QS Energy Inc

Previous wording

Once all the parts were delivered for a full AOT, we assembled the stack and installed the stack into the vessel. The vessel was filled with oil and tested. We were able to apply full voltage of 40.1kV to the AOT. We believe the AOT is now ready to test with customer oil and be deployed back into the field. Having achieved a positive hydrostatic test, we were able to have our final engineering call with a potential development partner. We are currently in pursuit of an LOI to include financial metrics for a commercially viable contract.

Current wording

Once all the parts were delivered for a full AOT, we assembled the stack and installed the stack into the vessel. The vessel was filled with oil and tested. We were able to apply full voltage of 40.1kV to the AOT. We believe the AOT is now ready to test with customer oil and be deployed back into the field. Having achieved a positive hydrostatic test, we were able to have our final engineering call with a potential development partner. We are currently in pursuit of a letter of intent and agreement to include financial metrics for a commercially viable contract (see paragraph below).

Previous wording

A noteworthy milestone has been achieved, demonstrating significant viscosity reduction for the specified oil target. Our collaboration with Temple University continues as we meticulously define the operational parameters of the AOT system, essential for effective field deployment. Concurrently, we are actively exploring other promising opportunities in parallel.

Current wording

A noteworthy milestone has been achieved, demonstrating significant viscosity reduction for the specified oil target. Our collaboration with Temple University continues as we define the operational parameters of the AOT system, essential for effective field deployment. Concurrently, we are actively exploring commercial opportunities for our AOT product.

Previous wording

Research and development expenses were $47,000 for the three-month period ended March 31, 2024, compared to $54,000 for the three-month period ended March 31, 2023, a decrease of $7,000. This decrease is attributable an decrease in prototype product development costs of $7,000.

Current wording

Research and development expenses were $48,000 for the three-month period ended June 30, 2024, compared to $47,000 for the three-month period ended June 30, 2023, an increase of $1,000. This increase is attributable to increases in prototype product development costs of $1,000.

Previous wording

The Company had a net loss of $449,000, or $0 per share, for the three-month period ended March 31, 2024, compared to a net loss of $334,000, or $0 per share, for the three-month period ended March 31, 2023.

Current wording

The Company had a net loss of $333,000, or $0.00 per share, for the three-month period ended June 30, 2024, compared to a net loss of $284,000, or $0.00 per share, for the three-month period ended June 30, 2023.

Previous wording

Operating expenses were $326,000 for the three-month period ended March 31, 2024, compared to $186,000 for the three-month period ended March 31, 2023, an increase of $140,000. This is due to an increase in non-cash expenses of $136,000, and an increase in cash expenses of $4,000. Specifically, the increase in non-cash expenses are attributable to an increase in stock compensation expense attributable to common stock issued for services of $136,000. The increase in cash expense is attributable to increases in patent expenses of $25,000, consulting expenses of $5,000, salaries and benefits of $4,000, and rent and utilities of $2,000, offset by decreases in legal and accounting of $19,000, travel expenses of $4,000, office expenses of $4,000, bank fees of $2,000, corporate expenses of $1,000, meals and entertainment of $1,000, and auto expenses of $1,000.

Current wording

Operating expenses were $527,000 for the six-month period ended June 30, 2024, compared to $344,000 for the six-month period ended June 30, 2023, an increase of $183,000. This is due to an increase in non-cash expenses of $134,000 and an increase in cash expenses of $49,000. Specifically, the increase in non-cash expenses is attributable to an increase in stock compensation expense attributable to common stock and warrants issued as compensation for services of $134,000. The increase in cash expense is attributable increases in patent expenses of $28,000, consulting fees of $22,000, rent and utilities of $5,000, legal and accounting of $3,000, public and investor relations of $2,000, insurance of $1,000, and corporate expenses of $1,000, offset by a decrease in office expenses of $6,000, travel expenses of $3,000, business meals of $2,000, bank fees of $2,000.

Previous wording

Other income and expense were $76,000 expense for the three-month period ended March 31, 2024, compared to $94,000 expense for the three-month period ended March 31, 2023, a net decrease in other expenses of $18,000. This decrease is attributable to a decrease in non-cash other expenses of $18,000. The decrease in non-cash other expense is due to decreases in expense attributable to interest, beneficial conversion factors and warrants associated with convertible notes issued in the amount of $18,000.

Current wording

Other expense were $160,000 for the six-month period ended June 30, 2024, compared to $173,000 expense for the six-month period ended June 30, 2023, a net decrease in other expenses of $13,000. This decrease is attributable to a decrease in non-cash other expenses of $13,000. The decrease in non-cash other expense is due to decreases in expense attributable to interest, beneficial conversion factors and warrants associated with convertible notes issued in the amount of $13,000.

Previous wording

As reflected in the accompanying condensed consolidated financial statements, the Company has not yet generated significant revenues and has incurred recurring net losses. We have incurred negative cash flow from operations since our inception in 1998 and a stockholders’ deficit of $5,382,000 as of March 31, 2024. Our negative operating cash flow for the periods ended March 31, 2024 was funded primarily through issuance of convertible notes and execution of options and warrants to purchase common stock.

Current wording

As reflected in the accompanying condensed consolidated financial statements, the Company has not yet generated significant revenues and has incurred recurring net losses. We have incurred negative cash flow from operations since our inception in 1998 and a stockholders’ deficit of $5,542,000 as of June 30, 2024. Our negative operating cash flow for the periods ended June 30, 2024 was funded primarily through issuance of convertible notes and execution of options and warrants to purchase common stock.

