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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

☒ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the quarterly period ended June 30, 2022

 

☐ Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

 

For the transition period from __________ to __________

 

Commission File Number: 333-174194

  

GRAPHENE & SOLAR TECHNOLOGIES LTD
(Exact name of registrant as specified in its charter)

 

colorado   27-2888719
(State or other jurisdiction of incorporation or organization)   (I.R.S. Employer Identification No.)

 

23 Corporate Plaza Drive, Suite 150 

Newport Beach, CA 92660

(Address of principal executive offices, including Zip Code)

 

(949) 478-8387

(Issuer’s telephone number, including area code)

(formally known as Solar Quartz Technologies Corporation) 

(Former name or former address if changed since last report)

 

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

 

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

 

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

 

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

 

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

 

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

 

As of August 17, 2022, the registrant had 362,823,733 outstanding shares of common stock.

 

 

 

 

GRAPHENE & SOLAR TECHNOLOGIES LIMITED

 

FORM 10-Q

 

TABLE OF CONTENTS

 

PART I — FINANCIAL INFORMATION  
Item 1. Condensed Consolidated Balance Sheets (Unaudited) 3
Item 2. Condensed Consolidated Statements of Operations (Unaudited) 4
Item 3. Condensed Consolidated Statements of Changes in Stockholders’ Deficiency (Unaudited) 5
Item 4. Condensed Consolidated Statements of Cash Flows (Unaudited) 7
Item 5. Management’s Discussion and Analysis of Financial Condition and Results of Operations. 12
Item 6. Controls and Procedures. 15
     
PART II — OTHER INFORMATION 17
Item 1 Legal Proceedings 17
Item 1A Risk Factors 17
Item 2 Unregistered Sales of Equity Securities and Use of Proceeds 17
Item 3 Defaults on Senior Securities 17
Item 4 Mine Safety Disclosures 17
Item 5 Other Information 17
Item 6. Exhibits. 17
     
SIGNATURES 18

 

2 

 

GRAPHENE & SOLAR TECHNOLOGIES LIMITED

CONDENSED CONSOLIDATED BALANCE SHEETS

 

    June 30,   September 30,
    2022
(Unaudited)		   2021
Assets                
Current Assets:                
Cash   $ 3,272     $ 3,728  
Prepaid expenses     18,252       18,797  
Total Current Assets     21,524       22,525  
Other Assets:                
Furniture and equipment, net of depreciation $81,629     1,569       2,250  
Intellectual property – at cost, net of amortization $837,417     6,042,328       6,777,424  
Other intangible assets – at cost     975       975  
Other receivable     2,094        —  
                 
Total Assets   $ 6,068,490     $ 6,803,174  
                 
Liabilities and Stockholders’ Deficit                
Current Liabilities:                
Accounts payable and other payable   $ 2,398,987     $ 2,197,894  
Accrued interest payable     171,476       154,412  
Due to related parties     1,205,635       947,826  
Notes payable – in default     77,223       60,000  
Convertible notes payable, net of discount $52,703 and $100,747 in default     168,967       173,038  
Other loans and payables     5,567       6,383  
Total Current Liabilities     4,027,855       3,539,553  
                 
Total Liabilities   $ 4,027,855     $ 3,539,553  
                 
Stockholders’ Deficit:                
Preferred stock: 10,000,000 shares authorized; $0.00001 par value; no shares issued and outstanding     —       —  
Common stock: 500,000,000 shares authorized; $0.00001 par value; 362,823,733 and 343,237,369 shares issued and outstanding     3,633       3,437  
Additional paid-in capital     62,427,147       49,922,922  
Stock Receivable     (795,000 )     (720,000 )
Accumulated deficit     (59,784,324 )     (46,050,640 )
Accumulated other comprehensive income     189,179       107,902  
Total Stockholders’ Deficit     2,040,635       3,263,621  
                 
Total Liabilities and Stockholders’ Deficit   $ 6,068,490     $ 6,803,174  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

3 

 

GRAPHENE & SOLAR TECHNOLOGIES LIMITED

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME

(Unaudited)

 

                                 
    Three Months Ending June 30   Nine Months Ending June 30
    2022   2021   2022   2021
Revenues   $ —     $ —     $ —     $ —  
                                 
