company's revenues and business operations. Even if we are successful in developing a high-volume mobile power manufacturing platform and reliable sources of component supply, we do not know whether we will be able to do so in a manner that avoids significant delays and cost overruns.
If we experience significant increased demand, or need to replace our existing suppliers, there can be no assurance that additional supplies of component parts will be available when required on terms that are favorable to us, or that a supplier would allocate sufficient supplies to us in order to meet our requirements or fill our orders in a timely manner. The loss of any single or limited source supplier or the disruption in the supply of components from these suppliers could lead to delays to our customers, which could hurt our relationships with our customers, result in negative publicity, damage our brand and adversely affect our business, prospects and operating results.
Any significant disruption in our supplier relationships, particularly relationships with sole source suppliers, could harm our business. Furthermore, some of our suppliers may not be able to handle any commodity cost volatility and/or sharply changing volumes while still performing as we expect. To the extent our suppliers experience supply disruptions, there is a risk for delivery delays, production delays, production issues or delivery of non-conforming products by our suppliers. Even where these risks do not materialize, we may incur costs as we try to make contingency plans for such risks.
Our research and commercialization efforts may not be sufficient to adapt to technological changes.
As technologies change, we plan to upgrade or adapt our mobile power generation system in order to continue to provide vehicles with the latest technology. However, our installations or retrofits may not compete effectively with alternative vehicles if we are not able to source and integrate the latest technology into our mobile power generation system. We plan to offer a no-idle system, however, since we do not plan to manufacture battery cells and/or solar panels, we are dependent on suppliers of battery cell and/or solar panel technology for our no idle systems. To help mitigate the risk, we have signed a strategic alliance with a solar power and energy storage company (VerdeWatts). However, there can be no guarantee that such risk mitigation will be successful. Furthermore, any failure to keep up with advances in electric or hybrid vehicle technology would result in a decline in our competitive position which would adversely affect our business, prospects, operating results and financial condition.
An occurrence of an uncontrollable event such as the COVID-19 pandemic is likely to negatively affect our operations.
The occurrence of an uncontrollable event such as the COVID-19 pandemic is likely to negatively affect our operations. A pandemic typically results in social distancing, travel bans and quarantine, and this has limited access to our facilities, customers, management, support staff and professional advisors. These, in turn, will not only impact our operations, financial condition and demand for our products but our overall ability to react timely to mitigate the impact of this event. Also, it may substantially hamper our efforts to provide our investors with timely information and comply with our filing obligations with the Securities and Exchange Commission.
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A prolonged economic downturn or economic uncertainty could adversely affect our business and cause us to require additional sources of financing, which may not be available.
Economic cycles and any related fluctuation in the businesses of our potential fleet customers, electric motor manufacturers or income of the general public may have a material adverse effect on our financial condition, results of operations or cash flows. If global economic conditions deteriorate or economic uncertainty increases, our potential customers may experience lowered incomes or deterioration of their businesses, which may result in the delay or cancellation of plans to convert their vehicles, reduced license sales or reduced royalties from sales by licensees. As a consequence, our cash flow could be adversely impacted.
Any changes in business credit availability or cost of borrowing could adversely affect our business.
Declines in the availability of business credit and increases in corporate borrowing costs could negatively impact the number of mobile generators installed and the number of electric motors and generators manufactured. Substantial declines in the number of installations or retrofits by our customers could have a material adverse effect on our business, results of operations and financial condition.
If we lose any of our key management personnel, we may not be able to successfully manage our business or achieve our objectives.
Our future success depends in large part upon the leadership and performance of our management and consultants. The Company's operations and business strategy are dependent upon the knowledge and business contacts of our executive officers and our consultants. We have employment agreements with our Chief Executive Officer and Vice President and a consulting agreement for the services of our Chief Financial Officer. Although, we hope to retain the services of all of our officers, if an officer should choose to leave us for any reason before we have hired additional personnel, our operations may suffer. If we should lose their services before we are able to engage and retain qualified employees and consultants to execute our business plan, we may not be able to continue to develop our business as quickly or efficiently.
In addition, we and our production partners/affiliates must be able to attract, train, motivate and retain highly skilled and experienced technical employees in order to successfully develop our business. Qualified technical employees often are in great demand and may be unavailable in the time frame required to satisfy our business requirements. We may not be able to attract and retain sufficient numbers of highly skilled technical employees in the future. The loss of technical personnel or our inability to hire or retain sufficient technical personnel at competitive rates of compensation could impair our ability to successfully grow our business. If we lose the services of any of our consultants, we may not be able to replace them with similarly qualified personnel, which could harm our business.
We may incur material losses and costs as a result of product defects, warranty claims or product liability actions that may be brought against us.
We face an inherent business risk of exposure to product liability if our mobile power generation system or other products fail to perform as expected or failure of our products results in bodily injury or property damage.
If flaws in the design of our products were to occur, we could experience a rate of failure in our mobile power generation system or other products that could result in significant charges for product re-work or replacement costs. Although we plan to engage in extensive quality programs and processes, these may not be sufficient to avoid conversion or product failures, which could cause us to:
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lose net revenue; |
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incur increased costs such as costs associated with customer support; |
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experience delays, cancellations or rescheduling of retrofits or orders for our products; |
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experience increased product returns or discounts; or |
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damage our reputation; |
all of which could negatively affect our financial condition and results of operations.
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If any of our mobile power generation systems or other products are or are alleged to be defective, we may be required to participate in a recall involving such installations or retrofits or products. A recall claim brought against us, or a product liability claim brought against us in excess of our insurance, may have a material adverse effect on our business.
Depending on the terms under which we supply products to a vehicle component or engine manufacturer, a manufacturer may attempt to hold us responsible for some or all of the repair or replacement costs of defective products under their warranties when the manufacturer asserts that the product supplied did not perform as warranted.
Developments or assertions by us or against us relating to intellectual property rights could materially impact our business.
We own significant intellectual property, including a number of patents, and intend to be involved in numerous licensing arrangements. Our intellectual property should play an important role in maintaining our competitive position in a number of the markets we intend to serve.
We will attempt to protect proprietary and intellectual property rights to our products and conversion system through available patent laws and licensing and distribution arrangements with reputable domestic and international companies. Despite these precautions, patent laws afford only limited practical protection in certain countries.
Litigation may also be necessary in the future to enforce our intellectual property rights or to determine the validity and scope of the proprietary rights of others or to defend against claims of invalidity. Such litigation could result in substantial costs and the diversion of resources.
As we create or adopt new technology, we will also face an inherent risk of exposure to the claims of others that we have allegedly violated their intellectual property rights.
Our products could infringe on the intellectual property rights of others which may result in costly litigation and, if we do not prevail, could also cause us to pay substantial damages and prohibit us from selling or licensing our products.
Third parties may assert infringement or other intellectual property claims against us. We may have to pay substantial damages, including damages for past infringement if it is ultimately determined that our products or technology infringe a third party's proprietary rights. Further, we may be prohibited from selling or providing products before we obtain additional licenses, which, if available at all, may require us to pay substantial royalties or licensing fees. Even if claims are determined to be without merit, defending a lawsuit takes significant time, may be expensive and may divert management's attention from our other business concerns. Any public announcements related to litigation or interference proceedings initiated or threatened against us could cause our business to be negatively impacted and our stock price to decline.
We may incur losses, additional costs or even interruption of business operations as a result of fines or sanctions brought by government regulators.
Our business will be subject to various U.S. federal, state and local, and non-U.S. environmental, transportation and safety laws and regulations.
We cannot assure you that we will be at all times in complete compliance with such laws, regulations and permits. If we violate or fail to comply with these laws, regulations or certifications, we could be fined or otherwise sanctioned by regulators.
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We may face risks from doing business internationally.
We have orders for our mobile power generation systems for Mexican and Turkish customers and we have signed joint venture and/or sales representation agreements with companies in Turkey, Poland and Australia. It’s likely that there will be further sales, licensing and distribution of products and technologies outside the United States, and that we will derive revenues from these sources. Consequently, our revenues and results of operations will be vulnerable to currency fluctuations. We will report our revenues and results of operations in United States dollars, but a significant portion of our revenues may be earned outside of the United States. We cannot accurately predict the impact of future exchange rate fluctuations on revenues and operating margins. Such fluctuations could have an adverse effect on our business, results of operations and financial condition.
Our business will also be subject to other risks inherent in the international marketplace, many of which are beyond our control. These risks include:
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laws and policies affecting trade, investment and taxes, including laws and policies relating to the repatriation of funds and withholding taxes, and changes in these laws; |
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changes in local regulatory requirements, including restrictions on installations or retrofits; |
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differing cultural tastes and attitudes; |
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differing degrees of protection for intellectual property; |
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the instability of foreign economies and governments; |
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war and acts of terrorism. |
Any of the foregoing could have an adverse effect on our business, financial condition and results of operations.
If we are unable to effectively implement or maintain a system of internal control over financial reporting, we may not be able to accurately or timely report our financial results and our stock price could be adversely affected.
Section 404 of the Sarbanes-Oxley Act of 2002 and related regulations require us to evaluate the effectiveness of our internal control over financial reporting as of the end of each fiscal year, and to include a management report assessing the effectiveness of our internal control over financial reporting in our Annual Report on Form 10-K for that fiscal year. Management determined that as of December 31, 2019, our disclosure controls and procedures and internal control over financial reporting were not effective to ensure that information required to be disclosed by us in reports filed or submitted under the Securities Exchange Act were recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Act Commission's rules and forms and that our disclosure controls are not effectively designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act is accumulated and communicated to management, including our principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our internal controls are not effective for the following reasons, (1) we have limited entity-level controls because of the limited time and abilities of the four officers, (2) we have not implemented adequate system and manual controls, and (3) there is no separate audit committee.
Any failure to implement new or improved controls necessary to remedy the material weaknesses described above, or difficulties encountered in the implementation or operation of these controls, could harm our operations, decrease the reliability of our financial reporting, and cause us to fail to meet our financial reporting obligations, which could adversely affect our business and reduce our stock price.
We may be at risk to accurately report financial results or detect fraud if we fail to maintain an effective system of internal controls.
As directed by Section 404 of the Sarbanes-Oxley Act of 2002, the SEC adopted rules requiring public companies to include a report that contains an assessment by management on the Company's internal control over financial reporting in their annual and quarterly reports on Form 10-K and 10-Q. We cannot assure you that significant deficiencies or material weaknesses in our disclosure controls and internal control over financial reporting will not be identified in the future. Also, future changes in our accounting, financial reporting, and regulatory environment may create new areas of risk exposure. Failure to modify our existing control environment accordingly may impair our controls over financial reporting and cause our investors to lose confidence in the reliability of our financial reporting, which may adversely affect our stock price.
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RISKS ASSOCIATED WITH OUR COMMON STOCK
The issuance of shares upon conversion of our preferred stock and exercise of outstanding warrants and options will cause immediate and substantial dilution to our existing stockholders.
As of December 31, 2019, there are 3 shares of Series A preferred stock (“Series A Stock”) issued and outstanding (each such share of Series A Stock has the voting right of 50,000 shares of common stock) convertible into an aggregate of 150,000 shares of common stock and 2,727,270 shares of Series B preferred stock (“Series B Stock”) issued and outstanding. For so long as the Series B Stock is issued and outstanding, the holders of Series B Stock shall vote together as a single class with the holders of the common stock and the holders of any other class or series of shares entitled to vote with the common stock, with the holders of Series B Stock being entitled to 66 2/3% of the total votes on all such matters. There are also warrants to purchase an aggregate of 74,037,722 shares of common stock and options to purchase an aggregate of 4,000,000 shares of common stock outstanding. The issuance of shares upon conversion of preferred stock and exercise of warrants and options will result in substantial dilution to the interests of other stockholders.
The holders of the Series B Stock have 66 2/3% of the voting rights of the Company.
Because the holders of the Series B Stock have 66 2/3% of the voting rights of the Company if they act together, they will be able to influence the outcome of all corporate actions requiring approval of our stockholders, including the election of directors and approval of significant corporate transactions, which may result in corporate action with which other stockholders do not agree. If the Series B stockholders vote in favor of the foregoing action and have sufficient voting power to approve such actions through their ownership of Series B Stock, no other stockholder approvals will be required.
Our common stock is subject to the "penny stock" rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock.
The SEC has adopted Rule 15g-9 which establishes the definition of a "penny stock," for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person's account for transactions in penny stocks; and (ii) the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must: (i) obtain financial information and investment experience objectives of the person; and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prescribed by the SEC relating to the penny stock market, which, in highlight form: (i) sets forth the basis on which the broker or dealer made the suitability determination; and (ii) that the broker or dealer received a signed, written agreement from the investor prior to the transaction.
Generally, brokers may be less willing to execute transactions in securities subject to the "penny stock" rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
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Because we do not intend to pay any cash dividends on our shares of common stock, our stockholders will not be able to receive a return on their shares unless they sell them.
We intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate paying any cash dividends on our common stock in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them at a price higher than that which they initially paid for such shares.
The market price of our shares of common stock is subject to fluctuation.
The market prices of our shares may fluctuate significantly in response to factors, some of which are beyond our control, including:
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The announcement of new products by our competitors |
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The release of new products by our competitors |
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Developments in our industry or target markets |
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General market conditions including factors unrelated to our operating performance |
Recently, the stock market in general has experienced extreme price and volume fluctuations. Continued market fluctuations could result in extreme market volatility in the price of our shares of common stock which could cause a decline in the value of our shares.
There is a limited trading market for our securities.
There is currently only a limited trading market for our common stock. We cannot predict the extent investor interest will lead to development of an active trading market or how liquid that trading market might become. If an active trading market does not develop or is not sustained, it may be difficult for investors to sell shares of our common stock at a price that is attractive or at all. In such a case, you may find that you are unable to achieve any benefit from your investment or liquidate your shares.
Because we are not subject to compliance with rules requiring the adoption of certain corporate governance measures, our stockholders have limited protections against interested director transactions, conflicts of interest and similar matters.
The Sarbanes-Oxley Act of 2002, as well as rule changes proposed and enacted by the SEC, the New York Stock Exchange, the Amex Equities Exchanges and NASDAQ, as a result of Sarbanes-Oxley, require the implementation of various measures relating to corporate governance. These measures are designed to enhance the integrity of corporate management and the securities markets and apply to securities which are listed on those exchanges or the NASDAQ. Because we will not be seeking to be listed on any of the exchanges, we are not presently required to comply with many of the corporate governance provisions.
Although our shareholders appointed independent directors to the board, we do not currently have independent audit or compensation committees. Until then, the directors who are part of management have the ability, among other things, to determine their own level of compensation. Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our stockholders without protections against interested director transactions, conflicts of interest and similar matters and investors may be reluctant to provide us with funds necessary to expand our operations.
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Our Articles of Incorporation allow for our board of directors to create new series of preferred stock without further approval by our stockholders which could adversely affect the rights of the holders of our common stock.
Our Board has the authority to fix and determine the relative rights and preferences of preferred stock. As a result, our Board could authorize the issuance of a series of preferred stock that would grant to such holders (i) the preferred right to our assets upon liquidation, (ii) the right to receive dividend payments before dividends are distributed to the holders of common stock and (iii) the right to the redemption of the shares, together with a premium, prior to the redemption of our common stock. In addition, our Board could authorize the issuance of a series of preferred stock that has greater voting power than our common stock or that is convertible into our common stock, which could decrease the relative voting power of our common stock or result in dilution to our existing common stockholders.
Any of the actions described in the preceding paragraph could significantly adversely affect the investment made by holders of our common stock. Holders of common stock could potentially not receive dividends that they might otherwise have received. In addition, holders of our common stock could receive less proceeds in connection with any future sale of the Company, whether in liquidation or on any other basis.
Our officers and directors own a substantial amount of our common stock and, therefore, exercise significant control over our corporate governance and affairs which may result in their taking actions with which other shareholders do not agree.
Our executive officers and directors control approximately 10% of our outstanding common stock. In addition, one of the directors owns Series B preferred shares which together with two other stockholders control 66 and 2/3 of the voting rights of the Company. These officers and directors, if they act together, may be able to exercise substantial influence over the outcome of all corporate actions requiring approval of our stockholders, including the election of directors and approval of significant corporate transactions, which may result in corporate action with which other stockholders do not agree. This concentration of ownership may also have the effect of delaying or preventing a change in control which might be in other stockholders' best interest, but which might negatively affect the market price of our common stock.
We are in breach of our agreements with certain investors for failure to timely file a registration statement with the SEC registering shares offered and sold to such investors.
In connection with the offer and sale shares and warrants to purchase shares of common stock, the Company agreed to file a registration statement with the SEC including these shares once the Company sold an aggregate of 1 million shares. The Company sold 1 million shares in July 2013. In addition, our placement agents also have "piggyback" registration rights for shares underlying warrants issued to them. If an investor or placement agent decides to bring an action against the Company before this registration statement is deemed effective, we may be faced with litigation and other costs and damages if unsuccessful in any such action.
We may, in the future, issue additional common shares, which would reduce investors' percent of ownership and may dilute our share value.
Our Articles of Incorporation authorizes the issuance of 500,000,000 shares of common stock, par value $0.001 per share, of which as of May 18, 2020, 395,929,942 shares are issued and outstanding excluding 1,000,000 shares held in escrow. On February 13, 2020, stockholders holding shares that entitled them to exercise at least a majority of the voting power, voted in favor of increasing the number of authorized shares of common stock, from 500,000,000 shares to 1,000,000,000 shares. The future issuance of common stock may result in substantial dilution in the percentage of our common stock held by our then existing stockholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors and may have an adverse effect on any trading market of our common stock.
Offers or availability for sale of a substantial number of shares of our common stock may cause the price of our common stock to decline.
If our stockholders sell substantial amounts of our common stock in the public market under Rule 144 or upon the exercise of outstanding options or warrants, it could create a circumstance commonly referred to as an "overhang" and in anticipation of which the market price of our common stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make more difficult our ability to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.
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Item 1B. Unresolved Staff Comments
Not applicable.
The Company rents a virtual office, which it uses as its corporate headquarters for a monthly rent of $300. The office is located at 8875 Hidden River Parkway, Suite 300, Tampa, Florida 33637. We believe this space is adequate for our current operations.
Securities and Exchange Commission Settlement
On September 20, 2018, the Securities and Exchange Commission (SEC) approved an offer to settle the enforcement proceedings against the Company pursuant to Section 21C of the Securities Exchange Act of 1934.
These proceedings arose out of the violation of the Regulation S-X requirement that interim financial statements filed as part of a Form 10-Q be reviewed by an independent public accounting firm prior to filing.
On three occasions, specifically, May 20, 2013, August 19, 2013 and August 22, 2016, Cool Technologies filed Form 10-Qs that contained financial statements that were not reviewed by an independent public accounting firm. In two cases, the Company properly disclosed that the 10Q’s were “unaudited and unreviewed” as set forth by the guidance in the Division of Corporation Finance Financial Reporting Manual Section 4410.3. And in each case, the Company subsequently filed a restated and amended Form 10-Q/A that complied with the Interim Review Requirement. In no instance were the filings ever subjected to audit challenge.
Pursuant to the enforcement proceeding instituted by the SEC, the Company settled for a fine of $75,000 and agreed to cease and desist from any future violations of Sections 13(a) of the Exchange Act and Rule 13a-13 thereunder, and Rule 8-03 of Regulation S-X.
From time to time, the Company may be a party to other legal proceedings. Management currently believes that the ultimate resolution of these other matters, if any, and after consideration of amounts accrued, will not have a material adverse effect on our consolidated results of operations, financial position, or cash flow.
Item 4. Mine Safety Disclosures
Not applicable.
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Market Information
Our common stock was quoted on the OTC Bulletin Board from July 30, 2009 to March 26, 2010 under the symbol BIBB. Prior to September 2010, there was no active market for our common stock. Our common stock is currently quoted on the OTCQB under the trading symbol WARM.
The following table sets forth the high and low sales prices as reported on the OTCQB. The quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.
Quarter Ended |
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High |
|
|
Low |
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||
|
|
|
|
|
|
|
||
March 31, 2019 |
|
$ | 0.07 |
|
|
$ | 0.03 |
|
June 30, 2019 |
|
$ | 0.07 |
|
|
$ | 0.03 |
|
September 30, 2019 |
|
$ | 0.07 |
|
|
$ | 0.02 |
|
December 31, 2019 |
|
$ | 0.03 |
|
|
$ | 0.01 |
|
March 31, 2018 |
|
$ | 0.07 |
|
|
$ | 0.04 |
|
June 30, 2018 |
|
$ | 0.09 |
|
|
$ | 0.06 |
|
September 30, 2018 |
|
$ | 0.08 |
|
|
$ | 0.03 |
|
December 31, 2018 |
|
$ | 0.06 |
|
|
$ | 0.02 |
|
The last reported sales price of our common stock on the OTCQB on May 8, 2020, was $0.01.
As of May 8, 2020, there were 214 stockholders of record of our common stock.
Dividend Policy
The Company has never paid dividends on its common stock and does not anticipate that it will pay dividends in the foreseeable future. It intends to use any future earnings for the expansion of its business. Any future determination of applicable dividends will be made at the discretion of the board of directors and will depend on the results of operations, financial condition, capital requirements and other factors deemed relevant.
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information regarding our equity compensation plans as of December 31, 2019:
Equity Compensation Plan Information
Plan category |
|
Number of securities to be issued upon exercise of outstanding options, warrants and rights |
|
|
Weighted-average exercise price of outstanding options, warrants and rights |
|
|
Number of securities remaining available for future issuance under equity compensation plans |
|
|||
Equity compensation plans approved by security holders |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity compensation plans not approved by security holders |
|
|
12,060,714 | (1) |
|
$ | 0.74 |
|
|
|
-- |
|
______________
(1) |
Represents (i) options to purchase 1,000,000 shares of common stock at $2.00 per share to each of Timothy Hassett and Mark Hodowanec; (ii) options to purchase 2,000,000 shares of common stock at $2.00 per share to Judson Bibb; and (iii) warrants to purchase 8,060,714 shares of common stock as set forth in Note 7 to the consolidated financial statements under Item 8 of this Annual Report on Form 10-K. |
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Recent Sales of Unregistered Securities
On January 28, 2019, Cool Technologies issued 850,000 shares of common stock to Spirit Bear, Ltd. upon conversion of 17 shares of Series A preferred stock.
On February 6, 2019, Cool Technologies issued 5,128,000 shares of common stock to Lucas Hoppel upon final conversion of $64,100 on convertible debt of $226,600.
On February 26, 2019, Cool Technologies issued 7,500,000 shares of common stock to Lucas Hoppel upon partial conversion of $93,750 on convertible debt of $396,550.
On April 25, 2019, Cool Technologies issued 7,500,000 shares of common stock to Lucas Hoppel upon partial conversion of $93,750 on convertible debt of $396,550.
On May 21, 2019, Cool Technologies issued 1,000,000 shares of common stock to LGH Investments pursuant to the terms of a promissory note agreement entered into on February 1, 2019. The shares were an inducement for the purchase of a promissory note entered into on the same date.
On May 30, 2019, Cool Technologies issued 650,000 shares of common stock to KHIC, LLC at an exercise price of $0.10 per share pursuant to the terms of a Stock Purchase Agreement signed December 23, 2016.
On July 31, 2019, the Company issued 4,000,000 shares of common stock to Lucas Hoppel upon partial conversion of $50,000 on convertible debt with a principal of $396,550.
On August 13, 2019, the Company issued 423,729 shares of common stock to PowerUp Lending Group Ltd. upon partial conversion of $15,000 on convertible debt with a principal of $140,000.
On August 23, 2019, the Company issued 545,455 shares of common stock to PowerUp Lending Group Ltd. upon partial conversion of $15,000 on convertible debt with a principal of $140,000 and 194 days of 8% annual interest. After the conversion, the principal balance remaining totals $110,000.
On August 29, 2019, the Company issued 604,839 shares of common stock to PowerUp Lending Group Ltd. upon partial conversion of $15,000 on convertible debt with a principal of $140,000.
On September 3, 2019, the Company issued 819,672 shares of common stock to PowerUp Lending Group Ltd. upon partial conversion of $20,000 on convertible debt with a principal of $140,000.
On September 5, 2019, the Company issued 833,333 shares of common stock to PowerUp Lending Group Ltd. upon partial conversion of $20,000 on convertible debt with a principal of $140,000.
On September 11, 2019, the Company issued 1,005,025 shares of common stock to PowerUp Lending Group Ltd. upon partial conversion of $20,000 on convertible debt with a principal of $140,000.
On September 11, 2019, the Company issued 2,500,000 shares of common stock to Lucas Hoppel upon partial conversion of $31,250 on convertible debt with a principal of $396,550.
On September 17, 2019, the Company issued 1,005,025 shares of common stock to PowerUp Lending Group Ltd. upon partial conversion of $20,000 on convertible debt with a principal of $140,000.
On September 17, 2019, the Company issued 2,012,072 shares of common stock to JSJ Investments, Inc. upon partial conversion of $40,000 on convertible debt with a principal of $140,000.
On September 24, 2019, the Company issued 1,119,558 shares of common stock to PowerUp Lending Group Ltd. upon final conversion of $15,000 on convertible debt with a principal of $140,000.
On October 1, 2019, the Company issued 2,695,599 shares of common stock to JSJ Investments, Inc. upon partial conversion of $40,000 on convertible debt with a principal of $140,000.
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On October 3, 2019, the Company issued 350,000 shares of our common stock to Eagle Equities, LLC pursuant to the terms of a securities purchase agreement entered into on October 2, 2019 as additional consideration for the purchase of a convertible promissory note.
On October 14, 2019, the Company issued 2,859,798 shares of common stock to JSJ Investments, Inc. upon partial conversion of $40,000 on convertible debt with a principal of $140,000.
On November 13, 2019, the Company issued 1,886,674 shares of common stock to JSJ Investments, Inc upon final conversion of $27,460 on convertible debt with a principal of $140,000.
On November 26, 2019, the Company issued 1,428,571 shares of common stock to LGH Investments, LLC upon conversion of $25,000 on a bridge promissory note with a principal of $250,000.
On December 5, 2019, the Company issued 2,224,000 shares of common stock to Lucas Hoppel upon final conversion of $27,800 on convertible debt with a principal of $396,550.
On December 19, 2019, the Company issued 1,128,687 shares of common stock to Eagle Equities, LLC upon partial conversion of $10,418 on convertible debt with a principal of $143,000.
On December 24, 2019, the Company issued 2,674,064 shares of common stock to Eagle Equities, LLC upon partial conversion of $20,844 on convertible debt with a principal of $143,000.
None of the above issuances involved any underwriters, underwriting discounts or commissions, or any public offering and we believe were exempt from the registration requirements of the Securities Act of 1933 by virtue of Section 4(2) thereof and/or Regulation D promulgated thereunder.
Item 6. Selected Financial Data
As a smaller reporting company, we are not required to provide the information required by this Item.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Our Management's Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. These risks and uncertainties include international, national and local general economic and market conditions; demographic changes and pandemics; our ability to sustain, manage, or forecast growth; our ability to successfully make and integrate acquisitions; raw material costs and availability; new product development and introduction; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; the loss of significant customers or suppliers; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; the ability to protect technology; and other risks that might be detailed from time to time in our filings with the SEC.
Because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. The following discussion and analysis of financial condition and results of operations of the Company is based upon, and should be read in conjunction with, the audited consolidated financial statements and related notes elsewhere in this Annual Report on Form 10-K.
Plan of Operation
We have not generated any revenues to date. We generated our first Mobile Generation order during the quarter ended June 30, 2014 and received a partial deposit in advance of completing the sale. On June 9, 2017, the Company received a purchase order for 10 MG systems from Craftsmen Industries. As Craftsmen builds custom vehicles designed to the individual specifications of their customers whose businesses and technical requirements vary widely, it is impossible to estimate when the order will be fulfilled. A 50% down payment will be received from Craftsmen at the time of customer acceptance.
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We believe the benefits of our mobile power generation systems are quickly realized once potential customers see it in operation. Public demonstrations of the MG systems began in April 2017. An inspection and performance demonstration for Mexican government officials and business leaders occurred in May 2018. Feedback from initial viewers resulted in more government officials and fruit growers coming to see a third demonstration in March 2019. Even more officials and growers followed -- flying to St. Louis for a review in May 2019.
In November 2017, the Company received a purchase commitment for 234 MG systems from a Mexican Producers’ Union. That was followed by a purchase commitment for 24 to 50 MG units from a second Mexican Producers’ Union in December 2017. On April 9, 2018, the first Mexican Producers’ Union executed a purchase order with the Company for 10 Ford F350s with MG80 kVA systems installed. On May 7, 2019, Turkish technology company Belirti Teknoloji, A.S. delivered a purchase order for six hundred MG80, MG125 and MG200 Mobile Generation systems. As of the May 1, 2020, the Company does not have the funds available to fulfill the orders.
Craftsmen Industries was selected to produce the first systems due to its engineering capabilities and extensive facilities. In January 2019, it began production on the initial vehicles and completed an initial production run vehicle two months later. In the meantime, we primarily incur expenses to commercialize our products, which include costs for research and development, professional fees and general operations.
Management is pursuing various financing alternatives, based upon a third-party assessment of the historically demonstrated or contractually committed profit-earning capacities of our IP, with Aon Risk Services Central, Inc. We see this as the best path forward for non-dilutive funding.
The funding will be used to support completion of the initial phases of our business plan, which is to license our thermal technologies and applications; to license or sell a mobile electric power system; and to license our submersible motor dry pit technologies and/or to bring to market our technologies and applications through key distribution partners. As of the filing date, it is uncertain whether COVID 19 will have a significant impact on production and distribution of Company products.
Significant Developments
Amendment of Series B Preferred Stock
On October 31, 2016, the Company filed an amended and restated Series B Preferred Stock Certificate of Designation (which was originally filed with the Secretary of State of Nevada on April 19, 2016, and amended on August 12, 2016) to designate 3,636,360 shares as Series B Preferred Stock and to provide for supermajority 66 2/3% voting rights for the Series B Preferred Stock. The Series B Preferred Stock will not bear dividends, will not be entitled to receive any distributions in the event of any liquidation, dissolution or winding up of the Company, and will have no other preferences, rights, restrictions, or qualifications, except as otherwise provided by law or the articles of incorporation of the Company. The holders of Class B Stock shall have the right, at such holder’s option, at any time to convert such shares into common stock, in a conversion ratio of one share of common stock for each share of Class B Stock. If the common stock trades or is quoted at a price per share in excess of $2.25 for any twenty consecutive day trading period, (subject to appropriate adjustment for forward or reverse stock splits, recapitalizations, stock dividends and the like), the Series B Stock will automatically be convertible into the common stock in a conversion ratio of one share of common stock for each share of Series B Stock. The Series B Stock may not be sold, hypothecated, transferred, assigned or disposed without the prior written consent of the Company and the holders of the outstanding Series B Preferred Stock.
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Amendment of Articles of Incorporation
We filed an amendment to our Articles of Incorporation with the Secretary of State of the State of Nevada increasing our authorized shares of common stock, from 140,000,000 shares to 350,000,000 shares, effective March 22, 2017. We filed a second amendment to our Articles of Incorporation with the Secretary of State of the State of Nevada increasing our authorized shares of common stock, from 350,000,000 shares to 500,000,000 shares, effective October 28, 2019.
On February 13, 2020, stockholders holding shares that entitled them to exercise at least a majority of the voting power, voted in favor of increasing the number of authorized shares of common stock, from 500,000,000 shares to 1,000,000,000 shares. The vote marked the first step in the process to amend the articles again.
Craftsmen Industries, Inc.
As a consequence of the first public demonstration of the MG 30 kilovolt amp (“kVA”) system at the North America International Auto Show in Detroit in January 2017, the Company entered into an agreement in principle, dated February 21, 2017, with Craftsmen Industries, Inc.(“Craftsmen’), a company engaged in the design, engineering and production of mobile marketing vehicles, experiential marketing platforms and industrial mobile solutions.
On April 25, 2017, we delivered to Craftsmen Industries, a Class III Vehicle (Ford F-350 dually) up-fitted with a production-ready MG 30 kVA (single phase/three phase) system.
Subsequently, Craftsmen invited the Company to demonstrate its mobile generation technology and the potential benefits for Craftsmen products at Craftsmen’s 35th Anniversary Party on April 27, 2017. Over 100 current and prospective Craftsmen customers were in the audience for the demonstrations.
On June 9, 2017, the Company received a purchase order for 10 MG systems from Craftsmen, each in the amount of $29,500 with 50% paid as a down payment at the time of customer acceptance.
Furthermore, Craftsmen has agreed to produce the MG systems for the Company’s initial orders from Jatropha and Veracruz (See below). Since October 2018 we have been ordering components for the initial pilot production run which was completed in the first quarter of 2019 and showcased on March 27, 2019. In parallel, purchase orders will be placed for components to support increased production in the months that follow.
Veteran Technology Group
On May 26, 2017, the Company entered into a five-year strategic alliance agreement with Veteran Technology Group LLC (“Vet Tech”), a developer of artificial intelligence (“AI”) software for advanced troubleshooting of complex systems. The agreement automatically renews for successive one-year terms unless terminated by either party 30 days prior to its expiration. The agreement may be terminated earlier by either party upon 60 days prior notice. The parties agreed not to solicit the other parties’ employees or contractors for six months after the expiration or termination of the agreement.
The agreement provides that the Company market and provide its MG product and services to customers referred by Vet Tech and Vet Tech will market and provide GAIT software and other AI services for clients referred by the Company.
National Union of Jatropha Producers
In November 2017, the Company received a purchase commitment for 234 MG systems from the National Union of Producers of Jatropha in Mexico (Jatropha).
Jatropha has established a center for processing oil from Jatropha seeds for biofuel production. Through their union of producers, Jatropha plans to introduce the MG and promote the product to their supplier network.
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The purchase commitment stipulates that CoolTech will furnish Jatropha with an MG80 retro-fitted onto a Ford F-350 truck within 60 business days. To ensure the system is optimized to meet Jatropha’s needs, CoolTech set the terms of the agreement to allow both teams to gather data and provide performance feedback another 30 to 60 days. Upon completion of this period, Jatropha will release the balance of the order for 233 units. Payment terms require 50% down and 50% at time of shipment, FOB (Freight on Board) from Cool Technologies’ dock.
On February 6, 2019, Jatropha signed an agreement to amend their previous purchase agreement. It eliminates the 60 business day deadline for the truck to be shipped to Mexico. Under the new agreement, representatives from Jatropha will come to Colorado for an inspection and live performance demonstration. If approved, the generator-equipped trucks will go into production as specified in the original purchase agreement.
A representative of the National Union of Jatropha Producers approved the generator-equipped truck. It will go into production as the Company secures final funding.
The value of the purchase commitment is expected to be between $17,000,000 and $22,000,000. On April 9, 2018, Jatropha executed a purchase order with the Company for 10 Ford F-350s with MG80 kVA systems installed. The value of the initial order is in excess of one million dollars.
National Union of Producers in Mexico for the state of Veracruz
In December 2017, the Company received a purchase commitment for 24 to 50 MG units from the National Union of Producers in Mexico for the state of Veracruz. Depending on the respective numbers of MG55 and MG80 kVA systems ordered, the Company expects the value of the commitment to range between $1,200,000 and $3,750,000.
The union represents farmers who grow labor and energy intensive crops such as sugar cane, tobacco, bananas, coffee, rice and vanilla. It expects that the MG systems will increase yields, exports and income for its members and their communities.
According to the contract, the Company will deliver an MG 80 retro-fitted onto a Ford F-350 truck within 60 business days. Then, to ensure the system fully addresses the application requirements, CoolTech, as a best practice of Six Sigma quality, will gather data and performance feedback. When CoolTech is satisfied that optimal performance has been achieved, the union will release the balance of the order and production begins.
On February 23, 2018, Veracruz signed an agreement to amend their previous purchase agreement. It eliminates the 60 business day deadline for the truck to be shipped to Mexico. Under the new agreement, representatives from Veracruz will come to Colorado for an inspection and live performance demonstration. If approved, the generator-equipped trucks will go into production as specified in the original purchase agreement.
A representative of the National Union of Jatropha Producers approved the generator-equipped truck. It will go into production as the Company secures final funding.
Payment terms require 50% down and 50% at time of shipment, each payable with a bank letter of credit. Product delivery will be considered FOB (Freight on Board) from Cool Technologies’ shipping dock.
The value of the purchase commitment is expected to commitment to range between $1.2M and $3.9M USD.
Panasonic System Communications Company of North America.
In January 2018, the Company announced that its Mobile Generation systems will incorporate Panasonic Toughpad tablets to run CoolTech’s software.
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The association between the two companies dates back to April 2017 when Cool Technologies demonstrated its Mobile Generation (MG) system at Craftsman Industries in St. Louis. In attendance was the Executive Director of Product Planning Strategy and Innovation at the Silicon Valley Center of Panasonic Corporation of North America. He received a demonstration of the MG technology as well as an overview of CoolTech’s thermal dispersion technologies. That led to several conversations and meetings regarding the ways in which the two companies could pursue joint initiatives and opportunities.
The first initiative resulted in CoolTech’s use of the Panasonic Toughpad tablet to provide a rugged touchscreen interface for field technicians to control and calibrate the Mobile Generation systems. The Toughpad will be deployed in the trucks’ cabs.
Aon Risk Services Central, Inc and Lee and Hayes, PLLC
In January 18, 2018, the Company entered into an agreement with Aon Risk Services Central, Inc. and Lee and Hayes, PLLC, through its operating unit, 601West, which provides intellectual property (“IP”) analytics, to assess the value of the Company’s IP. As set forth in the agreement, the assessment will be founded on historically demonstrated or contractually committed profit-earning capacities of our IP and may be used to obtain financing, including but not limited to, non-dilutive financing. Since then significant progress has been achieved, although at a pace much slower than anticipated.
Live MG80 Demonstration in Fort Collins, Colorado
On May 4, 2018, nine representatives from Mexico’s farming, banking, and government sectors flew to Fort Collins, Colorado for a live demonstration of CoolTech’s generator-equipped truck. The demonstration showcased the capabilities and ease of operation of the system. The Company demonstrated how an operator is able to control the generator from the comfort and safety of the truck’s cab using a Panasonic Toughpad. The Company also used the electricity from the truck to power a screw compressor, an industrial fan, and an industrial load bank. Additional capabilities, such as purifying water and using batteries and solar power to make operations more sustainable and environmentally friendly were discussed with the attendees.
A representative of the National Union of Jatropha Producers approved the generator-equipped truck. CoolTech plans to put this into production as soon as final funding is secured.
Purchase and Delivery of Truck to Craftsman Industries
On July 15, 2018, the Company purchased a Ford F-450 Chassis Cab Truck. Subsequently, a metal flatbed was manufactured and installed. The truck was delivered to Craftsmen on September 15th. It will be used for the installation and refinement of the MG 80 kVA system. A second F-450 will be used for the MG 125 kVA system.
Order of Parts and Components
During the week of October 7, 2018, the Company placed orders for System Controllers, 80 and 125 kVA Generators, Voltage Regulators, Panasonic Toughpads, Power Take-Offs (PTO) and Split Shaft PTOs.
CALSTART, Inc.
CoolTech joined CALSTART, Inc. (“CALSTART”) a non-profit, clean transportation technology coalition in November 2018. The coalition works with member companies and agencies to foster a high-tech clean-transportation industry by accelerating the adoption of emerging technologies and helping build markets.
Since then, the Company has been in contact with 4 utilities, 3 telecoms, 2 truck upfitters and 3 hybrid truck manufacturers. Proposals have been made for 3 MG systems of differing power to be installed on California Air Resources Board (CARB) certified vehicles, an MG No-idle system and an MG truck with a hydrogen-infused fuel system.
