UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
|
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the quarterly period ended:
|
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ____________ to _____________
Commission
File Number:
(Exact Name of Registrant as Specified in Its Charter)
|
|
|
|
|
(State
or other jurisdiction
of incorporation or organization) |
(I.R.S.
Employer
Identification No.) |
(Address of principal executive offices, Zip Code)
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| N/A | N/A | N/A |
Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Indicate
by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule
405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | |
|
|
Smaller
reporting company
|
|
|
Emerging
growth company
|
If
an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying
with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes☐
The number of shares outstanding of each of the issuer’s classes of common stock, as of November 17, 2023 is as follows:
| Class of Securities | Shares Outstanding | |
| Common Stock, $0.001 par value |
NEXT-ChemX Corporation
Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 2023
TABLE OF CONTENTS
| PART I – FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | F-2 |
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 3 |
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 6 |
| Item 4. | Controls and Procedures | 6 |
| PART II – OTHER INFORMATION | ||
| Item 1. | Legal Proceedings | 7 |
| Item 1A. | Risk Factors | 7 |
| Item 2. | Unregistered Sale of Equity Securities and Use of Proceeds | 7 |
| Item 3. | Defaults Upon Senior Securities | 7 |
| Item 4. | Mine Safety Disclosures | 7 |
| Item 5. | Other Information | 7 |
| Item 6. | Exhibits | 7 |
| Signatures | 8 | |
| 2 |
NEXT-CHEMX CORPORATION
INTERIM FINANCIAL STATEMENTS
(UNAUDITED)
Table of Contents
| F- 1 |
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
NEXT-ChemX Corporation
Condensed Balance Sheets
(Unaudited)
| September 30, | December 31, | |||||||
| 2023 | 2022 | |||||||
| ASSETS | ||||||||
| Current Assets: | ||||||||
| Cash | $ |
|
$ |
|
||||
| Investments |
|
|||||||
| Prepaid expense and other current assets |
|
|
||||||
| Total Current Assets |
|
|
||||||
| Property and equipment, net |
|
|
||||||
| Intangible asset, net |
|
|
||||||
| Total Non-current Assets |
|
|
||||||
| Total Assets | $ |
|
$ |
|
||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current Liabilities: | ||||||||
| Accounts payable and accrued liabilities | $ |
|
$ |
|
||||
| Other Current Liabilities |
|
|
||||||
| Notes payable |
|
|
||||||
| Due to related party |
|
|||||||
| Total Current Liabilities |
|
|
||||||
| Total Liabilities | $ |
|
$ |
|
||||
| Stockholders’ Equity (Deficit): | ||||||||
| Preferred stock, $ par value, shares authorized, shares issued and outstanding | ||||||||
| Common stock, $ par value, shares authorized, and shares issued and outstanding, respectively |
|
|
||||||
| Additional paid-in capital |
|
|
||||||
| Accumulated deficit |
(
|
) |
(
|
) | ||||
| Total Stockholders’ Equity (Deficit) |
(
|
) |
|
|||||
| Total Liabilities and Stockholders’ Equity (Deficit) | $ |
|
$ |
|
||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| F- 2 |
NEXT-ChemX Corporation
Condensed Statements of Operations
(Unaudited)
| For the three months ended | For the nine months ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2023 | 2022 | 2023 | 2022 | |||||||||||||
| Revenues | ||||||||||||||||
| Operating expenses | ||||||||||||||||
| General and administrative |
|
|
|
|
||||||||||||
| Total operating expenses |
|
|
|
|
||||||||||||
| Income (loss) from operations |
(
|
) |
(
|
) |
(
|
) |
(
|
) | ||||||||
| Other income (expense) | ||||||||||||||||
| Other income (expense) |
(
|
) |
(
|
) | ||||||||||||
| Interest expense |
(
|
) |
(
|
) |
(
|
) |
(
|
) | ||||||||
| Net other Income (expense) |
(
|
) |
(
|
) |
(
|
) |
(
|
) | ||||||||
| Net income (loss) |
(
|
) |
(
|
) |
(
|
) |
(
|
) | ||||||||
| Net income (loss) per common share: Basic and diluted | ) | ) | ) | ) | ||||||||||||
| Weighted average number of common shares outstanding: Basic and diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| F- 3 |
NEXT-ChemX Corporation
