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EAWD Energy & Water Development

Filed: 16 Nov 20, 7:00pm

 


 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 10-Q


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


For the quarter ended September 30, 2020


¨  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 þ    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 þ    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 þ

Smaller reporting company þ

 

Emerging growth company þ

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 þ

The number of shares outstanding of the registrant’s classes of common stock as of November 09, 2020 was 111,372,107 shares.


 

 





 


INDEX

 

 

 

Page

 

PART I.   FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements

1

 

Condensed Consolidated Balance Sheets as of September 30, 2020 (Unaudited) and December 31, 2019

1

 

Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020 and 2019 (Unaudited)

2

 

Condensed Consolidated Statements of Changes in Stockholders' Deficit for the nine months ended September 30, 2020 and 2019 (Unaudited)

3

 

Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019 (Unaudited)

5

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

6

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

15

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

19

Item 4.

Controls and Procedures

19

 

 

 

 

PART II.   OTHER INFORMATION

 

 

 

 

Item 1.

Legal Proceedings

20

Item 1A.

Risk Factors

20

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

20

Item 3.

Defaults Upon Senior Securities

20

Item 4.

Mine Safety Disclosures

20

Item 5.

Other Information

20

Item 6.

Exhibits

21

SIGNATURES

 

22

 

 

 


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.

 

  



i



 


PART I.   FINANCIAL INFORMATION

 

ITEM 1.   FINANCIAL STATEMENTS


Energy and Water Development Corp.

Condensed Consolidated Balance Sheets


 

 

September 30,

2020

 

 

December 31, 2019

 

 

  

(Unaudited)

  

  

                      

  

ASSETS

 

 

 

 

 

 

CURRENT ASSETS:

 

 

 

 

 

 

Cash

 

$

9,270

 

 

$

 

Prepaid expenses

 

 

148,384

 

 

 

30,375

 

TOTAL CURRENT ASSETS

 

 

157,654

 

 

 

30,375

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

157,654

 

 

$

30,375

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' DEFICIT

 

 

 

 

 

 

 

 

CURRENT LIABILITIES:

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

1,139,893

 

 

$

1,137,446

 

Customer/investor deposit (Note 6)

 

 

303,742

 

 

 

313,742

 

Due to affiliate distributor (Note 6)

 

 

 

 

 

4,959

 

Convertible loan payables, net of discounts (Note 7)

 

 

83,453

 

 

 

243,923

 

Due to officers (Note 5)

 

 

261,653

 

 

 

2,276,770

 

Derivative liability

 

 

344,186

 

 

 

413,795

 

TOTAL CURRENT LIABILITIES

 

 

2,132,927

 

 

 

4,390,635

 

 

 

 

 

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES (Note 7)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' DEFICIT:

 

 

 

 

 

 

 

 

Preferred stock, par value $.001 per share; 500,000,000 shares authorized, 3,780,976 and 0 shares issued and outstanding in September 30, 2020 and December 31, 2019, respectively

 

 

3,781

 

 

 

 

Common stock, par value $.001 per share; 1,000,000,000 shares authorized, 108,714,615 and 93,462,483 shares issued and outstanding in September 30, 2020 and December 31, 2019, respectively

 

 

108,714

 

 

 

93,462

 

Additional paid in capital

 

 

11,231,738

 

 

 

7,491,197

 

Accumulated deficit

 

 

(13,319,506

)

 

 

(11,944,919

)

TOTAL STOCKHOLDERS' DEFICIT

 

 

(1,975,273

)

 

 

(4,360,260

)

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT

 

$

157,654

 

 

$

30,375

 



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




1



 


Energy and Water Development Corp.

Condensed Consolidated Statements of Operations

(Unaudited)


 

 

For the Three Months Ended

 

 

For the Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

 

 

                      

 

 

 

 

 

 

 

 

 

 

GENERAL and ADMINISTRATIVE EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Management fees to affiliate

 

$

75,000

 

 

$

75,000

 

 

$

225,000

 

 

$

225,000

 

Officer’s salaries and payroll taxes

 

 

81,150

 

 

 

80,738

 

 

 

243,038

 

 

 

242,213

 

Professional fees

 

 

78,148

 

 

 

195,796

 

 

 

276,221

 

 

 

261,296

 

Travel and entertainment

 

 

 

 

 

 

 

 

33

 

 

 

8,082

 

Other general and administrative expenses

 

 

7,709

 

 

 

9,613

 

 

 

275,148

 

 

 

15,599

 

TOTAL GENERAL and ADMINISTRATIVE EXPENSES

 

 

242,007

 

 

 

361,147

 

 

 

1,019,440

 

 

 

752,190

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS FROM OPERATIONS

 

 

(242,007

)

 

 

(361,147

)

 

 

(1,019,440

)

 

 

(752,190

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of derivative liability

 

 

694,096

 

 

 

199,149

 

 

 

912,825

 

 

 

199,149

 

Interest and other income (expense), net

 

 

(921,706

)

 

 

(79,697

)

 

 

(1,256,970

)

 

 

(130,290

)

TOTAL OTHER INCOME (EXPENSE)

 

 

(227,610

)

 

 

119,452

 

 

 

(344,145

)

 

 

68,859

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LOSS BEFORE TAXES

 

 

(469,617

)

 

 

(241,695

)

 

 

(1,363,585

)

 

 

(683,331

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TAXES

 

 

(11,002

 

 

 

 

 

(11,002

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

$

(480,619

)

 

$

(241,695

)

 

$

(1,374,587

)

 

$

(683,331

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss per share - Basic and diluted

 

$

(0.00

)

 

$

(0.00

)

 

$

(0.01

)

 

$

(0.01

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding - Basic and diluted

 

 

107,287,560

 

 

 

92,994,440

 

 

 

100,764,795

 

 

 

90,569,338

 







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





2



 


Energy and Water Development Corp.

