UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
for the fiscal year ended
or
For the transition period from: _____________ to _____________
Commission
File Number:
(Exact name of small Business Issuer as specified in its charter)
| (State or other jurisdiction of | (IRS Employer | |
| incorporation or organization) | Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area
code:
| n/a |
| Former address if changed since last report |
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| Pink Sheets |
Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐
Indicate by check mark if the registrant is not required
to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐
Check whether the issuer (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past
90 days.
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (232-405 of
this chapter) during the preceding 12 months (or for such shorter period of time that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer ☐ | Accelerated Filer ☐ | Emerging Growth Company | |
| Smaller reporting company | |||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
☐ Yes ☒
The aggregate market value of the voting stock held
by non-affiliates of the registrant as of the last business day of the registrant’s most recently completed second fiscal quarter
was $
State the number of shares outstanding of the registrant’s $.001 par value common stock as of the close of business on the latest practicable date (February 7, 2022): .
Documents incorporated by reference: None
TABLE OF CONTENTS
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FORWARD LOOKING STATEMENTS
This Annual Report on Form 10-K (the “Report”), including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 contains forward-looking statements regarding future events and the future results of Blue Biofuels, Inc. and its consolidated subsidiaries (the “Company”) that are based on management’s current expectations, estimates, projections and assumptions about the Company’s business. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “sees,” “estimates” and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including, but not limited to, those discussed in the “Risk Factors” section in Item 1A, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 and elsewhere in this Report as well as those discussed from time to time in the Company’s other Securities and Exchange Commission filings and reports. In addition, such statements could be affected by general industry and market conditions. Such forward-looking statements speak only as of the date of this Report or, in the case of any document incorporated by reference, the date of that document, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this Report. If we update or correct one or more forward-looking statements, investors and others should not conclude that we will make additional updates or corrections with respect to other forward-looking statements.
ITEM 1. BUSINESS
Background
Business Overview
Blue Biofuels, Inc., was incorporated in Nevada on March 28, 2012, as Alliance Media Group Holdings, Inc. Since December 2013, Blue Biofuels, Inc. (the “Company”) has been a technology company focused on emerging technologies in the renewable energy, biofuels, and bioplastics technologies sectors.
In early 2018, the Company’s chief executive officer (“CEO”) Ben Slager invented a new technology system referred to as Cellulose-to-Sugar or CTS 2.0, and the Company filed a process patent application for this technology. Mr. Slager has since further developed the system with laboratory personnel. The patent on the CTS 2.0 (U.S. Patent No. 10,994,255) was awarded in 2021. The same patent was filed in all major jurisdictions of the world including the European Patent Organization, Australia, Brazil, China, Japan, the African Regional Intellectual Property Organization, and the Russian Federation. In addition to this patent, the Company has filed provisional patent applications for six additional patents that are currently pending.
Mr. Slager has further developed the system with laboratory personnel. The CTS 2.0 process is a continuous mechanical/chemical dry process for converting cellulose material into sugar and lignin, as compared to the CTS 1.0 which is a batch process that the Company previously licensed. The CTS 2.0 process creates molecular contact between two reactive solid components instead of competing systems where the reaction takes place between two liquid or gas components in a batch process. The reactants are (1) the cellulose, which is broken down into its components being sugars and lignin; and (2) a catalyst, abundantly available in the market from regular suppliers, and separated from reactor components and reused. The CTS 2.0 mechanical/chemical process allows for exact process control to ensure that all the material passing through it does so on the reaction parameters through which optimal efficiency is achieved.
The 100% owned CTS 2.0 system can convert virtually any cellulosic material – like grasses, wood, paper, farm waste, yard waste, forestry products, energy crops like hemp or king grass, and the cellulosic portion of municipal solid waste – into sugars and subsequently into biofuels and bioplastics without the use of expensive enzymes or harmful liquid acids or bases. CTS 2.0 is environmentally friendly in that it recycles the water and catalyst, and has a near zero carbon footprint in that the amount of added atmospheric carbon created by burning the biofuels produced by CTS 2.0 is reabsorbed by the plant-based feedstock used in the CTS 2.0 system in the next harvest.
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CTS 2.0 is different from other commercial processes that are used to convert cellulose into sugar. Other processes use expensive enzymes, or expensive and harmful chemicals like strong acids or bases, and some processes use steam at high temperature or high pressure.
The CTS 2.0 system converts plant-based feedstock into two product streams, soluble sugars and lignin, each of which can be converted into multiple products: (1) sugars can be further processed into cellulosic ethanol and other biofuels like jet fuel, and potentially into bio chemicals; and (2) Lignin can be used in ion exchange resins, specialty chemicals, or to create bioplastics. Lignin can also be burned as a renewable fuel.
CTS has different co-products than other processes. Our primary co-product is sulfur-free lignin. Other cellulosic ethanol processes do not yield sulfur-free high purity lignin because their processes destroy or contaminate the lignin. Most ethanol producers use corn, not cellulose, and the co-products of corn ethanol production are distillers grains animal feed and corn oil. Our lignin potentially can be converted into biodegradable bioplastics, or be used in ion exchange resins or specialty chemicals. Revenue streams from lignin can potentially be higher than from ethanol. We are also looking into whether the CTS process can produce nanocellulose profitably, which is used in pharmaceutical products and potentially could sell for over $1 per gram.
At a commercial scale, our management expects to be able to produce ethanol at a lower cost per gallon than existing commercial corn or cellulosic ethanol producers due to the fact that the CTS 2.0 process is uncomplicated and efficient, and is expected to have high value by-products. We believe a significant difference between CTS 2.0 and corn ethanol is the wide range of feedstocks that CTS 2.0 can process compared to corn. The CTS 2.0 feedstocks are not food and have much lower costs than corn. In addition, while in corn ethanol only the corn is used, the CTS 2.0 uses the whole plant or its waste products.
The promise of the CTS technology led the Company’s management and board to restructure the Company through chapter 11. Prior management had taken on various short-term high interest usurious “toxic” notes that converted into common stock at a fixed discount to the market price in 2017 and early 2018, and various other debts that the Company could not pay at that time. The Company’s new board and management determined that a chapter 11 bankruptcy filing was its only plausible alternative to save the company as a going concern for the benefit of creditors and stockholders. The Company voluntarily filed for Chapter 11 on October 22, 2018, in the U.S. Bankruptcy Court in the Southern District of Florida. Management fought, eliminated, and restructured millions in debts and disputed debts, and exited Chapter 11 on September 18, 2019, while keeping all classes, including the shareholders, unimpaired. The Company’s debts were either voided, renegotiated down and paid off, or renegotiated to be paid out of future revenues ($1,820,630) or renegotiated to be paid out of future profits ($917,502). These are reflected on the Company’s financial statements. A complete copy of the Plan of Reorganization was filed as Exhibit 2(a) of the Company’s 2020 financial statements. Having paid all debts that needed to be paid, the bankruptcy case was closed on October 25, 2019.
Throughout this bankruptcy period and thereafter, the Company has proceeded with engineering and development of its technology towards commercialization. The Company has built several prototypes of the CTS 2.0 system to further develop the process. The Company completed its upgraded 4th generation CTS 2.0 prototype system in 2021, which was designed to be a representative scale with nearly all systems and parameters anticipated in a full-scale industrial system. The Company decided to complete all the parameter optimizations possible with its 4th generation system before scaling up to a 5th generation system because the parameter optimizations lead to design improvements that have been done more cost effectively at that scale. The Company has recently finalized its 4th generation testing with great success as it was able to generate a 99%+ conversion of the cellulosic material into soluble sugars suitable for further processing into cellulosic ethanol. The Company is now moving into its 5th generation system.
The Company expects to have its 5th generation CTS 2.0 prototype, along with auxiliary equipment, completed within 6 to 12 months. The goal of the 5th generation system is to prove larger volume production, and to be an intermediate step to the final 6th generation which is intended to be the commercial volume system. The Company expects that the 5th generation system will be of sufficient size and handle sufficient capacity of feedstock to produce approximately one ton per day of the combination of sugar and lignin, which the Company believes will be sufficient to prove the commercial viability of the CTS 2.0 technology. Due to its mechanical nature and modularity, we anticipate that one plant would have multiple modular CTS systems. The Company expects to have a CTS 2.0 modular system ready for commercial production in 12-18 months.
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However, commencing commercial production will require project financing. The project financing will either be for bolting on our CTS 2.0 system into an existing ethanol facility of a future potential joint venture partner, or for acquiring an ethanol facility and converting that to cellulosic ethanol production using our CTS 2.0 system, or for setting up a production facility for converting ethanol into jet fuel using the Vertimass Process that the Company has licensed.
We believe retrofitting existing ethanol plants with the CTS 2.0 technology may achieve more rapid commercialization than building new plants. After its first plant is profitable, the Company intends to grow with additional plants in the United States and explore international growth by either licensing the technology or forming joint ventures with foreign domestic partners to build plants ourselves.
The ethanol industry is highly competitive with over 200 ethanol plants in the United States alone. Currently, the vast majority use corn as the feedstock. Their profitability depends highly on the fluctuations between the price of corn and the price of ethanol. Since the Company does not plan to use corn, and plans on having long-term purchase agreements with cellulosic suppliers, we expect that our profitability will potentially be more consistent.
Any new biofuels plant that is built would require various government permits. In particular, renewable fuels are subject to rigorous testing and premarket approval requirements by the EPA’s Office of Transportation and Air Quality and regulatory authorities in other countries. In the U.S., various federal, and, in some cases, state statutes and regulations also govern or impact the manufacturing, safety, storage and use of renewable fuels. The process of seeking required approvals and the continuing need for compliance with applicable statutes and regulations requires the expenditure of resources. The Company anticipates raising the necessary capital for this as a part of its project-based financing. The Company would also need various government permits before commercializing products for the plastics industry.
The Energy Policy Act of 2005, which included the Renewable Fuel Standard (RFS) Program enforced by the US Environmental Protection Agency (“EPA”), mandates a certain amount of renewable fuel be blended into the transportation fuel used by all motor vehicles in the country. This Program provides monetary incentives to companies that produce renewable transportation fuel (including jet fuel), establishes Renewable Identification Numbers (RINs) or credits for each gallon of renewable transportation fuel produced in the United States, and breaks down those fuels into different D-codes based on the source of the renewable fuel. D3 is the code for renewable ethanol that comes from cellulosic materials. The EPA’s newly proposed revised mandate for cellulosic ethanol is for 510 million gallons of cellulosic biofuels be blended into the fuel supply in 2020, 620 million gallons for 2021, and 770 million gallons for 2022 (the D3 mandate). This mandate has increased every year and is statutorily mandated to increase in the future and become a larger portion of the full renewable fuels mandate, if and when cellulosic biofuels can be produced profitably in larger quantities than they are now. The RFS mandate for 2022 calls for 20.77 billion gallons of total renewable fuel, 15 billion from conventional biofuels (corn ethanol) and 5.77 billion from advanced biofuels, including cellulosic biofuels. The “blend wall” (or upper limit to the amount of ethanol that can be blended into U.S. gasoline and automobile performance and comply with the Clean Air Act) of limiting ethanol content in gasoline to 10%, limits the total amount of ethanol consumed in the United States. The value of the D3 RIN fluctuates, but as of this filing, it is approximately $3.40 per gallon of ethanol. To profit from these incentives, the Company plans to apply for these D3 RIN credits as it brings its first plant into commercial operation.
The Company has a strategy that includes using its low-cost high-purity lignin co-product to produce biodegradable bioplastics. The plastics industry is highly competitive. The Company would need various government permits before commercializing products in this space, and it is too preliminary to discuss more details.
The Company has also licensed the Vertimass Process to convert ethanol (from the CTS 2.0 process) into bio-jet fuel. There is no up-front or annual fee until we are converting ethanol into bio-jet fuel. The license agreement with Vertimass is the subject of a confidentiality agreement between the parties. Since we are not yet producing ethanol on a commercial scale, it is too preliminary to discuss details.
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The Company believes that its management and consultants have significant experience in the development of technologies from concept to commercialization. As of this date, the Company has not generated any material revenues from its business.
Description of the Company’s Securities
The Company is currently authorized to issue 1,000,000,000 Shares of Common Stock par value $0.001 and 10,000,000 shares of Preferred Stock par value $0.001. Each share of Company Common Stock is entitled to one (1) vote per share.
Employees
The company currently employs seven full-time employees, five part-time employee and six consultants. The Company is in the process of hiring additional employees to more rapidly commercialize its technology.
ITEM 1A. RISK FACTORS
Not required as the Company is a “smaller reporting company.”
ITEM 1B. UNRESOLVED STAFF COMMENTS
None.
ITEM 2. PROPERTIES
Offices
The Company maintains its corporate office at 3710 Buckeye Street, Suite 120, Palm Beach Gardens 33410. The Company’s telephone number is 888-607-3555. On August 30, 2019, the Company signed a lease for a period of twenty-four (24) months from November 1, 2019 through October 31, 2021. In December 2020, this lease was extended for twelve (12) months. Annual rent commenced at approximately $84,100 per annum and increases on a year-to-year basis by three percent (3%) over the base year. In addition, the Company is obligated to pay an amount equal to 10.41% of the operating expenses of the building together with sales tax on all amounts. This office space includes the Company’s research and demonstration facilities.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject, from time to time, to litigation, claims and suits arising in the ordinary course of business. As of the date of filing, there are no material claims or suits whose outcomes could have a material effect on the Company’s financial statements.
On June 21, 2018, Power Up Lending Group Ltd., sued both the Company and four of its managers, ex-managers, and directors of the Company in the United States District Court for the Eastern District of New York. The case was dropped against the Company and the claim discharged by the bankruptcy court upon Plan Confirmation on September 18, 2019. Power Up has continued a tort case against the individuals. Our director and officer insurance has agreed to cover our chief executive officer Benjamin Slager, chief financial officer Anthony Santelli, as well as ex-controller Dennis Lenaburg, in this case. Management believes the Complaint is frivolous. The defendants have filed amended answers and counterclaims as of the date of this filing, and the case has gone into the discovery phase.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
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PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY; RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market for Registrant’s Common Equity
The Company became subject to Securities Exchange Act Reporting Requirements in October 2012. The symbol “BIOF” is assigned for its securities. The Company’s common stock commenced trading on the OTCBB on February 5, 2014, under the symbol ALLM and changed to BIOF on August 27, 2021.
On November 13, 2018, the Company filed a Form 15, suspending its duty to file reports under sections 13 and 15(d) of the Securities Exchange Act. The Company has subsequently traded on the Pink Sheets. On January 5, 2021, the Company filed a Form 10 Registration Statement to become fully reporting again and has been fully reporting ever since.
Options and Warrants
In November 2020, the Company began a round of financing wherein each unit consists of one (1) share of common stock and one (1) warrant to purchase common stock at a price of $0.15 per share for two (2) years. The Company sold 7,843,332 units. This financing was closed on January 5, 2021.
Subsequent financings have not contained warrants attached to them, or if they have all such warrants have expired or been exercised. At various times over the years, warrants have been issued for services, as parts of contracts, or in settlement agreements. Warrants also remain from some prior financings.
As of the date of filing, not including expired or exercised warrants, the Company has issued warrants to purchase an aggregate of 28,321,961 shares of common stock. The exercise prices associated with these agreements range from $0.005 to $0.45 and terms range from twenty four months to ten (10) years.