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On Thursday, January 17, 2019, a representative of the Company attended a meeting of the CALSTART Leadership Circle at Porsche Cars North American Headquarters, in Atlanta. Among the topics covered were the infrastructure pathway for electric vehicles and electric vehicle market growth. At the event, the Company met with representatives from Southern Company, Duke Energy and Altec, Inc.
Creation and Delivery of Business Proposals
The Company has been active in putting forth new business proposals in line with our strategy to target specific industry markets. We regularly review relevant press releases, major media articles and trade publications from various industries to keep up with trends and uncover opportunities. We also attend seminars and conferences to meet and network with prospective clients. Since the beginning of the year, we have delivered proposals to major utilities (Southern Company, Duke Energy) and car manufacturers (Porsche) covering electric vehicle charging for dealers and customers.
TARDEC
On February 26, 2019, a representative of the Company attended a Collaboration Day with the U.S. Army’s Tank Automotive Research Development and Engineering Center (TARDEC) at Marine Corps Air Station, Miramar. TARDEC is the U.S. Army's Research, Development and Engineering Center for all Ground Vehicles and Ground Vehicle Systems technology and integration, as well as Fuels and Lubricants, Water Supply and Wastewater Treatment, Tactical Military Bridging, Construction Equipment, Material Handling Equipment, and Army Watercraft. The Company participated in one-on-one sessions with members from the Ground Vehicle Power and Mobility team which pursues advanced technologies to increase fleet energy flexibility and efficiency with the goal of providing more power output without adding weight that degrades system performance.
On February 27, 2019, the Company participated in TARDEC’s Vehicle Electrification Forum which serves to advance electrification of Army combat and tactical systems by enabling industry to innovate products that meet Army needs and requirements. The Forum is a mechanism for industry to contribute to the formation of TARDEC's Vehicle Electrification Strategy. A representative from the Company participated in a session covering electric recharging and issues related to future powertrain configurations including improved system efficiency; requirements for hybrid, electric, and fuel cell configurations; energy storage; vehicle-to-grid and vehicle-to-vehicle capabilities; and engine/transmission improvements.
Unveiling of Initial Production Run Vehicle
On March 27, 2019, the Company unveiled the initial production run of its Mobile Generation (MG) work trucks for inspection by an audience of agricultural and community leaders from Latin America at Craftsmen Industries.
The itinerary for the showcase event included a tour of the St. Louis manufacturing facility and inspection of the first production run MG vehicle in operation as it powered a variety of equipment.
The purpose of the viewing was not only to show the truck’s capabilities, but to get feedback from the attendees.
Mexican Government
On May 13, 2019, government officials and fruit growers were at Craftsmen Industries in St. Louis for a review of a first run MG80 production vehicle and water purification/desalination options.
Among the politicians in attendance was Congressman Efraín Rocha Vega who is Secretary of the Commission of Development and Rural, Agricultural and Food Self-sufficiency Conservation, a member of the commission of Livestock and the commission of Environment, Sustainability, Climate Change and Natural Resources. Subsequent to the event, in an official Congressional Letter of Support, dated May 20th, 2019, Congressman Rocha wrote: “The successful demonstration of these technologies further strengthens the Mexican Government’s support of Mexican entities that desire to purchase CoolTech products, as well as affirms our position to provide financial assistance to such entities.” The letter can be viewed in its entirety at: http://www.cooltechnologiesinc.com/content/pdf/MexicanLegislationandFinancialAssistanceLetter.pdf.
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Introduction of new options
During the fourth quarter of 2019, the Company has introduced new options, which include an MG System that generates up to 200 kVA of electric power, water purification and desalination systems.
The truck mounted water purification and desalination units can produce from 2,800 to 10,000 gallons of fresh water every day. Assuming the average person needs 2 liters per day, 10,000 gallons is enough for 18,927 people.
A 30 kVA MG system could power any size unit as well as the pumps to deliver the water or five units at once which would conceivably be enough to keep the population of Santa Barbara hydrated. It could even tow a 1,250 gallon water tanker, if needed.
The purification and desalinization units feature fully automated controls and monitoring. When combined with the optional telematics offered in the vehicles, each unit could be remotely controlled and monitored from distant locations.
Belirti Teknoloji
On May 7, 2019, the Company entered into a joint venture agreement (“JV”) with Turkish technology company Belirti Teknoloji, A.S. (“BelirtiTech”). To launch the business, BelirtiTech awarded Cool Technologies a purchase order for up to $42 million USD for the purchase of several different models of its Mobile Generation kits. The purchase order will supply the JV with its initial inventory for resale into the Middle East and some African nations. The Company is actively working with the customer’s bank in addition to insurance companies and other financial entities to facilitate the financing of the orders. As of the date of this filing, the funds to fulfill the orders are not in place.
The initial purchase order is for six hundred MG80, MG125 and MG200 Mobile Generation systems. The MG systems will be integrated into the end customer’s choice of vehicles.
The order also includes an additional MG80 installed in a Ford F-450 with the 2,500 gallon per day mobile water desalinization option included.
KeyOptions
On May 30, 2019, the Company entered into a joint venture agreement (“JV”) with KeyOptions Pty Ltd., a privately held technology and security provider based in Victoria, Australia.
KeyOptions develops and markets products for governments, defense contractors and other commercial applications to counter security and cyber threats. The Company will provide a license for the JV to market and sell CoolTech’s entire product platform in Australia and neighboring countries in Southeast Asia.
New Strategic Alliance:
On December 16, 2019, the Company signed a cross marketing and licensing agreement with VerdeWatts, LLC., an energy generation and storage company encompassing everything from mobile solar power generation systems to large scale biogas turbine installations. Pursuant to the agreement VerdeWatts and the Company each granted the other a royalty free non-exclusive license to certain patents which license is subject to certain future negotiation.
Like CoolTech’s Mobile Generation systems (“MG”), VerdeWatts’ products are scalable and offer the ability to bring power nearly anywhere it is needed. Their proprietary Smart Solar Power Generation Units and energy storage systems combine to deliver sustainable power long after the sun has set.
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The agreement with VerdeWatts also included a cross marketing and royalty free non-exclusive licensing agreement with FirmGreen, Inc., a water treatment facilities developer that works closely with VerdeWatts to create a suite of synergistic products that address significant needs in the global marketplace. FirmGreen specializes in water purification and desalination technologies. Their mobile, solar and container applications feature 6 levels of water purification for unrivaled drinkability. Pursuant to the agreement FirmGreen and the Company each granted the other a royalty free non-exclusive license to certain patents which license is subject to certain future negotiation.
CoolTech’s MG platform makes the companies’ product offering complete with mobile power generation. It provides the capability to power everything from irrigation for farms and water purification for rural areas to electric vehicle charging and fast charging in the urban ones.
Consider the solar-powered generator system with a built-in water purification unit that makes seawater desalination sustainable. The system pumps and purifies up to 3,000 gallons per day and interfaces with CoolTech’s MG system for 24-hour operation. The solar panels collapse and fold together, so the entire system fits easily in the bed of a work truck. It can be set up and operate anywhere a four-wheel drive vehicle can reach. All of these systems are patent protected and cross licensed to each of the three companies.
FirmGreen and VerdeWatts have a global presence with projects on 3 continents. The largest encompasses the installation of 14 natural gas generators to produce over 60 megawatts (MW) of power. The generators will be integrated with 50 megawatt hours of battery storage and another 6 MW of solar to ensure a consistent flow of power. VerdeWatts intend to replace most of the legacy on-site generators with CoolTech’s MG systems, however the Company has not received any orders and there cannot be any assurance that any orders will be placed.
Together the companies can create an energy or utility ecosystem that can enable less developed countries to leapfrog non-existent, inadequate or failing infrastructure to deliver reliable power and water quickly, sustainably and cost effectively to their citizens, agriculture and other businesses. The scale and impact can reach from the individual farms and villages to cities and regions.
In fact, by combining their respective technologies: energy generation, energy storage and load management controls into a single suite of products, the companies create what is called a “microgrid”. Varying combinations of energy sources such as solar, wind, biogas and MG systems both backup and supplement one another to provide consistent, uninterrupted primary power even during severe weather or other emergency situations.
The synergies between the companies extend beyond water purification and power generation. VerdeWatts’ wind and gas turbines and generators which produce electric power can all be improved by CoolTech’s thermal reduction technologies.
New Sales Agent:
In early December 2019, the Company entered into an agreement with Gaia Energy of Gdansk, Poland to act as an independent agent for the Company by developing markets in Eastern Europe, the Middle East and Africa. The agreement describes the agent’s duties as “generating revenue, and investment funding, for the Company from various organizations including investment funds, end-users, channel partners, integrators, and OEMs.”
Team members of Gaia Energy include executives with more than twenty-five years’ experience with Panasonic, Ford Motor Company, Electronic Data Systems and the US Air Force in the fields of advanced technologies and an African diplomat with a thirty-year background working with and for diplomatic missions, non-governmental organizations and international disasters and aid management services.
The diplomat introduced CoolTech products at a recent African technical summit attended by representatives from 54 countries.
Request for Collaboration Sent to US Government Officials
On December 11, 2019, letters signed by 13 government officials and Congressmen in Mexico were mailed to their counterparts in the US, specifically Governor Gavin Newsom, Secretary Rick Perry, Secretary Wilbur Ross, Senator Mitch McConnell and Speaker of the House Nancy Pelosi.
The letters were a request for collaborative support between the two countries to accelerate CoolTech’s product deployment into Mexico to help solve urgent rural power and water purification problems that are hurting rural communities. Those problems include irregular and faulty power in rural areas which hinders crop irrigation and water pollution which affects crops farmed for sale to the US.
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The letters also detail the Mexican officials’ satisfaction with CoolTech’s solutions and management team and that they have met with the Company on several occasions for product demonstrations as well as strategic and technical advice . They highlight the benefits of CoolTech products, how they could quickly and efficiently address the problems noted, and how they expect them to become a viable part of the country’s infrastructure.
Export Import Bank of the United States
With the help of VerdeWatts and FirmGreen, CoolTech has initiated a relationship with the Export-Import Bank of the United States (EXIM), a U.S. government agency whose sole mission is to support U.S. exports. The bank fulfills its mission by offering very cost-effective financing for international customers and project developers to purchase U.S.-made services and purchase or lease U.S.-made goods.
To that end, the two companies applied to finance the Mexican projects referenced above. CoolTech also sent product information for due diligence review by the technical team at EXIM bank. Subsequently, CoolTech has received a Letter of Interest from EXIM, however, there cannot be any assurance that EXIM will provide any funding to the Company.
Going Concern
As a result of our financial condition, we have received a report from our independent registered public accounting firm for our consolidated financial statements for the years ended December 31, 2019 and 2018 that includes an explanatory paragraph describing the uncertainty as to our ability to continue as a going concern. As of December 31, 2019, we have not commenced full operations, raising 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 generate revenue, achieve profitable operations and repay our obligations when they come due. As of December 31,2019, we have $15,306 in cash and we owe $314,2018 and $3,227,215 for convertible and promissory notes, respectively We are pursuing various financing alternatives to address the payment of outstanding debt and to support the sales, component acquisitionand assembly of our mobile power generation systems as well as the completion of the secondary elements of our business plan: to license its thermal technologies and applications, including submersible dry-pit applications. There can be no assurance, however, that we will obtain adequate funding or that we will be successful in accomplishing any of our objectives. Consequently, we may not be able to continue as an operating company.
Results of Operations
The following table sets forth, for the periods indicated, consolidated statements of operations data. The table and the discussion below should be read in conjunction with the accompanying consolidated financial statements and the notes thereto, appearing elsewhere in this report.
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Year ended December 31, |
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|||||||
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2019 |
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2018 |
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Change |
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% |
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||||
Revenues |
|
$ | -- |
|
|
$ | -- |
|
|
|
N/A |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payroll and related expenses |
|
|
657,178 |
|
|
|
591,858 |
|
|
|
65,320 |
|
|
|
11.0 | % |
Consulting |
|
|
331,107 |
|
|
|
433,978 |
|
|
|
(102,871 | ) |
|
|
(23.7 | )% |
Professional fees |
|
|
226,859 |
|
|
|
305,778 |
|
|
|
(78,919 | ) |
|
|
(25.8 | )% |
Research and development |
|
|
296,800 |
|
|
|
501,342 |
|
|
|
(204,542 | ) |
|
|
(40.8 | )% |
General and administrative |
|
|
242,994 |
|
|
|
426,665 |
|
|
|
(183,671 | ) |
|
|
(43.0 | )% |
Total operating expenses |
|
|
1,754,938 |
|
|
|
2,259,621 |
|
|
|
(504,683 | ) |
|
|
(22.3 | )% |
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(2,027,030 | ) |
|
|
(2,336,442 | ) |
|
|
309,412 |
|
|
|
13.2 | % |
Change in fair value of derivative liability |
|
|
330,728 |
|
|
|
83,963 |
|
|
|
246,765 |
|
|
|
293.9 | % |
Loss on extinguishment of debt |
|
|
208,328 |
|
|
|
(120,016 | ) |
|
|
328,344 |
|
|
|
273.6 | % |
Gain on fixed asset disposal |
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|
-- |
|
|
|
11,231 |
|
|
|
11,231 |
|
|
|
N/A |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(3,242,912 | ) |
|
|
(4,620,885 | ) |
|
|
1,377,973 |
|
|
|
29.8 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Non-controlling interest |
|
|
(1,600 | ) |
|
|
(2,497 | ) |
|
|
897 |
|
|
|
(35.9 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss to shareholders |
|
$ | (3,241,312 | ) |
|
$ | (4,618,388 | ) |
|
|
1,377,076 |
|
|
|
29.8 | % |
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Revenues
During the years ended December 31, 2019 and 2018, and since inception, we have not generated any revenues. We generated our first Mobile Generation order during the quarter ended June 30, 2014 and received a partial deposit in advance of completing the sale with companies controlled by the individual who is a 5% owner of UPT and a shareholder of our Company. The order is in the production queue along with other existing orders.
Operating Expenses
Operating expenses decreased during the year ended December 31, 2019 compared to the year ended December 31, 2018, due to reductions in consulting costs, professional fees, research and development as well as general and administrative. During the year ended December 31, 2019, payroll and related expenses increased by $65,320 due to bonuses awarded for new Company patents.
The decrease in professional fees was due primarily to the reduced requirements for accounting and legal. The decrease in research and development was due to the focus on commercialization of the Company’s MG system. The decrease in general and administrative costs was due to limited funds.
Other Income and Expense
Interest expenses during the years ended December 31, 2019 and 2018 related primarily to our debt. The change in fair value of derivative liability reflects the change in fair value of the conversion features embedded in the convertible debt agreements entered into in May 2019, June 2019, July 2019, August 2019, October 2019, November 2019 and December 2019, and also includes the change in fair value of common share equivalents that were previously reclassified to derivative liability as a result of insufficient authorized but unissued shares.
Net Loss and Noncontrolling Interest
Since we have incurred losses since inception, we have not recorded any income tax expense or benefit. Accordingly, our net loss is driven by our operating and other expenses. Noncontrolling interest represents the 5% third-party ownership in UPT, which is subtracted to calculate net loss to shareholders.
Liquidity and Capital Resources
We have historically met our liquidity requirements primarily through the public sale and private placement of equity securities, debt financing, and exchanging common stock warrants and options for professional and consulting services. At December 31, 2019, we had cash and cash equivalents of $15,306.
Working capital is the amount by which current assets exceed current liabilities. We had negative working capital of $6,821,643 and $4,643,956 at December 31, 2019 and 2018, respectively. The decrease in working capital was due to large increases in accounts payable, accrued liabilities – related party, current debt and derivative liability.To that end, we owe approximately $449,968 for convertible notes that mature in the next six months and we owe another $2,400,000 in notes payable. Based on its current forecast and budget, management believes that its cash resources will not be sufficient to fund its operations through the end of the second quarter. Unless the Company can generate sufficient revenue from the execution of the Company’s business plan, it will need to obtain additional capital to continue to fund the Company’s operations. There is no assurance that capital in any form would be available to us, and if available, on terms and conditions that are acceptable. If we are unable to obtain sufficient funds, we may be forced to curtail and/or cease operations.
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August 2016 Convertible Note – In August 2016, the Company entered into a senior convertible note agreement with KHIC. We received $400,0000, bearing interest at 3%, with principal and interest payable on August 24, 2018.
The note may be converted at any time into shares of the common stock at the conversion price pursuant to the terms of the note. We determined that the conversion feature meets the requirements for derivative treatment and have recorded a derivative liability and a corresponding debt discount on the condensed consolidated balance sheet.
On April 8, 2018, KHIC was issued 2,025,000 shares of common stock after converting $50,625 in debt at $0.025 per share.
An amendment was signed on August 24, 2018 which extended the maturity date of the note to December 15, 2018. In exchange, the outstanding balance of the note was increased to $455,544.
An amendment was signed on December 10, 2018 which extended the maturity date of the note to December 28, 2018. In exchange, the outstanding balance of the note was increased to $460,095 and a partial payment of $250,000 was made on the balance. On December 28, 2018, the outstanding balance of $210,095 was wired to KHIC and the note was retired.
September 2016 Promissory Notes – On September 30, 2016, we sold a promissory note in the principal amount of $180,000. The note bears the terms: 5% interest per annum with a maturity date of June 30, 2017. In the event of a default, the interest rate will increase to 18%. On November 10, 2016, we issued 800,000 shares of our common stock as partial consideration for the note to Gemini Master Fund, Ltd.
On June 30, 2017, the promissory note holder signed an extension agreement that extended the maturity date of the promissory notes to September 30, 2017 and then again until November 30, 2017. The terms and conditions remain the same.
On November 13, 2017, Lucas Hoppel purchased the note for $226,325 which included accrued and unpaid interest as well as additional charges.
On November 20, 2017, Lucas Hoppel signed an amendment to the note which extended the maturity date to December 31, 2017. In addition, the note was changed from promissory to convertible with a conversion price of $0.05 per share. On December 29, 2017, the note was amended, and the maturity date was extended to February 16, 2017. In exchange the conversion price was reduced to $0.04.
On February 19, 2018, the Company signed an amendment to a convertible note for $226,325 originally issued on September 3, 2017. The amendment extended the maturity dated extended to March 31, 2018. In exchange, the conversion price was reduced from $0.04 to $0.025.
From December 7, 2017 to February 20, 2018, a total of $185,000 were converted into 4,750,000 shares of common stock. On March 5, 2018, the buyer converted $41,325 into 1,653,000 shares of common stock and the $226,325 note was retired.
August Convertible Note – On August 25, 2017, the Company entered into a convertible note agreement. We issued 300,000 inducement shares of restricted common stock and received $150,000, with an original issue discount of $15,000 in lieu of interest, for a total amount of $165,000 due on March 25, 2018. At the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of our common stock at $0.10 per share. In the event of default, the outstanding balance will increase by 25% and a daily penalty of $100 will accrue until the default is remedied.
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On February 19, 2018, the Company signed an amendment to a convertible note for $165,000. The amendment extended the maturity dated extended to April 30, 2018. In exchange, the conversion price was reduced from $0.05 to $0.025.
From March 23 to April 18, 2018, a total of $87,500 was converted into 3,500,000 shares of common stock.
On April 27, 2018, a second amendment was signed extending the maturity date until May 30, 2018. On May 23, 2018, we issued 3,298,000 shares on conversion of $82,450 and the note was retired.
January Convertible Note – On January 26, 2018, the Company entered into a convertible note agreement. We issued 800,000 inducement shares of restricted common stock and received $200,000, with an original issue discount of $20,000 in lieu of interest, for a total amount of $220,000 due on August 26, 2018. At the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of our common stock at $0.05 per share. In the event of default, the outstanding balance will increase by 25% and a daily penalty of $100 will accrue until the default is remedied.
On May 22, 2018, Lucas Hoppel signed an amendment to the note which extended the maturity date to October 1, 2018. In exchange, the note was changed from promissory to convertible with a conversion price of $0.025 per share.
On September 25, 2018, the Company issued 2,000,000 shares on conversion of $50,000 in debt. On October 1, 2018, Lucas Hoppel signed an amendment to the note which extended the maturity date to January 1, 2019. From October 25 to November 13, 2018, the Company a total of $112,500 in debt was converted into 4,500,000 shares of common stock.
On October 26, 2018, Lucas Hoppel signed an amendment to the note which extended the maturity date to January 1, 2019. All other terms and conditions remained the same. On January 1, 2019, Lucas Hoppel signed an amendment to the note which extended the maturity date to May 1, 2019. In exchange, the conversion price was reduced from $0.025 to $0.0125. On February 2, 2019, the Company issued 5,128,000 shares upon final conversion of $64,100 of debt and the note was retired.
February Convertible Note – On February 19, 2018, the Company entered into a convertible note agreement. We issued 2,000,000 inducement shares of restricted common stock and received $350,000, with an original issue discount of $35,000 in lieu of interest, for a total amount of $385,000 due on September 19, 2018. At the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of our common stock at $0.05 per share. In the event of default, the outstanding balance will increase by 25% and a daily penalty of $100 will accrue until the default is remedied.
On May 22, 2018, Lucas Hoppel signed an amendment to the note which extended the maturity date to November 1, 2018. In exchange, the note was changed from promissory to convertible with a conversion price of $0.025 per share.
On September 14, 2018, the Company issued 2,000,000 shares on conversion of $50,000 in debt. On October 26, 2018, Lucas Hoppel signed an amendment to the note which extended the maturity date to January 1, 2019. On October 31, 2018, the Company issued 2,000,000 shares on conversion of $50,000 in debt.
On January 1, 2019, Lucas Hoppel signed an amendment to the note which extended the maturity date to May 1, 2019. In exchange, the conversion price was changed from $0.025 to $0.0125 per share. On February 26, 2019, CoolTech issued 7,500,000 shares of common stock to Lucas Hoppel upon partial conversion of $93,750 in debt. On April 25, 2019, Cool Technologies issued 7,500,000 shares of common stock to Lucas Hoppel upon conversion of $93,750 in debt.
On May 1, 2019, Lucas Hoppel signed an amendment to the note which extended the maturity date to August 1, 2019. All other terms and conditions remained the same. On July 30, 2019, he signed an amendment to the note which extended the maturity date to November 1, 2019.
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From July 31 to September 11, 2019, the Company issued 6,500,000 shares of common stock to Lucas Hoppel upon partial conversion of $81,250 in debt.
On October 31, 2019, he signed an amendment which extended the maturity date to December 31, 2019. All other terms and conditions remained the same. On December 2, 2019, Cool Technologies issued 2,224,000 shares of common stock to Lucas Hoppel upon final conversion of $27,800 of debt and the note was retired.
April Convertible Note -- On April 26, 2018, the Company entered into a convertible note agreement. We received $128,000 with an original issue discount of $12,800 in lieu of interest, for a total amount of $140,800 due on July 25, 2019. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of our common stock at a 29% discount to the average of the three lowest Volume Weighted Average Prices (VWAP) during the 10 trading days preceding the conversion date. In the event of default, the interest rate will be 22% per annum and require the Company to redeem all or any portion of the note at a premium of 150%. On October 18, 2018, the Company wired $189,940 to the holder and the note was retired.
May Convertible Note – On May 22, 2018, the Company entered into a convertible note agreement. We issued 400,000 inducement shares of restricted common stock and received $110,000, with an original issue discount of $10,000 in lieu of interest, for a total amount of $100,000 due on December 22, 2018. At the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of our common stock at $0.05 per share. In the event of default, the outstanding balance will increase by 25% and a daily penalty of $100 will accrue until the default is remedied.
On December 5, 2018, the Company issued 2,000,000 shares on conversion of $50,000 in debt. On December 6, 2018, the Company issued 2,532,000 shares on conversion of $63,300 in debt and the note was retired.
May Convertible Note -- On May 31, 2018, the Company entered into a convertible note agreement. We received $53,000 with an original issue discount of $5,300 in lieu of interest, for a total amount of $58,300 due on May 31, 2019. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of our common stock at a 29% discount to the average of the three lowest Volume Weighted Average Prices (VWAP) during the 10 trading days preceding the conversion date. In the event of default, the interest rate will be 22% per annum, require the Company to (i) redeem all or any portion of the note at a premium of 150%. On November 13, 2018, the company wired $78,564 to the holder and the note was retired.
July Promissory Note – On July 5, 2018, the Company entered into a Promissory Note Agreement with a private individual. We received $100,000 in financing and promised to pay the principal amount on or before the one year anniversary. Furthermore, the Company committed to immediately pay the principal amount upon the receipt of funds from debt or surety bond financing, a bridge loan or payments received from product invoices or purchase contracts. In exchange, we issued cashless warrants to purchase 200,000 shares of common stock at an exercise price of $0.065. The warrants expire after five years. On September 28, 2018, the note was paid in full and retired.
August Convertible Note -- On August 17, 2018, the Company entered into a convertible note agreement. We received $63,000 with an original issue discount of $6,300 in lieu of interest, for a total amount of $58,300 due on August 17, 2019. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of our common stock at a 29% discount to the average of the three lowest Volume Weighted Average Prices (VWAP) during the 10 trading days preceding the conversion date. In the event of default, the interest rate will be 22% per annum and require the Company to redeem all or any portion of the note at a premium of 150%.
On February 14, 2019, the outstanding balance of $93,565 was paid in full and the note was retired.
December Convertible Note -- On December 10, 2018, the Company entered into a convertible note agreement. We received $152,000 with an original issue discount of $14,000.00 in lieu of interest, for a total amount of $138,000 due on December 10, 2019. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of our common stock at a 28% discount to the lowest Volume Weighted Average Prices (VWAP) during the 10 trading days preceding the conversion date. In the event of default, the interest rate will be 22% per annum, require the Company to (i) redeem all or any portion of the note at a premium of 150%.
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On June 5, 2019, the outstanding balance of $203,643 was paid in full and the note was retired.
February Convertible Note -- On February 11, 2019, the Company entered into a convertible note agreement. It received $140,000 with an original issue discount of $8,400 in lieu of interest, for a total amount of $132,500 due on February 11, 2020. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of CoolTech’s common stock at a 29% discount to the lowest Volume Weighted Average Price (VWAP) during the 10 trading days preceding the conversion date. In the event of default, the interest rate will be 22% per annum and require the Company to redeem all or any portion of the note at a premium of 150%.
On August 13, 2019, the Company issued 423,729 shares of common stock to PowerUp Lending Group Ltd. upon partial conversion of $15,000 in debt. On August 23, 2019, the Company issued 545,455 shares of common stock to PowerUp Lending Group Ltd. upon partial conversion of $15,000 in debt. On August 29, 2019, the Company issued 604,839 shares of common stock to PowerUp Lending Group Ltd. upon partial conversion of $15,000 in debt. On September 3, 2019, the Company issued 819,672 shares of common stock to PowerUp Lending Group Ltd. upon partial conversion of $20,000 in debt. On September 5, 2019, the Company issued 833,333 shares of common stock to PowerUp Lending Group Ltd. upon partial conversion of $20,000 in debt. On September 11, 2019, the Company issued 1,005,025 shares of common stock to PowerUp Lending Group Ltd. upon partial conversion of $20,000 in debt. On September 17, 2019, the Company issued 1,005,025 shares of common stock to PowerUp Lending Group Ltd. upon partial conversion of $20,000 in debt. On September 24, 2019, the Company issued 1,119,558 shares of common stock to PowerUp Lending Group Ltd. upon final conversion of $15,000 in debt and the note was retired.
March Convertible Note -- On March 13, 2019, the Company entered into a convertible note agreement. It received $140,000 with an original issue discount of $7,500 in lieu of interest, for a total amount of $131,600 due on February 11, 2020. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest Volume Weighted Average Price (VWAP) during the 10 trading days preceding the conversion date. In the event of default, the interest rate will be 18% per annum, require the Company to (i) pay the product of the then outstanding principal amount, plus accrued interest and default interest, divided by the conversion price multiplied by the highest price at which the common stock traded at any time between the issuance date and the date of the event of default.
On September 16, 2019, the Company issued 2,012,072 shares of common stock to JSJ Investments, Inc. upon partial conversion of $40,000 in debt. On October 1, 2019, the Company issued 2,695,599 shares of common stock to JSJ Investments, Inc. upon partial conversion of $40,000 in debt. On October 14, 2019, the Company issued 2,859,758 shares of common stock to JSJ Investments, Inc. upon partial conversion of $40,000 in debt. On November 12, 2019, the Company issued 2,886,674 shares of common stock to JSJ Investments, Inc. upon final conversion of $20,000 in debt and the note was retired.
May Convertible Note -- On May 13, 2019, the Company entered into a convertible note agreement. It received $150,000 after an original issue discount of $15,000 in lieu of interest, for a total amount of $165,000 due on December 13, 2019. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest Volume Weighted Average Price (VWAP) during the 10 trading days preceding the conversion date. In the event of default, the outstanding balance will increase by 25% and a daily penalty of $100 will accrue until the default is remedied.
The note also included a clause which stated that if the effective conversion price is less than $0.01 at any time, the principal amount of the note shall increase by $10,000 and that the conversion price will be permanently redefined to equal 40% of the lowest traded price that occurred during the 15 consecutive trading days immediately preceding the date on which the note holder elects to convert all or part of the note. On December 20, 2019, the effective conversion price reached sub-penny threshold. The principal amount and the subsequent conversion price were adjusted as noted above.
On January 6, 2020, the Company issued 5,000,000 shares of common stock to LGH Investments, LLC upon partial conversion of $17,920 in debt. On January 24, 2020, the Company issued 10,000,000 shares of common stock to LGH Investments, LLC upon partial conversion of $22,400 in debt. On February 24, 2020, the Company issued 15,000,000 shares of common stock to LGH Investments, LLC upon partial conversion of $17,400 in debt. On March 6, 2020, the Company issued 6,500,000 shares of common stock to LGH Investments, LLC upon partial conversion of $8,840 in debt. On March 25, 2020, the Company issued 8,500,000 shares of common stock to LGH Investments, LLC upon partial conversion of $23,120 in debt. After the conversion, the principal balance remaining totals $90,270.
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June Convertible Note -- On June 6, 2019, the Company entered into a convertible note agreement. It received $130,000 with an original issue discount of $13,000 and an annual interest rate of 8%. The principal ($143,000) and interest will be due on June 6, 2020. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest Volume Weighted Average Price (VWAP) during the 10 trading days preceding the conversion date. In the event of default, the interest rate will be 24% per annum, require the Company to (i) pay the product of the then outstanding principal amount, plus accrued interest and default interest, divided by the conversion price multiplied by the highest price at which the common stock traded at any time between the issuance date and the date of the event of default.
On December 19, 2019, Cool Technologies issued 1,128,687 shares of common stock to Eagle Equities upon partial conversion of $10,418 in debt. On December 24, 2019, the Company issued 2,674,064 shares of common stock to Eagle Equities upon partial conversion of $20,884 in debt. On January 13, 2020, the Company issued 4,220,881 shares of common stock to Eagle Equities, LLC upon partial conversion of $20,978.in debt. On January 27, 2020, the Company issued 6,173,709 shares of common stock to Eagle Equities, LLC upon partial conversion of $21,040 in debt. On February 3, 2020, the Company issued 9,573,426 shares of common stock to Eagle Equities, LLC upon partial conversion of $21,071. in debt. On February 13, 2020, the Company issued 11,992,022 shares of common stock to Eagle Equities, LLC upon partial conversion of $26,394 in debt. On March 2, 2020, the Company issued 9,820,030 shares of common stock to Eagle Equities, LLC upon partial conversion of $26,494 in debt.
July Convertible Note – On July 3, 2019, the Company entered into a convertible note agreement. It received $150,000 with an original issue discount of $15,300 in lieu of interest, for a total amount of $168,300 plus 8% annual interest due on July 3, 2020. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of CoolTech’s common stock at a 29% discount to the lowest Volume Weighted Average Price (VWAP) during the 10 trading days preceding the conversion date. In the event of default, the interest rate will be 22% per annum, require the Company to (i) redeem all or any portion of the note at a premium of 150%.
On January 3, 2020, Cool Technologies issued 2,238,805 shares of common stock to PowerUp Lending Group, Ltd. upon partial conversion of $15,000 in debt. On January 8, 2020, the Company issued 3,174,603 shares of common stock to PowerUp Lending Group, Ltd. upon partial conversion of $20,000 in debt. On January 14, 2020, the Company issued 3,921,569 shares of common stock to PowerUp Lending Group, Ltd. upon partial conversion of $20,000 in debt. On January 16, 2020, the Company issued 4,444,444 shares of common stock to PowerUp Lending Group, Ltd. upon partial conversion of $20,000 in debt. On January 21, 2020, the Company issued 5,111,111 shares of common stock to PowerUp Lending Group, Ltd. upon partial conversion of $23,000 in debt. On January 30, 2020, the Company issued 7,142,857 shares of common stock to PowerUp Lending Group, Ltd. upon partial conversion of $20,000 in debt. On March 3, 2020, wired $72,000 to PowerUp Lending Group and the note was retired.
August Convertible Note -- On August 28, 2019, the Company entered into a convertible note agreement. It received $115,000 with an original issue discount of $11,500 and an annual interest rate of 8%. The principal ($126,500) and interest will be due on August 28, 2020. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest Volume Weighted Average Price (VWAP) during the 10 trading days preceding the conversion date. In the event of default, the interest rate will be 24% per annum or the highest rate of interest permitted by law.
On March 10, 2020, Cool Technologies issued 10,282,003 shares of common stock to Eagle Equities, LLC upon partial conversion of $40,151 on convertible debt of $126,500
October Convertible Note -- On October 3, 2019, the Company entered into a convertible note agreement. It issued 350,000 inducement shares of restricted common stock and received $115,000 with an original issue discount of $11,500 and an annual interest rate of 8%. The principal ($126,500) and interest will be due on October 2, 2020. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest closing price during the 10 trading days preceding the conversion date. In the event of default, the interest rate will be 24% per annum or the highest rate of interest permitted by law.
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November Convertible Note -- On November 9, 2019, the Company entered into a convertible note agreement. It received $126,000 with an original issue discount of $13,000 and an annual interest rate of 8%. The principal ($141,000) and interest will be due on November 6, 2020. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest closing price during the 10 trading days preceding the conversion date. In the event of default, the interest rate will be 24% per annum or the highest rate of interest permitted by law.
December Convertible Note -- On December 5, 2019, the Company entered into a convertible note agreement. It received $103,000 with an original issue discount of $6,000 and an annual interest rate of 8%. The principal ($109,000) and interest will be due on December 5, 2020. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest Volume Weighted Average Price (VWAP) during the 10 trading days preceding the conversion date. In the event of default, the interest rate will be 18% per annum or the highest rate of interest permitted by law.
Off Balance Sheet Arrangements
We currently have no off-balance sheet arrangements.
Cash Flows
Our cash flows from operating, investing and financing activities were as follows:
|
Year ended December 31, |
|||||||
|
2019 |
|
2018 |
|
||||
Net cash used in operating activities |
|
$ |
(1,352,953 |
) |
|
$ |
(2,402,282 |
) |
Net cash used in investing activities |
|
(51,622 |
) |
|
(22,486 |
) |
||
Net cash provided by financing activities |
|
1,012,674 |
|
2,275,860 |
Net cash used in operating activities increased due to changes in other current assets and other current liabilities and was primarily attributable to an increase in outstanding accounts payable. Our investing activity relates to the development of patents, which has remained steady since inception, and the purchase of test vehicles. Net cash provided by financing activities increased primarily due to debt borrowings.
The Company's capital requirements for the next 12 months will consist of $3.4 million with anticipated expenses of $1.4 million for salaries, public company filings, and consultants and professional fees. An additional $2.0 million in working capital is expected to be needed for inventory and related costs for production of our mobile power generation systems as well as development and commercialization of our thermal dispersion technology applications.
Management believes the Company's funds are insufficient to provide for its projected needs for operations for the next 12 months. The Company is currently negotiating additional non-dilutive funding to support product development or for other purposes. In the event that the negotiations fail, the Company may have to rely on equity or debt financing that may involve substantial dilution to our then existing stockholders. If it is unable to close additional equity financing, the Company may have to cease operations.
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Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the amounts of revenues and expenses. Critical accounting policies are those that require the application of management's most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In applying these critical accounting policies, our management uses its judgment to determine the appropriate assumptions to be used in making certain estimates. Actual results may differ from these estimates.
We define critical accounting policies as those that are reflective of significant judgments and uncertainties and which may potentially result in materially different results under different assumptions and conditions. In applying these critical accounting policies, our management uses its judgment to determine the appropriate assumptions to be used in making certain estimates. These estimates are subject to an inherent degree of uncertainty.
Impairment of long-lived assets
When facts and circumstances indicate that the carrying value of long-lived assets may not be recoverable, management assesses the recoverability of the carrying value by preparing estimates of revenues and the resulting gross profit and cash flows. These estimated future cash flows are consistent with those we use in our internal planning. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, we recognize an impairment loss. The impairment loss recognized, if any, is the amount by which the carrying amount of the asset (or asset group) exceeds the fair value. We may use a variety of methods to determine the fair value of these assets, including discounted cash flow models, which are consistent with the assumptions we believe hypothetical marketplace participants would use.
If actual results are not consistent with our assumptions and estimates, or our assumptions and estimates change due to new information, we may be exposed to an impairment charge in the future.
Derivative financial instruments
When we issue debt that contains a conversion feature, we first evaluate whether the conversion feature meets the requirements to be treated as a derivative: a) one or more underlying, typically the price of the Company's stock; b) one or more notional amounts or payment provisions or both, generally the number of shares upon conversion; c) no initial net investment, which typically excludes the amount borrowed; and d) net settlement provisions, which in the case of convertible debt generally means the stock received upon conversion can be readily sold for cash. There are certain scope exceptions from derivative treatment, but these typically exclude conversion features that provide for a variable number of shares.
When we issue warrants to purchase our common stock, we must evaluate whether they meet the requirements to be treated as a derivative. Generally, warrants would be treated as a derivative if the provisions of the warrant agreement create uncertainty as to a) the number of shares to be issued upon exercise; or b) whether shares may be issued upon exercise.
If the conversion feature within convertible debt or warrants meet the requirements to be treated as a derivative, we estimate the fair value of the derivative liability using the Black-Scholes Option Pricing Model upon the date of issuance. If the fair value of the derivative liability is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the fair value of the derivative liability is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the carrying amount of the debt. The derivative liability is revalued at the end of each reporting period and any change in fair value is recorded as a change in fair value in the consolidated statement of operations. The debt discount is amortized through interest expense over the life of the debt. Derivative instrument liabilities and the host debt agreement are classified on the balance sheet as current or non-current based on whether settlement of the derivative instrument could be required within twelve months of the balance sheet date.
The accounting treatment of derivative financial instruments requires that the Company record the embedded conversion option and warrants at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. As a result of entering into warrant agreements, for which such instruments contained a variable conversion feature with no floor, the Company has adopted a sequencing policy in accordance with ASC 815-40-35-12 whereby all future instruments may be classified as a derivative liability with the exception of instruments related to share-based compensation issued to employees or directors.
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Contingent liabilities
We accrue a loss for contingencies if it is probable that an asset has been impaired or a liability has been incurred, and when the amount of loss can be reasonably estimable. When no accrual is made because one or both conditions do not exist, we disclose the contingency if there is at least a reasonable possibility that a loss may be incurred. We estimate contingent liabilities based on the best information we have available at the time. If we have a range of possible outcomes, we accrue the low end of the range.
Share-based Payments
All our share-based awards are classified as equity, as they may only be settled in shares of our common stock.