Condensed Consolidated Statement of Changes in Stockholders’ Deficit


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT DECEMBER 31, 2018

 

 

 

 

$

 

 

 

87,913,933

 

 

$

87,914

 

 

$

7,187,862

 

 

$

(11,016,304

)

 

$

(3,740,528

)

Sale of common stock

 

 

 

 

 

 

 

 

200,000

 

 

 

200

 

 

 

31,800

 

 

 

 

 

 

32,000

 

Net Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(213,920

)

 

 

(213,920

)

BALANCE AT MARCH 31, 2019 (Unaudited)

 

 

 

 

 

 

 

 

88,113,933

 

 

 

88,114

 

 

 

7,219,662

 

 

 

(11,230,224

)

 

 

(3,922,448

)

Sale of common stock

 

 

 

 

 

 

 

 

11,200

 

 

 

11

 

 

 

11,189

 

 

 

 

 

 

11,200

 

Conversion of debt

 

 

 

 

 

 

 

 

4,611,350

 

 

 

4,611

 

 

 

483,213

 

 

 

 

 

 

487,824

 

Conditional shares issued to debt holders

 

 

 

 

 

 

 

 

56,000

 

 

 

56

 

 

 

(56

)

 

 

 

 

 

 

Beneficial conversion feature

 

 

 

 

 

 

 

 

 

 

 

 

 

 

98,000

 

 

 

 

 

 

98,000

 

Net Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(227,716

)

 

 

(227,716

)

BALANCE AT JUNE 30, 2019 (Unaudited)

 

 

 

 

 

 

 

 

92,792,483

 

 

 

92,792

 

 

 

7,812,008

 

 

 

(11,457,940

)

 

 

(3,553,140

)

Common stock issued for services

 

 

 

 

 

 

 

 

140,000

 

 

 

140

 

 

 

39,060

 

 

 

 

 

 

 

39,200

 

Common stock issued to debt holders

 

 

 

 

 

 

 

 

266,000

 

 

 

266

 

 

 

58,734

 

 

 

 

 

 

 

59,000

 

Conditional shares resolved by debt holder

 

 

 

 

 

 

 

 

(16,000

)

 

 

(16

)

 

 

16

 

 

 

 

 

 

 

 

Reclassification of tainted notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(559,300

)

 

 

 

 

 

 

(559,300

)

Net Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(241,695

)

 

 

(241,695

)

BALANCE AT SEPTEMBER 30, 2019 (Unaudited)

 

 

 

 

$

 

 

 

93,182,483

 

 

$

93,182

 

 

$

7,350,518

 

 

$

(11,699,635

)

 

$

(4,255,935

)








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




3



 


Energy and Water Development Corp.

Condensed Consolidated Statement of Changes in Stockholders’ Deficit


 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE AT DECEMBER 31, 2019

 

 

 

 

$

 

 

 

93,462,483

 

 

$

93,462

 

 

$

7,491,197

 

 

$

(11,944,919

)

 

$

(4,360,260

)

Common and preferred stock issued to satisfy accrued payroll to officers

 

 

3,780,976

 

 

 

3,781

 

 

 

2,044,190

 

 

 

2,044

 

 

 

2,232,175

 

 

 

 

 

 

2,238,000

 

Conversion of debt

 

 

 

 

 

 

 

 

691,522

 

 

 

692

 

 

 

37,808

 

 

 

 

 

 

38,500

 

Conversion of interest and fees

 

 

 

 

 

 

 

 

46,789

 

 

 

47

 

 

 

2,573

 

 

 

 

 

 

2,620

 

Derivative settled upon conversion of debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23,940

 

 

 

 

 

 

23,940

 

Reclassification of equity to liability for derivatives

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(54,159

)

 

 

 

 

 

(54,159

)

Net Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,299

)

 

 

(11,299

)

BALANCE AT MARCH 31, 2020 (Unaudited)

 

 

3,780,976

 

 

 

3,781

 

 

 

96,244,984

 

 

 

96,245

 

 

 

9,733,534

 

 

 

(11,956,218

)

 

 

(2,122,658

)

Sale of common stock

 

 

 

 

 

 

 

 

 

 

1,301,111

 

 

 

1,301

 

 

 

67,699

 

 

 

 

 

 

69,000

 

Conversion of debt

 

 

 

 

 

 

 

 

4,426,091

 

 

 

4,426

 

 

 

239,074

 

 

 

 

 

 

243,500

 

Conversion of interest and fees

 

 

 

 

 

 

 

 

 

139,275

 

 

 

139

 

 

 

5,641

 

 

 

 

 

 

5,780

 

Common stock issued for marketing services

 

 

 

 

 

 

 

 

 

 

2,500,000

 

 

 

2,500

 

 

 

247,500

 

 

 

 

 

 

 

250,000

 

Derivative settled upon conversion of debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

151,434

 

 

 

 

 

 

151,434

 

Subscription deposits received

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

161,000

 

 

 

 

 

 

 

161,000

 

Net Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(882,669

)

 

 

(882,669

)

BALANCE AT JUNE 30, 2020 (Unaudited)

 

 

3,780,976

 

 

 

3,781

 

 

 

104,611,461

 

 

 

104,611

 

 

 

10,605,882

 

 

 

(12,838,887

)

 

 

(2,124,613

)

Sale of common stock

 

 

 

 

 

 

 

 

 

 

2,120,000

 

 

 

2,120

 

 

 

214,880

 

 

 

 

 

 

217,000

 

Conversion of debt

 

 

 

 

 

 

 

 

1,924,397

 

 

 

1,924

 

 

 

197,076

 

 

 

 

 

 

199,000

 

Conversion of interest and fees

 

 

 

 

 

 

 

 

 

58,757

 

 

 

59

 

 

 

4,341

 

 

 

 

 

 

4,400

 

Derivative settled upon conversion of debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

283,559

 

 

 

 

 

 

283,559

 

Subscription deposits received/used

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(74,000

)

 

 

 

 

 

 

(74,000

)

Net Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(480,619

)

 

 

(480,619

)

BALANCE AT SEPTEMBER 30, 2020 (Unaudited)

 

 

3,780,976

 

 

$

3,781

 

 

 

108,714,615

 

 

$

108,714

 

 

$

11,231,738

 

 

$

(13,319,506

)

 

$

(1,975,273

)


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





4



 


Energy and Water Development Corp.