Condensed Statement of Changes in Stockholders’ Equity (Deficit)
(Unaudited)
For the three, six and the Nine Months Ended September 30, 2023
| Common Stock |
Additional Paid-in |
Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance December 31, 2022 |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
|
||||||||||
| Stock Issuances to 3rd Party |
|
|
|
|
||||||||||||||||
| Net loss |
(
|
) |
(
|
) | ||||||||||||||||
| Balance March 31, 2023 |
|
$ |
|
|
$ |
(
|
) |
|
||||||||||||
| Net Income |
(
|
) |
(
|
) | ||||||||||||||||
| Balance June 30, 2023 |
|
$ |
|
$ |
|
$ |
(
|
) |
|
|||||||||||
| Stock Issuances to 3rd Party |
|
|
|
|
||||||||||||||||
| Net Income |
(
|
) |
(
|
) | ||||||||||||||||
| Balance September 30, 2023 |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
(
|
) | |||||||||
For the three, six and the Nine Months Ended September 30, 2022
|
Common Stock
|
Additional Paid-in |
Accumulated | Stockholders’ | |||||||||||||||||
| Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||
| Balance December 31, 2021 |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
|
||||||||||
| Net loss |
(
|
) |
(
|
) | ||||||||||||||||
| Balance March 31, 2022 |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
|
||||||||||
| Stock issued on conversion of 3rd party Loans |
|
|
|
|
||||||||||||||||
| Stock issued on conversion of related party loans |
|
$ |
|
$ |
|
|
||||||||||||||
| Net loss |
(
|
) |
(
|
) | ||||||||||||||||
| Balance June 30, 2022 |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
|
||||||||||
| Stock issued on conversion of 3rd party loans |
|
|
|
|
||||||||||||||||
| Net loss |
(
|
) |
(
|
) | ||||||||||||||||
| Balance September 30, 2022 |
|
$ |
|
$ |
|
$ |
(
|
) | $ |
|
||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
| F- 4 |
NEXT-ChemX Corporation
Condensed Statements of Cash Flows
(Unaudited)
| For the nine months ended | ||||||||
| September 30, | ||||||||
| 2023 | 2022 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||||
| Net income(loss) | $ |
(
|
) | $ |
(
|
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization |
|
|
||||||
| Other income received in form Shares of Stocks |
(
|
) | ||||||
| Consultant commission paid in third party stock |
|
|||||||
| Other Expense paid in stocks |
|
|||||||
| Changes in Operating Assets and Liabilities: | ||||||||
| Prepaid expenses |
(
|
) |
(
|
) | ||||
| Accounts payable and accrued liabilities |
|
|
||||||
| Net cash provided by (used in) operating activities |
(
|
) |
(
|
) | ||||
| INVESTING ACTIVITIES | ||||||||
| Purchase of property and equipment |
(
|
) | ||||||
| Net cash provided by (used in) investing activities |
(
|
) | ||||||
| FINANCING ACTIVITIES | ||||||||
| Proceeds from the Stock Issuance of Common Stocks |
|
|||||||
| Proceeds from convertible notes payable - related party |
|
|||||||
| Net proceeds from notes payable |
|
|
||||||
| Repayment of related party loans |
(
|
) | ||||||
| Repayment of notes payable |
(
|
) |
(
|
) | ||||
| Net cash provided by (used in) financing activities |
|
|
||||||
| Net increase (decrease) in cash |
|
(
|
) | |||||
| Cash, beginning of year |
|
|
||||||
| Cash, end of the period | $ |
|
$ |
|
||||
| SUPPLEMENTAL DISCLOSURES: | ||||||||
| Cash paid during the period for: | ||||||||
| Income tax | $ | $ | ||||||
| Interest | $ |
|
$ | |||||
| NON-CASH INVESTING AND FINANCING ACTIVITIES | ||||||||
| Common Stock issued on Conversion of 3rd party loan | $ | $ |
|
|||||
| Common stock issued on conversion of related party notes payable and accrued interest | $ | $ |
|
|||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| F- 5 |
NEXT-ChemX Corporation
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
September 30, 2023
NOTE 1 - ORGANIZATION AND BUSINESS OPERATIONS
Organization and Description of Business
NEXT-ChemX Corporation, formerly known as AllyMe Group Inc. (“Company”, “we” or “us”) was incorporated under the laws of the State of Nevada on August 13, 2014 and has adopted a December 31 fiscal year end. The Company trades on the OTC market (Pink Sheet) under the symbol “CHMX”. In December 23, 2021, the Company filed SEC Form 8 A12G becoming a mandatory filer and has since complied with the reporting requirements of the Securities Exchange Commission as a reporting issuer.