As of the date of this filing, the company has issued option agreements to its independent directors, officers, employees, and consultants, to purchase an aggregate of 47,384,466 shares of common stock of which 22,724,466 have vested and 24,660,000 have not yet vested. The exercise prices range from $0.042 to $0.45 and terms range from five (5) to ten (10) years.
Other than the foregoing, none of the Company’s shares of Common Stock are subject to outstanding options or warrants.
Holders
As of the date of filing, there were 274,153,883 shares of common stock outstanding and approximately 329 stockholders of record.
Transfer Agent and Registrar
The Company’s transfer agent is ClearTrust, LLC., 16540 Pointe Village Dr., Suite 205, Lutz, FL 33558, Phone: 813-235-4490.
Dividend Policy
The Company has never paid any cash dividends on its Common Stock and does not anticipate paying any cash dividends on its Common Stock in the foreseeable future. The Company intends to retain future earnings to fund ongoing operations and future capital requirements of its business. Any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon the Company’s financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant.
Securities Authorized for Issuance Under Equity Compensation Plans
There are currently, as of the date of filing, fully earned and vested option agreements in place to purchase an aggregate of 22,724,466 shares of common stock under the Company’s 2021 Employee, Director Stock Plan and there are additional agreements vesting over the next 5 years, or conditional upon events, to purchase an additional 24,660,000 shares of common stock.
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| Plan Category | Maximum number of securities reserved under equity compensation plan | Weighted average exercise price of outstanding options, warrants, and rights | Number of securities to be issued upon exercise of outstanding options, warrant, and rights | |||||||||
| Equity compensation plans approved by security holders | 52,891,546 | $ | 0.13 | 50,034,466 | ||||||||
| Equity compensation plans not approved by security holders | 0 | n/a | n/a | |||||||||
| Total | 52,891,546 | 50,034,466 | ||||||||||
The Plan provides that awards may be granted to officers, employees, consultants, or directors of the Company and its affiliates (“Eligible Persons”). The Plan permits the board of directors of the Company to grant three types of awards (“Awards”) to Eligible Persons: (a) a stock appreciation right (“Stock Appreciation Right”); (b) a stock option (“Stock Option”); and (c) a stock award (“Stock Award”).
Stock Options may be granted alone or in addition to other Awards granted under the Plan and may be of two types: (a) incentive Stock Options; and (b) non-qualified Stock Options. The exercise price per share under a Stock Option is determined by the administrator of the Plan (which is either the entire board or a designated committee comprised solely of independent directors); provided, however, that such exercise price is not less than the fair market value per Purchaser Share on the date the Stock Option is granted, subject to certain exceptions. The term of each Stock Option is fixed by the administrator of the Plan and no incentive Stock Option may be exercisable more than 10 years after the date such incentive Stock Option is granted. The Plan provides that other terms and conditions may be attached to a particular Stock Option, such terms and conditions to be referred to in an option agreement.
In the event an option holder ceases to be an Eligible Person other than by reason of death, disability or cause, the option holder may exercise any Stock Option granted to him or her to the extent that such Stock Option is exercisable on the date of such termination. In the event an option holder ceases to be an Eligible Person by reason of death or disability, the option holder or his or her representative, as applicable, may exercise any Stock Option granted to him or her to the extent that such Stock Option is exercisable on the date of such death or disability. All outstanding and unexercised Stock Options of an option holder will be cancelled in the event that such person ceases to be an Eligible Person by reason of cause.
Stock Appreciation Rights may be granted either on a stand-alone basis or in conjunction with all or part of any Stock Option granted under the Plan. Stock Appreciation Rights granted on a stand-alone basis may be exercisable only at such time or times and to such extent as determined by the administrator of the Plan. Stock Appreciation Rights granted in conjunction with all or part of any Stock Option may be exercisable only at the time or times and to the extent that the Stock Options to which they relate are exercisable. Upon the exercise of a Stock Appreciation Right, a holder will be entitled to receive an amount in cash, Purchaser Shares or both, which in the aggregate is equal in value to the difference in the fair market value of the Purchaser Shares at the date of exercise less the fair market value of the Purchaser Shares at the date of grant.
Stock Awards may be directly issued under the Plan, subject to such terms, conditions, performance requirements, restrictions, forfeiture provisions, contingencies and limitations as the administrator of the Plan may determine.
Subject to adjustment as provided in the Plan, the aggregate number of shares of common stock which may be delivered under the Plan shall not exceed a number equal to 15% of the total number of shares of common stock outstanding. The maximum number of shares of common stock which may be delivered under the Plan shall automatically increase by a number sufficient to cause the number of shares of common stock covered by the Plan to equal 15% of the total number of shares of common stock then outstanding, assuming for this purpose the conversion into common stock of all outstanding securities that are convertible by their terms (directly or indirectly) into common stock. The exercise price per share of common stock purchasable under a Stock Option shall be determined by the administrator of the Plan; provided, however, that the exercise price per share shall be not less than the Fair Market Value (as defined in the Plan) per share on the date the Stock Option is granted, or if the Stock Option is intended to qualify as an Incentive Stock Option and is granted to an individual who is a Ten Percent Holder (as defined in the Plan), not less than 110% of such Fair Market Value per share. The term of each Stock Option shall be fixed by the administrator of the Plan, but no Incentive Stock Option shall be exercisable more than 10 years (or five years in the case of an individual who is a Ten Percent Holder) after the date the Incentive Stock Option is granted.
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Recent Sales of Unregistered Securities
Below is a list of securities sold by the Company from January 1, 2021 through the date of filing which were not registered under the Securities Act.
| Entity | Date of Investment | Title of Security | Amount of Securities Sold | Consideration | ||||||
| Mark Cox | 01/05/21 | Common Stock | 133,333 | Purchased @ $0.075 per share | ||||||
| Dave Vanchina | 01/05/21 | Common Stock | 200,000 | Purchased @ $0.075 per share | ||||||
| Pamela McKenna | 01/05/21 | Common Stock | 133,333 | Purchased @ $0.075 per share | ||||||
| Michael Bozek | 01/05/21 | Common Stock | 135,000 | Purchased @ $0.075 per share | ||||||
| Sean Edmund Burke | 01/05/21 | Common Stock | 133,334 | Purchased @ $0.075 per share | ||||||
| Jeffrey Howard | 01/05/21 | Common Stock | 200,000 | Purchased @ $0.075 per share | ||||||
| Brian Joseph Burke | 01/05/21 | Common Stock | 275,000 | Purchased @ $0.075 per share | ||||||
| Alexander C Shepard | 01/05/21 | Common Stock | 400,000 | Purchased @ $0.075 per share | ||||||
| Edmund Burke | 01/05/21 | Common Stock | 266,666 | Purchased @ $0.075 per share | ||||||
| Conner Thomas Burke | 01/05/21 | Common Stock | 133,333 | Purchased @ $0.075 per share | ||||||
| Kevin Owen Burke | 01/05/21 | Common Stock | 133,333 | Purchased @ $0.075 per share | ||||||
| Vestech Securities, Inc. | 01/05/21 | Common Stock | 10,500 | Professional Services | ||||||
| Bret Williams | 01/05/21 | Common Stock | 59,500 | Professional Services | ||||||
| Tom Camerlengo | 01/11/21 | Common Stock | 200,000 | Exercise of Options | ||||||
| Radall Brodsky | 01/11/21 | Common Stock | 333,333 | Exercise of Warrants | ||||||
| John Lucken | 01/11/21 | Common Stock | 333,334 | Exercise of Warrants | ||||||
| Mary Lucken | 01/11/21 | Common Stock | 166,667 | Exercise of Warrants | ||||||
| The Loyalty American Companies, Inc. | 01/13/21 | Common Stock | 333,333 | Exercise of Warrants | ||||||
| Annie Bindler | 01/13/21 | Common Stock | 50,000 | Convertible Debenture | ||||||
| Zachary Bindler | 01/13/21 | Common Stock | 50,000 | Convertible Debenture | ||||||
| SLMJ Rocky Opportunity Trust | 01/15/21 | Common Stock | 480,000 | Convertible Debenture | ||||||
| Annie Bindler | 01/20/21 | Common Stock | 100,000 | Exercise of Warrants | ||||||
| Zachary Bindler | 01/20/21 | Common Stock | 100,000 | Exercise of Warrants | ||||||
| John Allen James | 01/20/21 | Common Stock | 200,000 | Purchased @ $0.25 per share | ||||||
| Randall Brodsky | 01/20/21 | Common Stock | 80,000 | Purchased @ $0.25 per share | ||||||
| John E. Lucken Revocable Trust | 01/20/21 | Common Stock | 80,000 | Purchased @ $0.25 per share | ||||||
| Edmund Burke | 01/22/21 | Common Stock | 3,500,000 | Convertible Debenture | ||||||
| Edmund Burke | 01/22/21 | Common Stock | 1,000,000 | Convertible Debenture | ||||||
| AES Capital Partners | 01/22/21 | Common Stock | 2,000,000 | Convertible Debenture | ||||||
| Frank Joan Costabile Trust | 01/25/21 | Common Stock | 100,000 | Purchased @ $0.25 per share | ||||||
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| Stacy Costabile | 01/25/21 | Common Stock | 100,000 | Purchased @ $0.25 per share | ||||||
| Randall Brodsky | 01/26/21 | Common Stock | 80,000 | Purchased @ $0.25 per share | ||||||
| Mary T. Lucken Revocable Trust | 01/26/21 | Common Stock | 80,000 | Purchased @ $0.25 per share | ||||||
| John E. Lucken Revocable Trust | 01/26/21 | Common Stock | 80,000 | Purchased @ $0.25 per share | ||||||
| Bohdan Rudawski Revocable Trust | 01/26/21 | Common Stock | 100,000 | Purchased @ $0.25 per share | ||||||
| Sam Spector | 01/26/21 | Common Stock | 100,000 | Purchased @ $0.25 per share | ||||||
| Animated Family Films, Inc | 01/26/21 | Common Stock | 100,000 | Purchased @ $0.25 per share | ||||||
| Bruce Greenburg Revocable Trust | 01/26/21 | Common Stock | 250,000 | Exercise of Warrants | ||||||
| Chris Kneppers | 01/27/21 | Common Stock | 50,000 | Exercise of Warrants | ||||||
| Bill Fitzpatrick | 01/27/21 | Common Stock | 100,000 | Professional Services | ||||||
| Audie Rolnick | 01/27/21 | Common Stock | 90,000 | Purchased @ $0.25 per share | ||||||
| Makhulu Holdings, LLC | 01/29/21 | Common Stock | 100,000 | Purchased @ $0.25 per share | ||||||
| Vecchitto FLP Valori, LLC | 01/30/21 | Common Stock | 900,000 | Exercise of Warrants | ||||||
| Annie Bindler | 02/01/21 | Common Stock | 100,000 | Exercise of Warrants | ||||||
| Zachary Bindler | 02/01/21 | Common Stock | 100,000 | Exercise of Warrants | ||||||
| Adam Langsom | 02/01/21 | Common Stock | 15,000 | Exercise of Warrants | ||||||
| Marjorie A Fidler Michael Fidler | 02/01/21 | Common Stock | 100,000 | Purchased @ $0.25 per share | ||||||
| Gregory Nacron | 02/01/21 | Common Stock | 80,000 | Purchased @ $0.25 per share | ||||||
| Alexander Dimitrief | 02/01/21 | Common Stock | 75,000 | Exercise of Warrants | ||||||
| Arthur Lehrhoff | 02/01/21 | Common Stock | 15,000 | Exercise of Warrants | ||||||
| Bernard Lehrhoff | 02/01/21 | Common Stock | 15,000 | Exercise of Warrants | ||||||
| Bradley S Schmarak Declaration of Trust | 02/01/21 | Common Stock | 45,000 | Exercise of Warrants | ||||||
| Bryan I Schwartz Revocable Trust | 02/01/21 | Common Stock | 15,000 | Exercise of Warrants | ||||||
| Daniel J Hyman | 02/01/21 | Common Stock | 15,000 | Exercise of Warrants | ||||||
| Daniel Lehrhoff and Patti Lehrhoff Trust | 02/01/21 | Common Stock | 30,000 | Exercise of Warrants | ||||||
| David Duckler | 02/01/21 | Common Stock | 30,000 | Exercise of Warrants | ||||||
| Diane S Kahan | 02/01/21 | Common Stock | 15,000 | Exercise of Warrants | ||||||
| JCH Investments, LLC | 02/01/21 | Common Stock | 75,000 | Exercise of Warrants | ||||||
| Kenneth M Berman | 02/01/21 | Common Stock | 15,000 | Exercise of Warrants | ||||||
| Mason Phelps Revocable Trust | 02/01/21 | Common Stock | 75,000 | Exercise of Warrants | ||||||
| Michael Hochman IRA Rollover | 02/01/21 | Common Stock | 21,000 | Exercise of Warrants | ||||||
| Randy Abeles | 02/01/21 | Common Stock | 30,000 | Exercise of Warrants | ||||||
| Monique Miron | 02/03/21 | Common Stock | 50,000 | Purchased @ $0.25 per share | ||||||
| Russel L. Miron | 02/03/21 | Common Stock | 50,000 | Purchased @ $0.25 per share | ||||||
| Chris Kneppers | 02/05/21 | Common Stock | 320,000 | Exercise of Warrants | ||||||
| Tyler Brett Properties, LLC | 02/05/21 | Common Stock | 100,000 | Purchased @ $0.25 per share |
| 10 |
| Matthew Ashley Beck | 02/05/21 | Common Stock | 100,000 | Purchased @ $0.25 per share | ||||||
| Capital Consulting, Inc. | 02/05/21 | Common Stock | 100,000 | Purchased @ $0.25 per share | ||||||
| Gary Noskin | 02/05/21 | Common Stock | 100,000 | Purchased @ $0.25 per share | ||||||
| Martin Schwimmer | 02/05/21 | Common Stock | 100,000 | Purchased @ $0.25 per share | ||||||
| Steven C Paul | 02/05/21 | Common Stock | 200,000 | Purchased @ $0.25 per share | ||||||
| Vecchio Financial, LLC | 02/05/21 | Common Stock | 200,000 | Purchased @ $0.25 per share | ||||||
| PT7, LLC | 02/05/21 | Common Stock | 800,000 | Purchased @ $0.25 per share | ||||||
| Julie Kaplan | 02/05/21 | Common Stock | 100,000 | Purchased @ $0.25 per share | ||||||
| LK Dayton Investments, LLC | 02/05/21 | Common Stock | 200,000 | Purchased @ $0.25 per share | ||||||
| Randall Brodsky | 02/05/21 | Common Stock | 60,000 | Purchased @ $0.25 per share | ||||||
| 321Gold, Ltd. | 02/05/21 | Common Stock | 200,000 | Purchased @ $0.25 per share | ||||||
| Steven Nelson | 02/05/21 | Common Stock | 200,000 | Purchased @ $0.25 per share | ||||||
| Jason Walkow | 02/05/21 | Common Stock | 40,000 | Purchased @ $0.25 per share | ||||||
| ANIMATED FAMILY FILMS, INC. | 02/08/21 | Common Stock | 100,000 | Purchased @ $0.25 per share | ||||||
| Krzysztof Gozdziak | 02/08/21 | Common Stock | 140,000 | Purchased @ $0.25 per share | ||||||
| John Piper Jr. | 02/09/21 | Common Stock | 50,000 | Purchased @ $0.25 per share | ||||||
| Edward J Piper | 02/09/21 | Common Stock | 50,000 | Purchased @ $0.25 per share | ||||||
| MK Bio LLC | 02/09/21 | Common Stock | 600,000 | Purchased @ $0.25 per share | ||||||
| Bradley S Schmarak | 02/09/21 | Common Stock | 100,000 | Purchased @ $0.25 per share | ||||||
| Evelyn Varvitsiotes | 02/09/21 | Common Stock | 40,000 | Purchased @ $0.25 per share | ||||||
| Paul M Chung Trust | 02/09/21 | Common Stock | 100,000 | Purchased @ $0.25 per share | ||||||
| Raymond L Leon | 02/10/21 | Common Stock | 250,000 | Purchased @ $0.25 per share | ||||||
| Anthony S De Leo Paul De Leo JTWROS | 02/11/21 | Common Stock | 200,000 | Purchased @ $0.25 per share | ||||||
| Chris Kneppers | 02/11/21 | Common Stock | 130,000 | Exercise of Warrants | ||||||
| LABRYS FUND | 02/12/21 | Common Stock | 100,000 | Exercise of Warrants | ||||||
| John D Lane | 02/12/21 | Common Stock | 350,000 | Exercise of Warrants | ||||||
| John D Lane | 02/12/21 | Common Stock | 362,000 | Exercise of Warrants | ||||||
| SLMJ Rocky 2017 Opportunity Trust | 02/12/21 | Common Stock | 1,000,000 | Exercise of Warrants | ||||||
