UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
x | ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended: DECEMBER 31, | |
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For transition period from |
Commission File Number333-57946
ALUMIFUEL POWER CORPORATION |
(Name of small business issuer in its charter) |
WYOMING | 88-0448626 | |
(State or other jurisdiction of |
| |
incorporation or organization) | (I.R.S. Employer Identification Number) |
7315 EAST PEAKVIEW AVENUE, ENGLEWOOD, COLORADO 80111
(Address of principal executive offices)(Zip Code)
Issuer's telephone number, including area code: (303) 796-8940
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act: None
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: ¨Yes x No
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. ¨
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 Days: xYes ¨ No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained in this form, and will not be contained, to the best of the Registrant’sRegistrant'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: x
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer:
Large Accelerated Filer | ¨ | Accelerated Filer | ¨ |
Non-Accelerated Filer | ¨ | Smaller Reporting Company | x |
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): ¨ Yes x No
The aggregate market value of the voting common equity held by non-affiliates of the issuer as of March 31, 20152016 was $130,500,$222,848, based on the last sale price of the issuers common stock ($0.00020.0001 per share) as reported by the OTCPink Martketplace.
The Registrant had 652,615,1312,228,481,617 shares of common stock outstanding as of March 31, 2015.2016.
Documents incorporated by reference: None
ALUMIFUEL POWER CORPORATION
FORM 10-K
This report may contain certain “forward-looking” statemenTs as such term is defined in the private securities litigation reform act ofTHIS REPORT MAY CONTAIN CERTAIN "FORWARD-LOOKING" STATEMENTS AS SUCH TERM IS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 or by the securities and exchange commission in iTs rules, regulations and releases, which represent the registrant’s expectations or beliefs, including but not limited to, statemenTs concerning the registrant’s operations, economic performance, financial condition, growth and acquisition strategies, investmenTs, and future operational plans. For this purpose, any statemenTs contained herein that are not statemenTs of historical fact may be deemed to be forward-looking statemenTs. Without limiting the generality of the foregoing, words such as “may”OR BY THE SECURITIES AND EXCHANGE COMMISSION IN ITS RULES, REGULATIONS AND RELEASES, WHICH REPRESENT THE REGISTRANT'S EXPECTATIONS OR BELIEFS, INCLUDING BUT NOT LIMITED TO, STATEMENTS CONCERNING THE REGISTRANT'S OPERATIONS, ECONOMIC PERFORMANCE, FINANCIAL CONDITION, GROWTH AND ACQUISITION STRATEGIES, INVESTMENTS, AND FUTURE OPERATIONAL PLANS. FOR THIS PURPOSE, ANY STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, WORDS SUCH AS "MAY", “expect”"EXPECT", “believe”"BELIEVE", “anticipate”"ANTICIPATE", “intent”"INTENT", “could”"COULD", “estimate”"ESTIMATE", “might”"MIGHT", or “continue” or the negative or other variations thereof or comparable terminology are intended to identify forward-looking statemenTs. These statemenTs by their nature involve substantial risks and uncertainties, certain of which are beyond the registrant’s control, and actual resulTs may differ materially depending on a variety of important factors, including uncertainty related to acquisitions, governmental regulation, managing and maintaining growth, the operations of the company and iTs subsidiaries, volatility of stock price and any other factors discussed in this and other registrant filings with the securities and exchange commission.OR "CONTINUE" OR THE NEGATIVE OR OTHER VARIATIONS THEREOF OR COMPARABLE TERMINOLOGY ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES, CERTAIN OF WHICH ARE BEYOND THE REGISTRANT'S CONTROL, AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING ON A VARIETY OF IMPORTANT FACTORS, INCLUDING UNCERTAINTY RELATED TO ACQUISITIONS, GOVERNMENTAL REGULATION, MANAGING AND MAINTAINING GROWTH, THE OPERATIONS OF THE COMPANY AND ITS SUBSIDIARIES, VOLATILITY OF STOCK PRICE AND ANY OTHER FACTORS DISCUSSED IN THIS AND OTHER REGISTRANT FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) General development of business.
We were incorporated in the state of Nevada on January 19, 2000 under the name Organic Soils.Com, Inc. Effective September 5, 2014, the Company changed its corporate domicile from Nevada to Wyoming.
Pursuant to an Agreement and Plan of Reorganization dated as of March 24, 2005 (the “Share"Share Exchange Agreement”Agreement"), by and between Organic Soils.com, Inc. and Inhibetex Therapeutics, Inc., a Colorado corporation (“Inhibetex”("Inhibetex"), Organic Soils.com, Inc. and Inhibetex entered into a share exchange whereby all of the issued and outstanding capital stock of Inhibetex, on a fully-diluted basis, were exchanged for like securities of Organic Soils.com, Inc., and whereby Inhibetex became a wholly owned subsidiary of Organic Soils.com, Inc. (the “Share Exchange”"Share Exchange"). The Share Exchange was effective as of May 19, 2005 at which time we also changed our name to Inhibiton Therapeutics, Inc. (the “Registrant”"Registrant" or the “Company”"Company").
Pursuant to an Agreement Concerning the Exchange of Securities by and among the Company, HPI Partners, LLC (“HPI”("HPI"), a Colorado Limited Liability Company, and the Security Holders of HPI Partners, LLC (the “HPI Members”"HPI Members") dated March 4, 2009, (the “Share"Share Exchange Agreement”Agreement"), the parties entered into a share exchange whereby all of the issued and outstanding membership interests of HPI were exchanged for 171,123,297 shares of the Company’sCompany's $0.001 par value common stock and 418,500 shares of the Company’sCompany's $0.001 par value Series A Preferred Stock, through which HPI and its wholly-owned subsidiary AlumiFuel Power, Inc. ("API") became a wholly owned subsidiaries of the Company (the “Share Exchange”"Share Exchange"). The 418,500 shares of the Company’sCompany's Series A Preferred Stock automatically converted to 34,397,261 shares of the Company’sCompany's $0.001 par value common stock upon approval by the Company’sCompany's stockholders of an increase in the number of authorized common shares effective on May 28, 2009. In addition, the HPI Members received warrants to purchase up to 14,302,500 shares of the Company’sCompany's $0.001 par value common stock, in exchange for a like number of HPI warrants that are exercisable until March 4, 2012 at an exercise price of $0.12 per share. The Share Exchange was effective as of May 5, 2009, upon closing of the transaction among the parties.
This acquisition was treated as a reverse-merger with HPI being the accounting acquirer including a recapitalization of its equity with Inhibiton Therapeutics, Inc. as the legal surviving entity. Effective on May 28, 2009, the Company changed its name from Inhibiton Therapeutics, Inc. to AlumiFuel Power Corporation. As a result of this transaction, the Company has ceased any further operations related to its previous cancer therapy research and development business.
In February 2010, the Company formed its new subsidiary, AlumiFuel Power International, Inc. ("AFPI"). In connection with the formation of the AFPI, the Company and AFPI executed a License Agreement through which AFPI received certain international marketing rights and the rights to utilize certain intellectual property from the Company for exploitation in countries and territories outside of North America in exchange for 25,000,000 shares of the Company's $0.001 par value common stock. The Company also purchased 15,000,000 shares of AFPI common stock at $0.01 per share. On July 31, 2011, the Company and AFPI executed a Patent Purchase Agreement through which the Company sold AFPI the international patent rights to certain of the Company's intellectual property. In exchange for the sale of these rights, the Company received 7,500,000 shares of AFPI common stock. As of December 31, 2014,2015, we owned 39,599,879 shares of AFPI common stock or 58% of the shares outstanding.
In December 2011, we formed a new wholly owned subsidiary, AlumiFuel Power Technologies, Inc. ("APTI"), but didn't begin significant operations until February 2012. APTI was formed as a separate entity to leverage the Company's hydrogen generation technology to take advantage of potential complimentary technologies.
In December 2012, we formed a new wholly owned subsidiary, NovoFuel, Inc. (“NovoFuel”("NovoFuel") and in 2013 transferred all of the assets related to our hydrogen generation business to NovoFuel in exchange for 12,000,000 shares of its common stock; 2,000,000 of which were allocated to our majority-owned subsidiary, AFPI, in exchange for the return of the European intellectual property and marketing rights back to the Company for use by NovoFuel. Novofuel was formed as a separate entity in anticipation of executing a transaction with Genport, SrL of Italy. In OctoberNovember 2013, the Company signed a Memorandum of Understandingan agreement with Genport, SrL of Italy to combine and integrate their technologies, assets and operations into NovoFuel, contingent upon closing of private financing of up to $4,500,000 for the venture. On closing of a capital investment, NovoFuel common shares are to be allocated to Genport shareholders in exchange for 100% of Genport shares. Although Genport would then be a wholly-owned subsidiary of NovoFuel, Genport, SrL would retain its status as an Italian company under Italian law. Following the closing of the transaction, NovoFuel will have operations in the United States and Italy. As of the date of this report, this financing has not been completed and Genport has notified the Company cannot guarantee it will be completed.no longer wishes to move forward with the project as planned.
PATENT APPROVAL. NovoFuel has been notified by the U.S. Patent and Trademark office (USPTO) that the provisional patent on its hydrogen generation technology has been allowed, and U.S. Patent No. 8,974,765 was issued on March 10, 2015. The omnibus provisional patent application, "METHODS AND APPARATUS FOR CONTROLLED PRODUCTION OF HYDROGEN USING ALUMINUM-BASED WATER-SPLIT REACTIONS", was filed in 2009, and went through a comprehensive review by the USPTO. The approved patent embodies 48 specific claims which are applications-oriented, focusing on the practical aspects of controlling the aluminum powder-water reaction in NovoFuel's cartridge-based hydrogen generation system used in such applications as feeding fuel cells for backup power and filling weather balloons.
In their opinion letter for the fiscal year ended December 31, 2014,2015, our auditors included an explanatory paragraph that disclosed conditions that raise concerns about the Company's ability to continue as a going concern. Please refer to the audited financial statements and accompanying auditors report within this filing.
(b) | Financial information about segments. | ||
Through December 31, | |||
(c) | Narrative description of business. |
AlumiFuel Power Corporation is a company that during 20142015 operated primarily through its subsidiary NovoFuel. We are an early production stage alternative energy company that generates hydrogen gas and superheated steam through the chemical reaction of aluminum, water, and proprietary additives. This technology is ideally suited for multiple niche applications requiring on-site, on-demand fuel sources, serving National Security and commercial customers. Hydrogen generated by our products can fill inflatable devices such as weather balloons, feed fuel cells for portable and back-up power, and can replace costly, hard-to-handle and high pressure K-Cylinders. Our hydrogen/heat output is also being designed and developed to drive turbine-based underwater propulsion systems and auxiliary power systems, and as the fuel for Flameless Ration Heaters. Our technology has significant differentiators in performance, adaptability, safety and cost-effectiveness in its target market applications, with no external power required and no toxic chemicals or by-products. This unique technology is based on the exothermic chemical reaction of aluminum powder and water. The Company intends to operate as much as possible utilizing path-to-market partners for each target application to help keep its overhead and infrastructure costs down.
The Company's first commercially available product was the PBIS-1000 portable balloon inflation device. Existing technologies for balloon inflation include: hydrogen and helium cylinders; assorted toxic solid fuel systems; expensive on-site electrolysis; and unwieldy chemical hydrogen generators. Our technology utilizes a unique, simple portable generation/launching system that is:
· | Field deployable | |
· | Can be launched at remote locations | |
· | Is a cost-effective total system solution | |
· | Is portable and easy to use | |
· | Is made of non-toxic materials |
As a result of input from the initial customer, the Company has worked to produce a quieter more rugged next generation PBIS-1000 unit that iswas a significant upgrade over the system produced and sold in 2010. The productionnext generation unit has a simpler design with fewer components, and is lighter, more compact, more ruggedized for military applications, more user-friendly quieter and more cost effective.quieter. Using a higher grade stainless steel construction with better corrosion properties and durable fluorocarbon rubber for all seals, the upgraded unit can better withstand required pressures and temperatures over its long expected lifetime. The reactor and water tanks, as well as all plumbing lines and connectors, have beenwere optimized for weight, simplicity, and cost, and are stamped and certified with the ASME code – a standard requirement for commercial pressure vessels. The unit meets military specification requirements for vibration, environmental and drop tests, and is housed in a molded polyethylene carrying case used regularly by the military.