Operating expenses                                
Professional Services     166,256       625,077       12,892,711       4,755,431  
General and administrative     278,762       35,567       829,218       116,917  
Total operating expenses     445,018       660,664       13,721,929       4,872,348  
                                 
Loss from operations     (445,018 )     (660,664 )     (13,721,929 )     (4,872,348 )
                                 
Other income (expense)                                
Other income     7,288       6,656       18,564       11,165  
Interest expense     (4,891 )     (99,267 )     (30,319 )     (129,094 )
                                 
Total other income (expense)     2,397       (92,611 )     (11,755 )     (117,929 )
                                 
Net Income (Loss)   $ (442,621 )   $ (753,255 )   $ (13,733,684 )   $ (4,990,277 )
                                 
Other Comprehensive Income   $ 137,979     $ 16,078     $ 81,277     $ 51,247  
                                 
Net Comprehensive Loss   $ (304,644 )   $ (737,177 )   $ (13,652,409 )   $ (4,939,030 )
                                 
Income (Loss) per share:                                
Basic and diluted   $ (0.00 )   $ (0.00 )   $ (0.04 )   $ (0.02 )
                                 
Weighted average shares outstanding     362,823,733       255,844,773       360,954,236       252,945,462  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

4 

 

GRAPHENE & SOLAR TECHNOLOGIES LIMITED

 

(Formerly Solar Quartz Technologies Corporation)

AND SUBSIDIARY

 

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIENCY

(Unaudited)

 

Three and Nine Months Ended June 30, 2022 and 2021

 

                                Accumulated   Total
    Common Stock   Additional   Stock   Accumulated   Comprehensive   Stockholders’
    Shares   Amount   Paid-in   Receivable   Deficit   Income   Deficit
                             
Balance, September 30, 2021     343,237,369       3,437       49,922,922       (720,000 )     (46,050,640 )     107,902       3,263,621  
Shares issued in connection with the sale of common stock     1,200,000       12       121,909       (75,000 )     —       —       46,921  
Stock-based compensation expense     18,386,364       184       12,382,316       —       —       —       12,382,500  
Foreign currency translation adjustment     —       —       —       —       —       (9,246 )     (9,246 )
Net loss     —       —       —       —       (12,850,758 )     —       (12,850,758 )
Balance, December 31, 2021     362,823,733       3,633       62,427,147       (795,000 )     (58,901,398 )     98,656     $ 2,833,038  
Shares issued in connection with the sale of common stock     —       —       —       —       —       —       —  
Beneficial conversion discount on convertible notes payable             —       —       —       —       —       —  
Stock-based compensation expense     —       —       —       —       —       —       —  
Foreign currency translation adjustment     —       —       —       —       —       (47,456 )     (47,456 )
Net loss     —       —       —       —       (440,305 )     —       (440,305 )
Balance, March 31, 2022     362,823,733       3,633       62,427,147       (795,000 )     (59,341,703 )     51,200     $ 2,345,277  
Shares issued in connection with the sale of common stock     —       —       —       —       —       —       —  
Beneficial conversion discount on convertible notes payable     —       —       —       —       —       —       —  
Stock-based compensation expense     —       —       —       —       —       —       —  
Foreign currency translation adjustment     —       —       —       —       —       137,979       137,979  
Net loss     —       —       —       —       (442,621 )     —       (442,621 )
Balance, June 30, 2022     362,823,733       3,633       62,427,147       (795,000 )     (59,784,324 )     189,179     $ 2,040,635  

 

5 

 

                                Accumulated   Total
    Common Stock   Additional   Stock   Accumulated   Comprehensive   Stockholders’
    Shares   Amount   Paid-in   Receivable   Deficit   Income   Deficit
                             