Since April 2021, following a complete change of the Company’s shareholders, management, assets and strategy, the business of the Company is the commercialization of a novel innovative Ion-Targeting Continuous-Flow Direct Extraction Technology (“iTDE Technology”) as further described in Note 5 below. The iTDE Technology is embodied in certain patents and patent applications as well as proprietary know-how.
The primary focus of the Company is the commercial launch of its iTDE Technology in a scalable system, deployable remotely to customer locations, that will enable the commercial extraction of lithium from natural brines and geothermal sources as well as liquors from leached mined ore solutions. Other potential future commercial applications for the iTDE Technology include:
| ● | Extracting Fatty Acids from Vegetable Oils for More Economical Refining; | |
| ● | Extracting of Radioactive Ions from Nuclear Plant Stored Water; | |
| ● | Extracting of Metal Ions from Mine Leach Solutions, Effluent, or Tailings; and | |
| ● | Desalination of Sea Water, by Extracting Ions for Water Purification |
During the third quarter of 2023, the Company has continued to manage the construction of the 2 pilot plant systems that will form the basis of its ongoing commercialization efforts by demonstrating the scalability of the system for commercial purposes, by providing actual commercial data to define typical running costs, and by generating commercial interest by processing samples supplied by potential customers to demonstrate the iTDE technology’s capability commercially. The two planned systems include (i) a smaller flexible system utilizing the iTDE Technology that will enable the processing of solutions containing lithium to demonstrate the commercial viability of the system; and (ii) a larger system that will handle the processing of industrial quantities of brines, better demonstrating the scalability and performance of the system when used commercially to extract lithium.
The smaller system is designed to facilitate work on refinement of the basic iTDE system by enabling, in particular, changes to sensor types and positions as well as adaptations to its other relevant systems. It is anticipated this will contribute to improvements in efficiency and assist in the modelling of the process for commercial implementation, enabling changes that will reduce the cost and improve the economics of the process. The inherent flexibility of the design also allows the Company to carry out its research into the extraction of other elements, and thereby to explore the commercial viability of the extraction of other elements.
The completion of the systems has been further delayed due to the long lead times for certain sensors and other necessary systems as well as a lack of funding in place. The present estimate for the completion of the first system is early in the first quarter of this year.
In the third Quarter, the Company closed its laboratories in the incubator facility run by the University of Illinois that would not be properly adapted to handling the operation of the pilot plants. The Company is seeking new premises that will be able to handle the import and storage of large quantities of chemicals and customer brines. The opening of the new facility is anticipated to coincide with the completion of the first pilot plant.
| F- 6 |
The Company anticipates first running extraction tests on brine solutions mixed with controlled defined quantities of elements that approximate the naturally occurring brines of potential customers. The Company has already received brine samples from Clontarf Energy plc, a UK AIM listed company with whom the Company concluded an agreement to iTDE Technology in Bolivia through a jointly established commercial venture. The composition of these brines will be the basis for modeling these controlled samples. This initial calibration of the system should provide a better baseline for the testing before proceeding to operate with actual brines. Subsequent testing of the naturally occurring brines on which the test samples were devised will then contribute to a better understanding of how the process copes with impurities and other elements.
The Company continues to pursue its intellectual property protection strategy with testing and development to support a strong protection profile.
NOTE 2 – GOING CONCERN
The
Company has incurred losses since inception (August 13, 2014) resulting in an accumulated deficit of $
In
the first quarter of 2023, the Company launched a private placement offering (“March PPO”). The March PPO targets qualified
investors and is anticipated to raise up to $
The
Company will need to complete the financing of a minimum of $
From
the anticipated receipts of the March PPO, the Company must discharge outstanding payables of $
During
the third quarter 2023, the Company agreed to extend the repayment dates for 5 of its loans totaling $
| F- 7 |
Ultimately, the ability to continue as a going concern is dependent upon the Company generating profitable operations in the future and, or obtaining the necessary financing to meet its obligations and repay its liabilities arising from normal business operations when they come due. Management intends to finance operating costs over the next twelve months with existing cash on hand, loans from directors and, or the private placement of common stock. However, there can be no assurances that management’s plans will be successful.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim Financial Statements
The accompanying unaudited condensed interim financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information, and in accordance with the rules and regulations of the United States Securities and Exchange Commission with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim financial statements furnished reflect all adjustments (consisting of normal recurring adjustments) that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These unaudited interim financial statements should be read in conjunction with the audited financial statements of the Company for the year ended December 31, 2022.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Intangible asset
The
iTDE Technology is classified as an indefinite intangible asset by the Company based on it being a fundamental stem technology that has
applications in numerous fields and that is anticipated to give rise to other applications and techniques. As a result, no amortization
has been recorded against the asset which remains at its October 1, 2021 value of $
Revenue Recognition
The Company utilizes a five-step process when assessing the recognition of revenue from contractual obligations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Determination of the moment the obligation undertaken is delivered or performance is satisfied.
