HYBRID Coating Technologies Inc. - FORM 10-K

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EX-32.1 - EXHIBIT 32.1 - HYBRID Coating Technologies Inc.	exhibit32-1.htm
EX-31.1 - EXHIBIT 31.1 - HYBRID Coating Technologies Inc.	exhibit31-1.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-K

[X] Annual Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934

FOR THE YEAR ENDED December 31, 2016

[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number 000-53459

HYBRID COATING TECHNOLOGIES INC.
(Exact name of registrant as specified in its charter)

NEVADA	20-3551488
(State of other jurisdiction of incorporation or	(IRS Employer Identification Number)
organization)

950 John Daly Blvd. Suite 260
Daly City, CA 94015
(Address of principal executive offices)

(650) 491-3449
(Registrant's telephone number, including area code)

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, $0.001 par value

Indicate by check mark if the Registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act. Yes [ ] No[X]

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes[ ] No[X]

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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[X] No[ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.[ ]

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):

	Large accelerated filer [ ]	Accelerated filer [ ]	Non-accelerated filer [ ]	Smaller reporting company [X]
				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 [X]

The aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $1,241,032 based on the closing price of $0.16 for the common stock on June 30, 2016, the last business day of the registrant’s most recently completed second fiscal quarter prior to December 31, 2016.

Number of shares outstanding of the registrant's class of common stock, as of May 7, 2018 was 14,731,148,200.

TABLE OF CONTENTS

		Page
PART I
	Special Note Regarding Forward Looking Statements	3
Item 1	Description of Business	4
Item 1A.	Risk Factors	15
Item 2	Description of Property	19
Item 3.	Legal Proceedings	19
Item 4.	Mine Safety Disclosures	19

PART II
Item 5.	Market for Common Equity, Related Stockholder Matters and Small Business Issuer Purchases of Equity Securities	20
Item 6.	Selected Financial Data	21
Item 7	Management Discussion and Analysis of Financial Condition and Results of Operations	21
Item7A	Quantitative and Qualitative Disclosures about Market Risks	25
Item 8.	Financial Statements and Supplementary Data	26
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	26
Item 9A.	Controls And Procedures	26

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	28
Item 11	Executive Compensation	32
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	34
Item 13	Certain Relationships and Related Transactions, and Director Independence	35
Item 14	Principal Accountant Fees and Services	36
Item 15	Exhibits	37

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. All statements, other than statements of historical fact, contained in this Annual Report constitute forward-looking statements. In some cases you can identify forward-looking statements by terms such as "may," "intend," "might," "will," "should," "could," "would," "expect," "believe," "estimate," "anticipate," "predict," "project," "potential," or the negative of these terms and similar expressions intended to identify forward-looking statements.

Forward-looking statements are based on assumptions and estimates and are subject to risks and uncertainties. We have identified in this Annual Report on Form 10-K (this “Annual Report”) some of the factors that may cause actual results to differ materially from those expressed or assumed in any of our forward-looking statements. There may be other factors not so identified. You should not place undue reliance on our forward-looking statements. As you read this Annual Report, you should understand that these statements are not guarantees of performance or results. Further, any forward-looking statement speaks only as of the date on which it is made and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances. New factors emerge from time to time that may cause our business not to develop as we expect and it is not possible for us to predict all of them. Factors that may cause actual results to differ materially from those expressed or implied by our forward-looking statements include, but are not limited to, those described under the heading "Description of Business and Risk Factors" under Item 1, as well as the following:

Our anticipated cash needs and estimates regarding its capital expenditures, as well as its capital requirements and need for additional financing;

Our ability to maintain its production capacity, staff complement and manufacturing performance in a cost-effective way;

Our ability to identify and retain personnel for the continued manufacturing and sale of the Nanotech Products;

Our ability to successfully commercialize its products including the Green Polyurethane™ products and to develop and commercialize new products and services;

Our ability to maintain current strategic relationships and develop relationships with new strategic partners;

Our ability to maintain its relationship with its current manufacturing partners;

Our ability to maintain its rights pursuant to the Licensing Agreement:

Our competitive position and its expectations regarding competition from other paint manufacturers and suppliers; and

Anticipated trends and challenges in Hybrid Coating Technologies Inc.’s business and the markets in which it operates.

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PART I

ITEM 1. DESCRIPTION OF OUR BUSINESS

Our Business

On August 30, 2010, Hybrid Coating Technologies Inc. (the “Company”) consummated an August 16, 2010 Stock Purchase Agreement (the “Stock Purchase Agreement”) with Nanotech Industries International Inc., (“Nanotech”) a Nevada corporation located in Daly City, California. A previous January 31, 2010 agreement with Nanotech Industries Inc. (“NTI”), a related party of Nanotech, was terminated on August 16, 2010 prior to its effectiveness.

Under the terms of the Stock Purchase Agreement, the Company agreed to acquire all of the issued and outstanding shares of capital stock of Nanotech (“Nanotech Shares”) from the holders of the Nanotech Shares (“Nanotech Shareholders”). In consideration for the purchase of the Nanotech Shares from the Nanotech Shareholders (the “ Nanotech Acquisition”), the Company issued an aggregate of 3,381,003 shares (the “Shares”) of the Company’s common stock, $0.001 par value per share (“Common Stock”), to the Nanotech Shareholders. In addition, certain shareholders of the Company agreed to have 1,028,000 of their shares cancelled as part of the transaction. This transaction was closed on August 30, 2010.

Upon completion of all required regulatory filings, the Company appointed the senior management of Nanotech to the board of the Company.

As a result of the Nanotech Acquisition, Nanotech is now a wholly owned subsidiary of the Company. The Company intends to pursue the business of its Nanotech subsidiary and assume and execute Nanotech's business plan as its sole business. (See “Incorporation and Business of Nanotech” below).

The products manufactured and sold by the Company (“Nanotech Products”) comprise the following:

(1)	coatings and raw binder ingredients comprised of Green Polyurethane™ Monolithic Floor Coating and Green Polyurethane™ Binder and hereinafter referred to as “Coating Products”.
(2)	sealants and adhesives comprised of Green Polyurethane™ and hereinafter referred to as “Sealant Products”.
(3)	polyurethane foam for the textile industry in addition to environmentally safe coatings.
(4)	spray foam insulation
(5)	polyurethane foam packaging
(6)	synthetic leather, sealants and adhesives (“Added Applications”)

The Company was granted the right to manufacture and sell the Nanotech Products pursuant to an agreement (“Licensing Agreement”) entered into between the Company and Nanotech Industries Inc. (“NTI”), the holder of the proprietary rights to the license and intellectual property required for the manufacturing of the Nanotech Products. The Nanotech Products will target the coatings, adhesives, sealants and elastomers (“C.A.S.E.”) market in North America, Europe and Russian Territory (including the Russian Federation, Belorussia, Kazakhstan Republic) with an option to sell in Asia and the rest of the world pursuant to the terms of the Licensing Agreement.

NTI and the Company are related parties by virtue of common ownership and control. NTI is privately-held.

“The Company” and “the Registrant”, as referred to herein, includes Hybrid Coating Technologies Inc. and/or its wholly owned subsidiary, Nanotech.

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Incorporation and Business of Nanotech

The Company was incorporated under the laws of the State of Nevada on July 8, 2010. On July 12, 2010, the Company entered into the Licensing Agreement (“Initial Licensing Agreement”) for the manufacturing and sale of the Coating Products, an alternative, non-isocyanate polyurethane, including coatings and raw binder ingredients comprised of Green Polyurethane™ Monolithic Floor Coating and Green Polyurethane™ Binder. The Nanotech Coating Products will be sold to the coatings and adhesives market in North America, with options to sell to Europe, South America, Asia and the rest of the world.

Initial Licensing Agreement ^{Note 1}

The terms of the Initial Licensing Agreement are as follows:

(i)	The Company was granted, effective June 12, 2010, manufacturing and sale rights (“North American Licensing Rights”) for the Coating Products on an exclusive basis for a 36-month period (“Exclusivity Period”) for the territory of North America. In consideration for the North America Licensing Rights, Nanotech paid NTI (“Licensor”) a one-time licensing fee of $500,000 and a royalty of 5% of future gross Coating Products sales.

(ii)	Within the Exclusivity Period, the Company shall have the option (“American- European Option”) to acquire perpetual and exclusive licensing rights for all of North America, South America and Europe (“Perpetual American-European Licensing Rights”). Should the Company wish to exercise the American-European Option, the Company shall issue to NTI an aggregate number of shares of common stock of the Company which shall give NTI, immediately upon such issuance of shares, a 52.5% ownership stake in the Company.

(iii)	Should the Company exercise the American-European Option, the Company shall then have an additional option to obtain perpetual and exclusive Licensing Rights for all of Asia and the rest of the world (“Asia Option”). Should the Company exercise the Asia Option, the Company shall issue to NTI an aggregate number of shares of common stock of the Company which shall give NTI, immediately upon such issuance of shares, an additional 10% ownership stake in the Company.

Note 1: The Initial Licensing Agreement was originally filed in a Current Report on Form 8-K on August 30, 2010 and the amended version (as described above) was refiled in a Current Report on Form 8-K on October 18, 2011. In the original filing the Licensing Rights included not only the Coating Products but Sealant Products as well. Also, for the “Asia” option the territory was for Asia only and later changed to Asia and the rest of the world.

Subsequent Licensing Agreements and Amendments

(i)

On March 17, 2011, the Company and NTI amended the agreement to now include the territory of the Customs Union of Belorussia, Kazakhstan Republic and Russian Federation (the “Russian Territory”), on an exclusive basis for a period of ten years from the date of the signing of this amendment. In exchange for the right to manufacture and sell in the Russian Territory, the Company shall pay to the Licensor an ongoing royalty of 7.5% of gross Coating Products sales in the Russian Territory, and a one-time royalty fee of $150,000 (paid as of December 31, 2011).

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(ii)	On July 7, 2011, a second amendment was made to the agreement granting the Company an option (the “Option”) for a period of six months from the signing of this amendment to manufacture and sell Coating Products in the territory of the European Continent on an exclusive basis for a period of five years from the date the option is exercised, after which time the European Right shall continue perpetually on a non-exclusive basis. In exchange for this Option, the Company shall pay to the Licensor a one-time royalty fee of $1,250,000 payable within 24 months of the exercise of the Option. On November 29, 2011, the Company exercised the Option, the payment for which is being financed by NTI. The Company recorded the royalty fee of $1,250,000 as a related liability in Note Payable-related party.

(iii)	On October 18, 2011, the Company and NTI entered into a second licensing agreement (“Sealant Agreement”) granting the Company an option (“Sealant Option”) to be exercised within six months of the signing of the Sealant Agreement, for the manufacturing and sale of the Sealant Products, for the following :

	1.	The Company shall issue to NTI a one-time licensing fee, an aggregate number of shares (“Sealant Shares”) of the Company’s restricted common stock which shall give NTI, immediately upon issuance of such shares, an incremental 15% (fifteen percent) ownership stake in the Company.

	2.	The Company shall pay to NTI a royalty of 7.5% of gross revenue from the Sale of the Sealant Products for the duration of this Agreement. The royalty shall be paid on a quarterly basis 65 calendar days after the end of each quarter and shall be based on the gross revenue as stated in the Company’s quarterly statements.

(iv)	On December 6, 2011, the Company notified NTI of its intent to exercise the Sealant Option. To date, the Company has not issued the Sealant Shares and the Sealant Option has expired. The Company intends to renegotiate the Sealant Option once the Company has determined it has commercial viability.

(v)	On June 28, 2013, the Company and NTI entered into a third licensing agreement whereby NTI granted the Company an extension of thirty-six months on the Exclusivity Period (as defined in the Licensing Agreement), which has been extended to July 12, 2016.

(vi)	On December 13, 2013, the Company and NTI entered into a fourth amendment agreement agreeing to modify the definition of Licensor Products to include polyurethane foam for the textile industry in addition to environmentally safe coatings.

(vii)	On March 31, 2014, the Company and NTI entered into a fifth amendment agreement agreeing to modify the definition of Licensor Products to include synthetic leather, sealants and adhesives (“Added Applications”). In consideration for the Added Applications, the Company shall pay the Licensor an amount equal to US $2,000,000, to be paid within 36 (thirty-six) months of the execution of this Fifth Amendment Agreement. Should the Company not pay the Consideration within the deadline, the Company shall lose all rights to the Added Applications, and the Added Applications shall be removed from the Licensor Product definition.

(viii)	On April 9, 2014, the Company and NTI signed a sixth amendment extending the terms of the note from 24 months to 42 months making it payable by May 29, 2015.

(ix)	On May 6, 2014, the Company and NTI signed a seventh amendment modifying the Products definition to include spray foam insulation for consideration of $500,000 payable within twelve months of execution of this amendment.

(x)	On August 19, 2014, the Company and NTI signed an eight amendment expanding the definition of the Exclusivity Shares for various territories to include warrants at the sole discretion of the Licensor, which warrants shall include a cashless exercise and be exercisable at a price per share equal to the Common Stock par value and expiring 10 years from the date of issuance and which, if so issued, shall be issued in the form of Warrant pursuant to Regulation D, or in the form of Warrant pursuant to Regulation S.

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(xi)	On September 10, 2014, the Company and NTI signed a ninth amendment expanding the definition of the licensing fees and consideration to include payment in shares of the Company’s Common Stock and/or warrants at the sole discretion of the Company, which shares shall have a fair market value calculated as the closing price reported by the over-the-counter market for the previous trading day and, which warrants shall include a cashless exercise and be exercisable at a price per share equal to the Common Stock par value and expiring 10 years from the date of issuance.

(xii)	On September 10, 2014, the Company issued 8,113,116 shares to NTI for proceeds of $872,160 that was applied to the debt to NTI for some of the licenses above. NTI now owns 18% of the Company based on the issued and outstanding shares of the Company at December 31, 2014.

(xiii)	On August 10, 2015, the Company signed a tenth amendment to the Licensing Agreement with NTI whereby the parties amended the Agreement (and subsequent Amendments) to expand the definition of Licensor product to include polyurethane foam packaging (“PFP”). In exchange the company issued 420,000 Series B preferred shares valued at $102,480 due to a control premium attributable to these shares.

(xiv)	On February 12, 2016, the Company signed an eleventh amendment to the Licensing Agreement with NTI whereby the parties amended the Agreement (and subsequent Amendments) to extend the Extended Exclusivity Period (as defined in the Licensing Agreement), to December 31, 2020 (“2020 Extended Exclusivity Period”). In consideration for the 2020 Extended Exclusivity Period, the Company shall pay the following consideration to NTI:

	i)	Issue 2,240,000 shares of Series B Preferred Stock (“Series B Preferred Shares”), to be issued at the time of execution of this Eleventh Amendment Agreement (“Share Issuance Deadline”).

	ii)	Issue purchase warrants to purchase 31,300,000 shares of Series B Preferred Stock (“90-Day Warrants”), to be issued 90 days following the execution of this Agreement (“90-Day Deadline“). The 90-Day Warrants shall be exercisable at any time from the date of issuance at a price per share equal to the par value of the Series B Preferred Stock and shall expire ten years from the date of issuance.

	iii)	Issue purchase warrants to purchase 126,000,000 shares of Series B Preferred Stock (“12-Month Warrants”), to be issued 12 months following the execution of this Agreement (“12-Month Deadline”). The 12-Month Warrants shall be exercisable at any time from the date of issuance at a price per share equal to the par value of the Series B Preferred Stock and shall expire ten years from the date of issuance.

		(The “90-Day Warrants” and the 12-Month Warrants” collectively referred to as the “Warrants”).

	iv)	Pay the Licensor an amount equal to US $1,500,000 (one million five hundred thousand USD) (“One Time Fee”), to be paid within 12 (twelve) months of the execution of this Eleventh Amendment Agreement (“Fee Deadline”).

Should NTI not meet any of: (i) the Share Issuance Deadline; or (ii) the 90-Day Deadline; or (iii) the 12-Month Deadline; or (iv) the Fee Deadline (individually referred to as “Unmet Deadline”) and should such Unmet Deadline not be extended by the Parties, the Company shall continue to have the right to the Manufacturing and Sale for the Territory, on a non-exclusive basis for the duration of the Agreement.

