Item 1. Business.
Thunder Energies Corporation f/k/a Thunder Fusion Corporation and CCJ Acquisition Corp. (“we”, “us”, “our”, (“TEC” or the “Company”) was incorporated in the State of Florida on April 21, 2011. The Company selected December 31 as its fiscal year end.
On July 25, 2013, Dr. Ruggero M. Santilli acquired from Company’s existing shareholders, a control block of stock in the Company consisting of two million nine hundred forty thousand (2,940,000) shares of restricted common stock of the Company, in a private equity transaction. As a result of this acquisition, Dr. Ruggero M. Santilli owned 98% of the issued and outstanding shares of common stock of the Company.
On August 10, 2013, the Company entered into an Asset Assignment Agreement (the “IBR Assignment Agreement”) with Institute For Basic Research, Inc., a Florida corporation (“IBR”) that also is beneficially controlled by our Chief Executive Officer, Dr. Ruggero M. Santilli. Pursuant to the IBR Assignment Agreement, IBR irrevocably assigned to the Company all rights, title, ownership and interests in all of IBR’s internet website domain name assets, owned and hereinafter acquired by IBR including, but not limited to, all physical and intangible assets and intellectual property related to the assets.
On August 11, 2013, Thunder Energies Corporation (the “Company”) entered into an Asset Assignment Agreement (the “Assignment Agreement”) with HyFuels, Inc., a Florida corporation (“HyFuels”) beneficially controlled by our Chief Executive Officer, Dr. Ruggero M. Santilli. Pursuant to the Assignment Agreement, HyFuels irrevocably assigned to the Company all physical assets, intangible assets, accounts receivable, intellectual property, accounting software, billing software, client lists, client prospects, trade secrets, proprietary property, the intellectual and physical property known as intermediate nuclear fusion without radiation, the physical property consisting of seven (7) Hadronic reactors, all copyrights, patents, patent applications, patent assignments, trademarks and anything having commercial or exchange value and the like.
Consideration for the assignment agreements consisted of one million (1,000,000) shares of our common stock that were issued to Dr. Ruggero M. Santilli, as designee for IBR and HyFuels. Company management determined the amount of consideration based upon ASC 845-10-S99 pertaining to transfer of non-monetary assets. According to ASC 845-10-S99, transfers of non-monetary assets to a company by its promoters or shareholders in exchange for stock prior to or at the time of the entity’s initial public offering should be recorded at the transferors’ historical cost basis determined under Generally Accepted Accounting Principles. As such, the cost basis carried on the books and records of HyFuels and IBR was minimal or essentially zero. Therefore, the accounting principles in ASC 845-10-S99 were followed and the Company recorded the intellectual and physical properties at its historical cost basis, which was at the historical cost basis of a nominal amount. In connection with the aforementioned assignment agreements, 1,000,000 shares of our common stock were transferred in exchange for the assets. The transfer was valued at one thousand dollars ($1,000.00), the value of the shares issued at par ($0.001) in exchange for the assets. This amount was determined by the Company to be de-minimus to the value received in the exchange and approximates the basis of those assets.
The Company has recorded the property and intangibles (7 reactors, intellectual property rights to develop the technology, and website) as an intangible asset. The valuation of the properties will be the par value of the stock received in exchange for the rights and assets. The Company’s filings will include a disclosure in the MD&A section and notes to the financial statement under the heading “Non-Monetary Transaction”. Management believes that the $1,000.00 valuation is reflective of the salvage value of the physical property, at a minimum. Our Company purchased internet website domain name assets owned by IBR and the intellectual and physical property known as intermediate nuclear fusion without radiation, the physical property consisting of seven (7) Hadronic reactors, all copyrights, patents, patent applications, patent assignments, trademarks and anything having commercial or exchange value owned by HyFuels as related to the reactors. None of the assets purchased had ever generated revenue for IBR or HyFuels. Although the Asset Assignment Agreements were more comprehensive in their description of “assets”, the aforementioned items were the only assets assigned to the Company.
Our Company purchased internet website domain name assets owned by IBR and the intellectual and physical property known as intermediate nuclear fusion without radiation, the physical property consisting of seven (7) Hadronic reactors, all copyrights, patents, patent applications, patent assignments, trademarks and anything having commercial or exchange value owned by HyFuels as related to the reactors. None of the assets purchased had ever generated revenue for IBR or HyFuels. Although the Asset Assignment Agreements were more comprehensive in their description of “assets”, the aforementioned items were the only assets assigned to the Company.
A further description of the assignors, IBR and HyFuels, follows. IBR is a Florida Corporation whose only business operations are the publication of an internet blog relating to scientific and academic matters. IBR does not generate revenue and has no expenses. Furthermore, IBR has never maintained a checking account. This status has been consistent over the last several years. Our Chief Executive Officer and Director, Dr. Ruggero M. Santilli is president and a director for IBR. IBR does not have any ownership interest in any of our securities.
HyFuels is a Florida corporation that utilized research and development funds to create the seven Hadronic reactors, but otherwise has no business operations since its inception. Its sole purpose is to serve as a patent holding company. Our Chief Executive Officer and Director, Dr. Ruggero M. Santilli is president and a director for HyFuels. HyFuels also does not have any ownership interest in any of our securities.
Neither IBR nor HyFuels has made any effort to commercialize the assets for purposes of generating revenue. Both IBR and HyFuels continue to exist as Florida corporations separate and distinct from the Company. Though they are deemed “related” entities through a common officer and director with our Company, they remain otherwise “unaffiliated” with our Company.
IBR maintains its principal place of business at 90 East Winds Court, Palm Harbor, Florida 34689. HyFuels maintains its principal place of business at 35246 US Highway 19 North, #215, Palm Harbor, Florida 34684. There is no continuity of facilities with the Company.
Neither IBR nor HyFuels had an employee base, a distribution system, a sales force, a customer base, production techniques or trade names associated with the assets. Their ownership rights may arguably be referred to as operating rights but there were essentially no operations associated with the assets.
The only activities of the assignors involved the creation of the Internet website domain names and the creation of the seven Hadronic reactors and associated patents pending. These assets did not generate revenue prior to the assignment, so there is essentially no financial data to report regarding “revenue producing activity previously associated with the acquired assets”. Furthermore, there is no “sufficient continuity of operations with our Company so that disclosure of prior financial information regarding IBR or HyFuels is material to an understanding of future operations regarding our Company.
Description of Business, Principal Products, Services
Thunder Energies Corp. is a developer of new technologies that are being brought to market by three divisions: 1) Division of Nuclear Instruments (TEC-DNI 2) Division of Optical Instruments (TEC-DOI); and 3) Division of Fuel Combustion (TEC--DFC). Each Division is protected by patent applications on which no royalties are due. Out of the three divisions, the Division of Nuclear Instruments and the Division of Optical Instruments have initiated sale of their products.
The Division of Nuclear Instruments is producing, selling and servicing new equipment producing on demand a flux of low energy neutrons synthesized from a hydrogen gas called Directional Neutron Source (DNS). This equipment is particularly suited to scan suitcases in airports for the detection of concealed nuclear materials such as Uranium 235. The equipment is also particularly suited to identify the existence and the concentration of precious metals in mining operations, for the test of large naval welds and other applications. One Directional neutron Source has been sold to a European customer and the company is now organizing its production and sale. The Company has filed research grant applications to the Defense Threat reduction Agency and DARPA for the completion of the available Directional neutron Source into a Nuclear Weapon detection Station. Funds expected from this filing are primarily intended to continue the development of this new neutron technology for the advancement of our national security; The Division of Optical Equipment is producing, selling and servicing a basically new telescope with concave lenses, known as the Santilli telescope, for the detection of images produced by antimatter light known as isodual light. In particular, TEC-DOE is producing, selling and servicing pairs of 70 mm, 100 mm, 150 mm and 200 mm Galileo and Santilli telescopes where the Galileo telescope is needed to focus images in the Santilli telescope. Besides new astrophysical detections, TEC pairs of Galileo and Santilli telescopes are useful for a comprehensive surveillance of civilian, industrial and military installations since they can identify images produced by all possible forms of light, the conventional light and the new isodual light. Three TEC Surveillance Stations are now operational, one in the USA and two in Europe.
Additionally, the business of Thunder Energies Corporation (“TEC”) is focused on the development of a new clean combustion of fossil fuels (oil, diesel, coal, etc.) with controlled minimal contaminants in the exhaust. Our business objective is achieved via new forms of processing fossil fuels, new additives to the combustion and the assistance of a high voltage electric discharges (patents pending) that burn combustible contaminants in fossil fuel exhaust while providing added on clean energy. The expected principal product, depending on funding, is a new type of furnace for the clean combustion of fossil fuel that will be available in various type and sizes and various type of energy application, from home heating to large plants for the clean production of electricity. The expected services are to be rendered by providing technical assistance to the market consisting of existing fossil fuel electric power plants for their decrease of pollutants in the exhaust and their verification of EPA regulations on the release of contaminants in the atmosphere. A prototype new furnace is expected to be available within one year following the availability of the necessary funds. As we are a development stage company, we have not yet generated any revenue from the assets that were recently assigned to and acquired by the Company, including the Hadronic reactors. The Hadronic reactors have been utilized to test and confirm the technology for ultimate inclusion in the new furnaces.
Distribution Methods Of The Products and Services
For this first division TEC-DOE we have initiated advertisement via direct e-mail and public news releases. Initially, we anticipate marketing via large advertisements on the internet, such as via PRWeb and PRNewswire Releases. For the other two divisions we expect to market through contacts that we are able to generate, and via direct contacts of potential buyers of TEC new fossil fuel furnaces or TEC services for the improvement of existing fossil fuel burning plants.
Status of Any Publicly Announced New Product Or Service
Regarding the sale of telescopes, we have made several news releases and radio interviews. In addition, we have presented all TEC technologies to investors’ conferences. For the other two divisions TEC-DNE and TEC-DFC the company contemplates no advertisement until the availability of production equipment. We have, however, published scientific papers on the new sciences underlying the Combustion and Nuclear Divisions. One Directional Neutron Source of the DNE has been manufactured, sold and serviced to a buyer from Europe. Pairs of the Galileo and Santilli telescopes have been manufactured, sold and serviced to customers in the U.S.A. and Europe.
Competitive Business Conditions And The Smaller Reporting Company’s Competitive Position In The Industry And Methods Of Competition
There are no known competitors for the new telescopes with concave lenses produced and sold by TEC-DOE. TEC new telescopes for the detection of isodual light are the only one in existence and no competition is known. There exist many types of furnaces for the combustion of fossil fuels but they are all based on conventional combustion of fossil fuels and then the removal of contaminants in the exhaust. By contrast, the main function of TEC furnaces is that of improving the combustion with consequential reduction of contaminants in the exhaust while increasing the energy output for the same fossil fuel. There is no known competition for the detection of fissionable material via a thermal neutron source under development by TEC-DNE. TEC Directional Neutron Source has no competition because it is the only available equipment producing on demand “low energy” neutrons in the needed direction and energy. Other commercially available sources produce neutrons at high energy, thus not being usable in civilian facilities as well as in all directions.
Sources And Availability Of Raw Materials And The Names Of Principal Suppliers
The Company has selected qualified manufacturers for the telescopes of TEC-DOE. All components for the new telescope are readily available on the open market. Suppliers are available for the other two technologies and will be selected following completion of their development. The raw material needed by the TEC furnaces is given by conventional fossil fuels all available in the U.S.A. by a large number of suppliers. All needed material have been purchased from the U. S. companies McMaster and/or Granger.
Dependence On One Or A Few Customers
There are many potential customers for the pair of telescopes produced by the TEC-DOE division. Our marketing analysis has identified the potential customers in all individuals and associations interested in sky watching. For the other two technologies, we have not yet performed market analysis. TEC has no need for such a dependence.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements Or Labor Contracts, Including Duration
Each of the above indicated three divisions has been the subject of a patent application as follows:
Title: “Method and Apparatus for Intermediate Controlled Fusion Processes”
U.S. serial no. 13/197836
Atty Docket no. TEC-0101
Inventor: Dr. Ruggero Maria Santilli
Title: “Novel Optical Instruments with Concave Lenses”
U.S. serial no. 62/144,268 (conf. no. 8850)
Atty Docket no. TEC-0102
Inventor: Dr. Ruggero Maria Santilli
Title: “Directional Production of Composite Particles” U.S. serial no. 62/518,047
Atty Docket no. TEC-0103
Inventor: Dr. Ruggero Maria Santilli
Trademarks are expected to be applied for depending on funding. No franchisee or license is expected during the first three years of operation. Labor contracts for employees are planned for implementation following legal assistance and decisions by our Board of Directors.
Need For Any Government Approval Of Principal Products Or Services
No governmental approval or permits are necessary for the telescopes. No governmental approval or permits is expected for the development of the new furnaces for the clean combustion of fossil fuels. Following their availability, the TEC furnaces will be subject to and must comply with applicable EPA requirements for permitted levels of contaminants in the exhaust. Regarding the neutron source, we need to further analyze the requirements
Effect Of Existing Or Probable Governmental Regulations On The Business
There are no governmental regulations affecting the sale of the telescope technology. Due to its novel conception, a principal objective of TEC furnaces is that of surpassing current EPA requirements for the contaminants in the combustion exhaust released in the atmosphere. We expect that the neutron source technology will be government regulated and we are in the process of analyzing and assessing the impact of such regulations on the business. TEC has filed research grant applications to DARPA, the Defense Threat Reduction Agency and the U. S. AIR FORCE for the completion of the available Directional Mention Source into a Nuclear Weapon Detection Station (NWDT,) under full Governmental control. No outcome of these grant applications is known at this time.
Estimate Of The Amount Of Money Spent During Each Of The Last Two Fiscal Years On Research And Development
Related entities have spent $126K and $57K in 2017 and 2018, respectively, for the development of the Directional Neutron Source and of the Santilli telescope. All funding for the development of our products to date has been derived from related entities, IBR and HyFuels, which are beneficially controlled by our Chief Executive Officer, Dr. Ruggero M. Santilli.
Costs and Effects Of Compliance With Environmental Laws
There are no environmental laws affecting the sale of pairs of telescopes as we simply assemble telescopes, cameras and proprietary concave lenses. We are unable to estimate the costs and effects of compliance with environmental laws prior to completion of a TEC prototype furnace.
Number Of Total Employees And Number Of Full-Time Employees
At this time, the Company has two full time employees and five persons working part time in various functions.