|
| F- 8 |
NOTE 4 – PREPAID EXPENSE AND OTHER CURRENT ASSETS
Prepaid
expenses and other current assets amounted to $
NOTE 5 – PRINCIPAL ASSET (iTDE TECHNOLOGY)
The
Company’s principal asset is the certain indefinite intangible intellectual property, comprising specifically certain patents and
patent applications along with the existing and developing knowhow, relating to a novel extraction process proven capable of removing
ions from solution using hollow fiber membranes (the “Extraction Technology”). The technology represents, in the opinion
of management, an entirely novel approach to the process of extraction of ions that is anticipated to be cheaper, more efficient and
less damaging to the environment. Following an assessment of the Extraction Technology carried out at the end of Q3, 2021, it was determined
that the Extraction Technology had an indefinite useful life. The said indefinite, intangible asset will not be amortized; however, the
value of the Asset will be examined for impairment periodically in accordance with ASC 350. At September 30, 2023, the Extraction Technology
is valued on the balance sheet at $
NOTE 6 – ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
As of September 30, 2023 and December 31, 2022, accounts payable and accrued liabilities consisted of as follows,
| September 30, | December 31 | |||||||
| 2023 | 2022 | |||||||
| Accounts payable and accrued expenses | $ |
|
$ |
|
||||
| Accrued payroll |
|
|
||||||
| Accrued interest |
|
|
||||||
| Total | $ |
|
$ |
|
||||
NOTE 7 – CONVERTIBLE NOTES, PROMISSARY NOTES AND LOANS
During the nine months ended September 30, 2023, the Company did not issue any new convertible notes and there are no convertible notes outstanding.
As
of December 31, 2022, the Company had a total of ten outstanding promissory notes, all issued during 2022 and having an aggregate value
of $
As
of December 31, 2022, the Company had three outstanding loans with an aggregate value of $
During
the nine months ended September 30, 2023, the Company recognized interest expense on its loans and promissory notes of $
| F- 9 |
NOTE 8 – RELATED PARTY TRANSACTIONS
The Company continues to rely on advances from related parties in support of its operations and cash requirements and this is expected to continue until such time as the Company can support itself or attain adequate financing through sales of equity or debt financing. Most of this support took the form of the nonpayment of all or a portion of salary payments to senior Directors, Officers, consultants and employees, effectively constituting a deferred debt payment to such persons.
As
at September 30, 2023, directors, officers and employees, including full time consultants, were owed a total of $
Four
Senior Managers of the Company have agreed not to receive payment for the majority of the outstanding indebtedness due to them at September
30, 2023. Only $
NOTE 9 – STOCKHOLDERS’ EQUITY (DEFICIT)
The Company is authorized to issue shares of common stock with a par value of $ and shares of preferred stock with a par value of $ . There was preferred stock issued and outstanding as of September 30, 2023.
On September 30, 2023, there were shares of common stock outstanding.
During
the nine months ended September 30, 2023, the Company issued
shares of common stock.
shares of common stock were issued
to two existing shareholders as part of an exempt private placement of the Company’s shares. The private placement offering is
ongoing and is now scheduled to close on December 29, 2023 at which time the Company expects to have raised
During the nine months ended September 30, 2023, the Company issued options under the Company’s 2021 Stock Incentive Plan (the “Plan”).
During the nine months ended September 30, 2023, the Company issued convertible debt exchangeable into shares of common stock.