| SLMJ Rocky 2017 Opportunity Trust | 02/12/21 | Common Stock | 1,425,000 | Exercise of Warrants | ||||||
| SLMJ Rocky 2017 Opportunity Trust | 02/12/21 | Common Stock | 1,815,342 | Exercise of Warrants | ||||||
| Tom Camerlengo | 02/19/21 | Common Stock | 150,000 | Exercise of Options |
| 11 |
| Tom Camerlengo | 02/19/21 | Common Stock | 177,778 | Cashless Exercise of Options | ||||||
| Chris Kneppers | 02/22/21 | Common Stock | 4,500,000 | Exercise of Warrants | ||||||
| Mark Monahan | 02/22/21 | Common Stock | 200,000 | Purchased @ $0.25 per share | ||||||
| Jason Taylor | 02/24/21 | Common Stock | 200,000 | Purchased @ $0.25 per share | ||||||
| David Gross and Nancy Burgess | 02/25/21 | Common Stock | 200,000 | Exercise of Warrants | ||||||
| Vestech Securities, Inc. | 03/03/21 | Common Stock | 6,450 | Professional Services | ||||||
| Bret Williams | 03/03/21 | Common Stock | 36,550 | Professional Services | ||||||
| Max Assenheimer | 03/17/21 | Common Stock | 10,000 | Professional Services | ||||||
| Hazel Holdings, LP | 03/22/21 | Common Stock | 1,000,000 | Purchased @ $0.25 per share | ||||||
| Randall Brodsky | 04/12/21 | Common Stock | 60,000 | Purchased @ $0.25 per share | ||||||
| Mark Monahan | 08/05/21 | Common Stock | 100,000 | Purchased @ $0.25 per share | ||||||
| Tom Camerlengo | 08/31/21 | Common Stock | 160,118 | Cashless Exercise of Options | ||||||
| Linda Gulla | 09/20/21 | Common Stock | 40,000 | Professional Services | ||||||
| NWBB, Inc. | 09/20/21 | Common Stock | 38,000 | Professional Services | ||||||
| Johan Foster | 10/05/21 | Common Stock | 3,000 | Professional Services | ||||||
| Nate Mancuso | 10/20/21 | Common Stock | 100,000 | Professional Services | ||||||
| Randall Brodsky | 12/10/21 | Common Stock | 100,000 | Purchased @ $0.25 per share | ||||||
| Mary T. Lucken Revocable Trust | 12/10/21 | Common Stock | 40,000 | Purchased @ $0.25 per share | ||||||
| John E. Lucken Revocable Trust | 12/10/21 | Common Stock | 60,000 | Purchased @ $0.25 per share | ||||||
| Bohdan Rudawski | 12/10/21 | Common Stock | 40,000 | Purchased @ $0.25 per share | ||||||
| Steve Tumen | 12/10/21 | Common Stock | 50,000 | Purchased @ $0.25 per share | ||||||
| Stacy Costabile | 12/10/21 | Common Stock | 50,000 | Purchased @ $0.25 per share | ||||||
| Melvin H. Eaton II | 12/10/21 | Common Stock | 400,000 | Purchased @ $0.25 per share | ||||||
| Linda Gulla | 12/10/21 | Common Stock | 400,000 | Purchased @ $0.25 per share | ||||||
| Vestech Securities, Inc. | 12/10/21 | Common Stock | 2,625 | Professional Services | ||||||
| Bret Williams | 12/10/21 | Common Stock | 14,875 | Professional Services | ||||||
| Nate Mancuso | 12/13/21 | Common Stock | 75,000 | Professional Services | ||||||
| NWBB, Inc. | 12/17/21 | Common Stock | 19,200 | Professional Services | ||||||
| Tom Camerlengo | 01/12/22 | Common Stock | 150,000 | Exercise of Warrants |
The securities issued in the above-mentioned transactions were issued in connection with private placements exempt from the registration requirements of Section 5 of the Securities Act of 1933, as amended, pursuant to the terms of Section 4(a)(2) of that Act and Rules 504 and 506 of Regulation D.
| 12 |
ITEM 6. [Removed and reserved]
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
The following discussion should be read in conjunction with the Company’s audited financial statements and the notes thereto.
Forward-Looking Statements
This annual report contains forward-looking statements and information relating to the Company that are based on the beliefs of its management as well as assumptions made by, and information currently available to, its management. When used in this report, the words “believe,” “anticipate,” “expect,” “estimate,” “intend”, “plan” and similar expressions, as they relate to the Company or its management, are intended to identify forward-looking statements. These statements reflect management’s current view of the Company concerning future events and are subject to certain risks, uncertainties and assumptions, including among many others: a general economic downturn; a downturn in the securities markets; federal or state laws or regulations having an adverse effect on proposed transactions that the Company desires to effect; Securities and Exchange Commission regulations which affect trading in the securities of “penny stocks”; and other risks and uncertainties. Should any of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this report as anticipated, estimated or expected. The accompanying information contained in this registration statement, including, without limitation, the information set forth under the heading “Management’s Discussion and Analysis and Plan of Operation — Risk Factors” identifies important additional factors that could materially adversely affect actual results and performance. You are urged to carefully consider these factors. All forward-looking statements attributable to the Company are expressly qualified in their entirety by the foregoing cautionary statement.
Business Overview
Blue Biofuels, Inc (the “Company”) is a technology company focused on emerging technologies in the renewable energy, biofuels, and bioplastics technologies sectors.
In early 2018, our chief executive officer (“CEO”) Ben Slager invented a new technology system referred to as Cellulose-to-Sugar or CTS 2.0, and the Company filed, and recently received, a patent application for this technology. The CTS 2.0 process is a continuous mechanical/chemical dry process for converting cellulose material into sugar and lignin.
The CTS 2.0 system converts plant-based feedstock into two product streams, soluble sugars and lignin, each of which can be converted into multiple products: (1) sugars can be further processed into cellulosic ethanol and other biofuels like jet fuel, and potentially into bio chemicals; and (2) Lignin can be used in ion exchange resins, specialty chemicals, or to create bioplastics. Lignin can also be burned as a renewable fuel.
The Company expects to have its 5th generation CTS 2.0 prototype, along with auxiliary equipment, completed in 2022. The goal of the 5th generation system is to prove larger volume production, and to be an intermediate step to the final 6th generation which is intended to be a commercial volume system.
Plan of Operation
The Company’s strategy is to diversify its product portfolio to include a number of product lines. These potentially include (1) biofuels – such as ethanol, or converting ethanol into higher biofuels like jet-fuel and the like; (2) selling sulfur-free lignin to ion exchange resin producers; (3) making bioplastics from lignin; or, (4) using the sugars and lignin to make biochemicals. We believe that one or more of these co-products could potentially be profitable for the Company.
Our goal is to develop our CTS 2.0 technology to a commercial scale and then seek to either enter into a joint venture or acquire existing corn ethanol plants to install the CTS 2.0 technology. The Company is also looking into converting ethanol to jet fuel. To minimize dilution to shareholders, we will seek project-based financing to build (or acquire and retrofit) or joint venture with existing ethanol producers to produce cellulosic ethanol and lignin/bioplastics and other specialty chemicals from our CTS 2.0 system. We believe retrofitting existing plants with the CTS 2.0 technology may achieve more rapid commercialization than building new plants. If its first plant is profitable, the Company intends to grow with additional plants in the United States and explore international growth by either licensing the technology or forming joint ventures with foreign domestic partners to build plants ourselves.
| 13 |
The Energy Policy Act of 2005, which included the Renewable Fuel Standard Program enforced by the US Environmental Protection Agency (“EPA”), mandates a certain amount of renewable fuel be blended into the transportation fuel used by all vehicles in the country. This Program provides monetary incentives to companies that produce renewable transportation fuel, and establishes Renewable Identification Numbers (“RINs”) or credits for each gallon of renewable transportation fuel produced in the United States, and breaks down those fuels into different D-codes depending on the source of the renewable fuel. D3 is the code for renewable ethanol that comes from cellulosic materials. (D6 is for corn ethanol). The value of the D3 RIN fluctuates, but as of this filing, it is approximately $3.40 per gallon of ethanol. To profit from these incentives, the Company plans to apply for these D3 RIN credits as it brings its first plant into commercial operation.
The Company believes that its management and consultants have significant experience in the development of technologies from concept to commercialization. As of this date, the Company has generated $194,319 in revenue, however it has not generated any revenues from its core business.
Capital Formation
From January 1, 2021 through the date of filing, 13,455,008 warrants were exercised for proceeds of $1,302,817.
From January 1, 2021, through the date of filing, the Company issued 10,543,332 shares at prices ranging from $0.075 to $0.25 per share for proceeds of $2,260,750.
From January 1, 2021, through the date of filing, 500,000 options were exercised for proceeds of $20,400.
From January 1, 2021 through the date of filing, the Company issued an aggregate of 515,700 shares of its common stock for services valued at $120,152.
From January 1, 2021 through the date of filing, the Company issued an aggregate of 1,166,667 warrants for services. Using a Black-Scholes asset-pricing model, these warrants were valued at $72,090. These warrant have all been exercised.
From January 1, 2021 through the date of filing, the company issued 7,080,000 shares in exchange for convertible debt of $279,000.
Purchases of Equity Securities
The Company has never purchased, nor does it own, any equity securities of any other issuer.
Going Concern
The Company has incurred losses since inception, and although it currently has a working capital surplus, it may be unable to raise further capital. At December 31, 2021 the Company had a working capital surplus of $713,554 and had incurred accumulated losses of $48,821,403 since its inception. The Company expects to incur significant additional losses in connection with its continued start-up activities. As disclosed in Note 2 to the financial statements, there is substantial doubt as to the Company’s ability to continue as a going concern based upon recurring operating losses and its need to obtain additional financing to sustain operations. The Company’s ability to continue as a going concern is dependent upon its ability to obtain the necessary financing to meet its obligations and repay its liabilities when they become due and to generate sufficient revenues from its operations to pay its operating expenses.
Results of Operations
Comparison of the year ended December 31, 2021 to December 31, 2020
For the year ended December 31, 2021, the Company recognized $0 in revenue and also $0 in 2020.
For the year ended December 31, 2021, the Company’s general and administrative expenses decreased by $192,826 to $1,034,948 from $1,227,776 in 2020. This decrease is primarily due to non-cash options packages valued at $876,291 in 2020 as compared to $31,104 non-cash stock compensation in 2021, partially offset by increased salaries to $942,522 from $396,394 in 2020.
| 14 |
Interest expense decreased in the year ended December 31, 2021 by $156,420 to $33,772 from $190,192 in 2020. This decrease is due to the Company’s decision to accrue interest on the back pay due to management in 2020 followed by the repayment of most back pay in 2021.
For the year ended December 31, 2021, the Company received a loan forgiveness of $66,330 versus $0 in 2020.
Research and Development
The Company expenses all research and development costs as incurred. For the years ended December 31, 2021, and 2020, the amounts charged to research and development expenses were $1,103,436 and $763,159, respectively.
The increase is due to the Company hiring additional laboratory personnel after successfully raising additional capital.
Liquidity and Capital Resources
Liquidity
As of December 31, 2021 the Company had $1,164,664 in cash and total stockholders’ equity at December 31, 2021 was negative $1,396,046. As of December 31, 2020, the Company had $286,579 in cash and total stockholders’ equity at December 31, 2020 was negative $3,336,764. Total debt, including advances, accounts payable and other notes payable at December 31, 2021, together with interest payable thereon and contingent liabilities, was $3,234,293, a decrease of $994,973 from December 31, 2020, where it stood at $4,229,266. This decrease is primarily attributable to paying down back pay and $279,000 of convertible notes having converted. $2,738,132 of the remaining debt was renegotiated to be payable out of future revenue or future profits and otherwise does not come due.
During the fiscal year ended December 31, 2021, the Company’s operating expenses increased $180,933 to $2,171,868 from $1,990,935 in 2020. This increase can primarily be attributed to an increase in salaries.
During the fiscal year ended December 31, 2021, the Company’s investing activities used $233,132 in cash. This can be attributed to $216,390 used to purchase machinery and equipment, and $16,742 in patent expenses.
During the fiscal year ended December 31, 2021, the Company generated an aggregate of $3,576,467 through its financing activities, which is an increase of $2,272,757 from $1,303,710 during the fiscal year ended December 31, 2020. This increase from the prior year can be attributed to $2,260,750 raised in private placements as compared to $887,380 in 2020, and $1,315,717 received from the exercise of warrants as compared to $350,000 in 2020.
Capital Resources
At this time, the Company has limited liquidity and capital resources. To continue funding its operations, the Company will need to generate revenue or obtain additional financing for current and future operations. The Company anticipates needing around $7.5 to $10 million to optimize and scale up its CTS 2.0 system to be commercially ready. The Company anticipates reaching this stage in around 12-18 months. There is no guarantee that we will achieve all of the additional funding that is needed.
As of the date of filing, the Company has raised $7,500 through the exercise of warrants in 2022, $3,576,467 in 2021, through the issuance of common stock and the exercise of warrants and options, in addition to $10,692,293 raised through the end of 2020 through its private placement offerings, and in addition to capital raised through debt or convertible notes. However, there is no guarantee that the company will be able to raise any additional capital on terms acceptable to the Company.
The inability to obtain this funding either in the near term and/or longer term will materially affect the ability of the Company to implement its business plan of operations and jeopardize the viability of the Company. In that case, the Company may need to re-evaluate and revise its operations.
| 15 |
Equity
As of December 31, 2021, shareholders’ equity was negative $(1,396,046).
There were 274,003,883 shares of common stock issued and outstanding as of December 31, 2021.
There were no preferred shares outstanding.
The Company has paid no dividends.
Critical Accounting Policies
Basis of Presentation
The accompanying consolidated financial statements of the Company were prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”) and include the assets, liabilities, revenues and expenses of the Company’s majority-owned subsidiaries over which the Company exercised control, if any, and there are currently none.