Balance, September 30, 2020     246,248,723       2,463       9,508,943       —       (11,235,696 )     52,015       (1,672,275 )
Shares issued in connection with the sale of common stock     1,450,000       15       84,723               —       —       84,738  
Stock-based compensation expense     3,100,000       31       404,969       —       —       —       405,000  
Foreign currency translation adjustment     —       —       —       —       —       (82,637 )     (82,637 )
Net loss     —       —       —       —       (639,185 )     —       (639,185 )
Balance, December 31, 2020     250,798,723     $ 2,509     $ 9,998,635       —     $ (11,874,881 )   $ (30,622 )   $ (1,904,359 )
Shares issued in connection with the sale of common stock     —       —       30,476       —       —       —       30,476  
Beneficial conversion discount on convertible notes payable             —       43,475       —       —       —       43,475  
Stock-based compensation expense     3,688,596       37       3,422,463       —       —       —       3,422,500  
Foreign currency translation adjustment     —       —       —       —       —       15,312       15,312  
Net loss     —       —       —       —       (3,597,837 )     —       (3,597,837 )
Balance, March 31, 2021     254,487,319     $ 2,546     $ 13,495,049       —     $ (15,472,718 )   $ (15,310 )   $ (1,990,433 )
Shares issued in connection with the sale of common stock     450,000       5       22,874       —       —       —       22,879  
Shares issued in connection with conversion of notes payable     534,446       7       127,043       —       —       —       127,050  
Stock-based compensation expense     1,100,000       11       480,989       —       —       —       481,000  
Beneficial conversion discount on convertible notes payable     —       —       33,885       —       —       —       33,885  
Foreign currency translation adjustment     —       —       —       —       —       16,078       16,078  
Net loss     —       —       —       —       (753,225 )     —       (753,225 )
Balance, June 30, 2021     256,571,765     $ 2,569     $ 14,159,840       —     $ (16,225,973 )   $ 768     $ (2,062,796 )

  

The accompanying notes are an integral part of these consolidated financial statements.

 

6 

 

GRAPHENE & SOLAR TECHNOLOGIES LIMITED

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

For the Nine-Month Period Ended June 30, 2022 and 2021

(Unaudited)

 

    2022   2021
Cash flows from operating activities                
Net Income (loss)   $ (13,733,684 )   $ (4,990,277 )
Adjustments to reconcile net income/(loss) to net cash from operating activities:                
Stock-based compensation     12,382,500       4,308,500  
Depreciation expense     611       12,403  
Amortization of intangibles     735,096       —  
Amortization of discount     13,943       106,670  
Change in operating assets and liabilities:                
Accounts payable     225,056       191,526  
Accrued interest payable     17,064       21,714  
Other Receivables     (2,094 )     —  
Pre-Payments     —       (15,579 )
Due to related parties     312,045       146,633  
Net cash used in operating activities     (49,463 )     (218,410 )
                 
Cash flows from investing activities                
 Cash paid for purchase of fixed assets     —       (381 )
Net cash used in investing activities     —       (381 )
                 
Cash flows from financing activities                
Proceeds from issuance of common stock     46,921       138,093  
Issuance of short term note payable, net of OID     —       133,785  
Net cash from financing activities     46,921       271,878  
Effect of currency translations to cash flow     2,086       (51,929 )
Net change in cash and cash equivalents     (456 )     1,158  
Beginning of period     3,728       12  
End of period   $ 3,272     $ 1,170  

 

Supplemental cash flow information   Quarter ended June 30,
    2022   2021
Interest paid   $ —     $ —  
Taxes   $ —     $ —  
Noncash investing and financing activities:                
Debt discount on convertible notes     —       77,360  
Conversion of loan principal & accrued interest into shares             127,050  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

7 

 

GRAPHENE & SOLAR TECHNOLOGIES Limited

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

 

NOTE 1 – BASIS OF PRESENTATION

 

These consolidated financial statements of Graphene &Solar Technologies Limited (GSTX or the Company) have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). In the opinion of management, these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair statement of the results for the interim periods. Certain information, accounting policies and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been omitted pursuant to Securities and Exchange Commission (SEC) rules and regulations. These financial statements should be read along with Graphene & Solar Technologies’ audited financial statements as of September 30, 2021.

 

Going Concern – The Company has incurred cumulative net losses since inception of $59,784,322 at June 30, 2022. Accordingly, it requires capital to fund working capital deficits and for future operating activities to take place. The Company’s ability to raise new funds through the future issuances of debt or common stock is unknown. The obtainment of additional financing, the successful development of a plan of operations, and its transition, ultimately, to the attainment of profitable operations are necessary for the Company to continue operations. The ability of the Company to continue its operations is dependent on management’s plans, which include the raising of capital through debt and/or equity markets, with some additional funding from other traditional financing sources, including term notes, until such time that funds provided by operations are sufficient to fund working capital requirements. The Company may need to incur additional liabilities with certain related parties to sustain the Company’s existence. There can be no assurance that the Company will be able to raise any additional capital and therefore raise doubt about the Company’s ability to continue as a going concern.

