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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarter ended March 31, 2022

 

☐  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: 000-56030

 

ENERGY and WATER DEVELOPMENT CORP.

(Exact Name of Registrant as Specified in Its Charter)

 

Florida   30-0781375
(State or Other Jurisdiction of Incorporation or Organization)   (I.R.S. Employer Identification No.)

 

7901 4th Street N STE #4174, St Petersburg, Florida 33702

(Address of Principal Executive Offices, including Zip Code)

 

Tel No.: 305-517-7330

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act: None

 

Title of each class Trading Symbol(s) Name of each exchange on which registered
None None None

 

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

 

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

 

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

 

Large accelerated filer ☐ Accelerated filer ☐
Non-accelerated filer ☒ Smaller reporting company ☒
  Emerging growth company ☒

 

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

 

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

 

The number of shares outstanding of the registrant’s classes of common stock as May 3, 2022 was 173,019,421 shares.

 

 
 

 

 
 

INDEX

 

    Page
  PART I.   FINANCIAL INFORMATION  
     
Item 1. Financial Statements 1
  Condensed Consolidated Balance Sheets as of March 31, 2022 (Unaudited) and December 31, 2021 1
  Condensed Consolidated Statements of Operations and Comprehensive Loss for the three months ended March 31, 2022 and 2021 (Unaudited) 2
  Condensed Consolidated Statements of Changes in Stockholders' Deficit for the three months ended March 31, 2022 and 2021 (Unaudited) 3
  Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (Unaudited) 4
  Notes to Condensed Consolidated Financial Statements (Unaudited) 5
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 17
Item 3. Quantitative and Qualitative Disclosures about Market Risk 20
Item 4. Controls and Procedures 20
     
  PART II.   OTHER INFORMATION  
     
Item 1. Legal Proceedings 22
Item 1A. Risk Factors 22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 22
Item 3. Defaults Upon Senior Securities 22
Item 4. Mine Safety Disclosures 22
Item 5. Other Information 22
Item 6. Exhibits 23
SIGNATURES   24
     

 

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

 

The information contained in this Report, including in the documents incorporated by reference into this Report, includes some statements that are not purely historical and that are “forward-looking statements.” Such forward-looking statements include, but are not limited to, statements regarding our Company and management’s expectations, hopes, beliefs, intentions or strategies regarding the future, including our financial condition, results of operations, and the expected impact of the offering on the parties’ individual and combined financial performance. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. The words “anticipates,” “believes,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “might,” “plans,” “possible,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” and similar expressions, or the negatives of such terms, may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking.

 

The forward-looking statements contained in this Report are based on current expectations and beliefs concerning future developments and the potential effects on the parties and the transaction. There can be no assurance that future developments actually affecting us will be those anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond the parties’ control) or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date hereof.

 

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. The following discussion should be read in conjunction with our financial statements and the related notes included in this Report.

 

  

 
 

PART I. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

Energy and Water Development Corp.

Condensed Consolidated Balance Sheets

 

         
   March 31,   December 31, 
   2022   2021 
   (Unaudited)     
ASSETS          
           
CURRENT ASSETS          
Cash  $412,051   $589,668 
Accounts receivable   55,112    55,169 
Inventory   445,977    196,553 
Prepaid expenses and other current assets   277,534    432,082 
TOTAL CURRENT ASSETS   1,190,674    1,273,472 
           
Property and equipment, net   37,392    3,834 
Operating lease right-of-use asset   38,986    49,432 
           
TOTAL ASSETS  $1,267,052   $1,326,738 
           
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)          
           
CURRENT LIABILITIES          
Accounts payable and accrued expenses  $905,144   $941,309 
Accounts payable – related party   124,370    124,370 
Convertible loans payable, net of discounts   39,999    176,703 
Due to officers   11,684    17,485 
Derivative liability   —    354,160 
Current portion of operating lease liability   38,986    39,148 
Common stock subscriptions liability   —    377,350 
TOTAL CURRENT LIABILITIES  $1,120,183   $2,030,525 
           
Operating lease liability, net of current portion   —    10,283 
TOTAL LIABILITIES   1,120,183    2,040,808 
           
COMMITMENTS AND CONTINGENCIES (Note 16)   —    — 
           
STOCKHOLDERS' EQUITY (DEFICIT):          
Preferred stock, par value $.001 per share; 500,000,000 shares authorized, 9,780,976 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively   9,781    9,781 
Common stock, par value $.001 per share; 1,000,000,000 shares authorized, 162,389,201 and 143,840,643 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively   162,389    143,840 
Common stock subscriptions, 10,324,000 and 15,855,000 shares at March 31, 2022 and December 31, 2021, respectively   722,445    792,745 
Additional paid in capital   22,034,831    20,777,401 
Accumulated deficit   (22,754,103)   (22,395,393)
Accumulated other comprehensive loss   (28,474)   (42,444)
TOTAL STOCKHOLDERS' EQUITY (DEFICIT)   146,869    (714,070)
           
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)  $1,267,052   $1,326,738 

 

See accompanying notes to the condensed consolidated financial statements (unaudited).

 

1 
 

Energy and Water Development Corp.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

 

         
   For the Three Months Ended 
   March 31, 
   2022   2021 
         
GENERAL AND ADMINISTRATIVE EXPENSES          
Marketing fees  $93,247   $165,188 
Professional fees   101,898    57,002 
Officers’ salaries and payroll taxes   113,237    75,000 
Other general and administrative expenses   122,655    8,292 
Travel and entertainment   12,075    — 
TOTAL GENERAL and ADMINISTRATIVE EXPENSES   443,112    305,482 
           
LOSS FROM OPERATIONS   (443,112)   (305,482)
           
OTHER INCOME (EXPENSE)          
Change in fair value of derivative liability   243,653    310,348 
Other income (expense)   (34,805)   — 
Interest expense   (124,446)   (438,918)
TOTAL OTHER INCOME (EXPENSE)   84,402    (128,570 
           
LOSS BEFORE TAXES   (358,710)   (434,052)
           
TAXES   —    — 
           
NET LOSS  $(358,710)  $(434,052)
           
OTHER COMPREHENSIVE INCOME (LOSS)          
Foreign currency translation adjustments   13,970    (2,501)
TOTAL OTHER COMPREHENSIVE INCOME (LOSS)   13,970    (2,501)
           
COMPREHENSIVE LOSS   (344,740)   (436,553)
           
Net loss per common share - Basic and diluted  $(0.00)  $(0.00)
           
Weighted average number of common shares outstanding - Basic and diluted   149,481,067    129,783,492 

 

See accompanying notes to the condensed consolidated financial statements (unaudited).

 

 

2 
 

Energy and Water Development Corp.