Condensed Consolidated Statements of Cash Flows

(Unaudited)


 

 

For the Nine Months Ended

 

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

  

                      

  

  

                      

 

CASH FLOW FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

NET LOSS

 

$

(1,374,587

)

 

$

(683,331

)

ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED IN OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

Amortization of debt discount (Note 6 and 7)

 

 

1,142,520

 

 

 

79,746

 

Common stock issued for services

 

 

250,000

 

 

 

39,200

 

Change in fair value of derivative liability

 

 

(912,825

)

 

 

(199,149

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(118,009

)

 

 

(1,875

)

Accrued management fees and due to/from officers

 

 

222,883

 

 

 

208,487

 

Accounts payable and accrued expenses

 

 

15,247

 

 

 

305,722

 

Due to affiliates

 

 

(4,959

)

 

 

 

Net cash used in operating activities

 

 

(779,730

)

 

 

(251,200

)

 

 

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from convertible loans

 

 

416,000

 

 

 

208,000

 

Proceeds from the sale of common stock

 

 

286,000

 

 

 

43,200

 

Proceeds from subscriptions

 

 

87,000

 

 

 

 

Net cash provided by financing activities

 

 

789,000

 

 

 

251,200

 

 

 

 

 

 

 

 

 

 

NET CHANGE IN CASH

 

 

9,270

 

 

 

 

 

 

 

 

 

 

 

 

 

CASH AT THE BEGINNING OF THE PERIOD

 

 

 

 

 

 

CASH AT THE END OF THE PERIOD

 

$

9,270

 

 

$

 

 

 

 

 

 

 

 

 

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

NON-CASH INVESTING AND FINANCING TRANSACTION:

 

 

 

 

 

 

 

 

Derivative liability discount

 

$

409,302

 

 

$

110,000

 

Conditional shares issued to debt holders

 

$

 

 

$

40

 

Common shares issued to satisfy related party liability

 

$

2,238,000

 

 

$

 

Common shares issued for interest and fees

 

$

12,800

 

 

$

 

Debt discount related to beneficial conversion feature

 

$

 

 

$

98,000

 

Reclassify derivative liability upon conversion

 

$

458,933

 

 

$

 

Stock issued to satisfy convertible debt

 

$

481,000

 

 

$

546,824

 

Reclassify equity to liability for derivatives

 

$

54,159

 

 

$

 


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




5



 


Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

September 30, 2020 and December 31, 2019


Note 1. Incorporation and Nature of Operations


In September 2019, Eurosport Active World Corp. changed its name to Energy and Water Development Corp. (the “Corporation”, “Company”, “EAWC” or “EAWD”) to better present the Company’s purpose and business sector.  The name change received approval by Financial Industry Regulatory Authority (“FINRA”) on October 22, 2019.  The Company was incorporated under the laws of the State of Florida on December 12, 2007.  


Note 2. Summary of Significant Accounting Policies


Basis of Presentation


The condensed consolidated financial statements (unaudited) include the accounts of Energy and Water Development Corp. and its wholly-owned subsidiaries 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 consolidated 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, 2019 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, 2019, have been omitted.


Certain reclassifications have been made in Fiscal 2019 results to conform to the presentation used in Fiscal 2020.  These reclassifications had no effect on the reported results of operations of the Company.


Fair Value of Financial Instruments


Due to their short maturities, the carrying amounts of Cash, Prepaid, Other Current Assets, Accounts Payable Accrued Expenses, Accrued Salaries and Other Current Liabilities approximate their fair value.


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 September 30, 2020 and December 31, 2019, were $344,186 and $413,795, respectively and measured on Level 3 inputs.


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.




6



Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

September 30, 2020 and December 31, 2019



For the nine months ended September 30, 2020 and 2019, an aggregate of 2,200,000 stock options to purchase shares of common stock were excluded from the computation of diluted net loss per share, as the inclusion of such shares would be anti-dilutive.


As discussed more fully in Note 6, 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 2,897,917 and 5,380,000 in additional common shares at September 30, 2020 and December 31, 2019, 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 consolidated financial statements. The following are a summary of recent accounting developments.


In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) to increase transparency and compatibility among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Topic 842 affects any entity that enters into a lease, with some specific scope exceptions. The guidance in this update supersedes Topic 840, Leases. The core principle of Topic 842 is that a lessee should recognize the assets and liabilities that arise from leases. A lessee should recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The amendments in this update became effective for our 2019 fiscal year including interim periods within the 2019 fiscal year. The adoption of ASU No. 2016-02 had no material impact on our financial statements.

 

Note 4. Going Concern


The Company has begun to commercialize its products by beginning the build out of its initial revenue opportunity.  The Company has received a deposit on its first order, which it has not yet been delivered due to delays caused by the COVID-19 global pandemic, consequently it has recognized no revenue.  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 $13,319,506 at September 30, 2020. During the nine months ended September 30, 2020, the Corporation incurred net losses of $1,374,587. The Company also incurred a working capital deficit of $1,975,273 at September 30, 2020.


These factors raise substantial doubt regarding the Corporation’s ability to continue as a going concern. The ability of the Corporation to continue as a going concern depends upon its ability to obtain funding to finance operating losses until the Corporation is profitable. The Corporation expects to be financed through equity capital, debt financing or from deposits related to purchases orders on proposals pending customer acceptance.

 

In the event the Corporation does not generate sufficient funds from issuance of common stock, debt financing or purchase orders, it may be unable to fully implement its business plan and pay its obligations as they become due, any of which circumstances would have a material adverse effect on its business prospects, financial condition, and results of operations. The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.




7



Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

September 30, 2020 and December 31, 2019



Note 5. Related Party Transactions


Due to officers


Amounts due to officers as of September 30, 2020 and December 31, 2019 are comprised of the following:


 

 

2020

 

 

2019

 

 

 

(Unaudited)

 

 

 

 

Ralph Hofmeier:

 

 

 

 

 

 

Unsecured advances due to officer

 

$

17,778

 

 

$

17,778

 

Accrued salaries

 

 

112,500

 

 

 

1,175,000

 

Total due to Ralph Hofmeier

 

 

130,278

 

 

 

1,192,778

 

 

 

 

 

 

 

 

 

 

Irma Velazquez:

 

 

 

 

 

 

 

 

Unsecured advances due to officer

 

 

18,875

 

 

 

20,992

 

Accrued salaries

 

 

112,500

 

 

 

1,063,000

 

Total due to Irma Velazquez

 

 

131,375

 

 

 

1,083,992

 

 

 

$

261,653

 

 

$

2,276,770

 


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.


Accrued salaries represent amounts earned for services rendered in accordance with the employment agreements for the Corporation’s Chief Executive Officer and Chief Operating Officer but were unpaid as of December 31, 2019.  On January 9, 2020, settlement and release agreements were signed by Ralph Hofmeier and Irma Velazquez regarding the accrued compensation due to each of them. Ralph Hofmeier received 1,022,095 common shares and 2,002,488 Series A preferred shares in satisfaction of $1,175,000 of accrued salaries. Irma Velazquez received 1,022,095 common shares and 1,778,488 Series A preferred shares in satisfaction of $1,063,000 of accrued salaries.  