 

Future issuances of the Company’s equity or debt securities will be required for the Company to finance operations and continue as a going concern. The financial statements do not include any adjustments that may result from the outcome of these uncertainties.

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

 

Principles of Consolidation and Basis of Presentation — The consolidated financial statements include the accounts of Graphene & Solar Technologies Limited and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

 

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and pursuant to the accounting and disclosure rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). A summary of the significant accounting policies applied in the preparation of the accompanying financial statements can be found in the Company’s Annual Report in form 10-K for the year ended September 30, 2021.

 

Use of Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

 

Significant estimates include but are not limited to the estimated useful lives of equipment for purposes of depreciation and the valuation of common shares issued for services, equipment and the liquidation of liabilities.

 

8 

 

Cash and Cash Equivalents – Cash and cash equivalents are carried at cost and represent cash on hand, demand deposits placed with banks or other financial institutions and all highly liquid investments with an original maturity of three months or less as of the purchase date of such investments. As of June 30, 2022 and 2021, the Company had $3,272 and $1,170 in cash, respectively, and no cash equivalents.

 

Derivative Financial Instruments – The Company accounts for freestanding contracts that are settled in a company’s own stock, including common stock warrants, to be designated as an equity instrument or generally as a liability. A contract so designated is carried at fair value on a company’s balance sheet, with any changes in fair value recorded as a gain or loss in a company’s results of operations.

 

The Company records all derivatives on the balance sheet at fair value, adjusted at the end of each reporting period to reflect any material changes in fair value, with any such changes classified as changes in derivatives valuation in the statement of operations. The calculation of the fair value of derivatives utilizes highly subjective and theoretical assumptions that can materially affect fair values from period to period. The recognition of these derivative amounts does not have any impact on cash flows.

 

At the date of the conversion of any convertible debt, the pro rata fair value of the related embedded derivative liability is transferred to additional paid-in capital.

 

There was no derivative activity in fiscal quarter ending June 30, 2022. Therefore, no derivative liabilities were recorded during the quarter ended June 30, 2022.

 

Stock-Based Compensation -ASC 718, “Compensation - Stock Compensation,” prescribes accounting and reporting standards for all share-based payment transactions in which employee and non-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 and non-employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values on the grant date. 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).

 

During the quarter ended June 30, 2022, the Company issued no shares of the Company’s common stock.

 

Total stock-based compensation expense was $12,382,500 and $405,000 for the nine-months ended June 30, 2022, of which $9,485,000 (13,500,000 shares) were issued to directors and considered related parties.

 

Foreign Currency Translations – The functional currency of the Company’s foreign subsidiary is primarily the respective local currency. Assets and liabilities of the Company’s foreign subsidiary are translated into U.S. Dollars at the year-end exchange rate, and revenues and expenses are translated at average monthly exchange rates. Translation gains and losses are recorded as a component of accumulated other comprehensive income (loss) within stockholders’ equity. All other foreign currency transaction gains and losses are included in other (income) expense, net.

 

9 

 

Earnings Per Share - Basic earnings per share have been calculated based upon the weighted-average number of common shares outstanding. Diluted earnings per share were not calculated as such potential shares would be anti-dilutive.

 

Reclassifications - Certain amounts previously presented for prior periods have been reclassified to conform to the current presentation. The reclassifications had no effect on net loss, working capital or equity previously reported.

 

NOTE 3 – NOTES PAYABLE

 

The Company’s indebtedness as of June 30, 2022 and September 30, 2021 were as follows:

Description   June 31,   2022   September 30, 2021
         
Convertible notes   $ 168,967     $ 168,967  
Notes Payable   $ 77,912     $ 60,000  
Other loans     5,567       5,623  

 

Notes Payable and Other Loans

 

During 2015 and 2016, the Company executed promissory notes payable with six individuals with an aggregate principal balance of $60,000. The notes were due on demand and included interest at 10%. As of June 30, 2022 and September 30, 2021, the total promissory notes payable balance was $99,701 and $96,710 including accrued interest of $39,701 and $36,710, respectively. On January 15, 2019, the holder of a note with a principal balance of $10,000 made demand for payment. To date, the note has not been paid.

 

During the year ended September 30, 2020 a Company Advisor, loaned the Company $5,781. The loan is a demand note at zero interest.