(xv)

On November 9, 2016, the Company signed a twelfth amendment to the Licensing Agreement with NTI whereby the parties amended the Agreement (and subsequent Amendments) to extend the spray foam insulation (SFI) exclusivity by 24 months from the date of this amendment in exchange for the following consideration:

(i)

The Company shall issue to the Licensor 600,000 Series B Preferred Shares and 3,000,000 warrants to purchase 3,000,000 Series B Preferred Shares with an exercise price of $0.00001 and expiring 10 years from the date of issuance (“Consideration”), to be paid at the time of execution of this Twelfth Amendment Agreement (“Deadline”). Should the Company not pay the Consideration within the Deadline, the SFI Exclusivity shall not be renewed.

(7)

(xvi)	On June 15, 2017 the Company signed a thirteenth amendment where the parties extended the Fee Deadline for the payment of the One Time Fee as part of the consideration for the 2020 Extended Exclusivity Period (as defined in part iv) of Amendment 11) to August 31, 2017, at which time the whole of the One Time Fee shall be due and payable.

(xvi)	On April 26, 2018 the Company signed a fourteenth amendment where the parties extended the Fee Deadline for the payment of the One Time Fee as part of the consideration for the 2020 Extended Exclusivity Period (as defined in part iv) of Amendment 11) to December 31, 2019, at which time the whole of the One Time Fee shall be due and payable.

As of May 2018, approximately $89,000 had been paid by the Company to NTI with regards to licensing fees payable and all share issuances deadlines were met.

Further information concerning the historical business of Nanotech, the business acquired by the Company in the Acquisition, is set forth below.

Overview

The Company is an early stage company and has only just begun to implement its business plan. The likelihood of success of the Company must be considered in light of the expenses, complications and delays frequently encountered in connection with the establishment and expansion of new business and the competitive environment in which the Company will operate. The Company's long-term viability, profitability and growth will depend upon successful commercialization of the Nanotech Products and the development and commercialization of new products and services relative to its business plan. As an early stage company, the Company has little or no relevant operating history upon which an evaluation of its performance can be made. Such performance must be considered in light of the risks, expenses and difficulties frequently encountered in establishing new products, services and markets.

Business Model

The Company’s business model is based on a two-tier strategy, which includes direct sales and licensing. The Company’s ultimate goal is to license its proprietary Green Polyurethane™ formulation to national and/or global coatings formulators and then focus on rolling out the commercialization of other Green Polyurethane™ applications such as adhesives and sealants. In order to achieve this, the Company is proving the validity of its products through direct sales and is therefore targeting large distributors and multiple client bases. The Company intends to focus within the Coatings, Adhesives, Sealants and Elastomers (“C.A.S.E.”) segment specifically for large industrial and commercial coatings applications where Green Polyurethane™ has a natural competitive advantage over other polyurethane ("PU") and epoxy coatings due to its superior chemical resistance and environmentally safe properties with reduced health risks. Some of the target applications for Green Polyurethane™ products include:

	•	Industrial and commercial buildings;
	•	Civil applications for tunnels and bridges;
	•	Private and public garages;
	•	Chemical and food processing plants;
	•	Warehouses;
	•	Monolithic floorings for civil, industrial and military engineering;
	•	Marine and Aeronautic applications;
	•	Industrial equipment for dairy and liquid fertilizer processing plants and delivery systems;
	•	Military facilities and equipment; and
	•	Protective coatings inside industrial and commercial pipes.

In addition to the above, the Company’s business plan includes plans to:

	•	Increase the number of contractors and applicators contacted;
	•	Contact paint formulators and offer Green Polyurethane™ Binder for their proprietary formulations; and
	•	Establish distribution channels utilizing existing distribution hubs.

Competitive Strengths

The Company believes that its competitive strengths include the following:

Product Advantage. Green Polyurethane™ is the first ever chemical platform based on modified hybrid polyurethane that is produced using pending patented proprietary methods which completely eliminate the use of toxic isocyanates resulting in a substitute for conventional polyurethane. This results in a product that is hundreds of times less toxic than conventional polyurethane and which has superior chemical and mechanical properties.

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2 Times Wear Resistance & Excellent Adhesion

•	Wear resistance is 25-30 (mgs./1000 cycles) or 2 times better than most premium polyurethane coatings
•	Adhesiveness - 10-30% higher (depends on substrate)

High Gloss, Self-Priming - Achieve Any Thickness in One Coat

•	Green Polyurethane’s™ 100% solids, specific curing formulation can be applied with only one layer at any thickness in specific environments (some substrates in poor condition may need a primer) compared to conventional polyurethane brands which normally require 2 or 3 layers
•	Does not require careful drying of substrates (compared to conventional polyurethane coatings)

Increased Resistance to Chemical Degradation & Corrosion

•	Maintains an extended period of corrosion protection, more reliability due to its non-porous coating structure, and better durability than conventional coatings
•	Assures more effective protection against aggressive media
•	Unlike conventional polyurethanes, Green Polyurethane™ is indifferent to moisture and does not require special moisture controlled conditions in the manufacturing process

Safe & Easy curing in Cold, Hot or Sunny Conditions

•	Hardens at ambient temperatures
•	UV and low temperature curing applications available (36-77 ºF) (2-25 ºC)

Increased Hydrolytic Stability

Maintains stability against chemical decomposition upon contact with water through an intramolecular hydrogen bond formed during its curing, thereby improving hydrolytic stability well above that of conventional polyurethanes making it virtually water proof.

Wider Range of Applications

•	There are circumstances where traditional polyurethanes cannot be used due to their decomposition toxicity during a fire event (reversion to isocyanate components).

Tested Product and Technology. The Green Polyurethane™ technology has been tested, is proven, is commercial ready and currently in use. The Green Polyurethane™ technology has undergone rigorous testing by the Polymer Institute, GmbH, a well-recognized analytical firm for qualifying materials for use in the flooring industry and Assured Testing Services of Pennsylvania.

Testing by the Polymer Institute and Assured Testing Services confirmed Green Polyurethane’s™ claims in regard to its structural and chemical properties and its suitability for use in the flooring industry. In addition, floor coating samples were rigorously tested and were found to perform successfully in accordance with The American Society for Testing and Materials.

The Company has also expanded its applications of the technology to include polyurethane foam for the textile industry, environmentally safe coatings spray foam insulation, polyurethane foam packaging, synthetic leather, sealants and adhesives.

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Cost Savings. The Company can offer substantial savings to clients in the flooring installation industry due to the unique combination of multiple properties in one coating of Green Polyurethane™ paint. Typically, concrete floors are painted using a primer, base and topcoat, resulting in the need for three different types of coatings for one application, which can be time consuming and costly. By using the Green Polyurethane™ formulation the number of layers can be reduced to only one or two, as Green Polyurethane™ does not require a primer, has excellent stand-alone adhesion and, in most cases, would not require a top coat due to its excellent mechanical properties. In addition, its zero isocyanate, approximate zero volatile organic compound (VOC) safety features, allows it to be applied without the interruption of business due to public exposure, creating an additional 30-60% savings on application costs for customers.

Management Team. The Company’s management team possesses a diverse set of industry skills and operating experience and a record of success in the scientific R&D, nanotechnology, management, marketing, sales and finance industries.

Growth Strategy

The Company’s business growth model includes a two-pronged strategy of direct sales and licensing. The Company’s ultimate goal is to license its’ proprietary formulation to national or global coatings formulators. In order to achieve this it is proving the validity of its products through direct sales.

The Company has developed marketing tools, brochures, one-sheets, and a user-friendly website to market its products directly to contractors and applicators of high end coatings and paint. The Company has also participated in high visibility trade shows to highlight the unique qualities of Green Polyurethane™. From these trade shows, internet and direct marketing campaigns, the Company has attracted hundreds of prospective clients. Flooring applications done for some of these clients in Montreal, San Jose, Bergen County, New Jersey and New York have allowed the Company to prove that its product can live up to the high standards and safety features advertised.

The Company’s marketing and direct coating sales/application efforts have attracted over 50 established regional and global coatings distributors and formulators who are either testing samples of Green Polyurethane™, applying for final pilot samples of the material prior to ordering commercial quantities or negotiating licensing contracts.

The $3.5 billion European Union (EU) polyurethane coatings market (JCT CoatingsTech | November 1, 2007 | Challener, Cynthia) is of particular interest to the Company because of the high demand and the overhaul of the EU’s chemical regulatory system. Registration, Evaluation & Authorization and Restriction of Chemicals (“REACH”) regulations were drafted in 1998 and finally adopted and put into force in June 2007. A major shift in this system will be placing a greater burden of proof on the industry that chemicals are safe. Substances of very high concern must be authorized under REACH and their use may be subject to restrictions. Isocyanates used in making polyurethane are highly toxic and require expensive worker safety and handling procedures. A general movement towards greener products combined with the REACH regulations has accelerated projected growth in the EU market for less toxic alternatives.

In addition to the above, the Company plans to:

	•	Increase the number of contractors and applicators contacted;
	•	Contact paint formulators and offer Green Polyurethane® Binder for their proprietary formulations;
	•	Establish distribution channels utilizing existing distribution hubs; and
	•	Sub-license technology in certain geographic areas

The Company intends to work with GBK Gmbh Global Regulatory Compliance , a global regulatory compliance consultancy firm, first in the EU marketplace and then in other markets to educate targeted government agencies responsible for setting standards for hazardous chemicals used in coatings.

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Educating Regulatory Authorities. The Company intends to educate regulatory agencies of the existence of an alternative to hazardous isocyanate-based polyurethane. The US Environmental Protection Agency (“EPA”) has shown strong interest in Green Polyurethane™ and has supported the efforts to manufacture and distribute Green Polyurethane™ products in the US and have suggested linking the Green Polyurethane™ technology to the EPA’s new website for spray polyurethane foam.

Maintain and Increase Cost and Operational Advantages. The Company’s strategy is to avoid large capital investments in manufacturing and instead rent facilities and equipment from its strategic partners. Management estimates that the Company can outsource the manufacture of up to 20,000 tons per year.

Subsidiaries

Nanotech Industries International, Inc. (“Nanotech”) is a wholly owned subsidiary of Hybrid Coating Technologies Inc. (collectively “the Company”) and is the source of the Company’s operations.

Legislation and Government Incentives

Current global trends toward more environmentally sound products and new legislative restrictions on the use of hazardous materials and their chemical by-products pose formidable obstacles to polyurethane manufacturers. The EU has already begun to take action against isocyanates by passing recent legislation that banned the addition of any new manufacturing capacities of isocyanates. Governmental health agencies and workers unions throughout Europe are beginning to actively speak out against the dangers of isocyanates in the workplace in order to protect and lobby for worker’s safety. On September 2007 the president of Federation of the Paints, Varnishes, Lacquers and Printing Inks Industries Technologists' Associations of Continental Europe (“FATIPEC”) along with the Oil & Color Chemists' Association reported that new EU safety regulations have been put into place which includes a tenfold lowering of the concentration limits of isocyanates in all paints.

In addition, the EPA has recently developed a new Action Plan causing any company that produces products with free isocyanates to report any health related incidents related to the isocyanate exposure of its workers and any consumers using its products.

These measures are similar to recent EU actions, which preceded the banning of any Do-It-Yourself (“DIY”) consumer products with free isocyanates. These new regulations will afford the Company the opportunity to gain new ground.

Manufacturing

Overview

The Company intends to establish full commercial-scale manufacturing for both of its products at Adhpro Adhesives in Magog, Quebec and Simpson Coatings in California through non-exclusive toll manufacturing agreements.

The Company’s strategy is to avoid large capital investments in manufacturing and to outsource the manufacturing of the Company products to third-party manufacturers. At current capacity, the Company can manufacture 20,000 tons per year.

Third Party Manufacturing Partners

Adhpro Adhesives Inc.

Adhpro is an industrial premium quality adhesives manufacturer based out of Magog, Quebec Canada. Adhpro’s products are manufactured from the highest quality raw material to meet customer’s exact needs. Established since 1990, Adhpro is a young company that is expanding its skills from coast to coast.

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Simpson Coatings Group Inc.

Simpson Coatings Group Inc. is a manufacturer of a wide variety of paints and lacquers for over fifty years based out of San Francisco, California. Simpson Coatings is a leader and respected principal in nearly every major coating paint category and a broadening list of specification products selling to firms of every description. The company is also a member of the National Paint and Coatings Association, Inc. and through this membership is kept current with all the latest specifications and their amendments.

Due to its long history, qualifications and production capacity Simpson Coatings is positioned as the primary source of production for the United States and its president is a Board member of Nanotech Industries, Inc. (“NTI”).

Research and Development

The Company does not foresee spending any capital on research and development. The Company has a renewable Licensing Agreement with NTI to sell the Nanotech Products. Any and all research and development for the Nanotech Products is conducted by NTI.

Intellectual Property Protection

Several formulations of Green Polyurethane™ technology are patent and know-how protected through control of the manufacturing process. The underlying patents of Green Polyurethane™ (often referred to as “HNIPU” or “NIPU”) have been filed with the U.S Registrar of Patents and are held by NTI and cover the composition of and method for producing Green Polyurethane™.

Name of Patent	Filed in USA
	Filing #	Date
Liquid oligomer composition containing hydroxylamine adducts and method of manufacturing thereof	12/315,580	04/12/2008
Nanostructured Hybrid Oligomer Composition	12/381,626	03/13/2009
Epoxy-Amine Composition Modified with Hydroxyalkyl Urethane	12/383,589	03/26/2009
Method of producing hybrid polyhydroxyurethane network on the base of carbonated-epoxydated unsaturated fatty acid triglycerides		09/20/2010

In addition, with respect to proprietary knowledge that is not patentable and processes for which patents are difficult to enforce, the Company relies on trade secret protection and confidentiality agreements to safeguard its interests. Many elements of the manufacturing process used by the Company may involve proprietary knowledge, technology or data that is not covered by patents or patent applications, including technical processes, equipment designs, algorithms and procedures.

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Facilities and Employees

Hybrid Coating Technologies Inc.’s office is located in Daly City, California, U.S.A.

As of December 31, 2016, Hybrid Coating Technologies Inc. had 3 employees.

Competition

To date, the Company is unaware of any other non isocyanate polyurethane product and as such does not have any direct competition. However, it still must compete against major companies manufacturing and supplying toxic PU based paints and coatings. Large members of this market are BASF, Sherwin Williams, PPG, Benjamin Moore, AKZO Nobel, Rust-Oleum and Sika AG. The Company’s products, however, offer these competitors a cost-effective and attractive green alternative to their existing coating formulations and this is why almost all of the top 10 formulators in the world have sought out the Company to learn about Green Polyurethane™.

Environmental Matters

The Company is not aware of any pending or threatened environmental investigation, proceeding or action by foreign, federal, state or local agencies, or third parties involving its current operations.

Description of the Industry

According to the Center for the Polyurethanes, the industry is generally broken up into the following segments:

	•	C.A.S.E. (Binders, Coatings, Adhesives, Sealants and Elastomers)

	•	Thermoplastics (highly elastic, flexible and abrasion resistant polyurethane)

	•	Rigid Foam (used as packaging material, building insulation, etc.)

	•	Flexible Foam (in bedding, furniture, car interiors, and running shoes)

The total available market for the Company within the polyurethane and coatings industries is currently estimated at $136 billion and comprised of three segments as follows:

•	Polyurethane – According to plastemart.com, a well-known online authority in the coatings market, “As per Research and Markets, the global market for polyurethanes was estimated at 13,650.00 kilo tons in 2010 and is expected to reach 17,946.20 kilo tons by 2016, growing at a CAGR of 4.7% from 2011 to 2016. In terms of revenue, the market was estimated to be worth US$33 billion in 2010 and is expected to reach US$55 billion by 2016, growing at a CAGR of 6.8% from 2011 to 2016.”

•	Global Paints & Coatings – According to Datamonitor’s 2010 paints & coatings Global Industry Guide, “the global paints & coatings market grew by 8.6% in 2010 to reach a value of $103 billion with a volume of 35MM Tons. In 2015, the global paints & coatings market is forecast to have a value of $142 billion, an increase of 37.3% since 2010.” This market comprises three segments: Decorative, Industrial and Automotive, Specialty and Other. HCT’s focus is on “Specialty and Other,” which comprises 23% of the market.

•	Nano Coatings - The market for nanocoatings was $2.1 billion in 2009 and projected to reach $3.3 billion in 2010 and $17.9 billion in 2015 with a five-year CAGR of 39.5% (BCC research, Jan. 2010).

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Total Serviceable Market (“TSM”)

The total serviceable market is currently estimated at $32 billion as follows:

•	Polyurethane – Out of the total $33BB global paints & coatings market, 25% or $8.25 billion accounts for binders, coatings & adhesives, available for the Company to service.

•	Global Paints & Coatings – Out of the total $103 billion polyurethane market 23% or $23.7 billion accounts for “specialty and other”, available for the Company to service.