Principles of Consolidation
The Company’s consolidated financial statements include the accounts of the Company and its then-existing subsidiaries, after elimination of intercompany accounts and transactions. Investments in business entities in which the Company lacks control but has the ability to exercise significant influence over operating and financial policies are accounted for using the equity method. The Company’s proportionate share of net income or loss of the entity is recorded in the Consolidated Statements of Earnings.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates presented and reported amounts of revenues and expenses during the reporting periods presented. Significant estimates inherent in the preparation of the accompanying Consolidated Financial Statements include estimates of impairment assessment of identifiable intangible assets and valuation allowance for deferred tax assets. Estimates are based on past experience and other considerations reasonable under the circumstances. Actual results may differ from these estimates.
Stock Compensation
The Company recognizes the cost of all share-based payments under the relevant authoritative accounting guidance. Share-based payments include any remuneration paid by the Company in shares of the Company’s common stock or financial instruments that grant the recipient the right to acquire shares of the Company’s common stock. For share-based payments to employees, which consist only of awards made under the stock option plan described below, the Company accounts for the payments in accordance with the provisions of ASC Topic 718, “Stock Compensation” (formerly referred to as SFAS No. 123(R)). Share-based payments to consultants, service providers and other non-employees are accounted for under in accordance with ASC Topic 718, ASC Topic 505, “Equity Payments to Non-Employees” or other applicable authoritative guidance
Seasonality
The Company’s operating results are not affected by seasonality.
Inflation
The Company’s business and operating results are not currently affected in any material way by inflation.
Contractual Obligations
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
Off-Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.
Item 8. Financial Statements and Supplementary Data.
Set forth below are the audited financial statements for the Company for the years ended December 31, 2021, and December 31, 2020, and the report thereon of Pragermetis, P.A.
| 16 |
Blue Biofuels, Inc.
Financial Statements
Years Ended December 31, 2021 and 2020
Index to Financial Statements Page
| F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Blue Biofuels, Inc.
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of Blue Biofuels, Inc. (Formerly known as Alliance BioEnergy Plus, Inc.) (the Company) as of December 31, 2021 and 2020, and the related consolidated statement of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States, which contemplate continuation of the Company as a going concern. As described in Note 2 to the consolidated financial statements, the Company has not generated any significant revenue since inception and has incurred losses since inception. As of December 31, 2020, the Company has incurred accumulated losses of $48,821,403. On October 22, 2018, the Company filed for Chapter 11 bankruptcy. On September 18, 2019, the judge confirmed the Company’s Chapter 11 Plan, and on October 25, 2019, the bankruptcy case was closed. The Company expects to incur significant additional losses and liabilities in connection with its start-up and commercialization activities. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern. Continuation as a going concern is dependent on the ability to raise additional capital and financing, though there is no assurance of success. Management’s plans in regard to these matters are also described in Note 2 to the accompanying consolidated financial statements.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which it relates.
We determined that there are no critical audit matters.
| /s/
|
|
| We have served as the Company’s auditor
since 2020. Our Auditor Firm ID is | |
| February 18, 2022 | |
| F-2 |
Blue Biofuels, Inc.
Formerly known as Alliance Bioenergy Plus, Inc.
CONSOLIDATED BALANCE SHEETS
| December
31, 2021 | December
31, 2020 | |||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses | ||||||||
| TOTAL CURRENT ASSETS | $ | $ | ||||||
| Other assets | ||||||||
| Property
and equipment, net of accumulated depreciation and amortization of $ | ||||||||
| Security deposits | ||||||||
| Right of Use Assets, net of accumulated amortization | ||||||||
| Patents | ||||||||
| TOTAL OTHER ASSETS | $ | $ | ||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accounts payable - Related Party | $ | |||||||
| Deferred wages and director’s fees - Related party | $ | |||||||
| Lease Liability - Current | $ | |||||||
| Chapter 11 Settlement | $ | |||||||
| Convertible Debentures — Related Party | - | |||||||
| Interest Payable - Related Party | ||||||||
| TOTAL CURRENT LIABILITIES | $ | $ | ||||||
| Long term liabilities | ||||||||
| Right of Use Lease Liability, net of current portion | - | |||||||
| Paycheck Protection Program SBA loan | - | |||||||
| Chapter 11 Settlement | - | |||||||
| Notes Payable — Related Party | ||||||||
| Notes Payable — Other | ||||||||
| Convertible debenture, payable from future profits — Related Party | - | |||||||
| TOTAL LONG TERM LIABILITIES | $ | $ | ||||||
| TOTAL LIABILITIES | $ | $ | ||||||
| STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||
| Preferred stock; $ par value; shares authorized; shares issued and outstanding | - | - | ||||||
| Common stock; $ par value; shares authorized; issued and outstanding at December 30, 2021, and shares issued and outstanding at December 31, 2020. | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity (deficit) | $ | ( | ) | $ | ( | ) | ||
| TOTAL EQUITY (DEFICIT) | $ | ( | ) | $ | ( | ) | ||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements
| F-3 |
Blue Biofuels, Inc
Formerly known as Alliance Bioenergy Plus, Inc.
CONSOLIDATED STATEMENT OF OPERATIONS
| Year Ended | ||||||||
| 31-Dec | ||||||||
| 2021 | 2020 | |||||||
| Revenues | $ | $ | ||||||
| Operating expense: | ||||||||
| General and administrative | ||||||||
| Research Development | ||||||||
| Loss on disposal of assets | ||||||||
| Total operating expenses | ||||||||
| Loss from operations: | ( | ) | ( | ) | ||||
| Other (income) expense: | ||||||||
| Loan Forgiveness | ( | ) | ||||||
| Interest expense - related party | ||||||||
| Interest expense - other | ||||||||
| Total other (income) expense | ( | ) | ||||||
| Income (Loss) before provisions for income taxes | $ | ( | ) | $ | ( | ) | ||
| Provisions for income taxes | ||||||||
| Net Income / (Loss): | $ | ( | ) | $ | ( | ) | ||
| Net income (loss) per share | $ | ( | ) | $ | ( | ) | ||
| Weighted average common shares outstanding | ||||||||
| Basic | ||||||||
The accompanying notes are an integral part of these consolidated financial statements
| F-4 |
Blue Biofuels, Inc.
Formerly known as Alliance Bioenergy Plus, Inc.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
| Common Stock | Preferred Stock | Additional Paid-in | Accumulated | Total Stockholder’s | ||||||||||||||||||||||||
| Shares | Amount | Shares | Amt | Capital | Deficit | (Deficit) | ||||||||||||||||||||||
| Balance as of December 31, 2020 | $ | - | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
| Issuance of common stock for services | $ | - | $ | $ | ||||||||||||||||||||||||
| Issuance of | - | |||||||||||||||||||||||||||
| Warrants exercised | - | |||||||||||||||||||||||||||
| Issuance of common stock and warrants for cash through PPM | - | |||||||||||||||||||||||||||
| Issuance of common stock in exchange for debt | - | |||||||||||||||||||||||||||
| Vesting of options under the employee, director plan | ||||||||||||||||||||||||||||
| Employee stock options exercised | - | |||||||||||||||||||||||||||
| Cashless exercise of stock options | - | ( | ) | |||||||||||||||||||||||||
| Net Income (Loss) | ( | ) | $ | ( | ) | |||||||||||||||||||||||
| Balance as of December 31, 2021 | $ | - | - | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Balance as of December 31, 2019 | $ | - | - | $ | $ | ( | ) | $ | ( | ) | ||||||||||||||||||
| Issuance of common stock for services | - | |||||||||||||||||||||||||||
| Issuance of common stock and warrants for cash through PPM | - | |||||||||||||||||||||||||||
| Issuance of common stock in exchange for debt | - | |||||||||||||||||||||||||||
| Issuance of vested options under the employee, director plan | - | |||||||||||||||||||||||||||
| Warrants exercised | - | |||||||||||||||||||||||||||
| Cashless exercise of stock options | ( | ) | ||||||||||||||||||||||||||
| Net Income (Loss) | ( | ) | $ | ( | ) | |||||||||||||||||||||||
| Balance as of December 31, 2020 | $ | - | $ | $ | ( | ) | $ | ( | ) | |||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements
| F-5 |
Blue Biofuels, Inc.
Formerly known as Alliance Bioenergy Plus, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| For the Year Ended | For the Year Ended | |||||||
| 31-Dec-21 | 31-Dec-20 | |||||||
| Cash flows from operating activities | ||||||||
| Net Income (Loss) | $ | ( | ) | $ | ( | ) | ||
| Reconciliation of net loss to net cash used in operating activities | ||||||||
| Depreciation and amortization | ||||||||
| Stock based compensation for services | ||||||||
| Net Issuance of options and warrants for services | ||||||||
| Loss on Disposal of assets | - | |||||||
| Changes in operating assets and liabilities | ||||||||
| Prepaid expenses | ||||||||
| Accrued interest - related party | ( | ) | ||||||
| Accounts payable and accrued liabilities | ( | ) | ||||||
| Forgiveness of PPP Loan | ( | ) | - | |||||
| Right of use lease | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from investing activities | ||||||||
| Purchase of property and equipment | ( | ) | ( | ) | ||||
| Security deposits | - | - | ||||||
| Patent Costs | ( | ) | ( | ) | ||||
| Net cash from (used in) investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities | ||||||||
| Proceeds from PPP Loan | - | |||||||
| Proceeds from exercise of warrants and options | ||||||||
| Net proceeds from issuance of common stock | ||||||||
| Net cash provided by financing activities | ||||||||
| Net increase (decrease) in cash and cash equivalents | ||||||||
| Cash and cash equivalent at beginning of the period | ||||||||
| Cash and cash equivalent at end of the period | $ | $ | ||||||
| Supplemental disclosure of cash flow information | ||||||||
| Cash paid during the period for | ||||||||
| Interest | $ | $ | ||||||
| Taxes | $ | $ | ||||||
| Supplemental schedule of non-cash activities | ||||||||
| Conversion of convertible debenture to common stock | $ | $ | ||||||
The accompanying notes are an integral part of these consolidated financial statements
| F-6 |
Blue Biofuels, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 – ORGANIZATION
Blue Biofuels, Inc (the “Company”) is a technology company focused on emerging technologies in the renewable energy, biofuels, and bioplastics technologies sectors. In early 2018, the Company’s CEO invented a new technology system it calls Cellulose-to-Sugar 2.0 or CTS 2.0, and a patent application was filed and later obtained (U.S. Patent No. 10,994,255). In addition to this patent, the Company has filed provisional patent applications for six additional patents that are currently pending.
The CTS 2.0 is a mechanical/chemical dry process for converting cellulose material into sugar for use in the biofuels industry. CTS 2.0 can convert any cellulosic material – like grasses, wood, paper, farm waste, yard waste, forestry products, energy crops like hemp or King Grass, and the cellulosic portion of municipal solid waste – into sugars and lignin, and subsequently into biofuels and bioplastics. The CTS 2.0 system produces sugar and chemically unmodified lignin among other by-products. The sugar can then be further converted into biofuels and the lignin into bioplastics.
The Company’s focus is to commercialize its CTS 2.0 technology. The Company has recently finalized its 4th generation testing and has begun to develop its 5th generation system which is expected to be semi-commercial in size.
Plan of Operation
The Company is now doing the engineering work to commercialize its CTS 2.0 technology.
The Company intends to raise additional capital and continue engineering work and scaling up towards a full-scale commercial size CTS 2.0 modular unit. At that point, and to minimize dilution to shareholders, the Company will seek project-based financing to build (or acquire and retrofit) or joint venture with existing ethanol producers to produce cellulosic ethanol and lignin/bioplastics from its patented CTS 2.0 system. Once the first plant is profitable, the Company intends to grow with additional plants both in the United States and internationally.
The Company has a strategy that includes the following:
| 1) | Selling sugar or ethanol either direct or in combination with joint ventures, mergers, and/or acquisitions of existing businesses in the renewable energy space; | |
| 2) | Selling low-cost high purity lignin, or using that lignin to produce ion exchange resins, specialty chemicals, or biodegradable plastics, or making biodegradable bioplastics products and selling them under our own brand. |
NOTE 2 – GOING CONCERN
The
accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles, which
contemplate continuation of the Company as a going concern, which assumes the Company will realize its assets and discharge its liabilities
in the normal course of business. The Company has not generated any significant revenue since inception and has incurred losses since
inception. As of December 31, 2021, the Company has incurred accumulated losses of $
Management believes that the Company’s future success is dependent upon its ability to achieve profitable operations, generate cash from operating activities and obtain additional financing. There is no assurance that the Company will be able to generate sufficient cash from operations, or sell additional shares of stock or borrow additional funds. The Company’s inability to obtain additional cash could have a material adverse effect on its financial position, results of operations, and its ability to continue in existence. These financial statements do not include any adjustments that might result from the outcome of this uncertainty
| F-7 |
The COVID-19 pandemic has negatively affected the U.S. and global economies, disrupted global supply chains, resulted in significant travel and transport restrictions, including mandated closures and orders to “shelter-in-place,” and created significant disruption of the financial markets. We are closely monitoring the impact of the COVID-19 pandemic on all aspects of our business, including how it will impact our supply chain, employees, and potential future customers. Our office and lab have remained open during the pandemic. Nevertheless, the pandemic slowed our ability to commercialize our process in two ways: by adversely affecting our ability to raise capital, and by adversely affecting the supply chain of laboratory equipment and various parts of upgrades to our CTS 2.0 system, which slowed the development of our prototypes. The extent to which our operations may be further impacted by the COVID-19 pandemic will depend largely on future developments, which are highly uncertain and cannot be accurately predicted. We may experience additional operating costs due to increased challenges with our workforce (including as a result of illness, absenteeism or government orders), access to supplies, capital, and fundamental support services (such as shipping and transportation). Even after the COVID-19 pandemic has subsided, we may experience materially adverse impacts to our business due to any resulting economic recession or depression. Furthermore, the effects of a potential worsening of global economic conditions and the continued disruptions to and volatility in the financial markets remain unknown.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements of the Company were prepared in accordance with generally accepted accounting principles in the U.S. (“U.S. GAAP”).
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, after elimination of intercompany accounts and transactions. Investments in business entities in which the Company lacks control but has the ability to exercise significant influence over operating and financial policies are accounted for using the equity method. All material intercompany transactions and balances were eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the dates presented and reported amounts of revenues and expenses during the reporting periods presented. Significant estimates inherent in the preparation of the accompanying Consolidated Financial Statements include estimates of impairment assessment of intangible assets and valuation allowance for deferred tax assets. Estimates are based on past experience and other considerations reasonable under the circumstances. Actual results may differ from these estimates.
Cash and Cash Equivalents
All highly liquid investments with maturities of three months or less at the date of purchase are considered to be cash equivalents.