Implications of Being an Emerging Growth Company
We qualify as an emerging growth company as that term is used in the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:
·
A requirement to have only two years of audited financial statements and only two years of related MD&A;
·
Exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002;
·
Reduced disclosure about the emerging growth company’s executive compensation arrangements; and
·
No non-binding advisory votes on executive compensation or golden parachute arrangements.
We have already taken advantage of these reduced reporting burdens in this Form 10-K, which are also available to us as a smaller reporting company as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards. We are choosing to utilize the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act. This election allows our Company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.
We could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
We are a reporting company and file all reports required under sections 13 and 15d of the Exchange Act.
Item 1A.
Item 1A. Risk Factors.
Because we are a Smaller Reporting Company, we are not required to provide the information required by this item.
Item 1B.
Item 1B. Unresolved Staff Comments.
NONE
Item 2.
Item 2. Properties.
We neither rent nor own any properties. We utilize the office space and equipment of our management at no cost. Management estimates such amounts to be immaterial. We currently have no policy with respect to investments or interests in real estate, real estate mortgages or securities of, or interests in, persons primarily engaged in real estate activities.
Item 3.
Item 3. Legal Proceedings.
We are not currently a party to any legal proceedings nor are any contemplated by us at this time.
Item 4.
Item 4. Mine Safety Disclosures.
Not applicable
PART II.
Item 5.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information.
We are presently traded on the OTC Pink Market under the ticker symbol TNRG. Our stock has been thinly traded during the past two fiscal years. Moreover, we do not believe that any institutional or other large-scale trading of our stock has occurred or will in fact occur in the near future unless we are successful in funding and implementing our business plan, are successful in returning to the NASDAQ Exchange, or both. The following table sets forth information as reported by the OTC Markets Group for the high and low bid and ask prices for each of the eight quarters ending December 31, 2018. The following prices reflect inter-dealer prices without retail markup, markdown or commissions and may not reflect actual transactions.
(b) Holders
As of December 31, 2018, the Company had 70 certificate holders of record. This number includes one position at Cede & Co., of which Company principals are not aware how many shareholders hold the shares in street name. The number of both shareholders of record and beneficial shareholders may change on a daily basis and without the Company’s immediate knowledge.
(c) Dividends
Holders of common stock are entitled to receive dividends as may be declared by our board of directors and, in the event of liquidation, to share pro rata in any distribution of assets after payment of liabilities. The board of directors has sole discretion to determine: (i) whether to declare a dividend; (ii) the dividend rate, if any, on the shares of any class of series of our capital stock, and if so, from which date or dates; and (iii) the relative rights of priority of payment of dividends, if any, between the various classes and series of our capital stock. We have not paid any dividends and do not have any current plans to pay any dividends.
No established public market for common stock
Although there have been a few trades of our stock on the OTC Markets Pink, the quotations have been limited and sporadic and thus, there is presently no established public market for our common stock. There is no assurance that a trading market will develop, or, if developed, that it will be sustained. A purchaser of our securities may, therefore, find it difficult to resell our securities should he or she desire to do so.
Holders.
On December 31, 2018, there were 69 unique certificate holders/shareholders of record of our common stock without including those shareholders whose Company common stock is held in street name. As of March 5, 2019, there are 116,064,237 shares of our Common Stock issued and outstanding.
Dividends.
Since inception we have not paid any dividends on our common stock. We currently do not anticipate paying any cash dividends in the foreseeable future on our common stock. Although we intend to retain our earnings, if any, to finance the exploration and growth of our business, our Board of Directors will have the discretion to declare and pay dividends in the future. Payment of dividends in the future will depend upon our earnings, capital requirements, and other factors, which our Board of Directors may deem relevant.
Recent Sales of Unregistered Securities.
COMMON STOCK
During the periods ending December 31, 2016, December 31, 2017 and December 31, 2018, the Company engaged in the sale of its unregistered securities as described below. The shares of our common stock were issued pursuant to an exemption from registration in Section 4(a)(2) of the Securities Act of 1933. These shares of our common stock qualified for exemption under Section 4(a)(2) of the Securities Act of 1933 since the issuance of shares by us did not involve a public offering. The offering was not a “public offering” as defined in Section 4(a)(2) due to the insubstantial number of persons involved in the deal, size of the offering, manner of the offering and number of shares offered. We did not undertake an offering in which we sold a high number of shares to a high number of investors. In addition, these shareholders had necessary investment intent as required by Section 4(a)(2) since they agreed to receive share certificates bearing a legend stating that such shares are restricted pursuant to Rule 144 of the 1933 Act. This restriction ensures that these shares would not be immediately redistributed into the market and therefore not be part of a “public offering.” All shareholders are “sophisticated investors” and are family members, friends or business acquaintances of our officers and directors. Based on an analysis of the above factors, we believe we have met the requirements to qualify for exemption under section 4(a)(2) of the Securities Act of 1933 for this transaction.
On March 18, 2016 the Company issued 18,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $2,880.
On April 1, 2016 the Company issued 250,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $37,500.
On April 6, 2016 the Company issued 22,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $3,300.
On August 23, 2016 the Company issued 70,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $14,000.
On August 30, 2016 the Company issued 18,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $3,600.
On September 16, 2016 the Company issued 6,726 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $1,076.
On October 19, 2016 the Company issued 28,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $11,480.
On December 28, 2016 the Company issued 30,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $6,900.
On January 9, 2017 the Company issued 3,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $690.
On January 10, 2017 the Company issued 5,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $1,250.
On January 24, 2017 the Company issued 8,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $2,080.
On January 27, 2017 the Company issued 36,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $10,800.
On February 13, 2017 the Company issued 10,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $2,100.
On March 6, 2017 the Company issued 10,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $3,000.
On April 12, 2017 the Company issued 150,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $22,500.
On May 9, 2017 the Company issued 70,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $5,600.
On June 5, 2017 the Company issued 120,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $10,000.
On June 8, 2017 the Company issued 16,530,769 shares to related parties for conversion of accrued compensation of $991,846, recorded at the fair market value of the share price.
On July 7, 2017 the Company issued 120,196 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $8,413.
On July 14, 2017 the Company issued 150,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $13,350.
On September 7, 2017 the Company sold 8,000,000 restricted shares to non-related parties for cash proceeds in the amount of $80,000.
On October 2, 2017 the Company issued 50,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $15,000.
On October 9, 2017 the Company issued 150,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $5,495.
On October 16, 2017 the Company issued 100,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $9,180.
On October 24, 2017 the Company issued 100,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $8,010.
On November 6, 2017 the Company issued 50,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $4,050.
On December 11, 2017 the Company issued 600,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $72,000.
On December 21, 2017 the Company issued 1,260,000 shares to related parties for conversion of accrued compensation of $126,000, recorded at the fair market value of the share price.
On December 27, 2017 the Company issued 75,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $6,045.
On January 12, 2018 the Company issued 200,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $30,000.
On January 16, 2018 the Company issued 150,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $22,500.
On February 12, 2018 the Company issued 40,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $3,216.
On February 15, 2018 the Company issued 100,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $10,000.
On February 23, 2018 the Company issued 100,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $8,810.
On March 15, 2018 the Company issued 100,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $8,500.
On March 29, 2018 the Company issued 75,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $7,117.
On March 29, 2018 the Company issued 663,856 shares to related parties for conversion of accrued compensation of $63,000, recorded at the fair market value of the share price.
On April 5, 2018 the Company issued 250,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $19,750.
On April 9, 2018 the Company issued 250,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $17,500.
On April 27, 2018 the Company issued 300,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $10,050.
On May 2, 2018, the Company issued 840,336 shares, at $0.0119 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $10,000 in principal toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on May 2, 2018 was $0.035 per share.
On May 7, 2018 the Company issued 1,1000,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $34,100.
On May 14, 2018, the Company issued 943,396 shares, at $0.0106 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $10,000 in principal toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on May 14, 2018 was $0.028 per share.
On May 24, 2018, the Company issued 1,041,667 shares, at $0.0096 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $10,000 in principal toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on May 24, 2018 was $0.0161 per share.
On June 4, 2018, the Company issued 2,341,176 shares, at $0.0068 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $14,600 in principal and $1,320 in accrued interest toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on June 4, 2018 was $0.03 per share.
On June 6, 2018, the Company issued 1,738,235 shares, at $0.0068 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $11,820 in principal toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on Jun 6, 2018 was $0.0127 per share.
On June 12, 2018, the Company issued 1,703,125 shares, at $0.0064 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $9,580 in principal and $1,320 in accrued interest toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on June 12, 2018 was $0.0113 per share.
On July 19, 2018, the Company issued 2,010,050 shares, at $0.00597 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $12,000 in principal toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on July 19, 2018 was $0.013 per share.
On July 25, 2018 the Company issued 5,800,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $58,000.
On August 6, 2018, the Company issued 2,181,818 shares, at $0.0055 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $12,000 in principal toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on August 6, 2018 was $0.0124 per share.
On September 18, 2018, the Company issued 4,411,765 shares to non-related party for services, recorded at the fair market value of the share price, in the amount of $30,000.
On October 5, 2018, the Company issued 1,000,000 shares to non-related party for services, recorded at the fair market value of the share price, in the amount of $7,400.
On October 8, 2018, the Company issued 2,348,571 shares, at $0.0035 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $7,100 in principal and $1,120 in accrued interest toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on October 8, 2018 was $0.0084 per share.
On October 11, 2018, the Company issued 3,428,571 shares, at $0.0035 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $12,000 in principal toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on October 11, 2018 was $0.012 per share.
On October 17, 2018, the Company issued 3,837,143 shares, at $0.0035 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $13,430 in principal toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on October 17, 2018 was $0.0083 per share.
On October 19, 2018, the Company issued 3,840,000 shares, at $0.0035 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $12,040 in principal and $1,400 in accrued interest toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on October 19, 2018 was $0.0075 per share.
On October 23, 2018, the Company issued 4,272,222 shares, at $0.0036 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $15,380 in principal toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on October 23, 2018 was $0.0071 per share.
On October 26, 2018, the Company issued 3,613,514 shares, at $0.0037 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $12,050 in principal and $1,320 in accrued interest toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on October 26, 2018 was $0.0089 per share.
On November 12, 2018, the Company issued 1,000,000 shares to non-related party for services, recorded at the fair market value of the share price, in the amount of $11,500.
On November 30, 2018, the Company issued 5,208,333 shares to non-related party for services, recorded at the fair market value of the share price, in the amount of $36,979.
Shares of our common stock were issued at fair market value of the share price as set forth in the table below.
During the twelve months ended December 31, 2017 the Company issued 9,977,196 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $319,294. During the twelve months ended December 31, 2017 the Company issued 17,790,769 shares to related parties for accrued compensation valued at $1,117,846. Additional shares of our common stock were issued at fair market value of the share price as set forth in the table below.
During the twelve months ended December 31, 2018 the Company issued 20,085,098 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $316,613. During the twelve months ended December 31, 2018 the Company issued 663,856 shares to related parties for accrued compensation valued at $63,000. Additional shares of our common stock were issued at fair market value of the share price as set forth in the table below.
PREFERRED STOCK
The Company has been authorized to issue 750,000,000 shares of $.001 par value Preferred Stock. The Board of Directors is expressly vested with the authority to divide any or all of the Preferred Stock into series and to fix and determine the relative rights and preferences of the shares of each series so established, within certain guidelines established in the Articles of Incorporation.
Series A: The certificate of designation for the Preferred A Stock provides that as a class it possesses a number of votes equal to fifteen (15) votes per share and may be converted into ten (10) $0.001 par value common shares.
On October 10, 2013, the Company issued fifty million (50,000,000) shares of our Series “A” Convertible Preferred Stock (the “Preferred Stock”) to Hadronic Technologies Press, Inc. (“Hadronic”), a Florida corporation maintaining its principal place of business at 35246 US Highway 19 North, Suite #215, Palm Harbor, Florida 34684. Our Directors, Dr. Ruggero M. Santilli and Mrs. Carla Santilli each own fifty percent of the equity in Hadronic. The Series “A” Convertible Preferred Stock has 15 votes per share and is convertible into 10 shares of our common stock at the election of the shareholder. Shares were valued at the par value of the common stock equivalents, $500,000.
At December 31, 2018 there were Fifty million (50,000,000) shares of Series A Convertible Preferred Stock issued and outstanding.
OPTIONS AND WARRANTS
In accordance with employment agreements, common stock options are issued annually to the officers of the Company. The number of shares is determined by the number of shares outstanding at the end of the year at a percentage per the employment agreements, as described below. The strike price is the fair value trading price as of the anniversary date of the employment agreements. The options are based on the number of shares outstanding of the Company at the year end, at an exercise price at market price at the employment agreements annual anniversary, July 25th. As of December 31, 2018, the officers are entitled to 29,887 options, at an average exercise price of $0.2818. There is no expiration date to these options and only vest upon a change in control. The options were valued at $4,695, however no expense has been recognized with the associated options, as no options have vested or are considered by management to probable vest. The options were valued using the Black Scholes Method, using the following assumptions:
There are no other warrants or options outstanding to acquire any additional shares of common stock of the Company as of December 31, 2018.
Item 6.
Item 6. Selected Financial Data.
The registrant qualifies as a smaller reporting company, as defined by Rule 229.10(f)(1) and is not required to provide the information required by this Item.
Item 7.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following Management’s Discussion and Analysis of Financial Condition and Results of Operations contain forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this report. The management’s discussion, analysis of financial condition, and results of operations should be read in conjunction with our financial statements and notes thereto contained elsewhere in this prospectus.
Our Business Overview.
Thunder Energies Corporation f/k/a Thunder Fusion Corporation and CCJ Acquisition Corp. (“we”, “us”, “our”, (“TEC” or the “Company”) was incorporated in the State of Florida on April 21, 2011. The Company selected December 31 as its fiscal year end.
On July 25, 2013, Dr. Ruggero M. Santilli acquired from Company’s existing shareholders, a control block of stock in the Company consisting of two million nine hundred forty thousand (2,940,000) shares of restricted common stock of the Company, in a private equity transaction. As a result of this acquisition, Dr. Ruggero M. Santilli owned 98% of the issued and outstanding shares of common stock of the Company.