 

Convertible Notes Payable

 

As of June 30, 2022 and September 30, 2021, noteholders representing $70,747 in outstanding principal had not requested the exchange of shares of common stock. As of June 30, 2022 and September 30, 2021, the exchange obligation payable was $168,967.46 and $158,285.37 including accrued interest of $95,475 and $48,493, respectively. As of June 30, 2022 and September 30, 2021, the exchange obligation was for 49,419 shares and 47,820 shares of common stock, respectively.

 

On February 1, 2016, the Company issued convertible secured note payable of $30,000 to an individual. The note was due on January 31, 2017 and included interest at 10%. The note was convertible at discretion of the holder into common shares of the Company at the rate of $0.50 per shares. The Company has not extended the maturity date and the note is in default. As of June 30, 2022 and September 30, 2021, the total convertible note payable balance was $48,493 and $46,997, including accrued interest of $18,493 and $16,997 respectively. As of June 30, 2022 and 2021, the exchange obligation was for 96,986 shares and 93,995 shares of common stock, respectively.

 

On December 5, 2019, the Company issued a convertible note payable in the amount of $68,220. The convertible note bear interest at 10% and matures on December 5, 2021 the principal and accrued interest of this convertible note can be converted at the discretion of the holder into common shares at 45% discount to the ADR 20 days prior to notification of conversion. The majority shareholder agreed to increase authorized shares, if needed, in order to settle this debt. This note was discounted for the full amount and the amount of amortization during the period was $0.

 

NOTE 4- RELATED PARTY

 

PGRNZ Limited, a management company controlled by the Company’s Chief Executive Officer, and a Company Director, provides management services to the Company for which the Company is charged $75,000 (AUD) quarterly, approximately $54,450 (US). During the three months ended June 30, 2022 and 2021, the Company incurred charges to operations of $13,068 (US) and $16,888 (US), respectively, with respect to this arrangement.

 

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As of June 30, 2022 and September 30, 2021, accrued expenses due to PGRNZ and other related parties was $1,205,635 and $947,826 respectively.

 

During nine-months period ended June 30, 2022, the Company approved and issued 10,000,000 shares ($7,000,000) to Rod Young who became a related party during first quarter reporting period. The shares were approved, issued, and fully expensed during that period.

 

During nine-months period ended June 30, 2022 and 2021, stock-based compensation expense relating to directors, officers, affiliates and related parties was $2,485,000 (3,500,000 shares) and $1,030,150 (2,000,000 shares), respectively.

 

NOTE 5 – STOCKHOLDERS’ EQUITY

 

Other than for Stock based compensation (see Note 2), 1,200,000 new common shares were issued during the nine- month period ending June 30, 2022 for net proceeds totaling $46,921.

 

The Company has a total of 5,778,366 shares that remain approved, reserved and outstanding and not yet issued by the Transfer Agent at June 30, 2022

 

NOTE 6 – COMMITMENTS & CONTINGENCIES

 

Contingencies

 

From time to time, we may be involved in routine legal proceedings, as well as demands, claims and threatened litigation that arise in the normal course of our business. The ultimate amount of liability, if any, for any claims of any type (either alone or in the aggregate) may materially and adversely affect our financial condition, results of operations and liquidity. In addition, the ultimate outcome of any litigation is uncertain. Any outcome, whether favorable or unfavorable, may materially and adversely affect us due to legal costs and expenses, diversion of management attention and other factors. We expense legal costs in the period incurred. We cannot assure you that additional contingencies of a legal nature or contingencies having legal aspects will not be asserted against us in the future, and these matters could relate to prior, current or future transactions or events. As of June 30, 2022, there were no pending or threatened litigation against the Company.

 

NOTE 7 – INTANGIBLE ASSETS/PATENTS

 

We capitalize external costs, such as filing fees and associated attorney fees, incurred to obtain issued patents and patent license rights. We expense costs associated with maintaining and defending patents subsequent to their issuance in the period incurred. We amortize capitalized patent costs for internally generated patents on a straight-line basis for 7 years, which represents the estimated useful lives of the patents. The seven-year estimated useful life for internally generated patents is based on our assessment of such factors as: the integrated nature of the portfolios being licensed, the overall makeup of the portfolio over time, and the length of license agreements for such patents. The estimated useful lives of acquired patents and patent rights, however, have been and will continue to be based on a separate analysis related to each acquisition and may differ from the estimated useful lives of internally generated patents. The average estimated useful life of acquired patents is 6.7 years. We assess the potential impairment to all capitalized net patent costs when events or changes in circumstances indicate that the carrying amount of our patent portfolio may not be recoverable.