The Company recognizes the cost of all share-based payments under the relevant authoritative accounting guidance. Share-based payments include any remuneration paid by the Company in shares of the Company’s common stock or financial instruments that grant the recipient the right to acquire shares of the Company’s common stock. For share-based payments to employees, which consist only of awards made under the stock option plan described below, the Company accounts for the payments in accordance with the provisions of ASC Topic 718, “Stock Compensation”. Share-based payments to consultants, service providers and other non-employees are accounted for in accordance with ASC Topic 718, ASC Topic 505, “Equity Payments to Non-Employees” or other applicable authoritative guidance.
| F-8 |
Stock-based Compensation Valuation Methodology
Stock-based compensation resulting from the issuance of common stock is calculated by reference to the valuation of the stock on the date of issuance, the expense being recognized as the compensation is earned. Stock-based compensation expenses related to employee options and warrants granted to non-employees are recognized as the stock options and warrants are earned. The fair value of the stock options or warrants granted is estimated at the grant date, using the Black-Scholes option-pricing model, and the expense is recognized on a straight-line basis over the shorter of the period over which services are to be received or the life of the option or warrant. The grant date fair value of employee share options and similar instruments is estimated using the Black-Scholes option-pricing model on the basis of the fair value of the underlying common stock on the measurement date, adjusted for the unique characteristics of those equity instruments, using the assumptions noted in the table below. The fair value of the common stock is determined by the then-prevailing closing market price. Expected volatility was based on the historical volatility of the Company’s closing day market price per share. The expected term of options and warrants was based upon the life of the option, and the risk-free rate used was based on the U.S. Treasury Daily Yield Curve Rate.
| 1/9/20 | 2/18/20 | 5/8/20 | 11/6/20 | 11/12/20 | ||||||||||||||||
| Risk-free interest rate | % | % | % | % | % | |||||||||||||||
| Expected life | years | years | years | years | years | |||||||||||||||
| Expected dividends | % | % | % | % | % | |||||||||||||||
| Expected volatility | % | % | % | % | % | |||||||||||||||
| ALLM common stock fair value | $ | $ | $ | $ | $ | |||||||||||||||
| 1/5/21 | 5/18/21 | 9/13/21 | 9/30/21 | 12/13/21 | ||||||||||||||||
| Risk-free interest rate | % | % | % | % | % | |||||||||||||||
| Expected life | years | years | years | years | years | |||||||||||||||
| Expected dividends | % | % | % | % | % | |||||||||||||||
| Expected volatility | % | % | % | % | % | |||||||||||||||
| ALLM common stock fair value | $ | $ | $ | $ | $ | |||||||||||||||
Property and Equipment
Property
and equipment are stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful
lives of the assets, generally
Patent Capitalization
If a product is currently under research and development and is not currently approved for market, costs incurred in connection with patent applications should generally be expensed in the income statement because there is uncertainty as to the future economic benefit of the asset. Conversely, if a product is approved for market (as is the case of the end product ethanol), or if future economic benefit is probable, or if an alternative future use is available to the Company, then such patent costs can be capitalized and amortized over the expected life of the patent(s). Since the Company’s primary end product is sugar converting to ethanol, which are in wide use, the Company has determined that it is reasonable to capitalize the patent costs associated with its CTS process.
Research and Development
The
Company expenses all research and development costs as incurred. For the years ended December 31, 2021, and December 31, 2020, the amounts
charged to research and development expenses were $
| F-9 |
Revenue Recognition
Effective January 1, 2018, the Company adopted ASC 606 — Revenue from Contracts with Customers. Under ASC 606, the Company recognizes revenue from the commercial sales of products by: (1) identify the contract (if any) with a customer; (2) identify the performance obligations in the contract (if any); (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract (if any); and (5) recognize revenue when each performance obligation is satisfied. Under ASC 606, revenue is recognized when the following criteria are met:
| 1. | persuasive evidence of an arrangement exists; | |
| 2. | product has been delivered or the services have been rendered to the customer; | |
| 3. | the sales price is fixed or determinable; and, | |
| 4. | collectability of the fee or sales price is reasonably assured. |
The Company currently has no customers. The Company’s revenues are expected to be derived principally from products sold through joint ventures and corporate owned plants. However, no sales have occurred through those revenue streams to date. The company will recognize revenue when title, ownership, and risk of loss pass to the customer, all of which occurs upon shipment or delivery of the product and is based on the applicable shipping terms.
Convertible Instruments
The Company evaluates and accounts for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”.
Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
The Company accounts for convertible instruments (when we have determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: The Company records when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. As of December 31, 2021, the Company has no convertible instruments.
Accounting for Derivative Instruments
The Company issues debentures where the number of shares into which a debenture can be converted is not fixed. For example, when a debenture converts at a discount to market based on the stock price on the date of conversion. In such instances, the embedded conversion option of the convertible debentures is bifurcated from the host contract and recorded at their fair value. In accounting for derivatives, the Company records a liability representing the estimated present value of the conversion feature considering the historic volatility of the Company’s stock, and a discount representing the imputed interest associated with the beneficial conversion feature. The discount is then amortized over the life of the debenture and the derivative liability is adjusted periodically according to stock price fluctuations. At the time of conversion, any remaining derivative liability is charged to additional paid-in capital. For purposes of determining derivative liability, the Company uses Black-Scholes modeling for computing historic volatility. As of December 31, 2021, the Company has no derivative instruments.
Common Stock Purchase Warrants and Other Derivative Financial Instruments
The Company classifies as equity any contracts that require physical settlement or net-share settlement or provide it with a choice of net-cash settlement or settlement in the Company’s own shares (physical settlement or net-share settlement) provided that such contracts are indexed to its own stock as defined in ASC 815-40 (“Contracts in Entity’s Own Equity”). The Company classifies as assets or liabilities any contracts that require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside the Company’s control) or give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). The Company assesses the classification of its common stock purchase warrants and other free-standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required.
| F-10 |
Investments in non-consolidated affiliates
Investments in non-consolidated affiliates are accounted for using the equity method or cost basis depending upon the level of ownership and/or the Company’s ability to exercise significant influence over the operating and financial policies of the investee. When the equity method is used, investments are recorded at original cost and adjusted periodically to recognize the Company’s proportionate share of the investees’ net income or losses after the date of investment. When net losses from an investment are accounted for under the equity method exceed its carrying amount, the investment balance is reduced to zero and additional losses are not provided for. The Company resumes accounting for the investment under the equity method if the entity subsequently reports net income and the Company’s share of that net income exceeds the share of net losses not recognized during the period the equity method was suspended. Investments are written down only when there is clear evidence that a decline in value that is other than temporary has occurred. The Company monitors its investment for impairment at least annually and makes appropriate reductions in the carrying value if it determines that an impairment charge is required based on qualitative and quantitative information. As of December 31, 2021, the Company has no investments in non-consolidated affiliates.
Impairment of Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. If events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable, the Company compares the carrying amount of the asset group to future undiscounted net cash flows, excluding interest costs, expected to be generated by the asset group and their ultimate disposition. If the sum of the undiscounted cash flows is less than the carrying value, the impairment to be recognized is measured by the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. The Company has no material uncertain tax positions for any of the reporting periods presented.
Basic profit (loss) per share amounts have been calculated using the weighted-average number of common shares outstanding during each reporting period. Diluted loss per share has been calculated using the weighted-average number of common shares plus the potentially dilutive effect of securities such as outstanding options and warrants. The computation of potential common shares has been performed using the treasury stock method. The warrants and options are antidilutive for all periods presented. When net loss is reported, diluted and basic net loss per share amounts are the same as the impact of potential common shares is antidilutive.
| F-11 |
Fair Value Measurements
The Company adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
The estimated fair value of certain financial instruments, payables to related parties, and accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments.
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
Level 1 — quoted prices in active markets for identical assets or liabilities
Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
At December 31, 2021, the Company did not identify any assets or liabilities that are required to be presented on the balance sheet at fair value in accordance with ASC 825-10.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on the Company’s accounting and reporting. The Company believes that such recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future either will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations, and cash flows when implemented.
NOTE 4 – PROPERTY AND EQUIPMENT
| PROPERTY AND EQUIPMENT | Life | December 31, 2021 | December 31, 2020 | |||||||||
| Building and Improvements | $ | $ | ||||||||||
| Machinery and Equipment | $ | $ | ||||||||||
| Furniture and Fixtures | $ | $ | ||||||||||
| Computer Equipment | $ | $ | ||||||||||
| $ | $ | |||||||||||
| Less Accumulated Depreciation | $ | ( | ) | $ | ( | ) | ||||||
| Property and Equipment | $ | $ | ||||||||||
Total
depreciation expense was $
NOTE 5 – PATENTS
The
Company has obtained one patent and has applied for six more patents on its technology, and has also applied for international patents.
The Company has capitalized the legal and filing fees in the amount of $
| F-12 |
NOTE 6 – DEBT
Details of each debt, including those that have been paid off or renegotiated during 2021, are indicated below.
Convertible Debentures Related Party
On March 12, 2019, the Company entered into a convertible promissory note with Edmund J Burke for a total of $25,000. The note was due on March 12, 2021, and carried no interest. To the extent unpaid five years after September 18, 2019, it is discharged. At the option of the noteholder, the note is convertible into common stock at $0.025/share. On January 22, 2021, Edmund Burke elected to convert this Note into common stock.
On March 12, 2019, the Company entered into a convertible promissory note with Chris Jemapete for a total of $25,000. The note had a maturity date of March 12, 2021, and carried no interest. To the extent unpaid five years after September 18, 2019, it would be discharged. At the option of the noteholder, the note was convertible into common stock at $0.025 per share. On August 5, 2020, Chris Jemapete elected to convert the note into common stock. Mr. Jemapete is a greater than 5% stockholder of the Company.
On March 12, 2019, the Company entered into a convertible promissory note with AES Capital Partners, LP, for a total of $50,000. The note was due on March 12, 2021, and bore 15% interest. To the extent unpaid five years after September 18, 2019, it is discharged. At the option of the noteholder, the note is convertible into common stock at $0.025/share. Upon conversion, all interest shall be forgiven. On January 22, 2021, AES Capital Partners, LP, elected to convert this Note into common stock.
Paycheck Protection Program SBA Loan
In May 2020, the Company received a loan in the amount of $66,330 under the Payroll Protection Program (“PPP Loan”). The loan accrues interest at a rate of 1% and has an original maturity date of two years which can be extended to five years by mutual agreement of the Company and SBA. The PPP loan contains customary events of default relating to, among other things, payment defaults and breaches of representations and warranties.
Under the terms of the loan, a portion or all of the loan is forgivable to the extent the loan proceeds are used to fund qualifying payroll, rent and utilities during a designated twenty-four week period. Payments are deferred until the SBA determines the amount to be forgiven. The Company has utilized the proceeds of the PPP loan in a manner which enabled qualification as a forgivable loan. On April 21, 2021, the Company received notice that the entire amount is forgiven.
Notes Payable — Chapter 11 Settlement
On July 18, 2018, the Company’s former Controller Dennis Lenaburg sued the Company for $2,694,577 dollars plus stock warrants in the Circuit Court of the 15th Judicial Circuit in Palm Beach County, Florida. That lawsuit was moved to the Bankruptcy Court when the Company entered Chapter 11 on October 22, 2018. The Company filed a Complaint against Lenaburg on November 16, 2018, in the bankruptcy court in the Southern District of Florida. The bankruptcy judge ordered mediation, and a settlement was reached that paid Lenaburg $13,650 upon Plan Confirmation and a $50,000 claim payable out of post-confirmation net profits over 3 years, plus 1.5 million common stock warrants with a strike price of $0.30/share and a ten year expiration period. The $50,000 is due on September 18, 2022.
Notes Payable – Related Parties
In July 2016, the Company issued six (6) short-term notes payable to related parties in conjunction with the Company’s acquisition of the remaining 49% of AMG Energy Group. These notes had a value of $2,002,126 and accrued interest at a rate of six percent (6%) per annum. As of December 31, 2018, and December 31, 2017, the total interest accrued on the notes was $278,795 and $176,460 respectively. All of the notes were due on August 4, 2017 and then were in default. However, the notes were held by related parties with the understanding that the notes were not to be paid until the Company begins generating profit. The Company renegotiated some of these notes during its Chapter 11 proceedings, whereas others failed to submit a claim and were discharged upon the Court’s Confirmation Order approving the Company’s Chapter 11 Plan on September 18, 2019. The renegotiated amounts, as per the Plan Confirmation are all to be paid from 50% of the future net profits and discharged to the extent unpaid five years after the Plan effective date of September 18, 2019. These amount are 1) Mark Koch $240,990 plus 6% interest on any portion not repaid within 12 months of the Company’s first reported quarterly net profit; 2) Animated Family Films $579,942 out of the Company’s net profits plus 6% interest; 3) Steven Dunkle, CTWC, Wellington Asset Holdings $1.5 million plus 6% interest once there is positive quarterly EBITDA from the first plant of Company, or, at its option, may convert that into an equity investment in the first plant of the Company, measured by a percentage of the total cost to build, subject to a minimum equity interest of 1.25% in said plant.
| F-13 |
On February 28, 2018, the Company entered into a short-term loan with Steven Sadaka, with a principal balance of $100,000 due and payable on May 1, 2018. The note does not accrue interest, however the Company provided 2,000,000 inducement shares to secure the note. These inducement shares were valued at $84,000 and are being amortized over the life of the note. The note’s maturity date was extended to 7/1/2018. If the note is not repaid at maturity, then an additional 5,000,000 shares of common stock will be due. The note was renegotiated during the Company’s Chapter 11 proceedings, and as per the Plan Confirmation, it is agreed that $100,000 is to be paid out of future gross revenues to satisfy this note in full, with no additional shares to be issued.
On May 15, 2018, the Company entered into a short term loan with Christopher Jemapete, with a principal balance of $50,000 due and payable on May 16, 2019. The note carried an interest rate of 5% plus the company issued 1,250,000 inducement shares to secure the note as well as 1,000,000 warrants with a $0.10 strike price and with a 5-year expiration. These inducement shares were valued at $36,250 and are being amortized over the life of the note; the warrants had a value of $24,449. On August 25, 2018, this note was restructured to remove the warrants. As of June 30, 2018 accrued interest on this note is $315. The note was renegotiated during the Company’s Chapter 11 proceedings, and as per the Plan Confirmation, it is agreed that $50,315 is to be paid out of future gross revenues.
On May 15, 2018, the Company entered into a short term loan with Pamela Jemapete, with a principal balance of $50,000 due and payable on May 16, 2019. The note carried an interest rate of 5% plus the company issued 1,250,000 inducement shares to secure the note as well as 1,000,000 warrants with a $0.10 strike price and with a 5-year expiration. These inducement shares were valued at $36,250 and are being amortized over the life of the note; the warrants had a value of $24,449. On August 25, 2018, this note was restructured to remove the warrants. As of June 30, 2018 accrued interest on this note is $315. The note was renegotiated during the Company’s Chapter 11 proceedings, and as per the Plan Confirmation, it is agreed that $50,315 is to be paid out of future gross revenues.
Notes Payable – Other
In July 2016, the Company issued a short-term note payable to a third party in conjunction with the Company’s acquisition of the remaining 49% of AMG Energy Group. The note had a principal balance of $96,570 and accrued interest at a rate of six percent (6%) per annum. As of December 31, 2018, and December 31, 2017, the total interest accrued on the note was $14,382 and $8,588 respectively. The note was due on August 4, 2017 and was then in default. The Company renegotiated this note during its Chapter 11 proceedings, and as per the Plan Confirmation, now the $96,570 is to be paid with no interest out of the same 50% of the future net profits of the Company as the notes mentioned above, if any, or discharged to the extent unpaid five years after September 18, 2019.