Condensed Statements of Changes in Stockholders’ Deficit

(Unaudited) 

 

                                                   
   Preferred Stock   Common Stock   Common Stock Subscriptions  

Additional

Paid-in

   Accumulated  

Accumulated Other

Comprehensive

  

Total

Stockholders'

 
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Loss   Deficit 
                                         
BALANCE AT DECEMBER 31, 2021   9,780,796   $9,781    143,840,643   $143,840    15,855,000   $792,745   $20,777,401   $(22,395,393)  $(42,444)  $(714,070)
Sale of Common Stock   —    —    17,453,000    17,453    (14,953,000)   (747,650)   1,030,197    —    —    300,000 
Common stock issued for services   —    —    520,000    520    —    —    88,080    —    —    88,600 
Common stock issued to satisfy convertible debt   —    —    540,716    541    —    —    49,459    —    —    50,000 
Stock issued for interest and fees   —    —    34,842    35    —    —    3,187    —    —    3,222 
Subscriptions liability reclassification to subscriptions   —    —    —    —    7,547,000    377,350    —    —    —    377,350 
Derivative settled upon conversion of debt   —    —    —    —    —    —    110,507    —    —    110,507 
Subscription deposits received   —    —    —    —    1,875,000    300,000    —    —    —    300,000 
Costs associated with equity line of credit   —    —    —    —    —    —    (24,000)   —    —    (24,000)
Net loss   —    —    —    —    —    —    —    (358,710)   —    (358,710)
Other comprehensive loss   —    —    —    —    —    —    —    —    13,970    13,970 
BALANCE AT March 31, 2022   9,780,796   $9,781    162,389,201   $162,389    10,324,000   $722,445   $22,034,831   $(22,754,103)  $(28,474)  $146,869 

 

 

                                                   
                   Common Stock   Additional       Accumulated Other    Total 
   Preferred Stock   Common Stock   Subscriptions   Paid-in   Accumulated   Comprehensive   Stockholders' 
   Shares   Amount   Shares   Amount   Shares   Amount   Capital   Deficit   Loss   Deficit 
                                                   
BALANCE AT DECEMBER 31, 2020   9,780,976   $9,781    123,316,886   $123,316    10,040,000   $1,504,000   $16,153,038   $(19,357,927)  $—   $(1,567,792)
Sale of common stock   —    —    471,433    471    200,000    20,000    139,550    —    —    160,021 
Common stock issued for services   —    —    500,000    500    —    —    164,500    —    —    165,000 
Common stock issued to satisfy convertible loans payable   —    —    690,606    691    —    —    65,309    —    —    66,000 
Common stock issued for interest and fees on convertible loans payable   —    —    38,690    39    —    —    3,402    —    —    3,441 
Derivative liability settled upon conversion of loans payable   —    —    —    —    —    —    67,350    —    —    67,350 
Common stock issued on subscriptions   —    —    10,040,000    10,040    (10,040,000)   (1,504,000)   1,493,960    —    —    — 
Net loss   —    —    —    —    —    —    —    (434,052)   —    (434,052)
Other comprehensive loss   —    —    —    —    —    —    —    —    (2,501)   (2,501)
BALANCE AT MARCH 31, 2021   9,780,976   $9,781    135,057,615   $135,057    200,000   $20,000   $18,087,109   $(19,791,979)  $(2,501)  $(1,542,533)

 

 

See accompanying notes to the condensed consolidated financial statements (unaudited).

 

3 
 

Energy and Water Development Corp.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

         
   For the Three Months Ended 
   March 31, 
   2022   2021 
         
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(358,710)  $(434,052)
Reconciliation of net loss to net cash used in operating activities          
Amortization of debt discount and deferred financing costs   63,296    405,196 
Depreciation expense   873    — 
Change in fair value of derivative liability   (243,653)   (310,348)
Stock issued for services   88,600    165,000 
Changes in operating assets and liabilities:          
Inventory   (256,999)   — 
Prepaid expenses and other current assets   142,910    (72,949)
Accounts payable and accrued expenses   (30,003)   (121,325)
Due to officers   (4,558)   30,167 
CASH USED IN OPERATING ACTIVITIES   (598,244)   (338,311)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchase of property and equipment   (34,525)   — 
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Proceeds from convertible loans payable   —    369,500 
Payments of convertible loans payable   (150,000)   (95,500)
Costs associated with equity line of credit   (24,000)   — 
Proceeds from sale of common stock   300,000    160,021 
Proceeds from common stock subscriptions   300,000    — 
CASH PROVIDED BY FINANCING ACTIVITIES   426,000    434,021 
           
Effect of exchange rate changes on cash   29,152    (2,501)
           
Net change in cash   (177,617)   93,209 
           
Cash beginning of period   589,668    12,047 
           
Cash end of period  $412,051   $105,256 
           
SUPPLEMENTAL CASH FLOW INFORMATION:          
Cash paid for interest  $67,940   $28,864 
Cash paid for taxes  $—   $— 
           
NON-CASH INVESTING AND FINANCING ACTIVITIES:          
Common stock issued for interest and fees  $3,222   $3,441 
Common stock issued to convert loans payable  $50,000   $66,000 
Derivative liability discount  $—   $730,280 
Derivative liability settled upon conversion of debt  $110,507   $67,350 
Reclassification of common stock subscription liability to common stock subscriptions  $377,350   $— 
Reclassification of common stock subscriptions to common stock  $747,650   $1,504,000 

 

 

 

See accompanying notes to the condensed consolidated financial statements (unaudited).

 

 

4 
 

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

Note 1. Incorporation and Nature of Operations

 

Energy and Water Development Corp. (the “Corporation”, “Company” or “EAWD”), was incorporated under the laws of the State of Florida on December 12, 2007. In September 2019, the Company changed its name from Eurosport Active World Corp. to Energy and Water Development Corp. to better present the Company’s purpose and business sector. We are an engineering services company formed as an outsourcing green tech platform, seeking to exploit renewable energy and water technologies.

 

On May 7th, 2021, the Company established an official Branch to initiate operations and assist on the establishment of an official subsidiary. On November 9, 2021, the Company established an official Subsidiary of EAWD in Germany to ensure the company is positioned to service its growing business in one of the EU’s most environmentally progressive countries. The company was incorporated under the name of Energy and Water development Deutschland GmbH, in Hamburg.

 

Note 2. Summary of Significant Accounting Policies

 

Principles of Consolidation and Basis of Presentation

 

The condensed consolidated financial statements include the accounts of EAWD and its subsidiary. All intercompany transactions and balances have been eliminated in consolidation.

 

The condensed consolidated financial statements (unaudited) include the accounts of Energy and Water Development Corp. and have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules of the Securities and Exchange Commission. These unaudited condensed financial statements should be read in conjunction with the financial statements and related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC.

 

In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for the interim periods are not necessarily indicative of the results to be expected for the full year. Notes to the financial statements that would substantially duplicate the disclosures contained in the audited financial statements of Energy and Water Development Corp. for the fiscal year ended December 31, 2021, have been omitted.

 

 Foreign currency translation

 

The United States dollar (“USD”) is the Company’s reporting currency. The Company has a subsidiary located in Germany. The net sales generated, and the related expenses directly incurred from the operations, if any, are denominated in local currency, Euro (“Euro”). The functional currency of the subsidiary is generally the same as the local currency.

 

Assets and liabilities measured in Euros are translated into USD at the prevailing exchange rates in effect as of the financial statement date and the related gains and losses, net of applicable deferred income taxes, are reflected in accumulated other comprehensive loss in its balance sheets. Income and expense accounts are translated at the average exchange rate for the period. The Company has not, to the date of these consolidated financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations. During the three months ended March 31, 2022 the Company used a spot rate of 1.11 and an average rate of 1.12 when converting EURO to USD.

 

 

 5

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

Use of Estimates

 

The preparation of condensed financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting periods. Actual results could differ from those estimates. Estimates which are particularly significant to the condensed financial statements include estimates relating to the determination of impairment of assets, assessment of going concern, the useful life of property and equipment, the determination of the fair value of stock-based compensation, and the recoverability of deferred income tax assets.