In addition, a more effective packaging configuration of the company’scompany's proprietary AlumiFuel fuel cartridges increases the speed of the reaction and the hydrogen yield, while reducing cartridge cost. The versatile PBIS-1000 unit can produce 1,000 liters of hydrogen in 20 minutes at ambient temperature and atmospheric pressure using only two 32oz AlumiFuel cartridges.
In 2011, we were awarded a contract with the United States Air Force Special Operations Command to deliver a PBIS-2000 Portable Balloon Inflation System. Originally slated for delivery in late February 2012, working with the customer the Company delivered the unit in April 2012. In September 2012, we received a Purchase Order/Contract from the U.S. Air Force Special Operations Command to make certain modifications to the PBIS-2000 delivered in April 2012. These modifications were made and the unit was returned to the customer in January 2013.
The PBIS-2000 expands the capability of our current family ofthe hydrogen generators we can produce, which includes the PBIS-1000 (for 100g balloons) and the PBIS-lite (designed for 30g pieball balloons). The PBIS-2000 generates sufficient hydrogen to inflate a 200g weather balloon within 20 minutes using up to 6 AlumiFuel Cartridges contained in a single reactor vessel; this represents significantly more hydrogen than is required for the PBIS-1000. While the footprint, weight and safety features of the PBIS-2000 are similar to the PBIS-1000, the configuration has been modified such that the system operates at ambient (atmospheric) pressure (below 10 psig) so that the user never has to deal with a high pressure system such as the industry standard K-Cylinder (2265 psig).
The PBIS series of man-portable reactorandreactorand launching units use our proprietary AlumiFuel technology to produce hydrogen through the powerful chemical reaction of powdered aluminum, water and proprietary additives. The devices require only a simple water hand pump and two to six small AlumiFuel cartridges to propagate the reaction and generate sufficient lift gas to launch a 5-foot diameter weather balloon. This innovation, which enables on the spot generation of hydrogen without any external energy or toxic chemicals, is easier to use and is cheaper than current lift gas solutions. Traditionally, helium has been used as the primary lift gas, but with the increasing scarcity and cost of helium, users are realizing the benefits of switching to hydrogen. These portable launching units are far more mobile and cost effective than other on-site hydrogen generation systems. The Company estimates the current weather balloon lift gas market isremains $150-$200 million per year and encompasses military as well as civil government meteorological users worldwide; with more than 1,000,000 weather balloons and special purpose balloons launched annually for telecom relay, cloud height measurement and military/national security applications. The customer base for the PBIS units includes various governmental users both civil and military.military, however, due to limits in our working capital we have not been able to effectively market our products with these users.
Our AlumiFuel cartridges utilize standard 32 oz aluminum drink cans and our "stuffing" iscan be outsourced to a third party volume packager/assembler with industrial scale packaging techniques & processes. The packager is able to support all product applications and provides shipping/distribution/supply chain logistics while we control our proprietary additives. Each 32 oz cartridge generates 500 liters of hydrogen equaling approximately 100 watts of power for 16 hours in a non-toxic can that can be thrown away in any municipal dump after use.
However, with recent federal budget cuts, the procurement process and new technology R&D funding relating to the Company’sCompany's systems have come to a virtual standstill. This has caused the company to shift focus on backup power applications for selected commercial applications, where there is a real demand and funding available for renewable energy solutions. Two notable examples are 5kW backup power hydrogen fuel cells for telecom rooftop cell towers, and a hybrid array of renewable energy components (wind, solar, lithium-ion battery, fuel cells and energy management and control systems) for cannabis cultivation -- an enormous and rapidly growing multi-billion dollar market. In fact, medical marijuana is now the fastest growing market in North America, surpassing mobile phones.
We believe our technology is different because:
· |
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| No storage or delivery issues as with other hydrogen generation processes | ||
| No reformers | ||
| No hydrogen processors | ||
| No electrolysis | ||
| No post-production compression or storage | ||
| No expensive new hydrogen infrastructure required | ||
| Novel packaging of aluminum powder & additives into cartridges | ||
| Inserting cartridge and water into portable generator produces .999 pure hydrogen |
· | Cost-effective total system life cycle |
| Abundant, inexpensive raw materials (aluminum + additives) | ||
| Low-cost production | ||
| Novel and efficient hydrogen generation process - no energy consumption in creating or compressing hydrogen | ||
| Commercially usable neutral byproducts – spent powder is recyclable |
· | Environmentally friendly and safe |
| Non-toxic, impurity-free products throughout life-cycle | ||
| Pollution-free, safe and manageable production processes | ||
| Clean burn - no harmful emissions; no carbon monoxide, carbo dioxide, or sulfur compounds produced | ||
| Reaction initiated under ambient conditions - no external energy input required |
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Other potential products include hydrogen/steam generators including turbine-based underwater propulsion systems, drop-in recyclable cartridges and flameless heater packs. Ours is an enabling technology that can deliver up to five times the energy density (runtime) of lithium batteries, which can open up doors for new power applications.
Of equal importance to the weather balloon market, the PBIS product family can easily be tailored to feed fuel cells to generate electricity for back-up, stand-by, auxiliary and portable power. We have had ongoing discussions with major fuel cell companies regarding technology collaboration for other applications.
At the present time, marijuana growing for medicinal purposes is legalized in 23 U.S. states, and there is pending legislation to follow suit in
This has become a major growth industry, with billions of dollars expected to be expended over the next several years. Growers range from mom-and-pop operations to large greenhouse facilities. This rapid growth and energy intensive profile have triggered a serious problem regarding the use of local grid power to assure successful cultivation – involving special lights, heat, air conditioning, dehumidifiers, driers and other ancillary equipment for indoor locations, and massive irrigation for outdoor operations. Even a typical one room indoor facility can use up to 10kW of power daily, which can be a tremendous burden on the local power utilities; this situation has already caused power outages and brown-outs in certain Colorado municipalities. A 2011 study on energy use in the industry shows that the energy consumption will be over 1% of national electricity consumption and create greenhouse gas pollution equivalent to that of 3 million automobiles. This can expect to increase as the industry becomes more fully developed.
As an increasing number of states gear up for medical and recreational marijuana programs, and as Canada implements the Marijuana for Medical Purposes Regulations (MMPR) program, warehouses and secure indoor gardening facilities are expanding operations to meet the
This rapidly expanding growing industry has led to the introduction of entirely new marijuana product applications such as the use of the stalks and stems to make paper, a cheaper and "greener" approach than using wood as the feed stock. This development has raised the stakes with big players, such as the tobacco companies, are now exploring entering this arena, and traditional farmers are considering cannabis as a profitable and easy-to-grow new crop. The ability to get carbon credits from the federal government and to get tax credits under the Farm Bill for growing a new commodity, adds to the attractiveness of this new crop for farmers.
In response to the enormous and rapidly expanding energy requirements of legal cannabis growers in the U.S. and Canada, NovoFuel conducted a network modeling analysis to determine optimized Renewable Energy System (RES) solutions for cannabis cultivation -- using hybrid "plug and play" systems. The analysis used sophisticated micro grid modeling tools to assess on and off-grid applications encompassing solar panel and mini-wind turbine power systems, large format lithium-ion batteries for energy storage and backup, inverters and converters, and, where applicable, hydrogen fuel cells – all integrated on a real-time basis by a world-class energy management & control software system which provides the power electronics for all RES components.
The analysis resulted in the development of a range of optimized hybrid RES configurations for various cultivation scenarios, and the design of a pilot RES solution for a specific location in Michigan (one of the now 23 US states to legalize medical marijuana). In the Michigan pilot site solution, off-grid Renewable Energy Systems would provide 52% of the total required energy load on site, supplementing and reducing the reliance on local utility grid power. For the Michigan site, specific commercially available hardware has been selected for the initial design, subject to modification in the final design. According to the NovoFuel plan, once the pilot configuration is fully tested out, installed, and passes site acceptance, comparable RES solutions would be expanded to other locations and other states, as well as Canada. In this process, as is the case in Michigan, NovoFuel would actively work with growers and electric power contractors in the local areas. NovoFuel believes it can field cost-effective solutions with prices that are competitive with traditional fossil-fuel based power systems. This entire process will take a significant amount of capital, however, and there is no assurance the Company will be successful in raising the funds necessary for the pilot site, research and development, and implementation of any successful solutions.
As previously mentioned, RES solutions are also ideal to power irrigation for large scale outdoor cannabis cultivation and other farming, mining and oilfield applications, where the required energy can be provided totally or partially off-grid, with a reduced life-cycle cost over a 20-year period. RES components are thought to be roughly one-fifth the cost of comparable fossil-fuel generators, eliminate harmful emissions, and lessen the need for foreign oil. Apart from specific applications, renewable energy systems are the fastest growing power source globally (6% per year) -- expected to increase by 40% and comprise 25% of gross power generation by 2018.
Although we have done the work necessary to locate a pilot site in Oceana County, Michigan to build an operating RES system, there is no assurance we will be able to raise the funds necessary to complete installation of the necessary components or if we do, that the system will function as intended such that a commercially viable product will be produced.
The Hydrogen Economy
Current applications include selected utility vehicles, and back-up, auxiliary, portable and remote power generation. Although Honda Motor Corporation has produced a vehicle for lease in California, it is anticipated a mass market for automotive applications won't occur until later in this decade. Current public perception is that the hydrogen economy is tied to the automotive market. The Company believes the following must occur to commercialize automotive applications: volume manufacturing, lower cost and increased reliability of hydrogen fuel cells must be achieved; automakers must adopt the increased use of fuel cells; a new fuel distribution infrastructure including bulk hydrogen production plants near dispersed customers, (e.g. service stations) must be built.
The Company believes there is limited public awareness of substantial and growing pre-automotive markets being driven by early adopters of hydrogen technology. These technologies include hydrogen fuel cells for back-up, portable and auxiliary power applications as well as the delivery of longer run-times, lower emissions, cheaper operations than present battery, generator sets, diesel, and other technologies.
The Company also believes its technology can impact the hydrogen economy through the favorable economics of supply and demand and a push for
In
Backup power technologies currently include batteries and generators
Portable Power applications, including emergency response, man-portable soldier power, battery charger, emergency medical equipment power, outdoor mobile camera surveillance, entertainment mobile power and recreational power, represent a $3.3 billion market in the near term. As each year passes, hydrogen fuel cells capture an increasingly larger share of this market from older technologies such as fossil-fuel gensets and batteries. Moreover, novel hybrid solutions can involve a combination of fuel cells and lithium-ion batteries. The ArcView Group characterizes the current market as follows: "The US national legal marijuana market value is now assessed at $1.53 billion (2013), comprising all states that have active and open sales of cannabis to people legally allowed to possess it under state law. The national market is projected to grow 68 percent from current levels to $2.57 billion by 2014.
Competition
Since hydrogen power generation technologies have the potential to replace existing power products, competition will come from improvements to current power technologies and from new alternative energy technologies. Each potential target market is currently serviced by existing manufacturers with existing customers and suppliers. These manufacturers use proven and widely accepted technologies such as internal combustion engines and turbines as well as coal, oil, electricity and nuclear powered generators.
There are a number of companies using reforming technologies for hydrogen generation, including, Airgas, H2Gen, Air Products, HyGear, and others. While many of these companies are further down the commercialization and production road, we believe our hydrogen generation technology is less expensive than a reformer-based approach for potential target applications, and that the technology is superior to other non-reforming hydrogen generation technologies in terms of cost, weight, safety and use of non-toxic materials.
Additionally, there are competitors working on developing technologies using other than hydrogen power generation systems (such as fuel cells, advanced Lithium-ion batteries, battery/fuel cell hybrids and hybrid battery/ICEs) like Tesla, Ballard Power and Plug Power in certain targeted markets.
There are many different individuals, institutions and companies across the United States, Canada, Europe and Japan, including corporations, national laboratories and universities that are actively engaged in the development and manufacture of alternative energy technologies including hydrogen generation technologies. Each of these competitors has the potential to capture market share in any potential future target markets.
Many of these competitors have substantial financial resources, customer bases, strategic alliances, manufacturing, marketing and sales capabilities, and businesses or other resources which give them significant competitive advantages over us.
