10-K/A: NEXT-ChemX Corporation Files Amended 10-K, Restates Financials Amid Auditor Change and Cybersecurity Disclosure

NEXT-ChemX Corporation files an amended 10-K/A report addressing auditor issues, restating financials due to a change in intangible asset valuation, and including a cybersecurity disclosure.

Summary

• NEXT-ChemX Corporation filed an amended annual report on Form 10-K/A.
• The filing addresses the SEC's denial of the company's former auditor, BF Borgers CPA PC, and the subsequent re-audit by Fruci & Associates II PLLC.
• The company's technology, previously considered an indefinite intangible asset, is now considered to have a useful life equivalent to its patent protection period, resulting in a $458,000 adjustment to the asset value as of December 31, 2023, and a $149,782 amortization charge.
• The balance sheet was readjusted to include $308,365 of retained earnings.
• The report includes a cybersecurity disclosure as Item 1C.
• 200,000 shares of common stock were issued during fiscal 2023.
• The company recorded a net loss of $2,511,013 for the year ended December 31, 2023, compared to a net loss of $1,743,799 for the fiscal year ended December 31, 2022.
• As of December 31, 2023, the company had a working capital deficit of $3,792,098 and an accumulated stockholders deficit of $(6,512,110).
• The company's ability to continue as a going concern is subject to substantial doubt.
• Management estimates that the minimum funds necessary to finance operations through fiscal year end 2024 is $2.62 million.
• The company is pursuing the commercialization of its iTDE Technology, primarily focusing on lithium extraction.
• The company is working towards the deployment of a viable product that embodies the iTDE Technology and is commercially advantageous.
• The best estimate for completion of the controlled pilot plant is the beginning of the third quarter of 2025.
• If successful, this could lead to operational pilot deployment at customer sites in the first quarter of 2026.

Sentiment

Score: 3

Explanation: The document presents a challenging financial situation with increasing losses, significant debt, and doubts about the company's ability to continue as a going concern. While there are positive aspects like the technology's potential and partnerships, the overall tone is negative due to the financial instability and operational delays.

Positives

• The company is actively working towards the commercialization of its iTDE Technology.
• The company has a partnership agreement with Clontarf Energy plc to exploit lithium mining and extraction in Bolivia.
• The iTDE Technology has a wide field of potential future applications beyond lithium extraction.
• The company is pursuing an aggressive intellectual property protection strategy.
• The company received $500,000 in cash in payment for the rights to use the iTDE Technology in Bolivia being transferred to the partnership company to be established between Clontarf and the Company.

Negatives

• The company recorded a net loss of $2,511,013 for the year ended December 31, 2023.
• As of December 31, 2023, the company had a working capital deficit of $3,792,098 and an accumulated stockholders deficit of $(6,512,110).
• The company's ability to continue as a going concern is subject to substantial doubt.
• The company has contracted significant debt from its inability to pay its employees together with a preference for the shareholders funding operations through loans and convertible loans.
• The company has received no revenues since the changes to the business that resulted from the April 27, 2021, Asset Purchase Agreement.

Risks

• The company needs to generate revenue or locate additional financing to continue its developmental plans.
• The company has contracted significant debt from its inability to pay its employees together with a preference for the shareholders funding operations through loans and convertible loans.
• There is no guarantee that the company can find adequate numbers of such personnel, attract them to work for the company, secure their right to work in the US at the company's offices or retain them.
• As a company with new technology, the company may be a significant target of attack by competitors, foreign governments and other interested and malicious parties.
• The inability to source materials or to manufacture components may force the company to design its system regarding supply chain issues rather than full optimization.

Future Outlook

Management believes that the Company's cash on hand will not be sufficient to fund all Company obligations and commitments for the next twelve months and estimates that the minimum funds necessary to finance operations through fiscal year end 2024 is $2.62 million.

Management Comments

• Management considers this not only to be a violation of the fundamental rights of individuals working to finalize the technology and to make the Company successful, but also a direct attempt to use the Texas courts erroneous decisions to launch a hostile takeover bid on the Company without due process, circumventing the usual protections afforded by the SEC.

Industry Context

The company operates in the Direct Lithium Extraction (DLE) technology space, which is gaining traction due to increasing environmental concerns associated with traditional lithium extraction methods.

Comparison to Industry Standards

• The company competes with several DLE technology developers, including Lilac Solutions, Sunresin, Standard Lithium, International Battery Metals, Koch Technologies/Membranes, and EnergyX Technologies.
• The company believes its iTDE system is inherently more energy efficient and environmentally friendly than other currently known or proposed extraction systems.

Legal Proceedings

• On May 15, 2024 the case was dismissed by the Illinois Department of Labor.
• Innovation News Network has threatened the Company with litigation and appointed a collection agent to recover the funds.
• On April 26, 2024, Judge Elizabeth Leonard of the Midland County District Court in Midland, Texas entered a Third Turnover Order (the Turnover Order) requiring the Company to turn over 15,866,096 of its common shares, registered to a corporation with the same name as the Company (NEXT-ChemX Corporation) but registered in a different jurisdiction.

Related Party Transactions

• As of December 31, 2023, seven employees, consultant senior managers and a third party professional have made related party advances: two direct employees, a consultant and a third party professional (resident in the US) are owed a total of $ 1,210,652 , and three senior managers (resident in Europe) were owed a total of $ 961,703 .

Stakeholder Impact

• Shareholders face the risk of further dilution due to potential capital raises and the conversion of debt to equity.
• Employees and consultants are impacted by delayed salary payments and potential changes in remuneration.
• The company's ability to deliver on its technology and partnerships is dependent on securing sufficient funding and addressing operational challenges.
• The company's stakeholders are impacted by the interference in the Companys operations by a creditor of a shareholder of one of the Companys shareholders.

Next Steps

• Complete construction and testing of the initial controlled pilot plant system.
• Secure additional financing to fund operations and reduce debt.
• Pursue commercial deployment of the iTDE Technology, focusing on lithium extraction.
• Continue intellectual property protection efforts.
• Address material weaknesses in internal control over financial reporting.

Key Dates

Keywords

iTDE Technology, Lithium Extraction, Financial Results, Annual Report, NEXT-ChemX, Restatement, Cybersecurity, Going Concern, Debt, Auditor