•	Nano Coatings - Out of the total $3 billion nanocoatings market, the Company anticipates servicing 5% or $150 million.

The only polyurethane markets for which it would not be economical to use Green Polyurethane™ are certain foams, which are produced at very low costs for furniture. However, Green Polyurethane™ can still be used for other polyurethane based foam products on a competitive basis. Green Polyurethane™ could also replace up to 20% of the high-end epoxy flooring/coating market.

2016 Progress and 2017 Outlook and Beyond

•	Comex, a division of PPG, launched its first product based on Hybrid’s isocyanate free hardener.

•	The Company received its first commercial order for $160,000 from its US distributor, which shipped in the first quarter of 2016.

•	The Company is presently in discussions with several large industry players to potentially enter into joint development agreements.

•	The Company received several pilot orders from several Europeans distributors that are looking to ramp up sales in Europe.

•	The Company is continuing to develop products in various verticals of the polyurethane industry including its spray foam insulation product.

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ITEM 1A. RISK FACTORS

Risks Related to Our Business, Products and the Green Polyurethane Industry

Risks Related to Hybrid Coating Technologies Inc.’s Business Operations

We have a limited operating history.

The Company was incorporated on July 8, 2010 and has a limited operating history. As such historical operating results may not provide a meaningful basis for evaluating the business, financial performance and prospects. You should consider the Company’s business, operations and prospects in light of the risks, expenses and challenges faced as an early-stage company.

Our business, and therefore our results of operations and financial condition, may be adversely affected by the current disruption in the global credit markets and instability of financial systems.

The recent disruption in the global credit markets, the re-pricing of credit risk and the deterioration of the financial and real estate markets generally, particularly in the U.S. and Europe, have all contributed to a reduction in consumer spending and a decline in the overall U.S. and world economy. Although the recent disruptions were initially in the housing, financial and insurance sectors, this deterioration has further expanded to the general economy and various sectors. Tight credit, increased unemployment and reduced consumer confidence have had negative effects on demand in the consumer market and consequently for our product and service offerings. In addition, some economists are predicting that the U.S. economy, and possibly the global economy, has entered into a prolonged recession or even a depression as a result of the foregoing factors. Such a prolonged downturn in the U.S. or global economy could have a material adverse effect on our business in a number of ways, including lower product demand and lower sales, which could have a material adverse effect on our liquidity, results of operations and financial condition.

The intellectual property used by the Company has limited protection.

The process of seeking patent, industrial design and trademark protection can be time consuming and expensive and there can be no assurance that patents, industrial design registrations or trademark registrations will issue from future applications or that the existing intellectual property rights used by the Company or any new patents, industrial design registrations or trademark registrations that may be issued will be sufficient in scope or strength to provide meaningful protection or any commercial advantage. There can be no assurance that any pending or future patent, industrial design or trademark applications will be granted in respect of the technology used by The Company or that any existing, pending or future patents, industrial design registrations or trademark registrations will not be challenged, invalidated, ignored, circumvented or otherwise rendered unenforceable.

The Company’s future success depends on its ability to increase its client base and distribution channels

We will initially sell the Nanotech Products primarily to end-users within North America. If we are unable to successfully increase our client base and expand our distribution channels, our revenues and future prospects may be materially harmed. As we seek to grow our sales by entering new markets, our ability to increase market share and sales will depend substantially on our ability to expand our distribution channels by identifying, developing and maintaining relationships with manufacturers and distributors. We may be unable to enter into relationships with resellers in the markets we target or on terms and conditions favorable to us, which could prevent us from entering these markets at all or in accordance with our current plans. Our ability to enter into and maintain relationships with resellers will be influenced by factors beyond our control, including the relationships between these resellers and our competitors and market acceptance of our products.

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Our dependence on third party manufacturers for the manufacturing of all the Nanotech Products could prevent us from delivering our products to our customers within required timeframes, which could result in order cancellations and loss of market share.

We obtain all of the Nanotech Products using third party manufacturers and assemblers and using materials and components procured from a limited number of third-party suppliers. If we fail to develop or maintain our relationships with these or other suppliers, we may be unable to manufacture our products or our products may be available only at a higher cost or after a long delay, which could prevent us from delivering our products to our customers within required time frames which may, in turn, result in order cancellations and loss of market share. The failure of a supplier to supply materials and components in a timely manner, or to supply materials and components that meet our quality, quantity and cost requirements could impair our ability to manufacture our products or increase their component costs, particularly if we are unable to obtain substitute sources of these materials and components on a timely basis or on terms acceptable to us.

Highly Competitive Industry

Many of the companies with which the Company will compete have significantly greater financial and other resources than the Company. Additionally, other companies which at present are not in competition with the Company may also enter into this industry, thereby directly competing with the Company.

Uncertain Acceptance and Maintenance of Company Brand

The Company believes that the establishment and maintenance of a brand identified with the Company’s services is critical to attracting and expanding its customer base. While the Company is confident that its services and brand name(s) will provide an excellent foundation for developing brand awareness, no assurance can be given that such branding efforts will be successful. Promotion of brand awareness among users will depend, among other things, on the Company’s success in its marketing efforts and the usability of its services, none of which can be assured.

Significant Growth Places a Strain on Resources

If the Company is unable to manage growth effectively, business could be adversely affected. The Company expects to experience significant growth, both internally and through possible acquisitions and partnerships. This anticipated future growth may place a significant strain on its resources. As part of this growth, the Company will need to expand on its operational and financial systems, procedures and controls.

The Company may require additional capital in the future and no assurance can be given that such capital will be available at all or available on acceptable terms.

The Company remains highly dependent upon funding from non-operational sources. The Company’s consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred net losses of $33,932,305 since inception and has a working capital deficit of $9,878,366 as of December 31, 2016. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties.

There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placement, public offerings and/or bank financing necessary to support the Company's working capital requirements. To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital is not available the Company may be required to curtail or cease its operations.

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The Company has no history of significant profit and no assured foreseeable earnings.

The Company has no history of significant profit. The Company expects to continue to incur losses in the very near future, and there can be no assurance that it will ever be profitable as it expects operating expenses to increase as its client base and distribution channels are expanded. The Company’s ability to reach and sustain profitability depends on a number of factors including, but not limited to, the availability of financing and the continued availability of third party manufacturers.

The Company’s business depends substantially on the continuing efforts of its executive officers, and its business may be severely disrupted if the Company loses their services. In addition, if the Company is unable to attract, train and retain technical personnel, the Company’s business may be materially and adversely affected.

The Company’s future success depends substantially on the continued services of its executive officers. If one or more of the Company’s executive officers are unable or unwilling to continue being employed by us, the Company may not be able to replace them readily, if at all. Therefore, the Company’s business may be severely disrupted, and it may incur additional expenses to recruit and retain new officers.

Recruiting and retaining capable personnel is vital to the Company’s success. If the Company is unable to retain and attract qualified employees, the Company’s business may be materially and adversely affected.

Our ability to increase market share and sales depends on our ability to successfully expand our distribution channels.

We will sell the Company Products to companies within North America. If we are unable to successfully expand our distribution channels and client base significantly, our revenues and future prospects will be materially harmed. As we seek to grow our sales by entering existing and new markets in some of which we have little experience selling coatings, adhesive and sealant products, our ability to increase market share and sales will depend substantially on our ability to expand our distribution channels by identifying, developing and maintaining relationships with resellers both within and outside of North America. We may be unable to enter into relationships with resellers in the markets we target or on terms and conditions favorable to us, which could prevent us from entering these markets or entering these markets in accordance with our plans.

The Company is delinquent in its payroll tax remittances.

Risks Related to the Common Stock

The Company may conduct further offerings in the future, in which case your shareholdings will be diluted.

Since inception, both the Registrant and the Company have relied on equity sales of Common Stock and issuances of convertible debt and warrants convertible or exercisable into shares of Common Stock to fund operations. The Registrant may conduct further equity and/or convertible debt offerings in the future to finance current projects or to finance subsequent projects that it decides to undertake. If Common Stock is issued in return for additional funds, or upon conversion or exercise of outstanding convertible debentures or warrants, the price per share could be lower than that paid by existing common stockholders. The Registrant anticipates continuing to rely on equity sales of Common Stock and issuances of convertible debt and/or warrants convertible or exercisable into shares of Common Stock in order to fund its business operations. If the Registrant issues additional shares of Common Stock, your percentage interest in the Registrant will be lower. This condition, often referred to as “dilution”, could result in a reduction in the per share value of your shares of Common Stock.

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The Company may exercise its American-European Option and additionally it’s Asia Option in the Licensing Agreement which will result in your shareholdings being significantly diluted.

On December 6, 2011, the Company notified NTI of its intent to exercise the Sealant Option. To date, the Company has not issued the Sealant Shares and the Sealant Option has expired. The Company intends to renegotiate the Sealant Option with NTI in the future.

Should the Company exercise the American-European Option or also exercise the Asia Option, (as defined in the Licensing Agreement), this will result in a significant issuance of Common Stock in return for Perpetual Licensing Rights (as defined in the Licensing Agreement). This share issuance will also result in a change of control and NTI will own 52.5% of the Company’s outstanding Common Stock in return for the exercise of the American-European Option (and an additional 10% of the Company’s outstanding Common Stock in the event the Company also exercises the Asia Option). As a result, NTI will have substantial influence over all matters requiring stockholder approval, including the election of directors and the approval of significant corporate transactions such as mergers, tender offers and the sale of all or substantially all of the assets. The interests of NTI could conflict with or differ from your interests as a holder of common shares. For example, the concentration of ownership held by NTI could delay, defer or prevent a change of control of the Company or impede a merger, takeover or other business combination which you may view favorably.

The Registrant does not anticipate paying dividends in the future.

The Registrant’s current policy is to retain earnings to finance the development of new lines of products and to otherwise reinvest in our business. Therefore, the Registrant does not anticipate paying cash dividends in the foreseeable future. The Registrant’s dividend policy will be reviewed from time to time by the Board of Directors in the context of its earnings, financial condition and other relevant factors. Until the Registrant pays dividends, which it may never do, its shareholders will not be able to receive a return on shares of Common Stock unless they sell them.

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ITEM 2. DESCRIPTION OF PROPERTY

We do not own any real property or any rights to acquire any real property. Our head office is located at 950 John Daly Blvd. Suite 260, Daly City, CA 94015. The lease is on a month-to-month basis at $3,750 per month.

ITEM 3. LEGAL PROCEEDINGS

There are no pending legal proceedings to which the Company is a party or to which any of our property is subject and to the best of our knowledge, no such actions against us are contemplated or threatened.

ITEM 4. MINE SAFETY DISCLOSURES

No applicable.

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PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Common Stock is quoted on the OTC Bulletin Board. Our shares were first traded on the OTC Bulletin Board on July 10, 2009, under the name “Allora Minerals, Inc.”, (OTCBB: ALRL). On August 12, 2009, the change of the Registrant’s name to Epod Solar Inc. was approved by the NASD, and we were issued the new trading symbol “EPDS”. On July 27, 2011, the Company changed its name to Hybrid Coating Technologies Inc., and on September 7, 2011, that change was approved by the Nevada Secretary of State and the Company was issued a new trading symbol “HCTI.ob”. The following table indicates the high and low bid prices of our common stock obtained during the periods indicated:

		For the Year Ended				For the Year Ended
		December 31, 2016				December 31, 2015
		High		Low		High		Low
First Quarter	$	0.0039	$	0.001	$	0.093	$	0.0251
Second Quarter	$	0.0015	$	0.0008	$	0.048	$	0.0035
Third Quarter	$	0.29	$	0.0006	$	0.018	$	0.0019
Fourth Quarter	$	0.013	$	0.0002	$	0.0108	$	0.0008

The range of high and low price quotes of our common stock as set out in the table above is as quoted on the OTC Bulletin Board. The market quotations provided reflect inter-dealer prices, without retail markup, mark-down or commission and may not represent actual transactions.

The number of holders of record of our shares of our common stock as of December 31, 2016, was 154 shareholders.

Penny Stock Rules

The United States Securities and Exchange Commission (“SEC”) has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ system; provided, that current price and volume information with respect to transactions in such securities is provided by the exchange or system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document prepared by the SEC, which: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker's or dealer's duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and in such form as the SEC shall require by rule or regulation.

The broker-dealer also must, prior to effecting any transaction in a penny stock, provide the customer with: (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) monthly account statements showing the market value of each penny stock held in the customer's account. In addition, the penny stock rules require that, prior to a transaction in a penny stock that is not otherwise exempt from those rules, the broker-dealer must: (a) make a special written determination that the penny stock is a suitable investment for the purchaser; and (b) receive from the purchaser his or her written acknowledgement of receipt of the determination and a written agreement to the transaction.

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These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock and therefore stockholders may have difficulty selling those securities.

Dividend Policy

We have never declared or paid any cash dividends on our common stock. We currently intend to retain future earnings, if any, to finance the expansion of our business. As a result, we do not anticipate paying any cash dividends in the foreseeable future.

Sale of Unregistered Securities

On August 30, 2010, the Company closed on the acquisition from Nanotech, a corporation formed pursuant to the laws of Nevada of all of the issued and outstanding shares of capital stock of Nanotech held by the holders of the Nanotech Shares. The purchase price for the Nanotech Acquisition consisted of 3,381,003 shares of common stock, $0.001 par value per share of the Registrant, issued to Nanotech Shareholders. In addition, certain shareholders of the Company agreed to have 1,028,000 of their shares cancelled as part of the transaction.

ITEM 6. SELECTED FINANCIAL DATA

N/A

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

This Management's Discussion and Analysis (“MD&A”) is designed to assist investors in understanding the nature and the importance of the changes and trends, as well as the risks and uncertainties associated with the Company's operations and financial position. Some sections of this MD&A contain forward-looking statements that, because of their nature, necessarily involve a number of known and unknown risks and uncertainties, including statements regarding our capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, forward-looking statements can be identified 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. The Company's actual and future results could therefore differ materially from those indicated or underlying these forward-looking statements. In evaluating these statements, you should consider various factors, including the risks discussed below, and, from time to time, in other reports filed by the Company with the SEC. See “Risk Factors” and “Special Note Regarding Forward Looking Statements”.

Although the Company deems the expectations reflected in these forward-looking statements to be reasonable, the Company cannot provide any guarantee as to the materialization of the expectations reflected in these forward-looking statements.

Basis of Presentation

This MD&A on the Company's operating results and cash flows for the fiscal years ended December 31, 2016 and 2015 as well as its financial position at December 31, 2016 and 2015, should be read in conjunction with the consolidated financial statements and accompanying notes contained in this report.

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Company Overview

Headquartered in Daly City, California, Hybrid Coating Technologies Inc.’s (formerly Epod Solar Inc.) (“HCT”) core business is that of its wholly-owned subsidiary, Nanotech Industries International Inc. (“Nanotech”). This business is the manufacturing and sale of alternative non-toxic (isocyanate-free) polyurethane, Green Polyurethane™. The products manufactured and sold by Nanotech (“Nanotech Products”) include coatings and raw binder ingredients (Green Polyurethane® Monolithic Floor Coating and Green Polyurethane™ Binder). Nanotech was granted the right to manufacture and sell the Nanotech Products pursuant to an agreement (“Licensing Agreement”) entered into between Nanotech and NTI (Nanotech Industries Inc.) the holder of the proprietary rights to the license and intellectual property required for the manufacturing of the Nanotech Products. The Nanotech Products will target the coatings, adhesives, sealants and elastomers (“C.A.S.E.”) market in North America, with options to sell in Europe, South America and Asia, pursuant to the terms of the Licensing Agreement. (see Note 4 to consolidated financial statements and Item 1 –Description of Business) .

Off-Balance Sheet Arrangements

N/A

Going Concern

The Company’s consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred net losses of $33,932,305 since inception and has a working capital deficit of $9,878,366 as of December 31, 2016. These conditions raise substantial doubt about the Company’s ability to continue as a going concern from the filing date of these consolidated financial statements. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties.

Recent Accounting Pronouncements

The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company’s results of operations, financial position or cash flows.

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Operating Results for the Fiscal Years Ended December 31, 2016 and 2015

Results of Operations

We have operating revenues for the year ended December 31, 2016 of $232,359 as the Company began to commercialize its products and fulfill orders related to the distribution agreement with Industrial Finishes entered into on January 7, 2016, compared to samples sales of $5,815 for the year ended December 31, 2015. Our activities to date have been financed from the proceeds of share subscriptions, proceeds from convertible debentures and notes issued and from loans from related and other parties and trade payables.