Note 6. Other Current Liabilities


Due to/from Commercial Distributor & Services Supplier


During the year ended December 31, 2019, EAWC-TV provided $200,000 of paid services and $100,000 of accrued services plus $13,389 net in interest and remitted $155,537 to vendors in satisfaction of EAWD obligations. EAWD also remitted $358,540 to EAWC-TV. The balance due to EAWC-TV by EAWD at December 31, 2019 was $4,959 in paid charges and $100,000 in unpaid services.  


During the nine months ended September 30, 2020, EAWC-TV provided $75,000 of paid services and $150,000 of accrued services plus $3,606 net in interest and remitted $176,018 to vendors in satisfaction of EAWD obligations. The escrow agent (see below) remitted $218,909 to EAWC-TV. The balance due to EAWD by EAWC-TV at September 30, 2020 was $101,245.  This balance has been offset against the accounts payable due to EAWC-TV for unpaid monthly management fees of $249,250, bringing the net amount due to EAWC-TV to $148,005.


Escrow Arrangement


During the nine months ended September 30, 2020, the Company engaged an escrow agent to receive funds and make disbursements of company funds held in escrow. During the nine months ended September 30, 2020 the escrow agent accepted $333,000 from lenders who acquired convertible notes and paid $114,089 of company expenses on behalf of EAWD, forwarding the remaining funds of $218,909 to EAWC-TV to manage for EAWD. The escrow arrangement ended in July 2020.




8



Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

September 30, 2020 and December 31, 2019



Customer deposit


In addition to providing management services and disbursement processing to EAWD as described above, EAWC-TV also functions as a distributor of EAWD products and engineering services.  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 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 will be satisfied through delivery of the equipment when performance has occurred.  The equipment is being built in Germany.


Investor deposit


On December 16, 2019, the Company received $10,000 from a potential investor to purchase 50,000 shares of the Company’s common stock.  The Company did not receive the required signed and completed subscription stock purchase agreements and accordingly did not issued the shares.  The instructions were formalized and signed purchase documents were received in July, 2020 and the shares were then issued.


Note 7. Convertible Loans Payable


As of September 30, 2020 and December 31, 2019, the balance of convertible loans payable net of discount was $83,453 and $243,923, respectively of which convertible loans held by shareholders amounted to $0 and $203,923. The convertible loans were issued in several different forms as discussed below.


Convertible loans

From December 2015 through December 2018, the Company issued convertible loans payable to an aggregate of 11 note holders, raising $586,825. These convertible loans were due on demand, unsecured, have no maturity date and were generally non-interest bearing although a few of the notes provide for 2% interest. During the year ended December 31, 2019, by mutual agreement between the Company and the debt holders, an aggregate of $546,824 of outstanding convertible debt was converted into 4,877,350 common shares of the Company at a conversion price ranging from $0.10 - $1.00 per share. In addition, the Company has issued 40,000 conditional shares to several note holders pending paperwork to complete the conversion. As of September 30, 2020 and December 31, 2019, the Company had outstanding convertible loans in this form of $40,000 and $40,000, respectively.


Convertible loans with beneficial conversion feature

During the first quarter of 2019, the Company issued two convertible loans payable, which totaled $98,000. The convertible loans payable are due on February 19, 2020, accrue interest at 0-2% per annum and are convertible into 1,960,000 shares of the Company’s common stock at $0.05 per share which is a discount to the market price on the date of the issuance (beneficial conversion feature). After performing an analysis of the conversion option under ASC Topic 815, “Derivatives and Hedging” and determining that the instrument does not qualify for derivative accounting treatment. The Company therefore performed an analysis if the conversion option was subject to a beneficial conversion feature and determined that it was.  Accordingly, the Company recorded a debt discount of $98,000 for the value of the beneficial conversion feature.  For the nine months ended September 30, 2020 and 2019 the Company amortized debt discount of $8,148 and $0, respectively.  The debt discount was fully amortized in the first quarter of 2020. On May 14, 2020 these notes ($98,000) were converted into 1,960,000 common shares. As of September 30, 2020 and December 31, 2019, the Company had no outstanding convertible loans net of the beneficial conversion feature.


Convertible loans with a variable conversion feature

On August 7, 2019, the Company entered into an $110,000 8% convertible note to provide interim financing.  The note bears interest at the rate of 8% per annum. All interest and principal must be repaid before or on August 7, 2020. The note is convertible into common stock, at the holder’s option, at a price equal to 70% of the lowest closing bid price of the common stock during the 20 trading day period prior to conversion. In the event the Company prepays the note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by:


(i)

115% if prepaid during the period commencing on the closing date through 60 days thereafter,

(ii)

120% if prepaid 61 days following the closing through 120 days following the closing, and

(iii)

135% if prepaid 121 days following the closing through 180 days following the closing.


After the expiration of 180 days following the date of the Note, the Company has no right of prepayment.



9



Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

September 30, 2020 and December 31, 2019



The Company has identified the embedded derivatives related to the above described note. This embedded derivative included variable conversion features. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivative as of the inception date of the note and to fair value as of each subsequent reporting date.

 

At the inception of the note, the Company determined the aggregate fair value of $183,809 of embedded derivatives, which resulted in a $73,809 loss from fair value charged to current period operations. The fair value of the embedded derivatives was determined using the Black Scholes Option Pricing Model based on the following assumptions:


Assumptions

 

Conversion

 

Remeasurement

 

 

 

 

 

(1) dividend yield of  

    

0%

    

0%

(2) expected volatility of

 

147.2–176.79%

 

180.74%

(3) weighted average risk-free interest rate of

 

0%

 

0.00%

(4) expected life of

 

0.22-0.32 years

 

0.10 years

(5) estimated fair value

 

$0.02-0.03

 

$0.00

 

The Company recorded $110,000 as a derivative liability discount at inception. At December 31, 2019, the Company determined the aggregate fair value of the embedded derivatives had fallen to $129,477, which resulted in a $54,332 change in fair value credited to current period operations. As of September 30, 2020 and December 31, 2019 the outstanding derivative liability related to these convertible notes was $0 and $129,477, respectively.  


For the nine months ended September 30, 2020 and 2019 the Company amortized debt discount of $70,540 and $14,595, respectively. Also during the nine months ended September 30, 2020, the loan holder on six occasions converted in aggregate, $110,000 of convertible debt into 2,417,613 common shares at pricing ranging from $0.04 to $0.09, which fully converted the debt to common shares.  These conversions were fair valued to determine the reduction of the derivative liability associated with the conversions. As of September 30, 2020 and December 31, 2019, the Company had outstanding convertible loans net of the debt discount of $0 and $39,460, respectively.