Government Regulation
We are not currently subject to any specific governmental regulations other than those common to any operating business. While we believe our hydrogen power generation products are environmentally benign, we may be subject to national or local environmental laws regarding the disposal or recycling of aluminum or water waste or other unforeseen by-products from our developing technologies. Additionally, we may be subject to customary regulations related to the shipment of hazardous materials for our AlumiFuel cartridges.
It is possible that we will encounter industry-specific government regulations in the future in any jurisdictions in which we may operate. Regulatory approvals may be required for the design, installation and operation of stationary and mobile hydrogen fuel stations and other fuel cell systems should we successfully develop and implement those products. It is our intention to comply with all necessary governmental regulations that may be imposed on products or services we develop for commercial use. Any delay in gaining necessary regulatory approval for future products or services could cause a delay in our development and growth.
Research and Development
We have not expensed any monies on direct research and development costs during the past two years. Any research and development costs incurred in the future will not include the day-to-day operating costs associated with our operations but will include expenses for laboratory supplies, design and development costs not directly related to the manufacturing process of our products. We have been working in
Employees
We currently have one full-time employee located in the Philadelphia area. This does not include our corporate officers who each devote at least thirty hours per week on the operations of the Company, outsourced administrative personnel or our Chief Technical Officer who works as a consultant on an as needed basis.
ITEM 1A. RISK FACTORS
The purchase of shares of our common stock is very speculative and involves a very high degree of risk. An investment in our stock is suitable only for the persons who can afford the loss of their entire investment. Accordingly, investors should carefully consider the following risk factors, as well as other information set forth herein, in making an investment decision with respect to securities of Inhibiton.
The market price of our common stock fluctuates significantly.
The market price of our common shares fluctuates significantly in response to factors, some of which are beyond our control, such as:
Further, the stock market in general has recently experienced extreme price and volume fluctuations. Continued market fluctuations could result in extreme volatility in the price of our common shares, which could cause a decline in the value of our common shares. You should also be aware that price volatility might be worse if the trading volume of our common shares is low.
Because we gained access to the public markets pursuant to a share exchange, we may not be able to attract the attention of major brokerage firms.
Additional risks may exist since we gained access to the public markets through a share exchange. Security analysts of major brokerage firms may not cover us since there is no incentive to brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to conduct any secondary offerings on our behalf in the future.
Trading of our common stock is limited and changes to the OTCPink Marketplace.
Trading of our common stock is conducted on the OTC Markets Group's OTCPink. This has adversely effected the liquidity of our securities, not only in terms of the number of securities that can be bought and sold at a given price, but also through delays in the timing of transactions and reduction in security analysts' and the media's coverage of us. This may result in lower prices for our common stock than might otherwise be obtained and could also result in a larger spread between the bid and asked prices for our common stock.
Because it is a
Our common stock is a
Our stock has been subjected to a DTC
Our common stock has been, but is not currently as of the filing of this report, subject to a
Risks Related to Our Business
We currently have limited product revenues and will need to raise additional capital to operate our business.
We generated
We are not currently profitable and may never become profitable.
We have a history of significant losses and expect to incur substantial losses and negative operating cash flow for the foreseeable future, and we may never achieve or maintain profitability. Even if we succeed in developing and commercializing one or more products, we expect to incur substantial losses for the foreseeable future and may never become profitable. We also expect to continue to incur significant operating and capital expenditures and anticipate that our expenses will not be offset by our revenues in any substantial way.
We also expect to experience negative cash flow for the foreseeable future as we work to commercialize our technology while funding our operating losses and capital expenditures. As a result, we will need to generate significant revenues or raise additional capital in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. Our failure to achieve or maintain profitability could negatively impact the value of our stock.
We have raised capital through the use of convertible debt instruments that causes substantial and sustained dilution to our stockholders.
Because of the size of our Company and its status as a "penny stock" as well as the current economy and difficulties in companies our size finding adequate sources of funding, we have been forced to raise capital through the issuance of convertible notes and other debt instruments. These debt instruments carry favorable conversion terms to their holders of up to 60% discounts to the market price of our common stock on conversion and in many cases provide for the immediate sale of our securities into the open market. Accordingly, this has caused significant dilution to our stockholders and will continue to do so in
The hydrogen power technology development business has a limited operating history on which to evaluate our business plan and currently possesses unproven hydrogen generation technology.
We will be required to continue engineering development on our hydrogen power generation technology against specific target applications and products. Our business plan is subject to further product development and there is a lack of meaningful historical financial data that makes it difficult to evaluate its prospects. To the extent that we are able to implement our business plan, our business will be subject to all of the problems that typically affect a business with a limited operating history, such as unanticipated expenses, capital shortfalls, delays in technology development and possible cost overruns.
We may not be able to achieve commercialization of any new products on the timetable we anticipate,
We cannot guarantee that we will be able to continue to develop commercially viable hydrogen power generation and portable power products on the timetable we anticipate, or at all. The continued commercialization of hydrogen power generation products require substantial technological advances to improve the efficiency, functionality, durability, reliability, cost and performance of these products and to develop commercial volume manufacturing processes for these products. Developing the technology for high-volume commercialization may require substantial capital, and we cannot assure you that we will be able to generate or secure sufficient funding on acceptable terms to pursue commercialization plans on a larger scale. In addition, before any new product can be released to market, it must be subjected to numerous field tests. These field tests may encounter problems and delays for a number of reasons, many of which are beyond our control. If these field tests reveal technical defects or reveal that our potential products do not meet performance goals, including useful life, reliability, and durability, our commercialization schedule could be delayed, and potential purchasers may decline to purchase future systems and products.
The commercialization of hydrogen power generation systems also may depend on our ability to significantly reduce the costs of future systems and products. We cannot assure you that we will be able to sufficiently reduce the cost of these products versus existing technologies without reducing performance, reliability and durability, which would adversely affect
We cannot assure you that we will be able to successfully execute our business
The execution of our business
Potential fluctuations in our financial and business results makes forecasting difficult and may restrict our access to funding for our commercialization plan.
We expect our operating results to vary significantly from quarter to quarter and even year to year. As a result, quarter to quarter or year to year comparisons of these operating results are not expected to be meaningful. Due to our hydrogen power technology
A mass market for our products may never develop or may take longer to develop than we anticipate.
The hydrogen power generation systems we currently market as well as portable power solutions we hope to market are sold in markets that are still emerging or may be subject to governmental spending cutbacks. As a result, we do not know whether end-users will want to use those products. The development of a mass market for the hydrogen power generation technology may be affected by many factors, some of which are beyond our control, including the emergence of newer, more competitive technologies and products, the future cost of raw materials used by our systems, regulatory requirements, consumer perceptions of the safety of any developed products and related fuels, and consumer reluctance to buy a new product.
If a mass market fails to develop or develops more slowly than anticipated, we may be unable to recover the losses it will have incurred in the development of our current and potential future products and may never achieve profitability. In addition, we cannot guarantee that we will be able to develop, manufacture or market any products if sales levels do not support the continuation of those products.
Regulatory changes could hurt the market for our products.
Changes in existing government regulations and the emergence of new regulations with respect to hydrogen generation systems may hurt the market for any developed products. Environmental laws and regulations in the U.S. and other countries have driven interest in alternate energy systems. We cannot guarantee that these laws and policies will not change. Changes in these laws and other laws and policies or the failure of these laws and policies to become more widespread could result in consumers abandoning their interest in hydrogen generation systems in favor of alternative technologies. In addition, as alternative energy products are introduced into the market, the governments in countries we intend to market our products may impose burdensome requirements and restrictions on the use of these technologies that could reduce or eliminate demand for some or all of our potential products.
If we fail to protect our intellectual property rights, competitors may be able to use our technology, which could weaken our competitive position, eliminate the potential for future revenue and increase costs.
We believe that our long-term success will depend to a large degree on our ability to protect the proprietary technology that we have developed or any other technology that we may develop or acquire in the future. In March 2015, we were issued by the U.S. Patent & Trademark Office (USPTO) a hydrogen generation patent as U.S. Patent No. 8,974,765 entitled "METHODS AND APPARATUS FOR CONTROLLED PRODUCTION OF HYDROGEN USING ALUMINUM-BASED WATER-SPLIT REACTIONS". Although we intend to aggressively pursue anyone we reasonably believe is infringing upon our intellectual property rights, initiating and maintaining suits against third parties that may infringe upon those intellectual property rights will require substantial financial resources. In addition, significant financial resources could be required to defend against any suits brought against us claiming our infringement of
Failure to protect any intellectual property rights could seriously harm our business and prospects because we believe that developing new systems and products that are unique to us is critical to our success. We will rely on patent, trade secret, trademark and copyright law to protect our intellectual property. However, some of the intellectual property may not be covered by any patent or patent application, and certain patents will eventually expire. We cannot assure that any present or future issued patents will protect the technology. Moreover, our patent position is subject to complex factual and legal issues that may give rise to uncertainty as to the validity, scope and enforceability of a particular patent. Accordingly, there is no assurance that:
In addition, effective patent, trademark, copyright and trade secret protection may be unavailable, limited or not applied for in certain countries.
We may also seek to protect any proprietary intellectual property, including intellectual property that may not be patented or patentable, in part by confidentiality agreements and, if applicable,
Future intellectual property may be acquired without typical representations and warranties. If necessary or desirable, we may seek further licenses under the patents or other intellectual property rights of others. However, we can give no assurances that we will obtain such licenses or that the terms of any offered licenses will be acceptable to us. The failure to obtain a license from a third party for intellectual property we use could cause us to incur substantial liabilities and to suspend the development, manufacture or shipment of products or our use of processes requiring the use of such intellectual property.
We may be involved in intellectual property litigation that causes us to incur significant expenses or prevents us from selling any developed products.
We may become subject to lawsuits in which it is alleged that we have infringed the intellectual property rights of others or commence lawsuits against others who we believe are infringing upon our rights. Involvement in intellectual property litigation could result in significant expense, adversely affecting the development of the challenged product or intellectual property and diverting the efforts of our technical and management personnel, whether or not such litigation is resolved in its favor. In the event of an adverse outcome as a defendant in any such litigation, we may, among other things, be required to:
We can provide no assurance that we would be successful in such development or acquisition, or that such licenses would be available upon reasonable terms. Any such development, acquisition or license could require the expenditure of substantial time and other resources and could have a material adverse effect on our business and financial results.
We will face significant competition.
As alternative energy technologies including hydrogen power generation and portable power technologies have the potential to replace existing power products, competition for those products will come from current power technologies, from improvements to current power technologies and from new alternative power technologies, including other types of alternative energy technologies. Each of our target markets is currently serviced by existing manufacturers with existing customers and suppliers. These manufacturers use proven and widely accepted technologies such as internal combustions engines and turbines as well as coal, oil and nuclear powered generators.
Additionally, there are competitors working on developing technologies other than hydrogen power generation systems (such as fuel cells, advanced Lithium-ion batteries and battery/fuel cell hybrids) in each of our targeted markets. Some of these technologies are as capable of fulfilling existing and proposed regulatory requirements as our technology.
There are many different individuals, institutions and companies across the United States, Canada, Europe and Japan, including corporations, national laboratories and universities that are actively engaged in the development and manufacture of alternative energy technologies including hydrogen generation technologies. Each of these competitors has the potential to capture market share in any of our future target markets.
Many of these competitors have substantial financial resources, customer bases, strategic alliances, manufacturing, marketing and sales capabilities, and businesses or other resources which give them significant competitive advantages over the Company.
The loss of the services of certain key employees, or the failure to attract additional key individuals, would materially adversely affect our business.
Our success
Hydrogen products use inherently dangerous, flammable fuels, which could subject our business to product liability claims.
Hydrogen technology exposes us to potential product liability claims that are inherent in hydrogen and products that use hydrogen. Our products utilize fuel canisters to be sold by us that may be considered hazardous materials and subject us to certain rules and regulations for the manufacture, sale and transport of hazardous materials. Hydrogen is a flammable gas and therefore a potentially dangerous product. Any accidents involving our technology or products could materially impede widespread market acceptance and demand for hydrogen energy products. In addition, we may be held responsible for damages beyond the scope of any insurance coverage. We also cannot predict whether we will be able to maintain any necessary insurance coverage on acceptable terms.
Our business may be concentrated in countries outside of the United States.