NOTE 10 – SUBSEQUENT EVENTS
The Company has evaluated events occurring subsequent to the balance sheet date through the date these unaudited condensed financial statements were issued and determined there are no additional events requiring disclosure.
| F- 10 |
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Caution Regarding Forward-Looking Information
This Quarterly Report on Form 10-Q, including, without limitation, statements containing the words “believes”, “anticipates”, “expects” and words of similar import, constitute forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.
Such factors include, among others, the following: international, national and local general economic and market conditions: demographic changes; the ability of the Company to sustain, manage or forecast its growth; the ability of the Company to successfully make and integrate acquisitions; existing government regulations and changes in, or the failure to comply with, government regulations; adverse publicity; competition; fluctuations and difficulty in forecasting operating results; changes in business strategy or development plans; business disruptions; the ability to attract and retain qualified personnel; and other factors referenced in this and previous filings.
Given these uncertainties, readers of this Form 10-Q and investors are cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to update any such factors or to publicly announce the result of any revisions to any of the forward-looking statements contained herein to reflect future events or developments.
Overview
The Company was organized on August 13, 2014 as a Nevada corporation under Chapter 78 of the Nevada Revised Statutes. The Company’s registered address is 3773 Howard Hughes Pkwy STE 500S, Las Vegas, NV, 89169, USA, and its principal office is located at 1980 Festival Plaza Drive, Summerlin South, 300, Las Vegas, NV 89135.
The Company qualifies as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act which became law in April 2012. The definition of an “emerging growth company” is a company with an initial public offering of common equity securities which occurred after December 8, 2011 and has less than $1 billion of total annual gross revenues during last completed fiscal year.
Overview of the Business
Since April 27, 2021, the Company has changed it business entirely with the acquisition of intellectual property assets related to a novel membrane-based ion extraction process (“iTDE Technology”), which is able to extract ions exiting in low concentrations from liquid solutions. The iTDE Technology is now being used in Laboratory pilot testing to enable the Company to produce its first commercial prototypes using the novel the Extraction method. The iTDE Technology allows for the removal of ions from solution: without concentration by evaporation (significantly preserving the water resources); without pressure or additional heating (reducing energy costs); and targets the specific ions to be extracted (reducing the need for further operations and increasing the potential for the sale of other ions present in the solution). On account of the reduced interference with the environment, the lower energy costs and the lack of a need for large evaporation ponds, management considers the iTDE Technology to be more environmentally friendly and sustainable when compared to alternatives.
The iTDE Technology has been shown effective when extracting lithium from brine solutions or mine leach solutions, and to have significant potential in the following applications: extracting fatty acids from vegetable oils as a superior refining process; extracting glycerides from biodiesel as a superior purification process; extracting radioactive ions from nuclear waste waters; extracting specific metal ions from mine leach solutions and waste effluents; and to remove salts from seawater for desalination, among other things.
Currently, the primary focus of the business is on completion of the 2 pilot plants embodying the iTDE Technology system that will enable the demonstration of the extraction system for the extraction of lithium, calcium, magnesium, boron, and certain other elements. The first, smaller system, will provide greater flexibility to optimize and extend the reach of the process, allowing for replacement of sensor systems and variation of process parameters. The second system will use the current design enabling higher throughputs and a better processing ability for marketing purposes. It is expected that these pilot plants will not only demonstrate the system and its ability to target lithium using naturally occurring brines and liquors (solutions of crushed ores), but also provide a platform to optimize the extraction process and extend the extraction to other elements. The plants will enable the Company to establish the percentage level of extraction as well as the purity of the extracted elements and the chemical form of the extracted elements. This in turn will give a clear indication of the economics of the process.
The Company believes it has the ability of the system to scale up due to its modular configuration: adding more units increases the extraction potential. It is expected therefore that, following successful completion and trial and calibration of the iTDE System pilot plant, the Company will launch the commercial testing and deployment of its system that will enable the commercial deployment of the system.
| 3 |
During the second quarter it became clear that the existing laboratory facilities would not be able to handle the installation of the pilot plants and to manage the storage and utilization of the chemicals necessary to manage the commercial trials of the system. The Company is actively searching for alternatives in a suitable location that will provide a better base moving forward. In this respect, the Company also took the decision to relocate its operation in Nevada pending a decision as to where the optimal site would be to unite all its operations in one central location.
Impact of Events in Ukraine
The Company still retains a small presence in Ukraine. While no further research and development is conducted in Ukraine, the Company hopes to restart its programs in Kyiv following resolution of the ongoing conflict. In particular, the analysis of the effectiveness of the iTDE Technology in extracting radioactive contaminants as well as the refining of sunflower oil are ideally located in Ukraine.