The fair value of the conversions was determined using the Black Scholes Option Pricing Model based on the following assumptions:


Assumptions

 

 

 

Remeasurement

6/30/20

 

 

 

 

 

(1) dividend yield of  

    

 

    

0%

(2) expected volatility of

 

 

 

229.34%

(3) weighted average risk-free interest rate of

 

 

 

0.17%

(4) expected life of

 

 

 

0.67 years

(5) estimated fair value

 

 

 

$0.099


Convertible loans with a variable vested conversion feature, Original Issue Discount

On January 23, 2020, February 27, 2020, April 8, 2020, June 11, 2020, July 17, 2020 and September 25, 2020 the Company entered into three $60,000, two $48,000 and one $43,000 8% convertible notes with original issue discount to provide interim financing.  The debt agreements provide that these notes are convertible 180 days after their issuance date. The notes bear interest at the rate of 8% per annum. All interest and principal must be repaid before or on January 24, 2021, February 28, 2021, April 15, 2021, June 15, 2021, July 17, 2021 and September 25, 2021. The notes are convertible into common stock, at the holder’s option after a one-year vesting period, at a price equal to 70% of the lowest closing bid price of the common stock during the 20 trading day period prior to conversion. In the event the Company prepays the note in full, the Company is required to pay off all principal, interest and any other amounts owing multiplied by:


(i)

120% if prepaid during the period commencing on the closing date through 90 days thereafter,

(ii)

125% if prepaid 91 days following the closing through 120 days following the closing,

(iii)

130% if prepaid 121 days following the closing through 150 days following the closing, and

(iv)

135% if prepaid 151 days following the closing through 180 days following the closing.




10



Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

September 30, 2020 and December 31, 2019



After the expiration of 180 days following the date of the Note, the Company has no right of prepayment.


As of July 30 the Company completed three transactions converting debt to common stock to fully convert the January 23, 2020 $60,000 loan into 800,359 shares of common stock.  As of September 30 the Company completed four transactions converting debt to common stock to fully convert the February 27, 2020 $60,000 loan into 669,002 shares of common stock.  


As of September 30, 2020 and December 31, 2019, the Company had outstanding convertible loans with variable vested conversion feature net of the debt discount of $43,453 and $0, respectively.  For the nine months ended September 30, 2020 and 2019, the Company amortized debt discount including original issue discount of $112,577 and $0, respectively.  


Derivative liability

The Company’s derivative liability consists of transactions discussed in the previous loan category (Convertible loans with a variable conversion feature) and loan category (Convertible loans with beneficial conversion).


A summary of transactions follows:


Fair value as of December 31, 2018

 

$

 

Fair value on the date of issuance recorded as debt discount

 

 

183,809

 

Fair value on the date of issuance recorded as loss on derivative

 

 

(73,809

)

Gain on change in fair value of derivatives

 

 

(255,505

)

Reclassification of tainted notes to derivative

 

 

559,300

 

Fair value as of December 31, 2019

 

 

413,795

 

Debt discount from derivatives

 

 

409,302

 

Reclassification of equity to liability for derivatives

 

 

54,159

 

Amortization of debt discount from derivatives

 

 

838,688

 

Change in fair value of derivatives

 

 

(912,825

)

Derivative settled upon conversion of debt

 

 

(458,933

)

Fair value as of September 30, 2020

 

$

344,186

 


Convertible loans with purchase option

In November of 2019, the Company entered into convertible loans with 2 lenders totaling $122,000.  These loans provide for a six month maturity, which may be extended up to one year, do not pay interest, and may be converted any time following the six month anniversary at a fixed price of $0.10 per share and fixed shares.  One of the above loans for $55,000 became convertible on February 19, 2020 and was converted into 275,000 shares on May 5, 2020 along with exercising the purchase option for 275,000 common shares.  On July 23, 2020 the second loan was converted in 335,000 common shares.


The convertible loans also provide a purchase option to acquire an additional matching number of shares as results from a conversion at the same $0.10 per share price. The fair value of the purchase options originated in 2020 was determined using the Black Scholes Option Pricing Model based on the following assumptions:


Assumptions

 

Purchase Option

 

 

 

(1) dividend yield of  

    

0%

(2) expected volatility of

 

237.56-245.94%

(3) weighted average risk-free interest rate of

 

0.24-.27%

(4) expected life of

 

0.375-0.60 years

(5) estimated fair value

 

$0.0883-$0.0757




11



Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

September 30, 2020 and December 31, 2019



As of September 30, 2020 and December 31, 2019, the Company had outstanding convertible loans with purchase options net of debt discount of $0 and $74,611, respectively. As of September 30, 2020 and December 31, 2019 the outstanding derivative liability related to these convertible notes was $0 and $0, respectively.  For the nine months ended September 30, 2020 and 2019, the Company amortized debt discount for these two notes of $47,389 and $0, respectively.


During February and March 2020, the Company entered into additional convertible loans with purchase options with seven lenders totaling $97,000. These loans provide for a six month maturity, which may be extended up to one year, do not pay interest, and may be converted any time following the six month anniversary at a fixed price of $0.10 per share and fixed shares. The fair value of the purchase options originated in 2020 was determined using the Black Scholes Option Pricing Model based on the following assumptions:


Assumptions

 

Purchase Option

 

 

 

(1) dividend yield of  

    

0%

(2) expected volatility of

 

105.64-237.28%

(3) weighted average risk-free interest rate of

 

0.0-1.58%

(4) expected life of

 

0.49-0.10 years

(5) estimated fair value

 

$0.0303-$0.0833


In June 2020, three of notes totaling $19,000 were converted into 190,000 shares of common stock and noteholders exercised their option to purchase an additional 190,000 shares for $19,000.  In July 2020, three of the notes totaling $12,000 were converted into120,000 common shares. One loan was cancelled by mutual agreement with the note holder.  The original note   was changed to a stock purchase for 660,000 common shares utilizing the $66,000 original proceeds of the loan.   As of September 30, 2020 and December 31, 2019, the Company had outstanding convertible loans net of debt discount of $0 and $0, respectively. As of September 30, 2020 and December 31, 2019 the outstanding derivative liability related to these convertible notes was $0 and $0, respectively. Total debt discount amortized for these 7 convertible notes with purchase options for the nine months ended September 30, 2020 was $65,175.