We intend to market our hydrogen generation products to countries outside of the United States both through our operating subsidiary AFPI and potentially through partners including our proposed transaction with Novofuel and Genport, srl. We will be subject to the risks and uncertainties inherent in doing business outside of the United States including varied governmental laws, rules and regulations as well as import and export restrictions. There is no assurance we will be successful in complying those laws, rule or regulations or that we will not inadvertently fail to comply. Failure to comply with the laws, rule and/or regulations in the various countries we intend to market our products could put us at risk for governmental actions that could inhibit our ability to transaction business in those countries. This could also expose us to significant costs for fines, tariffs, litigation, or other risks related to governmental actions.
AFPI is no longer listed on the Deutsche Börse Frankfurt Stock Exchange and
The Company's subsidiary AFPI was traded on the Deutsche Börse Frankfurt First Quotation Board until December 2012 under the symbol "9AP" at which time the Deutsche Börse Group closed the First Quotation board on which 9AP traded. Therefore, at present, there is no trading market for AFPI's common stock.
ITEM 2. PROPERTIES.
Our executive offices are located at 7315 East Peakview Avenue, Englewood, Colorado 80111 and are provided to us on a month to month basis by a corporation in which our officers and director are affiliated. During
ITEM 3. LEGAL PROCEEDINGS.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
PART II
ITEM 5. MARKET FOR
(a) Market information
Our common stock is not listed on any exchange; however, market quotes for the
Price High Low Fiscal year ended December 31, 2015 Quarter ended December 31, 2015 No bid Quarter ended September 30, 2015 No bid Quarter ended June 30, 2015 No bid Quarter ended March 30, 2015
Fiscal year ended December 31, 2014 Quarter ended December 31, 2014 Quarter ended September 30, 2014 Quarter ended June 30, 2014 Quarter ended March 30, 2014
The prices set forth in this table represent quotes between dealers and do not include commissions, mark-ups or mark-downs, and may not represent actual transactions.
(b) Holders
The number of record holders of our common stock as of March 31,
(c) Dividends
We have never declared or paid a cash dividend on our common stock and do not anticipate paying any cash dividends in the foreseeable future.
(d) Securities authorized for issuance under equity compensation plans
Recent Sales of Unregistered Equity Securities
During the three month period from October 1,
ITEM 6. SELECTED FINANCIAL DATA.
This information is not required for Smaller Reporting Companies.
ITEM 7.
General:
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the
The independent
While our independent auditor has presented our financial statements on the basis that we are a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable length of time, they have raised a substantial doubt about our ability to continue as a going concern.
For the fiscal year ended December 31,
The Company is a an early production stage alternative energy company that generates hydrogen gas and steam for multiple niche applications requiring on-site, on-demand fuel sources. Our hydrogen drives fuel cells for back-up, remote, and portable power, fills inflatable devices such as weather balloons, and can replace costly, hard-to-handle and high pressure K-Cylinders. Our steam/hydrogen output is also being designed to drive turbine-based underwater propulsion systems and auxiliary power systems. We have significant differentiators in performance, adaptability, safety and cost-effectiveness in its target market applications, with no external power required and no toxic chemicals or by-products.
During 2013, we transferred all of the assets related to our hydrogen generation business to a new wholly owned subsidiary, Novofuel, Inc. ("Novofuel") in exchange for 12,000,000 shares of Novofuel common stock.
NovoFuel's principal technology continues to be hydrogen generation on-site and on demand for such applications as feeding fuel cells to provide electricity, filling weather balloons for upper atmosphere readings, and providing power for unmanned undersea vehicle propulsion and surveillance operations. Government users typically are the early adopters of new technologies, and that is the case with NovoFuel's technology. However, with recent federal budget cuts, the procurement process and new technology R&D funding relating to NovoFuel's systems have come to a virtual standstill. This has caused the company to focus on backup power applications for selected commercial applications, where there is a real demand and funding available for renewable energy solutions. Two notable examples are 5kW backup power hydrogen fuel cells for telecom rooftop cell towers, and a hybrid array of renewable energy components for medical cannabis cultivation -- now the fastest growing market in North America, surpassing mobile phones.
Renewable Energy Applications. The Company believes most promising initiative currently being pursued by NovoFuel involves the integration of hybrid Renewable Energy Systems (RES) to support medical cannabis cultivation. NovoFuel's RES Power Station application is intended to include wind turbines, solar panels, large format lithium-ion batteries, hydrogen fuel cells when necessary, and a real-time energy management and control module. The initial thrust into this market focuses on establishing a pilot site in Michigan for proof of concept, which is presently being developed.
At the present time, cannabis growing for medicinal purposes is legalized in 23 U.S. states, and there is pending legislation to follow suit in
Although we have done the work necessary to locate a pilot site in Oceana County, Michigan to build an operating RES system, there is no assurance we will be able to raise the funds necessary to complete installation of the necessary components or if we do, that the system will function as intended such that a commercially viable product will be produced.
We have also been pursing in 2015 an initiative to design and produce lithium-ion batteries in conjunction with industry partners. All of the above referenced business plans and initiatives will require a significant infusion of working capital and there is no guarantee the Company will be able to raise the funds necessary to implement any of these plans. Over the past two years the Company has raised working capital for its day-to-day operations almost exclusively through the issuance of debt convertible into the Company's common stock at significant discounts to market of up to 60%. This has cause substantial and sustained dilution to our stockholders and this trend will continue for the foreseeable future. Raising additional funds to execute specific business plans and initiatives will only increase the potential for further debt issuances and dilution. LIQUIDITY AND CAPITAL RESOURCES
To address the going concern situation addressed in our financial statements at December 31,
During the year ended December 31,
In the year ended December 31,
We can make no assurance that we will be successful in raising the funds necessary for our working capital requirements as suitable financing may not be available and we may not have the ability to sell either equity or debt securities under acceptable terms or in amounts sufficient to fund our needs. Our inability to access various capital markets or acceptable financing could have a material effect on our commercialization efforts, results of operations and deployment of our business strategies and severely threaten our ability to operate as a going concern.
During the remainder of our fiscal year and for the foreseeable future, we will be concentrating on raising the necessary working capital through debt instruments and equity financing to insure our ability to continue our development and implement other business strategies. The Company's plans to raise additional capital through the sale of equity or equity related securities including those in the form of convertible debt will result in the issuance of Company securities and significant dilution to our current shareholders.
(b) Results of Operations
The
Year ended December 31, 2015 We had no revenue in the years ended December 31, 2015 and 2014. The loss from operations for the year ended December 31, 2015 was $527,038 versus $679,102 in the year ended December 31, 2014. This decrease in 2015 was primarily the result of significantly lower general and administrative expenses including a $100,000 decrease in salary attributable to the CEO of our operation subsidiary. There was also significantly lower professional services in 2015 versus 2014. The losses included $331,505 and $332,917 in 2015 and 2014, respectively, comprised of related party expense that included officer and key employee management fees as well as rent paid to related parties, which did not change appreciably and is not anticipated to change in 2016. The balance of $195,533 and $345,989 for general and administrative expenses in the periods ended December 31, 2015 and December 31, 2014 was comprised of the following: Year ended December 31, 2015 Year ended December 31, 2014 General and administrative Legal and accounting Professional services Stock based compensation Bad debt expense Bad debt recovery Salaries
The company recorded $639,982 in "other expense" during the year ended December 31, 2015 as compared to $862,856 in the year ended December 31, 2014. The single largest change was a decrease in interest expense and amortization of convertible note discounts due to lower convertible note issuances in late 2014 as well as 2015 resulting in lower amortization of the discount. This was partially offset by increased fair value adjustment of derivatives in 2015 versus 2014. The Company currently has approximately $667,000 in face value of convertible debt so it is anticipated similar losses related to derivative liabilities will continue in 2016 and for the foreseeable future as further debt instruments are issued. Year ended December 31, 2014
For the years ended December 31, 2014 and 2013, our total revenue was $0 and $13,440, respectively. The revenue in the December 31, 2013 period was received from the US Air Force for modifications to the PBIS-2000 unit delivered to them in 2012. The loss from operations for the year ended December 31, 2014 was
The balance of $345,989 and $424,846 for
The Company experienced lower general and administrative expenses as well as a significant decrease in professional services expenses in the 2014 period versus the 2013 period as the Company worked to lower its costs. All other expense categories remained relatively stable year-to-year. This is a trend the Company believes will continue in 2015, although there is no assurance the Company will see appreciable amounts from bad debt recovery as there is no guarantee of any payments from FastFunds.
The company recorded $862,856 in
(c) Off-Balance sheet arrangements
During the fiscal year ended December 31, 2014, the Company did not engage in any off-balance sheet arrangements as defined in Item 303(c) of the
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and a decline in the stock market. We do not enter into derivatives or other financial instruments for trading or speculative purposes. We have limited exposure to market risks related to changes in interest rates. We do not currently invest in equity instruments of public or private companies for business or strategic purposes.
The principal risks of loss arising from adverse changes in market rates and prices to which we are exposed relate to interest rates on debt. We have only fixed rate debt. We had
ITEM 8. FINANCIAL STATEMENTS.
The financial statements and related information required to be filed are indexed and begin on page F-1 and are incorporated herein.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Index to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholder of Alumifuel Power Corporation
We have audited the accompanying balance
We conducted our
We were not engaged to examine
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Alumifuel Power Corporation as of December 31, 2015 and 2014, and the results of its operations and cash flows for the
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred operating losses, has incurred negative cash flows from operations and has a working capital deficit. These and other factors raise substantial doubt about the
D. Brooks and Associates West Palm Beach, FL April
D. Brooks and Associates
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets
See accompanying notes to consolidated financial
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations
See accompanying notes to consolidated financial
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Consolidated Statement of Changes in Shareholders' Deficit Years Ended December 31,
Common stock Additional paid-in Accumulated Non-controlling Total shareholders Shares Par value capital deficit interest deficit Balance at December 31, 2013 (Restated) January through December 2014, issuance of common stock upon conversion of convertible debt (Notes 3 & 5) Reclassification of derivative liabilities upon conversion of convertible debt (Note 3) November 2014, Reverse stock split (1 for 250) shares issued for fractional shares (Note 5) Net loss Balance at December 31, 2014 January through September 2015, issuance of common stock upon conversion of convertible debt and accrued interest (Notes 3 & 5) Reclassification of derivative liabilities upon conversion of convertible debt (Note 3) January through September 2015, issuance of common stock for services (Note 5) Net loss Balance at December 31, 2015
See accompanying notes to consolidated financial
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows
See accompanying notes to consolidated financial
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements
NOTE 1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Basis of Presentation
AlumiFuel Power Corporation (the
The Company operates primarily through its subsidiaries, NovoFuel, Inc.
The financial statements contained herein for the years ended December 31,
On November 19, 2014, the Company effected a 1 for 250 reverse split of its common stock following which a total of 3,840,199,334 shares of issued and outstanding pre-split common stock became 15,360,797 shares of post-split common stock. As a result of the reverse split, the number of shares outstanding and per share information for all prior periods presented have been retroactively restated to reflect the new capital structure.
Formation of AlumiFuel Power International, Inc.
In February 2010, the Company formed its subsidiary, AFPI. In connection with the formation of the AFPI, the Company and AFPI executed a License Agreement through which AFPI received certain international marketing rights and the rights to utilize certain intellectual property from the Company for exploitation in countries and territories outside of North America in exchange for 25,000,000 shares of the Company's $0.001 par value common stock. In addition, the Company purchased 15,000,000 shares of AFPI common stock at $0.01 per share. On July 31, 2011, the Company and AFPI executed a Patent Purchase Agreement through which the Company sold AFPI the international patent rights to certain of the Company's intellectual property. In exchange for the sale of these rights, the Company received 7,500,000 shares of AFPI common stock valued at $10,275,000, the market value of the stock on the Deutsche Börse Frankfurt Stock Exchange on the agreement date.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to
Going Concern
The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has incurred operating losses since inception, used significant cash in support of its operating activities and, based upon current operating levels, requires additional capital or significant restructuring to sustain its operations for the foreseeable future. These factors, among others, may indicate that the Company will be unable to continue as a going concern for a reasonable period of time.
The financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. The
Use of Estimates
The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company considers all highly liquid securities with original maturities of three months or less when acquired to be cash equivalents. Cash equivalents at December 31,
Income Taxes
The Company accounts for income taxes under the provisions of ASC Topic 740, formerly known as SFAS No. 109,
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements
The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The Company has identified its federal tax return and its state tax return in Colorado as
Stock-based Compensation
The Company has certain stock option plans approved by its stockholders, and also grants options and warrants to consultants outside of its stock option plan pursuant to individual agreements.