On August 10, 2013, the Company entered into an Asset Assignment Agreement (the “IBR Assignment Agreement”) with Institute For Basic Research, Inc., a Florida corporation (“IBR”) that also is beneficially controlled by our Chief Executive Officer, Dr. Ruggero M. Santilli. Pursuant to the IBR Assignment Agreement, IBR irrevocably assigned to the Company all rights, title, ownership and interests in all of IBR’s internet website domain name assets, owned and hereinafter acquired by IBR including, but not limited to, all physical and intangible assets and intellectual property related to the assets.
On August 11, 2013, Thunder Energies Corporation (the “Company”) entered into an Asset Assignment Agreement (the “Assignment Agreement”) with HyFuels, Inc., a Florida corporation (“HyFuels”) beneficially controlled by our Chief Executive Officer, Dr. Ruggero M. Santilli. Pursuant to the Assignment Agreement, HyFuels irrevocably assigned to the Company all physical assets, intangible assets, accounts receivable, intellectual property, accounting software, billing software, client lists, client prospects, trade secrets, proprietary property, the intellectual and physical property known as intermediate nuclear fusion without radiation, the physical property consisting of seven (7) Hadronic reactors, all copyrights, patents, patent applications, patent assignments, trademarks and anything having commercial or exchange value and the like.
Consideration for the assignment agreements consisted of one million (1,000,000) shares of our common stock that were issued to Dr. Ruggero M. Santilli, as designee for IBR and HyFuels. Company management determined the amount of consideration based upon ASC 845-10-S99 pertaining to transfer of non-monetary assets. According to ASC 845-10-S99, transfers of non-monetary assets to a company by its promoters or shareholders in exchange for stock prior to or at the time of the entity’s initial public offering should be recorded at the transferors’ historical cost basis determined under Generally Accepted Accounting Principles. As such, the cost basis carried on the books and records of HyFuels and IBR was minimal or essentially zero. Therefore, the accounting principles in ASC 845-10-S99 were followed and the Company recorded the intellectual and physical properties at its historical cost basis, which was at the historical cost basis of a nominal amount. In connection with the aforementioned assignment agreements, 1,000,000 shares of our common stock were transferred in exchange for the assets. The transfer was valued at one thousand dollars ($1,000.00), the value of the shares issued at par ($0.001) in exchange for the assets. This amount was determined by the Company to be de-minimus to the value received in the exchange and approximates the basis of those assets.
The Company has recorded the property and intangibles (7 reactors, intellectual property rights to develop the technology, and website) as an intangible asset. The valuation of the properties will be the par value of the stock received in exchange for the rights and assets. The Company’s filings will include a disclosure in the MD&A section and notes to the financial statement under the heading “Non-Monetary Transaction”. Management believes that the $1,000.00 valuation is reflective of the salvage value of the physical property, at a minimum. Our Company purchased internet website domain name assets owned by IBR and the intellectual and physical property known as intermediate nuclear fusion without radiation, the physical property consisting of seven (7) Hadronic reactors, all copyrights, patents, patent applications, patent assignments, trademarks and anything having commercial or exchange value owned by HyFuels as related to the reactors. None of the assets purchased had ever generated revenue for IBR or HyFuels. Although the Asset Assignment Agreements were more comprehensive in their description of “assets”, the aforementioned items were the only assets assigned to the Company.
Our Company purchased internet website domain name assets owned by IBR and the intellectual and physical property known as intermediate nuclear fusion without radiation, the physical property consisting of seven (7) Hadronic reactors, all copyrights, patents, patent applications, patent assignments, trademarks and anything having commercial or exchange value owned by HyFuels as related to the reactors. None of the assets purchased had ever generated revenue for IBR or HyFuels. Although the Asset Assignment Agreements were more comprehensive in their description of “assets”, the aforementioned items were the only assets assigned to the Company.
A further description of the assignors, IBR and HyFuels, follows. IBR is a Florida Corporation whose only business operations are the publication of an internet blog relating to scientific and academic matters. IBR does not generate revenue and has no expenses. Furthermore, IBR has never maintained a checking account. This status has been consistent over the last several years. Our Chief Executive Officer and Director, Dr. Ruggero M. Santilli is president and a director for IBR. IBR does not have any ownership interest in any of our securities.
HyFuels is a Florida corporation that utilized research and development funds to create the seven Hadronic reactors, but otherwise has no business operations since its inception. Its sole purpose is to serve as a patent holding company. Our Chief Executive Officer and Director, Dr. Ruggero M. Santilli is president and a director for HyFuels. HyFuels also does not have any ownership interest in any of our securities.
Neither IBR nor HyFuels has made any effort to commercialize the assets for purposes of generating revenue. Both IBR and HyFuels continue to exist as Florida corporations separate and distinct from the Company. Though they are deemed “related” entities through a common officer and director with our Company, they remain otherwise “unaffiliated” with our Company.
IBR maintains its principal place of business at 90 East Winds Court, Palm Harbor, Florida 34689. HyFuels maintains its principal place of business at 35246 US Highway 19 North, #215, Palm Harbor, Florida 34684. There is no continuity of facilities with the Company.
Neither IBR nor HyFuels had an employee base, a distribution system, a sales force, a customer base, production techniques or trade names associated with the assets. Their ownership rights may arguably be referred to as operating rights but there were essentially no operations associated with the assets.
The only activities of the assignors involved the creation of the Internet website domain names and the creation of the seven Hadronic reactors and associated patents pending. These assets did not generate revenue prior to the assignment, so there is essentially no financial data to report regarding “revenue producing activity previously associated with the acquired assets”. Furthermore, there is no “sufficient continuity of operations with our Company so that disclosure of prior financial information regarding IBR or HyFuels is material to an understanding of future operations regarding our Company.
Description of Business, Principal Products, Services
Thunder Energies Corp. is a developer of new technologies that are being brought to market by three divisions: 1) Division of Nuclear Instruments (TEC-DNI) 2) Division of Optical Instruments (TEC-DOI); and 3) Division of Fuel Combustion (TEC--DFC). Each Division is protected by patent applications on which no royalties are due. Out of the three divisions, the Division of Nuclear Instruments and the Division of Optical Instruments have initiated sale of their products.
The Division of Nuclear Instruments is producing, selling and servicing new equipment producing on demand a flux of low energy neutrons synthesized from a hydrogen gas called Directional Neutron Source (DNS). This equipment is particularly suited to scan suitcases in airports for the detection of concealed nuclear materials such as Uranium 235. The equipment is also particularly suited to identify the existence and the concentration of precious metals in mining operations, for the test of large naval welds and other applications. One Directional neutron Source has been sold to a European customer and the company is now organizing its production and sale. The Company has filed research grant applications to the Defense Threat reduction Agency and DARPA for the completion of the available Directional neutron Source into a Nuclear Weapon detection Station. Funds expected from this filing are primarily intended to continue the development of this new neutron technology for the advancement of our national security. The Division of Optical Equipment is producing, selling and servicing a basically new telescope with concave lenses, known as the Santilli telescope, for the detection of images produced by antimatter light known as isodual light. In particular, TEC-DOE is producing, selling and servicing pairs of 70 mm, 100 mm, 150 mm and 200 mm Galileo and Santilli telescopes where the Galileo telescope is needed to focus images in the Santilli telescope. Besides new astrophysical detections, TEC pairs of Galileo and Santilli telescopes are useful for a comprehensive surveillance of civilian, industrial and military installations since they can identify images produced by all possible forms of light, the conventional light and the new isodual light. Three TEC Surveillance Stations are now operational, one in the USA and two in Europe.
Additionally, the business of Thunder Energies Corporation (“TEC”) is focused on the development of a new clean combustion of fossil fuels (oil, diesel, coal, etc.) with controlled minimal contaminants in the exhaust. Our business objective is achieved via new forms of processing fossil fuels, new additives to the combustion and the assistance of a high voltage electric discharges (patents pending) that burn combustible contaminants in fossil fuel exhaust while providing added on clean energy. The expected principal product, depending on funding, is a new type of furnace for the clean combustion of fossil fuel that will be available in various type and sizes and various type of energy application, from home heating to large plants for the clean production of electricity. The expected services are to be rendered by providing technical assistance to the market consisting of existing fossil fuel electric power plants for their decrease of pollutants in the exhaust and their verification of EPA regulations on the release of contaminants in the atmosphere. A prototype new furnace is expected to be available within one year following the availability of the necessary funds. As we are a development stage company, we have not yet generated any revenue from the assets that were recently assigned to and acquired by the Company, including the Hadronic reactors. The Hadronic reactors have been utilized to test and confirm the technology for ultimate inclusion in the new furnaces.
Distribution Methods Of The Products and Services
For this first division TEC-DOE we have initiated advertisement via direct e-mail and public news releases. Initially, we anticipate marketing via large advertisements on the internet, such as via PRWeb and PRNewswire Releases. For the other two divisions we expect to market through contacts that we are able to generate, and via direct contacts of potential buyers of TEC new fossil fuel furnaces or TEC services for the improvement of existing fossil fuel burning plants.
Status of Any Publicly Announced New Product Or Service
Regarding the sale of telescopes, we have made several news releases and radio interviews. In addition, we have presented all TEC technologies to investors’ conferences. For the other two divisions TEC-DNE and TEC-DFC the company contemplates no advertisement until the availability of production equipment. We have, however, published scientific papers on the new sciences underlying the Combustion and Nuclear Divisions. One Directional Neutron Source of the DNE has been manufactured, sold and serviced to a buyer from Europe. Pairs of the Galileo and Santilli telescopes have been manufactured, sold and serviced to customers in the U.S.A. and Europe.
Competitive Business Conditions And The Smaller Reporting Company’s Competitive Position In The Industry And Methods Of Competition
There are no known competitors for the new telescopes with concave lenses produced and sold by TEC-DOE. TEC new telescopes for the detection of isodual light are the only one in existence and no competition is known. There exist many types of furnaces for the combustion of fossil fuels, but they are all based on conventional combustion of fossil fuels and then the removal of contaminants in the exhaust. By contrast, the main function of TEC furnaces is that of improving the combustion with consequential reduction of contaminants in the exhaust while increasing the energy output for the same fossil fuel. There is no known competition for the detection of fissionable material via a thermal neutron source under development by TEC-DNE. TEC Directional Neutron Source has no competition because it is the only available equipment producing on demand “low energy” neutrons in the needed direction and energy. Other commercially available sources produce neutrons at high energy, thus not being usable in civilian facilities as well as in all directions.
Sources And Availability Of Raw Materials And The Names Of Principal Suppliers
The Company has selected qualified manufacturers for the telescopes of TEC-DOE. All components for the new telescope are readily available on the open market. Suppliers are available for the other two technologies and will be selected following completion of their development. The raw material needed by the TEC furnaces is given by conventional fossil fuels all available in the U.S.A. by a large number of suppliers. All needed material have been purchased from the U. S. companies McMaster and/or Granger.
Dependence On One Or A Few Customers
There are many potential customers for the pair of telescopes produced by the TEC-DOE division. Our marketing analysis has identified the potential customers in all individuals and associations interested in sky watching. For the other two technologies, we have not yet performed market analysis. TEC has no need for such a dependence.
Patents, Trademarks, Licenses, Franchises, Concessions, Royalty Agreements Or Labor Contracts, Including Duration
Each of the above indicated three divisions has been the subject of a patent application as follows:
Title: “Method and Apparatus for Intermediate Controlled Fusion Processes”
U.S. serial no. 13/197836
Atty Docket no. TEC-0101
Inventor: Dr. Ruggero Maria Santilli
Title: “Novel Optical Instruments with Concave Lenses” U.S. serial no. 62/144,268 (conf. no. 8850)
Atty Docket no. TEC-0102
Inventor: Dr. Ruggero Maria Santilli
Title: “Directional Production of Composite Particles” U.S. serial no. 62/518,047
Atty Docket no. TEC-0103
Inventor: Dr. Ruggero Maria Santilli
Trademarks are expected to be applied for depending on funding. No franchisee or license is expected during the first three years of operation. Labor contracts for employees are planned for implementation following legal assistance and decisions by our Board of Directors.
Need For Any Government Approval Of Principal Products Or Services
No governmental approval or permits are necessary for the telescopes. No governmental approval or permits is expected for the development of the new furnaces for the clean combustion of fossil fuels. Following their availability, the TEC furnaces will be subject to and must comply with applicable EPA requirements for permitted levels of contaminants in the exhaust. Regarding the neutron source, we need to further analyze the requirements
Effect Of Existing Or Probable Governmental Regulations On The Business
There are no governmental regulations affecting the sale of the telescope technology. Due to its novel conception, a principal objective of TEC furnaces is that of surpassing current EPA requirements for the contaminants in the combustion exhaust released in the atmosphere. We expect that the neutron source technology will be government regulated and we are in the process of analyzing and assessing the impact of such regulations on the business. TEC has filed research grant applications to DARPA, the Defense Threat Reduction Agency and the U. S. AIR FORCE for the completion of the available Directional Mention Source into a Nuclear Weapon Detection Station (NWDT,) under full Governmental control. No outcome of these grant applications is known at this time.
Estimate Of The Amount Of Money Spent During Each Of The Last Two Fiscal Years On Research And Development
Related entities have spent $126K and $57K in 2017 and 2018, respectively, for the development of the Directional Neutron Source and of the Santilli telescope. All funding for the development of our products to date has been derived from related entities, IBR and HyFuels, which are beneficially controlled by our Chief Executive Officer, Dr. Ruggero M. Santilli.
Costs and Effects Of Compliance With Environmental Laws
There are no environmental laws affecting the sale of pairs of telescopes as we simply assemble telescopes, cameras and proprietary concave lenses. We are unable to estimate the costs and effects of compliance with environmental laws prior to completion of a TEC prototype furnace.
Number Of Total Employees And Number Of Full-Time Employees
At this time, the Company has two full time employees and five persons working part time in various functions.
Implications of Being an Emerging Growth Company
We qualify as an emerging growth company as that term is used in the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other burdens that are otherwise applicable generally to public companies. These provisions include:
·
A requirement to have only two years of audited financial statements and only two years of related MD&A;
·
Exemption from the auditor attestation requirement in the assessment of the emerging growth company’s internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act of 2002;
·
Reduced disclosure about the emerging growth company’s executive compensation arrangements; and
·
No non-binding advisory votes on executive compensation or golden parachute arrangements.
We have already taken advantage of these reduced reporting burdens in this amendment to our Current Report on Form 8-K, which are also available to us as a smaller reporting company as defined under Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).