    June 30, 2022   June 30, 2021
Patents     6,879,745       —  
Accumulated amortization     (837,417 )     —  
Total patent costs, net     6,042,328       —  

 

NOTE 8 – SUBSEQUENT EVENTS

 

The Company has evaluated events occurring subsequent to June 30, 2022 through to the date these financial statements were issued and has identified no additional events requiring disclosure.

 

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND PLAN OF OPERATION

 

The following discussion of our financial condition and results of operations should be read in conjunction with our financial statements and the related notes, and other financial information included in this Form 10-Q.

 

Our Management’s Discussion and Analysis contains not only statements that are historical facts, but also statements that are forward-looking. Forward-looking statements are, by their very nature, uncertain and risky. Although the forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by them. Consequently, and because forward-looking statements are inherently subject to risks and uncertainties, the actual results and outcomes may differ materially from the results and outcomes discussed in the forward-looking statements. You are urged to carefully review and consider the various disclosures made by us in this report as we attempt to advise interested parties of the risks and factors that may affect our business, financial condition, and results of operations and prospects.

 

FORWARD LOOKING STATEMENTS

 

The information contained in this Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties, including among other things, statements regarding our capital needs, business strategy and expectations. Any statement which does not contain a historical fact may be deemed to be a forward-looking statement. In some cases, you can identify forward-looking statements by terminology such as “may”, “will”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential” or “continue”, the negative of such terms or other comparable terminology. In evaluating forward looking statements, you should consider various factors outlined in our Form 10-K report for the year ended September 30, 2021, filed with the U.S. Securities Exchange Commission (“SEC”) and, from time to time, in other reports we file with the SEC. These factors may cause our actual results to differ materially from any forward-looking statement. We disclaim any obligation to publicly update these statements or disclose any difference between our actual results and those reflected in these statements.

 

Overview

 

We are primarily focused on the early development of new graphene enabled photovoltaic solar modules, including graphene enabled covered thin-film solar panels. In this production initiative, we entered into a non-binding Letter of Intent for a joint venture with NanoGraphene, Inc. (doing business as GrapheneCA), a New York based manufacturer with five years’ experience in the manufacture of pure graphene and of the development of newly evolving graphene enhanced high-tech applications, to jointly develop graphene enhanced solar solutions. Of substantial importance, the principal of GrapheneCA has twelve years of experience in the design, construction and establishment of numerous thin film solar production factories through-out the U.S., Europe and Asia. As of June 30,2022, the joint venture has not been formed nor have there been any operations related to the joint venture.

 

The development of graphene enhanced combination silicon materials is currently one of the most intensive areas of research and development, attracting major interests from most world University research divisions and new technology players. Massachusetts Institute of Technology has actually manufactured graphene solar panels.

 

US Thin-Film Corporation (USTFC) was registered in April 2021 in the State of Nevada USA as a wholly owned subsidiary of Graphene & Solar Technologies Limited. On August 23 2021, the Company closed a Share Sale and Purchase Agreement through its wholly owned subsidiary, US Thin-Film Corporation with CIMA Nanotech Holdings Limited, “CNHL”, (a Cayman Island Registered company) to acquire its wholly owned subsidiary company Cima Specialty Materials Ltd and its wholly owned subsidiary companies, one of which holds the valuable portfolio of patents.

 

The portfolio includes several unique and specialized patents, patent applications and new inventions. They cover proprietary transparent conductive thin-film patented technologies from (1) basic manufacturing, (2) chemical formulation, (3) coating processes,(4) final product construct, to (5) transparent conductive thin film technology. Confirming the acquired patent assets as being extremely valuable for US Thin-Film Corporation and its parent, GSTX.

 

12 

 

Operational Overview.

 

GRAPHENE - HIGH PURITY MANUFACTURING – This facility will focus on establishing high efficiency and volume graphene production facilities to achieve high-quality, eco-friendly, and scalable graphene production in 2022/3. This initial factory will produce 1.5 tonnes per month (expanding to 12 tonnes +) of medical grade and industrial graphene suitable for applications such as cement 3D printing resin- coatings, epoxy resins and composites, as well as high-end medical connections of brain stem cells and lenses.