The Company accounts for compensation expense for its stock-based employee compensation plans and issuances of options and warrants to consultants in accordance with ASC Topic 718, formerly known as SFAS No. 123R "Share Based Payment" which replaced SFAS No. 123, "Accounting for Stock-Based Compensation"(
Debt Issue Costs
The costs related to the issuance of debt are capitalized and amortized to interest expense using the straight-line method over the lives of the related debt. The straight-line method results in amortization that is not materially different from that calculated under the effective interest method.
Non-Controlling Interests
In February 2010, the Company formed its subsidiary, AFPI. The total number of AFPI shares outstanding at December 31,
Fair Value of Financial Instruments
The estimated fair value of financial instruments has been determined by the Company using available market information and appropriate methodologies; however, considerable judgment is required in interpreting information necessary to develop these estimates. Accordingly, the
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements
The fair values of cash and cash equivalents, current non-related party accounts receivable, and accounts payable approximate their carrying amounts because of the short maturities of these instruments.
The fair values of notes and advances receivable from non-related parties approximate their net carrying values because of the allowances recorded as well as the short maturities of these instruments. The fair values of receivables from related parties are not practicable to estimate, based upon the related party nature of the underlying transactions.
The fair values of notes and loans payable to non-related parties approximate their carrying values because of the short maturities of these instruments. The fair value of long-term debt to non-related parties approximates carrying values, net of discounts applied, based on market rates currently available to the Company.
Fair value measurements are determined under a three-level hierarchy for fair value measurements that prioritizes the inputs to valuation techniques used to measure fair value, distinguishing between market participant assumptions developed based on market data obtained from sources independent of the reporting entity
Fair value is the price that would be received to sell an asset or would be paid to transfer a liability (i.e., the
The highest priority is given to unadjusted quoted prices in active markets for identical assets (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Securities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
The three hierarchy levels are defined as follows:
Level 1 – Quoted prices in active markets that is unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2 – Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets or financial instruments for which significant inputs are observable, either directly or indirectly;
Level 3 – Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
The Company has determined that its derivative liabilities comprised of convertible notes payable fall under Level
Credit risk adjustments are applied to reflect the
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements
Loss per Common Share
Loss per share of common stock is computed based on the weighted average number of common shares outstanding during the period. Stock options, warrants, and common stock underlying convertible promissory notes are not considered in the calculations for the periods ended December 31,
Accounting for obligations and instruments potentially settled in the
In connection with any obligations and instruments potentially to be settled in the Company's stock, the Company accounts for the instruments in accordance with ASC Topic 815, "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a
Derivative Instruments
In connection with the issuances of equity instruments or debt, the Company may issue options or warrants to purchase common stock. In certain circumstances, these options or warrants may be classified as liabilities, rather than as equity. In addition, the equity instrument or debt may contain embedded derivative instruments, such as conversion options or listing requirements, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative liability instrument. The Company accounts for derivative instruments under the provisions of ASC Topic 815,
Recent Accounting Pronouncements
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements In May 2014, the FASB issued ASU No. 2014-09, Revenue Recognition (Topic 606): Revenue from Contracts with Customers ("ASU 2014-09"). This new standard provides accounting In August 2015, the FASB issued In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements - Going Concern (Topic 205-40), Disclosure of Uncertainties about an Entities Ability to Continue as a Going Concern that requires management to evaluate whether there are conditions or events that raise substantial doubt about an entity's ability to continue as a going concern within one year In January 2015, the FASB issued ASU No. 2015-01, Income Statement - Extraordinary and Unusual Items (Topic 225-20), Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items that simplifies income statement presentation by eliminating extraordinary items from GAAP. This guidance is to be applied either prospectively or retrospectively and is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Early application is permitted provided the guidance is applied from the beginning of the annual year of adoption. The Company has adopted the guidance and the adoption of this standard did not have an impact on the Company's consolidated financial position or results of operations. In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810), Amendments to the Consolidation Analysis that meant to clarify the consolidation reporting guidance in GAAP. This guidance is to be applied using a retrospective method or a modified retrospective method, as outlined in the guidance, and is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2015. Early application is permitted. The Company has adopted the guidance and the adoption of this standard did not have an impact on the Company's consolidated financial position or results of operations. In April 2015, the FASB issued ASU 2015-03, Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which requires an entity to present debt issuance costs related to a debt liability as a direct deduction from the debt liability rather than as an asset. ASU 2015-03 is effective retrospectively for fiscal years, and interim reporting periods within those years, beginning after December 15, 2015. As the Company does not currently have any debt obligations, the adoption of this standard will not impact the presentation of certain financial statement line items within the Company's balance sheets, results of operations, and related disclosures.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805): Simplifying the Accounting Measurement-Period Adjustments, which eliminates the requirement for an entity to retrospectively adjust the financial statements for measurement-period adjustments that occur in periods after a business combination is completed. ASU 2015-16 is effective prospectively for fiscal years, and interim reporting periods within those years, beginning after December 15, 2015. The adoption of this standard will not have an impact on the Company's financial position and results of operations. In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, to simplify the presentation of deferred income taxes. The amendments in ASU 2015-17 require that deferred tax liabilities and assets be classified as non-current in a classified statement of financial position. The current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount is not affected by the amendments in the update. ASU 2015-17 is effective for fiscal years beginning after December 15, 2016, and interim periods within those years, and may be applied either prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. The adoption of this standard will not have an impact on the Company's financial position. In January 2016, the FASB issued ASU 2016-01, Financial Instruments - Overall: Recognition and Measurement of Financial Assets and Financial Liabilities. This new standard provides guidance on how entities measure certain equity investments and present changes in the fair value. This standard requires that entities measure certain equity investments that do not result in consolidation and are not accounted for under the equity method at fair value and recognize any changes in fair value in net income. ASU 2016-01 is effective for fiscal years beginning after December 31, In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires lessees to recognize a right of use asset and related lease liability for those leases classified as operating leases at the commencement date and have lease terms of more than 12 months. This topic retains the distinction between finance leases and operating leases. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and interim periods within those years, and must apply a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. Although the Company currently has no
NOTE 2.RELATED PARTY TRANSACTIONS
Related Party Accounts Payable
The Board of Directors has estimated the value of management services compensation for the Company at the monthly rate of $8,000 and $2,000 for the president and secretary/treasurer, respectively. The estimates were determined by comparing the level of effort to the cost of similar labor in the local market and this expense totaled $120,000 for each of the years ended December 31,
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements
In September 2009, the Company's board directors authorized a bonus program for the Company's officers related to their efforts raising capital to fund the Company's operations. Accordingly, the Company's president and secretary are eligible to receive a bonus based on 50% of the traditional "Lehman Formula" whereby they will receive 2.5% of the total proceeds of the first $1,000,000 in capital raised by the Company, 2.0% of the next $1,000,000, 1.5% of the next $1,000,000, 1% of the next $1,000,000 and .5% of any proceeds above $4,000,000. The amount is capped at $150,000 per fiscal year. During the years ended December 31,
In the years ended December 31,
The Company rented office space, including the use of certain office machines, phone systems and long distance fees, from a company owned by its officers at $1,500 per month in
Accounts payable to related parties consisted of the following at December 31,
Related Party Notes Payable
AlumiFuel Power Corporation
The Company issues promissory notes to its officers, and entities affiliated with its officers, from time-to-time. These notes all bear interest at 8% per annum and are due on demand. The following table outlines activity related to issuances and payment on these notes for the years ended December 31,
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements
Notes Payable – Related Parties and Affiliates: Principal balance 12/31/13 Notes issued 2014 Notes repaid 2014 Principal balance 12/31/14 Notes issued 2015 Notes repaid 2015 Principal balance 12/31/15 HPI Partners, LLC
In periods prior to December 31, 2012, HPI received loans from Company officers or their affiliates that were repaid in prior periods. Accrued interest due totaling $235 remained unpaid on these paid notes as of both December 31,
Total notes and interest payable to related parties consisted of the following at December 31,
NOTE 3. NOTES PAYABLE
AlumiFuel Power Corporation
From time to time the Company has issued various promissory notes payable to an unaffiliated trust, Gulfstream 1998 Irrevocable Trust. All notes bear an interest rate of 8% and are due on demand. As of December 31,
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements
As of December 31,
As of December 31,
At December 31,
During the year ended December 31,
Certain notes for which all principal was paid in previous years have interest payable balances. This amounted to $57 at both December 31,
Many of the Company's notes issued to unaffiliated third parties contain provisions allowing them to be converted to common stock of the Company at market price on the date of conversion.
AlumiFuel Power, Inc.
Certain notes for which all principal was paid in previous years have interest payable
AlumiFuel Power International, Inc.
During the quarter ended June 30, 2012, $26,100 in accrued interest payable to an unaffiliated third party was converted to a convertible promissory note leaving an interest balance due of $5 at both December 31,
As of December 31,
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements
HPI Partners, LLC
In periods prior to 2012, the Company issued various notes payable to unaffiliated third parties through HPI. These notes were also repaid in the periods prior to December 31,
Notes and interest payable to others consisted of the following at December 31,
AlumiFuel Power Corporation Convertible Promissory Notes
Convertible Notes and Debentures with Embedded Derivatives:
From time-to-time, we issue convertible promissory notes and debentures with conversion features that we have determined represent an embedded derivative as they are convertible into a variable number of shares upon conversion. Accordingly, these notes are not considered to be conventional debt under EITF 00-19 and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. The Company believes that the aforementioned embedded derivatives meet the criteria of ASC 815 (formerly SFAS 133 and EITF 00-19), and should be accounted for separately as derivatives with a corresponding value recorded as a liability. Accordingly, the fair value of these derivative instruments are recorded as a liability on the consolidated balance sheet with the corresponding amount recorded as a discount to the notes in the period in which they are issued. Such discount is capitalized and amortized over the life of the notes. The change in the fair value of the liability for derivative contracts is credited to other income (expense) in the consolidated statements of operations at the end of each quarter. The face amount of the corresponding notes are stripped of their conversion feature due to the accounting for the conversion feature as a derivative, which is recorded using the residual proceeds to the conversion option attributed to the debt.
2009/2010 Convertible Debentures
In September 2009 through January 2010 we issued $435,000 of 6% unsecured convertible debentures in transactions with private investors (the
The beneficial conversion feature (an embedded derivative) included in the Debentures resulted in an initial debt discount of $435,000 and an initial loss on the valuation of derivative liabilities of $71,190 for a derivative liability balance of $506,190 at issuance.
Notes to
At December 31, 2014, the Company revalued the derivative liability balance of the remaining outstanding
At December 31, 2015, the Company revalued the derivative liability balance of the remaining outstanding Debentures resulting in a derivative liability balance of $5,154 at December 31, 2015. January 2012 Convertible Notes
In January 2012 During the year ended December 31, 2015 More Capital converted $4,696 in principal on these notes to 93,916,856 shares of common stock at $0.00005 per share and resulting in a principal balance of At December 31, 2015 the Company revalued the derivative liability balance of the remaining outstanding notes resulting in a derivative liability balance of $45,784 at December 31, 2015.
January 2012 Interest Note
In January 2012, the Company converted a total of $26,100 in interest payable on $75,000 in notes of the Company and AFPI to an unaffiliated note holder to a convertible note. This note was due in January 2013 and carries an interest rate of 8% per annum. The note is convertible into shares of our common stock at a 50% discount to the lowest three trading prices in the ten days prior to conversion.
The beneficial conversion feature (an embedded derivative) included in the January 2012 Interest Note resulted in an initial debt discount of $26,100 and an initial loss on the valuation of derivative liabilities of $11,186 for a derivative liability balance of $37,286 at issuance.
During the year ended December 31, 2014, the holders converted the entire $26,100 principal plus $4,565 in accrued interest to 336,376 shares of our common stock, or $0.09 per share. As a result of these transactions, the derivative liability was $0 as of December 31, 2014.