In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended (the “Securities Act”) for complying with new or revised accounting standards. We are choosing to utilize the extended transition period for complying with new or revised accounting standards under Section 102(b)(2) of the JOBS Act. This election allows our Company to delay the adoption of new or revised accounting standards that have different effective dates for public and private companies until those standards apply to private companies. As a result of this election, our financial statements may not be comparable to companies that comply with public company effective dates.
We could remain an emerging growth company for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period.
We are a reporting company and file all reports required under sections 13 and 15d of the Exchange Act.
Results of Operations and Critical Accounting Policies and Estimates.
The results of operations are based on preparation of financial statements in conformity with accounting principles generally accepted in the United States. The preparation of financial statements requires management to select accounting policies for critical accounting areas as well as estimates and assumptions that affect the amounts reported in the financial statements. The Company’s accounting policies are more fully described in Note 3 to the Notes of Financial Statements.
Results of Operations for the years ended December 31, 2018 and December 31, 2017.
Revenues.
Total Revenue. Total revenues for the year ended December 31, 2018 and 2017 were $0 and $194,481 respectively. Revenues decreased by approximately 100% due to no sales during the year.
Expenses.
Total Operating Expenses. Total operating expenses for the years ended December 31, 2018 and December 31, 2017 were $768,627 and $771,059, respectively. Total operating expenses consisted of research and development of $57,285 and $125,664, respectively; professional fees of $488,287 and $403,164, respectively and selling, general and administrative expenses of $223,055 and $242,231, respectively. Research and development expense decreased by approximately 54% due to funding. Professional fees increased by approximately 21% due to the increase in shares issued for consulting services.
Other Income (Expense). Total other income (expense) for the years ended December 31, 2018 and 2017 was ($21,735) and ($52,063), respectively. Other income (expense) consisted of interest expense of ($21,735) and ($35,383), respectively; interest expense related to derivative liability of $0 and ($16,866), respectively and change in derivative of $0 and $186, respectively. Interest expense increased by approximately 39% due to increased borrowings for operations. Interest expense related to derivative liability and change in derivative decreased by 100% due to convertible notes payable being fully paid.
Financial Condition.
Total Assets. Total assets at December 31, 2018 and December 31, 2017 were $7,920 and $26,352, respectively. Total assets consist of cash of $7,920 and $1,883, respectively; accounts receivable of $0 and $24,469, respectively and intangible assets, net of accumulated amortization and impairment, of $0 and $200, respectively. Total assets decreased by approximately 70%. The main reason for the decrease was due to an reduction in accounts receivable of approximately 100% at December 31, 2018.
Total Liabilities. Total liabilities at December 31, 2018 and December 31, 2017 were $573,853 and $686,782, respectively. Total liabilities consist of accrued interest of $124 and $0, respectively; accrued interest related party of $43,349 and $33,262, respectively; derivative liability of $0 and $116,654, respectively; convertible note payable, net of discount of $0 and $16,866, respectively; accrued salaries of $189,000 and $0, respectively; note payable of $60,000 and $0, respectively and note payable to related parties of $281,380 and $520,000, respectively. Total liabilities decreased by approximately 16%. Accrued compensation, related parties increased by approximately 100% due to Dr. Ruggero Santilli and Ms. Carla Santilli converting their outstanding accrued compensation to the Company’s common stock for the year ended December 31, 2017. Accrued interest increased by approximately 100% due to increase borrowings for operations. Accrued interest-related party increased by approximately 30% due to increased borrowings for operations. Convertible note payable decreased by approximately 100% due to the notes being paid in full. Derivative liability decreased by approximately 100% due to the convertible notes being paid in full. Note payable increased by approximately 100%. Note payable related party decreased by approximately 46% due to the Company’s Chief Executive Officer, Dr. Ruggero M. Santilli requesting his note payable due be reduced by $250,000 and a non-related party assumed $60,000 of his notes payable.
Liquidity and Capital Resources.
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern which contemplates, among other things, the realization of assets and satisfaction of liabilities in the ordinary course of business.
The Company sustained a loss of $790,362 for the year ended December 31, 2018 and $628,641 for the year ended December 31, 2017. The Company has accumulated losses totaling $3,781,938 at December 31, 2018. Because of the absence of positive cash flows from operations, the Company will require additional funding for continuing the development and marketing of products. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We are presently able to meet our obligations as they come due through the support of our shareholders. At December 31, 2018 we had a working capital deficit of $565,933. Our working capital deficit is due to the results of operations.
Net cash used in operating activities for the years ended December 31, 2018 and 2017 were ($181,890) and ($132,578), respectively. Net cash used in operating activities includes our net loss, amortization, impairment, Derivative convertible note, stock issued for services, accounts receivable, accrued salaries and accrued interest.
Net cash provided by financing activities for the years ended December 31, 2018 and December 31, 2017 were $187,927 and $133,500, respectively. Net cash provided by financing activities includes proceeds from notes payable- related party of $11,380 and ($12,500), respectively; proceeds from notes payable of $60,000 and $0 respectively; proceeds from convertible notes payable of $96,000 and $66,000, respectively and proceeds from the issuance of common stock of $20,547 and $80,000, respectively.
We anticipate that our future liquidity requirements will arise from the need to fund our growth from operations, pay current obligations and future capital expenditures. The primary sources of funding for such requirements are expected to be cash generated from operations and raising additional funds from the private sources and/or debt financing. However, we can provide no assurances that we will be able to generate sufficient cash flow from operations and/or obtain additional financing on terms satisfactory to us, if at all, to remain a going concern. Our continuation as a going concern is dependent upon our ability to generate sufficient cash flow to meet our obligations on a timely basis and ultimately to attain profitability. Our Plan of Operation for the next twelve months is to raise capital to implement our strategy. We do not have the necessary cash and revenue to satisfy our cash requirements for the next twelve months. We cannot guarantee that additional funding will be available on favorable terms, if at all. If adequate funds are not available, then we may not be able to expand our operations. If adequate funds are not available, we believe that our officers and directors will contribute funds to pay for some of our expenses. However, we have not made any arrangements or agreements with our officers and directors regarding such advancement of funds. We do not know whether we will issue stock for the loans or whether we will merely prepare and sign promissory notes. If we are forced to seek funds from our officers or directors, we will negotiate the specific terms and conditions of such loan when made, if ever. Although we are not presently engaged in any capital raising activities, we anticipate that we may engage in one or more private offering of our company’s securities after the completion of this offering. We would most likely rely upon the transaction exemptions from registration provided by Regulation D, Rule 506 or conduct another private offering under Section 4(2) of the Securities Act of 1933. See “Note 2 - Going Concern” in our financial statements for additional information as to the possibility that we may not be able to continue as a “going concern.”
We are not aware of any trends or known demands, commitments, events or uncertainties that will result in or that are reasonably likely to result in material increases or decreases in liquidity.
Capital Resources.
We had no material commitments for capital expenditures as of December 31, 2018.
Off-Balance Sheet Arrangements
We have made no 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, capital expenditures or capital resources that is material to investors.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosure About Market Risk.
The registrant qualifies as a smaller reporting company, as defined by SEC Rule 229.10(f)(1) and is not required to provide the information required by this Item.
Item 8.
Item 8. Financial Statements and Supplementary Data.
The report of the independent registered public accounting firm and the financial statements listed on the accompanying index at page of this report are filed as part of this report and incorporated herein by reference.
Item 9.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
We did not have any disagreements on accounting and financial disclosure with our accounting firm during the reporting period.
Item 9A.
Item 9A. Controls and Procedures
(a) Management’s Annual Report on Internal Control over Financial Reporting.
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The Company’s internal control over financial reporting is a process designed under the supervision of the Company’s Principal Executive Officer and Principal Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external purposes in accordance with the U.S. generally accepted accounting principles.
As of December 31, 2018, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934. Based on this evaluation, management concluded that our financial disclosure controls and procedures were not effective so as to timely identify, correct and disclose information required to be included on our Securities and Exchange Commission (“SEC”) reports due to the Company’s limited internal resources and lack of ability to have multiple levels of transaction review. Through the use of external consultants and the review process, management believes that the financial statements and other information presented herewith are materially correct.
As of December 31, 2018, under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of the design and operations of our internal control over financial reporting, as defined in Rules 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 and based on the criteria for effective internal control described Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was not effective so as to timely identify, correct and disclose information required to be included on our Securities and Exchange Commission (“SEC”) reports due to the Company’s limited internal resources and lack of ability to have multiple levels of transaction review. Through the use of external consultants and the review process, management believes that the financial statements and other information presented herewith are materially correct.
The management, including its Principal Executive Officer and Principal Financial Officer, does not expect that its disclosure controls and procedures, or its internal controls over financial reporting will prevent all error and all fraud. A control system no matter how well conceived and operated, can provide only reasonable not absolute assurance that the objectives of the control system are met. Further, the design of control system must reflect the fact that there are resource constraints, and the benefit 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.
This Annual Report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to the temporary rules of the SEC that permit the Company to provide only management’s report in this Annual Report.
This report shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liabilities of this section, and is not incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
(b) Change in Internal Control Over Financial Reporting
We have not made any significant changes to our internal controls subsequent to the Evaluation Date. We have not identified any significant deficiencies or material weaknesses or other factors that could significantly affect these controls, and therefore, no corrective action was taken.
Item 9B.
Item 9B. Other Information.
NONE
PART III
Item 10.
Item 10. Directors, Executive Officers and Corporate Governance.
Directors and Executive Officers.
The names and ages of our directors and executive officers as of December 31, 2018 are set forth below. Our Bylaws provide for not less than one and not more than seven directors. All directors are elected annually by the stockholders to serve until the next annual meeting of the stockholders and until their successors are duly elected and qualified.
__________
(1) Dr. Ruggero M. Santilli will serve as a director until the next annual shareholder meeting.
(2) Mrs. Carla Santilli will serve as a director until the next annual shareholder meeting.
Dr. Ruggero M. Santilli, Chief Executive Officer and Director
Dr. Ruggero Maria Santilli is 83 years of age. In the last 5 years Dr. Santilli has served as the Chairman of the Board and Chief Executive Officer for Magnegas Corporation, a publicly traded entity from which he voluntarily resigned on May 30, 2013. Dr. Santilli was born and educated in Italy where he achieved his Ph.D., in mathematics and physics, as well as a chair in nuclear physics at the Avogadro Institute in Turin, Italy. In 1967 Santilli was invited by the University of Miami in Florida to conduct research for NASA and he moved with his family to the U.S.A. where he subsequently became a U.S. citizen. In 1968 he joined the faculty of Boston University, under partial support from the U.S. Air Force, where he taught physics and applied mathematics from prep courses to seminar post-PhD. courses. In 1975-1977 he went to MIT and from 1978 to 1983 he was a member of Harvard University faculty where he received five grants from the U. S. Department of Energy to study a generalization of quantum mechanics and chemistry needed for new clean energies and fuels. Since 1984 he has been the President of the Institute for Basic Research, originally located in a Victorian building inside Harvard University grounds and moved to Florida in 1990. Since his time at Harvard University he studied new clean energies and related chemistry. None of the aforementioned entities are a parent, subsidiary or affiliate of the Company. Dr. Santilli has not engaged in any related party transactions with the Company, except for loans made to the Company. During the years ended December 31, 2018 and 2017, Dr. Santilli and Mrs. Santilli loaned the company $96,800 and $47,700 for operations. During the years ended December 31, 2018 and 2017 the Company paid $85,500 and $60,200 toward the principal of the outstanding loans.
At December 31, 2018 and 2017 the demand notes accumulative balances were $281,380 and $520,000, respectively. Accrued interest at December 31, 2018 and 2017 was $43,349 and $33,262, respectively.
Dr. Santilli is the author of over 250 technical articles and 18 post Ph.D. level monographs in mathematics, physics, cosmology, superconductivity, chemistry and biology published the world over. He is the founding editor of three journals in mathematics and physics and editor of several others.
Dr. Santilli is also internationally known for the discovery of the basic science and for the industrial development of the “Santilli MagneGas Technology”.
Dr. Santilli is the recipient of various honors, including: his nomination by the Estonia Academy of Sciences among the most illustrious applied mathematicians of all times; two gold medals for scientific merits; the listing as “Santilli Hall” of a class room at an Australian research center; and nominations for the Nobel Prize in physics as well as in chemistry from scientists the world over. A scientific meeting was organized in June 2005 at the University of Karlstad, Sweden, to honor Prof. Santilli on his 70th birthday with participation of scientists from 50 countries.
Dr. Santilli’s qualifications to serve on our board of directors include his extensive knowledge of energy products and his experience researching new clean energies and fuels.
Mrs. Carla Santilli, Treasurer, Secretary and Director
Carla Santilli is 78 years of age, has been a Director of Magnegas Corporation since May 2007 and is the spouse of Dr. Santilli. Carla Santilli holds a Masters’ Degree in Human Services Administration from the School of Social Work of Boston University. She held positions of Clinical Social Worker and Community Programs Coordinator for the State of Massachusetts. Since the late 1980’s, Mrs. Santilli has been employed as the President and Chief Executive Officer of Hadronic Press, Inc, a physics and mathematics academic publishing company. In this capacity, Mrs. Santilli has directed the growth of this company from start-up to become one of the world’s leading physics and mathematics publishing companies. Books and journals published by Hadronic Press can be found in all of the leading University libraries across the world. Mrs. Santilli has been involved in the private sector as grant administrator and public relations specialist in the fields of academic publishing and environmental sciences. None of the aforementioned entities are a parent, subsidiary or affiliate of the Company. Mrs. Santilli has not engaged in any related party transactions with the Company, except for loans made to the Company. During the years ended December 31, 2018 and 2017, Dr. Santilli and Mrs. Santilli loaned the company $96,800 and $47,700 for operations. During the years ended December 31, 2018 and 2017 the Company paid $85,500 and $60,200 toward the principal of the outstanding loans.
At December 31, 2018 and 2017 the demand notes accumulative balances were $281,380 and $520,000, respectively. Accrued interest at December 31, 2018 and 2017 was $43,349 and $33,262, respectively.
Mrs. Santilli’s qualifications to serve on our board of directors include her thirty years of experience as President and Chief Executive Officer of Hadronic Press, Inc. and her experience in the environmental sciences field.
Involvement in Certain Legal Proceedings. There have been no events under any bankruptcy act, no criminal proceedings and no judgments, injunctions, orders of decrees material to the evaluation of the ability and integrity of any director, executive officer, promoter or control person of Registrant during the past ten years.