Previous wording

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying condensed consolidated financial statements, the Company had a net loss of $449,000 and a negative cash flow from operations of $170,000 for the three-month period ended March 31, 2024. In addition, as of March 31, 2024, 38 notes payable with an aggregate balance of $2,071,000, license agreement payables of $2,256,000 and certain obligations to a former officer are past due. These factors raise substantial doubt about our ability to continue as a going concern. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s December 31, 2023 financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.

Current wording

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying condensed consolidated financial statements, the Company had a net loss of $782,000 and a negative cash flow from operations of $319,000 for the six-month period ended June 30, 2024. In addition, as of June 30, 2024, 42 notes payable with an aggregate balance of $2,200,000 and certain obligations to a former officer are past due. These factors raise substantial doubt about our ability to continue as a going concern. In addition, the Company’s independent registered public accounting firm, in its report on the Company’s December 31, 2023 financial statements, has raised substantial doubt about the Company’s ability to continue as a going concern.

Previous wording

During the period ended March 31, 2024, we received cash totaling $185,000 from issuance of convertible notes and exercised warrants and used cash in operations of $170,000. At March 31, 2024, we had cash on hand in the amount of $78,000. We will need additional funds to operate our business, including without limitation the expenses we will incur in connection with the license agreements with Temple University; costs associated with product development and commercialization of the AOT and related technologies; costs to manufacture and ship our products; costs to design and implement an effective system of internal controls and disclosure controls and procedures; costs of maintaining our status as a public company by filing periodic reports with the SEC and costs required to protect our intellectual property. In addition, as discussed above, we have substantial contractual commitments, including without limitation, certain severance payments to a former officer and consulting fees, during the remainder of 2024 and beyond.

Current wording

At June 30, 2024, we had cash on hand in the amount of $132,000. We will need additional funds to operate our business, including without limitation the expenses we will incur in connection with the license agreements with Temple University; costs associated with product development and commercialization of the AOT and related technologies; costs to manufacture and ship our products; costs to design and implement an effective system of internal controls and disclosure controls and procedures; costs of maintaining our status as a public company by filing periodic reports with the SEC and costs required to protect our intellectual property. In addition, as discussed above, we have substantial contractual commitments, including without limitation salaries to our executive officers pursuant to employment agreements, certain severance payments to a former officer and consulting fees, during the remainder of 2024 and beyond.

Previous wording

For details of the licensing agreements with Temple University, see Financial Information, Part I, Note 6 (Research and Development).

Current wording

For details of the licensing agreements with Temple University, see Financial Statements attached hereto, Note 6 (Research and Development).

Previous wording

The preparation of consolidated financial statements in conformity with generally accepted accounting principles 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 consolidated financial statements and the reported amounts of expenses during the reporting period. Certain significant estimates were made in connection with preparing our consolidated financial statements as described in Note 2 to Notes to Consolidated Financial Statements. Actual results could differ from those estimates.

Current wording

The preparation of consolidated financial statements in conformity with generally accepted accounting principles 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Certain significant estimates were made in connection with preparing our consolidated financial statements as described in Note 2 to Notes to the Condensed Consolidated Financial Statements. Actual results could differ from those estimates.

Previous wording

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, during the three-months ended March 31, 2024, the Company incurred a net loss of $449,000, used cash in operations of $170,000 and had a stockholders’ deficit of $5,382,000 as of March 31, 2024. In addition, as of March 31, 2024, 38 notes payable with an aggregate balance of $2,071,000, license agreement payables of $2,256,000 and certain obligations to a former officer are past due. These factors raise substantial doubt about the Company’s ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Current wording

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, during the six-months ended June 30, 2024, the Company incurred a net loss of $782,000, used cash in operations of $319,000 and had a stockholders’ deficit of $5,542,000 as of that date. In addition, as of June 30, 2024, 42 notes payable with an aggregate balance of $2,200,000 and certain obligations to a former officer are past due. These factors raise substantial doubt about the Company’s ability to continue as a going concern. In addition, the Company’s independent registered public accounting firm, in its ability of the Company to continue as a going concern is dependent upon the Company’s ability to raise additional funds and implement its business plan. The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Previous wording

At March 31, 2024, the Company had cash on hand in the amount of $78,000. Management estimates that the current funds on hand will be sufficient to continue operations through May 2024. Management is currently seeking additional funds, primarily through the issuance of debt and equity securities for cash to operate our business, including without limitation the expenses it will incur in connection with the license agreements with Temple; costs associated with product development and commercialization of the AOT technologies; costs to manufacture and ship the products; costs to design and implement an effective system of internal controls and disclosure controls and procedures; costs of maintaining our status as a public company by filing periodic reports with the SEC and costs required to protect our intellectual property. In addition, as discussed below, the Company has substantial contractual commitments, including without limitation salaries to our executive officers pursuant to employment agreements, certain payments to a former officer and consulting fees, during the remainder of 2024 and beyond.

Current wording

At June 30, 2024, the Company had cash on hand in the amount of $132,000. Management estimates that the current funds on hand will be sufficient to continue operations through August 2024. Management is currently seeking additional funds, primarily through the issuance of debt and equity securities for cash to operate our business, including without limitation the expenses it will incur in connection with the license agreements with Temple; costs associated with product development and commercialization of the AOT technologies; costs to manufacture and ship the products; costs to design and implement an effective system of internal controls and disclosure controls and procedures; costs of maintaining our status as a public company by filing periodic reports with the SEC and costs required to protect our intellectual property. In addition, the Company has substantial contractual commitments, including without limitation salaries to our executive officers pursuant to employment agreements, certain payments to a former officer and consulting fees, during the remainder of 2024 and beyond.