October/November Convertible Notes
In October and November 2012 a private investor purchased a total of $139,600 in existing notes from a third party note holder (together the
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements
The beneficial conversion feature (an embedded derivative) included in the October/November Notes resulted in an initial debt discount of $139,600 and an initial loss on the valuation of derivative liabilities of $143,000 for a derivative liability balance of $282,600 at issuance. As of December 31,
During the year ended December 31, 2014, the debenture holders converted the remaining balance of $77,519 in face value and $10,443 in interest of the debentures to 1,413,655 shares of our common stock, or $0.0625 per share, fully converting these debentures. As a result of these transactions, the Company recorded a decrease to the derivative liability taking it to $0 and as of December 31, 2014, the total face value of the Debentures outstanding was $0.
During the
The
The beneficial conversion feature (an embedded derivative) included in the 2013 Asher Convertible Notes resulted in total initial debt discounts of $50,000 and a total initial loss on the valuation of derivative liabilities of $38,500 for a derivative liability balance of $88,500 total at issuance.
As of December 31,
During the year ended December 31, 2014, the 2013 Asher Convertible Notes holders converted the remaining principal balance of $39,610 plus $2,200 in interest to 913,238 shares of our common stock, or $0.045 per share. As a result of all conversions, the Company recorded a decrease to the derivative liability of $79,220 taking it to $0.
May 2013 Notes
In May 2013
The beneficial conversion feature (an embedded derivative) included in the May 2013 Notes resulted in an initial debt discount of $2,500 and an initial loss on the valuation of derivative liabilities of $2,232 for a derivative liability balance of $4,732 at issuance.
During the year ended December 31, 2014, the holders converted the $2,500 in face value plus $222 in interest to 64,039 shares of our common stock, or $0.015 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $4,732 and the balance due on the notes was 0.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements 2013 CareBourn Notes
In the year ended December 31, 2013 a private investor purchased a total of $118,351 in existing notes from one of our third party note holders and loaned an additional $32,000 in new notes for a total of
The 2013 Convertible Notes are convertible at a conversion price for each share of common stock equal to 50% of the lowest closing bid price per share of the
The beneficial conversion feature (an embedded derivative) included in the 2013 CareBourn Notes resulted in an initial debt discount of $151,351 and an initial loss on the valuation of derivative liabilities of $91,683 for a derivative liability balance of $242,034 at issuance.
During the year ended December 31, 2014, the note holders converted a total of $133,211 in face value and $7,071 in interest of the 2013 CareBourn Notes to 3,182,010 shares of common stock, or $0.045 per share. As a result of the total conversion of these notes, the Company recorded a decrease to the derivative liability of $242,034 and as of December 31, 2014, the total face value of the 2013 Convertible Notes outstanding was $0.
2014 CareBourn Notes
During the year ended December 31, 2014, an institutional investor, CareBourn Capital, converted $100,000 in promissory notes due from the Company into a convertible note due September 30, 2014. In addition, our president, converted $85,000 in fees due him from our subsidiary AFPI into convertible notes due February 1, 2014 ($50,000) and October 2, 2014 ($35,000), which were acquired by this investor. This investor also loaned the Company an additional $70,000 that is due August 2014 through July 2015. These notes total $255,000 (together the
The beneficial conversion feature (an embedded derivative) included in the 2014 CareBourn Notes resulted in an initial debt discount of $205,000 and an initial loss on the valuation of derivative liabilities of $72,950 for a derivative liability balance of $277,950 at issuance.
During the year ended December 31, 2014, the note holders converted a total of $4,711 in face value of the 2014 CareBourn Notes to 2,021,000 shares of our common stock, or $0.002 per share. As a result of the
During the year ended December 31, 2015, the note holders converted a total of $60,536 in principal and $3,712 in interest of the 2014 CareBourn Notes to 703,051,247 shares of our common stock, or $0.00009 per share. As a result of the conversion of these notes, the Company recorded a decrease to the derivative liability and as of December 31, 2015, the total face value of the 2014 CareBourn Notes outstanding was $189,753. At December 31,
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements
JMJ Convertible Note
In June 2013 we issued $16,500 of 12% unsecured convertible note with a private investor (the
The beneficial conversion feature (an embedded derivative) included in the JMJ Convertible Note resulted in an initial debt discount of $16,500 and an initial loss on the valuation of derivative liabilities of $15,180 for a derivative liability balance of $31,680 at issuance.
During the year ended December 31, 2014, the note holders converted a total of $14,300 in face value and $2,167 in interest of the JMJ Notes to 527,467 shares of our common stock, or $0.03 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $23,833 and as of December 31, 2014, the total face value of the 2013 Convertible Notes outstanding was $0.
Bohn Convertible Note
In May 2013 we issued a $20,000 8% unsecured convertible note with a private investor (the
The beneficial conversion feature (an embedded derivative) included in the Bohn Convertible Note resulted in an initial debt discount of $20,000 and an initial loss on the valuation of derivative liabilities of $11,429 for a derivative liability balance of $31,429 at issuance.
At December 31, 2014 the Company revalued the derivative liability balance of the remaining outstanding Bohn Convertible Note. Therefore, for the period from their issuance to December 31, 2014, the Company
At December 31, 2015 the Company revalued the derivative liability balance of the remaining outstanding note of $20,000 resulting in a derivative liability balance of $24,217 at December 31, 2015. Wexford Convertible Note
In May 2013,
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements WHC Capital Notes
During the year ended December 31, 2013, an unaffiliated institutional investor purchased three notes totaling $19,900 from
The beneficial conversion feature (an embedded derivative) included in the WHC Notes resulted in an initial debt discount of $29,900 and an initial loss on the valuation of derivative liabilities of $25,178 for a derivative liability balance of $55,078 at issuance.
During the year ended December 31, 2014, the
During the year ended December 31, 2014, WHC purchased additional notes totaling $101,300 from
The beneficial conversion feature (an embedded derivative) included in the WHC 2014 Notes resulted in an initial debt discount of $146,300 and an initial loss on the valuation of derivative liabilities of $17,556 for a derivative liability balance of $163,856 at issuance.
During the year ended December 31, 2014, the note holders converted a total of $57,565 in face value and $234 in interest due on the WHC 2014 Notes to 1,891,356 shares of our common stock, or $0.03 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability
During the year ended December 31, 2015, the note holders converted a total of $20,614 in face value on the WHC 2014 Notes to 249,053,338 shares of our common stock, or $0.00008 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability to $77,413 and as of December 31, 2015, the total face value of the WHC 2014 Notes outstanding was $68,122. At December 31,
Schaper
In December 2013 we issued a $15,000 8% unsecured convertible note
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements The beneficial conversion feature (an embedded derivative) included in the Schaper
At December 31, 2014 the Company revalued the derivative liability balance of the
At December 31, 2015 the Company revalued the derivative liability balance of the outstanding Schaper Notes totaling $41,500 resulting in a derivative liability balance of $46,856 at that date. 2014 Asher Convertible Note
In January 2014, the Company entered into a note agreement with an institutional investor for the issuance of a convertible promissory note in the aggregate amount of $22,500.
The 2014 Asher Convertible Note is convertible at 50% of the average of the lowest three closing bid prices per share of the
We received net proceeds from the 2014 Asher Convertible Note of $20,000 after debt issuance costs of $2,500 paid for lender legal fees. These debt issuance costs were amortized over the nine month term of the 2014 Asher Convertible Note and as of December 31, 2014, all of these costs had been expensed as debt issuance costs.
The beneficial conversion feature (an embedded derivative) included in the 2014 Asher Convertible Note resulted in total initial debt discounts of $22,500 and a total initial loss on the valuation of derivative liabilities of $1,800 for a derivative liability balance of $24,300 total at issuance.
During the year ended December 31, 2014, the holder converted a total of $21,000 in face value of the note to 840,000 shares of our common stock, or $0.025 per share. As a result of this transaction, the Company recorded a decrease to the derivative liability for a balance of
At December 31,
JSJ Notes
In February 2014 the Company issued a $25,000 12% unsecured convertible note with a private investor (the
The beneficial conversion feature (an embedded derivative) included in the JSJ Convertible Note resulted in an initial debt discount of $25,000 and an initial loss on the valuation of derivative liabilities of $1,500 for a derivative liability balance of $26,500 at issuance.
During the year ended December 31, 2014, the note holders converted a total of $18,377 in face value of the JSJ Notes to 2,066,015 shares of our common stock, or $0.009 per share. As a result of these transactions the total face value of the JSJ Notes outstanding was
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements
At December 31, 2014 the Company revalued the derivative liability balance of the remaining outstanding JSJ Convertible Note. Therefore, for the period from their issuance to December 31, 2014, the Company decreased the previously recorded liabilities
During the year ended December 31, 2015, the note holders converted the balance of $6,623 in principal and $2,102 in interest of the JSJ Notes to 108,708,299 shares of our common stock, or $0.0008 per share. As a result of these transactions the amounts payable on the JSJ Notes outstanding was $0 at December 31, 2015. LG Funding Notes
In February 2014 we issued a $40,000 8% unsecured convertible note with a private investor. This note is due on February 15, 2015 and is convertible into common stock at 50% of the lowest closing bid price for the ten (10) days immediate preceding the date of conversion. In June 2014 we issued an additional $25,000 note to this same investor with the same terms and conditions (the
We received net proceeds from the LG Convertible Note of $61,500 after debt issuance costs of $3,500. These debt issuance costs will be amortized over the terms of the LG Convertible Notes or such shorter period as the Notes may be outstanding. As of December 31, 2014, $2,567 of these costs had been expensed as debt issuance costs.
The beneficial conversion feature (an embedded derivative) included in the LG Convertible Notes resulted in an initial debt discount of $65,000 and an initial loss on the valuation of derivative liabilities of $5,200 for a derivative liability balance of $70,200 at issuance.
During the year ended December 31, 2014, the note holders converted a total of $10,600 in face value and $452 in accrued interest of the LG Funding Notes to 884,141 shares of our common stock, or $0.0125 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $11,448 and as of December 31, 2014 the total face value of the LG Funding Notes outstanding was $54,400.
At December 31, 2014 the Company revalued the derivative liability balance of the remaining outstanding LG Convertible
During the year ended December 31, 2015, the note holders converted a total of $33,135 in face value and $2,666 in accrued interest of the LG Funding Notes to 327,367,979 shares of our common stock, or $0.0001 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability and as of December 31, 2015 to $24,178 and the total face value of the LG Funding Notes outstanding was $21,265. Iconic Notes
In February 2014 the Company issued a $27,500 5% unsecured convertible note with a private investor (the
The Company received net proceeds from the Iconic Convertible Note of $25,000 after debt issuance costs of $2,500. These debt issuance costs will be amortized over the terms of the Iconic Convertible Notes or such shorter period as the Notes may be outstanding. As of December 31, 2014, $2,135 of these costs had been expensed as debt issuance costs.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements The beneficial conversion feature (an embedded derivative) included in the Iconic Convertible Note resulted in an initial debt discount of $27,500 and an initial loss on the valuation of derivative liabilities of $1,375 for a derivative liability balance of $28,875 at issuance.
In November 2014 the lender declared an event of default on the note for failure to maintain sufficient shares of the
During the
At December 31, 2014 the Company revalued the derivative liability balance of the remaining outstanding Iconic Convertible Note resulting in a derivative liability balance of $63,766 at December 31, 2014.
During the year December 31, 2015, the note holder converted a total of $35,814 in face value and $1,503 in accrued interest of the Iconic Notes to 130,147,427 shares of our common stock, or $0.0003 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability and as of December 31, 2015, the total face value of the Iconic Notes outstanding was $0. ADAR Convertible Note
On June 30, 2013 the Company issued a $25,000 8% unsecured convertible note with a private investor (the
The Company received net proceeds from the ADAR Convertible Note of $23,500 after debt issuance costs of $1,500. These debt issuance costs will be amortized over the terms of the ADAR Convertible Notes or such shorter period as the Notes may be outstanding. As of December 31, 2014, $1,238 of these costs had been expensed as debt issuance costs.
The beneficial conversion feature (an embedded derivative) included in the ADAR Convertible Note resulted in an initial debt discount of $25,000 and an initial loss on the valuation of derivative liabilities of $2,000 for a derivative liability balance of $27,000 at issuance.
During the year ended December 31, 2014, the note holder converted a total of $7,500 in face value of the Adar Convertible Notes to 600,000 shares of our common stock, or $0.0125 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $8,100 and as of December 31, 2014, the total face value of the Adar Notes outstanding was $17,500.
