MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
Please read the following discussion of our financial condition and results of
operations in conjunction with financial statements and notes thereto, as well
as the "Risk Factors" and "Description of Business" sections included elsewhere
in this Annual Report. The following discussion contains forward-looking
statements that reflect our plans, estimates and beliefs. Our actual results
could differ materially from those discussed in the forward-looking statements.
Factors that could cause or contribute to these differences include those
discussed below and elsewhere in this Annual Report, particularly in "Risk
Factors".
Overview
CarbonMeta Technologies, Inc. (f/k/a CoroWare, Inc.) ("CarbonMeta", the
"Company", "we", "us", or "our") is a publicly quoted environmental research and
development company that is commercializing technologies for processing organic
wastes into hydrogen and high-value carbon products economically and
sustainably.
The Company was incorporated on July 8, 2001, under the laws of the State of
Delaware, as SRM Networks, Inc. In connection with the acquisition of Hy-Tech
Computer Systems, Inc. on January 31, 2003, the Company changed its name to
Hy-Tech Technology Group, Inc. In connection with the Agreement and Plan of
Merger Robotics Workspace Technology, Inc., Innova Holdings, Inc. and the
Company's wholly owned subsidiary, RWT Acquisition, Inc., dated July 21, 2004,
the Company's name changed to Innova Holdings, Inc. Subsequently, on November
20, 2006, the Company changed its name to Innova Robotics and Automation, Inc.
and then on April 23, 2008, the Company changed its name to CoroWare, Inc. On or
about July 28, 2021, the Company filed Articles of Amendment to its Amended and
Restated Certificate of Incorporation with the State of Delaware to reflect a
name change from CoroWare, Inc. to CarbonMeta Technologies, Inc.
The Company was a reporting company with the Securities and Exchange Commission
until October 2016, when the Company's gross margins and financing costs became
unsustainable. In 2020, the Company began investigating emerging technologies
and sustainable growth business opportunities related to the production of
hydrogen and high value carbon products from organic waste streams. After
careful consideration of the potential market opportunities and the partnership
with Oxford University, the Company took the decision to raise capital in the
public market and therefore become an SEC reporting company again.
The Company has six wholly-owned subsidiaries: CoroWare Technologies, Inc.
("CTI"), CoroWare Robotics Solutions, Inc. ("CRS"), Robotic Workspace
Technologies, Inc. ("RWT"), Carbon Source, Inc. ("CS"), CoroWare Treasury, Inc.
("CWT"), and CarbonMeta Research Ltd. ("CMR"). The Company has two majority
owned subsidiaries: a 50.1% interest in CarbonMeta Green Building Materials, LLC
(joint venture with Salvum Corporation)("CMGBM") and a 51% interest in AriCon,
LLC ("AriCon").
CoroWare Technologies ("CTI") was incorporated in the State of Florida on May
16, 2006 and its principal business was a software professional services company
with a strong focus on information technology integration and robotics
integration, business automation solutions, and unmanned systems solutions to
its customers in North America and Europe.
CoroWare Robotics Solutions, Inc. ("CRS") was incorporated in the State of Texas
on February 27, 2015, and its principal business was as a technology incubation
company whose focus was on the delivery of mobile robotics and IOT products,
solutions and services for university, government and corporate researchers, and
enterprise customers. CRS's business operations were discontinued in October
2016 when the Company's gross margins and financing costs became unsustainable.
Robotic Workspace Technologies, Inc. ("RWT") was incorporated in the State of
Florida on July 1, 1994, and its principal business was developing and marketing
open-architecture PC controls and related products that could improve the
performance, applicability, and productivity of robots and other automated
equipment. RWT's business operations were discontinued in September 2007 when
the Company's losses became unsustainable.
Carbon Source, Inc. ("CS") was incorporated in the State of Wyoming on June 14,
2021 and its principal business is waste reclamation technologies and
processing.
CoroWare Treasury, Inc. ("CWT") was incorporated in the State of Wyoming on July
6, 2021 and its principal business is acquisitions related to acquiring
technologies and subsidiary businesses related to waste processing.
CarbonMeta Research Ltd. ('CMR") was incorporated in England and Wales on August
12, 2021 and its principal business will focus on the development of
technologies and solutions for processing organic wastes and generating
economically sustainable hydrogen and high-value carbon products. Using
proprietary and patented technologies, it plans to implement new industrial
methods using inexpensive, environmentally friendly catalysts that process
collected plastic waste material into high value products such as hydrogen gas,
graphene and carbon nanotubes.