Note 8. Stockholders’ Deficit


During the three months ended March 31, 2020 the Company engaged in the following equity transactions:


·

issued 3,780,976 shares of preferred series A stock and 2,044,190 shares of common stock to our Chief Executive and Chief Operating officers in exchange for $2,238,000 in accrued salaries, collectively,

·

issued 691,522 common shares for conversion of $38,500 of convertible debt as discussed in Note 7,

·

issued 46,789 common shares for interest and fees,

·

removed $23,940 of derivative for converted debt, and

·

recorded $54,159 for reclassification of equity to liability for derivatives.


During the three months ended June 30, 2020 the Company engaged in the following equity transactions:


·

issued 2,500,000 shares of common stock for $250,000 in web site services, data records and marketing services,

·

issued 4,426,091 common shares for conversion of $243,500 of convertible debt as discussed in Note 7,

·

issued 139,275 common shares for interest and fees,

·

sold 1,301,111 common shares for $69,000,

·

sold $161,000 in subscriptions to purchase 1,610,000 common shares, and

·

removed $151,434 of derivative for converted debt.


During the three months ended September 30, 2020 the Company engaged in the following equity transactions:


·

issued 1,924,397 common shares for conversion of $199,000 of convertible debt as discussed in Note 7,

·

issued 58,757 common shares for interest and fees,

·

  sold 2,120,000 common shares for $217,000,

·

issued common shares for $74,000 in subscriptions received in the previous quarter, and

·

removed $283,559 of derivative for converted debt.




12



Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

September 30, 2020 and December 31, 2019



Issuance of Series A Preferred Stock


On January 30, 2020 the articles were amended to authorize 3,780,976 shares of the authorized and unissued Preferred Stock of the Corporation are hereby designated “Series A Preferred Stock” with the following highlights of rights, preferences, powers, privileges and restrictions, qualifications and limitations.


1.

Dividends.  Series A Preferred Stock shall be treated pari passu with Common Stock except that the dividend on each share of Series A Preferred Stock shall be equal to the amount of the dividend declared and paid on each share of Common Stock multiplied by the Conversion Rate.

2.

Liquidation, Dissolution, or Winding Up.  In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, Series A Preferred Stock shall be treated pari passu, with Common Stock except that the payment on each share of Series A Preferred Stock shall be equal to the amount of the payment on each share of Common Stock multiplied by the Conversion Rate.

3.

Voting.  On any matter presented to the shareholders of the Corporation for their action or consideration at any meeting of shareholders of the Corporation (or by written consent of shareholders in lieu of meeting), each holder of outstanding shares of Series A Preferred Stock shall be entitled to cast the number of votes equal to the number of shares of Series A Preferred Stock held by such holder as of the record date for determining shareholders entitled to vote on such matter multiplied by the Conversion Rate. Except as provided by law or by the other provisions of the Articles of Incorporation, holders of Series A Preferred Stock shall vote together with the holders of Common Stock as a single class.

4.

Conversion Rate and Adjustments.

a.

Conversion Rate.  The “Conversion Rate” shall be five (5) shares of Common Stock (as adjusted pursuant to this Section 4) for each share of Series A Preferred Stock.


Note 9. Stock Option Plan


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, 2018

 

 

2,200,000

 

 

$

0.10

 

 

 

2.0

 

Issued

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2019

 

 

2,200,000

 

 

 

0.10

 

 

 

1.0

 

Issued

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

Outstanding at September 30, 2020

 

 

2,200,000

 

 

$

0.10

 

 

 

.25

 


The above outstanding options were granted on January 1, 2012, to a former executive of the Company. The options were fully vested and exercisable at December 31, 2016. Accordingly, during the nine months ended September 30, 2020 and 2019, the Corporation did not recognize any stock-based compensation expense.




13



Energy and Water Development Corp.

Notes to the Condensed Consolidated Financial Statements (Unaudited)

September 30, 2020 and December 31, 2019



Note 10. Commitments and Contingencies


Commitments


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


Effective January 1, 2020 the Company established its 7901 4th Street N STE# 4174 St Petersburg FL 33702 as the official corporate address.


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 consolidated operating results, financial position or cash flows.


Litigation


Norwood - Action proceeding on concluded litigation, Case Number 10-58982 CA 09 – Miami-Dade County, FL Circuit Court. Nick Norwood vs. Eurosport Active World Corp. and Ralph Hofmeier. The case is resolved. On June 2, 2020, the Company paid $107,872 and settled the judgement with the plaintiff.


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 – The nature of the litigation was for breach of a lease agreement. This case is concluded with a judgement against the Company in July 2010 for $84,393 plus 6% interest. 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 11. Subsequent Events


·

On July 29, 2020, EAWD received qualification of its Form 1-A regarding the offering of 20 million shares.

·

On October 08, 2020 the Company sold 335,000 common shares for $67,000.

·

On October 08, 2020 the Company issued 1,250,000 common shares valued at $204,750 for investor relations services.

·

On October 15, 2020 the Company issued 194,805 common shares to convert $15,000 of debt.

·

On October 19, 2020 the Company sold 200,000 common shares for $20,000.

·

On October 22, 2020 the Company issued 262,123 common shares to convert $20,000 of debt.

·

On October 28, 2020 the Company issued 225,564 common shares to convert $15,000 of debt.

·

On November 02, 2020 the Company issued 190,000 common shares valued at $20,000 for finders fees.





14



 


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 consolidated financial statements and the notes to those consolidated 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 Nine Months ended September 30, 2020 Compared to the Nine Months ended September 30, 2019


Revenue


For the nine months ended September 30, 2020, although the Company has received a deposit on its first order, which it has not yet been delivered; consequently it has recognized no revenue. The Company 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 will be satisfied through delivery of the equipment when performance has occurred by the end of 2020. The timing of the delivery has been extended several months due to the impact of COVID-19.


Another contract has been signed for the sale of a SPAWG to our South African customer, the build out began in the fourth quarter of 2019. The timing of the delivery has been extended several months due to the impact of COVID-19.


On June 18, 2020, the Company has received a Contract Award with a value of USD$14,650,640 from the Iraqi Project and Contracting Office to supply 20 self-sufficient energy supply atmosphere water generation systems to various Iraqi projects.

 

General and Administrative Expense

 

General and administrative expense increased by $267,250 to $1,019,440 for the nine months ended September 30, 2020 from $752,190 for the nine months ended September 30, 2019.