We recognize expense for fully-vested warrants at the time they are granted. For awards with service or performance conditions, we generally recognize expense when the service is complete; however, there may be circumstances in which we determine that the performance condition is probable before the actual performance condition is achieved. In such circumstances, the amount recognized as expense is the pro rata amount, depending on the estimated progress towards completion of the performance condition. Nonemployee share-based payments are measured at fair value, based on either the fair value of the equity instrument issued or on the fair value of the services received. Typically, it is not practical to value the services received, so we determine the fair value of common stock grants based on the price of the common stock on the measurement date, and the fair value of common stock warrants using the Black-Scholes option-pricing model ("Black-Scholes"). We use historical data to estimate the expected price volatility, the expected stock option life and expected forfeiture rate. The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of grant for the estimated life of the stock option. For awards that are recognized when a performance condition is probable, the fair value is estimated at each reporting date. The cost ultimately recognized is the fair value of the equity award on the date the performance condition is achieved. Accordingly, the expense recognized may change between interim reporting dates and the date the performance condition is achieved.
We issue two types of common stock options to employees: 1) fully-vested at the time of grant and 2) market price-based vesting. We recognize expense for fully-vested stock options on the date of grant at the estimated fair value of the options using Black-Scholes. We recognize expense for market price-based options at the estimated fair value of the options using the lattice-based option valuation model ("Lattice Model") over the estimated life of the options used in the Lattice Model. We use historical data to estimate the expected price volatility, the expected stock option life and expected forfeiture rate. The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of grant for the estimated life of the stock option. In the event, we modify the terms of a non-vested share-based payment award, we would incur additional expense for the excess of the fair value of the modified share-based payment award over the fair value of the original share-based payment award. The incremental expense would be recognized ratably over the remaining vesting period.
Income taxes
We recognize deferred income tax assets and liabilities for the expected future tax consequences of temporary differences between the income tax and financial reporting carrying amount of our assets and liabilities. We monitor our deferred tax assets and evaluate the need for a valuation allowance based on the estimate of the amount of such deferred tax assets that we believe do not meet the more-likely-than-not recognition criteria. We also evaluate whether we have any uncertain tax positions and would record a reserve if we believe it is more-likely-than-not our position would not prevail with the applicable tax authorities. We have significant net operating loss carryforwards, for which we have established a valuation allowance. If our estimate of the amount of such deferred tax assets change, we may recognize a benefit in the future. UPT is a limited liability company ("LLC"), which is treated as a partnership for income tax purposes, where all tax obligations flow through to the owners of the LLC during the period in which income taxes were incurred.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
As a smaller reporting company, we are not required to provide the information required by this Item.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Consolidated Financial Statements |
|
Page |
|
|
|||
|
F-1 |
||
|
|||
Consolidated Balance Sheets as of December 31, 2019 and 2018 |
|
F-2 |
|
|
|||
Consolidated Statements of Operations for the years ended December 31, 2019 and 2018 |
|
F-3 |
|
|
|||
|
F-4 |
||
|
|||
Consolidated Statements of Cash Flows for the years ended December 31, 2019 and 2018. |
|
F-5 |
|
|
|||
|
F-6 |
44 |
|
Table of Contents |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Cool Technologies, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Cool Technologies, Inc. (the Company) as of December 31, 2019 and 2018, and the related consolidated statements of operations, changes in stockholders’ 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, 2019 and 2018, 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 of America.
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 audits. 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 audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits 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 audits 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 audits 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 audits provide a reasonable basis for our opinion.
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 1, the Company has incurred net losses and negative cash flow from operations since inception. These factors, and the need for additional financing in order for the Company to meet its business plans raises substantial doubt about the Company’s ability to continue as a going concern. Our opinion is not modified with respect to that matter.
/s/ Accell Audit & Compliance, P.A.
We have served as the Company’s auditor since 2019.
Tampa, Florida
May 29, 2020
4806 West Gandy Boulevard • Tampa, Florida 33611 • 813.440.6380 |
F-1 |
|
Table of Contents |
Cool Technologies, Inc.
|
|
December 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
ASSETS |
|
|
|
|
|
|
||
Current assets: |
|
|
|
|
|
|
||
Cash |
|
$ | 15,306 |
|
|
$ | 24,435 |
|
Inventory |
|
|
149,744 |
|
|
|
54,474 |
|
Prepaid expenses |
|
|
5,000 |
|
|
|
12,000 |
|
Total current assets |
|
|
170,050 |
|
|
|
90,909 |
|
Intangibles |
|
|
213,192 |
|
|
|
205,974 |
|
Equipment, net |
|
|
76,280 |
|
|
|
64,446 |
|
Total assets |
|
$ | 459,522 |
|
|
$ | 361,329 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
||||||||
Current liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
$ | 1,931,543 |
|
|
$ | 1,288,175 |
|
Accrued liabilities – related party |
|
|
913,948 |
|
|
|
743,868 |
|
Customer deposits – related party |
|
|
400,000 |
|
|
|
400,000 |
|
Accrued payroll |
|
|
62,049 |
|
|
|
62,049 |
|
Debt, current portion |
|
|
2,971,232 |
|
|
|
2,091,014 |
|
Derivative liability |
|
|
712,921 |
|
|
|
149,759 |
|
Total current liabilities |
|
|
6,991,693 |
|
|
|
4,734,865 |
|
|
|
|
|
|
|
|
|
|
Debt, long-term portion |
|
|
29,329 |
|
|
|
36,819 |
|
Total liabilities |
|
|
7,021,022 |
|
|
|
4,771,684 |
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 6) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ deficit: |
|
|
|
|
|
|
|
|
Preferred stock Series A, $.001 par value; 410 shares authorized; 3 and 20 shares issued and outstanding at December 31, 2019 and 2018, respectively |
|
|
-- |
|
|
|
-- |
|
Preferred stock Series B, $.001 par value; 3,636,360 shares authorized: 2,727,270 issued and outstanding on December 31, 2019 and 2018. |
|
|
2,727 |
|
|
|
2,727 |
|
Common stock, $.001 par value; 500,000,000 shares authorized; 267,450,916 and 214,705,916 shares issued and outstanding at December 31, 2019 and 2018, respectively. |
|
|
267,450 |
|
|
|
214,705 |
|
Additional paid-in capital |
|
|
46,265,016 |
|
|
|
45,160,994 |
|
Common stock issuable |
|
|
58,670 |
|
|
|
123,670 |
|
Common stock held in escrow |
|
|
8,441 |
|
|
|
8,441 |
|
Accumulated deficit |
|
|
(52,107,440 | ) |
|
|
(49,866,128 | ) |
Non-controlling interest |
|
|
(56,364 | ) |
|
|
(54,764 | ) |
Total stockholders’ deficit |
|
|
(6,561,500 | ) |
|
|
(4,410,355 | ) |
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders’ deficit |
|
$ | 459,522 |
|
|
$ | 361,329 |
|
See accompanying notes to consolidated financial statements.
F-2 |
|
Table of Contents |
Cool Technologies, Inc.
Consolidated Statements of Operations
|
|
Year ended December 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
|
|
|
|
|
|
|
||
Revenues |
|
$ | -- |
|
|
$ | -- |
|
Cost of revenues |
|
|
-- |
|
|
|
-- |
|
Gross profit |
|
|
-- |
|
|
|
-- |
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
Payroll and related expenses |
|
|
657,178 |
|
|
|
591,858 |
|
Consulting |
|
|
331,107 |
|
|
|
433,978 |
|
Professional fees |
|
|
226,859 |
|
|
|
305,778 |
|
Research and development |
|
|
296,800 |
|
|
|
501,342 |
|
General and administrative |
|
|
242,994 |
|
|
|
426,665 |
|
Total operating expenses |
|
|
1,754,938 |
|
|
|
2,259,621 |
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(1,754,938 | ) |
|
|
(2,259,621 | ) |
|
|
|
|
|
|
|
|
|
Other income and (expense) |
|
|
|
|
|
|
|
|
Interest expense, net |
|
|
(2,027,030 | ) |
|
|
(2,336,442 | ) |
Change in fair value of derivative liability |
|
|
330,728 |
|
|
|
83,963 |
|
Gain (Loss) on extinguishment |
|
|
208,328 |
|
|
|
(120,016 | ) |
Loss on fixed assets |
|
|
-- |
|
|
|
11,231 |
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(3,242,912 | ) |
|
|
(4,620,885 | ) |
Net loss attributable to non-controlling interest |
|
|
(1,600 | ) |
|
|
(2,497 | ) |
|
|
|
|
|
|
|
|
|
Net loss attributable to Cool Technologies, Inc. |
|
$ | (3,241,312 | ) |
|
$ | (4,618,388 | ) |
|
|
|
|
|
|
|
|
|
Net loss per common share: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ | (0.01 | ) |
|
$ | (0.02 | ) |
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
|
238,714,877 |
|
|
|
191,539,568 |
|
See accompanying notes to consolidated financial statements
F-3 |
|
Table of Contents |
Cool Technologies, Inc.
Consolidated Statements of Changes in Stockholders’ Deficit
Years ended December 31, 2019 and 2018
|
|
Preferred Stock |
|
|
Common Stock |
|
|
Additional Paid-in |
|
|
Common Stock |
|
|
Preferred Stock |
|
|
Common Stock Held in |
|
|
Accumulated |
|
|
Non- Controlling |
|
|
|
|
|||||||||||||||||
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Issuable |
|
|
Issuable |
|
|
Escrow |
|
|
Deficit |
|
|
Interest |
|
|
Total |
|
|||||||||||
December 31, 2017 |
|
|
2,727,303 |
|
|
|
2,727 |
|
|
|
152,836,983 |
|
|
|
152,837 |
|
|
|
41,401,330 |
|
|
|
712,000 |
|
|
|
-- |
|
|
|
8,441 |
|
|
|
(45,247,740 | ) |
|
|
(52,267 | ) |
|
|
(3,022,672 | ) |
Sale of stock |
|
|
-- |
|
|
|
-- |
|
|
|
3,561,110 |
|
|
|
3,560 |
|
|
|
184,780 |
|
|
|
11,670 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
200,010 |
|
Issuance of common stock issuable |
|
|
-- |
|
|
|
-- |
|
|
|
8,409,091 |
|
|
|
8,409 |
|
|
|
591,591 |
|
|
|
(600,000 | ) |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
Cashless warrant exercises |
|
|
-- |
|
|
|
-- |
|
|
|
9,603,662 |
|
|
|
9,604 |
|
|
|
(9,604 | ) |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
Conversion of Series A preferred stock to common stock |
|
|
(13 | ) |
|
|
-- |
|
|
|
650,000 |
|
|
|
650 |
|
|
|
(650 | ) |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
Stock issued with debt |
|
|
-- |
|
|
|
-- |
|
|
|
3,972,070 |
|
|
|
3,972 |
|
|
|
182,911 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
186,883 |
|
Warrants issued for services |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
25,882 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
25,882 |
|
Warrants issued with debt |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
469,542 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
469,542 |
|
Employee common stock |
|
|
-- |
|
|
|
-- |
|
|
|
2,600,000 |
|
|
|
2,600 |
|
|
|
127,400 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
130,000 |
|
Debt converted |
|
|
|
|
|
|
|
|
|
|
33,073,000 |
|
|
|
33,073 |
|
|
|
776,553 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
809,626 |
|
Debt issued with beneficial conversion feature |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
1,351,274 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
1,351,274 |
|
Payment for stock previously issued |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
59,985 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
59,985 |
|
Net loss |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(4,620,885 | ) |
|
|
-- |
|
|
|
(4,620,885 | ) |
Noncontrolling interest |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
2,497 |
|
|
|
(2,497 | ) |
|
|
-- |
|
December 31, 2018 |
|
|
2,727,290 |
|
|
$ | 2,727 |
|
|
|
214,705,916 |
|
|
$ | 214,705 |
|
|
$ | 45,160,994 |
|
|
$ | 123,670 |
|
|
|
-- |
|
|
$ | 8,441 |
|
|
$ | (49,866,128 | ) |
|
$ | (54,764 | ) |
|
$ | (4,410,355 | ) |
Debt converted |
|
|
-- |
|
|
|
-- |
|
|
|
49,894,101 |
|
|
|
49,895 |
|
|
|
715,028 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
764,923 |
|
Stock issued for Services |
|
|
-- |
|
|
|
-- |
|
|
|
350,000 |
|
|
|
350 |
|
|
|
7,350 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
7,700 |
|
Issuance of common stock issuable |
|
|
-- |
|
|
|
-- |
|
|
|
1,650,000 |
|
|
|
1,650 |
|
|
|
93,350 |
|
|
|
(95,000 | ) |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
Series A preferred stock to common stock |
|
|
(17 | ) |
|
|
-- |
|
|
|
850,000 |
|
|
|
850 |
|
|
|
(850 | ) |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
Stock issued with debt |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
30,000 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
30,000 |
|
Warrants issued for services |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
32,624 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
32,624 |
|
Warrants issued with debt |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
112,260 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
112,260 |
|
Debt issued with beneficial conversion feature |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
144,260 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
144,260 |
|
Net Loss |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
---- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
(3,242,912 | ) |
|
|
|
|
|
|
(3,242,912 | ) | |
Noncontrolling Interest |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
1,600 |
|
|
|
(1,600 | ) |
|
|
-- |
|
December 31, 2019 |
|
|
2,727,273 |
|
|
$ | 2,727 |
|
|
|
267,450,017 |
|
|
$ | 267,450 |
|
|
$ | 46,265,016 |
|
|
$ | 58,670 |
|
|
|
-- |
|
|
$ | 8,441 |
|
|
$ | (53,107,440 | ) |
|
$ | (56,364 | ) |
|
$ | (6,561,500 | ) |
See accompanying notes to consolidated financial statements
F-4 |
|
Table of Contents |
Cool Technologies, Inc.
Consolidated Statements of Cash Flows
|
|
Year ended December 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
Operating Activities: |
|
|
|
|
|
|
||
Net loss |
|
$ | (3,242,912 | ) |
|
$ | (4,620,885 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
Stock issued for services |
|
|
7,700 |
|
|
|
-- |
|
Warrants issued for services |
|
|
32,624 |
|
|
|
25,882 |
|
(Gain) Loss on extinguishment of debt |
|
|
(208,328 | ) |
|
|
120,016 |
|
Non-cash interest expense |
|
|
-- |
|
|
|
8,918 |
|
Change in fair value of derivative liability |
|
|
(330,728 | ) |
|
|
(83,963 | ) |
Amortization of debt discount |
|
|
1,623,463 |
|
|
|
2,223,260 |
|
Depreciation expense |
|
|
32,570 |
|
|
|
27,376 |
|
Loss on Fixed Assets |
|
|
-- |
|
|
|
(11,231 | ) |
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Inventory |
|
|
(95,270 | ) |
|
|
(54,474 | ) |
Prepaid expenses |
|
|
7,000 |
|
|
|
(2,000 | ) |
Accounts payable |
|
|
643,848 |
|
|
|
77,533 |
|
Accrued liabilities – related party |
|
|
170,080 |
|
|
|
(117,846 | ) |
Accrued payroll |
|
|
-- |
|
|
|
5,132 |
|
Net cash used in operating activities |
|
|
(1,352,953 | ) |
|
|
(2,402,282 | ) |
|
|
|
|
|
|
|
|
|
Investing Activities: |
|
|
|
|
|
|
|
|
Expenditure for Intangible assets |
|
|
(7,218 | ) |
|
|
(22,486 | ) |
Purchase of Equipment |
|
|
(44,404 | ) |
|
|
-- |
|
Net cash used in investing activities |
|
|
(51,622 | ) |
|
|
(22,486 | ) |
|
|
|
|
|
|
|
|
|
Financing Activities: |
|
|
|
|
|
|
|
|
Proceeds from sale of common stock, net |
|
|
-- |
|
|
|
259,995 |
|
Proceeds from debt |
|
|
1,524,333 |
|
|
|
2,975,669 |
|
Payments on debt |
|
|
(128,887 | ) |
|
|
(959,804 | ) |
Net cash provided by financing activities |
|
|
1,395,446 |
|
|
|
2,275,860 |
|
|
|
|
|
|
|
|
|
|
Net change in cash |
|
|
(9,129 | ) |
|
|
(148,908 | ) |
|
|
|
|
|
|
|
|
|
Cash, beginning of period |
|
|
24,435 |
|
|
|
173,343 |
|
|
|
|
|
|
|
|
|
|
Cash, end of period |
|
$ | 15,306 |
|
|
$ | 24,435 |
|
|
|
|
|
|
|
|
|
|
Cash paid for: |
|
|
|
|
|
|
|
|
Interest |
|
$ | 65,933 |
|
|
$ | 22,923 |
|
Income taxes |
|
|
-- |
|
|
|
-- |
|
|
|
|
|
|
|
|
|
|
Non-cash transactions: |
|
|
|
|
|
|
|
|
Derivative liability offset by debt discount |
|
$ | -- |
|
|
$ | 346,821 |
|
Derivative liability due to issuance of debt |
|
|
1,138,804 |
|
|
|
-- |
|
Reduction of common stock issuable by issuing stock |
|
|
95,000 |
|
|
|
600,000 |
|
Debt and interest settled for common stock |
|
|
679,392 |
|
|
|
896,825 |
|
Stock and warrants issued with debt |
|
|
142,260 |
|
|
|
656,425 |
|
Reduction in test vehicle financing due to trade-in |
|
|
-- |
|
|
|
10,313 |
|
Increase in test vehicle financing due to trade-in |
|
|
-- |
|
|
|
45,176 |
|
Test vehicle acquired due to trade-in |
|
|
-- |
|
|
|
54,863 |
|
See accompanying notes to consolidated financial statements.
F-5 |
|
Table of Contents |
Cool Technologies, Inc. and subsidiary
Notes to Consolidated Financial Statements
Note 1 – Description of Business and Summary of Significant Accounting Policies
Description of Business
Cool Technologies, Inc. and subsidiary, (“the Company" or "Cool Technologies" or “CoolTech”) was incorporated in the State of Nevada in July 2002. In April 2014, CoolTech formed Ultimate Power Truck, LLC ("Ultimate Power Truck" or "UPT"), of which the Company owns 95% and a shareholder of Cool Technologies owns 5%. Cool Technologies was formerly known as Bibb Corporation, as Z3 Enterprises, and as HPEV, Inc. On August 20, 2015, the Company changed its name to Cool Technologies, Inc.
CoolTech has developed and intends to commercialize heat dispersion technologies in various product platforms. The Company has also developed and are commercializing a mobile power generation system that enables work trucks retrofitted with the system to generate electric power. In preparation, CoolTech has applied for trademarks for one of its technologies and its acronym. Cool Technologies currently owns one trademark: TEHPC. The Company believes that its proprietary technologies, including the patent portfolio and trade secrets, can help increase the efficiency and positively affect manufacturing cost structure in several large industries beginning with motors/generators and fleet vehicles. The markets for products utilizing the technology include consumer, industrial and military markets, both in the U.S. and worldwide.
The Company’s technologies are divided into three distinct but complementary categories: a) mobile power generation, b) heat dispersion technology and c) electric load assist.
As of December 31, 2019, CoolTech has seven US patents, one Canadian patent, one granted Mexican and one granted Canadian patent, two pending applications (1 in the US, 1 in Brazil) in the area of composite heat structures, motors, and related structures, heat pipe architecture, and applications (commonly referred to as "thermal" or "heat dispersion technology"). Cool Technologies also has a Patent Cooperation Treaty ("PCT") application pending that covers integrated electrical power generation methods and systems.
The Company intends to commercialize its patents by licensing its thermal technologies and applications to electric motor, pump and vehicle component manufacturers; by licensing or selling a mobile electric power system to commercial vehicle and fleet owners; and by licensing a plug-in hybrid conversion system for heavy duty trucks, buses and tractor trailers to fleet owners and service centers.
Basis of Presentation, Use of Estimates and Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Cool Technologies, Inc. and Ultimate Power Truck, LLC. Intercompany accounts and transactions have been eliminated. The consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States ("GAAP"). The preparation of the consolidated financial statements requires the Company to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. Although these estimates are based on management’s knowledge of current events and actions the Company may undertake in the future, actual results may ultimately differ from these estimates and assumptions. Furthermore, when testing assets for impairment in future periods, if management uses different assumptions or if different conditions occur, impairment charges may result.
Noncontrolling interest represents the 5% third-party interest in UPT. There are no restrictions on the transfer of funds or net assets from UPT to Cool Technologies.
F-6 |
|
Table of Contents |
Going Concern and Management’s Plan
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. CoolTech has incurred net losses of $52,107,440 since inception. As of December 31, 2019, its debts include $314,208 in convertible notes and $3,227,215 in notes payable. The cash available totals $15,306. CoolTech has not fully commenced operations, raising substantial doubt about its ability to continue as a going concern. Management believes that the Company’s ability to continue as a going concern is dependent on its ability to generate revenue, achieve profitable operations and repay obligations when they come due. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might result from this uncertainty. As of the filing date of this Annual Report on Form 10-K, management is negotiating additional non-dilutive funding arrangements to support completion of the initial phases of the Company’s business plan: to license its thermal technologies and applications, including submersible dry-pit applications and to license and sell mobile generation retrofit kits. There can be no assurance, however, that the Company will be successful in accomplishing these objectives. Consequently, it may have to curtail or cease operations if funding is not received by the end of the second quarter.
Summary of Significant Accounting Policies
Cash and cash equivalents
Cash and cash equivalents include cash on hand, deposits with banks, and investments that are highly liquid and have maturities of three months or less at the date of purchase.
Inventory
Inventory, consisting of mobile generation kit materials and parts, is stated at the lower of cost (first in, first out method) or net realizable value.
Intangible assets
The Company’s intangible assets consist of patents on its technology, recorded at cost. Cost is based on third party expenditures for patent applications. CoolTech will begin amortizing the intangibles over their estimated remaining useful life when it begins revenue-producing activities. Cool Technologies will determine the useful lives of its intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors that will be considered when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, the long-term strategy for using the asset, any laws or other local regulations that could impact the useful life of the asset, and other economic factors, including competition and specific market conditions.
F-7 |
|
Table of Contents |
Equipment
Equipment consists of vehicles the Company uses for testing and demonstrating its technology to potential customers. Depreciation is recorded using the straight-line method over five years, the estimated useful life.
Impairment of long-lived assets
When facts and circumstances indicate that the carrying value of long-lived assets may not be recoverable, management assesses the recoverability of the carrying value by preparing estimates of revenues and the resulting gross profit and cash flows. These estimated future cash flows are consistent with those CoolTech uses in its internal planning. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount, it recognizes an impairment loss. The impairment loss recognized, if any, is the amount by which the carrying amount of the asset (or asset group) exceeds the fair value. Cool Technologies may use a variety of methods to determine the fair value of these assets, including discounted cash flow models, which are consistent with the assumption’s management believes hypothetical marketplace participants would use. The Company has not recorded any impairment expense on its long-lived assets as of December 31, 2019.
Debt – original issue discount
When the Company issues notes payable with a face value higher than the proceeds it receives, CoolTech records the difference as a debt discount and amortizes it through interest expense over the life of the underlying note payable.
Derivative financial instruments
When the Company issues debt that contains a conversion feature, it first evaluates whether the conversion feature meets the requirements to be treated as a derivative: a) one or more underlying, typically the price of the Company's stock; b) one or more notional amounts or payment provisions or both, generally the number of shares upon conversion; c) no initial net investment, which typically excludes the amount borrowed; and d) net settlement provisions, which in the case of convertible debt generally means the stock received upon conversion can be readily sold for cash. There are certain scope exceptions from derivative treatment, but these typically exclude conversion features that provide for a variable number of shares.
When Cool Technologies issues warrants to purchase its common stock, the Company must evaluate whether they meet the requirements to be treated as a derivative. Generally, warrants would be treated as a derivative if the provisions of the warrant agreement create uncertainty as to a) the number of shares to be issued upon exercise; or b) whether shares may be issued upon exercise.
If the conversion feature within convertible debt or warrants meet the requirements to be treated as a derivative, CoolTech estimates the fair value of the derivative liability using the Black-Scholes Option Pricing Model upon the date of issuance. If the fair value of the derivative liability is higher than the face value of the convertible debt, the excess is immediately recognized as interest expense. Otherwise, the fair value of the derivative liability is recorded as a liability with an offsetting amount recorded as a debt discount, which offsets the carrying amount of the debt. The derivative liability is revalued at the end of each reporting period and any change in fair value is recorded as a change in fair value in the consolidated statements of operations. The debt discount is amortized through interest expense over the life of the debt. Derivative instrument liabilities and the host debt agreement are classified on the consolidated balance sheets as current or non-current based on whether settlement of the derivative instrument could be required within twelve months of the balance sheet date.
The accounting treatment of derivative financial instruments requires that the Company record the embedded conversion option and warrants at their fair values as of the inception date of the agreement and at fair value as of each subsequent balance sheet date. Any change in fair value is recorded as non-operating, non-cash income or expense for each reporting period at each balance sheet date. The Company reassesses the classification of its derivative instruments at each balance sheet date. If the classification changes as a result of events during the period, the contract is reclassified as of the date of the event that caused the reclassification. As a result of entering into warrant agreements, for which such instruments contained a variable conversion feature with no floor, the Company has adopted a sequencing policy in accordance with ASC 815-40-35-12 “Derivatives and Hedging” (provides comprehensive guidance on derivative and hedging transactions) whereby all future instruments may be classified as a derivative liability with the exception of instruments related to share-based compensation issued to employees or directors.
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Revenue
FASB ASU 2014-09 "Revenue from Contracts with Customers (Topic 606)," or ASU 2014-09 - In May 2014, the FASB issued ASU 2014-09, which supersedes the revenue recognition requirements of Accounting Standards Codification, or ASC, Topic 605 "Revenue Recognition." ASU 2014-09 requires revenue recognition to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new revenue recognition model requires identifying the contract, identifying the performance obligations, determining the transaction price, allocating the transaction price to performance obligations and recognizing the revenue upon satisfaction of the performance obligations. ASU 2014-09 also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and change in judgments, and assets recognized from costs incurred to obtain or fulfill a contract. ASU 2014-09 can be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the update recognized at the date of the initial application along with additional disclosures. This ASU is effective for annual reporting periods beginning after December 15, 2017, with the option to adopt as early as December 15, 2016. The Company adopted the new revenue guidance effective January 1, 2018. As the Company has not previously generated any revenues, there was no material impact to the Company's financial statements or financial statement disclosures
Research and development costs
Internal costs related to research and development efforts on existing or potential products are expensed as incurred. External costs incurred for intangible assets, such as attorney fees for patents, are capitalized.
Share-based payments
All the Company’s share-based awards are classified as equity. CoolTech does not have any liability classified share-based awards. Each warrant or stock option is exercisable for one share of common stock.
Nonemployees – Cool Technologies may enter into agreements with nonemployees to make share-based payments in return for services. These payments may be made in the form of common stock or common stock warrants. The Company recognizes expense for fully vested warrants at the time they are granted. For awards with service or performance conditions, CoolTech generally recognizes expense over the service period or when the performance condition is met; however, there may be circumstances in which it determines that the performance condition is probable before the actual performance condition is achieved. In such circumstances, the amount recognized as expense is the pro rata amount, depending on the estimated progress towards completion of the performance condition. Nonemployee share-based payments are measured at fair value, based on either the fair value of the equity instrument issued or on the fair value of the services received. Typically, it is not practical to value the services received, so the Company determines the fair value of common stock grants based on the price of the common stock on the measurement date (which is the earlier of the date at which a commitment for performance by the counterparty to earn the equity instruments is reached, if there are sufficient disincentives to ensure performance, or the date at which the counterparty's performance is complete), and the fair value of common stock warrants using the Black-Scholes option-pricing model ("Black-Scholes"). Cool Technologies uses historical data to estimate the expected price volatility, the expected stock option life and expected forfeiture rate. The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of grant for the estimated life of the stock option. For awards that are recognized when a performance condition is probable, the fair value is estimated at each reporting date. The cost ultimately recognized is the fair value of the equity award on the date the performance condition is achieved. Accordingly, the expense recognized may change between interim reporting dates and the date the performance condition is achieved.
Employees – Cool Technologies issues two types of common stock options to employees: 1) fully-vested at the time of grant and 2) market price-based vesting. The Company recognizes expense for fully vested stock options on the date of grant at the estimated fair value of the options using Black-Scholes. CoolTech recognizes expense for market price-based options at the estimated fair value of the options using the lattice-based option valuation model ("Lattice Model") over the estimated life of the options used in the Lattice Model. The Company uses historical data to estimate the expected price volatility, the expected stock option life and expected forfeiture rate. The risk-free interest rate is based on the United States Treasury yield curve in effect at the time of grant for the estimated life of the stock option.
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Modification of share-based payment awards – In the event Cool Technologies modifies the terms of a non-vested share-based payment award, it would incur additional expense for the excess of the fair value of the modified share-based payment award, measured at the date of modification, over the fair value of the original share-based payment award. The incremental expense would be recognized ratably over the remaining vesting period.
Sale of common stock with warrants – When the Company sells common stock it may also issue common stock warrants. CoolTech treats the value of these warrants as equity issuance costs. Accordingly, the value of the common stock warrants is included as a component of additional paid-in capital upon recording the sale of common stock.
Cashless exercise – Most of the common stock warrants and stock options may be exercised on a cashless basis. The number of shares of common stock received upon exercising on a cashless basis is based on a) the volume weighted-average price of the common stock for three trading days immediately preceding the exercise date; b) the exercise price of the warrant or option; and c) the number of common shares issuable under the instrument.
Income taxes
Cool Technologies recognizes deferred income tax assets and liabilities for the expected future tax consequences of temporary differences between the income tax and financial reporting carrying amount of the Company’s assets and liabilities. The Company monitors its deferred tax assets and evaluates the need for a valuation allowance based on the estimate of the amount of such deferred tax assets that it believes does not meet the more-likely-than-not recognition criteria. CoolTech also evaluates whether it has any uncertain tax positions and would record a reserve if management believes it is more-likely-than-not their position would not prevail with the applicable tax authorities. The Company’s assessment of tax positions as of December 31, 2019 and 2018, determined that there were no material uncertain tax positions.
UPT is a limited liability company ("LLC"), which is treated as a partnership for income tax purposes, where all tax obligations flow through to the owners of the LLC during the period in which income taxes were incurred.
Fair value of financial instruments
Cool Technologies financial instruments include cash and cash equivalents, accounts payable, accrued liabilities, and debt. The carrying value of these financial instruments is considered to be representative of their fair value due to the short maturity of these instruments. The carrying amount of the debt approximates fair value, because the interest rates on these instruments approximate the interest rate on debt with similar terms available to the Company. CoolTech’s derivative liabilities were adjusted to fair market value at the end of each reporting period, using Level 3 inputs.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The fair value hierarchy is based on three levels of inputs, of which the first two are considered observable and the last unobservable, as follows:
Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the measurement of the fair value of the assets or liabilities.
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Reclassifications
Certain reclassifications were made to the prior period financial statements to conform to the current period presentation. There was no change to the previously reported net loss.
Recently Issued Accounting Pronouncements
Financial Accounting Standards Board, or FASB, Accounting Standards Update, or ASU 2016-02 "Leases (Topic 842)"– In February 2016, the FASB issued ASU 2016-02, which requires lessees to recognize almost all leases on their balance sheet as a right-of-use asset and a lease liability. For income statement purposes, the FASB retained a dual model, requiring leases to be classified as either operating or finance. Classification is to be based on criteria that are largely similar to those applied in current lease accounting, but without explicit bright lines. Lessor accounting is similar to the old model but updated to align with certain changes to the lessee model and the new revenue recognition standard. The company adopted this ASU on January 1, 2019. Adopting this standard did not have a material impact on the Company’s consolidated financial statement or financial statement disclosure.
Note 2 – Equipment
Equipment consists of the following:
|
|
December 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
Test vehicles |
|
$ | 147,893 |
|
|
$ | 141,969 |
|
Other |
|
|
5,000 |
|
|
|
5,000 |
|
|
|
|
152,893 |
|
|
|
146,969 |
|
Less: accumulated depreciation |
|
|
(76,613 | ) |
|
|
(82,523 | ) |
|
|
$ | 76,280 |
|
|
$ | 64,446 |
|
Depreciation expense for the years ended December 31, 2019 and 2018, was $32,570 and $27,376, respectively.
Note 3 – Customer deposits – Related party
Customer deposits represent advance payments of $400,000 received on orders that have not yet been fulfilled, with companies controlled by the individual who is the 5% owner of UPT and is a shareholder of Cool Technologies.
Note 4 – Debt
Debt consists of the following:
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|
December 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
Notes payable |
|
$ | 3,071,300 |
|
|
$ | 1,800,000 |
|
Convertible notes payable |
|
|
381,667 |
|
|
|
581,950 |
|
Test vehicle financing |
|
|
70,418 |
|
|
|
56,231 |
|
Note payable – related party |
|
|
21,641 |
|
|
|
12,897 |
|
Note payable – UPT minority owner |
|
|
80,000 |
|
|
|
190,000 |
|
|
|
|
3,525,026 |
|
|
|
2,641,078 |
|
Debt discount |
|
|
524,465 |
|
|
(513,245 | ) | |
|
|
|
3,000,561 |
|
|
|
2,127,833 |
|
Less: current portion |
|
|
2,971,232 |
|
|
|
2,091,014 |
|
Long-term portion |
|
$ | 29,329 |
|
|
$ | 36,819 |
|
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Notes Payable
From September 5 – 7, 2018, the Company entered into Promissory Note Agreements with two accredited investors. CoolTech received $250,000 in financing and promised to pay the principal amount together with simple interest of 15% per annum. Furthermore, the Company committed to pay the principal amount and accrued interest within 30 days of the receipt of funds from debt or surety bond financing. In exchange, the Company granted a security interest in all of the Company’s intellectual property as collateral and it issued cashless warrants to purchase 2,000,000 shares of common stock at an exercise price of $0.05. The warrants expire after five years.
On September 11, 2018, the Company entered into Promissory Note Agreements with an accredited investor. CoolTech received $250,000 in financing and promised to pay the principal amount together with simple interest of 15% per annum on or before the one-year anniversary. Furthermore, the Company committed to pay the principal amount and accrued interest within 30 days of the receipt of funds from debt or surety bond financing. In exchange, the Company granted a security interest in all of the Company’s intellectual property as collateral and it issued cashless warrants to purchase 2,000,000 shares of common stock at an exercise price of $0.05. The warrants expire after five years. On March 16, 2020, the investor signed an amendment to the agreement extending the maturity date until April 30, 2020.
From September 7 – 17, 2018, the Company entered into Promissory Note Agreements with three accredited investors. CoolTech received $125,000 in financing and promised to pay the principal amount together with simple interest of 15% per annum. Furthermore, the Company committed to pay the principal amount and accrued interest within 30 days of the receipt of funds from debt or surety bond financing. In exchange, the Company granted a security interest in all of the Company’s intellectual property as collateral and CoolTech issued cashless warrants to purchase 1,000,000 shares of common stock at an exercise price of $0.05. The warrants expire after five years.
On September 25, 2018, the Company entered into Promissory Note Agreements with an accredited investor. CoolTech received $125,000 in financing and promised to pay the principal amount together with simple interest of 15% per annum on or before the one-year anniversary. Furthermore, the Company committed to pay the principal amount and accrued interest within 30 days of the receipt of funds from debt or surety bond financing. In exchange, the Company granted a security interest in all of the Company’s intellectual property as collateral and CoolTech issued cashless warrants to purchase 1,000,000 shares of common stock at an exercise price of $0.05. The warrants expire after five years. On March 16, 2020, the investor signed an amendment to the agreement extending the maturity date until April 30, 2020.
On October 2, 2018, the Company entered into a Promissory Note Agreement with an accredited investor. It received $250,000 in financing and promised to pay the principal amount together with simple interest of 15% per annum. Furthermore, the Company committed to pay the principal amount and accrued interest within 30 days of the receipt of funds from debt or surety bond financing. In exchange, the Company granted a security interest in all of the Company’s intellectual property as collateral and Cool Technologies issued cashless warrants to purchase 2,000,000 shares of common stock at an exercise price of $0.05. The warrants expire after five years.
On October 26, 2018, the Company entered into a Promissory Note Agreement with an accredited investor. It received $250,000 in financing and promised to pay the principal amount together with simple interest of 15% per annum on or before the one-year anniversary. Furthermore, the Company committed to pay the principal amount and accrued interest within 30 days of the receipt of funds from debt or surety bond financing. In exchange, the Company granted a security interest in all of the Company’s intellectual property as collateral and Cool Technologies issued cashless warrants to purchase 2,000,000 shares of common stock at an exercise price of $0.05. The warrants expire after five years. On October 26, 2019, the investor signed an amendment to the agreement extending the maturity date for seven months.
On December 19, 2018, the Company entered into a Promissory Note Agreement with an accredited investor. It received $50,000 in financing and promised to pay the principal amount together with simple interest of 15% per annum. Furthermore, the Company committed to pay the principal amount and accrued interest within 30 days of the receipt of funds from debt or surety bond financing. In exchange, the Company granted a security interest in all of the Company’s intellectual property as collateral and Cool Technologies issued cashless warrants to purchase 400,000 shares of common stock at an exercise price of $0.05. The warrants expire after five years.
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On February 1, 2019, the Company entered into a Promissory Note Agreement with an accredited investor. It received $75,000 in financing and promised to pay the principal amount together with simple interest of 15% per annum. Furthermore, the Company committed to pay the principal amount and accrued interest within 30 days of the receipt of funds from debt or surety bond financing. In exchange, the Company granted a security interest in all of the Company’s intellectual property as collateral and CoolTech agreed to issue1,000,000 shares of restricted common stock.
On March 13, 2019, the Company and a vendor agreed to convert an overdue $25,000 account payable into a Promissory Note Agreement. CoolTech promised to pay the principal amount together with simple interest of 15% per annum. Furthermore, the Company committed to pay the principal amount and accrued interest within 30 days of the receipt of funds from debt or surety bond financing. In exchange, the Company granted a security interest in all of the Company’s intellectual property as collateral and CoolTech issued cashless warrants to purchase 200,000 shares of common stock at an exercise price of $0.05. The warrants expire after five years.
On March 18, 2019, the Company entered into a Promissory Note Agreement with an accredited investor. It received $250,000 in financing and promised to pay the principal amount together with simple interest of 15% per annum on or before the one-year anniversary. Furthermore, the Company committed to pay the principal amount and accrued interest within 30 days of the receipt of funds from debt or surety bond financing. In exchange, the Company granted a security interest in all of the Company’s intellectual property and CoolTech issued cashless warrants to purchase 2,000,000 shares of common stock at an exercise price of $0.05. The warrants expire after five years.
On March 19, 2019, the Company entered into a Promissory Note Agreement with an accredited investor. It received $250,000 in financing and promised to pay the principal amount together with simple interest of 15% per annum on or before the one-year anniversary. Furthermore, the Company committed to pay the principal amount and accrued interest within 30 days of the receipt of funds from debt or surety bond financing. In exchange, the Company granted a security interest in all of the Company’s intellectual property and CoolTech issued cashless warrants to purchase 2,000,000 shares of common stock at an exercise price of $0.05. The warrants expire after five years. On March 19, 2020, the investor signed an amendment to the agreement extending the maturity date for four months.
Convertible notes payable
January Convertible Note – On January 26, 2018, the Company entered into a convertible note agreement. It issued 800,000 inducement shares of restricted common stock and received $200,000, with an original issue discount of $20,000 in lieu of interest, for a total amount of $220,000 due on August 26, 2018. At the holder’s option, a portion or all the unpaid principal and interest may be converted into shares of CoolTech’s common stock at $0.05 per share. In the event of default, the outstanding balance will increase by 25% and a daily penalty of $100 will accrue until the default is remedied.
On May 22, 2018, the holder signed an amendment to the note which extended the maturity date to October 1, 2018. In exchange, the note was changed from promissory to convertible with a conversion price of $0.025 per share.
On September 25, 2018, the Company issued 2,000,000 shares on conversion of $50,000 in debt. On October 1, 2018, Lucas Hoppel signed an amendment to the note which extended the maturity date to January 1, 2019. On January 1, 2019, Lucas Hoppel signed an amendment to the note which extended the maturity date to May 1, 2019. In exchange, the conversion price was changed from $0.025 to $0.0125 per share. On February 5, 2019, the buyer converted $64,100 into 5,128,000 shares of common stock and the $226,600 note was retired.