Current events in Ukraine do not have any material effect on the Company’s business which is currently focused on lithium and certain other extraction possibilities.
Results of Operations
The following table summarizes the results of our operations during the three months ended September 30, 2023 and 2022, respectively:
| Three Months Ended | ||||||||||||
| September 30, | ||||||||||||
| 2023 | 2022 | Change | ||||||||||
| Revenues | $ | - | $ | - | $ | - | ||||||
| Operating expenses | 403,435 | 387,859 | 15,576 | |||||||||
| Other (Income) expense | 519,422 | 13,591 | 505,831 | |||||||||
| Net profit (loss) | (922,857 | ) | (401,450 | ) | 521,407 | |||||||
| Profit (Loss) per share of common stock | (0.03 | ) | (0.01 | ) | 0.02 | |||||||
The following table summarizes the results of our operations during the nine months ended September 30, 2023 and 2022, respectively:
| Nine Months Ended | ||||||||||||
| September 30, | ||||||||||||
| 2023 | 2022 | Change | ||||||||||
| Revenues | $ | - | $ | - | $ | - | ||||||
| Operating expenses | 1,421,663 | 1,200,269 | 221,394 | |||||||||
| Other (Income) expense | 356,891 | ) | 43,596 | 313,295 | ||||||||
| Net profit (loss) | (1,778,554 | ) | (1,243,865 | ) | 534,689 | |||||||
| Profit (Loss) per share of common stock | (0.06 | ) | (0.04 | ) | 0.02 | |||||||
During the third quarter of 2023, operating expenses rose very sharply when compared to the same period of 2022. This was directly related to work on the iTDE System pilot plant, that necessitated payment of construction deposits and down payments. The Company also repaid certain indebtedness under promissory notes that became due and has seen minor increases in payroll and consulting expenses as well as the cost of certain third-party experts including its intellectual property managers and auditors. Other expenses remain broadly the same.
During the third quarter, the sale of exclusive rights to use the Company’s iTDE Technology in Bolivia offset the additional costs and reduced the impact of operating expense.
| 4 |
Liquidity and Capital Resources
As of September 30, 2023, we had total current assets of $235,344 and an accumulated deficit of $5,471,286.
Our operating activities used $366,458 in cash for the nine months ended September 30, 2023, while our operations used $488,865 cash in the nine months ended September 30, 2022. During the period, the Company has focused attention on the work necessary to complete the pilot plants. Strategically it was considered necessary to complete the pilot plants to enable the Company to move to the next stage of its marketing plan: to demonstrate the system and its extraction economics to potential users. The Company currently has several companies interested in testing the system using their brines and these tests will consume a considerable amount of time once the pilot plants are ready to process. Management considers it preferable to focus on this work, and this has led to an overall reduction in expenses prior to reengaging in other activities.
Our cash requirements continue to be primarily for the manufacture of the iTDE System pilot plant with the purchase of equipment and materials as well as the operating expenses for the development of pilot plant systems, as well as our payroll, intellectual and other expense. During the next 6 months, it is planned that the Company open new corporate offices and commence the organization of its initial production facility.
The Company received $500,000 during the nine months ended September 30, 2023, from the sale of certain rights to use its intellectual property. No revenues or other income were recorded during the period or in the prior year same period.
In addition, certain key members of management have agreed to defer their salaries until 2024 when it is anticipated that the pilot plants will be fully operational and the marketing of the technology properly advanced.
Despite the receipt of cash for the sale of certain intangible rights to the Company’s technology and a reduction in expenses, management believes that the Company’s cash on hand will not be sufficient to fund all Company obligations and commitments for the next twelve months. The Company has reached the stage in its development when it requires significant additional financing to be able to bring the first of its extraction processes to market. On March 20, 2023, the Company launched its March PPO seeking to raise $2.5 million at $5 per share. The Company closed immediately on the first $500,000 under this offering and hopes to complete the March PPO financing before the end of the fourth quarter 2023.
Historically, we have depended on investment from our principal shareholders and their affiliated companies to provide us with working capital as required. There is no guarantee that such funding will be available when required and there can be no assurance that our stockholders, or any of them, will continue making loans or advances to us in the future.
Off Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in our securities.
Seasonality
Our operating results are not affected by seasonality.