 

The increase in general and administrative expenses was primarily due to increases in the following categories:

 

 

·

 $14,925 increase for professional fees, as a result of :

·

a ($134,400) decrease in financial consulting matters,

·

a $34,965 increase in accounting, reporting and tax services,  

·

a $63,976 increase in SEC matters,   

·

a $54,234 increase in services related to the Norwood litigation,

·

a $12,500 increase in legal fees for financing matters to secure additional financing, and

·

a ($16,350) decrease for corporate matters.

 

 

 

 

·

$251,270 increase in advertising and marketing expense as primarily the result of the $250,000 purchase of web services and research materials to promote the Company, and

 

·

$1,055 increase in other general and administrative expense, which is considered nominal.

 

 

 

Other Income (Expense)

 

Other income (Expense) increased expense of $413,004 from $68,859 income (2019) to ($344,145) expense (2020) primarily as a result of the following:


 

·

a ($1,126,680) interest and other income, and

 

 

 

 

·

a $713,676 income for change in fair value of derivative liability.




15



 


Net Loss

 

Net Loss increased by $691,256 expense to $1,374,587 expense for the nine months ended September 30, 2020 from $683,331 for the nine months ended September 30, 2019. This increase was attributable to the net increases and decreases as discussed above.


Results of Operations for the Three Months ended September 30, 2020 Compared to the Three Months ended September 30, 2019


Revenue


For the three months ended September 30, 2020, although we signed a contract for the sale of a SPAWG to our South African customer, the build out which began in the fourth quarter of 2019, will take 6-8 months to complete before revenue will occur. On June 18, 2020, the Company has received a Contract Award with a value of USD$14,650,640 from the Iraqi Project and Contracting Office to supply 20 self-sufficient energy supply atmosphere water generation systems to various Iraqi projects. The timing of the delivery will be extended several months due to the impact of COVID- 19. These transactions represent a revenue opportunity for EAWD.

 

General and Administrative Expense

 

General and administrative expense decreased by $119,140 to $242,007 expense for the three months ended September 30, 2020 from $361,147 expense for the three months ended September 30, 2019.

 

The increase in general and administrative expenses was primarily due to increases in the following categories:

 

 

·

(($(117,648) decrease for professional fees, as a result of :

·

a ($134,400) decrease in financial consulting matters,

·

a $26,083 increase in accounting, reporting and tax services

·

a $14,532 increase in SEC matters,

·

a ($8,488) decrease in services related to the Norwood litigation,

·

a $500 increase in legal fees for financing matters to secure additional financing, and

·

a ($15,875) decrease for corporate matters, and

 

 

 

 

·

($1,492) decrease in other general and administrative expense, which is considered nominal.

 

 

 

Other Income (Expense)

 

Other income (Expense) increased $347,062 from $119,452 income (2019) to $227,610 expense (2020) primarily as a result of the following:


 

·

a ($842,009) interest and other income, and

 

 

 

 

·

a $494,947 income for change in fair value of derivative liability.


Net Loss

 

Net Loss increased by $238,924 to $480,619 for the three months ended September 30, 2020 from $241,694 for the three months ended September 30, 2019. This increase was attributable to the net increases and decreases as discussed above.

 


LIQUIDITY and CAPITAL RESOURCES

 

We had $9,270 cash and a working capital deficit of $1,975,273 at September 30, 2020. 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.

 

We have sustained operating losses since our operations began. At September 30, 2020, we had an accumulated deficit of $13,319,506. 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.




16



 


We have satisfied our cash and working capital requirements in the nine months ended September 30, 2020, through the issuance of convertible loans and the sale of common stock. During the nine months ended September 30, 2020, the Company entered into $97,000 in simple convertible loans, which contained a purchase option for an additional 970,000 shares. The holders of the convertible loan instruments have the option to convert these loans into common stock at a conversion price of $0.10 per share up to six months from the note issuance. The Company also issued $294,000 of convertible loans with a variable vested conversion feature. Refer to Note 7 of the financial statements under section “Convertible loans with a variable vested conversion feature, Original Issue Discount” for more information. In four individual transactions ranging from January 23, 2020 to June 11, 2020, the Company secured interim financing. The notes provide for interest at 8% per annum and require the all interest and principal be repaid in one year.


Comparison of Cash Flows for the Nine Months Ended September 30, 2020 (2020) and September 30, 2019 (2019)

 

Cash Flows from Operating Activities

 

We used $779,730 of cash in our operating activities in 2020 compared to $251,200 used in 2019. The increase in cash used of $528,530 was primarily due to:


·

$397,172 decrease in cash provided from changes in working capital components to $115,162 (2020) compared to $512,334 (2019). The decrease was primarily derived from $116,134 increase in cash used to reduce prepaid expenses for vendor advances and a $290,475 increase in cash used by accounts payable accrued expenses.

·

$131,358 increase in cash used from net loss and noncash adjustments to $894,892 (2020) compared to $763,534 (2019). This increase in cash used was primarily associated with an increase in net loss of 691,256 that was reduced by adjustments for noncash charges of $250,000 for stock issued for services, $1,062,774 increase for amortization of debt discount and $713,676 decreased by changes in fair value for derivative liabilities.


Cash Flows from Investing Activities

 

We received $0 cash provided by our investing activities in 2020 or 2019.   

 

Cash Flows from Financing Activities

 

We received $789,000 (2020) and $251,200 (2019) in cash provided from financing activities. The net increase of $537,800 is due primarily to a $208,000 increase in financing through issuance of convertible loans, a $329,800 increase in proceeds from the sale of subscriptions and common stock.


Financial Position

 

Total Current Assets – At September 30, 2020 the Company had $157,654 representing $9,270 in cash, $134,200 in deposits for the manufacture of equipment comprising our first sale and $14,184 advance payments for services primarily legal retainers for new corporate/SEC counsel.


PLAN OF OPERATION AND FUNDING


We have no lines of credit or other bank financing arrangements. Until we begin to generate revenues and positive cash flow, from our signed contracts, we expect that working capital requirements will continue to be funded through affiliate loans and/or further issuances of other securities. There is no assurance 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 may not be able to secure the additional financing necessary to commercialize our products and execute our business strategy, at terms that are acceptable to us.