The Board of Directors acts as the Audit Committee, and the Board has no separates committees. The Company has no qualified financial expert at this time because it has not been able to hire a qualified candidate. Further, the Company believes that it has inadequate financial resources at this time to hire such expert. The Company intends to continue to search for a qualified individual for hire.
A. Significant Employees. None.
B. Family Relationships. None.
C. Involvement in Certain Legal Proceedings. There have been no events under any bankruptcy act, no criminal proceedings and no judgments, injunctions, orders of decrees material to the evaluation of the ability and integrity of any director, executive officer, promoter or control person of Registrant during the past ten years.
D. The Board of Directors acts as the Audit Committee, and the Board has no separates committees. The Company has no qualified financial expert at this time because it has not been able to hire a qualified candidate. Further, the Company believes that it has inadequate financial resources at this time to hire such expert. The Company intends to continue to search for a qualified individual for hire.
Section 16(a) Beneficial Ownership Reporting Compliance
Our shares of common stock are registered under the Exchange Act, and therefore our officers, directors and holders of more than 10% of our outstanding shares are subject to the provisions of Section 16(a) which requires them to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and our other equity securities. Officers, directors and greater than 10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. Based solely upon our review of reports submitted to us during the fiscal year ended December 31, 2018, the following table sets forth the name of any such person that failed to file the required forms on a timely basis, including the number of late reports, the number of transactions not reported on a timely basis and any known failure to file a required form.
Code of Ethics
We have adopted a Code of Business Conduct and Ethics that applies to all of our employees, officers and directors. In addition to the Code of Business Conduct and Ethics, our principal executive officer, principal financial officer and principal accounting officer are also subject to written policies and standards that are reasonably designed to deter wrongdoing and to promote: honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; full, fair, accurate, timely and understandable disclosure in reports and documents that are filed with, or submitted to the SEC and in other public communications made by us; compliance with applicable government laws, rules and regulations; the prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and accountability for adherence to the code. We have posted the text of our Code of Business Conduct and Ethics on our Internet website, www.slpc1.com. We intend to disclose future amendments to, or waivers from, certain provisions of our Code of Business Conduct and Ethics, if any, on our above Internet website within four business days following the date of such amendment or waiver.
Legal Proceedings.
To the best of our knowledge, except as set forth herein, none of the directors or director designees to our knowledge has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past five years that resulted in a judgment decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or finding of any violation of federal or state securities laws, except for matters that were dismissed without sanction or settlement.
Meetings and Committees of the Board of Directors.
We do not have a nominating committee of the Board of Directors, or any committee performing similar functions. Nominees for election as a director are selected by the Board of Directors.
We do not yet have an audit committee or an audit committee financial expert. We expect to form such a committee composed of non-employee directors when such individuals are added to the board of directors. We may in the future attempt to add a qualified board member to serve as an audit committee financial expert in the future, subject to our ability to locate and compensate such a person. Despite the lack of an audit committee, those members of the board of directors that would otherwise be on our audit committee will continue to analyze and investigate our actual and potential businesses prospects as members of our board of directors. Furthermore, our entire board of directors is aware of the importance of the financial and accounting due diligence that must be undertaken in furtherance of our business and they intend to conduct a comprehensive accounting financial analysis of the Company’s business.
Item 11.
Item 11. Executive Compensation.
The following table sets forth information concerning the annual and long-term compensation of our Chief Executive Officer, and the executive officers who served at the end of the fiscal year December 31, 2018, for services rendered in all capacities to us. The listed individuals shall hereinafter be referred to as the “Named Executive Officers.”
Summary Compensation Table - Officers
__________
(1) The Company has entered into employment contract with Dr. Santilli. The employment contract for Dr. Santilli provides for an annual base salary of $180,000 payable in weekly installments and annual stock option compensation equal to .01% of the issued and outstanding number of shares on July 25 each year at the average trading price of the company common stock on such date. On June 7, 2017, our board of directors approved the offer from our directors, Dr. Ruggero M. Santilli and Mrs. Carla Santilli to convert the balances of their respective accrued salaries due to them by the Company into restricted shares of Company common stock. The salaries of Dr. Santilli ($708,461.54) and Carla Santilli ($283,384.62), as accrued through June 7, 2017, were converted into a total of 16,450,769 shares of restricted Company common stock (the “Shares”). Dr. Santilli was issued 11,727,692 Shares and Carla Santilli was issued 4,723,077 Shares. The Shares were all issued at the price of $0.060 per Share. On December 21, 2017, our board of directors approved the offer from our directors, Dr. Ruggero M. Santilli and Mrs. Carla Santilli to convert the balances of their respective accrued salaries due to them by the Company into restricted shares of Company common stock. The salaries of Dr. Santilli ($90,000) and Carla Santilli ($36,000), as accrued through December 31, 2017, were converted into a total of 1,260,000 shares of restricted Company common stock (the “Shares”). Dr. Santilli was issued 900,000 Shares and Carla Santilli was issued 36,000 Shares. The Shares were all issued at the price of $0.10 per Share. On March 29, 2018, our board of directors approved the offer from our directors, Dr. Ruggero M. Santilli and Mrs. Carla Santilli to convert the balances of their respective accrued salaries due to them by the Company into restricted shares of Company common stock. The salaries of Dr. Santilli ($45,000) and Carla Santilli ($18,000), as accrued through March 31, 2018, were converted into a total of 663,856 shares of restricted Company common stock (the “Shares”). Dr. Santilli was issued 474,183 Shares and Carla Santilli was issued 189,673 Shares. The Shares were all issued at the price of $0.0949 per Share.
(2) The Company has entered into a consulting agreement with Mrs. Santilli, at an annual rate of $60,000. On June 7, 2017, our board of directors approved the offer from Mrs. Carla Santilli to convert the balance of her accrued salary due to her by the Company into restricted shares of Company common stock. The salary of Mrs. Carla Santilli ($283,384.62), as accrued through June 7, 2017, was converted into 4,723,077 Shares. The Shares were all issued at the price of $0.060 per Share. On December 21, 2017, our board of directors approved the offer from our directors, Dr. Ruggero M. Santilli and Mrs. Carla Santilli to convert the balances of their respective accrued salaries due to them by the Company into restricted shares of Company common stock. The salaries of Dr. Santilli ($90,000) and Carla Santilli ($36,000), as accrued through December 31, 2018, were converted into a total of 1,260,000 shares of restricted Company common stock (the “Shares”). Dr. Santilli was issued 900,000 Shares and Carla Santilli was issued 36,000 Shares. The Shares were all issued at the price of $0.10 per Share. On March 29, 2018, our board of directors approved the offer from our directors, Dr. Ruggero M. Santilli and Mrs. Carla Santilli to convert the balances of their respective accrued salaries due to them by the Company into restricted shares of Company common stock. The salaries of Dr. Santilli ($45,000) and Carla Santilli ($18,000), as accrued through March 31, 2018, were converted into a total of 663,856 shares of restricted Company common stock (the “Shares”). Dr. Santilli was issued 474,183 Shares and Carla Santilli was issued 189,673 Shares. The Shares were all issued at the price of $0.0949 per Share.
(3) Dr. W. George Gaines submitted his resignation on February 24, 2016, effective as of that date.
(4) Dr. Leong Ying submitted his resignation on April 12, 2017, effective as of that date.
Director Compensation
_________
(1) The Company has entered into employment contract with Dr. Santilli. The employment contract for Dr. Santilli provides for an annual base salary of $180,000 payable in weekly installments and annual stock option compensation equal to .01% of the issued and outstanding number of shares on July 25 each year at the average trading price of the company common stock on such date. On June 7, 2017, our board of directors approved the offer from our directors, Dr. Ruggero M. Santilli and Mrs. Carla Santilli to convert the balances of their respective accrued salaries due to them by the Company into restricted shares of Company common stock. The salaries of Dr. Santilli ($708,461.54) and Carla Santilli ($283,384.62), as accrued through June 7, 2017, were converted into a total of 16,450,769 shares of restricted common stock. Dr. Santilli was issued 11,727,692 Shares and Carla Santilli was issued 4,723,077 Shares. The Shares were all issued at the price of $0.060 per Share. On December 21, 2017, our board of directors approved the offer from our directors, Dr. Ruggero M. Santilli and Mrs. Carla Santilli to convert the balances of their respective accrued salaries due to them by the Company into restricted shares of Company common stock. The salaries of Dr. Santilli ($90,000) and Carla Santilli ($36,000), as accrued through December 31, 2018, were converted into a total of 1,260,000 shares of restricted Company common stock (the “Shares”). Dr. Santilli was issued 900,000 Shares and Carla Santilli was issued 36,000 Shares. The Shares were all issued at the price of $0.10 per Share. On March 29, 2018, our board of directors approved the offer from our directors, Dr. Ruggero M. Santilli and Mrs. Carla Santilli to convert the balances of their respective accrued salaries due to them by the Company into restricted shares of Company common stock. The salaries of Dr. Santilli ($45,000) and Carla Santilli ($18,000), as accrued through March 31, 2018, were converted into a total of 663,856 shares of restricted Company common stock (the “Shares”). Dr. Santilli was issued 474,183 Shares and Carla Santilli was issued 189,673 Shares. The Shares were 0
(2) The Company has entered into a consulting agreement with Mrs. Santilli. on June 7, 2017, our board of directors approved the offer from our director, Mrs. Carla Santilli to convert the balances of her accrued salary due to her by the Company into restricted shares of Company common stock. The salary of Mrs. Carla Santilli ($283,384.62), as accrued through June 7, 2017, was converted into 4,723,077 Shares. The Shares were all issued at the price of $0.060 per Share. On December 21, 2017, our board of directors approved the offer from our directors, Dr. Ruggero M. Santilli and Mrs. Carla Santilli to convert the balances of their respective accrued salaries due to them by the Company into restricted shares of Company common stock. The salaries of Dr. Santilli ($90,000) and Carla Santilli ($36,000), as accrued through December 31, 2018, were converted into a total of 1,260,000 shares of restricted Company common stock (the “Shares”). Dr. Santilli was issued 900,000 Shares and Carla Santilli was issued 36,000 Shares. The Shares were all issued at the price of $0.10 per Share. On March 29, 2018, our board of directors approved the offer from our directors, Dr. Ruggero M. Santilli and Mrs. Carla Santilli to convert the balances of their respective accrued salaries due to them by the Company into restricted shares of Company common stock. The salaries of Dr. Santilli ($45,000) and Carla Santilli ($18,000), as accrued through March 31, 2018, were converted into a total of 663,856 shares of restricted Company common stock (the “Shares”). Dr. Santilli was issued 474,183 Shares and Carla Santilli was issued 189,673 Shares. The Shares were all issued at the price of $0.0949 per Share.
No retirement, pension, profit sharing, stock option or insurance programs or other similar programs have been adopted by the Company for the benefit of its employees.
There are no understandings or agreements regarding compensation our management will receive after a business combination that is required to be included in this table, or otherwise.
Compensation Committee Interlocks and Insider Participation.
As of December 31, 2018, our Board of Directors consisted of Dr. Ruggero M. Santilli and Mrs. Carla Santilli. At present, the Board of Directors has not established any committees.
Director Compensation.
There are currently no compensation arrangements in place for members of the board of directors.
Item 12.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The following table sets forth information concerning the beneficial ownership of shares of our common stock with respect to stockholders who were known by us to be beneficial owners of more than 5% of our common stock as of December 31, 2018, and our officers and directors, individually and as a group. Unless otherwise indicated, the beneficial owner has sole voting and investment power with respect to such shares of common stock.
Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission (“SEC”) and generally includes voting or investment power with respect to securities. In accordance with the SEC rules, shares of our common stock which may be acquired upon exercise of stock options or warrants which are currently exercisable or which become exercisable within 60 days of the date of the table are deemed beneficially owned by the optionees, if applicable. Subject to community property laws, where applicable, the persons or entities named below have sole voting and investment power with respect to all shares of our common stock indicated as beneficially owned by them.
___________
(1) Dr. Ruggero M. Santilli and Mrs. Carla Santilli are married and each own fifty percent of the equity in Clean Energies Tech, Inc. which owns 4,232,273 shares of our common stock.
(2) Dr. Ruggero M. Santilli and Mrs. Carla Santilli each own fifty percent of the equity in Global Beta, LLC which owns 6,170,000 shares of our common stock.
(3) Mrs. Carla Santilli is a member of the board of directors of The R.M. Santilli Foundation, Inc., a non-profit Florida corporation. Dr. Santilli’s indirect beneficial interest is through his spouse, Mrs. Carla Santilli. Mrs. Carla Santilli owns 4,723,077 shares of our common stock.
Dr. Santilli is our Chief Executive Officer and a director for our Company. Mrs. Carla Santilli is our Treasurer and a director for our Company.
The following table sets forth, as of December 31, 2017, the number of shares of our Series “A” Convertible Preferred Stock owned of record and beneficially by our executive officers, directors and persons who beneficially own more than 5% of such outstanding shares.
____________
(1) Dr. Ruggero M. Santilli and Mrs. Carla Santilli are married and each own fifty percent of the equity in Hadronic Technologies Press, Inc. which owns 50,000,000 shares of our Series “A” Convertible Preferred Stock. The Series “A” Convertible Preferred Stock has 15 votes per share and is convertible into 10 shares of our common stock at the election of the shareholder.
Item 13.
Item 13. Certain Relationships and Related Transactions, and Director Independence.
Transactions with Related Persons, Promoters and Certain Control Persons.
ADVANCES, PAYABLES AND ACCRUALS
Amounts included in accruals represent amounts due to the officers and directors for corporate obligations under the employment agreements. Payments on behalf of the Company and accruals made under contractual obligation are accrued (see below). As of December 31, 2018, and 2017 accrued expenses were $189,000 and $0, respectively.
NOTE PAYABLE
In support of the Company’s efforts and cash requirements, it has relied on advances from the majority shareholders until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by shareholders. All advances made in support of the Company are formalized by demand notes, at a 2.15% interest rate.
During the years ended December 31, 2018 and 2017 our Chief Executive Officer, Dr. Ruggero M. Santilli loaned the company $96,880 and $47,700 for operations. During the years ended December 31, 2018 and 2017 the Company repaid the principal amounts by $85,500 and $60,200, respectively.
On December 31, 2018, our Chief Executive Officer, Dr. Ruggero M. Santilli requested the extinguishment of $250,000 of notes payable due. The Company extinguished $250,000 of notes payable due Dr. Rugger M. Santilli on December 31, 2018 and booked the offsetting entry to Additional paid-in Capital due to it being a related party transaction.