 

Leases

 

Effective January 1, 2019, the Company adopted ASC 842- Leases (“ASC 842”). The lease standard provided a number of optional practical expedients in transition. The Company elected the package of practical expedients. As such, the Company did not have to reassess whether expired or existing contracts are or contain a lease; did not have to reassess the lease classifications or reassess the initial direct costs associated with expired or existing leases. The lease standard also provides practical expedients for an entity’s ongoing accounting. The Company elected the short-term lease recognition exemption under which the Company will not recognize right-of-use (“ROU”) assets or lease liabilities, and this includes not recognizing ROU assets or lease liabilities for existing short-term leases. The Company elected the practical expedient to not separate lease and non-lease components for certain classes of assets (facilities).

 

At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the unique facts and circumstances present in the arrangement. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets and short-term and long-term lease liabilities, as applicable.

 

Cash

 

The Company considers short-term interest-bearing investments with initial maturities of three months or less to be cash equivalents. The Company has $412,051 and $589,668 cash at March 31, 2022 and December 31, 2021, respectively.

 

Inventory

 

Inventory is stated at the lower of cost or net realizable value using the first in, first out (FIFO) method. A reserve is established if necessary to reduce excess or obsolete inventories to their net realizable value.

 

Prepaid Expenses and Other Current Assets

 

Prepaid expenses and other current assets include prepaid inventory, purchase deposits, miscellaneous prepaid expenses, value added tax receivable, and a security deposit.

 

Property and Equipment

 

Property and equipment is stated at cost, less accumulated depreciation. Depreciation is recognized over an asset’s estimated useful life using the straight-line method beginning on the date an asset is placed in service. The Company regularly evaluates the estimated remaining useful lives of the Company’s property and equipment to determine whether events or changes in circumstances warrant a revision to the remaining period of depreciation. Maintenance and repairs are charged to expense as incurred. Estimated useful lives of the Company’s Property and Equipment are as follows:

 

 
  Useful Life (in years)
Office equipment 5
Furniture and fixtures 7
Automobile 8

 

 

 

 

 6

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

Deferred Financing Costs

 

The Company has recorded deferred financing costs as a result of fees incurred by the Company in conjunction with its debt financing activities. These costs are amortized to interest expense using the straight-line method which approximates the interest rate method over the term of the related debt. As of March 31, 2022 and December 31, 2021, unamortized deferred financing costs were $0 and $6,663, respectively and are netted against the related debt.

 

Revenue Recognition

 

The Company recognizes revenue in accordance with ASC 606, Revenue from Contracts with Customers, the core principle of which is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to receive in exchange for those goods or services.

To achieve this core principle, five basic criteria must be met before revenue can be recognized: (1) identify the contract with a customer; (2) identify the performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to performance obligations in the contract; and (5) recognize revenue when or as the Company satisfies a performance obligation.

Fair Value of Financial Instruments

 

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at a measurement date. A fair value hierarchy requires an entity to maximize the use of observable inputs, where available, and minimize the use of unobservable inputs when measuring fair value.

  

Described below are the three levels of inputs that may be used to measure fair value:

 

Level 1 – Quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities,

Level 2 – Observable prices that are based on inputs not quoted on active markets, but corroborated by market data,

Level 3 – Unobservable inputs are used when little or no market data is available.

 

The application of the three levels of the fair value hierarchy under ASC Topic 820-10-35, our derivative liabilities as of March 31, 2022 and December 31, 2021, were $0 and $354,160, respectively and measured on Level 3 inputs.

 

Certain assets and liabilities are required to be recorded at fair value on a recurring basis. The Company adjusts derivative financial instruments to fair value on a recurring basis. The fair value for other assets and liabilities such as cash, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses, deferred cost and deferred revenue have been determined to approximate carrying amounts due to the short maturities of these instruments. The Company believes that its indebtedness approximates fair value based on current yields for debt instruments with similar terms.

 

Loss Per Common Share

 

The Corporation accounts for earnings (loss) per share in accordance with FASB ASC Topic No. 260 - 10, “Earnings Per Share”, which establishes the requirements for presenting earnings per share (“EPS”). FASB ASC Topic No. 260 - 10 requires the presentation of “basic” and “diluted” EPS on the face of the statement of operations. Basic EPS amounts are calculated using the weighted-average number of common shares outstanding during each period. Diluted EPS assumes the exercise of all stock options, warrants and convertible securities having exercise prices less than the average market price of the common stock during the periods, using the treasury stock method. When a loss from operations exists, potential common shares are excluded from the computation of diluted EPS because their inclusion would result in an anti-dilutive effect on per share amounts.

 

 7

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

As discussed more fully in Note 10, convertible note holders have the option of converting their loans into common shares subject to the terms and features offered by the specific convertible notes. Some note holders were also granted purchase options to purchase additional shares subject to the features of each purchase option. If the convertible note holders of unexercised convertible notes exercised their conversion feature and the additional purchase options, they would represent 0 and 2,708,091 in additional common shares at March 31, 2022 and 2021, respectively.  The potential shares from both the conversion feature and the rights to purchase additional shares were excluded from the computation of diluted net loss per share, as the inclusion of such shares would be anti-dilutive.

 

Related Party Transactions

 

A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. A related party is generally defined as:

 

  (i) any person that holds 10% or more of the Company’s securities including such person’s immediate families,
  (ii) the Company’s management,
  (iii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or
  (iv) anyone who can significantly influence the financial and operating decisions of the Company.

  

Note 3. Recently Issued Accounting Standards

 

Accounting standards promulgated by the FASB are subject to change. Changes in such standards may have an impact on the Corporation’s future financial statements. The following are a summary of recent accounting developments.

 

On January 1, 2022, the Company adopted ASU No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40). This standard eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. It also amends the accounting for certain contracts in an entity’s own equity that are currently accounted for as derivatives because of specific settlement provisions. In addition, the new guidance modifies how particular convertible instruments and certain contracts that may be settled in cash or shares impact the diluted EPS computation. The adoption of ASU 2020-06 did not have a material impact on the Company’s condensed consolidated financial statements.

 

On January 1, 2022, the Company adopted ASU No. 2021-04, Earnings Per Share (Topic 260), Debt – Modifications and Extinguishments (Subtopic 470-50), Compensation – Stock Compensation (Topic 718), and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modification or Exchanges of Freestanding Equity-Classified Written Call Options (“ASU 2021-04”), which will clarify and reduce diversity in practice. Specifically, the new standard includes a recognition model comprising four categories of transactions and corresponding accounting treatment for each category. The category that would apply to a modification or an exchange of an equity-classified warrant would depend on the substance of the modification transaction (e.g., a financing transaction to raise equity versus one to raise debt). This recognition model is premised on the idea that the accounting for the transaction should not differ from what it would have been had the issuer of the warrants paid cash instead of modifying the warrants. The adoption of ASU 2021-04 did not have a material impact on the Company’s condensed consolidated financial statements.

 

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses to improve information on credit losses for financial assets and net investment in leases that are not accounted for at fair value through net income. ASU 2016-13 replaces the current incurred loss impairment methodology with a methodology that reflects expected credit losses. In April 2019 and May 2019, the FASB issued ASU No. 2019-04, “Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments” and ASU No. 2019-05, “Financial Instruments-Credit Losses (Topic 326): Targeted Transition Relief” which provided additional implementation guidance on the previously issued ASU. In November 2019, the FASB issued ASU 2019-10, “Financial Instruments - Credit Loss (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842),” which defers the effective date for public filers that are considered small reporting companies (“SRC”) as defined by the Securities and Exchange Commission to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Since the Company is an SRC, implementation is not needed until January 1, 2023. The Company will continue to evaluate the effect of adopting ASU 2016-13 will have on the Company’s financial statements and disclosures.