CarbonMeta Green Building Materials, LLC ("CMGBM") is a joint venture with
Salvum Corporation organized on August 30, 2022 to develop and market
construction mix products that are carbon negative (see Production Agreement
below).
AriCon, LLC ("AriCon) was a joint venture that was intended to develop mobile
robot platforms, applications, and solutions for the construction industry. In
October 2016, AriCon ceased operations of all subsidiary business operations
when the Company's losses became unsustainable, and the Company was not able to
obtain investment financing.
In 2021, the Company began investigating emerging technologies, strategic
intellectual property partnerships, and sustainable growth business
opportunities related to the production of hydrogen and high value carbon
products from organic waste streams. Working cooperatively with Oxford
University Innovation, CarbonMeta plans to implement proven and patented
technologies to add value to organic waste streams. By utilizing these proven
proprietary technologies, collected and captured plastic waste material can be
upcycled to high value products such as carbon nanotubes ("CNTs") and hydrogen
gas.
CNTs can be used for improved electrical conduction and reinforcing materials
that are used in a wide variety of industries including the automotive industry,
aviation industry, medical industry, and construction. The number one growth
driver is the increasing need for high performance batteries for the electric
vehicle market.
Plastic waste is a cheap and abundant feedstock that will allow the Company to
scale quickly and produce hydrogen gas for a competitive price.
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License Agreements
Oxford University Innovation Limited
On June 2, 2021, the Company (the "Licensee") entered into a License Agreement
(the "Agreement") with Oxford University Innovation Limited (the "Licensor").
Under the terms of the Agreement, the Licensee will license the licensed
technology (OUI Project- Hydrogen from plastics via microwave-initiated
catalytic dehydrogenation). The Agreement is non-exclusive and includes the
United States and European Union. Signing fees for the Agreement were £54,807
and have been paid in full by the Company. The Royalty Rate is 5% of gross
sales. The Agreement comprises milestone fees as: (i) £20,000 upon the first
commercial sale of a licensed product; (ii) £50,000 upon generating $1,000,000
in sales; (iii) £10,000 upon the successful grant of the US patent; and (iv)
£10,000 upon the successful grant of the EU patent. Whether the company realizes
product sales or not, the Company is subject to a minimum payment to Oxford
University Innovation of £5,000 per year for license years 1 and 2, £3,000 for
license year 3 and £1,000 for license year 4 and each license year thereafter.
The process that the Company licensed from Licensor for producing hydrogen and
carbon products from waste plastics has not been demonstrated on a larger scale.
It is not yet known whether the process will be cost-effective or profitable to
implement on a larger scale. The Company has conducted tests to prove the
percentage of carbon nanotubes up to 10 grams. The Company is working with a
microwave reactor company to help demonstrate this process at a scale of 100
kilograms and 1,000 kilograms per day.
The Company has met the following milestones of its development plan set forth
in the license agreement with Oxford University Innovation:
? September 2021: established subsidiary in Oxford, United Kingdom
? March 2022: produced 0.025 kilograms per day of marketable carbon nanotubes
Oxford University Innovation may terminate the license due to the company not
using commercially reasonable efforts to develop, exploit and market the
licensed technology in accordance with the development plan.
From July 2022 to present (see Service Award below), CarbonMeta Technologies has
been working with University of Oxford on a project with a global multi-energy
provider based in Europe to assess the feasibility of processing mixed plastic
waste into clean hydrogen fuel and value-added carbon products using microwave
catalysis on a large commercial scale.
Ecomena Limited
On December 2, 2021, the Company ("Licensee") entered into a License of
Agreement (the "Agreement") with Ecomena Limited (an entity located in the
United Kingdom) ("Licensor"). Under the terms of the Agreement, the Licensee
will license the Licensed Technology to recycle industrial byproduct into cement
free pavers and mortars that are environmentally friendly and continuously
absorb carbon dioxide. The signing fees payable to the Licensor under the
Agreement are £20,000 cash (approximately $27,247 at February 17, 2022) of which
£10,000 has been paid by the Licensee, and 160,000,000 shares of the Company's
common stock, which was delivered to the Licensor on February 17, 2022. The
royalty rate payable to the Licensor is 5% of product sales, subject to a
minimum of £5,000 per year for license years 1 and 2, £3,000 for license year 3
and £1,000 for license year 4 and each license year thereafter. The term of the
Agreement is five years from December 2, 2021 to December 2, 2026. The Licensee
may terminate the Agreement for any reason at any time provided it gives
Licensor six (6) months written notice to terminate expiring after December 2,
2024. If requested by the Licensee, the Licensor shall agree to the Agreement
continuing in force after December 2, 2026. As of the date of this filing, the
Agreement is still in effect.