At December 31, 2014 the Company revalued the derivative liability balance of the remaining outstanding ADAR Convertible Note resulting in a derivative liability balance of $18,900 at December 31, 2014.
At December 31, 2015 the Company revalued the derivative liability balance of the remaining outstanding ADAR Convertible Note balance of $17,500 resulting in a derivative liability balance of $20,267 at December 31, 2015.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements Beaufort Notes
In November 2014 the Company issued a $16,000 unsecured convertible note with a private investor (the
The Company received net proceeds from the Beaufort Note of $12,500 after debt issuance costs of $3,500. These debt issuance costs will be amortized over the terms of the Beaufort Note or such shorter period as the Note may be outstanding. As of December 31,
The beneficial conversion feature (an embedded derivative) included in the Beaufort Notes resulted in an initial debt discount of $31,100 and an initial loss on the valuation of derivative liabilities of $1,244 for a derivative liability balance of $32,344 at issuance.
During the year ended December 31, 2014, the note holders converted a total of $1,739 in face value of the LG Funding Notes to 2,728,000 shares of our common stock, or $0.0006 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $1,656 and as of December 31, 2014, the total face value of the Beaufort Notes outstanding was $29,361.
At December 31, 2014 the Company revalued the derivative liability balance of the remaining outstanding Beaufort Notes resulting in a derivative liability balance of $30,535 at December 31, 2014.
During the year ended December 31, 2015, the note holders converted a total of $13,361 in face value of the Beaufort Notes to 62,295,857 shares of our common stock, or $0.0002 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability and as of December 31, 2015, the total face value of the Beaufort Notes outstanding was $16,000. At December 31, 2015 the Company revalued the derivative liability balance of the remaining outstanding Beaufort Notes resulting in a derivative liability balance of $16,640 at December 31, 2015. Pure Energy 714 2015 Notes In January 2015, Pure Energy 714 purchased a note totaling $21,000 in principal and $3,360 in accrued interest from one of our third party note holders and a new note in the amount of $24,360; and in August 2015 Pure Energy 714 purchased an additional note totaling $11,900 in principal and $1,139 in interest and issued a new note in the amount of $13,039 (together the "Pure Energy 2015 Notes"). The Pure Energy 2015 Notes may be converted at any time at a discount to market of 60% and 55%, respectively, of the lowest closing price per share of the Company's common stock for the thirty (30) and twenty (20) trading days, respectively, immediately preceding the date of conversion as adjusted for splits and other events. These notes have an interest rate of 8% per annum and are due in July 2015 and August 2015. The beneficial conversion feature (an embedded derivative) included in the Pure Energy 2015 Notes resulted in an initial debt discount of $24,360 and an initial loss on the valuation of derivative liabilities of $14,655 for a derivative liability balance of $39,025 at issuance.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements During the year ended December 31, 2015, the note holders converted a total of $23,160 in face value of the Pure Energy 2015 Notes to 388,657,736 shares of our common stock, or $0.00006 per share. As a result of these transactions, the Company decreased the derivative liability and as of December 31, 2015, the total face value of the Pure Energy 2015 Notes outstanding was $14,239. At December 31, 2015 the Company revalued the derivative liability balance of the remaining outstanding Pure Energy 2015 Notes resulting in a derivative liability balance of $15,398 at December 31, 2015. Black Forest Capital 2015 Notes In March 2015, an institutional investor purchased notes totaling $15,000 in principal from one of our third party note holders and issued a replacement convertible note in the amount of $15,000. In addition, this investor loaned the Company an additional $5,000 through a convertible note. These two notes together comprise a principal balance of $20,000 (together the "Black Forest Capital 2015 Notes"). The Black Forest Capital Notes may be converted at any time at a discount to market of 50% of the lowest closing price per share of the Company's common stock for the twenty (20) trading days immediately preceding the date of conversion as adjusted for splits and other events. This notes have an interest rate of 10% per annum, with a default interest rate of 15%, and are due in March 2016. The beneficial conversion feature (an embedded derivative) included in the Black Forest Capital 2015 Notes resulted in an initial debt discount of $20,000 and an initial loss on the valuation of derivative liabilities of $1,100 for a derivative liability balance of $21,100 at issuance. The Company received net proceeds from the Black Forest Capital 2015 Notes of $19,000 after debt issuance costs of $1,000. These debt issuance costs will be amortized over the terms of the Black Forest Capital 2015 Notes or such shorter period as the Notes may be outstanding. As of December 31, 2015, $833 of these costs had been expensed as debt issuance costs. During the year ended December 31, 2015, the note holders converted a total of $6,894 in face value of the Black Forest Capital 2015 Notes to 137,880,000 shares of our common stock, or $0.00005 per share. As a result of these transactions, the Company decreased the derivative liability and the total face value of the Black Forest Capital 2015 Note outstanding was $13,106. In November 2015, Black Forest Capital called an event of default on the notes due to a covenant that we maintain an ongoing bid price for the Company's common stock. As a result of the default, both the principal and interest due on the note increased to 50% resulting in an outstanding principal balance of $19,659 at December 31, 2015. At December 31, 2015 the Company revalued the derivative liability balance of the remaining outstanding Black Forest Capital Notes resulting in a derivative liability balance of $22,096 at that date. CareBourn Capital 2015 Notes In March 2015 we issued a total of $64,500 in two 12% convertible notes to CareBourn Capital, LP and in August 2015 an additional $33,000 in a third 12% convertible note (together the "CareBourn 2015 Notes"). The CareBourn 2015 Notes are due in December 2015 and May 2016 and have a conversion price of 50% of the lowest trading price per share of the Company's common stock for the ten (10) trading days immediately preceding the date of conversion. The beneficial conversion feature (an embedded derivative) included in the CareBourn 2015 Notes resulted in an initial debt discount of $97,500 and an initial loss on the valuation of derivative liabilities of $7,324 for a derivative liability balance of $104,824 at issuance.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements The Company received net proceeds from the CareBourn 2015 Notes of $88,500 after debt issuance costs of $9,000. These debt issuance costs will be amortized over the terms of the CareBourn 2015 Notes or such shorter period as the Notes may be outstanding. As of December 31, 2015, $5,500 of these costs had been expensed as debt issuance costs leaving a balance of $3,500 at December 31, 2015. At December 31, 2015 the Company revalued the derivative liability balance of the remaining outstanding CareBourn 2015 Notes resulting in a derivative liability balance of $107,478 at December 31, 2015. LG Capital 2015 Note In February 2015 we issued a $31,500 8% unsecured convertible note with a private investor (the "LG 2015 Note"). The LG 2015 Note due in February 2016 and has a conversion price of 50% of the lowest trading price per share of the Company's common stock for the twenty (20) trading days immediately preceding the date of conversion. The beneficial conversion feature (an embedded derivative) included in the LG 2015 Note resulted in an initial debt discount of $31,500 and an initial loss on the valuation of derivative liabilities of $3,780 for a derivative liability balance of $35,280 at issuance. The Company received net proceeds from the LG 2015 Note of $30,000 after debt issuance costs of $1,500. These debt issuance costs will be amortized over the terms of the LG 2015 Note or such shorter period as the Notes may be outstanding. As of December 31, 2015, $1,375 of these costs had been expensed as debt issuance costs leaving a balance of $125. At December 31, 2015 the Company revalued the derivative liability balance of the outstanding LG 2015 Note balance of $31,500 resulting in a derivative liability balance of $35,280 at December 31, 2015.
Convertible notes payable, net of discounts; and interest payable consisted of the following at December 31,
December 31, 2015 Convertible debentures; non-affiliates; interest at 6% and due December 2013; outstanding principal of $10,000 face value; net of discount of $0 January 2012 Convertible Notes (More Capital); non-affiliate; interest at 8% due January 2013; outstanding principal of $43,604 face value net of discount of $0 2014 Asher Convertible Notes; non-affiliate, interest at 8%; due May 2012; $1,500 face value net of discount of $0 2014 CareBourn Notes; non-affiliate; interest at 8%-12; due August 14 through July 2015; $189,753 face value net of discount of $0 Bohn Convertible Note; non-affiliate; interest at 8%; $20,000 face value net of discount of $0 Wexford Convertible Note; non-affiliate; interest at 8%; $75,000 face value net of discount of $0 WHC Convertible Notes; non-affiliate; interest at 8%; $68,122 face value net of discount of $0 Schaper Notes; non-affiliate; interest at 8%; due August 2014 and July 2016; face value $41,500 net of discount of $8,250 LG Funding Notes; non-affiliate; interest at 8%; due February 2015; face value $21,265 net of discount of $0 ADAR Notes; non-affiliate; interest at 8%; due February 2015; face value $17,500 net of discount of $0 CareBourn 2015 Notes; non-affiliate; interest at 12%; due December 2015; $97,500 face value net of discount of $16,500 Black Forest Capital 2015 Notes; non-affiliate; interest at 10%; due March 2016; $13,106 face value net of discount of $2,186 LG Capital 2015 Notes; non-affiliate; interest at 8%; due February 2016; $31,500 face value net of discount of $2,626 Pure Energy 2015 Notes; non-affiliate; interest at 8%; due July 2015 and August; $14,239 face value net of discount of $0 Beaufort Notes; non-affiliate; interest at 8%; due May 2015; face value $16,000 net of discount of $0 Total convertible notes, net of discount Discount on convertible notes Total convertible notes payable Interest payable, convertible notes Total convertible notes payable and accrued interest payable
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements December 31, 2014 Convertible debentures; non-affiliates; interest at 6% and due December 2013; outstanding principal of $10,000 face value; net of discount of $0 January 2012 Convertible Notes; non-affiliate; interest at 8%; due January 2013 2014 Asher Convertible Notes; non-affiliate, interest at 8%; due May 2012; $1,500 face value net of discount of $250 2014 CareBourn Notes; non-affiliate; interest at 8%-12; due August 14 through July 2015; $250,289 face value net of discount of $28,333 Bohn Convertible Note; non-affiliate; interest at 8%; $20,000 face value net of discount of $0 Wexford Convertible Note; non-affiliate; interest at 8%; $75,000 face value net of discount of $0 WHC Convertible Notes; non-affiliate; interest at 8%; $88,739 face value net of discount of $39,528 Schaper Notes; non-affiliate; interest at 8%; due August 2014; face value $25,000 net of discount of $1,111 JSJ Notes; non-affiliate; interest at 12%; due August 2014; face value $6,623 net of discount of $0 LG Funding Notes; non-affiliate; interest at 8%; due February 2015; face value $54,400 net of discount of $16,358 Iconic Notes; non-affiliate; interest at 5%; due February 2015; face value $35,814 net of discount of $3,438 ADAR Notes; non-affiliate; interest at 8%; due February 2015; face value $17,500 net of discount of $4,357 Beaufort Notes; non-affiliate; interest at 8%; due May 2015; face value $29,261 net of discount of $22,192 Total convertible notes, net of discount Discount on convertible notes Total convertible notes payable Interest payable, convertible notes Total convertible notes payable and accrued interest payable
NOTE
At December 31,
As of December 31,
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements
NOTE
On January 23, 2014, we filed Amended and Restated Articles of Incorporation with the Secretary of State of Nevada, pursuant to which the Company increased the authorized capital stock of the Company from 760,000,000 shares to 3,510,000,000 shares, of which 10,000,000 shares may be preferred stock having the voting powers, designations, preferences, limitations, restrictions and relative rights as determined by the board of directors from time to time.
Effective September 5, 2014, the Company changed is state of Domicile from Nevada to Wyoming. On September 18, 2014, the Company received notice that the Wyoming Secretary of State had accepted an amendment to its articles of incorporation through which the number of shares of authorized common and preferred stock of the Company went from 3,500,000,000 shares of $0.001 par value common stock and 10,000,000 shares of $0.001 par value preferred stock, to unlimited shares of $0.001 par value common stock and unlimited shares of $0.001 par value preferred stock.
On November 19, 2014, the Company effected a 1 for 250 reverse split of its common stock following which a total of 3,840,199,334 shares of issued and outstanding pre-split common stock became 15,360,797 shares of post-split common stock. As a result of the reverse split, the number of shares outstanding and per share information for all prior periods presented have been retroactively restated to reflect the new capital structure.