February Convertible Note – On February 19, 2018, the Company entered into a convertible note agreement. It issued 2,000,000 inducement shares of restricted common stock and received $350,000, with an original issue discount of $35,000 in lieu of interest, for a total amount of $385,000 due on September 19, 2018. At the holder’s option, a portion or all the unpaid principal and interest may be converted into shares of CoolTech’s common stock at $0.05 per share. In the event of default, the outstanding balance will increase by 25% and a daily penalty of $100 will accrue until the default is remedied.
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On May 22, 2018, the holder signed an amendment to the note which extended the maturity date to November 1, 2018. In exchange, the note was changed from promissory to convertible with a conversion price of $0.025 per share.
On September 14, 2018, the Company issued 2,000,000 shares on conversion of $50,000 in debt. On October 26, 2018, the holder signed an amendment to the note which extended the maturity date to January 1, 2019. On October 31, 2018, the Company issued 2,000,000 shares on conversion of $50,000 in debt.
On January 1, 2019, the holder signed an amendment to the note which extended the maturity date to May 1, 2019. In exchange, the conversion price was changed from $0.025 to $0.0125 per share. On February 26, 2019, CoolTech issued 7,500,000 shares of common stock to the holder upon partial conversion of $93,750 in debt. On April 23, 2019, Cool Technologies issued 7,500,000 shares of common stock to the holder upon conversion of $93,750 in debt.
On May 1, 2019, the holder signed an amendment to the note which extended the maturity date to August 1, 2019. All other terms and conditions remained the same. On July 30, 2019, the Company issued 4,000,000 shares of common stock to the holder upon partial conversion of $50,000 in debt.
On July 30, 2019, the holder signed an amendment to the note which extended the maturity date to November 1, 2019. On September 11, 2019, the Company issued 2,500,000 shares of common stock to the holder upon partial conversion of $31,250 in debt.
On October 31, 2019, he signed an amendment which extended the maturity date to December 31, 2019. All other terms and conditions remained the same. On December 2, 2019, Cool Technologies issued 2,224,000 shares of common stock to the holder upon final conversion of $27,800 and the note was retired.
August Convertible Note -- On August 17, 2018, the Company entered into a convertible note agreement. It received $63,000 with an original issue discount of $6,300 in lieu of interest, for a total amount of $58,300 due on August 17, 2019. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of CoolTech’s common stock at a 29% discount to the average of the three lowest Volume Weighted Average Prices (VWAP) during the 10 trading days preceding the conversion date. In the event of default, the interest rate will be 22% per annum and require the Company to redeem all or any portion of the note at a premium of 150%.
On February 14, 2019, the outstanding balance of $93,565 was paid in full and the note was retired.
December Convertible Note -- On December 10, 2018, the Company entered into a convertible note agreement. It received $138,000 with an original issue discount of $14,000 in lieu of interest, for a total amount of $152,000 due on December 10, 2019. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of CoolTech’s common stock at a 28% discount to the lowest Volume Weighted Average Prices (VWAP) during the 10 trading days preceding the conversion date. In the event of default, the interest rate will be 22% per annum, require the Company to redeem all or any portion of the note at a premium of 150%.
On June 5, 2019, the outstanding balance of $203,643 was paid in full and the note was retired.
February Convertible Note -- On February 11, 2019, the Company entered into a convertible note agreement. It received $140,000 with an original issue discount of $8,400 in lieu of interest, for a total amount of $132,500 due on February 11, 2020. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of CoolTech’s common stock at a 29% discount to the lowest VWAP during the 10 trading days preceding the conversion date. In the event of default, the interest rate will be 22% per annum, require the Company to redeem all or any portion of the note at a premium of 150%.
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On August 13, 2019, the Company issued 423,729 shares of common stock to the holder upon partial conversion of $15,000 in debt. On August 23, 2019, the Company issued 545,455 shares of common stock to the holder. upon partial conversion of $15,000 in debt. On August 29, 2019, the Company issued 604,839 shares of common stock to the holder upon partial conversion of $15,000 in debt. On September 3, 2019, the Company issued 819,672 shares of common stock to the holder upon partial conversion of $20,000 in debt. On September 5, 2019, the Company issued 833,333 shares of common stock to upon partial conversion of $20,000 in debt. On September 11, 2019, the Company issued 1,005,025 shares of common stock to upon partial conversion of $20,000 in debt. On September 17, 2019, the Company issued 1,005,025 shares of common stock to upon partial conversion of $20,000 in debt. On September 24, 2019, the Company issued 1,119,558 shares of common stock to the holder upon final conversion of $15,000 in debt and the note was retired.
March Convertible Note -- On March 13, 2019, the Company entered into a convertible note agreement. It received $140,000 with an original issue discount of $7,500 in lieu of interest, for a total amount of $131,600 due on February 11, 2020. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest VWAP during the 10 trading days preceding the conversion date. In the event of default, the interest rate will be 18% per annum, require the Company to pay the product of the then outstanding principal amount, plus accrued interest and default interest, divided by the conversion price multiplied by the highest price at which the common stock traded at any time between the issuance date and the date of the event of default.
On September 16, 2019, the Company issued 2,012,072 shares of common stock to the holder upon partial conversion of $40,000 in debt. On October 1, 2019, the Company issued 2,695,599 shares of common stock to the holder upon partial conversion of $40,000 in debt. On October 14, 2019, the Company issued 2,859,758 shares of common stock to the holder upon partial conversion of $40,000 in debt. On November 12, 2019, the Company issued 2,886,674 shares of common stock to the holder upon final conversion of $20,000 in debt and the note was retired.
May Convertible Note -- On May 13, 2019, the Company entered into a convertible note agreement. It received $150,000 after an original issue discount of $15,000 in lieu of interest, for a total amount of $165,000 due on December 13, 2019. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest VWAP during the 10 trading days preceding the conversion date. In the event of default, the outstanding balance will increase by 25% and a daily penalty of $100 will accrue until the default is remedied.
The note also included a clause which stated that if the effective conversion price is less than $0.01 at any time, the principal amount of the note shall increase by $10,000 and that the conversion price will be permanently redefined to equal 40% of the lowest traded price that occurred during the 15 consecutive trading days immediately preceding the date on which the note holder elects to convert all or part of the note. On December 20, 2019, the effective conversion price reached sub-penny threshold. The principal amount and the subsequent conversion price were adjusted as noted above. Therefore, as of December 31,2019, the convertible balance remaining totaled $179,950.
June Convertible Note -- On June 6, 2019, the Company entered into a convertible note agreement. It received $130,000 with an original issue discount of $13,000 and an annual interest rate of 8%. The principal ($143,000) and interest will be due on June 6, 2020. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest VWAP during the 10 trading days preceding the conversion date. In the event of default, the interest rate will be 24% per annum, require the Company to pay the product of the then outstanding principal amount, plus accrued interest and default interest, divided by the conversion price multiplied by the highest price at which the common stock traded at any time between the issuance date and the date of the event of default.
On December 19, 2019, Cool Technologies issued 1,128,687 shares of common stock to the holder upon partial conversion of $10,418 in debt. On December 24, 2019, the Company issued 2,674,064 shares of common stock to the holder upon partial conversion of $20,884 in debt. As of December 31, 2019, the convertible balance remaining totaled approximately $113,000.
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Table of Contents |
July Convertible Note – On July 3, 2019, the Company entered into a convertible note agreement. It received $150,000 with an original issue discount of $15,300 in lieu of interest, for a total amount of $168,300 plus 8% annual interest due on July 3, 2020. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of CoolTech’s common stock at a 29% discount to the lowest VWAP during the 10 trading days preceding the conversion date. In the event of default, the interest rate will be 22% per annum, require the Company to redeem all or any portion of the note at a premium of 150%.
August Convertible Note -- On August 28, 2019, the Company entered into a convertible note agreement. It received $115,000 with an original issue discount of $11,500 and an annual interest rate of 8%. The principal ($126,500) and interest will be due on August 28, 2020. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest VWAP during the 10 trading days preceding the conversion date. In the event of default, the interest rate will be 24% per annum or the highest rate of interest permitted by law.
October Convertible Note -- On October 3, 2019, the Company entered into a convertible note agreement. It issued 350,000 inducement shares of restricted common stock and received $115,000 with an original issue discount of $11,500 and an annual interest rate of 8%. The principal ($126,500) and interest will be due on October 2, 2020. After 180 days, at the holder’s option, a portion or all the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest closing price during the 10 trading days preceding the conversion date. In the event of default, the interest rate will be 24% per annum or the highest rate of interest permitted by law.
November Convertible Note -- On November 9, 2019, the Company entered into a convertible note agreement. It received $126,000 with an original issue discount of $13,000 and an annual interest rate of 8%. The principal ($141,000) and interest will be due on November 6, 2020. After 180 days, at the holder’s option, a portion or all the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest closing price during the 10 trading days preceding the conversion date. In the event of default, the interest rate will be 24% per annum or the highest rate of interest permitted by law.
Test Vehicle Financing
In October 2014, the Company entered into financing agreements for the purchase of test vehicles, bearing interest at 5.99% payable monthly over five years, collateralized by the vehicles. In July 2018, CoolTech traded-in one test vehicle and purchased another bearing an interest rate of 9.92% payable monthly over 6 years.
In June 2019, the Company traded in one test vehicle and purchased another with financing of approximately $44,500, bearing an interest rate of 9.92% payable monthly over a 5-year period.
Warrants Issued with Debt
When the Company issues notes payable, it may also be required to issue warrants.
|
|
Number of Warrants |
|
|
Weighted-average Exercise Price |
|
|
Weighted-average Remaining Life (Years) |
|
|
Aggregate Intrinsic Value |
|
||||
Outstanding December 31, 2017 |
|
|
14,421,379 |
|
|
$ | 0.02 |
|
|
|
1.5 |
|
|
$ | 725,950 |
|
Granted |
|
|
14,400,000 |
|
|
|
0.05 |
|
|
|
-- |
|
|
|
-- |
|
Forfeited or expired |
|
|
(750,000 | ) |
|
|
0.16 |
|
|
|
-- |
|
|
|
-- |
|
Exercised |
|
|
(13,603,662 | ) |
|
|
0.02 |
|
|
|
-- |
|
|
|
-- |
|
Outstanding, December 31, 2018 |
|
|
14,467,717 |
|
|
|
0.05 |
|
|
|
4.6 |
|
|
|
1,564 |
|
Exercisable, December 31, 2018 |
|
|
14,467,717 |
|
|
|
0.05 |
|
|
|
4.6 |
|
|
|
1,564 |
|
Granted |
|
|
4,200,000 |
|
|
|
0.03 |
|
|
|
5.0 |
|
|
|
220,000 |
|
Forfeited or expired |
|
|
(200,000 | ) |
|
|
0.08 |
|
|
|
-- |
|
|
|
10,000 |
|
Exercised |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
Outstanding, December 31, 2019 |
|
|
18,467,717 |
|
|
|
0.05 |
|
|
|
3.7 |
|
|
|
941,144 |
|
Exercisable, December 31, 2019 |
|
|
18,467,717 |
|
|
$ | 0.05 |
|
|
|
3.7 |
|
|
$ | 941,144 |
|
F-16 |
|
Table of Contents |
Transactions with Related Parties
The note payable - related party, in the amount of $21,641, is held by the Company's Chief Financial Officer and relates to unreimbursed expenses.
The note payable - UPT minority owner, in the amount of $80,000, is held by the 5% minority owner of UPT. The terms of the note have not been finalized.
Future contractual maturities of debt are as follows:
Year ending December 31, |
|
|
|
|
2020 |
|
$ | 2,971,232 |
|
2021 |
|
|
7,358 |
|
2022 |
|
|
8,134 |
|
2023 |
|
|
8,992 |
|
2024 |
|
|
4,845 |
|
|
|
$ | 3,000,561 |
|
Note 5 – Derivative Liability
Under the terms of the May 2019, June 2019, July 2019, August 2019, October 2019, November 2019 and December 2019 Convertible Notes, the Company identified derivative instruments arising from embedded conversion features.
The following summarizes the Black-Scholes assumptions used to estimate the fair value of the derivative liability at the dates of issuance and the revaluation dates:
|
|
Year ended December 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
Volatility |
|
114%-148 |
% |
|
102%-119 |
% |
||
Risk-free interest rate |
|
1.5%-2.5 |
% |
|
1.7%-2.7 |
% |
||
Expected life (years) |
|
0.9 - 1.2 |
|
|
0.0 - 1.3 |
|
||
Dividend yield |
|
|
-- |
|
|
|
-- |
|
Changes in the derivative liability were as follows:
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||
Convertible debt and other derivative liabilities at December 31, 2017 |
|
|
-- |
|
|
|
-- |
|
|
$ | 7,504 |
|
Issuance of convertible debt and other derivatives |
|
|
-- |
|
|
|
-- |
|
|
|
346,821 |
|
Extinguishment of convertible debt |
|
|
|
|
|
|
|
|
|
|
(120,603 | ) |
Change in fair value |
|
|
-- |
|
|
|
-- |
|
|
|
(83,63 | ) |
Convertible debt and other derivative liabilities at December 31, 2018 |
|
|
-- |
|
|
|
-- |
|
|
|
149,759 |
|
Conversions of convertible debt |
|
|
-- |
|
|
|
-- |
|
|
|
(79,027 | ) |
Issuance of convertible debt and other derivatives |
|
|
-- |
|
|
|
-- |
|
|
|
1,138,804 |
|
Extinguishment of convertible debt |
|
|
-- |
|
|
|
-- |
|
|
|
(165,887 | ) |
Change in fair value |
|
|
-- |
|
|
|
-- |
|
|
|
(330,728 | ) |
Convertible debt and other derivative liabilities at December 31, 2019 |
|
|
-- |
|
|
|
-- |
|
|
$ | 712,921 |
|
F-17 |
|
Table of Contents |
Note 6 – Commitments and Contingencies
U.S. District Court, Eastern District of New York
On October 7, 2016, the Company received a complaint, Wang et al v. Cool Technologies, Inc. et al, filed on July 28, 2016 in the U.S. District Court for the Eastern District of New York (Brooklyn) Civil docket #1:16-CV-04101-RRM-PK against the Company and Timothy Hassett, the Company’s Chief Executive Officer, alleging damages of $1,100,000 for inter alia breach of contract for failing to register shares sold to the Plaintiffs in February and March 2014.
On March 30, 2017, the Company and Timothy Hassett, the Company’s Chief Executive Officer, requested leave of the court to move to dismiss the matter, on both Substantive and Jurisdictional grounds. On April 13, 2017, the Honorable Roslynn R. Mauskopf granted leave to renew the Company’s March 30, 2017 request for a pre-motion conference after the initial conference before Magistrate Judge Kuo. At the initial conference, Corporate counsel informed the court that the Company, in fact, filed a registration statement for said shares in July 2014 and the Warrants were in the possession of Plaintiff Gary Zse Kong J.D. and located on his computer and printed at his office in the Law Offices of Gary Park. Magistrate Judge Peggy Kuo directed plaintiff to file an amended complaint and directed plaintiff Gary Sze Kong to preserve all computer and other records which may still be at the Law Offices of Gary Park. Defendants were also granted leave to subpoena such records if they are no longer under the control of Plaintiff Kong. On June 30th, Plaintiff amended their complaint inter alia admitting that the Company filed the registration statement with the SEC. On August 7, 2017, Corporate Counsel requested leave for a pre-motion conference to move to dismiss the matter.
On March 27, 2018, a Subpoena was issued and served upon the Law Offices of Gary S. Park P.C. On April 3, 2018 counsel for Plaintiffs withdrew and were replaced by Mr. Sang Joon Sim, Esq. of Sim & Record, LLP which shares an address with Mr. Park’s law offices. On April 3, 2018 plaintiffs obtained new counsel. On May 31, 2018, the parties entered into a settlement and on July 3, 2018 the Honorable Judge Mauskopf ordered the matter dismissed with prejudice without costs to either party. On July 9, 2018, the Order was entered dismissing the matter.
From time to time, Cool Technologies may be a party to other legal proceedings. Management currently believes that the ultimate resolution of these matters, and after consideration of amounts accrued, will not have a material adverse effect on consolidated results of operations, financial position, or cash flow.
Securities and Exchange Commission Settlement
On September 20, 2018, the Securities and Exchange Commission (SEC) approved an offer to settle the enforcement proceedings against the Company pursuant to Section 21C of the Securities Exchange Act of 1934.
These proceedings arose out of the violation of the Regulation S-X requirement that interim financial statements filed as part of a Form 10-Q be reviewed by an independent public accounting firm prior to filing.
On three occasions, specifically, May 20, 2013, August 19, 2013 and August 22, 2016, Cool Technologies filed Form 10-Qs that contained financial statements that were not reviewed by an independent public accounting firm. In two cases, the Company properly disclosed that the 10Q’s were “unaudited and unreviewed” as set forth by the guidance in the Division of Corporation Finance Financial Reporting Manual Section 4410.3 and in each case, the Company subsequently filed a restated and amended Form 10-Q/A that complied with the Interim Review Requirement. In no instance were the filings ever subjected to audit challenge.
F-18 |
|
Table of Contents |
Pursuant to the enforcement proceeding instituted by the SEC, the Company settled for a fine of $75,000 and agreed to cease and desist from any future violations of Sections 13(a) of the Exchange Act and Rule 13a-13 thereunder, and Rule 8-03 of Regulation S-X.
From time to time, Cool Technologies may be a party to other legal proceedings. Management currently believes that the ultimate resolution of these matters, and after consideration of amounts accrued, will not have a material adverse effect on consolidated results of operations, financial position, or cash flow.
Note 7 – Equity
Preferred Stock
Cool Technologies has 15,000,000 preferred shares authorized and 3 Series A and 2,727,270 Series B preferred shares issued and outstanding as of December 31, 2019.
On August 12, 2016, the Company entered into a Securities Purchase Agreement with four accredited investors pursuant to which it sold 3,636,360 shares of the Company’s Series B Convertible Preferred Stock. Each share of the preferred stock is convertible into one share of the Company’s common stock. The conversion price of the preferred stock is equal to the $0.055.
In addition to the preferred stock, the Securities Purchase Agreement included warrants to purchase 3,636,360 shares of the Company’s common stock at an exercise price of $0.07 per share. The warrants cannot be exercised on a cashless basis. The aggregate purchase price of the preferred stock and warrants was $200,000, of which $150,000 was paid in cash and $50,000 was paid in services.
In connection with the sale of the Preferred Stock, on October 20, 2016, the Company filed with the Secretary of the State of Nevada, an amended Certificate of Designations of the Rights, Preferences, Privileges and Restrictions, which have not been set forth in the Certificate of Designation of the Series B Convertible Preferred Stock nor the first Amendment to Certificate of Designation filed on August 12, 2016.
The preferred stock has the same rights as if each share of Series B Convertible Preferred Stock were converted into one share of common stock. For so long as the Series B Convertible Preferred Stock is issued and outstanding, the holders of such Series B Convertible Preferred Stock vote together as a single class with the holders of the common stock and the holders of any other class or series of shares entitled to vote with the common stock, with the holders of Series B Stock being entitled to 66 2/3% of the total votes on all such matters.
In the event of the death of a holder of the Class B Preferred Stock, or a liquidation, winding up or bankruptcy of a holder which is an entity, all voting rights of the Class B Preferred Stock shall cease.
The holder of any shares of Class B Preferred Stock have the right to convert their shares into common stock at any time, in a conversion ratio of one share of common stock for each share of Class B Preferred. If the Company’s common stock trades or is quoted at a price per share in excess of $2.25 for any twenty consecutive day trading period, the Class B Preferred Stock will automatically be convertible into the common stock of the Company in a conversion ratio of one share of common stock for each share of Class B Preferred.
The holders of Class B Preferred Stock are not entitled to receive any distributions in the event of any liquidation, dissolution or winding up of the Company.
On January 25, 2019, Spirit Bear converted all their shares of Series A Preferred Stock into 850,000 shares of the Company’s common stock.
KHIC, Inc., a related party, holds the remaining 3 shares of Series A Preferred Stock. Each share of Series A Preferred Stock ("Preferred Stock") is convertible into 50,000 shares of common stock. Each share of preferred stock has voting rights as if they were converted into 50,000 shares of common stock. The holders of each share of preferred stock then outstanding shall be entitled to be paid out of the Available Funds and Assets (as defined in the "Certificate of Designation"), and prior and in preference to any payment or distribution (or any setting a part of any payment or distribution) of any Available Funds and Assets on any shares of common stock, an amount per preferred share equal to the Preferred Stock Liquidation Price ($2,500 per share).
F-19 |
|
Table of Contents |
Common stock
On September 13, 2019, stockholders holding shares that entitled them to exercise at least a majority of the voting power, voted in favor of increasing the number of authorized shares of common stock, from 350,000,000 shares to 500,000,000 shares.
Common stock issuable on the consolidated balance sheets represents common stock to be issued for either cash received, or services performed. As of December 31, 2019 and 2018, the number of shares of common stock to be issued was 494,697 and 1,144,697 shares, respectively.
Common stock warrants issued with the sale of CoolTech’s common stock
When the Company sells shares of its common stock the buyer also typically receives fully vested common stock warrants with a maximum contractual term of 3-5 years. A summary of common stock warrants issued with the sale of common stock as of December 31, 2019 and 2018, and changes during the years then ended is presented below:
|
|
Number of Warrants |
|
|
Weighted-average Exercise Price |
|
|
Weighted-average Remaining Life (Years) |
|
|
Aggregate Intrinsic Value |
|
||||
Outstanding, December 31, 2017 |
|
|
47,437,588 |
|
|
$ | 0.19 |
|
|
|
|
|
|
|
||
Granted |
|
|
5,431,944 |
|
|
|
0.06 |
|
|
|
|
|
|
|
||
Forfeited or expired |
|
|
(501,645 | ) |
|
|
0.29 |
|
|
|
|
|
|
|
||
Outstanding, December 31, 2018 |
|
|
52,367,887 |
|
|
|
0.18 |
|
|
|
1.3 |
|
|
$ | 114,900 |
|
Exercisable, December 31, 2018 |
|
|
52,367,887 |
|
|
|
0.18 |
|
|
|
1.3 |
|
|
$ | 114,900 |
|
Granted |
|
|
-- |
|
|
|
-- |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
-- |
|
|
|
-- |
|
|
|
|
|
|
|
|
|
Forfeited or expired |
|
|
(6,853,719 | ) |
|
|
0.56 |
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2019 |
|
|
45,514,168 |
|
|
|
0.12 |
|
|
|
1.1 |
|
|
|
- |
|
Exercisable, December 31, 2019 |
|
|
45,514,168 |
|
|
$ | 0.12 |
|
|
|
1.1 |
|
|
$ | - |
|
Note 8 – Share-based payments
Amounts recognized as expense in the consolidated statements of operations related to share-based payments are as follows:
|
|
Year ended December 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
Nonemployee common stock |
|
$ | 7,700 |
|
|
$ | -- |
|
Nonemployee warrants – fully vested upon issuance |
|
|
-- |
|
|
|
25,882 |
|
Total share-based expense charged against income |
|
$ | 7,700 |
|
|
$ | 25,882 |
|
|
|
|
|
|
|
|
|
|
Impact on net loss per common share: |
|
|
|
|
|
|
|
|
Basic and diluted |
|
$ | (0.00 | ) |
|
$ | (0.00 | ) |
F-20 |
|
Table of Contents |
UPT management agreement
In July 2014, Cool Technologies entered into a three year agreement with the Company managing the operations of UPT, whereby it would issue common stock under the following conditions:
Condition |
|
Number of Shares |
|
|
UPT recognizes $100 million of revenue or a change in control |
|
|
500,000 |
|
UPT recognizes $100 million of revenue |
|
|
150,000 |
|
|
|
|
650,000 |
|
On June 30, 2017, the agreement expired. None of the conditions were met prior to expiration, so no expense will be recognized, and no common stock will be issued under this agreement.
In July 2014, Cool Technologies entered into a three-year agreement with the Company managing the operations of UPT, whereby CoolTech would issue common stock warrants under the following conditions:
|
|
|
|
Number of |
|
|
Vesting Condition |
|
Category |
|
Warrants |
|
|
Fully vest upon UPT generating $1 million of revenue |
|
Performance |
|
|
350,000 |
|
45,945 warrants for every $3 million of revenue generated by UPT up to $100 million |
|
Performance |
|
|
1,530,000 |
|
60,000 warrants for every three months of completed service managing UPT |
|
Service |
|
|
720,000 |
|
|
|
|
|
|
2,600,000 |
|
The common stock warrants have a three-year life and an exercise price of $1.00 per share. The grant date fair value was $2,586,000. On June 30, 2017, the agreement expired. None of the performance conditions were met prior to expiration, so no expense will be recognized, and no common stock warrants will vest under the performance conditions. During the year ended December 21, 2017, 120,000 of the common stock warrants under the service condition vested with the passage of time and the Company recognized expense of $6,118. There is no remaining service award expense to recognize. During 2019, 240,000 of the common stock warrants expired and 120,000 remain outstanding. They will expire during the first 6 months of 2020.
Nonemployee common stock
Other
During the years ended December 31, 2019 and 2018, Cool Technologies issued or accrued an additional 350,000 and 2,600,000 shares of common stock, respectively, in exchange for services, with a fair value of $7,700 and $130,000, respectively.
Nonemployee common stock warrants -- Fully-vested upon issuance
Cool Technologies may issue fully vested common stock warrants with a maximum contractual term of 5 years to non-employees in return for services or to satisfy liabilities, such as accrued interest. The following summarizes the activity for common stock warrants that were fully vested upon issuance:
|
|
Number of Warrants |
|
|
Weighted-average Exercise Price |
|
|
Weighted-average Remaining Life (Years) |
|
|
Aggregate Intrinsic Value |
|
||||
Outstanding, December 31, 2017 |
|
|
12,945,836 |
|
|
$ | 0.29 |
|
|
|
|
|
|
|
||
Granted |
|
|
500,000 |
|
|
|
0.05 |
|
|
|
|
|
|
|
||
Forfeited or expired |
|
|
-- |
|
|
|
-- |
|
|
|
|
|
|
|
||
Outstanding, December 31, 2018 |
|
|
13,445,836 |
|
|
|
0.27 |
|
|
|
1.4 |
|
|
$ | 78,000 |
|
Exercisable, December 31, 2018 |
|
|
13,445,836 |
|
|
|
0.27 |
|
|
|
1.4 |
|
|
$ | 78,000 |
|
Granted |
|
|
2,100,000 |
|
|
|
0.004 |
|
|
|
|
|
|
|
|
|
Exercised |
|
|
-- |
|
|
|
-- |
|
|
|
|
|
|
|
|
|
Forfeited or expired |
|
|
(5,810,000 | ) |
|
|
0.49 |
|
|
|
|
|
|
|
|
|
Outstanding, December 31, 2019 |
|
|
9,735,836 |
|
|
|
0.36 |
|
|
|
1.3 |
|
|
$ | 2,000 |
|
Exercisable, December 31, 2019 |
|
|
9,735,836 |
|
|
$ | 0.36 |
|
|
|
1.3 |
|
|
$ | 2,000 |
|
F-21 |
|
Table of Contents |
The following summarizes the Black-Scholes assumptions used to estimate the fair value of fully vested common stock warrants:
|
|
Year ended December 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
Volatility |
|
125%-148 |
% |
|
|
143 | % | |
Risk-free interest rate |
|
1.6%-1.7 |
% |
|
|
2.6 | % | |
Expected life (years) |
|
.05 – 4.2 |
|
|
|
5.0 |
|
|
Dividend yield |
|
|
-- |
|
|
|
-- |
|
No fully vested common stock warrants were exercised in 2019 and 2018.
Nonemployee common stock warrants -- Service and performance conditions
Summary
The following summarizes the activity for warrants that have performance and service conditions. There were no grants in 2019.
|
|
Number of Warrants |
|
|
Weighted-average Exercise Price |
|
|
Weighted-average Remaining Life (Years) |
|
|
Aggregate Intrinsic Value |
|
||||
Outstanding, December 31, 2017 |
|
|
3,280,000 |
|
|
$ | 0.84 |
|
|
|
|
|
|
|
||
Granted |
|
|
-- |
|
|
|
-- |
|
|
|
|
|
|
|
||
Forfeited or expired |
|
|
(2,120,000 | ) |
|
|
1.00 |
|
|
|
|
|
|
|
||
Outstanding, December 31, 2018 |
|
|
1,160,000 |
|
|
|
0.52 |
|
|
|
0.4 |
|
|
|
|
|
Exercisable, December 31, 2018 |
|
|
1,160,000 |
|
|
|
0.52 |
|
|
|
0.4 |
|
|
|
|
|
Granted |
|
|
-- |
|
|
|
-- |
|
|
|
|
|
|
|
|
|
Forfeited or expired |
|
|
(247,498 | ) |
|
|
1.00 |
|
|
|
0.0 |
|
|
|
|
|
Outstanding, December 31, 2019 |
|
|
912,502 |
|
|
|
0.39 |
|
|
|
0.5 |
|
|
|
|
|
Exercisable, December 31, 2019 |
|
|
912,502 |
|
|
$ | 0.39 |
|
|
|
0.5 |
|
|
$ | -- |
|
The following summarizes the status of the Company’s non-vested common stock warrants with performance and service conditions as of December 31, 2019 and 2018, and changes during the years then ended:
|
|
Number of |
|
|
Weighted-average Grant Date |
|
||
|
|
Warrants |
|
|
Fair Value |
|
||
Non vested, December 31, 2017 |
|
|
1,880,000 |
|
|
$ | 0.99 |
|
Vested |
|
|
(1,880,000 | ) |
|
|
0.99 |
|
Non vested, December 31, 2018 |
|
|
-- |
|
|
|
0.05 |
|
Vested |
|
|
-- |
|
|
|
-- |
|
Forfeited |
|
|
-- |
|
|
|
-- |
|
Non vested, December 31, 2019 |
|
|
-- |
|
|
$ | -- |
|
F-22 |
|
Table of Contents |
The following summarizes the Black-Scholes assumptions used to estimate the fair value of warrants with performance and service conditions:
|
|
Year ended December 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
Volatility |
|
127 -- 143% |
|
|
141--144% |
|
||
Risk-free interest rate |
|
1.5 -- 1.6% |
|
|
1.5--1.6% |
|
||
Expected life (years) |
|
0.251.08 |
|
|
|
3.0 |
|
|
Dividend yield |
|
|
-- |
|
|
|
-- |
|
Legal settlement – Replacement warrants
Under the terms of the February 2016 Waiver of Performance and Second Amendment to Settlement Agreement with Spirit Bear, the Company agreed to April issued replacement warrants for previously amended and replaced warrants. Six million of the previously amended and replaced warrants owned by Spirit Bear and by Leonora Lorenzo had their expiration dates extended from January 29, 2017, until January 29, 2020, and had their exercise price reduced from $0.25 to $0.10 per share.
In addition, Spirit Bear consented to the withdrawal of a Registration Statement on Form S-1 that was pending before the Securities Exchange Commission (SEC). The proposed registration statement covered the common shares underlying the preferred shares owned by Spirit Bear and the common shares underlying the warrants owned by Spirit Bear and Leonora Lorenzo.
When a replacement equity instrument is issued, expense is recorded if the fair value of the new instruments is greater than the fair value of the original instruments. The Company recorded expense of $423,973 associated with the replacement warrants. The following summarizes the Black-Scholes assumptions used to estimate the fair value of the previously issued warrants and the replacement warrants:
|
|
Previously issued |
|
|
Replacement |
|
||
Volatility |
|
|
206 | % |
|
|
151 | % |
Risk-free interest rate |
|
|
0.5 | % |
|
|
1.3 | % |
Expected life (years) |
|
|
0.2 |
|
|
|
3.2 |
|
Dividend yield |
|
|
-- |
|
|
|
-- |
|
Employee stock options – Fully-vested upon grant
Cool Technologies granted stock options to certain members of management in 2014 that were fully vested at the date of grant. There were no grants in 2019 or 2018. The following is a summary of fully vested stock option activity:
|
|
Number of Shares |
|
|
Weighted-average Exercise Price per Share |
|
|
Weighted-average Remaining Contractual Term |
|
|
Aggregate Intrinsic Value |
|
||||
Outstanding, December 31, 2017 |
|
|
4,000,000 |
|
|
$ | 2.00 |
|
|
|
|
|
|
|
||
Outstanding, December 31, 2018 |
|
|
4,000,000 |
|
|
|
2.00 |
|
|
|
-- |
|
|
$ | -- |
|
Exercisable, December 31, 2018 |
|
|
4,000,000 |
|
|
|
2.00 |
|
|
|
-- |
|
|
|
-- |
|
Outstanding, December 31, 2019 |
|
|
4,000,000 |
|
|
|
2.00 |
|
|
|
-- |
|
|
|
-- |
|
Exercisable, December 31, 2019 |
|
|
4,000,000 |
|
|
$ | 2.00 |
|
|
|
-- |
|
|
$ | -- |
|
F-23 |
|
Table of Contents |
Note 9 – Income Taxes
The components of the Company’s deferred tax asset are as follows:
|
|
December 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
Net operating loss carryforwards |
|
$ | 7,153,247 |
|
|
$ | 6,836,322 |
|
Equity-based instruments |
|
|
6,467,488 |
|
|
|
6,465,537 |
|
Accrued liabilities |
|
|
332,655 |
|
|
|
112,795 |
|
Deferred Revenue |
|
|
96,311 |
|
|
|
96,311 |
|
Pass-through losses |
|
|
100,315 |
|
|
|
92,634 |
|
Valuation allowance |
|
|
(14,150,016 | ) |
|
|
(13,603,599 | ) |
Deferred tax asset |
|
$ | -- |
|
|
$ | -- |
|
Effective January 1, 2018, the Federal corporate income tax rate has been decreased from 34% to 21%. The effect of this change on deferred taxes and the valuation allowance at December 31, 2017 was approximately $6.5 million. The NOLs that have been generated 12/31/2017 and prior are going to be 100% allowable against future income and will expire in 20 years beginning in 2031. NOLs generated 1/1/2018 and forward will be subject to the 80% limitation and they will never expire.
A reconciliation of income taxes computed at the statutory rate to the income tax amount recorded is as follows:
|
|
Year ended December 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
Income tax benefit at statutory rate |
|
$ | (681,012 | ) |
|
$ | (970,386 | ) |
State income tax, net of Federal benefit |
|
|
(140,905 | ) |
|
|
(200,777 | ) |
Convertible debt |
|
|
274,844 |
|
|
|
486,168 |
|
Other adjustments |
|
|
405 |
|
|
|
(11,685 | ) |
Meals and entertainment |
|
|
246 |
|
|
|
202 |
|
Increase in valuation allowance |
|
|
546,422 |
|
|
|
696,479 |
|
Income tax benefit |
|
$ | -- |
|
|
$ | -- |
|
Cool Technologies had no gross unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods. It has not accrued any interest or penalties associated with income taxes. The Company files income tax returns in the United States federal jurisdiction. With few exceptions, it is no longer subject to U.S. federal, state or non-U.S. income tax examination by tax authorities on tax returns filed before January 31, 2012. No tax returns are currently under examination by any tax authorities.
Note 10 – Net Loss per Share
Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the reporting period. Diluted net loss per share is computed similarly to basic loss per share, except that it includes the potential dilution that could occur if dilutive securities are exercised.
F-24 |
|
Table of Contents |
The following table presents a reconciliation of the denominators used in the computation of net loss per share – basic and diluted:
|
|
Year ended December 31, |
|
|||||
|
|
2019 |
|
|
2018 |
|
||
Net loss available for stockholders |
|
$ | (3,241,312 | ) |
|
$ | (4,618,388 | ) |
Weighted average outstanding shares of common stock |
|
|
238,714,877 |
|
|
|
191,539,568 |
|
Dilutive effect of stock options and warrants |
|
|
-- |
|
|
|
-- |
|
Common stock and equivalents |
|
|
238,714,877 |
|
|
|
191,539,568 |
|
|
|
|
|
|
|
|
|
|
Net loss per share – Basic and diluted |
|
$ | (0.01 | ) |
|
$ | (0.02 | ) |
Outstanding stock options and common stock warrants are considered anti-dilutive because the Company is in a net loss position. The following summarizes equity instruments that may, in the future, have a dilutive effect on earnings per share:
Note 11 – Subsequent Events
The Company has evaluated all the events or transactions that have occurred since December 31, 2019 and determined that the following should be disclosed:
On January 15, 2020, the Board of Directors of Cool Technologies, Inc. (the “Company”) appointed Steven P. Wilburn to serve as a director of the Company. Mr. Wilburn is an engineering executive who has 40 plus years of professional experience in the fields of alternative energy and water treatment. In 2004, Mr. Wilburn founded and continues to serve as chairman and CEO of FirmGreen, Inc., an integrated green energy company and business. In 2014, he founded and continues to serve as the managing member of VerdeWatts, LLC, an energy storage and management solutions company.
On January 3, 2020, Cool Technologies issued 2,238,806 shares of common stock to PowerUp Lending Group Ltd. upon partial conversion of $15,000 on convertible debt of $168,300.
On January 7, 2020, Cool Technologies issued 5,000,000 shares of common stock to LGH Investments, LLC upon partial conversion of $17,920 on convertible debt of $179,950
On January 8, 2020, Cool Technologies issued 3,174,603 shares of common stock to PowerUp Lending Group Ltd. upon partial conversion of $20,000 on convertible debt of $168,300.
On January 13, 2020, Cool Technologies issued 4,220,881 shares of common stock to Eagle Equities, LLC upon partial conversion of $20,978. on convertible debt of $143,300.On January 14, 2020, Cool Technologies issued 3,921,569 shares of common stock to PowerUp Lending Group, Ltd. upon partial conversion of $20,000 on convertible debt of $168,300.
On January 16, 2020, Cool Technologies issued 4,444,444 shares of common stock to PowerUp Lending Group, Ltd. upon partial conversion of $20,000 on convertible debt of $168,300.
On January 21, 2020, Cool Technologies issued 5,111,111 shares of common stock to PowerUp Lending Group, Ltd. upon partial conversion of $23,000 on convertible debt of $168,300.
On January 21, 2020, Cool Technologies issued 10,000,000 shares of common stock to LGH Investments, LLC upon partial conversion of $22,400 on convertible debt of $179,950.
F-25 |
|
Table of Contents |
On January 28, 2020, Cool Technologies issued 6,173,709 shares of common stock to Eagles Equities, LLC upon partial conversion of $21,040 on convertible debt of $143,300.
On January 30, 2020, Cool Technologies issued 7,142,857 shares of common stock to PowerUp Lending Group, Ltd. upon partial conversion of $20,000 on convertible debt of $168,300.
On January 30, 2020, the Company entered into a Bridge Note for $40,000 with an original issue discount of $4,000 in lieu of interest with a due date of August 30, 2020.
On January 30, 2020, the Company entered into a convertible note agreement. It received $36,000 after an original issue discount of $4,000 in lieu of interest, for a total amount of $40,000 due on July 30, 2020. After 180 days, at the holder’s option, a portion or all of the unpaid principal and interest may be converted into shares of common stock at a 29% discount to the lowest VWAP during the 10 trading days preceding the conversion date. In the event of default, the outstanding balance will increase by 25% and a daily penalty of $100 will accrue until the default is remedied.
On January 31, 2020, the Company entered into a Promissory Note Agreement with an accredited investor. It received $36,000 in financing and promised to pay the principal amount together with simple interest of 3% per annum. Furthermore, the Company committed to pay the principal amount and accrued interest within 30 days of the receipt of funds from debt or surety bond financing, In exchange, Cool Technologies issued cashless warrants to purchase 4,000,000 shares of common stock at an exercise price of $0.05. The warrants expire after five years.