At December 31, 2018 and 2017 the demand notes accumulative balances were $281,380 and $520,000, respectively. Accrued interest at December 31, 2018 and 2017 was $43,349 and $33,262, respectively.
EQUITY TRANSACTIONS
On July 25, 2013, Dr. Ruggero M. Santilli acquired from Company’s existing shareholders a control block of stock in the Company consisting of two million nine hundred forty thousand (2,940,000) shares of restricted common stock of the Company, in a private equity transaction. Dr. Santilli utilized his own funds to acquire the shares of common stock of the Company. As a result of this acquisition, Dr. Ruggero M. Santilli owns 98% of the issued and outstanding shares of common stock of the Company. On July 25, 2013, Dr. Ruggero M. Santilli and Ms. Carla Santilli were appointed to the Board of Directors of the Company. On July 25, 2013, Dr. Ruggero M. Santilli was appointed President, Chief Executive Officer, Principal Executive Officer and Principal Accounting Officer of the Company. Also on July 25, 2013, Carla Santilli was appointed Secretary and Treasurer for the Company.
On August 11, 2013 the Company issued 1,000,000 shares of common stock in exchange for assignment of non-monetary intangible assets (See Intangible Assets, Note 4).
On October 10, 2013, the Company issued fifty million (50,000,000) shares of our Series “A” Convertible Preferred Stock (the “Preferred Stock”) to Hadronic Technologies Press, Inc. (“Hadronic”), a Florida corporation maintaining its principal place of business at 35246 US Highway 19 North, Suite #215, Palm Harbor, Florida 34684. Our Directors, Dr. Ruggero M. Santilli and Mrs. Carla Santilli each own fifty percent of the equity in Hadronic. The Series “A” Convertible Preferred Stock has 15 votes per share and is convertible into 10 shares of our common stock at the election of the shareholder. Preferred shares issued were valued at $500,000, based on the fair value of the common stock equivalents.
On June 8, 2017 the Company issued 16,530,769 shares to related parties for conversion of accrued compensation of $991,846, recorded at the fair market value of the share price.
On December 21, 2017 the Company issued 1,260,000 shares to related parties for conversion of accrued compensation of $126,000, recorded at the fair market value of the share price.
On March 29, 2018 the Company issued 663,856 shares to related parties for conversion of accrued compensation of $63,000, recorded at the fair market value of the share price.
On December 31, 2018, our Chief Executive Officer, Dr. Ruggero M. Santilli requested the extinguishment of $250,000 of notes payable due. The Company extinguished $250,000 of notes payable due Dr. Rugger M. Santilli on December 31, 2018 and booked the offsetting entry to Additional paid-in Capital due to it being a related party transaction.
EMPLOYMENT CONTRACTS
The Company has employment contracts with its key employees, the controlling shareholders, who are its officers and directors of the Company.
· Dr. Santilli, 5 year contract, annual salary of $180,000 and annual common stock options for .01% of the outstanding stock per calendar year at the average trading price of the anniversary date, July 25th
· Carla Santilli, 5 year consulting contract, annual salary of $72,000 and annual common stock options for .005% of the outstanding stock per calendar year at the average trading price of the anniversary date, July 25th.
OTHER
The Company does not own or lease property or lease office space. At the current time, the office space used by the Company was arranged by the majority shareholders of the Company to use at no charge. It is anticipated that the Company will enter into formal lease arrangements in the near future.
The amounts and terms of the above transactions may not necessarily be indicative of the amounts and terms that would have been incurred had comparable transactions been entered into with independent third parties.
We have not established our own definition for determining whether our director or nominees for directors are “independent” nor has it adopted any other standard of independence employed by any national securities exchange or inter-dealer quotation system, though our current directors would not be deemed to be “independent” under any applicable definition given that they are officers of the Company. We also have not established any committees of the Board of Directors.
Given the nature of our Company, its limited shareholder base and the current composition of management, the Board of Directors does not believe that we require any corporate governance committees at this time. As our operations generate revenue we intend to seek additional members for our board of directors and establish our own definition of “independent” as related to directors and nominees for directors. We further intend to establish committees that will be suitable for our operations as our business operations warrant.
Director Independence.
We have not:
· Established our own definition for determining whether our director or nominees for directors are “independent” nor has it adopted any other standard of independence employed by any national securities exchange or inter-dealer quotation system, though our current directors would not be deemed to be “independent” under any applicable definition given that he is an officer of the Company; nor,
· Established any committees of the Board of Directors.
Given the nature of our Company, its limited shareholder base and the current composition of management, the Board of Directors does not believe that we require any corporate governance committees at this time. The Board of Directors takes the position that management of a target business will establish:
· Its own Board of Directors
· Establish its own definition of “independent” as related to directors and nominees for directors,
· Establish committees that will be suitable for its operations after the Company consummates a business combination
Item 14.
Item 14. Principal Accounting Fees and Services.
The Company does not currently have an audit committee. The normal functions of the audit committee are handled by the board of directors.
PART IV
Item 15.
Item 15. Exhibits, Financial Statement Schedule.
Exhibit Key
3.1
Incorporated by reference herein to the Company’s Form 10 Registration Statement filed with the Securities and Exchange Commission on July 21, 2011.
3.2
Incorporated by reference herein to the Company’s Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on November 15, 2013.
3.3
Incorporated by reference herein to the Company’s Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on November 15, 2013.
3.4
Incorporated by reference herein to the Company’s Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on August 13, 2018.
3.5
Incorporated by reference herein to the Company’s Form 10 Registration Statement filed with the Securities and Exchange Commission on July 21, 2011.
10.0
Incorporated by reference herein to the Company’s Form S-1 Registration Statement filed with the Securities and Exchange Commission on March 2, 2018.
14.0
Incorporated by reference herein to the Company’s Form 10-Q Quarterly Report filed with the Securities and Exchange Commission on January 17, 2012.
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.
THUNDER ENERGIES CORPORATION
NAME
TITLE
DATE
/s/ Dr. Ruggero M. Santilli
Principal Executive Officer,
Principal Accounting Officer, Chief Financial Officer,
Chairman of the Board of Directors
March 14, 2019
Dr. Ruggero M. Santilli
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.
NAME
TITLE
DATE
/s/ Dr. Ruggero M. Santilli
Principal Executive Officer,
Principal Accounting Officer, Chief Financial Officer,
Chairman of the Board of Directors
March 14, 2019
Dr. Ruggero M. Santilli
/s/ Carla Santilli
Director
March 14, 2019
Carla Santilli
Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants
Which Have Not Registered Securities Pursuant to Section 12 of the Act
None.
Report of Independent Registered Public Accounting Firm
To the shareholders and the board of directors of Thunder Energies Corporation
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Thunder Energies Corporation (the “Company”) as of December 31, 2018 and 2017, the related statements of operations, stockholders’ equity (deficit), and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company’s significant operating losses raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
/s/ BF Borgers CPA PC
BF Borgers CPA PC
We have served as the Company’s auditor since 2018.
Lakewood, CO
March 14, 2019
See notes to financial statements
See notes to financial statements
See notes to financial statements
See notes to financial statements.
THUNDER ENERGIES CORPORATION
Notes to Financial Statements
For the periods ending December 31, 2018 and 2017
NOTE 1 - NATURE OF BUSINESS
Thunder Energies Corporation (“we”, “us”, “our”, “TEC” or the “Company”) was incorporated in the State of Florida on April 21, 2011. Since inception, the Company has been engaged in organizational efforts and obtaining initial financing. The Company was formed as a vehicle to pursue a business combination and had made no efforts to identify a possible business combination. The business purpose of the Company has been to seek the acquisition of or merger with, an existing company. The Company year-end was changed to December 31 upon a change in control.
On July 29, 2013, the Company filed with the Florida Secretary of State, Articles of Amendment to its Articles of Incorporation (the “Amendment”) which changed the name of the Company from CCJ Acquisition Corp. to Thunder Fusion Corporation. The Amendment also changed the principal office address of the Company to 150 Rainville Road, Tarpon Springs, Florida 34689. On May 1, 2014, the Company filed with the Florida Secretary of State, Articles of Amendment to its Articles of Incorporation (the “Amendment”) which changed the name of the Company from Thunder Fusion Corporation to Thunder Energies Corporation. The Amendment also changed the principal office address of the Company to 1444 Rainville Road, Tarpon Springs, Florida 34689.
Description of Business, Principal Products, Services
The business of Thunder Energies Corporation (“TEC”) is focused on the development of a new clean combustion of fossil fuels (oil, diesel, coal, etc.) with controlled minimal contaminants in the exhaust. Our business objective is achieved via new forms of processing fossil fuels, new additives to the combustion and the assistance of a high voltage electric discharges (patents pending) that burn combustible contaminants in fossil fuel exhaust while providing added on clean energy. The expected principal product, depending on funding, is a new type of furnace for the clean combustion of fossil fuel available in any desired size for any type of energy application, from home heating to large plants for the clean production of electricity. The expected services are to be rendered by providing technical assistance to the market consisting of existing fossil fuel electric power plants for their decrease of pollutants in the exhaust and their verification of EPA regulations on the release of contaminants in the atmosphere. A prototype new furnace is expected to be available within one year following the availability of the necessary funds. As we are a development stage company, we have not yet generated any revenue from the assets that were recently assigned to and acquired by the Company, including the Hadronic reactors. The Hadronic reactors have been utilized to test and confirm the technology for ultimate inclusion in the new furnaces. Thunder Energies Corp. is a developer of new technologies that are being brought to market by three divisions: 1) Division of Optical Instruments (TEC-DOI); 2) Division of Nuclear Instruments (TEC-DNI); and 3) Division of Fuel Combustion (TEC--DFC). All intellectual properties, including patents, patent applications, domain names, copyrights, know how, etc., are exclusively and irrevocably owned by Thunder Energies Corp. without any royalty payments. Out of the three divisions, TEC-DOE has initiated production and sale of pairs of Galileo and Santilli telescopes with 70 mm, 100 mm, and 150 mm. The remaining two divisions are expecting funding for their commercialization.
NOTE 2 - GOING CONCERN
For the fiscal years ended December 31, 2018 and 2017, the Company had net losses of $790,362 and $628,641, respectively. As of December 31, 2018, the Company had a working capital deficit of $565,933. The Company has generated $0 and $194,481 in revenues for the years ended December 31, 2018 and 2017, respectively.
The Company’s financial statements are prepared using accounting principles generally accepted in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating cost and allow it to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.
In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan to obtain such resources for the Company include, obtaining capital from management and significant stockholders sufficient to meet its minimal operating expenses. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.
THUNDER ENERGIES CORPORATION
Notes to Financial Statements
For the periods ending December 31, 2018 and 2017
(continued)
There is no assurance that the Company will be able to obtain sufficient additional funds when needed or that such funds, if available, will be obtainable on terms satisfactory to the Company. In addition, profitability will ultimately depend upon the level of revenues received from business operations. However, there is no assurance that the Company will attain profitability. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION AND USE OF ESTIMATES
The Company prepares its financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”), which require 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 reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original maturity of three months or less at the date of acquisition to be cash equivalents. Cash totaled 7,920 at December 31, 2018 and $1,883 at December 31, 2017. The Company had no cash equivalents as of December 31, 2018 and 2017.
ACCOUNTS RECEIVABLE
The Company’s accounts receivable result from revenues earned but not collected from customers. Credit is extended based on an evaluation of a customer’s financial condition and, generally, collateral is not required. Accounts receivable are due within 30 to 60 days and are stated at amounts due from customers. The Company evaluates if an allowance is necessary by considering several factors, including the length of time accounts receivable are past due, the Company’s previous loss history and the customer’s current ability to pay its obligation. If amounts become uncollectible, they are charged to operations when that determination is made. The allowance for doubtful accounts was $0 and $0 as of December 31, 2018 and 2017, respectively.
At December 31, 2018, the Company had $0 accounts receivable. At December 31, 2017, the Company had accounts receivable from one customer which individually represented 100% of total accounts receivable. The customer received shipment of a Neutron Source Directional Equipment shortly before December 31, 2018 and 100% of accounts receivable were collected in January of 2018. The balance of accounts receivable at December 31, 2018 and 2017 were $0 and $24,469, respectively.
CASH FLOWS REPORTING
The Company follows ASC 230, Statement of Cash Flows, for cash flows reporting, classifies cash receipts and payments according to whether they stem from operating, investing, or financing activities and provides definitions of each category, and uses the indirect or reconciliation method (“Indirect method”) as defined by ASC 230, Statement of Cash Flows, to report net cash flow from operating activities by adjusting net income to reconcile it to net cash flow from operating activities by removing the effects of (a) all deferrals of past operating cash receipts and payments and all accruals of expected future operating cash receipts and payments and (b) all items that are included in net income that do not affect operating cash receipts and payments. The Company reports the reporting currency equivalent of foreign currency cash flows, using the current exchange rate at the time of the cash flows and the effect of exchange rate changes on cash held in foreign currencies is reported as a separate item in the reconciliation of beginning and ending balances of cash and cash equivalents and separately provides information about investing and financing activities not resulting in cash receipts or payments in the period.
RELATED PARTIES
The Company follows ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions.
REVENUE RECOGNITION
The Company had no revenues in the current period.
THUNDER ENERGIES CORPORATION
Notes to Financial Statements
For the periods ending December 31, 2018 and 2017
(continued)
CONCENTRATIONS OF CREDIT RISK AND SIGNIFICANT CUSTOMERS
Financial instruments which potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, marketable securities, accounts receivable and restricted cash. The Company limits its exposure to credit loss by placing its cash and cash equivalents with high credit-quality financial institutions in bank deposits, money market funds, U.S. government securities and other investment grade debt securities that have strong credit ratings. The Company has established guidelines relative to diversification of its cash and marketable securities and their maturities that are intended to secure safety and liquidity. These guidelines are periodically reviewed and modified to take advantage of trends in yields and interest rates and changes in the Company’s operations and financial position. Although the Company may deposit its cash and cash equivalents with multiple financial institutions, its deposits, at times, may exceed federally insured limits.
The Company did not have any revenues for the year ended December 31, 2018.
At December 31, 2017, one customer accounted for 100% of the Company’s total revenues of $194,481 for the year ended December 31, 2017. The revenue was from the shipment and delivery of one Neutron Source Directional Equipment shortly before December 31, 2017.