 

 

 8

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

Note 4. Going Concern

 

During the year ended December 31, 2021, pursuant to an equipment sale agreement, the Company recognized revenue of $550,000 for the sale of equipment, along with $350,000 for the cost of construction, earning $200,000 gross profit. The Company has incurred operating losses since it began operations (December 2012) totaling $22,754,103 at March 31, 2022. During the three months ended March 31, 2022, the Corporation incurred net losses of $358,710. The Company had working capital of $70,491 at March 31, 2022.

 

The Company’s ability to transition to profitable operations is dependent upon achieving a level of revenues adequate to support its cost structure. The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations and the anticipated growth of our business and availability to sufficient resources.

 

Management expects sales operations to continue to expand. If necessary, the Company will need to raise additional funds during 2022. Management of the Company intends to raise additional funds through the issuance of equity securities or debt, credit lines or advances from suppliers. The ability of the Company to continue as a going concern depends upon its ability to generate sales or obtain additional funding to finance operating losses until the Corporation is profitable.

 

These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

Note 5. Accounts Receivable

 

At March 31, 2022 and December 31, 2021, accounts receivable was $55,112 and $55,169, respectively, and determined to be fully collectible.

 

Note 6. Inventory

 

The components of inventory at March 31, 2022 and December 31, 2021, consisted of the following:

 

        
   March 31,   December 31, 
  

2022

   2021 
   (Unaudited)     
Work in progress  $445,977   $196,553 
Inventory, net  $445,977   $196,553 

  

 

 

 9

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

 

Note 7. Prepaid Expenses and Other Current Assets

 

The components of prepaid expenses and other current assets at March 31, 2022 and December 31, 2021, consisted of the following:

 

        
   March 31, 2022   December 31, 2021 
   (Unaudited)     
Prepayment on inventory not received  $33,000   $225,979 
Prepaid expenses   143,158    113,600 
Value added tax receivable   94,162    83,602 
Security deposit   7,214    7,394 
Purchase deposits   —    1,507 
Prepaid expenses and other current assets  $277,534   $432,082 

 

Note 8. Property and Equipment, net

 

The components of property and equipment at March 31, 2022 and December 31, 2021 consisted of the following:

 

          
   March 31,   December 31, 
  

2022

   2021 
   (Unaudited)     
Office equipment  $4,015   $1,526 
Furniture and fixtures   2,550    2,607 
Automobile   32,000    — 
Property and equipment, gross   38,565    4,133 
Less: Accumulated depreciation   (1,173)   (299)
Property and equipment, net  $37,392   $3,834 

 

Depreciation expense for the three months ended March 31, 2022 and 2021 was $873 and $0, respectively, and is included in other general and administrative expenses on the condensed consolidated statements of operations and comprehensive loss.

 

Note 9. Accounts Payable and Accrued Expenses and Accounts payable – Related Party

 

Significant components of accounts payable and accrued expenses at March 31 ,2022 and December 31, 2021 are as follows:

 

          
   March 31, 2022   December 31, 2021 
   (Unaudited)     
         
Accounts payable  $218,714   $251,404 
Accounts payable – related party   124,370    124,370 
Accrued expenses   265,506    385,776 
Accrued legal costs   349,726    253,901 
Accrued salary   71,198    50,228 
Accounts payable and accrued expenses and accounts payable – related party  $1,029,514   $1,065,679 

 

As of March 31, 2022 and December 31, 2021, the Company owed Virhtech Gmbh, a related party of the Company, $124,370, for services performed for the Company and is classified as accounts payable – related party on the condensed consolidated balance sheets.

 

 10

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

Note 10. Convertible Loans Payable

 

As of March 31, 2022 and December 31, 2021, the balance of convertible loans payable net of discount was $39,999 and $176,703, respectively.

 

During the year ended December 31, 2021, the Company issued two convertible loans in the aggregate amount of $404,000. The notes bear interest at 8% per annum and all mature within one year. On October 21, 2021, the Maturity Date of the $304,000 loan was extended from March 25, 2022 to April 21, 2022. The embedded beneficial conversion features in the notes meet the definition of a derivative and requires bifurcation and liability classification, at fair value. The fair value of the derivative liability as of the date of issuance was $746,672 and was recorded as a discount of the notes.

 

     
   Amount 
Balance of convertible loan payables, net of discounts on December 31, 2020  $149,241 
Issuances of debt   404,000 
Settlement of debt   (95,500)
Amortization of debt discount   402,125 
Debt discount   (406,500)
Deferred financing costs   (6,663)
Conversions   (270,000)
Balance of convertible loan payables, net of discounts on December 31, 2021  $176,703 
Amortization of debt discount   63,296 
Settlement of debt   (150,000)
Conversions   (50,000)
Balance of convertible loan payables, net of discounts on March 31, 2022 (Unaudited)  $39,999 

 

Derivative Liability

 

The Company issued debts that consist of the issuance of convertible notes with variable conversion provisions. The conversion terms of the convertible notes are variable based on certain factors, such as the future price of the Company’s common stock. The number of shares of common stock to be issued is based on the future price of the Company’s common stock. The number of shares of common stock issuable upon conversion of the promissory note is indeterminate. Due to the fact that the number of shares of common stock issuable could exceed the Company’s authorized share limit, the equity environment is tainted, and all additional convertible debentures and warrants are included in the value of the derivative liabilities. Pursuant to ASC 815-15 Embedded Derivatives, the fair values of the variable conversion options and warrants and shares to be issued were recorded as derivative liabilities on the issuance date and revalued at each reporting period.

 

Based on the various convertible notes described above, the fair value of applicable derivative liabilities on notes and change in fair value of derivative liability are as follows as of March 31, 2022 and December 31, 2021:

 

    
   Total 
Balance of derivative liability as of December 31, 2020  $310,641 
Change due to issuances   746,672 
Change due to exercise / redemptions   (1,972,419)
Change in fair value   1,269,266 
Balance of derivative liability as of December 31, 2021  $354,160 
Change due to issuances   — 
Change due to exercise / redemptions   (110,507)
Change in fair value   (243,653)
Balance of derivative liability as of March 31, 2022 (Unaudited)  $— 

  

 

 11

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

A summary of quantitative information with respect to valuation methodology and significant unobservable inputs used for the Company’s derivative liabilities that are categorized within Level 3 of the fair value hierarchy for the periods ended March 31, 2022 and December 31, 2021 is as follows:

 

          
  

March 31,

2022

 

December 31,

2021

 
 (Unaudited)      
Stock price   $0.19 - 0.20    $0.16 – 0.45 
Exercise price   $0.09  0.11    $0.03 – 0.20 
Contractual term (in years)   0.64 – 0.68    0.27 – 1 
Volatility (annual)   1,313% – 1,368%    149% – 2,095% 
Risk-free rate   0.51% – 0.78%    0.04% – 0.39% 

   

The foregoing assumptions are reviewed quarterly and are subject to change based primarily on management’s assessment of the probability of the events described occurring. Accordingly, changes to these assessments could materially affect the valuations.

 

Financial Liabilities Measured at Fair Value on a Recurring Basis

 

Financial liabilities measured at fair value on a recurring basis are summarized below and disclosed on the balance sheet under Derivative liability – warrants and derivative liabilities:

  

                    
    Fair Value measured at March 31, 2022 (Unaudited) 
    Quoted prices in    Significant other    Significant    Fair value at 
    active markets    observable inputs    unobservable inputs    March 31, 
    (Level 1)    (Level 2)    (Level 3)    2022 
Derivative liability  $—   $—   $—   $— 
Total  $—   $—   $—   $— 

 

  

   Fair value measured at December 31, 2021 
   Quoted prices in   Significant other   Significant   Fair value at 
   active markets   observable inputs   unobservable inputs   December 31 
   (Level 1)   (Level 2)   (Level 3)   2021 
Derivative liability  $—   $—   $354,160   $354,160 
Total  $—   $—   $354,160   $354,160 

 

There were no transfers between Level 1, 2 or 3 during the three months ended March 31, 2022 and 2021.