Inflation
The Company has in the past used funding from debt convertible equity as its primary source of funding. In the event of a high inflationary environment, this method of funding may become more expensive and may be less readily available. Our core business and operating results are not affected in any material way by inflation.
| 5 |
Critical Accounting Policies
Our financial statements and accompanying notes have been prepared in accordance with GAAP. The preparation of these financial statements requires management to make estimates, judgments, and assumptions that affect reported amounts of assets, liabilities, revenues and expenses. We continually evaluate the accounting policies and estimates used to prepare financial statements. The estimates are based on historical experience and assumptions believed to be reasonable under current facts and circumstances. Actual amounts and results could differ from these estimates made by management. Certain accounting policies that require significant management estimates and are deemed critical to our results of operations or financial position. Our critical accounting estimates are more fully discussed in Note 2 to our unaudited financial statements contained herein.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
Item 4 - Controls and Procedures
Disclosure of Controls and Procedures
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s chief executive officer (who is the Company’s principal executive officer) and the Company’s President (who is the Company’s chief operating officer) as well as its Financial Officer (the Company’s principal financial officer) to allow for timely decisions regarding required disclosure. At present one person combines the roles of President and Chief Financial Officer. In designing and evaluating the Company’s disclosure controls and procedures, the Company’s management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and the Company’s management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. The ineffectiveness of the Company’s disclosure controls and procedures was due to material weaknesses identified in the Company’s internal control over financial reporting, described below.
Management’s Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over the Company’s financial reporting. To evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act of 2002. Our management, with the participation of the Company’s principal executive officer and principal financial officer has conducted an assessment, including testing, using the criteria in Internal Control - Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) (2013). Our system of internal control over financial reporting is designed 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. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. This assessment included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation.
Based on this evaluation, the Company’s management concluded its internal control over financial reporting, while significantly improved, was still not effective as of September 30, 2023.
Changes in Internal Control Over Financial Reporting
Principal financial control is managed by the Company’s controller who maintains the accounts under the supervision of the Chief Financial Officer. At present the Company still relies on advances by officers and employees using their own means of payment to fund the Company, these are then repaid against an accounting of such expense. The Company plans to issue its own means of payment in the future that would improve efficiency and transparency. To this end the Company changed its bankers during the course of the third quarter 2023. While we believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within any Company have been detected, the Company continues to improve its control environment with a view to establishing an effective control environment and to satisfying the Company auditors of the same.
| 6 |
PART II
OTHER INFORMATION
Item 1 - Legal Proceedings
On May 16, 2022, the Company received formal notice of a wage claim from the Illinois Department of Labor filed by a former consultant (1099) who had already resigned from the Company with an effective date of March 18, 2022. The consultant is claiming $7,291.66 as a final payment for the period from February 9 to March 15, 2022. The complaint was filed on March 16, 2022 without any notice being given to the Company. On March 18, 2022, the date the resignation was due to take effect, the Company paid the consultant $5,833.33 as the final remuneration covering the days worked during the period. On July 27, 2022, the consultant sent notice to the Company maintaining that the demand for the full amount of $7,291.66 was still due. The Company has approached the Consultant to attempt to reconcile the claim made against the remuneration paid which appears manifestly incorrect, but the discussion was declined. The matter is still before the Illinois Department of Labor.
Item 1A – Risk Factors
Not applicable.
Item 2 - Sales of Unregistered Equity Securities and Use of Proceeds
None.
Item 3 - Defaults upon Senior Securities
None
Item 4 - Mine Safety Disclosures
Not applicable.
Item 5 - Other Information
None
ITEM 6. EXHIBITS.
The following exhibits are filed as part of this report or incorporated by reference:
| Exhibit No. | Description | |
| 31.1* | Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 31.2* | Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | |
| 32.1** | Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | |
| 101* | Inline XBRL Document Set for the condensed consolidated financial statements and accompanying notes in Part I, Item 1, “Financial Statements” of this Quarterly Report on Form 10-Q. | |
| 104* | Inline XBRL for the cover page of this Quarterly Report on Form 10-Q, included in the Exhibit 101 Inline XBRL Document Set. |
* Filed herewith
** Furnished herewith
| 7 |
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Date: November 20, 2023 | NEXT-ChemX Corporation | |
| By: | /s/ Benton Wilcoxon | |
| Benton Wilcoxon | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) | ||
| 8 |