Production Agreement
On January 11, 2022, the Company entered into an Interim Joint Product
Development and Sales Representation Agreement (the "Agreement") with Salvum
Corporation. Under the terms of the Agreement, the parties agree to work
together to develop both CarbonMeta's proprietary cementless paver products
known as "Cementless Paver" and Salvum's proprietary concrete alternative
products known as "EarthCrete." During the Term, Salvum agrees to manufacture
CarbonMeta's proprietary cementless paver products known as "Cementless Paver".
CarbonMeta reserves the right to appoint other manufacturers of the products
and/or to engage other sales representatives for CarbonMeta's proprietary
cementless paver products known as "Cementless Paver" outside the United States
of America. Although the Interim Joint Product Development and Sales
Representation Agreement with Salvum Corporation had a term of 180 days and
expired on July 11, 2022, the companies continued to work together, and the
companies formed CarbonMeta Green Building Materials, LLC ("CMGBM") and signed
an Operating Agreement for Management of CMGBM on August 28, 2022 that
supersedes the Interim Joint Product Development and Sales Representation
Agreement.
The Operating Agreement for Management of CMGBM (the "CMGBM Agreement") provides
for (1) the allocation of 501 Managing Membership units (50.1%) to CarbonMeta
Technologies, Inc. ("COWI") and 499 Managing Membership units (49.9%) to Salvum
Corporation, (2) COWI capital contributions to CMGBM of (a) 250,000,000 shares
of COWI common stock and (b) the assignment of the Ecomena Limited license
agreement, and (3) Salvum Corporation capital contributions to CMGBM of (a)
existing EarthCrete customer list and sales pipeline, and (b) license to use
EarthCrete trademark worldwide. The CMGBM Agreement also provides that profits
and losses (and distributions) of CMGBM shall be allocated on the basis of each
Managing Member's relative capital accounts and that a Managing Member may
withdraw from CMGBM upon not less than six months prior written notice to each
non-withdrawing Managing Member. As of December 31, 2022, the above capital
contributions provided for in the CMGBM Agreement had not occurred and no
significant operations of CMGBM had commenced.
Service Award
On June 10, 2022, our subsidiary, CarbonMeta Research Ltd. ("CMR"), was granted
a Service Award (entitled "Waste Plastic Catalysis Proof of Concept") from a
European global energy supplier. The award provides for CMR to provide the
customer with an initial prototype process for converting mixed waste plastic to
hydrogen and solid carbon and for the customer to pay CMR a total of 50,000
Euros in four installments as certain milestones are met. As of September 30,
2022, all of the milestones had been met by CMR and CMR had invoiced the
customer the full 50,000 Euros ($49,542), of which $40,103 was collected in the
third quarter 2022 and $9,439 has been collected in the fourth quarter 2022.
In October 2022, CMR was granted a second Service Award for 50,000 Euros to
provide the customer with further details on the composition of the carbon
products resulting from the microwave catalysis of waste plastics. In December
2022, CMR invoiced the customer for 20,000 Euros, which was collected in January
2023. The project is expected to reach completion in June 2023.
The below discussions are as of the date stated (unless specifically noted
otherwise) and should be read in conjunction with financial statements and notes
thereto for the applicable period referenced. These discussions may include
information that has since changed and may not be consistent with other sections
of this Annual Report.
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Results of Operations:
For the years ended December 31, 2022 versus December 31, 2021:
31-Dec-22 31-Dec-21 $ Change
Gross revenue $ 76,276 $ - $ 76,726
Operating expenses 803,501 428,502- 374,999
Loss from operations (727,225 ) (428,502 ) 298,723
Other Income (expense) 1,127,657 8,697,449 (7,569,792 )
Net Income 400,432 8,268,947 (7,868,515 )
Net income per share - basic and diluted $ 0.00 $ 0.00 $ 0.00
Revenues
For the year ended December 31, 2022, revenues were $76,276 compared to revenues
of $- during the year ended December 31, 2021. For the year ended December 31,
2022, the Company had two customers. The first is a European global energy
industry for whom we are in a technology assessment project to evaluate our
microwave catalysis process for mixed waste plastics. The Company has a
contractual agreement with this customer for the technology assessment project.