On February 3, 2020, Cool Technologies wired $72,000 to PowerUp Lending Group, Ltd. and the note with convertible debt of $168,300 was retired.
On February 3, 2020, Cool Technologies issued 9,573,426 shares of common stock to Eagle Equities, LLC upon partial conversion of $21,071.11 on convertible debt of $143,300.
On February 13, 2020, Cool Technologies issued 11,992,022 shares of common stock to Eagle Equities, LLC upon partial conversion of $26,394.44 on convertible debt of $143,300.
On February 13, 2020, stockholders holding shares that entitled them to exercise at least a majority of the voting power, voted in favor of increasing the number of authorized shares of common stock, from 500,000,000 shares to 1,000,000,000 shares.
On February 24, 2020, Cool Technologies issued 15,000,000 shares of common stock to LGH Investments, LLC upon partial conversion of $17,400 on convertible debt of $179,630.
On March 2, 2020, Cool Technologies issued 9,820,030 shares of common stock to Eagle Equities, LLC upon partial conversion of $26,494 on convertible debt of $143,300. After the conversion, the principal balance remaining totals approximately $3,000.
On March 3, 2020, wired $72,000 to PowerUp Lending Group and the July convertible note was retired.
On March 5, 2020, Cool Technologies issued 6,500,000 shares of common stock to LGH Investments, LLC upon partial conversion of $8,840.00 on convertible debt of $179,630.
On March 10, 2020, Cool Technologies issued 10,282,003 shares of common stock to Eagle Equities, LLC upon partial conversion of $40,151 on convertible debt of $126,500. On March 24, 2020, Cool Technologies issued 8,500,000 shares of common stock to LGH Investments, LLC upon partial conversion of $23,120 on convertible debt of $179,950.
F-26 |
|
Table of Contents |
On March 19, 2020, the Company defaulted on a note payable. The $250,000 note was purchased on March 18, 2019 by an accredited investor. The principal and interest as of May 19, 2020 total $287,603. As of the filing date, the Company has not received a notice of default for the note. As per the terms of the note, interest will continue to accrue at 15% per annum until paid in full.
On May 1, 2020, the Company defaulted on 2 notes payable. A $250,000 note was purchased on September 11, 2018 and a $125,000 note was purchased on September 25, 2018 by the same accredited investor. The principal and interest as of May 1, 2020 total $311,541 and $155,051, respectively. As of the filing date, the Company has not received a notice of default for either note. As per the terms of the note, interest will continue to accrue at 15% per annum until paid in full.
On May 4, 2020, the Company received loan proceeds of $52,612 (the “PPP Loan”) under the Paycheck Protection Program (“PPP” under the Coronavirus Aid, Relief and Economic Security Act).
The PPP Loan is evidenced by a promissory note (the “Note”), between the Company and Small Business Administration (the “Lender”). The Note has a two-year term, bears interest at the rate of 1.00% per annum, and may be prepaid at any time without payment of any premium. No payments of principal or interest are due during the six-month period beginning on the date of the Note (the “Deferral Period”).
The principal and accrued interest under the Note is forgivable after eight weeks if the Company uses the PPP Loan proceeds for eligible purposes, including payroll, benefits, rent and utilities, and otherwise complies with PPP requirements. In order to obtain forgiveness of the PPP Loan, the Company must submit a request and provide satisfactory documentation regarding its compliance with applicable requirements. The Company must repay any unforgiven principal amount of the Note, with interest, on a monthly basis following the Deferral Period. The Company intends to use the proceeds of the PPP Loan for eligible purposes and to pursue forgiveness, although the Company may take action that could cause some or all of the PPP Loan to become ineligible for forgiveness. No assurance is provided that forgiveness for all or any portion of the PPP Loan will be obtained.
The Note contains customary events of default relating to, among other things, payment defaults and breaches of representations, warranties or covenants. The occurrence of an event of default may result in the repayment of all amounts outstanding, collection of all amounts owing from the Company, or filing suit and obtaining judgment against the Company.
On May 7, 2020, Cool Technologies issued 4,460,094 shares of common stock to Eagle Equities, LLC upon partial conversion of $31,667 on convertible debt of $126,500.
On May 8, 2020, Cool Technologies issued 2,352,841 shares of common stock to PowerUp Lending Group, Ltd., upon partial conversion of $20,000 on convertible debt of $141,000.
As of May 26, 2020, Danial Ustian resigned from Cool Technologies’ Board of Directors. Daniel had been a member of the board since 2015.
F-27 |
|
Table of Contents |
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosures
On December 31, 2018, Green & Co. (“G&C”) resigned as the independent registered public accounting firm for Cool Technologies, Inc. (the “Company”). Consequently, they were not involved in the auditing of the 2018 Annual Report on Form 10-K.
During the Company’s fiscal year ended December 31, 2017, and during the subsequent interim period preceding the resignation of G&C, there were: (i) no disagreements with G&C on any matter of accounting principles or practices, financial statement disclosures, or auditing scope or procedures, and (ii) no reportable events of the type listed in Item 304(a)(1)(v) of Regulation S-K.
On January 2, 2019, the Company engaged Accell Audit and Compliance, P.A. (“Accell”) as the Company’s independent registered public accounting firm. Prior to that , the Company has not consulted with Accell with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that would have been rendered on the Company’s consolidated financial statements, or any other matters set forth in Item 304(a)(2)(i) or (ii) of Regulation S-K.
The decision to accept the resignation of G&C and engage Accell was approved by the Company’s Board of Directors.
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company's management does not expect that its internal controls over financial reporting will prevent all error and all fraud. Control systems, no matter how well conceived and managed, can provide only reasonable assurance that the objectives of the control system are met. 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 the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
(a) Evaluation of Disclosure Controls and Procedures
Under the supervision and with the participation of management, including the principal executive officer and principal financial officer, Cool Technologies conducted an evaluation of its disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and Rule 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of December 31, 2019. Based on this evaluation, the principal executive officer and principal financial officer have concluded that, based on the material weaknesses discussed below, the Company’s disclosure controls and procedures were not effective to ensure that information required to be disclosed in reports filed or submitted under the Securities Exchange Act were recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Act Commission's rules and forms and that the Company’s disclosure controls are not effectively designed to ensure that information required to be disclosed in the reports that Cool Technologies files or submits under the Securities Exchange Act is accumulated and communicated to management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
45 |
|
Table of Contents |
(b) Management's Annual Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act.
Internal control over financial reporting is defined under the Exchange Act as a process designed by, or under the supervision of, the CEO and CFO, and effected by the board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
|
-- |
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the Company’s assets; |
|
-- |
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and directors; and |
|
-- |
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company assets that could have a material effect on the financial statements. |
Because Cool Technologies has only three officers and limited personnel, the Company's internal controls are not effective for the following reasons, (1) there are limited entity-level controls because of the limited time and abilities of the three officers, (2) it has not implemented adequate system and manual controls, and (3) there is no separate audit committee. As a result, the Company's internal controls have inherent material weaknesses which may increase the risks of errors in financial reporting under current operations and, accordingly, are not effective as evaluated against the criteria set forth in "Internal Control – Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in 2013. Based on this evaluation, management concluded that Cool Technologies’ internal controls over financial reporting were not effective as of December 31, 2019.
Even though there are inherent weaknesses, management has taken steps to minimize the risk. The Company uses a third-party consultant to review transactions for appropriate technical accounting, reconcile accounts, review significant transactions and prepare financial statements. Invoices and other bookkeeping matters are reviewed by a third-party Certified Fraud Examiner. Any deviation or errors are reported to management.
(c) Remediation of Material Weaknesses
Cool Technologies can provide no assurance that its internal controls over financial reporting will be compliant in the near future. As revenues permit, the Company will enhance its internal controls through additional software and other means. If and when it becomes a listed company under SEC rules, the Company will create an audit committee comprised of independent directors.
(d) Changes in Internal Control over Financial Reporting
There were no changes in the Company’s internal controls over financial reporting during the fourth quarter that have materially affected or are reasonably likely to materially affect CoolTech’s our internal control over financial reporting.
None.
46 |
|
Table of Contents |
Item 10. Directors, Executive Officers and Corporate Governance.
The following table sets forth the names, ages and positions of our current board members and executive officers:
Name |
|
Age |
|
Position(s) |
|
||||
Timothy Hassett |
|
59 |
|
Chairman and Chief Executive Officer and Director |
Quentin Ponder |
|
90 |
|
Vice Chairman Chief Financial Officer and Director |
Judson Bibb |
|
63 |
|
Vice President, Secretary and Director |
Christopher McKee |
|
51 |
|
Director |
Richard "Dick" Schul |
|
73 |
|
Director |
Donald Bowman |
|
51 |
|
Director |
Steven Wilburn |
|
71 |
|
Director |
Our directors are elected for a term of one year and serve until such director's successor is duly elected and qualified. Each executive officer serves at the pleasure of the Board.
The Company has no nominating, audit or compensation committees at this time.
BACKGROUND INFORMATION
The following summarizes the occupational and business experience of our officers and directors.
Timothy Hassett is a co-founder of the Company and has been its Chairman since its inception and Chief Executive Officer since April 5, 2012. Mr. Hassett began his career as a marketing and business manager, for Rockwell Automation Incorporated's Motor Special Products division from 1990 to 1995, where he launched new product platforms and developed and implemented global distribution initiatives and channels. Mr. Hassett worked at General Electric from January 1996 to February 1998, as a general manager of Distribution Services in the Industrial Systems Division and from February 1998 to March 2000, in the Electric Motors Unit of the Industrial Systems Division where he restructured the unit, consolidated product lines and grew the business. From March 2000 to August 2003, he served as President of Hawk Motors and Rotors, a division of Hawk Corporation, a brake manufacturer, where he restructured the Company. From August 2003 to October 2005, Mr. Hassett served as Vice President and General Manager of Wavecrest Laboratories, a propulsion systems and controls start-up, where he led the development and launch of four new product platforms. From June 2006 to October 2010, Mr. Hassett served as President and Managing Director of LEMO USA, a Swiss-based connector company, where he restructured the Company, helped contain costs and improved operating margins and business. From December 2010 to October 2011, Mr. Hassett served as President of Cavometrix, a connector company serving the medical, energy and alternative energy industries. Mr. Hassett has a BS in Mechanical Engineering from Cleveland State University and a BS in Physics from Youngstown State University. Mr. Hassett's patents and patents pending and his extensive experience and professional contacts in the electric motor industry led to the decision to appoint him to the Board.
Quentin Ponder has served as President from October 20, 2011 until April 5, 2012, Secretary from October 20, 2011 until November 11, 2011 and Treasurer of the Company since October 20, 2011. On April 5, 2012, Mr. Ponder was appointed Chief Financial Officer and Vice Chairman. Mr. Ponder is a seasoned executive with over 40 years of management experience. From November 1962 to July 1967, Mr. Ponder served as Senior Manufacturing Engineer at General Electric where he worked in the development of a flow manufacturing system. From July 1980 to June 1985, he was President of Franklin Electric, Inc., an electric motor company, where he restructured the Company which became a global leader in submersible motors for water wells. From July 1985 to March 1990, Mr. Ponder was President of Baldor Electric, Inc., an electric motor company, where he restructured the Company. From April 1990 to May 1997, Mr. Ponder worked for Lincoln Electric, Inc., as a consultant. From May 1990 to the present, Mr. Ponder has worked as an independent management consultant. Mr. Ponder serves as a director and is a 33.3% owner of Reliable Electric Motor Company, Inc., an electric motor importer. Mr. Ponder is the sole owner and a director of Summit Management Consulting, Inc. and Capital Alternatives, Inc., a semi-trailer leasing company. Mr. Ponder earned a Ph.D. from Columbia University in general management, accounting, and economics. Mr. Ponder's extensive experience in the electric motor industry led to the decision to appoint him to the Board.
47 |
|
Table of Contents |
Judson W. Bibb has been a director of the Company since April 15, 2011. Mr. Bibb was appointed Secretary on November 11, 2011 and Vice President on April 5, 2012. He has worked exclusively for the Company since 2013. Prior to that, Mr. Bibb was a self-employed freelance multi-media producer since 1983. His services included: producer, writer, director, cinematographer, videographer, still photographer, audio and video editor, voiceover talent, marketer, ad designer and Internet search engine optimizer. His client list included KPMG, T. Rowe Price, Briggs & Stratton, Caterpillar, Toyota, Georgia-Pacific, Alcoa Aluminum, Lowes, Office Depot, PepsiCo, Hewlett-Packard, Bayer, Caremark, and T-Mobile. Mr. Bibb graduated cum laude from the University of South Florida with a B.A. in mass communications-film. Mr. Bibb's broad background and wide variety of resources, including experience in marketing and public relations and business experience in automotive, trucking, electronics, retail, direct response and the Internet led to the decision to appoint him to the Board.
Christopher McKee has been a director of the Company since August 19, 2015. Mr. McKee joined GTT Communications, Inc. ("GTT") (NYSE GTT) in 2008 and is GTT's General Counsel and EVP, Corporate Development and Corporate Secretary for the GTT Board. Mr. McKee is responsible for all GTT’s corporate legal requirements. Mr. McKee also oversees the development of strategic business opportunities for GTT, including all merger and acquisition activities. Mr. McKee has over 20 years of broad legal experience in the telecommunications industry. Prior to joining GTT, he served as General Counsel for StarVox Communications where he was responsible for the Company's legal department, mergers and acquisitions, employment law, litigation, and legal support for the sales teams. Mr. McKee also formerly served as Vice President and Assistant General Counsel for Covad Communications where he headed its Washington, DC office and directed its federal and state regulatory compliance and advocacy efforts. Mr. McKee previously worked for XO Communications, Net2000 Communications and was in private practice in Washington, DC as an associate at Dickstein Shapiro and Cooley LLP. Mr. McKee earned a law degree from Syracuse University and received his Bachelor of Arts from Colby College. Mr. McKee's background of supply chain, micro-cap and small cap as well as his M&A background and his knowledge and experience of regulatory compliance and company legal structure led to the decision to appoint Mr. McKee to the board.
Richard J. "Dick" Schul has been a director of the Company since August 19, 2015. Since November 2013, Mr. Schul has been an independent management consultant providing management and strategic planning services to company executives. Mr. Schul started his career with Emerson Electric in St. Louis in 1981, where he held positions of increasing responsibility throughout, including marketing manager, director of marketing and vice president of marketing for Emerson Motors (a global leader in generator technology) through 1989. In 1990, Mr. Schul was named president of Alco Controls Division of Emerson in Maryland Heights. In 1997, Mr. Schul was named president of Emerson's Air Moving Motors Division. In 1998 Mr. Schul was named president of Specialty and Air Moving Motors and in 2000 was named group vice president of Emerson's Commercial Industrial Motors group. In 2004, Mr. Schul was named group vice president of Emerson Climate Technologies. Mr. Shul received the Richard Schultz award and the Distinguished Service Award (highest award given by the Air Conditioning, Heating, and Refrigeration Institute in November 2011. Mr. Schul retired from Emerson in November 2011 after 43 years in the HVACR industry. Mr. Schul continued to work part-time as a consultant for Emerson through 2013. Mr. Schul graduated from Indiana Institute of Technology with a BS in Mechanical Engineering in 1969 and an MBA from the University of Dayton in 1976. Mr. Schul's background in the motor and generator industries as well as his business relationships led to the decision to appoint Mr. Schul to the board.
Donald L. Bowman has been a director of the Company since August 19, 2015. Mr. Bowman has been Chief Executive Officer of BVU Authority (formerly known as Bristol Virginia Utilities) since November 2013. BVU Authority is a utility system that provides electric, water, wastewater and fiber optic telecommunication and information services to the City of Bristol and the surrounding area. From 2011 to November 2013, Mr. Bowman provided consulting services to the legal industry and various California businesses. Mr. Bowman served as Operations and Business Development Manager and consultant to the General Manager of Lemo USA Inc., from 2006-2011. Prior thereto from 2004 to 2006, Mr. Bowman served as Vice President and General Counsel of WaveCrest Laboratories LLC, a technology company in Northern Virginia ("WaveCrest"). Prior to WaveCrest, Mr. Bowman served as Associate General Corporate Counsel of MeadWestvaco from 2001 to 2004. Mr. Bowman was an associate at the law firm of Dickstein Shapiro in Washington D.C. from 1999 to 2001. Mr. Bowman's has a Juris Doctorate from the University of Virginia School of Law (1998), a Master in Engineering Management from the Florida Institute of Technology (1993), a Master in Civil and Environmental Engineering from Old Dominion University (1992), and a Bachelor of Science in Civil Engineering with Highest Honors from Virginia Military Institute (1990). He is a licensed professional engineer in the state of Virginia. He has been a registered patent attorney with the U.S. Patent and Trademark Office for over fourteen years. Mr. Bowman served five years on active duty as an officer with the United States Navy and retired as Commander from the U.S. Naval Reserves in 2011. Mr. Bowman's business and legal background led to the decision to appoint Mr. Bowman to the board.
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Steven Wilburn was elected to the Board on January 15, 2020. In 2004, Mr. Wilburn founded FirmGreen, Inc., an integrated energy company participating in virtually all aspects of the global green energy business. Since then, he has served as the Chairman and Chief Executive Officer of FirmGreen, Inc. In 2014, Mr. Wilburn founded VerdeWatts, LLC, an energy storage and management solutions company, and has served as the Managing Member of VerdeWatts since its founding. During 2013 and 2014, Steve served on the Advisory Board of the Export Import Bank of the United States. From 2016 until 2018, he served on the inaugural Trade and Finance Advisory Committee under the Obama and Trump administrations.
In 1977, Wilburn was selected to lead a joint venture team (Monsanto, Wheelabrator, McDonnell-Douglas) to find a new cost-effective and environmentally-sound method of producing pure hydrogen for NASA’s Space Shuttle Program. The team built a pilot plant that gasified petroleum coke and coal to produce pure hydrogen fuel.
In 1976 Steve joined GWF Power Systems. His team invented a new process to generate clean power from petroleum coke, while producing a salable and environmentally stable soil amendment as a byproduct.
He was subsequently promoted to VP of Business Development at the newly merged Allied Signal Corporation, where he was responsible for the design, permitting, and construction of 5 power plants with a combined capital costs of $300 million dollars in 1984 dollars. ($750 million in 2019 dollars).
In 2001, Governor Gray Davis recruited him to fast track natural gas fired power plants during California’s energy crisis. Steve brought the plants on-line within 5 months of the signing the State’s Letter of Commitment.
Subsequently, he helped a friend commercialize a patented biogas cleanup process which produced pipeline quality gas and food grade CO2 from landfill gas and Anaerobic Digester Biogas. Steve and the team designed, built and operated a pilot plant at the Burlington County Landfill in New Jersey under a DOE grant.
In 1994, Steve started an alternative energy consulting business, Steve Wilburn and Associates.
A combat wounded and disabled Marine who was awarded the Purple Heart, a chemical engineer with in-depth applications engineering experience and an executive with over 40 years of experience in alternative energy and water treatment, Steve Wilburn’s depth of knowledge and vast industry experience in alternative energy, successful track record and political clout led to the decision to appoint Mr. Wilburn to the board.
Family relationships
There are no family relationships among any of our officers or directors.
Involvement in legal proceedings
Other than described above in "Legal Proceedings", there are no legal proceedings that have occurred within the past ten years concerning our directors, or control persons which involved a criminal conviction, a criminal proceeding, an administrative or civil proceeding limiting one's participation in the securities or banking industries, or a finding of securities or commodities law violations,
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Committees of the Board of Directors
The Company does not have an audit committee. We are not a "listed company" under SEC rules and are therefore not required to have an audit committee comprised of independent directors.
We do not currently have a "financial expert" within the meaning of the rules and regulations of the SEC.
The Company has no nominating or compensation committees at this time. The entire Board participates in the nomination and audit oversight processes and considers executive and director compensation. Given the size of the Company and its stage of development, the entire Board is involved in such decision-making processes. Thus, there is a potential conflict of interest in that our directors and officers have the authority to determine issues concerning management compensation, nominations, and audit issues that may affect management decisions. We are not aware of any other conflicts of interest with any of our executive officers or directors.
Resignations
Daniel C. Ustian resigned from the Board effective May 26, 2020.
Board of Advisors
The Company has a Board of Advisors which currently consists of eleven members. Scott Van Dorn (appointed March 18, 2014), currently engineering director at Navistar Corporation, has more than 20 years of experience in global engineering and management in vehicles, engines electronics and design. Richard Schul (appointed December 31, 2013) is a veteran of the motor/generator industry. The other members include: Bill Finley (appointed July 7, 2014), Chief Technology Officer of Siemens Industry Drive Technology; Dan Ustian (appointed September 10, 2014), a former chief executive officer of Navistar; Chris McKee (appointed June 1, 2014), executive vice president and general counsel of GTT; Andrew Scherr (appointed May 21, 2014), an investor, entrepreneur and strategic consultant; Gurminder Bedi (appointed January 1, 2016), managing partner at Compass Acquisitions, LLC; Mark Steele (appointed May 9, 2017), CEO, president and co-owner of Craftsmen Industries, Inc.; Steve Wilburn (appointed December 9, 2019) founder, Chairman and CEO for FirmGreen, Inc. and founder and managing member of VerdeWatts, LLC; Hakan Kostepen (appointed December 10, 2019) formerly Panasonic’s Executive Director of Product Strategy & Innovation who headed up their Silicon Valley Center; Raoul Wood (appointed December 17, 2019), an expert in sustainable energy and power generation who has developed more than twenty public sector solar power projects and over 2,000 solar electric vehicle charging installations; and Harvey Beverly (appointed December 17, 2019), who recently finished a 30-year career with the United States Army Corps of Engineers, the federal agency that oversees dams, canals and flood protection as well as public works projects worldwide.
Upon the execution of an Advisory Board Agreement, the Company issues a non-qualified 30-month warrant to purchase 200,000 shares of the Company's common stock at an exercise price that has varied from $0.03 to $0.80 per share depending on the Company's current share price. The warrant is immediately exercisable.
Code of Ethics
The Company has adopted a Code of Ethics that establishes the standards of ethical conduct applicable to all directors, officers and employees of the Company, including our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions. A copy of our Code of Ethics is available on our web site at www.cooltechnologiesinc.com. We will provide a copy of our Code of Ethics free of charge to any person who requests a copy. Requests should be directed to the Secretary at Cool Technologies, Inc., 8875 Hidden River Parkway, Suite 300, Tampa, Florida 33637, or by telephone at (813) 975-7467.
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Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our executive officers and directors, and persons who beneficially own more than 10% percent of our equity securities ("Reporting Persons") to file reports of ownership and changes in ownership with the SEC. Based solely on our review of copies of such reports and representations from the Reporting Persons, we believe that occurred during the fiscal year ended December 31, 2019:
|
· |
All reports were filed on a timely basis |
Changes in Nominating Process
There are no material changes to the procedures by which security holders may recommend nominees to our Board.
Item 11. Executive Compensation
Summary Compensation Table
The following table provides certain information regarding compensation awarded to, earned by or paid to persons serving as our Chief Executive Officer during fiscal 2019 and 2018 and our two other most highly compensated officers who had total compensation exceeding $100,000 for fiscal 2019 (each a "named executive officer").
Note: our CFO, Quentin Ponder, works under a consulting contract and, consequently, is not considered an employee. More information regarding his compensation can be found under “Consulting Agreements” below.
Name and Principal Position |
|
Fiscal Year
|
|
Salary
|
|
|
Bonus
|
|
|
Stock Awards
|
|
|
Warrant Awards ($) |
|
|
Option Awards
|
|
|
All Other
|
|
|
Total
|
|
|||||||
Timothy Hassett |
|
2019 |
|
|
210,000 |
(3) |
|
|
100,000 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
12,553 |
(1) |
|
|
322,553 |
|
CEO and Chairman |
|
2018 |
|
|
210,000 |
(4) |
|
|
|
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
11,904 |
(1) |
|
|
221,904 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quentin Ponder |
|
2019 |
|
|
144,000 |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
|
|
|
|
144,000 |
|
CFO |
|
2018 |
|
|
144,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
144,000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Judson Bibb |
|
2019 |
|
|
120,000 |
(5) |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
12,553 |
(1) |
|
|
132,553 |
|
Vice President, Secretary and Director |
|
2018 |
|
|
120,000 |
(6) |
|
|
-- |
|
|
|
-- |
|
|
|
13,537 |
(2) |
|
|
-- |
|
|
|
11,904 |
(1) |
|
|
145,441 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark Hodowanec, |
|
2019 |
|
|
175,000 |
(7) |
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
-- |
|
|
|
12,553 |
(1) |
|
|
187,553 |
|
Chief Technical Officer (9) |
|
2018 |
|
|
175,000 |
(8) |
|
|
100,000 |
|
|
|
-- |
|
|
|
13,537 |
(2) |
|
|
-- |
|
|
|
11,904 |
(1) |
|
|
300,441 |
|
____________
(1) |
Represents health care insurance premiums paid by the Company. |
|
|
(2) |
Value of the warrants $13,537 received in consideration of extraordinary efforts. |
|
|
(3) |
Mr. Hassett was paid $210,000. |
|
|
(4) |
Mr. Hassett was paid $152,927 with the balance of $57,073 being earned and accrued. |
|
|
(5) |
Mr. Bibb was paid $120,000. |
|
|
(6) |
Mr. Bibb was paid $34,250 with the balance of $85,750 being earned and accrued. |
|
|
(7) |
Mr. Hodowanec was paid $175,000. |
|
|
(8) |
Mr. Hodowanec was paid $85,800 with the balance of $89,200 being earned and accrued. Mr. Hodowanec resigned effective July 31, 2019. |
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Employment Agreements
We entered into an employment agreement, dated March 5, 2014, with Timothy Hassett to serve as our Chief Executive Officer for an initial annual salary of $210,000, to be paid in equal monthly installments. If the Company is cash flow positive for three consecutive months, the monthly compensation will increase to $25,000 per month. If the Company maintains profitability for four consecutive quarters, the monthly compensation will increase to $30,000 per month. The Company also agreed to reimburse Mr. Hassett for his healthcare costs until the Company adopts a healthcare plan (As of June 15, 2014, the Company contracted with United Healthcare to provide a healthcare plan for its employees. Consequently, the Company is no longer reimbursing Mr. Hassett for his healthcare costs). If Mr. Hassett's employment is terminated without cause, he will be entitled to severance in the amount of two years' salary in effect at such time to be paid by the Company in one payment or in four equal installments at the end of each quarter following termination, at the Company's discretion. Such severance obligation shall accelerate and become immediately payable upon change of control of the Company. The Company will also pay any excise tax on Mr. Hassett's behalf that may be triggered under the Internal Revenue Code as a result. Mr. Hassett will not compete with the Company during the term of the agreement.
On August 9, 2016, we entered into an employment agreement with Judson Bibb to serve as our Vice President for an initial annual salary of $120,000, to be paid in equal monthly installments. Mr. Bibb's annual salary shall be increased to $150,000 upon the Company remaining cash flow positive for three consecutive months and to $180,000 upon the Company maintaining profitability for four consecutive quarters. The Company also agreed to include Mr. Bibb on its healthcare plan (As of June 15, 2016, the Company contracted with Freedom Life Insurance Company of America to provide a healthcare plan for its employees.). If Mr. Bibb's employment is terminated without cause, he will be entitled to severance in the amount of two years' salary in effect at such time to be paid by the Company in one payment or in four equal installments at the end of each quarter following termination, at the Company's discretion. Such severance obligation shall accelerate and become immediately payable upon change of control of the Company. The Company will also pay any excise tax on Mr. Bibb's behalf that may be triggered under the Internal Revenue Code as a result. Mr. Bibb will not compete with the Company during the term of the agreement.
Consulting Agreements
We entered into a consulting agreement with Summit Management in April 2011 for services provided by Quentin Ponder to the Company for a consulting fee of $5,000 per month which was increased to $7,500 per month effective January 1, 2012. During 2012, Mr. Ponder agreed to forgo four months' payment under the consulting agreement due to the financial condition of the Company. Mr. Ponder was paid $7,500 per month from January 2013 through July 2013 and accrued $2,500 during those months (except for the first month in which he accrued $1,250); was paid $10,000 per month from August 2013 through April 2014; and was paid $12,000 per month from May 2014 through December 2016. On December 28, 2016, the Company entered into a new consulting agreement with Summit, effective January 1, 2017 to provide Mr. Ponder’s services for so long as they are needed by the Company.
We entered into a consulting agreement with Timothy Hassett in April 2011 pursuant to which he received $5,000 per month. The consulting fee was increased to $10,000 per month effective January 1, 2012. During 2012, Mr. Hassett agreed to forgo four months' payment on the agreement due to the financial condition of the Company. Mr. Hassett was paid $10,000 per month from January 2013 through July 2013 and accrued $3,500 during those months (except for the first month in which he accrued $1,750) and was paid $13,500 per month from August 2013 through October 2013. Such consulting agreement terminated on November 1, 2013; the date Mr. Hassett became a full-time, salaried employee of the Company.
On May 1, 2012, we entered into a consulting agreement with Bibb Productions & Consulting for Judson Bibb's services for a monthly consulting fee of $6,000 conditional upon the financial ability of the Company. Mr. Bibb's monthly consulting fee under this agreement was accrued but unpaid from May 2012 through April 2013 and was paid to Mr. Bibb for the months of May, June, July and August 2013. Such consulting agreement terminated on January 1, 2014, the date Mr. Bibb became a full-time, salaried employee of the Company and was paid $8,000 per month. Mr. Bibb's compensation increased to $10,000 per month in May 2014.
Outstanding Equity Awards
The table below reflects all outstanding equity awards made to any named executive officer that were outstanding at December 31, 2019.
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OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2019
|
|
Option Awards |
|
|||||||||||||||
|
|
|
|
Number of |
|
|
Number of |
|
|
|
|
|
|
|
||||
|
|
|
|
Securities |
|
|
Securities |
|
|
|
|
|
|
|
||||
|
|
|
|
Underlying |
|
|
Underlying |
|
|
|
|
|
|
|
||||
|
|
|
|
Unexercised |
|
|
Unexercised |
|
|
Option |
|
|
Option |
|
||||
|
|
|
|
Options (#) |
|
|
Options (#) |
|
|
Exercise |
|
|
Expiration |
|
||||
Name |
|
Grant Date |
|
Exercisable |
|
|
Unexercisable |
|
|
Price ($) |
|
|
Date |
|
||||
Timothy Hassett |
|
3/31/14 |
|
|
1,000,000 |
|
|
|
-- |
|
|
|
2.00 |
|
|
|
(1 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Judson Bibb |
|
3/31/14 |
|
|
2,000,000 |
|
|
|
-- |
|
|
|
2.00 |
|
|
|
(1 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mark Hodowanec |
|
3/31/14 |
|
|
1,000,000 |
|
|
|
-- |
|
|
|
2.00 |
|
|
|
(1 | ) |
_______________
(1) |
No expiration dates. |
Compensation of Officers
On January 13, 2014, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act"), and Section 14A of the Securities Exchange Act of 1934, as amended, our stockholders voted, on an advisory basis, to approve the compensation of the management team. This proposal, commonly known as a "say-on-pay" proposal, gave the Company's stockholders the opportunity to express their views on the compensation of the Chairman and Chief Executive Officer, Timothy Hassett, and the rest of the management team.
The compensation of the management team was approved by 77.46% of the shares voted.
On February 20, 2013, the Board approved the following compensation for its officers: (i) $13,500 per month for Timothy Hassett, as Chief Executive Officer, (ii) $10,000 per month for Quentin Ponder, as Chief Financial Officer and Treasurer, (iii) $12,500 per month for Theodore Banzhaf, as President, (iv) $14,500 per month for a still undesignated Chief Technical Officer and (v) $8,000 per month for Judson Bibb, as Vice-President and Secretary. Such compensation accrued commencing January 15, 2013 until July 2013 when the Company raised $1 million.
On February 20, 2013, the Board also approved increased compensation if and when the Company achieves certain milestones as follows: (1) generating $1 million in additional funding, (2) generating $100,000 in revenue or an additional $1 million in funding, (3) achieving profitability (being cash flow positive for three consecutive months) and (4) maintaining profitability for four consecutive quarters. With the achievement of the first milestone, the compensation for the President will increase to $17,500 per month. With the achievement of the second milestone, the compensation for the Chief Executive Officer shall increase to $17,500 per month, the compensation for the Chief Financial Officer and Treasurer shall increase to $12,000 per month, the compensation for the President shall increase to $20,000 per month, and the compensation for the Vice President and Secretary shall increase to $10,000 per month. With the achievement of the third milestone, the compensation for the Chief Executive Officer shall increase to $25,000 per month, the compensation for the Chief Financial Officer and Treasurer shall increase to $18,000 per month, the compensation for the President shall increase to $24,000 per month, and the compensation for the Vice President and Secretary shall increase to $12,000 per month. With the achievement of the fourth milestone, the compensation for the Chief Executive Officer shall increase to $30,000 per month, the compensation for the Chief Financial Officer and Treasurer shall increase to $24,000 per month, the compensation for the President shall increase to $29,000 per month, and the compensation for the Vice President and Secretary shall increase to $15,000 per month.
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In addition, the Board authorized the Chief Executive Officer to make quarterly bonuses of $50,000 and/or 50,000 shares of, or options for Common Stock available for each officer in addition to performance payments from 5% of the Company's net income to be given for individual contributions, such as the awarding of patents or the signing of major customer contracts.
On March 31, 2014, the Board approved the grant of options to Judson Bibb to purchase 2,000,000 shares of common stock at an exercise price of $2.00 per share and the grant of options to purchase 1,000,000 shares of common stock at $2.00 per share to each of Messrs. Hassett and Hodowanec.
Compensation of Directors
The Company has not yet established a compensation plan for its directors, however on September 20, 2017, each of our directors were issued three-year warrants to purchase 200,000 shares of the Company’s common stock at $0.08536 per share for serving on the board of directors. The warrants may be exercised on a cashless basis.
In 2011, Judson Bibb received a gift of 5,000,000 shares from PPEG. For accounting purposes, the shares are being classified as compensation. The shares were subsequently returned on April 13, 2012 and no financial benefit was accrued.
On February 20, 2013, the Board granted Judson Bibb an option to purchase 2,000,000 shares of common stock, at a purchase price of par value, or $0.001 per share. The option was not exercised and on March 21, 2013, the Company and Judson Bibb signed an agreement rescinding such option grant.
On March 14, 2014, Don Bowman was granted a five-year warrant to purchase 250,000 shares of the Company's common stock at $0.60 per share for legal services provided to the Company. The warrant may be exercised on a cashless basis.
On September 20, 2017, Christopher McKee and Richard Schul were each granted three-year warrants to purchase 100,000 shares of the Company’s common stock at $0.08536 per share for assistance and services provided to the Company. The warrants may be exercised on a cashless basis.
On September 20, 2017, Daniel Ustian was granted a three-year warrant to purchase 250,000 shares of the Company’s common stock at $0.08536 per share for assistance and services provided to the Company. The warrants may be exercised on a cashless basis.
On September 20, 2017, Quentin Ponder and Judson Bibb were each granted three-year warrants to purchase 200,000 shares of the Company’s common stock at $0.08536 per share in recognition for their efforts for maintain and advance the Company since inception. The warrants may be exercised on a cashless basis.
On September 20, 2017, Timothy Hassett was awarded $100,000 in consideration for the two patents he and Mark Hodowanec received in 2017 and, subsequently, assigned to the Company. The award was added to his accrued salary.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table lists, as of May 8, 2020, the number of shares of common stock beneficially owned by (i) each person, entity or group (as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934) known to the Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii) each of our named executive officers and (iii) all officers and directors as a group. Information relating to beneficial ownership of common stock by our principal stockholders and management is based upon information furnished by each person using "beneficial ownership" concepts under the rules of the SEC. Under these rules, a person is deemed to be a beneficial owner of a security if that person directly or indirectly has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to dispose or direct the disposition of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days. Under the SEC rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary interest. Except as noted below, each person has sole voting and investment power with respect to the shares beneficially owned and each stockholder's address is c/o Cool Technologies, Inc., 8875 Hidden River Parkway, Suite 300, Tampa, Florida 33637.
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The percentages below are calculated based on 395,929,942 shares issued and outstanding shares of common stock and 3 issued and outstanding shares of Series A Stock (each such share of Series A Stock has the voting right of 50,000 shares of Common Stock) and 2,272,270 issued and outstanding shares of Series B Stock (collectively, the 3 holders of the shares are entitled to 66 2/3% of the total votes), as of May 8, 2020.
Name of Beneficial Owner |
|
Number of Shares Beneficially Owned |
|
|
Percentage |
|
||
5% or Greater Stockholders |
|
|
|
|
|
|
||
Eric Paul Brown 1877 S. Wiesbrook Road Wheaton, Illinois 60189 |
|
|
3,877,269 |
(1) |
|
|
66.66 | %(2) |
|
|
|
|
|
|
|
|
|
Christopher J. Jones 1314 E. Forest Avenue Wheaton, Illinois 60189 |
|
|
4,149,996 |
(3) |
|
|
66.66 | %(2) |
|
|
|
|
|
|
|
|
|
Directors and Executive Officers |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Timothy Hassett |
|
|
8,387,928 |
(4) |
|
|
2.10 | % |
|
|
|
|
|
|
|
|
|
Quentin Ponder |
|
|
8,400,000 |
(5) |
|
|
2.10 | % |
|
|
|
|
|
|
|
|
|
Judson Bibb |
|
|
9,170,000 |
(6) |
|
|
2.29 | % |
|
|
|
|
|
|
|
|
|
Christopher McKee |
|
|
744,444 |
(7) |
|
* |
|
|
|
|
|
|
|
|
|
|
|
Richard J. "Dick" Schul |
|
|
500,000 |
(8) |
|
* |
|
|
|
|
|
|
|
|
|
|
|
Donald Bowman |
|
|
200,000 |
(9) |
|
* |
|
|
|
|
|
|
|
|
|
|
|
Daniel C. Ustian |
|
|
7,330,804 |
(10) |
|
|
66.66 | %(2) |
|
|
|
|
|
|
|
|
|
All executive officers and directors as a group (7 persons) |
|
|
34,733,176 |
|
|
|
8.69 | % |
_______
* less than 1% |
(1) |
Includes (i) 909,090 shares of Series B Stock which are convertible by the Series B stockholder into Common Stock on a one-to-one basis and automatically convert into Common Stock on a one-to-one basis if the Common Stock trades in excess of $2.25 for any consecutive 20-day period, (ii) a warrant to purchase 909,090 shares of Common Stock at $0.07 per share (iii) a warrant to purchase 309,090 shares of Common Stock at $0.07 per share, (iv) a warrant to purchase. 116,667 shares of Common Stock at $0.05 per share, and (v) a warrant to purchase 1,000,000 shares of Common Stock at $0.05 per share. |
(2) |
The Series B Stock votes together as a single class with the holders of the Common Stock, with the holders of Series B Stock being entitled to 66 2/3% of the total votes. |
(3) |
Includes (i) 909,090 shares of Series B Stock which are convertible by the Series B stockholder into Common Stock on a one-to-one basis and automatically convert into Common Stock on a one-to-one basis if the Common Stock trades in excess of $2.25 for any consecutive 20-day period, (ii) a warrant to purchase 909,090 shares of Common Stock at $0.07 per share (iii) a warrant to purchase 309,090 shares of Common Stock at $0.07 per share, (iv) a warrant to purchase 116,667 shares of Common Stock at $0.05 per share, and (v) a warrant to purchase 1,000,000 shares of common stock at $0.05 per share. |
(4)
|
Includes (i) an option to purchase 1,000,000 shares of Common Stock at $2.00 per share, (ii) a currently exercisable warrant to purchase 625,000 shares of Common Stock at $0.22 per share and (iii) a currently exercisable warrant to purchase 285,714 shares of common stock at $0.10 per share which expires on July 20, 2022. Does not include an aggregate of 90,000 shares held by Mr. Hassett’s minor children. |
(5) |
Includes (i) a currently exercisable warrant to purchase 400,000 shares of Common Stock at $0.22 per share (ii) a currently exercisable warrant to purchase 1,000,000 shares of Common Stock at $0.10 per share, (iii) currently exercisable warrants to purchase 400,000 shares of Common Stock at $0.08536 per share, and (iv) current exercisable warrants to purchase 1,600,000 shares of Common Stock at $0.0714 per share. |
(6) |
Includes (i) options to purchase 2,000,000 shares of Common Stock at $2.00 per share, and (ii) a currently exercisable warrant to purchase 750,000 shares of Common Stock at $0.22 per share, (iii) a currently exercisable warrant to purchase 1,400,000 shares of Common Stock at $0.10 per share, (iv) currently exercisable warrants to purchase 400,000 shares of Common Stock at $0.08536 per share, and (v) a currently exercisable warrant to purchase 1,000,000 shares of Common Stock at $0.0714 per share. |
(7) |
Includes (i) a currently exercisable warrant to purchase 222,222 shares of Common Stock at $0.57 per share, and (ii) currently exercisable warrants to purchase 300,000 shares of Common Stock at $0.08536 per share. |
(8) |
Includes (i) a currently exercisable warrant to purchase 100,000 shares of common stock at $0.22 and (ii) currently exercisable warrants to purchase 300,000 shares of Common Stock at $0.08536 per share. |
(9) |
Represents a currently exercisable warrant to purchase 200,000 shares of Common Stock at $0.08536 per share. |
(10) |
Includes (i) 909,090 shares of Series B Stock which are convertible by Mr. Ustian into Common Stock on a one-to-one basis and automatically convert into Common Stock on a one-to-one basis if the Company’s common stock trades in excess of $2.25 for any consecutive 20-day period, (ii) a currently exercisable warrant to purchase 909,090 shares of Common Stock at $0.07 per share, (iii) a currently exercisable warrant to purchase 222,222 shares of Common Stock at $0.57 per share; (iv) (v) a currently exercisable warrant to purchase 1,000,000 shares of Common Stock at $0.22 per share, (vi) currently exercisable warrants to purchase 450,000 shares of Common Stock at $0.08536 per share, (vii) a currently exercisable warrant to purchase 309,090 shares of Common Stock at $0.07 per share, and (viii) a currently exercisable warrant to purchase 2,000,000 shares of Common Stock at $0.05 per share.. |
55 |
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Table of Contents |
Change-in-Control Agreements
The Company does not have any change-in-control agreements with any of its executive officers, except that severance payments, if any, to which Messrs. Hassett and Bibb may be entitled under their employment agreements as described above in "Employment Agreements", accelerate in the event of a change of control.