For the year ended December 31, 2016, we incurred a total net loss of $4,577,945, including non-cash charges of $59,000 from stock-based compensation, intangible asset amortization of $705,512, amortization of debt discounts of $986,737, other non-cash interest expense of $337,415, loss on extinguishment of debt of $1,366,546, gain on settlement of payables of $390,000, a gain in the fair value of the derivative liability of $227,729 and impairment of intangible assets of $385,468. The Company also incurred other general and administrative expenses of $1,012,037, loss on foreign currency transactions of $2,161, additional interest expense of $438,832 and cost of sales of $134,325.

General and administrative expenses totaled $1,071,037 for the year ended December 31, 2016, as compared to $1,921,756 for the year ended December 31, 2015, representing a 44% decrease from the prior year. Included in general and administrative expenses are the following:

		Year Ended December 31			%
		2016		2015	change

Professional fees - third party	$	332,516	$	144,753	130%
Professional fees - related parties		303,963		972,565	(69%	)
Lawsuit settlement		-		50,000	(100%	)
Payroll		42,897		43,191	(1%	)
Stock-based compensation (non-cash)		59,000		325,327	(82%	)
Rent, supplies and general office costs		169,701		149,703	13%
Travel and trade shows		162,960		236,217	(31%	)

Total	$	1,071,037	$	1,921,756	(44%	)

General and Administration expenses analysis

Professional fees were $636,479 (of which $303,963 were with related parties) for the year ended December 31, 2016 compared to $1,117,318 (of which $972,565 were with related parties) for the year ended December 31, 2015. The Company incurred $50,000 in a settlement related to the lawsuit filed by William Alessi in December 2015. Professional fees to related parties decreased significantly from 2015 due to $614,000 charged by a shareholder-creditor, referred to in Note 12, in 2015 relating to strategic partnership negotiations and other business related services performed on the Company’s behalf. Professional fees to third parties increased by $189,748 in 2016 due to higher legal, sales and business consulting, and accounting fess in 2016 as the Company started to commercialize its products.

The Company continues to rely on consultants for financing, sales and marketing purposes as it retains a very small staff. Payroll was $42,897 for the year ended December 31, 2016 compared to $43,191 for the year ended December 31, 2015. There was only one employee paid through payroll in both 2016 and 2015. Two other employees in Senior management were remunerated through stock-based compensation. Stock-based compensation was $59,000 for the year ended December 31, 2016 compared to $325,327 for the year ended December 31, 2015. Stock-based compensation decreased by 82% in 2016 due to fewer payments to management and other consultants for services through the issuance of shares. Joseph Kristul, the Company’s president and CEO, received $48,600 in 2015 and $0 in 2016. Rent, supplies and general office costs was $169,701 in 2016 a 13% increase from $149,703 for the prior year due to minor increases in administrative costs. Travel and trade shows was $162,960 for the year ended December 31, 2016, a 31% decrease from $236,217, due to attending more shows and visiting potential customers and business partners as the Company in 2015 as the Company approached commercialization of their products.

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Amortization and depreciation was $705,512 for the year ended December 31, 2016, compared to $1,105,932 in the year ended December 31, 2015. Several licenses were extended to December 31, 2020 therefore increasing the amortization period and lowering the amortization cost for the year ended December 31, 2016.

During the year ended December 31, 2016, the Company recorded a gain of $227,729 on the change in fair value of derivative liabilities related to our convertible notes payable, compared to a gain of $302,596 during the year ended December 31, 2015. The change in derivative liability was primarily a result of the larger decrease in our stock price during the year ended December 31, 2015.

During the year ended December 31, 2016, the Company recorded $1,762,984 in interest expense compared to $2,017,673 during the year ended December 31, 2015. Interest expense was lower than in the prior year’s period due to the Company acquiring less debt in 2016 compared to 2015, and the Company converting its 2015 debt to shares of the Company’s common stock in 2016.

During the year ended December 31, 2016, the Company recorded a loss on the extinguishment of debt of $1,366,546 and a gain on settlement of payables of $390,000 yielding a loss totalling $976,546, compared to a loss on the extinguishment of debt of $174,475, and a loss on settlement of payables in the amount of $1,826,684, totalling $2,001,259 during the year ended December 31, 2015. The losses were a result of paying off accounts payable-related parties and other debt through the issuance of shares at a lower value than the fair value of the shares.

Liquidity and Capital Resources

The Company had $28 of cash at December 31, 2016, compared to $23,893 of cash at December 31, 2015. The Company had a working capital deficit of $9,878,366 as of December 31, 2016. We do not have sufficient cash on hand to fund operations. We believe that we will need approximately $1,100,000 to fund our operations over the next 12 months.

The ability of the Company to continue its operations is dependent on the successful execution of management's plans, which include the expectation of raising debt or equity based capital, 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 related parties to sustain the Company’s existence. The Company is highly dependent on loans from related parties to continue operations. There is no assurance we will be able to continue operating as a going concern.

In 2016, the Company received approximately $3,000,000 (approximately $2,500,000 from related parties) in short-term loans and repaid approximately $2,076,000 (of which $1,330,000 was repaid to shareholders and $610,000 was repaid to related parties).

In 2015, the Company received approximately $2,865,000 (approximately $2,039,000 from related parties) in short-term loans and repaid approximately $2,310,000 (of which $1,681,000 was repaid to shareholders and $439,000 was repaid to related parties).

-24-

Principal Cash Flows for the Fiscal Years Ended December 31, 2016 and 2015

Operating activities used cash flows of $971,315 for the year ended December 31, 2016, and $513,632 for the year ended December 31, 2015. This increase in cash used relates primarily to increase in actual cash used to fund operations in 2016 over 2015.

Investing activities used cash flows of $5,000 in 2016 (2015 - $12,000) due to the payment made on an equipment loan receivable during 2016.

Financing activities provided cash flows of $952,450 for the year ended December 31, 2016, primarily as a result of receipt of funds of $2,475,712 in shareholder loans, and $553,000 of proceeds from convertible notes. In addition, the Company repaid $610,000 of the note payable - related party, $1,330,206 on loans payable - shareholders, and $136,056 in convertible notes. During 2015, the Company had cash provided by financing activities of $549,525, primarily as a result of receipt of funds of $2,039,136 in shareholder loans, $229,000 in loans payable and $596,450 of proceeds from convertible notes. In addition, the Company repaid $439,000 of the note payable - related party, $1,681,137 on loans payable – shareholders, and $189,872 in convertible notes.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Convertible Debt

The fair market value of our 10% senior secured convertible debentures is subject to interest rate risk, market price risk and other factors due to the convertible feature of the debentures. The fair market value of the debentures will generally increase as interest rates fall and decrease as interest rates rise. In addition, the fair market value of the debentures will generally increase as the market price of our common stock increases and decrease as the market price falls. The interest and market value changes affect the fair market value of the debentures but do not impact our financial position, cash flows or results of operations due to the fixed nature of the debt obligations.

-25-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Hybrid Coating Technologies Inc.

Consolidated Financial Statements
December 31, 2016 and 2015

-26-

Hybrid Coating Technologies Inc.

Consolidated Financial Statements

Contents

Report of Independent Registered Public Accounting Firm	F-1

Consolidated Balance Sheets	F-2

Consolidated Statements of Operations	F-3

Consolidated Statement of Changes in Stockholders’ Deficit	F-4

Consolidated Statements of Cash Flows	F-7

Notes to Consolidated Financial Statements	F-11

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of
Hybrid Coating Technologies Inc.
Daly City, California

We have audited the accompanying consolidated balance sheets of Hybrid Coating Technologies, Inc. as of December 31, 2016 and 2015, and the related consolidated statements of operations, stockholders’ deficit and cash flows for the years then ended. Hybrid Coating Technologies Inc.’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Hybrid Coating Technologies Inc. as of December 31, 2016 and 2015, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that Hybrid Coating Technologies Inc. will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, Hybrid Coating Technologies Inc. has suffered recurring losses from operations and has a net working capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ GBH CPAs, PC

GBH CPAs, PC
www.gbhcpas.com
Houston, Texas
May 9, 2018

Hybrid Coating Technologies Inc.

Consolidated Balance Sheets

As of December 31, 2016 and 2015

		December 31,			December 31,
		2016			2015
ASSETS

Current assets
Cash and cash equivalents	$	28		$	23,893
Total current assets		28			23,893
Equipment loan receivable		17,000			12,000
Intangible assets, net of accumulated amortization and impairment		2,107,877			1,132,753

TOTAL ASSETS	$	2,124,905		$	1,168,646

LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities
Accounts payable and accrued liabilities	$	1,166,793		$	866,103
Accounts payable and accrued liabilities - related parties		789,462			324,865
Deferred revenue		26,840			177,442
Stock payable		15,000			15,000
Senior secured convertible debentures		200,000			200,000
Convertible notes, net of unamortized discount of $244,414 and $76,975, respectively		172,886			60,424
Convertible debentures , current portion		1,228,830			-
Loans payable		1,206,500			1,206,500
Loans payable - shareholders		2,468,434			2,197,082
Note payable - related party		2,190,455			1,300,491
Derivative liabilities		413,199			138,957
Total current liabilities		9,878,399			6,486,864
Convertible debentures, long-term portion		-			1,344,242
Total liabilities		9,878,399			7,831,106
Commitments and contingencies
STOCKHOLDERS’ DEFICIT
Series A preferred stock, $0.001 par value, 1,000,000 shares authorized, 0 shares issued		-			-
Series B preferred stock, $0.001 par value, 11,000,000 shares authorized, 613,500 shares and 2,300 shares issued and outstanding, respectively		614			2
Common stock, $0.001 par value, 22,500,000,000 shares authorized, 1,338,801,737 shares and 5,492,795 shares issued and outstanding, respectively		1,338,802			5,943
Additional paid-in capital		24,839,395			2,685,955

Accumulated deficit		(33,932,305	)		(29,354,360	)
Total stockholders’ deficit		(7,753,494	)		(6,662,460	)

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT	$	2,124,905		$	1,168,646

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

Hybrid Coating Technologies Inc.

Consolidated Statements of Operations

For the Years Ended December 31, 2016 and 2015

		Year Ended			Year Ended
		December 31, 2016			December 31, 2015
Revenues	$	232,359		$	5,815
Cost of sales		134,325			4,610
Gross profit		98,034			1,205
Operating expenses
General and administrative		1,071,037			1,921,756
Amortization of intangible assets		705,512			1,105,932
Impairment of intangible assets		385,468			-
(Gain) loss on settlement of payables		(390,000	)		1,826,684
Total operating expenses		1,772,017			4,854,372
Loss from operations		(1,673,983	)		(4,853,167	)
Loss on extinguishment of debt		(1,366,546	)		(174,475	)
Other income (expense)
Change in fair value of derivative liability		227,729			302,596
Gain (loss) on foreign currency transactions		(2,161	)		11,422
Interest expense		(1,762,984	)		(2,017,673	)
Total other income (expenses)		(2,903,962	)		(1,878,130	)
Net loss	$	(4,577,945	)	$	(6,731,297	)
Net loss per common share - basic and diluted	$	(0.03	)	$	(0.02	)
Weighted average number of common shares - basic and diluted		140,425,065			298,799,307

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

Hybrid Coating Technologies Inc.

Statement of Changes in Stockholders’ Deficit

For the Years Ended December 31, 2016 and 2015

	Series B Preferred Stock			Common Stock
	Number of			Number of						Additional
	Shares			Shares						Paid-In			Accumulated
	Issued		Amount	Issued			Amount			Capital			Deficit			Total
Balance, December 31, 2014		$		220,634		$	221		$	17,047,192		$	(22,623,063	)	$	(5,575,651	)
Stock-based compensation				36,684			37			325,290						325,327
Issuance of shares for payment on accounts payable and accrued liabilities - related parties				2,455,750			2,456			1,749,678						1,752,134
Issuance of warrants for payment on accounts payable and accrued liabilities - related parties										1,106,410						1,106,410
Issuance of warrants for payment of interest										15,600						15,600
Issuance of shares for conversion of debt				3,207,823			3,208			1,130,382						1,133,590
Exercise of warrants				4,550			5			495						500
Exchange of debt										36,103						36,103
Reduction of derivative liability on conversion of debt										754,873						754,873
Imputed interest on note payable - related party										135,421						135,421
Cancellation of shares and issuance of warrants				(9,750	)		(10	)		10						-
Issuance of shares for payment of interest				27,105			27			132,023						132,050
Issuance of preferred shares for settlement of debt	200		-							150,000						150,000
Issuance of preferred shares for intangible asset	2,100		2							102,478						102,480
Net loss													(6,731,297	)		(6,731,297	)
Balance, December 31, 2015	2,300		2	5,942,795			5,943			22,685,955			(29,354,360	)		(6,662,460	)
Stock-based compensation				500,000			500			58,500						59,000
Issuance of shares for payment on loans payable - shareholders				324,305,000			324,305			1,348,381						1,672,686
Issuance of shares for payment on accounts payable and accrued liabilities - related parties				22,500,000			22,500			-						22,500
Issuance of warrants for payment on loans payable - shareholders										3,380,000						3,380,000
Issuance of warrants for convertible debt inducement										15,000						15,000
Cancellation of warrants										(3,860,000	)					(3,860,000	)
Issuance of shares for conversion of debt				986,313,478			986,313			(322,902	)					663,411
Reduction of derivative liability on conversion of debt										784,209						784,209
Issuance of preferred shares and preferred share warrants for extension of intangible asset licenses	611,200		612							565,493						566,105
Imputed interest on note payable - related party										184,000						184,000
Cancellation of shares and issuance of warrants				(759,750	)		(760	)		760						-
Adjustment to shares and paid in capital for fractional shares				214			-			-						-
Net loss													(4,577,945	)		(4,577,945	)
Balance, December 31, 2016	613,500	$	614	1,338,801,737		$	1,338,802		$	24,839,395		$	(33,932,305	)	$	(7,753,494	)

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

Hybrid Coating Technologies Inc.

Consolidated Statements of Cash Flows

For the Years Ended December 31, 2016 and 2015

		Year Ended			Year Ended
		December 31, 2016			December 31, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(4,577,945	)	$	(6,731,297	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Stock-based compensation		59,000			325,327
Amortization of intangible assets		705,512			1,105,932
Impairment of intangible assets		385,468			-
(Gain) loss on settlement of payables		(390,000	)		1,826,684
Loss on extinguishment of debt		1,366,546			174,475
Change in fair value of derivative liability		(227,729	)		(302,596	)
(Gain) loss on foreign currency transactions		2,161			(11,422	)
Amortization of debt discounts		853,338			677,439
Interest expense related to derivative liability in excess of face value of debt		160,915			607,230
Interest imputed from notes payable - related party		184,000			135,421
Change in operating assets and liabilities:
Accounts payable and accrued liabilities		300,689			1,436,344
Accounts payable and accrued liabilities - related parties		357,332			85,389
Deferred revenue		(150,602	)		157,442
Net cash used in operating activities		(971,315	)		(513,632	)

CASH FLOWS FROM INVESTING ACTIVITIES

Issuance of loan receivable for equipment		(5,000	)		(12,000	)
Net cash used in investing activities		(5,000	)		(12,000	)

CASH FLOWS FROM FINANCING ACTIVITIES
Bank indebtedness		-			(5,552	)
Proceeds from convertible notes, net of issuance costs		553,000			596,450
Proceeds from loans payable		-			229,000
Proceeds from loans payable - shareholders		2,475,712			2,039,136
Repayments from loans payable - shareholders		(1,330,206	)		(1,681,137	)
Repayments of convertible notes		(136,056	)		(189,872	)
Repayments of note payable - related party		(610,000	)		(439,000	)
Proceeds from exercise of warrants		-			500
Net cash provided by financing activities		952,450			549,525

INCREASE (DECREASE) IN CASH		(23,865	)		23,893

CASH, BEGINNING OF THE YEAR		23,893			-
CASH, ENDING OF THE YEAR	$	28		$	23,893

Hybrid Coating Technologies Inc.