 

GREEN HYDROGEN PRODUCTION & AMBIENT AIR – WATER HARVESTING - Water scarcity is at the center of the world’s most significant challenges. The United Nations estimates approximately 30% of the world’s population will face severe water shortages by 2025. Management of the Company has developed a unique proprietary water harvesting technology utilizing modular, self-contained units that can be solar or grid powered, and deployed in urban and rural environments. The water harvester will extract moisture from the ambient air and collect as 100% pure fresh water. Each domestic water harvester will be capable of generating 30-50 liters (8-13 gal) of pure fresh water per day for personal use, with commercial models collecting up to 50,000 liters (13,000 gal) initially per day. The 100% pure H20 extracted from the atmosphere is also the perfect feed stock for the extraction of pure green hydrogen which is also planned as a major production initiative of a production facility complex.

 

Graphene Material.

 

Graphene, a new material, was discovered in 2004 by two UK based Russian university professors who were awarded the Nobel Prize in 2010 for their discovery. Graphene is a 2D material, (one atom thickness) made from graphite/carbon atoms, and whilst still largely unknown to the world is rapidly becoming a new industrial revolution in its own right with more than 8,800 patent applications for graphene and graphene enabled product applications having been filed recently. We have taken an early-stage leading-edge position in this evolving new technological field of graphene enabling and enhancement, specifically to focus upon development of graphene enabled photovoltaic solar panels. Subject to available capital we plan to work with GrapheneCA and other graphene developers to develop a new range of graphene enhanced thin-film solar module associated applications.

 

Graphene is the world’s thinnest and strongest material ever, with remarkable electrical, thermal and optical properties being the most conductive material ever scientifically measured. A sheet of graphene material is only one single atom in thickness and is referred to as a 2D nano-material having almost no measurable depth, only length and width. Graphene is also highly transparent and can be easily flexed and stretched 25% of its size without breaking. However, it is also 200 times stronger than steel and harder than a diamond. It is said that it would take the weight of an elephant balanced on a needlepoint to break through a single one-atom thick graphene sheet. Graphene material is completely impermeable, even a helium atom (the smallest) cannot pass through graphene. The advent of graphene and the introduction of the extraordinary benefits from combining graphene with existing solar industry materials to thereby create an entirely new range of solar grade materials with dramatically increased attributes and properties not previously believed possible before the advent of graphene is therefore of vital importance to the company.

 

Our main focus remains dedicated to our original premise of developing new leading-edge technologically advanced solar materials and applications, many of which when combined with graphene will ultimately expand the horizons of what is now possible relevant to the generating capacity of solar panels to sensitivity levels not achievable before the invention of graphene. Researchers have already established that the combination of graphene with existing solar materials and solar panel applications can increase the generating efficiency for conventional solar panels from 10%-12% sensitivity in thin-film solar applications, to recently achieved 17% -22% plus.

 

Subject to available funding this combination of existing solar industry materials, and silicon combined with graphene will also greatly benefit our company in ultimately achieving our sales revenues and profitability targets for the benefit of our stockholders.

 

13 

 

There are thousands of additional unique attributes and properties that make graphene a highly versatile material wit seemingly amazing properties similar to no material other with significant undeveloped potential. The number and variations of possible applications is virtually limitless, including graphene solar panels, graphene super capacitors (game changing graphene batteries that can recharge 5 to 10 times more quickly) than lithium-ion batteries, and cost-effective highly efficient water filtration and purification systems. Researchers have demonstrated graphene-based transistors, flexible networks, quantum dots, spintronic devices, integrated circuits and semiconductor as well as DNA sequencers and drug delivery applications. Adding 1% graphene to plastic makes it electronically conductive.

 

Results of Operations

 

For the fiscal quarters ended June 30, 2022 and 2021, we generated no revenues, and thus no cost of sales or gross profits.

 

For the fiscal quarters ended June 30, 2022 and 2021, we incurred $445,018 and $660,644 respectively in operating expenses.

 

For the fiscal quarter ended June 30, 2022 we recorded other expenses of $4,891, while in the fiscal quarter ended June 30, 2021, we incurred expenses of $99,267; both items are represented by accrued interest on debt. Other income of $7,288 was earned in the fiscal quarter, June 30, 2022.