FINANCIAL INSTRUMENTS
The Company’s balance sheet includes financial instruments, including cash, accounts payable, accrued expenses and notes payable. The carrying amounts of current assets and current liabilities approximate their fair value because of the relatively short period of time between the origination of these instruments and their expected realization.
ASC 820, Fair Value Measurements and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
Level 1
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3
Inputs that are both significant to the fair value measurement and unobservable.
Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of December 31, 2018. The respective carrying value of certain on-balance-sheet financial instruments approximated their fair values due to the short-term nature of these instruments.
INTANGIBLE ASSETS
The Company has applied the provisions of ASC topic 350 - Intangible - goodwill and other, in accounting for its intangible assets. Intangible assets are being amortized on a straight-line method on the basis of a useful life of 5 to 17 years. The balance at December 31, 2018 and December 31, 2017 was $0 and $200, respectively.
THUNDER ENERGIES CORPORATION
Notes to Financial Statements
For the periods ending December 31, 2018 and 2017
(continued)
IMPAIRMENT OF LONG- LIVED ASSETS
The Company reviews and evaluates long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. The assets are subject to impairment consideration under FASB ASC 360-10-35-17 if events or circumstances indicate that their carrying amount might not be recoverable. When the Company determines that an impairment analysis should be done, the analysis will be performed using the rules of FASB ASC 930-360-35, Asset Impairment, and 360-0 through 15-5, Impairment or Disposal of Long- Lived Assets.
DERIVATIVE LIABILITIES
Derivative liabilities include the fair value of instruments such as common stock warrants, preferred stock warrants and convertible features of notes, that are initially recorded at fair value and are required to be re-measured to fair value at each reporting period under provisions of ASC 480, Distinguishing Liabilities from Equity, or ASC 815, Derivatives and Hedging. The change in fair value of the instruments is recognized as a component of other income (expense) in the Company’s statements of operations until the instruments settle, expire or are no longer classified as derivative liabilities. The Company estimates the fair value of these instruments using the Black-Scholes pricing model. The significant assumptions used in estimating the fair value include the exercise price, volatility of the stock underlying the instrument, risk-free interest rate, estimated fair value of the stock underlying the instrument and the estimated life of the instrument.
NON-MONETARY TRANSACTION
According to ASC 845-10-S99, transfers of non-monetary assets to a company by its promoters or shareholders in exchange for stock prior to or at the time of the entity’s initial public offering should be recorded at the transferors’ historical cost basis determined under Generally Accepted Accounting Principles. As such, the cost basis carried on Hyfuel’s books and records was nominal. Therefore, the accounting principles in ASC 845-10-S99 were followed and the Company recorded the intellectual and physical properties at its historical cost basis, which was at the historical cost basis of a nominal amount. In the transfer agreement 1,000,000 shares of common stock was transferred in exchange for the properties. The transfer was valued at $1,000 (the par value of the shares issued in exchange for the intellectual property); this amount was determined by the Company to be the value received in the exchange and approximates the basis of those assets.
EXPENSES
Operating expenses encompass research and development, professional fees, selling general and administrative expenses and impairment expense. Total operating expenses were $768,627 and $771,059 for the year ended December 31, 2018 and 2017, respectively. Total operating expenses consisted of the following.
RESEARCH AND DEVELOPMENT
The Company expenses research and development costs when incurred. Research and development costs include engineering and testing of product and outputs. Indirect costs related to research and developments are allocated based on percentage usage to the research and development. We spent $57,285 and $125,664 for the years ended December 31, 2018 and 2017, respectively.
PROFESSIONAL FEES
Professional services are principally comprised of outside legal, audit and consulting services as well as the costs related to being a publicly traded company. Total professional fees were $488,287 and $403,164 for the years ended December 31, 2018 and 2017, respectively.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses consist primarily of management fees, technology services, public relations and travel expenses. Total selling, general and administrative expenses were $223,055 and $242,231 for the years ended December 31, 2018 and 2017, respectively.
THUNDER ENERGIES CORPORATION
Notes to Financial Statements
For the periods ending December 31, 2018 and 2017
(continued)
DEFERRED INCOME TAXES AND VALUATION ALLOWANCE
The Company accounts for income taxes under ASC 740, Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statements carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period the enactment occurs. A valuation allowance is provided for certain deferred tax assets if it is more likely than not that the Company will not realize tax assets through future operations. No deferred tax assets or liabilities were recognized as of December 31, 2018 or December 31, 2017.
NET INCOME (LOSS) PER COMMON SHARE
Net loss per share is calculated in accordance with ASC 260, “Earnings Per Share.” The weighted-average number of common shares outstanding during each period is used to compute basic earning or loss per share. Diluted earnings or loss per share is computed using the weighted average number of shares and diluted potential common shares outstanding. Dilutive potential common shares are additional common shares assumed to be exercised.
Basic net loss per common share is based on the weighted average number of shares of common stock outstanding at December 31, 2018 and 2017. As of December 31, 2018, and 2017, the common stock equivalents have not been included as they are anti-dilutive.
The following potentially dilutive securities were excluded from the calculation of diluted net loss per share because the effects were anti-dilutive based on the application of the treasury stock method and because the Company incurred net losses during the period:
SHARE-BASED EXPENSE
ASC 718, Compensation - Stock Compensation, prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).
The Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC 505-50, Equity - Based Payments to Non-Employees. Measurement of share-based payment transactions with non-employees is based on the fair value of whichever is more reliably measurable: (a) the goods or services received; or (b) the equity instruments issued.
Share-based expense for the years ended December 31, 2018 and 2017 was $378,113 and $1,357,141, respectively.
COMMITMENTS AND CONTINGENCIES
The Company follows ASC 450-20, Loss Contingencies, to report accounting for contingencies. Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated. There were no known commitments or contingencies as of December 31, 2018 and 2017.
THUNDER ENERGIES CORPORATION
Notes to Financial Statements
For the periods ending December 31, 2018 and 2017
(continued)
RECENT ACCOUNTING PRONOUNCEMENTS
From time to time, new accounting pronouncements are issued that we adopt as of the specified effective date. We believe that the impact of recently issued standards that are not yet effective may have an impact on our results of operations and financial statements.
In February 2016, the FASB issued ASU No. 2016-02, Leases, which is intended to improve financial reporting on leasing transactions. This standard requires a lessee to record on the balance sheet the assets and liabilities for the rights and obligations created by lease terms of more than 12 months. This standard will be effective for the Company on September 1, 2019. The Company is currently evaluating the impact the adoption of this ASU will have on its consolidated financial statements.
NOTE 4 - INTANGIBLE PROPERTY
On August 10, 2013, the Company entered into an Asset Assignment Agreement (the “IBR Assignment Agreement”) with Institute For Basic Research, Inc., a Florida corporation (“IBR”) that also is beneficially controlled by our Chief Executive Officer, Dr. Ruggero M. Santilli. Pursuant to the IBR Assignment Agreement, IBR irrevocably assigned to the Company all rights, title, ownership and interests in all of IBR’s internet website domain name assets, owned and hereinafter acquired by IBR including, but not limited to, all physical and intangible assets and intellectual property related to the assets.
On August 11, 2013, Thunder Energies Corporation (f/k/a Thunder Fusion Corporation) entered into an Asset Assignment Agreement (the “Assignment Agreement”) with HyFuels, Inc., a Florida corporation (“HyFuels”) beneficially controlled by our Chief Executive Officer, Dr. Ruggero M. Santilli. Pursuant to the Assignment Agreement, HyFuels irrevocably assigned to the Company all physical assets, intangible assets, accounts receivable, intellectual property, accounting software, billing software, client lists, client prospects, trade secrets, proprietary property, the intellectual and physical property known as intermediate nuclear fusion without radiation, the physical property consisting of seven (7) Hadronic reactors, all copyrights, patents, patent applications, patent assignments, trademarks and anything having commercial or exchange value and the like.
Consideration for the assignment agreements consisted of one million (1,000,000) shares of our common stock that were issued to Dr. Ruggero M. Santilli, as designee for IBR and HyFuels. Company management determined the amount of consideration based upon ASC 845-10-S99 pertaining to transfer of non-monetary assets. According to ASC 845-10-S99, transfers of non-monetary assets to a company by its promoters or shareholders in exchange for stock prior to or at the time of the entity’s initial public offering should be recorded at the transferors’ historical cost basis determined under Generally Accepted Accounting Principles. As such, the cost basis carried on the books and records of HyFuels and IBR was minimal or essentially zero. Therefore, the accounting principles in ASC 845-10-S99 were followed and the Company recorded the intellectual and physical properties at its historical cost basis, which was at the historical cost basis of a nominal amount. In connection with the aforementioned assignment agreements, 1,000,000 shares of our common stock were transferred in exchange for the assets. The transfer was valued at one thousand dollars ($1,000.00), the value of the shares issued at par ($0.001) in exchange for the assets. This amount was determined by the Company to approximate the basis of those assets.
The Company recorded the property and intangibles (7 reactors, intellectual property rights to develop the technology, and website) as an intangible asset. The valuation of the properties was the par value of the stock received in exchange for the rights and assets.
The Company has capitalized the legal expenses associated with filing applications with the United States Patent and Trademark Office. At December 31, 2018, the Company has capitalized $14,320. The Company has recorded $14,320 of impairment loss for the patent application process as of December 31, 2018.
The Company recognized amortization expense of $200 for the year ending December 31, 2018 and 2017. The Company has accumulated amortization of $1,000 as of December 31, 2018.
THUNDER ENERGIES CORPORATION
Notes to Financial Statements
For the periods ending December 31, 2018 and 2017
(continued)
NOTE 5 - CONVERTIBLE NOTE PAYABLE
POWER UP LENDING GROUP
On October 31, 2017; The Company executed a convertible promissory note with Power Up Lending Group, Ltd. The note carries a principal balance of $33,000 together with an interest rate of eight (8%) per annum and a maturity date of August 15, 2018. All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share in accordance with the terms of the note agreement shall be made in lawful money of the United States of America. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid.
On November 30, 2017; The Company executed a convertible promissory note with Power Up Lending Group, Ltd. The note carries a principal balance of $33,000 together with an interest rate of eight (8%) per annum and a maturity date of September 10, 2018. All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share in accordance with the terms of the note agreement shall be made in lawful money of the United States of America. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid.
On January 9, 2018; The Company executed a convertible promissory note with Power Up Lending Group, Ltd. The note carries a principal balance of $28,000 together with an interest rate of eight (8%) per annum and a maturity date of October 15, 2018. All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share in accordance with the terms of the note agreement shall be made in lawful money of the United States of America. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid.
On February 21, 2018; The Company executed a convertible promissory note with Power Up Lending Group, Ltd. The note carries a principal balance of $35,000 together with an interest rate of eight (8%) per annum and a maturity date of November 30, 2018. All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share in accordance with the terms of the note agreement shall be made in lawful money of the United States of America. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid.
On April 5, 2018; The Company executed a convertible promissory note with Power Up Lending Group, Ltd. The note carries a principal balance of $33,000 together with an interest rate of eight (8%) per annum and a maturity date of January 30, 2019. All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share in accordance with the terms of the note agreement shall be made in lawful money of the United States of America. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid.
The holder shall have the right from time to time, and at any time during the period beginning on the date which is one hundred eighty (180) days following the date of this note, to convert all or any part of the outstanding and unpaid principal amount into Common Stock. The conversion shall equal sixty-one percent (61%) of the average of the lowest two (2) trading prices for the Common Stock during the twelve (12) day trading period ending on the latest complete trading day prior to the conversion date, representing a discount rate of forty-five percent (39%).
The Company accounts for this embedded conversion feature as a derivative under ASC 815-10-15-83 and valued separately from the note at fair value. The embedded conversion feature of the note is revalued at each subsequent reporting date at fair value and any changes in fair value will result in a gain or loss in those periods. At December 31, 2018, the derivative liability associated with Power up lending was $0
THUNDER ENERGIES CORPORATION
Notes to Financial Statements
For the periods ending December 31, 2018 and 2017
(continued)
Convertible Notes payable consisted of the following:
NOTE 6 - ACCRUED INTEREST
The Company’s accrued interest consisted of the following:
NOTE 7 - INCOME TAXES
At December 31, 2018, the Company had a net operating loss carry-forward for Federal income tax purposes of approximately $3,781,938 that may be offset against future taxable income through 2035 No tax benefit has been reported with respect to these net operating loss carry-forwards in the accompanying financial statements because the Company believes that the realization of the Company’s net deferred tax assets calculated at the effective rates note below, was not considered more likely than not and accordingly, the potential tax benefits of the net loss carry-forwards are fully offset by the valuation allowance.
Deferred tax assets consist primarily of the tax effect of NOL carry-forwards. The Company has provided a full valuation allowance on the deferred tax assets because of the uncertainty regarding its realizability.
The Company’s tax expense differs from the “expected” tax expense for Federal income tax purposes (computed by applying the United States Federal tax rate of 21% and State tax rate of 3.6% to income before taxes), as follows:
The tax effects of the temporary differences between reportable financial statement income and taxable income are recognized as deferred tax assets and liabilities.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment.
THUNDER ENERGIES CORPORATION
Notes to Financial Statements
For the periods ending December 31, 2018 and 2017
(continued)
For the year ended December 31, 2018 and for the year ended December 31, 2017, the Company has net operating losses from operations. The carry forwards expire through the year 2035. The Company’s net operating loss carry forward may be subject to annual limitations, which could reduce or defer the utilization of the losses as a result of an ownership change as defined in Section 382 of the Internal Revenue Code. A valuation allowance has been applied due to the uncertainty of realization.
The Company’s net deferred tax asset as of December 31, 2018 and December 31, 2017 is as follows:
The Company is currently open to audit under the statute of limitations by the Internal Revenue Service for the period from inception ended December 31, 2014 through the year ended December 31, 2018. The Company recognizes interest and penalties related to income taxes in income tax expense. The Company had incurred no penalties and interest for the period from inception ended December 31, 2014 through the year ended December 31, 2018.
NOTE 8 - SHAREHOLDERS’ EQUITY
COMMON STOCK
The Company has been authorized to issue 900,000,000 shares of common stock, $0.001 par value. Each share of issued and outstanding common stock shall entitle the holder thereof to fully participate in all shareholder meetings, to cast one vote on each matter with respect to which shareholders have the right to vote, and to share ratably in all dividends and other distributions declared and paid with respect to common stock, as well as in the net assets of the corporation upon liquidation or dissolution.