In November 2017, the Company entered into a convertible debenture with Lucas Hoppel, with a principal balance of $143,000 due and payable on May 30, 2018. The note carries an 8% one-time interest charge, a $43,000 original issue discount and a 35% conversion discount to the lowest trade price in the prior twenty-five trading days, after 180 days, in whole or in part at the option of the holder. In addition, the Company provided 500,000 inducement shares to secure the note, and may have to provide additional shares on the note’s 6-month anniversary if the Company’s share price declines. These inducement shares were valued at $39,500 and were amortized over the life of the note. The note can be repaid, without prepayment penalties, within the first 90 days. Thereafter, the note will incur a 120% prepayment penalty of the then outstanding principal and interest due. In May 2018, the company made two principal payments totaling $40,000. The note went into default on June 1, 2018 and incurred a 40% penalty of the outstanding balance immediately prior to the default event. On August 30, 2018, Hoppel sued the Company in Superior Court of the State of California County of San Diego Central District. That case was staid on October 22, 2018 when the Company filed for Chapter 11 protection in the US Bankruptcy Court in the Southern District of Florida. Negotiations took place and a settlement was reached on this note and a subsequent note, and confirmed as part of the Plan Confirmation Order, that Hoppel would be paid a total of $100,000 out of 5% of the future gross revenue of the Company.
| F-14 |
In February 2018, the Company entered into a convertible debenture with Lucas Hoppel, with a principal balance of $165,000 due and payable on September 21, 2018. The note carries an 8% one-time interest charge, a $15,000 original issue discount and a 40% conversion discount to the lowest trade price in the prior twenty-five trading days, after 180 days, in whole or in part at the option of the holder. In addition, the Company provided 500,000 inducement shares to secure the note. These inducement shares were valued at $14,500, and were amortized over the life of the note. The note can be repaid, without prepayment penalties, within the first 90 days. Thereafter, the note will incur a 120% prepayment penalty of the then outstanding principal and interest due. The Note went into default on June 1, 2018, through a cross default provision with another Note to Hoppel, and incurred a 40% penalty of the outstanding balance immediately prior to the default event. On August 30, 2018, Hoppel sued the Company in Superior Court of the State of California County of San Diego Central District. That case was staid on October 22, 2018 when the Company filed for Chapter 11 protection in the US Bankruptcy Court in the Southern District of Florida. Negotiations took place and a settlement was reached on this note and a prior note, and confirmed as part of the Plan Confirmation Order, that Hoppel would be paid a total of $100,000 out of 5% of the future gross revenue of the Company to settle both notes.
On March 27, 2019, the Company entered into an agreement with another creditor, such that its debt will be reduced from $32,000 to $20,000 payable out of future gross revenues, upon the bankruptcy court’s acceptance of the Company’s plan of reorganization. The Plan was confirmed by the Court on September 18, 2019.
Convertible Debentures – Related Parties
On November 8, 2018, the Company entered into a convertible promissory note with Edmund J Burke for a total of $175,000. There is no interest, and it is payable out of 20% of the net profits of Company. The note is convertible into common stock at $0.05/share. Upon conversion, Burke shall receive an additional 4,450,148 warrants at a strike price of $0.005/share that expire on November 8, 2023. In addition, 4,450,148 shares of Burke’s common stock were cancelled. On January 22, 2021, Edmund Burke elected to convert this Note into common stock.
On November 8, 2018, the Company entered into a convertible promissory note with Steven Sadaka for a total of $24,000. There is no interest, and it is payable out of 2.5% of the net profits of Company. The note is convertible into common stock at $0.05/share. Upon conversion, Sadaka shall receive an additional 1,000,000 warrants at a strike price of $0.005/share that expire on November 8, 2023. In addition, 1,000,000 shares of Sadaka’s common stock were cancelled. On January 15, 2021, Steven Sadaka elected to convert this Note into common stock.
On November 8, 2018, the Company entered into a convertible promissory note with Annie Bindler for a total of $2,500. There is no interest, and it is payable out of 0.5% of the net profits of Company. The note is convertible into common stock at $0.05/share. Upon conversion, Annie Bindler shall receive an additional 100,000 warrants at a strike price of $0.005/share that expire on November 8, 2023. In addition, 100,000 shares of Annie Bindler’s common stock were cancelled. On January 13, 2021, Annie Bindler elected to convert this Note into common stock.
On November 8, 2018, the Company entered into a convertible promissory note with Zac Bindler for a total of $2,500. There is no interest, and it is payable out of 0.5% of the net profits of Company. The note is convertible into common stock at $0.05/share. Upon conversion, Zac Bindler shall receive an additional 100,000 warrants at a strike price of $0.005/share that expire on November 8, 2023. In addition, 100,000 shares of Zac Bindler’s common stock were cancelled. On January 13, 2021, Zac Bindler elected to convert this Note into common stock.
A summary of all debts that remain of those indicated in the Notes above is as follows:
| Notes Payable | December 31, 2021 | December 31, 2020 | ||||||
| Short Term Chapter 11 Settlement | $ | $ | ||||||
| Short Term Convertible Debentures Related Party | $ | $ | ||||||
| Long Term Chapter 11 Settlement | $ | $ | ||||||
| Long Term Paycheck Protection Program SBA loan | $ | $ | ||||||
| Long Term Notes Payable from future revenue — Related Party | $ | $ | ||||||
| Long Term Notes Payable from future revenue — Other | $ | $ | ||||||
| Long Term Note Payable from future profits — Related Party | $ | $ | ||||||
| Long Term Note Payable from future profits — Other | $ | $ | ||||||
| Long Term Convertible Debentures — Related Party | $ | $ | ||||||
| TOTAL NOTES | $ | $ | ||||||
| F-15 |
Of the $2,788,132 due as of September 30, 2021, $2,738,132 is due out of future revenue or future profits. $2,417,502 of the $2,788,132 will be discharged if not paid by September 18, 2024, which is 5 years after the Company exited Chapter 11. The remaining debt that would not be discharged is $370,630, consisting of $200,630 due to related parties, $120,000 due to other, and a $50,000 Chapter 11 settlement.
NOTE 7 – STOCKHOLDERS’ EQUITY
The
total number of shares of capital stock, which the Company has authority to issue, is
In
the year ended December 31, 2021, the company issued an aggregate of shares of its common stock for services, valued at $
In
the year ended December 31, 2021, the Company issued an aggregate of warrants for services. Using a Black-Scholes asset pricing
model, these were valued at $
In
the year ended December 31, 2021, warrants were exercised at an average price of
In
the year ended December 31, 2021, employee stock options were exercised for proceeds of $
In
the year ended December 31, 2021, employee stock options were exercised using the cashless exercise provision to obtain
In
the year ended December 31, 2021, the Company issued common shares for cash through private placements of $
In
the year ended December 31, 2021, $
In the year ended December 31, 2021, the Company issued options under its Employee Directors Stock Option Plan to purchase an aggregate of shares of common stock for a period of to at an exercise price ranging from $ to $. Using a Black-Scholes asset-pricing model, these agreements were valued at $. Only of those vested in 2021, along with an additional options. The vested options were valued at $.
In
the year ended December 31, 2020, the company issued an aggregate of shares of its common stock for services, valued at $
In
the year ended December 31, 2020, warrants were exercised at an average price of
In the year ended December 31, 2020, employee stock options were exercised using the cashless exercise provision to obtain shares.
In
the year ended December 31, 2020, the Company issued common shares for cash of $
In
the year ended December 31, 2020, $
| F-16 |
In the year ended December 31, 2020, the Company issued options under its Employee Directors Stock Option Plan to purchase an aggregate of shares of common stock for a period of to at an exercise price ranging from $ to $. Using a Black-Scholes asset-pricing model, these agreements were valued at $. An additional unvested options were issued.
Share-Based Awards
| Option Shares Outstanding | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value ($0’s) | |||||||||||||
| Outstanding as of December 31, 2020 | $ | $ | ||||||||||||||
| Awarded | $ | $ | ||||||||||||||
| Exercised | # | $ | # | - | # | $ | ||||||||||
| Expired | # | $ | # | - | # | $ | ||||||||||
| Outstanding as of December 31, 2021 | $ | $ | ||||||||||||||
| Vested as of December 31, 2021 | $ | $ | ||||||||||||||
| Outstanding as of December 31, 2019 | $ | $ | ||||||||||||||
| Awarded | $ | $ | ||||||||||||||
| Exercised | $ | - | $ | |||||||||||||
| Expired | $ | - | $ | |||||||||||||
| Outstanding as of December 31, 2020 | $ | $ | ||||||||||||||
| Vested as of December 31, 2020 | $ | $ |
Warrant activity for the year ending December 31, 2021, is as follows:
| Warrants Outstanding | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term (years) | Aggregate Intrinsic Value ($0’s) | |||||||||||||
| Outstanding as of December 31, 2020 | $ | $ | ||||||||||||||
| Awarded or received from note conversions | $ | $ | ||||||||||||||
| Exercised | $ | - | $ | |||||||||||||
| Expired | $ | - | $ | |||||||||||||
| Outstanding as of December 31, 2021 | $ | $ | ||||||||||||||
| Vested as of December 31, 2021 | $ | $ | ||||||||||||||
| Outstanding as of December 31, 2019 | $ | $ | ||||||||||||||
| Issued | $ | $ | ||||||||||||||
| Exercised | $ | - | $ | |||||||||||||
| Expired | $ | - | $ | |||||||||||||
| Outstanding as of December 31, 2020 | $ | $ | ||||||||||||||
| Vested as of December 31, 2020 | $ | $ | ||||||||||||||
| F-17 |
NOTE 8 – INCOME TAXES
The
reconciliation of income tax benefit at the U.S. statutory rate of
| December 31, 2021 | December 31, 2020 | |||||||
| Statutory federal income tax rate | - | % | - | % | ||||
| State income tax, net of federal benefits | - | % | - | % | ||||
| Valuation Allowance | % | % | ||||||
| Income tax provision (benefit) | % | % | ||||||
The provisional (benefit) for income tax is summarized as follows:
| December 31, 2021 | December 31, 2020 | |||||||
| Federal | ||||||||
| Current | - | - | ||||||
| Deferred | $ | ( | ) | $ | ( | ) | ||
| State | ||||||||
| Current | - | |||||||
| Deferred | $ | ( | ) | $ | ( | ) | ||
| Change in valuation allowance | ||||||||
| Income tax provision (benefit) | - | - | ||||||
The tax effects of temporary differences that give rise to the Company’s net deferred tax liability as of December 31, 2021 and 2020 are as follows:
| Years Ended | ||||||||
| December 31, 2021 | December 31, 2020 | |||||||
| Deferred tax asset | ||||||||
| Net operating loss carryovers | $ | $ | ||||||
| Total deferred tax assets | ||||||||
| Valuation Allowance | ( | ) | ( | ) | ||||
| Deferred tax asset, net of allowance | $ | $ | ||||||
As
of December 31, 2021, and 2020, the Company had approximately $
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment. Based on the assessment, management has established a full valuation allowance against the entire deferred tax asset relating to NOLs for every period because it is more likely than not that all of the deferred tax asset will not be realized.
| F-18 |
On
December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) was signed into law making significant changes to the
Internal Revenue Code. Changes include, but are not limited to, a federal corporate tax rate decrease from
The Company files U.S. Federal and Florida tax returns that are subject to audit by tax authorities beginning with the year ended December 31, 2015. The Company’s policy is to classify assessments, if any, for tax and related interest and penalties as tax expense.
NOTE 9 - COMMITMENTS AND CONTINGENCIES
Litigation
The Company is subject, from time to time, to litigation, claims and suits arising in the ordinary course of business.
On June 21, 2018, Power Up Lending Group Ltd., sued both the Company and four of its managers, ex-managers, and directors of the Company in the United States District Court for the Eastern District of New York. The case was dropped against the Company and the claim discharged by the bankruptcy court upon Plan Confirmation on September 18, 2019. Power Up has continued a tort case against the individuals. Our director and officer insurance has agreed to cover our chief executive officer Benjamin Slager, chief financial officer Anthony Santelli, as well as ex-controller Dennis Lenaburg, in this case. Management believes the Complaint is frivolous. The defendants have filed amended answers and counterclaims as of the date of this filing, and the case has gone into the discovery phase.
Leases
The
Company consolidated its premises into one location on November 1, 2019, and currently leases office and laboratory space in Palm Beach
Gardens, FL, that is classified as operating lease right-of-use (“ROU”) assets and operating lease liabilities in the Company’s
consolidated balance sheet. ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments
over the lease term at the commencement date for leases exceeding 12 months.
ASC 842 was effective for us beginning January 1, 2019. The adoption had a material impact on our consolidated balance sheets, but did not have a material impact on our consolidated income statements. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases.
Amortized
lease expense for the years ending December 31, 2021, and 2020, were $
The Company recognized the following related to leases in its Consolidated Balance Sheet:
| YEAR ENDED | December 31, 2020 | December 31, 2020 | ||||||
| Right of Use Lease Liabilities | ||||||||
| Current portion | ||||||||
| Long-term portion | - | |||||||
| TOTAL | ||||||||
As of December 31, 2021, the total future minimum lease payments in respect of leased premises are as follows:
| YEAR ENDED | MINIMUM DUE | |||
| 2022 | ||||
| 2023 | ||||
| 2024 | ||||
| TOTAL | $ | |||
| F-19 |
NOTE 10 – RELATED PARTY TRANSACTIONS
Related Transactions
The Company follows FASB ASC subtopic 850-10, Related Party Disclosures, for the identification of related parties and disclosure of related party transactions. Pursuant to ASC 850-10-20, related parties include: a) affiliates of the Company; b) entities for which investments in their equity securities would be required, absent the election of the fair value option under the Fair Value Option Subsection of Section 825–10–15, to be accounted for by the equity method by the investing entity; c) trusts for the benefit of employees, such as pension and profit-sharing trusts that are managed by or under the trusteeship of management; d) principal owners of the Company; e) management of the Company; f) other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests; and g) other parties that can significantly influence the management or operating policies of the transacting parties or that have an ownership interest in one of the transacting parties and can significantly influence the other to an extent that one or more of the transacting parties might be prevented from fully pursuing its own separate interests.
| 1) | Short-term notes payable, convertible notes, and contingent liabilities issued to related parties are described in NOTE 5. | |
| 2) | A board resolution was passed on February 13, 2020, that pledged the pending patents to secure the back pay claims of Ben Slager, CEO, Anthony Santelli, CFO, and Charles Sills, Director. This was done to ensure the continued involvement of management to build the Company while they continue to be owed back pay. |
The officers and directors for the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interest. The Company has not formulated a policy for the resolution of such conflicts.
NOTE 11 – SUBSEQUENT EVENTS
The Company has evaluated subsequent events through the date the financial statements were available to be issued. Based on this evaluation, the Company has identified the following subsequent events:
Subsequent to December 31, 2021, warrants expired.
Subsequent
to December 31, 2021, employee stock options were exercised for proceeds of $
Subsequent to December 31, 2021, employee stock options expired.
Subsequent to December 31, 2021, employee stock options vested.
| F-20 |
ITEM 9. – CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no changes in the Company’s independent registered accounting firm, nor any disagreements between the Company and its independent registered accounting firm.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure.
As required by Rule 13a-15(e) of the Exchange Act, our management has carried out an evaluation, with the participation and under the supervision of our chief executive officer and chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as of December 31, 2021. Based upon, and as of the date of this evaluation, our chief executive officer and chief financial officer determined that our disclosure controls and procedures were sufficient.