 

During the three months ended March 31, 2022 and 2021, the Company recorded gains of $243,653 and $310,348, respectively, from the change in fair value of derivative liability.

 

 12

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

Note 12. Leases

 

The Company’s leases do not provide an implicit rate that can be readily determined. Therefore, the Company uses discount rates based on the incremental borrowing rate of its current external debt of 8%.

 

The Company’s weighted-average remaining lease term relating to its operating leases is 1.00 years, with a weighted-average discount rate of the 8.00%.

 

The Company incurred lease expense for its operating leases of $10,173 and $2,034, respectively , which was included in general and administrative expenses in the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2022 and 2021. During the three months ended March 31, 2022 and 2021, the Company made cash lease payments of $10,173 and $2,034, respectively. At March 31, 2022 and December 31, 2021, the operating lease right-of-use asset was $38,986 and $49,432, respectively, the current portion of operating lease liability was $38,986 and $39,148, respectively, and the operating lease liability, net of current portion was $0 and $10,283, respectively.

 

The following table presents information about the future maturity of the lease liability under the Company’s operating leases as of March 31, 2022.

 

       
Maturity of Lease Liability   Amount  
2022 (remainder of the year)   $ 30,519  
2023     10,177  
Total undiscounted lease payments     40,696  
Less: Imputed interest     (1,710 ) 
Present value of lease liabilities   $ 38,986  
Remaining lease term (in years)     1.00  

 

Note 13. Related Party Transactions

 

Due to officers

 

Amounts due to officers as of March 31, 2022 and December 31, 2021 are comprised of the following:

 

        
   March 31, 2022   December 31, 2021 
   (Unaudited)     
Ralph Hofmeier:          
Accrued salaries  $11,684   $17,485 
Total due to Ralph Hofmeier   11,684    17,485 
         Total due to officers  $11,684   $17,485 

 

Unsecured advances due to officers represent unreimbursed Corporation expenses paid by the officers on behalf of the Corporation. These advances are non-interest bearing and are due on demand.

 

Officer Compensation

 

Accrued salaries represent amounts accrued in accordance with the employment agreements for Mr. Hofmeier, the Company’s President, Chief Executive Officer and Chairman of the Board, and Ms. Velazquez, the Company’s Chief Operating Officer and Vice-Chairman. Mr. Hofmeier and Ms. Velazquez are also significant stockholders.

 

 

 13

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

Customer deposit

 

EAWC-TV functions as a distributor of EAWD product. In 2019, EAWC-TV, having secured EAWD’s first customer, has placed a $550,000 order for a solar powered atmospheric water generator (“AWG”) for one of its customers. EAWC-TV and the Company on December 13, 2019 agreed to accept a $303,742 reduction in the balance owed by EAWD to EAWC-TV as a deposit with EAWD related to this order. The deposit was satisfied through delivery of the equipment. The equipment was built in Germany.

 

In 2020, manufacture of the unit was delayed due to Covid-19 related issues. The Company and EAWC-TV agreed as it had done in 2019, to clear the outstanding balances in the D/T/F EAWC-TV and the outstanding balance it carried in its accounts payable account for administrative services, which it did on December 26, 2020 which resulted in an additional down payment of $193,497. EAWC-TV has an unpaid balance on the equipment of $55,112 and 55,169 as of March 31, 2022 and December 31, 2021, respectively, which represents the balance of the Company’s outstanding accounts receivable as of March 31, 2022 and December 31, 2021. 

 

Virhtech Gmbh

 

As of March 31, 2022 and December 31, 2021, the Company owed Virhtech Gmbh, a related party of the Company, $124,370 for services performed for the Company and is classified as accounts payable – related party on the condensed consolidated balance sheets.

 

Investor deposit and officer compensation

 

As of December 31, 2021, the Company recorded $792,745, or 15,855,000 common shares to be issued, as common stock subscriptions within stockholders’ deficit and $377,350, or 7,547,000 common shares to be issued, as a common stock subscription liability for stock issuance transactions in process. The $1,170,095 is part of pending stock sales for 23,402,000 shares that has been funded and is waiting issuance to complete the sale at December 31, 2021. The common stock subscription liability consists of cash received for future share issuances in which a sales and purchase agreement was not signed and returned from the investor.

 

For the three months ended March 31, 2022, the Company recorded $722,445 in common stock subscriptions for stock issuance transactions in process. The $722,445 was part of pending stock sales for 10,324,000 shares that has been funded and was waiting issuance to complete the sale. Shares were issued within the period of April 2022.

 

Note 14. Stockholders’ Equity (Deficit)

 

Preferred Stock

 

Authorized: 500,000,000 shares of voting preferred stock with a par value of $0.001.

  

Common Stock

 

Authorized: 1,000,000,000 shares of voting common stock with a par value of $0.001.

  

During the three months ended March 31, 2022 the Company engaged in the following equity events:

 

  ·

On January 26, 2022 the Company entered into a two year equity Line of credit (“ELOC”) with an investor to provide up to $5 million. As of March 31, 2022, 2,500,000 common shares were issued pursuant to this agreement, including 500,000 common shares as the agreed upon commitment fee. The initial purchase in this agreement was for $300,000. See Note 16 for more information. 

  ·

On January 14, 2022, the Company completed a conversion of our outstanding convertible debt by exchanging $53,222 cash for retiring $50,000 in convertible debt along with $3,222 in interest for a total of 575,558 common shares. 

  ·

On February 2, 2022, the Company issued 20,000 shares of the Company’s common stock to a vendor for services valued at $3,600. 

  ·

On February 3, 2022, the Company issued 500,000 shares of the Company’s common stock to a vendor for services valued at $85,000. 

  ·

On February 18, 2022, the Company received a deposit in the amount of $300,000 for 1,875,000 common shares to be issued pursuant to a securities purchase agreement. As of April 14, 2022, these shares have been issued. 

  · From January 1, 2022 through March 31, 2022, the Company has issued 14,953,000 common shares related to subscriptions outstanding at December 31, 2021.
     

  

 14

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

Note 15. Stock Option Plan and Warrants

 

Stock Options

 

On January 2, 2012, the Corporation’s Board of Directors approved the creation of the 2012 Non-Qualified Stock Option Plan (the “2012 Plan”). The 2012 Plan provides for the issuance of incentive stock options to designated employees, certain key advisors and non-employee members of the Board of Directors with the opportunity to receive grant awards to acquire, in the aggregate, up to 5,000,000 shares of the Corporation’s common stock.

 

A summary of information regarding the Corporation’s common stock options outstanding is as follows:

 

                       
                Weighted  
                Average  
          Weighted     Remaining  
    Number of     Average     Contractual  
    Shares     Exercise Price     Term (Years)  
Outstanding at December 31, 2020     2,200,000     $ 0.10       1.0  
Issued     —       —       —  
Exercised     (2,200,000 )      —       —  
Outstanding at December 31, 2021     —       —       —  
Issued     —       —       —  
Expired     —       —       —  
Outstanding at March 31, 2022     —     $ —       —  

 

The above outstanding options were granted on January 1, 2012, to a former Corporation’s executive. The options vest 20,000 options per month with 2,200,000 being vested and exercisable at December 31, 2018. These options expired in January 2021. During the three months ended March 31, 2022 and 2021, the Corporation did not recognize any stock-based compensation expense.