Consolidated Statements of Cash Flows (continued)

For the Years Ended December 31, 2016 and 2015

		Year Ended		Year Ended
		December 31, 2016		December 31, 2015
Supplemental disclosure of cash flow information
Cash paid during the period for:
Interest paid	$	78,971	$	50,343
Income taxes	$	-	$	-

Non-cash investing and financing transactions:

Acquisition of intangible asset through issuance of note payable	$	1,500,000	$	-
Acquisition of intangible asset through issuance of preferred stock	$	566,104	$	102,480
Common stock issued for settlement of accounts payable - related party	$	1,695,186	$	1,752,134
Preferred stock issued for payment of note-payable-related party	$	-	$	150,000
Warrants and stock issued for settlement of liabilities	$	3,380,000	$	1,106,410
Warrants and stock issued and payable for principal And interest on Convertible Debenture	$	-	$	147,650
Warrants issued for convertible debt inducement	$	15,000	$	-
Reduction of derivative liabilities on redemption of debt	$	784,209	$	754,873
Derivative debt discount	$	1,286,180	$	931,659
Cashless exercise of warrants	$	-	$	410
Common stock issued for debt	$	663,411	$	1,133,590
Warrants issued for cancellation of shares	$	151,950	$	1,950
Exchange of debt with stockholder for common stock	$	-	$	36,103
Cancellation of warrants	$	3,860,000	$	-
Exchange of loans payable - shareholders to convertible notes	$	483,200	$	-

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

Hybrid Coating Technologies Inc.

Notes to Consolidated Financial Statements

December 31, 2016 and 2015

NOTE 1 – NATURE OF BUSINESS AND GOING CONCERN

Nature of Business Overview
Hybrid Coating Technologies Inc. (the “Company”, “HCT”) was incorporated in the State of Nevada on July 8, 2010. Our operations are now focused on the manufacturing and sale of Green Polyurethane™, including Green Polyurethane™ Monolithic Floor Coating and Green Polyurethane™ Binder, an alternative non-toxic (isocyanate-free) polyurethane.

Going Concern
The Company remains highly dependent upon funding from non-operational sources, principally related parties. The Company’s consolidated financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. The Company has incurred net losses of $33,932,305 since inception through December 31, 2016 and has a working capital deficit of $9,878,366 as of December 31, 2016. These conditions raise substantial doubt about the Company’s ability to continue as a going concern from the filing date of these consolidated financial statements. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of these uncertainties.

There are no assurances that the Company will be able to either (1) achieve a level of revenues adequate to generate sufficient cash flow from operations; or (2) obtain additional financing through either private placement, public offerings and/or bank financing necessary to support the Company's working capital requirements. To the extent that funds generated from operations and any private placements, public offerings and/or bank financing are insufficient, the Company will have to raise additional working capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable to the Company. If adequate working capital is not available, the Company may be required to curtail or cease its operations.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation – The financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America and are presented in US dollars. The Company’s fiscal year end is December 31.

Principles of Consolidation – The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Nanotech International, Inc. (“Nanotech”). All significant inter-company balances and transactions have been eliminated in the consolidated financial statements.

Use of Estimates – The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain 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 revenue and expenses during the reported period. Actual results could differ from those estimates.

Cash and Cash Equivalents – The Company maintains various cash balances in two financial institutions located in Daly City, California. These balances are fully insured by the Federal Deposit Insurance Corporation, which insures up to $250,000. On occasion, balances may temporarily exceed such coverage. The Company considers all highly liquid debt instruments, which could include commercial paper and certificates of deposits, with an original maturity of three months or less to be cash equivalents. Investments with maturities greater than three months and less than on year are classified as short term investments.

Loan Receivable – Loan receivable consists of an equipment loan entered into during 2015. The Company has classified this as a long-term asset in the balance sheet because the loan is due in 10 years. The Company evaluates these accounts receivable for collectability considering the results of operations of these related entities and when necessary records allowances for expected unrecoverable amounts. To date, no allowances have been recorded.

Intangible Assets – Intangible assets are comprised of license agreements with Nanotech Industries, Inc. which are amortized on a straight-line basis over the assets’ respective life, ranging from 24 months to 120 months.

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont’d)

Impairment of Long-Lived Assets – Long-lived assets to be held and used are reviewed for impairment on an annual basis or whenever events or changes in circumstances indicate that the carrying amount of such asset may not be recoverable. The determination of recoverability of long-lived assets is based on an estimate of undiscounted future cash flows resulting from the use of the asset or its disposition. Measurement of an impairment loss for long-lived assets that management expects to hold and use is based on the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or net realizable value.

Revenue Recognition – Revenue is recognized when persuasive evidence of an arrangement exists, goods are delivered, sales price is determinable, and collection is reasonably assured.

Sales to one customer comprised 65% of the Company’s total sales for the year ended December 31, 2016. Sales to one customer comprised 78% of the Company’s total sales for the year ended December 31, 2015. As current period revenues are not significant, the loss of customers would not have a material effect on the Company.

Income Taxes – Income taxes are provided for the tax effects of transactions reported in the financial statements and consist of taxes currently payable plus deferred taxes. Deferred income taxes are provided for the estimated income tax effect of temporary differences between the financial statement and tax bases of assets and liabilities. Deferred tax assets are also provided for certain tax loss carryforwards and tax credit carryforwards. A valuation allowance is established to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized. As long as the Company is categorized as a development stage company, the net amount of any potential deferred tax assets will be off-set by such valuation allowance. Deferred income taxes are measured using the enacted tax rates that are assumed will be in effect when the asset and liability basis differences reverse and/or when the tax loss carryforwards and tax credit carryforwards are utilized.

A tax benefit from an uncertain position is recognized if it is "more likely than not" that the position is sustainable, based upon its technical merits. The tax benefit of a qualifying position is the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with a taxing authority having full knowledge of all relevant information. As of December 31, 2016 and 2015, the Company had not recorded any tax benefits from uncertain tax positions.

Fair Value – ASC 820 defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements. It defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not active; and model-driven valuations whose inputs are observable or whose significant value drivers are observable. Valuations may be obtained from, or corroborated by, third-party pricing services.

Level 3: Unobservable inputs to measure fair value of assets and liabilities for which there is little, if any market activity at the measurement date, using reasonable inputs and assumptions based upon the best information at the time, to the extent that inputs are available without undue cost and effort.

As of December 31, 2016 and 2015, the significant inputs to the Company’s derivative liability calculation were Level 3 inputs.

The following table sets forth a reconciliation of changes in the fair value of financial assets and liabilities classified as Level 3 in the fair value hierarchy:

		Significant Unobservable Inputs
		(Level 3)
		Year Ended December 31,
		2016			2015
Beginning balance	$	138,957		$	181,723
Change in fair value of derivative liabilities		(227,729	)		(302,596	)
Settlements		(784,209	)		(754,873	)
Additions		1,286,180			1,014,703
Ending balance	$	413,199		$	138,957

Change in unrealized gains included in earnings relating to derivatives still held as of December 31, 2016 and 2015	$	227,729		$	302,596

Stock-Based Compensation – For stock and stock options awarded in return for services rendered, the expense is measured at the grant-date fair value of the award and recognized as compensation expense on a straight-line basis over the service period, which is the vesting period. The Company estimates forfeitures that it expects will occur and records expense based upon the number of awards expected to vest.

Earnings (Loss) per Share – Basic net loss per share amounts are computed by dividing the net loss by the weighted average number of common shares outstanding over the reporting period. In periods in which the Company reports a net loss, dilutive securities are excluded from the calculation of diluted net loss per share amounts as the effect would be anti-dilutive.

For the years ended December 31, 2016 and 2015, the following share equivalents related to convertible debt and warrants to purchase shares of common stock were excluded from the computation of diluted net loss per share, as the inclusion of such shares would be anti-dilutive:

Recently Issued Accounting Pronouncements – The Company does not expect the adoption of recently issued accounting pronouncements to have a significant impact on the Company's results of operations, financial position or cash flow.

In May 2014, the Financial Accounting Standards Board issued Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”), which supersedes nearly all existing revenue recognition guidance under GAAP. The core principle of ASU 2014-09 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. ASU 2014-09 defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. The standard is effective for annual periods beginning after December 15, 2016, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients; or (ii) a retrospective approach with the cumulative effect of initially adopting ASU 2014-09 recognized at the date of adoption (which includes additional footnote disclosures). The Company is currently evaluating the impact of its pending adoption of ASU 2014-09 on its consolidated financial statements and have not yet determined the method by which the Company will adopt the standard in 2017.

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The new standard requires management to assess the company’s ability to continue as a going concern. Disclosures are required if there is substantial doubt as to the company’s continuation as a going concern within one year after the issue date of financial statements. The standard provides guidance for making the assessment, including consideration of management’s plans which may alleviate doubt regarding the company’s ability to continue as a going concern. ASU 2014-15 is effective for years ending after December 15, 2016. The Company adopted the standard for the year ended December 31, 2016 and the adoption of this pronouncement did not have a material impact on our consolidated financial statements.

In April 2015, the FASB issued ASU No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30) - Simplifying the Presentation of Debt Issuance Costs. ASU 2015-03 amends previous guidance to require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The standard is effective for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Early adoption is permitted for financial statements that have not been previously issued. The Company expects that the affected amounts on its balance sheets will be reclassified within the balance sheets upon adoption of this ASU to conform to this standard. The Company adopted this ASU during the first quarter of 2016 and the adoption of this ASU did not have a material impact on its financial statements.

Subsequent Events – The Company has evaluated all transactions occurring from December 31, 2016 through the date of issuance of the consolidated financial statements for disclosure consideration.

NOTE 3 – EQUIPMENT LOAN RECEIVABLE

On October 5, 2015, the Company entered into an equipment loan agreement with a manufacturer whereby the Company agreed to loan $17,000 to the manufacturer with a maturity of 10 years at an interest rate of 0.1% per annum. At December 31, 2015, $12,000 had been loaned. The Company loaned an additional $5,000 in January 2016.

NOTE 4 – INTANGIBLE ASSETS

Beginning in 2010, the Company has entered into several licensing agreements and amendments with Nanotech Industries, Inc. (“NTI”), a privately-held company considered a related party due to common ownership and control, for exclusive rights to manufacture and distribute environmentally safe coatings, synthetic leather, adhesives, sealants, polyurethane foam, and spray foam insulation for the textile industry. The exclusivity rights originally covered North America and were later expanded to include the Russian Territory (Belorussia, Kazakhstan, and the Russian Federation), and the European Continent and are set to expire, after several amendments, on December 31, 2020.

As a part of these licensing agreements and amendments, the Company agreed to pay licensing fees totaling $5,900,000 and stock issuances totaling 8,113,116 shares of the Company’s common stock and 3,260,000 shares of the Company’s Series B Preferred Stock as well as 160,300,000 Series B Preferred Stock warrants. The Company also issued royalties of 7.5% of gross revenue from the sale of its products in the Russian Territory and the sale of adhesives and sealants. Per the terms of the agreements, the payment of these fees and issuance of these shares are due to be paid between 24 and 42 months from the agreement dates.

On August 10, 2015, the Company signed a tenth amendment to the licensing agreement with NTI whereby the parties amended the agreement to expand the products to include polyurethane foam packaging. In exchange, the Company issued 420,000 Series B preferred shares valued at $102,480.

On February 12, 2016, the Company signed an eleventh amendment to its licensing agreement with NTI whereby the parties amended the agreement to extend the exclusivity period to December 31, 2020. As consideration, the Company agreed to pay the following to NTI:

	i)	Issue 2,240,000 shares of Series B Preferred Stock.

	ii)	Issue purchase warrants to purchase 31,300,000 shares of Series B Preferred Stock, to be issued 90 days following the execution of the amendment. The warrants shall be exercisable at any time from the date of issuance at a price per share equal to the par value of the Series B Preferred Stock of $313,000 and expire ten years from the date of issuance.

	iii)	Issue purchase warrants to purchase 126,000,000 shares of Series B Preferred Stock, to be issued 12 months following the execution of the amendment. The warrants shall be exercisable at any time from the date of issuance at a price per share equal to the par value of the Series B Preferred Stock and expire ten years from the date of issuance.

	iv)	Pay NTI $1,500,000, to be paid within twelve months of the execution of the amendment.

The fair value of the 2,240,000 Series B Preferred Stock and 157,300,000 Series B Preferred Stock warrants was $502,104.

On November 9, 2016, the Company signed a twelfth amendment to its licensing agreement with NTI whereby the parties amended the agreement to extend the spray foam insulation exclusivity period by 24 months to November 9, 2018, in exchange for the following consideration:

Issue to NTI 600,000 shares of its Series B Preferred Stock and warrants to purchase 3,000,000 shares of its Series B Preferred Stock with an exercise price of $0.00001 and expiring 10 years from the date of issuance.

The fair value of the 600,000 shares of Series B Preferred Stock and 3,000,000 shares of Series B Preferred warrants was $64,000.

The Series B Preferred shares and warrants issued in February and November 2016 were valued based on an industry specific control premium and the Company’s market cap at the time of the issuance, based on the market price of its common stock.

The Company used the fair value standard set forth by the Statement of Financial Accounting Standard ASC 820-10-35-37 Fair Value in Financial Instrument with the fair value defined as the amount at which the liability could be incurred in a current transaction between willing parties.

In the event that the Company does not meet the deadlines mentioned above, and the deadlines are not extended, the Company will continue to have the right to the manufacturing and sale of these products on a non-exclusive basis for the duration of the agreement.

For the years ended December 31, 2016 and 2015, intangible asset activity consisted of the following:

		2016			2015

Net intangible assets, beginning of year	$	1,132,753		$	2,136,205
Additions		2,066,104			102,480
Less: current amortization and impairment		(1,090,980	)		(1,105,932	)
Net intangible assets, end of year	$	2,107,877		$	1,132,753

As of December 31, 2016 and 2015, the balance of intangible assets was as follows:

		2016			2015

Intangible assets	$	6,568,584		$	4,502,480
Less: accumulated amortization and impairment		(4,460,707	)		(3,369,727	)
Net intangible assets, end of year	$	2,107,877		$	1,132,753

During years ended December 31, 2016 and 2015, the Company recorded $385,468 and $0 of impairment of its intangible assets as a result of management’s assessment of the fair value of its licensing agreements and amendments through an independent valuation.

A summary of the licenses held by the Company as of December 31, 2016 and 2015 is as follows:

			Net Carrying Value
License Rights Overview	Licensed Region	Expiration Date	December 31, 2016	December 31, 2015

Coating Products	North America Russian Territory European Continent	December 31, 2020	$ 110,740	$ 153,820


Spray Foam Insulation	North America Russian Territory European Continent	November 9, 2018	44,883	86,865


Added Applications: synthetic leather, adhesives, and sealants	North America Russian Territory European Continent	December 31, 2020	467,858	833,333


Polyurethane Foam Packaging	North America	December 31, 2020	36,467	58,735

Extension	All regions and products except spray foam insulation	December 31, 2020	1,389,262	-


Extension: spray foam insulation	North America Russian Territory European Continent	November 9, 2018	58,667	-


Total			$ 2,107,877	$ 1,132,753

As of December 31, 2016 and 2015, the Company had outstanding payables owed to NTI related to these licensing agreements and amendments in the amount of $2,190,455and $1,300,491, respectively, which were included in notes payable – related party.

On June 15, 2017, the Company entered into a thirteenth amendment to its licensing agreement with NTI whereby the parties amended the agreement to extend the fee deadline for the February 2016 amendment to August 20, 2017, at which time the whole amount is due and payable.

On April 26, 2018, the Company entered into a fourteenth amendment to its licensing agreement with NTI whereby the parties amended the agreement to extend the fee deadline for the June 2017 amendment to December 31, 2019, at which time the whole amount is due and payable.

As of May 2018, approximately $89,000 had been paid by the Company to NTI with regards to licensing fees payable and all share issuances deadlines were met.

NOTE 5 – LOANS PAYABLE

Loans payable include a loan from a non-related party that was issued for $75,000 on November 16, 2010 and was repayable on May 16, 2011 with a 10% premium. This $7,500, 10% premium was fully amortized and on April 29, 2011, the lender converted $55,000 of this debt to convertible debentures. The balance at December 31, 2016 and 2015 was $27,500, and the loan is currently in default. The Company has not received any notices from the loan holder with respect to the default.

In 2014, 2013, 2012, and 2011, the Company entered into various loan agreements totaling $977,500 at interest rates ranging from 15% - 25%. In addition in 2013, the Company issued 110,000 warrants attached to these loans. These loans are all currently in default. The creditors have not called these loans.

In 2015, lenders advanced $229,000 in non-interest bearing demand loans.

In 2016, no additional loans were advanced.

During the years ended December 31, 2016 and 2015, total interest expense related to loans payable was $172,637 and $172,775, respectively, total interest paid was $27,000 and $50,343, respectively, and accrued interest at December 31, 2016 and 2015 was $542,147 and $396,510, respectively.