Item 13. Certain Relationships and Related Transactions and Director Independence.
Certain Relationships and Related Transactions
On February 12, 2018, we sold a total of 1,000,000 shares of common stock and a five-year warrant to purchase 1,000,000 shares of our common stock at an exercise price of $0.0714 per share, to Summit Management Consulting, the Company who provides the services of our Chief Financial Officer, Quentin Ponder, in exchange for $50,000 in accrued salary. The warrant may be exercised on a cashless basis.
On February 12, 2018, we sold a total of 1,000,000 shares of common stock and a five-year warrant to purchase 1,000,000 shares of our common stock at an exercise price of $0.0714 per share, to our Secretary and Vice President, Judson Bibb, in exchange for $50,000 in accrued salary. The warrant may be exercised on a cashless basis
On February 21, 2018, we issued for consideration of $17,000, 233,333 shares of our common stock and a three-year warrant to purchase 116,667 shares of our common stock at an exercise price of $0.05 to Eric Brown, a 5% stockholder. The warrant expires on February 21, 2021 and may be exercised on a cashless basis.
On February 21, 2018, we issued for consideration of $11,670, 233,333 shares of our common stock and a three-year warrant to purchase 116,667 shares of our common stock at an exercise price of $0.05 to Christopher Jones, a 5% stockholder. The warrant expires on February 21, 2021 and may be exercised on a cashless basis.
On February 25, 2018, we sold a total of 600,000 shares of common stock and a five-year warrant to purchase 600,000 shares of our common stock at an exercise price of $0.0714 per share, to Summit Management Consulting, the Company who provides the services of our Chief Financial Officer, Quentin Ponder, in exchange for $30,000 in accrued salary. The warrant may be exercised on a cashless basis.
On March 27, 2018, Gemini Master Fund, a 10% shareholder, exercised a warrant to purchase 13,671,379 shares via cashless exercise which resulted in the issuance of 9,603,662 shares of common stock. Gemini has no more warrants outstanding.
On March 28. 2018, we sold a total of 1,111,111 shares of our common stock and a five-year warrant to purchase 1,111,111 shares of our common stock at an exercise price of $0.10 per share to Abdalla Bamashmus, a 5% shareholder, in a private offering. We received $50,000 as consideration for the sale of such securities.
On April 10, 2018 KHIC, LLC, a 6% shareholder, was issued 2,025,000 shares of common stock upon partial conversion of $50,625 on convertible debt of $374,883
On September 1, 2018, we issued for consideration of $250,000, a five-year warrant to purchase 2,000,000 shares of our common stock at an exercise price of $0.05 to Daniel Ustian, a director. The warrant expires on September 1, 2023 and may be exercised on a cashless basis.
On September 7, 2018, we issued for consideration of $125,000, a five-year warrant to purchase 1,000,000 shares of our common stock at an exercise price of $0.05 to Christopher Jones, a 5% stockholder. The warrant expires on September 7, 2023 and may be exercised on a cashless basis.
On September 17, 2018, we issued for consideration of $125,000, a five year warrant to purchase 1,000,000 shares of our common stock at an exercise price of $0.05 to Eric Brown, a 5% stockholder. The warrant expires on September 17, 2023 and may be exercised on a cashless basis.
56 |
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Table of Contents |
Insider Transactions Policies and Procedures
The Company does not currently have an insider transaction policy.
Director Independence
We currently do not have any independent directors as the term “independent” is defined by the rules of the American Stock Exchange.
While five of our eight directors do not receive on-going consideration from the Company for their service as directors or officers, on September 20, 2017, seven of the directors were awarded a warrant to purchase 200,000 shares of common stock and four of the five outside directors have received consideration for their service on the Company's Board of Advisor. As the entire Board of Directors has yet to affirm that the respective individual directors do not have relationships that would interfere with the exercise of independent judgement in carrying out their directors' responsibilities, none of our directors can be defined as "independent".
Item 14. Principal Accounting Fees and Services.
Audit Fees
We incurred no non-audit related fees, tax fees or other fees for professional services rendered by our principal accountant for the years ended December 31, 2019 and 2018.
It should be noted that on February 2, 2018, the board of directors voted to terminate the services of Anton and Chia, LLP and engage the services of Green and Company, CPAs as the Company’s independent registered public accounting firm. Green and Company audited the Company’s annual report on Form 10-K for the year ended December 31, 2017. The aggregate fees billed for professional services rendered by Green and Company, CPAs for audit and review services for the fiscal year ended December 31, 2017 were $134,198
On December 31, 2018, Green & Co. (“G&C”) resigned as the independent registered public accounting firm for Cool Technologies, Inc. (the “Company”). On January 2, 2019, the Company engaged Accell Audit and Compliance, P.A. (“Accell”) as the Company’s independent registered public accounting firm. Accell Audit and Compliance audited the Company’s annual report on Form 10-K for the year ended December 31, 2018.
Audit fees consist of fees for professional services rendered for the audit of the Company's consolidated financial statements included in the Company's Annual Report on Form 10-K and the review of financial statements included in the Company's Quarterly Reports on Form 10-Q. The aggregate fees billed for professional services rendered by our accountant, Accell Audit and Compliance for audit and review services for the fiscal year ended December 31, 2019 were $84,000.
Administration of the Engagement; Pre-Approval of Audit and Permissible Non-Audit Services
We have not yet established an audit committee. Until then, there are no formal pre-approval policies and procedures. Nonetheless, the auditors engaged for these services are required to provide and uphold estimates for the cost of services to be rendered. The percentage of hours expended on Accel Audit and Compliance, PA, respective engagement to audit our financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant's full-time, permanent employees was 0%.
57 |
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Table of Contents |
Item 15. Exhibits, Financial Statement Schedules.
58 |
|
Table of Contents |
_____________
* Filed herewith
Not applicable.
59 |
|
Table of Contents |
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.
Cool Technologies, Inc. |
|||
Date: May 29, 2020 |
By: |
/s/ Timothy Hassett |
|
Timothy Hassett Chairman and Chief Executive Officer, (Principal Executive 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.
Signature |
|
Capacity |
|
Date |
|
||||
/s/ Timothy Hassett |
|
Chairman and Chief Executive Officer (Principal Executive Officer) |
|
May 29, 2020 |
Timothy Hassett |
||||
|
||||
/s/ Quentin Ponder |
|
Vice-Chairman, Chief Financial Officer, |
|
May 29, 2020 |
Quentin Ponder |
|
Treasurer and director (Principal Financial and Accounting Officer) |
||
|
||||
/s/ Judson Bibb |
Vice-President, Secretary and director |
May 29, 2020 |
||
Judson Bibb |
||||
|
||||
/s/ Donald Bowman |
Director |
May 29, 2020 |
||
Donald Bowman |
||||
/s/ Christopher McKee |
Director |
May 29, 2020 |
||
Christopher McKee |
||||
/s/ Richard Schul |
Director |
May 29, 2020 |
||
Richard Schul |
||||
|
||||
/s/ Steven Wilburn |
|
Director |
May 29, 2020 |
|
Steven Wilburn |
60 |
EXHIBIT 4.22
AMENDMENT
TO THE $385,000 PROMISSORY NOTE DATED February 19, 2018
The parties agree that $385,000 Promissory Note by and between Cool Technologies, Inc. (“Company”) and Lucas Hoppel (“Holder”) is hereby amended as follows:
Maturity Date: The Maturity Date shall be extended to August 1st, 2019.
ALL OTHER TERMS AND CONDITIONS OF THE $385,000 PROMISSORY NOTE REMAIN IN FULL FORCE AND EFFECT.
Please indicate acceptance and approval of this amendment dated May 1st, 2019 by signing below:
/s/ Tim Hassett | /s/ Lucas Hoppel | ||
Tim Hassett | Lucas Hoppel | ||
Cool Technologies, Inc. Chief Executive Officer |
EXHIBIT 4.23
NEITHER THIS NOTE NOR THE SECURITIES INTO WHICH THIS NOTE IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE. THESE SECURITIES HAVE BEEN SOLD IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS.
COOL TECHNOLOGIES, INC.
PROMISSORY NOTE
Issuance Date: May 13, 2019 |
Original Principal Amount: $165,000 |
Note No. WARM-12 |
Consideration Paid at Close: $150,000 |
FOR VALUE RECEIVED, Cool Technologies, Inc., a Nevada corporation with a par value of $0.001 per common share (“Par Value”) (the “Company”), hereby promises to pay to the order of LGH Investments, LLC, a Wyoming limited liability company or registered assigns (the “Holder”) the amount set out above as the Original Principal Amount (as reduced pursuant to the terms hereof pursuant to redemption, conversion or otherwise, the “Principal”) when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof) and to pay interest (“Interest”) on any outstanding Principal at the applicable Interest Rate from the date set out above as the Issuance Date (the “Issuance Date”) until the same becomes due and payable, upon the Maturity Date or acceleration, conversion, redemption or otherwise (in each case in accordance with the terms hereof).
The Original Principal Amount is $165,000 (one hundred sixty five thousand) plus accrued and unpaid interest and any other fees. The Consideration is $150,000 (one hundred fifty thousand) payable by wire transfer (there exists a $15,000 original issue discount (the “OID”)). The Holder shall pay $150,000 of Consideration upon closing of this Note.
(1) GENERAL TERMS
(a) Payment of Principal. The “Maturity Date” shall be seven months from the date of each payment of Consideration, as may be extended at the option of the Holder in the event that, and for so long as, an Event of Default (as defined below) shall not have occurred and be continuing on the Maturity Date (as may be extended pursuant to this Section 1) or any event shall not have occurred and be continuing on the Maturity Date (as may be extended pursuant to this Section 1) that with the passage of time and the failure to cure would result in an Event of Default.
(b) Interest. A one-time interest charge of three percent (3%) (“Interest Rate”) shall be applied on the Issuance Date to the Original Principal Amount. Interest hereunder shall be paid on the Maturity Date (or sooner as provided herein) to the Holder or its assignee in whose name this Note is registered on the records of the Company regarding registration and transfers of Notes in cash or converted into Common Stock at the Conversion Price provided the Equity Conditions are satisfied.
(c) Security. This Note shall not be secured by any collateral or any assets pledged to the Holder
1 |
|
(2) EVENTS OF DEFAULT.
(a) An “Event of Default”, wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):
(i) The Company’s failure to pay to the Holder any amount of Principal, Interest, or other amounts when and as due under this Note (including, without limitation, the Company’s failure to pay any redemption payments or amounts hereunder);
(ii) A Conversion Failure as defined in section 3(b)(ii)
(iii) The Company or any subsidiary of the Company shall commence, or there shall be commenced against the Company or any subsidiary of the Company under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company or any subsidiary of the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any subsidiary of the Company or there is commenced against the Company or any subsidiary of the Company any such bankruptcy, insolvency or other proceeding which remains undismissed for a period of 180 days; or the Company or any subsidiary of the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company or any subsidiary of the Company suffers any appointment of any custodian, private or court appointed receiver or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of sixty one (180) days; or the Company or any subsidiary of the Company makes a general assignment for the benefit of creditors; or the Company or any subsidiary of the Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or the Company or any subsidiary of the Company shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or the Company or any subsidiary of the Company shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company or any subsidiary of the Company for the purpose of effecting any of the foregoing;
(iv) The Company or any subsidiary of the Company shall default in any of its obligations under any other Note or any mortgage, credit agreement or other facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement of the Company or any subsidiary of the Company in an amount exceeding $50,000, whether such indebtedness now exists or shall hereafter be created; and
(v) The Common Stock is suspended or delisted for trading on the Over the Counter OTCQB Venture Marketplace or OTCPink Open Marketplace (the “Primary Market”).
(vi) The Company loses its ability to deliver shares via “DWAC/FAST” electronic transfer.
(vii) The Company loses its status as “DTC Eligible.”
2 |
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(viii) The Company shall become late or delinquent in its filing requirements as a fully-reporting issuer registered with the Securities & Exchange Commission.
(ix) The Company shall fail to reserve and keep available out of its authorized Common Stock a number of shares equal to at least the full number of shares of Common Stock issuable upon conversion of all outstanding amounts under this Note.
(b) Upon the occurrence of any Event of Default that has not been cured within five calendar days, the Outstanding Balance shall immediately increase to 125% of the Outstanding Balance immediately prior to the occurrence of the Event of Default (the “Default Effect”) and a daily penalty of $100 (one hundred) will accrue until the default is remedied. The Default Effect shall automatically apply upon the occurrence of an Event of Default without the need for any party to give any notice or take any other action. In addition, all amounts due and payable under the Note shall, at the election of the holder, accelerate and become immediately due and payable upon notice from the Holder to the Company.
(3) CONVERSION OF NOTE. The Holder shall have the right, but not the obligation, to convert the Outstanding Balance into shares of the Company’s Common Stock, on the terms and conditions set forth in this Section 3.
(a) Conversion Right. Subject to the provisions of Section 3(c), at any time or times, the Holder shall be entitled to convert any portion of the outstanding and unpaid Conversion Amount (as defined below) into fully paid and nonassessable shares of Common Stock in accordance with Section 3(b), at the Conversion Price (as defined below). The number of shares of Common Stock issuable upon conversion of any Conversion Amount pursuant to this Section 3(a) shall be equal to the quotient of dividing the Conversion Amount by the Conversion Price. The Company shall not issue any fraction of a share of Common Stock upon any conversion. If the issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share. The Company shall pay any and all transfer agent fees, legal fees, costs and any other fees or costs that may be incurred or charged in connection with the issuance of shares of the Company’s Common Stock to the Holder arising out of or relating to the conversion of this Note.
(i) “Conversion Amount” means the portion of the Original Principal Amount and Interest to be converted, plus any penalties, redeemed or otherwise with respect to which this determination is being made.
(ii) “Conversion Price” shall equal 71% of the lowest volume weighted average price in the prior 10 trading days.
(b) Mechanics of Conversion.
(i) Optional Conversion. To convert any Conversion Amount into shares of Common Stock on any date (a “Conversion Date”), the Holder shall (A) transmit by email, facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., New York, NY Time, on such date, a copy of an executed notice of conversion in the form attached hereto as Exhibit A (the “Conversion Notice”) to the Company. On or before the third Business Day following the date of receipt of a Conversion Notice (the “Share Delivery Date”), the Company shall (A) if legends are not required to be placed on certificates of Common Stock pursuant to the then existing provisions of Rule 144 of the Securities Act of 1933 (“Rule 144”) and provided that the Transfer Agent is participating in the Depository Trust Company’s (“DTC”) Fast Automated Securities Transfer Program, credit such aggregate number of shares of Common Stock to which the Holder shall be entitled to the Holder’s or its designee’s balance account with DTC through its Deposit Withdrawal Agent Commission system or (B) if the Transfer Agent is not participating in the DTC Fast Automated Securities Transfer Program, issue and deliver to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder shall be entitled which certificates shall not bear any restrictive legends unless required pursuant the Rule 144. If this Note is physically surrendered for conversion and the outstanding Principal of this Note is greater than the Principal portion of the Conversion Amount being converted, then the Company shall, upon request of the Holder, as soon as practicable and in no event later than three (3) Business Days after receipt of this Note and at its own expense, issue and deliver to the holder a new Note representing the outstanding Principal not converted. The Person or Persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock upon the transmission of a Conversion Notice.
3 |
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(ii) Company’s Failure to Timely Convert. If within three (3) Trading Days after the Company’s receipt of the facsimile or email copy of a Conversion Notice the Company shall fail to issue and deliver to Holder via “DWAC/FAST” electronic transfer the number of shares of Common Stock to which the Holder is entitled upon such holder’s conversion of any Conversion Amount (a “Conversion Failure”), the Original Principal Amount of the Note shall increase by $1,000 per day until the Company issues and delivers a certificate to the Holder or credit the Holder’s balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon such holder’s conversion of any Conversion Amount (under Holder’s and Company’s expectation that any damages will tack back to the Issuance Date). Company will not be subject to any penalties once its transfer agent processes the shares to the DWAC system. If the Company fails to deliver shares in accordance with the timeframe stated in this Section, resulting in a Conversion Failure, the Holder, at any time prior to selling all of those shares, may rescind any portion, in whole or in part, of that particular conversion attributable to the unsold shares and have the rescinded conversion amount returned to the Outstanding Balance with the rescinded conversion shares returned to the Company (under Holder’s and Company’s expectations that any returned conversion amounts will tack back to the original date of the Note).
(iii) Terms of Future Financings. So long as this Note is outstanding, upon any issuance by the Company or any of its subsidiaries of any security with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Holder in this Note, then the Company shall notify the Holder of such additional or more favorable term and such term, at Holder’s option, shall become a part of the transaction documents with the Holder. The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, conversion lookback periods, interest rates, original issue discounts, stock sale price, private placement price per share, and warrant coverage. Financings in which the Company receives proceeds of one million dollars or greater or excluded from the Terms of Future Financings.
(iv) DTC Eligibility & Sub-Penny. If the Company fails to maintain its status as “DTC Eligible” for any reason, or, if the effective Conversion Price as calculated in Section 3(a)(ii) is less than $0.01 at any time (regardless of whether or not a Conversion Notice has been submitted to the Company), the Principal Amount of the Note shall increase by ten thousand dollars ($10,000) (under Holder’s and Company’s expectation that any Principal Amount increase will tack back to the Issuance Date). In addition, the Conversion Price shall be permanently redefined to equal 40% of the lowest traded price occurring during the fifteen (15) consecutive Trading Days immediately preceding the applicable Conversion Date on which the Holder elects to convert all or part of this Note, subject to adjustment as provided in this Note.
(c) Limitations on Conversions or Trading.
4 |
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(i) Beneficial Ownership. The Company shall not effect any conversions of this Note and the Holder shall not have the right to convert any portion of this Note or receive shares of Common Stock as payment of interest hereunder to the extent that after giving effect to such conversion or receipt of such interest payment, the Holder, together with any affiliate thereof, would beneficially own (as determined in accordance with Section 13(d) of the Exchange Act and the rules promulgated thereunder) in excess of 4.99% of the number of shares of Common Stock outstanding immediately after giving effect to such conversion or receipt of shares as payment of interest. Since the Holder will not be obligated to report to the Company the number of shares of Common Stock it may hold at the time of a conversion hereunder, unless the conversion at issue would result in the issuance of shares of Common Stock in excess of 4.99% of the then outstanding shares of Common Stock without regard to any other shares which may be beneficially owned by the Holder or an affiliate thereof, the Holder shall have the authority and obligation to determine whether the restriction contained in this Section will limit any particular conversion hereunder and to the extent that the Holder determines that the limitation contained in this Section applies, the determination of which portion of the principal amount of this Note is convertible shall be the responsibility and obligation of the Holder. If the Holder has delivered a Conversion Notice for a principal amount of this Note that, without regard to any other shares that the Holder or its affiliates may beneficially own, would result in the issuance in excess of the permitted amount hereunder, the Company shall notify the Holder of this fact and shall honor the conversion for the maximum principal amount permitted to be converted on such Conversion Date in accordance with Section 3(a) and, any principal amount tendered for conversion in excess of the permitted amount hereunder shall remain outstanding under this Note. In the event that the Market Capitalization of the Company falls below $2,500,000, the term “4.99%” above shall be permanently replaced with “9.99%”. “Market Capitalization” shall be defined as the product of (a) the closing price of the Common Stock of the Common stock multiplied by (b) the number of shares of Common Stock outstanding as reported on the Company’s most recently filed Form 10-K or Form 10-Q. The provisions of this Section may be waived by Holder upon not less than 65 days prior written notification to the Company.
(ii) Capitalization. So long as this as this Note is outstanding, upon written request of the Holder, the Company shall furnish to the Holder the then-current number of common shares issued and outstanding, the then-current number of common shares authorized, and the then-current number of shares reserved for third parties.
(d) Other Provisions.
(i) Share Reservation. The Company shall at all times reserve and keep available out of its authorized Common Stock a number of shares equal to two times the number of shares of Common Stock issuable upon conversion of all outstanding amounts under this Note; and within 3 (three) Business Days following the receipt by the Company of a Holder’s notice that such minimum number of shares of Common Stock is not so reserved, the Company shall promptly reserve a sufficient number of shares of Common Stock to comply with such requirement. The Company will at all times reserve at least 15,000,000 shares of Common Stock for conversion.
(ii) Prepayment. This Note may not be prepaid without the written consent of the Holder.
(iii) All calculations under this Section 3 shall be rounded up to the nearest $0.00001 or whole share.
(iv) Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 2 herein for the Company’s failure to deliver certificates representing shares of Common Stock upon conversion within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief, in each case without the need to post a bond or provide other security. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law.
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(4) PIGGYBACK REGISTRATION RIGHTS. The Company shall include on the current registration statement the Company has with SEC (or on the subsequent registration statement if such registration statement is withdrawn) all shares issuable upon conversion of this Note. Failure to do so will result in liquidated damages of 15% of the outstanding principal balance of this Note, but not less than $15,000, being immediately due and payable to the Holder at its election in the form of cash payment or addition to the balance of this Note.
(5) REISSUANCE OF THIS NOTE.
(a) Assignability. The Company may not assign this Note. This Note will be binding upon the Company and its successors and will inure to the benefit of the Holder and its successors and assigns and may be assigned by the Holder to anyone of its choosing without Company’s approval.
(b) Lost, Stolen or Mutilated Note. Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Note, the Company shall execute and deliver to the Holder a new Note representing the outstanding Principal.
(6) NOTICES. Any notices, consents, waivers or other communications required or permitted to be given under the terms hereof must be in writing and will be deemed to have been delivered: (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party) (iii) upon receipt, when sent by email; or (iv) one (1) Trading Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same. The addresses and facsimile numbers for such communications shall be those set forth in the communications and documents that each party has provided the other immediately preceding the issuance of this Note or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) Business Days prior to the effectiveness of such change. Written confirmation of receipt (i) given by the recipient of such notice, consent, waiver or other communication, (ii) mechanically or electronically generated by the sender’s facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (iii) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.
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The addresses for such communications shall be:
If to the Company, to:
____________________________
____________________________
____________________________
If to the Holder:
Lucas Hoppel
Phone: 858-232-5110
Email: Luke@LukeHoppel.com
(7) APPLICABLE LAW AND VENUE. This Note shall be governed by and construed in accordance with the laws of the State of California, without giving effect to conflicts of laws thereof. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of California or in the federal courts located in the city of San Diego, in the State of California. Both parties and the individuals signing this Agreement agree to submit to the jurisdiction of such courts.
(8) WAIVER. Any waiver by the Holder of a breach of any provision of this Note shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Note. The failure of the Holder to insist upon strict adherence to any term of this Note on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Note. Any waiver must be in writing.
(9) LIQUIDATED DAMAGES. Holder and Company agree that in the event Company fails to comply with any of the terms or provisions of this Note, Holder’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to predict future interest rates, future share prices, future trading volumes and other relevant factors. Accordingly, Holder and Company agree that any fees, balance adjustments, default interest or other charges assessed under this Note are not penalties but instead are intended by the parties to be, and shall be deemed, liquidated damages (under Holder’s and Company’s expectations that any such liquidated damages will tack back to the Closing Date for purposes of determining the holding period under Rule 144).
[Signature Page Follows]
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IN WITNESS WHEREOF, the Company has caused this Convertible Note to be duly executed by a duly authorized officer as of the date set forth above.
COMPANY: | |||
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Cool Technologies, Inc. |
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By: | /s/ Tim Hassett | ||
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Name: |
Tim Hassett | |
Title: | Chief Executive Officer | ||
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HOLDER: |
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LGH Investments, LLC |
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By: |
/s/ Lucas Hoppel |
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Name: |
Lucas Hoppel |
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Title: |
President |
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[Signature Page to Convertible Note No. WARM-12]
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EXHIBIT A
CONVERSION NOTICE
[Company Contact, Position] [Company Name]
[Company Address]
[Contact Email Address}
The undersigned hereby elects to convert a portion of the $_______ Convertible Note issued to Lucas Hoppel on ______________ into Shares of Common Stock of _____________ according to the conditions set forth in such Note as of the date written below.
By accepting this notice of conversion, you are acknowledging that the number of shares to be delivered represents less than 10% (ten percent) of the common stock outstanding. If the number of shares to be delivered represents more than 9.99% of the common stock outstanding, this conversion notice shall immediately automatically extinguish and debenture Holder must be immediately notified.
Date of Conversion: |
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Conversion Amount: |
_______________________________ |
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Conversion Price: |
_______________________________ |
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Shares to be Delivered: |
_______________________________ |
Shares delivered in name of:
Lucas Hoppel
Signature:
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EXHIBIT 4.24
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THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 3(b) OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT) |
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US $143,000.00
COOL TECHNOLOGIES, INC.
8% CONVERTIBLE REDEEMABLE NOTE
DUE JUNE 6, 2020
FOR VALUE RECEIVED, Cool Technologies, Inc. (the “Company”) promises to pay to the order of EAGLE EQUITIES, LLC and its authorized successors and Permitted Assigns, defined below, ("Holder"), the aggregate principal face amount One Hundred Forty Three Thousand Dollars (U.S. $143,000.00) on June 6, 2020 ("Maturity Date") and to pay interest on the principal amount outstanding hereunder at the rate of 8% per annum commencing on June 6, 2019. This Note shall contain am original issue discount of $13,000 such that the purchase price shall be $130,000.00. The interest will be paid to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note. The principal of, and interest on, this Note are payable at 390 Whalley Ave., New Haven, CT 06511, initially, and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This Note is subject to the following additional provisions:
1. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder shall pay any tax or other governmental charges payable in connection therewith. To the extent that Holder subsequently transfers, assigns, sells or exchanges any of the multiple lesser denomination notes, Holder acknowledges that it will provide the Company with Opinions of Counsel as provided for in Section 2(f) of the Securities Purchase Agreement.
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2. The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended ("Act"), applicable state securities laws and Sections 2(f) and 5(f) of the Securities Purchase Agreement. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company's records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prequalified prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being converted ("Notice of Conversion") in the form annexed hereto as Exhibit A. The date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date. All notices of conversion will be accompanied by an Opinion of Counsel.
4. (a) The Holder of this Note is entitled, at its option, at any time after six months from the date of issuance, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company's common stock (the "Common Stock") at a price ("Conversion Price") for each share of Common Stock equal to 71% of the lowest closing price of the Common Stock as reported on OTC Markets exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future ("Exchange"), for the ten prior trading days including the day upon which a Notice of Conversion is received by the Company (provided such Notice of Conversion is delivered together with an Opinion of Counsel, by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. To the extent the Conversion Price of the Company’s Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this increase. In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 61% instead of 71% while that “Chill” is in effect. If the Company fails to maintain the share reserve at the 3x discount of the note 60 days after the issuance of the note, the conversion discount shall be increased by 10%. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may be increased to 9.99% on 61 days prior written notice).
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(b) Interest on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest may be paid by the Company in cash or in Common Stock ("Interest Shares"), at its election. Holder may, at any time conversion is permitted under Section 4(a), send in a Notice of Conversion to the Company for Interest Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
(c) The Notes may be prepaid with the following penalties:
This Note may not be prepaid after the 180th day. Such redemption must be closed and funded within 3 days of giving notice of redemption of the right to redeem shall be null and void.
(d) Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related transactions, (ii) a reclassification, capital reorganization (excluding an increase in authorized capital) or other change or exchange of outstanding shares of the Common Stock, other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a "Sale Event"), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.
(e) In case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.
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5. No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7. The Company agrees to pay all costs and expenses, including reasonable attorneys' fees and expenses, which may be incurred by the Holder in collecting any amount due under this Note.
8. If one or more of the following described "Events of Default" shall occur:
(a) The Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company; or
(b) Any of the representations or warranties made by the Company herein or in any certificate or financial or other written statements heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or the Securities Purchase Agreement under which this note was issued shall be false or misleading in any material respect; or
(c) The Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of the Company under this Note or any other note issued to the Holder; or
(d) The Company shall (1) become insolvent (which does not include a “going concern opinion); (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable; or
(e) A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged within sixty (60) days after such appointment; or
(f) Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; or
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(g) One or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or
(h) Defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered and failed to cure such default within the appropriate grace period; or
(i) The Company shall have its Common Stock delisted from an exchange (including the OTC Markets exchange) or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days or ceases to file its 1934 Act reports with the SEC;
(j) If a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;
(k) The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business days of its receipt of a Notice of Conversion which includes an Opinion of Counsel expressing an opinion which supports the removal of a restrictive legend; or
(l) The Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder.
(m) Beginning on the 6th monthly anniversary of this Note, the Company shall cease to be “current” in its periodic report filings with the Securities and Exchange Commission; or
(n) The Company shall lose the “bid” price for its stock in a market (including the OTC marketplace or other exchange).
Then, or at any time thereafter, unless cured within 5 days, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder's sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce any and all of the Holder's rights and remedies provided herein or any other rights or remedies afforded by law. Upon an Event of Default, interest shall accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. In the event of a breach of Section 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th day after the conversion notice was delivered to the Company. This penalty shall increase to $500 per day beginning on the 10th day. The penalty for a breach of Section 8(n) shall be an increase of the outstanding principal amounts by 20%. In case of a breach of Section 8(i), the outstanding principal due under this Note shall increase by 50%. If this Note is not paid at maturity, the outstanding principal due under this Note shall increase by 10%. Further, if a breach of Section 8(m) occurs or is continuing after the 6 month anniversary of the Note, then the Holder shall be entitled to use the lowest closing bid price during the delinquency period as a base price for the conversion. For example, if the lowest closing bid price during the delinquency period is $0.01 per share and the conversion discount is 50% the Holder may elect to convert future conversions at $0.005 per share.
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If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
Make-Whole for Failure to Deliver Loss. At the Holder’s election, if the Company fails for any reason to deliver to the Holder the conversion shares by the by the 3rd business day following the delivery of a Notice of Conversion to the Company and if the Holder incurs a Failure to Deliver Loss, then at any time the Holder may provide the Company written notice indicating the amounts payable to the Holder in respect of the Failure to Deliver Loss and the Company must make the Holder whole as follows:
Failure to Deliver Loss = [(Highest VWAP price for the 30 trading days on or after the day of exercise) x (Number of conversion shares)]
The Company must pay the Failure to Deliver Loss by cash payment, and any such cash payment must be made by the third business day from the time of the Holder’s written notice to the Company.
9. In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
10. Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Company and the Holder.
11. The Company represents that it is not a “shell” issuer and that if it previously has been a “shell” issuer that at least 12 months have passed since the Company has reported Form 10 type information indicating it is no longer a “shell issuer.
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12. The Company shall issue irrevocable transfer agent instructions reserving 18,534,500 shares of its Common Stock for conversions under this Note (the “Share Reserve”). Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. The Company shall pay all transfer agent costs associated with issuing and delivering the share certificates to Holder. If such amounts are to be paid by the Holder, it may deduct such amounts from the Conversion Price. The company should at all times reserve a minimum of three times the amount of shares required if the note would be fully converted. The Holder may reasonably request increases from time to time to reserve such amounts. The Company will instruct its transfer agent to provide the outstanding share information to the Holder in connection with its conversions.
13. The Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits, recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.
14. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable provision shall automatically be revised to equal the maximum rate of interest or other amount deemed interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it will not seek to claim or take advantage of any law that would prohibit or forgive the Company from paying all or a portion of the principal or interest on this Note.
15. This Note shall be governed by and construed in accordance with the laws of Nevada applicable to contracts made and wholly to be performed within the State of Nevada and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York or in the Federal courts sitting in the county or city of New York. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original.
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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.
Dated: ___________ |
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COOL TECHNOLOGIES, INC. |
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Note)
The undersigned hereby irrevocably elects to convert $___________ of the above Note into _________ Shares of Common Stock of Cool Technologies, Inc. (“Shares”) according to the conditions set forth in such Note, as of the date written below.
If Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.
Date of Conversion: ______________________________________________ |
Applicable Conversion Price: _______________________________________ |
Signature: ______________________________________________________ |
[Print Name of Holder and Title of Signer] |
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Address: ______________________________________________________ |
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SSN or EIN: ____________________________ |
Shares are to be registered in the following name: ________________________ |
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Name: ________________________________________________________ |
Address: ______________________________________________________ |
Tel: _________________________________ |
Fax: _________________________________ |
SSN or EIN: ___________________________ |
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Shares are to be sent or delivered to the following account: |
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Account Name: _______________________________________________ |
Address: ____________________________________________________ |
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EXHIBIT 4.25
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EXHIBIT 4.26
AMENDMENT
TO THE $385,000 PROMISSORY NOTE DATED February 19, 2018
The parties agree that $385,000 Promissory Note by and between Cool Technologies, Inc. (“Company”) and Lucas Hoppel (“Holder”) is hereby amended as follows:
Maturity Date: The Maturity Date shall be extended to November 1st, 2019.
ALL OTHER TERMS AND CONDITIONS OF THE $385,000 PROMISSORY NOTE REMAIN IN FULL FORCE AND EFFECT.
Please indicate acceptance and approval of this amendment dated July 30th, 2019 by signing below:
/s/ Tim Hassett | /s/ Lucas Hoppel | |||
Tim Hassett | Lucas Hoppel | |||
Cool Technologies, Inc. Chief Executive Officer |
EXHIBIT 4.27
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THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 3(b) OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT) |
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US $126,500.00
COOL TECHNOLOGIES, INC.
8% CONVERTIBLE REDEEMABLE NOTE
DUE AUGUST 28, 2020
FOR VALUE RECEIVED, Cool Technologies, Inc. (the “Company”) promises to pay to the order of EAGLE EQUITIES, LLC and its authorized successors and Permitted Assigns, de- fined below, (“Holder”), the aggregate principal face amount One Hundred Twenty Six Thousand Five Hundred Dollars (U.S. $126,500.00) on August 28, 2020 (“Maturity Date”) and to pay interest on the principal amount outstanding hereunder at the rate of 8% per annum commencing on August 28, 2019 (“Issuance Date”). This Note shall contain an original issue discount (“OID”) of $11,500 such that the purchase price shall be $115,000.00. The interest will be paid to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note. The principal of, and interest on, this Note are payable at 390 Whalley Ave., New Haven, CT 06511, initially, and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This Note is subject to the following additional provisions:
1. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder shall pay any tax or other governmental charges payable in connection therewith. To the extent that Holder subsequently transfers, assigns, sells or exchanges any of the multiple lesser denomination notes, Holder acknowledges that it will provide the Company with Opinions of Counsel as provided for in Section 2(f) of the Securities Purchase Agreement.
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2. The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”), applicable state securities laws and Sections 2(f) and 5(f) of the Securities Purchase Agreement. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prequalified prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date. All notices of conversion will be accompanied by an Opinion of Counsel.
4. (a) The Holder of this Note is entitled, at its option, at any time after six months from the date of issuance, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s common stock (the “Common Stock”) at a price (“Conversion Price”) for each share of Common Stock equal to 71% of the lowest closing price of the Common Stock as reported on OTC Markets exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future (“Exchange”), for the ten prior trading days including the day upon which a Notice of Conversion is received by the Company (provided such Notice of Conversion is delivered together with an Opinion of Counsel, by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. To the extent the Conversion Price of the Company’s Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this increase. In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 61% instead of 71% while that “Chill” is in effect. If the Company fails to maintain the share reserve at the 3x discount of the note 60 days after the issuance of the note, the conversion discount shall be increased by 10%. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may be increased to 9.99% on 61 days prior written notice).
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(b) Interest on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest may be paid by the Company in cash or in Common Stock (“Interest Shares”), at its election. Holder may, at any time conversion is permitted under Section 4(a), send in a Notice of Conversion to the Company for Interest Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
(c) The Notes may be prepaid with the following penalties:
This Note may not be prepaid after the 180th day. Such redemption must be closed and funded within 3 days of giving notice of redemption of the right to redeem shall be null and void.
(d) Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related transactions, (ii) a reclassification, capital reorganization (excluding an increase in authorized capital) or other change or exchange of outstanding shares of the Common Stock, other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.
(e) In case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.
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5. No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7. The Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by the Holder in collecting any amount due under this Note.
8. If one or more of the following described “Events of Default” shall occur: (a) The Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company; or
(b) Any of the representations or warranties made by the Company herein or in any certificate or financial or other written statements heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or the Securities Purchase Agreement under which this note was issued shall be false or misleading in any material respect; or
(c) The Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of the Company under this Note or any other note issued to the Holder; or
(d) The Company shall (1) become insolvent (which does not include a “going concern opinion); (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable; or
(e) A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged within sixty (60) days after such appointment; or
(f) Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; or
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(g) One or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or
(h) Defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered and failed to cure such default within the appropriate grace period; or
(i) The Company shall have its Common Stock delisted from an exchange (including the OTC Markets exchange) or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days or ceases to file its 1934 Act reports with the SEC;
(j) If a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;
(k) The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business days of its receipt of a Notice of Conversion which includes an Opinion of Counsel expressing an opinion which supports the removal of a restrictive legend; or
(l) The Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder.
(m) Beginning on the 6th monthly anniversary of this Note, the Company shall cease to be “current” in its periodic report filings with the Securities and Exchange Commission; or
(n) The Company shall lose the “bid” price for its stock in a market (including the OTC marketplace or other exchange).