 

Warrants

 

On February 17, 2021, the Company entered into an agreement with a consultant to provide Business Development advisement and analysis services. In consideration, the consultant will be issued 1,000,000 warrant shares. 500,000 warrants were issued on February 17, 2021, and the remaining 500,000 will be issued on the six-month anniversary of initial issuance. On August 31, 2021, due to a failure by the consultant to provide the services as required by the agreement, the Company terminated the agreement, and the warrants were canceled.

 

Note 16. Commitments and Contingencies

 

Commitments

 

Equity Line of Credit

 

The Company entered into a two-year Equity Line of Credit pursuant to an Equity Purchase Agreement with Tysadco Partners, LLC, dated January 26, 2022. Pursuant to the agreement, Tysadco Partners agreed to invest up to $5,000,000 to purchase the Company’s Common Stock, par value $0.001 per share, and upon execution of the ELOC the Company issued an additional 500,000 shares of common stock to Tysadco Partners as commitment shares in accordance with the closing conditions within the ELOC. Requests are limited to the lesser of $1,000,000 or 500% of the average shares traded for the 10 days prior the Closing Request Date. The purchase price per common share purchased shall equal 85% of the average of the two lowest daily traded VWAP during the 5 trading days commencing with the put notice date. In addition, the Company and Tysadco Partners entered into a Registration Rights Agreement, whereby the Company shall register the securities on a registration statement covering the Offering Amount with the SEC within forty-five days of filing its 10-K for the year ended December 31, 2021. If the Company fails do register the Securities, then for each thirty-day period thereafter, the Commitment Fee will increase by $10,000 payable in restricted common stock at $0.20 and capped at $20,000. As of the date of this filing, the Company has not filed the registration statement.

 

 

 15

Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

 

 Employment Agreements

 

The Corporation entered into employment agreements with its Chief Executive Officer, Mr. Ralph Hofmeier, and its Chief Operating Officer, Ms. Irma Velazquez (collectively the “Employment Agreements”), effective January 1, 2012. Under the Employment Agreements, the Corporation will pay each of Mr. Hofmeier and Ms. Velazquez an annual base salary of $125,000 during the first year and $150,000 during the second year and forward. Any increase to the annual base salary after the second year is subject to approval by the Corporation’s Board of Directors. The Employment Agreements each has initial terms of ten (10) years and is automatically renewed for successive one-year terms unless either party delivers timely notice of its intention not to renew.

 

Lease

 

Our registered office is located at 7901 4th Street N STE #4174, St. Petersburg, Florida 33702. Our telephone number is +1 (727) 677-9408. Office services are contracted for on a month-to-month basis in this Address. In October 2020, the Company established its official registered Branch in Hamburg Germany; the office Address until March 31, 2021 was Offakamp 9f- 2.17. On April 1, 2021, the Company entered into two lease agreements for a workshop located at Industriestraße 17, 25462 Relligen and an office located at Ballindam 3 20095 Hamburg, Germany. Our Telephone number is +49 40 809081354. Rent expense in the three months ending March 31, 2022 and 2021 amounted to $19,521 and $2,034, respectively.

 

Contingencies

 

From time to time, the Corporation may be a defendant in pending or threatened legal proceedings arising in the normal course of its business. While the outcome and impact of currently pending legal proceedings cannot be predicted with certainty, the Corporation’s management and legal counsel believe that the resolution of these proceedings through settlement or adverse judgment will not have a material adverse effect on its operating results, financial position or cash flows.

 

Litigation

 

EAWD vs Packard and Co-Defendant Nick Norwood - Case number 18-031011 CA-01 Miami-Dade County Circuit Court. The Company is requesting the proof of payment for shares issued in 2008.

 

CocoGrove – Case No. 09-81555 CA 21 in Miami-Dade County, Florida. The nature of the litigation was for breach of a lease agreement. This case is concluded with a judgement against the Company on July 7, 2010 for $84,393 plus 6% interest which as of March 31, 2021 interest had accrued to $60,402. There have been no efforts to seek collection of this judgement. Management intends to settle this judgement when it is in a financial position to make a payment.

 

Note 10. Subsequent Events

 

From April 1, 2022 through April 26, 2022, the Company has issued 10,324,000 common shares related to subscriptions outstanding at March 31, 2022.

 

On April 18, 2022, 78,947 shares of the company’s common stock were issued pursuant to a securities purchase agreement in exchange for $15,000.

 

On April 25, 2022, the Company entered into a Services Supplier Agreement with a vendor to provide 227,273 shares of the Company’s common stock valued at $100,000 for consulting services. As of April 27, 2022, these common shares have been issued to the vendor.

 

 

 

 

 

16 
 

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

INTRODUCTORY STATEMENT

 

The following discussion should be read in conjunction with our condensed financial statements and the notes to those condensed financial statements that are included elsewhere in this Report. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. See “Forward-Looking Statements.”

 

RESULTS of OPERATIONS

 

Results of Operations for the Three Months ended March 31, 2022 Compared to the three Months ended March 31, 2021

 

Revenue

 

The Company recognized no revenue during the three months ended March 31, 2022 and 2021.

 

Cost of equipment sold

The Company recognized no cost of equipment sold during the three months ended March 31, 2022 and 2021.

 

General and Administrative Expense

 

General and administrative expense increased by $137,630 to $443,112 for the three months ended March 31, 2022 from $305,482 for the three months ended March 31, 2021.

 

The increase in general and administrative expenses was primarily due to an increase in professional fees of $44,896, officer’s salaries of $38,237, and other general and administrative expenses by $114,363, offset by a decrease in marketing fees of $71,941.

 

Other Income (Expense)

 

The Company had other income of $84,402 for the three months ended March 31, 2022 compared to other expense of $128,570 for the three months ended March 31, 2021. The increase in income is primarily the result of a reduction in interest expense of $314,472 offset by a decrease in the gain on derivative liability of $66,695 and increase in other expense of $34,805.

  

Net Loss

 

Net loss decreased by $75,342 to $358,710 for the three months ended March 31, 2022 from $434,052 for the three months ended March 31, 2021. This increase was attributable to the net increases and decreases as discussed above.

 

LIQUIDITY and CAPITAL RESOURCES

 

We had $412,051 cash and working capital of $70,491 at March 31, 2022. Our operating and capital requirements in connection with supporting our operations will continue to be significant. Since inception, our losses from operations and working capital requirements have been satisfied through the deferral of payment for services performed by our founders and related parties discussed more fully below.

 

17 
 

 

We have sustained operating losses since our operations began. At March 31, 2022, we had an accumulated deficit of $22,754,103. The Company cannot predict how long it will continue to incur further losses or whether it will ever become profitable as this is dependent upon the reduction of certain expenses and success in obtaining more project contracts, among other things. These conditions raise substantial doubt about the entity’s ability to continue as a going concern.

 

We have satisfied our cash and working capital requirements in the three months ended March 31, 2022, through the sale of common stock.

 

Comparison of Cash Flows for the Three Months Ended March 31, 2022 (2022) and March 31, 2021 (2021)

 

Net cash used in operating activities

 

We used $598,244 of cash in our operating activities in 2022 compared to $338,311 used in 2021. The increase in cash used of $259,933 includes a net loss of $358,710, offset by non-cash expenses of $90,884 principally related to amortization of debt discount and deferred financing costs of $63,296, depreciation expense of $873, and common stock issued for services of $88,600, offset by a change in fair value of derivative liability of $243,653, as well as cash used in working capital items in the amount of $148,650 principally related to an increase in inventory of $256,999, a decrease in accounts payable and accrued expenses of $30,003, and a decrease in due to officers of $4,558, offset by a decrease in prepaid expenses and other current assets of $142,910.