Management’s Annual Report on Internal Controls over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)). The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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. Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021 using the criteria established in “Internal Control - Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over financial reporting as of December 31, 2021, the Company determined that there were no control deficiencies that constituted material weaknesses. Control deficiencies that existed in 2020 have been rectified. The Company now has an independent financial expert on its Audit Committee; and the Company backs up all financial data and material agreements in the cloud so that in the event of theft, misplacement, or loss due to fire or other unmitigated factors, the Company should still retain all of its material financial data and agreements.
As a result, management has concluded that the Company maintains effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by COSO.
Material weaknesses in our disclosure controls and procedures may be identified in the future. Should we discover such conditions, we intend to remediate them as soon as practicable. We are committed to taking appropriate steps for remediation, as needed.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. 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.
| 17 |
Changes in Internal Control over Financial Reporting
There has been a change in our internal control over financial reporting identified in connection with our evaluation we conducted of the effectiveness of our internal control over financial reporting as of December 31, 2020., that occurred during our fiscal year 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. The Company now has an independent financial expert on its Audit Committee, and the Company now backs up all financial data and material agreements in the cloud so that in the event of theft, misplacement, or loss due to fire or other unmitigated factors, the Company should still retain all of its material financial data and agreements. In addition, the Company now has multiple persons reviewing and reconciling the bank account and our financial data.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management’s report in this annual report.
PART III
ITEM 10. – DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Directors, Executive Officers and Significant Employees
The following table sets forth information with respect to the Company’s directors and executive officers.
| Name | Age | Position and Offices | ||
| Benjamin Slager | 59 | Chief Executive Officer and Chairman | ||
| Anthony Santelli | 56 | Chief Financial Officer and Director | ||
| George D. Bolton | 72 | Director and Secretary | ||
| Charles F. Sills | 76 | Director | ||
| Peter Zimeri | 68 | Director | ||
| Edmund Burke | 59 | Director |
Benjamin Slager became a director in October 2016, the Chief Technology Officer on April 1, 2017, the CEO on July 6, 2018, and Chairman on February 26, 2019. Mr. Slager is a seasoned business professional with significant experience in corporate finance, venture capital, and entrepreneurship. He has a proven record in founding, developing and selling high tech companies. He is the inventor of the CTS 2.0 technology.
Mr. Slager began his career in 1987 as a financial analyst with a venture capital firm, NesBic Holding BV, in Utrecht, the Netherlands. He also served as a market maker on the European Option Exchange in Amsterdam, while working for International Option Investment BV, in Amsterdam. In 1990, Mr. Slager turned his focus to sales and marketing while serving as a sales engineer and international sales director for ASM Pacific technologies in the Netherlands. In 1993, Mr. Slager began a 28-year career as a serial entrepreneur in starting, developing, and selling technically innovative companies. He was the Founder and CEO of NedCard and MicroIdentt a company assembling chips for bank cards and other electronic identification carriers. He started and grew that company from zero to a $100 million revenue base with affiliates in several countries. Further Ben was founder and CEO of SolarExcel BV, which had a patented solution to increase solar cell performance. He was also the CEO of Novameer BV, a company with high tech patented fibers. Ben sold off all of these companies to large multinationals. He has 20 families of patents summing to 108 in his name, divided over different territories in the world, including the CTS 2.0 process that is owned by Blue Biofuels.
Mr. Slager received his Bachelor of Science in Chemical Engineering from Technical College of Chemical Engineering in Hilversum, the Netherlands, in 1985. He also received a degree in Business Administration from Nijenrode University for Business Administration in 1987. The Company’s board determined that Mr. Slager is well-qualified to serve in senior management and member of the board of directors through his experience developing our technology and his prior experience founding, developing and selling technology companies. He is not a director of any other public company
Anthony Santelli II became a director on May 4, 2018, the Chair of the Audit Committee on May 11, 2018, until 2020, the Chief Operating Officer on October 20, 2018, and the CFO on February 1, 2020. His financial expertise along with his experience restructuring and building companies is the reason he was selected to be a board member and senior executive. Dr. Santelli served as a money manager for 20 years as the Founder and Chief Executive Officer of AES Capital, a hybrid venture capital-hedge fund management company. Dr. Santelli is an entrepreneur who has started, helped finance, or turnaround, various private companies and micro-cap publicly traded companies concentrating in the mining, energy and alternative energy fields. He has served in senior management and board positions at various private and micro-cap companies, although he has not served on the board of any other public company in the past five years. He previously was employed by Andersen Consulting, now known as Accenture, rising to the level of a Senior Management Systems Consultant before going to graduate school.
| 18 |
Dr. Santelli received his M.A. and Ph.D. in Economics from George Mason University, did graduate studies in economics and finance at NYU, and has a B.S. in Industrial Engineering from Cornell University. He had taught economics and finance at Union College and George Mason University prior to creating AES Capital. He is not a director of any other public company.
Charles F Sills became a director of the Company in July 2015. Mr. Sills has worked for the Defense Leadership Forum since 2014 as National Program Director for the Defense Contracting Summit Conferences. He has extensive experience planning and directing international industrial, infrastructure, environmental and energy initiatives, having served as a member of the Danube Task Force, the governing council that ran the Danube Basin Environmental Restoration Program led by the World Bank, the European Bank for Reconstruction Development and the UN Development Program, involving 13 countries from Austria to Moldova. He also served on the Japan-U.S. Joint Fund for Social Economic Development in Central/Eastern Europe, the Helsinki Commission focused on the environmental clean-up of the Baltic Sea, the Kaliningrad Defense Conversion Initiative, and the NGO Delegation to NAFTA, where he helped draft the Environmental Supplements. Mr. Sills was responsible for securing major funding support for the Smithsonian Institute’s biodiversity preservation/cancer cure research program in Brazil’s Amazon region; for the Sassari, Sardinia symposium on ozone depletion organized by the International Council of Scientific Unions; and for the White House Presidential Awards program sponsored by the President’s Council on Sustainable Development. He is not a director of any other public company.
Mr. Sills has been engaged in the renewable energy sector since the 1980’s, when he led the Martin Marietta Aerospace (now Lockheed Martin) team that won the contract for and installed the world’s largest (at that time) solar photovoltaic energy installation, under a pilot program co-funded by the U.S. and Saudi Arabian Governments; researched and wrote a worldwide survey of renewable energy technologies and commercialization opportunities; and testified before Congress on the need for pro-active U.S. Government support for advanced renewable energy RD and demonstration programs. Currently, he serves on both the Defense Security Advisory Committee and the International Advisory Committee for the American Council on Renewable Energy (“ACORE”); and serves as a Board Member and Advisor on Energy and Environment for the Eurasia Center/Eurasian Business Coalition, where he has planned and moderated conferences on “Doing Business with the BRICS (Brazil, Russia, India, China and South Africa)”, and energy and infrastructure investment opportunities associated with the “New Silk Road”.
He has extensive experience in Government Contracting, and an advocate for Small Business access to Federal and Military contracting opportunities, which is the reason he was chosen to be a director. (He is not a director of any other public company.) He has served as a member of the U.S. Chamber of Commerce’s Small Business Council, and an observer to the White House sponsored Inter-Agency Task Force on Veterans Business Development. He is President of FED/Contracting LLC, a consultancy that assists Small Businesses in partnering with Prime Contractors, and helps the Prime Contractors qualify Veteran and Minority vendors as teammates for project opportunities with mandated Diversity Supplier content. Based on the U.S. Defense Dept. ‘Mentor-Protégé’ program that he managed, Trillacorpe Construction, a Service-Disabled Veteran-Owned Small Business, was awarded the 2010 Defense Department Nunn-Perry Award for “superior performance in the areas of business growth and return on investment, Government contracting, technical performance and quality management”.
George D. Bolton became a director of the Company in July 2015. Mr. Bolton had been retired since 2010. Mr. Bolton was selected to the board for his agriculture industry experience and his expertise with climate change. Although not a member of any other corporate board, he is a seasoned business professional with significant experience in production agriculture. From the management of fertilizer and chemical plants to the development and integration of a precision farming system for a national fertilizer and chemical distribution company, George has worked to develop and integrate new technologies for agriculture.
Prior to becoming a director of the Company, Mr. Bolton recognized the impact carbon intensity would have on agriculture. Mr. Bolton was one of the founders of AgCert International, and co-author of the first agricultural baseline methodology approved by the United Nations Framework Convention on Climate Change (UNFCC) AM0016: Greenhouse gas mitigation from improved animal waste management systems in confined animal feeding operations. Under his direction this methodology was the catalyst which allowed AgCert International to construct over 725 biodigesters impacting more than 94% of the qualifying concentrated animal feeding operations in Mexico and Brazil. The construction and operation of these biodigesters dramatically improved each farms local environment impact while also lowering their carbon intensity. The cooperation between AgCert and the local farmers enabled the use of the Clean Development Mechanism of the UNFCC to produce and market millions of certified emissions for the purchasers, as well as covering the costs of each farm’s biodigesters.
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Peter Zimeri is self-employed and has been semi-retired since 2010. He has been the single largest private producer of electricity in Central America through his ownership and operation of five power plants producing 120 MW of electricity. He has also been the owner of a textile plant with a workforce of over 3000. He has degrees in Mechanical and Aeronautical Engineering from Georgia Tech. He has been a board member of the International Civil Aviation Organization and has extensive contacts in the aviation world, which is the reason he was selected to be a director, along with his experience managing plants. He is not currently a member of any other corporate board.
Edmund (Ned) Burke has been a director of the Company since 2020 and previously served in the financial services industry for the last 36 years, and his extensive contacts are the reason he was selected to be a board member. He recently retired as CEO of ALPS Holdings Inc., a wholly owned subsidiary of SSC Technologies Inc. Ned joined ALPS in 1992 as National Sales Manager, was named President in 2000 and became CEO in 2005 with the acquisition of ALPS by private equity firm Lovell Minnick Partners. ALPS was then acquired by DST Systems in 2011 and he remained CEO through DST being acquired by SSC until his retirement in 2019. From the time he became president in 2000 through his retirement in 2019, his company’s revenue grew from approximately $10 million to over $220 million. Prior to ALPS, he held Regional Vice President positions with Fidelity Investments and Pioneer Investments.
Mr. Burke currently serves on the boards of 4 investment company complexes: Financial Investors Trust, ALPS ETF Trust, Clough Global Funds and Liberty AllStar Funds. He also is an investor/advisor to a number of small companies. He has a B.A. in Economics from the University of New Hampshire.
Audit Committee and Audit Committee Financial Expert
The Company’s board of directors has an audit committee which currently consists of Edmund Burke (chair), George Bolton, and Charles Sills. Mr. Burke is the audit committee financial expert.
Other Board Committees
The Company’s board of directors has a compensation committee consisting entirely of independent directors, with Peter Zimeri as chair and Edmund Burke and Charles Sills as the other members.
The Company has established a nominating and corporate governance committee, consisting entirely of independent directors, with Edmund Burke serving as chair and George Bolton and Peter Zimeri as the other members.
Involvement in Certain Legal Proceedings
During the past five years no director, person nominated to become a director, executive officer, promoter or control person of the Company has: (i) had any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; (ii) been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); (iii) been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or (iv) been found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated except for the following:
Four of the directors of the Company (Messrs. Slager, Santelli, Sills and Bolton) were directors or executive officers of the Company at the time of the Company’s filing of a Voluntary Petition for Non-Individuals Filing for Bankruptcy pursuant to Chapter 11 of the United States Bankruptcy Act in the United States Bankruptcy Court for the Southern District of Florida (Case No. 18-23071-EPK) on October 22, 2018. This Bankruptcy Proceeding was closed on October 25, 2019.
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Section 16(a) Beneficial Ownership Reporting Compliance
Our shares of common stock are registered under the Securities Exchange Act of 1934, and therefore our officers, directors and holders of more than 10% of our outstanding shares are subject to the provisions of Section 16(a) of such Act which requires them to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and our other equity securities. Officers, directors and greater than 10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) reports they file. The Company filed a Form 15 in 2018 ceasing to be a “reporting Company”. On January 5, 2021, the Company filed a Form 10, which became effective 60 days later, on March 8, 2021. Based solely upon our review of reports submitted to us during the fiscal year ended December 31, 2021, The following table sets forth the name of any such person that failed to file the required forms on a timely basis, including the number of late reports, the number of transactions not reported on a timely basis and any known failure to file a required form.
| Name | Number of late reports | Number of transactions not reported timely | ||
| Benjamin Slager | 1 | 1 |
Code of Ethics
The Company’s board of directors has adopted a code of ethics that its officers, directors and any person who may perform similar functions is subject to. The Code of Ethics does not indicate the consequences of a breach of the code. If there is a breach, the board of directors would review the facts and circumstances surrounding the breach and take action that it deems appropriate, which action may include dismissal of the employee who breached the code.
ITEM 11. – EXECUTIVE COMPENSATION
The Company’s board of directors has a compensation committee consisting entirely of independent directors, with Peter Zimeri as chair and Edmund Burke and Charles Sills as the other members. The Company’s compensation philosophy is based on its belief that its compensation programs should be aligned with stockholders’ interests and business objectives; reward performance; and be externally competitive and internally equitable. The Company seeks to achieve three objectives, which serve as guidelines in making compensation decisions:
| 1. | Providing a total compensation package which is competitive and therefore enables it to attract and retain, high-caliber executive personnel; | |
| 2. | Integrating compensation programs with its short-term and long-term strategic plan and business objectives; and | |
| 3. | Encouraging achievement of business objectives and enhancement of stockholder value by providing executive management log-term incentive through equity ownership. |
The Company may compensate its officers with cash compensation, common stock and common stock options. The Company has not established any quantifiable criteria with respect to the level of compensation, stock grants or options. Rather, the Board of Directors and its compensation committee will evaluate cash, stock grants and stock options paid to executives in similarly situated companies.
With respect to stock grants and options which may be issued to the Company’s officers and directors, the Board and its compensation committee will consider an overall compensation package that includes both cash and stock-based compensation which would be in line with the Company’s overall operations and compensation levels paid to similarly situated companies. Under the Company’s 2012 Employee, Director Stock Plan, the administrator can provide for the grant of non-qualified stock options (“Non-Qualified Stock Options”), incentive stock options (“ISOs”, together with Non-Qualified Stock Options referred to herein as “Stock Options”), stock appreciation rights (“SARs”), restricted stock (“Restricted Stock”) and registered stock (“Registered Stock”), (collectively, the “Awards”) to eligible Participants.
As of the date of this filing, the Company has two executives.
Commencing on January 1, 2021, Ben Slager, CEO, has an employment contract to receive a salary of $360,000 per annum until at least June 30, 2022. He received a $40,000 bonus in early 2021 and has health insurance covered. In 2021, he also received his back pay from multiple prior years. The board awarded one months’ salary as a bonus to all employees employed in 2020 who remained employed in 2021. In addition, he must be given 6-months’ notice of termination, and shall receive a severance package of one-month’s pay in addition to the 6-months’ notice, or 3 months’ salary if he dies. If there is a change of control, all his options shall vest.
Commencing January 1, 2021, Anthony Santelli, CFO, has an employment contract to receive a salary of $250,000 per annum, and may not be terminated until all his back pay due is paid. The board awarded one months’ salary as a bonus to all employees employed in 2020 who remained employed in 2021. In addition, the CFO must be given 6-months’ notice of termination and shall receive a severance package of one-month’s pay in addition to the 6-months’ notice, or 3 months’ salary if he dies. If there is a change of control, all his options shall vest.