Then, or at any time thereafter, unless cured within 5 days, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce any and all of the Holder’s rights and remedies provided herein or any other rights or remedies afforded by law. Upon an Event of Default, interest shall accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. In the event of a breach of Section 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th day after the conversion notice was delivered to the Company. This penalty shall increase to $500 per day beginning on the 10th day. The penalty for a breach of Section 8(n) shall be an increase of the outstanding principal amounts by 20%. In case of a breach of Section 8(i), the outstanding principal due under this Note shall increase by 50%. If this Note is not paid at maturity, the outstanding principal due under this Note shall increase by 10%. Further, if a breach of Section 8(m) occurs or is continuing after the 6 month anniversary of the Note, then the Holder shall be entitled to use the lowest closing bid price during the delinquency period as a base price for the conversion. For example, if the lowest closing bid price during the delinquency period is $0.01 per share and the conversion discount is 50% the Holder may elect to convert future conversions at $0.005 per share.
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If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
Make-Whole for Failure to Deliver Loss. At the Holder’s election, if the Company fails for any reason to deliver to the Holder the conversion shares by the by the 3rd business day following the delivery of a Notice of Conversion to the Company and if the Holder incurs a Failure to Deliver Loss, then at any time the Holder may provide the Company written notice indicating the amounts payable to the Holder in respect of the Failure to Deliver Loss and the Company must make the Holder whole as follows:
Failure to Deliver Loss = [(Highest VWAP price for the 30 trading days on or after the day of exercise) x (Number of conversion shares)]
The Company must pay the Failure to Deliver Loss by cash payment, and any such cash payment must be made by the third business day from the time of the Holder’s written notice to the Company.
9. In case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
10. Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Company and the Holder.
11. The Company represents that it is not a “shell” issuer and that if it previously has been a “shell” issuer that at least 12 months have passed since the Company has reported Form 10 type information indicating it is no longer a “shell issuer.
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12. The Company shall issue irrevocable transfer agent instructions reserving 14,847,000 shares of its Common Stock, upon approval of a Schedule 14C Information Statement by the SEC and delivery of the Amended Articles of Incorporation to the transfer agent, for conversions under this Note (the “Share Reserve”). Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. The Company shall pay all transfer agent costs associated with issuing and delivering the share certificates to Holder. If such amounts are to be paid by the Holder, it may deduct such amounts from the Conversion Price. The company should at all times, upon approval of a Schedule 14C Information Statement by the SEC and delivery of the Amended Articles of Incorporation to the transfer agent, reserve a minimum of three times the amount of shares required if the note would be fully converted. The Holder may reasonably request increases from time to time to reserve such amounts. The Company will instruct its transfer agent to provide the outstanding share information to the Holder in connection with its conversions.
13. The Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits, recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.
14. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable provision shall automatically be revised to equal the maximum rate of interest or other amount deemed interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it will not seek to claim or take advantage of any law that would prohibit or forgive the Company from paying all or a portion of the principal or interest on this Note.
15. This Note shall be governed by and construed in accordance with the laws of Nevada applicable to contracts made and wholly to be performed within the State of Nevada and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York or in the Federal courts sitting in the county or city of New York. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original.
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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.
Dated: August 28, 2019____
COOL TECHNOLOGIES, INC. | |||
By: |
/s/ Timothy Hassett |
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Title: |
Chairman and CEO |
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Note)
The undersigned hereby irrevocably elects to convert $______________ of the above Note into ____________ Shares of Common Stock of Cool Technologies, Inc. (“Shares”) according to the conditions set forth in such Note, as of the date written below.
If Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.
Date of Conversion: ____________________________________________________
Applicable Conversion Price: _____________________________________________
Signature: ____________________________________________________________
[Print Name of Holder and Title of Signer]
Address: _____________________________________________________________
_____________________________________________________________
SSN or EIN: ______________________________
Shares are to be registered in the following name: _______________________________
Name: ________________________________________________________________
Address: _____________________________
Tel: _________________________________
Fax: SSN or EIN: ________________________
Shares are to be sent or delivered to the following account:
Account Name: _________________________________________________________
Address: ______________________________________________________________
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EXHIBIT 4.28
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THE SECURITIES OFFERED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED BY SECTION 3(b) OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE “1933 ACT) |
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US $126,500.00
COOL TECHNOLOGIES, INC.
8% CONVERTIBLE REDEEMABLE NOTE
DUE OCTOBER 2, 2020
FOR VALUE RECEIVED, Cool Technologies, Inc. (the “Company”) promises to pay to the order of EAGLE EQUITIES, LLC and its authorized successors and Permitted Assigns, defined below, (“Holder”), the aggregate principal face amount One Hundred Twenty Six Thousand Five Hundred Dollars (U.S. $126,500.00) on October 2, 2020 (“Maturity Date”) and to pay interest on the principal amount outstanding hereunder at the rate of 8% per annum commencing on October 2, 2019 (“Issuance Date”). This Note shall contain an original issue discount (“OID”) of $11,500 such that the purchase price shall be $115,000.00. The interest will be paid to the Holder in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note. The principal of, and interest on, this Note are payable at 390 Whalley Ave., New Haven, CT 06511, initially, and if changed, last appearing on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein.
This Note is subject to the following additional provisions:
1. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder shall pay any tax or other governmental charges payable in connection therewith. To the extent that Holder subsequently transfers, assigns, sells or exchanges any of the multiple lesser denomination notes, Holder acknowledges that it will provide the Company with Opinions of Counsel as provided for in Section 2(f) of the Securities Purchase Agreement.
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2. The Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.
3. This Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended (“Act”), applicable state securities laws and Sections 2(f) and 5(f) of the Securities Purchase Agreement. Any attempted transfer to a non-qualifying party shall be treated by the Company as void. Prior to due presentment for transfer of this Note, the Company and any agent of the Company may treat the person in whose name this Note is duly registered on the Company’s records as the owner hereof for all other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected or bound by notice to the contrary. Any Holder of this Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition to the requirements set forth in Section 4(a), and any prequalified prospective transferee of this Note, also is required to give the Company written confirmation that this Note is being converted (“Notice of Conversion”) in the form annexed hereto as Exhibit A. The date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion Date. All notices of conversion will be accompanied by an Opinion of Counsel.
4. (a) The Holder of this Note is entitled, at its option, at any time after six months from the date of issuance, to convert all or any amount of the principal face amount of this Note then outstanding into shares of the Company’s common stock (the “Common Stock”) at a price (“Conversion Price”) for each share of Common Stock equal to 71% of the lowest closing price of the Common Stock as reported on OTC Markets exchange which the Company’s shares are traded or any exchange upon which the Common Stock may be traded in the future (“Exchange”), for the ten prior trading days including the day upon which a Notice of Conversion is received by the Company (provided such Notice of Conversion is delivered together with an Opinion of Counsel, by fax or other electronic method of communication to the Company after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded. Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days of receipt by the Company of the Notice of Conversion. Accrued, but unpaid interest shall be subject to conversion. No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. To the extent the Conversion Price of the Company’s Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this increase. In the event the Company experiences a DTC “Chill” on its shares, the conversion price shall be decreased to 61% instead of 71% while that “Chill” is in effect. If the Company fails to maintain the share reserve at the 3x discount of the note 60 days after the issuance of the note, the conversion discount shall be increased by 10%. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 4.99% of the outstanding shares of the Common Stock of the Company (which may be increased to 9.99% on 61 days prior written notice).
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(b) Interest on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest may be paid by the Company in cash or in Common Stock (“Interest Shares”), at its election. Holder may, at any time conversion is permitted under Section 4(a), send in a Notice of Conversion to the Company for Interest Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.
(c) The Notes may be prepaid with the following penalties:
This Note may not be prepaid after the 180th day. Such redemption must be closed and funded within 3 days of giving notice of redemption of the right to redeem shall be null and void.
(d) Upon (i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related transactions, (ii) a reclassification, capital reorganization (excluding an increase in authorized capital) or other change or exchange of outstanding shares of the Common Stock, other than a forward or reverse stock split or stock dividend, or (iii) any consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity (other than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification, conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii) being referred to as a “Sale Event”), then, in each case, the Company shall, upon request of the Holder, redeem this Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaid interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.
(e) In case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change, consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash, the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.
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5. No provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.
6. The Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.
7. The Company agrees to pay all costs and expenses, including reasonable attorneys’ fees and expenses, which may be incurred by the Holder in collecting any amount due under this Note.
8. If one or more of the following described “Events of Default” shall occur:
(a) The Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company; or
(b) Any of the representations or warranties made by the Company herein or in any certificate or financial or other written statements heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or the Securities Purchase Agreement under which this note was issued shall be false or misleading in any material respect; or
(c) The Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of the Company under this Note or any other note issued to the Holder; or
(d) The Company shall (1) become insolvent (which does not include a “going concern opinion); (2) admit in writing its inability to pay its debts generally as they mature; (3) make an assignment for the benefit of creditors or commence proceedings for its dissolution; (4) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part of its property or business; (5) file a petition for bankruptcy relief, consent to the filing of such petition or have filed against it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable; or
(e) A trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without its consent and shall not be discharged within sixty (60) days after such appointment; or
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(f) Any governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control of the whole or any substantial portion of the properties or assets of the Company; or
(g) One or more money judgments, writs or warrants of attachment, or similar process, in excess of fifty thousand dollars ($50,000) in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid, unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of any proposed sale thereunder; or
(h) Defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered and failed to cure such default within the appropriate grace period; or
(i) The Company shall have its Common Stock delisted from an exchange (in-cluding the OTC Markets exchange) or, if the Common Stock trades on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days or ceases to file its 1934 Act reports with the SEC;
(j) If a majority of the members of the Board of Directors of the Company on the date hereof are no longer serving as members of the Board;
(k) The Company shall not deliver to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business days of its receipt of a Notice of Conversion which includes an Opinion of Counsel expressing an opinion which supports the removal of a restrictive legend; or
(l) The Company shall not replenish the reserve set forth in Section 12, within 3 business days of the request of the Holder.
(m) Beginning on the 6th monthly anniversary of this Note, the Company shall cease to be “current” in its periodic report filings with the Securities and Exchange Commission; or
(n) The Company shall lose the “bid” price for its stock in a market (including the OTC marketplace or other exchange).
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Then, or at any time thereafter, unless cured within 5 days, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder (which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder’s sole discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further) notice of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of grace, enforce any and all of the Holder’s rights and remedies provided herein or any other rights or remedies afforded by law. Upon an Event of Default, interest shall accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law. In the event of a breach of Section 8(k) the penalty shall be $250 per day the shares are not issued beginning on the 4th day after the conversion notice was delivered to the Company. This penalty shall increase to $500 per day beginning on the 10th day. The penalty for a breach of Section 8(n) shall be an increase of the outstanding principal amounts by 20%. In case of a breach of Section 8(i), the outstanding principal due under this Note shall increase by 50%. If this Note is not paid at maturity, or within 10 days thereof, then the outstanding principal due under this Note shall increase by 10%. Further, if a breach of Section 8(m) occurs or is continuing after the 6 month anniversary of the Note, then the Holder shall be entitled to use the lowest closing bid price during the delinquency period as a base price for the conversion. For example, if the lowest closing bid price during the delinquency period is $0.01 per share and the conversion discount is 50% the Holder may elect to convert future conversions at $0.005 per share.
If the Holder shall commence an action or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.
Make-Whole for Failure to Deliver Loss. At the Holder’s election, if the Company fails for any reason to deliver to the Holder the conversion shares by the by the 3rd business day following the delivery of a Notice of Conversion to the Company and if the Holder incurs a Failure to Deliver Loss, then at any time the Holder may provide the Company written notice indicating the amounts payable to the Holder in respect of the Failure to Deliver Loss and the Company must make the Holder whole as follows:
Failure to Deliver Loss = [(Highest VWAP price for the 30 trading days on or after the day of exercise) x (Number of conversion shares)]
The Company must pay the Failure to Deliver Loss by cash payment, and any such cash payment must be made by the third business day from the time of the Holder’s written notice to the Company.
9. In case any provision of this Note is held by a court of competent jurisdic-tion to be excessive in scope or otherwise invalid or unenforceable, such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.
10. Neither this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Company and the Holder.
11. The Company represents that it is not a “shell” issuer and that if it previously has been a “shell” issuer that at least 12 months have passed since the Company has reported Form 10 type information indicating it is no longer a “shell issuer.
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12. The Company shall issue irrevocable transfer agent instructions reserving 27,000,000 shares of its Common Stock upon approval of a Schedule 14C In formation Statement by the SEC and delivery of the Amended Articles of In corporation to the transfer agent, for conversions under this Note (the “Share Reserve”). Upon full conversion of this Note, any shares remaining in the Share Reserve shall be cancelled. The Company shall pay all transfer agent costs associated with issuing and delivering the share certificates to Holder. If such amounts are to be paid by the Holder, it may deduct such amounts from the Conversion Price. The company should at all times upon approval of a Schedule 14C Information Statement by the SEC and delivery of the Amended Articles of Incorporation to the transfer agent, reserve a minimum of three times the amount of shares required if the note would be fully converted. The Holder may reasonably request increases from time to time to reserve such amounts. The Company will instruct its transfer agent to provide the outstanding share information to the Holder in connection with its conversions.
13. The Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits, recapitalizations etc. This notice shall be given to the Holder as soon as possible under law.
14. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable provision shall automatically be revised to equal the maximum rate of interest or other amount deemed interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it will not seek to claim or take advantage of any law that would prohibit or forgive the Company from paying all or a portion of the principal or interest on this Note.
15. This Note shall be governed by and construed in accordance with the laws of Nevada applicable to contracts made and wholly to be performed within the State of Nevada and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York or in the Federal courts sitting in the county or city of New York. This Agreement may be executed in counterparts, and the facsimile transmission of an executed counterpart to this Agreement shall be effective as an original.
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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by an officer thereunto duly authorized.
Dated: 9/30/2019
COOL TECHNOLOGIES, INC. | |||
By: |
/s/ Timothy Hassett |
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Title: | Chairman and CEO |
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EXHIBIT A
NOTICE OF CONVERSION
(To be Executed by the Registered Holder in order to Convert the Note)
The undersigned hereby irrevocably elects to convert $_____________ of the above Note into_________________Shares of Common Stock of Cool Technologies, Inc. (“Shares”) according to the conditions set forth in such Note, as of the date written below.
If Shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable with respect thereto.
Date of Conversion: ______________________________________________ |
Applicable Conversion Price:________________________________________ |
Signature: ______________________________________________________
[Print Name of Holder and Title of Signer]
Address:_______________________________________________________
SSN or EIN:_____________________________
Shares are to be registered in the following name: _________________________
Name: _________________________________________________________
Address: _______________________________________________________
Tel: __________________________________
Fax: __________________________________SSN
or EIN: ________________________________
Shares are to be sent or delivered to the following account:
Account Name: ___________________________________________________
Address: ________________________________________________________
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EXHIBIT 4.29
AMENDMENT
TO THE $385,000 PROMISSORY NOTE DATED May 19, 2019
The parties agree that $165,000 Promissory Note by and between Cool Technologies, Inc. (“Company”) and Lucas Hoppel (“Holder”) is hereby amended as follows:
Maturity Date: The Maturity Date shall be extended to May 1st, 2020.
ALL OTHER TERMS AND CONDITIONS OF THE $165,000 PROMISSORY NOTE REMAIN IN FULL FORCE AND EFFECT.
Please indicate acceptance and approval of this amendment dated December 13th, 2019 by signing below:
/s/ Timothy Hassett | /s/ Lucas Hoppel | |||
Tim Hassett |
Lucas Hoppel | |||
Cool Technologies, Inc. Chief Executive Officer |
EXHIBIT 4.30
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EXHIBIT 4.31
NEITHER THIS NOTE NOR THE SECURITIES THAT MAY BE ISSUED BY THE COMPANY UPON CONVERSION HEREOF (COLLECTIVELY, THE “SECURITIES”) HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION. NEITHER THE SECURITIES NOR ANY INTEREST OR PARTICIPATION THEREIN MAY BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED: (I) IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE 1933 ACT, OR APPLICABLE STATE SECURITIES LAWS; OR (II) IN THE ABSENCE OF AN OPINION OF COUNSEL, IN A FORM ACCEPTABLE TO THE ISSUER, THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT OR; (III) UNLESS SOLD, TRANSFERRED OR ASSIGNED PURSUANT TO RULE 144 UNDER THE 1933 ACT.
8% CONVERTIBLE PROMISSORY NOTE
MATURITY DATE OF DECEMBER 5, 2020 *THE “MATURITY DATE”
$109,000 DECEMBER 5, 2019 *THE “ISSUANCE DATE”
FOR VALUE RECEIVED, Cool Technologies, Inc., a Nevada Corporation (the “Company”) doing business in Tampa, FL hereby promises to pay to the order of JSJ Investments Inc., an accredited investor and Texas Corporation, or its assigns (the “Holder”), the principal amount of One Hundred Nine Thousand Dollars ($109,000) (“Note”), on demand of the Holder at any time on or after December 5, 2020 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of Eight Percent (8%) per annum (the “Interest Rate”) commencing on the date hereof (the “Issuance Date”).
The Principal Amount is One Hundred Nine Thousand Dollars ($109,000) and the consideration paid by the Holder is One Hundred Three Thousand Dollars ($103,000) (the “Consideration”); there exists an original issue discount of $6,000 (the “OID”)).
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Payments of Principal and Interest. |
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Pre-Payment and Payment of Principal and Interest. The Company may pay this Note in full, together with any and all accrued and unpaid interest, plus any applicable pre-payment premium set forth herein and subject to the terms of this Section 1.a, at any time on or prior to the date which occurs 180 days after the Issuance Date hereof (the “Prepayment Date”). In the event the Note is not prepaid in full on or before the Prepayment Date, it shall be deemed a “Pre-Payment Default” hereunder. Until the Thirtieth (30th) day after the Issuance Date the Company may pay the principal at a cash redemption premium of 104%, in addition to outstanding interest, without the Holder’s consent; from the 31st day to the Sixtieth (60th) day after the Issuance Date, the Company may pay the principal at a cash redemption premium of 109%, in addition to outstanding interest, without the Holder’s consent; from the 61st day to the Ninetieth (90th) day after the Issuance Date, the Company may pay the principal at a cash redemption premium of 114%, in addition to outstanding interest, without the Holder’s consent; from the 91st day to the One-Hundred and Twentieth (120th) day after the Issuance Date, the Company may pay the principal at a cash redemption premium of 119%, in addition to outstanding interest, without the Holder’s consent; from the 121st day to the One-Hundred and Fiftieth (150th) day after the Issuance Date, the Company may pay the principal at a cash redemption premium of 124%, in addition to outstanding interest, without the Holder’s consent; from the 151st day to the Prepayment Date, the Company may pay the principal at a cash redemption premium of 129%, in addition to outstanding interest, without the Holder’s consent. After the Prepayment Date up to the Maturity Date this Note shall have a cash redemption premium of 140% of the then outstanding principal amount of the Note, plus accrued interest and Default Interest, if any, which may only be paid by the Company upon Holder’s prior written consent. At any time on or after the Maturity Date, the Company may repay the then outstanding principal plus accrued interest and Default Interest (defined below), if any, to the Holder. |
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Demand of Repayment. The principal and interest balance of this Note shall be paid to the Holder hereof on demand by the Holder at any time on or after the Maturity Date. The Default Amount (defined herein), if applicable, shall be paid to Holder hereof on demand by the Holder at any time such Default Amount becomes due and payable to Holder. The Holder may, by written notice to the Company at least five (5) days before the Maturity Date (as may have been previously extended), extend the Maturity Date to up to one (1) year following the date of the original Maturity Date hereunder. |
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Interest. This Note shall bear interest (“Interest”) at the rate of Eight Percent (8%) per annum from the Issuance Date until the same is paid, or otherwise converted in accordance with Section 2 below, in full and the Holder, at the Holder’s sole discretion, may include any accrued but unpaid Interest in the Conversion Amount. Interest shall commence accruing on the Issuance Date, shall be computed on the basis of a 365-day year and the actual number of days elapsed and shall accrue daily and, after the Maturity Date, compound quarterly. Upon an Event of Default, as defined in Section 10 below, the Interest Rate shall increase to Eighteen Percent (18%) per annum for so long as the Event of Default is continuing (“Default Interest”). |
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General Payment Provisions. This Note shall be paid in lawful money of the United States of America by check or wire transfer to such account as the Holder may from time to time designate by written notice to the Company in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day (as defined below), the same shall instead be due on the next succeeding day which is a Business Day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. For purposes of this Note, “Business Day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the State of Texas are authorized or required by law or executive order to remain closed. |
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Conversion of Note. At any time after the Pre-payment Date, the Conversion Amount (see Paragraph 2(a)(i)) of this Note shall be convertible into shares of the Company’s common stock (the “Common Stock”) according to the terms and conditions set forth in this Paragraph 2. |
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Certain Defined Terms. For purposes of this Note, the following terms shall have the following meanings: |
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“Conversion Amount” means the sum of (a) the principal amount of this Note to be converted with respect to which this determination is being made, (b) Interest; and (c) Default Interest, if any, if so included at the Holder’s sole discretion. |
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“Conversion Price” means the lower of: (i) a 29% discount to the lowest trading Volume Weighted Average Price (VWAP) during the previous ten (10) trading days to the date of a Conversion Notice (subject to equitable adjustments for stock splits, stock dividends or rights offerings by the Company relating to the Company’s securities or the securities of any subsidiary of the Company, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). |
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“Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof. |
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“Shares” means the Shares of the Common Stock of the Company into which any balance on this Note may be converted upon submission of a “Conversion Notice” to the Company substantially in the form attached hereto as Exhibit 1. |
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Holder’s Conversion Rights. At any time after the Pre-payment Date, the Holder shall be entitled to convert all of the outstanding and unpaid principal and accrued interest of this Note into fully paid and non-assessable shares of Common Stock in accordance with the stated Conversion Price. The Holder shall not be entitled to convert on a Conversion Date that amount of the Note in connection with that number of shares of Common Stock which would be in excess of the sum of the number of shares of Common Stock issuable upon the conversion of the Note with respect to which the determination of this provision is being made on a Conversion Date, which would result in beneficial ownership by the Holder and its affiliates of more than 4.99% of the outstanding shares of Common Stock of the Company on such Conversion Date. For the purposes of the provision to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended, and Regulation 13d-3 thereunder. Subject to the foregoing, the Holder shall not be limited to aggregate conversions of 4.99% (“Conversion Limitation 1”). The Holder shall have the authority to determine whether the restriction contained in this Section 2(b) will limit any conversion hereunder, and accordingly, the Holder may waive the conversion limitation described in this Section 2(b), in whole or in part, upon and effective after 61 days prior written notice to the Company to increase or decrease such percentage to any other amount as determined by Holder in its sole discretion (“Conversion Limitation 2”). If in the case that the Company’s Common Stock is “chilled” for deposit into the DTC system and only eligible for clearing deposit, then an additional 15% discount to the Conversion Price shall apply for all future conversions under the Note while the “chill” is in effect. For the avoidance of doubt, with reference to section 2(a)ii of this note, when the “chill” is in effect the conversion price will increase from a 29% discount to a 50% discount to the lowest trading price during the previous (20) days to the date of a Conversion Notice. To the extent the Conversion Price of the Company’s Common Stock closes below the par value per share, the Company will take all steps necessary to solicit the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all conversions submitted pending this adjustment unless the Holder, in its sole and absolute discretion elects instead to set the Conversion Price to par value for such conversion(s) and the conversion amount for such conversion(s) shall be increased to include Additional Principal, where “Additional Principal” means such additional amount to be added to the conversion amount to the extent necessary to cause the number of Common Stock issuable upon such conversion(s) to equal the same number of Common Stock as would have been issued had the Conversion Price not been set to par value in the Holder’s sole and absolute discretion. |
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Fractional Shares. The Company shall not issue any fraction of a share of Common Stock upon any conversion; if such issuance would result in the issuance of a fraction of a share of Common Stock, the Company shall round such fraction of a share of Common Stock up to the nearest whole share except in the event that rounding up would violate the conversion limitation set forth in section 2(b) above. |
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Conversion Amount. The Conversion Amount shall be converted pursuant to Rule 144(b)(1)(ii) and Rule 144(d)(1)(ii) as promulgated by the Securities and Exchange Commission under the Securities Act of 1933, as amended, into unrestricted shares at the Conversion Price. |
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Mechanics of Conversion. The conversion of this Note shall be conducted in the following manner: |
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Holder’s Conversion Requirements. To convert this Note into shares of Common Stock on any date set forth in the Conversion Notice by the Holder (the “Conversion Date”), the Holder shall transmit by email, facsimile or otherwise deliver, for receipt on or prior to 11:59 p.m., Eastern Time, on such date or on the next business day, a copy of a fully executed notice of conversion in the form attached hereto as Exhibit 1 to the Company. |
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Company’s Response. Upon receipt by the Company of a copy of a Conversion Notice, the Company shall as soon as practicable, but in no event later than one (1) Business Day after receipt of such Conversion Notice, send, via email, facsimile or overnight courier, a confirmation of receipt of such Conversion Notice to such Holder indicating that the Company will process such Conversion Notice in accordance with the terms herein. Within two (2) Business Days after the date the Conversion Notice is delivered, the Company shall have issued and electronically transferred the shares to the Broker indicated in the Conversion Notice; should the Company be unable to transfer the shares electronically, it shall, within two (2) Business Days after the date the Conversion Notice was delivered, have surrendered to an overnight courier for delivery the next day to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder, for the number of shares of Common Stock to which the Holder shall be entitled. |
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Record Holder. The person or persons entitled to receive the shares of Common Stock issuable upon a conversion of this Note shall be treated for all purposes as the record holder or holders of such shares of Common Stock on the Conversion Date. |
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Timely Response by Company. Upon receipt by Company of a Conversion Notice, Company shall respond within one business day to Holder confirming the details of the Conversion, and provide within two business days the Shares requested in the Conversion Notice. |
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Liquidated Damages for Delinquent Response. If the Company fails to deliver for whatever reason (including any neglect or failure by, e.g., the Company, its counsel or the transfer agent) to Holder the Shares as requested in a Conversion Notice within three (3) business days of the Conversion Date, the Company shall be deemed in “Default of Conversion.” Beginning on the fourth (4th) business day after the date of the Conversion Notice, after the Company is deemed in Default of Conversion, there shall accrue liquidated damages (the “Conversion Damages”) of $2,000 per day for each day after the third business day until delivery of the Shares is made, and such penalty will be added to the Note being converted (under the Company’s and Holder’s expectation and understanding that any penalty amounts will tack back to the Issuance Date of the Note). The Parties agree that, at the time of drafting of this Note, the Holder’s damages as to the delinquent response are incapable or difficult to estimate and that the liquidated damages called for is a reasonable forecast of just compensation. |
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Liquidated Damages for Inability to Issue Shares. If the Company fails to deliver Shares requested by a Conversion Notice due to an exhaustion of authorized and issuable common stock such that the Company must increase the number of shares of authorized Common Stock before the Shares requested may be issued to the Holder, the discount set forth in the Conversion Price will be increased by 11 percentage points (i.e. from 29% to 40%) for the Conversion Notice in question and all future Conversion Notices until the outstanding principal and interest of the Note is converted or paid in full. These liquidated damages shall not render the penalties prescribed by Paragraph 2(e)(v) void, and shall be applied in conjunction with Paragraph 2(e)(v) unless otherwise agreed to in writing by the Holder. The Parties agree that, at the time of drafting of this Note, the Holder’s damages as to the inability to issue shares are incapable or difficult to estimate and that the liquidated damages called for is a reasonable forecast of just compensation. |
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Rescindment of Conversion Notice. If: (i) the Company fails to respond to Holder within one business day from the date of delivery of a Conversion Notice confirming the details of the Conversion, (ii) the Company fails to provide the Shares requested in the Conversion Notice within three business days from the date of the delivery of the Conversion Notice, (iii) the Holder is unable to procure a legal opinion required to have the Shares issued unrestricted and/or deposited to sell for any reason related to the Company’s standing with the SEC or FINRA, or any action or inaction by the Company, (iv) the Holder is unable to deposit the Shares requested in the Conversion Notice for any reason related to the Company’s standing with the SEC or FINRA, or any action or inaction by the Company, (v) if the Holder is informed that the Company does not have the authorized and issuable Shares available to satisfy the Conversion, or (vi) if OTC Markets changes the Company’s designation to ‘Limited Information’ (Yield), ‘No Information’ (Stop Sign), ‘Caveat Emptor’ (Skull and Crossbones), or ‘OTC’, ‘Other OTC’ or ‘Grey Market’ (Exclamation Mark Sign) on the day of or any day after the date of the Conversion Notice, the Holder maintains the option and sole discretion to rescind the Conversion Notice (“Rescindment”) by delivering a notice of rescindment to the Company in the same manner that a Conversion Notice is required to be delivered to the Company pursuant to the terms of this Note. |
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Transfer Agent Fees and Legal Fees. The issuance of the certificates shall be without charge or expense to the Holder. The Company shall pay any and all Transfer Agent fees, legal fees, and advisory fees required for execution of this Note and processing of any Notice of Conversion, including but not limited to the cost of obtaining a legal opinion with regard to the Conversion. The Holder will deduct $3,000 from the principal payment of the Note solely to cover the cost of obtaining any and all legal opinions required to obtain the Shares requested in any given Conversion Notice. These fees do not make provision for or suffice to defray any legal fees incurred in collection or enforcement of the Note as described in Paragraph 13. All expenses incurred by Holder, for the issuance and clearing of the Common Stock into which this Note is convertible into, shall immediately and automatically be added to the balance of the Note at such time as the expenses are incurred by Holder. |
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Conversion Right Unconditional. If the Holder shall provide a Notice of Conversion as provided herein, the Company’s obligations to deliver Common Stock shall be absolute and unconditional, irrespective of any claim of setoff, counterclaim, recoupment, or alleged breach by the Holder of any obligation to the Company. |
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Other Rights of Holder: Reorganization, Reclassification, Consolidation, Merger or Sale. A n y recapitalization, reorganization, reclassification, consolidation, merger, sale of all or substantially all of the Company’s assets to another Person or other transaction which is effected in such a way that holders of Common Stock are entitled to receive (either directly or upon subsequent liquidation) stock, securities, cash or other assets with respect to or in exchange for Common Stock is referred to herein as “Organic Change.” Prior to the consummation of any (i) Organic Change or (ii) other Organic Change following which the Company is not a surviving entity, the Company will secure from the Person purchasing such assets or the successor resulting from such Organic Change (in each case, the “Acquiring Entity”) a written agreement (in form and substance reasonably satisfactory to the Holder) to deliver to Holder in exchange for this Note, a security of the Acquiring Entity evidenced by a written instrument substantially similar in form and substance to this Note, and reasonably satisfactory to the Holder. Prior to the consummation of any other Organic Change, the Company shall make appropriate provision (in form and substance reasonably satisfactory to the Holder) to ensure that the Holder will thereafter have the right to acquire and receive in lieu of or in addition to (as the case may be) the shares of Common Stock immediately theretofore acquirable and receivable upon the conversion of the Note, such shares of stock, securities, cash or other assets that would have been issued or payable in such Organic Change with respect to or in exchange for the number of shares of Common Stock which would have been acquirable and receivable upon the conversion of the Note as of the date of such Organic Change (without taking into account any limitations or restrictions on the convertibility of the Note set forth in Section 2(b) or otherwise). All provisions of this Note must be included to the satisfaction of Holder in any new Note created pursuant to this section. |
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Adjustment Due to Distribution. If the Company shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Company’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin- off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution. |
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Representations and Warranties of the Company. In connection with the transactions provided for herein, the Company hereby represents and warrants to the Holder the following: |
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Organization, Good Standing and Qualification. The Company is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and has all requisite corporate power and authority to carry on its business as now conducted. The Company is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its business or properties. |
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Authorization. All corporate action has been taken on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement. The Company has taken all corporate action required to make all of the obligations of the Company reflected in the provisions of this Agreement, valid and enforceable obligations. The shares of capital stock issuable upon conversion of the Note have been authorized or will be authorized prior to the issuance of such shares. |
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Fiduciary Obligations. The Company hereby represents that it intends to use the proceeds of the Note primarily for the operations of its business and not for any personal, family, or household purpose. The Company hereby represents that its board of directors, in the exercise of its fiduciary duty, has approved the execution of this Agreement based upon a reasonable belief that the proceeds of the Note provided for herein is appropriate for the Company after reasonable inquiry concerning its financial objectives and financial situation. |
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Covenants of the Company. |
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So long as the Company shall have any obligations under this Note, the Company shall not without the Holder’s prior written consent pay, declare or set apart for such payment any dividend or other distribution (whether in cash, property, or other securities) on shares of capital stock solely in the form of additional shares of Common Stock |
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So long as the Company shall have any obligations under this Note, the Company shall not without the Holder’s prior written consent sell, lease, or otherwise dispose of a significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned upon a specified use of the proceeds thereof. |
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Issuance of Common Stock Equivalents. If the Company, at any time after the Issuance Date, shall issue any securities convertible into or exchangeable for, directly or indirectly, Common Stock (“Convertible Securities”), other than the Note, or any rights or warrants or options to purchase any such Common Stock or Convertible Securities, shall be issued or sold (collectively, the “Common Stock Equivalents”) and the aggregate of the price per share for which additional Shares of Common Stock may be issuable thereafter pursuant to such Common Stock Equivalent, plus the consideration received by the Company for issuance of such Common Stock Equivalent divided by the number of shares of Common Stock issuable pursuant to such Common Stock Equivalent (the “Aggregate Per Common Share Price”) shall be less than the applicable Conversion Price then in effect, or if, after any such issuance of Common Stock Equivalents, the price per share for which additional Shares of Common Stock may be issuable thereafter is amended or adjusted, and such price as so amended shall make the Aggregate Per Share Common Price be less than the applicable Conversion Price in effect at the time of such amendment or adjustment, then the applicable Conversion Price upon each such issuance or amendment shall be reduced to the lower of: (i) the Conversion Price; or (ii) a twenty-five percent (25%) discount to the lowest Aggregate Per Common Share Price (whether or not such Common Stock Equivalents are actually then exercisable, convertible or exchangeable in whole or in part) as of the earlier of (A) the date on which the Company shall enter into a firm contract for the issuance of such Common Stock Equivalent, or (B) the date of actual issuance of such Common Stock Equivalent. No adjustment of the applicable Conversion Price shall be made under this Section 6 upon the issuance of any Convertible Security which is outstanding on the day immediately preceding the Issuance Date. |
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Reservation of Shares. The Company shall at all times, so long as any principal amount of the Note is outstanding, reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the conversion of the Note, three times the number of shares of Common Stock as shall at all times be sufficient to effect the conversion of all of the principal amount, plus Interest and Default Interest, if any, of the Note then outstanding (“Share Reserve”), unless the Holder stipulates otherwise in the “Irrevocable Letter of Instructions to the Transfer Agent.” So long as this Note is outstanding, upon written request of the Holder or via telephonic communication, the Company’s Transfer Agent shall furnish to the Holder the then-current number of common shares issued and outstanding, the then-current number of common shares authorized, the then-current number of unrestricted shares, and the then-current number of shares reserved for third parties. |
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Voting Rights. The Holder of this Note shall have no voting rights as a note holder, except as required by law, however, upon the conversion of any portion of this Note into Common Stock, Holder shall have the same voting rights as all other Common Stock holders with respect to such shares of Common Stock then owned by Holder. |
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Reissuance of Note. In the event of a conversion or redemption pursuant to this Note of less than all of the Conversion Amount represented by this Note, the Company shall promptly cause to be issued and delivered to the Holder, upon tender by the Holder of the Note converted or redeemed, a new note of like tenor representing the remaining principal amount of this Note which has not been so converted or redeemed and which is in substantially the same form as this Note, as set forth above. |
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Default and Remedies. |
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Event of Default. For purposes of this Note, an “ Event of Default” sha l l o c cur u pon: |
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the Company’s default in the payment of the outstanding principal, Interest or Default Interest of this Note when due, whether at Maturity, acceleration or otherwise; |
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the occurrence of a Default of Conversion as set forth in Section 2(e)(v); |
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the failure by the Company for ten (10) days after notice to it to comply with any material provision of this Note not included in this Section 10(a); |
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the Company’s breach of any covenants, warranties, or representations made by the Company herein; |
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any of the information in the DDF is false or misleading in any material respect; |
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the default by the Company in any Other Agreement entered into by and between the Company and Holder, for purposes hereof “Other Agreement” shall mean, collectively, all agreements and instruments between, among or by: (1) the Company, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including without limitation, promissory notes; |
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the cessation of operations of the Company or a material subsidiary; |
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the Company pursuant to or within the meaning of any Bankruptcy Law; (a) commences a voluntary case; (b) consents to the entry of an order for relief against it in an involuntary case; (c) consents to the appointment of a Custodian of it or for all or substantially all of its property; (d) makes a general assignment for the benefit of its creditors; or (e) admits in writing that it is generally unable to pay its debts as the same become due; |
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court of competent jurisdiction entering an order or decree under any Bankruptcy Law that: (a) is for relief against the Company in an involuntary case; (b) appoints a Custodian of the Company or for all or substantially all of its property; or (c) orders the liquidation of the Company or any subsidiary, and the order or decree remains unstayed and in effect for thirty (30) days; |
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the Company files a Form 15 with the SEC; |
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the Company’s failure to timely file all reports required to be filed by it with the Securities and Exchange Commission; |
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the Company’s failure to timely file all reports required to be filed by it with OTC Markets to remain a “Current Information” designated company; |
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xiii. |
the Company’s Common Stock is reported as “No Inside” by OTC Markets at any time while any principal, Interest or Default Interest under the Note remains outstanding; |
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the Company’s failure to maintain the required Share Reserve pursuant to the terms of the Irrevocable Letter of Instructions to the Transfer Agent; |
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the Company directs its transfer agent not to transfer, or delays, impairs, or hinders its transfer agent in transferring or issuing (electronically or in certificated form) any certificate for Shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw and stop transfer instructions) on any certificate for any Shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor its obligations pursuant to a Conversion Notice submitted by the Holder) and any such failure shall continue uncured for three (3) Business Days after the Conversion Notice has been delivered to the Company by Holder; |
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the Company’s failure to remain current in its billing obligations with its transfer agent and such delinquency causes the transfer agent to refuse to issue Shares to Holder pursuant to a Conversion Notice; |
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the Company effectuates a reverse split of its Common Stock and fails to provide twenty (20) days prior written notice to Holder of its intention to do so; or |
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xviii. |
OTC Markets changes the Company’s designation to ‘No Information’ (Stop Sign), ‘Caveat Emptor’ (Skull and Crossbones), or ‘OTC’, ‘Other OTC’ or ‘Grey Market’ (Exclamation Mark Sign). |
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“Change of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Securities Exchange Act of 1934) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 40% of the voting securities of the Company, (b) the Company merges into or consolidates with any other Person, as that term is defined in the Securities Act of 1933, as amended, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 60% of the aggregate voting power of the Company or the successor entity of such transaction, (c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company immediately prior to such transaction own less than 60% of the aggregate voting power of the acquiring entity immediately after the transaction, (d) a replacement at one time or within a three year period of more than one-half of the members of the Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the Issuance Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors was approved by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the execution by the Company of an agreement to which the Company is a party or by which it is bound. |
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xx. |
Altering the conversion terms of any notes that are currently outstanding. |
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xxi. |
Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Company of any covenant or other term or condition contained in any of other agreement entered into by the Company, after the passage of all applicable notice and cure or grace periods therein. |
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The Term “Bankruptcy Law” means Title 11, U.S. Code, or any similar Federal or State Law for the relief of debtors. The term “Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law. |
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Remedies. If an Event of Default occurs, the Holder may in its sole discretion determine to request immediate repayment of all or any portion of the Note that remains outstanding; at such time the Company will be required to pay the Holder the Default Amount (defined herein) in cash. For purposes hereof, the “Default Amount” shall mean: the product of (A) the then outstanding principal amount of the Note, plus accrued Interest and Default Interest, divided by (B) the Conversion Price as determined on the Issuance Date, multiplied by (C) the highest price at which the Common Stock traded at any time between the Issuance Date and the date of the Event of Default. If the Company fails to pay the Default Amount within five (5) Business Days of written notice that such amount is due and payable, then Holder shall have the right at any time, so long as the Company remains in default (and so long and to the extent there are a sufficient number of authorized but unissued shares), to require the Company, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Company equal to the Default Amount divided by the Conversion Price then in effect. |
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c. |
If at any time after the Issuance Date, the Company is not DWAC Eligible, then an additional 5% discount shall be factored into the Conversion Price. If at any time after the Issuance Date, the Common Stock is not DTC Eligible, then an additional 5% discount shall be factored into the Conversion Price. In addition, if any Event of Default occurs after the Issuance Date, then an additional 5% discount shall be factored into the Conversion Price for each of the first three (3) Events of Default that occur after the Issuance Date (for the avoidance of doubt, each occurrence of any Event of Default shall be deemed to be a separate occurrence for purposes of the foregoing reductions, even if the same Event of Default occurs three (3) separate times). For example, if there are three (3) separate occurrences of an Event of Default, then an additional 5% discount shall be factored into the Conversion Price for the first such occurrence, and so on for each of the second and third occurrences of such Event of Default. |
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11. |
Vote to Change the Terms of this Note. This Note and any provision hereof may only be amended by an instrument in writing signed by the Company and the Holder. |
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12. |
Lost or Stolen Note. Upon receipt by the Company of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of this Note, and, in the case of loss, theft or destruction, of an indemnification undertaking by the Holder to the Company in a form reasonably acceptable to the Company and, in the case of mutilation, upon surrender and cancellation of the Note, the Company shall execute and deliver a new Note of like tenor and date and in substantially the same form as this Note; provided, however, the Company shall not be obligated to re-issue a Note if the Holder contemporaneously requests the Company to convert such remaining principal amount, plus accrued Interest and Default Interest, if any, into Common Stock. |
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13. |
Payment of Collection, Enforcement and Other Costs. If: (i) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding; or (ii) an attorney is retained to represent the Holder of this Note in any bankruptcy, reorganization, receivership or other proceedings affecting creditors’ rights and involving a claim under this Note, then the Company shall pay to the Holder all reasonable attorneys’ fees, costs and expenses incurred in connection therewith, in addition to all other amounts due hereunder. |
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14. |
Cancellation. After all principal, accrued Interest and Default Interest, if any, at any time owed on this Note has been paid in full or otherwise converted in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued. |
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15. |
Waiver of Notice. To the extent permitted by law, the Company hereby waives demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note. |
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16. |
Governing Law. This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the laws of the State of Texas, without giving effect to provisions thereof regarding conflict of laws. Each party hereby irrevocably submits to the non-exclusive jurisdiction of the state and federal courts sitting in Texas for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by sending, through certified mail or overnight courier, a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY. |
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17. |
Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief. The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at law or in equity (including a decree of specific performance and/or other injunctive relief), and no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit the Holder’s right to pursue actual damages for any failure by the Company to comply with the terms of this Note. The Company covenants to the Holder that there shall be no characterization concerning this instrument other than as expressly provided herein. Amounts set forth or provided for herein with respect to payments, conversion and the like (and the computation thereof) shall be the amounts to be received by the Holder thereof and shall not, except as expressly provided herein, be subject to any other obligation of the Company (or the performance thereof). |
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18. |
Specific Shall Not Limit General; Construction. No specific provision contained in this Note shall limit or modify any more general provision contained herein. This Note shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any person as the drafter hereof. |
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19. |
Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude further exercise thereof or of any other right, power or privilege. |
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20. |
Partial Payment. In the event of partial payment by the Holder, the principal sum due to the Holder shall be prorated based on the consideration actually paid by the Holder such that the Company is only required to repay the amount funded and the Company is not required to repay any unfunded portion of this Note, with the exception of any OID contemplated herein. |
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21. |
Entire Agreement. This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subjects herein. None of the terms of this Agreement can be waived or modified, except by an express agreement signed by all Parties hereto. |
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22. |
Additional Representations and Warranties. The Company expressly acknowledges that the Holder, including but not limited to its officer, directors, employees, agents, and affiliates, have not made any representation or warranty to it outside the terms of this Agreement. The Company further acknowledges that there have been no representations or warranties about future financing or subsequent transactions between the parties. |
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Notices. All notices and other communications given or made to the Company pursuant hereto shall be in writing (including facsimile or similar electronic transmissions) and shall be deemed effectively given: (i) upon personal delivery, (ii) when sent by electronic mail or facsimile, as deemed received by the close of business on the date sent, (iii) five (5) days after having been sent by registered or certified mail, return receipt requested, postage prepaid or (iv) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery. All communications shall be sent either by email, or fax, or to the email address or facsimile number set forth on the signature page hereto. The physical address, email address, and phone number provided on the signature page hereto shall be considered valid pursuant to the above stipulations; should the Company’s contact information change from that listed on the signature page, it is incumbent on the Company to inform the Holder. |
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24. |
Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the rest of the Agreement shall be enforceable in accordance with its terms. |
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25. |
Usury. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it will not seek to claim or take advantage of any law that would prohibit or forgive the Company from paying all or a portion of the principal, Interest or Default Interest on this Note. |
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26. |
Successors and Assigns. This Agreement shall be binding upon all successors and assigns hereto. The Company may not assign this Note without the prior written consent of Holder. This Note and any shares of Common Stock issued upon conversion of this Note may be offered, sold, assigned or transferred by Holder without the consent of the Company. |
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27. |
Terms of Future Financings. So long as this Note is outstanding, upon any issuance by the Company or any of its subsidiaries of any security with any term more favorable to the holder of such security or with a term in favor of the holder of such security that was not similarly provided to the Holder in this Note, then the Company shall notify the Holder of such additional or more favorable term and such term, at Holder’s option, shall become a part of the transaction documents with the Holder. The types of terms contained in another security that may be more favorable to the holder of such security include, but are not limited to, terms addressing conversion discounts, prepayment rate, conversion lookback periods, interest rates, original issue discounts, stock sale price, private placement price per share, and warrant coverage. |
— SIGNATURE PAGE TO FOLLOW —
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IN WITNESS WHEREOF, the Company has caused this Note to be signed by its CEO, on and as of the Issuance Date.