NOTE 6 – LOANS PAYABLE – SHAREHOLDERS

During 2013, 2012 and 2011, the Company entered into various loan agreements and arrangements for loans with certain shareholders. The loans all had different maturity dates ranging from 2011 to 2015 and interest rates that range from 2% to 18%. The Company was in default on loans totalling $981,699 as of December 31, 2016. The shareholders have not called these loans.

During the year ended December 31, 2015, a shareholder-creditor transferred $100,000 of its outstanding balance owed by the Company to a third party. The Company and the third party agreed to amend the loan agreement to allow the third party to convert the principal balance into shares of the Company’s stock. The third party converted the principal balance of $100,000 into 6,252,324 shares of the Company’s common stock. The shares had a fair value of $258,141 and the Company recorded a loss on debt extinguishment of $158,141.

During the year ended December 31, 2016, the Company received $2,475,712 in shareholder advances and repaid $2,243,721. During the year ended December 31, 2015, the Company received $1,816,236 in shareholders advances and repaid $1,452,237. The Company had an outstanding balance of $2,468,434 and $2,197,082 as of December 31, 2016 and 2015, respectively.

During the years ended December 31, 2016 and 2015, total interest expense related to these loans payable to shareholders was $105,173 and $120,839, respectively, total interest paid was $3,120 and $4,371, respectively, and accrued interest at December 31, 2016 and 2015 was $362,942 and $260,889, respectively.

NOTE 7 – CONVERTIBLE DEBENTURES

On April 29, 2011, the Company issued convertible debentures for proceeds of $1,201,000 (the “April 29” debenture) and on February 21, 2012, issued an additional $119,500 (the “February 21” debenture and together the “Debentures”) with a maturity of 36 months and a coupon rate of 10% per annum payable in cash or capital stock at the Company’s discretion. The Debentures were amended on November 20, 2013. The Debentures are held by third parties and by non-controlling shareholders, and are convertible as follows:

April 29, 2011 convertible debentures

-by dividing the conversion amount by a conversion factor of 1.4 yielding units of the Company where each unit (at a price of $1.40 per unit), is comprised of 1 share of common stock and 2 warrants to purchase a share of common stock each of the Company with an exercise price equal to the conversion price and a maturity at April 29, 2014 extended to April 29, 2016 per the amendment on November 20, 2013. Warrants are exercisable at the option of the holder at any time prior to maturity, and have since expired without exercise.

February 21, 2012 convertible debentures

-by dividing the conversion amount by a conversion factor of 1.45 yielding units of the Company where each unit (at a price of $1.45 per unit), is comprised of 1 share of common stock and 2 warrants to purchase a share of common stock each of the Company with an exercise price equal to the conversion price and a maturity at February 21, 2015 extended to February 21, 2017 per the amendment on November 20, 2013. Warrants are exercisable at the option of the holder at any time prior to maturity, and have since expired without exercise.

Both debentures carry an anti-dilution provision. The conversion price applicable to the debentures is subject to reset in the event of a dilutive issuance (as defined in the debenture agreement) by the Company. A dilutive issuance excludes shares or options issued to employees, officers, directors or consultants pursuant to stock option plans approved by the Board of Directors.

On November 12, 2014, the Company issued convertible debentures for $25,000, a maturity of 24 months and a coupon rate of 10% per annum payable in cash or capital stock at the Company’s discretion. The debentures are held by third parties and by non-controlling shareholders. The conversion price is calculated as 45% of the average trading price for the five days prior to the conversion, however, the conversion price can never be lower than $0.08 per share nor can it exceed $0.30 per share.

The April 29, 2011 debentures, February 11, 2012 debentures and the November 12, 2014 debenture have all passed their respective maturity dates. The Company has defaulted on these payments but is in negotiations with all the debenture holders to exchange their debt for new financing of which the terms have not yet been determined. No notice by the debenture holders has been sent to the Company.

With respect to the April 29, 2011 debentures that have since defaulted, the Company successfully extended the maturity of one debenture holder of $300,000 to August 29, 2017 and then August 31, 2018 provided payments of $1,000 per month are made between February and August 2017. A total of $14,300 in payments were made to the debenture holder. Also, the Company extinguished $175,000 of old debt from two debenture holders in exchange for new convertible debentures totalling $218,750, maturing April 29, 2019, and a promissory note of $64,000 maturing September 30, 2019. The convertible debentures have a 10% per annum interest rate commencing on April 29, 2016 and are convertible into units of the company comprising of (1) one share of common stock at 65% of the lowest bid price of the Company’s common stock for the last 15 trading days prior to conversion and (2) two warrants to purchase shares of common stock with a three-year maturity and an exercise price equal to the conversion price. A discount was recorded of $182,141 on these convertible debenture with a corresponding derivative liability of $168,975 and a loss on settlement of debt of $69,175.

At December 31, 2016, approximately $132,000 (2015 - $82,000) in interest has been accrued. The debenture holders are owed a total of approximately $189,000 in interest. No interest was paid in 2016 related to these convertible debentures.

During the year ended December 31, 2016, the Company recorded $132,412 of interest expense related to these convertible debentures and amortized debt discount of $22,989.

During the year ended December 31, 2015, the Company recorded $58,193 of interest expense related to these convertible debentures and amortized debt discount of $675,893.

NOTE 8 – SENIOR SECURED CONVERTIBLE DEBENTURES

On August 16, 2010, the Company entered into a securities purchase agreement with a third party for the subscription of senior secured convertible debentures (“SSCD”) for an amount of $400,000. The debentures had a maturity date of August 16, 2012 with a coupon of 10% and convert into shares of common stock of the Company at a price of $0.75 per share. The notes are secured by all assets of the Company. The subscriber also received 533,336 Series A warrants with a maturity of 1 year and an exercise price of $1.25 per share and 133,360 Series B warrants with a maturity of 3 years and an exercise price of $1.50 per share all of which expired unexercised. All prices and warrants issued have been adjusted for the post-acquisition of Nanotech by HCT.

During the year ended December 31, 2011, $200,000 of the debt was repaid through the issuance of a Convertible Debenture due April 29, 2014. The balance due at December 31, 2016 and 2015 remained at $200,000. The Company is in default of payment of the debentures which matured on August 16, 2012. No notices have been issued by the debenture holder.

Interest expense of $20,000 was accrued during the year ended December 31, 2016 (2015 - $20,000), for an outstanding balance of $58,359 (2015 - $38,359) that has been accrued.

The obligations of the Company under the SSCD will rank senior to all outstanding and future indebtedness of the Company and shall be secured by a first priority, perfected security interest in all the assets of the Company.

NOTE 9 – CONVERTIBLE NOTES

Convertible debt with a variable conversion feature consists of the following as of December 31, 2016 and, 2015:

Noteholder (issue date)
		December 31, 2016			December 31, 2015
JMJ (3/4/15)	$	-		$	44,099
Prolific (5/8/15)		-			800
LG (7/16/15)		-			52,500
EMA Financial (10/29/15)		-			40,000
Harbour Gates (5/9/16)		50,909			-
EMA Financial (5/15/16)		5,101			-
Forest Capital (6/17/16)		25,000			-
LG (7/11/16)		29,000			-
Adar Bays (7/14/16)		35,000			-
Crown Bridge (7/28/16)		35,000			-
Forest Capital (8/25/16)		55,000			-
Forest Capital (8/26/16)		1,242			-
Eagle Equities (8/30/16)		5,000			-
Eagle Equities (9/8/16)		60,000			-
Lucas Hoppel (9/14/16)		38,500			-
Red Diamond (5/10/16)		52,500			-
Forest Capital (12/5/16)		7,048			-
Forest Capital (12/6/16)		18,000			-

	$	417,300		$	137,399
Less: debt discount		(244,414	)		(76,975	)
Convertible debentures, net	$	172,886		$	60,424

During the year ended December 31, 2016, the Company issued a total of $1,036,200 in convertible notes with interest ranging from 6% to 10% due one year from the issuance date. In addition, the Company amortized $244,414 of debt discount and issued 986,313,478 shares of common stock for converted notes payable of $756,299.

During the year ended December 31, 2015, the Company repaid a noteholder $189,872 including interest of $13,333 and amortized the remaining $60,424 discount to interest expense. In addition, the Company issued $596,450 in convertible notes, net of issuance costs of $151,389, recorded as a debt discount. The Company determined that the conversion option was a derivative. Accordingly, the Company recorded a derivative liability of $793,392 of which $428,025 was recorded as debt discount, $368,407 as additional interest expense and the Company amortized $96,136 of debt discount as interest expense and recorded accrued interest of $41,283. The Company issued to creditors, 3,207,823 shares for converted notes of $875,603 and interest of $21,308. This resulted in a corresponding reduction in the debt discount of $220,684 that was expensed as interest expense.

The Company issued an additional $32,000 in convertible notes which was an assumption of promissory notes owing to shareholder-creditors and thereby a reduction in loans payable to shareholders for the same amount and a loss on settlement of debt of $36,103. Accordingly, the Company recorded a derivative liability of $36,103 of which $32,000 was recorded as debt discount, $4,103 as additional interest expense and the Company amortized the full $32,000 of debt discount as interest expense as the lender converted all $32,000 of debt in exchange for 134,102 shares of the Company’s common stock.

Following is a summary of the activity during 2016 for each of the convertible notes:

		Balance at				Debt Discount						Balance at
									Debt
		December 31,				Net of			Conversion			December 31,
Noteholder (issue date)		2015		Additions		Amortization			s			2016
JMJ (3/4/15)	$	44,099	$	-	$	-		$	(44,099	)	$	-
Prolific (5/8/15)		800		-		-			(800	)		-
LG (7/16/15)		52,500		-		-			(52,500	)		-
EMA Financial (10/29/15)		40,000		-		-			(40,000	)		-
Oleg Poltaratsky (10/22/15)		-		20,000		-			(20,000	)		-
Harbour Gates (5/9/16)		-		110,000		(10,832	)		(59,091	)		40,077
EMA Financial (5/15/16)		-		40,000		(5,101	)		(34,899	)		-
Forest Capital (6/17/16)		-		25,000		(11,507	)		-			13,493
LG (7/11/16)		-		29,000		(15,255	)		-			13,745
LG (7/11/16)		-		25,000		-			(25,000	)		-
Adar Bays (7/14/16)		-		35,000		(18,699	)		-			16,301
Crown Bridge (7/28/16)		-		35,000		(20,041	)		-			14,959
Forest Capital (8/25/16)		-		55,000		(35,712	)		-			19,288
Forest Capital (8/26/16)		-		75,000		-			(73,758	)		1,242
Crown Bridge (8/29/16)		-		35,000		-			(35,000	)		-
Eagle Equities (8/30/16)		-		60,000		(3,457	)		(55,000	)		1,543
Eagle Equities (9/8/16)		-		60,000		(41,260	)		-			18,740
Lucas Hoppel (9/13/16)		-		53,500		-			(53,500	)		-
Micro Cap Equity (9/13/16)		-		25,000		-			(25,000	)		-
Lucas Hoppel (9/14/16)		-		38,500		(27,108	)		-			11,392
Crown Bridge (9/29/16)		-		56,700		-			(56,700	)		-
Red Diamond (5/10/16)		-		52,500		(39,986	)					12,514
Red Diamond (5/10/16)		-		75,000					(75,000	)		-
Lucas Hoppel (10/10/16)		-		43,000					(43,000	)		-
Micro Cap Equity (10/10/16)		-		25,000					(25,000	)		-
Red Diamond (11/29/16)		-		10,000					(10,000	)		-
Forest Capital (12/5/16)		-		35,000		(4,104	)		(27,952	)		2,944
Forest Capital (12/5/16)		-		18,000		(11,352	)		-			6,648

	$	137,399	$	1,036,200		(244,414	)	$	(756,299	)	$	172,886

NOTE 10 – DERIVATIVE LIABILITIES

The embedded conversion features in the convertible debentures and attached warrants are accounted for as derivative liabilities. The warrants contain full ratchet reset features (subject to adjustment for dilutive share issuances) and should be valued as derivative liabilities.

The valuation of the derivative liability attached to the debentures arrived at through the use of multinomial lattice models based on a probability weighted discounted cash flow model. These models are based on future projections of the various potential outcomes. The features in the note that were analyzed and incorporated into the model included the conversion feature with the reset provisions and the call/redemption options. Based on these features, there are six primary events that can occur: payments are made in cash; payments are made with stock; the holder converts upon receiving a change notice; the holder converts the note; the Issuer redeems the note; or the company defaults on the note.

The model analyzed the underlying economic factors that influenced which of these events would occur, when they were likely to occur, and the specific terms that would be in effect at the time (i.e. interest rates, stock price, conversion price, etc.). Projections were then made on these underlying factors which led to a set of potential scenarios. Probabilities were assigned to each of these scenarios over the remaining term of the note based on management projections. This led to a cash flow projection over the life of the note and a probability associated with that cash flow. A discounted weighted average cash flow over the various scenarios was completed, and it was compared to the discounted cash flow of the note without the embedded features, thus determining a value for the derivative liability. For the year ended December 31, 2016, the Company recorded derivative liabilities for issuance of convertible notes payable initial fair value of $1,286,180 (2015 - $1,014,703).

The Company recorded unrealized gains of $227,729 and $302,596 for the years ended December 31, 2016 and December 31, 2015, respectively. The fair value of the derivative liability was $413,199 and $138,957 as of December 31, 2016 and 2015, respectively.

		Derivative Values

									Fair Value
Valuation		December 31,				Conversions			Increase			December 31,
Date		2015		Additions		/Exchanges			(Decrease)			2016

April 29, 2011 and Feb 21,2012 Debentures	$	3,363	$	-	$	(607	)	$	39,628		$	42,384

2015 convertible notes		135,594		-		(154,939	)		19,345			-

2016 convertible debentures		-		168,975		-			15,083			184,058

2016 convertible notes		-		1,117,205		(628,663	)		(301,785	)		186,757

Total	$	138,957	$	1,286,180	$	(784,209	)	$	(227,729	)	$	413,199

		Derivative Values

									Fair Value
Valuation		December 31,							Increase			December 31,
Date		2014		Additions		Conversions			(Decrease)			2015

April 29, 2011 debenture	$	13,405	$	-	$	-		$	(10,042	)	$	3,363

Feb 21, 2012 debenture		9,000		-		-			(9,000	)		-

Oct 10, 2014 note		73,472		-		(109,896	)		36,424			-

Nov 12, 2014 debenture		2,750		-		-			(2,750	)		-

Nov 13, 2014 debenture		83,096		-		(41,094	)		(42,002	)		-

2015 convertible notes		-		1,014,703		(603,883	)		(275,226	)		135,594
Total	$	181,723	$	1,014,703	$	(754,873	)	$	(302,596	)	$	138,957

NOTE 11 – STOCKHOLDERS’ DEFICIT

On March 2, 2016, the Board of Directors approved and recommended the approval by the stockholders, to undergo a reverse stock split of each class of shares which includes the shares of common stock, the Series A Preferred Stock and the Series B Preferred Stock by a ratio of 200 to 1 for each class of shares. The par value of each class of shares shall remain unchanged. The Series A Preferred Stock and Series B Preferred Stock voting rights per share shall remain unchanged. The reverse stock split became effective on July 15, 2016. All share amounts and per share amounts have been retrospectively restated to reflect the reverse stock split.

On April 17, 2015, the shareholders approved an increase in the number of authorized common stock from 150 million to 650 million common shares, and on August 12, 2015 the shareholders approved another increase in the number of authorized common stock from 650 million to 1.6 billion common shares and an increase from 1 million to 4 million of the number of authorized Series B preferred shares.

Preferred Stock

On December 29, 2014, the Company increased the authorized common shares to 150 million and authorized 1,000,000 each Series A and Series B preferred shares, par value $0.001 per share with the following features:

Series A preferred stock: non-voting, no liquidation or dividend rights, redeemable and retractable at a price equal to its par value, convertible into a number of shares of common stock as is equal to the par value of the Series A Preferred Stock divided by the average closing price per share of common stock of the last 5 trading days immediately prior to conversion;

Series B preferred stock: voting with 500 votes per share, no liquidation or dividend rights, non – redeemable, no conversion privileges.

During the year ended December 31, 2016, as part of its extension of its licenses (see Note 3), the Company issued 611,200 Series B Preferred Shares and 3,786,500 Series B Preferred Share warrants with an exercise price of $0.001 and a 10-year maturity with a total fair value of $566,104.

During the year ended December 31, 2015, the Company issued the following preferred shares:

-2,100 Series B preferred shares valued at $102,480 as consideration for the tenth amendment of the Licensing Agreement.

-200 Series B preferred shares valued at $150,000 for settlement of debt.