On January 9, 2017 the Company issued 3,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $690.
On January 10, 2017 the Company issued 5,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $1,250.
On January 24, 2017 the Company issued 8,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $2,080.
On January 27, 2017 the Company issued 36,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $10,800.
On February 13, 2017 the Company issued 10,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $2,100.
On March 6, 2017 the Company issued 10,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $3,000.
On April 12, 2017 the Company issued 150,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $22,500.
On May 9, 2017 the Company issued 70,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $5,600.
On June 5, 2017 the Company issued 120,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $10,000.
On June 8, 2017 the Company issued 16,530,769 shares to related parties for conversion of accrued compensation of $991,846, recorded at the fair market value of the share price.
THUNDER ENERGIES CORPORATION
Notes to Financial Statements
For the periods ending December 31, 2018 and 2017
(continued)
On July 7, 2017 the Company issued 120,196 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $8,413.
On July 14, 2017 the Company issued 150,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $13,350.
On September 7, 2017 the Company sold 8,000,000 restricted shares to non-related parties for cash proceeds in the amount of $80,000.
On October 2, 2017 the Company issued 50,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $15,000.
On October 9, 2017 the Company issued 150,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $5,495.
On October 16, 2017 the Company issued 100,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $9,180.
On October 24, 2017 the Company issued 100,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $8,010.
On November 6, 2017 the Company issued 50,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $4,050.
On December 11, 2017 the Company issued 600,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $72,000.
On December 21, 2017 the Company issued 1,260,000 shares to related parties for conversion of accrued compensation of $126,000, recorded at the fair market value of the share price.
On December 27, 2017 the Company issued 75,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $6,045.
On January 12, 2018 the Company issued 200,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $30,000.
On January 16, 2018 the Company issued 150,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $22,500.
On February 12, 2018 the Company issued 40,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $3,216.
On February 15, 2018 the Company issued 100,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $10,000.
On February 23, 2018 the Company issued 100,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $8,810.
On March 15, 2018 the Company issued 100,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $8,500.
On March 29, 2018 the Company issued 75,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $7,117.
THUNDER ENERGIES CORPORATION
Notes to Financial Statements
For the periods ending December 31, 2018 and 2017
(continued)
On March 29, 2018 the Company issued 663,856 shares to related parties for conversion of accrued compensation of $63,000, recorded at the fair market value of the share price.
On April 5, 2018 the Company issued 250,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $19,750.
On April 9, 2018 the Company issued 250,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $17,500.
On April 27, 2018 the Company issued 300,000 shares to a non-related party for services, recorded at the fair market value of the share price, in the amount of $10,050.
On May 2, 2018, the Company issued 840,336 shares, at $0.0119 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $10,000 in principal toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on May 2, 2018 was $0.035 per share.
On May 7, 2018 the Company issued 1,1000,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $34,100.
On May 14, 2018, the Company issued 943,396 shares, at $0.0106 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $10,000 in principal toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on May 14, 2018 was $0.028 per share.
On May 24, 2018, the Company issued 1,041,667 shares, at $0.0096 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $10,000 in principal toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on May 24, 2018 was $0.0161 per share.
On June 4, 2018, the Company issued 2,341,176 shares, at $0.0068 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $14,600 in principal and $1,320 in accrued interest toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on June 4, 2018 was $0.03 per share.
On June 6, 2018, the Company issued 1,738,235 shares, at $0.0068 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $11,820 in principal toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on Jun 6, 2018 was $0.0127 per share.
On June 12, 2018, the Company issued 1,703,125 shares, at $0.0064 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $9,580 in principal and $1,320 in accrued interest toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on June 12, 2018 was $0.0113 per share.
On July 19, 2018, the Company issued 2,010,050 shares, at $0.00597 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $12,000 in principal toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on July 19, 2018 was $0.013 per share.
On July 25, 2018 the Company issued 5,800,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $58,000.
On August 6, 2018, the Company issued 2,181,818 shares, at $0.0055 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $12,000 in principal toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on August 6, 2018 was $0.0124 per share.
On September 18, 2018 the Company issued 4,411,765 shares to non-related party for services, recorded at the fair market value of the share price, in the amount of $30,000.
THUNDER ENERGIES CORPORATION
Notes to Financial Statements
For the periods ending December 31, 2018 and 2017
(continued)
On October 5, 2018 the Company issued 1,000,000 shares to non-related party for services, recorded at the fair market value of the share price, in the amount of $7,400.
On October 8, 2018, the Company issued 2,348,571 shares, at $0.0035 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $7,100 in principal and $1,120 in accrued interest toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on October 8, 2018 was $0.0084 per share.
On October 11, 2018, the Company issued 3,428,571 shares, at $0.0035 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $12,000 in principal toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on October 11, 2018 was $0.012 per share.
On October 17, 2018, the Company issued 3,837,143 shares, at $0.0035 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $13,430 in principal toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on October 17, 2018 was $0.0083 per share.
On October 19, 2018, the Company issued 3,840,000 shares, at $0.0035 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $12,040 in principal and $1,400 in accrued interest toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on October 19, 2018 was $0.0075 per share.
On October 23, 2018, the Company issued 4,272,222 shares, at $0.0036 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $15,380 in principal toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on October 23, 2018 was $0.0071 per share.
On October 26, 2018, the Company issued 3,613,514 shares, at $0.0037 per share, to Power Up Lending Group Ltd., an unrelated party, as reduction of $12,050 in principal and $1,320 in accrued interest toward its convertible note payable. The shares were issued at a discount to the market. Fair Market Value on October 26, 2018 was $0.0089 per share.
On November 12, 2018 the Company issued 1,000,000 shares to non-related party for services, recorded at the fair market value of the share price, in the amount of $11,500.
On November 30, 2018 the Company issued 5,208,333 shares to non-related party for services, recorded at the fair market value of the share price, in the amount of $36,979.
On December 14, 2018, the Company sold 4,353,125 shares to GHS Investments LLC, at $0.00472 per share, for cash proceeds of $20,547. The shares were issued at a discount to the market. Fair Market Value on December 14, 2018 was $0.0069 per share.
On December 31, 2018, our Chief Executive Officer, Dr. Ruggero M. Santilli requested the extinguishment of $250,000 of notes payable due. The Company extinguished $250,000 of notes payable due Dr. Ruggero M. Santilli on December 31, 2018 and booked the offsetting entry to Additional paid-in Capital due to it being a related party transaction.
PREFERRED STOCK
The Company has been authorized to issue 750,000,000 shares of $.001 par value Preferred Stock. The Board of Directors is expressly vested with the authority to divide any or all of the Preferred Stock into series and to fix and determine the relative rights and preferences of the shares of each series so established, within certain guidelines established in the Articles of Incorporation.
Series A: The certificate of designation for the Preferred A Stock provides that as a class it possesses a number of votes equal to fifteen (15) votes per share and may be converted into ten (10) $0.001 par value common shares.
THUNDER ENERGIES CORPORATION
Notes to Financial Statements
For the periods ending December 31, 2018 and 2017
(continued)
On October 10, 2013, the Company issued fifty million (50,000,000) shares of our Series “A” Convertible Preferred Stock (the “Preferred Stock”) to Hadronic Technologies Press, Inc. (“Hadronic”), a Florida corporation maintaining its principal place of business at 35246 US Highway 19 North, Suite #215, Palm Harbor, Florida 34684. Our Directors, Dr. Ruggero M. Santilli and Mrs. Carla Santilli each own fifty percent of the equity in Hadronic. The Series “A” Convertible Preferred Stock has 15 votes per share and is convertible into 10 shares of our common stock at the election of the shareholder. Shares were valued at the par value of the common stock equivalents, $500,000.
At December 31, 2018 and 2017 there were Fifty million (50,000,000) shares of Series A Convertible Preferred Stock issued and outstanding, respectively.
OPTIONS AND WARRANTS
In accordance with employment agreements, common stock options are issued annually to the officers of the Company. The number of shares is determined by the number of shares outstanding at the end of the year at a percentage per the employment agreements, as described below. The strike price is the fair value trading price as of the anniversary date of the employment agreements. The options are based on the number of shares outstanding of the Company at the year end, at an exercise price at market price at the employment agreements annual anniversary, July 25th. As of December 31, 2018, the officers are entitled to 29,887 options, at an average exercise price of $0.2818. There is no expiration date to these options and only vest upon a change in control. The options were valued at $4,695, however no expense has been recognized with the associated options, as no options have vested or are considered by management to probable vest. The options were valued using the Black Scholes Method, using the following assumptions:
There are no other warrants or options outstanding to acquire any additional shares of common stock of the Company as of December 31, 2018.
NOTE 9 - RELATED PARTY TRANSACTIONS
ADVANCES, PAYABLES AND ACCRUALS
Amounts included in accruals represent amounts due to the officers and directors for corporate obligations under the employment agreements. Payments on behalf of the Company and accruals made under contractual obligation are accrued (see below). As of December 31, 2018, and 2017 accrued expenses were $189,000 and $0, respectively.
NOTE PAYABLE
In support of the Company’s efforts and cash requirements, it has relied on advances from the majority shareholders until such time that the Company can support its operations or attains adequate financing through sales of its equity or traditional debt financing. There is no formal written commitment for continued support by shareholders. All advances made in support of the Company are formalized by demand notes, at a 2.15% interest rate.
During the years ended December 31, 2018 and 2017 our Chief Executive Officer, Dr. Ruggero M. Santilli loaned the company $96,880 and $47,700 for operations. During the years ended December 31, 2018 and 2017 the Company repaid the principal amounts by $85,500 and $60,200, respectively.
On December 31, 2018, our Chief Executive Officer, Dr. Ruggero M. Santilli requested the extinguishment of $250,000 of notes payable due. The Company extinguished $250,000 of notes payable due Dr. Rugger M. Santilli on December 31, 2018 and booked the offsetting entry to Additional paid-in Capital due to it being a related party transaction.
At December 31, 2018 and 2017 the demand notes accumulative balances were $281,380 and $520,000, respectively. Accrued interest at December 31, 2018 and 2017 was $43,349 and $33,262, respectively.
THUNDER ENERGIES CORPORATION
Notes to Financial Statements
For the periods ending December 31, 2018 and 2017
(continued)
EQUITY TRANSACTIONS
On July 25, 2013, Dr. Ruggero M. Santilli acquired from Company’s existing shareholders a control block of stock in the Company consisting of two million nine hundred forty thousand (2,940,000) shares of restricted common stock of the Company, in a private equity transaction. Dr. Santilli utilized his own funds to acquire the shares of common stock of the Company. As a result of this acquisition, Dr. Ruggero M. Santilli owns 98% of the issued and outstanding shares of common stock of the Company. On July 25, 2013, Dr. Ruggero M. Santilli and Ms. Carla Santilli were appointed to the Board of Directors of the Company. On July 25, 2013, Dr. Ruggero M. Santilli was appointed President, Chief Executive Officer, Principal Executive Officer and Principal Accounting Officer of the Company. Also on July 25, 2013, Carla Santilli was appointed Secretary and Treasurer for the Company.
On August 11, 2013 the Company issued 1,000,000 shares of common stock in exchange for assignment of non-monetary intangible assets (See Intangible Assets, Note 4).
On October 10, 2013, the Company issued fifty million (50,000,000) shares of our Series “A” Convertible Preferred Stock (the “Preferred Stock”) to Hadronic Technologies Press, Inc. (“Hadronic”), a Florida corporation maintaining its principal place of business at 35246 US Highway 19 North, Suite #215, Palm Harbor, Florida 34684. Our Directors, Dr. Ruggero M. Santilli and Mrs. Carla Santilli each own fifty percent of the equity in Hadronic. The Series “A” Convertible Preferred Stock has 15 votes per share and is convertible into 10 shares of our common stock at the election of the shareholder. Preferred shares issued were valued at $500,000, based on the fair value of the common stock equivalents.
On June 8, 2017 the Company issued 16,530,769 shares to related parties for conversion of accrued compensation of $991,846, recorded at the fair market value of the share price.
On December 21, 2017 the Company issued 1,260,000 shares to related parties for conversion of accrued compensation of $126,000, recorded at the fair market value of the share price.
On March 29, 2018 the Company issued 663,856 shares to related parties for conversion of accrued compensation of $63,000, recorded at the fair market value of the share price.
On December 31, 2018, our Chief Executive Officer, Dr. Ruggero M. Santilli requested the extinguishment of $250,000 of notes payable due. The Company extinguished $250,000 of notes payable due Dr. Ruggero M. Santilli on December 31, 2018 and booked the offsetting entry to Additional paid-in Capital due to it being a related party transaction.
EMPLOYMENT CONTRACTS
The Company has employment contracts with its key employees, the controlling shareholders, who are its officers and directors of the Company.
· Dr. Santilli, 5 year contract, annual salary of $180,000 and annual common stock options for .01% of the outstanding stock per calendar year at the average trading price of the anniversary date, July 25th
· Carla Santilli, 5 year consulting contract, annual salary of $72,000 and annual common stock options for .005% of the outstanding stock per calendar year at the average trading price of the anniversary date, July 25th.
OTHER
The Company does not own or lease property or lease office space. At the current time, the office space used by the Company was arranged by the majority shareholders of the Company to use at no charge. It is anticipated that the Company will enter into formal lease arrangements in the near future.
The amounts and terms of the above transactions may not necessarily be indicative of the amounts and terms that would have been incurred had comparable transactions been entered into with independent third parties.
THUNDER ENERGIES CORPORATION
Notes to Financial Statements
For the periods ending December 31, 2018 and 2017
(continued)
NOTE 10 - COMMITMENTS AND CONTINGENCIES
From time to time the Company may be a party to litigation matters involving claims against the Company. Management believes that there are no current matters that would have a material effect on the Company’s financial position or results of operations.
NOTE 11 - SUBSEQUENT EVENTS
On January 7, 2019 the Company issued 1,800,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $9,000.
On January 25, 2019 the Company issued 2,000,000 shares to non-related parties for services, recorded at the fair market value of the share price, in the amount of $8,800.
On February 6, 2019, the Company sold 4,534,293 shares to GHS Investments LLC, at $0.00304 per share, for cash proceeds of $13,784. The shares were issued at a discount to the market. Fair Market Value on February 6, 2019 was $0.005 per share.
Management has evaluated subsequent events through the date the financial statements were available to be issued, considered to be the date of filing with the Securities and Exchange Commission. Based on our evaluation no events have occurred requiring adjustment to or disclosure in the financial statements.