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Exhibit 1
Conversion Notice
Reference is made to the 8% Convertible Note issued by Cool Technologies, Inc. (the “Note”), dated December 5, 2019 in the principal amount of $109,000 with 8% interest. This note currently holds a principal balance of $109,000. The features of conversion stipulate a Conversion Price equal to a 35% discount to the lowest Volume Weighted Average Price (VWAP) during the previous ten (10) trading days to the date of a Conversion Notice, pursuant to the provisions of Section 2(a)(ii) in the Note.
In accordance with and pursuant to the Note, the undersigned hereby elects to convert $________ of the principal/interest balance of the Note, indicated below into shares of Common Stock (the “Common Stock”), of the Company, by tendering the Note specified as of the date specified below.
Date of Conversion: ___________
Please confirm the following information:
Conversion Amount: $________________
Conversion Price: $____________________ ( ____% discount from $___________________)
Number of Common Stock to be issued: ______________________________________________________
Current Issued/Outstanding: ______________________________________________________________
If the Issuer is DWAC eligible, please issue the Common Stock into which the Note is being converted in the name of the Holder of the Note and transfer the shares electronically to:
[BROKER INFORMATION]
Holder Authorization:
JSJ Investments Inc.
10830 North Central Expressway, Suite 152 *Do not send certificates to this address
Dallas, TX 75231
888-503-2599
Tax ID: 20-2122354
Sameer Hirji, President
[DATE]
[CONTINUED ON NEXT PAGE]
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PLEASE BE ADVISED, pursuant to Section 2(e)(ii) of the Note, “Upon receipt by the Company of a copy of the Conversion Notice, the Company shall as soon as practicable, but in no event later than one (1) Business Day after receipt of such Conversion Notice, SEND, VIA EMAIL, FACSIMILE OR OVERNIGHT COURIER, A CONFIRMATION OF RECEIPT OF SUCH CONVERSION NOTICE TO SUCH HOLDER INDICATING THAT THE COMPANY WILL PROCESS SUCH CONVERSION NOTICE in accordance with the terms herein. Within two (2) Business Days after the date of the Conversion Confirmation, the Company shall have issued and electronically transferred the shares to the Broker indicated in the Conversion Notice; should the Company be unable to transfer the shares electronically, they shall, within two (2) Business Days after the date of the Conversion Confirmation, have surrendered to FedEx for delivery the next day to the address as specified in the Conversion Notice, a certificate, registered in the name of the Holder, for the number of shares of Common Stock to which the Holder shall be entitled.”
Signature:
______________________________
Timothy Hassett
CEO
Cool Technologies, Inc.
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EXHIBIT 4.32
AMENDMENT
TO THE $165,000 PROMISSORY NOTE DATED May 19, 2019
The parties agree that $165,000 Promissory Note by and between Cool Technologies, Inc. (“Company”) and Lucas Hoppel (“Holder”) is hereby amended as follows:
Maturity Date: The Maturity Date shall be extended to May 1st, 2020.
ALL OTHER TERMS AND CONDITIONS OF THE $165,000 PROMISSORY NOTE REMAIN IN FULL FORCE AND EFFECT.
Please indicate acceptance and approval of this amendment dated December 13th, 2019 by signing below:
/s/ Timothy Hassett |
/s/ Lucas Hoppel |
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Tim Hassett |
Lucas Hoppel |
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Cool Technologies, Inc. Chief Executive Officer |
EXHIBIT 10.13
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EXHIBIT 10.14
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EXHIBIT 10.15
JOINT VENTURE AGREEMENT
This JOINT VENTURE AGREEMENT (the “Agreement”) is entered into as of 20__May__, 2019 (the “Effective Date”), between COOL TECHNOLOGIES, Inc. (“COOL TECHNOLOGIES”) a Nevada corporation with its principal place of business at 8871 Hidden River Parkway, Suite 300, Tampa, Florida, 33637 and Key Options Pty Ltd (“KEYOPTIONS”) an Australian corporation with its principal place of business at 34A Palermo Street South Yarra Victoria 3141 Australia(“the Parties”).
WHEREAS, COOL TECHNOLOGIES owns substantial Intellectual Property (“IP”) and proprietary information, including but not limited to patents, trade secrets, know-how, and confidential information related to mobile generation and the cooling of electric motors listed in Exhibit A (“COOL TECHNOLOGIES IP”); and
WHEREAS, COOL TECHNOLOGIES has created and commissioned manufactured a retrofittable mobile power generation system (“MG system”) kit that can be installed onto work trucks and enables the trucks to generate electric power; and
WHEREAS, COOL TECHNOLOGIES has as the capability to integrate a water purification and desalination system (“Optional Technologies”) with the MG system; and
WHEREAS, COOL TECHNOLOGIES offers a no-idle option (“Optional Technologies”) that enable the MG system to operate solely through battery and solar power without the need to idle the trucks engine; and
WHEREAS, COOL TECHNOLOGIES offers a HydroQube option (“Optional Technologies”) that is capable of injecting hydrogen gas into the trucks fuel system and thereby increases the efficiency and miles per gallon or liter of fuel delivered by the truck’s engine; and
WHEREAS, the Parties are desirous of importing into the country of Australia then installing, distributing and selling products designed, developed and manufactured by COOL TECHNOLOGIES as well as Optional Technologies provided by the same to XXXXXX end-users (“Products”);
NOW, THEREFORE, in consideration of their mutual covenants and obligations contained herein, and the mutual benefits to be derived here from, the Parties, intend to be legally bound, do hereby covenant and agree as follows:
Article 1: Definitions
1.1 “Confidential Information” means information, data, patents, documents, analyses, compilations, or studies in relation to a party, including its business activities that (a) is disclosed to the other party by or on behalf of the first party; (b) is acquired by the other party directly or indirectly from the first party; or (c) otherwise comes to the knowledge of the other party, in connection with this Agreement whether the information is in oral, visual or written form or is recorded or embodied in any other medium and includes all such information disclosed to, or accessed by, the other party before this Agreement commences.
1.2 “Territory” shall mean Australia and neighboring countries in South East Asia.
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Article 2: Purpose
2.1 The purpose of this joint venture is to exploit the Parties' complementary capabilities, specifically Cool Tech’s ability to create and manufacture an MG system kit and provide Optional Technologies and KeyOptions ability to install the products into work trucks then distribute and sell the trucks throughout the Territory.
KEYOPTIONS acknowledges that COOL TECHNOLOGIES’ right to license any IP, distribute or sell Products and/or Optional Technologies, or establish other Joint Ventures outside the Territory is in no way restricted.
2.2 To this purpose, the Parties do hereby set forth in this Agreement the terms and conditions of their Joint Venture to be known as the CoolTech-KeyOptions Joint Venture (“Joint Venture”).
Article 3: Contributions
3.1 The capital and asset contributions (cash, products, equipment, facilities and all other resources) of COOL TECHNOLOGIES and KEYOPTIONS will be furnished as detailed in Appendix A by each Joint Venturer.
KEYOPTIONS accepts that COOL TECHNOLOGIES owns all rights in relation to the COOL TECHNOLOGIES’ IP as well as proprietary and Confidential Information.
Article 4: Percentage Ownership
4.1 Each Venturer’s respective interest in the Joint Venture (hereinafter called “Percentage Ownership Interest”) is indicated below:
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COOL TECHNOLOGIES – fifty - percent (50 %) |
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KEYOPTIONS–fifty_percent (50 %). |
Article 5: Distributive Share
5.1 The net operating income and net operating loss of the Joint Venture shall be allocated and shared between the Joint Venture Parties in proportion to their Percentage Ownership Interest indicated above.
Article 6: Bank Account
6.1 The operating account (“Operating Account”) for this Joint Venture shall be set up at ANZ. The Operating Account shall be established in the name of the Joint Venture.
6.2 All payments due the Joint Venture for distribution and sales of Products shall be deposited into the Operating Account, and all expenses incurred shall be paid out from the Operating Account.
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Article 7: Duties
7.1 COOL TECHNOLOGIES shall be responsible for manufacturing and provision of all Products and Optional Technologies as well as all installation instruction and know-how to KeyOptions. KeyOptions shall be responsible for the installation, distribution, marketing, promotion and sales of Products and Optional Technologies throughout the Territory. COOL TECHNOLOGIES will have the right to visit the sites used by KeyOptions to evaluate performance as well as approve all marketing and promotional activities.
Article 8: Administrative Records
8.1 Accounting and other administrative records including the books of the Joint Venture and any other records relating to the Joint Venture shall be kept and maintained at the Turkish office of either the Joint Venture or the KEYOPTIONS. COOL TECHNOLOGIES will have the right to visit the office to inspect and copy any books and records relating to the Joint Venture. If requested, the KeyOptions shall promptly send to COOL TECHNOLOGIES copies of all reports, correspondence, documents and other information pertaining to the Joint Venture sent or received by the KEYOPTIONS.
Article 9: Quarterly Financial Statements
9.1 Quarterly financial statements showing cumulative contract receipts and expenditures (including salaries) will be submitted to COOL TECHNOLOGIES later than 30 days after each operating quarter of the Joint Venture
Article 10: Managing Committee
10.1 The Parties shall establish a Managing Committee hereunder, which shall consist of two (2) representatives from each of COOL TECHNOLOGIES and KEYOPTIONS. COOL TECHNOLOGIES and KEYOPTIONS may each from time-to-time replace its respective representatives on the Managing Committee, in its sole and absolute discretion, by notice to the other Party. The goal of the Managing Committee is to provide focus and direction in order to leverage both company’s capabilities.
10.2 The Managing Committee shall meet at such times and places as it shall determine appropriate to carry out its responsibilities hereunder. Such meetings may be in person or by means of telephonic communication. Either Party through its Managing members, may call a meeting of the Managing Committee by giving written notice thereof to the members of the other Party.
10.3 If a disagreement arises between the Parties as to any matters within the scope of this Agreement, either Party may request a meeting of the Managing Committee, which will, in good faith, diligently seek to resolve the dispute. If the Managing Committee is unable to resolve the dispute, notwithstanding the exercise of good faith efforts, within thirty (30) days, then, unless otherwise agreed by the Parties, either Party may initiate formal filing of legal action against the other. Notwithstanding the foregoing, either Party may initiate proceedings to seek injunctive relief before the time period otherwise required hereunder shall elapse, if such Party in good faith believes that it will suffer irreparable harm without the initiation of such proceedings.
Article 11: Confidentiality
11.1 KeyOptions shall not divulge to others, any trade secret or Confidential Information, knowledge, or data concerning or pertaining to the business and affairs of COOL TECHNOLOGIES, obtained by KEYOPTIONS as a result of its engagement hereunder, unless authorized, in writing by COOL TECHNOLOGIES. KEYOPTIONS represents and warrants that it has established appropriate internal procedures for protecting the trade secrets and confidential information of COOL TECHNOLOGIES including, without limitation, restrictions on disclosure of such information to employees and other persons who may be engaged in such information to employees and other persons who may be engaged in rendering services to any person, firm or entity which may be a competitor of.
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11.2 COOL TECHNOLOGIES shall not divulge to others, any trade secret or Confidential Information, knowledge, or data concerning or pertaining to the business and affairs of KEYOPTIONS obtained as a result of its engagement hereunder, unless authorized, in writing, by KEYOPTIONS.
Article 12: Term
12.1 The initial term of this Agreement shall be 5 (five) years from the date of execution and may be extended subject to satisfactory agreement on ongoing commercial terms.
Article 13: Miscellaneous
13.1 Notices. Any notice required or permitted to be given under this Agreement shall be sufficient if in writing, and if (i) sent by registered or certified mail to the other party’s place of business contained, All notices and other communications to be given pursuant to this Agreement shall be in writing to the party for whom intended at the addresses set forth below, or at such other addresses as the parties may in the future specify. Each such notice shall be effective on the earlier to occur of; (a) the day it is received, or (b) (i) if given by facsimile with machine confirmation, one day following transmission of the facsimile; (ii) if given by mail, three days after the notice is deposited in the mail; or (iii) if given by delivery, the day it is delivered, provided same is accomplished during normal business hours.
13.2 Governing Law and Forum. This Agreement shall be construed and administered in accordance with the laws of the State of Florida/Nevada, USA.
13.3 Attorney’s Fees. In the event that any legal action is commenced to enforce any term of this Agreement or to seek recovery for any breach thereof, the prevailing party in such action shall be entitled to recovery of its reasonable attorney’s fees and actual costs incurred in such action.
13.4 Injunctive Relief: Solely by virtue of their respective execution of this Agreement and in consideration for the mutual covenants of each other, COOL TECHNOLOGIES and KeyOptions hereby agree, consent and acknowledge that, in the event of a breach of any material term of this Agreement, the non-breaching party will be without adequate remedy-at-law and shall therefore, be entitled to immediately redress any material breach of this Agreement by temporary or permanent injunctive or mandatory relief obtained in an action or proceeding instituted in any court of competent jurisdiction without the necessity of proving damages and without prejudice to any other remedies which the non-breaching party may have at law or in equity.
13.5 Assignment. The rights and obligations of either party under this Agreement may not be assigned without prior written consent of the other party.
13.6 Severability. In the event that any one or more of the provisions of this Agreement shall for any reason be held to be invalid, illegal, or unenforceable by a court of competent jurisdiction or by operation of any applicable law, the remaining provisions of this Agreement shall be unimpaired and shall continue in full force and effect.
13.7 Entire Agreement: This Agreement contains the entire Agreement of the parties and supersedes any prior agreements, understandings and memoranda relating thereto. This Agreement may not be changed, altered and modified in any way except by a writing signed by the parties hereto.
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The Agreement is officially signed and executed by officials duly authorized to bind the Parties this 20th day of _May_______, 2019.
COOL TECHNOLOGIES, Inc. |
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Key Options Pty Ltd |
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/s/ Timothy Hassett |
/s/ Rick Wylie |
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Name: Timothy Hassett |
Name: Rick Wylie |
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Position: Chairman & CEO |
Position: CEO KeyOptions |
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Date: May 20, 2019 |
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Date: 20 May 2019 |
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EXHIBIT 10.16
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EXHIBIT 10.17
STRATEGIC ALLIANCE AGREEMENT
This STRATEGIC ALLIANCE AGREEMENT (the “Agreement”) is entered into as of December 16, 2019 (the “Effective Date”), between Cool Technologies, Inc. (“Cool Tech”) a Nevada Corporation and a Consortium of two companies, VerdeWatts, LLC (“VerdeWatts”), a Delaware Limited Liability Company and FirmGreen, Inc., a Delaware Corporation collectively called the (the “Consortium”) and all together (“the Parties”).
WHEREAS, Cool Tech owns substantial Intellectual Property (“IP”), patented products and proprietary information, including but not limited to patents, trademarks, trade secrets, know how, and confidential information related to Thermal Technology, Mobile Power Generation & Creation, listed in Exhibit A (“Cool Tech IP”);
WHEREAS, the Consortium owns substantial Intellectual Property (“IP”), patented products and proprietary information, including but not limited to patents, trademarks, trade secrets, know how, and confidential information related to Solar Energy, Battery Storage Technology, Water Treatment Technology, LED Technology, ‘Platform as a Service’ (Paas) Technology for connecting and managing data sources within a MicroGrid (IoT devices & connected systems/data) and Wireless Mesh Communications Systems
WHEREAS, Cool Tech is interested in licensing the Consortium’s IP to drive revenues through the sales of products that incorporate the Consortium’s and Cool Tech’s IP;
WHEREAS, the Consortium is interested in licensing and incorporating the Cool Tech IP with various technology products to be sold by the Consortium to end-users as a Mobile MicroGrid based, energy supply, lighting, water treatment and communications platform solution (“Products).
The purpose of this alliance is to exploit the Parties’ complementary capabilities for producing products based on the mutual licensing of IP to the worldwide markets.
NOW, THEREFORE, in consideration of their mutual covenants and obligations contained herein, and the mutual benefits to be derived herefrom, the Parties, intend to be legally bound, do hereby covenant and agree as follows:
Article 1: Definitions
“Confidential Information” means information, data, patents, documents, analyses, compilations, or studies in relation to a party, including its business activities that (a) is disclosed to the other party by or on behalf of the first party; (b) is acquired by the other party directly or indirectly from the first party; or (c) otherwise comes to the knowledge of the other party, in connection with this Agreement whether the information is in oral, visual or written form or is recorded or embodied in any other medium now in existence or not yet invented and includes all such information disclosed to, or accessed by, the other party before this Agreement commences.
Cool Technologies, Inc.
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“Cool Tech Licensed Patents” means Cool Tech’s United States and foreign patents and patent applications listed in Exhibit A. Any United States and foreign patents issuing from the patent applications listed in Exhibit A will be added to Exhibit A upon issuance. Licensed Patents shall also include divisions, continuations, reissues, re-examinations, substitutes, and extensions of the patents and patent applications as they arise.
“Consortium Licensed Patents and Proprietary IP” means the Consortium’s United States and foreign patents and patent applications listed in Exhibit B. Any United States and foreign patents issuing from the patent applications listed in Exhibit B will be added to Exhibit B upon issuance. Licensed Patents shall also include divisions, continuations, reissues, re-examinations, substitutes, and extensions of the patents and patent applications as they arise. IP will be the Proprietary Know- How described in Exhibit C
“Territory” shall mean Worldwide.
Article 2: License Grant
2.1 Term: The initial term of this Agreement shall be 20 years from the date of execution and may be extended subject to satisfactory agreement on ongoing commercial terms.
2.2 Cool Tech agrees to and does hereby grant to Consortium a royalty-free, worldwide, nonexclusive, conditional right and license, without the right to grant sublicenses, except to wholly owned subsidiaries, to make, have made, use, sell, distribute, and/or offer to sell systems and practice methods encompassed by its corresponding domestic and foreign patent applications and patent(s) resulting therefrom. Said license is conditioned only by a future undetermined negotiation in which an Original Equipment Manufacturer (OEM) seeks an exclusive license to a particular Cool Tech patent, patents or application thereof. The grant shall be made in exchange for $1.00 due upon the signing of this agreement.
2.3 Consortium agrees to and does hereby grant to Cool Tech a royalty-free, worldwide, nonexclusive, conditional right and license, without the right to grant sublicenses, except to wholly owned subsidiaries, to make, have made, use, sell, distribute, and/or offer to sell systems and practice methods encompassed by its corresponding domestic and foreign patent applications and patent(s) resulting therefrom. Said license is conditioned only by a future undetermined negotiation in which an Original Equipment Manufacturer (OEM) seeks an exclusive license to a particular Consortium patent, patents or application thereof. The grant shall be made in exchange for $1.00 due upon the signing of this agreement.
2.3 Consortium accepts that Cool Tech owns all rights in relation to the Cool Tech IP.
2.4 Cool Tech accepts that the Consortium owns all rights in relation to the Consortium’s IP.
2.5 The Parties agree that any original or possibly original ideas, inventions, developments and improvements which pertain to Cool Tech’s IP or which are conceived or introduced to practice during negotiation or performance of this Agreement shall be owned by Cool Tech.
Cool Technologies, Inc.
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2.6 The Parties agree that any original or possibly original ideas, inventions, developments and improvements which pertain to the Consortium’s IP or which are conceived or reduced to practice during negotiation or performance of this Agreement shall be owned by the Consortium.
Article 3: Duties
3.1 The Parties shall diligently pursue the design, development and ultimate commercialization of Products designated by the Managing Committee.
3.2 Duties of Cool Tech
a. Intellectual Property Development and Maintenance. Cool Tech shall develop and maintain the Cool Tech IP and Licensed Patents as provided in this Agreement.
3.3 Duties of the Consortium
a. Manufacturing, Packaging and Distribution. The Consortium shall arrange, contract for and direct the manufacture, packaging and distribution of all Products.
b. Marketing and Promotion. The Parties shall jointly arrange, contract for and direct the marketing, advertising, sales and promotion of the Products sold pursuant to this Agreement.
Article 4: Managing Committee
4.1 Cool Tech and the Consortium shall establish a Managing Committee hereunder, which shall consist of two (2) representatives from each of Cool Tech and the Consortium. Cool Tech and the Consortium may each from time-to-time replace its respective representatives on the Managing Committee, in its sole and absolute discretion, by notice to the other Party. The goal of the Managing Committee is to provide focus and direction in order to leverage both company’s capabilities and technologies.
4.2 It is among the objectives of the Parties to work together towards development and commercialization of Products by taking advantage of the respective technologies and other resources and assets of Cool Tech and the Consortium, on the terms and subject to the conditions of this Agreement, and to design, develop and implement the Products in a reasonably practicable fashion, subject however, to the respective corporate regulatory, financial and other obligations and considerations of each of the Parties as determined by on-going or regular review.
4.3 The Managing Committee shall meet at such times and places as it shall determine appropriate to carry out its responsibilities hereunder. Such meetings may be in person or by means of telephonic or Internet-based communication. Either Party through its Managing members, may call a meeting of the Managing Committee by giving written notice thereof to the members of the other Party.
4.4 The Managing Committee shall establish guidelines to govern the strategic activities, co- development and related activities of the Parties; the Managing Committee shall also establish such guidelines with respect to operational matters at such time as a Product is commercialized or in a pre-commercialized phase, as contemplated by this Agreement.
Cool Technologies, Inc.
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4.5 If a disagreement arises between the Parties as to any matters within the scope of this Agreement, either Party may request a meeting of the Managing Committee, which will, in good faith, diligently seek to resolve the dispute. If the Managing Committee is unable to resolve the dispute, notwithstanding the exercise of good faith efforts, within thirty (30) days, then, unless otherwise agreed by the Parties, either Party may initiate formal filing of legal action against the other. Notwithstanding the foregoing, either Party may initiate proceedings to seek injunctive relief before the time period otherwise required hereunder shall elapse, if such Party in good faith believes that it will suffer irreparable harm without the initiation of such proceedings.
Article 5: Equity Transaction and Royalties
For the rights, privileges and license granted hereunder, the Consortium shall pay to Cool Tech the following amounts in the manner hereinafter provided. Unless expressly stated otherwise in this Agreement, periodic payment obligations listed below shall endure through the Term of this Agreement, unless this Agreement shall be sooner terminated as hereinafter provided.
Article 6: Distribution of Revenues
Subject to the terms of this agreement, the gross profit margin of the revenues derived from each sale of the Products shall be allocated and shared between the Parties on a 60/40 basis wherein the Party that initiated the sale of the Products shall receive 60% of the gross profit margin and the other Party shall receive 40% of the gross profit margin. The respective percentages shall also be maintained for each repeat order from the same customer or entity.
For the purposes of this agreement, the gross profit margin shall refer to the total sales revenue derived from an individual order for any of the Products minus the cost of goods sold, specifically the direct costs incurred in selling, producing, distributing and/or shipping the Product or Products incorporated in each individual order.
Article 7: Payments
All payments due hereunder shall be paid in United States currency. With respect to sales of Products outside the United States on which any earned gross profit margin percentages are payable hereunder, conversions to U.S. dollars, if applicable, shall be made in accordance with standard accounting policy for conversion of foreign currencies, which shall be consistent with US generally accepted accounting principles.
Article 8: Reports
Within fifteen (15) days after the end of each of calendar quarter, Consortium shall provide Cool Tech with a written report detailing the Net Unit Sales of each product during the preceding calendar quarter and the amount derived from each sale.
Within fifteen (15) days after the end of each of calendar quarter, Cool Tech shall provide Consortium with a written report detailing the Net Unit Sales of each product during the preceding calendar quarter and the amount derived from each Net Unit Sale.
Cool Technologies, Inc.
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Article 9: Records.
Consortium agrees to keep accurate written records sufficient in detail to enable the revenues and gross profit margins payable under this Agreement by the Consortium to be determined and verified for a period of three (3) years after the final receipt of payments for each order for any of the Products delineated in this Agreement.
Cool Tech agrees to keep accurate written records sufficient in detail to enable the revenues and gross profit margins payable under this Agreement by Cool Tech to be determined and verified for a period of three (3) years after the final receipt of payments for each order for any of the Products delineated in this Agreement.
Article 10: Audit of Records.
Upon reasonable notice and during regular business hours, Consortium shall from time to time, but no more frequently than once annually, make available the records noted above for audit by independent representatives selected by Cool Tech and reasonably acceptable to Consortium at Cool Tech’s expense to verify the accuracy of the reports provided to Cool Tech.
Any representatives conducting such audit shall execute a confidentiality agreement reasonably acceptable to Consortium prior to conducting such audit. Such representatives may disclose to Cool Tech only their conclusions regarding the accuracy of the reports and of records related thereto, and shall not disclose any other Consortium information to Cool Tech without the prior written consent of the Consortium.
The right to audit shall extend for three (3) years from delivery of any Net Unit Sales report. If a discrepancy is found, Consortium will pay any additional revenue percentage due within thirty (30) days, and in addition, if the discrepancy is greater than five percent (5%), Consortium shall reimburse Cool Tech for all reasonable audit costs incurred for the related audit.
Upon reasonable notice and during regular business hours, Cool Tech shall from time to time, but no more frequently than once annually, make available the records noted above for audit by independent representatives selected by Consortium and reasonably acceptable to Cool Tech at Consortium’s expense to verify the accuracy of the reports provided to Consortium.
Any representatives conducting such audit shall execute a confidentiality agreement reasonably acceptable to Cool Tech prior to conducting such audit. Such representatives may disclose to Consortium only their conclusions regarding the accuracy of the reports and of records related thereto, and shall not disclose any other Cool Tech information to Consortium without the prior written consent of the Cool Tech.
The right to audit shall extend for three (3) years from delivery of any Net Unit Sales report. If a discrepancy is found, Cool Tech will pay any additional revenue percentage due within thirty (30) days, and in addition, if the discrepancy is greater than five percent (5%), Cool Tech shall reimburse Consortium for all reasonable audit costs incurred for the related audit.
Cool Technologies, Inc.
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Article 11: Confidentiality
11.1 The Consortium shall not divulge to others, any trade secret or Confidential Information, knowledge, or data concerning or pertaining to the business and affairs of Cool Tech, obtained by the Consortium as a result of its engagement hereunder, unless authorized, in writing by Cool Tech. The Consortium represents and warrants that it has established appropriate internal procedures for protecting the trade secrets and confidential information of Cool Tech including, without limitation, restrictions on disclosure of such information to employees and other persons who may be engaged in activities pertinent to, involving or covered by the patents or in rendering services to any person, firm or entity which may be a competitor of Cool Tech.
11.2 Cool Tech shall not divulge to others, any trade secret or Confidential Information, knowledge, or data concerning or pertaining to the business and affairs of the Consortium, obtained by Cool Tech as a result of its engagement hereunder, unless authorized, in writing by the Consortium. Cool Tech represents and warrants that it has established appropriate internal procedures for protecting the trade secrets and confidential information of, the Consortium including, without limitation, restrictions on disclosure of such information to employees and other persons who may be engaged in in activities pertinent to, involving or covered by such information or in rendering services to any person, firm or entity which may be a competitor of the Consortium.
Article 12: Miscellaneous
12.1 Notices: All notices and other communications to be given pursuant to this Agreement shall be in writing to the party for whom intended at the addresses set forth below, or at such other addresses as the parties may in the future specify. Each such notice shall be effective on the earlier to occur of; (a) the day it is received, or (b) (i) if given by facsimile with machine confirmation, one day following transmission of the facsimile; (ii) if given by mail, three days after the notice is deposited in the mail; or (iii) if given by delivery, the day it is delivered, provided same is accomplished during normal business hours.
12.2 Attorney’s Fees: In the event that any legal action is commenced to enforce any term of this Agreement or to seek recovery for any breach thereof, the prevailing party in such action shall be entitled to recovery of its reasonable attorney’s fees and actual costs incurred in such action.
12.3 Controlling Law/Arbitration: This agreement is subject to Delaware law and arbitration under Delaware law.
12.4 Injunctive Relief: Solely by virtue of their respective execution of this Agreement and in consideration for the mutual covenants of each other, Cool Tech and the Consortium hereby agree, consent and acknowledge that, in the event of a breach of any material term of this Agreement, the non-breaching party will be without adequate remedy-at-law and shall therefore, be entitled to immediately redress any material breach of this Agreement by temporary or permanent injunctive or mandatory relief obtained in an action or proceeding instituted in any court of competent jurisdiction without the necessity of proving damages and without prejudice to any other remedies which the non-breaching party may have at law or in equity.
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12.5 Entire Agreement: This Agreement contains the entire Agreement of the parties and supersedes any prior agreements, understandings and memoranda relating thereto. This Agreement may not be changed, altered and modified in any way except by a writing signed by the parties hereto.
12.6 Severability: If any clause or provision herein shall be adjudged to be invalid or unenforceable by a court of competent jurisdiction or by operation of any applicable law, such adjudication shall not affect the validity of any other clause or provision, which shall remain in full force and effect.
12.7 Independent Contractor: It is understood and agreed that the relationship of Cool Tech and the Consortium is that of an independent contractor, and nothing contained in this Agreement shall be construed to create any partnership, joint venture, principal/agent relationship, or any other fiduciary relationship between the parties hereto. The parties expressly disclaim the existence of any third party beneficiaries to this Agreement.
Cool Tech, Inc. |
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The Consortium on behalf of VerdeWatts, LLC and FirmGreen, Inc. |
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/s/ Timothy Hassett |
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/s/ Steven Wilburn |
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Name: Timothy Hassett |
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Name: Steven Wilburn |
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Position: Chairman & CEO |
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Position: Managing Member |
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Date: 12/16/2019 |
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Date: 12/16/2019 |
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Exhibit A, B, C to Follow as Attachments
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Exhibit A
Cool Tech Issued Patents
Title (Nickname) |
Filing Date |
Status |
Serial/Patent No. |
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|||
Motor w/ Heat Pipes (US App) |
6/19/2007 |
Issued 8/4/09 |
7,569,955 |
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Motor w/ Heat Pipes (Cont App) - Hermetic |
7/31/2009 |
Issued 10/9/12 |
8,283,818 |
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Motor w/ Heat Pipes (CIP App) - New Submersible |
7/31/2009 |
Issued 3/13/12 |
8,134,260 |
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Bearing Cooler (US App) |
4/3/2009 |
Issued 6/12/12 |
8,198,770 |
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Tot Encl’d Air-HP- Air Cooled (US App) |
8/6/2009 |
Issued 4/3/12 |
8,148,858 |
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Wet Brake |
12/18/2014 |
Issued 4/11/17 |
9,618,068 |
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Radial Vent HPs |
2/25/2014 |
Issued 1/10/17 |
9,543,809 |
Cool Technologies, Inc.
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Exhibit A
Cool Tech Patent Applications
Title (Nickname) |
Filing Date |
Status |
Serial/Patent No. |
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Wet Brake |
6/16/2017 |
Granted & Grant Fees Paid |
2,971,404 |
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Wet Brake |
12/16/2014 |
Enterer Canada 6/16/17 |
PCT/US2014/070513 |
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Radial Vent HPs |
2/25/2014 |
Entered BR, CA & MX 8/24/15 |
PCT/US2014/018246 |
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Radial Vent HPs |
8/24/2015 |
Brazil App - No Action Yet |
BR 112015020362-0 |
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Radial Vent HPs |
8/24/2015 |
Granted May 2019 |
2,902,329 |
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Radial Vent HPs |
8/25/2015 |
Granted April 2017 |
346856 |
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Electrical Power Generation |
4/27/2017 |
Provisional App - Expired 4/27/18 |
62/490,641 |
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Integrated Electrical Power Generation Methods and Systems |
4/27/2018 |
Completion of Nat’l Filing Due 10/27/19 |
PCT/US2018/029794 |
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Integrated Electrical Power Generation Methods and Systems |
4/27/2018 |
No Action Yet |
15/965,111 |
Cool Technologies, Inc.
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EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Timothy Hassett, certify that:
1. |
I have reviewed this Annual Report on Form 10-K of Cool Technologies, Inc (the "registrant") for the year ended December 31, 2019; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exhibit Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Dated: May 29, 2020 |
By: |
/s/ Timothy Hassett |
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Timothy Hassett |
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Chief Executive Officer (Principal Executive Officer) |
EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO SECTION 302 OF THE
SARBANES-OXLEY ACT OF 2002
I, Quentin Ponder, certify that:
1. |
I have reviewed this Annual Report on Form 10-K of Cool Technologies, Inc. (the "registrant") for the year ended December 31, 2019; |
2. |
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
2. |
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. |
The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exhibit Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
(a) |
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) |
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) |
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
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(d) |
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and |
5. |
The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
(a) |
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
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(b) |
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Dated: May 29, 2020 |
By: |
/s/ Quentin Ponder |
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Quentin Ponder |
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Chief Financial Officer (Principal Financial and Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO 18 USC, SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Cool Technologies, Inc. (the "Company") on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Timothy Hassett, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
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(1) |
The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: May 29, 2020 |
By: |
/s/ Timothy Hassett |
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Timothy Hassett |
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Chief Executive Officer (Principal Executive Officer) |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO 18 USC, SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of Cool Technologies, Inc. (the "Company") on Form 10-K for the year ended December 31, 2019, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Quentin Ponder, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Sec. 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
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(1) |
The Report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
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(2) |
Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Dated: May 29, 2020 |
By: |
/s/ Quentin Ponder |
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Quentin Ponder |
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Chief Financial Officer (Principal Financial and Accounting Officer) |