Common Stock

During the year ended December 31, 2016, the Company issued the following common shares for fair value based on the market price at the date of the grant:

-	500,000 common shares to a consultant as payment for services with a fair value of $59,000.
-	22,500,000 common shares to a related party for payment of accounts payable to related parties of $22,500.
-	986,313,478 common shares to convertible note holders for conversion of $653,493 of debt and payment of $9,000 in fees and $918 in interest for a fair value of $663,411.
-	324,305,000 common shares to a shareholder-creditor for settlement against shareholder loans of $375,316 and recognized a loss on settlement of debts in the amount of $1,297,370 for a fair value of $1,695,186.

In 2015, the Company cancelled 9,750 common shares issued in 2014 and 750 shares issued in 2015 in exchange for 759,750 warrants with a 5-year term and an exercise price of $0.001 valued on the original grant date, of which $151,950 was reclassified from common stock to additional paid-in capital.

In 2016, the Company issued 214 shares to shareholders for fractional shares as a result of the conversion.

During the year ended December 31, 2015, the Company issued the following common shares for fair value based on the market price at the date of the grant:

-	36,684 common shares to shareholder creditors and consultants as payment for services with a fair value of $83,974.
-	27,105 common shares to convertible debenture holders as payment of interest for the year of $147,650.
-	3,207,823 common shares to convertible notes holders for conversion of principal and interest of $1,133,590.
-	2,455,750 common shares to a shareholder-creditor and a related party for payment against accounts payable and accrued liabilities related parties of $720,813 and recognized a loss on settlement of payables in the amount of $1,031,321.

During the year ended December 31, 2015, 2,050 shares of common stock were issued for the cash-less exercise of 2,100 warrants. Upon exercise of the warrants, another 2,500 common shares were issued for $500.

The Company cancelled 9,750 common shares issued in 2014 in exchange for 9,750 warrants with a 5-year term and an exercise price of $0.001 valued on the original grant date, of which $10 was reclassified from common stock to additional paid-in capital in 2015.

Options and Warrants

On June 15, 2011, the Company’s Board of Directors established the 2011 Stock Incentive Plan expiring on June 15, 2016 (the “2011 Plan”).

Under the Plan, the Company may grant certain employees both incentive and non-qualified options to purchase shares of common stock. The Plan is authorized to grant options covering up to 700,000 common shares.

During the year ended December 31, 2016, the Company issued and then later cancelled 8,100,000 warrants to a shareholder to repay loans payable to shareholders with a fair value of $3,380,000 (original recorded as an adjustment to loans payable - shareholder of $531,000 and loss on settlement of debt of $2,849,000 but then reversed); cancelled an additional 1,500,000 warrants to the same shareholder-creditor originally issued in December 2015, reinstating the accounts payable - related party of $90,000 and reversing the loss on settlement of $390,000, 75,000 warrants issued to a convertible note holder as part of the derivative liability for a fair value of $151,755; 759,750 warrants to shareholder in exchange for the cancellation of 759,750 shares for consideration of $151,950, all with a corresponding increase in additional paid-in capital valued using the Black-Scholes option pricing model according to the following assumptions:

Expected volatility		176.4%-287.9%
Exercise price	$	0.002
Stock price	$	0.42-$0.2
Expected life		5 years
Risk-free interest rate		1.23%-1.46%
Dividend yield		0%

During the year ended December 31, 2015, the Company issued 1,500,000 warrants to a shareholder to repay accounts payable - related party with a fair value of $480,000, 21,750,000 warrants to consultants for consulting services at a fair value of $192,754 (recorded as stock-based compensation), 8,600,000 warrants to a shareholder to repay accounts payable-related party with a fair value of $1,094,260 (recorded as an adjustment to accounts payable - related party of $335,000 and loss on settlement of payables of $759,260), 300,000 warrants to shareholders for accrued interest of $15,600, 6,0000,000 options to the CEO for compensation of $48,600, 1,500,000 warrants to a related-party landlord for $12,150 for payment to accounts payable related party, 1,950,000 warrants to shareholder in exchange for the cancellation of 1,950,000 shares for consideration of $1,950, all with a corresponding increase in additional paid-in capital valued using the Black-Scholes method according to the following assumptions:

Expected volatility		261%-288%
Exercise price	$	0.00001-$0.001
Stock price	$	0.0016-$0.50
Expected life		4-5 years
Risk-free interest rate		1.19%-1.71%
Dividend yield	$	Nil

A summary of the activity in the Company's options and warrants during the years ended December 31, 2016 and 2015 is presented below:

	Number of				Weighted Average
	Options and			Weighted Average	Remaining Contract
	Warrants			Exercise Price	Term (# of years)

Outstanding and exercisable, at December 31, 2014	47,508		$	0.10	3.13
Granted	1,700,650		$	0.01
Exercised	(4,600	)	$	0.01
Expired	(9,382	)	$	0.14
Outstanding and exercisable, at December 31, 2015	1,734,176		$	0.01	4.83
Granted	8,934,750		$	0.01
Exercised	-			-
Expired	(9,600,000	)	$	0.01
Outstanding and exercisable, at December 31, 2016	1,068,926		$	0.01	4.07

In addition to the regular warrants detailed in the table above, there are 533,336 Series A warrants issued and outstanding with an exercise price of $0.39 per share and a maturity date of February 28, 2018.

The intrinsic value of warrants outstanding at December 31, 2016 was $109.

Contingent Warrant Issuance

On July 20, 2012, the Company’s board of directors approved the issuance of 300,000 stock purchase warrants, with an exercise price of $0.001 per share and a five-year life, from date of issuance, to the Company’s President, Joseph Kristul, contingent on his successful negotiation of a major sales contract. The major sales contract agreement has not yet been reached by the Company.

NOTE 12 – RELATED PARTY TRANSACTIONS

The Company entered into various related party transactions during the years ended December 31, 2016 and 2015, as follows:

NTI License Fees

The Company’s principal assets are licenses for product sales with NTI, an entity under common control.

During the year ended December 31, 2016, the Company extended all its licenses with NTI until December 31, 2020. The consideration given was 11,200 Series B preferred shares and 786,500 Series B preferred share warrants with a total fair value of $502,104 and a note payable of $1,500,000 due by February 12, 2017.

During the year ended December 31, 2015, the Company issued 2,100 shares of Series B Preferred Stock valued at $102,480 as consideration for its licenses with NTI. The notes payable – related party was repaid through cash payments of $439,000 and the issuance of 200 shares of Series B Preferred Stock valued at $150,000. As of December 31, 2016 and 2015, the notes payable – related party outstanding with NTI was $2,216,777 and $1,300,491, respectively.

The Company has an option (extended to December 31, 2020) to issue a controlling stake in the Company amounting to 52.5% to NTI for a perpetual exclusive license to manufacture and sell Nanotech Products for all North America, South America and Europe. If this option is exercised, the Company will have a similar option for the territory of Asia to issue an additional 10% ownership stake in the Company.

Fees charged by Shareholder

During the years ended December 31, 2016 and 2015, the Company was charged $252,465 and $832,565, respectively, by an outside consultant, who is also a shareholder-creditor, for professional fees of $15,000 per month in 2016 and 2015, out-of-pocket expenses of approximately $72,000 in 2016 and $38,000 in 2015, and professional fees of approximately $0 in 2016 and $614,000 in 2015 related to strategic partnership negotiations and other business related services performed on the Company’s behalf.

The Company issued 2,490,750 common shares and 1,547,050 warrants to purchase shares of the Company’s common stock with a total aggregate value of $1,137,813 to settle liabilities to the consultant during the years ended December 31, 2015. The Company had an outstanding balance payable included in accounts payable and accrued liabilities related parties as of December 31, 2016 and 2015 of $389,901 and $47,534 respectively. Also during the year ended December 31, 2015, the shareholder-creditor transferred $182,000 of its outstanding balance owed by the Company to a third party. The Company and the third party agreed to amend the loan agreement to allow the third party to convert the principal balance into shares of the Company’s stock. The third party converted the principal balance of $182,000 into 280,110 shares of the Company’s common stock. The shares had a fair value of $510,064 and the Company recorded a loss on debt extinguishment of $158,141 and loss on settlement of payables of $169,677.

During the year ended December 31, 2016, the shareholder-creditor described above loaned the Company $1,155,222 through loans payable - shareholders and the Company made a cash repayment of $15,000 and non-cash repayments through the issuance 324,305,000 shares of common stock with a fair value of $375,315. The shareholder-creditor also transferred $518,200 to third parties. During the year ended December 31, 2015, the consultant, described above, loaned the Company $455,413 through loans payable – shareholders and the Company made cash repayments to this consultant of $23,000.

Shared Administrative Costs

The Company shares office space with NTI. Costs are allocated among the parties based on usage. During 2016 and 2015, the allocation of such shared costs between the Company and NTI was 80% and 20%, respectively. Rent expense for the years ended December 31, 2016 and 2015 was $45,000.

NOTE 13 – INCOME TAXES

Deferred income taxes reflect the net effect of:

(a) temporary difference between carrying amounts of assets and liabilities for financial purposes and the amounts used for income taxes reporting purposes, and

(b) net operating loss carryforwards.

No net provision for refundable U.S. Federal income tax has been made in the accompanying statement of operations because no recoverable taxes were paid previously. Similarly, no deferred tax asset attributable to the net operating loss carryforward has been recognized, as it is not deemed more likely than not to be realized.

The effective tax rate of the Company is reconciled to statutory tax rates as follows for the years ended December 31, 2016 and 2015:

	2016		2015

US federal statutory tax rate	34%		34%
Change in US valuation allowance	(34%	)	(34%	)

Effective tax rate	-		-

Deferred tax assets consist of the following as of December 31:

		2016			2015

Net operating loss carryforward	$	9,054,980		$	8,191,642
Valuation allowance		(9,054,980	)		(8,191,642	)

Deferred tax asset	$	-		$	-

The Company has net operating losses carried forward of approximately $24,300,000 which expire beginning in 2031. They may be utilized to offset future taxable income. Future tax benefits, which may arise as a result of these losses and resource expenditures, have not been recognized in these financial statements.

NOTE 14 - COMMITMENTS AND CONTINGENCIES

The Company had an option (expiring December 31, 2020) to issue a controlling stake in the Company amounting to 52.5% to NTI, a related party, for a perpetual exclusive license to manufacture and sell Nanotech Products for all North America, South America and Europe. If this option is exercised, the Company will have a similar option for the territory of Asia to issue an additional 10% ownership stake in the Company. These options have not yet been exercised.

The Company is delinquent on its state and federal payroll tax remittances. The State of California has issued a Notice of State Tax Lien against the property and rights owned by the Company covering interest and penalties for non-payment of payroll remittances of $3,897. The Internal Revenue Service has issued a penalty against the Company for non-payment of payroll taxes of $64,695, accrued in accounts payable and accrued liabilities as of December 31, 2016.

NOTE 15 – SUBSEQUENT EVENTS

Subsequent to December 31, 2016, the Company issued the following shares:

	•	7,059,596,463 shares of common stock for the conversion of outstanding debt, valued on the various dates of issuances in the aggregate amount of $400,957 based on the market price, converting $371,153 in principal, $27,804 in accrued interest and $2,000 in fees.
	•	3,328,000,000 shares of common stock to a shareholder-creditor at fair value of $522,950, for settlement against shareholder loans of $75,640 and recognized a loss on settlement of debt in the amount of $447,310 for a fair value of $522,950.
	•	37,500,000 shares of common stock as settlement for accounts payable and accrued liabilities - related party at fair value of $3,750.

On January 9, 2017, the Board of Directors approved the following:

1.	To increase the authorized share capital to 25,000,000,000 shares of common stock

2.	To increase the authorized share capital to 55,000,000 shares of Series B Preferred Stock

Effective April 4, 2017, the Company began to process of amending its number of authorized shares to the 25,000,000,000 shares, as approved by the Board of Directors, by preliminarily amending its articles to increase the number of authorized shares of common stock to 22,500,000,000 shares. An additional amendment is planned for 2018 to increase the number of authorized shares to 25,000,000,000.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

ITEM 9A. CONTROLS AND PROCEDURES

Reference is made to the disclosures below under Item 9A(T) Controls and Procedures.

Item 9A(T). Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) which are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our President and Chief Executive Officer, who also acts as our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our President and Chief Executive Officer, who also acts as our principal financial officer, an evaluation was performed on the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this annual report. Based on that evaluation, our President and Chief Executive Officer, concluded that our disclosure controls and procedures were not effective and are not designed at a reasonable level to provide assurance that information we are required to disclose in reports that we file or submit under the Exchange Act as of the end of the period covered by this annual report for the purpose of gathering, analyzing and disclosing of information within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer, as appropriate to allow timely decisions regarding required disclosure. The Company has undertaken steps to remedy this and improve the effectiveness of its disclosure controls and procedures.

(b) Management’s Report on Internal Controls

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial reporting is a process designed under the supervision of our Principal Executive Officer and Principal Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles (“GAAP”) and includes those policies and procedures that:

	•	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer;

	•	Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and

	•	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer's assets that could have a material effect on the financial statements.

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Due to inherent limitations, internal control over financial reporting may not prevent or detect misstatements and, even when determined to be effective, can only provide reasonable, not absolute, assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate as a result of changes in conditions or deterioration in the degree of compliance.

As of December 31, 2016, we identified material weaknesses in certain controls related to the financial statement close and reporting process that were not functioning effectively to properly accrue certain expenses and classify some expenses in the financial statements. We also did not adequately segregate, or mitigate the risks associated with, incompatible functions among personnel to reduce the risk that a potential material misstatement of the financial statements would occur without being detected or prevented. Management concluded that these control deficiencies constituted a material weakness at December 31, 2016. We are currently in the development stage, and although we have hired qualified resources to carry out our day-to-day accounting and financial reporting obligations, we have not yet reached the point at which we have adequate resources to address all accounting procedures, especially the process to close our financial records at each reporting period in a timely manner. These control weaknesses were, in part, due to lack of adequate funding during the period in which the financial statements were being prepared.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to the attestation by our independent registered public accounting firm because smaller reporting companies are exempt from this requirement.

(c) Changes in Internal Controls

There were no changes in our internal control over financial reporting that occurred during the period covered by this Annual Report on Form 10-K that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS, CONTROL PERSONS AND CORPORATE GOVERNANCE; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The address of all Directors and Executive Officers listed above is c/o Hybrid Coating Technologies Inc., 950 John Daly Blvd. Suite 260, Daly City, CA 94015.

Directors and Executive Officers.

The current directors and executive officers of the Registrant are as follows:

Name	Age	Position(s)
Joseph Kristul	68	Director, President, Treasurer and Chief Executive Officer
Darin Nellis	47	Secretary , Director of Sales & Marketing
Alex Trossman	67	Director

All directors hold office until the next annual meeting of stockholders and until their successors have been duly elected and qualified. There are no agreements with respect to the election of directors. There is no family relationship between any of our directors or executive officers. As of April 16, 2013, there was no known litigation pending or active against any of our directors or executive officers. None of our directors or executive officers has served as a general partner or executive officer of any company that has filed, or has had filed against it, any petition for bankruptcy, either at the time such filing was made or during the preceding two years.

Set forth below is certain biographical information for our current directors and executive officers and certain persons whom we have identified as key personnel, including a summary description of the principal occupation and business experience of each of our directors and executive officers for at least the last five years.

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Directors and Executive Officers

Joseph Kristul, President, CEO, Treasurer and Director

Mr. Kristul is one of the founders and principal financial backers of Nanotech Industries. He has years of experience in international financing with an emphasis on marketing and sales. He is the former Chairman, CEO and co-founder of Transnational Financial Network. At Transnational Mr. Kristul was responsible for overall company management directly overseeing secondary marketing, finance, corporate marketing, lender relations and strategic corporate planning. In 1995 Mr. Kristul created Transnational’s wholesale division, where he developed the company's base of loan brokers and implemented systems and controls to manage the quality of loan products delivered to brokers. In 1999 he took the company public and by 2005 had over 400 employees and $800 million in mortgage loan originations. Mr. Kristul graduated with a Master of Science in Applied Mathematics and Mechanics from the Odessa Physics and Technology University, in Odessa, Russia.