 

Cash Flows from Investing Activities

 

The Company used $34,525 in cash from financing activities to purchase property and equipment.

 

Cash Flows from Financing Activities

 

We received $426,000 (2022) and $434,021 (2021) in cash provided from financing activities. The net decrease of $8,021 is due primarily to a $369,500 decrease in financing through issuance of convertible loans, a $54,500 increase in payments of convertible loans payable, and a $24,000 decrease due to costs associated entering the equity line of credit, offset by an increase of $439,979 from proceeds from the sale of stock and subscriptions.

 

Financial Position

 

Total Assets – At March 31, 2022 the Company had $1,267,052 representing $412,051 in cash, $55,112 in accounts receivable, $445,977 in inventory, $277,534 in prepaid expenses and other current assets, $37,392 in property and equipment, and $38,986 in operating lease right-of-use asset.

 

PLAN OF OPERATION AND FUNDING

 

We expect to generate more revenues which should, grow in time and lead to a positive cash flow. In the near future, we expect that working capital requirements will continue to be funded through lines of credit, convertible loans and/or further issuances of other securities in sufficient quantities that we will be able to meet our working capital requirement from these possible sources. Additional issuances of equity or convertible debt will result in dilution to our current shareholders.

 

We seek to focus on three main aspects of the water and energy business: (1) generation, (2) supply, and (3) maintenance. We seek to assist private companies, government entities and NGO’s to build profitable and sustainable supplies/generation capabilities of water and energy as required, by selling them the required technology or technical service to enhance their productivity/operability. With its outsourced technical arm and its commission-based global network of vendors, the Company expects to create sustainable added value to each project it takes on while generating revenue from its engineering and technical consultancy services, project management, sale of our patent filed Self Sufficient Power Supply Atmosphere Water Generation Systems (eAWGs) Solar Energy Generation Systems and Energy Management Systems, royalties from the commercialization of energy and water in certain cases, and revenues from the licensed innovated technologies.

 

18 
 

 

Through our BlueTech Alliance for Water Generation established in December 2020, we have state of the art technology partners, technology transfer agreements, and technology representation agreements in place relating to aspects of renewable energy and water supply. These unique key relationships offer important selling features and capabilities that differentiated EAWD from its competitors.

 

The Company plans to generate revenue from its engineering and technical consultancy services, project management, sale of our Patent filed Self Sufficient Power Supply Atmosphere Water Generation Systems (eAWGs), Solar Energy Generation Systems, and Energy Management Systems, royalties from the commercialization of energy and water in certain cases, and revenues from the licensed innovated technologies. 

 

MATERIAL COMMITMENTS

 

Employment Agreements

 

The Company entered into employment agreements with each of Mr. Hofmeier, its President, Chief Executive Officer and Chairman of the Board, and Ms. Velazquez, its Chief Operating Officer and Vice-Chairman (together, the “Employment Agreements”), effective January 1, 2012. Under the Employment Agreements, the Company agreed to pay each of Mr. Hofmeier and Ms. Velazquez an annual base salary of $125,000 during the first year and $150,000 during the second year and forward. Any increase to the annual base salary after the second year is subject to approval by the company’s Board of Directors. Each Employment Agreement has an initial term of ten (10) years and is automatically renewed for successive one-year terms unless either party delivers timely notice of its intention not to renew. The Company also entered into employment agreement with 4 other employees, effective on the 3rd quarter of 2021.

 

OFF-BALANCE SHEET ARRANGEMENTS

 

We have no off-balance sheet arrangements.

 

GOING CONCERN

 

During the year ended December 31, 2021, pursuant to an equipment sale agreement, the Company recognized revenue of $550,000 for a sale of equipment, along with $350,000 for the cost of construction, earning $200,000 gross profit. The next operational step to accomplish is to achieve sufficient sales volume to yield positive a net income. Due to the timing of the project build out, the Company has not currently recorded any revenue and consequently has incurred operating losses since it began operations (December 2012) totaling $22,754,103 at March 31, 2022. During the three months ended March 31, 2022, the Corporation incurred net losses of $358,710. The Company also had a working capital of $70,491 at March 31, 2022.

 

The Company’s ability to transition to profitable operations is dependent upon achieving a level of revenue adequate to support its cost structure. The timing and amount of our actual expenditures will be based on many factors, including cash flows from operations and the anticipated growth of our business and availability to sufficient resources.

 

At the filling date of this report, management plans to conclude the sales in Germany and in other regions of the world further the received approved proposals, which would bring a growing revenue. Managements plans to expand the sales operations by greater market penetration of the Agriculture, Industrial and Community development market with its water and energy generation, innovative solution, this to make sales operations to continue to expand. Management also plans to raise additional funds during 2022; through the issuance of equity securities and from deposits related to purchases orders on proposals pending customer acceptance as well, if necessary, loans from management and third-party lender. Management also plans to defer expenses by centralizing assembling, logistic and administration operations expenses. By doing so, the company would identify a bigger place to use as self-sufficient energy supply warehouse to be able to centralize the storage of supplies, while securing its inventory, this would reduce the costs of the assembling and the administrative operations, the company would acquire its own electrical trucks as well, to reduce cost of transportation of supplies.

 

The ability of the Company to continue as a going concern depends upon its ability to generate sales or obtain additional funding to finance operating losses until the Corporation is profitable.

 

19 
 

 

ADDRESSING CHALLENGES POST-COVID-19

 

COVID-19 is an incomparable global public health emergency that has affected almost every industry and has caused the worst global economic contraction of the past 80 years (IMF). The concerted global efforts achieved the development of vaccines that have helped to reduce a person´s risk of contracting the virus. However, the current war in Ukraine lead us as well to considering the changes in consumer behavior and demand, purchasing patterns, re-routing of the supply chain, dynamics of current market forces, and the significant interventions of governments; Disruptive activities could include the temporary closure of our manufacturing facilities and those used in our supply chain processes, restrictions on the export or shipment of our products, significant cutback of ocean container delivery from Germany, business closures in impacted areas, and restrictions on our employees’ and consultants’ ability to travel and to meet with customers. The extent to which COVID-19 impacts our results will depend on future developments, which still uncertain and cannot be predicted, including new information which may emerge concerning the severity of the current conflict as well as virus variants and the actions to contain it or treat its impact, among others. COVID-19 and the war in Ukraine could also continue to result in social, economic and labor instability in the countries in which we or our customers and suppliers operate.

 

If workers at one or more of our offices or the offices of our suppliers or manufacturers become ill or are quarantined and in either or both events are therefore unable to work, our operations could be subject to disruption. Further, if our manufacturers become unable to obtain necessary raw materials or components, we may incur higher supply costs or our manufacturers may be required to reduce production levels, either of which may negatively affect our financial condition or results of operations.

 

In light of these challenges, the Company is focusing its efforts on supporting key areas of our business that will help us to stabilize in the new environment and strategize for what comes next. Those key areas are: crisis and management response, workforce, operation and supply chain, finance and liquidity, tax, trade and regulatory, as well as strategy and brand. 

 

CRITICAL ACCOUNTING POLICIES

 

Our critical accounting policies are set forth in Note 2 to the condensed financial statements.