Our mission is to provide sustainable water production design and already commercialized systems as well as energy design and systems based on high efficiency and renewable sources, and also smart grid and storage solutions. Through a combination of the best design and state of the art configuration of AquaTech, EnergyTech and waste management assisted solutions and technologies, we believe that it is possible to create a completely self-sufficient energy generation and water production system, which can be used at the same time to meet the potable water requirements as well as the electrical energy needs of businesses, communities and entire States, like California in USA and or Cape Town in South Africa.




17



 


EAWD seeks to promote green technology solutions through commissioned-based distributers and agents worldwide. EAWD anticipates using Made in Germany Green Tech, Swiss and US technologies such as: atmosphere water generators (AWGs), CO2-free energy production, plasma-assisted gasification and sterilizations systems, solar-powered water purification systems, as well as those in solar and wind energy solutions which we may, when our financial condition permits, further develop ourselves.


Today we believe we have potential technology partners, technology transfer agreements and technology representation agreements in place relating to aspects of renewable energy and water supply and we believe one of our key unique selling features and capabilities is this relationship. We believe that one of our key unique selling features and capabilities is the combination of the different disciplines of water, energy and waste management.


Revenue would be generated by the sales of Engineering and Technical Consultancy Services, sales of various identified technologies, royalties from the sales of energy and/or water in certain projects.


MATERIAL COMMITMENTS


Employment Agreements

 

The Company entered into employment agreements with 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.


OFF-BALANCE SHEET ARRANGEMENTS


None


GOING CONCERN


The Company has begun to commercialize its products by beginning the build out of its initial revenue opportunity.  The Company has received a deposit on its first order, which it has not yet delivered due to delays caused by the COVID-19 global pandemic, consequently it has recognized no revenue.  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 $13,319,506 at September 30, 2020. During the nine months ended September 30, 2020, the Corporation incurred net losses of $1,374,587. The Company also incurred a working capital deficit of $1,975,273 at September 30, 2020.


These factors raise substantial doubt regarding the Corporation’s ability to continue as a going concern. The ability of the Corporation to continue as a going concern depends upon its ability to obtain funding to finance operating losses until the Corporation is profitable. The Corporation expects to be financed through equity capital, debt financing or from deposits related to purchases orders on proposals pending customer acceptance.

 

In the event the Corporation does not generate more sufficient funds from issuance of common stock, debt financing or purchase orders, it may be unable to fully implement its business plan and pay its obligations as they become due, any of which circumstances would have a material adverse effect on its business prospects, financial condition, and results of operations. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.


CRITICAL ACCOUNTING POLICIES


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




18



 


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, 2019. 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 September 30, 2020, 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 September 30, 2020, our disclosure controls and procedures were not effective:


 

·

Inadequate segregation of duties,

 

·

Limited level of multiple reviews among those tasked with preparing the financial statements,

 

·

Lack of a formal internal control environment.


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

 

Our company plans to take steps to enhance and improve the design of our internal controls over financial reporting. During the period covered by this quarterly report on Form 10-Q, we have not been able to remediate the material weaknesses identified above. To remediate such weaknesses, we plan to implement the following changes during our fiscal year ending December 31, 2019: (i) appoint additional qualified personnel to address inadequate segregation of duties and limited reviews (ii) adopt sufficient written policies and procedures for accounting and financial reporting. The remediation efforts set out are largely dependent upon our securing additional financing to cover the costs of implementing the changes required. If we are unsuccessful in securing such funds, remediation efforts may be adversely affected in a material manner.

 

We are unable to remedy our controls related to the inadequate segregation of duties and ineffective risk management until we receive financing to hire additional employees.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the fiscal quarter ended September 30, 2020 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.

 



19



 


PART II.   OTHER INFORMATION


ITEM 1.   LEGAL PROCEEDINGS


Norwood - Action proceeding on concluded litigation, Case Number 10-58982 CA 09 – Miami-Dade County, FL Circuit Court. Nick Norwood vs. Eurosport Active World Corp. and Ralph Hofmeier. The case is resolved. On June 2, 2020, the Company paid $107,872 and settled the judgement with the plaintiff.


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 – The nature of the litigation was for breach of a lease agreement. This case is concluded with a judgement against the Company in July 2010 for $84,393 plus 6% interest. 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.


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 nine months ended September 30, 2020:


·

issued 2,044,190 common shares and 3,780,976 Series A preferred stock, to satisfy accrued salaries of our Chief Executive Officer and our Chief Operating Officer of $2,238,000.

·

issued 691,522 common shares in three transactions for converting $38,500 in convertible debt.

·

issued 46,789 common shares in three transactions for interest and fees related to debt conversion.

·

Issued 1,865,365 common shares in three transactions for converting $71,500 in convertible debt along with interest and fees.

·

Issued 1,960,000 common shares for converting $98,000 in convertible debt.

·

Issued 550,000 common shares for converting $55,000 in convertible debt.

·

Issued 280,000 common shares for converting $14,000 in convertible debt and purchasing $14,000 in common stock.

·

Issued 2,250,000 common shares for purchasing $250,000 a data record.

·

Issued 250,000 common shares for purchasing $25,000 in website services.

·

Issued 50,000 common shares for converting $2,500 in convertible debt and purchasing $2,500 in common stock.

·

Issued 50,000 common shares for converting $2,500 in convertible debt and purchasing $2,500 in common stock.

·

Issued 3,421,111 common shares for $286,000 in cash.

·

Issued 455,000 common shares in four transactions for converting $79,000 in convertible debt.

·

Issued 800,395 common shares in three transactions for converting $60,000 in convertible debt along with 27,329 common shares for interest.

·

Issued 669,002 common shares in four transactions for converting $60,000 in convertible debt along with 31,428 common shares for interest.


ITEM 3.   DEFAULTS UPON SENIOR SECURITIES


None


ITEM 4.   MINE SAFETY DISCLOSURES


N/A


ITEM 5.   OTHER INFORMATION


·

On October 15, 2020, EAWD announced its official registration of a new branch of the corporation in Hamburg Germany.  The new location in Germany will allow the company to expand capacity for assembling, manufacturing, customer support, engineering, sales and services, and leadership functions across the entity.




20



 


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

 

XBRL Interactive Data File

 

 

 

 

 

 

 

 

 

*




21



 


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: November 16, 2020

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

 

November 16, 2020

Ralph Hofmeier

 

Chairman (Principal Executive Officer)

 

 

 

 

 

 

 

/s/ Irma Velazquez

 

Chief Operating Officer (Principal Financial Officer and

 

November 16, 2020

Irma Velazquez

 

Principal Accounting Officer), Director and Vice-Chairman

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 




22