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As of December 31, 2021, Anthony Santelli is owed $148,218 in back pay plus $16,033 in unpaid director’s fees, along with interest of $26,983.
As of December 31, 2021, AES Financial Advisors, LLC, an entity owned by Anthony Santelli II and his wife Marjorie Santelli, Esq., is owed $72,670, primarily dating from 2018, prior to when Dr. Santelli became COO, plus interest of $3,885.
The following table sets forth the compensation paid by the Company to its officers and directors for the fiscal years ended December 31, 2021, and December 31, 2020. This information includes the dollar value of base salaries, bonus awards and number of stock options granted, and certain other compensation, if any, actually paid. Accrued back pay is included in Other in the year in which it is actually paid. The compensation discussed addresses all compensation awarded to or paid to its named executive officers.
| Principal Position | Year | Salary | Bonus | Stock Awards | Option Awards | Non- Equity Incentive Plans | Non- Qualified Deferred Comp on Earnings | Other (back pay) | Total | |||||||||||||||||||||||||||
| Benjamin Slager | 2021 | 360,000 | 70,000 | - | - | - | - | 587,205 | $ | 1,017,205 | ||||||||||||||||||||||||||
| (CEO) | 2020 | 185,500 | - | - | 414,850 | - | - | - | $ | 600,350 | ||||||||||||||||||||||||||
| Anthony Santelli II | 2021 | 250,000 | 20,833 | - | - | - | - | 22,857 | $ | 293,690 | ||||||||||||||||||||||||||
| (CFO) | 2020 | 152,497 | - | - | 414,850 | - | - | 8,334 | $ | 575,681 | ||||||||||||||||||||||||||
OUTSTANDING EQUITY AWARDS
Grants of Plan-Based Awards
| Name | Grant Date | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Unearned Options (#) | Number of Securities Underlying Unexercised Options (#) Unexercisable (1) | Option Exercise Price ($) | Option Expiration Date | |||||||||||||||
| Ben Slager, CEO Chairman | 1/5/2021 | - | - | 6,000,000 | $ | 0.15 | 1/5/2031 | ||||||||||||||
| Anthony Santelli, CFO Director | 1/5/2021 | - | - | 4,000,000 | $ | 0.15 | 1/5/2031 | ||||||||||||||
| Ben Slager, CEO Chairman | 5/9/2020 | 5,000,000 | - | 5,000,000 | $ | 0.10 | 5/9/2030 | ||||||||||||||
| Anthony Santelli, CFO Director | 5/9/2020 | 5,000,000 | - | 5,000,000 | $ | 0.10 | 5/9/2030 | ||||||||||||||
| Peter Zimeri, Director | 2/18/2020 | 100,000 | - | - | $ | 0.07 | 2/18/2025 | ||||||||||||||
| Total | 10,100,000 | - | 20,000,000 | ||||||||||||||||||
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Warrants Issued to Management
Grants of Plan-Based Awards
| Name | Grant Date | Number of Securities Underlying Unexercised Warrants (#) Exercisable | Number of Securities Underlying Unexercised Warrants (#) Unexercisable (1) | Warrant Exercise Price ($) | Warrant Expiration Date | |||||||||||||||
| NONE | - | - | $ | - | ||||||||||||||||
| Total | - | - | $ | - | ||||||||||||||||
| (1) | As of December 31, 2021. |
Outstanding Equity Awards at Fiscal Year End
In January 2021, the company’s Chief Executive Officer Ben Slager received options to purchase up to 6,000,000 shares of the Company’s common stock under the Company’s 2012 Employee Director Stock Plan at an exercise price of 15 cents per share that vested January 1, 2022. Using a Black-Scholes option pricing model, these were valued at $743,298. In the year ended December 31, 2020, the Company’s Chief Executive Officer received options to purchase up to 10,000,000 shares of the company’s common stock under the Company’s 2012 Employee Director Stock Plan at an exercise price of 10 cents per share, half that vested immediately, and half that vest upon the commercialization of the CTS 2.0 process. Using a Black-Scholes asset pricing model, the vested options were valued at $414,850.
In January 2021, the company’s Chief Financial Officer Anthony Santelli received options to purchase up to 4,000,000 shares of the Company’s common stock under the Company’s 2012 Employee Director Stock Plan at an exercise price of 15 cents per share that vested on January 1, 2022. Using a Black-Scholes option pricing model, these were valued at $495,532. In the year ended December 31, 2020, the Company’s Chief Financial Officer received options to purchase up to 10,000,000 shares of the company’s common stock under the Company’s 2012 Employee Director Stock Plan at an exercise price of 10 cents per share, half that vested immediately, and half that vest upon the commercialization of the CTS 2.0 process. Using a Black-Scholes asset pricing model, the vested options were valued at $414,850.
Additional Narrative Disclosures
A majority of the Company’s employees, including its executive officers, have entered into employment contracts with the company. The company does not offer any benefits package, deferred compensation, or retirement plan at this time, other than an employee stock option plan.
Director Compensation
In March 2015, the Board of Directors approved a resolution to award compensation packages to the Company’s independent directors for their service as directors or as members of any committee of directors. Directors who are also officers are not to receive additional compensation for being Directors. A resolution dated May 5, 2021, reduced board compensation to $2,500 per quarter paid, at the option of the director, in cash or stock at the market price at the end of the quarter. Some directors have been accruing that as back pay.
The following table sets forth compensation we paid to our non-officer directors during the year ended December 31, 2021:
| Name | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) (1) | All Other Compensation (S) | Total ($) | |||||||||||||||
| George D. Bolton | 7,810 | - | - | - | $ | 7,810 | ||||||||||||||
| Charles F. Sills | - | - | - | - | $ | - | ||||||||||||||
| Peter Zimeri | 22,500 | - | - | - | $ | 22,500 | ||||||||||||||
| Ned Burke | - | - | - | - | $ | - | ||||||||||||||
(1) See note 3 to the audited financial statements included in this prospectus for assumptions used in valuation.
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ITEM 12. – SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth certain information regarding beneficial ownership of the Company’s Common Stock as of February 1, 2022, by: (i) each current director; each nominee for director, and executive officer of the Company; (ii) all directors and executive officers as a group; and (iii) each shareholder who owns more than five percent of the outstanding shares of the Company’s Common Stock. Except as otherwise indicated, the Company believes each of the persons listed below possesses sole voting and investment power with respect to the shares indicated.
| Name and Address | No of Shares (2) | % Owned (1) | ||||||
| Benjamin Slager (3) | 41,000,000 | 14.4 | ||||||
| 3710 Buckeye Street, Suite 120 | ||||||||
| Palm Beach Gardens, FL 33410 | ||||||||
| Anthony Santelli, II (4) | 47,490,027 | 16.5 | ||||||
| 3710 Buckeye Street, Suite 120 | ||||||||
| Palm Beach Gardens, FL 33410 | ||||||||
| Charles F. Sills | 1,100,000 | 0.455 | ||||||
| 3710 Buckeye Street, Suite 120 | ||||||||
| Palm Beach Gardens, FL 33410 | ||||||||
| George D. Bolton | 4,600,000 | 1.7 | ||||||
| 3710 Buckeye Street, Suite 120 | ||||||||
| Palm Beach Gardens, FL 33410 | ||||||||
| Peter Zimeri (5) | 100,000 | 0.041 | ||||||
| 3710 Buckeye Street, Suite 120 | ||||||||
| Palm Beach Gardens, FL 33410 | ||||||||
| Edmund Burke (6) | 13,696,942 | 4.9 | ||||||
| 3710 Buckeye Street, Suite 120 | ||||||||
| Palm Beach Gardens, FL 33410 | ||||||||
| All officers and directors as a group (five persons) | 107,986,969 | 35.5 | ||||||
| Chris Jemapete (7) | 16,675,000 | 6.1 | ||||||
| 6888 S. Irvington Court | ||||||||
| Aurora, CO 80016 | ||||||||
| Steven Sadaka (8) | 18,401,025 | 6.7 | ||||||
| 3474 Derby Ln | ||||||||
| Weston, FL 33331 | ||||||||
| Chris and Angela Kneppers (9) | 16,938,972 | 6.28 | ||||||
| 102 Grand View Avenue Hopewell, NJ 08525 | ||||||||
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| (1) | The percentages in this table are based upon 274,003,883 shares of common stock issued and outstanding as of December 31, 2021, and assumes the persons vested options and warrants are exercised but none other. |
| (2) | Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes voting and investment power with respect to the shares. Shares of Common Stock subject to options or warrants currently exercisable or exercisable within 60 days are deemed outstanding for computing the percentage of the person holding such options or warrants, but are not deemed outstanding for computing the percentage of any other person. |
| (3) | Includes 15,000,000 shares owned by the Benjamin Slager 2021 Irrevocable Trust; and shares underlying 11,000,000 fully vested and exercisable employee options owned by Benjamin Slager. Benjamin Slager also has 5,000,000 additional employee options awarded that will vest with the commercialization of the CTS 2.0 system, unless the company enters into a merger or purchase agreement, at which time all options shall vest immediately. |
| (4) | Includes 23,366,803 shares, 260,136 fully vested and exercisable warrants, and 9,000,000 vested and exercisable employee options owned by Anthony Santelli, II; 3,341,639 shares and 600,000 fully vested and exercisable warrants owned by AES Capital Partners, LP; 7,526,177 shares and 3,125,000 fully vested and exercisable warrants owned by The AES Capital Resource Fund, LP; and 135,136 shares and 135,136 fully vested and exercisable warrants owned by Santelli Partners, three entities controlled by Anthony Santelli, II. Anthony Santelli also has 5,000,000 additional employee options awarded that will vest with the commercialization of the CTS 2.0 system, unless the company enters into a merger or purchase agreement, at which time all options shall vest immediately. |
| (5) | Includes 100,000 fully vested and exercisable options. |
| (6) | Includes 7,980,128 shares and 5,716,814 fully vested warrants. |
| (7) | Includes 7,400,000 shares held by Chris Jemapete and 4,275,000 held jointly by Chris and Pamela Jemapete, his spouse. An additional 5,000,000 are owned by his spouse. |
| (8) | Includes 10,303,674 shares owned by Steven Sadaka, and 8,097,351 shares owned by SLMJ Rocky Opportunity Trust controlled by Steven Sadaka. He exercised all his warrants into shares in 2021. |
| (9) | Includes 16,838,972 shares owned communally. |
The Company is not aware of any person who owns of record, or is known to own beneficially, five percent (5%) or more of the outstanding securities of any class of the issuer, other than as set forth above.
Changes in Control
The Company does not currently have any arrangements which if consummated may result in a change of control of the Company.
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ITEM 13. – CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
Related Transactions
| 1) | A board resolution was passed on February 13, 2020, that pledged the patents and pending patents to secure the back pay claims of Ben Slager, CEO, Anthony Santelli, CFO, and Charles Sills, Director. This was done to ensure the continued involvement of management to build the Company while they continue to be owed back pay. | |
| 2) | Short-term notes payable, convertible notes, and contingent liabilities issued to related parties are described in NOTE 5 above. |
The officers and directors for the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interest. The Company has not formulated a policy for the resolution of such conflicts.
Director Independence
The Company currently has four (4) independent directors within the meaning of Nasdaq Marketplace Rule 4200. With four (4) independent directors, the company feels that the current board can competently perform the functions that an independent Board of Directors should provide.
ITEM 14. – PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees
The aggregate fees billed by the Company’s auditors, Prager Metis CPA’s LLC for professional services rendered for the audit of its annual financial statements for fiscal year ended December 31, 2021, and December 31, 2020, and review its interim financial statements for the first, second and third quarters of 2021 and 2020 are approximately $44,500 and $32,00 respectively.
Audit Related fees
During the past fiscal year, no fees were billed or incurred for assurance or related services by the Company’s auditors that were reasonably related to the audit or review of financial statements reported above.
Tax Fees
During the past fiscal year, the Company incurred approximately $5,000 for tax preparation fees for the fiscal year ended December 31, 2020 and $6,100 for fiscal year ended December 31, 2019.
All Other Fees
During the past fiscal year, no other fees were billed or incurred for services by the Company’s auditors other than the fees noted above. The Company’s board, acting as an audit committee, deemed the fees charged to be compatible with maintenance of the independence of its auditors.
The Board of Directors Preapproval Policies
The Company has had a functioning audit committee since May 2018. For the fiscal year ending December 31, 2021, the Company’s full board approved of the audit arrangement with Prager Metis P.A. Board of directors pre-approval of audit and non-audit services will not be required if the engagement for the services is entered into pursuant to pre-approval policies and procedures established by the Company’s board of directors regarding its engagement of the independent auditor, provided the policies and procedures are detailed as to the particular service, its board of directors is informed of each service provided, and such policies and procedures do not include delegation of its board of directors’ responsibilities under the Exchange Act to its management. The Company’s board of directors may delegate to one or more designated members of its board of directors the authority to grant pre-approvals, provided such approvals are presented to the board of directors at a subsequent meeting. If the board of directors elects to establish pre-approval policies and procedures regarding non-audit services, the board of directors must be informed of each non-audit service provided by the independent auditor. Board of Directors pre-approval of non-audit services, other than review and attest services, also will not be required if such services fall within available exceptions established by the SEC. For the fiscal year ending December 31, 2021, 100% of audit-related services, tax services and other services performed by the Company’s independent auditors were pre-approved by its board of directors.
The Company’s board has considered whether the services described above under the caption “All Other Fees”, which are currently none, is compatible with maintaining the auditor’s independence.
The board approved all fees described above.
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PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this 10-K:
1. FINANCIAL STATEMENTS
The following documents are filed in Part II, Item 8 of this annual report on Form 10-K:
2. FINANCIAL STATEMENT SCHEDULES
All financial statement schedules have been omitted as they are not required, not applicable, or the required information is otherwise included.
3. EXHIBITS
The exhibits listed below are filed as part of or incorporated by reference in this report.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Blue Biofuels, Inc. | ||
| (Registrant) | ||
| By | /s/ Benjamin Slager | |
| Benjamin Slager | ||
| Chief Executive Officer, (Principal Executive Officer) | ||
| Date | February 24, 2022 | |
| By | /s/ Anthony Santelli | |
| Anthony Santelli | ||
| Chief Financial Officer (Principal Financial and Accounting Officer) | ||
| Date | February 24, 2022 | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the registrant and in the capacity and on the date indicated.
| By | /s/ Benjamin Slager | |
| Benjamin Slager | ||
| Chief Executive Officer, (Principal Executive Officer) | ||
| Date | February 24, 2022 | |
| By | /s/ Anthony Santelli II | |
| Anthony Santelli | ||
| Chief Financial Officer (Principal Financial and Accounting Officer) | ||
| Date | February 24, 2022 | |
| By | /s/ George D. Bolton | |
| George D. Bolton | ||
| Director | ||
| Date | February 24, 2022 | |
| By | /s/ Charles F. Sills | |
| Charles F. Sills | ||
| Director | ||
| Date | February 24, 2022 | |
| By | /s/ Peter Zimeri | |
| Peter Zimeri | ||
| Director | ||
| Date | February 24, 2022 | |
| By | /s/ Edmund Burke | |
| Edmund Burke | ||
| Director | ||
| Date | February 24, 2022 |
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