 

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

 

We do not expect the adoption of recently issued accounting pronouncements as discussed in Note 3 to have a significant impact on our results of operations, financial position or cash flow.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

We are a smaller reporting company and are not required to provide the information under this item.

 

ITEM 4. CONTROLS AND PROCEDURES

 

Disclosure Controls and Procedures

 

We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13(a)-15(e) and 15(d)-15(e)) as of December 31, 2021. This evaluation was carried out by our Principal Executive Officer and our Principal Finance Officer. Based on that evaluation, our Principal Executive Officer and our Principal Finance Officer concluded that, as of March 31, 2022, our disclosure controls and procedures were not effective due to the presence of material weaknesses in internal control over financial reporting.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has identified the following material weaknesses, which have caused management to conclude that, as of March 31, 2022, our disclosure controls and procedures were not effective:

 

  · Inadequate segregation of duties, due to lack of human resources
  · Limited level of multiple reviews among those tasked with preparing the financial statements,
  · Lack of a more formal internal control environment.

 

 

20 
 

 

Remediation Plan to Address the Material Weaknesses in Internal Control over Financial Reporting

 

We intend to implement changes to strengthen our internal controls in addition to the enhanced controls discussed above. We are in the process of implementing a remediation plan for the identified material weaknesses and we expect that work on the plan will continue throughout 2022, as financial resources permit. Specifically, to address the material weaknesses arising from insufficient accounting personnel, the Company plans to hire a full-time Chief Financial Officer and has secured the services of additional accounting personnel on a consulting basis which begins to address segregation of duties. The Company is currently formalizing its policies and procedures in writing and to improve the integration of its financial reporting system into non accounting departments. Where appropriate, the Company is receiving advice and assistance from third-party experts as it implements and refines its remediation plan.

 

Additional measures may be necessary, and the measures we expect to take to improve our internal controls may not be sufficient to address the issues identified, to ensure that our internal controls are effective or to ensure that such material weakness or other material weaknesses would not result in a material misstatement of our annual or interim financial statements. In addition, other material weaknesses or significant deficiencies may be identified in the future. If we are unable to correct deficiencies in internal controls in a timely manner, our ability to record, process, summarize and report financial information accurately and within the time periods specified in the rules and forms of the SEC will be adversely affected. This failure could negatively affect the market price and trading liquidity of our common stock, cause investors to lose confidence in our reported financial information, subject us to civil and criminal investigations and penalties, and generally materially and adversely impact our business and financial condition.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the fiscal quarter ended March 31, 2022 that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

 

Limitations on the Effectiveness of Internal Controls

 

Management’s conclusion that our disclosure controls and procedures were not effective means that if a fraud or material misstatement of the company’s annual or interim financial statements were to occur; there is a reasonable possibility that they will not be prevented or detected on a timely basis. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within 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 internal 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.

 

 

21 
 

 

PART II. OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

EAWD vs Packard and Co-Defendant Nick Norwood - Case number 18-031011 CA-01 Miami-Dade County Circuit Court. The company is requesting the proof of payment for shares issued in 2008.

 

CocoGrove – Case No. 09-81555 CA 21 in Miami-Dade County, Florida. The nature of the litigation was for breach of a lease agreement. This case is concluded with a judgement against the Company on July 7, 2010 for $84,393 plus 6% interest which as of March 31, 2021 interest had accrued to $60,402. There have been no efforts to seek collection of this judgement. Management intends to resolve this matter when it is in a financial position to make a payment.

 

ITEM 1A. RISK FACTORS

 

We are a smaller reporting company and are not required to provide the information under this item.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

The Company issued the following common shares during the three months ended March 31, 2022:

 

  · During the three months ended March 31, 2022, 2,500,000 common shares were issued pursuant to the ELOC including 500,000 common shares as the agreed upon commitment fee. The initial purchase in this agreement was for $300,000.
  · On January 14, 2022, the Company completed a conversion of our outstanding convertible debt by exchanging $53,222 cash for retiring $50,000 in convertible debt along with $3,222 in interest for a total of 575,558 common shares.
  • On February 2, 2022, the Company issued 20,000 shares of the Company’s common stock to a vendor for services valued at $3,600. 
  · On February 3, 2022, the Company issued 500,000 shares of the Company’s common stock to a vendor for services.
  · From January 1, 2022 through March 31, 2022, the Company has issued 14,953,000 common shares related to subscriptions outstanding at December 31, 2021.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None

 

ITEM 4. MINE SAFETY DISCLOSURES

 

N/A

 

ITEM 5. OTHER INFORMATION

 

N/A

 

22 
 

ITEM 6. EXHIBITS

 

EXHIBIT INDEX

 

          Incorporated by Reference   Filed or Furnished
Exhibit #   Exhibit Description     Form   Date Filed     Exhibit #   Herewith
                         
31.1   Certification of Principal Executive Officer (Section 302)                   *
31.2   Certification of Principal Financial Officer (Section 302)                   *
32.1   Certification of Principal Executive Officer and Principal Financial Officer (Section 906)                   *
101.INS   Inline XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document)                   *
101.SCH   Inline XBRL Taxonomy Extension Schema Document                   *
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document                   *
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document                   *
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document                   *
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document                   *
104   Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)                   *

 

23 
 

 

SIGNATURES

 

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

 

  Energy and Water Development Corp.
   
Date: May 10, 2022 By: /s/ Ralph Hofmeier
    Ralph Hofmeier
    President 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   Title   Date
         
/s/ Ralph Hofmeier   President, Chief Executive Officer, Director, and   May 10, 2022
Ralph Hofmeier   Chairman (Principal Executive Officer)    
         
/s/ Irma Velazquez   Chief Operating Officer (Principal Financial Officer and   May 10, 2022
Irma Velazquez   Principal Accounting Officer), Director and Vice-Chairman    
         
         
         
         
         
         
         
         
         
         
         
         
         

 

 

24

 

Exhibit 31.1

 

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

 

I, Ralph Hofmeier, certify that:

 

1.       I have reviewed this Quarterly Report on Form 10-Q of Energy and Water Development Corp.;

 

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 Exchange 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;

 

b)       Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)       Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)       Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

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

 

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.

 

Date: May 10, 2022

 

/s/ Ralph Hofmeier

Ralph Hofmeier

President and Chief Executive Officer
(Principal Executive Officer)

 

 

Exhibit 31.2

 

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

 

I, Irma Velazquez, certify that:

 

1.       I have reviewed this Quarterly Report on Form 10-Q of Energy and Water Development Corp.;

 

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 Exchange 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;

 

b)       Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c)       Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d)       Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

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

 

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.

 

Date: May 10, 2022

 

/s/ Irma Velazquez

Irma Velazquez

Chief Operating Officer
(Principal Financial Officer and Principal Accounting Officer)

 

 

Exhibit 32.1

 

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

 

 

In connection with the Quarterly Report of Energy and Water Development Corp. (the “Company”) on Form 10-Q for the period ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof, I, Ralph Hofmeier, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

1.The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and

 

2.The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

 

 

/s/ Ralph Hofmeier

Ralph Hofmeier

President and Chief Executive Officer
(Principal Executive Officer)

Dated: May 10, 2022

 

 

 

 

In connection with the Quarterly Report of Energy and Water Development Corp. (the “Company”) on Form 10-Q for the period ended March 31, 2022, as filed with the Securities and Exchange Commission on the date hereof, I, Irma Velazquez, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:

 

1.The Quarterly Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and

 

2.The information contained in the Quarterly Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

/s/ Irma Velazquez

Irma Velazquez

Chief Operating Officer 
(Principal Financial Officer and Principal Accounting Officer)

Dated: May 10, 2022