The second is a construction contractor with expertise in the deployment of
solar farm systems. The Company has a Interim Joint Product Development and
Sales Representation Agreement with this customer, and the companies
subsequently signed a Joint Venture Agreement on August 28, 2022 that supersedes
the Interim Joint Product Development and Sales Representation Agreement. For
the year ended December 31, 2021, the Company had no customers.
Operating Expenses
For the years ended December 31, 2022 and 2021, operating expenses were $803,501
and $428,502, respectively. For the year ended December 31, 2022, operating
expenses were largely attributable to legal and professional fees of $284,502,
accrued executive compensation of $150,000 and investor relation fees of
$72,774.
We anticipate that our cost of revenues will increase in 2023 and for the
foreseeable future as we continue to identify potential acquisitions, joint
ventures and licensing opportunities.
We incurred $20,193 and $0 in research and development expenses during the years
ended December 31, 2022 and 2021, respectively.
We incurred $150,000 and $150,000 in compensation expenses during the years
ended December 31, 2022 and 2021, respectively. The Company anticipates that it
will need to expand its management team with future acquisitions or joint
ventures.
Loss from Operations
For the years ended December 31, 2022 and 2021, loss from operations was
$727,225 and $428,502, respectively.
Other Income (Expenses)
For the years ended December 31, 2022 and 2021, other income (expenses) was
$1,127,657 and $8,697,449, respectively. During the year ended December 31,
2022, other income (expenses) were largely attributable to a gain on derivative
liability of $2,247,918 offset by interest expense of ($1,113,261).
Net Income (Loss)
For the years ended December 31, 2022 and 2021, net income was $400,432 and
$8,268,947, respectively. The decrease in net income for the year ended December
31, 2022 was largely attributable to a gain on derivative liability of
$9,809,916 for the year ended December 31, 2021.
Liquidity and Capital Resources
For the Years Ended
December 31,
2022 2021
Cash (used in) provided by:
Operating Activities $ (299,197 ) $ (429,392 )
Investing Activities - (126,380 )
Financing Activities 281,556 566,345
Net increase in cash and restricted cash $ (10,194 ) $ 10,573
For the years ended December 31, 2022 and 2021, net cash (used in) operating
activities was ($299,197) and ($429,392), respectively. The decrease in net cash
(used in) operating activities for the year ended December 31, 2022 was largely
attributable to net income of $400,432, accounts payable and accrued expenses of
$1,238,306, offset by a gain from derivative liabilities of ($2,247,918).
For the years ended December 31, 2022 and 2021, net cash (used in) investing
activities was $- and ($126,380), respectively.
For the years ended December 31, 2022 and 2021, cash provided by financing
activities was $281,556 and $566,345, respectively. The decrease in net cash
provided from financing activities for the year ended December 31, 2022 was
largely attributable to a decrease in net proceeds from the sale of common stock
as compared to the year ended December 31, 2021.
At December 31, 2022, we had current assets of $24,061, current liabilities of
$24,810,798, a working capital deficit of $24,786,687 and an accumulated deficit
of $64,003,956.
At December 31, 2021, we had current assets of $40,573, current liabilities of
$26,046,833, a working capital deficit of $26,006,260 and an accumulated deficit
of $64,404,388.
Financing Needs
In order to fund our operations, we rely upon direct investments with accredited
investors, joint ventures, and customer revenues. Once the Company becomes
profitable, we intend to fund our operations from free cash flow.
At present, the Company only has sufficient funds to conduct its operations for
three to six months. There can be no assurance that additional financing will be
available in amounts or on terms acceptable to the Company, if at all.
If we are not successful in generating sufficient liquidity from Company
operations or in raising sufficient capital resources, on terms acceptable to
us, this could have a material adverse effect on the Company's business, results
of operations liquidity and financial condition.
The Company presently does not have any available credit, bank financing or
other external sources of liquidity. Due to its brief history and historical
operating losses, the Company's operations have not been a source of liquidity.
The Company will need to obtain additional capital in order to expand operations
and become profitable. In order to obtain capital, the Company may need to sell
additional shares of its common stock or borrow funds from private lenders.
There can be no assurance that the Company will be successful in obtaining
additional funding.
The Company will need additional investments in order to continue operations.
Additional investments are being sought, but the Company cannot guarantee that
it will be able to obtain such investments. Financing transactions may include
the issuance of equity or debt securities, obtaining credit facilities, or other
financing mechanisms. In the event there is a downturn in the U.S. stock and
debt markets, this could make it more difficult to obtain financing through the
issuance of equity or debt securities. Even if the Company is able to raise the
funds required, it is possible that it could incur unexpected costs and
expenses, fail to collect significant amounts owed to it, or experience
unexpected cash requirements that would force it to seek alternative financing.