Darin Nellis, Secretary Director of Sales & Marketing

Mr. Nellis, MBA, has twenty years of experience working in business management and community relations for private, public and non-profit organizations in Africa and the US. His expertise includes strategic planning, marketing, cross-cultural education, youth mentorship and nonviolent conflict resolution. Private sector positions include Director of Corporate Planning and consultant in the area of finance, strategic planning and marketing for several environmental high tech firms including the Eurasian power quality equipment distribution company, Power Quality Holdings and the nanotechnology commercialization company, Nanotech Industries. Non-profit and public positions have included Community Development Officer at The United Way of Greater LA, Loyola Marymount Peace Corps Fellow, and Community Development Agent for the U.S. Peace Corps in Mauritania West Africa and Volunteer & Outreach Coordinator for the American Oceans Campaign. Mr. Nellis received his BA from UCLA in International Relations and his MBA in International Business from Loyola Marymount University.

Alex Trossman, Director, VP of Israeli & European Operations

Mr. Trossman is directly responsible for the daily running of Nanotech’s operations in Israel including managing the production process, client orders & communication, product documentation and customs issues. Mr. Trossman has nearly 30 years of experience in management and mechanical engineering in Israel working in such positions as Assistant Chief Engineer for Automotive Industries, Ltd.; Chief of the Engineering Department of Rotem-Amfert-Negev, Ltd., a large fertilizer producer; Technical Manager of Galam, Ltd., a Starch, Glucose & Fructose producer; General Manager of Eurotech Israel, Ltd. and as a founding partner and general manager of the Polymate Research Center.

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Executive Employment Agreements

The Company currently has no employment agreements in place with any of its named executive officers.

Long-Term Incentive Plans

The Company currently has no long-term incentive plans.

Compensation of Directors

The Company has not compensated our directors for service on the board of directors.

Involvement in Certain Legal Proceedings

There are no legal proceedings that have occurred during the past five years concerning our directors or control persons which involved a criminal conviction, a criminal proceeding, an administrative or civil proceeding limiting one's participation in the securities or banking industries, or a finding of securities or commodities law violations.

Code of Ethics

Due to the limited scope of our current operations, the Company has not yet adopted a Code of Business Conduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar function. Following completion of the Acquisition described in Item 1, we may adopt a Code of Ethics.

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Committees

Since our Board of Directors has not established an audit or compensation committee comprised of independent directors, the functions that would have been performed by such committees are performed by our Board of Directors as a whole, nor has the Board established a corporate governance committee or nominating committee.

We do not have a policy regarding the consideration of any director candidates which may be recommended by our stockholders, including the minimum qualifications for director candidates, nor has our Board of Directors established a process for identifying and evaluating director nominees. We have not adopted a policy regarding the handling of any potential recommendation of director candidates by our stockholders, including the procedures to be followed. Our Board has not considered or adopted any of these policies, as we have never received a recommendation from any stockholder for any candidate to serve on our Board of Directors. While there have been no nominations of additional directors proposed, in the event such a proposal is made, all members of our Board of Directors will participate in the consideration of director nominees.

The Board is of the opinion that such committees and procedures are currently not necessary, as the Company is an early exploration stage company, has only one director and, to date, such director has been performing the functions of such committees. When we are able to expand our Board of Directors to include one or more independent directors, our Board of Directors plans to form an audit committee and a corporate governance committee.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires or directors and officers, and the persons who beneficially own more than ten percent (10%) of our common stock, to file reports of ownership and changes in ownership with the SEC. Copies of all filed reports are required to be furnished to us pursuant to Rule 16a-3 promulgated under the Exchange Act. Based solely on the reports received by us and on the representations of the reporting persons, we believe that these persons have complied with all applicable Section 16(a) filing requirements during the fiscal year ended December 31, 2016.

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ITEM 11. EXECUTIVE COMPENSATION

Summary Compensation Table

The table below sets forth all compensation awarded to, paid to or earned by the Registrant’s President, Chief Executive Officer and Chief Financial Officer and the Company’s Secretary and Director of Sales and Marketing for the fiscal year of the Company indicated.

								Nonequity	Nonqualified
Name and								Incentive	Deferred		All
Principal					Stock		Option	Plan	Compensation		Other
Position	Year	Salary	Bonus		Awards		Awards	Compensation	Earnings		Compensation		Total
		($)	($)		($)		($)	($)	($)		($)		($)

Joseph Kristul	2016	-	-		-		-	-	-		-		-
Director, President, Chief Executive Officer and
Chief Financial Officer	2015	-	-		-	$	48,600	-	-		-	$	48,600

Darrin Nellis	2016	-	-		-		-	-	-	$	51,500	$	51,500
Secretary, Director of Sales and Marketing	2015	-	-	$	43,434		-	-	-	$	15,500	$	58,934

Alex Trossman	2016	-	-		-		-	-	-		-		-
Dirtector , VP of Israeli and European Operations	2015	-	-		-	$	15,500	-	-		-	$	15,500

Compensation of Executive Officers

Mr. Kristul received 6,000,000 options for a fair value of $48,600, Mr. Nellis received 5,246,069 shares and Mr. Trossman 5,000,000 options for fair value of $15,500 in 2015 included in stock-based compensation. There was no such compensation received in 2016.

Employment Agreements

The Company has not entered into any employment agreements with our executive officers or other employees to date.

Grants of Plan-Based Awards

No plan-based awards were granted to any of our named executive officers during the fiscal year ended December 31, 2016.

Outstanding Equity Awards at Fiscal Year End

As of December 31, 2016, Joseph Kristul held 2,400 options expiring March 14, 2018, and 30,000 options expiring June 15, 2020, and Alex Trossman held 25,000 options expiring on September 10, 2020.

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Option Exercises and Stock Vested

No options to purchase our capital stock were exercised by any of our named executive officers, nor was any restricted stock held by such executive officers vested during the fiscal year ended December 31, 2016.

Pension Benefits

No named executive officers received or held pension benefits during the fiscal year ended December 31, 2016.

Nonqualified Deferred Compensation

No nonqualified deferred compensation was offered or issued to any named executive officer during the fiscal year ended December 31, 2016.

Potential Payments upon Termination or Change in Control

Our executive officers are not entitled to severance payments upon the termination of their employment agreements or following a change in control.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The table below provides information about the beneficial ownership of the Common Stock as of December 31, 2016, by each of the current directors and executive officers, by all directors and executive officers as a group and by each person known to the Registrant who is the beneficial owner of more than 5% of any class of the Registrant’s securities. Unless otherwise noted, the persons listed below have sole voting and investment power with respect to the shares reported.

Title of Class	Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership	Percentage of Common Stock	Percentage of Series B Preferred Stock	Percentage of Voting Capital ⁽²⁾
DIRECTORS AND OFFICERS
Common Stock	Joseph Kristul Director CEO, President	13,703 Direct 500 ⁽¹⁾ Indirect	0.001% 0.000%	----	0.001% -------
Common Stock	Darin Nellis Secretary	34,946 Direct	0.003%	----	0.003%
Common Stock	Alex Trossman Director	313 Direct	0.000%	----	------
Common Stock	All Officers and Directors as a Group (3 persons)	49,642	0.003%	-----	0.003%
5% STOCKHOLDERS
Common Stock Series B Preferred Stock	Nanotech Industries Inc.	40,566 Direct 13,500 Direct	0.003%	100%	0.003% 0.005% Total: 0.008%

Notes

⁽¹⁾	Represents 500 shares owned by Mr. Kristul’s wife, Maria Kristul.

⁽²⁾	Includes the 13,500 Series B Preferred Shares which in the aggregate carry the voting power of 13.6% of the Company’s voting capital as of the Record Date of December 31, 2016.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Transactions with Related Persons

None of the following parties has had, since the beginning of the Company’s fiscal year, any material interest, direct or indirect, in any transaction with us or in any presently proposed transaction that has or will materially affect the Registrant:

	•	Any directors or executive officers;
	•	Any person who beneficially owns, directly or indirectly, shares carrying more than 5% of the voting rights attached to the outstanding shares of Common Stock;
	•	Any promoters; and
	•	Any member of the immediate family (including spouse, parents, children, siblings and in- laws) of any of the foregoing persons.

Director Independence

Because the Common Stock is traded on the OTC Bulletin Board, the Company is not subject to the independence requirements of any securities exchange or the NASD regarding members of the Company’s Board of Directors. The Company intends, in the future, to use the definition of “independence” of a national securities exchange or of an inter-dealer quotation system which requires that a majority of the Board of Directors be independent. The Company has not determined whether any of its directors are independent.

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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Audit Fees

GBH CPAs PC (“GBH”) served as our independent registered public accounting firm for our fiscal year ended December 31, 2016 and 2015. The following table shows the fees that were billed for the audit and other services provided by the firm for the fiscal year indicated.

		Fiscal Year Ended	Fiscal Year Ended
		December 31, 2016	December 31, 2015

Audit Fees	$	87,125 $	66,000
Audit-Related Fees		-	-
Tax Fees		-	-
All Other Fees		-	-
Total	$	87,125 $	66,000

Audit Fees — This category includes the audit of our annual financial statements, review of financial statements included in our Quarterly Reports on Form 10-Q and services that are normally provided by the independent auditors in connection with engagements for those fiscal years. This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit or the review of interim financial statements.

Audit-Related Fees — This category consists of assurance and related services by the independent auditors that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under “Audit Fees.” The services for the fees disclosed under this category include consultation regarding our correspondence with the SEC and other accounting consulting.

Tax Fees — This category consists of professional services rendered by our independent auditors for tax compliance and tax advice. The services for the fees disclosed under this category include tax return preparation and technical tax advice.

All Other Fees — This category consists of fees for other miscellaneous items.

Our Board of Directors has adopted a procedure for pre-approval of all fees charged by our independent auditors. Under the procedure, the Board approves the engagement letter with respect to audit, tax and review services. Other fees are subject to pre-approval by the Board of Directors, or, in the period between meetings, by a designated member of Board of Directors. Any such approval by the designated member is disclosed to the entire Board of Directors at the next meeting. The audit and tax fees paid to the auditors with respect to our fiscal year ended December 31, 2016 were pre-approved by the Board of Directors.

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ITEM 15. EXHIBITS

Exhibit
Number	Description of Exhibits

3.1	Amended Articles of Incorporation. ⁽¹⁾
3.2	Bylaws, as amended. ⁽¹⁾
3.3	Certificate of Amendment to Articles of Incorporation ⁽²⁾
4.1	Convertible Debenture Agreement dated April 29,2011 Pursuant to Regulation D ⁽⁶⁾
4.2	Convertible Debenture Agreement dated April 29,2011 Pursuant to Regulation S ⁽⁶⁾
10.1	Stock Purchase Agreement, dated August 18, 2010, by and among Nanotech Industries International Inc. and EPOD Solar Inc. (3)
10.2	Licensing Agreement between Nanotech Industries International Inc. and Nanotech Industries Inc. dated July 12, 2010 (4)
10.3	Amendment to the Licensing Agreement previously entered into on the 12^thday of July, 2010 ⁽⁵⁾
10.4	Securities Purchase Agreement dated April 29,2011 Pursuant to Regulation D ⁽⁶⁾
10.5	Securities Purchase Agreement dated April 29,2011 Pursuant to Regulation S ⁽⁶⁾
10.6	Warrant Agreement dated April 29,2011 Pursuant to regulation D ⁽⁶⁾
10.7	Warrant Agreement dated April 29,2011 Pursuant to regulation S ⁽⁶⁾
10.8	Amendment to articles of incorporation to change the name of the company to “Hybrid Coating Technologies Inc.” (7)
10.9	Approval and adoption of the 2011 Stock Incentive Plan ⁽⁷⁾
10.10	Second Amendment to the Licensing Agreement previously entered into on the 12^thday of July, 201
10.11	Licensing Agreement between Nanotech Industries International Inc. and Nanotech Industries Inc. dated October 18, 2011 ⁽⁹⁾
10.12	Convertible Debenture Agreement Dated February 21, 2012 ⁽¹⁰⁾
10.13	Third Amendment of Licensing Agreement entered into the 12th day of July 2010 ⁽¹¹⁾
10.14	Amendment Agreements to Convertible Debenture Agreements dated April 29,2011 and February 21,2012⁽¹²⁾
10.15	Fourth Amendment of Licensing Agreement entered into the 12th day of July 2010 ⁽¹³⁾
10.16	Fifth Amendment of Licensing Agreement entered into the 12th day of July 2010 ⁽¹⁴⁾
10.17	Sixth Amendment of Licensing Agreement entered into the 12th day of July 2010 ⁽¹⁵⁾
10.18	Seventh Amendment of Licensing Agreement entered into the 12th day of July 2010 ⁽¹⁶⁾
10.19	Eight Amendment of Licensing Agreement entered into the 12th day of July 2010 ⁽¹⁷⁾
10.20	Ninth Amendment of Licensing Agreement entered into the 12th day of July 2010 ⁽¹⁸⁾
10.21	Form of 10% Convertible Debenture (Pursuant to Regulation D)⁽¹⁹⁾
10.22	Form of 10% Convertible Debenture (Pursuant to Regulation S)⁽¹⁹⁾
10.23	Form of Securities Purchase Agreement (Pursuant to Regulation D)⁽¹⁹⁾
10.24	Form of Securities Purchase Agreement (Pursuant to Regulation S)⁽¹⁹⁾
10.25	Tenth Amendment of Licensing Agreement entered into the 12th day of July 2010 ⁽²⁰⁾
10.26	Eleventh Amendment of Licensing Agreement entered into the 12th day of July 2010 ⁽²¹⁾
10.27	Twelvth Amendment of Licensing Agreement entered into the 12th day of July 2010 ⁽²²⁾
10.28	Thirteenth Amendment of Licensing Agreement entered into the 12th day of July 2010 ⁽²³⁾
10.29	Fourteenth Amendment of Licensing Agreement entered into the 12th day of July 2010 ⁽²⁴⁾
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 200
31.2	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

(1) Incorporated by reference to the Registration Statement on Form S-1 (File No. 333-153675),filed with the SEC on September 26, 2008.

(2) Incorporated by reference to the Current Report on Form 8-K filed with the SEC on July 22, 2009.

(3 Incorporated by reference to the Current Report on Form 8-K filed with the SEC on August 30, 2010.

(4) Incorporated as reference to the Current Report on Form 8-K filed with the SEC on August 30,2010

(5) Incorporated as reference to the Current Report on Form 8-K filed with the SEC on March 14,2011

(6) Incorporated as reference to the Current Report on Form 8-K filed with the SEC on May 3,2011

(7) Incorporated as reference to the Schedule 14C filed with the SEC on July 6,2011

(8) Incorporated as reference to the Current Report on Form 8-K filed with the SEC on July 7,2011

(9) Incorporated as reference to the Current Report on Form 8-K filed with the SEC on October 18,2011

(10) Incorporated as reference to the Current Report on Form 8-K filed with the SEC on February 21,2012

(11) Incorporated as reference to the Current Report on Form 8-K filed with the SEC on June 28,2013

(12) Incorporated as reference to the Current Report on Form 8-K filed with the SEC on November 20,2013

(13) Incorporated as reference to the Current Report on Form 8-K filed with the SEC on December 13,2013

(14) Incorporated as reference to the Current Report on Form 8-K filed with the SEC on March 31,2014

(15) Incorporated as reference to the Current Report on Form 8-K filed with the SEC on April 9,2014

(16) Incorporated as reference to the Current Report on Form 8-K filed with the SEC on May 8, 2014

(17) Incorporated as reference to the Current Report on Form 8-K filed with the SEC on August 19, 2014

(18) Incorporated as reference to the Current Report on Form 8-K filed with the SEC on September 10, 2014

(19) Incorporated as reference to the Current Report on Form 8-K filed with the SEC on November 28, 2014

(20) Incorporated as reference to the Current Report on Form 8-K filed with the SEC on August 14, 2015

(21) Incorporated as reference to the Current Report on Form 8-K filed with the SEC on February 12, 2016

(22) Incorporated as reference to the Current Report on Form 8-K filed with the SEC on November 9, 2016

(23) Incorporated as reference to the Current Report on Form 8-K filed with the SEC on June 15, 2017

(24) Incorporated as reference to the Current Report on Form 8-K filed with the SEC on April 26, 2018

-37-

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May 9, 2018	HYBRID COATING TECHNOLOGIES INC.
	(Registrant)

	By:	/s/ Joseph Kristul
		Name: Joseph Kristul
		Title: President and Chief Executive Officer
		(Principal Executive, Financial and Accounting
		Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date

/s/ Joseph Kristul		May 9, 2018
Joseph Kristul	President and Chief Executive
	Officer,
	(Principal executive officer
	principal financial and
	accounting officer)

/s/ Alex Trossman			May 9, 2018
Alex Trossman		Director

-38-

Year Ended December 31,

Common Shares Issuable for:

Convertible debt

2,932,164,256

Stock warrants

2,933,233,182