 

For the nine months ended June 30, 2022, we reported net loss before taxes of $13,733,684 while in the nine months ended June 30, 2021, we reported a net loss before taxes of $4,990,277. Since there were no tax obligations in either year, net income / loss in each year was the same as that reported before taxes.

 

For the periods ended June 30, 2022 and June 30, 2021, our cash positions were $3,272 and $1,170 respectively.

 

As of June 30, 2022, we had total current liabilities of $4,027,855 while as of September 30, 2021, we had total current liabilities of $3,539,553 an increase of about 14%. Accrued interest payable increased from $154,412 to $171,476 all attributable to accruals on the loans and the convertible notes payable.

 

Liquidity and Capital Resources

 

As of June 30, 2022, we had $21,524 in total current assets and $4,027,855 in total current liabilities. Accordingly, we had a working capital deficit of $4,006,331.

 

Operating activities used $49,463 in cash for the quarter ended June 30, 2022, as compared to $218,410 for the quarter ended June 30, 2021.

 

14 

 

Off-Balance Sheet Arrangements

 

There are no off-balance sheet arrangements.

 

Critical Accounting Policies and Estimates

 

For a discussion of our accounting policies and related items, please see the Notes to the Financial Statements, included in Item 1.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

 

Not applicable.

 

ITEM 4. CONTROLS AND PROCEDURES.

 

Evaluation of Disclosure Controls and Procedures

 

An evaluation was carried out under the supervision and with the participation of our management, including our Principal Executive and Interim Financial Officer, of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report on Form 10-Q. Disclosure controls and procedures are procedures designed with the objective of ensuring that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, such as this Form 10-Q, is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and is communicated to our management, including our Principal Executive [and Financial Officer], or persons performing similar functions, as appropriate, to allow timely decisions regarding required disclosure. Based on that evaluation, our management concluded that, as of December 31, 2020, our disclosure controls and procedures were not effective.

 

Management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2020, based on the framework established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013 (“COSO”).

 

As of period covered by this Quarterly Report on Form 10-Q, we have concluded that our internal control over financial reporting was ineffective. The Company’s assessment identified certain material weaknesses which are set forth below:

 

Functional Controls and Segregation of Duties

 

Because of the Company’s limited resources, there are limited controls over information processing.

 

There is an inadequate segregation of duties consistent with control objectives. Our Company’s management is composed of a small number of individuals resulting in a situation where limitations on segregation of duties exist. In order to remedy this situation, we would need to hire additional staff to provide greater segregation of duties. Currently, it is not feasible to hire additional staff to obtain optimal segregation of duties. Management will reassess this matter in the following year to determine whether improvement in segregation of duty is feasible.

 

Accordingly, as the result of identifying the above material weakness we have concluded that these control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis by the Company’s internal controls.

 

15 

 

Management’s Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting and for the assessment of the effectiveness of internal control over financial reporting. As defined by the Securities and Exchange Commission, internal control over financial reporting is a process designed by, or under the supervision of our Principal Executive and Financial Officer and implemented by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements in accordance with U.S. generally accepted accounting principles.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Roger May, our Principal Executive Officer, evaluated the effectiveness of our internal control over financial reporting as of December 31, 2020 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or the COSO Framework (2013). Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of those controls.

 

Changes in Internal Control Over Financial Reporting

 

There was no change in our internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Management has addressed the underlying causes for our weaknesses in internal control since early FY 2020. Our efforts to raise both debt and equity capital soon will allow us to undertake additional engagement of external independent consultants to assist with the processing of data and drafting financial reports on a timely basis in future reporting periods.

 

16 

 

PART II

 

ITEM 1. LEGAL PROCEEDINGS

 

None.

 

ITEM 1A. RISK FACTORS

 

Our business is subject to numerous risks and uncertainties including but not limited to those discussed in “Risk Factors” in our annual report on Form 10-K.

 

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

 

Please see Note 5 to our Financial Statements.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

None.

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6. EXHIBITS

 

Exhibits

 

31.1 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
31.2 Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
32 Certification pursuant to Section 906 of the Sarbanes-Oxley Act.

 

17 

 

SIGNATURES

 

Pursuant to the requirements 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.

 

  GRAPHENE & SOLAR TECHNOLOGIES LIMITED
     
Date: August 18, 2022 By: /s/ Roger May
    Chief Executive Officer and Director

 

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