Further, if the Company issues additional equity or debt securities,
stockholders may experience additional dilution or the new equity securities may
have rights, preferences or privileges senior to those of existing holders.
Satisfaction of Outstanding Liabilities
There can be no assurance that sufficient funds required during the next year or
thereafter will be generated from operations or that funds will be available
from external sources such as debt or equity financings or other potential
sources to satisfy these outstanding liabilities. The lack of additional capital
resulting from the inability to generate cash flow from operations or to raise
capital from external sources would force the Company to substantially curtail
or cease operations and would, therefore, have a material adverse effect on its
business.
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We currently have no external sources of liquidity such as arrangements with
credit institutions or off-balance sheet arrangements that will have or are
reasonably likely to have a current or future effect on our financial condition
or immediate access to capital.
We are dependent on the sale of our securities to fund our operations and will
remain so until we generate sufficient revenues to pay for our operating costs.
Our officers and directors have made no written commitments with respect to
providing a source of liquidity in the form of cash advances, loans and/or
financial guarantees.
If we are unable to raise the funds, we will seek alternative financing through
means such as borrowings from institutions or private individuals. There can be
no assurance that we will be able to raise the capital we need for our
operations from the sale of our securities. We have not located any sources for
these funds and may not be able to do so in the future. We expect that we will
seek additional financing in the future. However, we may not be able to obtain
additional capital or generate sufficient revenues to fund our operations. If we
are unsuccessful at raising sufficient funds, for whatever reason, to fund our
operations, we may be forced to cease operations. If we fail to raise funds, we
expect that we will be required to seek protection from creditors under
applicable bankruptcy laws.
Our independent registered public accounting firm has expressed substantial
doubt about our ability to continue as a going concern and believes that our
ability is dependent on our ability to implement our business plan, raise
capital and generate revenues. Please see NOTE C - GOING CONCERN for further
information.
Convertible Notes
At December 31, 2022 and December 31, 2021, the Company had $2,160,034 and
$1,987,425 in outstanding convertible debt, net, respectively. At December 31,
2022 and December 31, 2021, the Company had $1,781,104 and $1,781,104 of
outstanding default principal, respectively. If all Convertible Notes were
converted, shareholders would undergo significant dilution to their holdings.
The Company's legacy financing contains unfavorable terms that contributed to
dilution and negatively impacted the Company's market price, and therefore posed
a challenge to attracting investment under more favorable. During the year ended
December 31, 2021, the Company began the process of extinguishing or
renegotiating the terms of this unfavorable legacy debt. During the year ended
December 31, 2022, the Company began realizing revenues, and intends to grow its
business with key customers directly and through joint venture companies. As a
result, the Company has been able to attract investments with third parties that
are more favorable to the company, thereby reducing potential dilution.
Please see NOTE H - CONVERTIBLE DEBT, NET for further information.
Debt
At December 31, 2022 and December 31, 2021, the Company had $15,157,952 and
$14,142,762 in total debt, exclusive of derivative liabilities, respectively.
Please see NOTES F, G, H, I, J and K for further information.
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Required Capital Over the Next Twelve Months
We expect to incur losses from operations for the near future. We believe we
will have to raise an additional $2,500,000 to fund our operations over the next
twelve months, including roughly $50,000 to remain current in our filings with
the SEC. The additional funds will be utilized for hiring ancillary staff and
key personnel, corporate website and SEO development, acquisition(s) in the
waste and recycling management sector and day-to-day operations.
Future financing may include the issuance of equity or debt securities,
obtaining credit facilities, or other financing mechanisms. Even if we are able
to raise the funds required, it is possible that we could incur unexpected costs
and expenses or experience unexpected cash requirements that would force us to
seek alternative financing. Furthermore, if we issue additional equity or debt
securities, existing holders of our securities may experience additional
dilution or the new equity securities may have rights, preferences or privileges
senior to those of existing holders of our securities.
If additional financing is not available or is not available on acceptable
terms, we may be required to delay or alter our business plan based on available
financing.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Critical Accounting Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and 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.
Recent Accounting Pronouncements
There were various updates recently issued, most of which represented technical
corrections to the accounting literature or application to specific industries
and are not expected to a have a material impact on the Company's consolidated
financial position, results of operations or cash flows. See the Notes to the
Financial Statements for more information.
OTC Bulletin Board Considerations
As discussed elsewhere in this registration statement, the Company's common
stock is currently traded on the OTC Markets "PINK" under the symbol "COWI."
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