Common Stock
During the year ended December 31,
During the year ended December 31,
During the year ended December 31,
Preferred Stock
In August 2011, the Company authorized the issuance of up to 750,000 shares of $0.001 par value Series B Preferred Stock (the "Series B Preferred"). The Series B Preferred has a stated value of $1.00 and pays a dividend of 8% payable quarterly in our common stock. In the event of a liquidation of the Company, the holders of Series B Preferred then outstanding will be entitled to receive a liquidation preference, before any distribution is made to the holders of our common stock, in an aggregate amount equal to the par value of their shares of Series B Preferred. Each share of Series B Preferred is convertible into that number of shares of common stock on terms that are equal to (i) 100% of the Stated Value divided by (ii) 52% of the average of the three lowest day closing bid prices of the
There were 404,055 shares of our Series B Preferred Stock outstanding at December 31,
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements
Warrants
A summary of the activity of the
A summary of the activity of the Company's outstanding warrants at December 31, 2014 and December 31, 2015 is as follows: Warrants Weighted-average exercise price Weighted-average grant date fair value Outstanding and exercisable at December 31, 2013 Granted Expired/Cancelled Exercised Outstanding and exercisable at December 31, 2014 Granted Expired/Cancelled Exercised Outstanding and exercisable at December 31, 2015
The following table sets forth the exercise price range, number of shares, weighted average exercise price and remaining contractual lives of the warrants by groups as of December 31,
Exercise price range Number of options outstanding Weighted-average exercise price Weighted-average remaining life $ 2.50 0.4 years $ 75.00-$200.00 1.4 years $ 500.00 0.9 years 1.2 years
Stock Options
On March 4, 2009, our board of directors authorized our 2009 Stock Incentive Plan which was amended on May 6, 2009 and approved by our stockholders effective on May 26, 2009. The plan
All remaining options outstanding
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements 2009 Stock Incentive Plan Options Weighted-average exercise price Weighted-average remaining contractual life (years) Aggregate intrinsic value Outstanding at December 31, 2013 Options expired Options granted Outstanding at December 31, 2014 Options expired Options granted Outstanding at December 31, 2015
NOTE
Payroll Liabilities
Following the formation of API in May 2008, HPI hired certain former employees of Hydrogen Power, Inc. and maintained an office in Seattle, Washington for a period of approximately five months. During that time, API paid wages to these employees without the benefit of a payroll management service. Upon API's move from Seattle to Philadelphia, Pennsylvania in October 2008, the Company retained the services of a payroll management service to handle its payroll functions. During the period from May to October 2008, the Company recorded $52,576 in payroll liabilities due from wages paid to its employees and has been recording estimated penalties and interest quarterly on the balance. During the year ended December 31,
Office Lease Agreement
Effective on July 1, 2009, API entered into a lease for office and laboratory space in the University City Science Center in Philadelphia, Pennsylvania. Totaling approximately 2,511 square feet, the term of the agreement was for five years and six months expiring on December 31, 2014. In addition, the Company was obligated to pay certain common area maintenance fees of $1,886 per month during 2011.
In November 2011, the Company determined it could no longer sustain the significant payments under the lease and vacated the premises. On November 30, 2011, API was notified that a Judgment by Confession had been entered against it in the Court of Common Pleas Philadelphia County in Philadelphia, Pennsylvania by Wexford-UCSC II, L.P., its former landlord. The Judgment by Confession assesses total damages of $428,232, which is comprised of the following: $73,995 for unpaid monthly rent, maintenance fees, interest and late charges for the period through November 30, 2011; attorney's fees of $5,000; rent and maintenance charges of $10,020 for December 2011; and the value of future rent payments for the period from January 1, 2012 to December 31, 2014 of $339,217. The complaint alleged a breach of contract and event of default for API related to this lease.
ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements
We reached a Settlement Agreement with Wexford-UCSC II, L.P. in May 2013. Pursuant to the terms of the Settlement Agreement, the Company paid a cash payment of $2,000 and issued a Convertible Promissory Note in the amount of $75,000, as described more fully as "Wexford Convertible Note" in Note 3 - Notes Payable above. Also pursuant to the terms of the Settlement Agreement, AlumiFuel Power, Inc., AlumiFuel Power Corporation and all affiliated entities and persons have been fully released.
NOTE
A reconciliation of U.S. statutory federal income tax rate to the effective rate follows for the years ended December 31,
At December 31,
The valuation allowance is evaluated at the end of each year, considering positive and negative evidence about whether the deferred tax asset will be realized. At that time, the allowance will either be increased or reduced; reduction could result in the complete elimination of the allowance if positive evidence indicates that the value of the deferred tax assets is no longer impaired and the allowance is no longer required.
Should the Company undergo an ownership change as defined in Section 382 of the Internal Revenue Code, the Company's tax net operating loss carry forwards generated prior to the ownership change will be subject to an annual limitation, which could reduce or defer the utilization of these losses.
NOTE
Management has determined that there are no further events subsequent to the balance sheet date that should be disclosed in these financial statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES.
Evaluation of Disclosure Controls and Procedures
A review and evaluation was performed by the Company's management, including the Company's Chief Executive Officer (the "CEO") who is also the Chief Financial Officer (the
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a set of processes designed by, or under the supervision of, a
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It should be noted that any system of internal control, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Our CEO/CFO has evaluated the effectiveness of our internal control over financial reporting as described in Exchange Act Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this report based upon criteria established in
Due to the small size and limited financial resources, our corporate secretary and chief executive officer are the only individuals involved in the accounting and financial reporting. As a result, there is limited segregation of duties in the accounting function, leaving all aspects of financial reporting and physical control of cash in the hands of two individuals. This limited segregation of duties represents a material weakness. We will continue periodically review our disclosure controls and procedures and internal control over financial reporting and make modifications from time to time considered necessary or desirable.
This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting.
Changes in Internal Control over Financial Reporting
There have been no changes in the
ITEM 9B. OTHER INFORMATION.
Not applicable.
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.
(a)(b)(c) Identification of directors and executive officers
The following table sets forth the name, age, position and office term of each executive officer and director of the Company.
(c) Significant employees
Not applicable.
(d) Family relationships
None.
(e) Business experience
HENRY FONG
Mr. Fong has been the president and a director of the Company since May 2005. Mr. Fong has been a director of FastFunds Financial Corporation, a publicly traded company with operations of ancillary businesses service the cannabis industry, since June 2004. Mr. Fong has been a Director of SurgLine International, Inc. (f/k/a China Nuvo Solar Energy, Inc.) since March 2002 and was its president from March 2002 through September 1, 2011. SurgLine is a publicly traded company that sources and distributes high quality FDA approved medical and surgical products at discount prices. Mr. Fong was the Chief Executive Officer of Techs Loanstar, Inc. (and its predecessor companies), a publicly traded Company that provides software technology solutions to the healthcare market, from April 2008 to July 2011. Since July 2009 Mr. Fong has been the sole director, President and Chief Financial Officer of PB Capital International, Inc.
THOMAS B. OLSON
Mr. Olson has been secretary of the Company since May 2005.
(f) Involvement in certain legal proceedings
Not applicable.
(g) Promoters and control persons
Not applicable.
(h) Audit committee financial expert.
See (i) below.
(i) Identification of the audit committee
The Company does not currently have an audit committee of the board of directors, as none is required, and the board believes it can effectively serve in that function and, therefore, currently does. Management believes that certain individuals on the board of directors may have the necessary attributes to serve as a financial expert on an audit committee, if required.
Code of Ethics
We have adopted a Code of Ethics for our senior financial management, which includes our chief executive officer and chief financial officer as principal executive and accounting officers, that has been filed as exhibit 14.1 to this report.
ITEM 11. EXECUTIVE COMPENSATION.
(a) General
We currently have two executive officers including our President, Mr. Henry Fong, who is also our principal executive officer and our principal financial officer; and Mr. Thomas B. Olson, who is our Secretary.
(b) Compensation discussion and analysis
The Board of Directors has estimated the value of management services compensation for the Company at the monthly rate of $8,000 and $2,000 for the president and secretary/treasurer, respectively. The estimates were determined by comparing the level of effort to the cost of similar labor in the local market and this expense totaled $120,000 for each of the years ended December 31,
In September 2009, the Company's board directors authorized a bonus program for the Company's officers related to their efforts raising capital to fund the Company's operations. Accordingly, the Company's president and secretary are eligible to receive a bonus based on 50% of the traditional "Lehman Formula" whereby they will receive 2.5% of the total proceeds of the first $1,000,000 in capital raised by the Company, 2.0% of the next $1,000,000, 1.5% of the next $1,000,000, 1% of the next $1,000,000 and .5% of any proceeds above $4,000,000. The amount is capped at $150,000 per fiscal year. During the years ended December 31,
(c) Summary compensation table
The following table summarizes the compensation accrued to our principal executive officer, principal financial officer and any other executive officers for the years ended December 31,
Name and Principal Position Fiscal Year Salary Bonus Option Awards All Other Compensation Total 2015 President & Director; Principal Executive Officer & 2014 Principal Accounting Officer 2015 2014 AlumiFuel Power Technologies, Inc. & NovoFuel, Inc.
(d) Grants of plan based awards table
There were no grants made to officers in the years ended December 31,
(e) Narrative disclosure to summary compensation table and grants
For Mr. Fong in
For 2015 and 2014,
(f) Outstanding equity awards at fiscal year end table
Not applicable.
(g) Option exercises and stock vested table
Not applicable.
(h) Pension benefits
Not applicable.
(i) Nonqualified defined contribution and other nonqualified deferred compensation plans
Not applicable.
(j) Potential payments upon termination or change-in-control
Not applicable.
(k) Compensation of directors
Not applicable.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
(a) Security ownership of certain beneficial owners.
(b) Security ownership of management.
The following table sets forth information known to the Company with respect to the beneficial ownership (as such term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of the outstanding common stock of the Company as of March 31,
(c) Changes in control
We are not aware of any arrangements that could result in a change in control of the Company. The current officers of the Company maintain effective control of the Company through their ownership of the Company's Series B Preferred stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
(a) Transactions with related persons
Our offices are provided to us on a month to month basis by a corporation in which our officers and director are affiliated. We paid
(b) Review, approval or ratification of transactions with related persons
Our entire board of directors is responsible for the review, approval or ratification of transactions with related persons. The board routinely reviews material related party transactions to ensure such transactions are reasonable, appropriate, and in the best interests of the Corporation. We have no written policies with respect to the review and approval of related party transactions and records of such reviews are contained in the minutes and/or reports of the board of directors as appropriate.
Director Independence
Our board of directors has one director and has no standing sub-committees at this time due to the associated expenses and the small size of our board. We are not currently listed on a national securities exchange that has requirements that a majority of the board of directors be independent and have no members of our board considered
In performing the functions of the audit committee, our board oversees our accounting and financial reporting process. In this function, our board performs several functions. Our board, among other duties, evaluates and assesses the qualifications of the
We do not currently have a standing compensation committee or non-employee directors. When we have non-employee directors on our board, those non-employee directors consider executive officer compensation, and our entire board participates in the consideration of director compensation. Non-employee board members would oversee would compensation policies, plans and programs. Our non-employee board members would further review and approve corporate performance goals and objectives relevant to the compensation of our executive officers; review the compensation and other terms of employment of our Chief Executive Officer and our other executive officers; and administer our equity incentive and stock option plans.
Each of our directors participates in the consideration of director nominees. In addition to nominees recommended by directors, our board will consider nominees recommended by shareholders if submitted in writing to our secretary. Our board believes that any candidate for director, whether recommended by shareholders or by the board, should be considered on the basis of all factors relevant to our needs and the credentials of the candidate at the time the candidate is proposed. Such factors include relevant business and industry experience and demonstrated character and judgment.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
Fees for audit services billed for the fiscal year ended December 31, 2014
Fees for audit services billed for the fiscal year ended December 31, 2015 will be $10,000 and consists of audit of the Company's annual financial statements. For the fiscal year ended December 31, 2015, the Company paid D. Brooks and Associates CPA's $10,320 for reviews of the Company's quarterly financial statements. Audit-Related Fees
There were no other aggregate fees billed in the year ended December 31,
Tax Fees
There were no aggregate fees billed the year ended December 31,
All Other Fees
There were no other aggregate fees billed in the year ended December 31,
PART IV
ITEM 15. EXHIBITS
Exhibits
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
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